Topic 1.4 Making the business effective

Question 1

What is a sole trader?

Answer 1

a business with just one owner

Question 2

What are the advantages of sole trading?

Answer 2

• they’re easy to set up
• you get to be your own boss
• you decide what happens to any profit

Question 3

What are the disadvantages of sole trading?

Answer 3

• may have to work long hours
• your unincorporated
• you have unlimited liability
• hard to raise money

Question 4

What is a partnership?

Answer 4

where you have between 2 and 20 partners, where each partner has their own say in making decisions and equal share of profit

Question 5

What are the advantages of a partnership?

Answer 5

• more owners = more ideas
• more people to share the work
• more owners = more capital (money)

Question 6

What are the disadvantages of a partnership?

Answer 6

• each partner is legally responsible
• unlimited liability
• more owners = more disagreements
• profits are shared

Question 7

What are the two types of limited company?

Answer 7

private and public

Question 8

What does it mean if a business is incorporated?

Answer 8

in a separate legal identity from the owners

Question 9

What does being incorporated mean?

Answer 9

unlimited liability

Question 10

What does private mean?

Answer 10

shares can only be sold if all the shareholders agree

Question 11

What do private companies usually have on the end of their name?

Answer 11

ltd

Question 12

What is the advantage of being ltd?

Answer 12

• big advantage over sole traders and partnerships is limited liability
• easier to get a loan or mortgage

Question 13

What is the disadvantage of being ltd?

Answer 13

• more expensive to set up
• the company is legally obliged to publish it’s accounts every year

Question 14

What is a franchise?

Answer 14

where a business will take an already established business name and trademark of another firm

Question 15

What must a business do towards the business its franchising?

Answer 15

they give the firm a fee or a percentage of a profit

Question 16

What can the franchise do trading-wise?

Answer 16

trade under the franchise name but advertise they sell a particular product

Question 17

What are the advantages of franchising?

Answer 17

• customers will already recognise the franchisor brand
• less risky business start
• franchisor might provide training

Question 18

What are the disadvantages of franchising?

Answer 18

• franchisor might have strict rules about what the business can sell and how it operates
• franchisee usually has to pay a lot of money to start the franchise

Question 19

How does location influence different factors?

Answer 19

• competition
• location of raw materials
• location of the market
• using the internet
• labour supply

Question 20

How does location of raw material influence a business?

Answer 20

if it is nearby the transporting fees will be low, you will have extra money to use elsewhere

Question 21

How does labour supply influence the business?

Answer 21

if it is close to an area of high unemployment - keep wages low, good selection of people to employ,

Question 22

How does competition influence the business?

Answer 22

easy to find skilled labour, their must already be local suppliers

Question 23

How does location of the market influence the business?

Answer 23

some firms pay more to transport their finished product that their raw materials, some firms locate near to their market so people know about them and easy to get to them

Question 24

How does using the internet influence the business?

Answer 24

location of the firms is more flexible, trading over the internet means manufacturers can locate further, documents can also be accessed, which means businesses no longer need fixed premises

Question 25

What does the nature of the business influence?

Answer 25

what they prioritise when choosing their location

Question 26

What are the 4 p’s?

Answer 26

product, price, promotion, place

Question 27

What are the 4 p’s the key to?

Answer 27

understanding what the market is all about

Question 28

What is the marketing mix?

Answer 28

the 4 p’s

Question 29

What does different part of the marketing mix effect?

Answer 29

each other

Question 30

What are some things that effect a business’s marketing mix?

Answer 30

changes in technology, what customers want change, how competitive the market is

Question 31

Why must a business need to be very careful to make sure their getting their marketing mix right?`

Answer 31

they will have fewer sources of finance available to them

Question 32

Why might a small business focus on the price of a product?

Answer 32

• new businesses will have a lot of start up costs
• new businesses are likely to have high prices

Question 33

Why might a small business focus on the product ?

Answer 33

• they will have a smaller range as they will not have a high spending range
• may focus on providing higher quality

Question 34

Why might a small business focus promotion of a product?

Answer 34

• promoting the right brand
• flyers and free samples (cheaper)
• more likely to promote to local customers

Question 35

Why might a small business focus on the place of a product?

Answer 35

• may choose to sell directly to the customer or through small retailers

Question 36

What is a business plan?

Answer 36

an outline of what a business will do, and how it aims to do it

Question 37

Anyone starting a business must have…?

Answer 37

a plan

Question 38

What does a business plan force the owner to do?

Answer 38

think carefully about what the business is going to do, how it will be organised and what resources it needs

Question 39

What can the business plan be used for?

Answer 39

convince the financial backers that the idea is a sound investment

Question 40

What can writing a business plan help to do?

Answer 40

reduce the risks of a new business idea

Question 41

If the business is a bad idea, the business plan helps to do what?

Answer 41

help the owner or the financial backers realise this is at an early stage

Question 42

What does a business plan help to managers do?

Answer 42

decide what objectives need to be set to achieve their aims

Question 43

What do all good business plans include?

Answer 43

• the business idea
• business aims and objectives
• target market
• marketing mix
• location
• finance