Q+E

• Explain one advantage of starting a business as a Private Limited Company:

  • The owners would have limited liability.
  • This means that any debts are the responsibility of the business.
  • Therefore, the personal possessions of the owners will not have to be sold to pay the debts of the business.
• Explain one way the internet may affect where a small business chooses to locate:

  • The business could choose a cheaper location.
  • This is because the business can use e-commerce.
  • As a result, the business may not require a physical retail location.
• Explain one way a small business could become more competitive:

  • A small business could gain an advantage by charging lower prices.
  • This would mean customers are more likely to buy the product because it is cheaper than other products.
  • Therefore, this would attract customers from its competitors as they want to save money.
• Explain one advantage to a small business of meeting its legal obligations:

  • Employees will feel that the business is taking good care of them.
  • Therefore, the business will have a more motivated workforce.
  • This could lead to an increase in productivity.
• Explain one risk for an entrepreneur when starting a new business:

  • An entrepreneur may take a financial risk when starting a business.
  • This is because a new business will need financial investment to start up.
  • If the business fails then the entrepreneur could lose this money.
• Explain one way a small business could add value to a product:

  • A business could add value through developing a USP.
  • This will differentiate the product from its rivals.
  • Therefore, customers will pay extra for the product as they feel the product is better than the competition.
• Explain one disadvantage to a small business of using an overdraft as a source of business finance:

  • Overdrafts can be an expensive source of finance.
  • The bank may charge a high rate of interest for the overdraft facility.
  • This will lead to an increase in costs for the business.
• Explain one impact on a small business of an increase in unemployment:

  • A business could experience a fall in demand as unemployment rises.
  • This is because customers will have less money to spend if they lose their job.
  • This will lead to a reduction in sales for the business.
• Explain one way a small business could reduce its variable costs:

  • One way to reduce variable costs is to find a cheaper supplier.
  • This means a business will pay less for its raw materials.
  • This will lead to a lower cost of production for each unit.
• Explain one advantage to a small business of meeting all employment legislation:

  • Employees will feel that the business is taking care of them.
  • This will increase their levels of motivation.
  • Therefore, productivity could increase in the business.
• Discuss how possible conflicts between owners + employees could affect the profit of a small business:

  • Employees and owners may disagree about working practices in the business.
  • This will lead to lower productivity and therefore increased costs of production within the business.
  • This could lead to lower profits in the business.
  • Employees may put pressure on the owners for higher pay.
  • Increases in wages could lead to employees needing to be paid more.
  • Which could therefore, lower profit margins.
• Explain one disadvantage to a small business of not paying its employees on time:

  • One disadvantage is that the employees will want to leave the business.
  • This means the business may have to find new employees.
  • This may increase the recruitment costs of the business.
• Explain one advantage to a small business from using retained profit as a source of finance.

  • Retained profit is a cheap source of finance.
  • This is because interest is not paid on retained profit.
  • Therefore, the business would not experience an increase in costs.
• Discuss the impact on a small business from adapting existing products to develop new business ideas:

  • Adapting existinf products can take less time and creative input than creating original ideas.
  • New ideas can be brought to market ahead of competitor products.
  • Therefore, provide a competitive advantage to a business.
  • Adapting existing products may not be as innovative as creating original ideas.
  • Less innovative ideas may not fully meet changing customer needs.
  • Therefore, customers may choose a new product from a competitor that has filled a gap in the market.
• Explain one benefit to a small business from having a USP:

  • A USP will give the business a competitive advantage.
  • This would make customers more likely to buy from the business, rather than from competition.
  • This means the business will benefit from increased market share.
• Explain one advantage to a small business of using trade credit as a source of finance:

  • Trade credit will allow a small business to buy now and pay later.
  • This means the business has a chance to sell the goods before it has to pay the supplier.
  • This will improve the cash-flow of the small business.
• Explain one disadvantage of starting a small business as a partnership:

  • There may be disagreements between the partners.
  • This means it will be difficult to make business decisions.
  • This will lead to the busines not being able to meet customer needs.
• Explain one way the marketing mix of a small business may change due to changing consumer needs:

  • A small business may have to make changes to its product.
  • This is because the lifestyle of consumers may require extra features on a product.
  • Therefore, the design of the product may need to change to meet consumer needs.
• Explain one reason why new business ideas come about:

  • A new business idea may come about because consumers want something new.
  • Existing products may not meet consumer needs.
  • This can lead to an entrepreneur spotting a new business opportunity in the market.
• Explain one advantage to a small business of using market mapping:

  • Market mapping will allow a small business to spot a gap in the market.
  • This can lead to the business developing a product/service to help fill this gap.
  • As a result, the small business may capture market share from competition.