CAIE IGCSE Business Studies 1.4 Types of Business Organisation Questions
Use this business-organisation page to compare sole traders, partnerships, companies and franchises through applied case decisions.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Explain advantages and disadvantages of sole traders, partnerships or limited companies.
- Apply liability, control, finance and decision-making points to the case business.
- Justify whether franchising or another ownership form is suitable for expansion.
Covered syllabus points
Question 1
[Maximum number: 2]
CFG is a social enterprise. It buys cocoa beans from local farmers and then uses the beans to make chocolate. Being ethical is important to the business. CFG has developed a new chocolate bar. The Marketing Manager plans to use skimming as its pricing method, and retailers as its distribution channel for the new product. He knows there are many legal controls over marketing that might affect a business.
Define 'social enterprise'.
Award 2 marks for a full definition. Award 1 mark for a partial definition.
An organisation that has social objectives as well as an aim to make a profit to reinvest back into the business [2] OR
A business with social objectives that reinvests most of its profits back into the business/into benefiting society at large [2]
OR
A business that seeks to raise income, which it invests in a specific social or environmental issue [2]
OR
A business set up to help society/a community rather than make a profit [2]
Partial definition e.g. a business that aims to help/benefit society [1]
Question 2
[Maximum number: 6]
Viktor is starting up a business as a photographer. He will be a sole trader. Quality control will be important. Viktor plans to use sampling when carrying out market research. There are legal controls which could affect his marketing strategy. Viktor will employ 5 photographers. He knows there are many ways to motivate employees.
Explain two disadvantages to Viktor of operating as a sole trader.
Disadvantage 1:
Explanation:
Disadvantage 2:
Explanation:
Award 1 mark for each relevant disadvantage (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
- Difficult to raise capital [k] which could restrict growth [an] of the photography business [app]
- Unlimited liability [k] of his start-up business [app] so his personal assets are at risk if he cannot pay debts [an]
- Has all the responsibility / make decisions on own [k] so may lead to wrong decisions being taken [an]
- May have to work long hours [k]
- Business does not have a separate legal identity [k]
- No continuity of business/ if die, the business will close [k]
- No one to share risks/losses with [k]
Other appropriate responses should also be credited.
To use words from the stem as application the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for responses on this question:
- Photography
- Start-up/new business
- 5 employees
- (Carry out) market research
- Motivate employees
- Legal controls (over marketing)
Other appropriate examples can be credited.
Question 3
[Maximum number: 4]
DNG provides electricity to 16 million customers. It is a limited company which means DNG's shareholders benefit from limited liability. DNG is planning to stop using coal to produce its electricity. Pressure groups had an influence on this decision. The Managing Director knows there will be an opportunity cost to making this change. She is considering the best way to communicate this important information to DNG's 6500 employees.
Outline how having limited liability might benefit DNG's shareholders.
Award up to 2 marks for relevant points (max 2).
Award up to 2 marks for each relevant reference to this business (max 2).
- Shareholders risk is limited to the amount invested [k] in this electricity business [app]
- Protects personal assets [k] in case the business decision to contribute to sustainable development does not work [app]
- Encourages (potential/existing) shareholders to invest [k]
Other appropriate responses should also be credited.
Shareholders risk is limited (to the amount invested) [k] in the electricity company [app] protecting their personal assets [k] in case the decision to stop using coal does not work [app]
Note 1: Candidates can outline one benefit in detail or outline two separate benefits.
Note 2: Answers must refer to the owners / shareholders and not the business itself.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- Electricity
- (Stop using) coal
- 16 million (customers)
- 6500 (employees)
- Pressure groups
- Opportunity cost
Other appropriate examples in context can still be credited.
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