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39 Cards in this Set
- Front
- Back
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Primary Sector |
sector of the economy which EXTRACTS/PRODUCES raw materials |
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Secondary Sector |
sector of the economy that uses raw materials and MANUFACTURES finished goods |
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What is an example of the business in primary sector? |
- Oil companies like Shell, BP -coal mines in Africa - a farmer growing vegetables |
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What is an example of the business in secondary sector? |
- Abercrombie&Fitch clothing factories in developing countries - a factory canning fruits bought from farmers - oil refining companies |
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What is an example of the business in tertiary sector? |
- Park'n'Shop that sells finished goods to people - SERVICES : education, health care, etc - HSBC or Bank of China |
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Tertiary sector |
a sector of economy which provides services or finished goods to businesses and individuals |
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What is a merger? |
Two businesses joining together and becoming a single company, e.g. Disney and Pixar ` |
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What are diseconomies of scale? |
increases in average costs of running a business caused by the company becoming too big/growing too much |
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What are economies of scale? |
benefits caused by the successful expansion of a company and lowering of the average cost/unit |
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List out the types of economies of scale (6) |
Technical; Financial; Management; Marketing; Purchasing; Risk bearing |
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Why do economies of scale matter? |
Lower average cost -> ability to set lower price-> boost sales /increase demand |
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Give examples of diseconomies of scale : |
Managerial problem: communications problem, financial problems, governments can restrict bigger firms, more shareholders can try to influence companies' decisions Market issues : market is small so expansion does not bring more demand; niche markets are not attractive Personal reasons : owners want to stay as a small firm, do not want more shareholders |
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What is a takeover? |
When one firm buys another , e.g. Google bought Youtube in 2006 |
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What is sustainable development? |
development that meets the needs of the current people without compromising the ability of future generations to meet their needs |
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Advantages of being environmentally-friendly : |
- good for public image, media coverage - can increase demand and sales - eco-friendly market is new and growing - new technology might help cut wastage and save costs - will not be fined by the government |
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Disadvantages of being eco-friendly : |
- switching to new technology might take time and costs - some resources do not have environmentally-friendly equivalents yet - might reduce profits` |
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What is an externality ? |
An effect of the business activity that affects people outside the business; both positive and negative effects |
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What is a social cost? |
Total cost to society as a result of a business decision.
cost to the business + cost to society example? cigarettes |
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What is a social benefit? |
financial benefit to the business (from sale) + wider benefit to the society example? starting a new school |
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What is a public sector? |
any business owned, run or controlled by the Government , e.g. MTR in Hong Kong
also, education, health care, roads, electricity, etc
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What are the objectives of the public sector companies? |
1. Provide a service to the most number of people 2. Control natural monopolies 3. Protect domestic, key industries |
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Who are the stakeholders in the environment of each business? (8) |
1. Shareholders 2. Employees 3. Managers 4. Customers 5. Banks/other lenders 6. Local community/society 7. Government 8. Competitors |
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What is an enterprise ? |
2 meanings : a) a name for a business, company b) action of taking a risk to make your own initiative a business |
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What is a start-up company? |
Startups are usually small and initially financed and operated by a handful of founders or one individual; they tend to grow very fast and usually introduce a new technological product or an improved version of existing one |
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What is a business plan? |
Written document which describes companies objectives, mission, market, strategy and breakdown of how they will be profitable |
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Why Startups need a business plan? |
- for the founder : helps him clarify the idea, research his market, see how much money he needs for investors : assess the success of a company, make comparisons, decide who to support
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What is a franchise? |
A franchisor grants a licence (the "franchise") to another business (the "franchisee") to allow it to trade using the brand or business format.
e.g. Subway, McDonalds, Starbucks |
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Advantages of a franchise: |
+product is already known, easier to generate demand +banks are more willing to lend money +technical and business support of the experienced franchisor +success of franchisees in other places can help own franchise |
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Disadvantages of a franchise : |
- less independence than as a sole trader - need to pay royalty to the franchisor - usually has to input some own costs to start the franchise - can only sell products approved by the franchisor - has little choice of changing supplier to lower costs |
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What is a joint venture? |
enterprise undertaken by two or more businesses pooling resources together on specific projects |
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Advantages of a joint venture : |
+access to new markets +access to established distribution channels +less risk of failure - sharing potential costs +access to new technology, expertise, knowledge +increased capacity of production |
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Disadvantages of a joint venture : |
- firms can have different goals - firms can come into conflict - profits have to be shared - different cultures might be an obstacle to cooperation - if one firm provides more resource than the other, they might disagree on profit share |
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Why do businesses fail? |
- lack of experience, - lack of capital -poor location - poor advertising - poor inventory management - over-investment in fixed assets - poor terms of credit repayment - personal use of business funds |
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How can businesses add value? |
1. Create a brand 2. Advertise 3. Provide customised service 4. Provide additional features 5. Offer convenience |
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What is a 'small business'? |
independently owned and operated, with a small number of employees and relatively low volume of sales. US : small if <100 people Europe: small if <50 people Australia : small if 1-19 people
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What are the ways to measure the size of the company? |
1. number of employees 2. capital employed 3. size of the output 4. sales value, revenues |
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Why are small businesses important to the economy? |
- employ majority of the society - flexible in responding to economic changes - respond to local demands - provide employment in recession - provide competition - provide niche products |
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What are the problems facing small businesses?
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- Under capitalisation -poor debt management - lack of experience, good management - high turnover of staff - difficult to attract high-skilled staff - poor stock management |
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How can small businesses survive? |
- cater to a smaller but more exclusive market - quickly exploit new market trends - use Internet to find customers - join together with other companies - keep good accounting practices |
