1.4 Making the business effective

What is unlimited liability?

When the owner is responsible for the businesses’s debts.

Can potentially lose their personal belongings.

What is limited liability?

When the owners and the business have seperate legal entities.

Owners can only lose money they invested.

Examples of unlimited and limited liability?

Unlimited: sole trader, partnership

Limited: private limited company(Ltd), public limited company(PLC)

What are some types of business ownership for start-ups?

Sole trader

Partnership

Private limited company

Advantages of sole trader?

Makes all of decisions

Quick and easy to set up

Keeps all profit

Financial information is kept private

Disadvantages of sole trader?

Unlimited liability

Harder to raise money to start

Lots of pressure

No one to cover if their ill/takes time off

Advantages of partnerships?

Wider expertise

Share the risk

Easier to raise finance

Disadvantages of partnerships?

Decision by one can affect all

If one partner leaves business no longer exists

Shared profit

May disagree

Advantages of private limited company?

Limited liability

Customers may trust Ltd more

Continues to trade even if shareholders change

Easier to raise finance

Disadvantages of private limited company?

More complex to set up

Shareholders may disagree

Financial information is public

Advantages of running a franchise?

Brand image and relation is already established

Expensive marketing costs are covered by the franchise

Access to tested products

Disadvantages of running a franchise?

Cost of initial investment is high

Owner has little freedom to decisions

Franchisee will have to pay fee or royalty to franchiser

Restrictions on where franchise can set up

Factors that influence a businesses location?

Market- where customer are

Labour- workers

Materials-

Competitors

Transport- docks

What are the 4 natures of a business?

Manufacturing

Exporting

Retailing

Tourism

How does manufacturing influence a businesses location?

Since it may require special resources to be transported into their site and special facilities to remove the waste.

How does exporting influence a businesses location?

Since it may need to access docks, rail or airports to distribute their goods.

How does retailing influence a businesses location?

Since it may need to be located in an area where customers tend to shop.

How does tourism influence a businesses location?

Since it may need to be near popular tourist attractions.

What is the marketing mix?

A marketing tool used so businesses can provide products or services that meet the needs while generating a profit.

What are the 4 P’s?

Product

Place

Promotion

Price

Role of business plan?

To develop a business, giving forecasts of items such as sales, costs and cash flows.

Purpose of business plan?

Convince bank to loan money to business

Provide information about competitors

Identify needs of customers

How does business planning affect risk and reward?

Is reduces risk and increases likelihood of success.