Business Foundation Flashcards
Corporate Social Responsibility
CSR is the continuing commitment of a business to go above and beyond its legal obligations to operate in an economically, socially and environmentally sustainable manner.
• Customer that knows of socially responsible businesses are more likely to shop again and refer business to others.
• Maybe expensive however brings increased profits and sales. E.g invest in renewables.
Types of Business
Sole Trader
Single owner operating a business and is legally responsible for all aspects of the business.
Sole Trader Adv and Disadv
Advantages
Owner keeps all profit, Less expensive that other types, All decisions made by owner. (no one disputing them), Profit is taxed as personal income
Disadvantages
Unlimited liability. Owner responsible for business debt. Has to sell its own assets not only business assets to pay off debt, Harder to expand by raising capital, Needed to preform wide range of tasks ,Difficult to operate if sick
Partnership
Two-twenty co-owners or partners and involves a partnership agreement
Partnership Adv and Disadv
Adv
Low start-up costs, Shared workload, Pooled funds, Business can keep going after death of partner
Disadv
Unlimited liability, Liable for partners debts even before partnership started, Possible disputes, Difficult finding suitable partner
Private Limited Company
• Has two to fifty shareholders and shares can only be traded with permission. Has its own legal identity. (limited lability).
• Popular with sole trader and partnership businesses looking to expand.
Pty. ltd - Adv and Disadvantages
Advantages
Easier to attract finance
Limited liability
Only liable for the amount of money put into business Easier to transfer ownership
Company tax rate is lower than individual tax.
Disadvantages
Cost of formation of private limited company
Company taxed on profits and dividends
Required to produce annual audits
Public disclosure of certain information
Public Company
• A business that enables the public to be able to buy shares. (ASX) Australia Security Exchange
• Recognised by Ltd
Public Adv and Disadv
Adv
Able to raise capital through shares, Easier to transfer shares, Limited liability, Helps expansion and opportunities
Disadv
Difficult to establish and qualify for ASX could be costly, Must have high levels of transparency for public, Limited Control. Harder to maintain control, Initial financial commitment maybe higher
Social Enterprise
A business that produces goods or services for the main reason of fulfilling social need. Business main goal isn’t profit but will concentrate on community or environmental need. E.g Big Issue Magazine, society melbourne
Social Enterprise Adv and Disadv
Adv
Better customer relationship, Enhances reputation, helps society, easier to market
Disadv
difficult to focus on social and financial goals, harder to find finance because you cannot rely on making money back through business.
Government Business Enterprise (GBE)
• Established in a company model and operated in the public sector of economy
• Owned and operated by the government they are the shareholders of this business
• E.g Australia Post and VicRoads
GBE Adv and Disadv
Adv
Gives healthy competition and can lower prices, Can operate with independents from government
Disadv
Political interference, Inefficiencies caused by government, Less accountability with GBE’s resulting in less productivity, Harder to get capital must ask government for money.
Business Objectives
• Are statements which provide direction for a business
Types of Objectives
• Make a profit- Main aim is to make money. Done so in making more sales.
• Increase market share- increasing the percentage of overall sales in industry.
• Fulfil a market need- fills essential needs that may rarely see profit but needed. Goods or services that may not be available for the market. Mainly GBE
• Fulfil social need- main purpose is to concentrate on community or environmental needs. Done for the common good to make the world a better place. Social Enterprise
• Meet shareholders expectation- meet with the shareholders returns on their financial investment. Publicly listed companies.
Stakeholder
Stakeholders are individuals or groups of individuals who have a vested interest in an organisation. Stakeholders want the business they invested in to achieve its objectives.
Conflict
• Conflict refers to the differences in interests that stakeholders has with a business
• Employee and shareholders- employees require fair wages and working conditions however this reduces profit therefore reducing their dividends.
• Management and customers- manager wants to raise prices however customers expect reasonable priced products.
• Management and suppliers- management wants to keep costs down to improve profits but supplier providing ethical materials require higher price to cover costs.
• Supplier and community- suppliers expect to be paid fairly. Might reduce costs by acting unethically which will upset community.
Acting Ethical
Maybe be difficult as it is not clear cut. Sometimes unethical decisions need to be made for the greater good. E.g whistle-blowers. Most of the time managers know the right thing to do.
