Commerce - Business Studies

Entrepeneur

Someone who perceives an opportunity and creates an organisation to pursue it

Example of an Entrepeneur

Elon Musk

Sole Trader

An individual owner of a business, entitled to keep all profit after tax has been paid, but liable for all losses

Pros and Cons of being a Sole Trader

Pros - complete control, less government regulation, owner keeps all profits.

Cons - Personal liability for business debts, business ends when owner dies, difficult to operate when sick.

Partnership

Legal relationship of 2 to 20 people that operate a business together

Pros and Cons of a Partnership

Pros - low start up costs, shared responsibility and workload, the business can continue if one partner dies.

Cons - liability of all debts including the partners, difficult finding a suitable partner, divided loyalty and authority.

Incorporation

The process that companies go through to become a separate legal entity from the owners.

Unincorporated

Business that would be either a sole trader or partnership. Business is the same legal entity as the owner/s.

Private Limited Company

An incorporated business structure that has at least one director and max 50 shareholders

Shares

Can only be sold the shares to those only approved by the other directors.

Shareholders

The owners of a company who are entitled to share its profit. Either given shares or purchased them off the public exchange

Public Listed Companies

An incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX

Pros and Cons of Public Companies

Pros - easy to attract public finance, limited liability, easy to transfer ownership, lower company tax rate.

Cons - Everyone knows your details, full disclosure of reports, high gov regulation, annual auditing reports are costly

Social Enterprises

A business that is driven by a social purpose at the heart of what they do, with profits reinvested into the project.

Examples of a Social Enterprise

The Big Issue

Profit

The clear goal of any business is to make a profit or increase its profits. Profit = Revenue - expenses

Market Share

A business percentage of total sales within an industry. They aim to increase this by building customer loyalty, employing a talented dedicated work force.

Setting and Achieving Objectives

1. Set Objectives - e.g. increase market share

2. Develop strategies - e.g. Target new customers

3. Analyse performance through KPIs

e.g. Greater percentage of sales within the industry

Meet Shareholders Expectations

Shareholders expect a return on their investment. 'Return' meaning dividends (profits). Companies and directors are expected to meet the expectations and return dividends to investors, improving the value of the company through expansion.

Market Need

When a business meets an unmet customer demand.

Social Need

Improving society and the environment through business activities. These include living standards like: health, incomes, education, donations.

Management Style

The way in which managers work with other people to achieve the objectives of a business.

Autocratic

Manger makes all decisions. Limits employee knowledge. Frequently checking on employee performance. One way communication. Occurs during crisis or uncertainty.

Participative

Shares decision making. Recognises talent and skills of employees. Sense of pride and ownership. Two way communication.

Laissez faire

Creative and research environments. Sets business objectives and KPI's, but doesn't make decisions. Communication between employees. Horizontal structure. Two way communication. Conflict if goals aren't met.

Marketing

A total system of interacting activities designed to plan, price, promote and distribute products to current and potential customers, in order to satisfy a market want or need.

4p's

Product, Price, Place, Promotion

Product

A good or service or an idea that can be offered in exchange for money.

Tangible

A physical good such as a product itself. (features, quality, packaging).

Intangible

Non physical goods such as services. (beauty, healthcare, education).

Product Features

Quality, accessories, styles, repairs, updates.

Product branding

Should include: a brand name as well as a brand symbol or logo.

Brand Packaging

Well designed packaging that gives a positive impression of the product and encourage first time customers to purchase.

Price

Aim to achieve a profit margin. If the price of the product is too high, customers may choose to purchase from competitors with lower prices.

Psychological Pricing

Making the price look less than it is. $19.99 instead of $20. "Charm pricing"

Recommended Retail Price (RRP)

The price is recommended by either a wholesaler or the manufacturer of goods being sold by a retail business.

Bundle Pricing

Rather then buying a single item, buyers can purchase multiple times at a reduced price.

Place

An element of the marketing mix relating to how a business distributes its product to customers.

Distribution Channels

Producer to customer (direct)

Producer to retailer top customer (indirect)

Producer to wholesaler to retailer to customer (indirect).

Promotion

Marketing communications used by a business to inform, promote, and remind its target market about its product. It aims to attract new customers, brand loyalty, existing customers to purchase more.

Publicity

Planned or sometimes unplanned, attention given to a business and its product for promotional purposes. it is free and can take many forms.

Advertising

Bought and very targeted.