BUSINESS STUDIES TOPIC 1

Business

The organised effort of individuals to produce and sell, for a profit, the products that satisfy individuals' needs and wants.

Production process

Activities undertaken that combine resources to create products that satisfy needs and wants.

Stages of production

Input- Transformation- Output.

Finished product

Final product ready for consumer use.

Unfinished product

Can be further processed to manufacture.

Wage

Money received by the worker, usually on a weekly basis for services they provide an employer.

Salary

A fixed amount of money paid on a regular basis, usually fortnightly, to a permanent employee.

Industry

A group of businesses that are involved in a similar type of production.

Good

Items that can be seen and touched - tangible.

Service

Items that cannot be seen or touched - intangible.

Profit

What remains after all business expenses have been deducted from sales revenue (Revenue - expenses = Profit).

Employment

Provided to the community.

Income

Income to owners and employees.

Choice

Freedom of choice.

Innovation

Improvements to products and new products to better society.

Wealth

Economic growth.

Quality of life

Improved standard of living.

Entrepreneurship

An individual who has developed certain ideas and is willing to take a risk to implement their ideas into a business and develop strategies.

Risk

Any internal or external uncertainty, factor, or event that threatens a company's ability to operate, achieve its financial goals, or remain profitable.

Micro enterprises

Less than 5 people, e.g., graphic design, photography, home-based.

Small-medium enterprise

20-199 employees.

Large enterprise

200 or more employees.

Multinational

An international business with a home base (and ownership) in one country and a number of business operations in other countries.

Transnational Corporation (TNC)

An international business with ownership, operations, products, and customers in a number of countries.

Primary industry

Acquisition of raw materials, e.g., wheat, sugar, iron ore, timber, coal.

Secondary industry

Raw materials are combined with labour and capital equipment to create finished products, e.g., manufacturing businesses.

Tertiary industry

Prime function is related to service, e.g., hairdressers, lawyers, accountants, doctors.

Quaternary industry

Businesses that provide information services, e.g., banks, telephones, media.

Quinary industry

Traditionally at home, e.g., childcare, cleaning, landscaping, hospitality.

Sole Trader

Someone who conducts the running of a business on their own and is solely responsible for managing and financing the enterprise.

Partnership

Unincorporated business with 2-20 owners, ownership % of each partner, profit distribution according to ownership level.

Private company

1-50 owners or shareholders, separate legal entity, limited liability, not on ASX stock exchange.

Public company

Unlimited shareholders, separate legal entity, limited liability, on ASX stock exchange.

Franchise

A license to operate an independently owned business and use the production methods, products, trademarks, and advertising of another business.

Funding and loans

Financial resources necessary for business operations.

Business size and growth

Factors influencing the scale and expansion of a business.

Size of the business

Larger businesses may require a company structure; small businesses often operate as sole traders or partnerships.

Ownership/control

How many people own the business and how much control the owner wants over decisions.

Finance/capital

Access to funding—companies can raise capital through shareholders, whereas sole traders rely on personal savings or loans.

How to increase profit

Increase sales, reduce costs through wages (redundancy).

Wealth creation

Generate profit.

External influences

Economic, financial, geographic, social, legal, political, institutional, technological, competitive situation, markets.

Internal influences

Factors within the business that affect its operations.

Economic influences

The fluctuation of consumer and business spending over a period of time, economic cycle.

Financial influences

Borrowing money from banks and financial institutions; debt finances significantly influenced by interest rates.

Geographic influences

Climate, natural resources, topography, and location.

Social influences

Being constantly aware of consumer tastes and workplace diversity.

Legal influences

Laws and regulations set by local, state, and federal governments.

Technology influences

Equipment and knowledge available to help businesses perform certain functions more efficiently.

Competitive situation

Operate in a highly competitive environment; must develop a competitive advantage.

Market concentration

Refers to the number of competitors in a particular market.

Sustainable competitive advantage

Ability of a business to develop strategies that ensure it has a competitive advantage for a long period.

Changes in finance/capital markets

Finance or capital flow is now more mobile and flows easily between countries.

Changes in labour markets

The movement of large numbers of temporary migrant workers has been important to Australian businesses.

Changes in consumer markets

Value of world trade; countries achieve savings by specializing in products they can produce efficiently.

Products

Goods: tangible; Services: intangible.

Location

High visibility required to attract passing customers; cost of renting or leasing premises.

Resources

Financial resources, input resources, staff resources.

Management types

Hierarchical: multiple management levels; Flat: fewer levels, shared responsibility.

Business culture

Values, ideas, expectations, and beliefs by members of an organization.

Corporate Culture

Competent, effective management will use business culture as a force for positive change.

Establishment Stage

When a business first enters the market, characterized by slow growth and the need for sufficient sales.

Growth Stage

Established itself and achieved steady or rapid sales and cash flow.

Maturity Stage

Business growth begins to slow down and market share starts decreasing due to new businesses entering the market.

Post-Maturity Stage

Three possible outcomes: renewal, steady state, decline.

Renewal

Opportunity to revitalize the business, leading to growth in sales and market share.

Steady-State

Maintains current position and relies on a group of loyal customers.

Decline

Unable to address challenges, resulting in lost competitive advantage and falling sales.

Cessation

The business has been unable to overcome challenges and has decided to close.

Voluntary Cessation

Voluntarily ceases operations, selling assets to repay creditors.

Involuntary Cessation

Forced to close down by creditors, selling assets to repay debts.

Challenges at Establishment Stage

Struggle to attract customers while managing high startup costs and compliance.

Challenges at Growth Stage

Must manage increasing demand and maintain cash flow while facing competition.

Challenges at Maturity Stage

Growth slows due to market saturation, requiring innovation and cost control.

Challenges at Post-Maturity Stage

Sales and profits may decline as markets change or products become obsolete.

Lack of Management Expertise

Fails to prepare a business plan or modify it as the environment changes.

Lack of Sufficient Money

Undercapitalization leads to inability to purchase stocks and materials.

Bankruptcy

The owner files for a bankruptcy order.

Voluntary Administration

A formal Australian insolvency process where directors appoint a liquidator.

Insolvency

The business is unable to pay debts when they are due.

Liquidation

Occurs when a liquidator takes control of a business to sell assets to pay creditors.

Receivership

An independent person takes control of a business to repay creditors.

Secured Creditors

Creditors who have collateral for the loan.

Unsecured Creditors

Creditors who do not have collateral for the loan.

Stakeholders

Any group or individual who has an interest in or is affected by the activities of a business.

Owners/Shareholders

Individuals who own shares and have a vested interest in the business.

Managers

Responsible for running a profitable organization and influencing employee productivity.

Employees

Vital to the success of an organization, providing input and requiring a safe work environment.

Customers

Consumers who influence competition and demand health-conscious products.

Society

The community's needs and wants that businesses must address.

Environment

Pressure on businesses to adopt ecologically sustainable practices.