Business Studies Chap 7

Question 1

State the reasons why Entrepreneurs may decide to purchase an existing business

Answer 1

-Established business
-Established customer base
-Established name and reputation
-Known market
-Mentorship
-Cash flow
-Financing
-Current staff
-Market position

Question 2

Discuss the advantages of a franchise

Answer 2

-Purchasing a franchise could be cheaper than starting your own business
-Reduced long-term financial risk

Question 3

Describe the disadvantages of a franchise

Answer 3

-It is often difficult to sell a franchise or end a contract
-The start-up cost could be quite high

Question 4

Explain the contractual implications of a franchise

Answer 4

-policies that govern the product/services
-Royalties and the dates of payment

Question 5

Discuss the advantages of outsourcing

Answer 5

-Will provide continuity during periods of high staff turnover
-Allows businesses to focus on important business activities

Question 6

Describe the disadvantages of outsourcing

Answer 6

-There are often hidden costs in outsourcing
-Control of the outsourced products can be more complex

Question 7

Explain the contractual implications of outsourcing

Answer 7

Some details that should be addressed in an outsourcing agreement are:
-the length or duration of the contract
-the responsibilities and rights of both parties

Question 8

Discuss the advantages of leasing

Answer 8

-There is no large financial outlay as the cost is spread over a number of months or years
-The assets can be returned to the lessor when it is no longer needed

Question 9

Describe the disadvantages of leasing

Answer 9

-The lessee does not automatically become the owner of the asset
-No added tax advantages can be derived from leasing expenses

Question 10

Explain the contractual implication of leasing

Answer 10

The main responsibilities and contractual implications relating to lease
-the right to occupy an asset, e.g, a property
-The right to use the asset, for example, a delivery van