Professional Documents
Culture Documents
Notes On Business Studies (The Nature of Business)
Notes On Business Studies (The Nature of Business)
Types of businesses
● classification of business
○ size – small to medium enterprises (SMEs), large
- Ways to determine the size of a business include;
- The number of employees
- Number of owners
- The size of market share
- The legal structure
- Businesses can be classified as small or medium if;
- The owner makes management decisions
- The owner provides the capital
- The business has little control within the market
- It is independently owned
- The business is locally owned
- Micro business → < 5 employees
- Small business → 5-19 employees
- Medium business → 20-199 employees
- Large business → >200 employees
○ Local
- Local businesses have restricted geographical spread and serve the local area. They do not
offer a range of products and are used by nearby consumers.
○ National,
- National businesses operate within a whole country, they typically cater to the national
populations needs.
○ Global
- Multinational companies are those which operate in various countries, national borders do not
restrict the business of these countries.
- In developed multinational companies finance, assets, technology, information, employees,
goods and services all flow freely over national borders.
○ Industry
■ Primary
- The primary sector is involved in the extraction of natural resources → agriculture or mining
■ Secondary
- The secondary sector take output from the primary sector to produce either finished or
semi-finished products → manufacturing or construction
■ Tertiary
- The tertiary sector performs a range of services → wholesale, retail or transport
■ Quaternary
- The quaternary sector is involved in the processing of information and knowledge →
communications, finance, real estate
■ Quinary
- The quinary sector provides services which are traditionally performed at home → hospitality
or childcare
○ legal structure
- An unincorporated business is typically a sole trader or a partnership, where the financial
responsibility lies on the owner or the owners
- An incorporated business is one which is a separate legal entity from its owner. The business
exists regardless of what happens to its owner/s.
■ Sole trader
- Owned and operated by a singular owner, they are responsible for the finance and
management decisions.
- Not considered a legal entity.
- Unlimited liability means that the owner is financially responsible and may need to sell their
personal assets in order to support the business financially
■ Partnership → (Pty Ltd)
- Is operated by 2-20 people.
- A legally binding agreement or contract is not necessary, however it helps to settle disputes.
- Limited partnerships allows partners to contribute financially but not to the operations of the
business, they are known as silent or sleeping partners.
■ Private company (Ltd)
- Shares are offered, privately, to those who wish to be part owners in the business.
- Shares are not sold through stock exchange.
- Shareholders have unlimited liability protection.
- All shareholders must agree that a company is wound, if the decision is made to shut the
company down.
■ Public company
- Typically large companies, who market a large range of products.
- Public companies must;
- Have at least one shareholder
- Have no restrictions on transferring shares
- Issue a prospectus when first selling shares
- Have a minimum of 3 directors, 2 of which must reside in Australia
- Publish an annual report each year
■ Government enterprise
- Typically provide services such as health, education, roads and welfare.
- Economic efficiency can be increased by transferring from public to private sector, this is
known as privatisation.
→ Optus, QANTAS, Commonwealth and Telstra
→ small business will expand into a medium business, due to their growing nature and higher
demand.
→ a medium business will consider becoming a partnership and or private company, in order
to facilitate their growing financial demand.
→ FISCAL; how the government spends their money, is announced in March each year