BUSINESS STUDIES

NATURE OF BUSINESS- CORE 1

PRODUCING GOODS AND SERVICES
• Business: The organised effort of individuals to produce and sell, for a
profit, the products that satisfy individuals needs and wants
• Need: necessities, essential to survive
• Wants: What an individual desires, but is not essential for survival
• Good: A physical product – tangible
• Service: an activity of performing work for others – intangible

PROFIT, EMPLOYMENT, INCOMES, CHOICE, INNOVATION,

ENTREPRENEURSHIP AND RISK, WEALTH, AND QUALITY OF LIFE
8 Roles Of A Business
1. Profit – What remains after all business expenses have been deducted
from sales revenue
2. Income – Money received by a person from providing labour, or a
business from a return on its investments
3. Wealth Creation - Accumulation of assets (especially those that generate
income) over a long period of time. E.g. retirement plan.
4. Entrepreneurship and Risk – The ability and willingness to start, operate
and assume the risk of a business venture in the hope of making a profit
5. Employment – having paid work
6. Quality of life – refers to the overall wellbeing of an individual, and its
combination of both material and non-material benefits
7. Innovation – either creating a new product, service or process, or
significantly improving an existing one
8. Choice – the act of selecting amongst alternatives

TYPES OF A BUSINESS
Classification of business
1. Legal Structure
2. Size
3. Industry Sector
4. Geographical Spread

Sizes
• Micro business – A business with fewer than 5 employees
• Small business – a business with 5-19 employees
• Medium Business – A business with 20-199 employees
• Large business – 200 or more employees
Geographical Spread
• Local – serves the surrounding suburbs
• National – one that operates within just ONE country
• Global – Based in one country and operates or is partially owned in
another

Industry Sector
• Primary
o All business in which produce directly associated with the uses or
uses natural resources e.g. mining, fishing, forestry
• Secondary
o Using the raw materials that are gained in a primary industry and
making them into a finished (or semi-finished) product) e.g. car
manufactures
• Tertiary
• A service-based business (quaternary and Quinary)
• Quaternary
• Service industries involved in the transfer and processing of information
and knowledge e.g. education, journalist
• Quinary
• Performs a service that was traditionally completed in the home e.g.
cooking, cleaning, hospitality, child-care
Legal Structure

Incorporated businesses Unincorporated businesses

Have gone through the process
companies go through to become a
separate legal entity from the
owners. Meaning the business exists
in its own right in its own legal entity.
• Limited liability
No separate legal existence from its
owner(s) and will be either a sole
trader or partnership. This means the
business entity and the owner(s) are
one and the same. When the owner
dies then so too does the business
entity
• Unlimited liability
Legal Structures
• Sole traders – A business that is owned and operated by only one person.
Unincorporated and unlimited liability
• Partnerships – owned and operated between 2 and 20 people.
Unincorporated and Unlimited liability
• Private companies – owned by between 1 and 50 people. Incorporated
and Limited liability (PTY LTD)
• Public companies - Any company that has gone through incorporation
and is traded on the Australian Securities Exchange (ASX). Ownership
open to the public. Owners buy shares and in return receives a portion of
the profits, called a dividend. Incorporated and Limited Liability. (LTD)

FACTORS INFLUENCING CHOICE OF LEGAL STRUCTURE

There are 3 Primary factors that help a business owner choose a legal
structure:
1. Size of the business
• If sales increase, and the business keeps on growing, then further
expansion will be needed
2. Ownership
• If a business owner wishes to have complete control and ownership of a
business, then becoming a sole trader is the only realistic option. On the
other hand, if the owner wishes to share the ownership with other people,
then a partnership is the ideal legal structure
3. Finances
• when a business expands it will require injections of finance

INFLUENCES IN THE BUSINESS ENVIRONMENT

• Influence – To have the ability to effect, inspire or change the
behaviour of others
• Internal influences – occur within the business e.g. financial, products,
management
• External influences – occurs outside the business e.g. competitors,
markets, economic

Internal Influences are:

1. Products
• Types of goods and services produced
2. Location
• Visibility, Cost, Proximity to suppliers, proximity to support services,
proximity to customers
 3. Resources
• 4 main resources
o Human (employees)
o Information (knowledge and data)
o Physical (equipment)
o Financial (funds)
4. Management
• Autocratic vs. democratic
5. Business Culture
• Business culture normally consists of four essential elements:
o Values (basic beliefs)
o Symbol (objects used to represent something the business
believes to be important)
o Rituals (routine behaviours patterns in a business’s everyday life)
o Heroes (the businesses successful employees who set an
example for others)
Stakeholders
• Stakeholders – people or groups who have interest in or is affected by
the activities of a business
• Internal stakeholder - concerned about what is going on inside the
group
• External Stakeholder- concerned about what is going on outside the
group that is going to be impacted by the business activities
Internal stakeholders:
• Owners
• Shareholders
• Managers
• Employees/staff
External stakeholders:
• Customers
• Environment
• Society
• Government
BUSINESS GROWTH AND DECLINE
Stages:
• Establishment – Business birth
• Growth – time of acceleration
• Maturity – Stable Stage (sales at peak)
• Post maturity – business can either:
o Renewal (Diversify)
o Steady state
o Decline
o Cessation
Challenges In The Business Life Cycle
• Alternate names
• Goals
• Risk level
• Management structure
• Legal structure
• Finance
• Marketing
o Sales
o Market share
o Business reputation
• Accounting and Finance
o Cost
o Cash Flow (money going in and out of the business)
• Operations
o Production process
• Human Resources/employment relations
o Size
o Knowledge of business
o Experience

RESPONDING TO CHALLENGE
To grow a business can:
- Diversify
- Integrate
- Merge
- Acquisitions

Integration and diversification

• Vertical Integration - Occurs when a
business expands at different but
related levels in the production and
marketing of a product
• Horizontal Integration - Occurs when a
business acquires or merges with
another firm that makes and sells similar products
• Diversify - Occurs when a business acquires or merges with a business in
a completely unrelated industry
FACTORS THAT CONTRIBUTE TO BUSINESS DECLINE

FACTORS VOLUNTARY AND INVOLUNTARY CESSATION -

LIQUIDATION
• Cessation – The fact or process of ending or being brought to an end
• Voluntary Cessation– choosing to cease operations on your own.
• Involuntary Cessation – When a business is forced to cease its
operation

There are 3 methods for a business to stop trading:

• Bankruptcy – a declaration that a business or person is unable to pay
his or her debts
• Voluntary Administration - occurs when an independent administrator
is appointed to operate the business in the hope of trading out of the
present financial problems.
• Liquidation - occurs when an independent and suitably qualified
person – the liquidator – is appointed to take control of the business
with the intention of selling all the company’s assets in an orderly and
fair way in order to pay the creditors.

‘
 BUSINESS MANAGEMENT - CORE 2
NATURE OF MANAGEMENT
Management: The traditional definition of management is the process of
coordinating a business’s resources to achieve its goals. MANAGERS COORDINATE
RESOURCES

The four main resources available to a business are:

1. Human resources. Employees - the most important asset
2. Information resources. Knowledge and data - market, research, sales
reports, economic forecasts, technical material, legal advice
3. Physical resources. Equipment, machinery, buildings and raw materials
4. Financial resources. Funds the business uses to meet its obligations to
various creditors

Management: Management is the process of working with and through other

people to achieve the goals of the business in a rapidly changing environment
Effectiveness: Effectiveness measures the degree to which a goal has been
achieved
Efficiency: Efficiency compares the resources needed to achieve a goal (the costs)
against what was actually achieved (the benefits).

Management has 4 functions (POLC) *functions of management*

• Planning: The preparation of a predetermined course of action for a business
• Organising: the structure of the organisation to translate plans and goals into
action
• Leading: the process of influencing or motivating people to work towards the
achievement of the organisation’s objectives
• Controlling: The process of evaluating performance by comparing what was
intending to happen with what has actually occurred, and then taking
corrective action to ensure that the set objectives are being achieved

FEATURES OF EFFECTIVE MANAGEMENT

What makes a good manager? Functions of management POLC:
1. Organised • Planning
2. Assertive • Organising
3. Communicating • Leading
4. Planning • Controlling
5. Efficient
6. Considerate
7. Good decision maker
8. Critical thinking
9. Controlling
 SKILLS OF MANAGEMENT

Skill Definition | Description

What is it?

Interpersonal Those skills needed to work and communicate with

other people and to understand their needs
Communication The exchange of information between people; the
sending and receiving of messages
Strategic Thinking Allows a manager to see the business as a whole and
to take the broad, long-term view
Vision the clear, shared sense of direction that allows people
to attain a common goal
Problem-solving a broad set of activities involved in searching for,
identifying and then implementing a course of action to
correct an unworkable situation
Decision-making the process of identifying the options available and
then choosing a specific course of action to solve a
specific problem
Flexibility being responsive to change and able to adjust to
changing circumstances
Adaptability to Change the ability of a person to adapt to any type of situation.
Reconciling Conflicts The ability to restore conflicts

RECONCILING THE CONFLICT INTERESTS OF STAKEHOLDERS

As time moves on, there is an increasing focus on businesses meeting the needs of a
variety of stakeholders. Society expects businesses to accept responsibility and
accountability toward stakeholders. E.g. Woolies ad Coles – consumers did not want
plastic bags
ACHIEVING BUSINESS GOALS
A goal is a desired outcome (target) that an individual or business intends to
achieve within a certain time frame.

SMART goals: The importance of goals

1. Specific Goals should:
2. Measurable 1. Serve as targets – all managers know what the business is
3. Attainable trying to achieve
4. Relevant 2. ‘Measuring sticks’ – specific goals act as benchmarks so the
5. Timely business can measure its performance
3. Motivation – goals that are challenging, not easy, so
employees gain satisfaction when completing such goals
4. Commitment – getting an employee to agree to achieve a
goal, or better still, participating in the goal-setting process
What are business goals?

Profits:
• What remains after all business expenses have been deducted from sales
revenue. Only profitable businesses survive in the marketplace
• Profit Maximisation: occurs when there is a maximum difference between the
total revenue (that is the total number of sales made multiplies by the price)
coming into the business and total cost of being paid out
• Total sales X price = total revenue (TR)
• Total expenses incurred in operating the business = total cost (TC)
• Profit = TR – TC
• Maximum profit = TR at maximum difference from TC

Market share
• Refers to the business’s share of the total industry sales for a particular product
4. e.g. competition between the major Australian banks

• Promotion - describes the methods used by a business to inform, persuade and

remind a market about its products.

Growth
• Growth can be achieved internally or externally
• Internal growth could involve employing more people, increasing sales,
introducing innovative products, purchasing new equipment or establishing
more outlets.
• External growth is achieved by merging with or acquiring other businesses

Share Price
• A share is a part ownership of a public company. Shareholders therefore are
the real owners of companies. There are two reasons why a person will buy
shares.
• Owners may purchase shares in the hope of selling them for a higher price.
• Owning shares in a company entitles an investor to a part of the company’s
profits, which is distributed in the form of dividends.
 Social
5. All businesses operate within a community and, like individuals, have certain
social responsibilities.
6. Social goals are:
• 1. Community service. Business sponsorship of a wide range of
community events, promotions and programs rapidly increased during
the past decade. Many businesses financially support educational,
cultural, sporting and welfare activities.
• 2. Provision of employment. Most large businesses do not regard
employment of people as a main goal. Many small business owners,
however, look at the continuity of their business, sometimes employing
family members who otherwise might be unemployed.
• 3. Social justice. Everyone has the right to be treated fairly. A business
may be concerned for social justice — that is, it adopts a set of
policies to ensure employees and/or other community members are
treated equally and fairly.

Environment
• Every year, more output is demanded and consequently its production lines
work faster and faster. However, the raw materials are used to produce the
vast array of goods and services are shrinking at a frightening rate. In the
effort to increase output, essential maintenance is sometimes ignored.
• For quite a while people have treated the Earth just as they like, without
giving much thought to the long-term consequence
• the good news is that these changes are already occurring. There are signs
that people and businesses are becoming more environmentally aware.

Ways a business may attempt to increase profits:

• Well-targeted marketing campaign
• Creating more innovative products
• Delivering better services

STAFF INVOLVEMENT
Staff involvement - involving employees in the decision- making process and giving
them necessary skills and rewards

Labour productivity - measure how much an employee can produce in a set period
of time
Intrinsic Rewards - Awards that come from within the employee.
• It is where the employee is working for his/her own satisfaction and may
value challenging work he/she perceives to be meaningful to the
company.
• Example: personal achievement, skills

Extrinsic Rewards - The tangible rewards given to employees by managers. They are
external to the work itself and other people control their size and whether or not they
are granted
• Usually financial

STAFF INVOLVEMENT
Innovation
• All businesses should encourage an innovative business culture by
recognising and encouraging one of the most important sources of
innovative ideas: EMPLOYEES
• Innovation occurs when a new idea is applied to improving an existing
product of idea
• Staff must be encouraged and given the opportunity to be innovative

Training
• As the nature of the workplace changes, especially due to the introduction
of technology, existing employees must be trained and retrained
• Employee training generally refers to the process of teaching staff how to
perform their job more efficiently by boosting their knowledge and skills

Mentoring
• A mentor acts as a role model
• The process of developing another individual by offering tutoring and
coaching and modelling acceptable behaviour
• Mentoring programs aim to provide advice, guidance ad help with
socialisation
• A mentor is someone (usually a more experienced employee) who helps
develop a less experienced employee
Motivation
• Motivation is what drives a person to behave in a certain way
• High levels of motivation lead to increasing rates of productivity
• Managers rely on either rewards or punishment as motivation

MANAGEMENT APPROACHES
Management Approaches:
• Planning - Involves deciding what needs to happen in the future and
generating plans for action to carry out tasks and achieve goals
• Organising - involves making sure the human and other resources (such as
raw materials, finance and technology) are put into place and used
efficiently
• Co-ordinating - involves creating a structure through which an
organisation's goals can be accomplished
• Commanding - involves determining what must be done in a situation and
getting people to do it
 • Controlling - involves checking organisational progress against plans

Roles and Skills of Managers:

• Interpersonal: Roles that involve co-ordination and interaction with
employees to carry out work tasks
• Informational: Roles that involve handling, sharing and analysing
information about business performance
• Decisional: Roles that require decision making concerning operations,
finance, marketing, human resources, problem solving and dispute
resolution

THREE levels of Management

Top/executive Level
• Develops the mission statement and vision statement for the business
• Consists of the board of directors, the CEO and other executives such as
the Chief financial officer (CFO
• Responsible for controlling and overseeing the entire organisation
• Develop strategic plans, company policies and make decisions on the
direction of the business
• Play a significant role in the mobilisation of outside resources and are
accountable to the shareholders and general public for business
performance

Middle Management Level

• Objectives and strategic plans
• Consist of general managers, branch managers and department managers
• Accountable to top management for their departments function
• They devote more time to organisational and directional functions
• Their roles can be emphasised as executing organisational plans that are
consistent with the company's policies and the objectives of top
management.
• They define and discuss information an policies from top management to
lower management, and most importantly they inspire and provide
guidance to lower level managers towards better business performance
Lower/Supervisory Level
• Manages communicate the plans to employees
• Consist of supervisors, section leader and foremen
• They focus on controlling and directing
• They usually have the responsibility of assigning employees work tasks,
guiding and supervising employees on day-to-day activities, ensuring
quality production, making recommendations, suggestions, and dealing
with employees' problems.
• They are role models for employees who provide basic supervision,
motivation, career planning and performance feedback.
Classical Approach – Autocratic Leadership Style
• Leader makes all the decisions, dictates work methods, limits worker
knowledge about what needs to be done to the next step to be performed,
frequently checks employee performance and sometimes gives feedback
that is punitive.

Behavioural Approach – democratic leadership style

• The manager consults with employees to ask their suggestions and then
seriously considers those suggestions when making decisions
Contingency Approach
- This style stresses the need for flexibility in order to suit changing circumstances

CLASSICAL APPROACH
Classical approach - how best to manage and organise workers so as to improve
productivity (output).
• management as planning, organising and controlling --> Role of Management
(POLC)
• hierarchical organisational structure
• autocratic leadership style - communication runs from the top down
Controlling – The process of evaluating and modifying tasks to ensure that the set
goals are being achieved
Organising – The process of arranging the resources of the business to achieve the
goals
Planning - The process of setting goals and deciding on the methods to achieve
them

BEHAVIOURAL APPROACH
Behavioural Approach
• This management stress that people (employees) should be the main focus
of the way in which the business is organised
Functions:
1. Leading
2. Motivating
3. Communicating
CONTINGENCY APPROACH
Contingency approach is based on:
• adapting to change
• adjustments to leadership
• constantly monitoring the
business environment
• needs and management
changes overtime due to
internal and external factors

Benefits:
• Adaptability to chance
• Can be adjustments in leadership
• Constantly monitoring the business environment
• Improves leadership and management skill

MANAGEMENT PROCESS
There are 4 key business functions:
• Marketing - It is a total system of interacting activities designed to plan, price,
promote and distribute products to present and potential customers
• Human Resources - Are the employees of the business and are generally its most
important asset
• Operations - Refers to the business
process that involve transformation
or, more generally 'production'
• Finance - Refers to how a business
funds its activities Include
processing tax payments and filing
tax returns, invoicing customers,
assessing the company's financial
performance and keeping track of
orders. Your accountant will also be
responsible for calculating wages
and salaries, recording cash inflows
and identifying problem areas.

The two major factors that underpin all

key business functions are:
• Outsourcing: The use of external sources or business to undertake business
functions or activities for a business
• Research and development: A set of activities undertaken to improve existing
products, create new products and improve production
COORDINATING KEY BUSINESS FUNCTIONS AND RESOURCES
Important terms that describe the relationship between the four key business
functions are:

• Interdependence: mutual dependence that the key functions have on each

other; these function best when they work together when they work in harmony.
- working towards a common goal (managements job to communicate that
goal)
• Synergy: used to describe when the key business functions are working together
cohesively or to their optimum potential.

MARKETING
Marketing: marketing is a total system of interacting activities designed to plan, price
promote and distribute products to present and potential customers.
Marketing is made up of 4 elements (4 P's)
• Product (physical product or service)
• Place (where the product is purchased)
• Promotion (Tools used to get the message out)
• Price (the amount a consumer pays)

Key long-term goals of marketing are:

• Increase profitability
• Increase market share
• Increase sales
• Increase brand awareness
• Monitor, implement and control a marketing plan

OPERATIONS – GOODS AND SERVICES

Operations- Refers to the business process that involves transformation, or more
generally, 'transformation' and is the core function of any business
Operation Process
Inputs  transformation  output
Key words:
• Inputs- The resources used in the transformation process
• Transformations- Those inputs that are changed or converted in the operations
process
• Outputs- Refer to the end result of a business's efforts - the service or product
that is delivered or provided
• Tangible- Physical - a product
• Intangible- Can't be toughed - a service
FINANCE
Finance is about sourcing - where is the money going to come from?
• Revenue = how much is sold
• Profit = revenue minus expenses

Important definitions:
• Contingencies: unanticipated events that can lead to financial difficulty. For a
business to be well managed, it needs to have saved money for such events
e.g. corona Virus!
• Finance: refers to how a business funds its activities — for instance, where it gets
the money to trade, why it chooses to use certain lenders — as well as the costs,
risks, and benefits of different types of borrowings
• Accountability- occurs when a business acts in the best and highest interests of
its owners. Full and complete ‘disclosure’, which means to be open and not
hide the truth, ensures that the books of account are kept accurately and that
the information reflected in them, and which is summarised in reports, is based
on the true and actual transactions. Another term for accountability is
stewardship

Main accounting reports and statements:

• Cash Flow statement: Indicate the movement of cash receipts and cash
payments resulting from transactions over a period of time
• Income/revenue statement: Shows the revenue earned and expenses incurred
over the accounting period with the resultant profit or loss
• Balance Sheets: represents a business’s assets and liabilities at a particular point
in time and represents the net worth of the business

Revenue Statement
Profit = revenue minus expenses
• Gross profit- Gross profit is the term given to the sales less cost of goods sold
(COGS) or, mathematically:
o Gross Profit = sales-COGS

COGS = Opening stock + purchases - closing

Stock
• Opening stock is the value of stock (or
inventor) that the business has at the start
of the financial year.
• Closing stock is the value of stock on hand
at the end of the financial year.
• Net Profit- Gross profit - expenses
• Selling and distribution expenses- such as commissions paid to an agent,
delivery expenses, advertising, and the wages of sales staff
• Financial expenses- such as interest paid on loans, discounts allowed for
prompt payment by debtors and writing off bad debts
• General and administrative expenses - Including wages of office staff, rent,
insurance, telephone, electricity, and depreciation (Is the loss in value of an
asset over time and is usually over time and is usually due to wear and tear.
Balance Sheet
A snapshot on what is occurring in a business on a particular day
A balance sheet lists all the:
• Assets = Are the tangible or intangible items of value in a business - things that
the business owns
o Current assets - will be used up within one year (e.g. cash at a bank and
stock)
• Highly liquid - easy to convert into cash
o Non-current assets - will last for longer than a year (e.g. buildings or
equipment)
• Significant asset
• Least liquid form

• Liabilities = things that a business owes

o What the business owes to lenders and suppliers (those who sell to the
business on credit instead of cash)
• Current Liabilities: short term debts that need to be paid in the near future such
as a business credit card or overdraft (overdraft= bank account goes into a
negative territory)
o Interest is very high so you WANT to pay it off quickly
• Non-current Liabilities: long term debts paid gradually e.g. bank loan for factory
o Other Liabilities:
• Account payable - short term debts that need to be paid
o money yet to be paid
o Usually 30 days
• Owner's equity = how much money the businesses owners have put into the
business
o The value of the owners investment into the business
o Made up of TWO things:
• Capital (money injected into the business by the
owners/investors)
• Retained profits (net profit which is invested back
into the business to grow)
o Drawings = money going out, negative value, and is
represented by brackets

Assets are equal to liabilities and equity because they are funded by either
liability (borrow money for) or equity (buy it them self)

A=L+OE
Assets = liabilities +owner's equity

Cash Flow Statement

• Planning for months where the outflows>inflows
o Might need to save from previous months
o Might need to get extra finance (e.g. overdraft)
• Adjusting the numbers where expectations > actual results
o Maybe the predictions were too optimistic
o Maybe there's an area of spending that comes up as a problem
 HOW?
• Money ('cash') flows IN and OUT of the business for 3 basic reasons:
o The businesses OPERATING 'activities'
o Money in and out from the running of the business)
o The businesses INVESTING 'activities'
o Money in and out for equipment and property
o The businesses FINANCING 'activities'
o Money in and out for loans and investment in the business
• At the end of each month, the owners want to know:
• How much did we add to our bank account?
And
o How much did we start the month with?
So
o HOW MUCH CASH IF LEFT NOW

• This lets them take Corrective action - to identify an

issue and implement a strategy to fix it

THE HUMAN RESOURCE CYCLE

The Human resource cycle refers to the stages of an employee's time in a
particular organisation and the shifting roles in the Human Resource function
play in each of those stages

Stage 1: Acquisition
- Hiring new employees, planning, recruitment, selection
Stage 2: Development
- Improving employee’s skills and abilities, introduction and training, development
Stage 3: Maintenance
- Motivating employees to remain with the business
Stage 4: Separation
- Employees leaving the business
Recruitment/Acquisition
The first stage of the human resource cycle. There is internal and external recruitment
• Recruitment and selection- the process of finding and attracting the right to
quantity and quality of staff to apply for employment vacancies or anticipated
• Acquisition- The process of attracting and recruiting the right staff for roles in a
business
 • Employee selection- Involves gathering information about each applicant for a
position, then using that information to choose the most appropriate applicant
• Curriculum vitae/resume: A summary of a person's previous employment
experience

Training/ Development
• Training- generally refers to the process of teaching staff how to perform their
job more efficiently and effectively by boosting their knowledge and skills.
• Development- refers to activities that prepare staff to take greater
responsibility in the future.
Most common training methods available:
• Off-the-job-training
• On-the-job-training
• Action learning
• Competency-based
• Corporate universities
• Training technologies
• Job rotation
• Mentoring
• Formal business training

Employment Contracts
• When a job applicant accepts an offer from an
employer, a contract is established between the
two parties. An employment contract is a legally
binding, formal agreement between an employer
and an employee.
• An employment contract creates obligations for
both employer and employee. All businesses
operate within a legal framework of common law
and statute law.
Types of employment:
• Casual
• Part-time
• Full-time
• Subcontracting
Under common law, both employers and employees have basic rights and
obligations in any employment relationship.

Minimum Employment Standards

• Also known as the 'safety net'
• Employees are entitled to a set of minimum employment conditions, known
as the National Employment Standards. These were legislated by the
federal government in 2010 and apply to all full-time and part-time
employees, whether permanent or fixed-term. They generally do not apply
to casual employees.
The 10 standards are:
• Hours of work
• Parental leave
• Flexible work for parents
• Annual leave
• Personal, career’s and compassionate leave
• Community service leave
• Public holidays
• Information in the workplace
• Notice of termination and redundancy
• Long service leave

Awards
An award is a legally binding agreement that sets out the minimum wages and
conditions for a group of employees

Some businesses will provide above-award payments, especially if they wish to

attract more workers to their firm or if they want to hold on to their existing staff.

Enterprise Agreements
Collective agreements made at a workplace level between an employer and a
union, acting on behalf of its employees, or between the employer and a group of
employees, about terms and
conditions of employment.

In addition to the 10 National Employment Standards, enterprise agreements must

include the following:
• a nominal expiry date, usually two or three years after the
commencement of the agreement
• procedures for settling any disputes that might arise in the
implementation of the agreement, including the right of employees to
be represented in the dispute settlement procedure
• terms that allow for individual flexibility, so that arrangements can be
made between the employer and individual employees
• provisions for consultation with employees on major workplace
change.
Separation - voluntary/involuntary
• Separation is the ending of the employment
relationship

Voluntary separation - occurs when an

employee chooses to leave the business of
their own free will.

• Retirement
o Occurs when an employee decides
to give up full-time or part-time work
and no longer be part of the labour
force.
 • Resignation
o Is the voluntary ending of employment by the employee ‘quitting’ their
job.
• Redundancy
o Occurs when a person’s job no longer exists, usually due to technological
changes, an organisational restructure or a merger or acquisition.

Involuntary separation- occurs when an employee is asked to leave the business

against their will.
• Retrenchment
o Is when a business dismisses an employee because there is not enough
work to justify paying him or her
• Dismissal
o When the behaviour of an employee is unacceptable and it then
becomes necessary for a business to terminate the employee’s
employment contract.
• Unfair dismissal
o Occurs when an employee is dismissed by their employer and they
believe the action is harsh, unjust or unreasonable.

ETHICAL BUSINESS BEHAVIOURS

Ethics- standards that define what is acceptable and unacceptable behaviour.
Ethical Behaviour- Ethical behaviour respects the dignity, diversity and rights of
individuals and groups of people
Code of Conduct - a set of rules outlining the norms, rules, and responsibilities or
proper practices of an individual party or an organisation

Within the inter business environment there are ethical responsibilities to:
• Owners
• Shareholders - returns on investment, keeping business operating, acting
honestly
• Managers - acknowledging the work of the team, encouraging promotion,
eliminate discrimination, prevent unethical work behaviours
• Employees - to motivate, provide WSH (work, health and safety), pay
appropriate wages and leave, maintain the best employees

Management and Change

Key Concepts
• Managing Change
• Proactive - is to initiate change rather than simplify to react to events
• Reactive - is to wait for a change to occur and then respond to it
Managing change effectively
• identifying the need for change
business information systems

• setting achievable goals

• resistance to change
• management consultants
• Internal influences
• Management
• Employees

• External Influences
• Competition - is rivalry among businesses that seek to satisfy a market.
• Technology - A business that wants to be locally, nationally or globally
competitive must adopt the appropriate technology. If it is slow to exploit
technology, a business is likely to fail, because its competitors will strive to
capture greater market share and develop a sustainable competitive
advantage.
• Legislation - Whenever new laws are passed, businesses must comply with
the new legislative requirements.
• Social - Businesses operate within society and must adapt to changes in
society’s attitudes and values. Society’s attitudes of what is right and wrong
evolve over time and the values that are most important to people also
change, affecting the ways in which businesses operate.

• Outsourcing - is the use of external sources or businesses to undertake business

functions or activities for the business.
 BUSINESS PLANNING- CORE 3
SMALL TO MEDIUM ENTERPRISES – DEFINITION AND ROLE
Small to Medium Enterprises –
are defined by the Australian
Bureau of Statistics as firms
with fewer than 200 full-time
equivalent employees
and/or less than $10 million
turnover

Role of SME’s
• Employ approx. 73% of
all people working in
the private sector
• Have created 80% of Australia’s employment gains during the past 10
years
• Contribute approx. 50% of all products provided each year
• Generate an increasing amount of our total exports
• Account for 20% of all money spent on R&D
• Provide a wide range of products used by large businesses
• Earn more profits and pay more taxes than do large businesses

ECONOMIC CONTRIBUTION
Economy - system used to determine what to produce, how to produce and
to whom production will be distributed.
The economic contribution of SMEs to the Australian economy are:
• Contribution to gross domestic product
o GDP is the total money value of all goods and services produced
in Australia over a one-year period.
o If the GDP increases from one year to another, we say economic
growth has occurred
• Contribution to employment
o Provides jobs for people in the Australian economy
• Contribution to the balance of payments
o Refers to businesses exporting and importing. Mainly exporting
o With SME's exporting more, the money being injected back into the
economy increases
• Contribution to invention and innovation
o An invention is the development of something new. Innovation
occurs when something already established is improved upon.
SUCCESS AND/OR FAILURE OF SME’S
Of every 10 SME started, about seven go out of business within five years of
opening their door
Success Factors for SME’s
5 keys of SME’s success
• Entrepreneurial Abilities
• Access to information
• Flexibility
• Focus on market niche
• Reputation
Failure Factors for SME’s
SME is classified as a failure when it is:
• Unincorporated and declared bankrupt — a legal process of
distributing among the creditors the property of a business or person
who cannot or will not pay their debts
• Incorporated and either forced into liquidation or voluntarily closes
down because it cannot pay its debts and faces a cash flow problem.
Reasons for SME failure:
• Failure to plan • Being under-insure
• Lack of information
• Leadership crisis
• Inaccurate record keeping
• Failure to delegate
• Complacency
• Incorrect marketing strategy
• Poor location
• Lack of financial planning
• Negative cash flow
• New competitors
• Illness
• Supplies problems
• Economic downturn
• New taxes
• Change in government
policy
• Insufficient capital
• Partnership problems
• Lack of management
experiences
• Incorrect pricing policy
• Failure to seek advice
• Not enough sales
• Staff difficulties
INFLUENCES IN ESTABLISHING A SME
There are 9 influences in establishing a SME:
1. Personal qualities
o Skills
o Education and/or training
o Motivation
o Entrepreneurship
o Cultural background
o Gender
2. Source of information

3. The Business idea

• Identifying business opportunities
o A business opportunity can be described as something an
entrepreneur can see as an avenue to success.
• Competition
o There are two main ways of achieving competitiveness — cost of
production and differentiation of the goods or services.
 Cost- Cost will largely depend on production techniques. The
business that can produce a good or service at the lowest
possible cost and thus sell at the lowest price has the greatest
ability to attract market share.
 Differentiation- Differentiation is about making a product or
service different, unique or better than its rivals — for example,
selling a computer with extra service, lessons or added software.
4. Establishment options
• There are three ways of establishing a new business
o Setting up a new business from scratch
 New product
 Gap in the market
o Purchasing an existing business
  When buying an existing busines, you also purchase:
• Stock
• Equipment
• Reputation
• Buildings, land
• Goodwill
• Staff
• Existing customers

o Purchasing a franchise
 When buying a franchise, the franchisee often receives from the
franchisor:
• A well-recognised business name
• A successful business formula
• Established trademarks
• Contacts with established suppliers
• An established business plan
5. Market considerations
• Goods/service
• Price
• Location
o Zoning
o Proximity
o Visibility
6. Finance
• Refers to the funds required to carry out the activities of a business. It is
a crucial issue when an entrepreneur is identifying a business
opportunity, especially considering that it is often difficult to raise
• Overdraft + your own money goes into negative territory
• Factoring = debt collector (debt collection service
• Sources of finance:
o Debt- relates to the short-term and long-term borrowing from
external sources by a business.
o Short term - Less than one year
o Long term- Greeted than one year
• Equity finance- Also called equity capital, refers to the funds
contributed by the business owner(s) to start and then expand the
business
• Cost of finance - depends on type of finance, cost and the term (
duration) Some examples are:
 o Overdraft - the bank allows a business to overdraw their account up
to an agreed limit for a specified time, to overcome a temporary
cash shortfall.
• Trading bank loans- Available for the purchase of land and buildings
for a period of 3–10 years
• Leasing/Finance- Allows use of an asset without actual purchase

7. Legal Considerations
• Business name
o The Australian Securities and Investments Commission (ASIC) is now
responsible for a national business name registration service.
o Businesses need to register their business name, except when the
name is that of the owner and then it is optional. But if something is
added to a personal name, such as ‘Pty Ltd’, ‘Motors’, ‘and
Associates’ or ‘and Co.’, then the business name must be registered.
This is to
o prohibit anyone else from trading under a similar name
• Zoning
o Zoning regulations create areas where land can be used only for
particular purposes. These regulations specify the areas in which
residential, industrial, recreational, or commercial activities may take
place.
o This ensures that activities that do not belong together, such as those
associated with factories and residential areas, are kept separate.
This function assists the local community in terms of planning.
• Health regulations
o Local government also imposes health regulations under the Public
Health Act 2010 (NSW). Each local council supplies businesses
(primarily those dealing with food, such as cafés, restaurants, butcher
shops and bakeries) with the requirements and standards to meet in
order to receive a licence to operate
• Other regulations
o The Competition and Consumer Act 2010 (Cwlth) has a function to
protect both consumers and business, and applies to virtually all
businesses in Australia, including the commercial activities of
government
o The Competition and Consumer Act 2010 (Cwlth) is a law that
protects both consumers and businesses. It protects consumers from
deceptive or misleading practices, and it regulates the trade
practices of businesses.
8. Human resources
• Employees are the most valuable resources of any business
 • Skills – Skilled employees are more productive and create wealth for
the business. The skill base of existing employees should also be
detailed so that training needs can be identified. If the skills level of
employees is not adequate enough for them to fulfil their jobs
effectively, then the business owner has two options:
o provide training to improve the skills level of existing employee
o recruit people who have the required skills
• Cost – wage and non-wage:
o On-costs are payments for non-wage benefits.
o The main on-costs include:
 work health and safety requirements
 long service leave
 sick leave
 superannuation
 holiday pay
 study leave
9. Taxation
• Taxation is the compulsory payment of a proportion of earnings to
the government
• Different taxes apply to different businesses, so a person operating a
SME must become familiar with all appropriate tax requirements.
Different taxes include:
o Federal and state taxes
o Tax Law
o GTS
o Local government rates and charges
THE BUSINESS PLANNING
Role of a business plan: A business plan is the ‘travel itinerary’ for future
growth and development within a business. It sets out the desired goals and
direction of the business
Process of business planning: A series of actions to achieve a goal

SWOT - strengths, weaknesses, opportunities and threats

Strengths - internal Weaknesses - internal
• Skilled staff • Poor business • Bad cash
• Motivated managers culture management
• Good work environment • Inexperienced • Poor planning
staff • Bad
reputation
•
Opportunity - external Threat - external
• Gap in the market • Competitors
• Expanding the business
• Acquisition of another business
SOURCE OF PLANNING IDEAS
Common elements of a business plan
• Executive summary
o Brief overview of the plan
• Goals
o What a business hopes to achieve
• Strategies
o An overview as to how the business will attempt to achieve the goals
• Business description and outlook
o An overview of the industry in which the business will operate, including
a situational analysis
• Management and ownership
o The nature and type of organisational structure
• Operational plans
o Details the production process and the people required now and, in the
future
• Marketing plans
o The product, price, promotion, and distribution details

• Financial plans
o A description of the business’s financial needs and methods for
evaluating its performance
• Human resource plans
o Details both the present and future staff requirements
VISION, GOALS, AND/OR OBJECTIVES
Mission statement: More precise, accurate and realistic than a vision
statement and refers to the business’s bottom line e.g. net profits,
environmental aims. Creates a framework for all decision making
Vision statement: Broadly states what the business aspires to become in the
future
Difference between a vision and mission statement: A Mission Statement
defines the company's business, its objectives, and its approach to reach
those objectives. A Vision Statement describes the desired future position of
the company

SMART goal
• Specific: Well defined, clear, and unambiguous
• Measurable: With specific criteria that measure your progress towards the
accomplishment of the goal
• Achievable: Attainable and not impossible to achieve
• Realistic: Within reach, realistic, and relevant to your life purpose
• Timely: With a clearly defined timeline, including a starting date and a
target date. The purpose is to create urgency.

ORGANISING RESOURCES
Organising is determining:
• What is to be done
• Who is to do it
 • How it is to be done.
Organisational structure: Is the framework in which the business defines how
tasks are divided, resources are used, and departments are coordinated
Resource allocation: refers to the efficient distribution of resources so as to
successfully meet the goals that have been established
Organising resources: in reference to human resources, operations,
marketing and finance, and organising them to ensure tasks are achieved

Human resources:
• Employees are a SME’s most important resource
• SME owners need to use good recruitment and selection processes to
find employees who will be invaluable assets as the business grows and
expands
Other important aspects all SME owners need to consider when organising
their human resources is to provide adequate training and development for
staff, to seek ways to motivate and retain employees, and to ensure they
comply with existing legislation relating to employees

Operations:
• Operations function of a business involves transforming different
types of inputs (raw materials, labour, equipment and other
resources) into finished or semi-finished goods or services.
• To produce either a good or service, therefore, a business needs to
have essential equipment and knowledge.
Consequently, to undertake successful production, the following questions
will need to be asked.
• What type of equipment and raw materials are needed?
• Which suppliers will be used to purchase the equipment and raw
materials?
• How much money needs to be allocated for the purchase of the raw
materials and resources?
• What storage, warehouse and delivery systems are required?
• What level of technical expertise will employees need to achieve
maximum production from the raw materials and equipment?
Researching the answers to these questions enables the SME owner to
clarify what changes may need to be made to either the structure of the
business or the production process.

Marketing
• All sections of the business are involved in satisfying a customer's needs
and wants, while achieving the goal
• Adequate resources must be devoted to the marketing plan
• Additional training for employees may be needed to improve skills
 • Additional funds may be needed to accomplish the marketing
objectives
• Employees in the marketing departments must work together, this is
done by adequate resourcing
Finance
• New business ventures, even micro ones, require funds to operate.
• In organising the financial resources, one of the most important
questions the SME owner needs to answer is ‘What will be the most
appropriate source of financing?’
• The most common sources are personal savings and/or loans from
family, friends or banks.
• Organising the financial resources, the SME owner must explore the
wide range of federal and state government grants — any monetary
or financial assistance that does not generally have to be repaid —
and other funding programs.
Generally, there are no grants for starting a business.
• Grants are usually provided for:
• Expanding a business
• Research and development
• Innovation
• Exporting.

FORECASTING
Forecasting: in business is about giving managers the best possible
information they need to make the best possible decisions in an uncertain
environment
The business owner requires to forecast to enable effective planning, such as
the availability of labour, raw materials and finance.
Tools used to forecast are:
• Total Revenue and total cost
• Break- even analysis
• Cash flow projections

MONITORING AND EVALUATION

Monitoring – Monitoring is the process of measuring actual performance
against planned performance.
Evaluating - Evaluation is the process of assessing whether the business has
achieved stated goals.
Three areas that need constant monitoring and evaluating:
Sales
• Number of sales of a
product is a measure of
the number of goods or
services (products) sold.
 • Measuring the number of sales helps a business evaluate its
performance, especially its marketing strategies.
• Sales generate revenue for the business;
o It is important that the sales management control function be regularly
performed.
o Sales management control involves comparing budgeted sales against
actual sales, and making changes where necessary.

Budget
• No business should commence operating without having prepared a
budget.
• A budget is the business’s financial plan for the future.
o It outlines how the business will use its resources to meet its goals.
The budget contains projections of incomes and expenses over a
set period of time.
• Enable constant monitoring of goals and whether they are being
achieved.
• Assist in emphasising the goals of the business;
o Provide a basis for administrative control
o Direction of sales effort, production planning
o Control of stocks
o Price setting
o Financial requirements
o Control of expenses
o Production cost control

• Budgets are used in both the planning and the monitoring aspects of a
business;
o for example, the business owner can measure planned
performance against actual performance and take corrective
action as needed.

Profits
There are five main reasons why a business’s profit levels must be carefully
monitored and evaluated.
1. Profit as reward.
o Profit is what remains after all business expenses have been
deducted from the business’s sales revenue.
o Profit is regarded as the return, or reward, that business owners
receive for taking the risks in operating a business that
produces goods and services that consumers want.
2. Profit maximisation.
o One of the main goals of a business is to maximise its profits in
the long term.
3. Profit as a source of finance.
o One of the most important sources of finance for businesses is
profits that have been ploughed back.
 4. Profit as a performance indicator.
o The profit level also acts as the main indicator of a business’s
performance.
o Changes to the level of profit act as a guide to how well the
business is succeeding or failing.
5. Profit as a dividend payment.
o For incorporated businesses a proportion of the profit is
allocated to shareholders as dividends.

• Evaluating the profit levels will also reveal important information about a
business’s costs and revenues.
• These amounts must be accounted for and business owners need to be
able to identify their source and quantity.

TAKING CORRECTIVE ACTION

Modifying: the process of changing existing plans, using updated information
to shape future plans.
Modification process: Monitor and evaluate and then determine the course
of action - whether they change is immediate or gradual change (short term
or long term)

CRITICAL ISSUES IN BUSINESS SUCCESS AND FAILURE

Critical Issues in Business Success and Failure:
• Importance of a business plan:
o A business plan is the ‘travel itinerary’ for future growth and
development within a business. It sets out the desired goals and
direction of the business.  Without a business plan, a business is likely
to fail
• Management – staffing and teams
o Staffing refers to the process of finding the right employee with
appropriate qualifications of experience and recruiting them to fill a
position, role or job
• Trend analysis
o The widespread practice of collecting information and attempting to
spot a pattern
o Internal trends = potential sales, total revenue, total operating costs,
gross and net profits, and availability of labour
o External trends = Social, legal and technological changes, and the
economic and political environment
• Identifying and sustaining competitive advantage
o Competitive advantage = Refers to the strategies used by a business
to gain an ‘edge’ over its competitors. Something that makes your
company stand out over competitors
• Avoiding over-extension of finance and other resources
 o Idle asset = an asset that is not being used, therefore not generating
any revenue. These assets usually come with a maintenance cost.
• Using technology
o A business should adopt new technology because it works out more
efficient in the long run
• Economic conditions
o An economy is the large set of inter-related production and
consumption activities that aid in determining how scarce resources
are allocated.
In an economy, the production and consumption of goods and services are
used to fulfill the needs of those living and operating within it Economic
growth and decline