1.4 - Making The Business Effective

Question 1

What are sole traders and what is their advantages and disadvantages?

Answer 1

A business with one owner, common for small businesses

Advantages:

• Easy to set up
• Owner can be their own boss
• Get all of the profit

Disadvantages:

• Long hours, little holiday
• Unlimited liability
• Hard to raise finance

Question 2

What is a partnership and what is their advantages and disadvantages?

Answer 2

A business with between 2 and 20 owners

Advantages:

• More ideas and skills
• More people to share the work
• More money to put into business

Disadvantages:

• legally responsible for other partners
• Unlimited liability
• Less control over decisions
• Money is shared between owners

Question 3

What are limited companies and what is their advantages and disadvantages?

Answer 3

A business that is owned by shareholders. Two types:

• Private (Ltd) shares are restricted
• Public (PLC) shares are unrestricted

Advantages:

• limited liability
• Easier to raise finance

Disadvantages:

• More expensive (legal paperwork)
• Have to publish accounts

Question 4

What is franchising and what are the advantages and disadvantages?

Answer 4

Franchisor let’s franchisee use brand and use product in exchange for a percentage of the profit (fast food)

Advantages:

• Customers will recognise the brand
• Less risk
• Franchisor provides training and help

Disadvantages:

• Franchisee has limited freedom
• costs a lot for franchisee to set up

Question 5

What are the four p’s of the marketing mix

Answer 5

• Product
• Price
• Place
• Promotion

Question 6

What is product in the marketing mix?

Answer 6

Customers will prefer businesses with:

• higher quality
• larger range of products

Question 7

What is price in the marketing mix?

Answer 7

• Customers will want the lowest price
• Cost of raw materials
• Cost of manufacturing

Question 8

What is place in the marketing mix?

Answer 8

How the business distributes the product, through a retailer or straight to a customer

Question 9

What is promotion in the marketing mix?

Answer 9

The customer needs to know about a product so they will buy it

Question 10

What is a business plan and what does is describe? ( 6 things)

Answer 10

The plan for what the owner is going to do. It should describe?

• The business idea
• Business aims and objectives
• Target market
• Marketing mix
• Location
• Finance