Business Ownership Advantages/Disadvantages
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Questions and Answers

Which of the following is a benefit of a corporations, regarding profit distribution?

  • Profits can be removed in the form of dividends, which can be a tax benefit to the owner. (correct)
  • Profits must be reinvested in the business.
  • Profits are not taxed.
  • Profits are taxed at a higher rate than personal income.

    • Setting up a corporation is generally less expensive than other business structures.

    False (B)

    What type of liability does the owner of a corporation have?

    limited

    Owners cannot use business losses to offset their personal ______.

    <p>income</p> Signup and view all the answers

    Match the following characteristics to whether they are an advantage or disadvantage of corporations:

    <p>Ownership is easily transferred = Advantage More costly to set up = Disadvantage Personal liability is limited = Advantage More formal annual activities required = Disadvantage Profits can be removed as dividends = Advantage Losses cannot be used to offset personal income = Disadvantage</p> Signup and view all the answers

    Which of the following best describes the purpose of exploratory marketing research?

    <p>To identify opportunities for a business through open-ended questions. (D)</p> Signup and view all the answers

    Secondary research involves collecting data directly through surveys conducted by the researcher.

    <p>False (B)</p> Signup and view all the answers

    What are two key functions of a marketing strategy?

    <p>Identify target customers and define the product or service they are prepared to buy; Indicate the size of the potential market and outline possible trends</p> Signup and view all the answers

    A survey conducted using the total population of a country is known as a ______.

    <p>census</p> Signup and view all the answers

    Which question is NOT part of the initial phase of starting a business?

    <p>How do I handle product recalls? (C)</p> Signup and view all the answers

    Match the type of research with its description.

    <p>Exploratory = Open-ended questions to identify opportunities Specific = Multiple-choice questions to get specific information on a problem Causal = To find the relationship between a cause and its effect Internal = Using a business's own records</p> Signup and view all the answers

    Which of the following questions will assist with the 'Product' part of the marketing mix?

    <p>Is the product something customers will want to buy? (D)</p> Signup and view all the answers

    When a business conducts marketing research and uses surveys with very carefully chosen people to represent the population, these people are known as the census.

    <p>False (B)</p> Signup and view all the answers

    Which of the following is NOT a key question to ask when considering 'Place' for a new product or service?

    <p>Will it be of benefit to them? (A)</p> Signup and view all the answers

    A price taker strategy involves setting prices significantly higher than existing market prices to maximize profit.

    <p>False (B)</p> Signup and view all the answers

    What are the four stages of a product's life cycle?

    <p>Introduction, Growth, Maturity, Decline</p> Signup and view all the answers

    Costs that remain the same amount every month, like rent, are considered ______ costs.

    <p>fixed</p> Signup and view all the answers

    Match the following stages of the product life cycle with their description:

    <p>Introduction = When a product or service first appears in the marketplace. Growth = When a product is growing and establishing a presence in the market. Maturity = When the product has reached its peak popularity and established itself in the marketplace. Decline = When sales for the product begin to drop off.</p> Signup and view all the answers

    Which of these promotional activities would be MOST appropriate for reaching a younger target market (10-20 yrs old)?

    <p>TikTok Marketing Campaign (A)</p> Signup and view all the answers

    Increased productivity always leads to increased profit.

    <p>False (B)</p> Signup and view all the answers

    Besides 'advertising', name three other promotional strategies mentioned in the text.

    <p>personal selling, publicity, sales promotion, e-marketing</p> Signup and view all the answers

    When a business prices its products by following the existing prices in the market, it is using a ______ strategy.

    <p>price taker</p> Signup and view all the answers

    Match the following business ownership types with their primary advantage:

    <p>Sole Proprietorship = Quick, easy and inexpensive to establish. Partnership = Combines the talents and resources of two or more people Corporation = Have an unlimited life, so day-to-day business continues despite the illness or death of their owners.</p> Signup and view all the answers

    Which factor can have a variable effect on a business' profits?

    <p>Price (C)</p> Signup and view all the answers

    Advertising always guarantees an increase in profits for a new venture.

    <p>False (B)</p> Signup and view all the answers

    What are three sales promotion activities, as mentioned in the text?

    <p>discounts/sales, free samples, coupons, charitable causes</p> Signup and view all the answers

    The key element to success in a venture because it brings the product to the attention of the target market is ______.

    <p>promotion</p> Signup and view all the answers

    Match the following cost types with their descriptions:

    <p>Fixed Costs = Costs that are the same amount every month. Variable Costs = Costs that change every month.</p> Signup and view all the answers

    Flashcards

    Limited Liability

    The owner's personal assets are shielded from business debts.

    Tax Benefits of Dividends

    The company's profits can be distributed to the owner as dividends, potentially reducing their tax burden.

    Employee Benefits

    The company can offer benefits like health insurance or retirement plans to its employees.

    Cost to Set Up

    The business structure is more complex and involves higher upfront costs, including legal fees and government filings.

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    Marketing Research

    Gathers information about customers to make informed business decisions.

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    Primary Research

    Understanding customer needs and wants through observations, experiments, interviews, and surveys.

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    Deductible Business Losses

    Business losses are only deductible against future profits, meaning they cannot be used to offset personal income.

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    Secondary Research

    Utilizing data already collected by others for your research.

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    Internal Research

    Analyzing a company's internal records to gather information about sales, products, customers, or complaints.

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    Census

    A survey that includes the entire population of a country.

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    Sample

    A carefully selected group of people representing a larger segment of the population.

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    Marketing Strategy

    A detailed plan that outlines how a business will reach its target market and achieve its marketing objectives.

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    Marketing Mix

    The combination of elements that a business uses to market its products or services.

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    Target Market

    Individuals or organizations that are likely to use your product or service.

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    Introduction Stage (Product Life Cycle)

    The initial stage of a product's life, marked by its introduction to the market. It is characterized by low sales volume and potentially high marketing costs. This stage can prove crucial in establishing a foothold for the venture.

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    Growth Stage (Product Life Cycle)

    The period of rapid growth, often characterized by increasing sales, new customers, and potential competition. This stage requires a balance of meeting market demand and adapting to a changing landscape.

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    Maturity Stage (Product Life Cycle)

    The stage where the product reaches its peak popularity and enjoys a stable market presence. Sales growth may slow down, but the product remains strong and competitors may become more prevalent.

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    Decline Stage (Product Life Cycle)

    The decline stage, marked by a decline in sales and potentially reduced profitability. This requires strategic decisions about adaptation, repositioning, or ultimately, exiting the market.

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    Price Taker Strategy

    A pricing strategy where a venture sets its prices based on the existing prices of similar products in the market. It's often used by smaller businesses.

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    Productivity

    The output per worker. It is directly related to production. If more personnel are hired to a place that is producing at full capacity, productivity may lower.

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    Promotion

    The promotion of a product or service to bring it to the attention of the target market. This is a critical element of success, as it involves telling consumers about your product and why they should care.

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    Advertising

    A paid message directed to the target market used to attract attention, create interest and stimulate desire in a product or service.

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    Fixed Cost

    Costs that remain constant each month, regardless of production or sales volume. For example, rent or mortgage payments, equipment costs.

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    Variable Cost

    Costs that change every month, often tied directly to production levels. For example, raw materials, inventory, or utilities.

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    Sales Promotion Activities

    Strategies used by a business to stimulate sales or generate interest in a product or service. Examples include discounts, free samples, coupons, or charitable donations.

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    Sole Proprietorship

    A business structure where one person owns and operates the business. It is simple to set up, offers complete control, but also carries unlimited personal liability.

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    Partnership

    A business structure where two or more individuals share ownership and responsibility. It offers pooled resources and skills, but also increased complexity and potential disagreements.

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    Corporation or LLC

    A legal entity separate from its owners, offering limited liability, permanence, and easier access to capital. This structure requires more complex setup and regulatory compliance.

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    Study Notes

    Business Ownership Advantages/Disadvantages

    • Sole Proprietorship:

      • Advantages: Easy and inexpensive setup, owner controls all decisions, all profits/losses included with personal income.
      • Disadvantages: Limited liability, difficult to raise capital, owner fully responsible for debts, all income is taxed.

    • Partnership:

      • Advantages: Easy setup, combines resources/talents, deductible business losses, favorable tax treatment.
      • Disadvantages: Unlimited liability for general partners, income taxed personally, dissolves if a partner dies, disagreements complicate decision-making.

    • Corporation/LLC:

      • Advantages: Unlimited life, easy ownership transfer, profits can be dividends, employee benefits possible, limited personal liability.
      • Disadvantages: More expensive/complicated setup, annual meeting/report requirements, losses can't offset personal income, possible seizure of personal assets for business debts, start-up losses only deductible against future profits.

    Marketing Research

    • Definition: Systematically collecting, recording, and analyzing data to understand customers.

    • Classification:

      • Exploratory: Open-ended questions, small groups, identifies opportunities.
      • Specific: Multiple-choice, large groups, focused on defined problems.
      • Causal: Explains cause-and-effect relationships, finds "why" in particular results.

    • Research Types:

      • Primary: Directly gathered data (interviews, surveys, experiments).
      • Secondary: Uses data collected by someone else.
      • Internal: Uses company records (sales, customers, complaints).

    • Samples:

      • Census: Survey of entire population.
      • Sample: Carefully selected subset representing the population.

    Marketing Strategy Functions

    • Target Customers: Define who will buy the product/service.
    • Market Size & Trends: Estimate market potential and predict future changes.
    • Sales Expectations: Forecast sales and needed promotional activities.

    Marketing Mix (4 Ps)

    • Product: Will customers want the product/service? Meets needs?
    • Place: How will product reach customers? Channels of distribution? Stock/availability? Location?
    • Price: What price are customers willing/able to pay? Maximum profit price?
    • Promotion: How to let customers know about the product? Advertising, personal selling, etc.

    Target Market

    • Individuals/organizations likely to use and want the offered product/service.

    Product Life Cycle Stages

    • Introduction: Product enters market, potential for profit if successful.
    • Growth: Product gaining market presence, competition arises.
    • Maturity: Product established, peak popularity.
    • Decline: Sales drop, need to adapt or abandon.

    Price Taker Strategy

    • Advantages (small business): No price research needed.
    • Disadvantages (small business): Potential lower profit due to competitors with lower production costs, customers might prefer larger businesses.

    Production/Productivity

    • Increased productivity leads to increased production (output per worker).
    • Adding personnel to full capacity can decrease productivity.

    Promotion

    • Promotion informs target market about products/services.
    • Crucial to success, brings product to target market's attention.

    Advertising

    • Paid message to target market.
    • Aims to attract attention, create interest, stimulate desire, and encourage purchase.
    • Effects (new venture):
      • Advantages: Increased awareness and potential purchases.
      • Disadvantages: Higher costs.

    Sales Promotion

    • Activities like discounts, free samples, coupons, and charitable causes.

    Profit Influencers

    • Increased demand, efficiency, and productivity increase profits.
    • Price can either increase or decrease profit.

    Costs

    • Fixed Costs: Same amount every month (rent, equipment).
    • Variable Costs: Change every month (raw materials, gas).

    Question 6 - Six P's of Entrepreneurship

    • Profit
    • Price
    • Production
    • People
    • Productivity
    • Promotion

    Customer Perception & Value

    • Consider what customers value in a good or service.
    • Research similar products.
    • Understand competitor's pricing.

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    Description

    This quiz explores the advantages and disadvantages of different business ownership structures, including sole proprietorships, partnerships, and corporations/LLCs. Understand how each type impacts decision-making, liability, and taxation to make informed business choices.

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