1.4 Making the business effective

Question 1

What is meant by the term ‘Unlimited liability’

Answer 1

The owners are fully responsible for all depth owed by the business. Owners are also legally responsible for any unlawful acts committed by those connected to the business.

Question 2

What are the implications of ‘unlimited liability’

Answer 2

There there is no legal distinction between owners with unlimited liability, and the business. As a result, the business owners may have to use their own personal assets to pay debts or legal fees.

Question 3

What is meant by the term ‘limited liability’

Answer 3

Owners (shareholders) of private limited companies and public limited companies can only lose the original amount they invested in the business. If it fails shareholders are not responsible for business debts. In most cases, the shareholders cannot be held responsible for unlawful acts committed by those connected with the business.

Question 4

What are the limitations of ‘limited liability’

Answer 4

Companies are Incorporated and owners are considered a separate legal entirety to a business. This means that if a company fails, the owners will lose their investment shares, but would not have to use their assets to meet additional debts or legal fees.

Question 5

What dose liquidation mean

Answer 5

The Legal process of dissolving accompany

Question 6

What kind of liability would solentraders and partnerships have

Answer 6

Unlimited liability

Question 7

What are the 5 legal forms of a business

Answer 7

1. Sole trader
2. Partnership
3. Franchise
4. Private LTD company
5. Public LTD company

Question 8

What dose LTD mean

Answer 8

Limited

Question 9

What is a sole trader

Answer 9

A business that has a single owner (although they may hire employees)

Question 10

What are the advantages of starting up a business as a sole trader

Answer 10

Easy and inexpensive to set up
The owner has complete control over the business
All profits belong to the owner
Simple tex arrangements

Question 11

What are the disadvantages of being a sole trader

Answer 11

Unlimited liability meaning the owner is personally responsible for any debts the business incurs
Limited access to finance and capital
Limited skill set of the owner/entrepreneur

Question 12

What is a partnership

Answer 12

Two or more people join together to form a business

Question 13

What are the advantages of being a partnership

Answer 13

Easy to set up and inexpensive
Shared responsibility and decision making
More skills and knowledge available
Increased access to finance and capital

Question 14

What are the disadvantages of being in a partnership

Answer 14

Unlimited liability
Potential for disputes between partners
Profits are often shared equally regardless of the contribution
Difficult to transfer ownership

Question 15

What is a private limited company

Answer 15

The Ownership of the business is broken down into specific number of shares
these shares can be sold by the owner usually to friends and family or to venture capital
Decision-making often rest within the person is appointed to the run the business, often called the managing director or the CEO

Question 16

What are the advantages being in a private limited company

Answer 16

Limited Liability, meaning the owners are not personally responsible for the company’s debts.
Access to greater finance and capital
easier to transfer ownership
can have professional image and reputation.

Question 17

What are the disadvantages of being apart of a private limited company

Answer 17

More Expensive and time-consuming to set up.
More complex legal requirements and regulations Densole traders.
Annual finance reporting and auditing are required.
Shareholders have little control over the company as the founder usually imposes their agenda.

Question 18

What is franchising

Answer 18

Franchising is when a business model where an individual buys the rights to operate a business model, using its branding and software tools to receive support from a larger company (franchisor) in exchange for an initial lump sum plus ongoing fees known as royalties.

Question 19

What are the advantages of owning a franchise

Answer 19

Centralise advertising – a ready-made well recognised brand name, which will be promoted essentially by the franchiser
Training - The franchiser provides training, such as how to make pieces properly to ensure the quality and consistency of the brand stays the same
Supplies are provided – the franchiser provides equipment and supplies, so that the products will be the same, regardless of where it’s purchased
Exclusive location- The franchiser provides an exclusive area of market to sell
Support service - advice, training used of software, system and problem-solving are ongoing, and the franchiser may also provide a franchisee with the loans/insurance

Question 20

What are the disadvantages of owning a franchise

Answer 20

Overhead / startup costs - This is a fixed sum paid at the start of the franchise for the rights to use the businesses, name and resources
royalty costs - usually paid quarterly and batteries, according to the level of sales often equal to 5 to 10% of sales turnover
cost of supplies - The franchise of my cell material or equipment to the franchisee at an inflated price
quality control management - If the franchisee does not produce the good/ service to the required standard set by the franchisor the franchise rights can be removed from them

Question 21

Choosing a business can have significant impact on a business
Name 5

Answer 21

1. Attracting customers
2. Reducing costs
3. Accessing skilled labour
4. Remaining competitive
5. Enchanting it’s reputation

Question 22

What are the 3 factors that effect business location

Answer 22

Nature of the business
Impact of the internet
Generally proximity

Question 23

What is meant by proximity when choking a business location

Answer 23

Proximity to the market
Proximity to labour
Proximity to materials
Proximity to competitors

Question 24

What is meant by nature of business activity when choosing business location

Answer 24

Different types of businesses have different requirements in terms of space, infrastructure and accessibility

Question 25

What is meant by impact on the internet when choosing business location

Answer 25

Businesses Can now reach customers from anywhere and physical locations may not be as important as it once was

Question 26

What are the 4 P’s of the marketing mix

Answer 26

Price Product Promotion Place

Question 27

What is meant by promoting in the marketing mix

Answer 27

Promotion Is an important element of the marketing mix as it plays a **crucial role in generating customer interest and desire for a product/service** a business can communicate its value proposition (A simple statement that summarises why customer would choose your product or service) to potential customers and different itself from competitors promotion helps the best brand awareness and loyalty, which can lead to repeat purchases **The promotion element of the marketing mix, includes a variety of promotional methods, such as advertising direct selling to potential customers and public relations**

Question 28

What is meant by product in the marketing mix

Answer 28

The product design mix refers to the combination of elements that make up a product design is elements include **function, aesthetic and cost** Balancing The elements of functional aesthetics and cost helps the products design through both functional and attractive, was also being cost-effective for both the manufacturer and the customer Developing A strong brand can **help to differentiate a product or service from those offered by competitors** and can help a business to **add value** as customers often willing to pay high prices for a brand-new recognise and trust

Question 29

What is meant by price in the marketing mix

Answer 29

By Understanding the **customers, competitors, and costs,** businesses can set prices that maximise revenue and profitability Pricing can play a significant role in positioning the brand in the market and helping a firm to compete effectively

Question 30

What id meant by place in the marketing mix

Answer 30

This Refers to the **physical location of the business and all the journey through which the product goes from the business to the end** Customer choosing the most efficient, location, or distribution network will result in **lower costs and greater profits**

Question 31

How dose new technology impact price in the marketing mix

Answer 31

Businesses can use the data analytics to analyse their competitors pricing strategies and set the prices. Accordingly technology can also help companies reduce costs in several ways which gives them the option to lower their prices. Technology can enable dynamic pricing strategies where prices can be adjusted in real time based on supply and demand

Question 32

How dose new technology impact the product in the marketing mix

Answer 32

Businesses can now easily gather feedback from the customers. This Information can help businesses create and refine products that meet customer needs

Question 33

How dose new technology impact promotion in the marketing mix

Answer 33

Businesses can now easily reach their target audience with highly targeted marketing messages. Businesses can use digital channels to create two-way communication with customers, allowing them to provide feedback and ask questions.

Question 34

How dose new technology impact place in marketing mix

Answer 34

E-commerce has made it possible for businesses to reach customers in any location at any time, and throughout any device, businesses can expand their reach beyond the physical location and offer a wider selection of products

Question 35

What is a business plan

Answer 35

A document produced by the owner at the start up of a business

Question 36

What are the 8 elements of a business plan

Answer 36

1. The business idea 2. The business aims and objectives 3. The target market 4. The forecast revenues, costs and profits 5. The cash flow forecast 6. The sources of finance 7. The business location 8. The planned marketing mix

Question 37

What is the main reason to produce a business plan

Answer 37

To reduce Rick and help the owner to raise finance

Question 38

A well written business plan can help a business to obtain finance such as (3)

Answer 38

1. **Lenders and other investors** will be able to explore the plan and make an informed decision about whether the business is a credible and worth the financial risk 2. Investors - Will use the business plan to explore whether there is an opportunity to increase the value of their investment and make a worthwhile profit 3. The business having carried out research to support the plan will be well informed about the potential problems and chances of success I can select the most appropriate source of finance based on this information

Question 39

What is a business plan useful for

Answer 39

Obtaining money from a bank More knowledgeable about wether the business might succeed or fail