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U3AOS1 - Managing a Business - Coggle Diagram
U3AOS1 - Managing a Business
3.1.1 types of businesses
Sole Trader:
an individual owner of a business entitled to keep all profits after tax has been payed but liable for all losses, operating under their own name or RBN.
Simplest and most inexpensive
Total responsibility for decisions, planning, operations
Rights to all profits and capital
Owner held totally responsible for all debts of the business unlimited liability.
Partnership:
legal form of business ownership, 2 or more people work together with a view of making a profit
2 types, general and limited partnership
Combining expertise and resources of 2-20 people
Each partner is jointly reliable for debts unlimited liability
No perpetuity, not ongoing if a partner leaves/dies, new partnership must be formed.
Company:
a separate legal entity that is subject to the requirements of the corporation’s act, owned by shareholders who have limited liability
Private-Listed Company (Pty Ltd)
Minimum of 1 shareholder, restricted to max of 50 non-employee shareholders.
Limited liability
Has perpetuity
Public Listed Company (Ltd)
Used to increase number of shares and access to more capital.
Limited liability for debts incurred (separate legal entity)
Has perpetuity
Social Enterprise:
private sector business that distributes profit to benefit the community rather than individual shareholders.
Uses strategies to maximise improvements in human wellbeing or the environment.
Aims to earn revenue while achieving social, culture, community, or environmental outcomes.
Government Buisness Enterprise:
government owned and operated, they seek to run profitably by controlling costs and selling their good at a price to cover costs.
Governments act as the shareholders and have a strong interest in their performance and financial returns
3.1.2 business objectives
statements of desired achievement that provide direction for the business.
To make profit:
the difference between revenue and expenses. If a business makes a profit, it may be considered successful.
Profits may be earned to unsure survival, growth and expansion over time.
To increase market share:
proportion or percentage of the market (and total sales) controlled by the business.
Aiming to gain a greater percentage of the market through its sales resulting in an increased revenue stream.
Buis should aim to maximise appeal of their product/service where possible.
To improve efficiency:
the best use of resources in the production of goods and/or services
To improve the business needs to achieve more output (goods produced/services provided) for each unit of input.
A buis should review and evaluate operations to determine improvements (whilst working with financial constraints of the business)
To improve effectiveness:
degree to which a business achieves its stated objectives.
Businesses must have strategies in place to achieve stated objectives.
They must also consider tools to use to assess whether the outcome meets the stated objectives.
To fulfil a market need:
set of actual or potential buyers of a product or service.
It is important for a business to recognise and satisfy the needs of its market.
This allows the business to increase profits and sell more products and services (enabling greater concentration on the size and type of market)
To fulfil a social need:
relate to the role of a business in the community.
Going beyond the financial objectives, focusing on the business being a ‘good citizen’
May relate to the provision of services, contribution to causes, provision of local job opportunities and focussing on the environment.
Can also be promoted through policies and practices within the workplace.
To meet shareholder expectations:
shareholders expect to make a profit, for shares to increase in value and dividends to be paid.
Shareholder: owner of a company, earn money for the business
Stakeholders: an individual or a group that has direct or vested interest in the activities of a business e.g. employees, customers, competitors