Higher Understanding Business Flashcards
What are the sectors of industry
Primary
Secondary
Tertiary
Quaternary
Describe the primary sector
Is the extraction of raw materials or natural resources from the land. Any business that grows goods or extracts materials from the land would be classed as a primary sector business.
Describe the secondary sector
Is with manufacturing. This would involve taking the raw materials from the primary sector and converting them into new products.
Describe the tertiary sector
Is with providing a service. Services are activities that are done by people or businesses for consumers.
Describe the quaternary sector
Those industries providing information services. it sometimes includes the tertiary sector, as they are both service sectors.
More IT based (technology)
What are the sectors of economy
Private
Public
Third
Describe the private sector
Private sector organisations are owned and controlled by private individuals. Their primary aims are to survive and make a profit.
Describe the public sector
Public sector organisations are owned and controlled by the government. They aim to provide a service to the public and are funded by taxes.
Describe the third sector
Third sector organisations are set up to help a cause or provide a service to members. They aim to raise money and increase awareness for good causes.
What types of organisations are in the private sector
Sole trader
Partnership
Private limited company
What types of organisations are in the public sector
National government
Local government
What types of organisations are in the third sector
Charities
Voluntary organisations
Social enterprises
Describe a sole trader
A sole trader is a business owned by one person.They are usually small in size. Sole traders rely on their own savings, bank loans or loans from friends and family to finance their business.
Advantages of a sole trader
Easy to set up (legally)
Retains all profits for themselves
They make all the decisions
Disadvantages of a sole trader
Can be difficult to raise finance
Unlimited liability
Heavy workload
Describe a partnership
Partnerships can have a minimum of 2 and a maximum of 20 partners. A partnership is a business set up by the deed of partnership document. A partner who invests but is not involved in the day-to-day running of a partnership is called a sleeping partner.
Advantages of a partnership
- More equity available to finance more than a sole trader
- Different partners can bring different skills
- Work load is shared
Disadvantages of a partnership
Unlimited liability
Profit is shared between the partners
Partners may not always agree on decisions
Describe private limited companies (ltd)
Companies often need to grow larger than the maximum number of 20 partners allowed in a partnership.
One way of doing this is to become a limited company. Limited companies have limited liability
Advantages of private limited companies
Owner can retain control
More able to raise money
Limited liability
Disadvantages of private limited companies
Must be registered with the register of companies
High set-up costs
Harder to motivate and control workers
Describe a public limited company (plc)
Unlike a private limited company, a public limited company can offer shares of the business to the public.
they must have share capital of at least £50,000
they must have two shareholders, two directors, and a qualified company secretary
Advantages of public limited companies
Raise more money by selling shares on the stock exchange
Easier to growth and diversify
Disadvantages of public limited companies
Disagreements over how to run the company
Threat of take over
Difficult to pursue objectives other than increasing profit
Describe multinational
A multinational organisation is a company which has its headquarters in one country but has assembly or production facilities in other countries.
Advantages of being multinational
Creating jobs Bringing expertise in and improving the skills of the workforce Benefiting from economies of scale Gaining technical economies Achieving purchasing economies
Disadvantages of being multinational
Relying on deskilled jobs Not keeping profits in the host country Cutting corners Exploiting the workforce and/or the environment Exerting political muscle
Describe franchises
An entrepreneur can opt to set up a new independent business and try to win customers. An alternative is to buy into an existing business and acquire the right to use an existing business idea
Why is a franchisor
A franchisor, who sells the right to use a business idea in a particular location.
What is a franchisee
A franchisee, who buys the right from a franchisor to copy a business format.
What’s the cost and benefits of opening a franchise
Opening a franchise is less risky than setting up as an independent retailer. The franchisee is adopting a proven business model and selling a well-known product in a new local branch.
