Unit 1 Content only Flashcards
Business Structures
- Sole Trader
- Partnerships
- Private Limited and Public listed company
Evaluate Sole Trader
Advantages:
-Complete Control
- low cost of entry
Disadvantages:
-Unlimited liability
-Difficult to operate if sick
Evaluate Partnerships
Advantages:
* Shared responsibility and workload
* On death of one partner, business can keep going
Disadvantages:
* Unlimited Liability
* Divided loyalty and authority
* Difficulty in finding a suitable partner
Evaluate Companies
Advantages:
* Company tax rate lower than personal income tax rate
* Long life - perpetual succession
Disadvantages:
* Cost of formation
* Double taxation(company and personal)
Business Locations
-Shopping Centres
-reatil shopping strips
-Online Presence
-Home-based businesses
Discuss Shopping centres
Advantages:
* More likely to be successful with no exisisting competitors
* They have parking for several hundred cars, allows for more customers and enables customer convenience.
Disadvantages:
* Leasing a store in a shopping centre
* A business may also need to rely on the centre renewing its lease. If this does not occur, the business will be forced to move elsewhere
Discuss retail shopping strips
Advantages:
* High visibility for passing traffic
* The costs of locating in a retail shopping centre
Disadvantages:
* Limited protection from the weather, which can reduce foot traffic
*Most retail shopping strips suffer from a lack of parking
Discuss Online Presence
Advantages:
* Avoids expenses associated with rent, saving money
* Increased access to new customers
Disadvantages:
* Customers and businesses owners should always be careful to protect personal information
* Costs of planning, designing and maintaining an online presence are significant
Discuss Home-based businesses
Advantages:
*Does not face any substantial expenditure on renting or purchasing premises
* Locating a business at home provides flexibility around when the owner works and therefore reduces commuting time
Disadvantages:
* It can be difficult for the owner to keep work and home life seperate
* The owner may also feel isolated from other people and miss social interaction
Factors affecting choice of business location
- Visiblity
- Cost
- Proximity to customers and suppliers
- Proximity to competitors and complementary businesses
Visibility
A business wanting high visibility would locate in a prime shopping area, such as a shopping centre or main street. Whereas manufacturing businesses, which arrange to transport their goods to various retail outlets do not need a highly visible location to attract customers.
Cost
Leasing or purchasing a central location in a busy shopping centre will be far more expensive than a location with lower levels of passing traffic. The business owner will need to be confident of generating sufficient business to justify the higher cost.
Example - If the business is a cafe or food outlet, passing traffic is a major source of customers, so cutting costs by selecting a less visible location may be counterproductive
Proximity to customers and suppliers
Ideally, all businesses would choose to locate close to customers and suppliers, both for customer convenience and to minimise the costs of transportation from suppliers.
Retail businesses must be convenient for their customers, so shopping centres or shopping strips with off-street parking will be the primary choice for businesses like butchers, florists etc.
- Proximity to customers is generally not an issue for a manufacturing customers. Access to transport networks is more important for the movement of raw materials from suppliers, as well as to allow for distribution of completed goods to retailers
Proximity to competitors and complementary businesses
Competitiors - Being the first to establish a particular type of business in a shopping centre, or otherwise ensuring there are no lcal competitors, is likely to increase the chance of success.
Complementary businesses - The proximity of complementary businesses can assist in bringing customers to a new business. Complementary businesses offer goods or services aimed at the same customers.
Sources of Finance available to establish a business
Internal:
* Self-funding
* Family or friends
* Private investors
* Shares
* Crowd Funding
External:
* Debt finance
* short term borrowing
* long term borrowing