Business ownerships, economic factors and BPI

Economic factors that impact business function

Inflation, Interest rates, availability of skilled and unskilled labour and unemployment rates

What is inflation, how is it measured and what are the effects of inflation

The general increase in the level of prices on goods and services that a household buys over time. The most used indicator of inflation is the Consumer Price Index, this is calculated every quarter by the ABS based on the price of a list of the typical goods and services purchased by a household in Australia. This is then compared to previous quarters, measuring the rise in prices over time which is the inflations rates. High inflation can lead consumers to spend more time searching for the lowest prices, often turning to online shopping to compare priced. For businesses, higher inflations rated increase supply and production costs, but they still attempt to offer lower prices to remain competitive and retain customers, this causes profit margins to tighten and potentially reducing profits.

What are interest rates and the effect of them?

The amount a lender charges for the use of assets expressed as a percentage of the principal, This is based on the cash rate set by the Reserve Bank of Australia (RBA). Low interest rates encourage increased spending, as people are spending less on debt repayments. Both individuals and businesses are more likely to take on debt, since it's easier to repay. In contrast, high interest rates reduce spending and can make it difficult for businesses to stay financially stable, especially if rates rise faster than expected.

What is the availability of skilled and unskilled labour, how is it measured and what is the effect it has on businesses?

The number of workers willing and able to work in a particular job or industry for a given wage. This is measured by the number of hours people are willing and able to supply at a given wage rate, it is an upward sloping curve. The supply and demand of labour has an impact on the wages of employees. This effects businesses as when there is a shortage of people with specialized skills, demand is high while supply is low. This forces businesses to raise wages to attract and retain skilled workers, which in turn increases production costs and the overall cost of delivering goods or services.

What are unemployment rates, how are they measured and what are their effects.

The percentage of the population that aren’t employed but are willing and able to work. This is measured by the Australian Bureau of Statistics (ABS) through a Labour Force survey of 50,000 people of working age, grouping them into 3 categories, employed, unemployed and not in the labour force (people not in a paid job and no looking for work). The effect of unemployment rate include, when they are high, it leads to decreased consumer spending, reduced demand and lower wage levels. Lower unemployment rates increase consumer spending and the demand for goods and services, but can cause shortages in labour that put pressure on wages, causing higher inflation rates.

What is Business Public Image, how is it formed and how can it have negative a positive effects on a business?

How a business is viewed and their reputation in the community. It is formed from ideas and opinions about a businesses public relations, community engagement and advertising and impacts consumer decisions to engage or avoid a business. BPI can have both positive and negative effects, if a business crafts a certain image and follows through with is, customers will respect their position and it can benefit the business. However, if a business doesn’t follow though or misleads consumers, it can damage its reputation indefinitely.

2 Methods of raising business public image

Corporate sponsorships: When a business gives a kind of contribution such as payments, support, equipment, food or clothing, to an event, organisation or project. This raises BPI as it provides visibility, positioning, publicity and market reach.

Donations: When a business gifts money, resources, or time to support various good causes. This raises BPI by demonstrating their positive contribution to the community, building trust and establishing themselves as a social conscious business.

What are environmental issues that impact BPI

Climate change, pollution, energy use and animal testing.

What is climate change and how does it impact BPI

The long-term shifts in temperatures and weather patterns, this is happening due to the pollution created by human civilisation, with businesses contribute to climate change through pollution they produce. The public and consumers expect businesses to be aware of this and to be managing their contribution to climate change. Businesses that reduce their carbon footprint can strengthen their public image, this can be done through strategies like carbon offsets, which could involves tree planting, renewable energy investment, or recycling.

What is pollution and how can it impact BPI

Pollution is the presence of substances or heat in air, water, or land that produce undesirable environmental effects. Businesses can improve their BPI by reducing pollution through environmental management processes, such as pollution control (cleaning up pollutants after they are released) or pollution prevention (proactively reducing the production and release of pollutants). Pollution control only acts to fix a problem that has already been created, but pollution prevention is a more effective method to improve a positive BPI and to reduce pollution.

What is energy use and how can it impact BPI

The total amount of energy used by a business. If a business improves their energy efficiency it will reduce it expenses and lower its environmental impact, this can be done by installing energy efficient lighting, using more natural light and incorporating renewable energy options. By improving a business energy efficiency it will also build a more positive BPI as the yare reducing their carbon footprint on the environment.

What is animal testing and how can it impact BPI

Any scientific experiment or test in which a live animal is forced to undergo something that is likely to cause them pain, suffering, distress or lasting harm, often to test the safety of cosmetics, medicine and other products. In Australia animal testing on cosmetics is illegal, however many cosmetics products still contains ingredients tested on animals in other countries. Animal rights and consumer groups often publish lists of businesses that use animal testing in their products. A businesses public image can suffer if they associated with animal testing, but can be enhanced if they promote cruelty free products.

Sole Trader

A single person that owns and operates a business who has no legal separation between themself and the business.

Advantages of a sole trader business

Owner has full control over the business, retain all profits, make all decisions, and relatively easy to set up.

Disadvantages of a sole trader business

Unlimited liability, difficulty in raising capital, no shared workload and lack of business continuity.

Partnership business

A type of business owned and operated by two to twenty owners/partners, they are governed by the Partnership Act 1895, the act can be overridden by a formal Partnership Agreement.

Advantages of a Partnership business

Contribution of more skills and money, shared responsibilities, easy to establish.

Disadvantages of a Partnership business

Unlimited and shared liability, shared profits and disagreements are common between partners.

Small Proprietary Company

A business run by directors and owned by shareholders., It is a separate legal entity with a maximum of fifty owners, and has the words Proprietary Limited (Pty Ltd) in its name.

Advantages of a small proprietary company

limited liability, more ability to raise capital and easy transfer of ownership (shares)

Disadvantages of a Small proprietary company

Costly to set up, subject to more regulations by having to operate within the Corporations Act, shared profits among shareholders and less say in the running of the business.

Not-for-profit Organisation

An organization that is not operating for the profit or gain of its individual members. This means that any profits of the business, go back into the operation of the business and are not distributed to its members.

Advantages of a Not-for-profit Organisation

Inexpensive to incorporate, few formalities and low compliance requirements, and can be exempt from tax concessions

Disadvantages of a Not-for-profit Organisation

Organisations are limited to operating in the state of incorporation and they are not closely monitored or regulated meaning there are no clear guideline for operating and for reducing disputes.

Franchise

A business arrangement where the franchisor (the owner of the business) licences the business model to franchisees in return for ongoing fees or royalties.

Advantages of a franchise business

A well-established brand for the businesses product or service, offers management training and assistance, ongoing administration support from the franchisor and established management systems.

Disadvantages of a Franchise business

Must operate the business according to the franchisors’ procedures, less autonomy in business decisions and ongoing cost of payments to the franchisor.