1.4

• Limited liability means that the business owner or owners are only responsible for business debts up to the value of their financial investment in the business
• Unlimited liability means that the business owner or owners are personally responsible for all of the debts of the business, no matter what the value.
• Some advantages of sole trading

  • it is quick and easy to set up as a sole trader
  • the business owner will have a lot of control over the business and its money
  • it gives individuals the opportunity to be their own boss and make all the business decisions
  • It has low set-up costs

  Some disadvantages of sole trading

  • it has the risk of unlimited liability
  • it can involve long work hours and stressful conditions
  • there is a high level of responsibility for the owner
  • often the owner performs many different roles in the business
• Some advantages of partnerships

  • they are usually quick and easy to set up
  • there is shared decision-making by the owners
  • there is shared responsibility for debt by the owners

  Some disadvantages of partnerships

  • they can involve long work hours
  • conflict amongst owners can occur
  • there is the risk of unlimited liability
  • one partner may let the others down by not upholding their responsibilities in the business
• Some advantages of a private limited company

  • the owners have limited liability
  • it gives individuals the opportunity to be their own boss
  • any new shareholders need to be invited, which protects the business from outside influence
  • shares in the business can be sold to raise money

  Some disadvantages of a private limited company

  • there is often more paperwork
  • in some instances, other people are able to view the business’s financial information
  • it can be very time consuming to set up
  • the business may require outside professional help to manage its finances
• Some advantages of setting up a franchise

  • the franchisee gets access to free training and marketing
  • the franchisee is part of an established business
  • it can be easier to make money
  • it is lower risk for a new entrepreneur than setting up a new business

  Some disadvantages of setting up a franchise

  • the franchisee has to pay a percentage of its profits to the franchisor. This is known as royalties
  • it can be expensive to set up
  • the franchisee cannot make individual business decisions without consulting the franchisor
  • other franchises can be set up locally, which can cause competition for customers
• Factors influencing business location:

  ● proximity to: market, labour, materials and competitors

  ● nature of the business activity

  ● the impact of the internet on location decisions: e-commerce and/or fixed premises.
• PRODUCT

  A business needs its products to stand out from the products of its competitors so that customers buy from it. To do this, a business creates a unique selling point (or USP )
• Factors that influence price include:

  • competition – a business may need to reduce its prices to compete with other businesses
  • customer opinions – about the product and its worth
  • brand image – some products can have a higher price because customers perceive the business' brand as desirable
  • availability – if a product is in short supply, this can drive up the price as customers are more likely to pay more for something in limited supply (eg a concert ticket)
• Types of distribution include:

  • manufacturer → customer
  • manufacturer → wholesaler → customer
  • manufacturer → wholesaler → retailer → customer
• Place

  Place refers to where the customer is able to purchase the product or service. This can include:

  • a retail store
  • an online store or app
  • directly from the manufacturer
• Promotion is the methods a business uses to create interest in its products and services among its customers and potential customers. The main aim of promotion is to either persuade customers to purchase, or inform about products.

  This includes:

  • TV adverts
  • use of billboards
  • social media activity
  • influencers
  • online video and banner adverts
  • email advertisements
  • sponsorship deals
  • discounts and special offers
  • branding
• Businesses adapt their marketing mix to try to convince customers that their product is better than the products of their competition. The aim of these adaptations is to gain a competitive advantage. They can do this by:

  • offering a product or service that fills a gap in the market
  • offering better sales promotions, such as buy one get one free (BOGOFF), online discount codes or cashback
  • creating a unique selling point (USP)
  • developing relationships with existing customers to make them more likely to buy again
• Some ways businesses adapt to changing consumer needs are:

  • introducing new products, eg releasing smoothies to replace the need for people to eat individual pieces of fruit
  • by changing the selling price of products or bringing out budget products to match the state of the economy - eg during a recession, customers will spend less money and businesses may need to reduce their prices or develop a budget range to encourage customers to continue to purchase
  • opening new retail outlets to provide greater convenience to customers
  • introducing m-commerce and e-commerce to the business to meet customer expectations
• Examples of ways businesses may adapt to advances and trends in technology include:

  • increasing use of e-commerce and m-commerce in businesses
  • use of digital media to promote products and maintain consumer interest
  • changes to a product’s design to incorporate new technologies
  • reduction of prices because of more efficient production methods
  • introduction of more competitive pricing because of easy access to price comparisons across retailers
• The role and importance of a business plan:

  ● to identify:

  • the business idea;
  • business aims and objectives;
  • target market (market research);
  • forecast revenue, cost and profit;
  • cash-flow forecast;
  • sources of finance;
  • location;
  • marketing mix.
• purpose of a business plan

  • minimise risk
  • obtaining finance