Term 1 Flashcards
(143 cards)
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TOPIC 1: NATURE OF BUSINESS
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ROLE OF BUSINESS
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Business
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organised effort of individuals, to produce and sell, for a profit, the products that satisfy the individuals needs and wants
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Resources
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resources are inputs for business production; 4 types of production
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Product
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a good or service that can be bought
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Good
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an item that is tangible, this means it can be seen and touched - requires production with input and capital equipment
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Service
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an intangible product that cannot be touched - greater use of people in provision of serivce
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Primary Role of Business
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meet the needs and wants of its customers through providing products
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Production
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activities undertaken by the business to combine the resources to create products that satisfy customers needs and wants
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Intermediate Goods
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products usually require further processing and are often purchased by other businesses in their production processes.
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Finsihed Product
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products that are ready for use and need no further processing
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Finance
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process of providing and managing the funds that are needed so that goods can be produced and services provided.
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Expenses
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all the costs incurred in earning revenue; this could include wages, the cost of marketing
and the purchase of materials and stock.
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Management
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the people responsible for running the organisation.
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Profit
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revenue earned - total expenses; return or reward for businesses
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Empolyment
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employement for people in the economy; ppl provide labour resources in return for wages/salaries
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Income
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ties to employement; money exchanged for labour provided - wages/salaries
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Choice
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consumers have the freedom of choice; variety of products to pick from in a category - competitive prices
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Innovation
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existing products are improved or new products created - through R&D
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Entrepreneurship
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businesses provide indiviudals to turn their ideas into a livelihood
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Wealth
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businesses provide scope for greater economic growth & wealth - collection of assets - income creates wealth
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Quality of Life
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standard of living - overall wellbeing - businesses can improve by providing range of products
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Economic Roles of Businesses
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The roles of a buisness which affect the economy - profit, employemnt, income, wealth
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Social Roles of Businesses
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the roles of a business which affect the socieity/community as a whole - choice, entrepreneurhsip, innovation, quality of life
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Accountability
the process where managers are answerable to particular groups affected by the activities of the business.
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Brand
a name, design or symbol that distinguishes a particular product from the product of another business.
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Communcation
exchanging information between people eg talking, listening and understanding what is being said
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Competitive Advantage
features of a product or business that provide it with an advantage over its competitors.
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Dividend
income earned from owning shares in a company; based on company profits in the market
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Downsize
to decrease the scale of operations
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Driving Force
force that pushes towards the need for change.
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Economy
system where governments, businesses, consumers and other relevant groups interact to satisfy or meet the needs of society.
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Ethics
behaviour and moral position of a person, which influences the choices and decisions they make; what is seen as right and wrong for a business based on the values of management, employees and the community.
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Marketing
e process of developing a product and implementing (applying/putting into practise) a series of strategies aimed at correctly promoting and pricing the product and distributing it to a core group of customers
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Net Profit
final amount of revenue remaining after all expenses have been paid.
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Redundancy
Workers are made redundant when their labour is no longer needed as a result of either the business downsizing, restructuring or introducing technology to perform the workers' role.
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Shareholder
owners of a company; they provide the capital that allows the company to operate.
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CLASSIFICATION OF BUSINESSES
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Industry
a collection of businesses which produce and sell similar products
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Size
determined by number of employees - size of workforce, or market share, or revenue
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Micro Businesses
<5 employees
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Small Business
5-19 employees
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Medium Business
<200 employees
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Large Business
>200 employees
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SME
small medium enterprises - 5-200 employees or <10 mil turnover
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Revenue
total value of goods and services sold - turnover, sales
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Market Share
proption of market sales that business obtains in an industry
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Geographical Spread
location of business
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Local
serves only surrounding areas; main consumers live nearby; restrict spread(e.g. corner shop, barber shop)
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National
operates in one country(woolworths, coles, officeworks)
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Global
operates in more than one country; aka transnational or multinational corporation(google, samsung, aldi, harvey norman)
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Sector
a segment of the economy characterized by similar business activities, products, or services - primary, secondary, teritary, quarternary, quinary
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Primary Sector
directly assoicated with natural resources; production and extraction - all production starts here(e.g. farming, mining, fishing)
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Secondary Sector
take output from primary sector and process it into finsihed or semi-finsihed products(e.g. iron ore, coal and limestone turned to steel)
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Teritary Sector
people performing a vast range of services for other people(e.g. retailers, dentists, solicitors, banks, museums, health workers, transport)
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Quartnery Sector
services that involve the transfer and processing of information and knowledge(e.g. telecomm, property, computing, finance and education)
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Quinary Sector
services that have traditionally been performed in the home(e.g. tourism, hospitality, child-care)
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Legal Structure
how the business is viewed in the eyes of the law, in regards to operation and ownership. It determines who owns the business and how it is operated.
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Incorporated
business and owners are seperate entity; do not have unlimited liability
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Unincorporated
business and owners are a single entity; have unlimited liability
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Unlimited Liability
where the owners can have personal assets seized if company goes bankrupt
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Limited Liability
where the owner's personal assets can not be seized when company is liquidated
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Sole Trader
owned & operated by only one person - unincorporated & unlimited liability
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Partnership
2-20 ppl owe and operate - unincorprated & unlimited liability
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Private Company
proprietary limited(pty ltd) - privately owned company - limited liability - 50 shareholders
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Public Company
company listed on stock exchange - ASX - general public can buy shares of the company
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Government Enterprise
GBE - businesses owned and operated by the government
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Float
raising of capital in company through the sale of shares to the public.
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Prospectus
document providing information about the company to existing investors
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Venture Capitalist
someone willing to invest in a business, with the expectation that it will be profitable
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INFLUENCES ON A BUSINESS ENVIRONMENT
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Business Environment
surrounding conditions in which the business operates - can be external or internal
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Internal Influences
influences in which the business has some degree of control
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Product Influences
type of g&s produced, size of business(affect production capacity), type of business(retailer, manufacture, service)
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Location Influences
good location with > passing trade(convienct and visible) - affects sales and expenses
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Resources Influence
four resources avaliable - human(employees), information, physical, financial
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Management Influences
manager's way of doing things; e.g. hierarchy or flatter business organisational structure
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Chain of Command
levels of management, < levels = less levels to report too
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Span of Control
no. of employees a manager manages, > no. = employees included in decision making
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Hierarchical Structure
longer chain of command & shorter span of control - emphasise authority
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Flatter Strcture
shoter chain of command & wider span of control - emphasis teamwork
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Business Culture
business's values, ideas, beliefs, and expectations - through organisational structure, policies, goals, and slogans
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External Influences
influences in which the business has no degree of control
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Economic Influences
affected in any way by the economical factors; as well as consumer willingness to spend & productive capacity. as well as monterary and fiscal policy
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Economic Factors
the main elements that affect financial matters of a business like tax, interest rates, banks and stock markets.
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Expansion
> spending, investment, expectation, sales & profit, < unemployment
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Contraction
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Boom/Peak
business operating at full capacity; unsustainable
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Recession
before reaches trough, negative growth over 6 months
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Depression/Trough
negative growth for over 12 months, everything at lowest point.
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Finanical Influences
borrowing money from other sources, usually through debt finance
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Dereguation
Removal of government regulations from industries with the aim of increasing efficency and removing competition
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Geographic Influences
australia's geographic location in asia-pacific, ease of global trade, globalisation, demographic changes
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Social Influences
changes in taste, fashion, culture, beliefs, and trend
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Legal Infleunces
regulations; laws businesses have to comply with; fair work 2009, & compeititon and consumer act 2010
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Polictical
government policies, e.g. taxations(tax cuts), labour market reforms(minimum wage, skilled immigation), environment(renewable)
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Institutional Influences
government, regulatory bodies, and other(employer assiociations, trade unions)
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Federal Government Regulations
tax for employees, superannuations
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State Governemnt Regulations
whs regulations, pollution control
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Local Government Regulations
fire regulations, parking, approval for development
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Regulatory Bodies
protect indviduals and maintain reuglations; ACCC, Fair Trade NSW
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Technological Influences
increased quality and efficiency, reduced communication delays, reduce operation costs(automated)
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Competitive Situation Influences
competition with other businesses; affect prices, quality, customer service, provide icnreased choice and competitive price for consumers
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Product Differentitaiton
distinguish products by highlighting unique features, benefits, or attributes to create a competitive advantage and attract customers
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Sustainable Competitive Advantage
able to maintain loyal customer base
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Monoploy Competition
Complete concentration by one firm in the industry
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Oligoploy
A small number of larger firms thats have greater control over a market
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Monoploistic Competition
A large number of buyers and sellers in a particular market
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Perfect Competition
Large number of small firms that sell similar products
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Market Influences
changes in finanical, labour, and capital markets
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Finanical Markets
> mobility, rapid expansions of interanitonal financial flow
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Labour Market
Globaisation led to more open labour markets,
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Consumer Markets
improved techonlgy, e-commercec
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Stakeholders
indviduals or groups affected by the operations of the business, have stake or interest in the business(not monetary)
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Internal Stakeholders
e..g shareholder, owners, manager, employees, anyone who affects the business and is affect by it
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External Stakeholders
e.g. customer, supplier, investor, creditor, media, communties, trade unions, government agencies, environment, society
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BUSINESS GROWTH & DECLINE
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Establishment
first stage of the business; vulnerable and precarious, need positive cash flow & solid foundation
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Growth Stage
business is accelerating growth, sales increase, and cash flow is normal, customer base is extablished, develop new products
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Merger
when owners of two seperate businesses agree to combine resources to form new organisation
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Acquisition
when one business takes control of another business by purchasing the controlling interest in it
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Vertial Integration
business expands at different but related level in the porudction and marketing of a product
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Backward Vertical Integration
business integrates with supplier
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Forward Vertical Integration
business integrates with the firm it sells to
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Horizontal Integration
business integrates with another firm that makes and sells similar products
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Diversification/Conglomerate integration
integrates with a completely unrelated industry
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Maturity
rethinking about business operating to guarantee survival; sales and groth decrease
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Post Maturity
last stage of a business, has 3 possible outcomes; steady state, decline, or renewal
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Steady State
businesses continue to operate at the level it has been during the maturity phase
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Decline
fall of sales and profit resulting in business failure
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Renewnal
increase of sales and profit due to new growth areas
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Cessation
where business ceases operating, can be voluntary and involuntary
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Voluntary Cessation
when owners decide to close business and is able to their accounts recieveable and payables
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Involuntary Cessation
when owners force to close usually by court order after creaditor launch action in court
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Bankruptcy
declaration that a business is unable to pay their debts - for unincorporated businesses
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Voluntary Administration
independent administator appointed to oeprate businesses to trade out finanical problems - for incorprated businesses
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Liquidation
winding up company to pay the creditors back
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Liquiator
independent person, to take control of business to sell company assets to pay creditors.
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Receivership
business has a receiver to take charge of bussiness affairs and business may not be wound up
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Insolvent
business not able to pay debt and falls due
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Creditors Voluntary Liquidation
type of insolvent liquidation - creditors vote for liquidation & appoint liquidator(not from court) - shareholders agree to liqudate and appoint liquidator
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Court Involuntary Liquidation
court appoints liquidator after application made by creditor, shareholder, company director or ASIC
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Realisation
converting assets into cash
