forms of businesses + entrepreneurial skills (P1)

Question 1

what is an unincorporated business

Answer 1

Occurs when there is no legal difference between the owner and the business

Question 2

examples of unincorporated businesses

Answer 2

1. sole traders

2. partnerships

Question 3

what is an incorporated business

Answer 3

Occurs when there is a legal difference between its business and its owners

Question 4

Examples of an incorporated business

Answer 4

1. Private LIMITED company (LTD)

2. Public LIMITED company (PLC)

Question 5

What’s a benefit of operating as an incorporated business

Answer 5

there is limited liability meaning personal assets can’t be seized if the business fails

Question 6

2 benefits of operating as a sole trader

Answer 6

1. Easy to set up as there is minimal paper work

2. owner may have complete control and take all profits

Question 7

3 negatives of operating as a sole trader

Answer 7

1. unlimited liability
2. if the owner is unfit to work (COVID) the owner may make no money
3. harder to raise finance as sole traders often have limited funds for security against loans

Question 8

what is a sole trader

Answer 8

a business which is started and run by one person

Question 9

what is a partnership

Answer 9

a business which is started and run by two or more people

Question 10

2 benefits of a partnership

Answer 10

1. greater ability to raise finance

2. the partner can offer expertise

Question 11

3 negatives of a partnership

Answer 11

1. Unlimited liability
2. decision making can take longer causing delays in production and demand may not be met as a result
3. profit must be shared

Question 12

3 benefits of private limited companies

Answer 12

1. limited liabilities
2. easier to raise finance as it improves business reputation and more shareholder can invest in the business
3. corporation tax (19%) is lower than the lowest rate of income tax (20%)

Question 13

negatives of private limited companies

Answer 13

1. financial documents are made public

2. shared profits

Question 14

how is stock sold on the exchange market

Answer 14

a business commissions a bank to promote shares to potential investors such as other investment banks

the bank may act as a guarantor and buy any unsold shares

Question 15

what happens when shares go up in value

Answer 15

the business does not benefit from the increase in share price
the business will get its initial price of shares

Question 16

Advantages of operating as a plc

Answer 16

large amounts of finance can be raised

Question 17

disadvantages of operating as a PLC

Answer 17

1. risk of hostile takeover. may demotivate employees and output may decrease as a result
2. need a minimum of £50,000 to set up
3. shareholders expect a greater percentage of the profit

Question 18

non financial objectives to starting a business

Answer 18

1. want to be your own boss
2. pursuing a hobby (may be putting skills to better use)
3. major change in personal circumstances (divorce)
4. to help people

Question 19

Financial objectives to starting a business.

Answer 19

1. to increase income (financial freedom)

Question 20

entrepreneurial skills required to run business

Answer 20

Business management skills.
Teamwork and leadership skills.
Communication and listening.
Customer service skills.
Financial skills

Question 21

why is creating a good business idea important for entrepreneurs

Answer 21

as start up firms have unlimited liability if the business is unsuccessful personal assets such as homes can be seized.

however this depends on the size of the original investment

Question 22

why is financial management important for entrepreneurs

Answer 22

limits cash flow problems. potential expansion (mentioned in the case study) may fail if money is overspent the bank may seize the store

however in the long term financial managers can be hired

Question 23

what is a mass market

Answer 23

Where a business sells into the largest part of the market, where there are many similar products on offer

Question 24

advantages of a niche market

Answer 24

1. can charge higher prices as consumers expect a diversified product which may finance further R and D
2. may build links with suppliers and expertise
3. face less competition

Question 25

advantages of a mass market

Answer 25

1. economies of scale

2. may lead to more revenues as more consumers are willing and able to buy a mass market product.

Question 26

disadvantages of a niche market

Answer 26

1. a business may be to over reliant on a certain market. For example consumers may be less willing to buy luxury goods following COVID19

Question 27

benefits of selling online

Answer 27

1. no cost of a physical store may translate into lower prices. (however size of which prices may fall can be questioned)
2. can access markets abroad
3. growing demand for online sellers (more people go online to shop -> more web visits increases the likelihood of sales)

Question 28

negatives of selling online

Answer 28

1. may not reach older generations an areas without wifi

2. designing a good quality website is difficult

Question 29

2 benefit of product orientation

Answer 29

1. may faster develop USP (which is especially important in a dynamic market)
2. lower cost of market research

Question 30

1 benefit of market orientation

Answer 30

1. increased brand reputation as consumers need may feel better considered

Question 31

1 benefits of primary market research

Answer 31

1. data is more relevant to the business and products may better target the desired market as a result

Question 32

benefits of secondary market research

Answer 32

1. quick and often cheap

2. may be done by more specialist researchers (such as Mckinsey and company)

Question 33

evaluation of primary market research

Answer 33

1. only effective if the sample size is large and reflects a target population
2. managerial bias may persuade respondents

Question 34

2 ways ICT can be used market research

Answer 34

1. website tracking data

2. online surveys (better than IRL as many people are unwilling to answer them on the highstreet)

Question 35

ways a market can be segmented

Answer 35

Age, Race, Gender, Income, location