Theme 1 GCSE Business 1.4 Making the Business Effective

Limited Liability

If the business goes bankrupt, the investors only lose the money they have invested in the business.
They are not responsible for paying off the debts.
Companies have this, both ltds and plcs.

Unlimited Liability

If the business goes bankrupt the owners are responsible for paying all the debts. They may have to use their personal assets to pay them eg their house. Sole traders and partnerships have this.

Sole Trader

A business that is owned and run by one person who has unlimited liability

Partnership

A business that is owned and run by 2 or more people, with unlimited liability

Company

A business that is owned by shareholders and run by a board of directors. They raise finance by selling shares and have limited liability. Can either be a private or public.

Private Limited Company

A business that is owned by shareholders and run by a board of directors. It has limited liability and shares are only sold to people they know. (Ltd).

Public Limited Company

A business that is owned by shareholders and run by a board of directors. It has limited liability and shares are sold on the stock exchange to anyone. (Plc).

Franchise

The right given by one business to another to sell their goods or services.

Franchisee

The small business that gets permission to open as a franchise.

Franchisor

The big business that gives businesses the right to sell its products.

Start up fees

The amount a franchisee must pay the franchisor to open a franchise.

Royalties

The amount a franchisee must pay the franchisor every year to open a franchise.

Proximity to market

When businesses locate with consideration to where their customers are.

Proximity to labour

When businesses locate with consideration to where workers are. Generally linked to skilled workers.

Proximity to materials

When businesses locate with consideration to where their raw materials are. More important for bulk reducing products.

Proximity to competitors

When businesses locate with consideration to where their competitors are. More important to those selling 'shopping goods'.

Marketing MIx

A combination of factors that help a business take into account customer needs when selling a product...also called the 4 P's.

Product

All the issues that must be considered when designing a new item for the business eg size, colour, name.

Price

All the issues that must be considered when deciding what to charge for your product eg image.

Promotion

All the issues that must be considered when deciding how to advertise your product to the customers.

Place

All the issues that must be considered when deciding where to sell your product and how to get it to your customers

Differentiation

Making your product or service different from the others in some way such as ingredients, packaging or
design.

Business Plan

A document that outlines how an entrepreneur is going to set up a new business. Includes the idea, target market, financial data etc

Target Market

The group of people you are going to aim your product or service at