Unit 3 AOS1 - Business foundations Flashcards
6 types of businesses
Sole trader Partnership Private limited company Public listed company Social enterprises Government business enterprises
Define the term business
Businesses are organisations that sell goods and/or services to a market with the aim of making a profit. There can be diff types which all have unique structure and objectives
Define - sole trader
Sole trader - a business is owned and operated by one person. The proprietor May employ other people to assist with business activities however owner provides all the finances and is fully responsible for the business
Example - milkbar
Define - partnership
A partnership is a business structure where 2-20 people come together to run a business with the purpose of making a profit.
Each owner has equal responsibility over the business, and equally provide business funds
Example - law firm
Define private limited company
Private limited company is a business that is incorporated, meaning they have their own legal identity. The ownership of the company is divided into shares. These shares are not listed on the stock exchange
Example - Linfox
Define - public listed company
A public listed company is a business that has shareholders who own the business and directors who run it. The company is listed on the stock exchange for members of the public who buy and trade the shares
Example - qantas
Define- social enterprise
A social enterprise is revenue- generating business with the aim to fulfil a social cause or mission.
Example - thankyou
Define - government business enterprise
A government business enterprise is a company owned by the commonwealth. This business aims to make a profit which is distributed to shareholders (state and federal governors)
And act under general business principles
Example - aus post
2 advantages
2 disadvantages
Sole trader
- Low establishment cost
- Easy to cease operations
- Unlimited liability
- Reliant on owners skills and knowledge
2 advantages
2 disadvantages
Partnership
- workload is shared
- cheap and easy to set up
- potential disputes and personality clashes
- unlimited liability
2 advantages
2 disadvantages
Private limited company
- Limited liability
- extra capital can be obtained by issuing more shares
- higher establishment costs
- higher degree of government control
2 advantages
2 disadvantages
Public listed company
- Limited liability
- Separate legal entity to owners
- highly complex structure
- no control over who owns shares
2 advantages
2 disadvantages
Social enterprise
- Consumers feel they are helping a greater cause which their purchase
- Enterprise can meet needs that commercial businesses wouldn’t
- Difficult to obtain capital to start the business
- difficult to focus on both social and financial objectives
2 advantages
2 disadvantages
Government business enterprise
- gbe is able to carry out government policies
- Healthy competition to other business which can lower market costs
- Political interference with day to day running
- Management can be less effective than that of the private sector
Mission statement
A written document that sets out the reason for the existence of the business, it’s fundamental reason for being
A vision statement
Written document outlining the broad direction the business hopes to take in the future
Values statement
Written document that outlines what is important to the business in terms of values and ethics
Define - Business objectives
Objectives are the stated goals a business is aiming to achieve
Objective - make a profit
Profit = revenue - expenses
Objective - increase market share
Market share is the proportion of total sales a business has compared to others in the same market or industry
Fulfil a market need
To provide something in the market that is otherwise hard to obtain.
E.g a business may exist to provide a specialty service that other large businesses cannot
To fulfil a social need
This objective involves the production and/or sale of goods and service for the purpose of making the world a better place.
Objective example - helping the disadvantaged
Meet shareholder expectations
Making a profit is the primary objective, shareholders expect :
- To make a return on their investment
- the business to be successful
- the business to make profit
- shares purchased to gain value ( capital gain )
- receive dividends
Shareholder definition
People who have invested money into a business, hence owning shares of it
Define - stakeholders
An individual or a group that has direct or vested interest in the activities of a business
Can affect or be affected by business operations
3 stakeholders
2 interests and issues each
- Employees, are interested in earning fair pay, having good working conditions and ongoing employment.
- Shareholders, are interested in getting a return on their investment through dividends and capital gain
- Customers, to receive good quality products at affordable prices
Why stakeholders might have conflicting interests ( 2 examples )
Stakeholders
Corporate social responsibility
Managing a business in such way that the broader social welfare of employees,….. and the environment are taken into consideration when making business decisions
Management responsibility - Technology support
Responsible for installing and maintaining technology. Also provides assistance to those who use technology.
- Many businesses have encorporated tech into their business operations (e.g manufacturing) if it were to fail objectives could not be met
Management responsibility -
Sales and marketing
Involves creating awareness of business products, which in turn will create profit. Responsible for creating an developing strategies and relationships with customers
-
Management responsibility - Operations
Operations is the area of a business that produces goods and services
IMPUTS
PROCESSES
OUTPUTS
Need operations to be efficient to produce good quality goods in short amount of time. Which will help achieve objectives
Management responsibility - Finance
Finance - area of the business which oversees and manages the money and assets of a business.
- bookkeeping
- budgeting
Reports of financial performance can be passed onto senior management to minimise costs and maximise profit needed to sustain the business
Management responsibility - Human Resources
HR - area of the business that manages the relationship between the business and employees
- recruiting/training
- development and motivation
Helps to achieve objectives as a business needs to employ and more importantly retain the best employees who most effectively achieve set goals
Autocratic
- Manager makes all decisions and tells employees what to do - Decision making is centralised Power is centralised Employee involvement is none Communication is one way, top down
Pros - decisions are made quickly - clear communication to employees Cons No employee input Employees feel undervalued (poor motivation)
