The Nature of a Business - Roles and Classification

Question 1

Business Definition

Answer 1

The organised effort of individuals to produce and sell, for a profit, the products that satisfy an individual’s needs and wants.

Question 2

Primary role of Business

Answer 2

Production - to produce and sell goods and services

Question 3

Secondary Roles of a Business

Answer 3

Prince Phillip Eats Ice Cream In England With Queen

Production(primary), Profit, employment, incomes, choice, innovation, entrepreneurship, wealth creation, quality of life

Question 4

Classification - Sizes of Business

Answer 4

Non employing, Micro, Small, Medium, Large

Question 5

Non employing business

Answer 5

Sole proprietorships and partnerships without employees.

Question 6

Micro business

Answer 6

5> employees

Question 7

small business

Answer 7

20> employees

Question 8

medium business

Answer 8

20-199 employees

Question 9

large business

Answer 9

200+ employees

Question 10

Classification - Geographical Spread

Answer 10

local, national, global- international, transnational, multinational, multi-domestic

Question 11

Local

Answer 11

Operates within a small area e.g. café, news agency

Question 12

National

Answer 12

Operates within Australia e.g. Woolworths

Question 13

Global

Answer 13

Operates within in many countries e.g. Qantas. Sees the world as one market.

Question 14

International

Answer 14

Produces in only one country but sells to others. Eg Sistema Plastics, Aussie Bum Swim.

Question 15

Transnational

Answer 15

Large businesses with a home in multiple countries. Eg Coca Cola, IKEA.

Question 16

Multinational Cooperation

Answer 16

Have subsidiaries in more than one country.

Question 17

Multi-domestic Cooperation

Answer 17

Subsidiaries in many countries each acting independently in the domestic market.

Question 18

Classification - Industry

Answer 18

Primary, Secondary, Tertiary- Quaternary, Quinary

Question 19

Primary Industry

Answer 19

Businesses that include the extraction of raw materials and production of natural resources. E.g. farming, fishing, mining

Question 20

Secondary Industry

Answer 20

All businesses that transform raw materials into finished products. E.g. manufacturing cars

Question 21

Tertiary

Answer 21

Performing a service for other people. E.g. healthcare, retailers

Question 22

Tertiary- Quaternary

Answer 22

Services that involve the transfer and processing of information and knowledge E.g. communication, finance, property

Question 23

Tertiary- Quinary

Answer 23

All services that have traditionally been performed in the home E.g. hospitality, tourism, childcare

Question 24

Classification - Legal Structure

Answer 24

Sole trader, partnership, Private Company, Public company, Government Business enterprises

Question 25

Sole trader + adv and disadv

Answer 25

micro- small
Only one person owns it, although it can have other employees.
+ low cost of entry, owner’s right to all profits, complete control
- unlimited liability, hold all responsibilities, limited finance, burden of management

Question 26

Partnership + adv and disadv

Answer 26

small - medium
owned and operated by between 2 and 20 people with the aim of making a profit.
+ shared responsibilities, increased injection of capital, pooled funds and talents
- personal unlimited liability, divided authority and loyalty, liable for all debts including partner’s debts, possibility of disputes

Question 27

Private company + adv and disadv

Answer 27

PTY, LTD medium
between 2 and 50 shareholders that are involved by invite-only
Incorporated business
+ Choose who has shares, less liability, make decisions.
- Everything approved by director, less input.

Question 28

Public Company + adv and disadv

Answer 28

LTD, large, Transnational
Incorporated business
There can be an unlimited number of shareholders in a public company.
listed on the stock exchange which means the public can buy and sell shares
+ more funding, low liability, more success as larger.
- less input, dividends, don’t choose who invests.

Question 29

Factors influencing choice of legal structure

Answer 29

Size- businesses start small and as they grow change in legal structure may be needed, more partners, become company etc
Ownership- Sole trader = complete control, Partnerships = Control shared with multiple bodies (2-20) etc
Finance- Business expands = more finance needed, - Money used to purchase new equipment etc, limited liability = use of personal finance