Worksheet WBA1: Types of business

Transcription

1 Worksheet WBA1: Types of business Worksheet WBA1.2: Setting up a partnership Business Activity: WBA1 Types of business Scenario Liza Cream has proved to be a success in Elizabeth s town and she would like to open more ice-cream parlours in other towns nearby. Elizabeth does not have enough money to do this herself, although her initial stake is now worth $40,000, and she has approached her friends (Martha, a marketing executive, and Andreas, the accountant) to become partners in her business. Martha and Andreas want to know whether it is a good idea to become partners in the business. If they are satisfied with the explanations, they will agree to invest a total of $20,000 each in the business and give up their jobs to work alongside Elizabeth. Explain the advantages and disadvantages to Martha and Andreas of becoming partners in Elizabeth s business. IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 1/1

2 Worksheet WBA1: Types of business Worksheet WBA1.5: Setting up franchises Business Activity: WBA1 Types of business Scenario Liza Cream plc have set an overall aim of opening ice-cream parlours in every town nationwide. The icecream parlours have been very popular and the directors of Liza Cream plc have decided to expand abroad. The directors realise this is possible, but it will be very expensive to achieve. Martha, the Marketing Director, has brought up the concept of franchising the name of Liza Cream, which will speed up expansion plans abroad and keep the costs to the company to a minimum. The ice-cream parlours are advertised widely on television and have a well-known logo of a polar bear. The ice-cream sold is recognised as being a creamy quality-tasting and naturally-produced ice-cream. No other ice-creams have achieved the recognition of quality ice-cream like Liza Cream plc in the annual Rosemary Ice-Cream Production Awards. a) Explain what franchising involves. b) Explain the difference between a franchisor and a franchisee. c) What are the advantages and disadvantages to Liza Cream plc of franchising the business? d) Why might someone want to become a franchisee of Liza Cream plc? IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 1/2

3 Business Activity: WBA1 Types of business e) What are the benefits and the drawbacks of becoming a franchisee? f) Why would a franchisee be more likely to obtain a bank loan than a sole trader? Task 2 List at least six examples of franchises in your area. IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 2/2

4 Worksheet WBA2: Size and growth of businesses Worksheet WBA2.1: Primary, secondary, tertiary sectors Key information The primary sector of industry extracts and uses the natural resources of the earth. The secondary sector of industry manufactures goods using the raw materials provided by the primary sector. The tertiary sector of industry provides services to consumers and the other sectors of industry. Place the following types of occupation into the relevant columns of the table below. Fire-fighter Police officer Teacher Solicitor House builder Dentist Electrician Farmer Car salesperson Mechanic Production worker Packer Fruit picker Coal miner Cattle herder Tax inspector News reader Television presenter Gold pourer Soldier Baker Crocodile farmer Ship builder Politician Primary Secondary Tertiary IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 1/2

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6 Worksheet WBA2: Size and growth of businesses Worksheet WBA2.2: Comparing the size of businesses Key information Ways to define the size of businesses By the number of employees This is a simple way of defining the size of a business. However, some businesses use production methods that employ very few people, but which produce high output levels (e.g. automated factories). These firms are called capital intensive firms they use a great deal of capital equipment to produce their output. By value of output and sales This method is often used to compare businesses within the same industry, but it does not necessarily give a clear indication of the number of employees, since, for example, a firm employing few people might sell several very expensive items a year. By size of profit This is the least accurate way of comparing the size of firms because profit depends not just on size but on efficiency and managerial skill; very large businesses can make very low profits if they are badly managed. By capital employed Capital employed is the total amount of capital invested into the business. As a measure of size, it can be misleading because a company employing many workers may still not seem large by this definition if it uses labour-intensive methods of production, i.e. with little capital equipment and low output levels. Choose six different businesses and try to find the following information for each business: the number of employees the value of output and sales (turnover) net profit (operating profit) capital employed. Task 2 Using this information, rank the businesses in order of size for each of the criteria listed above. Draw up a table to present your findings. Task 3 Look at the table you have just drawn up. Are the businesses always in the same order of size for each of the criteria listed? If not, suggest reasons. Task 4 Why is it important that there should be more than one way of comparing the companies chosen to assess their success, size, profitability, efficiency, etc.? IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 1/1

7 Worksheet WBA2: Size and growth of businesses Worksheet WBA2.3: Internal and external growth Key information The growth of a business is an important incentive for the owners of that business. The larger the business, the more likely it is that the owners will earn larger profits and own more assets. The same is true for shareholders, especially if it means extra profits and a higher price for the shares. Businesses can grow by internal means, through an increase in sales, output, profit and number of employees. Businesses can also grow by external means. Several firms join together to form a single, larger organisation in order to widen their product bases, save on costs (economies of scale) and produce more competitively priced goods. There are three types of external growth: mergers: when two businesses join together, it is usually called a merger. Mergers tend to be of similar sized businesses, which join together to form a single, larger organisation. take-overs: usually a larger business takes over a smaller business. The business being bought may, or may not, be happy with the offer. acquisitions: this is mainly when a business buys part of another business. Give one recent example of each type of external growth. a) Take-over: b) Acquisition: c) Merger: Key information Within the external modes of growth there are several types of integration. These include: horizontal integration, where two businesses, which make the same products at the same stage in the chain of production (same type of company), join together through a merger or take-over. vertical integration, where two businesses in different stages of the chain of production join together. For example, a newspaper company buying a newsagents (forward vertical integration); a newspaper buying a paper mill (backward vertical integration). conglomerate merger, where two businesses with no common interest merge. Task 2 State which type of integration is taking place in each of these mergers or take-overs: a) Gilbert, the makers of Benson and Walterman Pens, buys the Pinky Pen Company for $285 million. b) Shashe, the water company serving the Northern region, buys a restaurant chain for $22 million. c) Chang s cars (a manufacturer of cars) buys Bhalay s Steel Factory for $396 million. IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 1/2

8 Task 3 Annette Curtain and Drew Drapes have set up a company that produces curtains and drapes for show houses and shops. Although this is a lucrative business, they feel that they could make more money by also producing settee covers and making clothes for certain manufacturers. With this in mind, a smaller firm, which specialises in making clothing (Massey), has let it be known that they are looking to sell their business. a) Which type of ownership does Curtain & Drapes Ltd have? b) Are Curtain & Drapes trying to grow internally or externally? c) What type of growth could this be (take-over, acquisition or merger)? d) What type of integration could this be and why? Massey has decided not to sell, but to join Curtain & Drapes in an amicable agreement, which would involve producing products for different businesses. e) What type of growth occurred when Massey joined with Curtain & Drapes? By 2002, the group decided to buy a cloth factory for a princely sum of $2.5m. f) What type of integration is this, and why? g) What is a conglomerate merger? IGCSE Business Studies CD-ROM John Murray (Publishers) Ltd 2/2