Business Studies Revision

Topics: Management, Business, Strategic management Pages: 10 (3001 words) Published: December 8, 2013
Business Revision
Nature of Business 9.1
Role of business:
Nature of a Business:
A business can be defined as the organised effort of individuals to produce and sell, for a profit, the products (goods and services) that satisfy individuals’ needs and wants. Business enterprises undertake many activities to provide the products demanded by customers, with production being one of the most important. Production occurs when the business combines the resources to create products. Other functions of business:

Profit, employment, incomes, choice, innovation, entrepreneurship and risk, wealth and quality of life. Types of businesses:
Classification of business:
Size – businesses can be classified as small, medium or large. Their classification will depend on such things such as the number of employees, market share, ownership and who makes the decisions. A micro-business usually a SOHO employs fewer than five people, including the owner. Businesses can also be classified as local, national or global according to their geographical spread. A local business has a very restricted geographic spread, as it serves the surrounding area. A national business operates in just one country. A global business – a transnational corporation (TNC) – is a large business with a home base in one country that operates wholly or partially owned businesses in other countries. The four main reasons businesses expand to serve national and global markets are: Increase in sales

Desire to increase profits
Increase in market share
Global consumers
Classification by industry sector:
An industry consists of businesses that are involved in similar types of production. A primary industry includes all those businesses in which production is directly associated with natural resources. Examples are farming, mining, fishing, grazing and forestry. A secondary industry involves taking raw material and making I into a finished or semi-finished product. For example, iron ore, coal and limestone are turned into steel - a semi-finished product that is then used to manufacture cars. A tertiary industry involves performing a service for other people. Examples include retailers, dentists, solicitors, banks, museums and health workers. A quaternary industry includes services that involve the transfer and processing of information and knowledge. Examples include telecommunication, property, computing, finance and education. A quinary industry includes all services that have traditionally been performed in the home. Examples include hospitality, tourism, craft-based activities and childcare. Legal Structure:

Privately owned business structures can either be unincorporated or incorporated. A business that is incorporated becomes a separate legal entity from the owner/s. A sole trader – an unincorporated business entity – is a business that is owned and operated by one person and has unlimited liability. A partnership – also an unincorporated business entity – is a business that is owned and operated between two and 20 people and has unlimited liability too. The partnership can be made verbally or in writing or by implication. All companies are incorporated enterprises. In limited liability companies, the most money a shareholder can lose is the amount they paid for their shares. A proprietary (private) company is an incorporated business entity and usually has between two and 50 shareholders. Must have the letters ‘Pty Ltd’ after its name. A public company’s shares are listed on the Australian Securities Exchange and must also have ‘Ltd’ in its name. Government enterprises are government-owned and operated and provide essential community services. Due to privatisation some government enterprises have become public companies. Influences in the business environment:

External influences: The external environment includes those factors over which the business has little control, such as government policy, technology, economic conditions and social attitudes. They...
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