Business Fundamentals: Structures, Growth, and Operations
Business Fundamentals
A business uses resources to meet consumer needs by adding value to those resources.
Types of Goods and Services
- Consumer goods: Physical products sold to the general public.
- Consumer services: Non-tangible products sold to the general public.
- Capital goods: Goods used by industry to aid in the production of products and services.
Factors of Production
The four factors are: Land, Labour, Capital, and Enterprise.
Entrepreneurship
Successful entrepreneurs should be innovative, self-motivated, multi-skilled, possess strong leadership, and be willing to take risks. They must:
- Identify successful business opportunities.
- Raise capital to start up.
- Determine a location.
- Offer competitive pricing.
- Build a customer base.
Business failure often results from a lack of record-keeping, insufficient working capital, or changes in the business environment.
Economic Impact
Benefits of enterprise on a country’s economy include employment creation, economic growth, and innovation/technological change.
Business Ownership Structures
- Social enterprise: Businesses that operate in socially responsible ways.
- Sole trader: A single owner with unlimited liability.
- Private limited companies: Owned by shareholders (often family). Shares cannot be sold on the open market. They offer limited liability and separate legal personality, though raising finance can be difficult.
- Public limited companies: Offer the same advantages as private companies plus the right to sell shares to the general public. Risks include potential takeovers and director influence by major investors.
- Cooperatives: All members contribute to and vote on business decisions; profits are shared equally.
- Franchises: A business that uses the name, logo, and trading systems of an existing successful business via a contract between the franchisee and franchisor.
- Joint ventures: Two or more businesses work together on a specific project, creating a separate business division.
- Holding companies: An organization that owns and controls several separate businesses without uniting them into one company.
- Public sector enterprises: Public corporations owned and controlled by the state.
Business Size and Growth
Measuring business size: Number of employees, sales turnover, capital employed, market capitalization, and market share.
Reasons for growth: To increase profit, market share, economies of scale, and the power/status of the business.
Internal growth: An example includes a supermarket opening new shops.