LESSON 1.1 - WHAT IS A BUSINESS?

Question 1

What is a business?

Answer 1

• Organizations involved in the production of goods or the provision of services

Question 2

What are the 4 functional areas of a business?

Answer 2

• Finance = manages the organization’s money
• HR = manages the employees of the organization
• Operations = responsible for production; converting raw materials into finished goods
• Marketing = responsible for identifying and satisfying the needs and wants of customers

Question 3

Define production.

Describe inputs-process-outputs relationship.

Answer 3

the process of creating goods or services, adding value in the process

Inputs = the raw materials, machinery, equipment, labour, etc.
Process = turning raw materials into finished products
Output = the final goods or services that customers are buying

Question 4

Within “process”, we add value.

Define “adding value”.
List ways to add value.

Answer 4

• the practice of producing a good or service that is worth more than the cost of the resources used in the production process
• HOW DO WE ADD VALUE? (e.g., 24/7 service/customization/”feel good factor”/location/efficiency or speed, quality, variety, brand awareness, etc.)

Question 5

Define:
Needs
Wants
Goods
Services

Answer 5

Need = basic necessities a person muct have to survive
Want = people’s desires
Good = a physical product that is produced and sold to customers
Service = intangible product that is sold to customers

Question 6

Classifying goods and services
- what does high involvement mean? what does low involvement mean?
- what are durable, semi-durable, vs. non-durable goods? (recall services don’t fit in these categories)
- what are emotional vs functional purchases?

Answer 6

• high involvement = involves lots of thought/effort usually pricey/risky vs low involvement = involves less thought, usually routing behaviour
• durable goods = last forever (like books)
• semi-durable = last for more than a few weeks like clothes or shoes
• non-durable = can only be used once like food
• functional purchases = driven by a practical need like gasoline for car
• emotional purchases = driven by emotions/express oneself like a designer bag

Question 7

Define
Consumers
Customers

Answer 7

Consumers = people/orgs. that actually use the product
Customers = people/orgs. that buy the product

Question 8

What are capital goods?

Give an example (recall difference btw. consumer and customer)

Answer 8

Capital goods = goods that are used in producing other goods, rather than being bought by consumers (one company’s business can be another business’s input)

EXAMPLES:
Customer - buys the product (Subway buys tomatoes)
Consumer - actually uses the product (People that go to Subway actually eat the tomato in a sandwich)
Another example: Customer buys the product (starbucks buys coffee beans), and then starbucks sells coffee to consumer (average person who buys starbucks)

Question 9

Define the 4 business sectors of the economy:
Primary sector (more capital intensive)
Secondary sector
Tertiary sector
Quaternary sector

Answer 9

Primary sector = refers to businesses involved with the cultivation and/or extraction of natural resources

Secondary sector = refers to businesses involved in the construction and/or manufacturing of products

Tertiary sector = refers to businesses that are involved with the provision of services to customers

Quaternary sector = a sub-category of the tertiary sector; businesses involved in intellectual/knowledge-based activities that share and generate information (e.g., research orgs)

Question 10

Define sectoral change.

Answer 10

Sectoral change is when there is a shift in the relative share (proportion) of national output and employment that is attributed to each business sector over time

Question 11

Define
Entrepeneur
Entrepeneurship

List characteristics of an entrepeneur.

Answer 11

Entrepreneur = a person who M,O, and P the resources needed for business activity to reach org. objectives

Entrepeneurship = the collective knowledge, skills, and experiences of entrepreneurs

• Risk-takers, independent, motivated

Question 12

DEFINE INTRAPENUERSHIP.

Answer 12

Intrapreneurship = the act of being an entrepreneur as an employee within an organization

Question 13

Why start a business?/Oppurtnutites for start-ups (CASH)

Answer 13

Challenge = drives them to perform and gives them personal satisfaction
Autonomy = you have autonomy over how things are done; independence, freedom of choice and flexibility
Security = job security & accumulate personal wealth for an early retirement
Hobby = turn their hobby into a business; successful entrepreneurs are passionate about what they do

Question 14

steps to start business (5)

Answer 14

1. write biz plan
2. obtain start-up capital
3. obtain biz registration
4. open biz bank account
5. marketing

Question 15

What is a business plan and what are the main elements that go into a business plan?

Answer 15

A business plan outlines the goals and objectives of the proposed business or project and how the organization plans to achieve them.

The business = details of business (owners)/goals/start-up costs
The product = describing the product/why customers will buy it
The market = target customers
The finance = proposed sources of finance
The personnel = number and job roles of workers/HR
The marketing plan

Question 16

Challenges for business start-ups

Answer 16

• Lack of finances to purchase fixed assets; they may not have the credentials to secure external funding
• Unestablished customer base; no customer loyalty, which takes time
• Organization structure; may not know how to hire or train employees, leading to poor customer service, which leads to less sales
• Not complying with business legislation; any mistake could result in the business having to pay multiple fees, even though they don’t have money.
• Production problems; not sure how to predict levels of demand
  Overproduction leads to waste
  Underproduction leads to dissatisfied customers and potential loss of sales
• Higher production costs - “bulk purchases”

Question 17

ONE-TIME START-UP COSTS

Answer 17

Fixed assets/capital expenditures (buildings, equipment, delivery truck, furniture, etc.)
Legal fees (business registration and/or licensing fees)
Marketing (billboards, logo, etc.)
Labour costs associated with labour such as training and uniform costs
Website
Initial inventory

Question 18

MONTHLY START-UP COSTS

Answer 18

Marketing through advertising/social media
Paying wages
Utility costs (water, electricity, etc.)
Buying inventory
Rent