1.4- Making the business effective Flashcards
Limited liability
An investor is only responsible for the business’s debts up to the value of their financial investment
Unlimited liability
The entrepreneur is responsible for the total debts of the business
Liability
Effects on the owner
Limited= personal belongings safe, little risk, separate entity from business
Unlimited= could lose personal belongings to pay debts, very risky, doesn’t have separate entity
Sole trader
Def, ad, dis
An individual who runs and owns their business
Ad- Retain all profits, make own decisions
Dis- Unlimited liability, high work load/ hard to take holiday
Partnership
Def, ad, dis
When two or more people run the business
Ad- Different expertise, shared workload so can take holiday
Dis- Share profits to deed of partnership, shared decision making can cause conflict
Private limited company
Def, ad, dis
Owners and companies are separate entities, owned by shareholders
Ad- Low risk of hostile takeover, shareholders need to be invited, limited liability
Dis- Shareholders have input on decisions, complexity when setting up
Business becoming franchisor
Ad, dis
Ad- Lower operational costs, franchisor doesn’t pay rent or materials, easier to expand nationally & internationally
Dis- Reduced control, franchisee might not meet standards, Franchisee keeps some profits
Entrepreneur becoming franchisee
Ad, dis
Ad-Lower risk of failure as brand reputation will attract customers, Supported set up as franchisor gives product range and often sorts a supplier
Dis- Initial fee must be paid, Limited freedom in decision making
Franchisor
A business that creates the franchise and enables a franchisee to use it
Franchisee
A person or business who has paid to become part of the franchise
Franchise
The right given by one business to another to sell goods under it’s name
Franchising
When a business gives a person or business the right to sell goods under their name
Factors affecting business location
Raw materials- cheapest and easiest way to transport. May be closer to materials or market
Employment- close to areas of unemployment for unskilled labour, for skilled labour big cities
Competitors- near improves image, far can improve sales if access to customers w/o comp
Proximity to market- near footfall or online/far if can sell anywhere
Nature of retail business
-Locate close to customer destinations
-Unless online, could locate anywhere
Nature of service business
-Locate close to customers but may not need a premise
-Could travel to the customer or be close to busy areas
Nature of manufacturing business
-Close to materials or market depend on costs
-Close to good transport
-Close to skilled labour
E-commerce
Ads and dis
Ad-low rent costs, reduce break-even output, lower risk
Can be UK, international and open 24/7
Dis-initial&ongoing costs for website
Marketing mix
Product
The good or service that the customer obtains
Needs to satisfy needs and stand out (USP)
Marketing mix
Price
How much the customer is paying
Must reflect the value
Marketing mix
Place
Where the customer can purchase the product
Could be from a retailer, the internet or a shop
Needs to be convenient
Marketing mix
Promotion
How the customer is found and persuaded
~Can use many methods eg. free samples, discounts
Marketing mix in competitive environment
Develop new products and USPs, reduce prices, increase adverts and discounts
Marketing mix in consumer changes
Add new products, price should reflect the economic status, use preferred platforms, online
Marketing mix with technology
Adapt products based on feedback, need to be lowest on price comparisons, can reach wider market, easier advertising
Business plan
Document that provides details about elements of the business
Purpose of business plan
Minimise risks, consider all elements & address issues. Market research and cash flow forecasts are most helpful
Obtain finance, plan is essential to show bank or investor
E-commerce
M-commerce
Process of selling products online
Selling products on mobile devices like apps
9 Sections in a business plan
Idea, aims & objectives, target market, revenue forecast, projected costs and profits, cash flow forecasts, sources of finance, location, marketing mix
