T1:Business Real World

Question 1

What is a business?

Answer 1

A business is an organisation that provides goods or services to meet the needs and wants of customers, usually with the aim of making a profit.

Question 2

What is the difference between goods and services?

Answer 2

Goods are tangible items (e.g., a phone), while services are intangible activities (e.g., teaching, hairdressing).

Question 3

What are needs and wants?

Answer 3

Needs are essential for survival (e.g., food, shelter), while wants are things that improve quality of life but are not essential.

Question 4

What is the role of business enterprise?

Answer 4

To take risks and combine factors of production to create goods/services, often bringing innovation and generating employment.

Question 5

What is an entrepreneur?

Answer 5

A person who starts and runs a business, taking on the risks in hope of profit.

Question 6

Why do people start businesses?

Answer 6

To make profit, be their own boss, pursue an interest, identify and fill a gap in the market.

Question 7

What is opportunity cost?

Answer 7

The value of the next best alternative that is given up when a decision is made.

Question 8

What are the four factors of production?

Answer 8

Land (natural resources), Labour (human input), Capital (equipment/machinery), Enterprise (entrepreneurship).

Question 9

What are the three sectors of production?

Answer 9

Primary (raw materials), Secondary (manufacturing), Tertiary (services).

Question 10

What is a sole trader?

Answer 10

A business owned and operated by one person who has unlimited liability.

Question 11

What are the advantages of being a sole trader?

Answer 11

Simple to set up, full control, keep all profits.

Question 12

What are the disadvantages of being a sole trader?

Answer 12

Unlimited liability, hard to raise finance, long hours.

Question 13

What is a partnership?

Answer 13

A business owned by 2 to 20 people sharing responsibilities and profits.

Question 14

What are the pros and cons of a partnership?

Answer 14

Shared workload and skills but possible conflicts and shared profits.

Question 15

What is a Private Limited Company (Ltd)?

Answer 15

A company owned by shareholders with limited liability. Shares are not available to the general public.

Question 16

What are the advantages of an Ltd?

Answer 16

Limited liability, control remains within close family/friends.

Question 17

What are the disadvantages of an Ltd?

Answer 17

More legal formalities, profits shared among shareholders.

Question 18

What is a Public Limited Company (PLC)?

Answer 18

A company whose shares are traded on the stock exchange. It must have at least £50,000 of share capital.

Question 19

What are the pros and cons of a PLC?

Answer 19

Can raise large capital but has more legal requirements and risk of takeover.

Question 20

What is a not-for-profit organisation?

Answer 20

An organisation that operates to benefit society, such as charities or social enterprises.

Question 21

What is limited liability?

Answer 21

The owners are only liable for the business’s debts up to the amount they invested.

Question 22

What is unlimited liability?

Answer 22

The owner is personally responsible for all business debts.

Question 23

What is a business aim?

Answer 23

The general long-term goal of a business, such as becoming the market leader.

Question 24

What is a business objective?

Answer 24

A specific, measurable target to help achieve the aim.

Question 25

What are common business objectives?

Answer 25

Survival, profit, growth, market share, customer satisfaction, social/ethical goals.

Question 26

Why do objectives differ between businesses?

Answer 26

Due to size, ownership, market conditions, and stage of development.

Question 27

Why do business objectives change over time?

Answer 27

Due to economic changes, business growth, customer feedback, or new competition.

Question 28

What is a stakeholder?

Answer 28

A person or group with an interest in or affected by a business's activities.

Question 29

Who are internal stakeholders?

Answer 29

Owners, employees, and managers.

Question 30

Who are external stakeholders?

Answer 30

Customers, suppliers, local community, government, lenders.

Question 31

What are stakeholder objectives?

Answer 31

What each stakeholder wants from the business, e.g. employees want fair pay.

Question 32

What is stakeholder conflict?

Answer 32

When the aims of stakeholders clash, e.g. higher pay for staff vs lower costs for owners.

Question 33

What factors affect business location?

Answer 33

Proximity to market, labour supply, transport links, cost, raw materials, competitors.

Question 34

Why does location matter?

Answer 34

It impacts costs, sales potential, staff availability, and competitiveness.

Question 35

What are the benefits of e-commerce for location?

Answer 35

Businesses can sell nationwide or globally, reducing the need for expensive retail locations.

Question 36

What is a business plan?

Answer 36

A detailed document setting out what a business does, its objectives, and how it plans to achieve them.

Question 37

Why is a business plan important?

Answer 37

Helps reduce risk, attract investors, secure loans, and guide decision-making.

Question 38

What does a business plan include?

Answer 38

Business idea, aims and objectives, market research, competitors, operations, finance, and marketing plans.

Question 39

What is business growth?

Answer 39

The process of a business increasing in size, revenue, or market share.

Question 40

What is organic growth?

Answer 40

Growth from within the business, such as increasing output or launching new products.

Question 41

What are the advantages of organic growth?

Answer 41

Less risk, maintains control, builds on existing strengths.

Question 42

What are the disadvantages of organic growth?

Answer 42

Slower growth, limited by existing resources.

Question 43

What is inorganic growth?

Answer 43

Growth through mergers or takeovers.

Question 44

What is horizontal integration?

Answer 44

Two businesses at the same stage of production join together.

Question 45

What is vertical integration?

Answer 45

Businesses join at different stages of the supply chain (forward or backward).

Question 46

What is lateral integration?

Answer 46

Two unrelated businesses join to diversify risk.

Question 47

What is a merger?

Answer 47

Two businesses agree to join together to form one entity.

Question 48

What is a takeover?

Answer 48

One business buys control of another.

Question 49

What is a franchise?

Answer 49

The right to use a successful business model and brand in exchange for a fee.

Question 50

What are the advantages of a franchise for the franchisor?

Answer 50

Rapid expansion, regular income from franchise fees.

Question 51

What are the advantages of a franchise for the franchisee?

Answer 51

Established brand, support and training.

Question 52

What is outsourcing?

Answer 52

Hiring another company to perform certain business functions.

Question 53

What are economies of scale?

Answer 53

Cost savings gained when a business increases production.

Question 54

What are diseconomies of scale?

Answer 54

When growth leads to inefficiencies and rising average costs.