Flashcards · 0715 · Topic 2

Commercial operations flashcards

31 cards on Topic 2, subtopics 2.1 to 2.6. Pick a subtopic or study them all.

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2.1 Commercial enterprises

Sole trader vs partnership: ownership and liability: Sole trader: one owner with unlimited liability. Partnership: two or more owners; ordinary partners also have unlimited liability. More partners bring more capital and skills.
What changes when a business becomes a private limited company?: It becomes a separate legal person and the owners (shareholders) have limited liability, but it must register and shares cannot be sold to the general public.
Private limited company vs public limited company: Private (Ltd): shares sold privately, not to the public. Public (plc): shares can be sold to the general public, raising large amounts of capital, but it must publish accounts and risks takeover.
Cooperative vs public corporation: Cooperative: owned and run by its members, who share the profits. Public corporation: owned and run by the government in the public sector.
What is a franchise? Give a benefit and a drawback for the franchisee.: A franchisee trades under an established brand using the franchisor’s systems in return for fees and a share of revenue. Benefit: lower risk from a proven model. Drawback: less independence and ongoing payments.
What are the benefits and drawbacks of hosting a multinational company?: Benefits: jobs, investment, technology transfer and export earnings. Drawbacks: profits may leave the country, local firms face strong competition, and decisions are made abroad.
Which factors affect where a business locates?: Physical: labour, markets, transport, power, raw materials, competition, suppliers, communication and government influence. E-commerce: wi-fi, warehousing, technology specialists and logistics.

2.2 Outsourcing

What is outsourcing?: Paying another business to carry out an activity that the enterprise could do itself.
Contract manufacturing vs contract logistics: Contract manufacturing: paying another company to produce goods. Contract logistics: paying another company to handle storage and distribution.
Why might an enterprise outsource?: Lower costs, access to specialist expertise, and freeing capital and management time for its core activities.
What are the risks of outsourcing?: Less control over quality and delivery, dependence on the supplier, and damage to reputation if the supplier behaves badly.

2.3 Retailing

Why do small-scale retailers survive against large ones?: Personal service, flexible opening hours and additional services, such as delivery or credit for known customers, plus convenience and local knowledge.
What are the advantages of large-scale retailers?: Economies of scale, lower prices, a wide range, own brands and self-service. Drawbacks: less personal service and often less convenient locations.
What does e-commerce need in order to work well?: Reliable delivery and secure online payment. It removes the need for a physical shop and lets customers buy at any time.
Name digital retail trends: Omnichannel and multi-channel retailing, click and collect, EPoS, self-service checkouts, cashless stores, subscription commerce, QR codes, VR showrooms, dropshipping and mobile apps.
What is click and collect?: A customer orders online and collects the goods from a store or collection point, combining online convenience with no delivery wait or charge.

2.4 Wholesaling

Retailer vs wholesaler: Retailer: sells to the final consumer. Wholesaler: buys in bulk from manufacturers and sells in smaller quantities to retailers.
How does a wholesaler help retailers?: Breaking bulk so they can buy small quantities, granting credit to improve their cash flow, delivering goods, and advising on new lines.
How does a wholesaler help manufacturers?: Buying in bulk, storing goods (warehousing), bearing the risk of goods deteriorating or falling in price, and passing on information about demand.
When is the wholesaler eliminated from the chain of distribution?: When manufacturers sell directly to large retailers such as supermarkets, or straight to consumers online or by mail order, and for perishable or bulky goods.
How do independent wholesalers survive?: Mainly through cash-and-carry outlets and by forming voluntary chains with small retailers.

2.5 Trading documents

Put the main trading documents in order: Enquiry → quotation → order → invoice → delivery note → credit note (if needed) → statement of account → receipt.
Enquiry vs quotation: Enquiry: the buyer asks a seller for details of goods, prices and terms. Quotation: the seller replies with prices, terms and delivery details.
Invoice vs delivery note: Invoice: the bill, showing the goods supplied, prices and total owed. Delivery note: goes with the goods; the buyer signs it to confirm they arrived.
When is a credit note issued?: When the amount a buyer owes must be reduced, for example because goods were returned, damaged or overcharged.
Statement of account vs receipt: Statement of account: summarises transactions over a period and shows the balance owed. Receipt: proof that payment has been made.
What do a bill of lading and a certificate of origin do in international trade?: Bill of lading: issued by the shipping company for goods sent by sea; it is evidence of the contract and a document of title. Certificate of origin: states the country where the goods were made, for customs purposes.

2.6 Communication

Which factors affect the choice of communication method?: Urgency, cost, security, distance, network availability and the importance of the message.
How does modern communication help trade?: Email, websites, video conferencing and messaging let traders agree orders, prices and delivery quickly and cheaply across countries, and allow e-commerce and online tracking.
What are the limitations of digital communication for businesses?: The cost of equipment and training, dependence on a reliable network, and risks such as hacking and fraud.
How should you answer "recommend a communication method"?: Weigh the factors (urgency, cost, security, distance, importance) against the specific scenario and justify one choice, rather than listing every method.