Key Terms P1 Flashcards
Private limited company
Ends in LTD
Shares can only be transferred privately from 1 individual to another
Directors of LTD tend to be shareholders + involved in running the business
Profit is paid to shareholders in form of dividends
Sole trader
1 owner
Employee any number of people
Pay income tax + national insurance
Unlimited liability
If business has unlimited liability and fails can LOSE more than INVESTED
business forced to sell personal ASSETS TO PAY OFF BUSINESS DEBTS
Advantages soletrader
Owner keeps all profit and has control
Easy set up and has no legal requirements
Business can be flexiable adapt and change quick
Disadvantages soletrader
Owner unlimited liability
Difficult to raise finance - 1 owner
Little independence
Owner works long hours
Business close when owner dies
Advantage franchisors of franchising
Franchising cheaper method of growth bc franchisees take some of financial risk
Franchisees take some of risk behold of franchiser
Franchisees more motivated than employee
Disadvantage of franchiser of franchising
Profit shared with franchisees
Poor franchisees damage brands name/ reputation
Cost of supporting franchisees maybe high
Advantage of franchisees to franchisors
Franchisees lower risk as using idea already tried and tested
Get support from franchisors
Set up cost of franchise predictable
Disadvantage of franchisees to franchisors
Profit shared with franchisors
Franchisees sign contract with franchisors reduce independence
Set up franchise expensive way to start business
Public limited company
Owned by shareholders
Ends in PLC
Limited liability
Shares bought/sold on stock market
Stock market flotation
Business goes public
Process called initial public offering (IPO)
Expensive + time consuming
Investment bank shared applications
Advantage stock market flotation
Limited liability
More power due to size often dominate the market
Huge amounts of money can be raised from the sale of shares
High levels of profit due to opportunities for growth
Disadvantage of stock market flotation
Expensive
Financial accounts are public
Company legislation slows making + increases cost
Sleeping partner
Person who invests in a brand but doesn’t work day to day role in the running business
Monopoly market
One market holds majority of market share
Market research aims
Identify + anticipate customer needs and wants
Likely demand for a product
Provide an insight into customer behaviour
Market research limitations
Business wants to be sure data they’ve collected is reliable
Primary research doesn’t always produce reliable data bc:
Human behaviour - answer may not reflect actual behaviour
Sampling bias- data gathered from group of respondents whose views behaviour should be represented of target market
Market segmentation
Market divided into different sections
Demographic market
Age gender income social class ethnicity
Market segmentation disadvantage
How easy is it to categorise customers ?
Cost of research
Too much segmentation may mean sales are lost
Market mapping advantage
Identify closest rivals
Identify gaps in market
Market mapping disadvantages
They are based on opinions
Gaps in market may exist for a reason
Oversimplication if product or business plan
