1.4 making the business effective

Question 1

what is a sole trader / sole proprietors?

Answer 1

businesses owned by one person

Question 2

what is a partnership?

Answer 2

when between 2 and 20 people own a business

Question 3

what businesses have limited liability?

Answer 3

private limited companies (Ltd)

public limited company (PLC

Question 4

what businesses have unlimited liability?

Answer 4

sole traders

partnerships

Question 5

what are the differences between unlimited liability and unlimited liability?

Answer 5

-more risk in unlimited
-unlimited the owner has 100% control
-unlimited accounts do not have to be mad public
-unlimited the owner keeps 100% of the profits
for limited liability it is the opposite to all of these

Question 6

what are the advantages and disadvantages of being a sole trader?

Answer 6

advantages:

• makes all the decisions
• quick and easy to set up
• keeps all profits
• financial info kept private

disadvantages:

• unlimited liability
• harder to raise money or grow
• pressure on one person
• no one can take over when the sole trader is ill

Question 7

what are the advantages and disadvantages of being a partnership?

Answer 7

advantages:

• owners can share ideas
• owners share risk
• easier to raise finance

disadvantages:

• no longer exists if someone leaves
• profits are shared
• partners may conflict

Question 8

what are the advantages and disadvantages of being a private limited company?

Answer 8

advantages:

• owners have limited liability
• customers may trust an Ltd more
• easier to raise finance and grow

disadvantages:

• more complex to set up
• stakeholders may disagree
• financial info published can be accessed
• more info has to be reported to the government

Question 9

what is limited liability?

Answer 9

when owners can only be charged the amount they have invested in a business

Question 10

what is unlimited liability?

Answer 10

when the owner is liable for all the debts a business has

Question 11

what is a franchisor?

Answer 11

the business that gives franchisees the right to sell its product or service

Question 12

what is a franchisee?

Answer 12

a business that agrees to manufacture, distribute or provide a branded product under license from a franchisor

Question 13

what is franchising?

Answer 13

the expansion of an established business by licensing the right for entrepreneurs to set up their own business using the name, equipment and products of the franchise . in return the franchisee pays the franchisor a fee or a share of the revenue

Question 14

what are the benefits of running a franchise?

Answer 14

• brand image and reputation already established
• expensive marketing costs covered by the franchise
• access to tried and tested products
• may have an established customer base
• higher chance of survival
• specific support and training provided

Question 15

what are the drawbacks of running a franchise?

Answer 15

• the cost of initial investment can be high
• the owner has little freedom to make decisions
• franchisee will have to pay a fee or royalty (% of sales revenue) to the franchisor
• restrictions on the location

Question 16

what effects business location?

Answer 16

• market - you will need to be convenient for customers
• transport -you may need to be near docks
• competitors -you don’t ant competitors stealing all your customers
• labour -you will need to be located where your customers can access the shop
• materials -you will need materials to make products

Question 17

what is e-commerce?

Answer 17

trading on the internet

Question 18

how can location not be important?

Answer 18

if you are e-commerce you do not necessarily need to have a store which can help reduce costs

Question 19

what are the four p’s and how are they effective?

marketing mix

Answer 19

Product:
-has to meet the needs of the customer
-successful businesses will differentiate their products from others
Place:
-they way in which a product is distributed
-businesses have to consider the channel
Promotion:
-can include: advertising, sales promotion, sponsorship, public relations
Price:
-must reflect the value the customers place on the product

Question 20

how may a business adapt to its marketing mix?

Answer 20

• changing the features to incorporate new trends and technology
• adjust the price of its products in response to competitors pricing
• launching new advertising campaign
• sell its products through popular retailers
• allowing customers to return online products free of charge

Question 21

what is the impact of advancements in technology on the marketing mix in terms of the 4 p’s?

Answer 21

• new tech demands that products are constantly innovated - product
• much more advertising on social media - promotion
• customers can easily compare prices online - price
• E-commerce not only provides an effective channel for selling, but also the ability to customize products or services - place

Question 22

what is the purpose of a business plan?

Answer 22

• convince a bank to loan the business money
• forecast financial projections
• identify customer needs
• formulate market research into important information
• provide information
• provide the owner with a plan of action that will minimalist risk

Question 23

who uses a business plan?

Answer 23

owners - as a guide
partners and employees - anyone working with the business
investors - to asses the risk and rewards of the business
Lenders - eg banks will investigate the likely success and risk of the business

Question 24

what information should a good business plan contain?

Answer 24

Business idea- an outline of the business and concepts so the stakeholders can understand business intentions
Aims and objectives- aims and objectives that are SMART so the business can measure its success
Market research- target market and competitors
Financial forecast- forecast of costs, revenue, profit, cash flow, budgets and break even
Sources of finance- how it will be financed and how borrowings will be repaid
Location- the location and reasons why
Marketing mix- to develop a successful product or service
Production- How the product will be produced

Question 25

what can a business plan reduce?

Answer 25

risk
a detailed business plan reduces the risk associated with unforeseen problems and poor decision making and increase the likely hood of success