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Questions and Answers
What defines a business model?
What defines a business model?
- The operational structure of a company
- How a business generates or intends to generate revenue (correct)
- The number of employees in a company
- The range of products offered by a company
What is the primary goal of a profit-seeking business?
What is the primary goal of a profit-seeking business?
- To generate revenue and maximize profits (correct)
- To employ as many people as possible
- To operate with the least costs possible
- To maximize customer satisfaction
Which of the following best describes the term 'profit'?
Which of the following best describes the term 'profit'?
- Revenue generated from selling goods and services
- Total revenue before expenses
- Money remaining after all costs have been deducted from revenue (correct)
- The amount invested in business operations
Which of the following is NOT a reason businesses accept risks?
Which of the following is NOT a reason businesses accept risks?
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What is a significant characteristic of a digital enterprise?
What is a significant characteristic of a digital enterprise?
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In cost leadership strategies, what is the expected relationship between price and quantity?
In cost leadership strategies, what is the expected relationship between price and quantity?
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Which concept best represents the definition of 'barriers to entry'?
Which concept best represents the definition of 'barriers to entry'?
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What does a two-sided business model typically involve?
What does a two-sided business model typically involve?
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Study Notes
Business Definition
- A business is a profit-seeking entity that provides goods and services to satisfy customer needs.
- Revenue is the money a company earns from selling products or services.
- A Business Model explains how a company generates revenue by focusing on price, quality and cost.
- Profit is the remaining revenue after all business costs are deducted.
Competitive Advantage
- Businesses strive to have a competitive advantage that makes them stand out to customers.
Business Risks and Rewards
- All businesses take risks in pursuit of profit.
- Risk is the potential for loss or failure.
- Reward is the potential for profit or success.
Business Categories
- Businesses can be categorized by:
- Ownership Structure: Sole proprietorship, partnership, corporation, etc.
- Industry: Retail, manufacturing, finance, etc.
- Size: Small, medium, large
- Geography: Local, regional, national, international
Benefits and Drawbacks of Businesses
- Businesses can benefit society by:
- Creating jobs
- Producing goods and services
- Contributing to economic growth
- However, businesses can also have negative impacts, such as:
- Environmental pollution
- Exploitation of workers
- Harmful products
Business Environment
- Businesses operate in a dynamic environment with opportunities and constraints.
- Opportunities are favorable external factors that can help a business succeed.
- Constraints are unfavorable external factors that can challenge a business.
- Barriers to entry are resources or capabilities required to compete in a market.
Functional Areas of Business
- Businesses typically have six major functional areas:
- Marketing: Identifies and meets customer needs.
- Finance: Manages the company's money.
- Operations: Produces the company's goods or services.
- Human Resources: Manages the company's employees.
- Information Technology: Develops and maintains the company's information systems.
- Legal: Ensures the company complies with all laws and regulations.
Business Professions
- There are many important professions in business, including:
- Accountant
- Marketing Manager
- Finance Analyst
- Human Resources Specialist
- Operations Manager
- Software Developer
- Lawyer
Professionalism
- Qualities of a professional include:
- Excellence: Striving to be the best.
- Dependability: Being reliable and trustworthy.
- Teamwork: Collaborating effectively with others.
- Respect: Treating others with courtesy and consideration.
- Ethical behavior: Following a code of conduct.
Digital Enterprise
- A digital enterprise uses digital systems for value creation.
- Digital transformation is the process of adopting digital technologies.
Organizational Structure
- An organization is a group of people with shared goals and a defined structure.
- Maslow's Hierarchy of Needs is a theory that describes the levels of needs that motivate people.
Two-Sided Business Model
- A two-sided business model provides value to two distinct groups.
- Example: Instagram is free to users but profits by selling data to advertisers.
Revenue Formula and Cost Leadership Strategies
- Revenue is calculated as price multiplied by quantity sold, minus costs.
- Cost leadership strategies focus on offering lower prices.
- Low price, high quantity: Costco, Ryanair, fast fashion
- High price, low quantity: Luxury goods
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