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Unit 1 - Business and its Environment - Coggle Diagram
Unit 1 - Business and its Environment
Enterprise
Factors of production
Land
Rent
Raw materials
Sites for building
Labour
Wages
Capital
Interest
Factories
Machines
Finance
Enterprise
Profit
Decision makers
Risk takers
Role of the entrepreneur
Had an idea for a new business
invented some of their own saving and capital
accepted the responsibility of managing the business
accepted the possible risk of failure
Characteristics of succesful entrepreneurs
Innovation
Commitment and self motivation
multi skilled
leadership skills
send-confidence and an ability to bounce back
risk taking
perseverance
Major challenges faced by entrepreneurs
identifying successful business opportunities
sourcing capital (finance)
Determining a location
competition
building a customer base
personal service
knowledgeable pre- and after- sales services
providing for one- off customer requests that larger firms may be reluctant to provide for
Why do new businesses often fail
Lack of record keeping
lack of cash and working capital
poor management skills
changes in the business environment
new competitors
legal changesSteven Marero Siahaan e.g. outlawing the product altogether
economic changes that leave customers with much less money to spend
technological changes that make the methods used by the new business old-fashioned and expensive
Common types of entreneneurial businesses
primary sector
fishing
market gardening
secondary sector
Jewellery making
dress making
craft manufacture
building trades
Tertiary sector
hairdressing
car repairs
café and restaurants
child minding
impact of enterprise on a country's economy
employment creation
economic growth
firm's survival and growth
innovation and technological change
exports
personal development
increased social cohesion
social enterprise
a business with mainly social objectives that reinvest mosts of its profits into benefiting society rather than maximising returns to owners
objectives
economic
social
environmental
Business structure
primary sector business activity
all those activities the end purpose of which consists in exploiting natural resources: agriculture, fishing, forestry, mining, deposits
Secondary sector business activity
economic sector in the three-sector theory that describes the role of manufacturing. It encompasses industries that produce a finished, usable product or are involved in construction
tertiary sector business activity
firm that provide services to consumers and other businesses such as retailing, transport, insurance, banking, hotels, tourism and telecommunications.
Public and private sectors
public
comprises organisations accountable to and controlled by central or government
private
comprises business owned and controlled by individuals or group of individuals
command economy
economic resources are owned planned and controlled by the state
mixed economy
economic resources are owned and controlled by both private and public sectors
free-market economy
economic resources are owned largely by the private sector with very little state intervention
the legal structure of business organisations-private sector
sole trader
A sole trader describes any business that is owned and controlled by one person - although they may employ workers. Individuals who provide a specialist service like plumbers, hairdressers or photographers are often sole traders.
Partnership
an arrangement between two or more people to oversee business operations and share its profits and liabilities. In a general partnership company, all members share both profits and liabilities.
Limited companies
limited liability
the business owner or owners are only responsible for business debts up to the value of their financial investment in the business. This means that a creditor can only take assets or finances belonging to the company.
legal personality
right ,duties and ability to sue and be sued ensured by law or statue of that country. if that is not ensured by law is not considered as legal personality. A' open a company but A'dont registred his company according to law. that company dont have legal personality.
continuity
Private limited companies
a type of privately held small business entity, in which owner liability is limited to their shares, the firm is limited to having 50 or fewer shareholders, and shares are prohibited from being publicly traded. A company becomes an independent legal structure when it incorporates.
share
a single unit of ownership in a company or financial asset. It is essentially an exchangeable piece of value of a company which can fluctuate up or down, depending on several different market factors. Companies divide capital into shares as a means of raising capital. Shares are also known as stocks.
shareholder
a person or institution owning shares in a limited company
Advantages and Disadvantages of private limited companies
Adavantages
shareholders have limited liability
separate legal personality
continuity in the event of the death of a shareholders
Disadvantages
High set-up costs
Harder to motivate and control workers
Public limited companies
a business that is managed by directors and owned by shareholders. A public limited company can offer shares to the public.
Advantages and Disadvantages of public limited companies
Advantages
limited liability
separate legal identity
continuity
Disadvantages
legal formalities in formation
cost of consultants and financial advisers when creating such a company
Legal formalities in setting up a company
this states the name of the company, the address of the head office through which ut can be contracted, the maximum and the declared aims of the business.
Size of business
Measuring business size
Number of employees
Revenue
Capital employed
Market capitalisation
Market share
Small business
Advantages
can be managed and controlled by the owner
often able to adapt quickly to meet changing customer needs
offer personal service to customers
Disadvantages
may have limited access to sources of finance
may not be diversified, so there are greater risks of negative impact of external charge
few opportunities of economies of scale
Big business
Advantages
can afford to employ specialist professional managers
have access to several different sources of finance
benefit from the cost reductions associated with larger scale production
Disadvantages
may be difficult to manage, especially if geographically spread
may have potential cost increases associated with larger scale production
Strengths and weaknesses of family businesses
strengths
commitment
Reliability and pride
Knowledge continuity
weaknesses
Succession/continuity problem
informality
Traditional
why do other business owners and directors of companies seek growth for the business?
Increased profits
increased market share
increased economies of scale
increased power and status of the owners and directors
reduced risk of being a takeover target
Internal growth
expansion of a business by means of opening new branches, shops or factories
Business objectives
Importance of objectives
S.M.A.R.T
Smart
Measurable
Achievable
Realistic
Time-specific
Corporate objectives
Profit maximisation
private sector firms want to gain the highest profit through increasing revenue & decreasing costs of production
profit satisficing
aiming to achieve enough profit to keep the owners happy but not aiming to work flat out to earn as much profit as possible. Once a satisfactory level of profit has been achieved, the owners consider that other aims take priority – i.e. More leisure time.
growth
this is usually measured in terms of sales / value of output; growth can reduce risk of takeovers,
appeal to new competitors, & motivate managers
increasing market share
indicates that the marketing mix of the business is proving to be more successful than that of its competitors. Becoming the ‘brand leader’ would make customers & retailers want to be more involved w/ this product over the competitors.
survival
there is a high failure rate of new business, which means that to survive for the first two years of
trading is a very important aim for entrepreneurs.
corporate social responsibility
this concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on consumers, employees, communities and environment
Maximising shareholder value
helps to direct management action towards taking decisions that would increase share price & returns to shareholders
Maximising short-term sales revenue
would benefit managers & staff when salaries & bonuses are
dependent on sales revenue levels
how objectives might change over time
Change in owners’ priority
the owners shift from one
object to the next as time unfolds
Change in market conditions
in a recession the
business may aim for survival
Change in size of the business
owners’ objective
could be growth in early stages & then profit maximisation as the business becomes well established
Change in management
the new management can introduce new changes & objectives
Change in competitor behaviour
the business can change its objectives in response to changes made by the competitors
Change in legislation
a change in government laws can force a business to come up w/ new objectives in a new environment
Stakeholders in a business
Individuals / groups interested in the activities of business
Stakeholders
people / groups of people who can be affected by - & therefore have an interest in - any action by an organisation
Roles
Customers
Purchase goods and services
Provide revenue
Suppliers
supply goods and services
Employees
provide manual and other labour services
Local community
provide local services and infrastructure
Government
Achieve economic stability
Lenders
Provide finance in different forms
rights
Customers
Receive goods and services that meet local laws
Suppliers
Fair treatment
Employees
Treated within minimum legal limits
Local community
Not have lives badly affected
Government
Businesses to meet requirements
Lenders
Repaid on agreed dates
responsibility
Customers
Honesty
Suppliers
Supply goods in time and condition already decided
Employees
Honesty
Local community
Cooperate
Government
Prevent unfair competition
Lender