Business Activity
The process of producing goods and services to satisfy consumer demand.
Business activity
The view that humans are motivated only by money.
The theory of economic man
What are the Four Ps?
The right product at the right price with the right promotion in the right place
Factors that cause average costs to rise as the scale of operations increases.
Diseconomies of scale
Revenue rises while costs stay the same.
Revenue increases → profit increases.
Why do some businesses fail?
Competition, poor planning, poor marketing, lack of finance, liquidity problems, poor management skills, economic influences
What are some problems of ineffective communication?
wrong type of employee recruited, business' reputation damaged, employees' morale and motivation fall, tasks done incorrectly or incomplete
How a product gets from the producer to the final consumer.
Channels of distribution
Give the difference between fixed costs and variable costs.
Fixed costs - costs that do NOT change with output
Variable costs - costs that change in direct proportions to output
Cost of sales increases but price stays unchanged.
Gross profit falls → profit margin decreases.
Businesses taking responsibility for the impact their activities might have on society and the environment.
Corporate social responsibility (CSR)
What's the difference between centralized and decentralized organisations?
Centralized - important decision making is held at the top, by the CEO & senior managers
Decentralized - decisions are delegated to lower levels in the hierarchy
Setting a high price for a new product that is unique or very different from any other product on the market.
Market skimming
Job production - one item produced at a time
Batch production - items produced in batches
Flow production - items produced at a very large quantity of identical goods using a continuously moving process
Customers take longer to pay the business.
Cash inflows are delayed → cash balance falls → liquidity problems.
If an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts.
Unlimited liability
Give one advantage and disadvantage of off-the-job training.
Advantage - employees learn the latest methods and techniques
Disadvantage - employee does not produce any output during training
What's the difference between price inelastic and elastic demand?
Inelastic - change in demand is less than the change in price
Elastic - change in demand is greater than the change in price
The difference between the current level of output and break-even output. This is a measure by which sales can fall before losses are made.
Margin of safety
A business takes a large bank loan. Give the negative chain.
Interest payments increase → expenses increase → profit decreases.
Give one advantage and disadvantage of a franchise.
Advantage: 1. less chance of business failure as the product and brand are well known. 2. franchisor provides training & finance the promotion of the brand
Disadvantage: 1. initial cost of buying a franchise is very expensive. 2. strict controls. 3. franchisor takes a percentage of revenue or profits
Organizing work so that employees are encouraged to use their full abilities.
Job enrichment
What are the main methods of market segmentation and how do they differ?
1. Geographic segmentation - divides consumers by geographic area
2. Demographic segmentation - divides consumers by age, gender, income, ethnic background, social class
3. Psychographic segmentation - divides consumers by lifestyles, personality, attitudes
Why is quality important?
Quality helps a business to:
-reduce customer complaints and returns of goods
-lengthen a product's life cycle
-improve brand image
-charge a premium price for its goods
The ability of a business to pay its short-term debts.
Liquidity