Q1] Define these terms : BS C2 [ Classification of Business ]

Primary Sector ; This sector extracts and uses the natural resources of Earth to produce raw materials used by other
businesses e:g Farming, Fishing & Forestry.
Secondary Sector ; This sector of industry manufactures goods using the raw materials provided by the primary sector.
e:g Construction, Car manufacturing & Computer assembly.
Tertiary Sector ; This sector provides services to both consumers & other businesses. E:g Banking, Retail, Insurance
De-industrialization ; It occurs when there is a decline in the importance of the secondary (manufacturing) sector in a country.
Mixed Economy ; This economy has both a private sector and a public sector
Planned Economy / Public sector ; Businesses and organizations are mostly owned & controlled by the state/government.
Free Market Economy / Private Sector ; Businesses and organizations are mostly owned and controlled by privately.

Q2] Which sector of industry is more important to an economy - Primary / Secondary or Tertiary ?

-More primary sectors in an economy means country is under developed or is in developing phase
-More Secondary sectors means an economy is developing as their is industrialization.
-More Tertiary sector indicates that a country is Developed and is having growth stage.

All sectors are important but countries should try to move towards tertiary sector and secondary sectors because it shows that
the country has made progress in terms of economic development and more income can be generated in these two sectors as
compared to Primary.
Furthermore, the countries which has a higher proportion of workers in each category or which has much output level in
comparison to eachother would be considered the most important in each case.

Q3] Do you think that in developing economies the relative importance of the secondary sector has increased as compared to
primary sector in recent years?

Ans : In many countries , Secondary sector has become more important than primary sector in developing economies due to
several reasons;
- Industrialization : If country wants to develop, it has to shift from primary to secondary which is done by introducing more
Manufacturers & Factories for production, thus the country encourages industrialization.
- Urbanization : As more people want to live in urban cities , the population in rural areas decrease by time and so no or little
farming, and other primary activities such as Extraction of raw materials is done. This results in more Work &
progress in secondary sector
- Technology & Infrastructure : Developing economies have improved their technological capabilities and infrastructure to
support industrial and manufacturing activities.
Q4] Why wages of workers in primary sector may fall ?
a) Country shifting to Sec/tertiary sector
b) Many people available to work in Primary sector so cheap labour can be bought
c) Seasonal variations. as seasons change no need for farming so people's wages may fall.
d) Government changes policies. Reduces wages for primary sectors.

Q5] A private sector b.s produce g/s more efficiently than a public sector business. Discuss

Private vs Public
a) Profit maximizing a) Services free of cost to consumers
b) More competition b) as government is in control , so no competition
c) More redundancy rate c) less / low redundancy (The rate at which employees leave job)

Reading Answer Only ;

The word efficiency in general means ‘ to generate highest possible output levels in a most minimal use of resources or cost.

The public sectors usually has a low redundancy rate and labor turnover as their objective is not to cut the
costs but rather to provide for goods/services having low or no prices such as free hospitals , education , railways etc. Due to
such aims, employees are always motivated as they don’t have fear of being removed. And therefore they are more efficient in
providing services.
However Private sectors aim towards profit - maximization which makes them more efficient as they have
to deploy resources at low costs and having high quality (cheap but qualitative labor, cheap but more output generating
machines in factories) as they cannot afford higher costs, thus leading to a improved output than that we see in public sectors.
On the other hand, the government is almost a monopoly so no/less competition. However, there is a higher
competition in the private sectors as there are more suppliers in such industries and each is willing to lead the market by
providing best possible goods/services in least possible costs ultimately making them more efficient.

Therefore , due to reasons above explained in favor of private sectors, I agree to disagree with the minister’s statement.
 Q1] What are Benefits and Drawbacks of being an Entrepreneur ? : BS C3 [Enterprise, B.s Growth & Size]

Benefits : Independence in decision making Drawbacks : Risk of failure

Profits may be higher than salary Capital may become obstacle
Personal skills and personal abilities can be used Loss of employment benefits

Q2] What are the qualities of a successful entrepreneur ?

a) Hardworking : Works longer hours to make b.s successful

b) Risk Taker : Takes risk and tries new products / New ideas / new markets / new environment
c) Optimistic : Thinks positively and better for the future
d) Independent : Doesnot relies upon orders from others , works with freedom
e) Responsible : entrepreneur is always responsible for daily business decisions and also plays a vital role in management.

Q3] What is a business plan ? What are its contents ? What are advantages of business plans / what are they used for ?

Ans : A business plan is a document containing the business objectives and important details about the operations, finance
and owners of the new business. It's contents are Products, Cashflows, Business Costs, Location and other resources.
they are used for
- Careful planning as it reduces risks :
A business plan is a clear picture of 'what to do' & 'how to do' . The answer to every question is mentioned in it. Therefore, the
owners become fully aware of what decisions to make and they refer to their business plans for thinking ahead about the future.

- Gives a clear set of goals to the business

As the goals & objectives are also mentioned in it. The workers / managers and the owner are very clear as to which path is the
most suitable to achieve their business goals, so the business plan becomes a good source for it.

Helps to get loans/Funds

- Helps to gain finance from different sources eg Banks . The banks and finance institutions are interested if the business would
be able to return or not, so they refer to business plan to understand the past and present situation of the businesses.

Q4] Why and how governments support new businesses ?

Ans : WHY ?
a) More businesses create more employment opportunites
b) It increases competition
c) It increases total national output of the country
d) New small b.s may become large and even multinational in the future
HOW ?
a) Providing low cost land & buildings to new b.s [Location support]
b) Interest free loans to small businesses (Financial Support)
c) Grants to b.s for training of employees (Financial Support)
d) Offering various b.s ideas and support programmes
Q5] How can size of businesses be measured ?

Ans : Size of a b.s can be measured in a number of ways . Some of the most common are explained

a) NUMBER OF EMPLOYEES
Higher the number of employees , larger the b.s is considered. However, this method is not suitable to capital-intensive
businesses as these capital intensive b.s employ very small amount of manual labour, mostly production is based on manual /
automatic machines.

b) VALUE OF OUTPUT
Output means ' production ' . Businesses can be compared by the total output generated especially manufacturing industries.
This method is however only suitable for inter - industry comparision. Also , all goods having high value might not even be sold,
which indicates that b.s is not large due to low sales.

c) VALUE OF SALES
Mostly businesses in retail sector are compared by this method. However businesses selling different products cannot be
compared with eachother through this method. A Sweets selling stall would of course have more sales than luxury perfumes.

d) VALUE OF CAPITAL EMPLOYED

This means the value of total capital invested into the business. Such method of measuring size is not suitable to
labour-intensive businesses as they buy very less machines and thus they have have much investments in machinary. Even
though they have high number of employees but they will be potrayed as small by this method.
Q6] Why the owners may want to expand the business ?

Ans : Owners may want to expand because;

1) More profits ;
There is a probability to earn more if a business is expanded which will increase the total profit as the business has now grown.
This desire to increase the profits from 2 or 3 digits to millions or even billions may lead to owners making expansion decision.

2) Higher market share

As the business expands and grows, it creates more room for itself in the market. Such business will have higher share in the
market as they will be selling more. This will increase their brand image and will help them increase their prices in the future as
their product becomes well known.

3) Less Costs / Economies of scale

Large businesses often have the advantage as they can easily keep the cost of purchasing low. These businesses buy from
suppliers at a very low rate as they are buying in huge quantity. So they are given discounts on such huge raw materials or
other purchases for production. It is a great benefit for large manufacturers.

4) More benefit for managers / workers

The workers including managers would earn more salary if the business runs on a larger scale and growth will also increase
their experience as well as skills. This high earning might be motivating for them and beneficial for Owners as they will now
see quality work of their employees due to motivation.

Q7] Define these ;

Internal growth : Occurs when a business expands its existing operations. eg Hotel owner opens other hotels, Steel
manufacturers open up another steel manufacturer in other city.
External growth : Occurs when a business takes over or merges with another business. It is often called integration as one
business is integrated into another one. Bs of coal miners merges with Coal supplying firm.
Takeover : A takeover or acquisition is when one business buys out the owners of another business, which then becomes
part of the ‘predator’ business (the business which has taken it over). A car manufacturing firm takes over tire
manufacturing business.
Merger : Merger is when the owners of two businesses agree to join their businesses together to make one business. A car
manufacturer merges with Tire manufacturer.

Horizontal Integration : It is when one business merges with or takes over another one in the same industry at the same
stage of production.
Vertical integration : It is when one business merges with or takes over another one in the same industry but at a different
stage of production. Vertical integration can be forward or backward.
Conglomerate integration : It is when one business merges with or takes over a business in a completely different industry.
This is also known as diversification

Q8] What are the benefits of integration ? Identify and explain in each case .

Horizontal Integration Conglomerate

+ Competitors reduced
+ Higher market share
+ Less costs due to economies of scale.
Forward Vertical Integration (Later stage of production)
+ Assured outlet available for sales.
+ Profit increases as now all sales of the integrated
business are absorbed by our business.
+ Retailer can be stopped from selling competitor's
products.
Backward Vertical Integration (Earlier stage of production)
+ Supply is assured. no delay / important components
availed to us without any hindrance
+ Profit increases as now all sales of the integrated
business are absorbed in by the business.
+ Supplier could be prevented to supply to other
competitors.
+ Risk spreaded
: The business will have more activities of different kind.
Thus it would be diversify its risks among them all. The
losses from some would be adjusted from the profits of
other integrated.
+ More ideas
: As the b.s would now be using its time and skils for
different industries, it would have the opportunity to
generate more ideas and apply them and earn more
profits.
 Q9] Why some businesses remain small and donot grow ?

Owners Objectives : The main goal is to play small and not to run a large business. Some owners want to have control of
minimal staff and to have no stress and worries therefore they donot go for the big run.

Market size : The total no.of customers might be small. When there are limited customers of a certain service or a good, the
businesses to produce such goods/service remain small

Type of Industry : Businesses offering personal services often remain small as their industry is of such type. For eg
hairdressing, plumbers, car repairs etc are mostly small.

Q10] Why businesses fail / Reasons for failing a buiness ?

- Poor management : Lack of experience leading to bad decisions by the managers

- No plan for a change : The business donot have any clue as how to be in same position if the environement changes,
such as if new tech appears and the competitor uses it. Business fails when such circumstances occur.

- Over Expansion : A business often fails when it bites more than it can chew. It goes down because it becomes impossible
to manage and run it. Resultantly it has to shut down due to inefficiency and ineffectiveness.

- Poor Financial management : Shortage of cash, failure to plan and forecast cashflows results in liquidity issues for a
business and the lenders start knocking the doors which eventually results in shutdown.

Q11 ] What problems can a business face if it expands its operations ?

-Mismanagement ( Difficult to control and handle )

-Financial shortage can occur
-Poor communication
-Integration might be difficult ( Opposite managing styles / rules etc )
Q1] Define terms : BS C4 [Types of B.s Org]

• Sole traders : It is a business owned by one person.

• Partnerships : A business in which 2 or more persons jointly own and run a business.
• Private limited companies : In which there are 1 or more than 1 shareholders( Owners ) but shares can only be sold to
friends, family & public (not to the general public). These are incorporated businesses.
• Public limited companies : Where there are 2 or more than 2 shareholders & shares can be sold to general public through
stock exchange. It is also called incorporated business.
• Franchises : A franchise is a business based upon the use of the brand names, promotional logos and trading methods n
of an existing successful business. The franchisee buys the licence to operate this business from the franchisor.
• Joint ventures : Where two or more businesses start a new projecttogether, sharing capital, risks and profits.
• Public corporation : Business in the public sector that is owned and controlled by the state (government).
• Unincorporated business : One that does not have a separate legal identity. Sole traders and partnerships are
unincorporated businesses.
• Incorporated businesses : Companies that have separate legal status from their owners.
• Shareholders : The owners of a limited company. They buy shares which represent part-ownership of the company.

Q2] Sole trader / Partnership / Private Limited co. / Public Limited CO

a) Features b) Advantages c) Disadvantages

SOLE TRADER PARTNERSHIP

Features
• Single owner
• The business ends with owners leave / death
• Unlimited liability - Liability of owner is not limited
to the amount invested, If the business faces loss
the owner would have to pay back losses
from his personal wealth / personal assets
Advantages
+ He is his own boss. Free from consulting others.
Can make his own decisions without others approval
+Less legalities involved while starting
+As he is only boss so he keeps all of the profits to
himself. No need to share
+More privacy and secrecy as compared to companies
Disadvantages
-- Unlimited liability-Liability of owner is not limited
to the amount invested, If the business faces loss
the owners would have to pay back losses
from their personal wealth / personal assets
--The business is not seperate legal entity , if the owner
dies the business ends.
-- WIll have to bear losses all on his own
-- No one to discuss with different complex matters.
--Owner have to arrange all capital by himself while
starting or in case of growth / expansion.
Features
• More than 1 less than 20 own and run
• Unlimited liability - Liability of owners is not limited
to the amount invested, If the business faces loss
the owners would have to pay back losses
from their personal wealth / personal assets
• Can start partnership through verbal or written agreement
Written agreement is called partnership agreement.
Advantages
+ More owners , more ideas and creativity. Helps in decision
making when complex situations arise
+ Capital would now become easier to generate in case of
startup or expansion.
+Any losses incurred would now be shared by both.
+The responsibilities would be shared b/w both or more.
Disadvantages
-- Conflicts between partners while making important
decisions
-- Unlimited liability -Liability of owners is not limited
to the amount invested, If the business faces loss
the owners would have to pay back losses
from their personal wealth / personal assets
--The business is not seperate legal entity. If one of the
owners die the business ends.
--If one of the partners is inefficient / dishonest, others will
face difficulties and suffer loss of money

PRIVATE LIMITED Co.

Benefits :
Drawbacks
+Shares can be sold to larger no.of people. Now, more
-- Legal implications- Company will have to go through
capital can be managed from family, friends. Business can
registration procedures. Documents like AoA / MoM would
expand more rapidly
be needed in that case.
+All shareholders will have limited liability. The owners now
--Shares cannot be sold to other companies without
won't have to sell private property / possessions. Their liability
approval other shareholders. This might make investors
is limited to the investments made.
unwilling to invest
+Partners who started company can own , keep control if they
--To expand rapidly, company cannot offer shares to
donot sell majority shares to others.
general public, large sums of capital not possible to raise
+It is incorporated business, Company has seperate legal
identity, the business continues even if one of the owners die.
 PUBLIC LIMITED Co.
Benefits
+ Large sums of capital can be raised as the shares are
now distributed to the general public. No limit on no.of sh.hol
+There is no restriction on buying / selling or transfer of shares.
Shareholders donot require approval from others
+All shareholders will have limited liability. The owners now
won't have to sell private property / possessions. Their liability
is limited to the investments made.
+It is incorporated business, Company has seperate legal
identity, the business continues even if one of the owners die.
+A public ltd co. has high status as it is considered much bigger
than other types of b.s organizations so easier to attract much
customers & charge high prices for g/s.
Drawbacks
-- Legal implications- Company will have to go through
registration procedures. Documents like AoA / MoM would
be needed in that case.This is time consuming and costly
-- Some public companies become so large that it
becomes difficult to manage and control them.
-- Selling shares to public will create expenses such as
Payment to banks for selling shares, commission to
brokers, Publication & printing costs for prospectus.

Q3] What are the benefits of a Frachise business to the Franchisor and Franchisee ?

Benefits / Disadvantages to the Franchisor :

+Expansion becomes faster, as now the franchisor will not have to finance all outlets themselves.
+Management of outlet is responsibility of Franchisee.
+Franchisor will receive license fees and royalties from franchisee

-Franchisee will keep the profit share from outlet

-Poor management and performance may lead to bad reputation of brand.

Benefits / Disadvantages to the Franchisee :

+Low chances of business failure as now a well-known product is being sold.
+Costs like Training / Advertising paid by franchisor

-Less independence than non-franchised b.s.

-License fee and royalty needs to be paid to the Franchisor.

Q4] What are the advantages / disadvantages of a Joint Venture ?

A joint venture is when two or more businesses agree to start a new project together, sharing the capital, the risks and the
profits.

+ Costs are shared in between, useful for large projects

+ Risks are shared losses will be faced jointly.

_ Both might have different ways of doing business. e:g cultures

_Disagreements / conflicts over important decisions.

Q5] What are public sector businesses ? Identify explain advantages / drawbacks of public corporations ?

Public sector includes all businesses owned and run by the state / government.

Public corporations are owned by government and run by Board of Directors appointed by the Gov.t

+ Important industries such as electricity, water supply should be under gov.t control, in this way no monopoly will be
created and the consumers will not have to face results of Price-fixing by such monopolies.
+ If an important business is failing and likely to collapse, the government can step in to nationalise it. This will keep the
business open and secure jobs.

-- Public sector are considered less efficient and low in quality as compared to that of private sector businesses.
-- Mostly , these public corporations donot aim for high profits so the employees are often receiving lower salaries which
keeps the employees demotivated and there is high redundancy rate.