Business Fundamentals Overview

Nature of Business

• Businesses exist to meet customer needs and wants, often by selling goods and services for profit.
• They combine human, physical, and financial resources to create products and services.

How Businesses Add Value

• Transforming raw materials into finished products.
• Designing innovative products.
• Providing quality products and efficient services.
• Effective marketing strategies.

Quaternary Sector

• Part of the tertiary sector.
• Involves the creation and sharing of knowledge and information.
• Includes activities like education, consultancy, and software development.

Successful Entrepreneurs

• Risk-takers, willing to take calculated business risks.
• Innovative, with creative and original thinking.
• Strategic thinkers, able to develop and implement effective plans.
• Enthusiastic and driven.
• Resilient, able to handle setbacks and feedback.

Reasons for Starting a Business

• Financial reward.
• Autonomy (being your own boss).
• Passion for the product or service.
• Family ties (entrepreneurship in the family).
• Unfilled market opportunities.
• Making a difference (social enterprise).

Business Plan Purpose

• Increased chances of success with a well-planned strategy.
• Securing finance by demonstrating business viability.

Added Value

• The amount added to production costs by the business process (design, marketing, unique selling points).
• Calculation involves subtracting production costs from the sale price.

Primary Sector

• Extracts and grows raw materials.
• Examples include farming, fishing, and mining.

Secondary Sector

• Manufacturing and construction of raw materials into finished goods.
• Examples include manufacturing and construction.

Tertiary Sector

• Involves providing services.
• Examples include retail, transportation, and healthcare.

Entrepreneur

• Combines the factors of production (human, natural, capital, and entrepreneurship).
• Takes on risks to start a business.

Challenges for New Businesses

• Lack of knowledge, skills, and experiences.
• Lack of market research.
• Lack of finance.
• Long hours.
• Poor marketing strategies.
• Limited human resources.

Business Plan

• Detailed description of a new or existing business.
• Includes company objectives, marketing, and financial plans.

Business Plan Contents

• Executive summary (overview of the business and its objectives).
• Introduction (overview of the business, legal structure).
• Market analysis.
• Product analysis.
• Financial analysis (projections, budgets).
• Marketing strategy.

Private Sector Definition

• Businesses owned by private individuals or organizations.
• Usually, but not always aiming to earn profit.
• Includes charities, NGOs, and not-for-profit social enterprises.
• Operates independently from government but needs to comply to nation's rules and regulations.

Public Sector Definition

• Businesses controlled by a regional or national government.
• Aim to provide essential services for the general public.
• May or may not directly charge for services.

Incorporation

• A legal distinction between business owners and the business itself.
• Limited liability: Owners are only liable up to the amount of their investment.
• Unlimited liability: Owners are liable for all debts of the business.

Sole Trader

• Business owned and run by one person.
• Owner keeps all profits, makes all decisions.
• Unlimited liability (owner is responsible for all debts).
• Limited funds due to sole ownership.
• High workload.

Partnership

• Business owned by two or more people.
• Profits shared among partners.
• Unlimited liability (but partners may have different responsibilities).
• Potential disagreements among partners during decisions.
• More access to capital than sole traders.
• More expertise available.

Private Limited Company

• For-profit business owned by a limited number of shareholders.
• Shares cannot be sold publicly.
• Less risk to shareholders than other forms.
• Limited liability (shareholders are not liable for company debts).
• Restrictions to selling shares.

Public Limited Company

Business owned by shareholders.

• Shares are sold publicly on the stock exchange.
• Easy to raise large amounts of capital.
• Greater ability to expand compared to other types.
• Limited liability.
• Financial obligations to the shareholders in the form of yearly reports.
• Risk of loss of control if another entity buys more than 50% of the shares.

Social Enterprises

• Aim to solve social or environmental problems while creating revenue and profits.
• May or may not be financially dependent on NGOs.

Cooperatives

• Owned and run by members (customers or employees).
• Profit-sharing amongst members.
• Equal voting rights for members.

Advantages of Being a Social Enterprise

• Positive impact on society/environment.
• Potential for revenue and profit.
• Possibility to improve financial stability through social programs.

Business Objectives

• Clear targets set to achieve overall company goals.
• Measurable, and specific examples include sales growth or profitability targets.

Vision Statements

• Organisational long-term aspirations
• Should inspire.

Mission Statements

• Explains the core purpose and objectives for the short-term
• Provides insight on how they want to achieve the long-term goals.

Operational Objectives

• Short-term goals (less than a year).
• Specific and measurable.

SMART Objectives

• Specific: Clearly defined.
• Measurable: Able to be measured.
• Achievable: Realistic for the business to reach.
• Relevant: Directly related to the overall company objectives.
• Time-bound: Specific time limit for completion.

Ethical Objectives

• Business goals based on social values and beliefs.

Ethical Marketing Practices

• Practices that prioritize ethical standards for the business.
• Protecting intellectual property.
• Sustainable operations.

Circular Business Models

• Focus on long-term environmental concerns and sustainability for business activities.
• Waste is converted into valuable resources.
• Business models reduce consumption and increase resource efficiency.

STEEPLE Analysis

• A business planning framework that can help identify external factors (social, technological, economic, environmental, political, legal, ethical).

Explore the essential concepts of business, including how businesses function to meet customer needs, the value they add, and the characteristics of successful entrepreneurs. Understand the significance of the quaternary sector in knowledge creation and the various reasons for starting a business.