Enterprise (Cambridge (CIE) A Level Business): Flashcards
Exam code: 9609
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What is the purpose of business activity?
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What is the purpose of business activity?
The purpose of business activity is to organise human, physical and financial resources to produce goods or services that meet customer needs while adding value.
True or False?
Like goods, services can be stored until customers need them.
False.
Services are intangible, so they cannot be stored and are provided when customers need them. Only goods are tangible physical items that can be stored.
How can meeting customer needs benefit a business?
Meeting customer needs helps a business build customer loyalty, increase brand awareness and generate revenue.
Define factors of production.
Factors of production are the resources used to produce goods and services, and producing any good or service needs a combination of all four of them.
Define capital.
Capital is any man-made resource used to produce goods or services, such as tools, buildings, machines and computers.
In business, land refers to the non-man-made _____ resources available for production.
In business, land refers to the non-man-made natural resources available for production.
True or False?
Some workers are more productive than others because of their education, training and experience.
True.
Labour is the human input into production, and not all labour is of the same quality. It can be skilled or unskilled.
What does the factor of production enterprise involve?
Enterprise involves taking risks in setting up or running a firm. The entrepreneur decides how to combine the other factors of production with the aim of generating profit.
Define added value.
Added value is the difference between the price charged to the customer and the cost of the inputs needed to create the product or service.
Why is a high added value important to a business?
The greater the added value, the more successful the business is likely to be and the higher its profits. If no value is added, fixed costs cannot be covered and no profit will be made.
State five methods a business can use to add value.
A business can add value through branding, convenience, quality, design and unique selling points (USPs). Many of these allow product differentiation, so a higher selling price can be charged.
Define scarcity.
Scarcity means that resources are limited while wants are unlimited.
Scarcity creates the basic ______ problem, so producers, consumers, workers and governments must make choices about the most efficient use of resources.
Scarcity creates the basic economic problem, so producers, consumers, workers and governments must make choices about the most efficient use of resources.
Define opportunity cost.
Opportunity cost is the next-best option given up when a choice is made.
What is meant by a dynamic business environment?
A dynamic business environment is an external environment that is constantly changing. Changes in technology, consumer expectations and the economic and legal climate affect demand and the way a business operates.
How do successful businesses respond to a changing environment?
Successful businesses identify opportunities, plan for changes that could have a negative effect and develop innovative solutions that meet customers' changing needs.
True or False?
Changes in the business environment only create threats for businesses.
False.
Change can reduce demand for some products, but entrepreneurs recognise opportunities created by changes in the market and develop new business ideas.
How can changing environmental expectations of consumers create opportunities for businesses?
Growing demand for environmentally responsible products gives businesses the opportunity to develop new products that are less damaging to the natural world.
Products and services can become ______ due to changes in technology or consumer demand, creating opportunities for new and innovative products.
Products and services can become obsolete due to changes in technology or consumer demand, creating opportunities for new and innovative products.
Why might a rise in interest rates reduce demand for some products?
Higher interest rates make borrowing more expensive, so demand falls for products that consumers usually buy on credit, such as electrical consumer durables.
How can changes in law affect a business?
New or amended laws and regulations can change consumer behaviour and require businesses to make changes to their operations.
True or False?
There is no single recipe for business success.
True.
There is no single formula for success, but businesses that thrive usually share some common characteristics.
State four characteristics that successful businesses often share.
Successful businesses often understand their customers, are adaptable, are financially stable and manage operations effectively.
Why does financial stability help a business succeed?
A business with good cash reserves and low debt can survive shocks and still invest in new projects.
True or False?
Only new businesses are at risk of failure.
False.
Failure is a risk to both new and established businesses. New businesses are more at risk because of limited management skills and experience and cash flow problems during start-up.
What financial factors can cause a business to fail?
A business may fail if it cannot generate enough revenue, its costs rise sharply, it has cash shortages so creditors cannot be paid, or it has limited access to finance.
Define overtrading.
Overtrading occurs when a business expands too quickly, and poor coordination and planning of growth can lead to diseconomies of scale that increase costs.
Making decisions based on hunches rather than _____________ is a sign of poor management that can lead to business failure.
Making decisions based on hunches rather than market research is a sign of poor management that can lead to business failure.
What is a local business?
A local business operates in a specific and limited location, such as a town, a city zone or within a tourist attraction.
True or False?
Owners of local businesses usually aim for rapid growth.
False.
Local business owners usually focus on providing a service to the surrounding community and tend to remain small.
What is a national business?
A national business operates outlets or provides services in numerous locations across one country, meeting the needs of customers of a particular nationality.
National businesses usually aim to increase market share and achieve ________________.
National businesses usually aim to increase market share and achieve economies of scale.
What is an international business?
An international business operates outlets or provides services in more than one country.
Which characteristics do international businesses look for when choosing countries to operate in?
They tend to choose countries that share characteristics with their home country, such as similar customer needs and wants, common business procedures or regulations and the same language.
Define multinational company (MNC).
A multinational company (MNC) is a business that is registered in one country but has manufacturing operations or outlets in different countries.
True or False?
Globalisation and deregulation have contributed to the growth of MNCs.
True.
Globalisation and deregulation have made it easier for businesses to set up operations in many countries, helping MNCs to grow.
What factors influence where an MNC chooses to locate its operations?
MNCs choose locations based on factors such as cost advantages, for example lower production costs, and access to markets.
Define entrepreneur.
An entrepreneur is a person who is willing and able to create a new business idea or invention and who takes risks in pursuing success.
What are the three main roles of an entrepreneur?
An entrepreneur organises resources, makes business decisions and takes risks to maximise returns and maintain a competitive advantage.
True or False?
Entrepreneurs only take financial risks when starting a business.
False.
Entrepreneurs may take financial, personal, professional or conceptual risks. For example, they may quit a secure job to start their own business.
Define intrapreneur.
An intrapreneur is an individual tasked with creating or improving innovative products or processes within an already-established business.
How can encouraging intrapreneurship benefit a business?
It lets a business tap into the creative potential of its employees to develop new products and processes that drive growth and competitive advantage. It also creates a sense of ownership that increases motivation and helps retain top talent.
To promote intrapreneurship, businesses may provide resources to employees or offer ________ or rewards for successful projects.
To promote intrapreneurship, businesses may provide resources to employees or offer incentives or rewards for successful projects.
What are the three main roles of an intrapreneur?
An intrapreneur innovates, organises operations through day-to-day decisions and persuades business owners to take calculated risks and follow new paths.
True or False?
Starting a business often requires an entrepreneur to solve problems with limited support.
True.
Starting a business is often the sole responsibility of a single entrepreneur, so they must be able to solve problems with limited support.
Why is persuasive communication an important quality for entrepreneurs and intrapreneurs?
Convincing lenders, investors and customers to support the business is central to achieving financial success.
Why is developing new solutions to problems an important intrapreneurial quality?
Developing new solutions to existing or emerging problems helps a business stand out from rivals and achieve success.
State five barriers to entrepreneurship.
The main barriers are lack of finance, lack of customers, finding a suitable location, lack of opportunities and existing competition.
Existing competitors are likely to have ______________________, an existing customer base and the financial resources to invest in promotion.
Existing competitors are likely to have greater market knowledge, an existing customer base and the financial resources to invest in promotion.
Why might lenders be reluctant to lend to a new business?
Lenders may refuse loans because a new business has no trading record or an unconvincing business plan.
Define uncertainty.
Business uncertainty is when a business cannot predict what is going to happen or directly influence it.
What factors typically cause business uncertainty?
Uncertainty is caused by environmental factors such as natural disasters, economic changes, the entry of new competitors, changes in legislation and changes in the political party governing the country.
Why is risk easier for a business to manage than uncertainty?
Risk can be measured, so business owners can make informed decisions before taking action. Uncertainty is unknown and cannot be measured or prepared for.
Research, market insight and creating a ___________ can help to reduce risk.
Research, market insight and creating a business plan can help to reduce risk.
True or False?
All entrepreneurs are willing to accept the same level of risk.
False.
Entrepreneurs accept varying levels of risk. Risk-averse entrepreneurs may prefer to start small and achieve slow growth.
How can entrepreneurs share or limit the risks of running a business?
They can share risks with others in a partnership, or protect their personal assets by forming a private limited company.
True or False?
Successful entrepreneurs respond quickly to uncertainty in the business environment.
True.
Successful entrepreneurs manage risk and adapt quickly, for example by changing strategy to meet customers' changing needs.
What support might a government offer to encourage entrepreneurs?
Governments may offer training programmes, low-cost government-supported loans, mentoring and tax exemptions for a limited period.
How do small businesses help a country achieve economic growth?
They increase the country's output, which leads to higher living standards and raises tax revenues for spending on public services.
Competition from new businesses can lead to greater ________ and better customer service for consumers.
Competition from new businesses can lead to greater innovation and better customer service for consumers.
How do new and growing businesses help to reduce unemployment?
New and growing businesses create jobs and increase labour skills.
How can social enterprises contribute to a country's development?
Social enterprises often support disadvantaged groups, providing help that might otherwise be unavailable.
Define business plan.
A business plan sets out the key aspects of a business and how the owners intend it to develop.
What are the two main aims of producing a business plan?
The main aims are to reduce the risk of starting a new business and to help the owners raise finance.
How does producing a business plan help to reduce risk?
It forces the owner to think about every aspect of the business before they start, so they are well-informed about potential problems and the chance of success.
True or False?
Venture capitalists use a business plan mainly to judge whether a loan can be repaid.
False.
Venture capitalists are investors, so they use the plan to judge whether there is an opportunity to increase the value of their investment and make a worthwhile profit.
A business plan should be a regularly updated ______________, because plans change as the business faces new threats and opportunities.
A business plan should be a regularly updated working document, because plans change as the business faces new threats and opportunities.
What does the executive summary of a business plan include?
The executive summary gives a concise overview of the business idea, its unique selling proposition, its target market and its financial projections.
What is included in the market analysis section of a business plan?
The market analysis covers the target market's size, growth potential and key trends, the target customers and their needs, and a competitor analysis.
What does the financial projections section of a business plan contain?
It contains a detailed financial forecast, including cash flow forecasts, and outlines funding requirements and sources of finance.
True or False?
A business plan should include a risk analysis that sets out how potential risks will be mitigated.
True.
The risk analysis section considers the potential risks and challenges the business may face and the strategies for mitigating them.
State three benefits of a business plan, other than helping to raise finance.
A business plan helps owners set aims and objectives, review ideas to see if they could make a profit, and measure success by comparing actual outcomes with the plan.
A business plan is only as good as the ______ behind it and the individuals who produced it.
A business plan is only as good as the research behind it and the individuals who produced it.
State four limitations of a business plan.
Uncertainty makes sales, costs and cash flows hard to predict, and inexperienced owners may write ineffective plans. Plans also take time and effort, and opportunities can be missed if they are not in the plan.
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