Intro To Business

Question 1

Business sectors:

What is meant by the primary sector?

Answer 1

Primary sector - Refers to harvesting raw materials e.g. fishing

Question 2

Business sectors:

What is meant by the secondary sector?

Answer 2

Secondary sector - converting raw materials into finished good (manufacturing)

Question 3

Business sectors:

What is meant by the tertiary sector?

Answer 3

Tertiary sector - providing services e.g. teaching

Question 4

Business sectors:

What is meant by a private sector business?

Answer 4

Private sector - businesses are run to make profit and are owned by private individuals.

Question 5

Business sectors:

What is meant by a public sector business?

Answer 5

Public sector - businesses are run on behalf of the public by the government.

Question 6

Business sectors:

What is meant by a third sector organisation?

Answer 6

Third sector - refers to charities and NGO’s

Question 7

Business sectors:

What is a local market

Answer 7

Local markets refer to when customers are close to the suppliers

Question 8

Business sectors:

What is a national market?

Answer 8

A national market refers to where customers are spread throughout a country

Question 9

Business sectors:

What is meant by an international market?

Answer 9

An international market refers to when customers are located in many different countries around the world.

Question 10

Business sectors:

What is the difference between a national and a multinational business?

Answer 10

A national business has operations in one country which is sells to…
whereas a multinational business has operations in more than country.

Question 11

Franchises and franchisees:

What is meant by a franchise?

Answer 11

Franchise - when a business with a well known brand name (franchiser) let’s a person or group of people (franchisee) set up using that brand.

Question 12

Franchises and franchisees:

What are the advantages to the franchiser?

Answer 12

• firm doesn’t have to spend lots to grow.
• products necessary for franchise to operate are under the franchisers control.
• Applicants can be carefully selected for suitability.

Question 13

Franchises and franchisees:

What are the disadvantages to the franchiser?

Answer 13

• there may be control issues.
• the cost of supporting the franchisees.
• the possibility of conflict with the franchisees.

Question 14

Franchises and franchisees:

What are the advantages to the franchisee?

Answer 14

• lower risk as it’s an established business.
• access advice and training.
• large amounts of marketing.
• may be easier to obtain finance.

Question 15

Franchises and franchisees:

What are the disadvantages to the franchisee?

Answer 15

• profits have to be shared
• there are fees involved e.g. franchise fee and royalty fees.
• Less control and independence
• supplies have to be bought from the franchiser.

Question 16

Franchises and franchisees:

What are costs that the franchisee has to pay to the franchiser?

Answer 16

• franchisee fee (cost of becoming a franchise)
• a percentage of profits.
• training or marketing fees.

Question 17

Franchises and franchisees:

What is meant by a cooperative?

Answer 17

Cooperative - a business that is owned and run by its members (employees and customers).

Question 18

Franchises and franchisees:

What are the advantages of cooperatives?

Answer 18

• members have limited liability.

- a higher quality of service.

Question 19

Franchises and franchisees:

What are some disadvantages of cooperatives?

Answer 19

• capital can be limited.

- slower decision making

Question 20

External growth:

What is meant by a joint venture?

Answer 20

Joint venture - when 2 or more businesses pool their resources and expertise to achieve a particular goal e.g. developing new products or business expansion.

Question 21

External growth:

What are the benefits of a joint venture?

Answer 21

• partners benefit from the others expertise and resources
• each partner has the option to acquire the joint venture in the future
• reduced risk

Question 22

External growth:

What are the drawbacks of a joint venture?

Answer 22

• risk of clashes in organisation cultures e.g. management styles.
• the objectives of each partner may change leading to a conflict of objectives.
• there may be an imbalance in the expertise/investment or assets brought by the partners.

Question 23

External growth:

What is meant by a strategic alliance?

Answer 23

Strategic alliance - an arrangement between 2 companies that have decided to share resources to undertake a specific, mutually beneficial project.

Question 24

External growth:

What is the difference between a joint venture and a strategic alliance?

Answer 24

In a strategic alliance the 2 or more companies remain separate entities whereas in a joint venture a new entity is formed.

Question 25

External growth:

What are the benefits of a strategic alliance?

Answer 25

• firms can share resources.

Question 26

External growth:

What are the drawbacks to strategic alliances?

Answer 26

• may be legal disputes over who owns what e.g. branding or design.
• often no better off than if one firm went it alone.