Please enable JavaScript.

Coggle requires JavaScript to display documents.

LO1 - Different types of businesses and their objectives. - Coggle Diagram

- - - - e.g. coal mining, potato farms & oil drilling.
  - - - e.g. car manufacturing, cardboard box factory, frozen food factory.
  - - - e.g. restaurants, Music shops, hairdressers
- - - - They have unlimited liability and are personally responsible for debts and income tax on their earnings.
        
        e.g. photographers, electricians, hairdressers.
        
        Advantages: quick and easy to set up, owner has a lot of control over business, they can make their own decisions, low set up costs
        
        Disadvantages: Risks with unlimited liability, long work hours, high responsibility, owner is various roles.
  - - - Some have limited liability
        
        Eg. doctor, lawyer
        
        Advantages: quick and easy to set up, share decision making, shared responsibly for debt.
        
        Disadvantages: long work hours, conflict amongst owners, risk of unlimited liability, one part may let down the other.
  - - - Advantages: owners have limited liability, be their own boss, new shareholders are invited so protects business from any tom, dick and harry joining, shares can be sold to raise money.
        
        Disadvantages: more paperwork, cause they register with companies house, anyone can view financial information, time consuming to set up, may require professional help.
        
        Companies house - they register companies, records are public and their is a fee to register.
  - - - Limited liability, plc's are subject to costly regulations.
        
        For businesses that need to raise large amounts of capital e.g. Tesco plc, needs to build new stores etc.
        
        Advantages: shareholders benefit from limited liability, shares can be bought, sold + transferred easy, shares sold raise capital, plc has a high profile so easy to get new customers and good suppliers.
        
        Disadvantages: everyone can see the accounts - even competitors, decision making process is long, legal process is long and costly, issuing shares can be costly, original owners wont have full control over decision making.
  - - - E.g. large organisations that provide a vital service or product to the population - may not exist without government support.
        
        E.g. BBC or Ordnance Survey.
        
        Advantages: Some businesses/industries are vital - government makes sure they survive, some would be inefficient to have more that 1 product/service - e.g. royal mint, Government can support struggling businesses to stay alive:)
        
        Disadvantages: large businesses may be inefficient cause of diseconomies of scale and higher prices, businesses that don't have shareholders might not prioritise cost control, businesses can be used for political gain e.g. unemployment, more jobs are created but this would increase costs and inefficiency.
  - - - Companies of all sizes, have social/community benefits at heart ♥, familiar structure and running of a limited company.
        
        Advantages: Company has its own legal identity, reputation may be enhanced.
        
        Disadvantages: Articles of Association and Memorandum of Association must be completed and sent to the Register of Companies, Tax must be paid from profits.
  - - - Groups with social, cultural, political, environmental and welfare aim and objectives.
        
        Advantages: Same as sole traders, quick and easy to set up, can make quick impact, same as limited company.
        
        Disadvantages: Same as sole traders, depends on volunteers - can be difficult to maintain support, same as limited company, set up is expensive and regulated by companies house and charity commission, annual accounts must be provided, large charities use aggressive commercial tactics to raise money.
- - - - Range from small local business e.g. electrician to multinational corporations e.g. Walmart
        
        Examples: Next plc, Iceland Ltd
  - - - Public corporations owned in the public sector: Royal Mint.
        
        Financed via sources such as taxation, council tax payments, license fees (BBC), selling products and services (Ordnance survey)
  - - - Registered charities: NSPCC + Oxfam
        
        Self-help groups: Alcoholics Anonymous
        
        Community groups: Grow wild
- - - - Means that in a limited company the business not the owner would be sued if there was damage to a customers property.
  - - - E.g. A sole trader or partnership will mean a higher personal financial risk due to unlimited liability whereas becoming a limited company will lower risk due to separate legal identity.
        
        The owners personal situation may influence this choice as an individual without commitments such as kids or a mortgage could be more likely to take the risk of becoming a sole trader etc.
  - - - But becoming public limited company is costly, this requires a merchant bank to facilitate the process which charges a commission fee + the costs of producing a prospectus and advertising the share sale. Each year accounts must be produced and published e.g. expensive glossy brochure.
        
        A business must consider whether this financial outlay is outweighed by the benefits of becoming a public limited company as well as whether there are funds with in the business to finance the process.
  - - - A sole trader will have sole responsibility, in a partnership decisions are discussed among the partners.
        
        in a limited company the shareholders control the business, in a public limited company the shareholders elect a board of directors to make decisions on their behalf but the shareholders are the owners.
  - - - This may influence the type of ownership chosen depending on the timescale in which the owners wishes to commence trading.
        
        Once the business is trading, there are different requirements for different forms of ownership e.g. a plc must produce and publish audited accounts and submit them to Companies house, whereas a sole trader simply completes an income tax self-assessment form.
- - - - Break even - covering costs; in the short term a business can survive as long as costs are covered, even if profit is not being made.
        
        Increase revenue - a business that is moving forward they should aim to increase revenue e.g. additional products/services, expanding stores & getting customers from competitors as long as costs are kept under control - increase in revenue = increase in profits.
        
        Reduce costs - in a competitive market, businesses must control or reduce their cost
        
        Benefits: option to pass this cost saving on to customers via lower prices, May improve competitiveness or the ability to earn higher profits.
        
        Make a profit - most businesses aim to make a profit, there for aim and objectives relating to profits will provide the business with funds for investments as well as providing remuneration.
        
        If a profit is not made a business is unlikely to carry on trading.
  - - - Reasons for growth; wanting a greater market share, wanting expansion e.g. opening more stores, increasing provision e,g, a bus company buying more buses, benefiting from economies of scale, spreading risk by diversification, a larger business may find it easier to obtain external finance such as bank loans
        
        Economies of scale - cost advantages gained when the size of a business increases e.g. suppliers may offer discounts to those placing larger orders.
  - - - E.g. producing good-quality products, providing excellent customer service and acting in a ethical and socially responsible way to provide a business with a unique selling point (USP), makes the business stand out.
  - - - Chance of survival will be influenced by factors e.g. finance available within the business, economy & number of competitors in the market.
        
        Many businesses don't survive a recession.
  - - - A business that's enterprising likely takes risks to peruse an idea, these types of businesses will identify gaps on the market, remain competitive and use experience to produce products or provide a service that customers find new and exciting.