business chapter 2

Define primary sector business activity

Firms engaged in farming, fishing, oil extraction, and all other industries that extract natural resources so that they can be processed

Define secondary sector business activity

Firms that manufacture and process products from natural resources into finished or semi finished products, including computer, baking, cloth making and construction

Define tertiary sector business activity

Films providing services to consumers and other businesses, such as retailing, transport, insurance , banking, hotels and tourism

Define quaternary sector business activity

Business that provide Information knowledge and specialized services often involving the creation or process of information

What is industrialization?

Rise in secondary sector

Reasons for industrialization

•Demand

•Population increase

•tax decrease income increase increases for demand increase increases

• Interest rate decreases demand increase

• Subsideries

Positive impact of industrialization

•Employment

• Demand increase

• GDP increase

• Tax revenue increase collected

• Living standards increase

• Balance of payment positive

Negative impacts of industrialization

• Pollution

• Environmental damage

• Air pollution

• Noise pollution

• Depletion of natural

• High competition

What is deindustrialization ?

Decline in secondary sector

Reasons for the deindustrialization

•International relations disrupted

•High Tax

•Low rate

•High generation gap

• Interest rate increase

What are unincorporated businesses

The business which are not separate legal identity, business, and owner are legally same thing

What are incorporated businesses

The business which to have separate legal identity business become a separate legal person from its owner

What is separate legal identity?

Incorporated companies, separate artificial person from it, shareholders,

can sign contracts, and can be signed with

give loans and take loans

Define limited liability

In case of bankruptcy loss, shareholders, financial responsibility be up to the amount of invested no further assets can be claimed by them

Define continuity

In case of shareholders of incorporated, that business operations will be considered continuous

Define sole traders

type of unincorporated

Owned and controlled by single person

Profit and loss of single person and investment and responsibility

Define partnership

Type of unincorporated

Owned and controlled by two or more than two people

Investment responsibilities and profit loss will be shared

Advantages of sole traders

Can keep all the profits

Have full and complete control

Flexibility

Privacy

Easy to set up

Disadvantages of sole traders

Unlimited liability

Lack of continuity

Heavy workload

Difficulty to raise additional capital

Advantages of partnership

More capital

Shared workload

More skill or expertise

Shared risk

Disadvantages of partnership

Have to share profit

Unlimited liability

Disagreement can occur

Lack of continuity

Define limited partnership

Type of partnership business in which one or more Partner one partner has limited liability, but there must be one with unlimited liability

What is partnership agreement?

Legal contract between partner, has profit percentage, responsibility investment

Some features of private Limited Companies

Type of Incorporated company

Shareholders will be from friends and family only

It cannot sell shares to general public

It’s shareholders, cannot sell a transfer shares without the consent of other shareholders

It is compulsory to produce financial statements, but not publish it

Advantages of Private Limited companies

Shareholders have limited liabilities

Continuity

Can raise finance

More Privacy

Disadvantages of private limited company

Less controller for owners

Difficulty in selling shares for shareholders

Profit may be shared

Capital cannot be raised by sale of Sears to general public

Legal formal Involved

Define franchise

Legal form of business that takes permission from another successful well established business to use its name logo promotion at national level

define franchisee

A person or business advised that buys the right from the franchiser to operate the franchise

Define franchiser

A person or a business that sells the right open stores and sell products or services using the brand name and brand identity

Advantages of franchisee

Low Risk

Already established

The franchiser can provide training and support

Marketing support

Disadvantages of franchisee

License franchise fee

Less control

Little Room for growth

Having to potentially divide profit depend depends on the licensing contract

Advantages of franchiser

Lower finance risk

License franchise fee

Expansion of your brand/business

Disadvantages of franchiser

Less control over local outlet

Have to provide training

Conflict with franchisee

Define joint venture

Legal form of venture in which two businesses combined their economic resources management in order to complete one specific project to achieve their common adjective profitably

advantages of joint venture

Shared cost, and risks

Combined Skill and expertise

Access to more finance

Access to more market

Disadvantages of joint venture

Profits are shared

Disagreement

Loss of control

Risk of knowledge technology being shared

Find cooperative

Legal form of business in which group of farmer, producers, employees, combined owned, and controlled organization in In order to achieve their common objective profitably

Features of cooperative

All members can contribute to running the business

All members have won vote at important meeting

Profits are shared equally among members

Advantages of cooperative businesses

Buying in bulk

Working together to solve problems and take decision

Shared skill and expertise

Share risk

Greater market power

Disadvantages of cooperative business

Conflict between members (slow decision-making)

Possible lack of professional skill management

Profit may not be the main priority

Limited access to finance(Heavily on numbers contribution Solar finance available for expansion)

Define public coporation

A company owned and controlled by government with the purpose of public welfare

Advantages of public cooperation

Provide essential services

Large Scale funding

Can Boost Employment

Lower price

National strategic Interest

Disadvantages of public cooperation

Over staffing

Political changes can disrupt strategy

Poor customer service

Government fundings have opportunity cost

Define public sector

All the businesses and economic resources owned and controlled by the government with the purpose of public welfare

Define private cooperation

A company owned by private individuals are shareholders and operate independently of the government

Define private sector

Part of the economy made up of businesses that are owned and controlled by private. Individuals are organization.

Find social enterprise

A business with mainly social objectives that we invest most of his profits into benefiting society rather than maximizing returns to owners

Similarities of social enterprise with commercial enterprise

Both sell goods and service services to customers

Both generate Revenue

Both need to cover their cost to remain financially Sustainable

Both can make profit

Both employee workers and require effective management

Differences of social enterprise with commercial enterprise

•Social enterprise assistant objective to achieve a social or environmental benefit, while commercial enterprise has the main objective to maximize profit for owners

• Profits are largely reinvested to achieve the social objective for social enterprise as profits can be distributed to owners a reinvested for commercial

• Success is admired by both financial performance and social impact for social enterprise Where at for commercial enterprise successes, mainly measured by financial performance and profitability