Making the business effective Flashcards
Unlimited liability:
owner is legally responsible for any debts potentially losing personal belongings to pay them off
Limited liability:
the owner has a separate legal identity their personal belongs are not liable
What are the factors of unlimited liability?
- high risks
- owner has complete control of decisions
- owner keeps all profits
- accounts do not have to be made public
What are the factors of limited liability?
- reduced risk for owners
- control depends of the proportion of shares
- profits are shared with shareholders
- accounts are filed and can be viewed
Examples of limited liability are:
- private limited companies
- public limited companies
Examples of unlimited liability are:
- sole traders
- partnerships
What are the advantages of being a sole trader?
- make all decisions
- quick and easy to set up
- keep all profit
- financial information is kept private
What are the disadvantages of being a sole trader?
- unlimited liability
- harder to raise money and grow
- increased pressure
- no one to cover
What are the advantages of a partnership?
- owners may have wiser expertise
- owners share the risk and pressure
- could be easier to raise finance
What are the disadvantages of a partnership?
- disagreements
- no longer exists if one leaves
- profits are shared
What are the advantages to a private limited company?
- limited liability
- customers may trust them more
- continues to trade even if shareholders change
- could be easier to raise finance and grow
What are the disadvantages to a private limited company?
- complex set up
- disagreements
- financial information is published
- increased government awareness
Franchisor:
business that’s gives franchisees the right to sell its product or services
Franchisee:
business that agrees to manufacture, distribute or provide a branded product under licence from a franchisor
What does the franchisee get when they buy a franchise?
- an established brand name
- training
- equipment
- ongoing support
- access to goods and services
- advertising and promotion
- operate in exclusive areas
What are the benefits of running a franchise?
- brand image and reputation is already established
- marketing costs are covered
- access to tried and tested products
- may have an established customer base
- higher chance of survival
- support and training provided
What are the drawbacks of running a franchise?
- high initial investment costs
- owner has little freedom
- franchisee pays a fee or royalty
- restrictions on location
What do businesses have to consider proximity wise?
- market
- materials
- labour
- competitors
- transport
Natures if a business that influences location:
- manufacturing
- exporting
- retailing
- tourism
What are the perks of trading on the internet?
removes the significance of location as they trade virtually allowing them to save costs
What is included in the market mix?
- price
- product
- place
- promotion
How may a business adapt to changing needs?
- changing features of a product
- adjusted prices
- launching new advertising campaigns
- selling through popular retailers
- allowing free returns online
What is the purpose of a business plan?
- convince a bank to loan
- forecast financial projections
- identifying customer needs
- formulate market research
- provide information
- minimise risk
Business plans include:
- business ideas
- aims and objectives
- market research
- financial forecasts
- sources of finance
- location
- marketing mix
- production
