Topic 1 - The Nature of Business

Question 1

What is the role of business

Answer 1

To satisfy the needs and wants of the community by providing goods and / or services

Be a role model for society

Question 2

Advantages of Businesses? (5)

Answer 2

• Provide large variety of goods and services
• Promotes individual choice
• If you own a business, personal wealth increases
• Businesses provide employment + income
• Businesses provide innovation

Question 3

Disadvantages of Businesses? (5)

Answer 3

• Creates tension between competition and community
• Creates social inequality (materialistic)
• Cause environmental damage - pollution
• Big businesses exploit foreign workers (sweat shops)
• Large Businesses dominate markets - hard for new markets to compete

Question 4

What is a SME?

Answer 4

Small to medium enterprise

Question 5

What is a Local Business?

Answer 5

a business that provides to its local area. E.g. Jim’s mowing, corner shops, local news agency, fruit shops

Question 6

What is a national business?

Answer 6

A business that sells products all over one single country

E.g. Woolworths, BHP, NAB, Commonwealth, Australia Post

Question 7

What is a global business?

Answer 7

A business that produces products in one country and distributes it all around the world
E.g. Coca Cola, Tesla

Question 8

What is a Transnational business? (TNC)

Answer 8

A business that operates in many countries. Goods and services are produced and sold in many countries while its headquarters is located in another country.
E.g. Apple, Toyota, Mcdonalds

Question 9

What are the 3 industries?

Answer 9

1. Primary
2. Secondary
3. Tertiary
   - Quaternary
   - Quinary

Question 10

What is the Primary industry

Answer 10

Businesses in this industry collect + acquire Natural resources and Raw materials

E.g. Mining, fishing, farming, forestry

Question 11

What is the secondary Industry

Answer 11

Businesses in this industry are the manufacturing sector, they take the raw materials and turn them into outputs

E.g. Food processing, oil refinery, manufacturing

Question 12

What is the Tertiary sector

Answer 12

This is the SERVICE sector

Question 13

What is the Quaternary Sector

Answer 13

This is the Knowledge based sector.
-Information and communication technologies (ICT), Finance + information

E.g. Giving Business Advice, ICT, Financial Advice

Question 14

What is the Quinary Sector

Answer 14

This sector involves services that were Traditionally performed in the home.

E.g. Gardening, Cleaning, Car Wash, Mowing, Ironing, Cafe, Cooking - Restaurant

Question 15

List the 4 legal strucutres

Answer 15

• Sole Trader
• Partnership
• Private Company
• Public Company

Question 16

List Advantages for Sole Trader (4)

Answer 16

• All profits to Owner
• Cheap and Easy to Establish
• Freedom in Business
• Work for yourself (Flexible work times)

Question 17

List Disadvantages for Sole Trader (4)

Answer 17

Unlimited Liability
Stress and Hard work
Pay income tax
Long Hours

Question 18

List Advantages for Partnerships (4)

Answer 18

Partners bring money and Ideas
Workload is spread out
Less Stress on both partners
Debts are split

Question 19

List Disadvantages for Partnerships (4)

Answer 19

Arguments - Disputes
Profits are splits
Decisions have to be agreed upon
Less freedom in the business

Question 20

List Advantages for Private companies (3)

Answer 20

Limited Liability
Only invite trusted people to invest
Increased business size - likely to reach larger market

Question 21

List Disadvantages for Private Companies (2)

Answer 21

• Arguments with investors about rights - can hurt family relationships
• Cost money to become a company - expensive

Question 22

List Advantages for Public Companies (3)

Answer 22

Limited Liability
Raise money through selling shares - Capital Gain
Listed on the ASX

Question 23

List Disadvantages for Public Companies (2)

Answer 23

Forced to release annual financial statements

Lack of Privacy

Question 24

What is a government Enterprise?

Answer 24

A business that acts on behalf of the government

E.g. Australian Post

Question 25

What does the term 'Privatised' Mean?

Answer 25

It's when a government enterprise has been turned into a public company by switching owners and listing it on the ASX

Question 26

How can size influence choice of legal structure

Answer 26

The size of a business can determine how much market share it has. A business owner may also have the choice of expanding their businesses into a different legal structure in the future.

Question 27

How can Ownership influence choice of legal structure

Answer 27

How much a business owner wants to own will determine legal structure, the the owner doesn't mind splitting ownership then they might transition to a partnership.

Question 28

How can finance influence choice of legal structure

Answer 28

The business may have to transition to a partnership or private company to acquire funds without debt - equity finance

Question 29

What is an Internal Influence?

Answer 29

things a business can control

Question 30

What is an External Infleuence

Answer 30

Things a business can't control

Question 31

Name External Influences (3)

Answer 31

- Economic - Technological - Social Trends

Question 32

Name Internal Influences (3)

Answer 32

- Type of Product Sold - Location - Management + Corperate Culture

Question 33

How can the Economy influence a business?

Answer 33

- During a recession customers don't spend money and businesses don't produce goods as much - During boom customers spend a lot of money, Businesses produce goods and employment rates are up

Question 34

How can Technology influence a business?

Answer 34

- Increase efficiency - Don't pay wages - Decrease Costs Disadvantages: - Staff Redundancies - Lower staff morale

Question 35

How can Social Trends influence a business

Answer 35

- Depending on the social trend the business may have to change products E.g. Climate Change, Fashion Trends, Gender Roles

Question 36

How can Location influence a business?

Answer 36

- Proximity to Competitors - Cost of leasing / buying - Customer Access - Parking / Visibility - Proximity to Suppliers - Transportation time + costs

Question 37

Name the stages of the business life cycle

Answer 37

1. Establishment 2. Growth 3. Maturity 4. Post Maturity

Question 38

Name the stages of Post Maturity

Answer 38

- Renewal - Steady State - Decline - Cesation

Question 39

Identify Issues of the Establishment Stage (3)

Answer 39

- High Costs associated with establishment - Sales low because no customer base - Profit minimum because little sales, maybe even negative profit

Question 40

Identify Goals in the Establishment Stage (3)

Answer 40

- Break even with day to day expenses - Survival - Increasing sales and reaching growth phase

Question 41

How can we over come common challenges in the business life cycle?

Answer 41

- Budget (to avoid over unnecessary spending) - Planning (forecasting) - Management (skills)

Question 42

Identify characteristics of the Growth Stage

Answer 42

- Sales start to increase rapidly - Business should have enough money to cover day-to-day costs, short term expenses and to start paying off debts - Business should have a good customer base

Question 43

What are the considerations in the Growth Stage? (5)

Answer 43

- Budget - Marketing - Staffing - Finance - Structure

Question 44

What are the Goals in the Growth Stage?

Answer 44

- Pay off business debts | - Grow business

Question 45

What is a merger?

Answer 45

When 2 businesses combine resources and start a new organisation

Question 46

What is an Acquisition?

Answer 46

When one business takes control of another buy purchasing majority share.

Question 47

What are the characteristics of the Maturity stage

Answer 47

- Business growth and market share begin to slow - Business faces increased competition - Lack of innovation

Question 48

What are the characteristics of Renewal?

Answer 48

- Business begins a second growth stage | - due to innovation