Making the business effective

What does limited liability mean?

The business owner or owners are only responsible for business debts up to the value of their financial investment in the business

What does unlimited liability mean?

The business owner or owners are personally responsible for all of the debts of the business, no matter what the value

What does a limited liability business have?

Its own legal identity, meaning the owners are not personally responsible for its debts

What does unlimited liability mean for business owners?

It can have big implications, as the owners are personally responsible for all debts of the business

What is a sole trader?

A business owned and run by one person, though they may have employees

What are some advantages of being a sole trader?

It is quick and easy to set up, the owner has control over the business, the opportunity to be their own boss, and low set-up costs

What are some disadvantages of being a sole trader?

It involves unlimited liability, long work hours, stressful conditions, high responsibility, and performing many roles in the business

What is a partnership?

A type of business with 2 or more owners who agree to run the business together

What is a deed of partnership?

A document outlining the rules of the partnership, such as profit allocation, ownership percentages, roles and responsibilities, and debt responsibilities

What type of tax do owners in a partnership pay?

Income tax on their earnings

What are some advantages of partnerships?

They are quick and easy to set up, there is shared decision-making, and shared responsibility for debt

What are some disadvantages of partnerships?

They can involve long work hours, conflicts amongst owners, and one partner may let others down by not fulfilling responsibilities

What is a private limited company?

A business with limited liability where the owners are shareholders

What is the role of shareholders in a private limited company?

They own shares in the company and must be invited to purchase shares

What type of tax do private limited companies pay?

Corporation tax, which is a tax on the profits of a business

What are some advantages of a private limited company?

Limited liability for owners, opportunity to be your own boss, ability to raise money by selling shares

What are some disadvantages of a private limited company?

More paperwork, some financial information is public, time-consuming to set up, may require professional help to manage finances

What is a franchise?

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

What does a franchise do?

It provides the franchisee with a licence to use its name, products, training, marketing, and equipment

What is a franchisee?

A business that agrees to sell goods or services under the licence of a franchisor

What is a franchisor?

A business that gives the franchisee the right to sell or distribute branded products

What is a royalty payment?

A fee paid by the franchisee to the franchisor, usually a percentage of the franchisee's sales revenue

What are some advantages of setting up a franchise?

Access to free training and marketing, being part of an established business, easier to make money, lower risk than starting a new business

What are some disadvantages of setting up a franchise?

The franchisee must pay royalties to the franchisor, setting up can be expensive, and the franchisee can't make independent business decisions without consulting the franchisor

What does the term "market" refer to?

It refers to a business' customers and consumers

Why is being close to the market important?

It allows businesses to better serve their customers, making their products or services more accessible

What are some location factors businesses consider?

Proximity to labor, proximity to materials, proximity to competitors, infrastructure

Why is proximity to labor important?

Being close to high-quality labor ensures businesses can hire skilled workers

Why is proximity to materials important?

It can save costs, especially for products that require raw materials that are expensive to transport

What are bulk-gaining products?

Products that are larger than the raw materials used to produce them

What are bulk-reducing products?

Products that are smaller than the raw materials used to produce them

Why might a business choose to be located near its competitors?

In some cases, it can help attract more customers, especially in industries where competition leads to customer concentration

Why might a business choose to be located far from its competitors?

Being far from competitors can help reduce direct competition and attract more customers

Why might retail companies prefer certain locations?

They generally want to be close to their customers for convenience and better foot traffic

Do service companies always need to be near their customers?

No, some service companies can be located anywhere, depending on their service model

Why do manufacturing companies often prefer cheaper rent over proximity to customers?

Manufacturers tend to focus on minimizing costs, so cheaper rent becomes a priority over customer location

What is infrastructure?

It refers to the facilities and systems that support everyday economic activities, like transportation networks and utilities

What are the benefits of e-commerce and m-commerce?

Lower costs, flexible working hours, access to a larger market, 24 7 availability, and relatively low-cost marketing and promotion

What is the right marketing mix?

It should work well together, with each element complementing the rest

What is the marketing mix?

It is made up of the four Ps – product, price, place, and promotion

What is the main aim of promotion?

The main aim is to either persuade customers to purchase or inform them about products

What are some methods of promotion?

TV adverts, billboards, social media activity, influencers, online video and banner adverts, email advertisements, sponsorship deals, discounts, special offers, and branding

Why do businesses use a mix of promotion methods?

To increase sales by reaching different customer segments through varied channels

What does the term "competitive environment" refer to?

It refers to the pressure placed on a business by its competitors

What is competitive advantage?

How a business tries to outperform its rivals, such as offering a unique product or better sales promotions

How do businesses adapt their marketing mix to remain competitive?

By adjusting their marketing strategies and tactics to meet customer needs and outperform competition

What are some ways businesses adapt to changing consumer needs?

Introducing new products, changing product pricing, opening new retail outlets, introducing mobile and e-commerce

How do businesses adapt to advances and trends in technology?

By changing product design to incorporate new technologies, reducing prices due to more efficient production, and introducing more competitive pricing

What is a business plan?

A document created by a business or entrepreneur that outlines key details about the business

What are the main sections of a business plan?

Business idea, aims and objectives, target market, revenue forecast, projected costs and profit, cash flow forecast, sources of finance, location, and marketing mix

What does a business plan help an entrepreneur understand?

It helps them gain a full understanding of each element of their business

Why is a business plan important when raising finance?

It provides evidence to banks or investors that the business has a clear strategy and is likely to succeed

What do investors look for in a business plan?

They want assurance that their investment will be safe and that the business will be profitable