1.4 Making the business effective Flashcards
What is limited liability?
The owners and the business are separate legal entities meaning that the owner can only lost money up to the share capital that they have invested in the business.
What is unlimited liability?
The owner is legally responsible for any debts of the business, so the owner could lose personal assets e,g house.
Advantages and Disadvantages of limited liability.
ADS:
- ensures financial security and protects the owner.
- -company will exist beyond the life of its owners as they separate legal entities.
- -reduces risk for owners
DIS:
– Privacy issues as files have to be uploaded onto Companies House.
Sole trader, who is it? ADS AND DIS?
Sole Trader, an unincorporated business, have a sole owner and an unlimited liability. Ads: - all the decision making -quick and easy to set up - keeps all the profits -financial info is kept private
Dis:
- Unlimited liability
- Hard to raise money or grow the business.
- Pressure
- No one else to cover for the sole trader
Partnership, ads and dis
Partnership- when two or more people join together to set and run a business. Set up through a deed of partnership.
ADS:
-The business owners share their expertise.
-risk is shared
-easier to raise finance
-financial info kept private
Dis:
-disagreements between partners can slow down decision making
-Profits are shared
-Partnership no longer exists if one person leaves.
What is a ltd, ADS AND DIS.
An incorporated business owned by its shareholders and must be registered at companies house.
ADS:
-limited liability
-better reputation
-trading continues regardless of changes in shareholders
- no unknown people can invest a share
-easy to raise finance
DIS:
- Has to be registered at companies house.
- Disagreements within shareholders
- More required information to be given to the government.
What is a franchise?
A right given by one person to another business to sell goods or services using its name.
Franchisor
The business that gives the franchisees the right to sell their products.
Franchisee
A business that agrees to pay a fee to trade under the franchisor’s name.
Advantages to a franchisee
Disadvantages to a franchisee
ADS:
- Brand image and reputation is already established.
- Marketing costs are covered by the franchisor
- Products are already ready and match customer needs.
- Sustained survival
- Gain training and contacts from the franchise.
Dis:
- High initial investment cost
- Little freedom
- pay fee/royalty (%of sales revenue)
- restrictions.
What factors should a business’ location be within proximity of:
-Proximity means nearness.
Proximity to market, being close to customer increases footfall and increases convenience.
Proximity to labour, so that the availability of workers is high.
Proximity to materials i.e raw materials.
Proximity to competitors for a shopping good.
Difference between a bulk-gaining product and a bulk reducing product?
Bulk gaining is when he end product is bigger and more expensive than the raw materials.
Bulk reducing is when end product is smaller and less expensive than the raw materials.
Explain the 4 Ps of thw marketing mix
Product: Actual good or service
Price: amount of money customers pay, this depends upon the product’s value and the competition.
Promotion: communication between the business and customer that makes the customer aware of the products:
-advertising
-sales promotion
-sponsorship
-PR
Place: where the customer can purchase the product.
How can a business balance the marketing mix based on the competitive environment?
By changing the product’s price to match or undercut that of the competitor.
Differentiating the product.
Brand loyalty and awareness.
Changing place to increase the market share.
How do changing consumer needs impact the marketing mix?
- Launching new products
- Changing prices in response the economic condition.
- Being more convenient opening more stores.
