private sector

Question 1

feature of a public limited company

Answer 1

a business owned by shareholders

controlled by board of directors

financed by publicly selling shares on stock market

limited liability

Question 2

advantages of plc

Answer 2

• Shareholders have limited liability.
• Public shares allow for large amounts of finance to be raised.
• Easy to borrow money due to their size and reputation so less risk for banks.
• PLCs can easily dominate the market.

Question 3

disadvantages of plc

Answer 3

• More shareholders = More dividends.
• Control can be lost as anyone can buy shares.
• Annual accounts have to be published.
• Costly and complicated to set up.

Question 4

what is a franchise

Answer 4

A franchise is a business that sells a licence to others to allow them to open a new branch under their name

The business selling the licence is known as the franchiser - like an employer.

The business/person buying the licence is known as the franchisee - like an employee.

Question 5

advantages to the franchiser

Answer 5

• A low risk form of growth as the franchisee invests the majority of the capital
• Receives a percentage of all franchisees profits each year (known as royalties

Question 6

disadvantages to the franchiser

Answer 6

• The reputation of the whole franchise can be tarnished by one poor franchisee.
• Only a share of profits is received rather than all profits as it would be if they owned each branch.

Question 7

advantages to the franchisee

Answer 7

• The franchise is a well-known business with an existing customer base.
• Industry knowledge and training is provided by the franchiser
• the franchisee benefits from national adverts carried out by the franchiser

Question 8

disadvantages to the franchisee

Answer 8

• Royalties have to be paid each year
• There are high initial start-up fees
• Very little power over decisions as the franchiser decides on products, uniform etc

Question 9

what is a multinational

Answer 9

a business that has operations in more than one country

The head office is usually based in the HOME country.

Outlets abroad whether that be shops or production facilities are said to operate in the HOST country.

Question 10

effect of multinationals on host countries - advantages

Answer 10

• Jobs are provided
• Can bring income to local communities

Question 11

effect of multinationals on host countries - disadvantages

Answer 11

• May use up natural resources like oil and water
• May pay staff a low wage
• May put local firms out of business
• May send profits back to home country

Question 12

advantages of operating as a multinational - home country

Answer 12

• May be able to access cheaper raw materials
• May be able to avoid legislation like minimum wage
• May access grants provided by host governments
• May be able to avoid quotas by basing themselves in the host country
• access to a wider market
• increased brand awareness

Question 13

disadvantages of operating as a multinational - home country

Answer 13

• Language barriers slow down communication
• Cultural differences (eg ‘sietsas’ in Spain)
• May be time differences
• May have to deal with changes in value of currencies.