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Business Paper 1 > 1.4 - Making the Business Effective > Flashcards

1.4 - Making the Business Effective Flashcards

1
Q

What is the easiest business to start?

A

Sole trader.

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2
Q

What are the advantages of a sole trader?

A
  • easy to set up
  • be your own boss
  • you decided what happens to the profits
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3
Q

What is a sole trader business?

A

A business which has just one owner.

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4
Q

What are the disadvantages of being a sole trader?

A
  • might have long hours and fewer holidays
  • unlimited liability
  • hard to raise finance
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5
Q

What is a partnership business?

A

A business that generally has between 2 and 20 partners. Each partner has an equal say in making decisions and an equal share of the profits - unless there’s a deed of partnership that says otherwise.

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6
Q

What are the advantages of a partnership?

A
  • more ideas, skills and expertise
  • share the work
  • more capital can be put into the business by the owners (personal savings)
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7
Q

What are the disadvantages of a partnership?

A
  • legally responsible for each other
  • unlimited liability
  • disagreements
  • shared profits
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8
Q

Who own limited companies?

A

Shareholders.

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9
Q

What does incorporated mean?

A

The business has a different legal identity to the owners.

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10
Q

Are limited companies incorporated or unincorporated?

A

Incorporated.

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11
Q

What’s the abbreviation for a private limited company?

A

Ltd.

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12
Q

What are private limited companies?

A

Where ownership is restricted.
- shares can only be sold if all the shareholders agree
- shareholders are often all members of the same family

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13
Q

What are the advantages of private limited companies?

A
  • limited liability
  • easier to gain finance
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14
Q

What are the disadvantages of private limited companies?

A
  • more expensive to set up
  • legally obliged to publish its accounts
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15
Q

What is a franchise?

A

Where they sell the products or use the trademarks of another firm. They then give the firm they’re franchising from a fee or a percentage of their profits.

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16
Q

What are the advantages of franchising?

A
  • customers will already recognise the franchisor’s brand so are more likely to buy
  • franchisor might provide training
  • less risky that starting from scratch, easier to get a bank loan
17
Q

What are the disadvantages of franchising?

A
  • limited freedom
  • pay the franchisor a lot
18
Q

What factors affect where a business might set up?

A
  • location of raw materials
  • labour supply
  • competition
  • location of the market
  • using the internet
19
Q

How does the location of raw materials affect where a business would set up?

A

If raw materials are located nearby - this will lower transport costs.

20
Q

How does the labour supply affect where a business would set up?

A

Levels of employment / unemployment will affect the wages aswell (low or high). And it will affect the selection to choose from.

21
Q

How does the competitions location affect where a business would set up?

A

Being near competitors can be an advantage, it should be easy to find skilled labour, there are already local suppliers, and local customers.
However, some business might want to be away from competitors.

22
Q

How does the location of the market affect where a business might set up?

A

Transport cost to the customers.
Being nearer the business could bring awareness to their product.
Easier for customers to get to.
Passing trade. (people who walk past)

23
Q

How does the use of the internet affect where a business might set up?

A
  • The internet makes the firms location more flexible.
  • They can locate further away from their market but closer to raw materials because of e-commerce.
  • Or e-commerce could mean that business don’t need a fixed premises to sell from.
  • Employees could work from home and could be from anywhere in the world.
24
Q

What is the marketing mix?

A

The four P’s.
Price
Product
Promotion
Place

25
Q

What does a firm base their product off of?

A

The customers need and wants.

26
Q

Why do products need to be promoted?

A

So that potential customers are aware that it exists and will want to buy it.

27
Q

What does place mean in the marketing mix?

A

The method of distribution used to get a product from the company to the customers. E.g. whether it is sold through retailers or sold straight to a customer.

28
Q

What factors can affect the marketing mix?

A
  • they can affect each other
  • changes in technology
  • customer needs
  • competition
29
Q

What three ways might competition affect the marketing mix?

A
  • price
  • choice
  • might need to promote their own product more
30
Q

Why might a new business have a higher price?

A
  • can’t benefit from economies of scale
  • lots of start up costs like buying new machinery
  • so they may have a higher price than large businesses as they will need to cover these costs in order to survive
31
Q

What is a business plan?

A

It is an outline of what a business will do, and how it aims to do it.

32
Q

Who has business plans most often?

A

New business but also existing firms that want to make changes.

33
Q

How does a business plan help the business organise itself?

A

It forces the owner to think carefully about what the business is going to do, how it will be organised and what resources it needs. This allows the owner to calculate how much money it needs.

34
Q

What can a business plan help or do?

A
  • convince financial backers
  • organise the business
  • reduce risks
  • avoid wasting time and money on a bad idea
  • help set objectives for their aims
  • help make business decisions e.g. the sales forecast can influence stock levels that they buy
35
Q

What do most business plans include?

A
  • the business idea
  • aims and objectives
  • target market
  • marketing mix
  • location
  • finance

Business Paper 1 (6 decks)

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