Sectors Of Economy Flashcards
DESCRIBE public limited companies (plc)
A Plc is a business started by individuals to make a profit.
A PLC is business that is owned by shareholders who have brought shares of a business from the stock market.
Plc’s are managed by a board of directors
Plc’s are financed by shared capital
DISCUSS (advantages and disadvantages) PLCs
Advantages
- there is limited liability for shareholders therefore they are responsible for their own debts
- more sources of finance are available including debentures, makes it flexible to find cheaper methods of banking save costs.
- the size of a Plc can easily dominate the market giving them more power-more sales
- because of their size, they can take advantage of economies of scale (cost savings they get as a result of being large eg bulk buying).
- a well known brand name which leads to more sales as customers know and trust the business & customer loyalty
Disadvantage
- the annual company accounts have to be published, therefore they lose money in producing the information, that could be used somewhere else in the business.
- setting up a Plc is costly which could impact on profits.
- dividends are shared with many shareholders, therefore the company loses control over some of their profits.
- controls of the business can be lost as anyone can buy shares on the stock market.
DESCRIBE a franchise
A franchise is a business run by one firm under the name of another
The franchisor (eg McDonald’s) gives the franchisee (eg restaurant owner) a license permitting them to sell goods or services under the franchisor’s brand name, usually in return for a share of the franchisees profits.
The franchisees license permits him/her to use the franchisor’s brand name, publicity materials, decor, uniforms, etc.
DISCUSS franchisor
Advantages
- it is a quick way to enter new geographical markets
- the franchisers name become better known as the business expands
- get money from franchisees (royalties)
Disadvantage
- franchisor’s are reliant on franchisees to maintain the image and good name of the business, if one franchisee creates a bad reputation it could impact on the whole franchise.
DESCRIBE multinational companies.
A multinational company is a business which operates in more than one country. They normally have headquarters in one country known as the ‘home’ country and the other countries are known as the ‘host’ country.
DISCUSS multinational companies.
Advantages
- access to government incentives eg tax breaks, grants
- larger customer base/market share
- more profits/more revenue
- access to cheaper resources in host countries -labour, land, rent –> lower costs
- better brand awareness
- fewer legal restrictions, more relaxed o
- greater economies of scale
- availability of skilled workers
Disadvantages
- distribution costs eg marketing, transport
- different standards eg safety
- different consumer tastes
- time differences can hinder communication between head office and branches around the world
- language barrier can slow down communication
DESCRIBE the public sector
Public sector organisations are government organisations which provide a public service.
Owned by government
Finance for public organisations comes mainly from taxation.
Run by elected ministers and committees
DESCRIBE the third sector
Third sector organisations are sometimes referred to as non-profit making organisations which are set up to support a particular cause or activity.
What are the purposes of third sector organisations
- raising funds for research
- to make a difference for a specific cause
- to help others
- to provide basic needs for people in poverty
- to increase donations
- to provide education
- to raise awareness
- to reduce inequality/injustice
DESCRIBE charities (these are also the features of third sector organisation)
A charity is an organisation set up to give help to those in need.
Their purpose is to help a specific cause, to raise awareness, to raise funds, etc
Charities have no legal owner
A board of trustees run the charity and are responsible for distributing funds
They are financed by donations (majority), selling goods, government
DESCRIBE social enterprises
These are businesses which have a social aim. This means they want to change the world for the better.
They are not set up to make profits for the owners. Instead they use some/all of their profits to help their local community, improve the environment or tackle a social problem
They sell goods and services like a private sector business, unlike a charity which receive donations
DISCUSS franchisee
Advantages
- the new business can begin trading on the established reputation of the franchisor immediately
- the franchise has the advantage of a well known brand name and back up service
- all franchisees can benefit from ideas generated by each of them. For eg when a McDonald franchisee though up the egg mcmuffin
- you get the franchisor’s marketing and advertising
- you get trained by franchisor
Disadvantage
- a percentage of the revenue has to be paid to the franchisor (royalties)
- the franchisor may impose strict rules on the franchisees and restrict their ability to operate on their own initiative
- the franchisees reputation and profitability depend in part on that of the franchisor and the performance of the other franchisees.
COMPARE (similarities and differences) charities and social enterprises
Charities do not pay tax on most types of income whereas social enterprises pay tax on profits.
Charities earn most of income by donations whereas social enterprises earn income by sell goods or services.
Both charities and social enterprises are part of third sector organisations.
Both charities no social enterprises exist to help a cause.
JUSTIFY social enterprises
Advantages
- help tackle social problems it has chosen
- some funding/grant/support is only available yo social enterprises
- publicity for the social issue promotes the business
- attract customers who appreciate the good cause they help
- attract good quality staff who want to help the social cause
- can make use of an asset lock
- can sell shares to raise finance if they are a limited company
