Unit 1 Understanding Business

Question 1

What is the secondary sector?

-sectors of the industry

Answer 1

Manufacturing and assembly process.
E.G making plastics from oil
It also involves assembling the product
E.G building houses, bridges and roads

Question 2

What is the Tertiary sector?

-sectors of he industry

Answer 2

Commercial services that support the production and distribution process
E.G insurance, transport, advertising, warehousing and other services such as teaching as health care

Question 3

What is the Quaternary sector?

-Sectors of the industry

Answer 3

This constitutes of those industries providing information services
E.G Computing, ICT consultancy and R&D
This sector sometimes included with the tertiary sector. They both provide services

Question 4

What is the private the sector of the economy?

Answer 4

This consists of businesses that aim primarily to maximise profits and it includes all profit making businesses from the John bells to Apple

Question 5

What is the public sector of the economy?

Answer 5

This consists of the government-owned organisation and agencies which aim to provide services for society.
NHS, education and the police

Question 6

What is a primary sector?

-sectors of industry

Answer 6

Raw materials.
E.G metals and coals have to be mined, oil drilled from the ground and rubber tapped from tress.
This is sometimes known as extractive production.

Question 7

What is the third sector of the economy?

Answer 7

This consists of organisations that have been set up to provide goods or services to benefit others. This sector includes charities, voluntary groups, social enterprises and co-operatives.

Question 8

What are private limited companies

LTD

Answer 8

They must have a minimum of 2 shareholders

Managed by a board of directors

Now allowed to sell shares to the public

Question 9

Who are private limited companies financed by

Answer 9

Issuing shares

Borrowing loans

Applying for government grants
Using retains profits from previous years

Question 10

Name two advantages of operating a private limited company

Answer 10

They can only lose money they’ve invested - limited liability

More finance can be raised from shareholders

Question 11

Name two disadvantages of operating a private limited company

Answer 11

Profits are shared among shareholders - dividend

More complicated to setup than a sole trader as it involves a legal process

Question 12

What is the public limited companies

-PLC

Answer 12

Large companies - must have a minimum of 50,000 pounds

shares can be bought or should on the stock exchange

managed by a board of directors

Question 13

Who are public limited companies financed by?

Answer 13

Selling shares on the stock market

borrowing loans

applying for government grants

Question 14

Name two advantages of operating public limited company

Answer 14

Raise large amounts of capital by selling shares on the stock market

shares can be given to employees to dominate the market

Question 15

Name two disadvantages of operating public limited company

Answer 15

the firm can be taken over if a rival is able to acquire enough shares

not all decisions are made by the owners.

Question 16

What are franchises?

Answer 16

A business run by one firm (franchisee) under the name of another. (franchiser)

Question 17

Name two advantages to the franchiser

Answer 17

It is a quick way for the franchiser to increase market share

The franchiser will earn a percentage of the franchisee’s profits every year.

Question 18

Name two disadvantages of being a franchiser

Answer 18

The reputation of the hole franchise is dependant upon the success of the individual franchisees

The share of the profit earned could be less than if it were run directly

Question 19

Name two advantages of being a franchisee

Answer 19

The franchisee can set up a business using n established name, reducing risk

Likely to benefit from national marketing campaigns (TV ads)

Question 20

What is a tall structure?

Answer 20

It positions within the organisation, the different levels of authority and responsibility.
Least at the bottom and most at the top.

Question 21

Name two advantages of a tall structure ?

Answer 21

Each member of staff knows their role and who to report to

Narrow span on control
-managers have more time for planning, supervision and decision making

Question 22

Name two disadvantages of a tall structure

Answer 22

Communications takes time to flow through the levels, which slows down decision making

the organisation can be slow to react to changes in the market

Question 23

What is a flat structure?

Answer 23

Similar to a tall structure. However, a flat structure has fewer layers of managements and a shorter chain of command.
It has a wide span of control

Question 24

Name two advantages of a flat structure

Answer 24

Information can be communicated quickly between levels

The organisation can react quickly to external factors (PESTEC), they are more dynamic.

Question 25

Name two disadvantages of a flat structure

Answer 25

Fewer levels mean fewer opportunities for promotion so quality staff may leave to progress their career somewhere else

Question 26

What is delayering?

Answer 26

Removing one or more levels of management to move from a tall to a flatter structure.

Question 27

Name two advantages of delayering

Answer 27

Money is saved on paying out the salaries of the management levels that were removed.

The organisation can be more responsive to changes in the market as there are fewer levels.

Question 28

Name two disadvantages of delayering

Answer 28

There are fewer promotion opportunities for staff

redundancy payments could be costly in the short term

Question 29

What is centralised management

Answer 29

Decision making and control is kept at the top level of a centralised organisation

All decisions are make by senior management /owners in head office.

Question 30

Name two advantages of centralised management

Answer 30

There is a low risk of important information leaking from branches or department.

A high degree of corporate indentitiy and strategy exists as decisions are made for the whole organisation.

Question 31

Name two disadvantages of centralised management

Answer 31

less responisbilty is given to subordinates which can result in demotivated staff

decisions will not reflect the needs of local markets

Question 32

What is de-centralised management?

Answer 32

Decisions making and control is delegated to the individual branches.
Best retail chains where there is an understanding of local market.

Question 33

Name two advantages of de-centralised management?

Answer 33

The business reacts quickly to external factors (PESTEC)

Decisions are made quickly as local management don’t need to consult head office before implementing decisions.

Question 34

Name two disadvantages o de-centralised management?

Answer 34

The organisations can lose an overall corporate image if each department/ branch is operating differntly

Local branches could start to compete with each other i they are allowed to make key decisions which could be bad for business.

Question 35

What is a matrix structure?

Answer 35

It involves being arranged into temporary project teams to carry out a particular task. The teas are made uo on employees from various department bringing their expertise.

Question 36

Name two advantages of matrix structure

Answer 36

Each team has a specialised staff from each of the functional areas.

complex problems can be solved.

Question 37

Name two disadvantages of matrix structure

Answer 37

Many managers across all projects will mean high wage costs.

Duplication of resources across administration and equipment.

Question 38

What is a entrepreneurial structure?

Answer 38

This is used primarily by smaller organisations.

usually there is one key decision maker, the owner.

Question 39

Name two advantages of entrepreneurial structure

Answer 39

Decisions are made quickly as there is little consultation.

Staff know who they need to report to.

Question 40

Name two disadvantages of entrepreneurial structure

Answer 40

This structure creates a heavy workload for the main decision maker.

if the owner is unavailable, key decisions will not be made.