GSE 202/ GSE 301: WHY IS BUSINESS IMPORTANT TO SOCIETY

By | November 26, 2019

KEY POINTS WITH SUMMARY

INTRODUCTION TO ENTREPRENEURSHIP SKILLS (THEORY)

GRADUATE SELF EMPLOYMENT

PRACTICE QUESTIONS

 

 

PART A : KEY POINTS WITH SUMMARY

 

CHAPTER 1

NATURE PURPOSE AND SCOPE OF BUSINESS

* Business refers to an occupation in which goods and services are produced and sold in return for

 

money.

* The prime objective of business is profit making

* Business organization is an entity that is both commercial and social, which provides the necessary

structure to achieve the central objective of trade in goods or services

* Business enterprises are institutions whose primary objective is Profit—making

* Forms of business org. includes:

> Sole Proprietorship: this is the simplest form of business under which an individual can operate a

business. Feature of SP. Includes:

  1. Simplistic in nature

 

  1. Easy and simple to set—up
  2. It does not require legal recognition and attendant formalities.
  3. There is no distinction between the business and the owner.
  4. Management rest with the owner/proprietor him/herself
  5. Owner has unlimited liability
  6. Owner bears all the profits earned and bears all losses incurred by the business.

 

Advantages of SP

  1. It is easy to form, formal registration is not necessarily needed
  2. There is independence and freedom in decision making.
  3. There is high secrecy in the business
  4. Presence of tax advantage
  5. Dissolution of business is very easy.

 

Demerits of SP

  1. A sole proprietor has unlimited resource at his/her disposal.
  2. There is limitation to the ability of the proprietor
  3. He is fazed with unlimited liability
  4. Life span of the business is usually limited.

 

> PATNERSHIP: This is an arrangement where parties, known as partners, agree to cooperate to advance

their mutual interests. A partnership agreement may be either written or not.

Features of partnership include:

  1. Profit of the business are shared according to partners’ contribution to the business.

Partnership is not separated from the partners

It is easy to form, as initial starting cost is low

Death of a partner can lead to the dissolution of the partnership.

Partners risk their personal assets.

Benefits of Partnership

  1. It is easy to form
  2. Shared financial commitment
  3. Complementary skills
  4. It provides employment opportunities

Demerits of Partnership

  1. Joint and individual liability
  2. Possibility of disagreement among partners
  3. Discord among partners on shared profit.

 

> LIMITED LIABILITY COMPANY: this is an artificial creature, invisible, intangible, and existing in only one

contemplation of law.

READ:  ICH312: ULTIMATE GUIDE FOR STUDYING ELEMENTS OF FOOD SCIENCE AND TECHNOLOGY

* A company is legally formed by meeting the condition stipulated in the Companies and Allied Matter

Act (Decree), 1990.

*Promoters must apply for registration at the Corporate Affairs Commission together with both a

Memorandum and Articles of Association.

*The Registrar—Genera|, issues a Certificate of Incorporation ifthe Memorandum and the Articles of

association are in order.

* The business environment includes Customers, competitors, government regulatory agencies, legal

and political framework and institutions, technological development and social cultural factors that

influence business behavior

* The objectives of business are:

Profit objective                    Growth objective                 Market Share objective

Survival                               — Employee Satisfaction         — Image and Reputation

Social Objective                  National Objectives             Shareholder Satisfaction

* The purpose of business activity is to identify and satisfy the needs and wants of the people, with the

overall aim of earning profit.

* Functions of a business are:

> Production Function: The transformation of inputs into specified outputs as demanded by the market

and society.

> Marketing Function: The distribution of goods and services produced by the business’ production

department.

> Finance Function: The arrangement of sufficient capital for the smooth running of the business.

> Personnel Function: Finding suitable employees, training them, as well as motivating them.

 

*The theories on the purpose of business are:

> shareholder’s theory: Shareholder theory encompasses the idea that the main purpose of business

lies in generating profits and increasing shareholder wealth.

> Stakeholder Theory: states that firms can best generate competitive advantage and wealth by taking

more than just their shareholders into account

* The characteristics/features of business are:

Exchange of goods and services

Profit: the reward of business is profit.

Involvement in numerous transactions

Marketing and distribution of goods

Risk taking and Uncertainties

Availability of buyer and seller

Production of goods and services

Development of skills for economics

Social Obligations

Meeting human needs and wants

*The scope of business may be looked into from two perspectives; Industry and Commerce

> Industry: This activity of extraction, production, conversion, processing or fabrication of products.

The products of an industry may be a:

  1. Consumers goods: goods used by final consumers
  2. Capital goods: goods used in the production of other goods
  3. Intermediate goods: these are materials that were once the finished products of one industry

but are now intermediate product of other industries.

*The types of industry are:

READ:  CHM341: KEY POINTS TO NOTE ON QUANTUM CHMISTRY I

Primary Industries: which can be;

  1. Extractive industry: one which draws it products from natural sources
  2. Genetic Industries: one involved in the breeding of plants and animals for use in further

reproduction.

Secondary Industries: which can be;

  1. Manufacturing Industries: one engaged in producing goods through the creation of ”form

utility”. The products of extractive industry eventually become the raw—materials of manufacturing

industry. M.| may take the form of Analytical, Synthetic, Processing and Assembly line.

 

>Commerce: This is an interchange of goods or commodities between different entities, either

domestically or foreign/internationally. The main function of commerce is to remove the hindrance of

persons through trade, place through transportation, insurance and packaging, time through

warehousing and storage, and knowledge through salesmanship.

The concept of commerce usually covers two important areas; Trades and Service business or Aids or

trade.

* Trade can be classified into

(i) Domestic Trade: this is an internal trade. Payment is made in national or local currency and it can be

further subdivided into retail and wholesale trade.

(ii) Foreign Trade: this is an international trade. It involves the use of foreign currency.

* Service Business: There are referred to as Aids to Trade and they include:

  1. Banking

 

  1. Transportation

 

iii. Warehousing

 

  1. Insurance

 

  1. Advertising

 

  1. Communication.

 

* Further research led to the discovery of the following important scope of business

  1. Demand Analysis and Forecasting: This assist business owners in maintaining and strengthening

market position and reduce wastage.

  1. Cost and Production Analysis: It helps in yielding significant cost estimates which are useful for

business decisions.

  1. Price Decisions, Policies and Practices: It help in profit planning exercises.
  2. Profit Maximization: It refers to sales level where profits are the highest
  3. Capital Management: It ensures a business has sufficient cash flow in order to meet its short—term

debt obligations and operating expenses.

  1. E—commerce (Electronic Commerce): This is the buying and selling of goods and services or

transmitting of funds or data, over an electronic network.

NOTE: (B2C) = business—to—consumer

(B2B) = business—to—business

 

(CZB)    =  consumer—to—business

 

(CZC)    =  consumer—to—consumer.

 

*Beneficiaries of Business

  1. Business owners

 

  1. Employees

 

iii. Government

 

  1. Society

 

* The stakeholders of business are: Communities, Competitors, Customers and consumers, employees

and agents, families, government, Media and advocacy groups, Owners/shareholders, Society, Suppliers.

CONTINUE ON THE NEXT PAGE

Leave a Reply

Your email address will not be published. Required fields are marked *