Topic 1.4

Question 1

Definition: Unlimited liability

Answer 1

Owners are fully responsible for debt and may lose personal possessions (risky)

Question 2

Definition: Limited liability

Answer 2

The owners cannot lose more than what has been invested (protected)

Question 3

Sole Trader

Answer 3

Business that is owned by one owner

• Unlimited liability
• PROS: easy to set up, complete ownership and control
• CONS: work long hours, risk of unlimited liability

Question 4

Partnership

Answer 4

Between 2 - 20 joint owners of a business

• Unlimited liability
• PROS: more owners = more ideas, more capital -> faster growth
• CONS: disagreements, legal responsibility for everyone

Question 5

Private Limited Company (Ltd.)

Answer 5

Owned by shareholders who have to be invited by the business to buy shares

• Limited liability
• PROS: easier to get a loan, limited liability
  CONS: legally obliged to publish accounts, more expensive cause of legal paperwork

Question 6

Franchise

Answer 6

A business that gives the right to another person/business to sell goods/services using its name

• Unlimited liability
• PROS: recognisable brand so less risk of failure, provide training
• CONS: limited freedom, have to pay royalties (% of profits)

Question 7

Factors that influence business location

Answer 7

• Proximity of raw materials: being close to the raw materials is cheaper for some
• Proximity of market: some need to be located near to customers to get sales through passing trade
• Proximity of labour: close to high-skill workers or location which is accessible by transport
• Proximity of competition: being close competitors means finding skilled labour and local suppliers will be easy, far away means won’t lose sales and won’t have to reduce prices

Question 8

E - commerce

Answer 8

Trading over the internet

• Cheaper: no fixed premise
• Employees can work from home and can employ all over the world

Question 9

Nature of business

Answer 9

Will influence the prioritisation of factors while choosing a location
e.g. salon on high street

Question 10

4Ps of marketing mix a

Answer 10

Place
Price
Promotion
Product

Question 11

Impact of things on marketing mix

Answer 11

Competitive environment: lower prices, add USP, promotion

Changing customer needs: introduce/change products and price, introduce e - commerce platform

Technology: use of digital media to promote (sponsors and influencers), selling online

Question 12

Business plans

Answer 12

• Are an outline of what a business will do and how they will do it
• Used to convince financial backing
• Reduces risks
• Includes: business idea, aims/objectives, target market, location, source of finance, market research, cash flow