Sectors Of Economy Flashcards
What are the sectors of the economy?
Private sector
Public sector
Voluntary/third sector
What is the public sector?
-public sector organisations are owned and controlled by the government on behalf of the tax payer
-aim to provide service to the general public
What is a private limited company (ltd)
-companies whos shares are owned privately
-not available to the public on the stock market
-minimum of one shareholder
What is the advantaged of private limited company (ltd)?
-control of company not lost to outsiders as shares aren’t available to public
-able to raise finance amounts amongst family and friends
-limited liability so personal assets dont have to be sold if business goes into debt
What are disadvantages of ltd?
-high set up costs
-shared cant be sold to general public which limits the amount of finance to be made
-must publish annual accounts publicly which means that profits aren’t private
What is a public limited company (plc)?
-shares are available for purchase by the public on stock market
-minimum of two shareholders
What are the advantages of plc?
-huge amounts of finance can be raised by selling stock
-plc often dominate the market
-limited liability-personal assets do not have to be sold if business goes into debt
What are disadvantages of plc?
-high set up costs and can be complicated
-no control over who buys shares
-must publish annual accounts
-dividends need to be shared with many shareholders
What are similarities of ltd and plc?
-both are owned by the shareholders
-both controlled by a board of directors
-both are finances through shares
What is a franchise?
-a right to sell a company’s products in a particular area using the company’s name
-a franchisee buys the right from a franchiser to copy business format
-franchiser sells the right to use a business idea in a location
What are advantages of a franchise for the franchiser?
-cheap way of expanding market share and can gain increased brand presence
-provides them with reliable revenue - receive royalties each year
What are disadvantages of a franchise for the franchiser?
-share of profit depends on the success of the franchise
-reputation of business is dependant on each franchisee - can be tarnished by one poor franchise
What are advantages of a franchisee for the franchisee?
-lower costs as franchisior may do all the training and advertising
-risk of failure is reduced as brand is already well known
-already have brand loyalty and existing customers
What are disadvantages of a franchise for the franchisee?
-can’t use own initiative as franchiser may dictate products and selling price
-have to give a percentage of the profits to franchiser
-costly to by a franchise so high initial set up fees
