YEAR 10 BUSINESS

WHAT IS AN ENTREPENEUR?

• A person who sets up a business or businesses, taking on financial risks in the hope of profit.

BEING SELD EMPLOYED (ADV)

ADVANTAGES

• Sense of independence

• own profit, reward and satisfaction

• develop own ideas

• employ family members

BEING SELF EMPLOYED (DISADV)

• hard work and longer hours

• income may fluctuate

• risk of failure

• stress

• high levels of responsibility

SOLE TRADE → LEGAL STRUCTURE

• OWNER HAS AND OPERATED BY ONE PERSON

• HAS UNLIMITED LIABILITY AND UNINCORPORATED

  Adv:

• Low entry cost/operation cost

• Complete control

• Less government regulation

  Dis:

• Unlimited liability/unincorporated

• Difficult to operate when sick

• End of business when owner dies

PARTNERSHIP → LEGAL STRUCTURES

• OWNER AND OPERATED BY 2-20 PEOPLE

• CAN BE FORMED VERBALLY, IN WRITING OR WITHOUT ANY LEGAL BNDING AGREEMENT

• HAS UNLIMITED LIABILITY AND UNINCORPORATED

  Adv:

• Low entry/operation cost

• Shared responsibility and workload

• Business continues if parter dies

  Dis:

• Unlimited liability/unincorporated

• Possibility of disputes

• Difficulty finding suitable partners

PRIVATE COMPANIES → LEGAL STRUCTURES

• 2-50 PRIVATE SHAREHOLDERS, USUALLY HAS ‘PTY LTD’ AT THE END OF ITS NAME

• INCORPORATED, LIMITED LIABILITY

• SHARES ONLY SOLD IF THE DIRECTOR APPROVES

ADVANTAGES OF OWNING A COMPOANT

• EASIER TO ATTRACT FINANCE

• LIMITED LIABILITY/INCORPORATED

• EXPERIENCED MANAGEMENT

DISADVANTAGES OF OWNING A COMPANY

• COST OF FORMATION

• DOUBT TAXATION

• MUST MAKE A YEARLY ANNUAL REPORT OF ACCOUNTS

WHAT IS PROMOTION

• MAKING PEOPLE AWARE OF YOUR BUSINESS

ADVERTISING → PROMOTION MIX

• messages communicated through mass media

  ADVANTAGES

• Attracts attention

• Shares in about business to wider audience

  DISADVANTAGES

• Costly for advertisements

• Risk of low response rates

PERSONAL SELLING→ PROMOTION MIX

• the activities of a sales representative directed to a customer to make a sale

  ADVANTAGES

• Personalised approach → assuming their needs

• DISADVANTAGES

• Hiring and training a sales force can be expensive

RELATIONSHIP MARKETING →PROMOTION MIX

• making long-term, cost effective and strong relationships with individuals customers

  ADVNTAGES

• Increased customer lifetime value

• Improved customer retention

  DISADVANTAGES

• Difficult to manage time

• The expectations of returning customers

SALES PROMOTION → PROMOTION MIX

• the use of activities or materials as direct inducements to customers

  ADVANTAGES

• Enhances the attraction to new customers

• Increases productivity and performance of employees

  DISADVANTAGES

• Short-term impact

• Cannibilisation: sales promotion reduces to regular products/services or shift the demand from one period to another

PUBLICITY → SALES PROMOTION MIX

• any free news story about business product (not under business control)

  ADVANTAGES

• Credibility

• Cost effective

• Broad reach

  DISADVANTAGES

• Lack of control

• Negative publicity

• Unreliable timing

PUBLIC RELATIONS → PROMOTION MIX

• activities aimed at creating and maintaining favourable relations between the business and its customers

ADVANTAGES:

• enhanced brand credibility

• Cost-effective

DISADVANTAGED:

• increased competition

• Unpredictable

PLACE STRATEGIES → DISTRIBUTION CHANNELS

• DISTRIBUTION CHANNELS REFERS TO THE CHANNELS CHOSEN TO GET THE PRODUCTS TO THE CUSTOMER. THERE ARE THREE TYPES OF DISTRIBUTION CHANNELS. THESE INCLUDE:

1. PRODUCER TO CUSTOMER

2. PRODUCER TO RETAILER TO CUSTOME

3. RPRODUCER TO WHOLESALER TO RETAILER TO CUSTOMER

CHANNEL CHOICES → PLACE STRATEGIES

• CHANNEL CHOICES REFERS TO HOW AVAILABLE THE BUSINESS CHOOSES TO MAKE THE PRODUCT ACROSS A MARKET. THERE ARE THREE CHANNEL CHOICES, THESE INCLUDE:

1. INTENSIVE

2. SELECTIVE

3. EXCLUSIVE

INTENSIVE → CHANNEL CHOICE

Business is available in all stores

ADV:

• increased market coverage,

• higher sales volume

  DIS:

• lower profit margins,

• increased distribution costs

SELECTIVE → CHANNEL CHOICE

Business is open in certain stores

ADV

• greater control over brand image

• Better retailer relationships

  DIS

• Limited market reach

• Increased pressure on brand loyalty

EXCLUSIVE → CHANNEL CHOICE

Business is open only in the actual store itself

ADV

• strong brand image and prestige

• Increased customer loyalty

  DIS

• Limited market reach

• High dependency on the chosen retailer

WHAT IS HUMAN RESOURCES

The management of the relationship between employee and employers

TYPES OF TRAINING METHODS

• off the job training → ex, taking courses

• On the job training → ex, being taught how to make meals at a restaurant

• Mentoring → ex. A mentor is not a dictator, simply a help and guide

BENEFIT OF TRAINING AND DEVELOPMENT → NEW WORKERS

• Opportunities for promotion and self improvement

• Improved job satisfaction through better job performance

• A challenge (chance to learn new things)

INTERNAL SOURCE OF FINANCE

• funds generate from inside the business

• Main type of finance is; retained profits

• Retained profits = profits that are kept in the business for investments in future business activities

• In Australia, approx 50% off profits retained to be reinvested.

EXTERNAL SOURCE OF FINANCE

• funds provided from sources outside the business

• Debt and equity

ADVANTAGES OF DEBT

• owner does not have to sell any ownership in the business

• Easy to access

• Tax deductions

DISADVANTAGES OF DEBT

• Needs to be repaid

• Has interest

• Makes company less attractive to investors

• May need to offer ‘collateral’

ADVANTAGES OF EQUITY

• No repayments need to be made

• Low risk

• No additional financial burden

• Cheaper source of finance

• Investors with expertise and connections

DISADVANTAGES OF EQUITY

• loss of ownership and control

• Dividends must be paid

• Reduced profits for owners

• Can’t be acquired at short notice

3 TYPES OF FINANCIAL STATEMENTS

• CASH FLOW STATEMENT

• INCOME STATENMENT

• BALANCE SHEET

CASH FLOW STATEMENT

• indicate the movement of cash receipts and cash payments resulting from transactions over a droid of time.

• Measures liquidity → the ability to meet short-term financial obligations

CASH INFLOW → MONEY COMING IN

• Sales

• Loan

• Investment (equity)

CASH OUTFLOW → MONEY COMING OUT

• Debt

• Wages

• Bills

• Marketing

WHAT IS LIQUIDITY

means to see if you accomodate for financial obligation

FORMULA:

INFLOW - OUTFLOW → OPENING BALANCE + NETFLOW = CLOSING BALANCE

MARKET SHARE

IS THE AMOUNT OF SALES A BUSINESS HAS IN A INDUSTRY

SHARE MARKET

SHARE MARKET IS WHERE YOU GO TO BUY SHARES (ASX)