Business foundations sac 1A Flashcards
What is a business?
- lawful commercial activities
- aims to satisfy the wants and/or needs of consumers
- aims to make a profit
Types of businesses: sole trader
- one individual owns the business
- sole person legally responsible for all aspects of the business
- has unlimited liability
Types of businesses pros and cons: sole trader
Pros
- simple and inexpensive to set up
- owner keeps all profits
- owner has complete control
Cons
- burden of managing entire business
- unlimited liability
- difficult to gain finance
Types of businesses: partnership
- 2-20 individuals who carry the business together, shared control and management
- has the same legal entity as the owners
- requires a seperate tax file number
- unlimited liability
Types of businesses pros and cons: partnership
Pros
- simple and inexpensive to set up
- workload can be shared among partners
- risk/debt can be shared among partners
Cons
- unlimited liability
- potential disagreement over key decisions
- profits are shared among partners
Types of businesses: private limited company
- incorporated business owned by up to 50 shareholders
- controlled by director
- shares aren’t freely available to the public
- has limited liability
- has ‘Pty’ after its name
Types of businesses pros and cons: private limited company
Pros
- limited liability
- life of company can live longer than directors
- pay company tax rate
Cons
- more complex and expensive to set up
- shares cannot be traded freely
- more reporting requirements to the owners and government
Types of businesses: public listed company
- owned by shareholders
- shares can be purchased or sold on an open market
- listed on the stock exchange
- public has access to buy and trade the shares
- limited liability
- has ‘ltd’ at the end of their name
Types of businesses pros and cons: public listed company
Pros
- limited liability
- life of company can live longer than directors
- easier to raise more capital by selling shares to the public
Cons
- high costs in establishment
- possible loss of control
- highly complex and time consuming to establish
Types of businesses: social enterprise
- primarily exists to fulfil a vision that benefits the community or a social need
- profit is used towards a social cause e.g. thank you
- can be self sustaining or rely heavily on grants and donations
Types of businesses pros and cons: social enterprise
Pros
- metting a social need can encourage community support, increasing profits
- improved morale as employees value the work they are doing
Cons
- difficult to obtain finance to begin the business
- difficult to focus on financial and social objectives
Types of businesses: government business enterprise
- owned and operated by the government
- commonwealth entity, that unlike government department aims to act under general business principles
- aims to make a profit e.g. Aust post
Types of businesses pros and cons: government business enterprise
Pros
- provides healthy competitions to private sectors
- may invest in areas private sectors may hesitate in
Cons
- can be political interference
- may not be as productive as private sector business (possible lack of accountability)
- strategic directors can change with changing governments
what are business objectives?
- goals the business is aiming to achieve in the future
- give the business a sense of purpose and direction
- having measurable objectives can help give clarity for people within the business
Types of objectives (5)
- profit
- increase market share
- fulfilled a market need
- meet shareholder expectations
- fulfil a social need
Types of objectives: profit
- surplus remaining after total costs are deducted from total revenue
- basis on which tax is calculated and dividends are paid
- important so the business can survive and grow
Types of objectives: increase marketshare
- percentage/portion of the total sales the business has in an industry for a particular good or service
Types of objectives: fulfil a market need
- a market is a specific group that has similar characteristics
- a need is a groups desire for a specific product or benefit
- identifying what customers require allows the business to build a market for their goods
Types of objectives: meet shareholder expectations
- those that own the business
- expect to make a return on their investment through capital gains and dividends
- capital gains: the value of the business increases
- divid ends: individuals share in the companies profits
Types of objectives: fulfil a social need
- focused on the community
- how the business can improve the lives of others
What is a stakeholder?
- have a vested interest in the business
- managers need to consider different interests when making decisions
- can be from inside and outside the business
what is corporate social responsibility?
- going above and beyond legal obligations
- ongoing commitment
- operating in a economically, socially, environmentally sustainable manner
- important to consider CSR when dealing with stakeholders
Types of stakeholders, their interest and their CSR interest: owners/shareholders
- those that own the business
- interest is they want a return on their investment
- CSR interest is the business should ensure the shareholders investment is safe and keep them informed about business operations and prospects
Types of stakeholders, their interest and their CSR interest: directors
- responsible for managing the company’s overall business activities
- interest is to expect to be well remunerated
- CSR consideration: ethical remuneration
Types of stakeholders, their interest and their CSR interest: management
- those responsible for different areas of the business
- interest is they expect to be in decision making and remunerated fairly
- CSR consideration need to make decisions demonstrating CSR and help the organisation achieve long term objectives
Types of stakeholders, their interest and their CSR interest: employees
- those that work for the business in exchange for money
- interest is they expect fair pay, safe conditions and ongoing employment
- CSR considerations is being open and honest about job security
Types of stakeholders, their interest and their CSR interest: customers
- those that purchase the goods or service
- interest is they expect good quality products for fair prices
- CSR considerations is ensuring customers get what they pay for (quality its price)
Types of stakeholders, their interest and their CSR interest: suppliers
- those that provide a business with materials and resources
- interest is they expect strong relationships and to be paid on time
CSR consideration: ensure suppliers implement CSR
Types of stakeholders, their interest and their CSR interest: competitors
- rival businesses that sell similar products
- need to monitor businesses so they can respond to competitors and remain competitive
- their interest is that they expect healthy and fair competition
- CSR considerations is fair and honest competition that don’t undermine ethical practices
Types of stakeholders, their interest and their CSR interest: governments
- authority to govern a particular area, federal, state and local
- their interest is they expect businesses to help the economy and the community
- CSR considerations is for the business to use local employees
Types of stakeholders, their interest and their CSR interest: community
- people who live in the same place in which the business operates
- their interest us that they expect the business to give back to the community
- CSR considerations is for the business to give back to the community by supporting local programs, ethical waste disposal and reduce carbon foot print
What is management responsibility?
- managers take authority to oversee certain areas of the business
- each area contributes to the achieve of business objectives
Types of areas of management responsibility and achieve business objectives: operations management
- produces the goods or services
- needs to oversee operations to ensure goods and services are produced effectively and to the desire quality
- converts inputs into outputs
- activities involve sourcing stock, minimising etc
- helps achieve business objectives because
Types of areas of management responsibility and achieve business objectives: finance management
- managing the money and budgets if the business
- keeping track of finances allows a manager to make informed decisions
- activities include budgeting, financial planning etc
- helps achieve business objectives because if the business can manage it’s finances then business objectives such as profit can be achieved
Types of areas of management responsibility and achieve business objectives: Human Resources
- manages the relationships between the employees and the business
- manages all aspects of their working relationship
- activities include recruitment, selection, training, termination etc.
- helps achieve business objectives because by having employees that are motivated and performing at a high-level helps a business achieve objectives e.g. increase profit
Types of areas of management responsibility and achieve business objectives: sales and marketing management
- responsible for promoting the business and its products/services
- connects the goods and services produced and connects them with their end customer
- responsible for product development, pricing strategies, promotion and product distribution
- helps achieve business objectives such as profit, percentage of market share
Types of areas of management responsibility and achieve business objectives: technology support
- responsible for implementing and maintaining the technologies within the business
- provides the business ad customers with user friendly assistance
- important for communication data storage and processing and operations
- technology needs to be monitored, updated and employees need to be supported in its use
- can help achieve business objectives because it can help improve business objectives like increase profit and marketshare
