Business Studies

• Business


  An organisation that has goals and is managed in a purposeful way to use inputs and produce outputs (goods and services)
• Businesses


  • Produce goods and services
  • Acquire and combine inputs (raw materials, labour, machinery, power)
  • Aim to be efficient and effective
  • Add value to inputs
• Goods


  Physical, tangible products such as a car or mobile phones
• Services


  Intangible products such as transport and communication
• Managers


  • Establish systems
  • Allocate tasks
  • Ensure businesses operate efficiently
• Utility


  The usefulness of outputs to consumers
• Key business functions


  • Marketing
  • Finance
  • Human Resources
• Marketing


  Connects consumers with the products that a business produces
• Finance


  Involves the planning, organising and controlling of the financial resources of the business
• Human Resources (HR)


  Refers to the systems that have been developed to manage people in an organisation and involves the planning of staff needs, acquisition and maintenance of employees
• Financial goals of a business

  • Profitability
  • Growth
  • Efficiency
  • Liquidity
  • Solvency
• Profitability


  The ability of a business to make a profit and refers to the fact that there is a relationship between the sales revenue and the profit it makes
• Growth


  The expansion of the business after it begins operations
• Efficiency


  Relates to the greatest possible output from a low input
• Liquidity


  The cash flow position of the business and focuses on whether a business can pay its debts as they fall due
• Solvency


  The extent to which assets of the business exceed the liabilities, if they do the business is able to meet its debt commitments
• Managers


  • Hired to manage employees
  • Receive bonuses (different from normal employees)
• HR


  • Decide what jobs are needed
  • Establish minimum educational and training requirements
  • Manage employees
  • Consult employees about business direction
• Rent


  Income from property owned by the business and rented out
• Salaries/Wages


  Fixed payments to employees for their labour
• Borrowing


  Businesses borrow money from individuals and financial institutions to conduct normal business or for expansion
• Choices businesses have


  • Legal structure
  • Goals
  • How to raise funds
  • Size
  • Products to produce
  • Mix of labour and capital
  • Mix of inputs
  • Aim for ecological sustainability
• Innovation


  The creation or improvement of products, technologies or ideas
• Competitive advantage


  Developed through innovation to introduce new or improved products
• Entrepreneur


  A person who is willing to take a risk in business
• Risks entrepreneurs need to consider

  • Financial risk
  • Market risk
  • Technological risk
  • Political and economic risk
  • Environmental risk
  • Operational risk
• Wealth


  The production and acculturation of assets which satisfy human wants and needs minus any liabilities that are owed
• Standard of living


  The income per head population in terms of the goods and services
• Businesses contribute to wealth

  • Growing to produce more output
  • Providing employment
  • Increasing and improving machinery
• Quality of life


  A standard to measure the general wellbeing of individuals, including environmental factors, health, education, recreation and leisure time as well as wealth and employment
• Businesses contribute to quality of life


  • Adding value to raw materials and intermediate goods
  • Improving quality of goods and services
  • Providing high standards of customer service
  • Providing employment and training
  • Implementing best practice workplace health and safety
  • Implementing environmentally sustainable production
  • Developing corporate social responsibility programs
• Factors that determine the type of business

  • Personal goals of owners
  • Financial goals of owners
  • Whether producing goods or services
  • Volume of output
  • Number of owners
  • Amount of capital required
• SMEs (Small to Medium Enterprises)

  Businesses with fewer than 100 full-time employees (manufacturing) or 20 full-time employees (other)
• SME classifications


  • Microbusiness (>5 full-time employees)
  • Very small (1-9 full-time employees)
  • Small (10-49 full-time employees)
  • Medium (50-149 full-time employees)
• Advantages of small businesses

  • Independence
  • Flexibility to respond to customer demand
  • Suited for niche markets
• Disadvantages of small businesses

  • Lack of cash flow
  • Risk of business failure (owner personally liable)
• Large businesses


  Businesses with more than 150 full-time employees
• Local business


  Consumers are usually living near where the business is located, with a small market area and number of customers
• National business


  Owns franchises or branches operating in more than one state or territory, with a market in large urban areas
• Types of global businesses

  • International businesses (no investments, staff or sales premises outside home country)
  • Multinational corporations (head office in home country, subsidiaries in other countries)
  • Transnational corporations (large corporate structures with global business transactions)