Category: Business Studies

The function of an economy Basic economic problem: scarcity and choice An economy is a framework or a system that attempts t tackle and solve economic problem. What to produce? What will be made and what will be sacrificed How to produce? Which production method For whom to produce? Target consumers In what quantities to…

Public cooperations These are the businesses in the public sector, nationalized, completely owned by the government. They’re operated by board of directors Advantages Managed with social objective rather than profit Loss making services might still be kept operation if there is social benfit Finances raised by the government Disadvantages Lack of profit leads to inefficiency…

Holding companies A company that owns and controls a number of separate businesses yet does not unite them into one unified company. They have diversified interests. They are separate and independent of each other for major decisions but there will always be  the possibility of centralized control from the directors over crucial issues such as…

Joint ventures When two businesses agree to work closely together on a project and create separate business to do so. Advantages Costs and risk are shared Different strengths Major markets in different countries Disadvantages Style of management and culture: may not blend in Error and mistakes may lead to blaming Business failure of one can…

Franchises Legal contract between two firms that allows one of them to use the logo, name and marketing methods of the other. The franchisee can then decide what legal structure to adopt Requires intial fee and contract Limitation on area of operation Design of premises Supplies purchased An annual payment to the franchiser based upon…

Cooperatives Common in agriculture and retailing All members can contribute to the running of the business, sharing workload, responsibilities and decision making. Advantages Buying in bulk Working together to solve problems and take decisions Good motivation of all members Disadvantages Poor management skills Capital shortage cause no sales of share to the non member general…

Setting up a company A memorandum of association: name of company, company objectives, location of register company, address of head office, maximum share capital for which the company seeks authorization and declared aims of the business, statement that the company has limited liability. Articles of association: internal rules of company eg power of director,rights and…

Public limited company These are the most common form of legal organization for really large businesses. They have all the advantages of a private company plus the right to advertise their shares for sale and have them quoted in the stock exchange. They can raise very large sums of public issues of shares. This flexibility…

Private limited companies Usually shares are owned by original sole trader. Shareholders may only sell their shares with the agreement of the other shareholders. Restrictions can be made on sales of shares, not allowed to advertise its share. Smaller than public limited companies. Advantages Limited liability Continuity Separate legal personality Original owner can take control…

Partnerships Agreements between two or more people to carry on a business togethe for profit. Groups must be chosen carefully. Deed of partnership should be made: agreement on issues such as voting rights, distribution of profits, management. Mostly common in law and accounting. Advantages Specialization in different areas Shared decision making Additional capital, more finance…