Introducing Business - Chp 1 Flashcards
What are the two types of organisations?
For profit and not for profit organisations
What is a business?
A for-profit organisations that sells good and services to consumers in order to make a profit.
Not-for-Profit organisations
May make a profit but the reason for they exist is to pursue their social mission
Profit
When the businesses revenue is greater than their expenses
Revenue
Comprises of all sources of income to be earned by the business.
Sales
The amount of money received for selling good and services
What are the 8 main activities of a business?
Management Organising resources Distribution Planning finances and business needs Forecasting sales Controlling production (quality&quantity) Marketing products Production
Finished goods
Goods that are ready for the customer to buy and use
Objectives of for-profit organisations
To aim of the organisation is to make a profit
Objectives of not-for-profit organisation
The main goal of this organisation is to achieve its social mission
Owners of For-Profit Organisations?
Sole Traders, Partnerships, and Shareholder
Owners of Not- For-Profit Organisations?
No one in particular except for the stakeholders
How profits are distributed in a For-Profit Organisation
Distributed to the owner of shareholders, through dividends
Employees of For-Profit Organisations
Employees are paid for their work
Employees of Not-For-Profit Organisations
Employees are either paid or unpaid (volunteers)
The different sizes of businesses
Small, SME, Medium, and Large
Enterprise
Another name of a business
Franchise
Individual purchases the right to operate under a business name
What is an organisation?
A group of people who come together to achieve a common goal or set of objectives
Do for-profit organisations make a profit?
For profit organisations can make a profit, it its just put back into the organisation to fund other services
Market Share
The portion of total market sales the business had compared to its competitors
Sole Trader
One owner
Partnership
Owned by several people (up to 20)
Multinational Corporation
Company has branches in many different countries
Number of Employees in:
Small
Medium
Large
Small - less that 20
Medium - 21 to 199
Large - 200+
Ownership:
Small
Medium
Large
Small - up to 5 owners
Medium - 6 to 199 owners
Large - owned by thousand of public shareholders
Legal Structure:
Small
Medium
Large
Small - Sole Trader or Partnership
Medium - Partnership or Private Company
Large - Public Company
Decision Making:
Small
Medium
Large
Small - owner responsible for majority of decisions
Medium - owner basically responsible for decisions, more compacted decisions, influence of directors
Large - complex decision making due to division of responsibilities among directors & management.
Sources of finance:
Small
Medium
Large
Small - owner equity or loan, difficulties accessing loan due to unlimited liability
Medium - owner/partner equity, or loan which are now easier to access, or private shareholders
Large - many resources; cash reserves, retained profit, sale of shares and loans from domestic and overseas institutions
Market Share:
Small
Medium
Large
Small - small, usually occupy local area; not dominant in industry
Medium - medium sized, dominance in a certain region; some market dominance
Large - large, multinational corporations that dominate the markets of many countries
Corporation
A company or group of people
Objective
States what the organisation expects to achieve over a set period of time
Three main types of Objectives
- Financial
- Social
- Personal
What do all objective have in common?
They are the motivating force behind an organisation.
Financial Objective
Ways to maximise profit
- Increase Sales
- Increase Market Share
- Expand the Business
Return on Investment
A positive of negative percentage that relates the money gain or lost on an investment. The return on the investment occurs over a 12 month period.
Why is the return on investment important to investors?
The profit gained by the business in returned it its investors, therefore the return on the investment is important
Social Objectives
Ways in which to benefit the community as well as achieving financial objectives
- community service
- providing employment
- social justice
- sustainability
Personal Objectives
The objectives of the business owner of manger not usually made public. To motivate them to and their persist for success.
Economy
A system set up to determine; what products to produce, how these are to be produced and how these products will be distributed and to who.
What type of economic system does Australia use?
Market Capitalist Economy.
Where private buyers and sellers provide the system.
What contributions do small businesses have on the economy?
- provide employment
- contribute to taxation revenue
- boost economic growth
- export earnings
Tax revenue
A tax on income earned.
Small businesses pay tax on certain aspect according to the way their run their business, as do their employees on the income they make.
What does taxation provide?
Taxation is used to provide findings for essential services that benefit the whole community.
Economic Growth
Occurs when the nations real value of good and services increases over a set period of time.
GDP
Gross Domestic Product
The total market value of all final good produced by a country over a set period of time.
Exports
Refers to the sale of our goods and services to other countries.
Product
Refers to a good or a service that is being sold in the market
Small business export earnings?
Small businesses in agribusiness, manufacturing, professional services and entertainment are all experiencing rapid export growth contributing approximately $1.2 billion to Australia’s export earnings.
What makes small businesses favourable by overseas buyers?
The flexibility of small businesses makes them more responsive to the needs of overseas markets.
Business Environments
Refers to the surrounding conditions in which the business operates in.
What are the two categories that business environments can be divided into?
Internal and External Environments
Internal Environments
Includes those elements that make up the business itself, such as the people within the business.
- employees
- managers
- management style
- corporate culture
- company policies
Management Style
Ways in which the manager manages his/her employees
Corporate culture
A set of unwritten rules that spell out how people are to behave most of the time.
Company policy
A general guide to help employees deal with recurring situations
External Environment
Includes those factors over which the business has little control over.
What are the two further categories the external environment divides into?
External operating environment and external macro environment.
External Operating Environment
Refers to the outside stakeholders with whom the business interacts with in conducting its business, and may also have a direct impact on the business operations.
Stakeholder
A group or individual who have a particular interest in or are affected by the activities of the business
Who are the four main stakeholders?
- customers
- suppliers
- interest groups
- competitors
Customers
The individual or organisation purchasing your products,
To ensure success and profitability, a business needs to recognise and asses changes in customer tasted so it can constantly satisfy their needs and wants
Suppliers
Organisation or individuals that supply the resources needed to conduct business operations.
Competitors
Other businesses that offer rival products
Competition
The rivalry among business that seek to satisfy a smiliar market
Sustainable competitive advantage
The ability of a business to develop strategies that ensure it has an edge over its competitors.
Interest groups
Groups of people who try to influences the organisation to act in a certain way and persuade them to change its policies
Types of Interest Groups
- Trade Unions
- Consumer Groups
- Specific issue groups
The External Macro Environment
The broad conditions and trends in the economy and society within which a business operates.
Examples of external macro factors:
- Political Forces
- Economic Forces
- Legal Forces
- Technological Forces
- Social Forces
Political Forces
Government imposes its own direct and indirect regulations to which all businesses must adhere.
Free Trade
When trading in and out of the county is possible with any restrictions.
Tariff
A tax imposed on imported goods.
Economic Forces
The level of economic activity from periods of growth to recession affects both the business and their customer. In the businesses ability to compete and customers willingness and ability to spend.
Legal Forces
Changes that occur to the legal framework within which the business must operate. Such as interpretations of current laws and a large number of new statues being introduced which will all affect businesses conduct
Technological Forces
The development of new products and processes to create new opportunities for the business. Although failure to adopt new technology will result in the businesses products being out dated and very much obsolete
Social Forces
Changes that have occurred within society that have a direct affect on business operations, such as certain demographics and ethics.
Workplace diversity
Means that a multitude of individual differences exist among people in the workplace
Business Ethics
The application of moral standards and values to business behaviour
Socially Responsibilty
Giving back to the community above and beyond what is expected by law.
Socially Responsible Management
Managing an organisation in such a way that the social welfare of the community is taken into account when making business decisions.
Examples of Ethical Issues?
- Behaving fairly and honestly in business
- Truthful communication in business
- Dealing with employees ethically
- Conflict of Intrest
Conflict of Interest
When a person takes advantage of a situation or piece of information for his or her own personal gain
Corruption
The lack of honestly or integrity; by using a position of trust or authority to receive favours such as bribes
Workplace relations
The relationship between the employer and employee
Code of Conduct
A set of ethical standards by which mangers and employees should abide by.
