Types of organisations AND Growth

Question 1

What type of liability does a private limited company have?

Answer 1

Limited

Question 2

Who are the owners of a private limited company

Answer 2

Shareholders

Question 3

Who are private limited companies controlled by?

Answer 3

Board of director

Question 4

What are the advantages of a private limited company?

Answer 4

Owners have limited liability

Ownership is not lost to outsiders

Business retains a close and tight-knit friendly
feel and level of customer service found in
smaller companies.

Expertise and business acumen gained from an
experienced board of directors

Question 5

What are the disadvantages of a private limited company?

Answer 5

Profits have to be split with many shareholders by issuing dividends

Complicated legal process required to set up the company

Limited source of capital as shares are not sold publicly

Financial statements have to be shared with ‘Companies House’ meaning their profits are not kept private

Question 6

What type of liability does a public limited company have?

Answer 6

Limited

Question 7

Who controls a public limited company?

Answer 7

Board of directors
However public limited companies can sell their shares publicly, through the stock market.

Question 8

What are the advantages of a public limited company?

Answer 8

shareholders have limited liability

Large amounts of finance can be raised through

Easy to borrow finance due to a PLC’s size and

reputation is less risk for banks

PLCs can easily dominate markets

Question 9

What are the disadvantages of a public limited company?

Answer 9

Dividends shared with many shareholders

the public sale of shares Can lose control of the business as anyone can buy shares on the stock market

Annual accounts have to be published

Setting up a PLC is costly and complicated

Question 10

What is a franchise?

Answer 10

is a business model that allows businesses to pay a sum of money to own a branch of a well-known, existing business

Question 11

What are the aims of a franchise?

Answer 11

The franchiser’s main aim is to grow and increase market share. They also aim to maximise profits and as they may be a PLC, increase their market value too.

Question 12

What are the advantages of a franchiser?

Answer 12

Low risk growth as the franchisee invests the
majority of the capital

Receives a percentage of all franchisee’s profits
each year

Question 13

What are the disadvantages of a franchiser?

Answer 13

Reputation of the whole franchise can be tarnished by one poor franchisee

Only a share of profits received rather than all profits if they owned each branch.

Question 14

What are the advantages for a franchisee?

Answer 14

The franchise is a well-known business with
existing customer base.

Industry knowledge and training provided by
the franchiser

Franchisee benefits from national advertisements carried out by the franchiser

Question 15

What are the disadvantages for a franchisee?

Answer 15

Very little autonomy over decisions as the franchiser decides on products, store layout, uniforms etc…

Royalties have to be paid each year

High initial fees

Question 16

What is a multinational

Answer 16

is a business that has operations in more than one country

Question 17

What are the advantages of a multinational?

Answer 17

Wage and raw material costs are lower in other
countries

Can avoid legislation in home country

Grants can be issued by governments to locate in their country

Avoid quotas (retraction on amount of
imports/exports) and tariffs (taxes on
imports/exports) issued by their own
governments

Question 18

What are the disadvantages of a multinational?

Answer 18

Language barriers can slow down communication

Cultural differences can affect production, e.g. ‘Siestas’ in Spain.

Exchange rates can affect purchasing and paying expenses in different countries

Time differences can hinder communication between head office and branches around the world

Question 19

What are the advantages of a charity?

Answer 19

Charities are exempt from paying some taxes
such as VAT or Corporation Tax

Low wage costs due to volunteers working for
free

Private companies are more willing to donate
to or sponsor charities than ever before as it is
good ‘PR

Question 20

What are the disadvantages of Charitys?

Answer 20

Can be difficult to compete with private sector’s large marketing budgets

Charities rely heavily on volunteers who may leave for paid work

Question 21

What are advantages of setting up a social enterprise?

Answer 21

· Social aims can endear them to customers who share their beliefs.

· High quality staff are attracted to the organisation.

· More likely to receive government grants due to their positive impact on society.

· Should they be closed down the sale of any assets and any profits they have will be used to benefit their cause (‘Asset Lock’)

Question 22

What are objectives of businesses?

Answer 22

Maximising profits
Survival
Satisficing
provide a high quality service
increase market share
managerial objectives
maximise sales
Corporate social responsibility
Customer satisfaction

Question 23

What are ethical and environmental responsibilities?

Answer 23

· Use renewable energy, such as solar and wind energy

· Use sustainable raw materials, e.g. sustainable fish stocks

· Fair trade

· Offering fair pay and working conditions for staff

· Avoid testing on animals

· Avoid the use of child labour

Question 24

What are advantages of good CSR?

Answer 24

· Business gains a good reputation for their caring nature

· Customers that agree with the aim are likely to use the business

· Society and the environment are kept in good order which will benefit the business in the long run