Flashcards in Understanding business Deck (35):
Sectors of Industry
Primary Sector - describe
Involve extracting natural resources and turning them into raw materials to be used in the secondary sector.
Sectors of Industry
Secondary Sector - describe
take raw materials and manufacture or construct goods.
Sectors of Industry
Tertiary Sector - describe
Industries providing the provision of any service.
Also includes business which distribute/retail products from secondary sector.
Sectors of industry
Quaternary Sector - describe
Industries providing information services such as ICT, consultancy and market research help
Consumer Goods - define
Goods manufactured for private consumers
Capital Goods - defne
Goods manufactured for other businesses.
Describe the ownership of a Limited Liability company
Investors buy shares of ownership in the company, the more shares the investor has, the greater share of ownership they have and the greater share of profit they will receive.
Describe the CONTROL of Limited Liability companies.
Day to day running is by Board of directors who are appointed by shareholders at AGM.
Describe the FINANCE when setting up a Limited Liability company (3 sources of finance)
Financed through selling of shares, debentures and commercial loans
Distinguish between a Public limited company and a Private limited company
PLC - sells sold via stock market, anyone can buy shares.
Ltd - new share holders must be approved by existing shareholders.
Advantages of Limited Companies (general)
- limited liability for investors
- can continue trading during changes to ownership
- new shareholders appointed to board of directors and bring new ideas and skills to business.
- Large organisations more likely to dominate their markets.
Disadvantages of Limited Companies (general)
-Profits shared between more people
- Legal process to be followed to set up business
Advantages specific to Ltd's
- cannot be subject to hostile takeover
- doesn't have to make financial info publicly available
Advantages specific to PLC's
- investors know shares can be resold so are encouraged to buy shares.
- huge sums of money raised as shares sold to institutional investors
Disadvantages specific to Ltd's
- difficult to agree on who can buy shares- not as easy to raise finance as plc
Disadvantages specific to PLC's
- info is public to everyone, including competitors
- they are large organisations so inflexible/unresponsive to changes in market
- subject to hostile takeover by investor buying 51% of shares.
Describe key features of a franchise
- business run by one business under the name of another.
- Franchiser gives franchisee licence to trade under their name in return for share of profits
- Franchiser may supply franchisee with products to sell on OR franchisee is responsible for producing the product.
Advantages to Franchiser
- name becomes better known as business expands.
- receive percentage of franchisee's profit without taking financial risk
- work load reduced, they don't have to do day to day work
- expand business without raise finance to invest
Advantages to Franchisee
- business immediately begins trading on established market
- parent company does advertisement, reducing advertisement costs.
- receive ongoing support from franchiser
- benefit from access to ideas of other franchises
Disadvantages to franchiser
- profits split with franchisee
- locked into 20 year agreement
- if franchisee not up to standard, could damage businesses reputation
Disadvantages to franchisee
-reputation dependent on franchisers ability to advertise
- subject to bad publicity if other franchises have poor performance
- percentage of profits have to be paid to franchiser
Describe a MNC
Business which has operating sites in more than one country and sells products over the world, they have a head office located in their 'home country' where strategic (major) decisions are made.
Reasons for setting up a MNC
-cheaper premises and labor available
- may not have to pay as much tax in host country
- may receive grants from host country
Advantages on MNC for the Host Country
- created employment in area
- company may fund improvements to infrastructure
- company will pay taxes to host government
- greater choice for consumers in host country
Disadvantages of MNC to Host Country
- MNC's powerful and may influence government
- may exploit labor, unethical practices
- may force local producers out of business
Disadvantages of being MNC
- laws in host country may be restrictive
- cultural differences meaning business has to adapt products to meet local requirements
-Language barriers, decrease in consistency across business
Who owns public sector organisations
Who controls public sector organisations?
employees of the government
How are public sector organisations financed?
Financed by the government using tax payers money and grants.
Reasons to set up a voluntary organisation.
- support charitable cause
- raise awareness on social or political issue
- promote sporting or social activities
Describe the ownership of voluntary sector organisations.
Owned by their members or supporters.
Describe the Control of voluntary sector organisations
controlled by elected committee's
Ways they raise finance
- trading activities (charity shops)
- charging fees/subscriptions to members
- Fund raisers
- Seeking sponsorship
- Applying for grants
Advantages of voluntary organisations
-operate for good of their members
- Top up government services so vulnerable people will receive support they need
- receive tax concessions so more money they raise will go to good cause.