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Making the business effective Flashcards

1
Q

What is limited liability, and which types of businesses have it?

A

Limited liability means owners are only responsible for debts up to their investment. It applies to private limited companies.

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2
Q

What does unlimited liability mean for business owners?

A

Unlimited liability means owners are responsible for all the debts of the business

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3
Q

Why is unlimited liability riskier than limited liability?

A

Because owners may lose personal assets if the business has debts.

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4
Q

What are the main benefits of e-commerce and m-commerce?

A

The benefits are lower costs, flexible hours, access to a larger market, 24/7 availability, and low-cost marketing.

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5
Q

How do creditors recover debts in businesses with limited liability?

A

Creditors can only take the company’s assets, not the owners’ personal assets.

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6
Q

What is the main benefit of limited liability for business owners?

A

Limited liability protects owners’ personal finances and limits losses to their investment.

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7
Q

What does having a separate legal identity mean for limited liability businesses?

A

It means the business is responsible for debts, not the owners personally.

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8
Q

What are the risks for owners in unlimited liability businesses?

A

Owners are responsible for all debts and may lose personal savings or possessions.

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9
Q

Why is unlimited liability riskier than limited liability?

A

Because owners’ personal assets can be used to pay off debts.

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10
Q

Give an example of the implications of unlimited liability.

A

Sarah, a sole trader, must pay £60,000 of debt using her personal assets if her business fails.

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11
Q

What is a sole trader?

A

A sole trader is a business owned and run by one person, but they may have employees.

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12
Q

What type of liability does a sole trader have?

A

A sole trader has unlimited liability and is personally responsible for all business debts.

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13
Q

What are the advantages of being a sole trader?

A

It is quick and easy to set up, gives full control, low set-up costs, and allows the owner to keep all profits.

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14
Q

What are the disadvantages of being a sole trader?

A

It has unlimited liability, long work hours, stressful conditions, and high responsibility, with the owner handling many roles.

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15
Q

What kinds of businesses might operate as sole traders?

A

Examples include photographers, electricians, hairdressers, small online clothing brands, and beauty therapists.

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16
Q

What is a partnership?

A

A partnership is a business owned and run by two or more people.

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17
Q

What kinds of businesses often operate as partnerships?

A

Professional services like law firms, medical practices, and accountancy businesses.

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18
Q

What is a deed of partnership, and what does it include?

A

It is a legal document outlining rules about profit sharing, ownership, roles, and debt responsibilities.

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19
Q

What are the advantages of partnerships?

A

They are quick to set up, allow shared decision-making, and distribute responsibility for debts.

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20
Q

What are the disadvantages of partnerships?

A

They may involve long hours, conflicts among owners, unlimited liability, and issues if a partner fails to meet responsibilities.

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21
Q

What is the difference between partnerships with limited and unlimited liability?

A

Limited liability separates owners from the business’s legal entity, while unlimited liability makes owners personally responsible for debts.

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22
Q

What is a private limited company?

A

It is a business with limited liability that has “Ltd” after its name.

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23
Q

What are shareholders, and how do they acquire shares?

A

Shareholders are owners of the business who must be invited to purchase shares, which are portions of the company.

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24
Q

What type of tax does a private limited company pay?

A

It pays corporation tax on profits.

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25
What are the advantages of being a private limited company?
Limited liability, protection from external influence, ability to sell shares, and opportunity to be one’s own boss.
26
What are the disadvantages of being a private limited company?
More paperwork, time-consuming set-up, possible visibility of financial information, and the need for professional financial help.
27
What are the registration requirements for a private limited company?
It must register with Companies House and file annual financial reports.
28
What is a franchise?
A franchise allows one business to sell goods or services under another business's name for a fee.
29
Who are the franchisee and franchisor?
The franchisee buys the rights to operate under the franchisor's brand. The franchisor is the original business granting these rights.
30
What are the advantages of setting up a franchise?
The franchisee gets free training and marketing, is part of a known brand, and has lower risk.
31
What are the disadvantages of setting up a franchise?
Franchisees must pay royalties, have high set-up costs, limited decision-making, and may face local competition.
32
Why is buying into a franchise safer than starting a new business?
The franchisee gets to use an established brand, making it less likely to fail.
33
What is a royalty payment?
It is a percentage of the franchisee’s profits paid to the franchisor.
34
What is proximity to the market, and why is it important?
Proximity to the market means being close to the business's customers. It is important for businesses like takeaways and shops because being close to customers increases sales and makes the business accessible.
35
Are all businesses affected by proximity to the market?
No, businesses like online design companies and car manufacturers don't need to be close to their market because they can sell and deliver products anywhere.
36
Why is proximity to labour important for highly skilled roles?
Businesses with highly skilled roles, like engineers or computer scientists, need to be located near big cities or university towns where there are more skilled workers.
37
What does proximity to labour mean?
Proximity to labour means being close to skilled workers or areas where workers are willing to travel. It’s important for businesses to be located near people with relevant skills
38
What is proximity to materials, and why is it important for some businesses?
Proximity to materials means being close to the raw materials needed for production. It’s important for businesses that need to reduce transport costs, especially for bulk-reducing products like smoothies.
39
What is the difference between bulk-gaining and bulk-reducing products?
Bulk-gaining products (e.g., bikes) are larger than their raw materials, so it makes sense to be close to the market. Bulk-reducing products (e.g., smoothies) are smaller than their raw materials, so it’s better to be close to the materials to save on transportation costs.
40
How does proximity to competitors affect business success?
Some businesses prefer to be far from competitors (e.g., petrol stations) to attract more customers, while others (e.g., car dealerships, clothing shops) prefer to be close to their competitors to increase visibility and encourage customers to shop around.
41
What type of location do retail companies prefer?
Retail companies want to be close to customers and are usually in busy areas with other retail outlets.
42
Do service companies always need to be close to their customers?
No, some service companies, like train operators or taxi services, need to be close, but others, like web designers or contact centers, can be located anywhere.
43
What do manufacturing companies prioritize in choosing their location?
Manufacturing companies prioritize cheap rent over being close to customers. Location decisions often focus on cost, especially for small businesses.
44
How does product type affect a manufacturing company’s location?
Bulk-gaining products might need to be close to the market, while bulk-reducing products are usually located near raw materials.
45
What is infrastructure, and why is it important?
Infrastructure includes facilities like roads and phone lines. It helps businesses transport supplies, move products, and allows employees to get to work.
46
How does location affect businesses?
Location impacts businesses differently. For example, shops need to be near customers, while delivery-only businesses can be on the outskirts if transport links are good.
47
How do e-commerce and m-commerce affect business location?
E-commerce and m-commerce allow businesses to choose cheap locations, as they don’t need to be near customers.
48
How do businesses sell products in e-commerce and m-commerce?
Businesses sell products online and send them to customers via couriers.
49
Do all businesses operate only online?
No, some businesses have both an online presence and a fixed retail location, like clothing shops.
50
What is the marketing mix?
The marketing mix consists of the four Ps: product, price, place, and promotion.
51
Why is the marketing mix important?
It helps attract customers by carefully considering all four elements to ensure they work well together.
52
How should the marketing mix elements work together?
Each element should complement the others, such as choosing the right promotion for the product being sold.
53
Why do marketing mixes need to adapt?
Marketing mixes need to adapt to the changing business environment, including price, promotion, product updates, and distribution channels.
54
What does the product element refer to?
The product element refers to the goods or services that a business sells.
55
How can a business find out what its customers want?
A business can conduct market research to understand the needs and wants of its target market.
56
Why does a business need its products to stand out?
A business needs its products to stand out so customers will choose them over competitors’ products.
57
What does price refer to?
Price refers to the amount a business charges its customers for its product or service.
58
How are prices set?
Prices are set based on what customers are willing and able to pay, aiming to provide value for money.
59
Why might some products have higher prices?
Some products have higher prices because they are perceived as high-quality or luxury goods, like sports cars or designer bags.
60
What is the general rule for pricing?
High quality usually means a higher price, while low quality typically means a lower price
61
What are some pricing strategies businesses use?
Businesses may lower prices to increase sales or raise prices to make their products seem higher quality.
62
What factors influence price?
Factors include competition, customer opinions, brand image, and availability (e.g., limited supply can increase price).
63
What does place refer to in the marketing mix?
Place refers to where the customer can purchase the product or service, such as a store, online, or directly from the manufacturer.
64
What options do businesses selling mass-market products use?
They use various options to ensure customers can easily purchase the products, such as retail stores, online stores, and apps.
65
What does the channel of distribution refer to?
The channel of distribution refers to how the product moves from the manufacturer to the final customer.
66
What are the types of distribution channels?
Types of distribution include: Manufacturer → customer Manufacturer → wholesaler → customer Manufacturer → wholesaler → retailer → customer
67
What are the 4 p's of the marketing mix?
Price Promotion Place Product
68
What is promotion in the marketing mix?
Promotion refers to the methods a business uses to create interest in its products and services among customers.
69
What is the main aim of promotion?
The main aim is to persuade customers to purchase or inform them about the product.
70
What are some methods of promotion?
Methods include TV adverts, billboards, social media, influencers, online ads, email ads, sponsorship deals, discounts, and branding.
71
What is the promotional mix?
The promotional mix is the combination of different promotion methods a business uses, depending on the product, costs, and budget.
72
What is the competitive environment?
The competitive environment refers to the pressure a business faces from its competitors.
73
What is an example of a business operating in a mass market?
The fast food industry is an example of a business operating in a mass market.
74
How do businesses adapt their marketing mix in a competitive environment?
Businesses adapt their marketing mix to convince customers their product is better than competitors' products.
75
What is the aim of adapting the marketing mix?
The aim is to gain a competitive advantage.
76
How can businesses gain a competitive advantage?
They can offer a product that fills a market gap, better sales promotions, a unique selling point (USP), or develop relationships with existing customers.
77
Why do consumer needs change over time?
Consumer needs change due to technological improvements or shifts in knowledge and priorities, such as new information about healthy eating.
78
How must businesses adapt to changing consumer needs?
Businesses must adapt their marketing mix to continue meeting customer needs
79
What is one example of a business adapting to consumer needs?
A company reducing the amount of plastic in its packaging to show concern for the environment.
80
What is a common consumer trend?
What is a common consumer trend?
81
How can businesses adapt to changing consumer needs?
Businesses can introduce new products, adjust prices, open new outlets, or implement m-commerce and e-commerce.
82
How do technological advances impact a business's marketing mix?
Technological advances may require a business to adjust its promotional mix to interact with customers through newer technologies like online messaging and digital advertising.
83
How has social media changed business promotions?
Social media has reduced spending on traditional advertising, like TV and newspapers, and increased the use of influencers and sponsorships for promotion.
84
What are examples of how businesses adapt to advances in technology?
Businesses may increase the use of e-commerce and m-commerce, use digital media for promotions, redesign products with new technologies, or reduce prices due to more efficient production methods.
85
What impact does technology have on pricing strategies?
Technology enables easier price comparisons across retailers, which can lead to more competitive pricing.
86
How does a business plan help minimize risk?
A business plan helps minimize risk by considering all key elements of the business, addressing potential issues, and conducting market research to understand the market and customers.
87
What is the purpose of market research in a business plan?
Market research helps the entrepreneur understand the market, identify potential customers, determine the best location for the business, and set realistic aims and objectives.
88
What is a cash flow forecast and how does it reduce risk?
A cash flow forecast predicts the money coming in and out of the business over time. It helps identify potential periods of financial strain, allowing the entrepreneur to adjust their budget or payments accordingly.
89
Why is a business plan important when obtaining finance?
A business plan is essential when seeking finance as it provides evidence to banks or investors that the business idea is viable and has the potential for success.
90
What do banks and investors look for in a business plan?
Banks and investors look for a business plan to assess the likelihood of the business succeeding and generating returns, as they want to ensure their investment is safe.

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