1 – Business activity and influences on business Flashcards
define aim and give an example
overall long-term target or goal of the business
e.g. profit maximisation
define objective and give an example
the short-term steps a business needs to take to meet its overall aims
e.g. gain market share
which of the following is a financial objective?
A. independence
B. challenge
C. survival
D. personal satisfaction
C. survival
give reasons why business aims and objectives change as
businesses evolve
to respond to market conditions, technology,
performance, legislation, internal reasons
define sole trader
a single person who is the exclusive owner of a business
give an advantage of sole traders
- easy to set up
- get to be their own boss
- can decide what to do with profit
- easy to change legal structure
give a disadvantage of sole traders
- unlimited liability,
- hard to get a loan ~ seen as risky,
- all responsibility for making decisions is on one person,
- harder to retain good employes
define partnership
a business owned by 2 to 20 partners
give an advantage of partnerships
- more experience and ideas
- easier to raise money ~ seen as less risky than sole traders
- good employees can become partners, easier to retain
give a disadvantage of partnerships
- profits are shared
- unlimited liability
- may have disagreements
- each partner is liable for the actions of other partners
define public limited company (PLC)
companies that sell shares on the stock exchange
give an advantage of public limited companies
- limited liability
- raise money faster by selling shares on stock exchange
- easy to raise capital from banks - seen as less risky
give a disadvantage of public limited companies
- owners have little say in how the business is run
- anyone can take over if they buy more than half the shares
- company’s accounts must be made public
define private limited company
companies where ownership of shares is restricted
give an advantage of private limited companies
- limited liability
- retain control in managing the business - restricted ownership as all shareholders must agree to sell shares
- easier to get a loan - seen as less risky
give a disadvantage of private limited companies
- finance is needed for upfront fee and costs of paperwork to incorporate the business - not accessible to smaller firms
- company’s accounts must be published
define public corporation
business owned and controlled by the state/government
reasons for public ownership (public corporations)
- avoid wasteful duplication
- maintain control of strategic industries
- save jobs
- fill gaps left by private sector
- serve unprofitable regions
reasons against public ownership (public corporations)
- cost to government
- inefficiency
- political inference
- difficult to control
define stakeholders and give an example
an individual or group with an interest in the operation of a business
e.g. owners, customers, employees, managers, suppliers
define shareholders
owners of limited companies
define franchise
structure in which a business (franchisor) allows another operator (franchisee) to trade under their name
give an advantage to a franchisor
- fast method of growth
- cheap
- franchisee take some of the risk
- franchisees more motivated than employees
give a disadvantage to a franchisor
- potential profit is shared with franchisee
- poor franchisees may damage brand’s reputation
- franchisees may get their merchandise from elsewhere
- cost of support for franchisees may be high
give an advantage to a franchisee
- less risk - a tried and tested idea is used
- back up support is given
- set up costs are predictable
- national marketing may be organised
give a disadvantage to a franchisee
- profit is shared with franchisor
- strict contracts have to be signed
- lack of independence - strict operating rules apply
- can be expensive
define social enterprise
business that aims to improve human or environmental well-being, e.g. charities
define multinational
large business with significant production or service operations in at least two different countries
define primary sector
extracts raw materials from the earth
define secondary sector
converts raw materials into finished or semi-finished goods
define tertiary sector
provides a wide variety of goods and services to customers
give the main factors influencing location decisions
- proximity to market, labour, materials and
competitors - nature of the business activity
- the impact of the internet on location decisions - e-commerce and/or fixed premises
- legal controls and trade blocs.
give examples of financial objectives
survival, profit, sales, increase market share, financial security
give examples of non-financial objectives
social objectives, personal satisfaction, challenge, independence and control
