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Business Studies > Topic 1 - The Nature of Business > Flashcards

Topic 1 - The Nature of Business Flashcards

1
Q

What is The Nature of Business?

A

The nature of business is a statement about a company’s offering to its clients, its industry, legal structure, or any other distinctive qualities of the business.

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2
Q

Define Business?

A

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

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3
Q

Define product?

A

A product is a good or service that can be bought or sold.

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4
Q

Define goods?

A

Goods are tangible products, they can be seen or touched.

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5
Q

Define services?

A

Services are intangible products, they are done for you by others.

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6
Q

What is a finished product?

A

An item that is ready for customers to buy and use.

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7
Q

Define production?

A

Refers to those activities undertaken by the business that combine the resources to create products that satisfy consumers’ needs and wants.

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8
Q

Outline the role of a business?

A

To produce and distribute goods and services to satisfy a public need or demand

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9
Q

Define profit?

A

This is the return or reward, that business owners receive for producing products that consumers need and want.

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10
Q

Define revenue?

A

The money a business receives as payment for its products.

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11
Q

Define operating expenses?

A

All costs of running a business except the cost of goods sold.

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12
Q

Define risk?

A

Refers to the possibility of loss.

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13
Q

Define income?

A

Money received by a person for providing his or her labour, or a business from a return on its investments.

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14
Q

Define wage?

A

Money that is received by workers, usually on a weekly basis, for services they provide to an employer.

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15
Q

Define salary?

A

A fixed amount of money paid on a regular basis, usually fortnightly or monthly, to a permanent employee of a business.

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16
Q

Define shareholders?

A

People who are part owners of a company because they own a number of shares.

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17
Q

Define dividend?

A

Part of a business’s profit that is divided among shareholders.

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18
Q

Define choice?

A

The act of selecting among alternatives.

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19
Q

Define innovation?

A

an improvement on something already established.

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20
Q

Define invention?

A

The development of something new.

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21
Q

Define entrepreneur?

A

Someone who starts operates and assumes the risk of a business venture in the hope of making a profit.

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22
Q

Define QoL?

A

Quality of life refers to the overall well-being of an individual and is a combination of both material and non-material benefits

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23
Q

Define market share?

A

Refers to the business’s share of the total industry sales for a particular product.

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24
Q

What is a transnational (multinational) corporation?

A

A company that has branches in many different countries.

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25
Q

Define micro business?

A

Employs fewer than five people (including the owner).

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26
Q

SOHO?

A

(small office home office)

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27
Q

Geographical spread?

A

The presence of a business and the range of its products across a suburb, city, state or country or the globe.

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28
Q

Local business?

A

a very restricted geographical spread; it serves the surrounding area.

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29
Q

National business?

A

One that operates within just one country.

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30
Q

Reasons for business expansions?

A
  1. Increase in sales
  2. Desire to increase profits
  3. Increase in market share
  4. Global consumers
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31
Q

E-commerce?

A

The buying and selling of information and products via the internet.

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32
Q

Primary industry?

A

Includes all those businesses in which production is directly associated with natural resources.
E.g FARMING

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33
Q

Secondary industry?

A

Involves taking a raw material and making it into a finished or semi-finished product. E.g COAL

34
Q

Tertiary industry?

A

Involves performing a service for other people. E.g DENTIST

35
Q

Quaternary industry?

A

Includes services that involve the transfer and processing of information and knowledge. E.g Education

36
Q

Quinary industry?

A

Includes all services that have traditionally been performed in the home. E.g craft-based activities

37
Q

Incorporated business structure?

A

Refers to the process companies go through to become a separate legal entity from the owner/s. 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.

38
Q

Unincorporated business structure?

A

An unincorporated business is a sole trader or partnership where the business entity and the owner are one and the same. When the owner dies then so too does the business entity. The most common legal structure for a small business in Australia is the unincorporated business entity because this structure is the easiest and cheapest to establish.

39
Q

Sole trader?

A

A business that is owned and operated by only one person.

40
Q

Unlimited liability?

A

Occurs when the business owner is personally responsible for all the debts of his or her business.

41
Q

Partnership?

A

A legal business structure that is owned and operated by between two and 20 people with the aim of making a profit.

42
Q

Incorporation?

A

The process that companies go through to become incorporated, i.e. to become a registered company and a separate legal entity.

43
Q

Limited liability?

A

A feature of corporate ownership that limits each owner’s fi nancial liability to the amount of money he or she has paid for the business’s shares.

44
Q

A proprietary (private) company?

A

Is an incorporated business and usually has between two and 50 private shareholders.

45
Q

Public companies?

A

The shares for public companies are listed on the Australian Securities Exchange, and the general public may buy and sell shares in those companies.

46
Q

Government enterprises?

A

government-owned and operated. (They are also known as government business enterprises — GBEs.)

47
Q

Privatisation?

A

The process of transferring the ownership of a government business to the private sector.

48
Q

Franchise?

A

Means buying the rights from another business to distribute its product under its name.

49
Q

Franchisor?

A

An individual or business that grants a franchise.

50
Q

Franchisee?

A

An individual or business that purchases a franchise.

51
Q

Factors influencing the choice of legal structure?

A
  1. size of the business
  2. ownership structure
  3. finances needed.
52
Q

A float?

A

The raising of capital in a company through the sale of shares to the public.

53
Q

Prospectus?

A

A document giving details of a company and inviting the public to buy shares in it.

54
Q

Venture capital?

A

Is money that is invested in small and sometimes struggling businesses that have the potential to become very successful.

55
Q

Business environment?

A

Refers to the surrounding conditions in which the business operates. It can be divided into two broad categories: internal and external.

56
Q

External environment?

A

Includes those factors over which the business has very little control.

57
Q

Internal environment?

A

Includes those factors over which the business has some degree of control.

58
Q

External influences on businesses?

A

Economic, Financial, Geographic, Social, Legal, Political, Institutional, Technological, Competitive situation, Market.

59
Q

Economic cycles/Business cycles?

A

Are the periods of growth (‘boom’) and recession (‘bust’) that occur as a result of fluctuations in the general level of economic activity.

60
Q

Characteristics of a BOOM period?

A
  • Higher levels of employment. Employers may be willing to employ more people as they feel business sales and profits will remain stable or increase in the future.
  • Inflation may increase. In periods of growth, some business owners feel that consumers are more willing to spend their income, so they may take the opportunity to increase their prices to achieve higher profit margins.
  • Wages increase as employees seeks to keep their wages rising at the same rate as inflation.
  • The level of spending by consumers increases as they have more confidence in the economy and feel secure in their employment.
61
Q

Characteristics of a RECESSION period?

A

• Unemployment levels rise as many business owners experience a decrease in sales, which means they are unable to maintain their current number of employees
.• Inflation may remain stable or fall as consumer spending is reduced. A business must work harder to gain sales, so prices remain stable and in line with competitors.
• Wages are less likely to rise as employers are concerned about business costs and employees are concerned with job stability.
• The level of spending usually decreases as consumers who are concerned about job security are more inclined to save rather than spend any excess income.

62
Q

Deregulation?

A

The removal of government regulation from industry, with the aim of increasing efficiency and improving competition.

63
Q

Globalisation?

A

The process that sees people, goods, money, and ideas moving around the world faster and more cheaply than before.

64
Q

Dominant political issues affecting businesses?

A
  1. Labour market reform
  2. Social reforms
  3. Environmental management
  4. Taxation
65
Q

Goods and services tax (GST)

A

A broad-based tax of 10 percent on the supply of most goods and services consumed in Australia.

66
Q

Regulations?

A

Are rules, laws, or orders that businesses must follow.

67
Q

Institutional influences?

A

There are three main institutional influences on business, including government, regulatory bodies, and other groups such as trade unions and employer associations.

68
Q

Factors influencing a business’s competitiveness?

A

Ease of entry into a market for a new business
Number of competitors
Marketing strategies employed by competitors’
local and foreign competition

69
Q

Market concentration?

A

Refers to the number of competitors in a particular market. There are four main types of market concentration:

70
Q

Monopoly?

A

Is complete concentration by one fi rm in the industry, e.g. Australia Post

71
Q

Oligopoly?

A

Where a small number of larger firms have greater control over a market, e.g. car manufacturers

72
Q

Monopolistic competition?

A

Where there is a large number of buyers and sellers in a particular market, e.g. local retailing shops

73
Q

Perfect competition?

A

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.

74
Q

Marketing strategies?

A

A business will be influenced by the type of marketing measures taken by a competitor. For example, a business that uses television advertising extensively will have greater exposure to the market than a business that relies on flyers or word of mouth. Of course, the type and extent of marketing will depend on:

  1. Size of the market
  2. The size of the business
  3. Number of competitors
  4. The nature of the product
75
Q

Internal influences on a business?

A

Product, Location, Management, Recourse management, Business culture

76
Q

Location factors?

A
  1. Visibility
  2. Cost
  3. Proximity to suppliers
  4. Proximity to consumers
  5. Promxity to support services
77
Q

Responsibilities to shareholders?

A

Shareholders are the owners of the business. As such, the main responsibility of the business is to maximize the return on the shareholders’ investment in a sustainable way.

78
Q

Responsibilities to managers?

A

Managers must give an honest and accurate account of their management of the business’s resources. In return, the business has to support the actions of its management. Adequate resourcing levels, clear lines of communication, and delegation of authority are necessary preconditions for successful management.

79
Q

The business life cycle?

A

Refers to the stages of growth and development a business can experience.

80
Q

Cash flow?

A

Is simply the money coming into the business in the form of cash receipts, and the money leaving the business as cash payments.

81
Q

An acquisition (takeover)?

A

Occurs when one business takes control of another business by purchasing a controlling interest in it.

82
Q

Factors that can contribute to a business decline?

A

Lack of management expertise.

Lack of sufficient money.

Business Studies (3 decks)

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