S3 Business May Exam

Question 1

What is the private sector of the Economy

Answer 1

An organization started and ran by private individuals, their main objective is profit maximization and is finances by owners savings and bank loans

Question 2

What is the public sector of the economy

Answer 2

An organization ran and funded by the government wit their main objective providing a quality service and is financed through taxation, examples include hospitals, schools, parks and libaries

Question 3

What is the third sector of the economy

Answer 3

An organization set up by individuals in order to benefit a specific group, their main objective is to provide a service that Private and public sectors do not, examples include charities, clubs, voluntary groups and social enterprise. They are financed through grants and donations

Question 4

What are features of a sole trader?

Answer 4

Features of a sole trader are they are owned and controlled by one person, financed through owner’s savings and loans and have unlimited liability

Question 5

What are the advantages of a sole trader? (4)

Answer 5

Easy to set up - few legal documents required

Owner keeps all the profit

Owner had complete control / makes all the decisions

Owners can decide hours of work / holidays

Question 6

What are the disadvantages of a sole trader (4)

Answer 6

Unlimited liability

Workload and responsibility - no one to share it

Difficult to take time off

Difficult to raise finance (risk involved)

Question 7

What are features off a private limited company? (4)

Answer 7

Owned by individuals called ‘shareholders’

Run by a Board of Directors who are elected each year by share holders

Shareholders by a number of shares in the company

Shareholders receive dividends

Question 8

What are advantages of a private limited companies? (3)

Answer 8

Limited liability

Finance can be easily raised by selling more shares

Directors and shareholders bring different skills and experiences

Question 9

What are disadvantages of private limited companies? (3)

Answer 9

Every year Financial Statements must be prepared and published for all to see

Companies Act must be followed

Costly to set up

Question 10

What are objectives of charities? (4)

Answer 10

To meet the ends of the people who are they supporting

To raise awareness of their cause

To be efficient (resources)

To keep within budget

Question 11

How are charities financed? (4)

Answer 11

Donations

Fundraising Activities

Grants

Money earned through shops

Question 12

What are the objectives of social enterprises (a business which aims to change the world for the better) (4)

Answer 12

To make a profit

To raise awareness of a social cause or issue

To create employment for those individuals who struggle to find work

To transform communities

Question 13

What are some examples of internal stakeholders (people in the organization) (3)

Answer 13

Owners / shareholders
Managers
Employees

Question 14

What are some examples of external stakeholders (people outside the organization and influence its success) (5)

Answer 14

Customers
Suppliers
Bank/Lenders
Local communities
Government

Question 15

how do internal stake holders show interest and influence the business (3)

Answer 15

Owners Interest- High profits / high return on investment. Owners influence - Make decisions which impact on success

Managers Interest - High bonuses. Managers influence - make decisions which influence on success

Employees Interest - High wages, job security. Employees interest - skills and abilities, motivation levels

Question 16

how do external stake holders show interest and influence the business (5)

Answer 16

Customers - Value for money, quality products. Customers Influence - make decision whether or not to buy from the business and recommend it to others

Bank / Lenders interest - Repayments and Interest. Bank / Lenders influence - make a decision whether if the loan is allowed or not

Government’s Interest - In the business paying taxes and creating employment. Governments Influence - Pass laws which the business must abide by

Local Community - Provision of local services, supporting local events; no litter or disturbance due to business. Local Community - May protest about the business’ impact on the environment/local community

Suppliers interest - In receiving a fair price for their product, prompt payment and repeat orders. Suppliers Influence - By the quality of product they provide, the price they charge and the standard of service provided

Question 17

What are sources of Finance (7)

Answer 17

Shareholder investment
Bank Loan
Mortgage
Hire purchase
Leasing
Overdraft
Trade credit

Question 18

What are features of good customer service (4)

Answer 18

Having well trained, easy to identify staff (knowledgeable about products/services, wears a uniform

Producing a quality product/service

Dealing with customers quickly – speedy service

Having a complaints procedure in place

Question 19

What are benefits of good customer service (6)

Answer 19

Customers will recommend your organization to their family, friends and colleagues

Increased sales/market share

Increased profit

Fewer complaints

Happy, motivated staff who enjoy working in the organization

Good image/reputation

Question 20

What are methods of surveying customer satisfaction? (2)

Answer 20

Questionnaire

Interview

Question 21

What are features of a questionnaire (2)

Answer 21

The customer is asked a series of questions (usually closed questions).

Completed on-line, via the postal service or carried out over the telephone.

Question 22

What are features of a interview (3)

Answer 22

The customer is asked face-to-face questions by an interviewer.

It is carried out face-to-face - an immediate response is gained.

Allows for further clarification re the questions being asked.

Question 23

What are methods of surveying customer satisfaction (2)

Answer 23

focus group

comment cards

Question 24

what are features of a focus group (3)

Answer 24

A group of customers are invited to attend a meeting where they will be asked questions about products/service received.

The organization gets customer views and opinions.

If one member of the group is very dominant this can influence the responses of the others.

Question 25

What are features of comment cards (3)

Answer 25

Customers are given the chance to complete a brief set of questions before leaving the organization (usually a restaurant or shop). There is no pressure for the customer to fill this in. Problem areas can be highlighted and addressed.

Question 26

What are examples of market segmentation? (6)

Answer 26

Age Income Gender Lifestyle Occupation Religion

Question 27

What are benefits of market segmentation? (6)

Answer 27

Products are developed and designed that meet the needs of specific customers; Prices can be set that cater for different customer incomes; The Place where customers want to be able to buy the product is more likely to be suitable for them; Promotions such as Advertising can be designed to appeal to particular market segments and so people may be more likely to consider buying the product Other Promotions (special offers/discounts) can be designed to appeal to particular market segments and so encourage them to ‘buy it and try it’. This leads to maximizing customer satisfaction and can result in increasing sales, increasing market share and increased profits

Question 28

What are the 4Ps for marketing mix (4)

Answer 28

Product – item being sold; can be good or a service Price – amount of money paid by consumers for one unit Place – how and where the product is made available to consumers Promotion – raising awareness of product’s existence and persuading consumers to purchase it

Question 29

What are stages of the product life cycle? (4)

Answer 29

Introduction - The product is launched onto the market, Low sales/high costs (advertising, development) and no profit is being made. Growth - Sales start to increase as consumer awareness of product increases. Maturity - sales are at a peak and profits are at a maximum Decline - Sales start to fall as new products enter the market, profit is falling.

Question 30

What is branding (product)

Answer 30

a name, symbol or logo that is associated with a product or a group of products.

Question 31

Why do people buy branded goods? (3)

Answer 31

People think they are of a higher quality Know of product through advertising – branded goods are heavily advertised To buy into luxury lifestyle/status symbol Personal preference – tastes better

Question 32

What are benefits of Branding? (5)

Answer 32

Logos, symbols and names can be used as a marketing tool Product stands apart from competitors making it instantly recognizable to the customer Customers become brand loyal – increasing sales and market share Higher prices can be charged for the product as quality of product is perceived to be higher New products can be introduced more easily as brand name is already established and has built up loyal customer base

Question 33

What is the cost of Branding? (4)

Answer 33

If one product within the brand gets a bad reputation this can damage the reputation of all products in the brand Establishing a brand is a costly process as huge amounts of money must be spend on advertising on an ongoing basis Brand imitations can weaken the brand and are expensive to challenge via the courts Rebranding can cause confusion

Question 34

What are features of packaging (5)

Answer 34

Packaging displays useful information about product ingredients which allows consumers to check product meets their needs It contains nutritional information to enable consumers to make informed choices It can make the product stand out from others on the shelf if it is bright/eye-catching, drawing customers to it. It protects the product from damage. It adds to the cost per unit, reducing profit per unit. Packaging can be seen as not environmentally friendly which puts some customers off buying the product.

Question 35

What are methods of promotion (5)

Answer 35

free sample - Consumers can try the product at no cost to themselves. Bonus packs - Additional amount at no extra cost eg 25% extra Price reductions - Offering the product at a lower price for a limited time period In-store demonstrations / tastings - Customers are allowed to try the product before they buy it Buy-one-get-one-free - Customer receives 2 products for the price of one

Question 36

What are features of product endorsement (3)

Answer 36

Use of celebrities to wear or use a product; people who like the celebrity will buy the product -> increasing sales. Can be very expensive to “buy” a celebrity to endorse the product. If celebrity falls out favor it can negatively impact on brand image.

Question 37

What are features of product placement (3)

Answer 37

Branded merchandise is supplied to be used in films and on TV eg Virgin Airlines and James Bond. People will see the product being used within a particular setting and be encouraged to purchase it – buying into a lifestyle. Could go unnoticed if consumer is focusing on the programme/film.

Question 38

What are methods of desk research (4)

Answer 38

Internet searches – viewing competitor websites can give an insight into their future plans and their marketing mix. Government statistics – reports published by the Government contain a wealth of information on a variety of topics eg consumer incomes, lifestyles, home ownership, health etc. Newspapers/magazines – contain information on changes and trends in consumer behavior. Trade journals – contain information on the current market and any possible future changes.

Question 39

What are advantages of desk research (3)

Answer 39

Available at the click of a button - time efficient No charge to access - cost effective Can gain useful information about external environment

Question 40

What are disadvantages of desk research? (4)

Answer 40

Difficult to verify May be wrong or out of date May contain bias - sample to small Available to competitors