Section 1- Business And Its Environment°°°°°°°°section 2- People In Organisations Flashcards
Definitions 🤓
Consumer goods :
The physical and tangible goods sold to the general public - they include durable consumer goods, such as cars and washing machines; and non-durable goods, such as food, drinks and sweets that can only be used once (have a short life span)
Consumer services
The non-tangible goods sold to the general public - they include hotel accommodation 🏩, insurance services and hair salons. This is when a business does something for their consumer (providing the service) in return for money in most cases
Capital goods
The physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles.
Creating value
Increasing the difference between the cost of purchasing the bought in materials and the price the finished goods are sold for
Added value
The difference between the cost of purchasing bought-in materials and the price the finished goods are sold for.
Opportunity cost
The benefit of the next desired option which is given up. This concept exists for all economic decision makers :consumers, businesses and government
Entrepreneur 😎
Someone who takes the financial risk of starting and managing a new venture.
The characteristics of successful entrepreneurs is :innovation, commitment and self motivation, multiskilled, leadership skills, self confidence and ability to bounce back, and risk taking.
The challenges they face : identifying successful business opportunities, sourcing capital, determining location, competition and building a customer base.
Social enterprise
a business with mainly social objectives that reinvest most of its profits into benefiting society (the community) rather than maximising returns to owners.
Their objectives are referred to as the triple bottom line : economic, social and environmental.
Common features include :
- Directly produce g/s
- have social aims & use ethical ways of achieving them
- Need surplus /profit to survive as they cannot rely on donations as charities do
Triple bottom line
The three objectives of social enterprises : economic, social and environmental.
💵 Economic refers to making a profit to reinvest back into the business and provide some to owners.
👬Social insinuates that they will provide jobs / support for locals, often disadvantaged communities.
🌄Environmental refers to protecting the environment and managing the business in a environmentally sustainable way.
Primary sector business activity
Firms engaged in farming, fishing 🎣, oil extraction and all other industries that extract resources so that they can either be used or processed by other firms.
Secondary sector business activity
Firms that manufacture and process products from natural resources, including computers, brewing, clothes - making and construction 🚧
Tertiary sector business activities
Firms that provide services to consumers and other businesses, such as retailing, transport 🚘, insurance, banking, hotels 🏩, tourism and telecommunications
Public ⛣ sector
Comprises of organisations accountable to and controlled by central / local government (the state and municipality )
Private sector
Comprises of business owned and controlled by individuals / groups of individuals
Mixed economy
Economic resources are owned and controlled by both the private and public ⛣ sectors. E. G South Africa 🌍
Free-market economy
Economic resources are owned largely by the private sector with very little state intervention. E. G US
Command economy
Economic resources are owned, planned and controlled by the the state. E. G North Korea
Sole trader/proprietor
A business in which one person provides the permanent ♾ finance and, in return, has full 🌕 control of the business and is able to keep all the profits.
An advantage would be that it is easy to set up(no legal formalities) and a disadvantage is that it has unlimited liability (all of owners assets are potentially at risk)
Business
Any organisation that uses resources to meet the needs and wants of customers by providing a product or service they demand
Partnership ⚯
A business formed by 2 or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
An advantage s that partners may specialise in different areas of business management. A disadvantage is that profits are shared as well as there is unlimited liability.
Limited liability
The only liability - or potential loss - a shareholder has if the company fails is the amount they invested into the company, not the total wealth of the shareholder
Private limited company
A small to medium sized business that is owned by shareholders who are often members of the same family ; this company cannot sell shares to the general public.
An advantage is that shareholders have limited liability. A disadvantage is that capita cannot be raised by the sale of shares.
Share
A certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.
Shareholder
A person / institution owning shares in a limited company (part ownership)
Public ⛣ limited company
A limited company, often a large business, with the legal right to sell shares to the general public - share prices are quoted on the national stock exchange 💱.
An advantage is continuity and a disadvantage is share prices are subject to fluctuation.
Memorandum of association
This states the name of the company, the address of the head office 🏢 through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business.
Articles of association
The document covers the internals workings ⚒ and controls of the business - for example the names of directors and the procedures to be followed at the at meetings will be detailed.
Cooperative
Very common form of ownership, especially in agriculture and retailing. All members can contribute to the running of the business, sharing the workload, responsibilities and decision-making, although in larger cooperatives some delegation to professional managers takes place. All members have one vote at important meetings and profits are equally shared. An advantage is buying bulk and a disadvantage is slow decision - making if all members are to be consulted on important issues.
Franchise
A business that uses the name, logo and trading systems of an existing successful business e.g. Mc Donald’s.
An advantage is that there are fewer chances of new business failing as an established brand and product are being used. A disadvantage is that the initial franchise license fee can be expensive.
Joint venture
2 or more businesses agree to work closely together on a particular project for mutual benefit and create a separate business division ➗ to do so.
One of the reasons for having one is the costs and risks of a new business venture are shared - this is a major consideration when the cost of developing new products is rising rapidly. A problem of a joint venture is that the business failure of one of the partners would put the whole project at risk
Holding company
A business organisation that owns and controls a number of separate businesses, but does not unite them into one unified company. Often, the separate business are in completely different markets, meaning that the holding companies have diverse interests
Public cooperation
A business enterprise owned and controlled by the state - also known as nationalised industry. They usually do not have profit as a major objective.
An advantage is that their finance raised mainly from the government and a disadvantage is that they have a tendency towards inefficiency due to lack of strick profits margins.
Revenue
The total value of sales made by a business in a given period of time
Capital employed
The total value of all long - term finance invested in the business
