Nature Of business Flashcards
Definition of Business
The organised effort of individuals to produce and sell, for a profit, products that satisfy consumers needs and wants.
What do Business provide
Goods and Services
What are Goods
- Tangible
- Can be touched and seen (Woolworths)
What are Services
- Intangible
- Things done for us, more like an experience. (Taxi or Hairdresser)
How many roles of businesss?
7
Profit
The money left over after all the expenses have been decuted from the revenue.
How does profit work?
Revenue - Expenses = Profit
What is revenue
Money received from selling products
What is expenses?
Costs faced
Employment
When businesses hire people to work for them
Income
Money workers recieve in return
Choice
Consumers are allowed to choose the products that suits them best
Primary Industry
Businesses where production involve natrual resoruces
e.g. farming & minning
Entrepreneurship
When people start and operate their own busienss
Innovation
How businesses come up with new product ideas or improve existing ones.
Risk
Entrepreneurship comes with risks as entreprenuers will invest their time and money into ideas that might not always work out.
Quality of life
Improves consumer lives by providing employment and goods & services.
What are the different business sizes?
Small, Medium and Large
Wealth
Enabling the flow of money to pay for all expenses and operate.
What is a medium size business
- 20-199 employees
- Classifed as a aprtnerhsip or private company owned by a few private share holders.
- Flexible decision making
- Easier to get money from loans or private shareholders.
Larger customer base
Teritiary Industry
Using things made in other industries to perform a service
What is a small business?
- Less than 20 people
- Usually owned by one person
- Sole trader
- Hard to recive finance
- Less costumers
What is a large business?
- Usually have more than 200 employess
- Private company or public companies
- Decision are usally made by shareholders or directors
- Banks are likely to lend money
- National or Global market share
What is Geographical Spread?
How big the area is that they sell to.
What is local business?
A family owned corner store
What is a Global Business?
Products you can find anywhere from Asia to South America
e.g. Coco Cola
What is an industry?
A group of busiensses that are involved in similar types of productions.
e.g. electronics & fast food
What is a National Business?
Stores within every state
e.g. David Jones
Secondary industry
Taking raw materials and making them into products
(raw materials from primary industry)
Quinary
All the services that used to be formed in the home.
e.g. hair dressing and childcare
Quaternary
Services that involve transferring and processing information and knowledge.
e.g. schools and banks
What is Liability?
Another word for legal responsibility
What is a Private Business Enterprise?
Owned by private individudals.
e.g. local resturants or mc donalds
What is a Public Business Enterprise?
Owned by the government.
e.g. Australian Post or Service NSW
What is Unlimited Liability?
The business and the owner are the same legal entity.
- Owner is fully responsible for all business debts
- Personal items can be sold to pay back business debts.
What is Limited Liability?
The business has a seperate legal entity to the owner.
- The corporation is responsible for business debts.
What are shareholders?
People that put money into the business in return for owning part of it.
Sole Trader
A business that is owned and operated by one person.
Advantage: owner can make all the decisions themsleves and have all the profits.
Disadvantage: Unlimited liability
Partnership
A business owned and operated between 2-20 people.
Advantage Workload is shared.
Disadvantage: unlimited liability and possibly not all agreeing on decisions.
Private Company
Business owners can invite between 2-50 people to be private shareholders.
Advantage: Limited Liability
Disadvantage: Going through process of incorporation is expensive.
What are Shareholders?
A person in the company that owns a sharemarket.
Public company
Offers shares to members of the public and can buy shares on exchanges.
Advantage: limited liability
Disadvantage: Have to public financial reports for the public to see.
e.g. New York Stock Exchange & Australian Stock Exchange
What are external influences?
Factors outside of a business’s control that cn affect their performance.
List the external influences
- Economic influences
- Financial influences
- Geographical influences
- Social influences
- Legal influences
Why are external factors important?
- Consumers might not buy their products.
- They could end up paying lots of extra costs.
- They wont make as much profit.
Economic influence
Periods of growth and decline due to the general level of economic activity.
- changes how much people are spending.
Menaing of Boom
When the economy is expanding
-Consumers are more likely to spend more money during this period.
Meaning of Recession
When the economy is contracting.
- Consumers are saving their money
- They dont need/make as much product, staff and sales.
Financial Influence
How businesses gets money.
- become easier due to online banking.
Geographical Influence
Where businesses can source inputs, to sell their products and what type of consumers they sell to.
Social Influecne
Must identify and repsond to changes in taste, fashion and culture.
Legal Influence
Ensure businesses comply with the laws and regulations.
Political Influence
The government impacts businesses through the polices and decisions.
Instituional influences
Different institutions place regulations on businesses that they need to stick to.
e.g. fair work commision
Technologocial influence
Advances in technology that make practices more efficent and easier.
Competition influence
Competition between businesses forces them to aim to produce the best possible product at a low cost.
e.g. coles and woolies
Changes in financial market
Easier for businesses to access overseas funding.
Changes in labour markets
Increased demand for skilled workers.
Changes in consumer markets
Businesses can sell to a global market.
What are internal influences?
Factors within the business that managers can change that affect their business performance.
Product influence
The type of goods and services that are produced influences business.
e.g. different meals of the day in a caferteria
Location influence
Where the managers decide to set up.
- Good visbility
- close to suppliers, costumers, support servics.
Resoruce influence
- Human: Who they hire
- Information: What kind of information they need
- Physical: Physical objects that are needed
- Financial: where they can get their finance
Managment influence
Owners decide the type of managment the business has.
e.g. training waitress to be a barista.
Business culture influence
Ideas, values and beliefs shared by members of the business.
e.g. formal and strict or relxaed.
What is a Stakeholder?
Anyone who is intersted in the business or affceted by what they do.
e.g. business gets shut down and you lose your job.
Who are StakeHolders?
- Shareholders
- Consumers
- Managers
- Society
- The environment
- Employees
ShareHolders
People who have bought ideas in a company, meaning they’re a part owner.
- only a stakeholder for private and public companies
- each shareholder gets a share of money.
Stakeholder: Consumer
affected by things such as the products available and store locations.
Stakeholder: Society
We’re all affected by what business do.
e.g. donations, supporting public events and setting trends.
What is a dividend?
When a company gives some of its money to each shareholder.
Stakeholder: Managers
Job is to run the business, any decision they make will affect their work and income.
Stakeholder: Employee’s
Employee’s are stakeholders as they depend on getting paid.
Stakeholder: Environment
Business production which realese polution into the earth contributing to global warming.
Establishment stage
Beginning of a business, when they are small (sole trader or partnership)
- highest risk anf failure.
Growth Stage
Growth of the business, when sales increase and new products are introduced.
- not to expand rapidly
Merger
When two sepeate bsuiness join to form a new organisation.
- sell the same thing or different products.
Acquistion
One business buys another to have control and use their resources.
Vertical integration
business expands at different but related levels in the production and selling of a product.
e.g. buying a supplier
Horizontal integration
Business expands with another firm that sells and makes similar products.
- share resources
Post-Maturity Stage
Steady state: stay in maturity phase
Renewal: Expand into new markets, make new productions, acquire other companies.
Decline: Sales fall and busines fails.
Diversification integration
When a business expands with another business in an unrelated industry
Maturity Stage
When sales slow down and there’s no more room in the market to keep selling the product.
- meidum or large business
- private or public company
Voluntary cessation
Choose to stop business
Involuntary cessation
Forced to stop business operations by others.
Bankruptcy
Unlimited lianility, personal items can be sold to pay back.
Liquidation
company declares they are unable to pay back debts and assests are sold to pay back.
Voluntary administration
independent person is hired to operate the business to get them out of debt if previous manager wasn;t effective.
Reason for decline: Lacking managment expertise
bad manager that makes poor decisions or fails to update business plan.
Reason for decline: Lacks sufficent capital
lacks of sufficent money
- purchase materials
- finance production
- paying workers
Reason for decline: Not meeting consumers need
doesnt deliver a good or service that people want to buy.
Reason for decline: Competiton
Competitors might offer better goods or servcies or lower costs that businesses cant compete with
Process
A liquidator is hired to sell company to pay creditors
