Role and functions of business - A business is an organisation that attempts to satisfy the needs and wants of individuals by providing goods and/or services. It produces products (goods (tangible) and services (intangible)) that can be bought or sold in aim to generate profit.
Employment: One of the most important roles business plays in society is the provision of employment. Very small businesses with fewer than nine employees employ over 16% of the workforce. Businesses with fewer than a hundred employees employ over 42% of the workforce. Incomes: Businesses provide income to business owners/shareholders and employees. Choice: Consumers have freedom of choice—the choice of what to purchase and where to purchase it. Businesses have a choice of what they produce. Innovation: For one business to capture and maintain a competitive edge over other businesses it needs to be constantly seeking ideas for new products, product modifications or different markets for existing products. entrepreneurship: An entrepreneur is someone who starts, operates and assumes the risk of a business venture in the hope of making a profit. And quality of life: refers to the overall wellbeing of an individual, and is a combination of both material and non-material benefits.
To provide products demanded, businesses require production. This occurs when the business combines the resources to create finished products.
Types of business
• classification of business
o size – small-medium enterprises make up 98% of all businesses in Australia. (SMEs), large
micro: 1-5, 82% of non-manufacturing SME's.
small: 1-20 employees, sole trader or partnership, quick decision making medium: 20-199, partnership or private company, owner makes decision large: 200+, public company, complex decision making, division of responsibilities among directors o industry classification:
primary - includes all those businesses in which production is directly associated with natural resources. i.e. mining secondary - includes all those businesses that take the output of firms in the primary sector (raw materials) and process it into a finished or semi-finished product (manufacturing businesses). i.e. car manufacturers tertiary - provide services. Tertiary industry involves people performing a vast range of services for other people. Examples include retailers quaternary - services that involve the transfer and processing of information and knowledge. i.e. telecommunication and education quinary – traditionally performed at home. i.e. hospitality, childcare
Production process: inputs – operations - outputs
sole trader – owned by one person who controls all decisions and provides finance, unlimited liability (when business owner is responsible for all debt) partnership – 2-20 owners, unlimited liability.private company – 'pty ltd' Incorporated (separate legal entity), perpetual succession (continues after owner dies), limited liability (private shareholders ((2-50) can't lose more than input) public company – Australia public may buy and sell shares, min. 1 shareholder, limited liability, incorporated, min. 3 directors. i.e. Woolworths government enterprise – GBEs such as RailCorp, run by Government. • factors influencing choice of legal structure:
size- starts off as small (sole trader but if it expands and becomes medium, it'll need new requirements which require more injections brought by partners or private shareholders who bring extra finance, skills, and expertise. Limited liability is preferable if expansion is rapid (private company). Unincorporated to incorporated. Ownership- sole traders have full control of business.
Finance- Expansion of business requires more finance, for this, partnerships or private companies are better than sole traders.
Influences in the business environment
• external influences:
economic – business cycle, boom and recession.
Social- increased diversity, changing...
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