UNIT 1. Chapter 2 (Part 2): Business structure

Question 1

Def. Cooperatives

Answer 1

Businesses that are owned and run jointly by its members with mutual assistance, with shared profits, workload, responsibilities and decision making.

Question 2

Advantages of Cooperatives

Answer 2

• Purchasing economy of scale (buying in bulk)
• Working together to solve problems and make decisions
• Good motivation in between members.

Question 3

Def. Franchise

Answer 3

A businesses that uses the name, logo and trading systems of an existing successful business. To obtain a franchise, franchisee pays an initial fee to the franchisor and agrees to stick to the license. A royalty is paid based on franchisee’s sales turnover.

Question 4

Advantages of Franchise (3)

Answer 4

• Fewer chances of failing
• Advice and training offered by franchisor
• Supplies obtained from established suppliers.

Question 5

Disadvantages of a Franchise

Answer 5

• A royalty has to be paid
• Initial franchise license may be expensive
• Strict rules over pricing and layout of the outlet reduce owner’s control over his/her business.

Question 6

Disadvantages of Cooperatives

Answer 6

• Poor management skills
• Capital shortage
• Slow decision making

Question 7

Def. Joint ventures

Answer 7

A business formed when two independent businesses set up a new enterprise in which they each own a stake.

Question 8

Advantages of Joint ventures (3)

Answer 8

• Costs and risks are shared
• Different companies may have different strengths and experience which may fit well together
• They can make use of each other’s markets in different countries.

Question 9

Disadvantages of Joint ventures (2)

Answer 9

• Style of management might not blend well

- Disagreements may occur