Revision Year 11 Mid Year Exam

Types of Businesses Businesses are classified in a number of ways Size Geographical spread Industry sector Legal Structure Small, medium, large. Local, national, global. Primary, secondary, tertiary, quarternary, quinary. Unincorporated, incorporated. Sole trader, partnership, public or private company. Get students to identify an example of each type of business.

Size Small business- Less than 20 employees Independently owned and operated by one or two people What kind of ownership is most common for a small business? Owner responsible for majority of decision making. Quick implementation of changes How are these businesses usually financed? Small market share, local area, not dominant in industry Examples?

Medium businesses- 20-199 employees Owned and operated by a few people and/or private share holders Partnership or private company Owner basically responsible for majority of decisions if partnership; more complicated decisions, with slower implementation if a private company. How is a medium sized business financed? Medium market share due to dominance within geographic region. Some market dominence. Examples?

Large businesses- 200+ employees Usually owned by thousands of public shareholders Most often a public company (listed on the ASX) Complex decision making and various levels of management fronted by a CEO or director/s, followed by senior and middle management. Possibly slow implementation of decision making and change due to layers of management. Many sources of finance including; cash reserves, retained profit, sale of shares and loans from domestic and foreign institutions Large market share, particularly for multinational corporations that dominate the markets of many countries Examples?

Geographical Spread Local businesses- National businesses- Serves the surrounding area, with a restricted geographical spread. Often only used by consumers who live nearby. National businesses- As a business grows the area its serves also increases. A small local business can sometimes grow exponentially to become a national business, operating country wide- within a single country. Examples….

Global businesses- Can be further divided into multi-national and transnational businesses Usually has a base in a home country while operating partially or wholly owned businesses in other countries. For these companies national borders do not represent barriers to trade, they are simply lines on a map. Why has the number of global businesses increased in the last 20 years? Examples?

Why do businesses expand from local  national  global Desire to increase profits Increase in sales Business Expansion Increase in market share Global consumers

Industry Sector INDUSTRY SECTOR PRIMARY SECONDARY TERTIARY QUARTERNARY Primary industries are those which production is directly associated with natural resources e.g. farming, mining, fishing, forrestry. Employs only 4% of the labour force- HOWEVER it is essential because it provides our food requirements. 60% of our exports come from these industries. Secondary industries are those businesses which take the materials from the primary sector and turn it into a finished or semi-finished product. E.g. Ore  steel  car both the steel and car manufacturing companies are secondary industry businesses. Tertiary businesses provide a service banks, dentists, solicitors. This is the largest industry sector and has been subdivided into a further two sectors- quarternary and quinary Quarternary industry includes services which involve the transfer and processing of knowledge e.g. telecommunication, property, computing, finance, education. The quarternary industry is expected to experience rapid growth and change in the next 20 years due to rapid advances in telecommunications as well as e-commerce and other internet-based business. Quinary industry includes all services which have traditionally been performed in the home e.g. hospitality, tourism, craft-based activities and childcare. It includes both paid and unpaid work. Due to both societal and lifestyle changes and the increase of dual income households the demand for quinary industry services is also predicted to increase in the next 20 years. Small businesses make up a significant number of these services, filling a niche in the market. QUARTERNARY QUINARY

CLASSIFICATION BY LEGAL STRUCTURE SOLE TRADER PARTNERSHIP PRIVATE COMPANY PUBLIC COMPANY Incorporated- refers to the process companies go through to become a separate legal entity from the owners. This means that the business exists in its own right, regardless of what happens to individual owners & other shareholders the business continues to operate. In an unincorporated business is a sole trader or partnership where the business entity and the owner are one in the same- when the owner dies, so does the business. It is the most common legal structure for a business as it is the easiest and cheapest to establish. Unincorporated Incorporated

Business Structure Sole trader ADVANTAGES Personal (unlimited) liability for business debts End of business when owner dies Difficult to operate if sick Need to carry all loses Burden of management Need to perform a vide variety of tasks Difficult to raise finance for expansion ADVANTAGES Low cost of entry Simplest form Complete control Less costly to operate Owners right to keep all profits Less government regulation No tax on profit, only personal income What is unlimited liability? DISADVANTAGES

Partnerships Personal unlimited liablity Liability for all debts, including partners debts even before partnership began. Possibility of disputes Divided loyalty and authority ADVANTAGES Low start up costs Less costly to operate than a company Pooled funds and talent Minimal government regulation No taxes on profit, only personal income On death of one partner, business can continue DISADVANTAGES

Companies What is meant by the term limited liability? Private company vs. Public companies The most common type of company in Australia. Has between two and 50 private shareholders Small to medium family businesses Shareholders can only sell their shares if approved by other directors Listed on the ASX Large companies At least one shareholder with no maximum number No restrictions on the transfer of shares Must issue a prospectus when selling first shares A minimum of three directors The word ‘Limited’ or ‘Ltd’ Publish an annual report

Government Enterprises- Government owned and operated. Provide essential community services such as health, education, roads and welfare. Wave of privatisation in the early 1980’s- the reason for this is that economic efficiency is increased by transferring enterprises away from the public sector into the private sector Franchising- A _________ means buying the rights from another business to distribute its product under its name. A _________is an individual or business that grants a franchise A __________ is an individual or business that purchases the franchise. Franchisee Franchise Franchisor

Factors influencing legal structure Three factors Size of the business 2. Ownership structure 3. Finances needed WHY? Give an example of a company the started as a sole trader or partnership which is now a public company