Types of Businesses (unit 1.2)

Question 1

What is a multinational company

Answer 1

It is a company that is located in more than 1 country. with its branches, offices and facilities in more than one country

• it often has its head offices in 1 country
• it has 25% of its earning revenue outside of the country

Question 2

What are advantages of multinational companies?

Answer 2

• increase in customers = wider target audience
• access to cheaper supplies = saves money
• access to cheaper labour = decrease in finance
• wider range of skills = increase in productivity and innovation

Question 3

What are private limited companies

Answer 3

it is a business owned by a shareholder with limited liability and whos shares are private and cannot be sold on the stock market but can be sold to family and friends

Question 4

What are 4 features of private limited companies

Answer 4

• difficult to raise finance
• limited liability
• they vote on major decisions
• their shares can only be sold/bought privately

Question 5

What is a public limited company

Answer 5

it is a incorporated business that allows the general public to buy and sell shares in the company via stock market ; all shareholders have limited liability

Question 6

What are advantages and disadvantages of public limited companies

Answer 6

Pro:
- more sources of finance
- limited liability

Con:
- no control of who your shareholders are
- expensive to set up

Question 7

Ansoff matrix
STEEPLE (4marker) and analysis
mission statement
types of diseconomies of scale and disadvantages
types of economies of scale and advantages

Question 8

What Is economies of scale

Answer 8

cost reductions that occur when a business increases their production

the cost advantages a company gains when it increases their production

(can occur via: negotiation)

Question 9

What are the advantages of economies of scale?

Answer 9

• lower production costs
• Increase in profit
• competitive advantage

Question 10

What is diseconomies of scale?

Answer 10

when a business grows so large that their cost per unit increases

Question 11

What are types of diseconomies of scale

Answer 11

Types:

Internal: an increase in average cost of production in the business due to factors that are within control of the organization.

External: a decrease of average costs of the business due to factors that are beyond the control of the organization

Question 12

What are the disadvantages of diseconomies of scale?

Answer 12

• reduces employee motivation = because they feel like they are not doing enough in the business and/or are not valued
• lack of communication

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Question 13

What is ansoff matrix

Answer 13

Market development:

Question 14

what is a private sector

Answer 14

it is a business owned and run by private individuals that usually may earn a profit.

they operate independently however they must oblige the country’s rules and regulations

eg: sole tradders
partnerships
private and public held companies