SAC 1A Flashcards
(25 cards)
TYPES OF BUSINESS’
sole trader partnership company private listed company public listed company social enterprise government business enterprise social enterprise
Sole trader
a Sole Trader aka sole proprietor is a type of business structure owned and ran by one person. The sole owner provides finance and makes decisions for on the direction of the business. The owner is legally responsible for all aspects of the business including unlimited liability, because of this the owner usually puts up capital which runs a financial risk. Most common type of business because of its ease to set up
Partnership
A partnership is a type of business structure owned by 2 or more people (up to 20). A partnership is not aa separate legal entity and therefor has unlimited liability. A partnership can help a business because of the wide range of skillsets and experience across all owners and it can access more funds as owners can pool their money, however this means that all decisions have to be run by and agreed on by the other owners.
Company
A company is its own independent legal entity meaning that the company has limited liability. Companies are owned by shareholders who share in the profits. These shareholders elect managers to run the company. Incorporation is the process of establishing a company. despite limited liability, directors can be found liable if they are fraudulent, negligent or reckless.
Private limited company
A private limited company, aka proprietary limited company is restricted to 50 shareholders. Shares are sold privately and are not opened to be publicly traded. A private limited company will have pty ltd at the end of their name
Public listed company
A public listed company is listed on an exchange (such as Australian securities exchange ASX). This means its shares can be bought and sold (traded) by the general public. Companies can raise money by offering shares to the public in exchange for money. This means shareholders owns a part of the company and gets to share in any profits through dividends and capital gains in share price. Public listed companies need to report on activities so that so the market is aware of anything that may affect the company’s share prices.
Social enterprise
A social enterprise is a business that exists primarily to fulfil a vision that benefits the public or community. To be a social enterprise a company must be selling goods/services to a market place and using the profits to fulfil a vision that benefits the community. A social enterprise is still ran like every other company and its workers are paid a salary however excess profits are used to fulfil a social need.
Government business enterprise
a GBE is an organisation that undertakes a commercial activity on behalf of the government. Although they are owned by the government, they are run just like any other company. GBEs are run by shareholder ministers (finance minister and the portfolio minister). These ministers provide and change objectives as well as select and remove directors and asses the financial performance of the GBE.
Business Objective
are the stated goals a business is aiming to achieve in a specific timeline. They give the business and its employees direction. Types of objectives vary depending on the time frame (short, medium and long term). Objectives can be set with a mission statement or a vision statement. Mission statement is stating the purpose and how it aims to achieve this purpose, a vision statement states the overall aspirations of the business. Types of business objectives include: profit, increase market share, fulfil a market/social need,meet shareholder expectations, improve productivity, customer service,
To make a profit
allowing the business to grow and expand, gives employees job security and makes the owner more money
Increase market share
the proportion of the market controlled or owned by a business or product. It is expressed as a percentage of the size of the market. If a business can increase their market share it means competitors are losing theirs, meaning more sales.
To fulfill a market or social need
A social enterprise would wish to fulfill a social need to make a change in the community public. Fulfilling a market need can also lead to more sales as consumers need to purchase from the business as there are limited producers for this market need.
Meet shareholder expectations
many companies rely heavily on the finance of shareholders so if they can meet shareholder expectations, they may attract investments from other potential shareholders resulting in more funding.
Improve productivity
productivity is a measure of how efficiently an organisation can produce its good and or services. If a business can improve their productivity, it can give them a competitive advantage, due to their efficiency they may be able to sell their product for less or get their product to the market quicker than other business’.
Customer service
In a highly competitive market customer service may be the difference that sells a business’ product. If a customer has a good experience, they are more likely to return, increasing sales and business reputation.
CHARACTERISTICS OF STAKEHOLDERS
Stakeholders are those that have a vested interest in a business. All business’ have stakeholders and the decisions that managers may make can affect stakeholders in different ways. Its important for managers to take stakeholder interests into account when making decisions for the business. Types of stakeholders include: • lenders • employees • competitors • suppliers • customers • trade unions • community
Shareholders
those that have invested money into the business and a share, depending on the size of the business they may or may not be involved in the everyday affairs of the business. They usually put pressure on the managers to make decisions that will improve profit and benefit the return for shareholders.
CSR (corporate social responsibility)
is the continuing commitment of a business to operate in an economically, socially and environmentally sustainable manner whilst balancing the interests of diverse stakeholders. When a business goes beyond their legal requirements to provide ethical means.
Potential conflict between stakeholders
Employees and shareholders -Employees want fair wages, but this reduces profit for shareholders
Management and customers -Raising product prices for profit will upset customers
management and community -Cut costs by neglecting maintenance which can put the community at risk
Management and suppliers -Management wants to lower prices and cut costs but suppliers will want to make more money on their product
Management responsibility
Management responsibility includes areas such as operations, finance, human resources, sales and marketing as well as technology support and how each one of these areas contributes to the success of the business.
Operations
Responsible for activities converting outputs into inputs in the production of goods and services. Involves ordering and sourcing stock, minimising waste, ensuring quality meets customer expectations, redesigning the sequence of production etc. “converting the raw material into a good in which can be sold”
Finance
Responsible for controlling activities concerned with receiving and spending money within the business, typically includes budgeting, financial planning, managing day to day payments, receipts as well as auditing the business accounts. “making sure the business is creating a profit”
Human resources
Responsible for managing employees and all aspects of their working relationship, with the business. Includes recruitment, selection, training, motivation, termination and employment term and conditions and labour laws
Sales and marketing
Responsible for connecting goods and services produced by the business to the customers. Includes determining features, pricing, promotion, distribution and customer service as well as after sales report
