1.1.4 Making The Business Effective 🧨 Flashcards
What is limited liability?
Owner and business are separate legal entities
Any debts can only be paid off with the money that owner invested into business , personal possessions are protected
What is unlimited liability?
Business owner not protected by law so any person possessions can be lost in order to cover any debts
What are the control profits and privacy of unlimited liability?
100% control and profit
Account does not have to be made public
What is the control privacy and profits of limited liability?
Control - normally with main owner but depends on how many shareholder there are
Profits- shared with shareholders
Privacy- accounts filed with companies house but can be view for a small fee
What are the 4 business ownerships ?
Partnership 2-20 people
Sole trader 1 person but can employ others
LTD
PLC
What are the positives and negatives of sole traders?
Positives - decisions can be made quickly and easily as it’s just one person
Quick and easy to set up
Keep all profits
Sole trades info is kept private
Negatives - lots of work load pressure
UNLIMITED LIABILITY
Hard to raise funds
No one to help sole trader if I’ll - lack of security
What are the positives and negatives of a partnership?
Positives - wide range of expertise to share ideas and designs making
Owners share risks
Easier to raise funds to establish and expand business
Negatives - partners may disagree
Decisions have to be agreed with all partners - take a longer time
Profits shared
What are the positives and negatives of having a LTD
Positives- people have more trust with LTDs
Limited liability
Easier to raise finance
Negatives- more complex to set up than a sole trader
More info is reported to government
Financial info can be published to others
Share holders may disagree
What is a franchise
Franchisor seeking the rights to use business name and idea to seek good / services to a franchisee
What is a franchisee?
Person buying the rights of using the business name and idea and has to pay royalty fees
What is a franchisor ?
Person selling rights and franchise
What is the purpose of selling a franchise?
Helps the expansion of an existing business in different locations
What are the 7 things that a franchisee gets when they buy a franchise from a franchisor ?
Established brand name
On going support
Training
Equipment
Exclusive area - with demand
Promotion
Access to goods and services
Positives of having a franchise?
Established customer base and brand image
Already have tried and tested products available to customers
Marketing costs are covered
Higher chance of survival
What are the negatives of running a franchise?
Costs of initial investments are high
Have to pay royalty fees
Don’t have that much control to make decisions
eg. Found new type of burger that tastes amazing but you can sell it because you are not in charge
Restrictions where franchise can be set up
What are the 5 things the business has to be in proximity to?
Competitors - ensures customers from rivals + an active market
Market- where potential customers are
Labour- workers for your business
Materials- raw materials to make your products
Transport - for raw materials to business
What are the four things that determine what factor of location is important ?
Manufacturing - waste away form local residents/ noice pollution
Tourism - go to famous landmarks for demand
Retailing - set up in a busy high street to gain benefits
Exporting - need to access docks in order to distribute goods abroad
What are the 4 p’s?
Price- if it corresponds to quality
Product - if it meets the customer needs and if it’s Able to be differentiated from competitors
Place- how the product gets to your
customers
Promotion- how customers are made aware that your product is available and exists
How may a business adapt its marketing mix to meet the changing needs of customers ? (5)
- Changing features of the product to incorporate new trends and tech
- Adjust the price to be the same as competitors
- New advertising to boost internet of production- in response to falling sales
- Allowing customers to return online products free of charge
- Selling products through popular retailers
How does technology effect price?
Can easily compare them with competitors online- so have to closely monitor competitors to remain competitive
Reduces price of product,making the e-tailer market more competitive
How does tech effect place?
More convenient- customers and purchase anytime anywhere
How does tech effect product?
Have to be constantly innovated (due to high demand)
How is promotion effected by tech ?
Go to social media - more effective can communicate with customers for free - more feedback quickly compared to traditional flyers / questionnaires
What is a purpose of a business plan ?
- Keeps owner in task and minimise risks (plan of action)
- Persuades banks do give loan - seen as reliable
- Provides financial forecast
Who are the 4 people who use an business plan?
Owner - a work guide
Partners- anyone wanting to work with business
Investors- to access the risk and rewards of business
Lenders - to investigated if the loan will be a likely risk or success
What are the 8 parts of a business plan?
Aims and objectives
Marker research
Financial forecasts
Business idea
Production
Marketing mix
Location
Sources of finance
