1.4 - Making The Business Effective

Question 1

What is limited liability?

Answer 1

-When the business has a seperate legal identity to the owner(s).

Question 2

What is unlimited liability?

Answer 2

-When the owner is responsible for any debts that the business has.

Question 3

What are the types of business ownership?

Answer 3

-Sole Trader:A business created and ran by 1 person(UNLIMITED).
-Partnership:A business with 2 or more owners who share the risks.(UNLIMITED).
-Private Limited Company:A business owned by shareholders(LIMITED).

Question 4

What are the advantages and disadvantages of sole trader?

Answer 4

+Easy to set up
+All profit belongs to the sole trader
-Unlimited Liability
-Difficult to raise finance

Question 5

What are the advantages and disadvantages of partnership?

Answer 5

+Easier to raise finance
+Workload is shared
-Unlimited Liability
-Possible conflict between owners

Question 6

What are the advantages and disadvantages of Private Limited Company?

Answer 6

+Easier to raise finance
+Limited Liability
-Control could be lost
-More legal paperwork

Question 7

What are the advantages of franchising?

Answer 7

-Already established brand image
-Training and support is provided

Question 8

What are the disadvantages of franchising?

Answer 8

-Expensive to set up
-No complete control

Question 9

What factors influence business location?

Answer 9

-Proximity to market
-Proximity to labour
-Proximity to supplier
-Proximity to competitors

Question 10

How might the nature of the business activity influence where the business is located?

Answer 10

-The most important of the 4 factors above depends on the nature of the activity.
-A manufacturing firm may need to be close to the supplier.

Question 11

What is the impact of the internet on the location of the business?

Answer 11

-Advancements in the internet allows entrepreneurs to set-up their business at home.

Question 12

What is the marketing mix?

Answer 12

-Price
-Product
-Place
-Promotion

Question 13

How does the competitive environment influence the marketing mix?

Answer 13

-If a competitor sells a similar product at a lower price, then a business may have to decrease their price.,

Question 14

What is the impact of changing customer needs on the marketing mix?

Answer 14

-As customer needs change, the business may need to update the features of their product.

Question 15

What is the impact of technology on the marketing mix?

Answer 15

-New technology allows businesses to develop more innovative products
-allowed e-commerce to grow

Question 16

What is a business plan?

Answer 16

-A business plan details what the idea of the business is.
-It guides the entrepreneur to think carefully to spot opportunities.

Question 17

What does a business plan help identify?

Answer 17

-business aims and objectives
-target market
-cashflow forecast
-sources of finance

Question 18

What is the purpose of planning business activity?

Answer 18

-To minimise risk=allows the business to be prepared for any unexpected problems.
-Obtaining finance=potential investors would like to know whether it is worth investing.