unit 1 definition

Enterprise:

• Consumer goods – the physical and tangible goods sold to the general public – include durable consumer goods like cars and washing machines and non-durable goods like food, drinks and sweets that can be used only once.

• Consumer services – the non-tangible products sold to the general public. It includes hotel accommodation, insurance services and train journeys.

• Consumer – Individual who buys goods and services for their own use.

• Customer – Individual, group of individuals or an organisation who purchase goods and services from a business.

• Factor of Production – Resources required by business to commence production of goods and services.

• Capital goods – the physical goods the industry uses to aid in producing other goods and services, such as machines and commercial vehicles.

• Adding value – increasing the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for.

• Added value – the difference between the costs of purchasing bought-in materials and the price the finished goods are sold for.

• Opportunity cost – the benefit of the next most desired option given up.

• Entrepreneur – someone who takes the financial risk of starting and managing a new venture.

• Enterprise – Action of showing initiatives to take risk to start up a business.

• Branding – Process of differentiating or making a product unique relative to competitors by developing a symbol, name, image or trademark etc.

• Multinational Business (MNC) – A business firm that has its head office in one nation, but with operating branches, factories in other countries.

• Intrapreneur – Employee of the business who takes direct responsibility for turning an innovative idea into a profitable product or business venture.

• Business Plan – Written documents that describes a business, its objectives, strategies, financial forecast and the market it operates in.

Business Structure:

Primary Sector Business Activity

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

Secondary Sector Business Activity

• Firms that manufacture and process products from natural resources including computers, brewing, baking, and clothes-making and construction.

Tertiary Sector Business Activity

• Firms that provide services to consumers and other businesses such as retailing, transport, insurance, banking, hotels, tourism and telecommunications.

Quaternary Sector Business Activity

• Firms that provides information related services. It includes R&D, ICT, computing, web designing and management consultancy, etc.

Public Sector

• It comprises of organisations accountable to and controlled by the central or local government.

Private Sector

• It comprises of businesses owned and controlled by individuals or groups of individuals.

Mixed Economy

• Economic resources are owned and controlled by private and public sectors.

Free-Market Economy

• Economic resources are owned largely by the private sector with little state intervention.

Command Economy

• Economic resources are owned, planned and controlled by the state.

Sole Trader

• A business in which one person provides the permanent finance and, in return, has full control of the business and can keep all of the profits.

Partnership

• A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.

Limited Liability

• The only liability or potential loss the shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder.

Unlimited Liability

• Founder or Owners of the business bear full, legal responsibility for debt of the business which can risk their personal assets.

Private limited company

• A small to medium-sized business owned by shareholders who are often members of the same family; this company cannot sell shares to the general public.

Share

• A certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.

Shareholder

• A person or institution owning shares in a limited company.

Public limited company

• A limited company, often a large business, with the legal right to sell shares to the general public. Prices are quoted on the national stock exchange.

Public corporation

• A business enterprise owned and controlled by the state-also known as nationalised industry.

Memorandum of association

• This states the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business.

Articles of association

• This document cover the internal working and control of the business-for example, the names of the directors and the procedures to be followed at meetings will be detailed.

Cooperative

• Jointly owned business whose members operate it considering their mutual benefits, to produce or distribute goods and services.

• E.g. Consumers' cooperative, Farmers' cooperative and Workers' cooperative, etc.

Franchise

• A business that uses the name, logo and trading systems of an existing successful business.

Franchiser

• Person or Business selling license containing rights of their brand image, name or identity to someone who wants to open shops and sell products under that brand identity.

Franchisee

• Person or Business purchasing license that contains rights to operate under, usually a successful established brand.

Joint venture

• Two or more businesses agree to work closely together on a particular project and create a separate business division to do so.

Joint Venture

• When two or more firms agree to work closely together on a particular project and establish a completely separated business division to commence operation of that project.

Social Enterprise

• A business with mainly social objectives that injects most of its profit back into the business with aims based on societal welfare rather than profit motive. They following the triple bottom line.

Triple Bottom Line

• Three objectives of social enterprise:- Economic (Financial), Social and Environmental.

Size of Business:

Revenue

• Total value of sales made during a certain time period of business operation.

Capital Employed

• Total value of long-term finance invested into a business.

Market Capitalisation

• Total value of issued shares of the business firm.

Market Share

• Sales of a business as a proportion of total market sales.

Small Business

• A business with a limited scale of operations. Its characteristics consist of having fewer employees and lower revenue compared to large enterprises.

• Such businesses are usually privately owned and operated.

Family Business

• A business where decision-making process occurs with members of a family. It is typically managed and controlled by family members across multiple generations, with family interests influencing its operation and strategy.

Organic Growth

• Expansion of a business by establishing new plants, stores, or factories. Also known as internal growth.

External Growth

• Expansion of a business through integration or takeover of another business.

Merger

• Agreement by owners and managers of two businesses to unite them together into a new combined business.

• It's referred to as a friendly merger.

Takeover

• When a company buys more than 50% of shares of another business and becomes its owner.

• Also known as acquisition.

Horizontal Merger

• Integration with a business in the same industry in the same stage of production.

Vertical Integration

• Integration with a business in the same industry in different stage of production.

Backward Vertical Integration

• Integration with a business in the same industry in the earlier stage of production. It integrates with supplier business.

Forward Vertical Integration

• Integration with a business in the same industry in the later stage of production. It integrates with retailer business.

Conglomerate Integration

• Integration with a business in the different industry in the different stage of production.

Synergy

• "The whole is greater than the sum of parts".

• It is usually assumed that combined business organisations are more successful than its original separate entities.

Strategic Alliance

• Agreement between two firms to commit resources to accomplish a certain aim while retaining its independence from each other.

Business Objective:

• Business Objectives – A stated measurable target of the business written in its business plan that it hopes to achieve.

• Corporate Social Responsibility (CSR) – When businesses take interest of the society in consideration, and by taking accountability for the impact of their decisions and activities on various stakeholders as well as the environment.

• Pressure Group – An association created by group of individuals with a common interest or goal, thus putting pressure on corporations and government to change specific policies so that their aim is achieved. It is usually for betterment of society.

• SMART Objectives – Aims that are specific, measurable, achievable, realistic and time-limited.

• Annual (Company) Report – Document containing details of a firm's activities over a year, including its financial accounts.

• Business Strategy – Long-term plan consisting steps of action of a business, tailored to achieve a specific objective.

• Tactic – Short-term plan of action which is a part of the overall strategy to achieve its main aim.

• Target – Short-term objective of the corporation that must be completed in order to achieve their overall objective.

• Ethical Code (Code of Conduct) – Document detailing company's rules and guidelines on employee behaviour that must be followed by all the workers.

Stakeholders in a Business:

• Stakeholders – Individuals or groups who can be affected by, and have an interest in, any action taken by an organisation.

• External Stakeholders – Individuals or groups who are separate from the business but are affected by or interested in its operations.

• Internal Stakeholders – Individuals or groups who work within the business, or own it, and are affected by the operations of the business.

• Trade Union – Organisations of working people with the objective of improving the pay and working conditions of its members and providing them with support and legal services.

• Stakeholder Concept – The view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders. Also known as stakeholder theory.