NATURE OF BUSINESS Flashcards
*** ROLE OF BUSINESS
- The nature of a business
- producing goods & services
- functions of a B
PRODUCING G&Ss
Business …
the organised effort of individuals to produce & sell products for a profit
PRODUCING G&Ss
Product…
either a goods or service or combination of both
E.G restaurant, zoo
PRODUCING G&Ss
Goods…
tangible, touchable → furniture
Goods are either intermediate or final.
PRODUCING G&Ss
Services…
intangible, an experience, goods can be attached to it → mechanic, hairdresser
PRODUCING G&Ss
Intermediate…
(made into something further) → fabric→ clothes.
PRODUCING G&Ss
Final…
oil is final product from an oil company
FUNCTIONS OF A BUSINESS (8)
profit, employment, incomes, choice, innovation, entrepreneurship & risk, wealth, quality of life.
PROFIT
Main function of a B, expenses deducted from revenue
increase profit
- ↑ sales → marketing etc
↓ expenses, economy of scale (bulk), labour, global source
EMPLOYMENT
Main source of employment in Au is from SMEs
Employment → income → self esteem → role in society
INCOMES
Bs provide income for individuals.
- Wage, salary, commision, dividend
CHOICE
Bs give consumer alternatives & freedom to choose between G&Ss
Adv→
Flexibility in PRICE of products between Bs→ monopoly, Auspost.
Improved FEATURES in products→competitive adv→meets the needs/wants of ppl
INNOVATION
variation to an existing product > done through market research
invention
complete new product
ENTREPRENEURSHIP & RISK
ability & willingness to start, operate & assume the risk of a B venture to make a profit.
→ John Foley, co founder CEO of Peloton, 6 year built 4.15B US→ rapid trend of spin classes
WEALTH
A B receives money from customers when they sell a product or service Simultaneously a B must expand money in order to pay expenses
QUALITY OF LIFE
- Bs utilise customers want to get ahead of their competition
- consumer trends & influences that affect the spending of customers forces Bs to change & evolve.
- these imposed consumer constraints compel Bs to make more of what customers want
Quality & skills of an entrepreneur
positive risk takers, adventurous, innovative, financial risk taking, connection, resilient, creativity, faith, good people person, humility, willingness to listen & learn etc.
*** TYPES OF BUSINESS
- Classification of business
- Factors influencing choice of legal structure
CLASSIFICATION OF BUSINESS
- size, geographical spread, legal structure, industry
SIZE
micro, small, medium large
SIZE
Microbusiness
> 5
SIZE
Small
5 - 19
SIZE
Medium
20 -199
SIZE
Large
200 or more
% of SMEs in AU…
98%
Size is differientiated in Bs through…
no. employees, no. owners, market share, legal structure
Qualitative descriptions help to determine size…
Owner making most management decisions, owner provides capital, finance, B has little control within market, independently owned or funded, the B is locally based
Quantative descriptions helpt to determine size…
- micro, small, no. employees
GEOGRAPHICAL SPREAD
The prescence of a B and the range of its products across a suburb, city, state, country or globe
- local - national - global.
GEOGRAPHICAL SPREAD
Local
- restricted geo location
- serves the surrounding area
E.G hairdresser
GEOGRAPHICAL SPREAD
National
- operates within just one country
E.G Coles, myer, David jones
GEOGRAPHICAL SPREAD
Global
- large companies that have branches in numerous countries
- multinational
E.G Mcdonalds
INDUSTRY SECTOR (5)
primary, quaternary, tertiary, secondary, quinary
Industry…
Bs that are involved in similar types of products
INDUSTRY SECTOR
Primary
the collection of natural resources
E.G mining, fishing, agriculture
INDUSTRY SECTOR
Secondary
production of finished or semi-finished goods
E.G raw wool, fabric
INDUSTRY SECTOR
Tertiary
performing a service
E.G → labour, services→ plumber, gelato store
INDUSTRY SECTOR
Quaternary
the transferring and processing of information and knowledge
E.G doctor, teacher
INDUSTRY SECTOR
Quinary
services that have traditionally been performed in the home
E.G cooking
LEGAL STRUCTURE (4/5)
sole trader, partnership, public company, private/proprietary, govt enterprise
Unincorporated
name legally tied to the B > unlimited liability
Incorporated
seperate entity > limited liability
Limited liability
shareholders are legally responsible for the debts of the company, only to the extent of the nominal value of their shares.
Unlimited liability
legal obligations general partners & sale proprietors as they are liable for all B debts if B can’t pay its liabilities
> completely liable
LEGAL STRUCTURE
Sole trader
- unincorporated B entity
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