IGCSE /AS Business Students can answer the 8 Marks Analysis question with the given possible structure. The current question states the Disadvantages of business as public limited company. Please note, the answer is just a sample and may not be used as a standard but is shared for generation of idea only. The following question is referred from 0450_s21_in_22 and 0450_s21_qp_22 (Answer to the questions).
Disadvantage 1:
Leads to Dis-economies of Scale; The performance of business deteriorates with the greater size of it.
Explanation:
With the increasing sizes, there are greater chances of wastage, spillage, lack of coordination and communication issues. Such dis-economies will lead to lower performance /efficiency. [An] Even though the production method of TT would be cost effective but there may be a limited demand of the products in Country Z as the high earning groups with potential demand of toys would be less than 10% of the whole population [App]. In case of competitors entrance in market, this issue will further escalate. [An+]
Disadvantage 2:
Lesser control of ownership; as the shares are openly floated in stock exchanges.
Explanation:
As anyone can buy shares from the stock exchange there are chances of hostile takeovers or at-least the a greater chunk of shares may be bought by another company. [An] In such case, the decision will be influenced by that company, leading to deviation from the core objectives of TT for example the current objective of expansion may be replaced /influenced with the profit earning objective. [An+] TT has developed a brand image over the years with possible affiliation with the brand, in case of hostile takeover it may be a setback for Tandeep of loosing his business control. [App]
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Important points to remember:
While attempting Paper 2 Style Questions or the questions with Case Study as a background, there is a requirement to “Apply” the analysis according to the given scenario of the question. For example in this question Disadvantages of business as pubic limited, you can see both styles of [App] in explanation, one give at the end and another given during the analysis. You are free to use any style as far as application is there.
