Understanding Business

Question 1

Needs

Answer 1

What we require in order to survive (food, water, shelter)

Question 2

Wants

Answer 2

Goods/services that make our lives more enjoyable and pleasureable, but we dont require in order to survive ( games consoles, tv)

Question 3

Goods

Answer 3

A Physical product that we can see and touch ( newspaper, jacket

Question 4

Services

Answer 4

Something that is provided for us by an organisation (taxi, haircut)

Question 5

Consumption

Answer 5

The using up of a good/service ( wearing a jacket, eating a sandwhich, watching a film at the cinema)

Question 6

The cycle of business

Answer 6

1. Consumers have needs and wants
2. Business carry out market research to identify those needs and wants
3. businesses produce goods and services
4. goods and services are bought and consumed

Question 7

1.Land

Answer 7

This refers to natural resources and includes not only the surface of the earth but all other natural resources discovered within it ( fish, oil,coal)

Question 8

2. Labour

Answer 8

This refers to human resources (employees who work for the business)

Question 9

3. Capital

Answer 9

This refers to human-made resources ( the buildings, machineiry and equipment used in the production process)

Question 10

4. Enterprise

Answer 10

This is the art of bringing together the other factors of production in order to produce goods and services

Question 11

Chain of production

Answer 11

The stage a product passes through from start to finish

At each stage of the chain of production, value is added to the prodcut. This is known as creating wealth

Question 12

Primary sector of industry

Answer 12

Buisnesses inloved in the extraction of our natural resources from above and below the earths surface ( farming, fishing, coal mining)

Question 13

Secondary sector of industry

Answer 13

Businesses involved with taking raw materials and manufacuring a product ( car manufacturing, cake making)

Question 14

Tertiary sector of industry

Answer 14

Businesses involved with providing a service ( cinema, hotel, supermarket)

Question 15

Private sector

Answer 15

Organisations owned by private individuals that exist to make a profit

Question 16

Public sector

Answer 16

Services and agencies run by the goverment on our behalf

Question 17

Third sector

Answer 17

Non-profit makiing organisations that exist ot support a cause or aim

Question 18

Sole trader key features

Answer 18

A business owned and run by one person

Owned by one private individual

Controlled by the private individual

Financed by their own personal savings, or possibly a bank loan or grant

Question 19

Sole trader advantages

Answer 19

Easy to set up

Owner gets to keep all the profit

Owner gets to make all their own decisions

Question 20

Sole Trader Disadvantages

Answer 20

Unlimited Liability- if the business goes into debt, the individual owner is resposible for paying it back. This could mean their personal possestions are taken to pay for this

Raising finance can be dificult- banks will often look at sole traders as high risk

Workload and responsobilites canbnot be shared with another work loader

Question 21

Partnership key features

Answer 21

A business owned by and run by 2-20 people

Owned by the 2-20 partners

Controlled by the 2-20 partners

Financed by the investment of each individual partner

Question 22

Partnership advantages

Answer 22

More finance can be raised compared to a sole trader

Workload and responsobility can be shared between partners

Partners each bring different experience and expertise to the business

Question 23

Partnership disadvantages

Answer 23

Unlimited Liability- if the business goes into debt, the partners are resposible for paying it back. This could mean their personal possestions are taken to pay for this

Profit is split between partners

There could be arguments between partners

The actions of one partner are legaly binding on others

Question 24

Private limited company key features

Answer 24

A business owned by 1-50 private shareholders

Owned by private shareholders- shares cannot be sold on the stock market

Controlled by a board of directors who run the business on the behalf of the shareholders

Financed by share equity invested by shareholders

Question 25

Private limited company advantages

Answer 25

Limited Liability- if the business goes into debt, the owners are not responsible for paying it back. They can only ever lose what they have invested. more finance can be raised compared to sole traders and partenrships viewed as less risky compared to sole traders and partnerships

Question 26

Private limited company disadvantages

Answer 26

Financial acounts must be published which the public and competitors can see More complicated and expensive to set up compared to sole traders and partnerships profits shared between many shareholders by paying dividends

Question 27

Aims of the Private sector

Answer 27

Profit Maximisation- to make as much profit as possible Acheiving quality- to provide the highest standard of product/service Survival- to continue to exist from one year to the next Customer satisfaction- To ensure your customers are happy with their purchase Increase market share- to gain more customers relative to your competitors Social responsoblility- to act in a responsible way towards the environment, your community and wider soceity Innovation- to create new and unique ideas

Question 28

Key features of the public sector

Answer 28

Services and agencies run by the goverment on our behalf Owned by the goverment on our behalf Controlled by goverment departaments at UK, scottish and local levels Financed by taxation

Question 29

Public corporations

Answer 29

Business organisations owned by the goverment on our behalf (BBC)

Question 30

Aims of the public sector

Answer 30

Make the best use of funds- spending taxpayers money wisely to get the most value Quality of service- to provide a high standard of service to the community/users Raise revenue- to increase the amount of funds generated Cut costs- to reduce spending on public services Improve infrastructure- to develop and build new roads, rail links and cycle paths

Question 31

Charaties

Answer 31

Charaties have no recognised owner Controlled by a board of trustees who represent the charity Financed by donations, fundraising, grants from government and sales from charity shops A charity will mostly be run by volunteers but may also have some paid employees

Question 32

Advantages of charaties

Answer 32

Exempt from paying certain taxes Low wage costs due to using mostly volunteers

Question 33

Disadvantages of charaties

Answer 33

High turnover of volunteers who may leave for paid work Difficult to compete for donations against thousands of other charaties

Question 34

Clubs and assosiations key features

Answer 34

Clubs and assosiations have no recognised owner Controlled by an elected comitee Financed by membership fees/subscriptions paid by members

Question 35

Aims of the third sector

Answer 35

Increase funds- raise as much funds as possible for their cause Provision of service- to provide a service to people/animals in need increase awarness- to increase the number of people in soceity who are aware of the aim/cause Pressure goverment- to campaign to goverment to change a law/policy related to their cause More branches- to open more branches of charity shops

Question 36

Social Enterprises key features

Answer 36

Organisations that trade and earn income from business but use the profits to help their cause They can be a profit making organisation They operate in the third sector

Question 37

Social enterprise advantages

Answer 37

Social aims/cause can help attract customers to buy products/use service More likely to recieve grants from the goverment due to their postitive impact on soceity Easier to attrack high quality employees who want to support the aim/cause

Question 38

Social enterprise disadvantages

Answer 38

Due to heavy reliance on grants, levles of funding can be unpredictable Difficult to compete against profit driven sector businesses