Types of Businesses (Y10, T1.1)

Define an entrepreneur

someone who starts their own business and has all responsibility for risks

Why would someone want to start their own business? List 3 at least

for independence(be their own ”boss”)

need a job

have a passion

want to provide a service(e.g:charity)

have spotted a gap in the market.

Why do businesses have objectives?

to have a clear target and make it easier to analyse business performance

Define a private sector organisation and their aim as such.

that which is owned and managed by an individual. They typically aim to maximize profits (financial objective)

Define a public sector organisation and their aim as such.

that which is owned and managed by the government. Aim to provide essential services (non-financial objective)

Define market share and why businesses want to have a big portion.

the percentage of an industry's sales that a particular company owns. Having a larger market share means to have a greater influence over suppliers and consumers as they’re more dominant in the market, thus make more profit.

Is survival a financial or non-financial objective?

financial

Why would a business change its objectives? List 3 at least

• former objective (like survival) achieved

• market conditions/demand changes

• competitor changes

• performance

• legislation

• internal reasons (e.g: new boss)

• technology development

Define legislation

set of laws (rights and responsibilities to be followed by a business)

stakeholders VS shareholders

stakeholders: those who have an interest in the operation of a business

shareholders: company or person that invests in a business in exchange for a certain amount of the business’ profit (dividend)

define dividend

share of profit paid to shareholders

Public VS Social sector enterprise (what they do and how they get funds)

Public enterprise: owned and controlled by the government to provide public services. Usually get funds from taxation.

Social enterprise: owned by anybody to provide a public services(social goals). Are funded by the profit they make.(profit is reinvested into the business)

Define sole trader

a business owner who runs and manages it alone

Define partnership in business

a business which has 2-20 people running a business

advantages of partnership

• collaborated decision making

• easy to set up

• more capital

disadvantages of partnership

• split profit

• conflict/dispute

• unlimited liability: all equally responsible for business debts

advantages of sole trading

• keep all profits

• decision freedom/flexibility

• control/independence

disadvantages of a sole trader business

• unlimited liability: owner pays incurred debts of business without a restricted value

• long hours

• self provided capital

Define limited liability

the business owner(s) is only financially responsible for business debts up to a certain value (business debts aren’t owner’s debts)

Define unlimited liability

the business owners are personally responsible for business debts without a restricted value (risk of owner losing personal assets)

Define an audit

conduction of an inspection to verify the accuracy of financial requirements being met

Define legal binding

a signage of contract between 2 parties in agreement to certain statememts/rules

Define limited partnership

partners with the right to invest but not manage

Define a deed of partnership

legal document of an agreement of the responsibilities and rights of partners

Define a legal status

the classified identity of a business in the eyes of the law

Define an incorporated business

the legal identity of a company is separate from that of the owner

Define an unincorporated business

the legal identity of a company/business is the same as that of the owner

Define an unlimited/unincorporated company

A company that legally identifies the same with the owner(unincorporated) and the members of the company have unlimited liability (responsible for financial losses up to no restricted amount)

Define a limited/incorporated company

A company that is its own legal entity, separate from that of the owner(incorporated) and the owner(s) have limited liability (the most money they can lose in business debt is the amount they’ve invested)

Name an incorporated business company type

public or private limited company

Name an unincorporated business company type

sole trader, partnership

Private(LTD) VS Public(PLC) Limited Company?

Private Limited Company(LTD): can only accept investments from company members, family, and friends

Public Limited Company(PLC): offers shares to/accepts investment from general public

What has to be done, in terms of documents, to set up an unlimited company?

2 documents have to be sent to the register of companies

What is the benefit of being an unlimited company?

Unlimited companies are not subject to many of the same legal and regulatory requirements as other types of companies, making operation flexible.

Define flotation

shares being openly sold to the public

Describe the ownership, finance source and control of public corporations

• state owned (meaning, by government) and state funded (tax)

• controlled by board directors who are appointed by the government.

Define franchise

a business structure in which the owner of a business(franchisor) grants a license to another person or business(franchisee) to use their business idea

Define franchisor

business which sells rights to use their branding, logo and products (their name) to a franchisee

Define franchisee

business which purchases rights to use a business’(franchise’s) branding, logo and products (their name)

Franchising advantages

• Key decisions already made (suppliers, services, products, uniforms)

• Help and support provided

• Established customer base (less risk of failure)

• National marketing campaigns: can afford, compared to a small business

Franchising disadvantages

• High start-up costs for franchisee

• Lack of control (can’t change intellectual property)

• Profit shared with franchisor

• Brand reputation could be damaged by activities incurred in other branches

Define a multinational business/corporation (MNC)

business that has operations in more than one country

Advantages of an MNC

• access to cheaper supplies and labor

• increase in potential customers

• access to wider range of skills

Disadvantages of an MNC

• exploitation of workers

• more taxes to pay

• potential undercutting by local, higher quality businesses/competitors

define the primary sector

work of extracting raw material

define the secondary sector

work of manufacture/production/assembly of raw materials into products

define the tertiary sector

work of providing services

advantages of e-commerce trading?

• easy to set up

• global customer base

• convenience for customers

• reduced fixed costs (e.g: no physical store, hence no rent)

disadvantages of e-commerce trading?

• shipping costs and times

• customers can’t try before buying (higher likelihood of returns)

• customers can’t pay in cash (card interchange fees)

• customers must have internet

Define globalization and its affects on businesses and economies

spreading business operation to an international scale. Affects business location and imports/exports

Globalization advantages and disadvantages

advantages:

• wider customer base when products sold in other countries

• reduced costs(cheaper raw materials, labor, facilities in other countries)

• supports growth of developing economies (imported products can help developing countries with employability and establishing businesses)

• more revenue and profitability(likelihood of more customers)

  disadvantages:

• lingual and cultural barrier (limited communication and product may not translate well globally)

• possible worker exploitation

• risk of hostile takeover (domination of shareholders)

Define a trade bloc

groups of countries that establish rules for trade between all participating countries.

Define economies of scale

producing more of a product to lower the average cost per item (encourage bulk buying)