Business in the real world

Question 1

Primary sector

Answer 1

involves extracting natural resources from the earth, such as growing crops

Question 2

Secondary sector

Answer 2

manufacturing of goods

Question 3

Tertiary sector

Answer 3

providing services

Question 4

Division of labour

Answer 4

involves splitting roles up between different people., who are specialists in that particular area, to increase efficiency

Question 5

Are partnerships easier to run than sole traders?

Answer 5

Yes - extra help from partners (division of labour, help with decisions, more capital)
No - partners can be unreliable/disagreements can occur
Depends on - type/nature of business

Question 6

Is a business more likely to succeed as a partnership or sole trader?

Answer 6

Yes - partners may bring extra finance/expertise, so less risk for 1 person
No - sole trader is easy to manage - 1 owner so decision making is quicker
(factors like: price, quality, competition and demand will also determine success)

Question 7

Explain why a charity like “WaterAid” is an example of a not-for-profit organisation?

Answer 7

Has clear social objectives - to help others
Raises money for good causes

Question 8

Why do businesses set aims and objectives?

Answer 8

to motivate staff
to measure success
to help with decision making
to provide direction to the firm - a purpose

Question 8

Why do businesses set aims and objectives?

Answer 8

to motivate staff
to measure success
to help with decision making
to provide direction to the firm

Question 9

Financial aims and objectives:

Answer 9

maximise profit
growth/expansion
market share
survival
shareholder value

Question 10

Non-financial aims and objectives:

Answer 10

customer satisfaction
being ethical
environmental and sustainability targets

Question 11

Why would a business want to set the aim/objective of improving customer satisfaction?

Answer 11

helps encourage customer loyalty and create repeat purchases - increased sales
improves reputation so can have more flexibility with pricing

Question 12

Stakeholders of a business:

Answer 12

employees - concerned with wages
suppliers
owners
customers
community - concerned with environment (e.g. noise pollution) and ethics
government - concerned with taxes to reinvest into infrastructure and services
shareholders - concerned with dividends

Question 13

What effect does a business replacing 100 of its workers with machines have on its stakeholders?

Answer 13

customers - benefit from consistent quality, can lead to greater customer satisfaction
owners - reduce costs, can maximise profits
employees - may leave or strike, resulting in a loss of skills; extra employees may be hired that need to be trained, increased costs; motivational methods need to be used to retain remaining employees
community - may be concerned with noise pollution created by machines, can impact the reputation of the business

Question 14

Competitors

Answer 14

rival businesses trying to attract the same customers

Question 15

Supppliers

Answer 15

businesses that provide the raw materials or stock to a business

Question 16

Market

Answer 16

where the buyer and seller meet

Question 17

Labout

Answer 17

the number of workers nearby

Question 18

Unemployment

Answer 18

the number of workers without a job

Question 19

How will the supply of labour nearby influence the business location?

Answer 19

if location is in an area of high unemployment, can keep wages low

Question 20

How will how far away raw materials are influence the business location?

Answer 20

if they are near, will reduce transport costs

Question 21

How will how far away the market is influence the business location?

Answer 21

if it is near, can receive more footfall as it is more convenient for customers to buy from the business

Question 22

How will the number of competitors nearby influence the business location?

Answer 22

if there are too many, can be difficult to attract customers, may need a USP or to lower prices

Question 23

How will the cost influence the business location?

Answer 23

if it is expensive, it will increase the business’s costs, will have a shorter profit margin

Question 24

Why may a new business struggle against a competitor?

Answer 24

competitor - already has a loyal customer base, well known, therefore customers will trust more

Question 25

Advantages of writing a business plan:

Answer 25

• the business is better organised (all areas of the business have been considered)
• can be used to secure a bank loan
• can use to monitor progress
• can help with decision making (especially for someone with limited business experience)

Question 26

Disadvantages of writing a business plan:

Answer 26

• time-consuming (especially for someone with limited business experience + skill)
• can be inaccurate (if minimal market research)
• only useful if regularly updated (someone with limited business experience may not see the importance of updating it)

Question 27

Internal growth (organic growth)

Answer 27

franchises
opening another store/office/factory
outsourcing
e-commerce

Question 28

External growth (inorganic growth)

Answer 28

mergers (friendly)
takeovers (hostile)

Question 29

Organic growth vs inorganic growth

Answer 29

organic growth - less risky but is slower than external growth; franchising passes majority of the risk onto the franchisees (except reputation); outsourcing can be risky as could have poor quality and can be time consuming to choose appropriate outsourcing partner
inorganic growth - not all mergers and takeovers will be successful, could have diseconomies of scale; diversification can be risky, due to a lack of experience entering new markets with new products

Question 30

unit costs formula

Answer 30

total costs/output

Question 31

Types of economies of scale:

Answer 31

technical economies of scale (machinery)
purchasing economies of scale (bulk-buying discounts)

Question 32

Types of diseconomies of scale:

Answer 32

Poor communication - decisions take longer
Poor coordination - managers in charge of increasing numbers of employees, lead to reduced staff motivation and productivity, increases unit costs; could cause a duplication of roles, increases costs
Poor motivation - business has too many employees, employees feel less significant, feel they bring no value to business, causes poor motivation, increases waste

Question 33

Diseconomies of scale

Answer 33

when average unit costs increase as the business expands