KNOWLEDGE TEST 1: Business in The Real World 3.1

Question 1

What are the reasons for starting a business?

Answer 1

-to make profit
-pursue an interest
-helping society (social enterprise)
-spotted a gap in the market

Question 2

What is the difference between goods and services?

Answer 2

Goods: tangible items/products eg. clothes and jewellery
Services: intangible products/ services to aid the customer eg. hairdressers and plumbers

Question 3

What are the difference between needs and wants?

Answer 3

Wants: things people would like to have but is not a necessity (can survive without) eg cars and jewellery
Needs: things people cannot live without eg food and housing

Question 4

what are the factors of production?

Answer 4

Land - natural resources used in production
Labour - staff needed by the business / input of humans into production
Capital - machinery and equipment needed to make products and services
Enterprise - skills of the people managing the business (entrenpreneurs)

Question 5

what are the three sectors?

Answer 5

primary sector - produces raw materials and natural resources
secondary sector - manufactures goods eg factories
tertiary sector - provides services

Question 6

What are the terms enterprise and entrepreneurs?

Answer 6

enterprise - another word for business
entrepreneurs - someone who takes a risk and starts a business

Question 7

what are the characteristics for an entrepreneur?

Answer 7

innovative - come up with new ideas and solutions
willing to take risks
hardworking
organised

Question 8

what are the reasons for becoming an entrepreneur?

Answer 8

-make profit to give them better quality of life
-they have identified a gap in the market
-to be their own boss
-pursue an interest

Question 9

What is a sole trader?

Answer 9

someone who sets up a new business on their own

Question 10

benefits and drawbacks of being a sole trader

Answer 10

benefits:
+easy to set up
+keep all the profits
+make all of your own decisions
+total control
drawbacks:
-long hours
-no one to cover if sick
-unlimited liability
-business does not have its own legal identity
-difficult to initially raise profits

Question 11

what is a partnership?

Answer 11

-a business which include between 2 to 20 partners
-each partner has an equal say in making decisions
-equal share of profits unless deed of partnership

Question 12

benefits and drawbacks of a partnership

Answer 12

benefits:
+more owners means more ideas and a greater range of skills and expertise
+shared workload
+more owners mean more capital can be put into business
drawbacks:
-each partner is responsible for what other partners do
-unlimited liability
-more owners may mean that there would be more disagreements
-profits are shared
-decision making can be slow

Question 13

what is a private limited company?

Answer 13

-shares can only be sold if all shareholders agree, and the share holders are often friends and family

Question 14

benefits and drawbacks of a private limited company

Answer 14

benefits:
+limited liability
+incorporated - business can continue if die
+easier to get a loan
drawbacks
-expensive to set up
-legally obliged to publish accounts (could benefit rivals)

Question 15

what is a public limited company?

Answer 15

companies shares are traded on a stock exchange (on the market) and can be bought and sold to anyone

Question 16

benefits and drawbacks of a public limited company

Answer 16

benefits:
+can sell shares on market so it makes it easier to raise money if needed
+helps the company expand and diversify
+limited liability
+being incorporated
drawbacks:
-each shareholders say depends on how many shares they have
-disagreements
-accounts made public (beneficial for competitors)
-risk of take over/being bought by other companies

Question 17

what is a not for profit organisation?

Answer 17

an organisation that aims to help other in society rather than to make a profit e.g a charity

Question 18

what is limited liability

Answer 18

business and its owners are seperate, so that the owners personal possessions cannot be sold or jeopardised if the business goes into dept

Question 19

what is unlimited liability?

Answer 19

The owners personal possession (e.g their house) are at risk if there are problems (bankruptcy)

Question 20

what is the term aim and objectives?

Answer 20

aims - overall longterm goals
objectives - short term goals that assist you with achieving aims

Question 21

examples of business objectives

Answer 21

-market share
-increase customer satisfaction
-shareholder value
-dividends
-growth
-survival
-maximise profit
-ethics

Question 22

what are the role of objectives in a running business

Answer 22

they are measurable steps on the way to the aim.
objectives can act as clear targets for the firm to work towards, and can measure their success.

Question 23

how and why objectives set will differ between businesses

Answer 23

(size)small businesses - may depend on word of mouth to survive, so an objective for them would be customer satisfaction

Question 24

how and why objectives set will change as a business evolves?

Answer 24

new legislation
changes in economy
changes in tech
environmental changes

Question 25

what other ways can a business measure success?

Answer 25

-profit
-value of shares on the stockmarket
-level of customer satisfaction
-surveys

Question 26

WHAT ARE SEVERAL KEY STAKEHOLDERS??

Answer 26

-owners
-employees
-suppliers
-local community
-customers

Question 27

what are different stakeholders objectives?

Answer 27

customers - want high quality products at low prices (benefit customer satisfaction
local community - where the business is based, if the firm provides good jobs and sponsor local activities, and minimise damage to the local environment
owners - make profit if the business is successful and decide what happens to the business
employees - interested in job security and promotion, this is also improved if the firm is profitable

Question 28

how may businesses face conflict between stakeholders

Answer 28

firm may ignore the opinions of other stakeholders (?) and they wont survive as a firm
unhappy workers may become unproduction
company may not mind being unpopular in the local community if it sells most of its products somewhere else
(dumb q)

Question 29

what are the factors influencing where a business is located?

Answer 29

-proximity to the market (convenient for customers)
-availability of raw materials
-labour supply
-competition

Question 30

what is the term business plan

Answer 30

outlines what a business will do and its aims to achieve its goals

Question 31

WHY DO BUSINESSES CREATE PLANS??

Answer 31

assist the owner to think strategically about their decisions and what their business is going to do, how it will be organised and resources required

Question 32

what are the main sections of a business plan?

Answer 32

-personal statement
-mission statement
-objectives
-product description
-production details
-staffing requirements
-finance

Question 33

benefits and drawbacks of business planning

Answer 33

-time consuming
-money (benefit may not outweigh cost)
-some people may be TOO OPTIMISTIC
-unexpected change in marker (brand new competitors which may cause business to alter plan)

Question 34

what are the methods used by businesses when expanding through internal organic growth (business expanding its own activities)

Answer 34

-ecommerce (selling via internet)
-opening new stores
-outsourcing (pay another firm for production)

Question 35

what are the methods when expanding through external growth?

Answer 35

merger - two firms join together
takeover - existing firm expands by buying more than half of the share in another firm

Question 36

adv and disadv of franchising

Answer 36

adv:
+increases franchisors income
+increases market share
+increases brand awareness
disadv:
-if a franchisee has poor standards, it could damage franchisors reputation