1.2: Business Structure Part 2

Question 1

Def. Cooperatives

Answer 1

Businesses that are owned and run jointly by its members with mutual assistance, with shared profits, workload, responsibilities and decision making.

Question 2

Advantages of Cooperatives

Answer 2

1. Purchasing economy of scale (buying in bulk)
2. Working together to solve problems and make decisions
3. Good motivation in between members.

Question 3

Def. Franchise

Answer 3

A businesses that uses the name, logo and trading systems of an existing successful business. To obtain a franchise, franchisee pays an initial fee to the franchisor and agrees to stick to the license. A royalty is paid based on franchisee’s sales turnover.

Question 4

Advantages of Franchise (3)

Answer 4

1. Fewer chances of failing
2. Advice and training offered by franchisor
3. Supplies obtained from established suppliers.

Question 5

Disadvantages of a Franchise.

Answer 5

1. A royalty has to be paid
2. Initial franchise license may be expensive
3. Strict rules over pricing and layout of the outlet reduce owner’s control over his/her business.

Question 6

Disadvantages of Cooperatives

Answer 6

1. Poor management skills
2. Capital shortage
3. Slow decision making

Question 7

Def. Joint ventures

Answer 7

A business formed when two independent businesses set up a new enterprise in which they each own a stake.

Question 8

Advantages of Joint ventures (3)

Answer 8

1. Costs and risks are shared
2. Different companies may have different strengths and experience which may fit well together
3. They can make use of each other’s markets in different countries.

Question 9

Disadvantages of Joint ventures (3)

Answer 9

-Style of management might not blend well, culture clash
- Disagreements may occur such as how, when and whether to end the business
-Difference of opinion on how to divide the profits