learning outcome 1

Question 1

primary activity

Answer 1

The primary business activity can refer to the extraction and collection of natural resources from the environment, such as agriculture, farming, mining, forestry, or fishing.

Question 2

key features of primary activity

Answer 2

Extraction of Raw Materials: Involves obtaining natural resources directly from the land or water. These resources can be used in their raw form or processed into finished goods by secondary industries.

Resource-Based: The primary sector focuses on the use of natural resources such as minerals, agricultural products, and timber.

Question 3

examples of primary activity

Answer 3

A wheat farm or a dairy farm

A coal mine or a gold min

Question 4

secondary activity

Answer 4

The secondary business activity involves the manufacturing, processing, or construction of goods from raw materials that are produced in the primary sector. This sector takes the raw materials from the primary sector and transforms them into finished goods or products.

Question 5

secondary activity key featires

Answer 5

Manufacturing and Processing: Secondary activities are primarily involved in manufacturing products from raw materials, such as turning steel into cars or cotton into clothing.

Value Addition: The main goal of the secondary sector is to add value to raw materials from the primary sector. This value addition can involve altering the form, function, or design of raw materials.

Question 6

secondary activity examples

Answer 6

Toyota
Nike
Nestle

Question 7

tertiary activity

Answer 7

The tertiary business activity refers to the service sector of the economy. It involves providing services rather than producing goods. Businesses in the tertiary sector offer services to consumers and other businesses, which can include anything from retail, entertainment, education, healthcare, to financial services.

Question 8

tertiary activity key features

Answer 8

Service-Oriented: Tertiary activities involve providing services rather than manufacturing or extracting goods. These services can be aimed at individuals, businesses, or governments.

Supportive Role: The tertiary sector supports the primary and secondary sectors by providing services like transportation, finance, marketing, education, and healthcare, which enable businesses to operate smoothly.

Question 9

tertiary activity examples

Answer 9

Tesco
NHS
schools

Question 10

private sector

Answer 10

The private sector refers to businesses and organizations that are owned and operated by private individuals or groups rather than by the government. These businesses aim to make a profit and can operate in various industries, including manufacturing, services, retail, and more. The private sector is driven by competition and market forces.

Question 11

private sector key features

Answer 11

Ownership: Businesses in the private sector are owned by private individuals, families, or shareholders. Ownership is not held by the government.

Profit Motive: The key goal of private sector businesses is to make a profit by providing goods or services. These profits are distributed among owners, shareholders, or reinvested into the business for growth and expansion.

Question 12

private sector examples

Answer 12

Tesco
Amazon
Barclays

Question 13

public sector

Answer 13

The public sector refers to organizations and businesses that are owned and operated by the government or state. These organizations are funded primarily by taxpayers and aim to provide services to the public rather than generate a profit. The primary goal of the public sector is to deliver essential services that benefit society, such as healthcare, education, transportation, and national defense.

Question 14

public sector key features

Answer 14

Ownership: Public sector organizations are owned and controlled by the government at various levels (local, regional, or national), rather than by private individuals or groups.

Non-Profit Motive: The goal of the public sector is not to generate profit, but to provide essential services such as education, healthcare, public safety, and infrastructure, for the benefit of society.

Question 15

public sector examples

Answer 15

NHS
Schools
universities

Question 16

third sector

Answer 16

The third sector, also known as the voluntary sector or non-profit sector, refers to organizations that are neither privately owned nor government-run. These organizations are typically charities, social enterprises, and non-governmental organizations (NGOs) that aim to achieve social, environmental, or charitable goals, rather than making a profit.

Question 17

third sector key features

Answer 17

Non-Profit Motive: Third sector organizations are driven by a social mission rather than profit-making. Any income they generate is reinvested into the organization to further their cause, rather than being distributed to owners or shareholders.
Voluntary Participation: Many third sector organizations rely heavily on volunteers, who donate their time and skills to help achieve the organization’s goals.

Question 18

sole trader

Answer 18

an individual who owns and runs their business alone

Question 19

advantages of sole trader

Answer 19

Full control : The sole trader has complete control over decision - making

Simple setup : It’s easy and inexpensive to set up a business as a sole trader with minimal legal formalities

Direct taxation : the business is taxed as personal income, which can be simpler for tax purposes
All profits to the owner: The sole trader keeps all the profits made from the business

Question 20

disadvantages of sole trader

Answer 20

Unlimited liability : the owner is personally liable for all business debts, meaning personal assets could be at risk

Limited expertise: the owner might lack the necessary skills in all areas of the business, such as accounting, marketing or legal

Workload : the owner is responsible for all tasks, which can lead to long hours and stress

Question 21

what is a sole trader most appropriate for

Answer 21

Small businesses with limited capital needs
Business where the owner wants complete control

Question 22

partnership

Answer 22

a business owned by two or more individuals who share responsibility for managing the business and its profits/losses

Question 23

advantages of partnership

Answer 23

Shared responsibility: partners can share the workload and management responsibilities

More capital: partnerships can raise more funds than sole traders due to multiple owners

Combined expertise: partners can pool their skills, knowledge and experience

Question 24

disadvantages of partnerships

Answer 24

Unlimited Liability: In a general partnership, all partners have unlimited liability, which means personal assets are at risk if the business fails.

Potential for Conflict: Disagreements between partners can occur, leading to a negative impact on the business.
Shared Profits: Profits are shared between partners, which may not always be equal or fair.

Difficult to Transfer Ownership: Partnerships may have difficulty bringing in new partners or selling the business.

Question 25

what is a partnership most appropriate for

Answer 25

Professionals like doctors, lawyers, or accountants who want to share the workload. Businesses with moderate capital needs and where the skills of multiple people are important. Small to medium businesses where collaboration and joint decision-making are key.

Question 26

private limited company (Ltd)

Answer 26

A private limited company is a business structure where the company's shares are owned privately, typically by a small group of shareholders, and not available to the public on the stock market.

Question 27

advantages of Ltd

Answer 27

Limited Liability: Shareholders are only liable for the amount they invest in the business, protecting personal assets. Separate Legal Entity: The company is a separate legal entity from its owners, meaning it can enter into contracts, sue, and be sued in its own name. Raising Capital: Private limited companies can raise capital through the sale of shares to a small group of private investors. Credibility: Having the status of a limited company can make the business more credible to customers, suppliers, and investors.

Question 28

disadvantages of Ltd

Answer 28

Costs and Complexity: Setting up and maintaining a private limited company is more expensive and complex than a sole trader or partnership. Limited Number of Shareholders: There is a cap on the number of shareholders, usually limited to 50. Less Control: Shareholders may have a say in decisions, which could limit the control of the business owner. Public Disclosure: Private limited companies must file annual financial reports with the government, making some information public.

Question 29

what is the Ltd most appropriate for

Answer 29

Small to medium-sized businesses that want to limit liability and raise capital. Businesses that wish to expand but don’t want to go public. Companies needing credibility with suppliers, customers, and investors.

Question 30

public limited company

Answer 30

A public limited company is a company whose shares are traded publicly on the stock exchange. It can raise capital by offering shares to the general public.

Question 31

advantages of public limited company

Answer 31

Limited Liability: Shareholders’ liability is limited to the amount they invest in the business. Access to Capital: A PLC can raise substantial capital by issuing shares on the stock market. Public Profile: A PLC can benefit from the publicity and recognition that comes with being listed on the stock exchange. Transferable Shares: Shareholders can buy and sell shares easily, making ownership more liquid.

Question 32

disadvantages of public limited company

Answer 32

Costly and Complex: Setting up and running a PLC is expensive and involves significant legal requirements, including regular reporting and audits. Loss of Control: Ownership is divided among many shareholders, so the original founders may have less control over the business. Pressure to Perform: Public companies are under constant pressure from shareholders and analysts to perform well financially. Public Scrutiny: Being publicly traded subjects the company to greater public and regulatory scrutiny.

Question 33

what is the public limited company most appropriate for

Answer 33

Large businesses looking to raise substantial capital for expansion or projects. Businesses that are looking to expand significantly and are ready to be publicly traded. Companies with established brands or significant market presence.

Question 34

state / government owned

Answer 34

A state/government-owned business is an organization that is owned and operated by the government. This could be at the local, regional, or national level.

Question 35

advantages of state / government owned

Answer 35

Public Service Focus: These organizations can focus on providing essential services rather than generating profit. Government Support: Government-owned businesses may receive financial backing or subsidies to support their operations. Stability: As part of the government, these businesses are less likely to be affected by market fluctuations.

Question 36

disadvantages of state / government owned

Answer 36

Bureaucracy: Government-owned businesses may suffer from inefficiency due to red tape and bureaucratic procedures. Lack of Innovation: The profit motive is often absent, which may lead to less innovation or slower responses to market demands. Political Influence: Business decisions may be influenced by political agendas rather than market forces.

Question 37

what is state / government owned most appropriate for

Answer 37

Essential public services such as transportation, healthcare, and utilities. Services where the government wants to maintain control over resources or ensure access for all citizens.

Question 38

charity / not for profit

Answer 38

A charity or not-for-profit organization is a business that is established to fulfill a social or charitable purpose rather than to generate profit for owners or shareholders.

Question 39

advantages of charity

Answer 39

Tax Benefits: Charities are often exempt from taxes, including corporation tax, and can claim back gift aid on donations. Public Trust: Charities often enjoy public trust and goodwill, which can make fundraising easier. Social Impact: Charities focus on benefiting society, which can lead to greater community support and involvement.

Question 40

disadvantages of charity

Answer 40

Limited Funding: Charities rely heavily on donations, grants, and fundraising, which can be inconsistent or limited. Dependence on Volunteers: Charities may have fewer paid staff and rely on volunteers, which can impact operations. No Profit Motive: Charities do not generate profits for owners, which can make it difficult to attract investors or raise capital.

Question 41

what is charity most appropiate for

Answer 41

Organizations focused on social causes, community support, or humanitarian efforts. Businesses that want to address societal issues rather than focus on profit generation, such as Oxfam, Red Cross, or Doctors Without Borders.

Question 42

community interest companies

Answer 42

A CIC Limited by Guarantee is a legal structure that does not have shareholders. Instead, it has members who agree to pay a nominal amount (usually £1) if the company is wound up.

Question 43

advantages of community interest companies

Answer 43

Community-focused: Profits are fully reinvested into the community, making it ideal for non-profit initiatives. Low risk for members: Members' liability is limited to the guarantee amount. Appeals to funders: Funders, such as grants and charities, often prefer this structure because it demonstrates a strong commitment to community benefit. Simple ownership structure: With no shareholders, decision-making aligns directly with the community mission.

Question 44

disadvantages of community interest companies

Answer 44

Disadvantages: Limited fundraising options: Cannot raise funds through share capital, relying instead on grants, loans, or donations. Restricted growth potential: Difficulty in accessing significant investment may limit scalability. Administrative burden: Compliance with CIC regulations and company law can be complex.

Question 45

what is best suited for community interest companies

Answer 45

Non-profit organizations or social enterprises that focus exclusively on community projects without needing external investors.

Question 46

legal status

Answer 46

The legal status of a business determines its identity in the eyes of the law.

Question 47

most appropriate form of legal ownership for legal status business

Answer 47

Sole Trader: The business and owner are legally the same entity. Partnership: A group of individuals jointly operating a business, either general or limited liability. Private Limited Company (Ltd): A separate legal entity owned by shareholders. Public Limited Company (PLC): A separate legal entity that can offer shares to the public. Community Interest Company (CIC): A company with a legal status emphasizing community benefit. Charity: A not-for-profit entity with specific tax advantages.

Question 48

influence and appropriate example for legal status

Answer 48

Influence: Businesses focused on community benefit (e.g., CICs) or large-scale public operations (e.g., PLCs) often select legal structures that emphasize public accountability and access to funding. Appropriate Example: A CIC is best suited for businesses prioritizing community benefit while maintaining a corporate structure.

Question 49

liability

Answer 49

Liability refers to the financial risk borne by the owners or members of the business.

Question 50

unlimited liability

Answer 50

Owners are personally responsible for all business debts (e.g., sole traders, general partnerships).

Question 51

limited liability

Answer 51

Owners’ financial liability is restricted to their investment in the business (e.g., Ltd, PLC, CIC).

Question 52

influence and appropriate example for liability

Answer 52

Influence: For businesses with significant financial risks, such as startups or those needing external investment, limited liability is crucial. Appropriate Example: A CIC Limited by Shares offers limited liability while enabling profit reinvestment into the community.

Question 53

funding

Answer 53

Funding refers to the methods available to raise capital for the business.

Question 54

e most appropriate form of legal ownership for funding business.

Answer 54

Personal Capital: Sole traders or partnerships often rely on personal funds. Bank Loans: Suitable for small to medium businesses but requires strong creditworthiness. Equity Investment: Available to businesses that issue shares (e.g., Ltd, PLC). Grants and Donations: Ideal for non-profits or CICs focused on social impact.

Question 55

influence and appropriate example for funding

Answer 55

Influence: Businesses requiring substantial upfront investment or aiming to scale rapidly often choose share-based models (e.g., Ltd, PLC). CICs also attract ethical investors and grants. Appropriate Example: A CIC Limited by Shares is ideal for businesses needing to balance community benefit with access to external investors.

Question 56

control and decision making

Answer 56

This factor determines how decisions are made and who holds authority.

Question 57

most appropriate form of legal ownership for a control and decision making business.

Answer 57

Sole Trader: Full control lies with the owner. Partnership: Decision-making is shared, often based on partnership agreements. Ltd/PLC: Directors make decisions on behalf of shareholders. CIC: Governed by directors with a focus on community benefit, often requiring transparency and stakeholder involvement.

Question 58

influence and appropriate example for control and decision making business

Answer 58

Influence: A business with a strong social mission may prefer a CIC structure to ensure decision-making aligns with its community-focused goals. Appropriate Example: A CIC Limited by Guarantee ensures decision-making prioritizes community needs over profit maximization.

Question 59

legal and administrative requirements

Answer 59

Businesses must comply with various legal and regulatory obligations based on their ownership structure.

Question 60

most appropriate form of legal ownership for legal and administrative requirements business.

Answer 60

Sole Traders: Minimal paperwork but unlimited liability. Partnerships: Partnership agreements and tax filings required. Ltd/PLC: Requires incorporation, filing annual accounts, and compliance with company law. CIC: Additional requirements, such as a community interest statement, asset lock, and adherence to CIC regulations.

Question 61

influence and appropriate example for legal and administrative requirements

Answer 61

Influence: Businesses willing to take on greater administrative burdens for public trust or funding may opt for incorporated structures. Appropriate Example: A CIC is suitable for businesses that can manage additional legal requirements while gaining credibility for their social mission.

Question 62

survival

Answer 62

Survival is a primary objective for new or struggling businesses, particularly in challenging economic environments.

Question 63

characteristics of survival

Answer 63

Focus on maintaining operations. Often involves cutting costs, managing cash flow, and sustaining customer relationships. Crucial for startups, businesses in highly competitive markets, or during economic downturns.

Question 64

example of survival

Answer 64

A small café in its first year may prioritize survival by focusing on building a loyal customer base and managing overhead costs.

Question 65

appropriateness of survival

Answer 65

Survival is essential for any business during its initial stages or when facing unexpected challenges.

Question 66

financial objectives - break even

Answer 66

Reaching break-even ensures that a business covers all its costs without making a loss.

Question 67

characteristics of break - even

Answer 67

Critical for startups or businesses introducing a new product/service. Often calculated through break-even analysis.

Question 68

example and appropriateness of break - even

Answer 68

Example: A tech startup launching a subscription app may set break-even as an early objective to stabilize its finances. Appropriateness: A break-even objective is suitable for businesses focusing on sustainability before aiming for profit.

Question 69

increase revenue

Answer 69

Businesses aim to boost income from sales to achieve growth or meet other financial goals.

Question 70

characteristics of increase revenue

Answer 70

Often achieved by expanding product offerings or entering new markets. Focus on customer acquisition and retention.

Question 71

example and appropriateness of increase revenue

Answer 71

Example: An online retailer may introduce seasonal discounts to drive sales and increase revenue during the holiday period. Appropriateness: Increasing revenue is vital for businesses aiming to grow or reinvest in new opportunities.

Question 72

reduce costs

Answer 72

Reducing operational expenses to increase profit margins.

Question 73

characteristics of reduce costs

Answer 73

Characteristics: Focuses on efficiency and cost-cutting measures. Often involves renegotiating supplier contracts or automating processes.

Question 74

example and appropriateness of reduce costs

Answer 74

Example: A manufacturing company might reduce costs by switching to energy-efficient machinery. Appropriateness: Reducing costs is suitable for mature businesses looking to improve profitability.

Question 75

make profit

Answer 75

Profit generation is a key long-term objective for most businesses.

Question 76

characteristics of make profit

Answer 76

Essential for sustainability, growth, and reinvestment. May involve optimizing pricing strategies, increasing sales, or reducing costs.

Question 77

example and appropriate of make profit

Answer 77

Example: A consulting firm may aim to increase profit by offering premium services. Appropriateness: Making a profit is crucial for established businesses aiming to reward stakeholders or expand operations.

Question 78

growth - physical expansion and example

Answer 78

Expanding into new locations or increasing production capacity. Example: A local bakery may open additional branches in neighboring towns.

Question 79

increase market share and example

Answer 79

Capturing a larger percentage of the market by outperforming competitors. Example: A mobile network provider may lower prices to attract customers from competitors and increase market share.

Question 80

increase provision and example and appropriateness

Answer 80

Offering more products, services, or access to existing ones. Example: A gym might increase provision by adding more equipment and classes. Appropriateness: Growth objectives are suitable for businesses in competitive markets aiming to establish dominance or increase their impact.

Question 81

reputation

Answer 81

Building a positive reputation is essential for long-term success and customer loyalty.

Question 82

examples and appropriateness of reputation

Answer 82

Examples: Quality: A luxury brand focusing on high-quality products. Value for Money: A discount retailer offering affordable prices. Ethical Practices: A fashion brand using sustainable materials. Social Responsibility: A CIC supporting community projects. Environmental Friendliness: A renewable energy company reducing carbon emissions. Appropriateness: Reputation-based objectives are vital for businesses targeting ethical consumers or aiming for differentiation in competitive markets.

Question 83

Being Enterprising

Answer 83

Businesses may pursue objectives related to innovation, independence, or competitive advantage.

Question 84

examples and appropriateness of being enterprising

Answer 84

Examples: Own Boss: A sole trader starting a business to achieve personal freedom. Pursue Own Interests: A craftsperson launching a handmade goods shop. Being Competitive: A tech company investing in R&D to innovate faster than competitors. Appropriateness: Being enterprising is suitable for entrepreneurs, startups, or businesses in fast-paced industries.