Business Unit 1 exam revision

Entrepreneurship

The process of establishing a business to satisfy a need in the market whilst taking on the associated risks.

Personal motivations behind starting a business

• financial independence

• the freedom to be one’s own boss

• pursue a passion

• fulfillment of a social need.

Characteristics of successful managers

Successful Managers:

Communication

Determination

Knowledge

Strong ethics

Flexibility

Characteristics of successful entrepreneurs

Successful Entrepreneurs:

Taking calculated risks

networking abilities

determination

innovative qualities

resourcefulness

knowledge

How do these characteristics contribute to business success?

Communication - clear direction for employees, feedback and ability to provide support to improve employee roles. Enhances employer-employee relationship.

Determination - hardworking and perseverance for goals.

Knowledge - Enables decisions to be made that is in the best interest of the business when change needs to occur.

Strong ethics - Ensures employees, customers, suppliers, and the environment are treated well along with attracting more customers.

Flexibility - able to adapt to situations with ease.

Sources of business opportunity

Innovation

Recognising and taking advantage of market opportunities

Changing customer needs

Research and development

Technological development

Global markets

Importance of goal setting and decision making in business

Goals provide a business with purpose and direction. Establishing goals allows employees and managers to work towards a set of shared targets over a period of time.

Importance of business concept development

It translates an idea into a tangible, testable, and understandable form, allowing for informed decisions and a clearer understanding of the business’s value proposition.

The relationship between business opportunity and business concept development

A business concept is developed by a prospective business owner after an idea has arisen from an assessment of possible business opportunities.

Market research

Market research is the process of investigating and analyzing the activities and behaviors of customers and competitors in a specific industry.

The market research process aims to gather quantitative and qualitative data that can provide potential business owners with greater understanding of the viability of their business idea.

Examples:

• Surveys ​

• Interviews​

• Focus groups​

• Customer observation

Initial feasibility studies

An initial feasibility study is a researched evaluation of how viable a business concept is.

It informs potential business owners of what they should consider and the risks involved when starting up a business. Along with this it can determine if they want to establish their business.

The contribution that businesses make to the economic and social wellbeing of a nation

Businesses significantly contribute to both the economic and social wellbeing of a nation through various means, including job creation, economic growth, innovation, and social responsibility.

The methods by which a culture of business innovation and entrepreneurship may be fostered in a nation.

A nation can foster a culture of business innovation and entrepreneurship through a combination of government policies, educational initiatives, and community support.

Key elements include government investment in research and development, educational programs that encourage entrepreneurial thinking, access to funding and mentorship, and the creation of supportive networks and hubs. 

The relationship between the internal environment and the external environment.

The internal and external business environments affect each other. A business can control and plan for its internal environment, which helps it manage its impact on the outside world. However, it cannot control external factors like the economy, laws, or competitors. These outside changes can strongly affect how the business operates. To stay competitive, a business should plan for possible external changes and be ready to adapt.

Types of businesses

• Sole trader - Individual owner

• Partnership - 2 - 20 owners

• Private limited company - incorporated business with up to 50 shareholders

• Public listed company - incorporated business with unlimited shareholders

• Social enterprise - aims to fulfil a social or environmental need through selling products

• Government Business enterprise - businesses owned and operated by the government.

Types of business

Online business - trade products via the internet

Direct to consumer - products sold directly to the consumer

Bricks and mortar - physical store

Franchise - franchisees permission to operate under another business’s name, use its business systems, and sell its products.

Importers - buy products overseas and sell them in their home country

Exporters - produce products in their home country and sell them to buyers overseas

Costs and benefits of purchasing an existing business compared with establishing a new business.

Both purchasing an existing business and establishing a new business have their own advantages and disadvantages. Starting a new business requires the owner to make decisions on various factors, such as location, employees, and suppliers. However, these are already set up when buying an existing business.

Business resource needs

Natural - Raw materials from the environment (wood)

Labour - skills from the people (employees)

Capital - Man-made goods (tools)

Factors affecting the use of business resources

Natural: Supplier considerations, nature of resources, CSR

Labour: Cost, quality, CSR

Capital: Supplier considerations, nature of resources, CSR

Business locations

Shopping centres

Shopping strips

Home businesses

Online businesses

Factors influencing business locations

• Visibility and accessibility

• Cost

• Proximity to competitors

• Proximity to complimentary businesses

• Proximity to suppliers

• Proximity to customers

• Area demographics

• Laws and regulations

Sources of finance available to establish a business

• Equity capital is money provided by an investor in return for partial ownership of the business.

• Debt capital is money that has been borrowed from an external source.

• Grants are money awarded by a government or another organization for a specific purpose.

• Overdraft facilities are agreements between banks and businesses or individuals that allow a bank account to be withdrawn below zero.

Factors affecting the type and source of finance

Overall cost, flexibility, level of control, and business structure

Business support services

• Legal support services ensure that a business meets all of its legal requirements.

• Financial support services assist in managing a business’s finances.

• Technological support services assist in managing and implementing the technologies available to businesses.

• Community-based support services assist in engaging businesses with the community.

• Formal networks are official and professional interconnected groups of people and businesses.

• Informal networks are unofficial interconnected groups of people that offer advice to business owners.

• Business mentors are experienced individuals who can assist in providing expert advice and feedback.

Planning analysis tools to assist in determining the strengths and weaknesses of decisions regarding changing internal factors. 

SWOT Analysis

• Strengths

• Weaknesses

• Opportunities

• Threats

Overview of business plans, including the benefits of using them

Business planning can help ensure that the business's vision aligns with its objectives and strategies that it sets out to achieve. A business can utilise many methods to plan for business success.

• A business plan includes many different features and has the purpose to provide a clear direction for the achievement of business goals.

Outline of business plan key features

• Executive summary

• Business brand

• Business owners

• Product

• Operations plans

• Marketing plan

• Financial plan

• CSR

• Supporting documents

CSR considerations and business planning

Corporate social responsibility (CSR) is the ethical conduct of a business beyond legal obligations, and the consideration of social, economic, and environmental impacts when making business decisions.

To be socially responsible, businesses should carefully plan their CSR (Corporate Social Responsibility) activities. They should talk to their stakeholders—such as customers, employees, and the community—to understand what matters to them. This can be done through meetings and market research.

To build good relationships, businesses need to be honest and transparent about their CSR efforts. Since CSR decisions can affect how a business uses its resources, regular review and planning are important.

By showing a strong commitment to doing the right thing, businesses can build a good reputation and stay competitive.

Macro factors

Macro factors are social, legal, technological, and economic conditions that a business operates in and has no control over.

Operating factors

Operating factors are the primary external factors impacting a business that it has some control over.

• Customer needs and expectations

• Competitors behavior

• Special interest groups

• Suppliers and the supply chain

Overview of key legal and government regulations affecting businesses in the planning stage.

• Employment laws and regulations

• Council regulations

• Environmental legislation

• Taxation requirements

• Industry regulations

Societal attitudes and behaviours 

Societal attitudes are the collective values, beliefs, and opinions held by a group of people.

Societal behaviour is the way people act and respond in various situations.

Economic considerations

• interest rates, which determine the cost of borrowing. •

employment levels, which can influence the availability of potential employees and the wage required to attract them.

• tax rates, which are an expense of all businesses, but depend on business size and structure.

• consumer confidence levels, which can indicate the degree to which consumers are willing to spend on goods and services.

Technological considerations

Technological considerations in business involve evaluating how new technologies can impact various aspects of a business, from operations and productivity to customer experience and innovation.

Global considerations

When planning a business, the owner should address a number of global considerations as they can significantly impact business decisions.

• Overseas competitors are rival businesses located in different countries that sell similar products to customers.

• Overseas markets are markets that are located in another country where a business may be interested in selling its goods and services.

• Offshoring labour involves moving a business’s services or processes to another country to gain access to cheaper labour and minimise business expenses.

• Exchange rates are the relative price at which the currency of one country can be exchanged for the currency of a different country and can impact a business’s decision to sell its products in each country.

• Online sales involve buying and selling goods and services via the internet, allowing local and global markets to be reached with ease.

Corporate social responsibility considerations related to business planning

CSR matters because it can help a company build a positive reputation, improve employee engagement, attract and retain customers and investors, and even boost financial performance.

Customer needs and expectations

It is important for a business owner to identify and consider customer needs and expectations when planning a business. A customer need is an essential requirement that customers intend to fulfil when purchasing a product, whereas a customer expectation is the perceived value that customers seek when purchasing a product from a business. By considering customer needs and expectations, a business can maintain a positive reputation and is likely to experience higher levels of customer satisfaction, customer retention, and sales.

Competitors behavior

When planning a business, a business owner must consider the actions of both local and overseas competitors. Business owners should ensure they spend time investigating the strengths, weaknesses, pricing strategies, and product offerings of their competitors before establishing a business. Businesses should be quick to adapt and respond to changes in competitors’ behaviour in order to stay relevant in the market and maintain a competitive advantage.

Suppliers of business resources AND considerations regarding the supply chain.

A business owner should ensure they plan what resources the business will require, where the resources will be sourced from, and how they will be retrieved. There are various operating factors that can affect decisions made by a business owner when planning a business.

• Suppliers are individuals or businesses that provide the resources required to produce goods and services.

• The supply chain is the network of individuals or businesses that are involved in producing and distributing a good or service to customers.

A business should be aware of both sourcing and retrieving considerations when establishing its supply chain, which relates to where it finds its resources from and how it transports these resources.

Special interest groups

Organisations or a group of people that seek to influence laws, policies, or behaviours to benefit a specific cause.