Nature of Business Flashcards
What is a business?
The organised effort of individuals to produce and sell for a profit, goods and services that satisfy individuals’ needs and wants.
What is a good?
Tangible items that can be seen and touches
What is a service?
Non tangible items (done by people for you)
What are the functions of a business?
Profit
Employment
Incomes
Choice
Innovation
Entrepreneurship and risk
Wealth
Quality of life
What are the sizes of a business?
- Small ( less than 20 employees)
- Medium ( 20-199 employees)
- Large (200 or more employees)
What are the types of geographical spread?
- Local (serves surrounding area)
- National (operates within just one country)
- Global (TNC) - Large business that has a home base in one country and is partially or wholly owned in another
What is the primary industry?
- Production associated with natural resources (raw materials)
- E.g wheat and barli
What is the secondary industry?
- Involves raw material and making it into a finished or semi-finished product
- E.G textiles
What is the tertiary industry?
- Involves performing a service for other people
What is the quaternary industry?
Transfer and processing of information and knowledge
What is the quinary industry?
Domestic services (traditionally in the home)
What types of business are unincorporated?
Sole trader
partnership
What is a sole trader?
- One owner
- Makes all the decisions for the business
- Provides the finance and takes responsibility for the operation of the business
What are the advantages and disadvantages of a sole trader?
Adv:
- Low cost of entry
- Simplest form
Dis:
- Unlimited liability for business debts
- End of the business when the owner dies
What is a partnership?
- Operated by 2-20 people
- No legal entity
Advantages and disadvantages of a partnership
Adv:
- Low start up cost
- Less costly to operate than a company
Dis:
- Unlimited liability
- Liability for all debts including partner’s
What is are the types of incorporated business’?
- Private company
- Public company
What is the establishment stage?
- Foundation of the business to get enough cash flow
- Plan
- Prepare for cash problems with savings
- Develop effective marketing strategies
What is the growth stage?
- Increased sale
- New products
- Improved cash flow
- Long term planning
- Work hard
Effective credit policy
What are the types of business growth
- Merger
- Takeover
What is diversification
Taking over or merging with another business in a completely different industry
What is vertical integration?
When a business expands at different but related levels in production
What is horizontal integration?
Taking over or merging with another firm that makes similar products
What is the maturity stage?
Formal organisational structure
Sale increase but at a slower rate
- Focus on decreasing production costs
- Expand range of products
