Role Of BusinessTopic 9.1 Nature of Business

Preliminary Business Studies Course11BS104 2011 Ms

Giveen

Agenda

Syllabus Focus

Learning the “Lingo”

Getting into the detail

Syllabus Focus

role of business

the nature of a business producing goods and services

profit, employment, incomes, choice, innovation, entrepreneurship and risk, wealth and quality of life 

What is a Business?Setting the scene

(a) What's a Business?

Sound Like Feel Like

Look Like

Introduction

Businesses of all sizes provide a vast array of goods and services.

People associate businesses with large transnational corporations like BHP Billiton that operate in many countries, employ thousands of people and earn millions of dollars in profit.

98% of all businesses in Australia are SMEs – small to medium enterprises.

The common feature shared by businesses is that they produce a product – good or service – which is sold in a market where buyers and sellers meet.

Why Learn About Business?

It is concerned with activities affecting us on a day-to-day basis.

Stories about business can make us feel:

Optimistic – developments of new products that helped improve our standard of living.

Dejected and cynical – poor ethical behaviour that has misled the public about safety standards or exploited weaker members of society.

The simple transaction of purchasing your first item from the school canteen may have been the start of your life journey as a business customer.

What Businesses are in the News?

Name at least 3 businesses that have been in the news recently?

Has it been for good or bad behaviour?

How does this affect your opinion of them?

Will it have any influence on your future likely interactions with them?

Importance Of Business Studies To

You

Business

Studies

Successful

Business Owner

Productive

employee

Informed consume

r

Informed Investor

(a) Why is Business Important to the

Australian Economy?Draw a fishbone diagram & note some ideas

Problem

Cause

Cause

Cause

Cause

Profit• Employme

nt income• Investmen

ts

Taxes• Imports &

exports • Investment

revenue• Retail

Spending

Economic development• Goods• Services• Technology

development

Standards of living• Food• Housing• Infrastructu

re

One way of looking at it

Importance of Business to the Economy

Employment and income for employees

Taxes for government

Undertake investment leading to economic growth

A wide range of goods for consumers

Improves our quality of life

Training for entrepreneurs

Creates value encouraging economic growth

Encourages competition

Income for business owners

Research and development of new products hence invention and innovation

Challenges and rewards for business owners

Exports products which generate income and reduce our trade deficit

Assists in the development and use of new technology

(a) Activity

Select 5 elements discussed in the Importance of Business to the economy activity.

Explain why each one is important to the Australian economy

Did you know?

Australia is home to citizens from some 200 countries, making it the most multilingual workforce in the Asia–Pacific region.

More than 4 million Australians speak a second language.

Department of Foreign Affairs & Trade, 2008

Playing with Numbers

(a) Do you enjoy making decisions and being in charge ?

A. DefinitelyB. Most of the timeC. SometimesD. Not at all

Is Starting A Business Right For You?

If you answered: A

You are definitely suited to be being a business owner

When you start a business, you’re the one that has to make all the decisions, and live with the results of your choices. But this is one of the aspects of starting a business that would-be entrepreneurs look forward to.

In fact, in an RBC (Royal Bank of Canada) Survey (conducted in August 2005), 81% of the people who said they wanted to start a business within the next five years chose being their own boss as the main reason they wanted to start a business.

If you didn’t there are many other rewarding careers possible

(a) Learn the Lingo

Complete the following activity sheet.

It is designed to be a useful tool to organise your information for exam revision purposed

11 BS Role of business worksheet.docx

You can either use your text book or a website such as http://www.businessdictionary.com/

The Nature of A Business

The Nature Of A Business

People all have needs and wants.

Businesses are:

“ the organised effort of individuals to produce and sell for a profit the products (goods and services) that satisfy individual needs and wants”

And Businesses produce products customers demand.

“ The business hopes to make a profit with the products sold in the market”

(a) What’s the difference between:

a good a service a product

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Goods•Inherently useful and relatively scarce tangible item (article, commodity, material, merchandise, supply, wares) produced from agricultural, construction, manufacturing, or mining activities.•Commodity, or a physical, tangible item that satisfies some human want or need, or something which people find useful or desirable and make an effort to acquire it.

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Services•Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, know how, medical treatment, transportation. •No transfer of possession or ownership takes place when services are sold, and they

•(1) cannot be stored or transported,

• (2) are instantly perishable, and

•(3) come into existence at the time they are bought and consumed.

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Products•Good or service that most closely meets the requirements of a particular market or segment and yields enough profit to justify its continued existence•It is:

•(1) tangible personal property,

•(2) output or result of a fabrication, manufacturing, or production process, and

• (3) passes through a distribution channel before being consumed or used.

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Production•The most important activity of business enterprises is production –

•activities undertaken by the business that combine the resources to create products that satisfy customers’ needs and wants

•Finished products – products that are ready for customers to buy and use

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(a) Activity

Complete the attached table for a small restaurant that is:

open for breakfast lunch and dinner

open 7 days a week

Activity Undertaken by Business

Example

Production – creating products

Cooking meals

Organising natural capital and human resources

Marketing products

Controlling production – quantity & quality

Forecasting sales, expense and profit

Distributing goods

1.3 Other functions of business

Profit - return or reward for producing products consumers need and want

Employment – 80% of public sector jobs

Incomes – for owners/shareholders and employees

Choice – purchase products at competitive prices

Innovation – research and development to improve existing products and create new ones

Entrepreneurship – turn ideas and passions into livelihood

Wealth creation – activities resulting in higher economic growth and wealth

Quality of life – offer products that improve our standard of living

Profit

Profit is earned when sales revenue is greater than operating expenses.

Profit is what remains after all business expenses have been deducted from sales revenue.

Profit is the property of owners hence is regarded as the return or reward.

Profit & Risk – the Relationship

Profits encourage risk taking .

There are 2 key risks

owners can not be certain anyone will buy what he or she plans to sell

consumers can also change their preference and purchase a competitors product.

If a business fails owners:

are not paid, and

can lose all or part of the money they put into it.

Must Remember!!!!!Easy Profit Calculation

Sales Revenue – Operating expenses = Profit

Or

Operating Expenses + Profit = Sales Revenue

(depends on how you want to look at it)

(a) Activity

1. Sally's pet shop has expenses of $2000 per week and earned $3500 in revenue. Is there a profit, if yes how much?

2. Bens gardening supplies has a revenue of $6000 each week for a month. Expenses are $7000 week 1, $8000 week 2 & 3 and $3000 for week 4. Is there a profit, if yes how much?

3. Harry’s hairdressing has expenses of $2500 each month and earns $2000 in revenue each week. Is there a profit, if yes how much?

Employment

To purchase products consumers need money which they earn by working at jobs provided by businesses.

The number of employees hired depends on the nature of products and the number of customers wishing to purchase the product.

The SME sector accounts for 50% of non-government sector employment.

Incomes

Income is money received by a business for providing his or her labour, or a business from a return on its investments.

Employees provide labour in return for either:

Wages – money received usually on a weekly basis for services provided to an employer.

Salary – a fixed amount of money paid fortnightly or monthly to a permanent employee.

Shareholders, people who are part owners of a private or public company, receive a share of the company’s profit as a dividend.

Businesses satisfying the demands of consumers experience increased sales and thus can offer higher income to employees, business owners and shareholders.

Choice

Choice is the act of selecting among alternatives.

Consumers have freedom of choice so can shop around and select from a range of competitors’ products which can be a double edged sword.

Why?

Innovation

Innovation – an improvement on something already established.

Invention – the development of something new.

Music for example has been the subject of innovation and invention.

Innovation and invention results in improved efficiency and increased productivity.

First phonograph 1877 Thomas Edison. Music recorded on cylinders.

1920s discs

1930s and 1940s tape recording

1982 compact discs

1990s digital recording using the internet, iPods and USB flash drives

http://teachingtreasures.com.au/technology-enterprise.htm

Entrepreneurship and risk

A entrepreneur is someone who starts, operates and assumes the risk of a business venture in the hope of making a profit.

Entrepreneurs explore untapped markets with no track record of proven consumer demand or guaranteed returns.

Gordon Merchant the founder of Billabong is a successful Australian entrepreneur.

Wealth Creation

Quality of life

Quality of life refers to the overall wellbeing of an individual combining material and non-material benefits.

For example individuals require leisure time for hobbies and recreation.

Non-material products including fresh air, clean water, unpolluted earth, conservation of wildlife and protection from toxic sources improve an individuals quality of life.