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Introduction to Business

Businesses should aim to improve customers' quality of life. This is done by trading goods and services and improving the production quality of goods and services to satisfy consumers' needs. There is much more to the business process, though. Read along to take a closer look at some of the fundamentals.

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Introduction to Business

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Businesses should aim to improve customers' quality of life. This is done by trading goods and services and improving the production quality of goods and services to satisfy consumers' needs. There is much more to the business process, though. Read along to take a closer look at some of the fundamentals.

What is Business?

Business is economic activity that involves the exchange of products and/or services for profits, or other motives. It is a transactional activity.

Business looks to satisfy customers' needs through the provision and production of necessary services or goods.

Goods are tangible items produced and traded by businesses in order to generate profits. Examples include bags, food, and electronics.

Services are intangible products that cannot be touched, held, or stored. Examples include services from lawyers, doctors, banks, or internet providers.

Business activities are important for improving the standard of life by creating employment opportunities, providing services, and producing goods.

Some businesses are not established for profit generation, though. These businesses, referred to as not-for-profit organisations, are established for purposes other than the generation of profit.

These purposes usually include goals that benefit society as a whole, such as the provision of education or community empowerment. Examples of such organizations include Amnesty International, Boy Scouts, and the Bill and Melinda Gates Foundation.

Introduction to Business: Business Factors of Production

In the provision of goods and services, businesses utilise the four factors of production. They are land, labour, capital, and entrepreneurship (see Figure 1 below).

Introduction to Business, factors of production, StudySmarterFig. 1 - Factors of Production

Introduction to Business: Land (natural resources)

Often referred to as just land, natural resources are inputs such as raw materials and land areas essential for business activities. Examples of natural resources include minerals, farmland, water, forests, etc.

Capital refers to the resources and money used by the business to create further wealth. It is used to purchase non-current assets like machinery, equipment, warehouses, etc.

Often referred to as labour, Human Resources involve human input - skilled or unskilled - into business activities. Examples include business Managers, workers, scientists, and all employees who work for a company.

Introduction to Business: Entrepreneurship

These are risk-takers who manage other factors of production to provide the goods and services needed to satisfy consumers' needs, while also making profits for the business. They are referred to as risk-takers because not all business processes return profits.

Business Environment

The business environment takes into consideration all events, factors, or conditions, internal or external, that influence business activities. These factors may either have a direct or an indirect effect on the business and may either provide it with an opportunity or a risk.

The interaction between the Environment and Business is mutual. Examples of business environments include government regulations, Health and Safety regulations, the Economic Climate, the political environment, technology changes, environmental culture, competition, and customer demand.

Types of business environments

The two types of business environments are internal and external.

Introduction to Business, Types of business environment, StudySmarterFig. 2 - Types of Business Environments

The internal environment is related to the internal functions of the business, such as its operations, its employees, its management, ethics, marketing resources, etc.

The external environment is related to influences that come from outside of the business, such as governmental bodies, the Economic Climate, customer demands, etc.

Introduction to Business: Stakeholders

Stakeholders are either internal or external parties who hold interest in the activities of a business, and can exert or receive influence in regard to that business. Stakeholders include owners, investors, employees, suppliers, customers, communities, trade associations, and government bodies.

A business Stakeholder can be of two types - internal or external.

Internal stakeholders have a direct relationship with the business. They could be employees or investors. Thus they have a significant interest in the business.

External stakeholders are those who don’t have a direct relationship with the business but are still affected by or are affecting business activities. Examples include suppliers and local communities.

Check out our explanation on Stakeholders to find out more!

Introduction to Business Management

Business management refers to the organising, maintaining and allocating of business resources in order to achieve business goals and develop the business. Business Managers are responsible for overseeing the management processes of the Business Enterprise.

Introduction to Business: Business enterprise and entrepreneurship

An 'entrepreneur' is someone who uses an available opportunity to set up a new business. This opportunity may arise due to an unsatisfied market need, a drive to make a social difference, or simply to make a profit. Entrepreneurs bear most of the risks that come with setting up a new business. However, they also enjoy the rewards if it is a success.

Want to learn more about entrepreneurship? Take a look at our Business Enterprise explanation

Risks and Rewards of starting a business

Starting a new business is risky. The kinds of risks in starting a new business include:

  1. Strategic risks

  2. Operational risks

  3. Financial risks

  4. Compliance risks

  5. Reputation risks.

The rewards of starting a new business include:

  1. Sense of satisfaction

  2. Financial rewards mostly from business profitability

  3. Expanding business reach

  4. Provides the entrepreneur with autonomy

  5. Provides the entrepreneur with a platform for growth and development.

To learn more about this topic, check out our explanation, Risks and rewards of business enterprise.

In conclusion, businesses are essential for improving stakeholders' quality of life. An entrepreneur might have a fantastic idea for a business opportunity that leads to a huge amount of sales and profit. Starting a company is a huge challenge, though, and there are numerous internal and external risks businesses face. It is important to pay attention to these to minimise business failure.

Introduction to Business - Key takeaways

  • Business is any economic activity that involves the exchange of products and/or services for profits, or other motives. It is a transactional activity.

  • Goods are tangible items produced and traded by businesses in order to generate profits. Examples include bags, food, and electronics.

  • Services are intangible products that cannot be touched, held, or stored. Examples include services from lawyers, doctors, banks, or internet providers.

  • When providing goods and services, businesses utilise the four factors of production. They are land, labour, capital, and entrepreneurship

  • The business environment takes into consideration all events, factors, or conditions - internal or external - that influence business activities.

  • Stakeholders are either internal or external parties who hold an interest in the activities of a business.

  • An'entrepreneur' is someone who uses an available opportunity to set up a new business.

  • There are various risks and rewards associated with starting a business.

Final Introduction to Business Quiz

Introduction to Business Quiz - Teste dein Wissen

Question

What is business ownership?

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Answer

Business ownership refers to legal control over a business. It gives the owner the legal capacity to dictate the business operations and dealings. 

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Question

What is the simplest business ownership structure?

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Answer

Sole proprietorship 

Show question

Question

Cooperative is a form of business ownership structure?



Show answer

Answer

True

Show question

Question

List the basic forms of business ownership structure 


Show answer

Answer

Sole Proprietorship 

  • Partnership 

  • Corporations 

  • Limited Liability Companies, LLC

  • Cooperatives 

Show question

Question

Give two disadvantages of sole proprietorship 


Show answer

Answer

1. The proprietor is bears responsibility for all business debt and losses 

2. There is mostly little to differentiate between personal and business income 

Show question

Question

Explain sole proprietorship


Show answer

Answer

Sole Proprietorship involves a business being owned and directed by an individual. The individual owns all the rights to run the business however he/she deems fit. 



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Question

What are the two forms of partnership?

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Answer

General partnership and limited liability partnership 

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Question

Explain limited liability partnership 


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Answer

LLP provides protection for each partner against debt incurred by the other partner(s). It usually requires a formal agreement between partners to protect each partner from the actions of other partners.

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Question

Profits generated from non-profit corporations are shared among the board

 

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Answer

False

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Question

What is a limited liability company?


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Answer

This is a flexible business ownership structure which employs practises from corporation, sole proprietorship and partnership providing minimal liability. 

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Question

 Give one advantage and one disadvantage of LLC


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Answer

Advantage of LLC - Limited liability provide option for owners to control how the business is run

Disadvantage of LLC - Due to legal filings, starting up a limited liability company may prove expensive 

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Question

Explain the business ownership structure, cooperative 


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Answer

Cooperative is a business structure whose owners are people who use its products or/and services, and is operated to provide benefits to these people. Income and profits are usually distributed among its members. 

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Question

What are the factors that should be considered when choosing a business ownership structure?


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Answer

Factors that determines business ownership are -

  • Start-up finance

  • Taxes

  • Number of owners 

  • Liabilities 

  • Business ownership transfer 

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Question

What is business planning?

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Answer

Business planning is a process of developing a roadmap aimed towards achieving a business goal. 

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Question

The document used by stakeholders to collate ideas into a formally written document that summarizes the business current state, the state of the business market, and steps to improve the business performance is called ……

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Answer

A business plan 

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Question

What is a business plan?

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Answer

A business plan is an officially written document showing a business core activities, objectives, and the business roadmap to achieving its established objectives. 

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Question

 Give two importance of a good business plan

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Answer

A. The importance of a good business plan can be seen in the organised growth of a business. It allows business owners to track business growth and stay in line with the business objectives. 

B. A business plan also gives investors an idea of how the business is operated and if it is worth investing in. A good business plan attracts investors and sells them the idea of your business. 

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Question

What is the first element of a business plan?

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Answer

Executive summary 

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Question

What information does the executive summary provide?

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Answer

This executive summary provides a brief description of the business. It gives information on the business leadership, its employees, operations and location. It also provides the business mission statement, goals and business vision. 

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Question

 A business budget usually includes ….,.

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Answer

A business budget includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses. 

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Question

What does a SWOT analysis show about a business ?

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Answer

A SWOT analysis shows a business strength, weaknesses, opportunities and threats to the business. 

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Question

A good business plan helps a business focus on its short term and long term goals, and it also helps business owners focus on the specified steps put in place to help the business succeed. True or False?

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Answer

True

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Question

What is business?

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Answer

Business is an economic activity which involves the exchange of products and/or services for profits or other motives. In basic words, business is any transactional activity people engage in to make profits. 

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Question

What is business classification?


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Answer

Business classification involves grouping businesses into different sectors based on similar business activities. 

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Question

 Business classification is broadly of two types, name them

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Answer

Industry business classification and commerce business classification 

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Question

Business classification is based on?

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Answer

 Business classification is based on business activities 

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Question

Explain the primary sector?

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Answer

Businesses classified into the primary sector are involved in the extraction and exchange of natural resources to make profits.

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Question

The primary sector is divided into two, name them

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Answer

Extraction and genetic sector 

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The extraction sector deals with processing of resources into finished products, True or false?

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Answer

False

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Question

Explain the secondary sector

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Answer

Businesses classified into the secondary sector are involved in the processing and conversion of raw materials into consumer ready products. The secondary sector looks to convert resources extracted in the primary stage into finished products.

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Question

The secondary sector is divided into two, name them

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Answer

Manufacturing sector and construction sector 

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Question

Explain the role of the manufacturing sector

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Answer

Semi-finished goods or raw materials are processed and converted into finished goods by the manufacturing sector. 

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Question

Differentiate between the primary and secondary sector

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Answer

The difference between the primary sector, secondary sector and tertiary sector industry business classification is in the activity carried out by each industry. The primary sector is involved in resource extraction, the secondary sector is involved in resources processing into finished products, the tertiary sector is involved in flow of goods and services. 

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Question

Explain the tertiary sector

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Answer

The tertiary sector business classification promotes the activities of the primary and secondary sectors by providing facilities for the easy flow of goods from each sector. 

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Question

Explain the commerce business classification 

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Answer

Commerce business classification involves the classification of business based on the activity of the distribution of goods and services to markets and customers. Therefore, all business activities that involve distribution of goods all fall under this business classification. 

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Question

The commerce business classification is divided into two, name them

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Answer

Commerce is broadly divided into two namely, trade and aids to trade. 

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Question

Explain the term aids to trade

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Answer

This involves business activities that make business trading easier by eliminating problems which may arise during the production or the distribution of goods and/or services. Aids to trade includes banking services, transportation services, marketing and advertising, insurance policy, etc. 

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Question

 Explain the term internal trade

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Answer

Also referred to as domestic trade or home trade, internal trade involves business transactions with the boundaries of a country. Here, the currency of the country in question is used for business activities. Internal trade can be done in two ways, retail or wholesale. 

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Question

A good business location aims to provide an advantage to l business by creating a balance between …..

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Answer

A good business location aims to provide an advantage to your business by creating a balance among the following - 

  • The business operational cost - the daily cost incurred to run your business -,

  • Potential revenue that can be generated,

  • The customers the business operations are targeting. 

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Question

What is a business operational cost?

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Answer

A business operational cost is the cost involved in the daily running of the business. 



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Question

What is a business objective?

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Answer

A business objective is a measurable target of a company’s goal. 

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Question

What is the difference between an objective and a business aim?

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Answer

An aim can be vague and broad while the objective is specific and measurable.

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Question

Give 3 reasons for evaluating business objectives

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Answer

  • Improve the overall performance and results of your business

  • Know if your business is heading in the right direction and make changes when needed

  • Persuade investors to invest in your business

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Question

Name 3 financial criteria to evaluate business success

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Answer

Market share, profit, revenue

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Question

Name 3 reasons to measure revenues of a business

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Answer

  • Plan future expenses. 
  • Assess trends and create new growth strategies. 

  • Update prices to improve income. 

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Question

What can profit metrics tell us?

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Answer

Profit metrics can tell us: 


  • If the business has sufficient cash for future operations 

  • How well the business turns sales into profits

  • If the business is creating added value with its production 

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Question

Name 3 benefits of measuring customer satisfaction

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Answer


  • Improve product and services to attract more customers

  • Discover customers’ deeper needs and wants

  • Acquire new customers via word of mouth

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Question

What are 2 metrics associated with employee satisfaction? 

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Answer

Labour retention and Labour turnover

Show question

Question

Name one method to evaluate customer satisfaction

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Answer

Send out polls and surveys via online platforms or physical stores to collect customer feedback. 

Show question

Question

What is a SMART goal?

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Answer

A goal that is specific, measurable, attainable, realistic and time-specific. 

Show question

Test your knowledge with multiple choice flashcards

Cooperative is a form of business ownership structure?

Profits generated from non-profit corporations are shared among the board 

Business success can be measured based on ...

Next

Flashcards in Introduction to Business247

Start learning

What is business ownership?

Business ownership refers to legal control over a business. It gives the owner the legal capacity to dictate the business operations and dealings. 

What is the simplest business ownership structure?

Sole proprietorship 

Cooperative is a form of business ownership structure?



True

List the basic forms of business ownership structure 


Sole Proprietorship 

  • Partnership 

  • Corporations 

  • Limited Liability Companies, LLC

  • Cooperatives 

Give two disadvantages of sole proprietorship 


1. The proprietor is bears responsibility for all business debt and losses 

2. There is mostly little to differentiate between personal and business income 

Explain sole proprietorship


Sole Proprietorship involves a business being owned and directed by an individual. The individual owns all the rights to run the business however he/she deems fit. 



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