U1 AOS 1: The Business Idea

Business Management 1&2 2023

Motivations for starting a business - Personal independence

Motivations for starting a business - Personal independence

• desire to have full control

• be in charge of decisions made for business

• freedom to organise own life

• flexibility in hours & working conditions

Motivations for starting a business - Financial independence

• fund desired lifestyle without relying on income from another individual (no longer relying on employees)

• directly related to success of actions when running their business

Motivations for starting a business - To make a profit

• business generating more revenue than expenses

• sales from product: expenses incurred in running the business such as wages

Motivations for starting a business - To fufil a market need

• a product that satisfies unmet needs referred to as filling "a gap in the market"

Motivations for starting a business - To fulfil a social need

• production of goods & services for purpose of making world better place

• business that addresses social need called social enterprise

Business Objectives - To make a profit

• money left over after business expenses have been deducted from money earned from sales

• important as allows business to survive & grow

• business success = size of profit

Business Objectives - To increase a market share

• business's proportion of total sales in market or industry in compassion to competitors expressed as %

• usually objective in large businesses & small market shares gains can often translate into large profits for these businesses

Business Objectives - to fulfil a social need

• involves production or selling purpose of making world better place & improving lives of others

Business Objectives - to fulfil a market need

• "filling a gap in the market" can be done by offering service/good where there is customer demand

Business Objectives - to meet a shareholder expectations

• shareholders owners of business & expected to make return on investment

• dividends: share of company's profits

• capital gains: increase in value of shares

Business strategies

description of exactly how business plans to achieve business objectives

Sources of Business Opportunity - Innovation & entrepreneurship

• creating new product service or process

Sources of Business Opportunity - Recognising market opportunities

• need or want by consumers that is not currently being met by any rival businesses

• society's needs & wants change

Sources of Business Opportunity - Recognising market opportunities (factors that create market opportunities)

• changing demographics

• changing societal attitudes & norms

• changing laws & regulations

• advancements in technology

Sources of Business Opportunity - Changing customer needs

• customer's needs are impacted by popular trends

Sources of Business Opportunity - Research & development (R & D)

• directing resources towards discovering

Sources of Business Opportunity - Technological advancements

• inventions & innovation tools that solve problems & enhance processes

• improve how business create

Sources of Business Opportunity - Global markets

• globalisation: overseas countries

• allows business to reach more customers

Skills of Successful Entrepreneurs - Communication

• ability to transfer information to employees and other relevant people in way that is understood

• can be verbal

Skills of Successful Entrepreneurs - Delegating

• authority & responsibility to carry out specific activities transferred from manager to employee

• manager remains accountable for outcome (allows employees to make own decisions)

Skills of Successful Entrepreneurs - Planning

• can identify business objectives & determine methods or strategies to achieve those objectives

• can be strategic

Skills of Successful Entrepreneurs - Leading

• influence/motivate people to work towards achievement of business objectives

Skills of Successful Entrepreneurs - Decision making

identifying available options & choosing one course of action from alternatives

• involves being able to make decisions within a particular time frame

Skills of Successful Entrepreneurs - Interpersonal

• deal or liaise with people to build positive relationships with staff

Characteristics of Successful Entrepreneurs - Willing to take risks

• if not willing to risk in business - go backwards instead of progress

• start-up business requires owner to risk own personal assets

• must able to live with possibility of failure

Characteristics of Successful Entrepreneurs - Innovative thinkers

• come up with new ideas, then develop and improve them - creative

Characteristics of Successful Entrepreneurs - Resilience

• must be prepared to persist and preserve over long-term

• success can take years of hard work - constantly have curveballs

• ability to have sense of hope and confidence that future will be good and keep going even when things get tough

Characteristics of Successful Entrepreneurs - Confidence

• radiates power

• makes people believe in what you are saying - trust

Characteristics of Successful Entrepreneurs - Flexible

• ability to adapt and change direction when required

• result in changing tastes, consumer demands, or altering market conditions

Characteristics of Successful Entrepreneurs - Ability to work independently

• intrinsically/internally motivated to achieve personal goals, enjoy challenges and naturally competitive.

Business Concept Development - Business Opportunities

• can be found through experience or research up with new or innovated product that is not currently available

Business Concept Development - Business Concept

• idea for business that includes basic information

  • service or product

  • target demographic

  • unique selling point (USP

Business Concept Development - Business Concept Development

• process of successfully refining and improving initial idea of product to allow it to become saleable and bring competitive advantage

Business Concept Development - Importance

• better chance of success in market place and will show whether business opportunity is feasible

• creates strong business plan that could help encourage financial lenders to invest in business

Business Concept Development - Process

1. Initial idea/concept

2. Conduct market research

3. Refine business idea

4. Conduct feasibility study

5. Write business plan

Business Concept Development - Intellectual property

• original creates of mind that can be legally owned

• include brand, logo invention, design or artistic work

• business implement range of legal barriers

Legal barriers - Trademark

• legal protection for business over rights of name, symbols, colours, packaging or additional tools used to sell products

Legal barriers - Patent

• licence that provides business with exclusive rights to use of innovative devices, methods and processes

Legal barriers - Copyright

• free and automatic protection used on original ideas such as writing, art, sound, films and photographs

Legal barriers - Domain name

• unique website address

Business Concept Development & Business Opportunities Relationship

• Initial business ideas and concepts often developed after identifying business opportunity in market

• after recognising business opportunity, business owners can decide on goods or services they want to sell to gain competitive advantage

• foods or service in individual plans sell may or be significant improvement on something that already exists or entirely new offering

Market research

• process of collecting and analysing data from consumers about attitude, opinions and behaviours towards existing products/services

• data helps business make decisions about consumers and marketplace

• identify and evaluate industry in which they will be operating

Market research - Forecasting

• planning tool that relies on fate from past and present which determine future events

• qualitative - gathered from opinions

• quantitative - use of numerical date

Feasibility studies

• initial research required to determine whether a business concept potientially viable or whether identified resons business concept should not proceed

• information gathered from market research included and part of evaluation to determine if estibated cost result in profit

Components of Feasibility studies

1. Description of the business idea – products to be sold or service to be offered

2. Description of the market – consumers, size of market, expected sales

3. Profile of key people involved – skills, qualifications & experience

4. Analysis of the competition - and how a competitive advantage may be gained

5. Assessment of financial feasibility – preparation of budgets –  estimated cash flow, profits, and start up costs

6. Strengths of business owner/s – skills and experience in the area/industry, commitment to the idea

Feasibility studies - viability

• whether business capable of developing and growing - can survive and be profitable

Feasibility studies - market feasibility

• understanding of market conditions will help determine of business concept has potential to be successful in long term

Feasibility studies - operational feasibility

• individual will have to research what kind of employees required

• what equipment needed

• if resources accessible

• technology required

Feasibility studies - commercial feasibility

• afford cost of setting up business

• costs include hiring, purchasing equipment

• industry in position to supporting opening of specific business area - research involve examining market conditions and assessing profitability of market

Feasibility studies - technical feasibility

• examines current skills of individual starting business and ability to help business achieve aim

• establish resources required to support owner

Feasibility studies - legal feasibility

• understand legal regulations associated with starting business and determine if possible to start business while complying with applicable laws and registrations

Contribution to Economic wellbeing

• reflected by level of income, consumption and wealth people have to support their standard of living

Contribution to Economic wellbeing - Employment

• employ human labour to produce goods and services - employment opportunities

• individuals can use income to purchase goods and services to meet needs and wants

• supports growth of nation’s business and creates further job opportunities

Contribution to Economic wellbeing - Taxation revenue

• compulsory payment to government

• provide essential services

• businesses sell goods or services to make revenue → portion of revenue used to pay income to employees → government taxes individuals percentages of their income

Contribution to Economic wellbeing - Infrastructure

• essential facilities and structures

  • transport, communications, education, power and electricity sercice

• functions society smoothly

• plays critical role

Contribution to Economic wellbeing - economic growth

• or Gross Domestic Product (GDP) known as total market value of production in country over period of time, minus cost or production

• ensure improved standard of living

• when businesses sell more, they increase total value of goods and services productid and sold with economy - results in economic growth

Contribution to Economic wellbeing - international trade

• exchange of goods and services between different countries

• allows businesses and individuals to good they may not otherwise have been to purchase

• exporting - money being accessed and fuelled into local economy from businesses in different countries

• importing - given businesses access to cheaper materials, which can reduce costs and price of final products

Contribution to Economic wellbeing - Research and development

• development of existing products, development of new businesses process as well as innovation of entirely new products

• outcomes - allow business to meet demands of customers, cut costs and improve affordability of products

• lower prices improve standard of living - customers purchase more goods and services

Contribution to Social wellbeing

• quality of life based

  • non-material living standards

• includes general happiness, crime rates, environmental quality, education and accessibility of healthcare

Contribution to Social wellbeing - Employment

• likely to be happier and more fulfilled

• less financial stress because of regular income

Contribution to Social wellbeing - less crime

• lower unemployment levels - lower homelessness and crime rates

• more individuals afford housing and less incentive to turn to crime as source of income

Contribution to Social wellbeing - employee wellbeing programs

• improve mental health of workers

• programs such as counselling, employee check in sessions

Contribution to Social wellbeing - environmentally friendly

• sustainable production methods

• improve, protect and preserve environment we live in

Building Culture of Innovation & Entrepreneurship - Government investment in R&D

• implemented number of initiatives to assist business in R&D to make more affordable

  • innovation connections - provides support and funding assistance to operate in growing industries

  • R&D tax incentive - if business have revenue less than $20 million, spend over $20,000 on R&D and pay tax in Australia able to apply to receive tax offset, making financially feasible

  • Accelerating commercialisation - government program provides funding and advisory support to develop new and innovative products. participants in program more quickly make products available in market

Building culture of Innovation & Entrepreneurship - Council grants for new businesses

• include money and incentives provided to businesses and individuals to pursue business ideas and development

  • start-ups, business growth grants and relocation and expansion grants

Building culture of Innovation & Entrepreneurship - Business mentorship

• person or program that offers knowledge, advice and experience to another person

• offer assistance to businesses

Building culture of Innovation & Entrepreneurship - School-based educational programs

• introduce students to business world and develop business knowledge and problem-solving skills

• aims to create culture of innovation and increase student confidence and willingness to develop innovative ideas in future as well as to highlight career pathways

Building culture of Innovation & Entrepreneurship - Creation of regional start-up hubs

• place where businesses and individuals to go seek support and have place and space to use without having to set up in own office

• particularly beneficial for regional businesses