business theme 1.4

What are the factors affecting a business’s choice of location?

Proximity to: market, labour, materials, competitors.

Price

Impact of internet on location decisions - e-commerce/ fixed premises

Nature of business activity

How does the internet affect a business’s decision of location?

E-commerce- businesses can locate further from their market and closer to raw materials

Fixed premises- some businesses don’t need shops or offices due to e-commerce/ working from home

What is limited liability?

When a business and business owner have a separate legal identity. Limits responsibility for flaw for the owner. Protects personal assets

What is unlimited liability?

An owner/s are responsible for the business’s debts. Personal assets are not protected.

State a feature, advantage and disadvantage of a sole trader.

Feature- one owner → work alone

Advantage- get to choose and make decisions in their opinion → limits disagreements

Disadvantage- unlimited liability → have to take full responsibility due to the business and owner having the same legal identity

State a feature, advantage and disadvantage of a partnership

Feature- 2 or more owners

Advantage- multiple skill sets → more experience

Disadvantage- unlimited liability

State a feature, advantage and disadvantage of a private limited company

Feature- registered at companies house

Advantage- limited liability

Disadvantage- accounts published → can be downloaded and viewed

What is a franchise?

A business that gives the right to another person or business to sell goods or services using its name.

What are the advantages of franchising?

Brand recognition → helps sales

Can be easier to get loans → seen as less risky

Franchiser might help franchisee → training, management

Quick way to expand → through franchisees

What are the disadvantages of franchising?

Less freedom → limited by franchisors rules

Extra costs from payments to franchisor

Profits have to be shared

What is the marketing mix?

The elements a business needs to consider when launching a new product in order to promote and advertise to its customers.

List the 4 factors of the marketing mix?

Price

Product

Promotion

Place

Why must a product/service be priced correctly?

To give a correct image of quality, affordable for customer, all whilst allowing profit to be made. Too low price → image of low quality. Too high price → not worth a customers money.

Why must the product be right for customers?

Needs to meet customers wants and needs. This attracts customers as it suits their preferences.

Why must the place be right for customers?

Needs to allow them to access the product and provide the right image for the business/ brand.

Why must the promotion be right for customers?

It must inform customers of product / service and build a brand image.

What is a business plan?

A document used by a business to organise and plan resources in order to best exploit an idea. This could be for a new start-up business or a new idea for an existing business.

What should business plans contain?

Business name

Brief description of plan

Forecast : revenue, costs profit.

Location

Marketing

Cash flow forecast

Budgets

Target market/ customers

Aims and objectives

What is the purpose of planning business activity?

The role and importance of business plan in minimising risk and obtaining finance