Forms of Business | A-Level Business Basics

The third question addresses how control is exercised in a PLC. The discussion highlights the 'divorce of ownership and control,' where shareholders own the business but directors are elected to run it on their behalf, a key concept for PLCs.

Jim and Graeme open the session, with Jim broadcasting from London and Graeme from Sunderland. They introduce the topic: forms of business, building on previous sessions concerning exam skills like application analysis and evaluation. They hint at focusing on forms of business that have caused issues in past exams.

An interactive activity named 'Lifting the Lid' is introduced, where viewers guess a business based on clues. The clues reveal a business founded 13 years ago by two brothers, owned by the Debenhams Group, headquartered in Manchester, and identified as a fast fashion retailer. The answer is 'Boohoo', which is revealed to be a private company.

The first multiple-choice question asks to identify a disadvantage of operating as a sole trader. The correct answer, 'harder to raise finance,' is discussed, clarifying that sole traders have unlimited liability, which often makes banks less willing to lend compared to companies.

The second question delves into non-profit organizations, asking which statement about them is false. It's explained that the misconception that non-profits don't make a profit is false; they often aim for surpluses to reinvest in their charitable goals, rather than distributing profits to owners.

This section involves two true/false statements: one about the liability of a sole trader and another about private limited companies selling shares. It's clarified that sole traders have unlimited liability, and private limited companies can sell shares to invited individuals, not just family and friends.

The final quiz question discusses the roles in franchising and whether PLC directors can be shareholders. It's explained that the franchisor owns the brand and system, while the franchisee buys the right to operate it. Directors of PLCs can also be shareholders.

An activity using a fictional multinational PLC, 'Cakey Breaky Heart,' demonstrates how various scenarios impact share prices. The first scenario, a successful new low-fat cake range, would likely increase share price due to higher demand from investors anticipating future profits and dividends.

The second scenario for 'Cakey Breaky Heart' involves product contamination leading to a recall. This is analyzed as a negative event that would cause the share price to fall due to bad publicity, potential legal action, increased costs, and decreased consumer satisfaction, leading to a higher supply of shares as investors sell.

The discussion shifts to franchising, exploring the benefits for a franchisee, such as reduced risk, established brand image, and ongoing support and training from the franchisor. However, downsides include high initial fees, ongoing royalty payments, and less control over business decisions due to following the franchisor's format.

The session concludes with a case study of 'What Do I Care,' a family-owned private limited company opticians with expansion plans. The question is about the benefits and downsides of being a private limited company. Benefits include maintaining family control, while a key downside is the potential difficulty in raising substantial capital (like 4 million pounds) for expansion without being able to sell shares publicly, potentially slowing growth.