Untitled Quiz

Production

• Production is the creation of goods and services
• Factors of production include:
  • Labour: physical and mental effort
  • Land: natural resources, renewable/non-renewable
  • Capital: man-made resources for production
  • Enterprise: willingness to take risks and make decisions in business

Working capital vs Fixed capital

• Working Capital: goods not yet used (on shelves)
• Fixed capital: goods used regularly (e.g. machinery)

Enterprise

• Willingness and ability to bear uncertain risks and make business decisions.

Economic Problem & Opportunity Cost

• Choosing how to use limited resources wisely.
• Opportunity cost is the next best alternative forgone when a choice is made.

Specialisation

• Division of labour: breaking down a production process into different tasks.
• Advantages:
  • Increased efficiency and output
  • Less time wasted
• Disadvantages:
  • Could be boring for workers
  • If one worker is absent, it can impact output.

Added Value

• Added value is the difference between the selling price and cost of inputs.

Ways to increase added value

• Raising selling price, while input costs remain the same.
• Lowering input costs while maintaining selling prices.

Privatization

• Transferring ownership and management of industries from public to private sector.
• Cons:
  • May not consider all costs and benefits to society
  • Can lead to monopolies
  • Lower quality and higher prices if there is a lack of competition.
• Pros:
  • Easier to raise funds
  • Products may satisfy consumer needs more easily
  • Businesses are more efficient

Business Plans

• Description of the business
• Products and services offered
• Target market (who you sell to)
• Competitors
• Business location
• How to reach customers (distribution plan)

Government Support

• Governments offer support to entrepreneurs to increase competition, output, and benefit society.
• Support can include training, low-cost premises, low-interest loans, and grants.

Size of Firms

• Size of a business can be measured by:
  • Number of employees
  • Output value
  • Revenue
  • Capital employed

Capital intensive firms

• Employ fewer people
• High output levels
• Examples include Tesla and Honda

Labour intensive firms

• Opposite of capital intensive, employing a lot of people.

Business Expansion

• Pros:
  • Higher profits
  • More prestige
  • Economies of scale
  • Larger market share
• Methods of growth
  • International growth (enlarging existing plants or opening new ones)

Product Life Cycle

• Stages a product goes through from introduction to decline:
  • Development: testing/prototyping
  • Introduction: launch to wider market, high promotion
  • Growth: rapid sales increase
  • Maturity: slower sales increase, competitive pricing
  • Saturation: high competition, no new competitors
  • Decline: sales fall, low demand

Product Life Cycle: Extension Strategies

• Ways to extend the product life cycle
  • Introduce new variations (small changes in design, color, packaging)
  • Selling into new markets
  • Advertising campaigns
  • Improvements to old products
  • Selling through multiple retail outlets

Marketing Mix: Price

• Setting prices for products which considers:
  • Brand image
  • Competitors
  • Market Share
• Methods of Pricing:
  • Cost plus pricing: costs plus a profit margin
  • Competitive pricing: pricing in line with competitors
  • Penetration pricing: lower prices to enter market
  • Price skimming: high prices initially for a new product
  • Promotional pricing: temporary low prices

Marketing Mix: Promotion

• Raising customer awareness.
• Methods:
  • Advertising (above the line): widely broadcast media (TV, radio etc.)
  • Sales promotion (below the line): short-term incentives (coupons, discounts)

Marketing Mix: Other Elements

• Product: what the business sells
• Price: amount of money charged
• Place: where the product is sold
• Promotion: how the product is advertised

Types of advertising

• Persuasive: trying to convince consumer that they need the product
• Informative: providing information
• Sales promotion: incentives for buyers to purchase (promotions)

Marketing Budget

• Financial plan for marketing a product or range over a period of time.
• A consideration for firms which spend less money

Social Media Marketing

• Creating and sharing content across social media to achieve marketing goals.

Viral Marketing

• Encouraging consumers to share info about the product online.

E-Commerce (electronic commerce)

• Buying and selling goods/services online

Forms of Working Capital

• Additional working capital
• Working capital - finance needed for daily costs.
• No business can be run without sufficient working capital.
• Includes cash, debtors, inventory

Statement of Financial Position

• Summarize the value/worth of the business at a given time.
• It shows the business's assets and liabilities.

Assets

• Items of value owned by the business.
• Types
  • Current assets: used within one year (cash, inventory, accounts receivable)
  • Non-current assets: used over a year (equipment, buildings)

Liabilities

• Debts owed by the business
• Types
  • Current liabilities: debts payable within a year (accounts payable, loans)
  • Non current liabilities: debts payable over more than one year. (long-term loans)
  • Shareholder's equity= amount invested by shareholders + retained profit

Profitability Ratios

• Measures of profitability
• Includes:
  • Gross profit margin
  • Net profit margin
  • Return on capital employed

Liquidity Ratios

• Measures of liquidity.
• Includes
  • Current ratio
  • Acid test ratio

Business Cycles

• The fluctuation in a country’s total output (GDP).
• Stages
  • Growth: rising GDP
  • Boom: high spending
  • Recession: decrease in spending
  • Slump: low demand, many businesses close downs

Government Economic Policies

• Fiscal Policy: Changes in taxation and government spending.
• Monetary Policy: Changes in the level of interest rates, controlled by central banks.
• Supply-side policies: Aim to improve training, increase competition, and improve efficiency overall.

Environmental and Ethical Issues

• Social Responsibility: Impacts of a business decision
• Environmental Responsibilities: Consideration for the environment (recycling, renewable sources)
• Ethical Issues: Doing the right thing

Protectionism

Policies that protect businesses from foreign competition.

• Includes:
  • Tariffs (taxes on imported goods)
  • import quotas (limits on the number of imports)

Multinational Corporations (MNCs)

• Businesses that operate in more than one country.
• Benefits:
  • Lower production costs
  • Access to new markets
  • Global reach
• Drawbacks:
  • Reduced local business
  • Repatriation of profits

Exchange Rates

• The price of one currency in relation to another.
• Exchange rates can affect the competitiveness of a company or country.