Business Exam Flashcards
Factors of production
Land: natural resources
Labour: workers, intellectual or physical efforts
Capital: man-made goods used to produce and finance needed to start up a business/ eg. Machinery
Entrepreneurship:individuals who combine the resources (other 3) to make the business work/ risk-takers, driven, organised, leaders
Economic sectors
Primary: businesses that work with the land (farms)
Secondary: manufacturers (BMW, Jeep)
Tertiary: businesses that provide services (IBS, Red Cross)
Quaternary: businesses that deal in information/technology (new apps)
Sole trader
1 Owner
Eg. Wedding planners
+: Full control, Easy to setup, you get to be your own boss
-: Unlimited liability, unincorporated, long hours, lack of finance
Partnership
2 or more owners
Equal pay -> Deed of Partners
Eg. Paul Allen and Bill Gates, Steve Jobs and Steve Wozniak, Mark Zuckerberg and Winklevoss Brothers, William Proctor and James Campbell, William Procter and James Gamble
+: Share decision making process (new ideas, share the work), more capital
-: Unlimited liability, unincorporated, lack of agreement
deed of partnership (how)
Decisions will be made Profits will be distributed, Disputes will be solved Future partners will be admitted Partners can be bought out Partnership will be dissolved
Types of partnerships
General Partnership
Limited Partnership
Joint Ventures (specific period of time)
Limited Companies
2 types: Private limited companies (LTD, UK) (SRL, SP) (SCL, FRA), Public limited companies (PLC, UK) (INC, US), (SA, SP)
+: incorporated, limited liability, easy to raise finance, stable form of structure
-: greater admin costs, public disclosure of company information,
Private limited company
Owned by shareholders
Shares are sold only to people known by the shareholders (must be accepted by all owners)
Eg. Amazon, Toyota, Samsung, IKEA
Public Limited company
Shares are sold in the stock exchange
Eg. Sainsbury, Marks and Spencer, EasyJet
Franchise
A franchise is the right to sell other firms products or use their trademarks
Franchisor (Mc Donalds) and Franchisee (Restaurants) : Fee (constant, % of profit), Use of the brand know how (HR management)
Cooperatives
They are run by a board of directors
Producers: owners are the workers (ownership and control)
Retailers: owners are the customers (eg. Banks)
+: No conflict between owners and workers
-: Limited sources of finance (retained profits, owners capital)
Public corporations
Owned and funded by the government
Board of trustees appointed by the owner (government)
If there is a loss -> the government pays (taxpayers)
If there is profit -> the money goes to the government (taxpayers)
Public Private Partnership (PPP)
involvement of the private sector in the form of management expertise and/or financial investment in public sector projects in aim of benefiting the public.
How to chose the ownership structure
The industrial sector Size Revenue Number of workers Needs of finance (most important!)
Firms objectives
Survival
Profit Maximisation (see chp3) (Profit Margin and Return on the capital employ)
Growth: (number of employees, income from sales, number of products produced)
Market Share: (Sales of the business/Total sales in the market) x100. The bigger the market shore the more control of the market
Customer Satisfaction: Surveys
Ethical considerations (CSR)
Environmentally Friendly (CSR)
