Business
An organised effort of individuals to produce and sell goods and services for profit to satisfy needs and wants
Goods
Tangible products that can be seen or touched (e.g. food clothing electronics)
Services
Intangible activities provided to customers (e.g. hairdressing banking)
Profit
Financial reward gained when revenue is greater than expenses
Profit Formula
Profit = Revenue − Expenses
Employment
Businesses provide jobs and income for people in the economy
Income
Money earned by individuals through work or business ownership
Wages
Payment made to employees based on hourly work
Salary
Fixed annual payment to employees
Commission
Payment based on a percentage of sales made
Bonus
Extra payment given as a reward for good performance
Fringe Benefits
Non-cash benefits given to employees such as company cars or discounts
Dividend
A share of profit paid to shareholders of a company
Choice
Competition between businesses gives consumers more variety and options
Innovation
The process of improving or creating new products or services
Research and Development (R&D)
Activities businesses undertake to develop new products or improve existing ones
Entrepreneur
A person who starts and runs a business and takes financial risks
Risk
The possibility that a business may lose money
Wealth
The total value of goods services and assets produced in an economy
Quality of Life
The overall standard of living and wellbeing of individuals in society
Micro Business
A business with fewer than 5 employees
Small Business
A business with 5–19 employees
Medium Business
A business with 20–199 employees
Large Business
A business with 200 or more employees
SME (Small to Medium Enterprise)
A business with fewer than 200 employees
Local Business
A business that operates in a small geographic area
National Business
A business that operates across one country
Global Business
A business that operates in multiple countries around the world
Primary Industry
Industry involved in extracting natural resources (e.g. mining farming)
Secondary Industry
Industry involved in manufacturing goods from raw materials
Tertiary Industry
Industry that provides services to consumers and businesses
Quaternary Industry
Industry based on knowledge and information services such as IT and research
Quinary Industry
Industry providing domestic or personal services such as childcare and hospitality
Unincorporated Business
A business where the owner and business are legally the same
Incorporated Business
A business that is a separate legal entity from its owners
Unlimited Liability
The owner is personally responsible for all business debts
Limited Liability
The owners are only responsible for debts up to the amount they invested
Sole Trader
A business owned and operated by one person
Sole Trader Advantage
Easy to start full control keeps all profit
Sole Trader Disadvantage
Unlimited liability and limited access to capital
Partnership
A business owned by 2–20 people who share profits and responsibilities
Partnership Advantage
Shared responsibility and more capital
Partnership Disadvantage
Unlimited liability and possible disagreements
Private Company (Pty Ltd)
A company owned by shareholders but not listed on the stock exchange
Public Company (Ltd)
A company that sells shares to the public on the stock exchange
External Influences
Factors outside the business that cannot be controlled but affect operations
Internal Influences
Factors inside the business that management can control
Economic Influence
Factors such as inflation unemployment interest rates and economic growth
Financial Influence
The availability of finance such as loans or investment capital
Geographic Influence
Physical location factors such as climate distance and natural resources
Social Influence
Changes in society’s values attitudes and lifestyles
Legal Influence
Laws and regulations businesses must follow
Political Influence
Government policies that affect businesses
Institutional Influence
The impact of organisations such as regulators or unions
Technological Influence
Advances in technology that affect how businesses operate
Competitive Situation
The level of competition between businesses in a market
Product
The goods or services a business sells
Location
The physical place where a business operates
Resources
Inputs used by businesses including human physical financial and information resources
Management
The process of planning organising leading and controlling resources
Business Culture
The shared values beliefs and behaviours within a business
Stakeholders
Individuals or groups with an interest in a business’s activities
Internal Stakeholders
Stakeholders inside the business such as owners managers and employees
External Stakeholders
Stakeholders outside the business such as customers suppliers and government
Business Life Cycle
The stages a business goes through from start-up to decline
Establishment Stage
The stage where the business begins operations and faces high costs and low sales
Growth Stage
The stage where sales increase and the business expands
Maturity Stage
The stage where growth slows and competition increases
Post-Maturity Stage
The stage where the business may renew remain stable or decline
Business Decline
A decrease in sales profits or market share
Voluntary Cessation
When the owner chooses to close the business
Involuntary Cessation
When creditors force a business to close
Bankruptcy
A legal process where individuals cannot repay debts
Voluntary Administration
An external administrator is appointed to attempt to save the company
Liquidation
The process of selling a company’s assets to repay creditors