Review 2 of Nature of Business

ROLE OF BUSINESS

100

Identify 3 goods & 3 services that you would find in a marketplace?

Goods are items that can be seen or touched. Services are things done for you by others.

200

Identify at least 4 qualities required to be an entrepreneur.

Courage motivation determination energy drive enjoys challenges taking (moderate) risks passion planning confidence working well with people competent communicator lateral thinker prepared to take responsibility being organised.

300

Describe the relationship between revenue, expenses and profit.

If the business’s SALES REVENUE is greater than its EXPENSES, it has earned a PROFIT. Revenue is the money a business receives as payment for its products. Expenses are all the costs of running the business. Profit is what remains after all business expenses have been deducted from sales revenue.

400

DEMONSTRATE the difference between an invention and an innovation.

Inventions: creation of new products Innovations: the improvement of existing ones e.g. - John Kellogg invented cornflake breakfasts. - all Apple's so called inventions such as the iPod & iPad were improvements on existing designs.

500

Predict at least 2 social consequences of an economy that is experiencing a large number of business failures.

1. People would lose their jobs and source of income. 2. Fewer products would be available for purchase. 3. The flow of money would quickly contract. 4. A reduction in confidence means fewer new businesses. 5. An increase in the levels of poverty.

TYPES OF BUSINESS

100

Pete's Retail Furniture is an example of a business from the secondary industry sector. True or false?

False - tertiary (retail).

200

What is the difference between businesses from the quaternary & quinary sectors.

Quaternary: "Intangibles" - financial & information services (teaching, computing, property, finance). Quinary: originally home based services (health, child care, hospitality, arts & culture).

300

A or B. A. Classify these 3 businesses according to industry sector: ebay, Delta Goodrem & Fosters (beer). OR B. Industries are divided into 5 categories - identify 4 & provide a definition for 3 of these categories.

A. ebay - quaternary (internet based) Delta Goodrem - quinary (arts & culture) Fosters - secondary (processes raw materials) OR B. 1. Primary-production is directly associated with natural resources. 2. Secondary-taking a raw material and making it into a finished or semi-finished product. 3. Tertiary-performing a service for other people. 4. Quaternary-services that involve the transfer and processing of information and knowledge. 5. Quinary-services that have traditionally been performed in the home.

400

Jenny's Cotton is a family farming business that is run as a partnership between Jenny & her husband John. She has been advised to form a company. Discuss at least 2 advantages & disadvantages in making this change.

Disadvantages of partnership 1. personal liability for losses/debts 2. business ‘dies’ when owner dies 3. difficult to operate if sick 4. must carry all losses 5. burden of management 6. must perform a variety of tasks 7. hard to raise $ to expand 8. personal unlimited liability 9. liable for all debts, including partner’s debts, even before the partnership has begun 10. possibility of disputes 11. difficulty in finding a suitable partner 12. divided loyalty & authority Disadvantages of company structure 1. Cost of formation 2. Double taxation – company and personal 3. Personal liability for business debts if directors knew at the time that the business was unable to pay loans 4. Must publish a yearly annual report of audited accounts 5. Public disclosure – reporting of certain info 6. Becomes too large resulting in efficiences 7. Higher accountant's bill

500

Predict which of the 5 main industry sectors will grow the most in the next 10 years. Justify your answer.

QUATERNARY: 1. because Sydney will become a financial centre for Asia, the fastest growing area of the world. 2. because Australia has one of the world's leading education industries to cater for Asia's emerging economies. QUINARY: 1. to cater for Australia's aging population 2. to cater for a growing economy that eats out more often.

INFLUENCES

100

Identify the 3 levels of government.

Federal, state & local.

200

There are 10 external influences on a business - name 6.

1. Competitive situation 2. Economic 3. Financial 4. Geographic 5. Institutional 6. Legal 7. Markets 8. Political 9. Social 10. Technological

300

Internal influences cover 5 categories: product, location, management, resource management & business culture. Describe 1 of these categories & provide an example that demonstrates the influence.

1. product 2. location 3. management 4. resource management 5. business culture

400

ASSESS whether the legal influence of banning alcohol sales after 3am is good for the economy: Provide an argument for AND against.

DISADVANTAGES - reduction in profits to business; damage to tourist trade & reputation; passing of problem to areas outside CBD. ADVANTAGES - reduction in: drunken fights, damages to businesses from vandalism & burden on health system.

500

There are 6 categories of stakeholders in a business. Identify 2 stakeholders that potentially could clash with each other. Analyse whose stake is more important.

1. Customers 2. Managers 3. Society/general public 4. Environment 5. Shareholders 6. Employees

GROWTH

100

Identify the 4 main stages in the business life cycle.

1. Establishment 2. Growth 3. Maturity 4. Post-maturity

200

Describe the difference between a merger & an acquisition.

A MERGER occurs when the owners of two separate businesses agree to combine their resources and form a new organisation. An ACQUISITION (takeover) occurs when one business takes control of another business by purchasing a controlling interest in it.

300

For a company in the ESTABLISHMENT phase, describe typical challenges of 2 of these 4 features: 1. Goals 2. Sales 3. Marketing 4. Profit

1. Goals: Survival,setting a firm foundation for future growth. 2. Sales: Normally begin slowly and are somewhat erratic. 3. Marketing: Highlight product advantages by accentuating the product’s strengths; Inexpensive promotion strategies. 4. Profit: Usually slow to begin with, occasionally a loss. Sometimes all the profits are put back into the business to ensure its survival.

400

Identify three challenges that you believe to be the most serious for a business to confront at the GROWTH stage.

1. Expanding too rapidly and therefore losing control of the business’s direction. 2. Moving away from the core business activities — that is, what the business originally produced. Business may not have enough experience in the new areas. 3. The need for finance to continue with the growth.

500

One-third of all small businesses fail within the first year of operation. Propose why the failure rate is so high.

1. Cash flow 2. Market research 3. Planning 4. Slow economy.

DECLINE

100

Once a business reaches the final stage of the business life cycle (POST-MATURITY), it is faced with three possible outcomes. What are they?

1. Steady state 2. Decline 3. Renewal

200

Identify a common cause for business decline.

1. Lack of management expertise. 2. Lack of sufficient money — undercapitalisation.

300

Define creditors.

Those people or businesses who are owed money.

400

Differentiate liquidation from receivership.

LIQUIDATION occurs when the liquidator is appointed to take control of the business with the intention of selling all the company’s assets to pay the creditors. RECEIVERSHIP is where a business has a receiver take charge of the affairs of the business. Unlike liquidation, the business may not necessarily be wound up.

500

Create a list of 2 success strategies for a business that is experiencing a decline of its sales.

1. Appoint a voluntary administrator to advise ways to trade out of the crisis. 2. Find a new source of funds. 3. Sell off the poor performing sections of the business. 4. Cut your losses & appoint a liquidator to sell the assets.