Unit 1.1 - Nature Of Business Activity

Front 1

Section 1 - Business Organization and Environment
Unit 1.1 - Nature of Business Activity

Back 1

Section 1 - Business Organization and Environment
Unit 1.1 - Nature of Business Activity

Front 2

What are businesses?

Back 2

Businesses are organizations involved in the production of goods and/or the provision of services

Front 3

What are needs?

Back 3

Needs are the basic necessities that a person must have in order to survive, e.g. food, water, warmth, shelter, and clothing

Front 4

What are wants?

Back 4

Wants are the desires, i.e. things that people would like to have, e.g.e a larger home, a new mobile phone, or a foreign holiday

Front 5

What is a market?

Back 5

A place or process whereby buyers (customers) and sellers (businesses) meet to trade.

Front 6

What are customers? What is the difference between customers and consumers?

Back 6

Customers are the people who buy a product whereas consumers are the people who use it.

Front 7

What are consumer goods?

Back 7

Products that are sold to the general public rather than to businesses

Front 8

What are capital goods?

Back 8

Also called producer goods, these are products purchased by other businesses to produce goods and/or services.

Front 9

What are services?

Back 9

Intangible products provided by businesses.

Front 10

What is added value?

Back 10

The difference between the value of inputs (the costs of production) and the value of outputs (the goods and services that are sold to customers).

Front 11

What does added value do?

Back 11

It allows a business to sell its products for more than its production costs, thereby earning the business a profit.

Front 12

What can added value come in the from of?

Back 12

1. Speed/quality of the service
2. Quality of the finished product
3. Prestige associated with the purchase
4. Brand image and/or brand loyalty
5. Taste/design

Front 13

What is opportunity cost?

Back 13

The best alternative that is forgone when making a decision

Front 14

What does the study of Business and Management assume?

Back 14

That people are rational decision-makers, i.e. they will choose the option that gives them the most benefit.

Front 15

What are revenues?

Back 15

The inflows of money, usually from the sale of products.

Front 16

What are costs?

Back 16

The outflows of money, to finance production activities.

Front 17

What is profit?

Back 17

The positive difference between a firm's total revenues and its total costs per period of time.

Front 18

What are the functions of profit?

Back 18

1. An incentive to produce
2. Reward for risk takers
3. Encourages invention and innovation.
4. Indicator of growth/decline
5. Source of finance

Front 19

What are the four factors of production?

Back 19

Land, Labor, Capital and Enterprise.

Front 20

What is Land?

Back 20

Land refers to all natural resources found on the planet that are available for production, e.g. wood, water, fish, crude oil.

Front 21

What is Labor?

Back 21

The physical and mental effort of people in the production of a good or service.

Front 22

What is Capital?

Back 22

Any non-natural resources that are used in the production of other products.

Front 23

What is Enterprise/Entrepreneurship?

Back 23

Enterprise refers to the management, organization, and planning of the other three factors of production.

Front 24

What is an entrepreneur?

Back 24

Someone who has the skills needed to oversee the whole production process, whilst having the ability and willingness to take potentially high risks.

Front 25

What is the financial return for Land?

Back 25

Rent

Front 26

What is the financial return for Capital?

Back 26

Interest

Front 27

What is the financial return for Labor?

Back 27

Wages or salaries

Front 28

What is the financial return for Enterprise?

Back 28

Profit (if there is any)

Front 29

What are the four financial returns collectively known as?

Back 29

Income

Front 30

What does Specialization mean?

Back 30

It means that a business concentrates on the production of a particular good or service or a small range of similar products.

Front 31

What are the different levels specialization occurs at?

Back 31

1. Individual
2. Departmental
3. Corporate
4. Regional
5. National

Front 32

What is Division of Labor?

Back 32

The term used to refer to the specialization of people, rather than organizations

Front 33

What are the advantages of Specialization?

Back 33

1. Increased productivity - Output increases
2. Increased efficiency - Better use of sources, costs fall down
3. Standardization - Outputs are of the exact same standard and quality
4. Higher profit margins - Customers willing to pay more

Front 34

What are the disadvantages of Specialization?

Back 34

1. Boredom - Negative effect on staff motivation and productivity
2. Inflexibility - Lack skills to adapt to different roles
3. Lack of autonomy - Breakdown in one part of the process causes problems for the entire business
4. Capital Costs - Specialist machinery can be very expensive.

Front 35

What is the primary sector?

Back 35

Businesses operating in the primary sector are involved with the extraction, harvesting, and conversion of natural resources.

Front 36

What is the secondary sector?

Back 36

Businesses that operate in the secondary sector are involved in the manufacturing or construction of products

Front 37

What is the tertiary sector?

Back 37

Businesses in the tertiary sector specialize in providing services to their customers.

Front 38

What is industrialization?

Back 38

When a country moves away from primary production towards manufacturing as its principal sector then it is said to have experienced industrialization.