Business Studies Notes

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Business Studies Notes
by Abdullah
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StudyGuide.PK Business Studies O-Level Notes

Page 1

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Business aims and Activities
Private sector aims
The aim of a business in the private sector is to survive by making a profit. This may be a sole trader working alone, like a newsagent, or thousands of shareholders in a large Public Limited Company.

Businesses gain a larger market-share [a percentage of overall sales in an industry] by increasing the sales of their products against competitors. This may involve reducing prices. To win the loyalty of customers and encourage repeat sales [Customers returning to buy the product from the same business], businesses need to be reliable and provide a quality service to their customers.

Private sector activities
The activities of industry can be divided into stages - primary, secondary and tertiary production. These stages form the chain of production and provide consumers with the finished goods. Primary production

This involves acquiring raw materials. For example, metals and coal have to be mined; oil drilled from the ground; rubber tapped from trees; foodstuffs farmed, and fish trawled. This is sometimes known as extractive production.

Secondary production
Is the manufacturing and assembly process. This involves converting raw materials into components, eg making plastics from oil, and assembling the product, eg building houses, bridges and roads. Tertiary production

This refers to the commercial services that support the production and distribution process, eg insurance, transport, advertising, warehousing and retail, teaching and health care.

StudyGuide.PK Business Studies O-Level Notes

Page 2

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Limited companies
All limited companies are incorporated [ firm with separate legal existence], which means they can sue or own assets in their own right. Their owners are not personally liable for the firm's debts their losses are limited to the amount they invested in the business (limited liability). The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.

A public limited company (PLC) can sell its shares on the Stock Market, while a private limited company (Ltd) cannot. Unlike a sole trader or a partnership, the owners of a limited company are not involved in the running of the business, unless they have been elected to the Board of Directors.

Public and Private Limited Companies
In general, both types of company must audit [an independent check no the accounts of the company] their accounts, and have them available for inspection. There are, however, exceptions to this rule for smaller private limited companies. Both types of company must indicate their status in their name, usually by using the abbreviation PLC or Ltd. This lets traders know that their liability is limited and that debts cannot be recovered from the personal funds of the company shareholders.

Private Limited Companies
Advantages

Disadvantages

Easy and inexpensive to set up.
Lack of capital due to no share issue.
Ownership and control are closely connected, eg Board No benefit from economies of scale, e.g. of Directors are usually the main shareholders.
bulk buying, cheaper borrowing.
Small and less bureaucratic than PLCs, eg decisions can
be taken more quickly.

Public Limited Companies
Advantages

Disadvantages

Raise large amount of capital from share issue. Become too large resulting in poor labour relations . Benefit from economies of scale, eg bulk
Conflict of interest between shareholders and the
buying, cheaper borrowing.
Board of Directors.
Possibility of takeover or merger because shares can
Produce goods at lower unit cost.
be bought by anyone.

Sole traders
A sole trader describes any business that is owned and controlled by one person, although they may employ workers, eg a newsagent's...
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