International Airlines Group (IAG) PLC, formed through the merger of several national carriers, operates as a private sector business after being privatised in 2011. The company focuses on maximising shareholder returns while maintaining high service standards. In 2024, IAG announced plans to expand its routes across Southeast Asia.
Define the term 'private sector business'.
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Mexican National Oil Company is undergoing partial privatisation in 2024, with the government planning to partially privatise the business by selling 40% of shares to private investors while retaining majority control.
State two reasons why governments privatise public sector businesses.
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Smith & Son's Bakery, a sole trader business in Leeds, was established in 2024. James Smith runs the bakery independently, making all business decisions and keeping all profits, though he employs three part-time staff.
Define the term 'sole trader'.
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Blik Digital Services Ltd, a private limited company, provides IT solutions to local businesses. The company has five shareholders who are all family members.
State two advantages of operating as a private limited company.
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African Growth Industries plc recently became a public limited company when it listed on the Johannesburg Stock Exchange. Its flotation provided funds to expand into neighbouring countries.
State two benefits of becoming a public limited company.
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EcoHarvest Enterprises, a social enterprise operating in Vietnam, employs smallholder farmers to grow sustainable crops while providing agricultural training and microfinance services. The company reinvests 70% of its profits into farmer education and community development programmes.
Define the term 'social enterprise'.
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Children's Future Foundation, a registered charity operating in Central America, focuses on providing education to underprivileged children. The organisation must comply with strict regulatory requirements and maintain transparent financial reporting.
Define the term 'charity'.
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Translink Metro is Belfast's primary public transport operator. The public sector organisation receives government funding but also generates revenue through ticket sales and advertising. TM must balance providing essential public services with maintaining financial sustainability.
Describe one characteristic of public sector organisations.
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Gourmet Bakehouse Ltd is a small private sector business specialising in premium, handcrafted baked goods. Founded by two entrepreneurs, Maria and James, the company began as a sole proprietorship, with Maria managing operations while James handled the finances. As demand for their products grew, they decided to transition into a private limited company to secure additional funding and reduce personal liability.
The Bakehouse recently secured a significant order from a major retail chain, which will require expanding production capabilities. Maria and James are debating whether to lease new equipment or invest in custom-built machines. Leasing is less risky but may be more expensive in the long term, while custom-built machines could enhance efficiency but require substantial upfront investment.
Additionally, the entrepreneurs are exploring whether to open a new outlet or partner with another bakery to reach new markets. They aim to maintain the company’s reputation for quality while navigating these growth opportunities.
Explain one advantage and one disadvantage for Maria and James of transitioning Gourmet Bakehouse Ltd into a private limited company.
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Gourmet Bakehouse Ltd is a small private sector business specialising in premium, handcrafted baked goods. Founded by two entrepreneurs, Maria and James, the company began as a sole proprietorship, with Maria managing operations while James handled the finances. As demand for their products grew, they decided to transition into a private limited company to secure additional funding and reduce personal liability.
The Bakehouse recently secured a significant order from a major retail chain, which will require expanding production capabilities. Maria and James are debating whether to lease new equipment or invest in custom-built machines. Leasing is less risky but may be more expensive in the long term, while custom-built machines could enhance efficiency but require substantial upfront investment.
Additionally, the entrepreneurs are exploring whether to open a new outlet or partner with another bakery to reach new markets. They aim to maintain the company’s reputation for quality while navigating these growth opportunities.
Describe two reasons why Maria and James decided to set up Gourmet Bakehouse Ltd.
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Precision Law is a partnership offering tailored legal services to small and medium-sized enterprises (SMEs) in the commercial sector. Founded by four partners, the firm combines expertise in areas such as contract law, mergers and acquisitions, and employment law. Each partner contributes an equal share of capital and decision-making authority, as specified in their partnership agreement.
The firm’s personalised service has earned it a loyal client base and steady growth in recent years. However, the increase in clients has led to heavier workloads, and the partners are struggling to keep up with demand. One partner has proposed converting the partnership into a private limited company to raise additional capital and hire more staff. This move could reduce the financial risks associated with unlimited liability and provide access to greater resources.
Some partners are hesitant, expressing concerns about losing autonomy over decision-making and altering the firm’s collaborative culture. They also worry about the additional administrative and legal requirements involved in transitioning to a private limited company. Precision Law’s partners must weigh the benefits of expansion against the potential risks to their business model.
Analyse two advantages and one disadvantage of converting Precision Law into a private limited company.
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Precision Law is a partnership offering tailored legal services to small and medium-sized enterprises (SMEs) in the commercial sector. Founded by four partners, the firm combines expertise in areas such as contract law, mergers and acquisitions, and employment law. Each partner contributes an equal share of capital and decision-making authority, as specified in their partnership agreement.
The firm’s personalised service has earned it a loyal client base and steady growth in recent years. However, the increase in clients has led to heavier workloads, and the partners are struggling to keep up with demand. One partner has proposed converting the partnership into a private limited company to raise additional capital and hire more staff. This move could reduce the financial risks associated with unlimited liability and provide access to greater resources.
Some partners are hesitant, expressing concerns about losing autonomy over decision-making and altering the firm’s collaborative culture. They also worry about the additional administrative and legal requirements involved in transitioning to a private limited company. Precision Law’s partners must weigh the benefits of expansion against the potential risks to their business model.
Describe two elements that should be included in a partnership agreement for Precision Law.
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MetroLink Transit Authority is a public sector organisation responsible for providing affordable and reliable transportation services across a major metropolitan area. Owned and funded by the local government, MetroLink operates an extensive network of buses and trams, serving millions of residents annually. The organisation’s mission includes improving accessibility, reducing traffic congestion, and promoting environmentally sustainable transportation options.
Despite its achievements, MetroLink has faced criticism for inefficiencies, such as delayed maintenance and outdated infrastructure. The local government has proposed partially privatising the organisation by selling a stake to private investors. The goal is to improve operational efficiency and reduce the financial burden on taxpayers. Proponents argue that private sector involvement could modernise MetroLink’s fleet and streamline services.
However, critics warn that privatisation could lead to higher fares and reduced access for low-income residents, undermining MetroLink’s public service mission. There are also concerns about accountability, as private investors may prioritise profits over service quality. MetroLink’s management team is tasked with evaluating these trade-offs to determine whether partial privatisation aligns with the organisation’s long-term goals.
Explain one advantage and one disadvantage of MetroLink Transit Authority being a public sector organisation.
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MetroLink Transit Authority is a public sector organisation responsible for providing affordable and reliable transportation services across a major metropolitan area. Owned and funded by the local government, MetroLink operates an extensive network of buses and trams, serving millions of residents annually. The organisation’s mission includes improving accessibility, reducing traffic congestion, and promoting environmentally sustainable transportation options.
Despite its achievements, MetroLink has faced criticism for inefficiencies, such as delayed maintenance and outdated infrastructure. The local government has proposed partially privatising the organisation by selling a stake to private investors. The goal is to improve operational efficiency and reduce the financial burden on taxpayers. Proponents argue that private sector involvement could modernise MetroLink’s fleet and streamline services.
However, critics warn that privatisation could lead to higher fares and reduced access for low-income residents, undermining MetroLink’s public service mission. There are also concerns about accountability, as private investors may prioritise profits over service quality. MetroLink’s management team is tasked with evaluating these trade-offs to determine whether partial privatisation aligns with the organisation’s long-term goals.
Analyse two advantages and one disadvantage of partially privatising MetroLink Transit Authority.
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Precision Law is a partnership that provides legal services to small and medium-sized enterprises (SMEs). The firm was founded ten years ago by four partners who each invested the same amount of money and share decision-making equally. They specialise in areas such as contract law, employment law, and mergers and acquisitions. The firm has built a strong reputation for providing personalised advice and practical solutions, which has helped it attract a loyal client base
The business has grown steadily, and its client list now includes over 200 SMEs from industries such as retail, technology and construction. This growth has created challenges. The partners and staff are struggling to manage the increased workload, with many handling multiple cases at the same time. A recent staff survey revealed that fewer than half of the employees feel their workload is manageable, and this has caused tensions between staff and partners. Some staff feel that expectations are too high, while the partners argue that managing workloads is essential for maintaining profitability
One partner has proposed converting Precision Law from a partnership into a private limited company (Ltd). This would allow the firm to sell shares and raise funds to hire more staff and invest in advanced management information systems (MISs). These systems could help automate tasks such as scheduling and document management, which would reduce workloads and improve efficiency. Additionally, becoming a Ltd would limit the personal liability of the partners, protecting their personal assets. However, other partners worry about losing control of decision-making if external shareholders become involved. They are also concerned about the added legal and administrative requirements of operating as a Ltd
Precision Law has recently taken steps to improve its reputation by introducing corporate social responsibility (CSR) initiatives. It now provides free legal advice to underserved communities through a local charity. This has been praised by clients and has boosted the firm’s profile. However, some employees feel that the additional work created by these activities adds to their stress
The partners must decide how to handle these challenges. Should they focus on raising funds to expand, invest in MIS technology or work on improving relationships between staff and management to address workload concerns?
Table 1: Financial information (2023)
Metric | Value ($) |
|---|---|
Annual revenue | 1.8m |
Net profit | 450,000 |
Operational costs | 1.35m |
Estimated cost of expansion (first year) | 250,000 |
Table 2: Employee feedback survey (2023)
Feedback area | Positive responses (%) | Staff comments |
|---|---|---|
Workload management | 45 | “The work is too much for the number of staff.” |
Job satisfaction | 70 | “I enjoy the team culture but feel overworked.” |
Support for CSR activities | 60 | “Helping others is great, but it adds to my workload.” |
Discuss the implications of Precision Law converting from a partnership into a Ltd.
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Established as a sole trader business in 2009, Gourmet Bakehouse is a producer and retailer of premium handmade baked goods. The business is well known for its high-quality gluten-free bread, pastries and custom cakes. It has a small production facility and sells its products directly through a retail store and local cafés. The Bakehouse is popular for its excellent quality and has many loyal customers. As the business grew, its owners, Maria and James, decided to form a private limited company
Recently, the company signed a contract to supply baked goods to a large retail chain. This new contract is a big opportunity for growth but also brings challenges. The company’s current production facilities are working at full capacity, so Maria and James have identified the need to invest in more equipment to meet demand. They must decide whether to lease equipment or buy custom-built machines. Leasing costs less initially but is more expensive over time. Custom-built machines cost a lot upfront but are more efficient and cheaper in the long run
Maria and James are also thinking about how to grow their business. Maria wants to create an online ordering and delivery service. She likes this idea because it would allow the business to grow quickly and reach more customers without needing a physical store. James prefers opening a new outlet in a nearby city. He believes doing so would help build a long-term presence, make the brand more visible and allow customers to experience the Bakehouse in person. Both options have advantages, but Maria and James need to choose the best one for their business goals and finances
Each choice comes with risks and benefits. The decision about equipment and expansion will have a big impact on the Bakehouse’s future. Maria and James must think carefully about how their choices will affect the company’s reputation for quality and its long-term success
Table 1: Financial data for equipment options
Option | Initial cost ($) | Monthly maintenance cost ($) | Efficiency gain (%) |
|---|---|---|---|
Leasing | 50,300 | 2,100 | 10 |
Custom-built | 199,700 | 480 | 25 |
Table 2: Financial data for expansion options
Option | Initial cost ($) | Projected annual revenue ($) | Key risks |
|---|---|---|---|
Opening a new outlet | $149,800 | $310,000 (Year 5) | High setup costs, slower growth at the start and high running costs, such as staff and rent |
Online ordering service | $74,600 | $380,000 (Year 5) | Difficulties in managing deliveries, keeping products fresh and possibly incurring customer complaints |
Graph 1: Projected revenue growth over five years
Examine how becoming a private limited company may impact the way Gourmet Bakehouse raises finance for future expansion.
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