Introduction to business

Question 1

Define entrepreneur.

Answer 1

A risk taker who sets up a new business

Question 2

Define enterprise.

Answer 2

Another term for a business

Question 3

What are the four factors of production?

Answer 3

Land, Labour, Capital and Enterprise (Loopy Lottie counts eggs)

Question 4

Define what is meant by factors of production.

Answer 4

The inputs which are used in the production of goods and services.

Question 5

Why are the factors of production important to stakeholders?

Answer 5

A shortage in the factors of production means that a business will raise its prices as the factor will be more expensive, creating a lower profit margin.

Question 6

Why is entrepreneurship and enterprise important for the economy?

Answer 6

Entrepreneurs and enterprise provide jobs, goods and services, they provide a higher tax revenue for the government and create a better national income.

Question 7

What is an entrepreneur’s role in decision making?

Answer 7

An entrepreneur’s decisions determine the success of the business, whether this is through leadership skills or their creativity.

Question 8

What are the 6 characteristics of an entrepreneur?

Answer 8

Energy and Enthusiasm, Leadership, Creativity and imagination, ability to be comfortable with risk, ability to work under pressure, persistence and drive.

Question 9

Why is entrepreneurial activity important for the stakeholders of a business?

Answer 9

Employee’s need motivation to keep the efficiency of the business high, customers need new products/good customer service and shareholders want the business to grow.

Question 10

What is a primary organisation?

Answer 10

The sector which deals with the extraction of raw materials.

Question 11

What is a secondary organisation?

Answer 11

The manufacturing sector.

Question 12

What is the tertiary sector?

Answer 12

The retail sector. (also banking and transportation. e.g: where the finished product is used or sold)

Question 13

What is a private sector business?

Answer 13

A business which is owned by an individual or individuals.

Question 14

What is a public sector business?

Answer 14

A business which is owned by the government.

Question 15

What is a third sector business?

Answer 15

A non-profit organisation/ as charity… seeking to achieve social goals.

Question 16

What is a national business?

Answer 16

A business which operates in one country.

Question 17

What is a multinational business?

Answer 17

A business which has operations in more than one country.

Question 18

What is a local market?

Answer 18

Goods and services are sold where they are made.

Question 19

What is a national market?

Answer 19

The goods and services which are sold in a country.

Question 20

What is a global market?

Answer 20

Selling goods or services across the world.

Question 21

What is the legal structure of a sole trader?

Answer 21

The owner and the business are inseparable, unlimited liability and no continuity BUT few legal requirements when setting up.

Question 22

What is the legal structure os a partnership?

Answer 22

2-20 people, unlimited liability, no continuity and easy to start up.

Question 23

What is the legal structure of a private limited company?(LTD)

Answer 23

Shares must be sold through private negotiation, cannot be involuntarily taken over, no minimum share capital.

Question 24

What is the legal structure of a public limited company?

Answer 24

Shares can be sold on the stock market, company can be taken over if someone buys 51% of the shares, minimum share capital of £50,000, need to publish detailed financial reports.

Question 25

What is meant by unlimited liability?

Answer 25

When the owner of a business has full legal responsibility for the financial state of the business.

Question 26

What is limited liability?

Answer 26

Shareholders are legally responsible for the debts of a business, only to the nominal extent of their shares.

Question 27

What 6 factors change the choice of legal structure that a business may choose?

Answer 27

1. Control 2. The amount of liability 3. The costs 4.the flexibility 5. tax implications 6. continuity

Question 28

What is a franchise?

Answer 28

A franchise is a type of license that a party acquires to allow them to sell a product or provide a service under the business’s name.

Question 29

What is a franchisee?

Answer 29

The individual who has gained the permission to sell products under the franchisor’s name.

Question 30

What is a franchisor?

Answer 30

Sells the right for someone else to sell their products under their name.

Question 31

What is a co-operative?

Answer 31

Businesses that are owned and run by their members. (members are customers, employees or residents they are everyday people who have an equal say in what the business does and a share in the profits.)

Question 32

What are the 4 functions of a business?

Answer 32

1. Accounting and Finance 2. Operations management and production 3. Marketing and support services 4. Human Resource management

Question 33

What is the role of accounting and finance?

Answer 33

The department which controls a business’ finances & creates reports.

Question 34

What does operations management mean?

Answer 34

designing and controlling the process of production to make it as efficient as possible

Question 35

What does production mean?

Answer 35

Transforming raw materials into finished products. OR inputs to outputs.

Question 36

What is the role of marketing?

Answer 36

To ascertain the needs of consumers by conducting market research.

Question 37

What is the role of support services?

Answer 37

After the product has been bought, support services are important as it is reassuring for a customer to know they can get help with the product they have brought.

Question 38

How is the size of a business measured?

Answer 38

How many factories/outlets they have, offices, employees or the value of their shares.

Question 39

What factors affect the size of a business? state 6.

Answer 39

1. Entrepreneurial Skill 2. Managerial Ability 3. Availability of Finance 4. Availability of Labour 5. Nature of Business 6. Extent of the Market.

Question 40

What is meant by the term ‘joint venture’?

Answer 40

When two businesses work together to one end goal like BMW and Toyota developing hydrogen fuels together. (shared returns and shared risk)

Question 41

What is meant by a ‘strategic alliance’?

Answer 41

Two parties joining to achieve a common goal whilst remaining separate entities.

Question 42

Define Companies House.

Answer 42

All UK companies must be registered. They must submit details about themselves like who their directors are, shares sold…the latest Reports and Accounts.

Question 43

State 3 advantages for a franchisor.

Answer 43

1.the firm doesn’t have to spend large amounts of money to expand 2.The products which are needed to franchise are under the franchisor’s control. 3.The franchisor can choose applicants who are appropriate for becoming a franchisee.

Question 44

State 3 disadvantages for a franchisor.

Answer 44

1. control problems 2. Large costs for supporting franchisees 3. large possibilities of conflict between the franchisor and the franchisee.

Question 45

State 3 advantages to the franchisee.

Answer 45

1. Using a tried and tested business model 2.Specialist advice and training is available 3. Easier to obtain a bank loan.

Question 46

State 3 disadvantages to the franchisor.

Answer 46

1. Supplies have to be bought from the franchisor which could mean they are more expensive. 2. Royalty payments 3. Less control over how the business is run.