Business Activity Flashcards
Why are Managers interested in the performance of the business?
-Responsible for the performance of the business, if they do well they may gain bonuses or promotions
Why the suppliers are interested in the business?
-They are interested in the amount of cash the business has to be able to pay the suppliers at required dates and if they can get success from supplying the business
What are the differences between the objectives of private sector and public sector?
Private sector: -Earn profit - Survive - Increase market share Public sector: - Increase GDP - Decrease unemployment rates - Provide a better standard of living
Why and how governments support business start-ups?
- To create jobs so unemployment rates are lower
- Increase variety of products available so consumers have more choice
- Create more competition, which usually results in lower prices and better quality of goods and services
- To create large businesses which the country could benefit from for the economy
How to measure the business size?
- Capital employed: The value of long-term finance invested in a business, to buy things such as factories, office building, machinery etc. (also known as assets)
- Market share: How large a business owns a share in the market
- Number of employees: How many employees there are working for a particular company
- Value of output: How much a business is earning from selling their products or service
Give reasons of business’s failures
- Poor management skills
- Lack of objectives
- Economic influences
- Competition
- Poor marketing
Why new businesses are at greater risk of failing?
Because they are new to the market and may not have a lot of recognition so there may not be a lot of sales and they usually don’t have enough money to support themselves after a certain period of time
Advantages of franchises?
- Less chance of failure
- Franchises often provides advice and training to the franchisee
- Franchisors finance the promotion of the brand through national advertising
- The franchisor would have already checked the quality of suppliers
Disadvantages of franchises?
- Initial cost of buying into a franchise can be very expensive
- The franchisor will take a percentage of the revenue or profits made by the franchisee each year
- There are very strict controls over what the franchisee is allowed to do with the product, pricing, store layout
- The franchisee doesn’t gain any personal recognition, they only gain recognition because of the existing brand
Disadvantages of joint venture
- Any mistakes made may damage the reputation of all firms in the joint venture
- The businesses ay have different business cultures or styles of leadership, making decision making difficult
Advantages of joint venture
- Reduces risks for each business and cuts costs
- Each business brings different expertise to the joint venture
- Market and product knowledge can be shared
Difference between unincorporated businesses and limited companies
An unincorporated business does not have a separate legal identity from its owners. Whereas, an incorporated business does.
Concepts of risk, ownership and limited liability
Unincorporated business ownership have a greater legal and financial risk than incorporated business because
- Owners and the business have the same legal identity, e.g. if a customer is injured from the business’s products, then the owners may be sued for damages
- Owners have unlimited liability for business debts
Describe the business organisations in the public sector
- Are owned and controlled by the state
- Are financed mainly through taxation
- Most of the times, their objectives are social rather than profit
- The services provided are often free or at a very low price
