Unit 5: Ownership and internal organisation

Question 1

What is a sole-trader?

Answer 1

A business owned by own person.

Question 2

Advantages of being a sole trader?

Answer 2

Easy to set up, no special paper work is required
Usually a small business, less capital is required
Decisions are made quickly
Special services can be offered for the customers
Profits do not have to be shared
Business affairs can be kept private

Question 3

Disadvantages of being a sole trader?

Answer 3

Unlimited liability
Hard to raise the finance
Ill health, holidays may affect the running of the business
Narrow range of skills
Mistakes may occur because there is no one to notice them

Question 4

What is unlimited and limited liability?

Answer 4

Unlimited liability means the sole trader is personally responsible for all the debts of the business. The debts are not limited and might endanger personal possessions.
Limited liability is a legal protection which limits the debts owned by an individual owner of a company to the sum of money they have invested.

Question 5

What are the main features of partnership?

Answer 5

Creating partnership usually involves creating a legal agreement between the partners. There are usually between 2 to 20 partners involved.

Question 6

What are the advantages of being in a partnership business?

Answer 6

More capital available
Risks and responsibilities can be spread
Larger range of skills
Limited liability (some)

Question 7

What are the disadvantages of being in a partnership business?

Answer 7

Disagreements
Unlimited liability (most)
Legal arrangements must be reformed if something happens to a partner

Question 8

What is a company?

Answer 8

To become a company, a business needs to be legally incorporated. The owners of the company are shareholders. A company is protected by limited liabilities.

Question 9

What are the main features of the 2 types of limited companies?

Answer 9

Private companies (Ltd): Shared can only be bought directly from the company with permission. Usually quite a small number of shareholders (may be run by a family). Has access to less capital.
Public companies (Plc):Shares can be bought and sold on a stock exchange, anyone can buy them. Can have a large number of shareholders. Has access to more capital.

Question 10

What is a franchise?

Answer 10

A business based upon a name, logo and trading method of an exiting successful business. To obtain a frachise, franchisee pays an initial fee to the franshisor and agrees to stick to the conditions (License). A royalty is paid based on franchisee’s sales turnover.

Question 11

Joint ventures

Answer 11

A joint venture of formed when two independent businesses set up a new enterprise in which they jointly own a stake.

Question 12

What are multinational companies?

Answer 12

Multinational companies are companies that have head quarters in one country but produce and sell its products in others.

Question 13

What are the advantages of being a multinational company

Answer 13

Use of natural resources in many countries
Making use of labour force
Opportunity to have a global market
Creating a wide range of skilled employment.

Question 14

What are the disadvantages of being a multinational company?

Answer 14

Oil, gas and chemicals from factories lead to pollution
Local environments are damaged
Creates losses for smaller business
Takes profits from the domestic economies.

Question 15

What is an organisation chart?

Answer 15

It’s a chart that shows the roles of people in an organisation and their relationship.

Question 16

Tall and flat organisations

Answer 16

Tall organisations allow easier control, but have too many levels of management. making is difficult to run. Flat organisations, managers delegate responsibility to subordinates, therefore managers have to have more trust in their subordinates.

Question 17

What do managers have to do? PLOC

Answer 17

Plan = Set goals and objectives
Lead = Motivate the workers
Organise = Co-odinate resources
C= Control = Make decisions and review progress

Question 18

The shareholders system

Answer 18

The shareholders vote for a board of directors. Every year there s a Annual General Meeting (AGM) in order for shareholders to meet and make decisions.

Question 19

What are the common communication problems?

Answer 19

Language (International)
Emotional state (Misinterpret due to lack of focus)
Communication method (Mail not sent, Phone call broke off)
Cultural differences (Different interpretations of the meanings)

Question 20

How to solve communication failure

Answer 20

Make the employees aware of the importance of communication. Also make them familiar with the best ways to communicate.

Question 21

Types of internal communication

Answer 21

Formal written: Memos (memorandums), reports, fax.
Formal verbal: Giving instructions, Meetings, Appraisal Interviews.
Electronic: Intranet, Telephone, Video conferencing

Question 22

Methods of external communication

Answer 22

Personal relationships
Business letters
Email
Company websites
Customer newsletters
Advertisements
Telephone
File Transfers
Electronic data interchange (EDI)
Video conferencing