Studied by 14 people
What is a business?
A decision making organization involved in the process of using inputs to produce goods and services (outputs)
What is in a business system?
Inputs, processes, outputs, feedback
What are inputs?
Resources needed to create a product or service
What are types of inputs?
Physical: raw materials (corn, timber, metal ores, crude oil), semi-finished goods (steel, iron, producer goods), capital goods (equipment, machines)
Financial: funds needed to set up a business, short, medium, and long
Human: people needed to run a business (employees, CEO, managers)
What is an enterprise?
The process of taking risks to combine the other resources to create a good or service
What are processes?
Combining inputs to create outputs (HR, finance and accounts, marketing, operations)
What are outputs?
What the business produces or sells, goods or services
What is feedback?
Process where the results of the outputs have become an input of the same system
What is the effect of negative feedback?
It pushes the system in a different direction, necessary for change and improvement.
What is the effect of positive feedback?
It pushes the system in the same direction, good if the business is doing well, bad if the business is doing poorly
What is the primary business sector?
Extracts and harvests materials from the Earth (agriculture, oil mining, ore mining, fishing, farming)
What is the secondary business sector?
Manufactures and processes goods by using raw materials to create products (car makers, food processing, chemical business)
What is the tertiary business sector?
Services industry (retail, wholesale, entertainment, hotels, healthcare, real estate)
What is the quaternary business sector?
Industries providing information services, knowledge-based, collect, process, and sell information and data (ICT, consultancy, education, R&D, financial services, media)
What is a supply chain?
Steps involved in making products
What determines the dominant sector of a country?
Resources and economic development
What is sustainability?
Meeting needs without compromising the future
What are the 3 aspects of sustainability?
People, Planet, Profit
Who are entrepreneurs?
A person who starts a business
What are characteristics of an entrepreneur?
Has creativity and passion
Willing to take risks
Understands the community and its problems
Can design and plan solutions
Wants to share and grow ideas to increase impact
What gives a business a good chance at success?
Have skilled and collaborative employees
Have enough funds
Good marketing
Efficient operations
External opportunities and minimal threats
Who is an intrapreneur?
A person who develops new ideas, process, or products for the business they are in
What are reasons to start a business?
New idea
Passion to make a change
Have a powerful sense of purpose in their work, highly motivated
The market has an unmet need
Want to earn a living for themselves
Potential for greater financial reward
Want to have control of schedule and work
What are challenges of starting a business?
Lack of funds
Strong competition, no market share
No market
Employees are afraid of risk, unskilled, or not fit for the job
Poor management skills that lead to expensive mistakes
Can’t react to external changes
What are the steps of starting a business?
Refine idea
Prepare a business plan
Decide on a legal structure (ownership)
Register
Find a location
Get funding
Hire employees
What is SWOT?
A tool to analyze strengths, weaknesses, opportunities, and threats to understand the business’s current position and how to improve
What is STEEPLE and what does it stand for?
Areas of external factors that may affect the business
Sociocultural (age, health status, culture, education)
Technological (state of technology, affects process, quality, human well-being, and infrastructure)
Economic (GDP affects demand)
Environmental (resource availability, CSR)
Political (stability of a government, disagreements between political parties)
Legal (laws and regulations)
Ethical (pressure for profit can cause unethical decisions)
What is a business plan?
A tool used to describe a business
What is the purpose of a business plan?
Helps people believe in the business, reduces risks, inspires others to join them
What is included in a business plan?
Purpose
Vision and mission statement
Description of problem you are trying to solve
Product description
Legal structure of the business
HR needs
Location and facilities
Value of your product
Effect of business on stakeholders and environment
Description of the market and competition or partners (social business)
Marketing plan
SWOT analysis
Cashflow forecast and budget
Sources of finance
What is a private sector business?
A business owned and controlled individually, all decisions are made by owners, and has the goal to profit
What are types of private sector businesses?
Sole traders, partnerships, privately held companies/private limited companies (LTD), publicly held companies/public limited companies (PLC)
What do private sector businesses do for the economy?
Creates employment, develops and grow the economy, provides goods and services
What are public sector businesses?
Organizations created and owned by the government
What is the purpose of the public sector?
Provide essential goods and services (healthcare, education, emergency services)
How is the public sector funded?
Government uses tax revenue to fund
What do national governments provide?
Defence, universities, museums, hospitals, embassies, infrastructure
What do local governments provide?
Schools, emergency services, hospitals, water supply, recycling and disposal of trash
What is a sole trader?
An individual who runs a business alone, 1 legal owner
What are advantages of being a sole trader?
Easy to set up due to little legal formalities, regulations, and paperwork
All profits go to the owner
The owner makes all the decisions
Easier to cater to individual customers due to smaller size
Finances are kept private
What are disadvantages of being a sole trader?
Hard to compete with larger organizations
Unlimited liability, owner is responsible for all debts
Difficult to finance
All work is done by owner (can have employees)
Likely to cease trading if owner dies
Potential for higher taxes (higher income tax rate than corporate tax)
What are partnerships?
The creation of a business between 2-20 people
What is necessary for a partnership to be formed?
A partnership agreement must be signed
What does a partnership agreement include?
Initial investment put in by each partner
How profit and loss is split
Role and responsibilities of each partner
Rules of accepting and withdrawal of partners
Procedures of ending the partnership
What are advantages of being a partnership?
Easy to set up
Easier access to finance than a sole trader as there are more owners
Partners can specialize to increase efficiency and productivity
Reduces costs for each individual owner and work is split
Finances are kept private
What are disadvantages of being a partnership?
Unlimited liability
Partners must agree on decisions so it may take longer and there may be disagreements
More legal and financial responsibility as a mistake will affect all other owners
If 1 partner dies, the deed of partnership may have to be remade
What are companies/corporations?
A larger organization usually owned by many or a group of individuals called shareholders
Who are shareholders?
Someone who owns part of a business
What can shareholders do and what do they get?
Can vote in AGM
Receives part of profits in the form of dividends
Have limited liability (can’t lose personal assets if a company goes bankrupt)
What are the 2 types of limited liability companies?
Private limited companies/privately held companies (LTD) and public limited companies/publicly held companies (PLC)
What are privately held companies (LTD)?
A privately owned business, often with friends or family as shareholders
How do people become shareholders in an LTD?
Shares aren’t sold on the stock exchange and must be approved by all shareholders before sold
What are advantages of being a LTD?
Control and ownership are kept in a small group
More investors, so there is more access to finance
Shareholders have limited liability and only lose as much as they put in
Finances are kept private
What are disadvantages of being a LTD?
Profits are shared
Decisions must be agreed on by many people
Shares aren’t publicly traded
The company can’t be examined by external experts
Costly and time consuming to set up due to paperwork
What are the paperwork needed in the creation of an LTD?
Memorandum of associations which states details of a company
Articles of association which states the internal roles and responsibilities of the board of directors and shareholders
What is a publicly held company (PLC)?
A company that has sold part of the business to external shareholders
How do companies “go public”?
Companies have an initial public offering (IPO) which sells part of the business to external shareholders for the first time
What are advantages of being a PLC?
Greater capital from selling shares
Limited liability
Risk is split among shareholders
It is a separate legal entity, so the death of a shareholder doesn’t affect business continuity
What are disadvantages of being a PLC?
Profits are shared
Finances are public
Costly and time-consuming to set up
Less control as outsiders will have a majority of shars
What paperwork is needed to set up a PLC?
Memorandum of associations, articles of associations, and certificate of incorporation (a license that recognizes a company as a separate legal entity and allows trading)
What are social enterprises?
A business which focuses on social and environmental objectives
What are for-profit social enterprises?
A revenue and profit-making business that integrates social and environmental impact into their business model.
Can be sole traders, partnerships, LTDs, or PLCs
How is profit distributed?
Most of it is reinvested into the business while some is distributed to owners
How to for-profit social enterprises make money?
Sales of goods or services, not donations
What does a private sector for-profit social enterprise do?
Produce goods and services typically sold in market for a price (most for-profit social ents.)
What does a public sector for-profit social enterprise do?
Produces goods and services that are typically provided by the public sector (owned by the government or watched over by the government)
Ex. charging tourists entrance fees to a national park so that they can maintain it, using money from public transportation to improve it, and other things that benefit society
What are cooperatives?
A business owned and operated by members who split the profits
What is the purpose of cooperatives?
Create value for members by operating in a socially responsible way
Who are cooperative members?
People with a common interest who can vote for a decision or elect representatives to make decisions
Profit is shared between members
What are examples of cooperatives
Retail trade/wholesalers
Common owners: shopkeepers, consumers
Common purpose: negotiate with suppliers, share marketing expenses, lower prices for members
Agriculture
Common owners: farmers, consumers
Common purpose: lower input costs, increase selling price
Banking
Common owners: customers
Common purpose: generate more stable profit, boost local economies through loans
Utilities
Common owners: customers
Common purpose: provide utilities to the area
Education
Common owners: teachers, other education-related people
Common purpose: provide education
Healthcare
Common owners: doctors, nurses
Common purpose: make healthcare more affordable
What are benefits of cooperatives?
Each member feels empowered and has an incentive for working
Members have power in decision-making
Benefits society
Tend to have support from the public
What are the disadvantages of being a cooperative?
Tend to have lower salaries than other companies
Limited sources of finance as it tends to be more difficult to get bank loans
Slow decision-making due to democratic structure
Limited promotional opportunities due to flat organizational structure
What are benefits of a for-profit social enterprise?
Positively impacts the world
Generates more profit, so it is more stable than a non-profit
Attracts people who value sustainable and responsible businesses
What are challenges of for-profit social enterprises?
Takes longer time to see returns and often requires patient capital (long-term capital)
More distrust from people as they are scared of greenwashing or social washing (can gain credibility through certifications)
Hard to measure social impact
Complex supply chain as suppliers must align with business objectives and mission
Hard to remain true to purpose with changing conditions
What are non-profit social enterprises?
Businesses that work to improve social and environmental outcomes by getting funding from grants, donations, or fundraiser events
Where does the money obtained by a non-profit social enterprise go?
Surplus must be reinvested into the business (go to cause, pay workers, provide housing, marketing expenses, etc.)
What are the benefits of being a non-profit social enterprise?
Limited liability
All surplus is reinvested
No tax
Tend to rely on volunteers (no salary)
Can receive grants or donations
What are challenges of a non-profit social enterprise?
Funding is difficult
Limited salary makes it hard to retain workers
A lot of paperwork to set up and the government is very strict
What are non-governmental organizations (NGOs)?
A non-profit social enterprise that is not controlled by the government but can receive funding from the government
What is a vision statement?
A long-term goal, dream, or understanding of waht the future should look like
What is a mission statement?
A short statement that defines what the organization does now in order to achieve its vision
What is the importance of having a purpose?
Allows everyone to orient themselves to a goal and allows outside parties to understand a business’s purpose and priorities
What are values?
Any benefit experienced by stakeholder
They come in many different forms and each stakeholder views value differently
What are aims?
Long-term gaols of a business that is often in the mission statement
What are characteristics of aims?
They are the general purpose and intention of a business, they tend to be qualitative, they are vague and abstract, they are created by senior leaders
What are objectives?
Short to medium-term, specific targets and organization sets to achieve its aims
What are characteristics of objectives?
They are SMART goals set by managers or subordinates, often related to growth, profit, market share, customer satisfaction, ethics, and sustainability
What is a strategy?
A plan created to reach a specific objective
What are characteristics of strategies?
Decisions and actions by senior management, medium to long-term, may require large investments, can be risky
What comes with a successful strategy?
More agile and resilient to external changes
What does strategic planning include?
Understanding and connecting to the vision and mission
Market and product research
Consideration of impact of plans
SWOT analysis
Sources of finances
Milestones to evaluate progress and revise strategy
What are examples of strategies?
Profit maximization, growth, improve image and reputation
What are circular strategies?
Strategies where outputs feedback into inputs, reduces waste and uses less resources
What are tactics?
Smaller actions that a business takes to reach its goals
What are characteristics of a tactic?
Shorter timeframe, smaller, less important goals, created by less senior managers or employees, less risk, actions are reversable, requires less resources, can result in loss of money but it won’t destroy a company
What are examples of tactical objects?
Survival or sales revenue maximization
What is corporate social responsibility?
A set of actions taken by a business to improve its impact on the society and the environment
What are the benefits of pursuing CSR?
Earn a higher revenue in the long term
Consumers seek out businesses that align with their values
Consumers are more likely to stay loyal
More likely to recruit, retain, and motivate employees
Reduce future risks and protect their reputation
Easier to adjust to anticipated social and environmental regulations
What are limitations of CSR?
Difficult to change the culture of a company
Cost of production may increase (expensive inputs, additional training, change in supply chain)
Risk of reputation damage if the company doesn’t live up to expectations
CSR is subjective
What is a circular business model?
Business model where outputs can be inputs so that it becomes more sustainable
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