Understanding Business

Question 1

Capital

Answer 1

the machinery used to produce products or the money used to start up a business

Question 2

enterprise

Answer 2

the person who combines all the factors of production together

Question 3

land

Answer 3

the natural resources used in a business

Question 4

labour

Answer 4

the human resources that work in a business

Question 5

Primary sector of industru

Answer 5

industries that extract natural resources from the ground

Question 6

secondary sector of industry

Answer 6

industries that use primary resources to produce their product

Question 7

Tertiary sector of industry

Answer 7

industries that provide a service

Question 8

quaternary sector of industry

Answer 8

industries which provide information using ICT

Question 9

Stages of of employment development in the UK

Answer 9

1. Country is dominated by primary industries
2. country is dominated by manufacturing
3. service sector becomes the most important
4. the quaternary sector is sometimes inculted with the tertiary sector as they are both service sectors
5. between them the tertary and the quaternary sectors are the largest part of the UK economy

Question 10

Private sector

Answer 10

owned by private individuals to make a profit

Question 11

public sector

Answer 11

owned by the government and the main aim is to break even

Question 12

third sector

Answer 12

to help others in need

Question 13

Private limited company

Answer 13

owned by a minimum of one shareholder who are family and friends

board of dircetors make the decisions

identified by having Ltd after the business name

Question 14

Advantages of a private limited company

Answer 14

Shareholders have limited liability

easier to raise finance as new shares can be sold

no limit to number of shareholders

control of the company is not lost

large amount of experience can be gained from shareholders and directors

Question 15

disadvantage of a private limited company

Answer 15

set up costs are expensive and time consuming

accounts have to be published

profits are shared amongst a larger amount of people

shares cannot be sold to the public- difficult to raise finance

meet the requirments of the companies act

Question 16

Public limited company

Answer 16

Owned by a minimum of 2 shareholders with a capital of £50000

decisions are made by a board of directors

shareholders vote at an AGM

Question 17

Advantages of a public limited company

Answer 17

shareholders have limited liability

can raise vast amounts of finance by selling shares on the stock market

Plc’s dominate the market

shares can be sold on the stock market

due to size they benefit from economies of scale

Question 18

Disadvantages of a public limited company

Answer 18

set up costs are high

you have no control over who buys the shares- risk of takeover

prospectuses have to be produced

must abide by the companies act

must publish annual accounts

separation of ownership and control

Question 19

Franchise

Answer 19

an agreement where a business sells the rights to other businesses allowing them to sell the products or use the company name

Question 20

franchisee

Answer 20

the person who buys the rights

Question 21

franchiser

Answer 21

the company selling the rights

Question 22

franchiser advantages

Answer 22

allows market share to increase without much effort

has the power to withdraw the franchise if rules and conditions are not being met

finance for the business is provided by the franchisee

risks are shared betwene franchisee and franchiser

% of profits are achieved

Question 23

franchiser disadvanatges

Answer 23

image and reputation depends on the franchisees

Question 24

franchisee advantages

Answer 24

franchiser will advertise nationally

franchiser carries out administration and training

begin trading with an established name

customers are familliar with the products

Question 25

franchisee disadvanatges

Answer 25

franchisees reputation and profitability depend on the franchiser and the performance of other franchisees strict rules may be set by the franchiser and the may pose restrictions a % of profits has to be paid to the franchiser the franchiser has the power to withdraw the contract

Question 26

Multinational

Answer 26

a company that owns production service facilities outside the country in which it is based have budgets larger than some countries normally public limited companies often gain a bad reputation for child labour and poor working conditions for staff

Question 27

benefits of MNC's

Answer 27

an org may be given grants from govts to locate in that country and the grants will not require to be paid back orgs will become larger which may result in them being safer from takeovers call allow orgs to increase their sales/profits take advanatge of economies of scale and reduce unit costs of products employ cheaper staff may helt avoid legal restrictions in the orgs own country whihc could allow them to sell/ produce their products abroad could allow for tax advantages which will increase profitability avoidance of ariffs/quotas imprsed by governemnts

Question 28

costs of MNC'S

Answer 28

legislation may be different in other countries which may require the organisation to alter its product/ service legislation may exist on how a product/service is marketed and may result in some marketing techinques having to be chnaged cultural differences will mean that organisation have to be sensitive to countries cultures different languages will exist and this may mean that organisation have to employ specialist linguists to work with the organistaion

Question 29

Benefits for host countries

Answer 29

creation of employment introduction of technology improved standard of living

Question 30

Disadvantages for host countries

Answer 30

exploitation of workers/resources profits go back to MNC of origin MNC's become too powerful and exert a strong influence on governemnts social responsibility- damage to environment- use up non renewable energy low costs of MNC can force local businesses out of business increased competition for local companies

Question 31

Advantages of a social enterprise

Answer 31

help to solve social and enviro issues whilst making a profit media attention for the social issue provides publicity for your business attracts customers who support the issue can sell shares to raise finance if they are a limited company grants are available specifically to social enterprise businesses

Question 32

disadvantages of a social enterprise

Answer 32

depends heavily on volunteers paid workers normally are paid a lower wage than those in the private sector

Question 33

private sector objectives

Answer 33

survival growth provide a qualty good/ service maximise profit dominate the market maximise sales become more socially responsible improve their reputation

Question 34

public sector objectives

Answer 34

provide an improved service break even make best use of taxes keep within a budget be socially responsible cut costs

Question 35

Third sector objectives

Answer 35

increase awareness increase volunteers open more shops maximise donations help people/animals/ protect the environment

Question 36

Stakeholders definition

Answer 36

an individual or a group of individuals who have an interets or interest in the success or failure of a business

Question 37

Stakeholder interdependence

Answer 37

a reason why one stakeholder needs another