Business management U1 AOS3

The external environment

Macro factors (LSETGC), level of control

Factors that influence a business planning that the business has NO control over.

L- legal/government regulation

S- societal attitudes & behaviours

E- economic conditions

T- technological considerations

G- global considerations

C- corporate social responsibility

Operating factors (CCSI), level of control

Primary external factors impacting a business involving the external stakeholders business closely interact with.

SOME control

C- customer needs & expectations

C- competitors behaviour

S- suppliers and the supply chain

I- interest groups

Key difference between macro and operating

Level of control.

Macro = NO control, Operating = SOME control

Legal and government regulations

The laws and rules made by parliaments and governments as well as decisions made by the courts.

Employment laws and regulations

Rules that govern the relationship between employers and employees.

• when planning business owners must recognise and provide safe working environment

• when planning to hire, its important to consider the employment laws & regulation (equal opportunity act 2010, the occupational health and safety act stating all requirements for well being of staff etc.)

• employment legislation protects employees by: setting minimum wages, working conditions, unfair dismissal & discrimination

E.g. SafeWork Australia investigated McDonald’s as they were accused of not giving breaks to employees

Environmental legislation

Set of laws that aim to preserve and protect the environment from harmful business activities.

• during planning owners must investigate if activities fall under any environmental legislations and stay informed on relevant legislation developed by governments to protect environment

• businesses rely on natural resources (i.e. oil, water gas), when misused leaves negative impact on environment so legislation established to minimise impact on environment and protect limited resources

• Examples: RRR - reduce, reuse, recycle; minimising energy use; reducing water use;

E.g. Environmental protection Authority Victoria (EPA) is responsible for preventing and controlling pollution etc.

Industry regulations

Rules directed at a business within a specific industry.

• when planning and starting a business, owners must research unique/specific rules and regulations that apply to their industry to reduce conflicts and infringement

• regulations could include: permit, qualificaiton, registration, license

• Australian Business License and Information service (ABLIS) a free government service, provides rules to help business owners determine whats required for them to operate in a specific industry

E.g. Need a working with children’s check if business is involved with children

Council regulations

Local government rules relating to businesses operating in their local geographical area.

• important local businesses become familiar with local council regulations to avoid legal issues

• councils have different rules and laws that will impact different business activities

Common council regulations businesses must follow

Location - zoning laws. Few business types are allowed to operate in a residential zone

Operating hours - may only be allowed to operate within certain set of hours. Restrictions for issues such as level of noise allowed at different times

Types of display signs - signage may need permit to be on footpath outside shop as its a tripping hazard

Renovations - may face restrictions. If building is heritage listed it can limit renovations completed

Waste disposal - local laws govern this. Local laws state when and where businesses can dispose waste

Taxation requirements

Laws and rules related to tax that apply to all businesses.

• during planning there are many requirements a business needs to fulfil before legally operating i.e. obtaining a Australian Business Number (ABN)

• ABN identifies a business and registers them for compulsory goods and services tax (GST)

• Taxation is payed to the Australian Taxation Office (ATO) that collects taxation revenue for the Australian Government

• business owners also have to apply for a tax file number (TFN) - helps ATO identify business for tax purposes

• all registered businesses in GST must prepare a Business Activity Statement (BAS) - includes taxes and amount of GST collected on sales and how much was paid on purchases etc.

E.g. Crown Casino payed $61mill to Vic Gov after royal commissioner revealed business had evaded tax requirements in 2021

Define societal attitudes & behaviour

Attitudes - The collective, values, beliefs and opinions held by a group of people

Behaviour - The way people act and respond in various situations.

Societal values and beliefs

The principles, standards and assumptions upheld by individuals or a group of people, which influence how a business makes decisions.

• collective values and beliefs of society enable individuals to form opinions on how a business should operate

• social media influence has led society to be more concerned on how a business operates - expected business has positive impact on community and environment

• business should constantly research changing values and beliefs to develop products to suit these preferences and remain competitive

• expected business treat employees fairly and all them to achieve work-life balance

E.g. businesses who use environmentally sustainable materials, sourced from local suppliers are viewed as more favourable by customers.

Examples of how values and beliefs imapct business planning

Improving physical and mental health and wellbeing - to remain competitive bus owners have to adapt planning to suit growing importance society has placed on achieving good mental and physical health.

e.g. supermarkets offering healthy food options

The wellbeing of employees - due to common value and belief that family and leisure time is important there’s an expectation employees can achieve work-life balance in their job

e.g. businesses offer flexible working hours and work-from-home options

Environmental sustainability - society is majorly concerned with negative impact business activities can have on environment

e.g. businesses source materials ethically & aim to reduce amount of waste and pollution generated

Hygiene practices - COVID -19 pandemic has caused society to become more conscious of maintaining good hygiene (to reduce chances of spreading virus)

e.g. placing hand sanitising stations at front of store & encouraging employees to wear masks when serving customers

Societal trends

Can be described as whats popular at a certain time.

• a trend is a general development in the way a group of people in society are behaving

• by researching, it provides information evidence about changing customer needs/interests/behaviours

• businesses should plan products according to trends relevant to target market

• businesses are more likely to attract customers with trending products as its appealing to common desires and needs

• can be identified through analysing data and looking for patterns

E.g. Woolworths now stocks plant-based faux meat as there are more vegetarians in Australia

Examples of how trends impact planning

Increased reliance on technology - businesses offer a wider range of devices to meet consumer desires of purchasing advanced technology and they’re constantly looking for ways to upgrade technological products to ensure they have latest developments and tech in their processes.

Greater focus & action on achieving gender equality - businesses implement policies that enable achievement of gender equality like gender quotas.

Increased purchasing of products related to health and wellbeing - more businesses are selling active wear, exercise equipment, workout programs etc. to benefit customers health and wellbeing.

Economic conditions

The conditions that exist in relation to the productive performance and financial stability of a nation or other geographical area.

• individuals should plan to launch a business when economic conditions are favourable with high levels of consumer spending - businesses are more likely to be successful when economy is growing & consumers are financially stable

Weakening and expanding economy

Weakening economy: unemployment, decreased growth, falling inflation

Expanding economy: falling unemployment, increased economic growth & inflation

Interest rates

The price paid for money that has been borrowed, expressed as a percentage (cost of borrowing).

• businesses will borrow money to start a business, this gains interest and needs to be paid back

• if individual doesn’t have enough savings they can take out a loan to cover initial start up and operation costs HOWEVER need to ensure they can afford the interest rate

• businesses need to adjust plans as demand increases

• interest rates rise in periods of inflation & more demand for credit

• influenced by Reserve Bank of Australia (RBA) who can change interest rates by charging commercial banks more → commercial banks charge businesses & consumers more DOMINO EFFECT

• RBA makes decision based on global and national economic conditions

When interest rates are low

• business loans are less expensive

• loan repayments are easier to manage

• consumers are confident to take out loans for big purchases

• can increase desire of business to expand: larger premises, new R&D, new tech

If cost borrowing increases, monthly expenses increase → businesses may delay plans as repayment of loans become expensive.

When interest rates are high

• bus owners have to pay more for the amount of money they borrowed - credit is expensive

• consumers may think twice about making purchases - low confidence

Labour force

No. of people 15 above who are willing to and able to work .

• common indicator of employment rates which = unemployment rate

Employment rates

The number of people who are working in an economy

• measured as the percentage of the labour force who are working in paid employment

• fluctuate with economic conditions & lead to labour shortages in certain industries → affecting business planning

• can indicate worker availability and influence wages a business needs to offer to attract workers

E.g. Low employment (high unemployment) rates → many people want to work but aren’t employed so businesses don’t have to pay higher than minimum wage. However, high employment (low unemployment) staff can’t be picky due to job limitations so business may offer incentives: higher wages to compete with other jobs.

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Tax rates

The percentage of income or spending, required to be payed to the government by individuals or businesses.

• business must consider tax obligations when planning a business to budget for additional expenses → businesses should always tax obligations to avoid legal penalties

• government determines & applies different tax rates on businesses depending on their structure (company, sole trader, partnership)

• For unicorporated businesses (not a company) the Australian Taxation Office taxes money earned on personal income tax tare of individual owner

• For incorporated businesses (legal status is company) it is different so individuals should consider tax rates when deciding business structure

Types of taxation

Taxation: amount of money the government collects from a business as a % of their income on G&S’s

Income tax - tax levied on individuals personal income

Company tax - tax levied on companies profits

Goods and services tax (GST) - tax on the sale of most goods and services

Payroll tax - state & territory tax paid by employers on employee wages

Progressive income - higher your income → higher you get taxed

Consumer confidence

Measure of consumer’s feelings & expectations about current and future economic conditions.

• measured monthly by a survey that questions households about current & future financial situation, expectations about future economic conditions & upcoming expenditure on household items

High vs low consumer confidence

High - belief economy will grow

• consumers are willing to spend money as they are confident in job security etc.

• business sales will increase - should plan for increased productions and orders

Low - economic growth expected to slow down

• individuals may delay launch of business or launch on smaller sale → expected lower demand for their goods

• plan for less suppliers, less staff, or change how they operate

Technological developments

The invention and innovation of tools that solve problems and enhance processes.

• its the new tech that make businesses easier, better, more efficient

• advanced tech can improve competitiveness, quality, safety, productivity and accuracy

• provides greater convenience to customers, speed of production and establishes online presence

• if business doesn’t take advantage of TD its products become outdated and unattractive

Examples of how tech developments impact planning

Automated production lines - reduce human labour, more precise, complete dangerous and unsafe tasks

EFTPOS - reduced risk of theft, customer convenience

Online presence - reaches wider customer base and attract more customers through online ads

Ai chatbot - increase speed of customer assistance therefore greater customer convenience

Strong electronic payment - good business reputation, fast transaction speed and proof of payment

Advantages of technological developments *

Business - increase accuracy and precision of production process resulting in consistent level of quality that can improve business reputation. Easily connect, listen and respond to customer - improves customer satisfaction.

Employee - automated production lines remove repetitive and unsafe tasks for employees, to enjoy safer jobs in other areas of the business

Time - can run 24/7 as technology doesn’t require breaks, holidays etc. Publishing info on their website like frequently asked questions

Money - technology reduces labour resources & wage costs. Customers can purchase products online at their convenience increasing sales

Disadvantages of technological developments *

Business - poor reputation for replacing employees with technology - increasing unemployment rates

Employee - employees may lose their job as tech replaces their job

Time - if tech breaks down it can halt production lines, time consuming to maintain and develop/maintain technology

Money - tech has high initial set up and maintenance costs, tech keeps advancing so businesses may need to spend money researching and upgrading tech

Business responsiveness to technological developments

Need to CONSTANTLY keep up with changes because if they don'‘t their competitors will

• owners need to monitor, understand & adopt latest TD to remain competitive and survive otherwise will result in an outdated business

• successful businesses were able to anticipate evolving customer demands for upgraded tech

Overseas competitors

Businesses that operate in the same industry.

• important that bus owners understand overseas competitors by investigating how they operate and identifying their strengths and weaknesses

• allows owner to consider how they can achieve distinction from competitors and devlop competitive advantage like lower costs

Overseas markets

Any markets that are outside of a business’s own country of operation.

• businesses that launch in local and overseas markets can access larger and diverse customer base, making it less dependent on the local market

• during planning its important owners understand the different: legal & government regulations, customer needs and expectations, economic conditions a cultural and communication barriers

• businesses may need to adopt products to better suit customer needs and attract sales and establish a customer base

Offshoring labour

Involves a business moving its production to another country.

• cost effective: lower labour costs

• increases efficiency and access more diverse range of skills

• time effective: business could offshore labour for time consuming tasks so they can focus more time and effort into expansion etc.

• risks: raise ethical concern as unemployment rises in Australia and not ethically responsible, business needs to plan for changes in employment laws, transportation cost increase

Exchange rates

The rate at which one currency will be exchanged for another currency.

• exchange rate fluctuations directly impacts businesses that purchase overseas resources or sell in overseas currency

• bus owners must anticipate changes and ensure their prices account for flucuations, planning also helps manage profit margin

• changes everyday due to political events, economic conditions etc.

Currency appreciation vs depreciation

Appreciation (increase) - increase in the value of another foreign currency

• beneficial because Australian businesses who purchase overseas can but more of a foreign currency, but that makes g&s’s more expensive for overseas buyers →less attractive

Depreciation (decrease) - decrease in the value of a currency against another foreign currency

• increases the cost of imports for business and AUD cannot buy as much with foreign currency but g&s’s are cheaper for overseas buyers → more attractive to overseas

Online sales

Buying or selling goods using the internet

• online sales helps reach wider customer base in local and overseas markets

• increases sales → customer convenience 24/7 however business need to plan for change in the way consumers are shopping (sites easier to navigate)

• if business has online presence it may not need physical store - reduces operating costs

• failing to take advantage of online sales may make business less competitive

Intellectual property

Creations of the mind that are protected by laws.

Copyright

Legal framework that’s free and automatic protection used on og ideas such as writing, art, sound, film & photographs.

• provides exclusive rights online or hard copy to control the use of their creative work

• subject to international conventions as it protects in overseas markets as well

• copy right infringement could result in fines and penalties - negatively impacting reputation owners should ALWAYS BE AWARE

Copy right considerations

Legal regulations - aware of copy right infringement

Costs - free but may need to hire a lawyer for advice

Registration - automatic

Trademark

Exclusive right granted over a unique aspect of a business used to distinguish the business or product, logo, word, phrase, packaging, business name.

• country-to-country basis so business should consider registering their trademark in other countries they plan to operate in

• once registered a business has all rights to use, license and sell their trademark for 10 years

• if not registered a business is at risk of competitors copying similar aspects of business (trademark infringment)

Trademark considerations

Legal regulations - aspects are all original and unique

Costs - depends on what business is trademarking $200-$500, lawyer costs

Registration - owner should ensure trademark they want to use is still available, processing time could take months

Patent

A license that provides a business with exclusive rights for an new invention, innovative device, method or substance.

• stops others from using, making or selling the invention

• need to obtain a patent in each country they sell in

Patent considerations

Legal regulations - ensure aspects are new, inventive and useful: application is more likely to be approved and avoids trademark infringement

Costs - depends $100-$500

Registration - necessary documentation and registering in countries they wish to expand to

Corporate social responsibility

The ethical conduct of a business going above and beyond legal obligations. It considers the society and the environmental

PPP - People, Profit, Planet

Environmental considerations

Reduce the impact of a business on the environment, considers the welfare of local, national & global societies by protecting & preserving the environment.

• environmental sustainability

• producing goods and services can damage the environment & implementing CSR reduces it

Suggestions:

• source sustainable materials from local supplier

• waste management strategies RRR

• environmentally friendly packaging

• renewable energy sources

• donate profits to organisations

Social considerations

Business impact on society and that goods and services positively contribute to society.

Suggestions:

• Inputs: responsibly source from local suppliers; use suppliers that follow CSR

• Processes: reduce waste, recycle; businesses should assist effected employees whose jobs are taken over by technology

• Outputs: product is good for society; packaging; owners could offer employees paid volunteer time

Advantages of CSR

Business - positive business reputation attracting more customers; attract highly skille employees who value ethical conduct

Employee - employees prefer working for businesses that are socially responsible; motivated and loyal

Time - production processes could be more efficient

Money - customers could be willing to pay more for ethically sourced products

Disadvantages of CSR

Business - decrease productivity in competition of other business tasks as focus is on implementing strategies etc.

Employee - employees may feel overwhelmed and struggle to adapt new practices within business

Time - time consuming

Money - can be expensive

Customer needs & expectations

Needs - requirements customers intend to fulfil with purchase of products from business

Expectations - values or benefits a customer seeks when purchasing from a business; not essential but are things customers anticipate when making a purchase

• investigate who their potential customers are and their needs

• what customers want customers get otherwise business will collapse

• consistently meeting customer needs and expectations can improve customer retention and increase sales

Effect of customer needs on bus planning

Customer convenience - customers expect experience that saves them time & effort so owners should plan to offer convenience e.g click and collect, Afterpay, paypal

High quality good or service - ensure suppliers products are high standard and don’t have defects e.g. inspections of products to meet desired standards

Social responsibility - customers are increasingly more informed and conscious about buying things so businesses should use ethical materials for socially responsible products; done by reducing waste and pollution

Responsive customer service - ensure customers can interact with business to earn customer loyalty e.g. dedicated support team, service through calls, emails, social media etc., consider having a frequently asked page on their website

Competitors behaviour

• business needs to analyse and consider the behaviour of both local and overseas competitors by market research - helps business make informed decisions about products & business direction

• to succeed a business must quickly respond to change in competitors behaviour to deal with threats before they arrive and plan for new potential competition

Competitors are monitored to see if they: introduce new products, change the pricing of products, improve their products, offer incentives.

How competitors behaviour affects planning & business response

Selling similar product at lower price - may need to reconsider manufacturing & operating costs; reconsider competitive advantage if they can offer a lower price e.g. free shipping on orders

Selling highly unique product - must build competitive edge by investing in creating a product with newer or unique features

Threat of potential new competitors in market - must anticipate the no. of new competitors and threats entering market and have a plan to respond to create edge

Suppliers; Wholesaler; Retailer; Inputs; Outputs

Suppliers - provide resources

Wholesaler - sells products in large quantities at lower prices

Retailer - sells products directly to customers

Inputs - resources used by a business to produce g&s’s

Outputs - final g&s’s produced that are delivered or provided to customers as a result of operations

Resources and supply chain

- Suppliers source raw materials and can directly affect a business → business must choose a trustworthy and reliable supplier which will positively affect reputation and customer satisfaction (sales)

-- Business should ensure resources are transferred through the supply chain efficiently to meet expectations etc.

Sourcing considerations

• Where resources are sourced - locally or overseas

• import duty

Time - local suppliers can be faster than overseas. Overseas can take longer due to less predictability of shipping times.

Shipping costs - locally how will business pick up supplies to reduce (drive). Overseas: higher shipping costs

Social responsibility - locally: reduces transport distances and fuel emissions. Overseas: could harm reputation as suppliers might not be sustainable etc.

Access to resources - local suppliers may not have necessary resources to meet product requirements. Overseas enables access to raw materials not available locally

Legal regulations - locally doesn’t need to comply with customs. Overseas requires customs and consideration of different tax rates → import duties

Transport considerations

How close suppliers are situated to business; how often delivery is; is there a chance supplies could be damaged during transit?

• sourcing overseas may be cheaper but transport costs factor in

• is there alternative greener suppliers?

How transport consideration can impact bus planning

Road - cost effective retrieving from local as business saves on delivery costs; may be long distances or delays, limited capacity of trucks

Air - costly, effective fr overseas to be delivered quickly

Rail - slower, cost effective as it can take up a lot of space

Sea - can’t be used except for Tasmania and australia; for overseas its slower and cant be disrupted by factors such as weather however cost effective and less pollution compared to air

Special interest group

A group or organisation of people that have concerns or influence laws, policies, behaviours of a specific cause.

• avoid negative publicity and conflict

Can influence a business to change: policies, suppliers, quality of products, location, advertising, name of product

Union

Organisation formed by workers in an industry to represent their rights & to protect and improve wages & working conditions.

• owners should always investigate if union exists for employees to cooperate and avoid conflict which reduces risk of developing a negative reputation

• unions advocate, defend and represent employees in workplace disputes

• unions can take industrial action if a business doesn’t comply with requests e.g. employee strike

Business associations

Organisations that support and advise businesses in a specific industry by paying a membership fee

• provide education through training programs, seminars & conferences for support to ensure changes are successfully implemented

• offer advice about employers rights & responsibility’s

Environmental lobby group

Organisations that advocate for the protection of the environment and promote environmental issues to businesses, government & the public to make changes.

• if business operates in harmful manner then EL groups will campaign to pu

Impact of environmental lobby groups on bus planning