Business studies yr 11

Marketing (KBF)

Marketing (KBF)

Refers to the marketing mix of place, product, price and promotion which helps assist the business create brand awareness, packaging and foster customer engagement

Operations (KBF)

Refers to inputs, transformation process and outputs that governs the production process.

Human resources (HR) (KBF)

Refers to the “human” aspect of the biz responsible for dealing with employee recruitment, training and contract termination, and wellbeing + feedback.

Finance (KBF)

Refers the biz financial management, in which it overlooks biz revenue and profits, and taking out biz loans and purchasing assets.

Management consultant

Refers to third party services that assist biz in making incremental or transformational changes , such as opening a new franchise or changing organisation structure (i.e. classical to behaviourial).

Role of management consultant

Management consultants can use their expertise to create SMART biz goals, provide clear and transparent communication to employees, and delegate resources effectively in order to meet biz needs/goals.

Internal influences on biz

Employees, products, resources, location, management, biz culture.

“Internal influences on the biz, such as employees and location, are factors over which the biz has great control. For example, employees are hired and managed directly by the biz, such that they are given a series of tasks to complete. By effectively managing employees, the biz can foster a positive environment that will boost employee productivity and morale and thus resulting in biz success. However, if employees are not treated fairly and professionally, it may result in increased staff turnover and the establishment of a negative biz culture and reputation for the biz, hence leading to biz failure.”

External influences of biz

Legal, economic conditions (i.e. recessions and expansions), social (i.e. trends), competitive situations, technological changes/development.

“External influences are factors over which the biz has little to no control over. Economic conditions can not be directly influenced by a biz, but rather, governed by the entire economy’s spending and current interests. By having such minimal control over economic conditions, the biz has to be able to respond and adapt to changes in the economy quickly and effectively to foster biz success and capitalise from the economic change. For example, during an expansion, the biz can increase marketing efforts and production of products and diversification in order to establish an early competitive advantage and appeal to customer wants quickly before the market becomes saturated, resulting in increased market share and profits for the biz.”

Liquidation

The process of closing a biz and selling off its assets to pay off debt.

Liquidity

Refers to how quickly and easily a biz is able to turn its assets into cash to pay for liabilities

High liquidity = assets can be sold quickly and easily to pay off liabilities

Low liquidity = assets can be are not sold quickly and easily to pay off liabilities

Revenue statement (Income statement)

Summary of the income earned and expenses incurred over a period of time.

Opening stock = value of stock at beginning of year

Closing stock = value of stock at end of year

COGS formula (revenue statement)

COGS (cost of goods sold) = Opening stock + purchases - closing stock

Net profit formula (revenue statement)

Net profit = Gross profit - expenses

Gross profit formula (revenue statement)

Gross profit = Revenue(sales) - COGS

Selling expenses (revenue statement)

Selling expenses = expenses associated with the process of selling a good/service such as commission, salaries, advertising

Administrative expenses (revenue statement)

Administrative expenses = expenses associated with the management/running of biz such as electricity, rates, rent, telephone

Financial expenses (revenue statement) + key characteristics

Financial expenses = expenses associated with the financial section of biz such as Interest repayment (loans), lease payments

Balance sheet + key characteristics

A SNAPSHOT of biz’s assets and liabilities —> Shows current net worth of biz

Short period of time = less than 12 months

Owner’s equity (capital) = money contributed by owner/s to help establish/grow the biz. Retain profits fall under the category of owner’s equity

Assets = money going into biz

Liabilities = money going out of biz

Account equation (balance sheet)

Total assets( both current and non-current) = total liabilities (both current and non-current) + owner’s equity

Current assets and non-current assets (balance sheet)

Current assets = assets that a biz can expect to use up/turn over within 12 months (i.e. cash, accounts receivable , stock)

Non-current assets = assets that biz keeps for more than 12 months (i.e. Company car, equipment, land and buildings)

Current liabilities and non-current liabilities (balance sheet)

Current liabilities = Liabilities to be repaid within 12 months (i.e. Overdraft, accounts payable)

Non-current liabilities = Liabilities that need to be repaid over a period of time longer than 12 months (i.e. Mortgage, loan)

Accounts receivable and accounts repayable (balance sheet)

Accounts receivable = Money owed to the biz from customers (money from customers that biz intends to receive)

Accounts payable = current liabilities arising from payments owed to suppliers or other external parties (money biz intends to repay)

Cash flow statement + why? and key characteristics

Indicates the movement of cash receipts and cash payments resulting from transactions over a period of time (cash inflows and outflows)

why?

—> understand expenses/debits (outflows), fact check, learn to classify biz activities

Cash inflow (credit) = money coming into the biz

Cash outflow (debit) = money going out of biz

() - brackets = negative sign (i.e. (10,000) = -10,000)

Operating activities (cash flow statement)

Operating activities = inflows and outflows of the main biz activities (i.e. inflows = sales and outflows = repayments to supplies, employees and other expenses)

Financial activities (cash flow statement)

Financial activities = inflows and outflows from the borrowing activities of biz. (i.e. Inflows = equity such as issuing of shares (IPO) and outflows = debt (such as repayment of loans))

Investing activities (cash flow statement)

Investing activities = inflows and outflows from purchase and sale of non-current assets and investments (i.e. inflow = sales of non-current assets and investments and outflows = purchase of non-current assets such as machinery, land and company car)

Net cash flow formula (cash flow statement)

Net cash flow = inflows - outflows

Limitations of financial statements

1. use of estimates (can be potentially bias)

2. Historical costs rather than current market value (misinterpretation of value of assets —> bias)

3. Static nature as they are just snapshots of biz financial position, when in reality biz are highly volatile and change on a day to day basis.

Biz plan characteristics

Blue print for future growth of biz and includes goals, well developed plan to achieve goals, reliable metric to measure progress

—> subject to change

SMART goals

Specific, measurable, achievable, relevant, timeframe

Trend analysis

Process of investigating changes over time and determining patterns (trends) to predict future failure or success

Competitive advantage

Competitive advantage = strategies used by biz to ensure it has ‘edge’ (i.e. better) over competitors/competition. Quality should not be reduced to compensate

Pricing strategies

Pricing strategies include price penetration (sell below competitors) and price skimming (sell as high as possible —> better when competitive advantage has been established)

Differentiation strategies

Differentiation/product diversification strategies include high product quality, innovation/creative design/diversification (i.e. product diversification like coke, coke zero, diet coke)

Economic conditions

Refers to that of which an economy is in either a contraction (down) or expansion (up)

Overextension

Purchase of excess resources (i.e. buying to much stock or hiring to much staff)

Financial forecasting

SWOT analysis = Evaluation and analysis of biz strengths, weaknesses, opportunities and threats which helps managers and employees understand the biz current position and effective planning for future trajectories, changes and meeting goals and objectives

Transformational change

Results in completer restructure of organisation (i.e. implement classical management structure from behavioural, or complete revamp of biz operations)

Incremental change

Results in minor changes (i.e. change in CEO(management), employee promotion, technological shift/addition/implementation, product differentiation such as new products or branches/variants (coke, coke zero, diet coke)

Driving forces

Forces that support and assist the change

Restraining forces

Forces that work against/to stop change

Strategies to reduce resistance to change

1. Make reasonable changes

2. Allow employees to participate in change

3. Clearly articulate purpose of change

4. Transparent and clear communication with employees.

Managing change effectively

Identify need for change:

1. Analyse external and internal influences on biz

2. Trend analysis

   Set SMART goals to achieve/plan for this change

   Use of management consultants

Management consultants + key characteristics

Third party entity (external) that have a wide range of expertise and experience in biz change and success. Management consultants provide an objective(neutral) viewpoint, conducts analysis, deals with legal compliance and takes care of training required for employees/dealing with redundancy (gets rid of employee)

Fixed costs

Costs that do not vary on how many units of goods/services are produced (i.e. rent, company car repayment, rates, insurance)

Variable costs

Costs that depends on no. of products produced (i.e. tools, price of haircut, wages, marketing, packaging)

Total cost formula

Total costs = fixed costs + variable costs

Total revenue formula

Total revenue = Selling price * quantity of units sold

Quantity formula

Quantity (no. of products) = Total fixed costs / unit price (selling price) - variable costs

Break even point

Profit = zero, revenue matches expenses

Debt financing

Borrowing money that must be repaid with interest (debt)

Equity financing

Raising capital by means that do not involve debt such as use of angel investors, one’s own capital, selling of company shares to investors

Establishment phase of biz life cycle characteristics

First stage of biz life cycle: Detailed planning, great risk of failure, negative margins until profit beings, scarce sales

Growth phase of biz life cycle characteristics

Second stage of biz life cycle: Increased sales, regular customer base, improve cash flow, new product introduction, long term planning

Maturity phase of biz life cycle characteristics

Third stage of biz life cycle: Plateau of sales, more market competitors, improves overall cash flow, more formal management structure

Post-maturity phase of biz life cycle (3 stages + characteristics)

Fourth and final stage of biz lifecycle:

1. Steady —> neither declining or expanding (plateaued profit) maintaining current biz position

2. Renewal —> New products + markets; increased sales and positive cash flow

3. Decline —> fall in sales + cash flow eventual biz failure (i.e. trajectory for biz failure)

Primary industry sector

Biz’s involved in collection of raw material (i.e. fishing, agriculture, mining and forestry)

Secondary industry sector

Biz’s that creates finished or semi finished products from raw materials (i.e. production and manufacturing biz such as Toyota and Apple).

Tertiary industry sector

Involves people performing a vast range of services for other individuals (essentially just a biz that provides a service such as retail or dental services). Comprised of Quaternary and Quinary industry sectors

Quaternary

Services that involve the transfer and processing of information + knowledge (i.e. education, computing, finance)

Quinary

Services that traditionally take place in the home (domestic) (i.e. hospitality, cleaning, gardening)

Purchasing existing biz establishment option + characteristics

Purchase of an already established/existing biz + everything associated with it (as per contract/agreement).

Franchising establishment option

Franchise pays for the right to use established biz’s name + biz formula (i.e Maccas)