ADVANTAGES AND DISADVANTAGES Flashcards
1
Q
Advantages of a sole trader
A
- The owner keeps all the profit
- They are independent- owner has complete control
- It is simple to set up with no legal requirements
- Flexibility - for example: can adapt to change quickly
- Can offer a personal service because they are small
- May qualify for government help
2
Q
Disadvantages of a sole trader
A
- Have unlimited liability
- May struggle to raise finance - considered too risky by those that lend money
- Independence may be too much of a responsibility
- Long hours and very hard work
- Usually too small to exploit economies of scale
- No continuity - the business dies with the owner
3
Q
Advantages of a partnership
A
- Easy to set up and run - no lega, formalities
- Partners can specialize in their area of expertise
- The job of running a business is shared
- More capital can be raised with more owner
- Financial information is not published
4
Q
Disadvantages of a partnership
A
- Partners have unlimited liability
- Profit has to be shared
- Partners may disagree and fall out
- Any partners’ decision is legally binding on all
- Partnerships still tend to be small
5
Q
Advantages to the franchisee
A
- Less risk - a tried and tested idea is used
- Back-up support is given
- Set-up costs are predictable
- National marketing may be organised
6
Q
Disadvantages to the franchisee
A
- Profit is shared with the franchisor
- Strict contracts have to be signed
- Lack of independence - strict operating rules apply
- Can be an expensive way to start a business
7
Q
Advantages to the franchisor
A
- Fast method of growth
- Cheaper method of growth
- Franchisees take some of the risk
- Franchisees more motivated than employees
8
Q
Disadvantages to the franchisor
A
- Potential profit is shared with franchisee
- Poor franchisees may damage brand’s reputation
- Franchisees may get merchandise from elsewhere
- Cost of support for franchisees may be high
9
Q
Advantages of private limited companies
A
- Shareholders have limited liability
- More capital can be raised
- Control cannot be lost to outsiders
- Business continues if a shareholder dies
- Has more status - for example than a sole trader
10
Q
Disadvantages of private limited companies
A
- Financial information has to be made public
- Costs money and takes time to set up
- Profits are shared between more members
- Take time to transfer shares to new owner
- Cannot raise huge amounts of money like PLCs
11
Q
Advantages of public limited companies
A
- Large amounts of capital can be raised
- Shareholders have limited liability
- PLCs can exploit economies of scale
- May be able to dominate the market
- Shares can be bought and sold very easily on the stock market
- May have a very high profile in the media
12
Q
Disadvantages of public limited companies
A
- Setting up costs can be very expensive
- Outsiders can take control by buying shares
- More financial information has to be made public
- May be more remote form customers
- More regulatory control owing to Company acts
- Managers may take control rather than owners
13
Q
One difference between private limited companies ( Ltd ) and public limited companies ( PLC )
A
PLC -shares can be bought and sold in the stock market
Ltd - shares in private limited companies cannot be traded on the stock market
14
Q
Advantages of face-to-face communication
A
- Allows immediate feedback
- Encourages cooperation
- Allows new ideas to be generated
- Saves time
15
Q
Disadvantages of face-to-face communication
A
- Negative body language may create a barrier
- A record of the message may not be kept
- Non-relevant information may be included
- In a meeting, some people may not listen
- Limits to the number reached, for example: by the capacity of largest meeting room
