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Business > Chapter 1: Understanding Business > Flashcards

Chapter 1: Understanding Business Flashcards

1
Q

What is the Primary Sector of Industry?

A

Consists of businesses that are involved in exploiting natural resources eg. farming, mining & oil drilling

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2
Q

What is the Secondary Sector of Industry?

A

Consists of businesses that are involved in manufacturing and construction eg. electronics manufacture, car production & house building

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3
Q

What is the Tertiary Sector of Industry?

A

Consists of businesses that are involved in providing a service eg. retail outlets, banks, hotels & hospitals

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4
Q

What is the Quaternary Sector of Industry?

A

Consists of businesses providing information and knowledge-based services eg. ITC, consultancy & research and development (R&D)

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5
Q

What is the Private Sector of the Economy?

A

Consists of businesses that aim primarily, to maximise profits eg. Ford & Samsung

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6
Q

What is the Public Sector of the Economy?

A

Consists of government-owned organisations and agencies which aim to provide a service to society eg. NHS, police & state education

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7
Q

What is the Third Sector of the Economy?

A

Consists of organisations that have been set up to provide goods or services to benefit others eg. charities, social enterprises & voluntary organisations

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8
Q

If a company has ‘Limited Liability’ what does this mean?

A

The owners’ personal possessions are not at risk, if a business gets into debt with creditors, owners only lose their investment in the company

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9
Q

What companies have ‘Limited Liability’?

A

Private Limited Companies

Public Limited Companies (PLC)

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10
Q

What is the owner of a Limited Company called?

A

Shareholders

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11
Q

In a Private Limited Company, who are shares available to?

A

Shares are sold privately to investors and are not available to the general public

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12
Q

What are the aims of a Private Limited Company? (3)

A
  1. maximise profits
  2. grow
  3. increase market share
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13
Q

What are the advantages of a Private Limited Company? (4)

A
  1. owners (shareholders) have limited liability
  2. ownership is not lost to outsiders
  3. the business usually retains a close and tight-knit, friendly feel with a high level of customer service
  4. expertise and business acumen are gained from an experienced board of directors
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14
Q

What are the disadvantages of a Private Limited Company? (4)

A
  1. profits have to be split with many shareholders by issuing dividends
  2. a complicated legal process is required to set up the company
  3. a limited source of capital is available and shares are not sold publicly
  4. financial statements have to be shared with Companies House (and therefore made publicly available), meaning profits are not kept private
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15
Q

In a Public Limited Company (PLC), who are the shares available to?

A

PLCs can sell their shares publicly through the stock market

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16
Q

What are the aims of a Public Limited Company (PLC)?

A
  1. dominate market
  2. increase market share
  3. increase market value
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17
Q

What are the advantages of a Public Limited Company (PLC)? (4)

A
  1. shareholders have limited liability
  2. large amounts of finance can be raised through the public sale of shares
  3. it is easy to borrow finance due to a PLCs size and reputation, so less risk for banks
  4. PLCs can easily dominate the market
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18
Q

What are the disadvantages of a Public Limited Company (PLC)? (4)

A
  1. dividends are shared with many shareholders
  2. control of the business can be lost as anyone can buy shares on the stock market
  3. annual accounts have to be published
  4. setting up a PLC is costly and complicated
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19
Q

What is a Franchise?

A

A business model that allows businesses to pay a sum of money to own a branch of a well-known, existing business

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20
Q

What is the Franchiser?

A

The main, original business

21
Q

What is the Franchisee?

A

The owner of each individual branch

22
Q

What are the aims of a Franchise?

A
  1. grow
  2. increase market share
  3. maximise profits
  4. increase market value (if it’s a PLC)
23
Q

What are the advantages for a Franchiser? (2)

A
  1. a low-risk of growth as the Franchisee invests the majority of the capital
  2. receives a percentage of all Franchisee’s profits each year (known as royalties)
24
Q

What are the disadvantages for a Franchiser? (2)

A
  1. the reputation of the whole Franchise could be tarnished by one poor Franchisee
  2. Only a share of profits is received rather than all the profits as it would be if they owned each branch
25
Q

What are the advantages for a Franchisee? (3)

A
  1. there is very little autonomy over decisions as the franchiser decides on products, store layout, uniform etc
  2. royalties have to be paid each year
  3. there are high initial start-up fees
26
Q

What are Multinational businesses?

A

Businesses that have operations in more than one country, most are limited companies and their head office is usually based in the ‘home country’

27
Q

The World becoming one big market place in known as what?

A

Globalisation

28
Q

In recent years, how has it become easier to operate as a Multinational?

A

Due to the improvement in infrastructure eg. inexpensive air travel, single currencies (euro) & the growth of e-commerce

29
Q

What effects does Multinational have on ‘Host Countries’?

A

Positive and Negative
On one hand, multinationals provide jobs and training and can have positive effect on local economies
On the other hand, they can exploit low-paid labour, use up natural resources, put local firms out of business and take their profits back to their home country

30
Q

What are the advantages of a Multinational? (4)

A
  1. wages and raw material costs are lower in host countries
  2. business can avoid legislation in the home country
  3. grants can be issued by governments to locate in their country
  4. business can avoid quotas (retraction on amount of imports/exports) and tariffs (taxes on imports/exports) issued by their own governments
31
Q

What are the disadvantages of a Multinational? (4)

A
  1. language barriers can slow down communication
  2. cultural differences can affect production eg. ‘siestas’ in Spain
  3. exchange rates can affect purchasing and paying expenses in different countries
  4. time differences can hinder communication between head office and branches around the world
32
Q

What are ‘Nationalised’ Companies?

A

Businesses that were once in the private sector but that have now been bought over in part or full by the government to stop them from going bust.

33
Q

What is the opposite of ‘Nationalising’?

A

Privatising which is when a public sector organisation gets sold to the private sector eg. royal mail, scotrail

34
Q

Do charities have individual owners?

A

No. Charities are set up as trusts in which the overall control is carried out by a board of trustees

35
Q

What are the main aims and objectives of a charity?

A

Depends on the individual cause at the heart of the organisation eg. SSPCA aims to improve welfare of animals in Scotland

36
Q

What are the advantages of Charities? (3)

A
  1. Charities are exempt from paying some taxes, such as VAT and Corporation Tax
  2. There are low wage costs due to volunteers working for free
  3. Private companies are more willing to donate to and sponsor charities than ever before as it is good ‘PR’
37
Q

What are the disadvantages of Charities? (2)

A
  1. It can be difficult to compete with the large marketing budgets of organisations within the private sector
  2. Charities rely heavily on volunteers who may leave for paid work
38
Q

What do Voluntary Organisations aim to do?

A

They aim to provide a service for their members and the local community eg. local sports clubs; golf, football

39
Q

How do Voluntary Organisations raise finance?

A

They raise money mostly through membership subscriptions

40
Q

Who runs Voluntary Organisations?

A

They are controlled and run by an elected committee and helped by volunteers

41
Q

What is the main aim of a Social Enterprise?

A

To make a profit that will benefit a specific group or cause eg. Big Issue aims to help the homeless in the UK

42
Q

What sector of Industry do Social Enterprises most resemble and how?

A

Private Sector, as they can be owned by one person (sole trader), two to twenty people (partnership) or shareholders in a limited company

43
Q

What is the main difference between Social Enterprises and organisations within the Private Sector?

A

The profits of a Social Enterprise benefit a social, environmental or cultural cause and not solely the owners of the business

44
Q

What are the advantages of a Social Enterprise? (4)

A
  1. Social aims can endear a social enterprise to customers
  2. Good-quality employees who believe in the social ‘mission’ are attracted to the organisation
  3. They are likely to receive government grants due to their positive impact on society
  4. ‘Asset lock’ means that, should the enterprise be closed down, the sale of any assets and any profits will be used to benefit their cause
45
Q

What is the main aim of a Co-operative?

A

To provide quality service for the benefit of its members and customers

46
Q

Who gets invited to become a member of a Co-operative?

A

Customers and employees are, they then share ownership, decision-making and profits (dividends)

47
Q

What do Co-operatives subscribe to?

A

An internationally agreed set of values and principles which define their ethical approach to business

48
Q

What distinguishes Co-operatives from organisations following the Social Enterprise model?

A

The values, principles and democratic structure of the business

Business (1 decks)

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