• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/46

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

46 Cards in this Set

  • Front
  • Back

Types of business organizations

Sole proprietors


Partnerships


Private companies


Public companies


Multi-nationals


Co-operatives


Public corporation

Sole proprietor

Sole proprietor is a business owned and managed by one person. Sole proprietor is often referred to as the sole trader.

Sole proprietor advantages

Easy to set up


A very personal business (connection with customers)


Full control over business


Receives all profits

Sole proprietor disadvantages

Unlimited liability, lose all his or her possessions to pay off ant business debts


Full responsibility for managing business


Lack capital (banks are unwilling to lend)

Partnership

Partnership is a business owned and managed by at least 2 persons. Owners of partnership are referred to as partners.

Partnership advantages

Easy to set up


Specialisation


Invest new capital


Less working hours


Spreads the risk

Partnership disadvantages

Have to share profits


Less control


Disputes


Limited finances


Unlimited liability

Public limited companies

Public limited is a business owned and managed by at least 2 persons


Public limited companies have plc after their company name


PLC companies have limited liability


Public limited companies raise large amount of finance by selling shares


Can sell shares to general public through stock market

Private limited companies

Private limited is a business owned and managed by at least 2 persons


Owners are referred to as shareholders


Private companies have limited liability


Private companies raise finance by issuing shareCannot sell share without consent of the other shareholders

Private limited companies advantages

Selling shares raise capital


Limited liability


Shareholders have no management responsibilities


Company has separate legal identity from owners (company taken to court, not owners)

Private limited companies disadvantages

Disclose financial information in annual accounts


Cannot sell their shares publicly


Management diseconomies - becoming to large


Vulnerable to takeover

Shareholders or owners

People who buy shares

Multi-nationals

A company which produces or provides services in more than one country The advantages and disadvantages they provide to the country where they operate are:


– Advantages: employment, tax revenue, quality products


– Disadvantages: harm to domestic industry

Multinational advantages

Reach more consumers and sell far more


Avoid trade barriers


Minimize transport costs


Minimize wage costs


Raise significant amounts of capital


Economies of scale

Multinational economic impacts

Provide jobs for local workers


Direct inward investment (increase investment in new business premises)


Bring new knowledge and skills to a country


Pay taxes boosting government expenditure

Multinational problems

May exploit workers in low wage economies by paying less


Natural resources can be exploited, environment destroyed


Profits may be switched between countries to avoid paying taxes


May use power to obtain generous subsidies/tax advantages


Local competition may be forced out



Co-operatives

Cooperatives are owned and managed by its members persons.


Cooperative operate for the welfare of its members.


Owners are referred to as the members.


Different co-operatives have different objectives .Can sell shares to general public

Co-operatives advantages

Popular with workers because everyone has equal say


Workers receive profits they make

Co-operatives disadvantages

May find it difficult to raise money, must rely on borrowing from banks


Badly run, no entrepreneurial ability

Franchising

Franchisor - a business who sells the right to another business to operate a franchise.

Franchising advantages

Tried and tested market place


Easier to raise money from bank


Given right equipment to do well


Receives training


National advertising paid for


Tried and tested business model

Franchising disadvantages

Cost to buy franchise


Have to pay a percentage of your revenue to business you have brought


Less flexible

Public sector organisations

Publicly owned organisations that provide goods and services to the public at national levels. Owned by government. Provide essential services.

Effects of privatization

When public corporations are sold to the private sector it is called privatisation.


– Business efficiency (low cost, high quality)



What determines the demand for factors of production

– Consumer (entrepreneurs produce the products which consumerswant)


– Productivity


– Cost

Costs

Total costs– Total expense of producing an output or a product (Fixed costs + Variable costs)


Average cost– Total cost divided by output

Profit Maximisation

Firms strive to achieve maximum profits.They do this by keeping the difference between total revenue and total cost highest and in a positive figure.

Specialisation

Specialization is when a nation or individual concentrates its productive efforts on producing a limited variety of goods.

Industrial sectors

Primary industries: production or extraction of natural resources


Secondary industries: manufacturing natural resources into finished goods


Tertiary industries: distributing and selling manufactured goods.

Public and Private sectors

Public sector: goods and services provided by the government


Private sector: business activity conducted by an individual

Productivity

Measures the amount of output produced from a given amount of input.

Pricing and output policies in perfect competition

Large number of buyers and sellers


The firms charge the same price as the competition does, they do not increase or decrease price


They seek to achieve competitive advantage


Firms respond quickly to the changes in consumer demands

Pricing and output policies in monopoly

One seller supplying the product


Monopoly can charge the price which is acceptable to the consumers


It may restrict the supply to increase the demand and earn abnormal profits


Monopoly does not respond to the consumers’ demands because it knows it will sell the product anyway

Advantages of monopoly

Lower costs


Save money, by not producing wasteful duplication


Spend money on research


Offer lower price to the consumer

Disadvantages of monopoly

Inefficiency in production


Does not cater to the demands of consumersMay exploit the consumers as it is the only business providing the product


May charge higher price by decreasing the supply

Main reasons for different sizes of firms

Size of market


Capital


Organization


Barriers to enter

Integration

Integration is when two businesses join each other

Types of integration

Horizontal integration


Vertical integration


– Backward vertical integration


– Forward vertical integration

Horizontal integration

Horizontal integration happens when a business acquires or joins a business which is providing the same product at the same stage of production

Vertical Integration

Backward vertical integration happens when a business acquires or joins one of its suppliers




Forward vertical integration happens when a business acquires or joins one of its retailer or distributor

Economies of scale

When long term costs decrease as output increases

Internal economies of scale

Arises from an increase of output from the firm itself

External economies of scale

Occurs within an industry, all competitors benefit

Internal economies of scale types

Managerial - can have specialist managers


Technical - bigger factories


Buying - buying in bulk is cheaper


Marketing - advertise for large amount of units


Financial - can borrow money cheaply and easily


Networking - more people using something, more efficient

Diseconomies of scale

When long term costs increase as output increase

Internal diseconomies of scale

Managerial - too inefficient


Technical - not enough raw material