Business Structure

Question 1

private sector and examples

Answer 1

the private sector includes all these businesses that are set up by individuals or groups of individuals
•sole traders, partnerships, companies, charities and cooperatives

Question 2

public sector and examples

Answer 2

the public sector is business activity that is owned/run by the government for the benefit of everyone
•army, police force, schools, hospitals

Question 3

Goods

Answer 3

Items produced by the conversion of raw materials into finished products by a secondary sector; tangible/physical products

Question 4

consumer goods

Answer 4

goods that are used by the consumer

Question 5

producer goods

Answer 5

Items that are bought by another business and used to help make other goods

Question 6

Single use goods

Answer 6

Items that can only be used once

Question 7

Durable goods

Answer 7

Items that can be used over and over again

Question 8

Services

Answer 8

Intangible, a task performed in return for payment; including personal/direct services

Question 9

Business aims

Answer 9

The long-term intentions that provide a focus for setting objectives- usually qualitative sometimes in the form of a mission statement

Question 10

Business objectives

Answer 10

The medium to long-term targets that can give a sense of direction to a manager, department or whole organisation

Question 11

private sector aims

Answer 11

•survival
•profit maximisation
•maximising growth/sales revenue/shareholder value
•gain market share
•diversify into new products/markets
•social aims/ethical/ environmental aims
•improve reputation/quality
•increased efficiency
•competitiveness

Question 12

public sector aims

Answer 12

•provide a universal service to all UK households
•provide a service that the private sector may not be willing to provide
•merit goods raise society’s standards of living
•ensure effective provision of public goods

Question 13

public goods and examples

Answer 13

goods that wouldn’t be provided in a free market system because businesses wouldn’t be able to charge for them
•defence, social protection- police, street lighting

Question 14

public goods characteristics

Answer 14

•non-rivalry - the consumption of the good by one individual doesn’t reduce the amount available for others
•non-excludability - it is impossible to exclude others from benefiting from their use

Question 15

merit goods and examples

Answer 15

goods that could be provided by the free market but policy makers recognise that they would be under-consumed, there are external benefits and are provided free from charge by the Government
•health, education, libraries, museums, roads

Question 16

importance of public sector

Answer 16

•goods and services needed in everyday life and wouldn’t be provided by the private sector who want to make profit
•everyone benefits from them without paying for them

Question 17

sole trader

Answer 17

owned and run by one individual but they may employ people

Question 18

advantages of sole traders

Answer 18

•independence/own boss- quick decision making due to full control
•wants to develop skills
•increased rewards- to earn more
•privacy of business affairs- no legal requirement to share performance

Question 19

disadvantages of sole trader

Answer 19

•unlimited liability
•more responsibility
•relies heavily on ability to make decisions
•may work long hours and have limited holidays
•limited sources of resources

Question 20

reasons to set up your own business

Answer 20

•financial reward
•independence
•personal satisfaction
•prefer to work alone
•interest
•may take over family business
•identifying gap in market
•lack of employment opportunities
•encouragement by external agencies

Question 21

partnerships

Answer 21

owned and run between 2-20 people

Question 22

Deed of partnership

Answer 22

A legal agreement setting out the rights and responsibilities of the partners:
•how much capital they’ll contribute
•how profits will be shared
•procedure of ending the partnership
•how much control each has
•rules for taking on new partners

Question 23

Advantages of partnership

Answer 23

•share resources and ideas
•can cover for each other
•have more sources of finance
•shared responsibility and decision making

Question 24

disadvantages of partnerships

Answer 24

•unlimited liability
•loss of control
•slow decision making
•disagreements between partners
•profits must be shared between partners

Question 25

private limited companies

Answer 25

often a small business- shares do not trade on the stock exchange

Question 26

advantages of LTD

Answer 26

•benefit of limited liability- can attract extra shareholders to invest •control cannot be lost to outsiders- owners have to invite people to buy company shares •continuity •increased capital- selling shares

Question 27

disadvantages of LTD

Answer 27

•legal procedure in setting up takes time and money •have to disclose the accounts- can be looked at by public/ competition •profits have to be shared •slower decision making

Question 28

public limited companies

Answer 28

•usually a large, well-known business- shares trade on the stock exchange

Question 29

advantages of PLC

Answer 29

•all shareholders maintain limited liability •larger size means more market power •huge amount of money raised from sale of shares to public on the stock exchange- can use to expand the business •economies of scale •greater dominance in the market •often easier to raise finance- banks are more willing to lend

Question 30

disadvantages of PLC

Answer 30

•can be expensive to set up •outside interests could take control •greater divorce of ownership and control •accounts can be inspected by public/ competitors •have to publish more info •greater size may lead to slower decision making •time consuming to gain listing •inflexible due to size

Question 31

charities

Answer 31

a non-profit organisation established with the aim of collecting money from individuals and spending it on a cause

Question 32

charities characteristics

Answer 32

•not established to make profits but can earn surpluses •often have a narrow focus on what they want to achieve •raise the majority of finances through voluntary donations

Question 33

social enterprises

Answer 33

include for-profit and not-for-profit businesses with primarily social objectives, trading for social and environmental purposes , whose surpluses are principally reinvested for that purpose in the business or the community

Question 34

social enterprises characteristics

Answer 34

•seek to survive, make profit and wish to grow •distinctive as their social or environmental purpose is central to what they do- profits are reinvested to sustain and further their mission for positive change

Question 35

stakeholder

Answer 35

anyone with an interest in a business- individuals, groups or organisations that are affected by the activity of the business

Question 36

interests of owner/shareholders

Answer 36

how much profit the business makes

Question 37

interests of managers

Answer 37

concerned about their salary

Question 38

interests of employees/ workers

Answer 38

want to earn high wages, have job security and a nice working environment

Question 39

interests of customers

Answer 39

want the business to produce quality products at reasonable prices and to have a variety of products/ services to choose from

Question 40

interests of suppliers

Answer 40

want the business to continue to buy their products at a fair price

Question 41

interests of competition

Answer 41

what the business is doing, and to keep up with them

Question 42

interests of lenders

Answer 42

want to be repaid on time and in full

Question 43

interests of government

Answer 43

whether or not the business is operating within the constraints of the law; how many jobs its providing and how much tax they have to pay

Question 44

interests of trade unions

Answer 44

fight for the rights of their members and put pressure on the business to behave in a certain manner

Question 45

interests of the local community

Answer 45

employment, increased regional wealth, improved facilities and infrastructure