Role Of Business
11BS104
Topic 9.1 Nature of Business
Preliminary Business Studies Course
2011
Ms Giveen
Agenda
 Syllabus Focus
 Learning the “Lingo”
 Getting into the detail
Syllabus Focus
 role of business
 the nature of a business
 producing goods and services
 profit, employment, incomes, choice, innovation,
entrepreneurship and risk, wealth and quality of life
What is a Business?
Setting the scene
(a) What's a Business?
Look Like
Sound Like
Feel Like
Introduction
 Businesses of all sizes provide a vast array of goods and
services.
 People associate businesses with large transnational
corporations like BHP Billiton that operate in many countries,
employ thousands of people and earn millions of dollars in
profit.
 98% of all businesses in Australia are SMEs – small to
medium enterprises.
 The common feature shared by businesses is that they
produce a product – good or service – which is sold in a
market where buyers and sellers meet.
Why Learn About
Business?
 It is concerned with activities affecting us on a day-to-day
basis.
 Stories about business can make us feel:
 Optimistic – developments of new products that helped improve
our standard of living.
 Dejected and cynical – poor ethical behaviour that has misled
the public about safety standards or exploited weaker members
of society.
 The simple transaction of purchasing your first item from the
school canteen may have been the start of your life journey as
a business customer.
What Businesses are in the
News?
 Name at least 3 businesses that have been in the news
recently?
 Has it been for good or bad behaviour?
 How does this affect your opinion of them?
 Will it have any influence on your future likely
interactions with them?
Importance Of Business
Studies To You
Successful
Business
Owner
Informed
Investor
Business
Studies
Informed
consumer
Productive
employee
(a) Why is Business
Important to the
Australian Economy?
Draw a fishbone diagram & note some ideas
Cause
Cause
Problem
Cause
Cause
One way of looking at it
Standards
of living
Economic
development
Taxes
Profit
• Employment
income
• Investments
• Imports &
exports
• Investment
revenue
• Retail Spending
• Goods
• Services
• Technology
development
• Food
• Housing
• Infrastructure
Importance of Business to
the Economy

Employment and income for
employees

Encourages competition

Income for business owners

Research and development of
new products hence invention
and innovation

Taxes for government

Undertake investment leading
to economic growth

A wide range of goods for
consumers

Challenges and rewards for
business owners

Improves our quality of life


Training for entrepreneurs
Exports products which
generate income and reduce
our trade deficit

Creates value encouraging
economic growth

Assists in the development
and use of new technology
(a) Activity
 Select 5 elements discussed in the Importance of
Business to the economy activity.
 Explain why each one is important to the Australian
economy
Did you know?
 Australia is home to citizens from some 200 countries,
making it the most multilingual workforce in the Asia–
Pacific region.
 More than 4 million Australians speak a second
language.
Department of Foreign Affairs & Trade, 2008
Playing with Numbers
Is Starting A Business Right
For You?
(a) Do you enjoy making decisions
and being in charge ?
A. Definitely
B. Most of the time
C. Sometimes
D. Not at all
If you answered: A
 You are definitely suited to be being a business owner
 When you start a business, you’re the one that has to make all the
decisions, and live with the results of your choices. But this is one of
the aspects of starting a business that would-be entrepreneurs look
forward to.

In fact, in an RBC (Royal Bank of Canada) Survey (conducted in
August 2005), 81% of the people who said they wanted to start a
business within the next five years chose being their own boss as the
main reason they wanted to start a business.
 If you didn’t there are many other rewarding careers possible 
(a) Learn the Lingo
 Complete the following activity sheet.
 It is designed to be a useful tool to organise your
information for exam revision purposed
 11 BS Role of business worksheet.docx
 You can either use your text book or a website such as
http://www.businessdictionary.com/
The Nature of A
Business
The Nature Of A Business
 People all have needs and wants.
 Businesses are:
“ the organised effort of individuals to produce and sell for a
profit the products (goods and services) that satisfy
individual needs and wants”
And
 Businesses produce products customers demand.
“ The business hopes to make a profit with the products sold
in the market”
(a) What’s the difference between:
a good
a service
a product
Goods
•Inherently useful and relatively scarce tangible item (article,
commodity, material, merchandise, supply, wares) produced
from agricultural, construction, manufacturing, or mining
activities.
•Commodity, or a physical, tangible item that satisfies some
human want or need, or something which people find useful
or desirable and make an effort to acquire it.
Services
•Intangible products such as accounting, banking, cleaning,
consultancy, education, insurance, know how, medical
treatment, transportation.
•No transfer of possession or ownership takes place when
services are sold, and they
•(1) cannot be stored or transported,
• (2) are instantly perishable, and
•(3) come into existence at the time they are bought and
consumed.
Products
•Good or service that most closely meets the requirements
of a particular market or segment and yields enough profit
to justify its continued existence
•It is:
•(1) tangible personal property,
•(2) output or result of a fabrication, manufacturing, or
production process, and
• (3) passes through a distribution channel before being
consumed or used.
Production
•The most important activity of business enterprises is
production –
•activities undertaken by the business that combine the
resources to create products that satisfy customers’ needs and
wants
•Finished products – products that are ready for customers
to buy and use
(a) Activity
Complete the attached
table for a small
restaurant that is:

open for breakfast
lunch and dinner
 open 7 days a
week
Activity Undertaken by
Business
Example
Production – creating products
Cooking
meals
Organising natural capital and
human resources
Marketing products
Controlling production –
quantity & quality
Forecasting sales, expense and
profit
Distributing goods
1.3 Other functions of
business

Profit - return or reward for producing products consumers need and want

Employment – 80% of public sector jobs

Incomes – for owners/shareholders and employees

Choice – purchase products at competitive prices

Innovation – research and development to improve existing products and create
new ones

Entrepreneurship – turn ideas and passions into livelihood

Wealth creation – activities resulting in higher economic growth and wealth

Quality of life – offer products that improve our standard of living
Profit
 Profit is earned when sales revenue is greater than
operating expenses.
 Profit is what remains after all business expenses have
been deducted from sales revenue.
 Profit is the property of owners hence is regarded as the
return or reward.
Profit & Risk – the
Relationship
 Profits encourage risk taking .
 There are 2 key risks
 owners can not be certain anyone will buy what he or she plans
to sell
 consumers can also change their preference and purchase a
competitors product.
 If a business fails owners:

are not paid, and
 can lose all or part of the money they put into it.
Must Remember!!!!!
Easy Profit Calculation
Sales Revenue – Operating expenses = Profit
Or
Operating Expenses + Profit = Sales Revenue
(depends on how you want to look at it)
(a) Activity
1. Sally's pet shop has expenses of $2000 per week and
earned $3500 in revenue. Is there a profit, if yes how
much?
2. Bens gardening supplies has a revenue of $6000 each
week for a month. Expenses are $7000 week 1, $8000
week 2 & 3 and $3000 for week 4. Is there a profit, if yes
how much?
3. Harry’s hairdressing has expenses of $2500 each month
and earns $2000 in revenue each week. Is there a profit,
if yes how much?
Employment
 To purchase products consumers need money which
they earn by working at jobs provided by businesses.
 The number of employees hired depends on the nature
of products and the number of customers wishing to
purchase the product.
 The SME sector accounts for 50% of non-government
sector employment.
Incomes

Income is money received by a business for providing his or her
labour, or a business from a return on its investments.

Employees provide labour in return for either:

Wages – money received usually on a weekly basis for services provided
to an employer.

Salary – a fixed amount of money paid fortnightly or monthly to a
permanent employee.

Shareholders, people who are part owners of a private or public
company, receive a share of the company’s profit as a dividend.

Businesses satisfying the demands of consumers experience increased
sales and thus can offer higher income to employees, business owners
and shareholders.
Choice
 Choice is the act of selecting among alternatives.
 Consumers have freedom of choice so can shop around
and select from a range of competitors’ products which
can be a double edged sword.
Why?
Innovation

Innovation – an improvement on something already established.

Invention – the development of something new.

Music for example has been the subject of innovation and invention.

Innovation and invention results in improved efficiency and increased
productivity.

First phonograph 1877 Thomas Edison. Music recorded on cylinders.

1920s discs

1930s and 1940s tape recording

1982 compact discs

1990s digital recording using the internet, iPods and USB flash drives

http://teachingtreasures.com.au/technology-enterprise.htm
Entrepreneurship and risk
 A entrepreneur is someone who starts, operates and
assumes the risk of a business venture in the hope of
making a profit.
 Entrepreneurs explore untapped markets with no track
record of proven consumer demand or guaranteed
returns.
 Gordon Merchant the founder of Billabong is a
successful Australian entrepreneur.
Wealth Creation
Quality of life
 Quality of life refers to the overall wellbeing of an
individual combining material and non-material
benefits.
 For example individuals require leisure time for hobbies
and recreation.
 Non-material products including fresh air, clean water,
unpolluted earth, conservation of wildlife and protection
from toxic sources improve an individuals quality of life.