Introduction to business
Basic Business Concepts
- Enterprise: Refers to a business or company. Can also refer to initiative, risk-taking and innovation in business.
- Entrepreneur: An individual who sets up a business or businesses, often taking financial risks in order to do so.
- Profit: The difference between the revenue generated by a business and its costs.
Business Sectors
- Primary sector: The part of the economy that produces raw materials, like farming or mining.
- Secondary sector: These are the businesses that transform raw materials into finished goods, such as manufacturing companies.
- Tertiary sector: This refers to the service sector of the economy, like retailers or banking.
Legal Structures of Business
- Sole trader: This is a business owned and run by one individual. The owner may employ other people but has sole responsibility for the running of the business.
- Partnership: A business owned by two or more people, who share the risks, costs, responsibilities and profits of the business.
- Private Limited Company (Ltd): A type of business structure where the company is seen as a separate legal entity to the owner. Can sell shares to family and friends.
- Public Limited Company (plc): A business structure where the business is considered a separate legal entity and can sell shares to the general public.
Factors Influencing Business Start-ups
- Business idea: The product or service that the business will sell.
- Finance: The initial investment needed to start a business.
- Market research: A process of collecting, analysing and presenting data relating to the specific market that the business intends to enter.
- Business plan: A formal written document that serves as a road map for how a company plans to succeed.
Business Objectives
- Survival: This is the number one goal for many new businesses, especially in the first year of trading.
- Stability: Once survival is secured, a business may aim for stability, maintaining a consistent level of profits.
- Growth: This could be measured by opening more branches, entering new markets or increasing sales.
- Profit Maximisation: The business tries to make as much profit as possible.
- Increased market share: A firm may aim to increase its share of the market, either by selling more products or services than competitors or buying out other companies.
Role of Stakeholders
- Owners: Want the business to succeed to maximise their return on investment.
- Employees: Want job security, promotion opportunities and good wages.
- Customers: Want good quality products at reasonable prices.
- Suppliers: Want to sell their products to the business.
- Government: Interested in businesses succeeding as they provide employment and pay taxes.
- Community: Want businesses to succeed as it can mean more jobs and prosperity for the local area.