Definition - business is the organized effort of individuals to produce and sell, for a

profit, the goods and services that satisfy society’s needs.

Characteristics
 businesses must be the result of individuals working together in an organized
way
 Businesses must satisfy a societal need
 businesses must seek to make a profit

Divisions
 Production
 Research and Development (often abbreviated to R&D)
 Purchasing
 Marketing (including the selling function)
 Human Resource Management
 Accounting and Finance.
Objectives

S – Specific – objectives are aimed at what the business does, e.g. a hotel might have an
objective of filling 60% of its beds a night during October, an objective specific to that
business.
M - Measurable – the business can put a value to the objective, e.g. €10,000 in sales in
the next half year of trading.
A - Agreed by all those concerned in trying to achieve the objective.
R - Realistic – the objective should be challenging, but it should also be able to be
achieved by the resources available.
T- Time specific – they have a time limit of when the objective should be achieved, e.g.
by the end of the year.

 Survival – a short term objective, probably for small business just starting out,
or when a new firm enters the market or at a time of crisis.
 Profit maximisation – try to make the most profit possible – most like to be the
aim of the owners and shareholders.
 Profit satisficing – try to make enough profit to keep the owners comfortable –
probably the aim of smaller businesses whose owners do not want to work longer
hours.
 Sales growth – where the business tries to make as many sales as possible. This
may be because the managers believe that the survival of the business depends
on being large. Large businesses can also benefit from economies of scale.

Purpose of Business activity – Unlimited wanted, limited resources, entrepreneurs

combine land labor money and material to give products

Mixed Economy
an economic system combining private and state enterprise.
A mixed economy is variously defined as an economic system blending elements of
market economies with elements of planned economies, free markets with state
interventionism, or private enterprise with public enterprise.
A mixed economy is a system that combines characteristics of market, command and
traditional economies.
Advantages
 it distributes goods and services to where they are most needed. It allows prices
to measure supply and demand.
 it rewards the most efficient producers with the highest profit.
 it encourages innovation to meet customer needs more creatively, cheaply or
efficiently.
 it automatically allocates capital to the most innovative and efficient producers.
Disadvantages
 if the market has too much freedom, it can leave the less competitive members of
society without any government support.
 But central planning of government industries also creates problems. The defense
industry could become a government-subsidized monopoly or oligarchy system.
That could put the country into debt, slowing down economic growth in the long
run.
 Successful businesses can lobby the government for more subsidies and tax
breaks. The government could protect the free market so much that it doesn’t
regulate enough.

Private Sector and Public Sector

The private sector encompasses all for-profit businesses that are not owned or operated
by the government. Companies and corporations that are government run are part of
what is known as the public sector
The private sector employs workers through individual business owners, corporations
or other nongovernment agencies. Jobs include those in financial services, law firms,
newspapers, aviation, hospitality or other nongovernment positions. Workers are paid
with part of the company’s profits. Private-sector workers tend to have more pay
increases, more career choices, greater opportunities for promotions, less job security
and less-comprehensive benefit plans than public-sector workers. Working in a more
competitive marketplace often means longer hours in a more demanding environment
than working for the government.

The public sector employs workers through the federal, state or local government.
Typical civil service jobs are in health care, teaching, emergency services, armed forces
and city council. Workers are paid through a portion of the government’s tax dollars.
Public-sector workers tend to have more comprehensive benefit plans and more job
security than private-sector workers; once a probationary period concludes, many
government positions become permanent appointments. Moving among public-sector
positions while retaining the same benefits, holiday entitlements and sick pay is
relatively easy while receiving pay increases and promotions is difficult. Working with a
public agency provides a more stable work environment free of market pressures, unlike
working in the private sector.
Co-operative Sector

It refers to the sector which is voluntary association of persons owned and managed
for their or sometimes the communities benefit.
 Voluntary association
 Open membership
 Legal entity
 Equal voting right
 Service Motive
 Co-operation among Co-operatives
 Concern for community
Joint sector

Joint sector industries are owned jointly by the government and private individuals who
have contributed to the capital.
Merits
 Social control over industries
 Failures of Private and Public sector
 Compromise and solution of both sector
 Instrument of industrial growth and regional development
 Strategy of state sponsored industrialization
 Removal of the contradictions involved in the concept of mixed economy
 Mobilization of financial, Technical and managerial Resources
Demerits
 Corruption
 Quality of services
 Evaluation
 Wealth creation
 Monopoly
Sole proprietorship
Advantages
 It's easiest to form, with no requirement to register with a state.
 It's easiest to run, with no regulations about having a board of directors or
meeting minutes or annual meetings.
 The owner is in complete control of the business, not having to answer to anyone.
 The owner gets all of the profits of the business, but of course he or she must
also take all of the losses.
Disadvantages
 The sole proprietor of the business can be held personally liable for the debts and
obligations of the business. Additionally, this risk extends to any liabilities
incurred as a result of acts committed by employees of the company.
 All responsibilities and business decisions fall on the shoulders of the sole
proprietor.
 Investors won't usually invest in sole proprietorships.
Partnership
A partnership is a business with multiple owners, each of whom has invested in the
business. Some partnerships include individuals who work in the business, while other
partnerships may include partners who have limited participation and also limited
liability for the debts and lawsuits against the business.
Advantages
 two heads (or more) are better than one
 your business is easy to establish and start-up costs are low
 more capital is available for the business
 you’ll have greater borrowing capacity
 high-calibre employees can be made partnersthere is limited external regulation
 it’s easy to change your legal structure later if circumstances change.
Disadvantages of a partnership
 the liability of the partners for the debts of the business is unlimited
 each partner is ‘jointly and severally’ liable for the partnership’s debts; that is,
each partner is liable for their share of the partnership debts as well as being
liable for all the debts
 there is a risk of disagreements and friction among partners and management
 each partner is an agent of the partnership and is liable for actions by other
partners
Joint Stock Company
A Joint Stock Company is a voluntary association of persons to carry on the business.
It is an association of persons who contribute money which is called capital for some
common purpose.
1. Artificial Person
2. Separate legal Entity
3. Perpetual Existence
4. Limited liability of shareholders
5. Common Seal
6. Transferability of Shares
7. Capital
8. Management
9. Membership
10. Formation

Nonprofit organizations
nonprofit organization is a business granted tax-exempt status by the Internal Revenue
Service (IRS). Donations made to a nonprofit organization are typically tax deductible to
individuals or businesses that make them, but the nonprofits must make financial and
operating information public so that donors are certain their contributions have been
used effectively. Nonprofits pay no income tax on the donations they receive or any
money they earn through fundraising activities. Nonprofit organizations are sometimes
called NPOs or 501(c)(3) organizations based on the section of the tax code that permits
them to operate.