Understanding Business

• What is a need?


  These are essential to human survivial.
• What is a want?

  Luxuries that make life more comfortable.
• What does durable mean?

  A good which can be used repeatedly
• What does non-durable mean?

  A good which is normally used once.
• What is value added?


  Increase in worth of a product or service at each stage of production or distribution.
• What is a lifecycle of buying goods?

  Customers have needs and wants --> Businesses identify these wants --> Businesses produce goods and services to make profits --> Customers buy and consume them.
• What are the factors of production?

  Land, Labor, Capital and enterprise.
• What is land?


  The natural resources used by the business.
• What is labor?


  The workforce of the business e.g. employees
• What is Capital?


  The man made resources/ the capital e.g. tools or money
• What is enterprise?


  This is when the entrepreneur will use land, labor, and capital to achieve a business idea, producing goods or services.
• What are 2 sources of help and advice for a business?

  Enterprise agency- e.g. Business gateway - Free business advice and support, training courses and help with preparing a business plan.

  Chamber of Commerce - To help a business network (make contact with each other for support and advice).
• What are the sectors of industry?

  Primary, Secondary and Tertiary
• What is the Primary sector?

  Anything that extracts a natural good e.g. fishermen
• What is the Secondary industry?

  A business that is involved with making things e.g. factories, shipbuilding and construction
• What is the tertiary industry?

  A business that does not produce goods but provides a service e.g. Hotels or window cleaners
• What is primary production?

  Extraction
• What is secondary production?

  Manufacture and Assembly
• What is tertiary production?


  Transport, Advertising, Warehousing and Selling
• What are the sectors of economy?

  Public, Private and Third
• What is the Private Sector and its aims?

  Owned by individual shareholders. e.g. Partnership, Sole trader, Private Limited Company (Ltd), Public Limited Companies (Plc) and Franchises.

  Aims- Maximize profits, fill a gap in the market and expand the business.
• What is the Public Sector and its aims?

  Run by government and funded by taxes e.g. Police, Schools, Hospitals, Army and Fire brigade.

  Aims- To provide a high quality service and to make good use of taxpayers money.
• What is the Third Sector and its aims?

  Not for profit e.g. Charities, Voluntary organizations and Social Enterprises.

  Aims- To provide support for worthy causes, promote awareness of "good causes" and to provide the best service possible.
• What is a sole trader?


  A business which is owned and managed by one person.
• What is advantages of being a sole trader?

  Easy and cheap to set up, Owner keeps all of the profit and makes all of the decisions.
• What are the disadvantages of being a sole trader?

  Unlimited liability, Long work hours, few holidays and sole responsibility.
• What is a partnership?

  A business owned by up to 2-20 people.
• What are the advantages of a partnership?

  Workload can be shared, more money can be invested, Partners specialize in different areas.
• What are the disadvantages of a partnership?

  Unlimited liability, Arguments may occur, Profits must be shared.
• What is unlimited liability?


  When the owners personal assets can be sold/taken to pay off the debt of a business e.g. a car
• What is a sleeping partner?

  Someone who only puts money into a business and does not have a say on how it is run. However a sleeping partner has limited liability.
• What are features of a Private Limited Company?

  A company who shares are owned privately and are not available to the public.

  Minimum of one shareholder.

  Controlled by a board of directors.

  Financed by selling shares.
• What are some advantages of being a Private limited company (Ltd)?

  Limited Liability, More finance can be raised from share holders and lenders and control of the company is not lost to outsiders.
• What are disadvantages of being a Private Limited Company (Ltd)?

  Profits are shared (dividends), Must abide by the companies act and shares cannot be sold to the general public.
• What is a Franchiser?

  The company or person that permits others to use their franchisers name, publicity, material, decor, uniforms e.c.t
• What is a franchisee?

  The person who has obtained the licenses from the franchiser allowing them to use the franchisers name ect.
• What are advantages of a franchise?

  Provides a reliable revenue for the franchisee.

  Increases market share without investing heavily for franchiser.

  Advertising costs covered for franchisee.
• What are the disadvantages of a franchise?

  Profits shared among more people for franchisee.

  Hard for franchiser to manage stores.

  Decisions mostly decided for franchisee.
• What is the Public Sector made up of?

  Central government (Westminster), Local government (Council e.g. Stirling) and Businesses that are owned by the governement (e.g. BBC)
• What are some features of The Public Sector?

  Funded by taxes, Owned by government and run by MP's/Elected officials.