Making The Business Effective : Test 4

Question 1

What is a sole trader ?

Answer 1

Businesses that have only one owner for example hairdressers, plumbers etc

Question 2

What are advantages of sole traders ?

Answer 2

• They are easy to set up
• You get to be your own boss
• You get all the profit and decide what gets done
• Low set up costs

Question 3

What are disadvantages of sole traders ?

Answer 3

• You have unlimited liability because you aren’t legally separate from the business and therefore personal finances are at risk
• It can be hard to raise money as banks see sole traders as risky so it may be hard to get a loan
• You are unincorporated because the business doesn’t have its own legal identity so if the business is sued so are you
• high level of responsibility and long hours

Question 4

What is a partnership ?

Answer 4

Partnerships are generally between 2-20 partners. Each partner has an equal say in making decisions and an equal share of profits unless the deed of partnership ( an agreement ) says otherwise

Question 5

What are advantages of a partnership ?

Answer 5

• More owners means more ideas and skills
• It means the workload is shared
• More owners means more capital (money) can be put in the business to help it grow faster
• quick to set up

Question 6

What are disadvantages of partnerships ?

Answer 6

• Each partner is legally responsible for what the other partners do
• Most partnerships have unlimited liability
• More owners means more disagreements
• The profits are shared between the partners so if a sole trader decides to go into partnership with another person they could end up with less money
• Long hours

Question 7

What are the two types of limited companies

Answer 7

Private limited companies (Ltd) and Public limited companies (Plc)

Question 8

Describe what private limited companies are ?

Answer 8

It can be a small or large business with unlimited liability. The owners are known as shareholders and have to be invited to get a share.

Question 9

What are advantages of private limited companies ?

Answer 9

• Limited liability meaning you only lose money invested not personal assets
• It is easier for a private limited company to get a loan or a mortgage than it is easier for a sole trader or partnership
• Shares in the business can be sold for money

Question 10

What are disadvantages of private limited companies ?

Answer 10

• They’re more expensive to set up than partnerships because of all the legal paperwork
• Unlike sole traders or partnerships they are not legally obliged to publish its accounts every year
• can be time consuming to set up

Question 11

What is a franchise ?

Answer 11

A business that gives the right to another person or business to sell goods or services using its name. It does this by providing the person with a license. You have to pay a fee to be part of it but it comes with benefits including marketing, training, equipment, products ect

Question 12

What is a franchisor ?

Answer 12

A business that gives franchisees the right to manufacture, distribute or sell its branded products in return for a fixed sum of money or a royalty payment.

Question 13

What are franchisees ?

Answer 13

A business that agrees to manufacture, distribute or sell branded products under the license of a franchisor

Question 14

What are advantages of franchises ?

Answer 14

• the franchisee gets access to free training and marketing
• the franchisee is part of an established business
• it can be easier to make money
• it is lower risk for a new entrepreneur than setting up a new business

Question 15

What are disadvantages of franchising ?

Answer 15

-the franchisee has to pay a percentage of its profits to the franchisor. This is known as royalties
- it can be expensive to set up
- the franchisee cannot make individual business decisions without consulting the franchisor
- other franchises can be set up locally, which can cause competition for customers

Question 16

What are the 4 P’s in the marketing mix

Answer 16

Product, Price, Promotion and Place

Question 17

What is limited liability?

Answer 17

The business owners are only financially responsable for the business debts.

Question 18

What is unlimited liability?

Answer 18

A business owner fully is responsable for all business debts and assets can be taken of the owner if in debt.

Question 19

What is a franchise?

Answer 19

The right given by one business to another to sell goods using its name

Question 20

What is a gap in the market?

Answer 20

A gap in the market is an opportunity for a business where customer needs and wants are not being met.

Question 21

What is a competitive environment?

Answer 21

A competitive environment is a market where there are other businesses producing the same or similar products and services.

Question 22

Define limited liability

Answer 22

Limited liability means that the business owner or owners are only responsible for business debts up to the value of their financial investment in the business

Question 23

Define unlimited liability

Answer 23

Unlimited liability means that the business owner or owners are personally responsible for all of the debts of the business, no matter what the value.

Question 24

Why is a business being close to target market important

Answer 24

It helps them not miss out and sales and be accessible to their target market

Question 25

Why is proximity to labour important

Answer 25

Businesses need to make sure they are located in an area that has people with skills relevant to the job role. In general, for roles with a low requirement for skills, a business would just need to be located near any populated area to ensure it can hire employees. For roles that require a high level of skill, such as a design engineer, computer scientist or solicitor, businesses may need to be located close to big cities, university towns or other areas that attract more highly-skilled people.

Question 26

Why is proximity to materials important

Answer 26

It can help save money as the raw materials will not have to be transported as far.

Question 27

What is a bulk gaining product

Answer 27

Where the product is larger than the raw materials used to produce it e.g bikes

Question 28

What are bulk reducing products ?

Answer 28

Where the product is smaller than the raw materials used to produce it

Question 29

What are the differences in proximity to competitors

Answer 29

Some business like to be located far away from competitors as they have more access to customers instead of having to fight of competition( petrol stations, corner shops).However some business like it for example car dealerships as customers are more likely to shop around.

Question 30

Do retail companies want to be located near or far from competitors?

Answer 30

Near

Question 31

Define e-commerce

Answer 31

E-commerce is any transaction that takes place through the internet

Question 32

Define M-commerce

Answer 32

M-commerce is any transaction that takes place using mobile technologies, for example a mobile phone app.

Question 33

What are benefits of e-commerce and m-commerce?

Answer 33

- Lower costs - Flexible working hours - Access to larger market -Ability to be open 24 hours a day - Relatively low price and promotion

Question 34

Define product in the marketing mix

Answer 34

The product element refers to the products or services the business sells.

Question 35

Define price in the marketing mix

Answer 35

Price is the amount a business charges its customers for its product or service.

Question 36

What are some factors that influence price?

Answer 36

-competition – a business may need to reduce its prices to compete with other businesses. -customer opinions – about the product and its worth. -brand image – some products can have a higher price because customers perceive the business' brand as desirable. -availability – if a product is in short supply, this can drive up the price as customers are more likely to pay more for something in limited supply (eg a concert ticket).

Question 37

Define place in the marketing mix

Answer 37

Place refers to where the customer is able to purchase the product or service e.g. retail store, online website, directly from manufacturer

Question 38

What are the channels of distribution

Answer 38

The channels of distribution are the different ways in which a product gets from the producer to the end consumer

Question 39

What is promotion in the marketing mix

Answer 39

Promotion is the methods a business uses to create interest in its products and services among its customers and potential customers.

Question 40

What is a business plan?

Answer 40

A business plan is a document created by a business or entrepreneur that provides details about each element of the business.

Question 41

What is a business plan made up of

Answer 41

Business idea, smart objectives,market research, revenue, costs and profits, cash flow, sources of finance, location and marketing mix

Question 42

What does the SMART objective mean

Answer 42

Specific Measurable Agreed Realistic Time bound

Question 43

What is an advantage of a business plan

Answer 43

A business plan allows an entrepreneur to minimise the level of risk when setting up a business

Question 44

What are aims and objectives

Answer 44

An aim is the main goal and objectives are the steps to achieve it