BUSINESS STUDIES GCSE - EDEXCEL UNIT 1

Question	Answer
What do businesses need to consider when researching potential customers' buying preferences?	Who the customers are, what they want, what they buy and how often they buy.
How can a business to this through?	Finding information about customers, using their own experience, looking at existing businesses and trying competitors' products, observations and surveys.
Give examples of how a market can be segmented	Age (e.g. 18-24) Gender (e.g. male) Income (e.g. socio-economic group) Lifestyle (e.g. adventure) Life-stage (e.g. newlyweds)
What does market segmentation allow a business to do?	Meet specific customer needs Differentiate their products Focus on a specific group of customers Target marketing activity Develop a unique brand image Build close customer relationships
What does a market mapping diagram show?	A market mapping diagram can be used to position and compare products in a market, and identify opportunities where customer needs are not being met.
What are ways to compete?	Stronger brand image. Better product features. Higher quality. Better design. More enjoyable experience. Wider product range. Better after-sales service.
How could businesses differentiate their products?	One business could have a better customer service and the other business could have really good quality products but a poor customer service.
What is branding?	A brand is a named product that customers see as being different from other products, and that they can associate or identify with. A company or product cam develop a unique brand image that customers associate with them.
What is added value?	Added value is the increase worth that a business creates for a product; it is the difference between what a business pays its suppliers and the price that is able to charge for the product.
What are the ways to add value?	Unique selling point (USP) Better design. Improved quality. Branding. Greater speed of service. More convenience.
What is the importance of added value?	The added value of a product goes towards paying off a company's cost. The higher the added value, the sooner costs can be paid off and the quicker a business will make a profit. The more value a business can add to its products, the more chance the business has of success, survival and long-term growth.
What will a unique selling point also help other than adding value?	A USP will also help a business compete.
How can a unique selling point be developed?	By understanding customer needs and market mapping.
What does a business have to do in order to make their product the most successful?	The business needs to be able to keep costs down as they add new features or benefits.
What is a franchise?	A franchise is the right given by one business to other businesses to sell goods or services using its name. The businesses that buy into a franchise remain as independent businesses.
What is a franchisor?	The business that gives franchisees the right to sell its product or service.
What is a franchisee?	A business that agrees to manufacture, distribute or provide a branded product, under licence by a franchisor.
What is the principle of franchising?	The principle behind a franchise is the expansion of an established business through licensing the right for entrepreneurs to set up their own business using the name, equipment and products of the franchise in return for a fee or share of the sales revenue.
What does the franchisee get when they buy a franchise?	Access to goods and services. Advertising and promotion. Operate in an exclusive area. On going support. Equipment. Training. An established brand name.
What are the benefits of a franchise?	Expensive marketing costs covered by the franchise. Brand image/reputation already established. Access to tried-and-tested products. Possibly an established customer base. Higher chance of survival. Specific support and training provided.
What are the disadvantages of a franchise?	Start up costs can be expensive. Royalty payments. Complicated application process. Lack of independence and control. Limited flexibility to make your own decisions.
What are the factors when choosing a location for other businesses other than restaurants and retail shops?	How close you are to competitors. Cost. Busy (passing trade) Access (parking, etc...)
What is enterprise?	The willingness to show initiative; take risks and undertake new ventures.
What is an entrepreneur?	A person who owns and runs their own business and takes risks.
What is social enterprise?	A business that exists to benefit the community.
What is the importance of risk?	Entrepreneurs take risks when they start their own business. There is a chance that their businesses will not survive and therefore they risk their own time, livelihood and money. Enterprise is important because new businesses create jobs and wealth in the economy.
Give examples of thinking creatively	Unique ideas and products. Identify new opportunities and markets. Improved customer service. Cheaper production techniques. Better products. Consider 'What if?" questions.
What is deliberate creativity?	Deliberate creativity is the intentional creation of new ideas through recognised and accepted techniques.
Give examples of deliberate creativity	Creating lists. Mind mapping / brainstorming. Make it bigger / smaller. Combining things together.
What is blue skies thinking?	Blue skies thinking is coming up with as many ideas as possible to solve a problem.
What is lateral thinking?	Lateral thinking involves thinking differently to try to find new and unexpected ideas. De Bono's six thinking hats is an example of lateral thinking.
What does De Bono's six thinking hats do?	Gives six different ways to think about an issue, idea or problem.
What do each of the six hats mean?	White - facts about an idea. Red - emotions are gut feelings about an idea. Grey - Difficulties of the idea. Yellow - positive aspects of the idea. Green - how to get around a problem creatively. Blue - thinking about what they are thinking.
Why should entrepreneurs ask themselves questions before they start their own business?	Helps identify business objectives. Helps develop aspects of the business plan. Identifies potential problems and pitfalls. Helps make important decisions.
Give examples of the sort of questions that will help identify the purpose and direction of the business	Why do I want to start my own business? Why do I want to change? Why not set up my own website business?
Give examples of types of questions that help identify specifics about the business that can help form parts of a business plan	How do is set up the business? How do I build up a customer base? How will I research my market? Where can I get help and advice? When could I open the business?
Give examples of "what if?" questions that allow an entrepreneur to asses the value and likelihood of any possible. Solutions can then be identified from these questions.	What if my business loses money? What if my customers do not like my products? What if there is too much competition? What if I am ill for a long period of time?
What is an innovation?	Transforming an invention into something that can be sold to the customer.
What is an invention?	The discovery of a new process or product.
What are the risks associated with invention and innovation?	Invention and innovation are risky. They can be expensive and time consuming, and many new products fail to make it to market. Businesses gain a competitive advantage from invention and innovation, but some businesses choose to wait to copy or 'follow' businesses, creating 'me too' products.
What is a patent?	Right of ownership of an invention, design or process when it is registered with the government.
What is copyright?	Legal ownership of material such as books, music and films which prevent these being copied by others.
What are trademarks?	The logo, symbol, sign, or other features of a product or business that cannot be copied by others.
What is a calculated risk about?	Taking a calculated risk is about putting a numerical value or probability on a risk and the likelihood of it coming true. Weighing up the risks and rewards of a new business idea is important in judging the outcome and viability of a start-up.
How can a business take a calculated risk?	Through market research, and understanding the risk can help a business make decisions that will reduce the likelihood of a negative outcome.
Give examples of calculated risks	50:50 chance of an advert's success 1 in 3 chance of a business failing 10% of customers will return products
What is the importance of making mistakes?	Reducing risk is important but entrepreneurs have to fail before they learn how to be successful. Making mistakes is important part of developing a business. As entrepreneurs learn from mistakes they will become better at calculated risks.
What are upsides?	The positives/benefits of a course of action.
What are downsides?	The negatives/drawbacks of a course of action.
What are the other important enterprise skills?	Planning, Drive, Thinking ahead, Determination, and Seeing opportunities. Mnemonic: Please Don't Trip Down Stairs
What is planning?	Identifying a direction and plan of action for the business.
What is drive?	Being hardworking and motivated to achieve success.
What does thinking ahead mean?	Having the foresight to identify potential problems.
What does determination mean?	Being resilient when things go wrong / not giving up.
What does it mean by seeing opportunities?	Having creativity and imagination to do things differently.
What are objectives?	Objectives are goals that a business is trying to achieve.
Why are objectives important?	Gives a business a direction and a target to measure success against.
What are financial objectives and give examples?	Objectives that involve money. E.g. survival, profit and income, wealth and financial security.
What are non-financial objectives and give examples?	Objectives that don't include money. E.g. personal satisfaction, independence and control, helping others (social enterprise)
What is initiative?	Being pro-active and getting a job done e.g. approaching a competitor to discuss possibility of working together on a new product.
Why does an entrepreneur need a quality of making decisions?	Entrepreneurs need good judgement, e.g. deciding the most suitable source of start-up finding.
Why do entrepreneurs need to be persuasive?	Because they need to be able to convince customers, suppliers and banks, e.g. talking a supplier round to give an extra 2% discount on an order.
Why do entrepreneurs need leadership skills?	Because they employ and lead others, e.g. motivating staff to meet a deadline.
What is revenue/sales revenue/ turnover?	The amount of income received from selling goods or services over a period of time.
How do you work out the total revenue?	Price x Quantity
What are fixed costs?	Costs that do not vary with the output produced by a business, e.g. salaries, rent, advertising costs.
What are variable costs?	Costs that vary with output, e.g. raw materials, petrol, phone bill...
How do you work out a variable cost?	Cost of one unit x Quantity produced
How do you calculate total costs?	Fixed costs + Variable costs
When does a profit occur?	When revenues of a business are greater that its total costs. However, if business's costs are greater than revenue, it will make a loss.
How do you calculate profit?	Total revenue - Total costs
Why is profit one of the main objectives for a business?	Allows them to: Survive, reinvest profits for expansion, give an incentive to start the business, provide security and savings, reward employees, generate wealth for the owner.
What are the ways in which a business can increase profits?	Lower variable costs. Lower fixed costs. Increase sales price. Increase the quantity of sales.
What effect does making a loss have on a business?	Business might be: Unable to repay loans. Unable to pay bills such as wages. Experiencing cash flow problems Unable to survive, leading to business stopping trading.
Define cash flow	The flow of money in and out of a business.
Define a cash flow forecast	Predicts how cash will flow through a business over time.
What can a business do with forecasting cash flow?	Identify periods where it could have a cash-flow problem, where it does not have enough money flowing to pay for its bills.
Define inflow / receipts	The amount of money coming into the business from owners, bank loans or cash from sales.
Define outflows / payments	The amount of money going out of the business, e.g. wages, raw materials, interest on loans, advertising and bills.
How do you calculate net cash flow?	The inflows/ receipts - outflows/payments
Define opening balance	The amount of money in a business at the start of the month.
How do you calculate closing balance?	Net cash flow + opening balance
What impacts on cash flow?	Change in costs (commodity prices) Seasonality in sales (such as sun cream) Business expansion or contraction Change in stock levels. Credit terms can change (period of time or amount needed to pay a bill) Change in sales revenue/change in demand.
What can insufficient cash within the business lead to?	Business in debt (insolvent) Means they are unable to: Pay its debts. Repay bank loans. Pay wages to employees. Buy raw materials and products to sell. Promote the business.
Explain why cash flow is not profit?	A profitable business may still have a cash flow problem and go out of business. Cash flow is an important part of any business plan. Planning to avoid cash-flow problems can reduce risk.
What is a business plan?	A plan for the development of a business giving a cash flow forecast.
Why might a business owner write a business plan?	To: Convince a bank to loan money. Forecast financial projections. Identify the needs of customers. Formulate market research into important info (e.g. about competitors) Provide the owner with a 'plan of action that will minimise risk.
What goes into a business plan?	Overview: name location, type of business, purpose (I.e. products it will sell). Objectives: what they hope to achieve in a certain period of time. Market research: size, growth, features, trend in market. Personnel: who will work, roles Finances: sources, cash-flow forecasts, revenue, cost, profit. Production: suppliers, how it will be made, how supplied.
What are long-term sources of finance?	Share capital (limited companies, not sole traders) Personal savings from owner. Grants. Loans, e.g. bank. Mortgage (loan for property) Retained profit. Leasing, e.g. property, equipment , vehicle instead of buying it.
Give an external long term source	Venture capitalist (external investor looking for fast growth and return on their investment) Like the dragons on Dragons Den.
What are shares?	A share is a part-ownership in a business.
Explain how at start-up limited company can sell shares	A start-up that is a limited company, can sell shares to potential investors to raise capital.
What are shareholders?	These investors who invest their money in a share in a business are called shareholders in the business who are entitled to a share of any profits generated.
What does short-term sources of finance mean?	These are sources that are repaid immediately or fairly quickly, usually within a year.
Give examples of short-term sources of finance	Delayed payment (some businesses may try to delay payments to reduce cash outflows) Credit cards (short-term borrowing) Factoring (receiving cash immediately from a factor like a bank, instead of waiting to be paid) Trade credit. Bank overdraft.
What are the 3 stages of being customer focused?	Identifying needs. Anticipating needs. Meeting customer needs.
Explain identifying customer needs	Using techniques such as market research to find out what customers want.
How is identifying needs put into practice?	A business asking customers to complete a questionnaire as they leave the store.
Explain anticipating needs	The best businesses are able to identify needs in advance to give them a competitive advantage.
How is anticipating needs put into practice?	A pub opening a beer garden, anticipating warm weather, or fashion brand changing clothing in its store to match the styles at a national fashion show.
Explain meeting customer needs.	A business must be able to provide whatever customers want, whether that is quality, low prices or excellent service.
How is meeting customer needs put into practice?	A business adapting elements of the marketing mix, e.g. using recycled packaging for environmentally conscious customers.
What are the 4'Ps in the marketing mix?	Product. Place. Promotion. Price.
Explain product	The product itself has to meet the needs of the customers and have the correct attributes and features that the customer wants. A successful business will try to differentiate their products.
Explain place	Place is the way in which a product is distributed - how it gets from the producer to the consumer. Businesses have to consider the channel (e.g. online or through retail stores). For example, a luxury suit might be sold in a upmarket boutique on Bond Street in London.
Explain promotion	Promotion is communication between the business and customer that makes the customer aware of its product, including: advertising, sponsorship, sales promotion, public relations.
Explain price	The price of a product must reflect the value customers place on the product. High quality products have a high price. Customers are also willing to pay more for special features. Price is very subjective because it depends on many factors such as commodity prices and the price set up by competitors.
What does liability mean?	The term liability refers to legal responsibility of a business towards its debts.
What is unlimited liability and what type of businesses have this?	Sole traders are businesses owned by one person. The owner has unlimited liability. The owner is legally responsible for any debts of the business. Therefore there is a potential for the owner to lose his or her personal belongings to pay off any debts.
What is limited liability and what type of business has this?	Private limited companies (ltd) have limited liability. The owners and the business are separate legal entities. Any debts incurred by the business belong to the business and the owners can only lose up to the amount that they have invested. Their personal belongings are not liable.
What are differences between a sole trader and a private limited company?	Risks - sole trader has more risk due to unlimited liability, but ltd company has limited liability so risk is reduced. Control - sole trader has 100% control of decisions. LTD- the control of the main owner will depend on the proportion of the business sold as shares to other share holders.
Give two other difference between sole traders and private limited companies	Profits - sole trader keeps all profit, but limited companies have to share profit proportionally between shareholders. Privacy- sole traders have more privacy Private limited companies accounts are filled with Companies House and can be viewed by anyone on payment of a small fee.
Why do businesses need to follow legal requirements?	So that the government can keep track of business activity. So taxes can be collected. To protect businesses from illegal activity. To protect customers from illegal business practices.
What are the legal requirements of a small business?	Register and trade under unique name that promotes the business. Keep records of sales, purchases and names of businesses they have worked with.
What are the other two legal requirements of a small business?	Register with Her Majesty's Revenue & Customs (HMRC - the government authority in the UK responsible for collecting tax) Pay appropriate level of tax to HMRC.
What are the taxes on small businesses?	Value Added Tax - VAT Income tax. National Insurance Contributions - NIC Corporation tax.
What is VAT?	A tax on the value of sales of a business. Businesses that sell more than a certain amount will register to pay VAT.
What is income tax?	A tax on the income earned by workers and sole traders.
What is National Insurance Contributions?	A tax on earnings of workers and sole traders like to state benefits.
What is corporation tax?	A tax paid by limited companies on profits of the company.
What is customer satisfaction?	A measure of how much a business or its products meet customers' expectations.
How could a business provide good customer service?	Dispatch orders quickly. Being 100% accurate in orders/deliveries. Offering excellent after-sales care. Providing person service. Going the 'extra mile' Being convenient, polite, friendly. Responding quickly to complaints.
What are the benefits of good customer satisfaction?	Repeat purchases. Loyalty. Business can charge a premium price. Improves business reputation (good public relations and word of mouth) Can differentiate a business and become their USP.
How do repeat purchases help a business?	It helps achieve long term sales and therefore the success of business.
How can repeat purchases be stimulated?	Cheaper prices that competitors. Easy and convenient service. Effective customer service. Promotions and special offers. Building good relationship with customers (good communication)
Explain the steps of the recruitment process	Draw up recruitment documents including job adverts, job particulars, job descriptions and job specification. Receive applications through CVs, application form and letters. Shortlisting - a list of suitable candidates is drawn up.
What happens after shortlisting?	Selection - involves interviews and assessments: references might be requested. Training - to develop skills using on the job and off the job training (all staff, but especially new staff)
What must the candidate selected have?	The right skills, e.g. the ability to operate computers or machines) and attitudes, e.g. flexibility or hardworking.
How can a business motivate staff?	Paying fair and competitive wages. Providing good working conditions. Providing perks, such as company cars. Giving power and responsibility. Training and nurturing staff development. Encouraging teamwork and good relationships.
What is the employment legislation?	Where employers must abide laws that protect employees.
Explain recruitment in the employment legislation	Employees cannot discriminate on the basis of sex, age , gender or disability.
Explain pay in the employment legislation	Employees must be paid equally for doing the same job.
Explain discipline in the employment legislation	Employees are protected from unfair dismissal.
Explain working hours in the employment legislation	Employees cannot be expected to work over a certain number of hours.
What is supply?	Supply for a product is the amount that sellers are willing and able to sell at any given price.
What is demand?	Demand for a product is the amount that buyers are willing and able to purchase at any given price.
What does it mean when the demand is high but the supply is low?	Prices will rise - shortage
What does it mean when demand is low but the supply is high?	Prices will fall - surplus
What is a market?	Where buyers and sellers meet to exchange products and services.
What is a commodity market?	Markets for raw materials such as oil, steel and wheat, used in the production of other goods.
What is a goods market?	Are markets for everyday products, such as clothes and food.
Explain how changes in raw materials and energy costs affect the costs of small businesses.	How much it effects depends on: Their proportion of total costs (a great deal, greatly affected) How much costs go up (a little, not greatly affected) The ability to pass on costs to customers or absorb them (passed on, not greatly affected)
What is an interest rate?	The percentage reward or payment over a period of time that is given to savers on savings or paid by borrowers on loans.
Explain how a business will have to pay interest after getting an overdraft or loan	They will have to pay interest on top of its repayments for the loan and on any amount it is overdrawn.
What are fixed interest rates?	Fixed interest rates do not change over the life of a loan. A business could lose out on a fixed contract if the rate falls.
What are variable interest rates?	Variable interest rates change over the life of a loan. They can be more risky and hard for a business to plan against.
Explain the effects of when a rise in interest rates increases the cost of borrowing	Businesses on a variable rate may struggle to repay loans. Small businesses are less likely to borrow money to start up or expand. Customers are less likely to spend money as borrowed money costs more, so consumer spending falls.
Explain the effects of when a fall in interest rates lowers the cost of borrowing	Businesses will have more money to spend and cash flow may improve. Businesses may borrow money for a start-up or expansion. Customers are more likely to borrow and to spend their money. Consumer spending rises.
What are exchange rates and what does it tell?	The exchange rate is the price of buying foreign currency. It tells UK people and businesses how much foreign currency they get for every pound.
What are imports?	Goods and services bought from abroad
What are exports?	Goods and services sold abroad
Give an example of how you would calculate exports	£1 = $2 £500 of goods sold to a business in the USA cost $1000 (500 x 2)
Give an example of how you would calculate imports	£1 = $2 $600 of goods bought by UK business cost £300 (600 / 2)
What are the effects of a fall in the value of a pound?	Good for: UK exporters of goods - price of export falls - sales increase. UK tourism - prices cheaper for foreigners- tourism increases. UK businesses- imports more expensive - people buy more UK goods.
Give a bad effect if the value of a pound fell?	Bad for UK importers of materials - imports more expensive - costs rise.
What are the effects of a rise in the value of a pound?	Bad for: UK exporters of goods - price of exports rises - sales fall. UK tourism - prices more expensive to foreigners - tourism falls. UK businesses - imports cheaper - people buy fewer UK goods.
Give a positive effect of the rise of the value of a pound	Good for UK importers of materials - imports cheaper - costs fall.
What is a stakeholder?	A stakeholder is an individual or a group that has an interest in and is affected by the activities of a business.
Give examples of stakeholders	Managers - want bonuses and long-term success. Workers - want good pay and working conditions. Competitors- sometimes want cooperation and support.
Give other examples of stake holders	The local community- wants local investment and limited pollution. Government- wants low unemployment and competitive markets. Suppliers - want regular orders. Owners (share holders) want profits and a return on their investment.

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	Created by Khadijah Mohammed over 9 years ago