Sectors Of Economy Flashcards
what is the role of a business?
a business is set up to achieve a set of objectives.
what is an objective?
aims/ goals
what three sections do UK economy break down into?
- PRIVATE sector
- PUBLIC sector
- THIRD sector
what 4 sections does the private sector break down into?
- SOLETRADERS
- PARTNERSHIPS
- FRANCHISES
- COMPANIES
companies sin the private sector breaks down in what 3 further sections?
- PRIVATE LIMITED (LTD)
- PUBLIC LIMITED (PLC)
- MULTINATIONALS
what are the 2 sections the public sector breaks down into?
- LOCAL GOVERNMENT
- CENTRAL GOVERNMENT
what are the public sector business run by?
private individuals
what are the objectives for private sector business?
make a profit
what do private sector business include?
- SOLE TRADER
- PARTNERSHIP
- FRACNHISE
- COMPANIES - plc, ltd, mnc
- MULTINATIONALS - mnc
each of these business are financed in different ways.
how are sole traders owned and controlled by?
one person
how are sole traders financed?
owners savings, loan from relatives, bank loan, bank overdraft and government grants.
what the objectives of a sole trader?
- MAXIMISE PROFITS
- SURVIVE
- GROW AND EXPAND
what is the owner role in the sole trader business?
- owners make all decisions and keep all profits
- but they have full responsibility of business and unlimited liability.
how is partnerships controlled and owned?
by 2-20 people
what are the partnership agreement?
states share of profits, holidays, responsibilities and procedures if partner dies/leaves.
how are partnership businesses financed?
- PARTNER SAVINGS
- NEW PARTNERS
- BANK LOAN OR OVERDRAFT
- GOVERNMENT GRANTS
what is an objective of a partnership?
- MAXIMISE PROFIT
- SURVIVE
- GROW AND EXPAND
do partners in a partnership agreement have unlimited or limited liability?
unlimited liability
what should owners in a partnership come to an agreement on?
- all business decisions
- profits spilt
- work load and responsibilities shared
limited companies are in what sector?
private sector
(private sector) what are the limited companies called?
- PRIVATE LIMITED COMPANIES(LTD)
- PUBLIC LIMITED COMPANIES(PLC)
do owners o limited companies have unlimited or limited liability?
limited
what must owners of limited companies do?
- register with the register of companies
- create a memorandum of association and articles of association
what are the two types of limited companies in he private sector?
- PRIVATE LIMITED COMAPNY (LTD)
- PUBLIC LIMITED COMPANY (PLC)
whats the main difference between between LTD’s and PLC’s?
- Ltd can only sell shares to individuals who are invited to buy shares with the full agreement of the existing shareholders. Usually family or friends.
- PLC’s sell their shares to the public through the stock market.
how are private limited company (LTD) owned?
by minimum of 2 shareholders.
how are private limited company (LTD) controlled?
board of directors
who can be a director in private limited company?
shareholders
how are private limited companies financed?
by:
- shareholders investments
- new shareholders
- issuing more shareholders
- retained profits
what are the objectives of private limited companies?
- maximise sales
- maximise profits
- survive and grow
how are public limited companies (PLC) owned?
by minimum of 2 shareholders.
how are public limited companies (PLC) controlled?
by a board of directors.
public limited companies (PLC) require?
minimum of £50,000 share capital (investment)
how are public limited companies (PLC) financed?
by:
- shareholder investment
- new shareholders
- Bank loan
- Debentures
- retained profits
what are the objectives of public limited companies (PLC)?
- MAXIMISE PROFITS
- MAXIMISE SALES
- GROW AND MARKET DOMINANCE
what are the positives of PLC’s?
- ACCESS TO MORE CAPITAL THAN PRIVATE LIMITED COMPANIES
- EMPLOYS SPECIALISTS
- LIMITED LIABILITY FOR SHAREHOLDERS
- COMPANY DOES NOT DIE IF OWNERS DIE
- SHAREHOLDERS CAN BE ISSUED THROUGH STOCK EXCHANGE
- CAN DOMINATE THE MARKET DUE TO THIER SIZE
- TAKW ADVANTAGE OF ECONOMIES OF SCLS EDIE THEIR SIZE
what are the negatives of PLC’s?
- FORMATION EXPENSIVE
- MUST PUBLISH/GO PIBLIC WITH ACCOUNTS AND PERFORMANCE ANNUALLY
- MAY BECOME TO LARGE TO MANAGE EFFECTIVELY
- DECISIONS MORE DIFFICULT TO ARRIVE AT AND CAN TAKE A LONG TIME TO GET AGREEMENT
- NO CONTROL WHO PURCHASES SHARES ON THE STOCK MARKET
what are multinationals?
when some PLC’s and franchises operate o an international scale.
what does internationally include?
- TRANSPORTING GOODS
- MANUFACTURING
- STORING
- SELLING
what are features of MNC?
- Operates internationally
- Global brand - recognisable
- distinct HQ.
-largely influenced local economies - profits can be bigger than some countries GDP (gross domestic
product) - dominate markets across many countries
why do PLC’s want to expand into a MNC?
- Reduce production costs - cheaper labour and land in other countries
- Reduce transport costs
- Enter new markets
- Take advantage of ‘host’ government assistance and incentives
- Escape government regulations at home
- Earn higher after tax profit
what are multinational disadvantages?
- DAMAGE TO REPUTATION - exploiting cheap labour.
- CURRENCY VARIATION - exchange rates can work out more expensive.
- POOR INFRASTRUCTURE - internet/road/rail
- POLITICALLY UNSTABLE
- CULTURAL DIFFERENCES - language barrier
- TRANSPORTATION CAN BE EXPENSIVE
- DIFFICULT TO CONTROL/MANAGE - when in different countries.
what is globalisation?
globalisation is the process of businesses trading products all over the globe.
why is the marketplace for goods and services global?
improvements in technology
what does the internet and e-commerce give mall businesses access to?
international markets and the opportunity to trade globally.
what are the globalisation advantages?
- ACCESS TO LAGER MARKET PLACE
- DEVELOPS BRAND INTERNATIONALLY
- HOME AMFKET MAY BE SATURATED- this is the only option for growth.
- INCREASE PROFIT MARGINS MAY BE AVAILABLE
what are the globalisation limitations?
- MORE COMPETITION - not just local/ national
- ADDITIONAL TRANSPORT COSTS
- ADDITION RESEARCH AND DEVELOPMENT COSTS
- LEGISLATIONS
- CULTURE/LANGUAGE
- PROFITS GO BACK TO HOME COUNTRY
- IMOACT ON THE ENVIRONMENT
what is a franchise?
a business agreement that allows one business to trade using another business’s name and sell their products/ services.
what must a franchise be able to do to trade using an establishment business name?
pay sum of money
what is the definition of a franchisee?
person/ firm who owns and runs an individual branch of the brand.
what is the definition of a franchiser?
the parent firm that owns the brand name.
what are the advantages of the franchiser?
- GUARANTEED INCOME ESCH YESR FROM FRANCHISEE’S SALES
- RAPID GROWTH
- RISK IS SHARED
- GOOD IDEAS CAN BE SHARED
what are the disadvantages of the franchiser?
- INCOME FROM FRANCHISEE SALES COULD BE LESS
2. RISK OF DAMAGE TO THE BUSINESS NAME/REPUTATION IF FRANCHISEE PERFORMS POORLY
what are the advantages of the franchisee?
- REPUTATION FOR FRANCHISER WILL HELP THE BUSINESS GAIN CUSTOMERS AND SALES QUICKLY.
- FRANCHISER WOLL HELP AND SUPPORT - through training and pays cost of advertising.
what are the disadvantages of the franchisee?
- FRANCHISEE HAS NO CONTROL OBER PRODUCTS AND PRICES
- CAN BE EXPENSIVE TO PURCHASE A
FRANCHISE - FRANCHISEE MUST PURCHASE ALL SUPPLIES FROM FRANCHISER
- FRANCHISEE HAS TO PAY A PERCENTAGE OF THEIR PROFITS TO THE FRANCHISER
- NO FLEXIBILITY OF PRODUCTS SOLD OR PRICES CHANGED
