1.4 Making the business effective flashcards

What are limited and unlimited liability?

limited:

A businesses has its own legal identity.

Owners are not personally responsible for debts.

unlimited:

A business does not have its own legal identity.

Owners are personally responsible for debts.

What is a sole trader? + advantages & disadvantages

A business owned by one person.

They may have employees.

• Cheap, quick, and easy to set up.

• The owner has complete control.

• They have unlimited liability.

• It can be stressful as they do many things alone.

What is a partnership? + advantages & disadvantages

There are two to twenty owners.

Quick and easy to set up.

Shared responsibility.

Conflict between owners can occur.

Some have unlimited liability.

What is a private limited company? + advantages & disadvantages

Any company with ‘Ltd’ next to their name.

Owners are known as shareholders.

The owners have limited liability - protects personal assets

Shares can be sold privately to raise money.

Any new shareholders must be invited - protects business from outside influence

Sensitive financial information isn’t public

It is time consuming and involves more paperwork.

Some financial information can be public: competitors and others can view them

Higher set-up and running costs

What is a public limited company? + advantages & disadvantages

Any company with ‘Plc’ next to their name.

Owners are known as shareholders.

The owners have limited liability.

Shares can be sold publicly on the stock market - can raise significant funds

Public listing builds credibility & boosts brand image

It is time consuming and involves more paperwork.

People can buy the majority of shares and take over.

What are franchises? + advantages & disadvantages

Franchisees are businesses who operates under a franchisor.

Already established brand, so lower risk - customers want to buy a well-known brand.

Training and marketing is supplied by the franchisor.

Franchisees pay royalties to the franchisor.

It can be expensive to set up.

Less control.

What impact has technology had on business location?

• Workers can be replaced by machines.

• Workers can be remote or “work from home”.

• E-commerce means companies can sell online.

• Many new businesses launch as just e-commerce.

What factors influence location decisions?

• Proximity to raw materials - convenience & costs

• Proximity to labour

• Proximity to market

• Proximity to Competition

• Costs e.g. some areas of land cost more than others.

• Government assistance e.g. grants based on location.

• Transport e.g. warehouses locating next to motorways.

What is the marketing mix? (the four P’s)

• Price: need to be competitive, but still make a profit: what are customers willing to pay?

• Product: how it is designed, specific materials for a specific purpose, will it satisfy a customer need?

• Place

• Promotion: how can they promote it?

How are the four Ps affected by no competition?

• Product

high sales as there is no other option, leading to no innovation.

• Price

can be set high, resulting in high profits.

• Promotion

no competition to stand out from, so little need to spend on promotion.

• Place

focus on what is convenient for the business as customers can adapt for the business.

How can the four Ps adapt to consumer needs?

• Introducing new products.

• Changing the selling price of products.

• Opening new retail outlets.

• Introducing e-commerce.

What is the impact of technology on the four Ps?

• E-commerce is a new place for businesses to sell. - easier to reach UK-wide and international customers

• Digital marketing is a new method of promotion.

• New products are possible due to technology.

• Prices can be lower due to more efficient production.

• Online surveys and polls can be used to get feedback from customers about products as well as their wants and needs, which can then be used to create new products.

• customers can easily compare prices online: products must be priced competitively

What is a business plan?

• Business idea

• SMART objectives

• Market research

• Revenue

• Costs and profit

• Cash flow

• Sources of finance

• Location

• Marketing mix

What is the purpose of having a business plan?

• Justifies the business idea.

• Outlines the marketing mix.

• Investors would want to see it.

• Helps set appropriate objectives.

• Minimises risk of business failure.

• Shows the financial viability of the idea.

• Businesses can measure their future performance.

• Outlines the business’s target market through research.

• Banks want to see it before approving loans.

How a franchise can use the marketing mix

• Promotion: the franchisor can advertise nationally

• Price: a well-known brand can charge more for the products offered

• Place: the franchisor can help set up the new business in a good location & can help with research & architects, making setting up easier

• Product: the product will already be well-known because of all the national advertising

Royalty meaning

regular payments made to the franchisor by the franchise

Identifying resources

A good business plan will identify the resources needed to run effectively

• human resources: staff needed

• equipment

• raw materials

• technology

• vehicles