Types Of Business
What is a Social enterprise?
A business with the objective of meeting a social need.
Identify why businesses should analyse their performance.
Helps them make better decisions based on data. By identifying what works and what doesn’t, companies can improve their strengths and fix weaknesses. This process also allows them to set clear goals and track progress.
Define what is meant by the term ‘stakeholder’.
people and groups that interact in some way with the business and have a vested interest (or stake) in its activities.
Explain why there are potential conflicts between the interests of stakeholders.
Conflicts between stakeholder interests occur because different groups have varying priorities. Owners want to maximize profits, while employees seek higher wages and job security. Customers may demand lower prices and better quality, and local communities often want businesses to invest in sustainability.
Explain the difference between a sole trader and a partnership.
Sole trader - Business owned and operated by one person, who is the individual responsible for all aspects of the business, both financially and legally
Partnership- Owned by two or more people. Maximum of 20 partners.
Differentiate between effectiveness and efficiency.
Effectiveness refers to the ability to achieve desired outcomes or goals. It measures whether a business is doing the right things to meet its objectives.
Efficiency, on the other hand, measures how well resources are used to achieve those outcomes. It focuses on doing things in the best possible way, often with minimal waste or effort.
State the type of interest a stakeholder will have in a business.
Financial stakeholders, like investors and shareholders, care about profitability and returns. Employees focus on job security, wages, and benefits. Customers are interested in product quality, pricing, and service. Local communities look at the business's impact on the economy and environment.
List some business activities that could involve corporate social responsibility considerations.
Business activities involving corporate social responsibility (CSR) focus on ethical practices. This includes sustainable sourcing, supporting local charities, and recycling initiatives. Ensuring fair wages for employees and making safe, eco-friendly products are also key.
Identify three advantages and three disadvantages of a sole trader
Advantages -Low cost of entry, Simplest form, Complete control, Less costly to operate, No partner disputes, Owner’s right to keep all profits, Less government regulation, Profit is taxed as personal income
Disadvantages - Personal (unlimited) liability for business debts, End of business when owner dies, Difficult to operate if sick, Need to carry all losses, Burden of management, Need to perform wide variety of tasks, Difficulty in raising finance for expansion
Outline the difference between an objective and a strategy.
An objective is a specific goal you want to achieve, like increasing sales by 20% in a year. It’s clear and measurable.
A strategy is the plan to reach that goal. It explains how you will achieve the objective, such as launching a digital marketing campaign on social media.
Identify two likely interests of customers as stakeholders of a business.
Customers want high-quality products or services that meet their needs and expectations.
Customers are interested in fair and competitive pricing, seeking value for their money.
Identify in what ways the interests of stakeholders conflict.
Stakeholder interests often conflict, creating challenges for businesses. Owners may prioritize profits, while employees seek higher wages. Customers want quality, but managers might cut costs, affecting standards.
Explain what limited liability is and how it affects shareholders in a company.
shareholders in a company will not be held personally responsible for the debts of that business.
If the company goes bankrupt, their personal assets are safe. This limited risk encourages more people to invest, allows them to diversify their investments without fearing total loss, but they can still lose their invested money if the company performs poorly.
Explain the importance of business objectives.
Business objectives are crucial because they set clear goals for the company, guiding efforts and tracking progress. They motivate employees by showing how their work contributes to success and help allocate resources effectively. Overall, clear objectives align the team and drive long-term success.
Explain how the interests of owners and managers may differ.
Managers are concerned about job security and may make choices that ensure their positions, even if those decisions don't fully align with the owners' financial goals.
Owners often prefer conservative strategies to protect their investments, while managers might be more open to taking risks for potential growth and innovation. This difference in risk tolerance can lead to conflicts in decision-making.
Explain the key differences between a private limited company and a public listed company.
Private Limited Company - Owned by a small group of people (like family or friends) and not available to the general public, Shares can only be sold privately and usually need approval from current shareholders. Fewer rules and less financial reporting, allowing more privacy. Raises money through private investments or loans, which can limit growth. Generally smaller and often focused on local markets. Owners often run the company themselves. Harder for owners to sell their shares.
Public Listed Company- Owned by the public, with shares that anyone can buy or sell on a stock exchange. Share Availability, Shares are freely traded on the stock market. Must follow strict regulations and regularly disclose financial information. Can raise a lot of money by selling shares to the public. Usually larger and operates on a bigger scale, often internationally. Management is usually separate from ownership, with professional managers in charge. Shareholders can easily sell their shares on the stock market.
Distinguish between the objectives ‘to make a profit’ and ‘to increase market share’.
The objective "to make a profit" focuses on earning money after expenses are paid. It looks at the company’s financial health, with success measured by profit margins and net income.
The objective "to increase market share" aims to capture a larger share of sales in a specific market. It emphasizes growth and competition, with success measured by changes in market share percentage and sales compared to competitors.
Explain why the general community may have an interest in local businesses
The community values local businesses because they create jobs and generate tax revenue that supports essential services. Additionally, these businesses reflect the community's character, promote sustainability, and often engage in local activities, strengthening community ties.