UB - Types of Business Organisations

Question 1

What objectives does a private sector business have? (7)

Answer 1

Profit maximisation
Survival
Satisficing - Making enough profit which is sufficient to keep all shareholders happy
Corporate social responsibility - improving public image
Provision of a service - aiming to provide a service in the best way possible
Maximising sales
Growing

Question 2

What objectives does a public sector business have? (5)

Answer 2

Meeting national and local government priorities
Operating to a specified budget
Providing a service that meets the needs of everyone
Being more affordable than the private sector
Using taxes wisely

Question 3

What objectives does a third sector business have? (5)

Answer 3

Raise awareness of cause being supported
Provide a quality service
Support a specific group of people
Gain more volunteers
Raise more funds

Question 4

How can a business achieve their CSR? (5)

Answer 4

Making sure raw materials come from sustainable sources
Recycling as much as possible
Trying to reduce its carbon footprint
Making sure suppliers are paid fairly (fair trade)
Encourage employees to improve health by offering activities

Question 5

What are managerial objectives? (4)

Answer 5

Maximise person salary/bonus
Maximise departmental budgets
Improve status and recognition
Maximise number of employees in their charge

Question 6

What is the central government?

Answer 6

Houses of parliament and the Scottish parliament that provide the public with a variety of services and allocates spending in the budget to each service.

Question 7

What is the local government?

Answer 7

Receive majority of their funding from the central government and council tax. Uses money it receives to provide the public with a variety of services for everyday life.

Question 8

What is privatisation?

Answer 8

Making a public sector organisation turn into a private sector organisation

Question 9

Who are public sector organisations owned and controlled by?

Answer 9

Owned by central government/local government and run by politicians, civil servants, locally elected councillors and council employees.

Question 10

Sole trader facts - owned by, run by and size

Answer 10

Owned by one person, run by one person and usually small businesses

Question 11

Sole trader advantages and disadvantages (4 each)

Answer 11

Adv:
Minimal legal documents required to set up
Owner can choose when they work
All profits are kept by the owner
All business decisions are made by the owner

Disadv:
No one to share workload with
Raising large start up capital is difficult
Unlimited liability
Ill health/holidays can affect the running of the business

Question 12

Partnership facts - owned by, run by and size

Answer 12

Owned by and run by 2-20 partners. Usually small to medium size businesses.

Question 13

Partnership advantages and disadvantages (3 each)

Answer 13

Adv:
Decision making, responsibility and workload can be shared
Partners can bring different skills and experiences
Finance can be raised more easily
Disadv:
Unlimited liability
Arguments can occur with decision making
If partners come or go, the original partnership must be dissolved and a new one set up

Question 14

Ltd facts - owned by and run by

Answer 14

Owned by shareholders (minimum of 2), run by a board of directors appointed by shareholders

Question 15

Ltd advantages and disadvantages (3 adv, 4 disadv)

Answer 15

Adv:
More capital as more investment
Limited liability for shareholders
Owner retains more control compared to a plc with stocks only being sold to friends/family
Disadv:
Must be registered with registrar of companies - high set up cost
Disagreement between shareholders
Growth may be limited as max shareholders is 50
No privacy as financial information is publicly accessible

Question 16

PLC facts - owned by, run by and size

Answer 16

Owned by shareholders, run by board of directors and are large companies.

Question 17

PLC advantages and disadvantages (3 adv, 4 disadv)

Answer 17

Adv:
Limited liability for shareholders
Shares can be sold on the stock exchange to raise capital quickly
PLCs often dominate the market
Disadv:
Must publish annual accounts which can be expensive
Large amount of legislation is required to set up - expensive
PLCs can grow quickly and uncontrollably making them difficult to manage effectively
High start-up capital - £50,000

Question 18

Franchise facts - franchiser, franchisee

Answer 18

Franchiser - sells the right to use a business idea in a particular location
Franchisee - buys the right to copy a business format from a franchiser.

Question 19

Franchiser advantages and disadvantages (2 each)

Answer 19

Adv:
Quick way to enter geographical markets
They receive a percentage of all the franchisee’s profits every year (royalties)

Disadv:
Rely on the franchisee to maintain a good image and reputation. Can affect the entire business.
Only a share of profits is received rather than all of them

Question 20

Franchisee advantages and disadvantages (2 each)

Answer 20

Adv:
Well known, already established brand. Reduces failure chance.
Can benefit from new ideas from all franchisees

Disadv:
Royalties have to be paid so not all profits are kept
May not be able to use own initiative
Reputation relies on other franchisees

Question 21

Multinational facts - PLCs, branches, head office, sales outlets, production facilities.

Answer 21

Many large PLCs operate as MNCs. MNCs have branches called ‘subsidiaries’ in more than one country. Head office is based in the ‘home country’. Countries for sales outlets are called ‘host countries’. Production facilities are set up in more than one host country.

Question 22

MNC advantages and disadvantages (7 adv, 4 disadv)

Answer 22

Adv:
Skilled labour is more available
Labour can be cheaper
Legislation in other countries may be more relaxed
Corporation tax may be lower
Disadv:
Legislation may be too strict and expensive
The local currency may be weak
There may be a lack of infrastructure
Products may be unpopular in other cultures

Question 23

Host country advantages and disadvantages (2 adv, 4 disadv)

Answer 23

Adv:
Increased jobs available
Improves economy

Disadv: