Business Definitions

Sole traders

a business structure that is owned and operated by one individual.

Partnerships

a business structure that is owned by two to 20 owners

Private Limited Companies

an incorporated business structure that has at least one director and a maximum of 50 shareholders.

Public Listed Companies

an incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX

Social Enterprises

a type of business that aims to fulfil a community or environmental need by selling goods or services

Government Business Enterprises

a business that is owned and operated by the government.

To make a profit

To increase market share

To improve efficiency

To improve effectiveness

To fulfil a market need

when a business fills a gap in the market, which involves addressing customer needs that are currently unmet or underrepresented by other businesses in the same industry.

To fulfill a social need

improving society and the environment through business activities.

To meet shareholder expectations

shareholders expect a return on their original investment. This financial return is through the payment of dividends or achieving capital gains.

Owners

individuals who establish, invest, and have a share in a business, often with the goal of earning a profit from its operations. In public listed and private limited companies, owners are known as shareholders.

Managers

individuals who oversee and coordinate a business’s employees and lead its operations to ultimately achieve the business’s objectives

Employees

individuals who are hired by a business to complete work tasks and support the achievement of its objectives.

Customers

individuals or groups who interact with a business by purchasing and utilising its goods and services

Suppliers

individuals or groups that source raw materials, component parts, and processed materials, and sell them to a business for use in the production of its goods and services

The general community

the individuals and groups who are impacted by a business’s operations and decisions, often because they are located in close proximity to the business.

Autocratic

involves a manager making decisions and directing employees without any input from them.

Persuasive

involves a manager making decisions and communicating the reasons for those decisions to employees without their input.

Consultative

involves a manager seeking input from employees on business decisions but making the final decision themselves.

Participative

involves a manager sharing information with employees so that employees can participate in decision-making.

Laissez-faire

involves a manager communicating business objectives to employees and giving them freedom to make decisions independently

Communication

the skill of effectively transferring information from one party to another.

Delegation

the skill of assigning work tasks and authority to other employees who are further down in a business’s hierarchical structure.

Planning

the process of determining a business’s objectives and establishing strategies to achieve these aims.

Leadership

the skill of motivating others in order to achieve a business’s objectives

Decision-making

the skill of selecting a suitable course of action from a range of plausible options.

Interpersonal

the skill of creating positive interactions with other employees, to foster beneficial professional relationships.

Real Corporate Culture

involves the shared values and beliefs that develop organically within a business, and are practised on a daily basis by its employees

Official Corporate Culture

involves the shared views and values that a business aims to achieve, often outlined in a written format.

Hierarchy of Needs (Maslow)

a motivational theory that suggests people have five fundamental needs, and their sequential attainment of each need acts as a source of motivation:

1. Self-actualisation needs — reach their full potential through creativity and personal growth.

2. Esteem needs — feel important, valuable, and respected.

3. Social needs — sense of belonging and friendship among groups, both inside and outside the workplace

4. Safety and security needs — protection from dangerous or threatening environments.

5. Physiological needs — basic requirements for human survival, such as food, water, and shelter.

Goal Setting Theory (Locke and Latham)

a motivation theory that states that employees are motivated by clearly defined goals that fulfil five key principles:

1. Clarity — specific, measurable, easy to understand

2. Commitment — employees want to complete the goal

3. Challenge — difficult enough to push employees to improve to achieve it

4. Task complexity — achievable for the employee

5. Feedback — support provided when needed, fixing mistakes and providing clarity

Four Drive Theory (Lawrence and Nohria)

a motivational theory that suggests that people strive to balance four fundamental desires:

1. acquire — rewards and high status

2. bond — participate in social interactions and feel a sense of belonging.

3. learn — gain knowledge, skills, and experience

4. defend — protect personal security as well as the values of the business

Performance-related pay

a financial reward that employees receive for reaching or exceeding a set business goal.

Career advancement

the upwards progression of an employee’s job position.

Investment in training

allocating resources to improve employee skills and knowledge.

Support strategies

providing employees with any assistance that improves their satisfaction at work.

Sanction strategies

penalising employees for poor performance or breaching business policies.

On-the-job Training

employees improving their knowledge and skills within the workplace.

Off-the-job training

employees improving their knowledge and skills in a location external to the business.

Management by objectives

both managers and employees collaboratively setting individual employee goals that contribute to the achievement of broader business objectives.

Appraisals

a manager assessing the performance of an employee against a range of criteria, providing feedback, and establishing plans for future improvements

Self-evaluation

an employee assessing their individual performance against a set of criteria.

Employee observation

a range of employees from different levels of authority assessing another employee’s performance against a set of criteria.

Retirement

an individual deciding to leave the workforce permanently as they no longer wish to work.

Redundancy

an employee no longer working for a business because there is insufficient work or their job no longer exists.

Resignation

an employee voluntarily terminating their own employment, usually to take another job position elsewhere.

Dismissal

the involuntary termination of an employee who fails to meet required work standards or displays unacceptable or unlawful behaviour.

Entitlement considerations

legal obligations an employer owes to its employees following the termination of their employment contract:

• Annual or long service leave

• Redundancy pay

• Notice of termination

• Justifiable reasons for employment termination

Transition considerations

social and ethical practices that a manager can consider implementing when terminating employment.

• offering resume writing or interview training to employees to improve their employability.

• providing networking support for employees in the form of contacts that they can use to gain future employment.

• providing flexible working hours that allow employees to attend interviews at other businesses.

• introducing counselling and financial services to ease the uncertainty of leaving the business.

• holding celebrations and providing recognition of the achievements of employees who are leaving the business.

• slowly reducing the working hours of retiring employees to help them adjust to a change in their lifestyle.

Human Resource Managers

individuals who coordinate the relationship between employees and management within a business.

Employer Associations

advisory bodies that assist employers in understanding and upholding their legal business obligations.

Unions

organisations composed of individuals who represent and speak on behalf of employees in a particular industry to protect and improve their wages and working conditions.

Fair Work Commission

Australia’s independent workplace relations tribunal that has a range of responsibilities outlined by the Fair Work Act.

Industry Awards

legal documents that outline the minimum wages and conditions of work for employees across an entire industry.

Enterprise Agreements

legal documents that outline the wages and conditions of employees and are applicable to a particular business or group of businesses.

Mediation

involves an impartial third party facilitating discussions between disputing parties to help each side of the conflict reach a resolution themselves.

Arbitration

involves an independent third party hearing arguments from both disputing parties and making a legally binding decision to resolve the conflict.

Inputs

the resources used by a business to produce goods and services.

Processes

the actions performed by a business to transform inputs into outputs

Outputs

the final goods or services produced as a result of a business’s operations system, that are delivered or provided to customers.

Manufacturing Business

use resources and raw materials to produce a finished physical good.

Service Business

provide intangible products, usually with the use of specialised expertise.

eg. Qantas

Automated Production Lines

machinery and equipment that are arranged in a sequence, and the product is developed as it proceeds through each step.

Robotics

programmable machines that are capable of performing specified tasks.

Computer-aided Design (CAD)

digital design software that aids the creation, modification, and optimisation of a design and the design process.

Computer-aided Manufacturing (CAM)

the use of software that controls and directs production processes by coordinating machinery and equipment through a computer.

Artificial Intelligence (AI)

using computerised systems to simulate human intelligence and mimic human behaviour.

Online Services

services that are provided via the internet.

Forecasting

a materials planning tool that predicts customer demand for an upcoming period using past data and market trends.

Master Production Schedule (MPS)

a plan that outlines what a business intends to produce, in specific quantities, within a set period of time.

Materials Requirement Planning (MRP)

a process that itemises the types and quantities of materials required to meet production targets set out in the master production schedule.

Just in Time (JIT)

an inventory control approach that delivers the correct type and quantity of materials as soon as they are needed for production.

Quality Control

inspecting a product at various stages of the production process, to ensure it meets designated standards, and discarding those that are unsatisfactory.

Quality Assurance

a business achieving a certified standard of quality in its production after an independent body assesses its operations system.

Total Quality Management (TQM)

a holistic approach whereby all employees are committed to continuously improving the business’s operations system to enhance quality for customers.

Reduce

a waste minimisation strategy that aims to decrease the amount of resources, labour, or time discarded during production.

Reuse

a waste minimisation strategy that aims to make use of items which would have otherwise been discarded.

Recycle

a waste minimisation strategy that aims to transform items which would have otherwise been discarded.

Pull

a lean management strategy that involves customers determining the number of products a business should produce for sale.

One-piece Flow

a lean management strategy that involves processing a product individually through a stage of production and passing it onto the next stage of production before processing the next product, continuing this process throughout all stages of production.

Takt Time

a lean management strategy that involves synchronising the steps of a business’s operations system to meet customer demand.

Zero Defects

a lean management strategy that involves a business preventing errors from occurring in the operations system by ensuring there is an ongoing attitude of maintaining a high standard of quality for the final output.

Lean Management

the process of systematically reducing waste in all areas of a business’s operations system whilst simultaneously improving customer value.

Corporate Social Responsibility (CSR)

the ethical conduct of a business beyond legal obligations, and the consideration of social, economic, and environmental impacts when making business decisions.

Global sourcing of Inputs

a business acquiring raw materials and resources from overseas suppliers.

Overseas Manufacture

a business producing goods or services outside of the country where its headquarters are located.

Global Outsourcing

transferring specific business activities to an external business in an overseas country.

Proactive approach to Change

when a business changes to avoid future problems or take advantage of an opportunity to gain a competitive advantage.

Reactive approach to Change

when a business undertakes change in response to a situation or crisis.

Key Performance Indicators (KPIs)

criteria that measure a business’s efficiency and effectiveness in achieving its different objectives.

Percentage of market share

measures the proportion of a business’s total sales, compared to the total sales in the industry, expressed as a percentage figure.

Net profit figures

calculated by subtracting total expenses incurred from total business revenue earned, over a specific period of time.

Rate of productivity growth

the change in the total output produced from a given level of inputs over time, expressed as a percentage figure.

Number of sales

the total quantity of goods and services sold by a business over a specific period of time.

Rates of staff absenteeism

the average number of days employees are not present when scheduled to be at work, for a specific period of time.

Level of staff turnover

the percentage of employees that leave a business over a specific period of time and must be replaced.

Level of wastage

the amount of inputs and outputs that are discarded during the production process.