1.4 - making the business effective

Question 1

what is a sole trader?

Answer 1

an individual owning the business by themselves

Question 2

what are some advantages to being a sole trader? (4)

Answer 2

cheap and easy to set up, all profits go directly to you, competitors cant see your accounts, you are the boss

Question 3

what are some disadvantages to being a sole trader? (4)

Answer 3

unlimited liability, may not have skills required to handle the business, decision making can be stressful, heavy workload

Question 4

what is a partnership?

Answer 4

where a business is owned and started by more than one person

Question 5

what is recommended when having a partnership?

Answer 5

a partnership agreement, sets out how the partnership is run and how the profits are divided

Question 6

what are the advantages to a partnership? (5)

Answer 6

minimal paperwork once set up, simple to form a business together, jobs can be shared, loss is shared, other skills can be provided

Question 7

what are the disadvantages to a partnership? (5)

Answer 7

unlimited liability, they have to live with the decisions of each other, decision making can take longer than usual, short life as if one partner leaves the partnership ends, profits have to be shared

Question 8

what is unlimited liability?

Answer 8

where the owners may have to use their own personal funds to pay for any debts if there isnt enough money in the business to pay these debts, the owners will be liable for any debts the business incurs

Question 9

what is a limited company?

Answer 9

a company that is formed with a separate legal identity to the owners , the owners are shareholders and they receive a dividend as profit, it is ran by a board of directors

Question 10

what is a private limited company?

Answer 10

companies that can raise funds from investors like family, as its shares arent listed on the stock exchange

Question 11

what is limited liability?

Answer 11

where shareholder’s aren’t responsible for the company’s debts , they may only lose the money that they invested into the business

Question 12

what are advantages to having a private limited company?

Answer 12

limited liability, finance can be easily raised as company can sell shares, stable structure as the company stays despite the shareholders, original owners likely to retain control

Question 13

what are disadvantages to having a private limited company?

Answer 13

shareholders have to agree about the distribution of profit, greater administrative costs , finance limited to friends and family, less privacy, director’s legal duties are stricter

Question 14

what factors influence ownership choice? (5)

Answer 14

size of business, type of business, lender requirements, investment protection, control

Question 15

what is franchising?

Answer 15

where a franchisor grants a licence, franchise to another business (franchisee) to allow it to trade using their brand, name and business format

Question 16

what makes a successful franchise?

Answer 16

proven format, distinctive image and brand, specific area to target, potential to make enough profit for both franchisor and franchisee

Question 17

what are advantages to setting up a franchise? (7)

Answer 17

franchisor will still own the business and still receive royalties from the franchisees, tested and developed format and brand, advice support and training is available to the franchisee, easier to raise money, no industry expertise required, lower risk method for franchisee and low failure rate

Question 18

what are disadvantages for the franchisee? (4)

Answer 18

not cheap, restrictions on marketing activities, risk that franchisor will go out of business, franchise needs to earn enough profit for franchiser and franchisee

Question 19

what is a franchisor?

Answer 19

someone that sells the right to operate the franchise to another business

Question 20

what is a franchisee?

Answer 20

business that buys the right to use the business idea from an existing business

Question 21

what are factors that influence business location? (6)

Answer 21

raw materials, labour, competition, costs, nature of business activity, proximity to the market

Question 22

how do raw materials influence business location?

Answer 22

business may depend on raw materials so locating near the supplies may reduce costs

Question 23

how does proximity to the market influence business location?

Answer 23

businesses may need to locate near a certain group of people, this is important for those businesses with services

Question 24

how does competition influence business location?

Answer 24

if a new business sees a gap in the market where there are no competitors this will be a good place to locate but this may also mean it isnt a profitable area for the business

Question 25

how do costs influence business location?

Answer 25

limited finance at the start of a business, cost and labour varies in each location

Question 26

how does labour influence business location?

Answer 26

access to a reliable supply of skilled staff is advised

Question 27

what is the impact of internet affect business location?

Answer 27

many businesses launch online as it's cheaper and easier to set up and will be able to reach a wider range of customers

Question 28

what is the marketing mix?

Answer 28

how a business combines product and price and uses promotion effectively and the location of their sales to be successful

Question 29

what are the elements of the marketing mix? (4)

Answer 29

product, price, promotion, place

Question 30

how does no competition affect product?

Answer 30

business will have higher sales meaning there is less incentive to improve the quality or make a product

Question 31

how does no competition affect price?

Answer 31

price can be set high, resulting in big profit

Question 32

how does no competition affect promotion?

Answer 32

once people are aware of the business there is little promoting that needs to be done

Question 33

how does no competition affect place?

Answer 33

convenience matched to the business instead of the customer

Question 34

how does competition affect product?

Answer 34

constant developing of products and great quality, usps may need to be developed to keep up as well

Question 35

how does competition affect price?

Answer 35

low prices must be retained to survive in the market, this means less profit is made

Question 36

how does competition affect promotion?

Answer 36

increased promotion to keep customers loyal and attract new consumers

Question 37

how does competition affect place?

Answer 37

greater focus on customer requirements which may increase costs

Question 38

what is digital technology?

Answer 38

business uses computer based things to generate, store or process data

Question 39

what is e-commerce?

Answer 39

buying and selling of goods using the internet

Question 40

what is m-commerce?

Answer 40

using mobile phones to buy and sell goods

Question 41

how has digital marketing affected product?

Answer 41

it has led to a whole range of products

Question 42

how has digital marketing affected price?

Answer 42

decreased costs because the cost of production is lower now, competition is also increased

Question 43

how has digital marketing affected promotion?

Answer 43

lots of advertising is done via the internet because of its personalisation and websites

Question 44

how has digital marketing affected place?

Answer 44

many consumers can now buy many products from anywhere around the world

Question 45

what is a business plan?

Answer 45

a written document that describes a business, its objectives, its strategies, the market it is in and financial forecasts

Question 46

what is the purpose of business planning? (7)

Answer 46

provides focus on business idea, helps test financial viability of the idea, helps set appropriate objectives, allows target market to be identified through market research, allows marketing mix to be clearly outlined, organised, helps you measure actual performance

Question 47

what info should be included in a business plan? (8)

Answer 47

idea, objectives, finance required, market overview, how business will operate, marketing, cash flow forecast, forecast rev costs and profit

Question 48

advantages to a business plan (5)

Answer 48

allows reviewing and to see if it provides a profitable future, reduces risk, allows the business' progress to be compared and change anything, helps to secure finance, market research reduces risk

Question 49

disadvantages to a business plan (4)

Answer 49

poor quality as poor market research may be conducted resulting in lower sales and higher starting costs, requires updating, requires time and effort, new opportunities can be missed if not in the plan