Unit 1.1, 1.2, 1.3

Question 1

What is the aim of a business? How do they achieve that common aim? (What is a business?)

Answer 1

An organization that aims to meet consumer demands via:
- extracting raw materials
- creating a product
- providing a service

Question 2

What could be a considered a business?

Answer 2

Any organization that uses their resources in order to generate output for people’s demands
- What resources?: Enterprise, physical, human, financial..
- NGOs, churches/religious orgs, etc. can be considered businesses
- because they invest resources in order to create their services/goods

Question 3

How do businesses add value to resource inputs?

Answer 3

By creating outputs (products/services)
- Because that is how they gain profits (for the resources that they put in)

Question 4

Outline the 4 types of resource inputs.

Answer 4

Human, Financial, Enterprise, Physical ( -> similar to capital + land)
- Similar to the FoPs aka the diff kind of resources in econ (with the exception of finance, otherwise they’re similar-ish)
- Side note: I wonder why they’re classified a little differently? Like why do physical resource input include both the FoP of Land AND Capital? Why are they separated into two FoPs? (this side not is tbd until I get the answer)

Question 5

Explain the human resource input

Answer 5

It is the quality AND quantity of people required in the business
- ALL businesses, even heavily automated ones, require at least one person

Question 6

Explain the physical resource input.

Answer 6

It is the right quality and quantity of materials/machinery/land space required
- Similar to the FoP of “capital”.
- All businesses (such as internet services) need phys resource input (such as office, computers, etc.)

Question 7

Outline the financial resource input.

Answer 7

It is the right quantity of finance (e.g. cash) required
- ALL businesses need this (as the other resource inputs are not free)

Question 8

Explain the enterprise resource input.

Answer 8

The least tangible input but important and always present.
Also called “entrepreneurship”
- includes:
- business ideas
- turning those ideas into a reality

Question 9

Outline the two types of production processes.

Answer 9

*8Labour-intensive and capital-intensive**

Question 10

Explain the labour-intensive production process,

Answer 10

Labour refers to human contributions.
- Labour-intensive = uses a large portion of labour relative to other inputs
- especially land + machinery (physical resource inputs, kind of like opposites)

Question 11

Explain the capital-intensive production process.

Answer 11

Capital (like in Econ) refers to the physical resource inputs in business
- Capital- intensive = uses a large prop. of land + machinery relative to other resources
- Especially labour (human resource inputs).

Question 12

Outline the two different types of product outputs

Answer 12

Goods and services

Question 13

Explain what are goods?

Answer 13

Product outputs that are tangible/physical

Question 14

Explain what are services?

Answer 14

Product outputs that are non-tangible
- are actions rather than an item

Question 15

Outline the 4 business functions.

Answer 15

Human Resources (HR), Marketing. Finance and accounts, Operations management/production
- Notice that most of these (except marketing?) relate to the 4 resource inputs.

Question 16

What is the difference of how small businesses and large businesses deal with the business functions?

Answer 16

Owners of smaller businesses deal with the functions themselves

Owners of bigger businesses can hire specialized managers

Question 17

Explain what HR (Human Resources) does

Answer 17

Ensures that employees are rewarded becomingly.
- In order to make them suitable for reward, they must be fit for the job
- SO, HR: trains employees, recruits them, dismisses them, determine appropriate compensation

Question 18

Explain the role of finance and accounts.

Answer 18

Ensuring appropriate funds are available to make the product or service

Question 19

Explain the role of marketing.

Answer 19

Goal: To ensure that the business’ products/services is desired by a sufficient amt of people/businesses for profitable operations
- How do they accomplish this goal?: Marketing promotes, prices, packages and distributes the product
- Why?: These will make the products/services desirable (e.g. good ads, relatively accessible prices, good-looking and functional packaging, distribution to a large audience)

Question 20

Explain the role of operations management or production.

Answer 20

Goal: To ensure appropriate processes are used in the producing of the product/service
- How?: determine the quantity and flow of stock, determine methods of production
- Why?: Similar to the second question of the main Econ problem, they ensure the efficiency of the production

Question 21

Examine interdependence of the business departments/functions

Answer 21

(use collanote for the map)
- Marketing determines demands > If there’s a change, Op. management deals with the production > Finance and accounds finds funds for redesign > If redesign requires more/less people and/or people with different expertise, then HR deals w/ the training, hiring, compensating, dismissing of employees.

Question 22

Explain how priorities change when a small business becomes big.

Answer 22

At first, small businesses w/ their departments prioritize survival

When a business becomes big, they may prioritize other things other than survival.”
- Like what?: Diversifying their business ventures (e.g. expanding to a new market) and controlling/growing a market
- Why?: These are opportunities for the business to grow larger. Because larger businesses have enough resources, they can chase those opportunities.

Question 23

Explain how the strength of a business is determined.

Answer 23

It is determined by the successful alignment of the four functions
- For example: (to be explained by sir, BECAUSE what does it mean by “alignment”?)

Question 24

Distinguish between the private and the public sectors.

Answer 24

Public sector - government-ran, has meaningful economic implications
Private sector - individual/company-ran, not from government. Usually for profit.

Question 25

Outline the main features of the types of organizations.

Answer 25

1.) **Sole traders** - the *owners own and run the business.* May have employees but owners take ultimate responsibility for it. -*no legal distinction* between business and the sole trader (unlimited liability) -*limited finances (limited to owner)* - banks are reluctant to know because of credit. -*Businesses are geographically close to customers*, so owners can get to know their customers. -sole trader has a *high level of privacy and limited accountability.* - sole traders don’t have to disclose their finances to anyone except tax authorities and lenders (if they are lending) -Starting a business as a sole trader is *usually quicker and inexpensive* 2.) **Partnerships** - need a *deed of partnership* - *Partners decide (there’s another consultant)* -*Owned and managed by more than one person)* -*No legal distinction exists between the businesses and partners* -*More finance than a sole-trader business* -*sleeping partners contribute some finance and expect a share of the profit* -*offers a more varied service than the sole trader* - different partners bring different expertise and the products/services can vary - *Partners can share accountability* -*typically more stable and more likely to continue* 3.) **Privately held companies** -*limited liability to owners, only to their contribution to the business* -*shareholders cannot sell their shares to shareholders outside their company unless they have been offered.* - basically not everyone can join the business (as a shareholder) 4.) **Publicly held companies** -*offers limited liability as well* -*anyone can be a shareholder*

Question 26

Explain primary sector.

Answer 26

**The acquiring of raw materials** - extraction, mining, farming, hunting, etc.

Question 27

Explain the secondary sector.

Answer 27

the processing of raw materials (usually by manufacturing)

Question 28

Explain the tertiary sector.

Answer 28

all services fall under here, sometimes use manufactured products

Question 29

Explain the quaternary sector

Answer 29

Subgroup of tertiary. Deals with information (e.g. media, IT, etc.). Web-based.

Question 30

Define chain of production

Answer 30

The steps through different sectors to make consumer goods

Question 31

Outline the four main types of organizations

Answer 31

1.) Sole traders/proprietors 2.) Partnerships 3.) Companies/Corporations 4.) Profit/Non profit/Governmental

Question 32

Describe the advantages of a sole trader

Answer 32

1.) Easy to set up — therefore they’re the most common type of business - requires no paperwork 2.) owners have complete control and keep all of the profits. - therefore, they have the freedom to choose their time and patterns of work. 3.) Is more able to create close relationships with customers and staff (if any are employed) 4._ Business can be based on interest and skills of the owner instead of following the interest of a larger business

Question 33

Describe the *defining characteristic* of the sole trader

Answer 33

One person owns and runs the business (though they may hire staff)

Question 34

Describe the disadvantages of the sole trader

Answer 34

- **Unlimited liability** — all of the owner’s assets are potentially at risk - **Face intense competition from bigger firms e.g. karenderyas vs. Tablo** - Owners have to cover all aspects of managing and running the business — **unable to specialize.** - **Long hours** often necessary to make business pay. - **Lack of continuity** - if owner dies, the business dies. Even if it’s passed down to their descendant. It will be a new business.

Question 35

Describe the *characteristics* of a partnership

Answer 35

Two or more people own and run a business. This requires a *deed of partnership* which establishes the rights and responsibilities between partners - e.g. distribution of profits, voting rights, roles, contract signing…

Question 36

Describe the advantages of partnerships

Answer 36

- Partners could specialize - Shared decision making - Additional capital injected by each partner. - Business loss shared between partners - Greater privacy and fewer legal formalities than corporate organizations (companies)

Question 37

Describe the disadvantages of Partnerships

Answer 37

- unlimited liability - shared profits - no continuity if even one of the partners die - all partners are bound to the decisions of one another — lose independence of decision making. - not possible to raise capital from selling shares

Question 38

Describe the characteristics of **a limited company**

Answer 38

- A business where the owners have a separate legal personality from the business. - Owned by shareholders (they own a “share” or part of a company)

Question 39

Explain limited liability

Answer 39

Legal and financial protection in case the company fails or there is any legal action being taken against the company (or LC)

Question 40

Define legal personality

Answer 40

“Being one’s own person” in the eyes of the law.

Question 41

Define continuity

Answer 41

A company being able to exist event after the death of its owners

Question 42

Describe the characteristics of a Private Limited Company (PLC)

Answer 42

- *tend to be relatively small* - business name ends in *Limited or Ltd.* IE: JP solutions Ltd. - *Shares are transferred privately and all shareholders must agree to the transfer (like a clique!)* - PLCs are often between relates/close people such as friends - Comprise *many manufacturing firms* - *limited liability* -*more capital bc no limit to no. of shareholders.* -*control of companies cannot be lost to outsiders* -*has continuity*

Question 43

Describe the disadvantages of PLCs

Answer 43

- shared profits among a larger number of members - legal procedures required to set up the business. - shares cannot the sold to the public thus restricts the amount of capital that can be raised. - financial info. filed with the SEC can be inspected by any member of the public (?) - competitors can use this to their advantage

Question 44

Describe the characteristics of a Public Limited Company

Answer 44

It is a company that issues **its shares to the public via stocks with the share prices quoted on the stock exchange.** - In order to represent those shareholders, a representative is elected for the *board of directors*

Question 45

Describe the advantages of Public Limited Companies (aka corporations)

Answer 45

- via issuing shares of stock to the public, they gain more money - offers owners limited liability - owners only liable to the amount of their investments (not sure for private lc’s though) - the business can hire experts to professionally manage each aspect of the business

Question 46

Describe the disadvantages of Corporations (Private and Public Limited Company)

Answer 46

- Costly start up — also needs legal assistance to make a business a corporation/public limited comp. - more gov. regulations than partnerships or sole proprietorships - share prices fluctuate; *risk of takeover* - income is taxed twice (?) - Short-term profit are the objectives of major shareholders.

Question 47

Define what are organizational objectives

Answer 47

**The overall goals, purpose and mission of a business** that have been established by its management and communicated to its employees.

Question 48

Explain why are organizational objectives important

Answer 48

Because businesses are *social organizations*, they need a set of objectives to star focused and properly allocate resources such as money and time.

Question 49

Outline the hierarchy of organizational objectives

Answer 49

VMGSTO

Question 50

Define the functions of a vision statement and give the question it asks

Answer 50

The question: **”What do we want to become?”** - identifies where the organization intends to the in the future - business’ guiding image of success - a compass of company aspirations

Question 51

Outline what makes a good vision statement

Answer 51

- short simple powerful - inspiring with emotional impact - clear direction and mental image of what the company wants to become. - provides a sense of belonging to the members of the org

Question 52

Explain what a mission statement (or creed statement) is and what question does it answer.

Answer 52

Answers the question: **”What is our business?”** (because business is used to achieve vision) - describes what the organization does, who it serves (market), and unique point from its competitors - reason why a company exists. - main focus of main business activity.

Question 53

Distinguish a mission statement vs. a vision statement

Answer 53

Question 54

Distinguish between goals and objectives

Answer 54

- Objectives: concrete; goals: tangible (concrete vs tangible) - goals: long term; objectives: shorter period (length) - Objectives depend on reality and ideas; goals: imagination and creativity (reality vs imagination) E.g.: Goal - I will graduate college - long term, not specific Objective - I will get a bachelor’s degree in X and graduate with honors - specific goals (honors and specific subject)

Question 55

Outline the characteristics of an objective

Answer 55

Question 56

Explain the 3 basic types of objectives

Answer 56

Question 57

Explain why are ethical objectives important

Answer 57

- Build costumer loyalty - Positive image - Create a positive work environment - Reduce the risk of legal redress - Meet the customer’s ever increasing expectations for ethical behavior (related w/ image and loyalty somewhat…) - increase profits

Question 58

Define what is corporate social responsibility

Answer 58

CSR = ethical behavior of a company towards society (e.g. sustainability, social, etc.)