1.4 Making Business Effective Flashcards
Explain the difference between limited liability and unlimited liability?
Limited liability is where a business has its own legal identity separate from the owners whereas unlimited liability is where the business and the owners are not legally separate.
What is a sole trader?
A sole trader is a business that is owned and controlled by one person.
What is a partnership?
A partnership is a business owned by two or more people.
What is an LTD?
A private limited company is owned by shareholders who each own part of the business.
Explain why unlimited liability is risky?
Unlimited liability means that the owner can lose personal possessions such as house and car if the business gets into debt.
Define the term ‘franchise’.
A franchise allows an entrepreneur to buy the rights to use an existing business model.
Outline a benefit of being a franchisee.
Reduced risk to entrepreneurs as an already successful business model.
Explain the difference between a brick and a click business.
Brick business refers to a physical shop, whereas a click business refers to an online shop or e-commerce.
State 3 factors a business would consider when choosing a location?
Proximity to labour, market, materials, and competitors.
Give an advantage of having an online business.
Bigger market.
Give an advantage of having a physical shop.
Locate where demand is.
What are the 4 P’s in the marketing mix?
Product, Price, Promotion, Place.
What is the purpose of the marketing mix?
A tool which describes in detail the actions that the business will need to take when introducing a product to the market.
How does the development of technology influence the marketing mix?
Technology has a big impact on the marketing mix, take, for example, the role social media has today. Further examples include: Increasing use of e-commerce and m-commerce in businesses and use of digital media to promote products and maintain consumer interest.
What is a business plan?
A written document that sets out the business goals and the plans for achieving them.
What is the purpose of a business plan?
The purpose of a business plan is to set out the business goals and the plans for achieving them because this gives the business owners a clear plan to follow, leading to financial forecasts and a clear plan that can help persuade people to invest in the business.
Why would a bank be interested in a business plan?
A business may ask a bank for money to expand their current premises, e.g. to add a shopping area in a cafe. The business plan will set out what they want the money for and how they are going to spend it, leading to the bank looking at the financial forecasts and deciding whether they will be able to pay back the loan.