Buisness Activity (long answer) Flashcards
Advantages of Specialisation
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
Disadvantages of Specialisation
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
What is the Purpose of Buisness Activity
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
How to increase Added Value
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
Why does deindustrialisation occur
Depletion of primary resources in the home country
Cheaper goods by developing countries
Ability to spend more income on services
Define Privatisation
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.
Characteristics of entrepreneur
Hard working
Risk Takers
Creative
Effective Communicators
Optimistic
Self-confident
Innovative
Independent.
Advantages of Entrepreneur
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
Disadvantages of Entrepreneur
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
Why do Governments help Buisness Start ups
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
How do Governements help Buisness Start ups
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
How do we measure a Buisness Size
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)
What are the limitations to measuring Buisness Size
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
What are the reasons for Buisness Growth
Higher profits
More status for owners and managers
can benefit from Economies of Scale (lower costs)
Larger share of its market, ‘big names’
Why small Buisnesses are at greater risk
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
Why Buisness Fail?
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
Advantages of Sole Trader
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
Disadvantages of Sole Trader
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
Advantages of Partnership
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)
Disadvantages of Partnership
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
Contents of Partnership Agreement:
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
What are the Article of Association
Rules for shareholder meetings
List of directors and their jobs
Voting rights of shareholders
Details of how accounts are recorded
What are Memorandum of Association
Company name, address
What the business does
Number of shares to be sold
Advantages of Private Limited Company
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
