Business Studies - everything (Y11)

All content covered in term 1 of business

Legal Structures for a business

Sole trader, partnership, private company, public company

Sole Trader

business owned and operated by one person, with unlimited liability, but reaps all profit benefits

Partnership

A business in which two or more persons combine their assets and skills - like a sole trader, the business is NOT a separate legal entity to the owners

What is a private company?

A company that is owned by a person, family, or small group of investors. A separate legal entity to the owners

Do private companies sell shares to the public? Why/ why not?

No - they typically have restrictions the owners put in place on public transfers of stocks, and they do not have to disclose public finances

Public Business

Typically, a business owned by the government, providing services for the community, i.e. a hospital or school

What is unlimited liability?

The owner is personally and fully responsible for all losses and debts of the business

What is the difference between an incorporated business & an unincorporated one?

An incorporated business is a separate legal entity to the owner (meaning less liability for the owner). An unincorporated business is not a separate legal identity (leading to full liability for the owner)

What are the 5 types of industry

Primary, secondary, tertiary, quaternary, quinary

What is the primary industry?

Industry that extracts natural resources from the earth

What is the secondary industry?

Uses the raw materials and changes them into products for consumers (manufacturing sector)

What is the tertiary industry?

Retail; concerned with selling products produced by the secondary industry

What is the quaternary industry?

Engages in knowledge-based services such as research, information technology, consulting, and innovation to support and advance other industries

What is the quinary industry?

Home-based services, i.e. lawn mowing

What defines a small-medium business (SME)?

Its number of employees and annual revenue, typically having fewer than 250 employees and generating a limited amount of annual turnover

What defines a large business?

Having more than 250 employees, with at least $2,000,000 in annual turnover

What are the three different reaches a business can be defined as?

Local, national & global

What does the term “reach of a business” mean?

The geographical spread of a business & its operations - the market its selling to

What is a local business?

Serves customers in immediate area, gaining close connections with the community, but tend to be smaller businesses

What is a national business?

Serves customers across a nation, operating at several locations, with high brand recognition among the country’s people

What is a global business?

Large & recognisable business, operating all over the world to a global market

What are external influences to a business, generally, naming some examples?

Factors outside of the business’ control that impact every business - examples include economic, social, geographical, technological, competition, markets, legal, political, institutional, and financial influences

What are internal influences to a business, generally, naming some examples?

Factors within a business that owners have control over, and can change to adapt to put the business on track. Examples include products, location, resources, management, and business culture

How do external & internal influences impact a business?

Internal influences shape business operations, while external factors affect its success and adaptability

What is super important to mention when weighing up what legal structure is best for an owner?

Unlimited & limited liability, and incorporated vs. unincorporated

What are the four stages of the business life cycle?

Establishment, growth, maturity, post-maturity

What is the establishment phase of the business life cycle?

Launching the business, heavy promotion & high costs to set up the ground work of operations

What is the biggest risk with the establishment phase?

Falling into debt due to not much income & profits

What is the growth phase of the business life cycle?

Increase of sales & profits, tweaking products to fit consumer needs (refining everything)

What is the maturity phase of the business life cycle?

Business has become stable; no major growth or decline - nothing wrong with staying stable

What is the post-maturity phase of the business life cycle, and what are the two pathways beyond?

How a business preserves itself - either declines into possible liquidation, or re-inventing their brand to expand even higher

Challenges during the establishment phase of the business life cycle?

Manage high costs with low income, must have reliable supply, advertise the brand (brand awareness)

Challenges during the growth phase of the business life cycle?

Keep up with the high costs even if you’re making a lot of money - it’s expensive to produce a lot, AND improve/ refine product quality

Challenges during the maturity phase of the business life cycle?

Cut down on production (cheaper suppliers) costs to maintain & increase profits, AND maintain motivated innovation within the business

Challenges during the post-maturity (renewal) phase of the business life cycle?

Being able to adjust to a new system/ market by finding employees fit for new roles, AND find more reliable suppliers AND maintain product quality

Challenges during the post-maturity (decline) phase of the business life cycle?

Manage lower income & be quick to cease operations (cessation) if that’s the inevitable ending

What is cessation?

Where a business stops all its operations

What is liquidation?

Where a business sells off all its assets in order to generate money to pay off debts - ends in being forced to shut down with nothing left

What is voluntary cessation?

Where the owner chooses to shut down all operations on their own accord

Example of voluntary cessation for an unincorporated business?

Retirement

Example of voluntary cessation for an incorporated business?

Shareholders selling off their shares

What is voluntary administration?

Where the owner appoints someone to run the business in an attempt to save the business and avoid liquidation

What are all the ways to classify a business?

Legal structure, reach, size & what industry it’s in

What is a shareholder?

Someone who invests into shares on the ASX (only certain people can buy shares for a private business)

What is a stakeholder?

Anyone involved in the business; customers, shareholders, employees, etc.

What is the benefit to private companies not having to disclose their financial situation?

Competitors can’t know their assets & shares

Characteristics of an entrepreneur?

Risk-taking, innovative, problem-solving

What are the roles of businesses

1. quality of life

2. profit

3. employment

4. income

5. innovation

6. entrepreneurship

7. wealth

Difference between a wage & salary?

A wage is a rate of pay (typically hourly), an income is a fixed payment for a period (typically a year)

(MENTION THESE IN EXAM) What are the 4 factors of production?

Labour (work), land, capital (machinery, assets), entrepreneurship (risk taking)

What do the factors of production mean?

They are inputs the business makes

(MENTION THESE IN EXAM) What are the 4 returns on the factors of production?

Wages (return on wages), rent (return on land), interest (return on capital), profit (return on entrepreneurship)

What’s the term you use when a business shuts down and it’s no longer available for the customer to go to OR if a new business opens up?

Customer choice (decreases if businesses shut down, increases if new businesses open)

What are the 3 market influences (factors affecting purchasing)?

Goods and services

Price

Location

What is SWOT analysis?

S- Strengths (what is done well internally)

W- Weaknesses (what isn’t done well internally)

O- Opportunities (external opportunities to expand)

T- Threats (what might get in the way of success, i.e. competing companies)

What is vision and business goals?

Vision - the overarching view of the owner’s idea of how to achieve goals

Goals - Targets the business aims to achieve over a period (typically profit or expansion)

How do business’ mostly achieve long term growth?

Re-invest profits to improve products or expand

Total revenue = ??

Number of sales x price

Profit = ??

Total revenue - total expenses

What is breaking even?

Where revenue equals total expenses (no profit, no loss)

What is the break even formula?

Selling price x quantity sold = total expenses per unit x quantity sold

What are the two business approaches? What do they each entail?

Classical - focus on getting work done, division of labour to maximise productivity

Behavioural - stronger focus on the wellbeing of workers, motivating them to be more productive, typically implementing teams

What are competitive advantages?

Things a business might do to gain an advantage over competition, i.e. lowering product costs, or making them different (better) to entice customers

What are sustainable advantages?

An advantage that a business can implement for a long period of time to stay ahead of competitors

What is overextension?

When a resource is being stretched too far, i.e. borrowing money that is unrealistic to pay back or overworking workers

What are some management skills (think of all 5)

Flexibility/ adaptability

Reconciling conflicting interests of stakeholders (decisions that will make as many stakeholders as possible happy)

Strategic thinking

Vision

Problem solving and decision-making

What is the problem solving process

1. Address what the issue is

2. What evidence do I have to suggest this is problem

3. Consider different options to solve the issue

4. Benefits of each solution

5. Choose the best option

What are the main business goals? (6)

Profit

Market share

Growth

Share price

Social

Environmental

What is market share?

A business’ share of sales in a specific industry as a percentage (i.e. if 100 total rolls of toilet paper across all businesses are sold and a particular business sells 51 of them, their market share is 51%) SALES NOT MONEY MADE

What does lowering product price do?

Might increase your market share, but lower profits (not maximising it)

How can staff become involved?

Innovation

Be motivated

Mentoring

Training

Who are the founders of the classical approach?

Henri Fayol

Frederick Taylor

Max Weber

What is the organising process?

1. What tasks need to be done?

2. How will these tasks be performed?

3. Assign work appropriately

What is autocratic leadership style?

Where one person makes all the decisions; they have absolute control

What is democratic leadership style?

A more collaborative decision-making process

How to distinguish between leadership styles and management approaches?

Leadership style only applies to managers; how they motivate employees

management styles apply to the whole organisation

What is control in the classical approach?

Corrective measure being taken when results aren’t as expected

What is the hierarchical pyramid?

A representation of the chain of command; who reports to who? CEO’s at the top, employees at the bottom, supervisors and managers between them

Define specialisation of labour

Specific people do specific tasks, typically that suit their skills

Where would an autocratic system work well?

Emergency services - consistent and efficient decisions

Where would an autocratic system not work well?

Innovative/ creative environments - the collaborative aspect would be taken away

What is autonomy?

Self governance

What is downsizing (in a business)?

Becoming smaller by removing staff positions

Who is the main behavioural management theorist?

Elton Mayo

What are the Hawthorn studies?

Conducted by Elton Mayo, was a test to observe how productive workers were when they were valued

What is the participative/ democratic leadership style?

Leaders actively involves staff in decision making, etc

Disadvantages of participative leadership?

Slower decision making

Potential for conflict between collaborators

What is marketing?

Planning, executing and promoting a product/ service to SATISFY consumers

What is a target market?

A group of people (demographic) a product is designed for

How are target markets identified?

Geographic

Demographic (age, gender, religion)

Lifestyle

Behavioural (actual usage)

What the 4 P’s of marketing?

Product

Price

Promotion

Place

Why is social media a good marketing tool?

Because it’s cost effective

What are business outflows?

Where the business pays (lose money)

What are business inflows?

Where the business is being paid (gaining money)

Formula for sales revenue

Units sold x average selling price

Formula for cost of good sold (COGS)

Opening stock + purchases - ending stock

Gross profit formula

Sales revenue - COGS

Expenses formula

Gross profit - net profit

Net profit formula

Gross profit - total expenses

What are the 3 financial statements?

Cash flow statement (opening balance, closing balance, cash inflows & outflows)

Income statement (Making a profit or loss, sales revenue, cost of goods sold, gross profit, expenses, net profit (or loss))

Balance sheet (What the business owns and owes, plus owners equity, non-current & current assets, non-current & current liabilities)