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Business Year 12 > Topic 1 > Flashcards

Topic 1 Flashcards

1
Q

Advantages and disadvantages of sole traders

A

Advantages:
- easy and quick to set up
- complete control

Disadvantages:
- unlimited liability
- no continuity

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2
Q

Advantages and disadvantages of partnerships

A

Advantages:
- more ideas/ skills
- continuity

Disadvantages:
- unlimited liability
- shared profits

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3
Q

Advantages and disadvantages of a PLC

A

advantages:
- easy to raise finance
- limited liability

Disadvantages:
- possibility of a takeover
- must disclose company info

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4
Q

Definition of capital gains

A

Share price increase

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5
Q

Private, public and third sector

A

Private sector :
- Owned by individuals or companies. Mainly run for profit

Public sector :
- Owned by the tax payer run by the government on behalf of the public. Main purpose is to provide a product or service.

Third sector:
- Voluntary and community groups, charities, social enterprises, cooperatives. Value driven, public welfare, social goals.

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6
Q

Franchisee, Franchise and Franchiser

A

Franchisee : Individual buying the right to use the brand name.

Franchise: Business

Franchiser: Brand owner

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7
Q

Advantages and disadvantages for the franchiser

A

Advantages:
- products necessary for the franchise to operate are under the franchises control.
- the firm may not have to spend large amounts of money in order to expand.

Disadvantages:
- costs of supporting the franchisees
- possibility of conflict with franchisee if they create a bad reputation

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8
Q

Advantages and disadvantages for the franchisee

A

Advantages:
- lower risk (proven business concept)
- support advice and training

Disadvantages:
- supplies have to be bought from franchiser
- profit is shared

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9
Q

Cooperatives definition and advantages and disadvantages

A

Definition: a business that is owned and run by its members rather than being distributed to shareholders.

Advantages:
- customers are usually loyal supportive
- higher quality service is likely to be provided (as customers are likely to be members)

Disadvantages:
- capital can be limited (only what members contribute)
- slower decision making (involvement of members)

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10
Q

Barriers to exit

A

The factors that could prevent a firm from leaving the market. Eg, redundancy costs for workforce, exit fees from rental agreements, contracts with suppliers, selling off capital.

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11
Q

Market power

A

The ability of a firm to influence or control the terms and conditions, on which goods are bought and sold.

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12
Q

Market dominance

A

A measure of market share compared to competitors.

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13
Q

Mergers

A

2 companies merge together and shareholders merge. Form 1 large business.

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14
Q

Acquisition/ takeovers

A

This is where control of another company is achieve by buying a majority of its shares.

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15
Q

Advantages and disadvantages of external growth

A

Advantages:
- will result in an increase in revenue and therefore market share.
- may be able to meet customers needs more effectively with combination of resources

Disadvantages:
- can be expensive
- managers may lack experience to deal with the other businesses

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16
Q

Collusion

A

Takes place when rival companies cooperate for their mutual benefit. When two or more parties act together to influence production, and for price levels, thus preventing for competition. Common in oligopolies.

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17
Q

Operational efficiency

A

More production to optimise processes, reducing time and waste. Eg. Reducing time and waste per cake.

18
Q

Benefits for business of external growth

A
  • may be able to meet customer needs more effectively with combination of resources.
  • may experience economies of scale
19
Q

Organic/ internal growth

A

Involves expansion from within a business. Eg. Opening new stores, launching new products, investing in new technology, employing more workers.

20
Q

Advantages and disadvantages of organic growth

A

Advantages:
- business remains in control of all operations
- mitigates complications of external growth eg. Mergers

Disadvantages:
- slow growth as it takes longer than external growth
- must remain competitive

21
Q

Regulation

A
  • dominance, anti- competitive practices and mergers/ acquisitions can be investigated.
  • the competition and markets authority (CMA) are a regulating body
  • the CMA can stop mergers and acquisitions going ahead
22
Q

What can the CMA do

A
  • Apply 10% fine of global turnover
  • Directors can be sanctioned for 8 years
  • Prison for 5 years
23
Q

Competitive market

A

No of firms in market: large number

Ability to control price : none (compete on price)

Barriers to entry : none, minimal

Product differentiation: very little, almost identical products

Examples: farm and dairy

24
Q

Monopoly

A

No of firm in the market: one

Ability to control price : high (can set market price)

Barriers to entry: subject to government regulation

Product differentiation: no products that directly compete

Examples: utilities used by as gas and gas

25
Q

Monopolistic competition

A

No of firms in market: many sellers (fewer than perfect competition)

Ability to control price : limited

Barriers to entry : few

Product differentiation: emphasis in showing perceived differences in products

Examples: retail, clothing stores, fast food

26
Q

Oligopoly

A

No of firms in market: few large firms dominate market

Ability to control price : some

Barriers to entry : many

Product differentiation: some differences

Examples: mobile phone networks

27
Q

Evaluation ideas

A

Cost
Objectives
Competition
Information
Time

28
Q

Local markets definition: advantages and disadvantages

A
  • customer service offer (closer to customers)
  • change more quickly to customers needs
  • do not benefit from economies of scale as growth is limited
  • susceptible to competitors
29
Q

National markets definition : advantages and disadvantages

A
  • distribute throughout the country
  • manufacturing plants (benefit from economies of scale)
  • distribution (vehicles, warehouses)
  • offers greater profit potential
30
Q

International markets definition : advantages and disadvantages

A
  • Import and export
  • globalisation
31
Q

International vs multinationals definition

A

International companies are importers and exporters no investment outside home country. Multinationals have investment (operations) in other countries.

32
Q

Advantages and disadvantages of multinationals to host nations

A
  • Increase gdp
  • Tax for host nation
  • domestic businesses may not be able to compete
  • impose culture on host nation
33
Q

External growth types eg. Horizontal

A

Forward vertical - Further up the supply chain eg. BMW buying a dealership
Backwards vertical - Earlier in the supply chain eg. BMW buying a Tire factory
Horizontal - same stage in the supply chain eg. BMW buying Mini
Diversification - no connection eg. BMW buying McDonald’s

34
Q

Joint ventures definition : advantages and disadvantages

A

A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. Risks and rewards are shared.

Advantages:
- Reduces risk (particularly when entering new markets)
- sharing each others expertise (resources, technology, skills)

Disadvantages:
- Disagreements (clash of culture, management style)
- synergy not guaranteed (may be better to go into alone)

35
Q

Strategic alliance definition : advantages and disadvantages

A

A strategic alliance is an arrangent between two companies that have decided to share resources to undertake a specific, mutually beneficial, project. Less involved and less permettant than a joint venture.

Advantages:
- grants access to new resources and expertise
- Access to new markets

Disadvantages:
- often no better off at the end than if you ‘went in alone’
- legal disputes over who owns what (especially branding and designs)

36
Q

Diseconomies of scale definition

A

They arise when unit costs rise as output rises. Could occur due to the business becoming less effective due to miscommunication in larger businesses. Or workers lack motivation and feel isolated and less appreciated in larger businesses.

37
Q

Globalisation definition : advantages and disadvantages

A

A process by which countries and economies have become more interconnected or the world coming together to trade in each others markets.

Advantages:
- larger markets
- cheaper labour (economies of scale)

Disadvantages:
- increases competition
- ethical and environmental issues

38
Q

International trade definition

A

This prefers to selling across borders. Eg. The exchange of goods and services between countries.

39
Q

Trade deficit, quota, tariff definition

A

Trade deficit : occurs when a country imports more than it exports

Quota : a quota is a limit on the quantity o imports

Tariff: a tax payed on imports

40
Q

Trading blocs definition : advantages and disadvantages

A

A group of countries that trade together. They have reduced or removed trade barriers for its members countries.

Advantages:
- access to larger markets
- increased specialisation

Disadvantages :
- increased competition (free trade)
- countries become economically dependent on each other

41
Q

Advantages and disadvantages of an Ltd

A

Advantages:
Limited liability
Able to retain control however can still sell shares

Disadvantages
High set up costs
Accounts listed on companies house annually

42
Q

Primary, secondary and tertiary sectors

A

Primary: extraction of natural resources
Secondary: manufacturing
Tertiary: providing a service

Business Year 12 (1 decks)

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