Chapter 1: People In Business

Question 1

Define stakeholder.

Answer 1

Stakeholders are people who are affected by how a business is run.

Question 2

Name 9 stakeholders.

Answer 2

• Entrepreneur
• Investor
• Employer
• Employee
• Interest Group
• Manager
• Supplier
• Consumer
• Service Provider

Question 3

Explain Entrepreneur.

Answer 3

Spots an opportunity, gap/niche in the market and takes the initiative to set up a business to make a profit from that opportunity. Takes personal and financial risks to do this. E.g. Mark Zuckerberg

Question 4

Define Investor.

Answer 4

A person who gives money (capital) to the entrepreneur that they need to set up and run the business in exchange for a return on their investment. E.g. Dragons Den

Question 5

Explain the difference between debt capital and equity finance.

Answer 5

Debt Capital-return on the investment plus interest.

Equity Finance-return on the investment through shares.

Question 6

Define Employer.

Answer 6

Hires others to work for them. An entrepreneur may become an employer when they cannot complete all tasks alone. The employer rewards employees for their work. Rewards can be financial (salary) or non-financial (more holidays). E.g. Aer Lingus employs pilots.

Question 7

Define employee. And an intrapreneur.

Answer 7

Person who works for the entrepreneur in return for a wage. They carry out essential tasks needed to make the business a success which the employer cannot or will not do. E.g. Pilots at Aer Lingus.
Employees can also give their employers ideas to make the business more successful. E.g. Microsoft employees coming up with the xbox

Question 8

Define Supplier.

Answer 8

A business that makes raw materials and sells to the business who will then turn them into finished products and sell to consumers E.g. Tayto buys potatoes for crisps.

Question 9

Define Consumer.

Answer 9

A person who buys goods or services from the entrepreneur for their own personal use. The customer provides the entrepreneur with a market for their product and therefore a profit. E.g. A mother paying for childcare.

Question 10

Define manager

Answer 10

A manager’s job is to the run the business and make sure it achieves its’ objectives. The manager uses the resources of the business (people, money, equipment) effectively so that the business is a success. A good manager is able to lead and motivate employees and communicate effectively with all shareholders. E.g. Michael O’Leary CEO of Ryanair.

Question 11

Define Service Provider.

Answer 11

A business that offers a wide range of helpful supports to an entrepreneur. Service providers do not make products instead they do helpful things. E.g. A solicitor

Question 12

Define Interest Group.

Answer 12

An organisation of people who come together and campaign for a common goal by lobbying decision makers. By joining forces they have more money, power and talented people and are more likely to be listened to. E.g. Greenpeace

Question 13

Explain cooperative relationship with an example?

Answer 13

Stakeholders have the same objective so they work together to achieve their common goal. This is a win-win situation as working together produces better than working alone. E.g. employer and investor. Employer provides honest information about how the business is doing and the investor cooperates by giving more capital.

Question 14

Explain competitive relationship with an example?

Answer 14

One party in the business wants to be more successful than the other. Mutually exclusive objectives. This is a win-lose situation as only one can win. Often the parties fight against each other and are rivals. E.g. Employers want max profit, employees want max wage.

Question 15

Explain dymanic relationship with an example?

Answer 15

Relationships between stakeholders that are constantly changing. Sometimes is a competitive relationship, sometimes cooperative. E.g. Restaurants in a town compete all year but come together to host a town festival that will benefit all of them.

Question 16

Explain dependent relationship with an example.

Answer 16

Parties need each other to be successful. They cannot achieve their goals on their own, they rely on the other party to provide what they need to be successful. E.g. Consumers and Producers need each other. Consumers need producers to make products and Producers meed consumers to buy the products.

Question 17

Explain the term contract and give an example of a legally binding contract.

Answer 17

A contract is legally binding agreement between two or more people in which each promises to do something for the other. The agreement is enforceable by law. If a party breaks the agreement a judge can order compensation to be paid or force the party to fulfil their part of the contract. E.g. A written contract to sell a house

Question 18

Name the eight components of a valid contract.

Answer 18

Offer
Acceptance
Consideration
Intention to Contract
Capacity to Contract
Consent to Contract
Legality of Form
Legality of Purpose

Question 19

Define Offer.

Answer 19

An offer is made when one person asks another to enter into a contract. For the offer to be valid the terms should be communicated clearly in writing or spoken or conduct with all conditions attached. E.g. When you buy groceries you offer to buy them by placing them on the conveyor belt.

Question 20

Define Invitation to Treat.

Answer 20

An indication that the seller would like to receive offers for this product. E.g. A price tag

Question 21

Define acceptance.

Answer 21

Acceptance means that the other person agrees to all of the terms of the offer. They can accept the offer by speaking, writing or conduct. E.g. Cashier scans groceries (conduct)

Question 22

Define Consideration.

Answer 22

Is the payment that one party gives to the other party as part of the agreement. It must be real and valuable. The agreement cannot be for free or it is not a valid contract. E.g. Money given for groceries.

Question 23

Define intention to contract.

Answer 23

Intention to contract means both parties mean to enter a legally binding contract and understand that they will end up in court if they break the contract. E.g. Agreements between family members are not intended contracts. Agreements between businesses are always intended contracts.

Question 24

Define Capacity to Contract. List four examples

Answer 24

Means that a person has the legal right to make a legally binding contract. If a contract is entered by someone not eligible it is not a legal contract. E.g. People under 18, People who are mentally incapacitated (drugs/drunk), diplomats who have immunity or company directors acting beyond their legal powers (ultra vires).

Question 25

Define Consent to Contract.

Answer 25

Consent to contract means that both parties must give genuine, voluntary and real permission to enter into it. They cannot be forced against their will. E.g. Death threats

Question 26

Define legality of form.

Answer 26

Certain contracts must be drawn up in certain ways to be legally binding. E.g. A contract to buy a house must be in writing.

Question 27

Define Legality of Purpose.

Answer 27

Means that legally binding contracts can only be for legal transactions. No agreement which involves breaking the law is a legal contract. E.g. A bank robber suing a getaway driver who didn’t show up.

Question 28

Name the four ways to terminate a contract.

Answer 28

Performance, agreement, frustration, breach of contract.

Question 29

Define Performance.

Answer 29

A contract ends when both parties carry out their side of the agreement exactly as they agreed. E.g. A contract to buy a house for €1000. The house is given to the buyer and the €1000 to the seller.

Question 30

Define agreement.

Answer 30

A contract comes to end if all parties involved agree to end it. E.g. an employer hires an employee for a 9 month contract but as the project is finished after 6 months. Both mutually agree to end the contract.

Question 31

Define frustration.

Answer 31

A contract ends because of an event, which was not reasonably foreseeable when the contract was made and was not under the direct control of either party, which makes it impossible to carry out the contract. E.g. bankruptcy or death

Question 32

Define Breach of Contract.

Answer 32

A contract is terminated as soon as people involved fail to carry out their side of the agreement. Conditions are fundamental to the contract and when broken it is terminated. Those affected can seek compensation from the party that broke the contract.
E.g. A teacher doesn’t show up for a grind then you don’t have to pay her.

Question 33

Explain damages as a remedy.

Answer 33

Judge orders the party who broke the contract to pay compensation to all innocent parties to compensate for any financial loss as a result of the breach to ensure the innocent parties don’t suffer financially. E.g. Adele agreed to do a concert in London for €20000 but doesn’t show up. Organisers can take her to court to make back any money lost from Adele cancelling the concert.

Question 34

Explain specific performance as a remedy.

Answer 34

Judge orders the party who broke the contract to carry it out exactly as agreed under the original contract. This ensures no suffering as a result of the breach. E.g. Adele must perform the concert at a later date.

Question 35

Explain rescind the contract as a remedy.

Answer 35

Judge orders the contract to be set aside and for both parties to be returned to how they were before the contract was made. This ensures innocent people are returned to the state before the contract and don’t suffer as a result of the breach. E.g. If Adele cancelled because of serious illness, the judge would rescind the contract and the €20000 would be returned to the organisers. The contract is set aside.