Unit 1: Business organization and environment

what is a business's purpose?

​​​​​to satisfy needs and wants of their customers by selling goods and services, usually in return for profit.

to create a customer (peter drucker)

what are the main functions of business orgs?

hr, finance, marketing, or

what is a business?

​a decision-making organization established to produce goods and/or provide services

​​​​​what are goods?

physical products

what are services?

intangible products

what are the factors of production?

land, labor, capital, entrepreneurship

what is adding value?

producing a particular good or service worth more than the cost of the resources used to produce it

what is the difference between customers and consumers?

consumers are the people who use goods and services while customers are the people or businesses that purchase goods and services

what is the primary sector?

involved with the extraction of natural resources

primary sector production is also known as extractive production

what are notable things about the primary sector?

predominant sector in low-income economies/less economically developed countries

the added value of the output is relatively low

what is the secondary sector?

involved with the manufacturing or construction of finished products

transforms primary sector output into finished goods

what are notable things about the secondary sector?

predominant sector in economically developing countries/middle-income countries

said to be the "engine of growth"

what is the tertiary sector?

involved with providing services to customers

what are notable things about the tertiary sector?

predominant sector in economically developed countries/high-income economies

added value is very high

what is the quaternary sector?

involved with the creation or sharing of knowledge and information, as well as using computer and digital information technologies

what is entrepreneurship?

the traits of individuals who run their own business/es, aka an entrepreneur

what are important traits of an entrepreneur?

Risk-taker

Innovative

Strategist

Enthusiastic

Resilient

what are common challenges new businesses may encounter?

- lack of finance

- lack of market research

- poor marketing strategy

- limited human resources

- long hours

- lack of knowledge, skills, and experiences

what opportunities could incentivize people to start their own business?

- money

- autonomy

- challenges

- passions

- family ties

- unfilled market opportunities

- making a difference

what is the private sector of the economy?

it consists of businesses owned and run by private individuals and organizations that usually aim to earn a profit

what is the public sector of the economy?

business organizations in the public sector are controlled by a regional and/or national government, mainly to provide essential goods and services for the general public

what are the terms for evaluation for types of entities?

liability, legal identity, transparency, accountability, and set-up costs

explain liability

the extent to which you risk losing personal possessions in case of business failure

two types:

• unlimited liability

  • 100% personally responsible for all the losses a business might have

• limited liability

  • losses don’t affect your personal assets, only your investment

explain legal identity

the formal registration of a human/non-human identity, whether you exist from a legal perspective

two types:

• incorporated

  • legal identity is not shared with the owner

  • apple and tim cook

• unincorporated

  • legal identity is shared with the owner 

  • your friend’s small business

explain transparency

the extent to which businesses have to disclose their financial data

explain accountability

the degree to which a person or business must answer to someone

explain set-up costs

how much it takes to set up a business

what are companies?

companies aka corporations for commercial for-profit businesses owned by shareholders

they are incorporated and with limited liability

explain the two categories of companies

privately held companies

• shares cannot be advertised for sale nor sold

• usually small businesses but can be large orgs

• usually no legal requirement for the company to publish detailed financial accounts

publicly held companies

• shares are traded on a public stock exchange

• no need for prior approval of existing owners for trading of shares

• strictly regulated and required to publish final accounts annually

• no legal limit on max num. of shareholders

• when a company first sells its shares, it does so through an IPO (initial public offering)

what are the advantages and disadvantages of privately held companies?

what are the advantages and disadvantages of publicly held companies?