1.4 - Making the Business effective

Question 1

1.4.1 - What is the difference between limited and unlimited liability?

Answer 1

• In unlimited liability, there is no distinction between the business and the owner and so any debts that the business owes have to be payed off by the owner’s personal assets.
• In limited liability, the business and the shareholders that own it are distinct and so any debts cna only only be taken form the business.

Question 2

1.4.1 - What is a sole trader and a partenership and what are their pros and cons?

Answer 2

ST - The only owner of a business which has unlimited liability. Their accounts do not have to be published publicly.
P - Where two or more individuals run a continuing business for profit.
ST have more privacy control and profit but
P can share responsibility and risk

Question 3

1.4.1 - What does it mean for a business if it is owned by its shareholders?

Answer 3

It is either a PLC or LTD, has limited liability and have to publish their accounts publicly.
+ They have limited liability
+ Reduced risk
+ Increased capital
+ Increased status means they’re more likely to be approved for loans etc.
- Desicions can be limited as company ia owned by many people
- Profit may be the only goal
- Other people can buy more shares and take over

Question 4

1.4.1 - What is franchising?

Answer 4

The right given by one business to another to

sell goods or services using its name.

Question 5

1.4.1 - What is a franchisor and what are their pros and cons?

Answer 5

The business that gives franchisees the right to sell its product, in return for a fixed sum of money or a royalty payment:

\+ Growth
\+ Profit
\+ Customer Awareness
\+ Long Term Income
- Changing Demands
- Brand Image
- Poor Performance

Question 6

1.4.1 - What is a franchisee and what are their pros and cons

Answer 6

A person or company that is granted a license to do business under the franchisor’s trademark. The franchisee purchases a franchise from the franchisor:

\+ Training
\+ Equipment
\+ Materials
\+ Back Up Services
\+ Brand Name
\+ Exclusive Area
- Royalty Fee
- Franchise Fee
- Lack of Flexibility
- Long Term Costs

Question 7

1.4.2 - The proximity to what four factors affect business location and why?

Answer 7

• Target market and demographics ( so that there will be sufficient people interested in your business)
• Labour (So that you have workers who are able to commute and won’t loose out on your workforce)
• Materials (Your product needs be easily manufacturable)
• Competitors (You may want to be close as it means a similar target market will be nearby. You may want to be far away as they can steal your customers)

Question 8

1.4.2 - Why might the nature of a business’ activity effect its location?

Answer 8

Businesses in the tertairy sector will require to be in city centres as they provide services that may require to be in locations convenient for customers. In the primary sectro, you location may be in rural area as land is cheap and you don’t need to be close to your customers.

Question 9

1.4.2 - What are the benefits and limitations of e-commerce over fixed premises?

Answer 9

+ Reach a larger market of customers
+ Less overhead fees (electricity rent etc.)
+ Less workers to pay
- Customers may be wary of paying online
- Tecnological failures can limit businesses
- Technology may not always be user-friendly

Question 10

1.4.3 - What does the marketing mix consist of?

Answer 10

• Price
• Place
• Product
• Promotion

Question 11

1.4.3 - How does technology affect the marketing mix? (What does it introduce)

Answer 11

• E-commerce: Being able to use the internet as a place for selling items
• Digital communication: Promoting you product to potential customers online