Flashcards · 1BS0 · Topic 1.1

Enterprise and entrepreneurship flashcards

16 cards on Topic 1.1, subtopics 1.1.1 to 1.1.3. Pick a subtopic or study them all.

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The three reasons the specification gives for new business ideas: Changes in technology; changes in what consumers want; products and services becoming obsolete.
Obsolete: Out of date because something better has replaced it, so few people still want it.
Original ideas: New to the market. No direct rivals at first, but demand is untested.
Adapting existing products, services or ideas: Changing what is already sold. Demand is proven, but rivals exist.
Dynamic (as in the dynamic nature of business): Always changing, so ideas and markets keep shifting.

The three risks and three rewards of enterprise named in the specification: Risks: business failure, financial loss, lack of security. Rewards: business success, profit, independence.
Business failure versus financial loss: Failure is the business closing. Financial loss is costs exceeding revenue, or money being lost. A business can make a loss for a while without failing, but losses over time may cause failure.
Revenue, total cost and profit: formulas: Revenue = price × quantity. Total cost = total fixed costs + total variable costs. Profit = revenue − total costs. Formulae are not provided in the exam, so learn them.
A shop sells 140 items at £9 each with total costs of £1,000. Find the profit. What if sales fall to 100?: Revenue = 9 × 140 = £1,260; profit = 1,260 − 1,000 = £260. At 100 items: revenue £900, a loss of £100.
Independence (as a reward of enterprise): Being your own boss and choosing how to work.

The three purposes of business activity: To produce goods or services, to meet customer needs and to add value.
Add value: Make the output worth more to the customer than the inputs bought. Value added is not all profit, because wages and rent still have to be paid.
The five ways of adding value in the specification: Convenience (saves time or effort), branding (a trusted name), quality (better made or delivered), design (looks or works better) and unique selling points.
Unique selling point (USP): A feature that rivals do not offer.
The three roles of an entrepreneur: Organises resources (premises, labour, equipment, money), makes business decisions (what, where, how and for whom) and takes risks (puts time and money in without a guarantee).
Goods and services: Goods are physical items sold to customers. Services are actions done for customers.