GCSE Business 1.4 Making the Business Effective

Limited Liability

Where the investors only lose the money they have invested in the business, if it goes bankrupt. Companies have this

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

Private Limited Company

A business that is owned by shareholders and run by a board of directors. It has limited liability.

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'.

Bulk gaining products

A product that gets bigger during the production process eg cars and so it's sensible to locate near the market.

Bulk reducing products

A product that gets smaller during the production process eg paper and so it's sensible to locate near the raw materials

Shopping Good

An item that customers consider before buying eg cars, electrical.
They may browse in several shops before purchasing.

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.

Pricing Strategies

The main approach a business takes to setting a price. This often based on the market positioning of a product.

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.

Customer Perceptions

How customers feel about your product, what standard they believe it to be

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

SMART Objectives

Objectives that are Specific, Measurable, Achievable, Realistic and Time-bound. They means they can be monitored and it's easy to see if you're on track.

Target Market

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