Term 1 - (Nature of Business) Flashcards
What four things can a business be classified by?
Size, location, industry, and legal structure.
How many employees does each size of business have?
Small: less than 20
Medium: less than 200
Large: More than 200
Micro: Less than 5
What are the five different industries?
Primary: Businesses that produce or extract raw materials that are by other sections/firms. E.g. fishing, farming, and mining.
Secondary: Business that produce intermediate or finished products by using raw materials made in primary industry. E.g using raw material to make steel, which is a finished product used to create a final product (like vehicles).
Tertiary: Businesses that provide SERVICE to their customers. E.g dentists, solicitors, museums, health workers, lawyers and retailers.
Quaternary: Business that provide products relating to finance, education, technology, and communication. E.g. Vodafone and Commbank.
Quinary: Businesses that provide service relating to activities that can be done at home. E.g childcare, domestic cleaning, cooking/hospitality, tourism.
What is a sole trader?
Business is owned and operated by 1 person. The owner has unlimited liability i.e. when the owner is responsible for all the debs of the business.
What is a partnership?
Business is owned and operated by 2-20 people. The owners also have unlimited liability. There are also two types of partnerships: limited and general. A partnership can be made verbally or in writing or by implication.
What are the different legal structures?
Unincorporated: Sole trader and partnership.
Incorporated: Private and public.
What does unincorporated mean?
Unincorporated is when a business entity and the owners are the same. When the owner dies then so too does the business entity. E.g. sole trader and partnership
What does incorporated mean?
The term incorporation refers to the process companies go through to become a separate legal entity from the owners. This means the business exists in its own right, its own legal entity. Regardless of what happens to individual owners (shareholders) of the company, the business continues to operate. This also means that owners have limited liability. The business has taken on a life of its own. E.g Private and Public Companies.
Difference between public and private company.
Private company only has 2-50 private shareholders that are approved by owners. Public companies has shares listed on stock exchange.
What is a government business enterprise?
Government owned and run
Often referred to as the public sector. Provide essential community services. E.g. Australia Post, Rail Corp, Sydney Water
Since 1980’s, many of them are privatised (selling the ownership to private investors). The rationale is to improve efficiency
In periods of strong economic growth, characteristics include what?
Higher employment as businesses are willing to hire more staff.
Higher chance of wage rise.
Increase consumption due to increase consumer confidence (higher wage growth, earlier to get a job) and better job security.
Increase level of inflation (general increase in the price of goods and services). With more consumer spending, businesses will increase their price to maximise profit.
In period of economic recession characteristics include what?
Higher unemployment as businesses are less likely to hire more staff due to decrease in sales.
Lower change of wager rise.
Decrease consumption due to lower consumer confidence (slower wage growth, harder to get a job) and lower job security.
Stable or lower level of inflation. With less consumer spending business will be less likely to increase their price.
What are external influences of a business?
- Technological
- Competitive situation
- Economy
What are internal influences of a business?
- Products
- Management
What are the four types of market concentration?
A monopoly - is complete concentration by one firm in the industry, e.g. Australia Post.
An oligopoly - where a small number of larger firms have a greater control over a market, e.g. car manufacturers.
Monopolistic competition - where there is a large number of buyers and seller in a particular market but products are different, e.g. local retailing shops.
Perfect competition - where there is a large number of small firms that sell similar products. They are unable to differentiate products from each other and so can only use price as a way of achieving market share, e.g. fruit and vegetable growers.
