Business Flashcards
Identify and explain different motivations and objectives for businesses including:
Financial
Survival: Many businesses do not survive past their initial set up stage, as they use all their money setting up and do not allow any cash to get them through until the profits start to be made. A business has many expenses to pay (suppliers, wages, rent, raw materials etc) so it is important that there are funds to carry a business through until the profits build up.
Profit and Income: Profit is the most important objective for a new business. A profit is earnt when income excesses the total costs of running the business. Profits allow the business to reinvest he profits or take them as a personal payment.
Wealth: Profit provides income to live and after a few years of operation, hopefully it is more than sufficient, increasing the owners overall wealth and financial security.
Financial Security: Profits are the return for hard work and risks taken and the reward for making in investment that gives an owner financial security.
Identify and explain different motivations and objectives for businesses including:
Personal satisfaction/challenge: Personal satisfaction in pursuing an interest or building a business and being successful.
Independence and control: Need for greater independence is a major motivator for many business owners. It gives them more control over their working life. Excaping an uninteresting job or career and wanting a greater share of rewards for effort, compared to being paid by an employer. Fed up of working for others and having to co-exist with others.
Development of an innovative product or service: A desire to pursue an interest or hobby. To be able to create a product or service you are passionate and enthusiastic about, giving financial gain and personal satisfaction.
Social Enterprise: is an organisation that uses commercial strategies to maximise improvements for human and environmental well-being, rather than maximise their profits for shareholders. A business who’s primary purpose is to do common good, by using methods of business for power in the market place to advance their social, environmental and human justices agenda. EG: Jamie Olivers 15 Restaurant
The Big Issue
Divine Chocolate
Definition of an Entrepreneur
- A person who starts a business and is willing to risk loss in order to make a financial gain.
- Entrepreneurs assist in bringing innovations to market and leading the creation and development of new and exciting enterprises to make the innovation a success.
Identify and explains the key skills, characteristics and attributes of Entrepreneurs making use of real life, specific examples
• Dick Smith is a successful entrepreneur who conducted his day to day operation with many of the key attributes of an entrepreneur. • Entrepreneurs are: o hard-working, committed & passionate o Creative, Innovative, Courageous o Willing to take risks o Listen and learn from others o Supportive of social and environments issues o Give back to the community
Definition of Invention:
- Transforming new thoughts into tangible ideas and bringing new solutions to the world.
- Inventions lead to the innovation of further inventions.
Definition of Innovation:
- Using creativity and inventions to produce ideas/products that people can and wish to use and making them marketable to users.
- Does not have to be new to the world, but a first to a business.
- Something that is inspiring, useful and effective.
- Requires assistance from entrepreneurs to bring it to market.
Definition of Creativity:
- The mental ability to imagine new, unique and unusual ideas.
- Seeing what no-one else sees.
- Thinking what no-one else has thought of before.
- Creativity results in an invention and innovation being discovered.
Explain the link between invention, innovation, creativity and entrepreneurship, using specific examples
- The all have different roles, but all share the same goal “To create value for people”, by interacting with one another to produce the best product they can.
- Creativity and Entrepreneurship – both influence and persuade others.
- Inventions and Innovations – require creativity.
- All four are needed to have a successful innovation and to find solutions to problems that can change the world. EG: (The telephone invented by Alexander Graham Bell) - his creativity led to a unique idea which led to an innovative feature and the invention of the telephone being brought to users through the entrepreneurship of Bell.
Identify different types of innovation including:
Product Innovations: The development and marketing of a new or redesigned product or service eg (product invention, quality improvement to an existing product).
Process Innovations: The implementation of new or significantly improved production or delivery method.
Organisational Innovations: The implementation of new organisational methods in business practices, workplace organisation and external relations.
Marketing Innovations: The implementation of new marketing methods involving changes in product design or packaging, placement, promotion or pricing.
Explain ways in which Intellectual Property can be protected including:
It Protects Intellectual Property – (Branding and Business Share)
Copyright: A document granting exclusive rights to publish and sell literary, musical or artistic work.
Trademarks: A sign that distinguishes goods and services from those of their competitors. EG
(words,logos or a combination of both). A registered symbol
Patents: A document granting legal protection for an inventors sole rights to an invention.
Definition of Stakeholders:
• A person, group or organisation that has an interest in an organisation or business.
Explain what a Stakeholder is, using examples
- Stakeholders can be affected by the actions of an organisation
- Stakeholders can affect a business positively or negatively
- Stakeholders include shareholders, employees, customers, suppliers etc, as they all rely on the business for different reasons such as employment, good and services, profits etc.
Identify different groups of Stakeholders and their potential interests including:
- Shareholders/owners: Individual that legally owns a share or stock in an organisation (also called stakeholder). Their rights include: voting and participating in shareholder meetings, sharing in the profits (dividends), receiving financial statements and approval of major changes.
- Employees: are stakeholders who without the company would not have jobs.
- Customers: are stakeholders who rely on the company to provide goods and services.
- Suppliers: are stakeholders who rely on the company to provide revenue for their supplies.
- Local Community: are stakeholders who want support from local businesses to improve the surrounding environment.
- Government: are stakeholders who want your business to do well, so they receive taxes.
- Competitors: are stakeholders who want healthy competition.
- Pressure Groups: are stakeholders who want your business to have a positive impact on the environment.
Explain the differences between a Shareholder and a Stakeholder
- Shareholders are stockholders in a business, but stakeholders are not always shareholders.
- A shareholder owns part of a company through stock and ownership, but a stakeholder is not an owner,
- just interested in the companies’ performance for their own benefit (eg a supplier).
Explain the difference between Internal and External Stakeholders, using specific examples
• Internal Stakeholders – have a financial stake in the business
Eg (shareholders, employees)
• External Stakeholders – individuals or groups outside of the business
Eg (customers, suppliers, community)
Definition of Business Ethics
- Taking the right course
- Something morally right
- Acting ethically (with production, processes and company behaviour)
Definition of Sustainability
• An enduring and balanced approached to economic activity, environmental responsibility and social benefit.
• Meeting the challenges of ensuring that future generations can enjoy the same life style as they do today.
Eg (recycling, minimising waste, replacing resources)
Explain what is meant by Corporate Social Responsibility (CSR), using examples
- Commitment to ethical behaviour for all stakeholders.
- Showing responsibility in the manner of delivery. EG (how their products impact on society and the environment)
- EG (making steel is an investment in material that is truly recyclable, giving benefits of reduced costs, improved image/reputation and long term business opportunites)
Explain and evaluate the benefits, motives and cost of ethical behaviour in business.
Benefits of Ethical Behaviour
• To reflect the ethical views and values of the business and its direction.
• A public relations exercise to improve the reputation of the organisation.
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Motives for Ethical Behaviour
• Good public image.
• Less negative and more positive publicity.
• Being morally correct.
• Supporting manufacturers and the community.
• Reduces externalities associated with products.
• Less business costs.
• Benefits for stakeholders.
Cost of Ethical Behaviour
• Higher labour, operations and material costs.
• The cost of training and ethical auditing.
• Changing the culture of the organisation.
• Turning away business from organisation that are considered unethical.
Identify and explain a range of ethical issues that businesses may have to respond to
- Employee behaviour
- Employee working conditions
- Business Ethics and PRACTICES
- Supplier and Customer Relations
- Integrity and Trust
- Environmental Laws
Explain giving positives and negatives of real life examples of the following ownership structures:
Sole Trader
Sole Trader: A business that is owned by one person (usually small to medium business)
Positives: -Owner has great control over business.
- Satisfaction in developing own ideas. - Own Boss. - Knows customers and employees personally. - Entitled to all the profits.
Disadvantages: -Owner is responsible for all the debts of the business.
- Size of business is usually restricted to the wealth of the owner. - Owner must carry out many of the duties of the business. - to take holidays, sick leave (trying to find someone to replace owner difficult) - Business success is limited to the abilities of the owner.
Examples of
Sole Traders: -Hairdresser, Newsagents, Plumbers, Builders, Beauticians, Butchers
Explain giving positives and negatives of real life examples of the following ownership structures:
Partnership
Partnership: A business conducted in common by 2 people with a view to profit.
Positives: -Larger capital can be raised with 2 or more partners.
- Easier to borrow money for business expansion.
- Specialist skills can work together to provide a wider range of skills.
- Work load can be shared, making it easier to take time off.
- More people available to share decision making.
Negatives: -If one partner is unable to pay his share after the sale of their private assets, the other
- partners are responsible for their share.
- Partners may disagree on business matters causing unworkable conditions.
- Partnerships have a limited life (because of conflicts that arise)
Examples of
Partnerships: Lawyers, Doctors, Accountants, Financial Advisors
Explain giving positives and negatives of real life examples of the following ownership structures:
Public Company
Public Company: -Have a minimum of 5 Shareholders, but not maximum.
- A Board of Directors are elected by shareholders to run the company. - Has Ltd or Limited after its name EG. Dodwell Co Ltd. - May sell shares to public (to raise capital). - Often larger businesses – (due to the ability to raise funds). - Must publish an Annual Report. Examples Public Co: Banks, Airlines, Mining Companies,
Explain giving positives and negatives of real life examples of the following ownership structures:
Private
Private Company: -Minimum of 2, maximum of 50 shareholders.
- Cannot sell shares to general public. - Public cannot invest in private companies. - Do not have to publish an annual report. - Must have Pty Ltd after company name Eg; John Stillwell Pty Ltd Examples Private Co: ????
Positives 0f Public and Private Companies:
Large amount of capital can be raised.
- Ownership and management can be separated. - Qualified staff can be employed to operate the business.
Negatives 0f Public and Private Companies:
Establishing Public and Private companies is costly
- Many documents required to establish business setup. - Subject to government regulations. - Open to public appraisal. - Owners do not have control of daily decisions.
