Unit 1.1-1.2 Flashcards
What is a business?
A business is an organisation that combines the inputs of production in order to provide outputs (in the form of goods and services) to satisfy the needs and wants of their customers.
Factors of production
Factors of production are the resources that are combined in the production of goods and services. These are;
Land- Natural resources
Labour- Workforce and human effort
Capital- non natural resources (machinery, tools)
and enterprise
Factors of production
Factors of production are the resources that are combined in the production of goods and services. These are;
Land- Natural resources
Labour- Workforce and human effort
Capital- non natural resources (machinery, tools)
Enterprise- the skill and knowledge needed for the combination of inputs
Value Added
Value added is the process of creating a product worth more than the cost of inputs used to produce it.
Human resources
Human resources oversees the human capital within an organisation. This includes processes such as recruitment as well as the overall well being of the workforce.
Finance and Accounts
Finance and accounts oversees the financial resources ad accounts of a business organisation. This can include annual budgeting, forcasting and final accounts like balance sheets.
Marketing
Marketing oversees researching and appealing to the needs of consumers and customers.
Operations
Operations oversees the processes involved in the production of an organisations product.
Primary Sector
The sector that extracts natural resources. Most common economic Sector in LEDC’s. Least added value across all sectors.
Secondary Sector
This sector manufactures products by processing natural resources.
Tertiary Sector
This Sector comprises of businesses that provide services to consumers as well as other businesses.
Quaternary Sector
The Sector that is characterized by the sharing and creation of knowledge.
Entrepreneurship
Characterizes the activity that entails having the skill and the ability to take risks and initiative in starting a business.
Entrepreneurs
A person who possess the skill, knowledge and risk taking ability need to start a business.
Intraprenuer
A person who is employed, typically by a large corporation, who has the skills and knowledge and is given the freedom to to develop new products for the organisation.
Sole trader
A sole trader is a type of organisation that is mainly owned and occasionally operated by one individual.
Advantages of Sole trader
Limited liability
Autonomy over business decisions
A sense of motivation that is inspired by self employment
Can collect a larger shared of profit generated by the business
Disadvantages of Sole Trader
No continuity in the owners absence
Unlimited liability
Limited finance resources
Partnership
A partnership is a type of business organisation in which there are two or more owners.
Advantages of partnerships
Access to a greater pool of finances
Division of labour
More knowledge and skill base
Disadvantages of partnerships
Profits must be divided
More prone to conflict
Unlimited liability
Companies/Corporations
Are organisations that have limited liability and are owned by shareholders.
Limited liability
Limited liability separates the legal identity of a business from its owners. Thus protecting business owners from the debt accumulated by a business.
Unlimited liability
Unlimited liability means that the owner of the business is directly accountable for the debts of a business.
Private limited companies
Usually smaller than public limited companies.
Shares can only be sold privately on approval of the board.
Typically shares are owned to family members.
Shares cannot be sold publicly on the stock exchange.
Public limited companies
Large corporations.
Shares can be acquired by members of the public.
Typically enlisted on the stock exchange.
Are legally required to publish their financial reports.
Advantages of private limited companies.
Control of the corporation can be maintained.
More privacy as compared to public limited companies.
Limited liability.
Disadvantages of private limited companies.
Restriction on sources of finance.
Advantage of public limited companies.
More sources of finance for growth.
Limited liability
Benefits of operating at a large scale etc. economies of scale market dominance.
Disadvantages of public limited liability companies.
Susceptible to takeover.
Owners risk the loss of control of the business.
Lack of privacy due to the publication of financial reports.
High cost of being enlisted on the stock exchange.
Cooperatives
Cooperatives are for profit organisations that are owned and operated by members. These organisations are characterized by business activity that benefits members.
Advantages of Cooperatives
All members must be active and exercise ownership and control over the organisation.
Limited liability
Financial assistance from the government in the form of grants.
Disadvantages of Cooperatives
Difficulty in attracting members.
Limited financial resource due to the reliance on member contributions.
Distribution of responsibility within the organisation may be unbalanced.
Members may lack skill and knowledge needed to operate organisation.
Micro finance providers
Micro finance providers provide financial resources to unemployed or low income earners. Who would fail to gain access these resources on the basis of multiple reasons.
Public-private partnerships
Are organisations that are a partnership between the government and at least one private sector business. These partnerships cater to a service need in local communities that the government would lack the financial resources to complete.
Non profit organisation
non profit organisations are organisations that do not strive to generate profit off of their organisational activity but strive to achieve and attain their organisational mission and vision.
Charities and Non governmental organisations.
