Buisness Activity (long answer)

Question 1

Advantages of Specialisation

Answer 1

Workers specialized in a certain task, increase efficiency

Less time is wasted from one workbench to another, and more efficiency
As the business is more efficient, output increases which may lead to economies of scale

Workers become more skilled and experienced, reducing the mistakes made

Question 2

Disadvantages of Specialisation

Answer 2

Workers become bored of doing the same job. Efficiency might fall

If a worker is absent, no other worker can do the job. Efficiency might fall
Employees have to rely on each other to produce products, leading to a fall in productivity

Question 3

What is the Purpose of Buisness Activity

Answer 3

Businesses combine scarce factors of production to produce goods or services to satisfy people’s wants

A business also employs people as workers and pays them wages to allow them to consume products as well

Question 4

How to increase Added Value

Answer 4

Increase the selling price of the product while keeping the total cost of material the same
Create a brand image
Improve packaging
Make products more appealing by adding features
Provide higher quality goods and services

Question 5

Why does deindustrialisation occur

Answer 5

Depletion of primary resources in the home country
Cheaper goods by developing countries
Ability to spend more income on services

Question 6

Define Privatisation

Answer 6

Privatisation refers to the selling of a public sector business to the private sector.
Privatisation may occur as the private sector is more efficient and competitive and will be able to make good quality goods, leading to higher profits.
But private sector does not have social objectives, making their products unaffordable.

Question 7

Characteristics of entrepreneur

Answer 7

Hard working
Risk Takers
Creative
Effective Communicators
Optimistic
Self-confident
Innovative
Independent.

Question 8

Advantages of Entrepreneur

Answer 8

Independent, able to choose how to use time and money
Able to put own ideas into practice
May become successful and very profitable if business grows
Able to make use of personal interests and skills
Profits to themselves, no need to share them with anyone

Question 9

Disadvantages of Entrepreneur

Answer 9

entrepreneurs will have to put their own money into the business.
many entrepreneur’s businesses fail (risky)
Lack of knowledge and experience in starting and operating a business
Lost income from not being employee for another business (Opportunity cost)
Will have to invest their own savings as well as find other sources of finance , which is time taking and expensive

Question 10

Why do Governments help Buisness Start ups

Answer 10

Reduce unemployment, new businesses create jobs
Increase competition, gives consumers more choice
Increase output, economy benefits from increased output of goods and services
Can grow further and become large and important businesses which pay government more taxes

Question 11

How do Governements help Buisness Start ups

Answer 11

Business ideas & help, they set up support sessions held by experienced business people
Finance, they may lend loans at low interest rates or grants
Governments provide grants for training employees to make them more efficient and productive
Governments allow entrepreneurs to use research facilities in universities

Question 12

How do we measure a Buisness Size

Answer 12

The number of people employed in the business
The value of output of the business
The value of sales
The total value of capital (money) invested into the business (capital employed)

Question 13

What are the limitations to measuring Buisness Size

Answer 13

Some businesses employ few people but produce high output values
high level of output does not mean business is big
different businesses sell different products (expensive and cheap)

some companies may use cheap labor giving high output with low-cost equipment

Question 14

What are the reasons for Buisness Growth

Answer 14

Higher profits
More status for owners and managers
can benefit from Economies of Scale (lower costs)
Larger share of its market, ‘big names’

Question 15

Why small Buisnesses are at greater risk

Answer 15

Established by youngsters who lack managed experience
Borrow money to begin so will have to repay whether or not business is successful
Start-ups have lesser experience and information about the market in order to make informed decisions
New entrepreneurs may not have a realistic picture of the market

Question 16

Why Buisness Fail?

Answer 16

Poor management – from lack of experience, poor choice of managers (family business), bad decisions

Failure to plan for change – businesses need to adapt everchanging business environment. Must take risks.

Poor money management – lack of money to pay workers, suppliers, landlords, etc.

Over-expansion – (diseconomies of scale), management problems and finance

Competition with other businesses – new businesses are at more risk of failing than existing businesses.

This is because start-ups have lack of money, resources, poor planning & don’t have much research

Question 17

Advantages of Sole Trader

Answer 17

Easy to set up, do not require a lot of money to set up

They are their own boss, has the freedom to choose their own holidays, work hours, prices, who to employ

Close relationship with customers

Does not have to share profits

Does not have to give information about the business

Lesser legal restrictions

Question 18

Disadvantages of Sole Trader

Answer 18

Capital is usually provided by owner, hard to get capital to expand firm
They have unlimited liability (responsible for any debts of the business, bank can take away possessions to pay back)
Business is likely to remain small
No one to discuss business matters with
They are unincorporated (business has same identity as the owner). So, business ends when owner dies

Question 19

Advantages of Partnership

Answer 19

Easy to set up, do not require a lot of money
More capital invested (more expansion)
Partners are motivated because any losses are shared by the partners
Responsibilities are shared (focused on different parts of business)

Question 20

Disadvantages of Partnership

Answer 20

Capital is usually provided by partners
Partners have unlimited liability
Partners can disagree on decisions. If one of the partners is inefficient, they all lose money
They are unincorporated. If one of the partner dies, the partnership ends

Question 21

Contents of Partnership Agreement:

Answer 21

Amount of capital invested by all partners

Tasks to be done by each partner

The way profits are shared out

How long partnership will last

Arrangements for absence, retirement and how partners could be let known

Question 22

What are the Article of Association

Answer 22

Rules for shareholder meetings

List of directors and their jobs

Voting rights of shareholders

Details of how accounts are recorded

Question 23

What are Memorandum of Association

Answer 23

Company name, address

What the business does

Number of shares to be sold

Question 24

Advantages of Private Limited Company

Answer 24

Shares can be sold to lots of people. More capital to expand
Owners are able to keep control of company as long as they don’t sell too many shares
All shareholders have limited liability (bank can only take amount of money invested)
Company continues after a shareholder dies

Question 25

Disadvantages of Private Limited Company

Answer 25

Difficult to set up (legal formalities).
Shares are difficult transfer. Requires other shareholders to agree
Accounts are less secret than other forms of business
Company cannot offer it shares to the public

Question 26

Advantages of Public Limited Company

Answer 26

Opportunity to raise high capital sums
No restriction of buying, selling or transferring shares

Question 27

Disadvantages of Public Limited Company

Answer 27

Difficult to set up (legal formalities) & accounts are even more public
Danger of business being taken over due to public shares
Selling shares to public is expensive

Question 28

Advantages of Joint Venture

Answer 28

Costs are shared, good for expensive projects
Shared knowledge of two businesses
Risks are shared

Question 29

Disadvantages of Joint Venture

Answer 29

Profits have to be shared if project is successful
Might have disagreements over important decisions
Different methods of running business

Question 30

Advantages of Public Sector

Answer 30

Reduces wastage of resources (if a monopoly)
Allows access of essentials to everyone
Continued even if in losses
Keeps in mind social costs of decisions (non-profitable)

Question 31

Disadvantages of Public Sector

Answer 31

Low efficiency due to lack of competition
Easily manipulated by the government to exploit citizens
Not flexible as profit is not a main aim
Will have to be subsidized if in losses, opportunity cost

Question 32

What are the benefits of Buisness Objectives

Answer 32

Employees have a clear target to work towards
Decisions made keeping in mind objectives
Clear & measurable objectives will make sure the entire organisation works towards the same goal
Managers will be able to compare performance
A business objective maybe changed if economic conditions change or one objective has already been achieved

Question 33

What are the Private Sector Buisness Objectives

Answer 33

Business Survival - Adjust to business environment, change price of products if necessary

Generating profit – pay a return to owners or provide finance to invest further in business

Returns to shareholders - discourage shareholders from selling their shares. Can be increased by increasing profit or increasing the share price

Growth of business – increase salaries, economies of scale. only achieved if customers are satisfied with the product

Market Share – the proportion of the total market sales by one business, gives good publicity, more influence over suppliers and customers

Service to community – provide jobs, support disadvantaged groups in society, protect environment