AICE Business Final Exam Review

Franchise Disadvantages

- share of profits must be paid to franchiser - franchise license is expensive - local promotions must be paid for

Private limited company

A small to medium sized business that is owned by shareholders who are often members of the same family.

innovation

An improvement of an existing technological product, system, or method of doing something. - must carve a niche in the market and be different than others in the market

economic growth

any increase in goods or services from a start-up business will increase the GDP,

risk-taking

bearing the uncertainties that are part of the marketing process, like investing ones own savings into their own businesses as a means of starting it up.

Sole trader

business owned and operated by one person

non-durable goods

goods that last a short period of time, such as clothing, foods, drinks and candy

Challenges faced by Entrepreneurs

identifying successful businesses opportunities, determining a location, competition, sourcing capital. building a customer base,

measurable

objectives that have a quantitative value are likely to prove to be more efficient targets for directors/staff to work toward

tertiary sector

provides services people need (hairdressing, car repair, daycare, restaurants)

opportunity cost

the benefit of the next most desired option which is given up

micro-enterprise

very small businesses

private limited company advantages

• Shareholders have limited liability • Separate legal personality • Continuity in the event of the death • Original owner is still often able to retain control • Able to raise capital from sale of shares to family, friends and employees

large business advantages

- afford specialist professional managers - benefit from cost reduction with large-scale production - can set low prices that firms have to follow - access to several different sources of finance - may be diversified in several markets and products so that risks are spread out - afford research and development

cooperatives

- common form of organization - agriculture or retail (most frequently) - all members contribute to workload, responsibilities and decisions. - all have one vote - profits equally shared

Partnership Advantages

- different specializations of business management - shared decision making - additional capital - liability split in two - fewer legal formalities than corporate

large business disadvantages

- difficult to manage (especially if geographically spread) - costs associated with large-scale production - slow decision making and poor communication - ownership issues can cause conflict

Sole trader advantages

- easy to set up - owner has complete control - owner keeps all profit - manage time working - based on personal interests - close relationships with employeees

Franchise Advantages

- fewer chances of business failing - advice can be offered - national advertising is funded - may be only one in a region... profits are maximized - supplies obtained from trusted suppliers.

public limited company disadvantages

- legal formalities in formation - cost of business consultants and financial advisors when creating a company - share prices subject to fluctuation - legal requirements concerning disclosure of information to shareholders and public - risk of takeover due to the availability of shares

private limited companies disadvantages

- legal formalities involved in establishing the business - capital cannot be raised through selling shares to public - difficult for shareholders to sell - End of year accounts must be sent to companies house, available for public inspection there

small business disadvantages

- limited access to finance - no economies of scale - may not be diversified - excessive responsibilities for owner if they cannot afford specialist managers for each sector

public limited company advantages

- limited liability - separate legal identity - continuity - easy of buying and selling shares - access to substantial capital sources

public sector corporation advantages

- managed with social objectives rather than solely with profit objectives - loss making services might still be kept operating if the social benefit is great enough - finance raised mainly through the government

Partnership Disadvantages

- profits are shared - unlimited liability between the two - no continuity if partners die - bound by decisions of the other - not possible to raise capital from selling shares

Small business benefits

- provides many jobs - benefits consumers (more choices in market) - variety in available services/goods available - creates competition and prevents consumer exploitation - provide specialist goods for large businesses - prosperity - managed controlled by owners - offer personal service to customers - good worker relations - often able to adjust to changing customer - small firms may be cheaper (smaller fees)

public sector corporation disadvantages

- tendency towards inefficiency due to lack of strict profit targets - subsidies from government can also encourage inefficiencies - government may interfere in business decisions for political reasons, for example by opening a new branch in a certain area to gain popularity

Sole trader disadvantages

- unlimited liability - intense competition from big companies - owner in charge of everything - difficult to raise capital - long hours - if there is no transition in business owner, the business will die after the owner dies.

partnership

A business in which two or more persons combine their assets and skills

franchise

A business that uses the name, logo and trading systems of an existing successful business

developing country

A country that is at a relatively early stage in the process of economic development

exports

Goods and Services sold to other countries

number of employees

Measuring the _____________________________ is the simplest way to determine the size of a company. This would be ineffective in companies that are technology based, as few employees are needed to run it... despite it being larger than the other companies.

SMART

Specific, Measurable, Attainable, Realistic, Timely

3

How many stages are involved in turning natural resources into finished products?

multi-skilled

Workers being trained in more than one skill, enabling them to do a range of jobs. - includes the making, promoting, selling and working out the finances of a product

land

_______ itself, as well as the renewable and non-renewable resources of nature like minerals and animals

triple bottom line

a business concept that posits firms should commit to measuring their social and environmental impact in addition to their financial performance

public corporation

a business enterprise owned and controlled by the state, also known not nationalized industry

holding company

a business organization that owns and controls a number of separate business, but does not unite them into one unified company

social enterprise

a business whose main social objective that reinvests most of its profits into benefits rather than maximizing returns to owner

share

a certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights

comparatively large

a company is ______________________________ if it has a high market share among the others in the industry

clientele

a group of customers or patrons

shareholder

a person or institution owning shares in a limed company

enterprise

a project or undertaking, typically one that is difficult or requires effort. the driving force that makes up the business and takes on challenges

self confience

a true entrepreneur would not let early setbacks and failures define them, and they would be able to rise back up and ultimately lead a successful project

family-owned business

actively owned and managed by at least two members of the same family

reduced rate of profits tax (corporation tax)

allows small businesses the opportunity to grow in the early stages and retain more profits

competition

always an issue for new companies, unless their products are completely unique. If not, they must create value to satisfy their customers over opposers.

multinational company

an organization that does business in several countries

private sector

comprises businesses owned and controlled by individuals or groups of individuals

public sector

comprises organizations accountable to and controlled by central or local government

market capitalization formula

current share price x total number of issues shared

deindustrialization

decline in the importance of secondary-sector activities and an increase in the tertiary sector - a result of rising incomes and higher living standards... leading to consumers spending stuff on services more than goods.

mixed economy

economic resources are owned and controlled by both private and public sectors... though most business activity is done in the private sector

free-market economy

economic resources are owned largely by the private sector with very little state intervention... public sectors are very small

command economy

economic resources are owned, planned and controlled by the state... private sectors are minimal

consumer services

emotional items/services that are non-tangible and sold to the public ex.) hotel accommodations, insurance and travel services.

business activity purpose

establish the needs of the potential customers, purchase resources, create a product or service that they demand

specific

focus on what the business does and should directly apply to that business ex.) a hotel sets objective to fill 80% of beds in winter time

durable goods

goods that last for a relatively long time, such as houses, cars, and appliances

Loan Guarantee Scheme

government funded scheme that guarantees a repayment of a certain percentage of bank loan if they business ends up failing

creating value

increasing the difference between the cost of purchasing raw materials and the price of the finished goods are sold for

Characteristics of an Entrepreneur

innovation, commitment and self motivation, multi-skilled, leadership skills, self confidence and the ability to bounce back, and risk-taking

factors of production

land, labor, capital and enterprise

workshops

located in economically deprived areas and aim to aid small businesses

secondary sector

manufacture and process products made from natural resources (computers, clothes, jewelry)

revenue

measuring a company in terms of its ____________ is helpful when comparing companies in the same industry, but less effective when comparing across industries

capital

money, the goods itself, machinery, computers, factories, offices, buildings and vehicles

realistic and relevant

objectives should be realistic when compared with the company's resources and should be expressed in terms relevant to the people who have to carry them out ex.) Janitor should be told to reduce cleaning resource usage by 10% not that company sales should reduce by 15%

public limited company

often a large business, with the legal rights to sell shares to the general public - share prices are quoted on the national stock exchange

charity

organization that is reliant on donations to help people

consumer goods

physical and tangible items that can only be used once. both durable and indurable

capital goods

physical goods that are used by the industry to aid in the production of other goods and services ex.) machines and commercial vehicles

social cohesion

serious social problems arise due to unemployment, and if a bunch of successful businesses start-up pop up, other people in the region may be influenced to have a similar mindset.

entrepreneur

someone who takes the financial risk of starting and managing a new venture

financing issues

sourcing capital - lack of sufficient own finance - lack of awareness of financial support and grants available - lack of any trading record to present to banks as evidence of past success - poorly produced business plan that fails to convince potential investors

personal development

successfully leading a start-up business leaves the entrepreneur with a states of fulfillment, which can inspire other entrepreneurs

leadership

the ability to motivate individuals and groups to accomplish important goals

added value

the differences between the cost of purchasing raw materials and the price the finished goods are sold for

achievable

the goals must be achievable in their given time frame, or they are pointless. this can demotivate workers if they cant reach the goal

industrialization

the growing importance of the secondary-sector manufacturing industries in developing countries

larger

the larger the business, the ______________ the value of capital needed for long term investment

market share

the sales of a business as a proportion of total market sales

market capitalization

the total value of a company's issued share

capital employed

the total value of all long term finance invested in the business

economic problem

there are insufficient goods to satisfy all of our wants and needs at any one time.

time-specific

there should be a time limit when achieving the goal. It is impossible to measure a goal with unlimited time... thus it is critical that a time is included in the objective

articles of association

this document covers the internal workings and control of the business... for example, the names of directors and the procedures to be followed at meetings will be detailed.

memorandum of association

this states the name of the company, address where it can be contacted, the maximum share capital for which the company seeks authorization and the declared aims of the business

revenue (definition)

total value of sales made by a business in a given time period

joint venture

two or more businesses agree to work closely together on a particular project and create a separate business division to do so

commitment and self-motivation

two qualities that are necessary when starting up businesses due to its difficulty. It is risky... but work ethic, commitment, and ambition to succeed are key

creating value example

well designed shop display, employing kind assistants, attractive shop, nice packaging

employment creation

when new businesses open, more people are hired for jobs... so unemployment rate decreases

labor

workers used to make up the workforce of the business

socially responsible

working or operating in ways that are not harmful to society or the environment

market share formula

Sales/Total Market Sales X 100

primary sector

The portion of the economy concerned with the direct extraction of materials from Earth's surface, generally through agriculture, although sometimes by mining, fishing, and forestry.