3.1 Business in the Real World Flashcards
Why start a business?
To make profit Help society (social enterprise) Need a job Become successful Escape from a boring job Flexibility from a working hours
Reasons to not become a sole trader
Unlimited liability
Can be quite stressful making so many decisions
Illness/holidays may effect the running of the business
Reasons to be a sole trader
No special paperwork
Don’t have to share the profits
Can cater for local people’s needs
Identify 4 factors of production
Land
Labour
Capital
Enterprise
Identify 3 different business sectors
Primary
Secondary
Tertiary
What is opportunity cost?
It is the benefit lost of the next best alternative
What is an entrepreneur?
It is someone who takes the risk starting a business
What are the skills to become an entrepreneur?
Creative Brave Resilient Confident Determined Good at negotiating
What is a dynamic market?
This means that the business environment is constantly changing, to stay successful a business needs to continuously adapt
What is a sole trader?
A business that is owned and run by a single individual
What is unlimited liability?
Owners are personally for debts of the business
May have to sell own possessions
What is limited liability?
Shareholders are only liable for the debts of the company up to the value of what they originally invested
What is a partnership?
Partners are joint owners of a business. There must be between 2 and 20 partners
What is limited companies?
A company that has limited liability and whose shares are traded publicly on the stock exchange e.g Tesco, Morrisons
What are private limited companies?
A company whose shares are sold privately often to friends and family
PLC =
Limited Companies
LTD
Private Limited Companies
Positives of PLC
Limited liability Wide range of shareholders Expertise/skills Larger status Able to raise larger amounts of capital through shares
Negatives of PLC
At risk of hostile takeover
Have to display information publicly
Shareholders disagreement on objectives more likely
May not know shareholders
Positives of LTD
Limited liability
Continues if business founders dies
Only have to have £2 capital to setup
Negatives of LTD
Can’t sell to the public
Shareholder have to agree when inviting new shareholders, that might many disagreements
What is a Not for Profit organisation?
A business that is set up to achieve other objectives than make a profit
Positives of Not for Profit
Provides added value on goods and services
Benefiting society
Negatives of Not for Profit
Difficult to trust
Difficult to raise finance
What is location?
Where a business is geographically situated
Factors to consider when deciding on location
Local Community Competitors Employees Cost Access to infrastructure
What is a stakeholder?
An individual, group or organisation that effects or is affected by a business’ action
Name some common business stakeholders
Customers Local Community Shareholders Owners Competition Suppliers
What is an aim?
An overall or target a business hopes to reach
What is an objective?
It is a specific, measurable target that outlines how a business will achieve that aim
SMART =
Specific Measurable Achievable Realistic Time
Purpose of objectives
Give business a clearly defined target
Specific plans can be made to achieve these targets
Helps investors understand the direction of the business
Helps monitor and control the employees
Can help motivate employees
Enables business to measure progress towards goals
