Understanding Business Flashcards
Capital
the machinery used to produce products or the money used to start up a business
enterprise
the person who combines all the factors of production together
land
the natural resources used in a business
labour
the human resources that work in a business
Primary sector of industru
industries that extract natural resources from the ground
secondary sector of industry
industries that use primary resources to produce their product
Tertiary sector of industry
industries that provide a service
quaternary sector of industry
industries which provide information using ICT
Stages of of employment development in the UK
- Country is dominated by primary industries
- country is dominated by manufacturing
- service sector becomes the most important
- the quaternary sector is sometimes inculted with the tertiary sector as they are both service sectors
- between them the tertary and the quaternary sectors are the largest part of the UK economy
Private sector
owned by private individuals to make a profit
public sector
owned by the government and the main aim is to break even
third sector
to help others in need
Private limited company
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
Advantages of a private limited company
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
disadvantage of a private limited company
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
Public limited company
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
Advantages of a public limited company
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
Disadvantages of a public limited company
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
Franchise
an agreement where a business sells the rights to other businesses allowing them to sell the products or use the company name
franchisee
the person who buys the rights
franchiser
the company selling the rights
franchiser advantages
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
franchiser disadvanatges
image and reputation depends on the franchisees
franchisee advantages
franchiser will advertise nationally
franchiser carries out administration and training
begin trading with an established name
customers are familliar with the products
franchisee disadvanatges
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
Multinational
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
benefits of MNC’s
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
costs of MNC’S
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
Benefits for host countries
creation of employment
introduction of technology
improved standard of living
Disadvantages for host countries
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
Advantages of a social enterprise
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
disadvantages of a social enterprise
depends heavily on volunteers
paid workers normally are paid a lower wage than those in the private sector
private sector objectives
survival
growth
provide a qualty good/ service
maximise profit
dominate the market
maximise sales
become more socially responsible
improve their reputation
public sector objectives
provide an improved service
break even
make best use of taxes
keep within a budget
be socially responsible
cut costs
Third sector objectives
increase awareness
increase volunteers
open more shops
maximise donations
help people/animals/ protect the environment
Stakeholders definition
an individual or a group of individuals who have an interets or interest in the success or failure of a business
Stakeholder interdependence
a reason why one stakeholder needs another
