Higher Understanding Business

Question 1

What are the sectors of industry

Answer 1

Primary
Secondary
Tertiary
Quaternary

Question 2

Describe the primary sector

Answer 2

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.

Question 3

Describe the secondary sector

Answer 3

Is with manufacturing. This would involve taking the raw materials from the primary sector and converting them into new products.

Question 4

Describe the tertiary sector

Answer 4

Is with providing a service. Services are activities that are done by people or businesses for consumers.

Question 5

Describe the quaternary sector

Answer 5

Those industries providing information services. it sometimes includes the tertiary sector, as they are both service sectors.

More IT based (technology)

Question 6

What are the sectors of economy

Answer 6

Private
Public
Third

Question 7

Describe the private sector

Answer 7

Private sector organisations are owned and controlled by private individuals. Their primary aims are to survive and make a profit.

Question 8

Describe the public sector

Answer 8

Public sector organisations are owned and controlled by the government. They aim to provide a service to the public and are funded by taxes.

Question 9

Describe the third sector

Answer 9

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.

Question 10

What types of organisations are in the private sector

Answer 10

Sole trader
Partnership
Private limited company

Question 11

What types of organisations are in the public sector

Answer 11

National government

Local government

Question 12

What types of organisations are in the third sector

Answer 12

Charities
Voluntary organisations
Social enterprises

Question 13

Describe a sole trader

Answer 13

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.

Question 14

Advantages of a sole trader

Answer 14

Easy to set up (legally)
Retains all profits for themselves
They make all the decisions

Question 15

Disadvantages of a sole trader

Answer 15

Can be difficult to raise finance
Unlimited liability
Heavy workload

Question 16

Describe a partnership

Answer 16

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.

Question 17

Advantages of a partnership

Answer 17

• More equity available to finance more than a sole trader
• Different partners can bring different skills
• Work load is shared

Question 18

Disadvantages of a partnership

Answer 18

Unlimited liability
Profit is shared between the partners
Partners may not always agree on decisions

Question 19

Describe private limited companies (ltd)

Answer 19

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

Question 20

Advantages of private limited companies

Answer 20

Owner can retain control
More able to raise money
Limited liability

Question 21

Disadvantages of private limited companies

Answer 21

Must be registered with the register of companies
High set-up costs
Harder to motivate and control workers

Question 22

Describe a public limited company (plc)

Answer 22

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

Question 23

Advantages of public limited companies

Answer 23

Raise more money by selling shares on the stock exchange

Easier to growth and diversify

Question 24

Disadvantages of public limited companies

Answer 24

Disagreements over how to run the company
Threat of take over
Difficult to pursue objectives other than increasing profit

Question 25

Describe multinational

Answer 25

A multinational organisation is a company which has its headquarters in one country but has assembly or production facilities in other countries.

Question 26

Advantages of being multinational

Answer 26

Creating jobs 
Bringing expertise in and improving the skills of the workforce
Benefiting from economies of scale
Gaining technical economies
Achieving purchasing economies

Question 27

Disadvantages of being multinational

Answer 27

Relying on deskilled jobs 
Not keeping profits in the host country
Cutting corners
Exploiting the workforce and/or the environment
Exerting political muscle

Question 28

Describe franchises

Answer 28

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

Question 29

Why is a franchisor

Answer 29

A franchisor, who sells the right to use a business idea in a particular location.

Question 30

What is a franchisee

Answer 30

A franchisee, who buys the right from a franchisor to copy a business format.

Question 31

What’s the cost and benefits of opening a franchise

Answer 31

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.