IGCSE Enterprise: Specimen Questions with Answers 6 - 7 of 49

Passage

Case Study -1

Starting a business in Haiti takes 12 procedures and more than three months. Formal registration of a company is so complicated that the process cannot be completed without using the services of third parties — lawyers and notaries. Company statutes are often drafted by an attorney, then need to be certified by a notary before being submitted for incorporation. The result is an additional cost burden for entrepreneurs trying to navigate the complex process to enter the formal sector. In New Zealand, by contrast, an entrepreneur can complete the entire process of company formation in just a few hours through a single online procedure. The burdensome nature of these entry regulations is surely one of many reasons underlying the fact that Haiti has far fewer registered companies relative to population size — only 4 per 100,000 people in 2012, compared with 1,020 per 100,000 people in New Zealand. Formalization has many benefits. Formally registered companies tend to have greater profits, investments, and productivity, while their employees benefit from social security and other legal protections. Yet, in many economies around the world, entrepreneurs continue to face excessively burdensome entry regulation. Formalizing a business may involve multiple interactions with government agencies and with third-party private professionals whose services are either required by law or desirable because of regulatory complexity.

Main Findings

  • Most of the cost of starting a business comes from the fees of third-party professionals such as lawyers and notaries.
  • Entrepreneurs use third-party services in business start-up mostly because the process is too complex.
  • Economies with greater third-party involvement in business incorporation tend to have more businesses operating in the informal sector. They also tend to have less accessible laws and regulations and less efficient systems of civil justice.
  • Notary services are used in business start-up in 76 of the 189 economies covered by Doing Business.
  • Latin America and the Caribbean has the largest share of economies where legal services are used in the start-up process.

Question 6 (5 of 12 Based on Passage)

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Short Answer▾

Starting a business in Haiti takes 12 procedures and more than three months.

What are the uses of SWOT analysis?

Explanation

Uses of SWOT Analysis Are

  • SWOT analysis is a useful tool for strategic planning and brainstorming sessions. It helps us decide on how to take advantage of the business opportunity and deal with changes.
  • SWOT helps a business to understand the areas where it is performing well. Insight into these areas give business its competitive advantage.
  • SWOT addresses individual issues such as staffing, new product development, financial resources, advertising, operational efficiency etc.

Question 7 (6 of 12 Based on Passage)

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Short Answer▾

Formally registered companies tend to have greater profits, investments, and productivity, while their employees benefit from social security and other legal protections. Based on above statement answer the following-

Describe two external economies of scale.

Explanation

External economies of scale are the associated advantage outside the firm but within the same industry. It is associated with an increase in the industry. External economies accrue to a firm when the long-term expansion of an industry leads to the development of ancillary services which benefit suppliers in the industry.

  • A skilled labor workforce: A firm can recruit workers who have been trained by other firms in the industry.
  • A good reputation: An area can gain a reputation for high quality production.
  • Specialist suppliers of raw material and capital goods: When an industry becomes large enough, it can become worthwhile for other industries, called subsidiary industries to set up for providing for the needs of the industry.
External Economies

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