Nature of Business Flashcards
What is purpose of Research and Development
Creation of new products (invention) and improvement of existing ones (innovation)
What is a person who transforms their ideas into a new business
Entrepreneur
What is quality of life
Well being of an individual, and is a combination of
material and non-material benefits.
Business purpose
Provide goods and services to satisfy wants and needs
Three benefits of business to economy
Provide employment
improves quality of life
provides income for owner
Functions of business
Choice Profit Incomes Entrepreneur and risk Wealth Creation in economy Quality of life
Main ways of classifying business
geographical spread
Industry sector
Legal structure
Size
Types of geographical spread
Local
National
Transnational
Global
Types of industry
Primary
Secondary
Tertiary (quaternary, quinary)
what is primary industry
Deals with raw materials e.g. mining/fishing
What is secondary industry
Businesses that take output of firms in primary industry and produce into finished/semi finished goods/services e.g. manufacturing
What is tertiary industry
Provides a service
What is Quaternary industry
Service that involves transfer and processing of information
What is Quinary industry
Services that have traditionally been performed at home
Types of legal structure
Sole trader
partnership
private company
public company
What is incorporated business
private/public company. business is separate legal entity limited liability
What is unincorporated business
Sole trader/partnership business has unlimited liability
How many people in most partnerships
2-20
Difference between private and public company
Public is listed on stock exchange private is not
Reasons for choice of legal structure
size of business
ownership structure
finance
different sizes of business
micro
small
medium
large
number of employees for each business
micro 5
small 5-20
medium 20-199
large 200+
external influences in business environment
Financial Government Economic Legal Social Political markets competitive situation
internal influences in business environment
Product location management resource management stakeholders business culture
Location factors
visibility
proximity to suppliers
proximity to customers
cost
Types of business resources
Human
information
physical
financial
management influences
business structure flatter or hierarchical
Main stakeholders in business
Society employees managers shareholders customers environment
Main stages of business life cycle
establishment
growth
maturity
post-maturity
Establishment stage features
sales are erratic generating positive cash flow high fixed cost failure rate high small employee number and customer base
Growth stage features
expanding too rapidly
business diversifying
production costs decrease due to economies of scale
difference between mergers and acquisitions
merger 2 businesses combine and acquisition one business acquires another
Maturity features
business growth slows
sales plateau
costs need to be controlled
business must avoid complacency
Main outcomes of post-maturity stage
steady state-business continues
decline-business fails
renewal-increase in sales and profits
Factors that contribute to business decline
Lack of management expertise
Lack of sufficient money
Difference between voluntary and involuntary cessation
voluntary- business decides
involuntary- forced by other
What happens when unincorporated business goes fails
Bankruptcy (voluntary or involuntary)
What is bankruptcy
declaration business or person is unable to pay their debts
What happens when company fails
placed in voluntary administration then if that fails placed into voluntary or involuntary cessation, then liquidation
What is voluntary administration
When person takes over business with hope of saving the business
What is liquidation
When business assets are turned into cash to pay back creditors
what is product life cycle
intro
growth
maturity
decline/product extension
Types of business expansion
horizontal/vertical integration, diversification
what is vertical integration
movement along supply chain
forward/backward
what is horizontal integration
acquiring another business
