classification of businesses

Question 1

examples of primary sector

Answer 1

• fishing
• farming
• mining
• beekeeping
• shearing
• oil extraction
• poultry

Question 2

examples of secondary sector

Answer 2

• flour mill
• brewery
• manufacturing (automobiles)

Question 3

examples of tertiary sector

Answer 3

• retail shops
• hospitals
• transportation
• banking
• insurance
• communication

Question 4

relative importance of economic sectors

Answer 4

• how many people are employed in that sector
• contribution of that sectors output to the national output

Question 5

reasons for the change in the importance of economic sectors

Answer 5

• sources for primary products get depleted
• lose competitiveness to manufacturing to developing countries
• wealth and living standards increase so importance of tertiary sector increases

Question 6

advantages of sole trader

Answer 6

• easy setup
• complete control
• full profit
• cater to local needs
• business affairs kept private
• personal relationship with customers

Question 7

disadvantages of sole trader

Answer 7

• limited capital so less expansion
• less ideas
• unlimited liability
• no continuity
• no sick leaves so commitment required

Question 8

advantages of partnership

Answer 8

• more capital than sole trader
• divided workload
• room for specialisation
• more ideas

Question 9

disadvantages of partnership

Answer 9

• bound by actions of one partner
• more discussion and consultation so time taking
• limitation on number of partners
• unlimited liability
• no continuity

Question 10

advantages of private limited company

Answer 10

• more capital than partnerships
• limited liability
• owner can retain control
• continuity
• can enter into legal contracts with other businesses

Question 11

disadvantages of private limited company

Answer 11

• must be registered so difficult and expensive set up
• accounts less private
• cannot sell shares to public
• cannot sell shares without permission of all shareholders
• over expansion may lead to certain diseconomies of scale like many employees become hard to manage

Question 12

advantages of public limited company

Answer 12

• more capital than private limited company
• economies of scale so can employ specialist and have lower per unit cost
• limited liability
• continuity
• shares issues through Stock Exchange to general public

Question 13

disadvantages of public limited company

Answer 13

• expensive legal and administrative costs
• legal formalities in setting up
• must publish accounts
• if too large then diseconomies of scale and cannot be managed efficiently
• decisions difficult to arrive at

Question 14

advantages of franchises to franchisor

Answer 14

• money from license and royalties
• expansion of business faster and easier
• day to day management responsibility of franchisee
• all products sold obtained from franchisor

Question 15

disadvantages of franchises to franchisor

Answer 15

• poor management could affect reputation
• franchisee keeps profit

Question 16

advantages of franchises to franchisee

Answer 16

• less chances of business failure as they sell well known products
• franchisor covers advertisement costs
• all supplies obtained from central source
• fewer decisions to make
• training will be provided
• established product so bank may be willing to give loans

Question 17

disadvantages of franchises to franchisee

Answer 17

• less independence
• unable to change products according to change in markets so no creativity
• license fee and part of profit must be paid so heavy start up costs

Question 18

advantages of joint venture

Answer 18

• sharing of costs, knowledge and risks
• business you are working with may have local knowledge
• international technologies can be utilised

Question 19

disadvantages of joint venture

Answer 19

• different management styles lead to disagreements and conflicts
• profits have to be shared
• cultural differences can lead to problems

Question 20

advantages of public sector corporations

Answer 20

• set up for public welfare so can reach out to underprivileged and unemployed groups of society
• provision of goods and services at lower costs

Question 21

disadvantages of public sector corporations

Answer 21

• less efficiency as can always rely on government subsidies
• lower incentive to earn profits
• political influence
• low competition so less creativity

Question 22

advantages of multinationals

Answer 22

• economies of scale
• increased sales
• tax incentives
• save on transportation costs

Question 23

disadvantages of multinationals

Answer 23

• legislation required to set up
• cultural difficulties
• opposition from local businesses