Chapter 2 Flashcards
What are some examples of primary sectors businesses?
Fishing
Oil extraction
Farming
What are some examples of secondary sector business?
Jewellery making
Dress making
Building trades
What are some examples of tertiary sector businesses?
Hairdressers
Car repairs
Cafes and restaurant
What is meant by the industrialisation that occurs between the primary and secondary sector?
There is a lot of manufacturing between these two sectors
What is meant by the deindustrialisation that occurs between the secondary and tertiary sectors?
There is more importing than manufacturing between these two sectors
What are some benefits in the increase of secondary sector activity?
- promote economic growth and development through exports
- important source of well paying jobs in some countries
What are some disadvantages to the increase in secondary sector activity?
D
What legal structures are within the private sector?
- Sole trader
- Private limited company
- Public limited company
- Cooperatives
- Private sector businesses
- Partnership
What is the difference between the running of the private and public sector?
The public sector is run and controlled by the state, whereas the private sector is run and controlled by individuals or groups of them.
Why is limited liability important?
This allows for more people to trust the company in terms of buying shares and owning part of the company. People wouldn’t want to buy parts of the company if their money would be lost if the business were to fail.
What is affected by deindustrialisation and industrialisation?
The employment and business activity for different sectors, on a national scale
What is the primary sector?
These are business that extract raw materials from natural resources.
E.g. oil extraction; farming
What is the secondary sector?
The secondary sector is area of business that includes the manufacturing of products without the involvement of the consumers.
Often business to business.
What is the tertiary sector?
The tertiary sectors includes the businesses that interact directly with consumers and the public to provide the good or service.
What are the features of private sector businesses?
- Not very continuous (except ltd)
- Have little to no liability (except ltd)
- no legal personality (except ltd)
- no share selling (ltds can but not to the public)
What are the features of public sector businesses?
- state controlled businesses whose objectives are to benefit the public
- merit goods
- can have shares and shareholders
What are merit goods?
They are things provided at a cost but that are already provided freely by the gent (eg private vs public schools)
The merit good is provided by the government
Appropriateness is legal structure
A
What problems can result from changing from on s legal structure to another?
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What are the advantages of soletrading?
- easy to set up
- choose working hours and patterns
- owner keeps all profit
What are disadvantages to sole trading?
- unlimited liability
- difficult to raise additional capital
- lack of continuity
What are disadvantages do partnerships?
- unlimited liability for all partners
- profits are shared
- loses independence of decision making
What are advantages of partnerships?
- partners can specialise in different areas of business management
- shared decision making (more insight)
- losses shared between partners
What is it that private limited companies cannot do but public can?
Sell shares to the general public
What is limited liability?
This is when if a company fails, the money lost is the total money invested into the company and not the total wealth of the shareholders
What is a legal personality?
This is when the business or company is recognised by the law as having its own legal identity, separate form those of its owners
What is continuity?
This is when, if an owner dies, the company can be passed down or given to someone and it will not have to break-up or dissolve
What is the minimum number of shareholders for a private limited company?
2
What does the memorandum of association show?
It shows the aims of the company
It is very vague so it doesn’t limit the business’ options
What does the article of association show?
It shows the internal workings and control of the business e.g. the names of directors, structure and procedures followed in meetings etc.
What is the divide between ownership and control when changing from a private to a public limited company?
4444
What are some advantages of publiclimited companies?
- can raise capital through general public shares
- legal identity
- continuous
- has limited liability
What are some disadvantages to a public limited company?
- lots of paperwork and legal formalities
- share prices can fluctuate with economy
What a re shareholders often interested in?
Making a profit and money
Hence they often have short term objectives that will help them get this
What is the name of the business that represent the franchisor’s brand?
Franchisee
What are some advantages to a franchise?
- lower failure chances
- national advertising paid
- advice and training already offered
What are some disadvantages to a franchise?
- share of profit/ revenue has to be paid to franchiser yearly
- initial franchise license fee can be costly
- no choice in suppliers or supplies
- little creative freedom
What are the names of business “held” bony holding companies?
Subsidiaries
How can subsidiaries be different from eachother?
- different managing styles
- different objectives/ aims
- different corporate cultures
- different corporate identities
What say do the directors of holding companies have?
They have a large say in major crucial issues
E.g. major new investments
Why would a holding company mighty want to keep their subsidiaires separate?
- already developed customer base and business (better to leave alone)- to keep a business’ identity
- to keep issues in one subsidiary away from others
What is turnover?
Turnover is the amount of money coming into your business without taking away expenses
How do joint ventures benefit both companies?
- merged strengths
- exploit each other’s market ranges
- shared costs
What are the risks that come with participating in a joint venture?
- incompatible businesses
- conflict
- business failure on one end could affect the project
What are cooperatives?
They are businesses that work together and purchase in bulk so that products are cheaper to buy and easier to sell ( business to business
)
What are the advantage sof a public corporation?
- managed with social objectives over profit-orientated
- government raised finance
- they can make a loss and continue for social benefit
What are the disadvantages to public corporations?
- tend to be inefficient
- government can interfere with business decisions for wring reasons e.g. opening a branch in a new reason to gain favour
