Business studies - end of year

Every chunk

What is a business?

An organisation that attempts to satisfy the needs and wants of the community by providing goods and/or services.

What percentage of all businesses in Australia are SMEs (small to medium enterprises)?

About 98%

Define 'goods' in a business context.

Tangible items that can be seen/touched, can be owned and transferred; value is ascertained by adding all costs and factoring in a margin.

Define 'services' in a business context.

Intangible things done to you by others; cannot be owned; production and consumption happen simultaneously; value is subjective.

What share of Australia's GDP does the services sector represent?

About 70% of GDP, employing four out of five Australians.

Define profit.

The money earned by a business when its total revenue exceeds its total expenses.

What is the formula for profit?

Revenue (sales) – Expenses = Profit

Define employment (as a role of business).

An agreement between an individual and another entity that stipulates responsibilities, payment terms, and workplace rules, recognised by government.

What is the difference between a wage and a salary?

A wage is paid hourly/daily/weekly and may vary; a salary is a fixed regular payment, often paid fortnightly/monthly but expressed as an annual sum.

How does business income differ from business owner income?

Business income (money earned selling goods/services) isn't automatically the owner's income — expenses must be deducted first; remaining profit becomes the owner's income (or is distributed to shareholders as dividends in a company).

Define choice (as a role of business).

The act of selecting among alternatives; businesses provide consumers freedom of choice and the opportunity to buy a variety of products at competitive prices.

Define innovation (as a role of business).

Creating a new product, service or process, or significantly improving an existing one.

What is a patent and why is it relevant to innovation?

Legal protection for the exclusive right to commercially exploit an invention; required to protect innovative ideas from being copied, though it involves high costs.

Define entrepreneurship.

The ability and willingness to start, operate and assume the risk of a business venture in the hope of making a profit.

Define risk (in a business context).

The possibility of loss.

Define wealth (as a role of business).

The value of assets and resources accumulated by individuals, businesses and governments over time; in business it includes profits, investments, retained earnings and business assets.

What is the formula for wealth?

Wealth = Assets – Liabilities (A – L)

Define quality of life (as a role of business).

The overall wellbeing of an individual and satisfaction of employees, customers and stakeholders — a combination of material and non-material benefits.

Define Corporate Social Responsibility (CSR).

A business's commitment to operate ethically, legally and sustainably while considering its impact on society, the environment and the economy.

What is the Triple Bottom Line and what does it measure?

A CSR framework measuring business performance in three areas: Profit (economic sustainability), People (social responsibility), and Planet (environmental responsibility).

What are the four main ways businesses are classified?

Size (SME/large), geographical spread (local/national/global), industry sector (primary/secondary/tertiary/quaternary/quinary), and legal structure (sole trader/partnership/private company/public company/government enterprise).

Define an SME.

A business that is independently owned and operated, employs fewer than 200 people, has a relatively small market share, and is closely controlled by its owners/managers.

What is meant by 'geographical spread' of a business?

The distribution of business operations across different geographical locations within a country or across multiple countries — categorised as local, national, or global.

What defines a 'global' business in terms of geographical spread?

Has branches in more than one country and has finance, assets, technology, information, employees and products flowing freely across country borders.

What must a business do once it hits market saturation in a national market?

Export, in order to keep expanding into new (global) markets.

What is a sole trader?

A business owned and operated by one person, who is the same legal entity as the business.

What is 'unlimited liability'?

Where the business owner(s) are personally liable for all business debts — personal assets can be used to pay business debts.

How many owners can a partnership have, and what are the exceptions?

Normally 2–20 people; exceptions include doctors/stockbrokers (up to 50), vets/architects/chemists (up to 100), and solicitors/accountants (up to 400).

Do partnerships require a written partnership agreement?

It is advisable but not legally required.

What is a silent/limited partnership?

One where certain partners provide capital with an expectation of profit but are not directly involved in managing the business.

Define a company (as a legal structure).

A legally recognised business entity separate from its owners, with its own legal identity — it can own assets, enter contracts, sue and be sued, and gives shareholders limited liability.

What is incorporation?

The process a company goes through to become a registered company and a separate legal entity.

Define limited liability.

A feature of corporate ownership that limits each owner's financial liability to the amount of money they paid for the business's shares.

What are the key characteristics of a private company in Australia?

1–50 private shareholders (members); limited by shares; not publicly traded; ownership transfer requires agreement from all shareholders; must use 'Pty Ltd' after its name.

What are the key requirements of a public company in Australia?

At least one shareholder (no maximum); no restrictions on share transfer/public share offers; must issue a prospectus when first selling shares; minimum 3 directors (2 must live in Australia); must use 'Limited'/'Ltd' in its name; must publish audited financial statements yearly.

What is a prospectus?

A formal 'offer document' filed with ASIC that provides details about an investment (share) offering to the public, to help investors make informed decisions.

Define a Government Business Enterprise (GBE).

A government-owned company established by an Act of Parliament that operates commercially, aiming to deliver essential services, generate government revenue, and support economic growth.

How many GBEs currently exist in Australia?

Nine.

Define privatisation.

The process of transferring (selling) ownership of a government business to the private sector (individuals or companies).

Give three examples of privatised Australian companies.

AUSSAT (now Optus), Qantas, CBA, Telstra, or Sydney Airport (any three).

What three factors influence a business's choice of legal structure?

Size, ownership, and finance.

How does 'size' influence choice of legal structure as a business grows?

Businesses typically start as sole traders; as sales grow they may become a partnership or private company to raise capital; rapid expansion may favour a private company for limited liability; continued growth may lead to becoming a public company via a share float/prospectus.

How does 'ownership' influence choice of legal structure?

Complete control = sole trader; shared ownership = partnership; high control + limited liability = private company; public company ownership relates to number of shares held (50%+ needed to retain control).

How does 'finance' influence choice of legal structure?

Sole traders/partnerships often struggle to obtain capital as banks see them as high risk; venture capital (an investment firm taking equity) can be a solution.

What are the external influences on a business (as per the syllabus)?

Economic, financial, geographic, social, legal, political, institutional, technological, competitive situation, and markets.

What are the internal influences on a business (as per the syllabus)?

Products, location, resources, management, and business culture.

What happens to sales during a period of economic boom vs contraction?

Boom periods bring increased sales/business activity; contraction periods bring decreased business activity.

List the characteristics of an expansionary economic period.

Higher employment, inflation may increase, wages increase, and consumer spending increases.

List the characteristics of a contractionary economic period.

Unemployment rises, inflation may remain stable or fall, wages are less likely to rise, and consumer spending usually decreases.

How does an increase in interest rates (monetary policy) affect businesses?

Higher rates lower demand for goods because consumers pay more interest on borrowed funds, reducing business production.

How does an increase in taxes (fiscal policy) affect businesses?

Increased taxes reduce demand for goods, leading to less business production and lower profits.

Define deregulation and its effect on business finance.

The removal of government regulation from industry to increase efficiency and competition; it has improved businesses' financial state by making borrowing easier, including overseas.

Define globalisation.

The spread of products, technology, information and jobs across nations — people, goods, money and ideas move around the world faster and more cheaply.

What is demography?

The study of particular features of a population, including size, age, sex, income, cultural background and family size.

How do changing Australian demographics affect business (e.g. Baby Boomers)?

Australian 'Baby Boomers' (born 1946–1964) reaching retirement age has significant consequences for changing customer needs and business opportunities.

Define social influences on business.

Factors in society which alter consumer trends and spending habits, such as changes in tastes, fashions and cultural values.

Define resources (as an internal influence).

The inputs into the production process; when combined, they produce goods and services.

What are the four main resources available to a business?

Human resources (employees), information resources (knowledge/data), physical resources (equipment, machinery, buildings, raw materials), and financial resources (funds).

Define management (as an internal influence).

The process of planning, organising, controlling and coordinating resources to achieve specific goals and objectives effectively and efficiently.

Compare hierarchical vs flatter organisational structures.

Hierarchical: at least 3 levels of management, direct chain of command, senior management makes decisions passed down, tends to be autocratic. Flatter: few or no levels of middle management, flexible/adaptable, tends to be democratic/participative.

Define business culture.

The values, ideas, expectations and beliefs shared by members (managers and employees) of an organisation, reflected in its policies, goals, slogans and unwritten/informal rules.

What is 'best practice' in relation to business culture?

The way the most competitive businesses in the industry do things — involving efficiency, quality production and high customer service.

Name the four elements of business culture.

Values, symbols, rituals/rites and celebrations, and heroes.

Define a stakeholder.

Any group or individual who has an interest in or is affected by the activities of a business.

List the 7 groups of stakeholders covered in this course.

Shareholders/Investors, Customers, Employees, Suppliers/Vendors, Communities, Government, Environment.

What is a business's responsibility to shareholders/investors, and their influence on the business?

Responsibility: ensure a fair and regular return on investment. Influence: without them, businesses can't raise capital; they have voting rights on major decisions.

What is a business's responsibility to customers, and their influence on the business?

Responsibility: ensure product/service quality and value. Influence: essential source of revenue; reviews affect business reputation.

What is a business's responsibility to employees, and their influence on the business?

Responsibility: provide salary/wages, job security and workplace safety. Influence: provide skill, knowledge and labour that impact productivity, profitability and sustainability; can be the 'face' of the business.

What is a business's responsibility to suppliers/vendors, and their influence on the business?

Responsibility: pay on time, honour contracts, ensure a safe supply chain. Influence: provide materials/products/services that enable the business to operate.

What is a business's responsibility to communities, and their influence on the business?

Responsibility: minimise health risks, ensure safety, sustainably enhance economic development/jobs. Influence: provide resources/support, build brand awareness, and hold the business accountable.

What is a business's responsibility to government, and their influence on the business?

Responsibility: pay taxes and contribute to GDP. Influence: set regulation and laws around business practices.

What is a business's responsibility to the environment, and its influence on the business?

Responsibility: consider environmental impact and operate sustainably. Influence: environmental regulations and policies must be adhered to.

Define ecological sustainability.

A company's ability to use natural resources at its current pace without depleting the resources it relies on — meeting present needs without compromising future generations' needs.

What is the Business Life Cycle (BLC)?

A model showing the progression of a business through stages of development over its lifetime: establishment, growth, maturity, and post-maturity.

What is the goal of the 'establishment' stage of the BLC, and what is the failure rate?

The goal is survival; around 33% of businesses fail in their first year.

List the features/challenges of the establishment stage.

Slow and erratic sales, high start-up costs, challenging cash flow management, and an emphasis on achieving market acceptance.

List the key features of the growth stage of the BLC.

Expanding customer base, rapid increase in sales/profits, positive but heavily outflowing cash flow, new products for new segments, increased hiring, stronger brand recognition, greater access to finance.

Define a merger.

When the owners of two separate businesses agree to combine their resources and form a new organisation.

Define an acquisition (takeover).

When one business takes control of another by purchasing a controlling interest in it.

What is the definition of an SME?

A small to medium enterprise with fewer than 200 employees OR an annual turnover of less than $250 million.

What quantitative measures are used to classify an SME?

Number of owners, number of employees, legal structure, market share.

What qualitative measures are used to classify an SME?

Source of finance, geographical spread, decision making, market domination.

Which measure does the ABS mainly use to classify SMEs?

Number of employees.

What percentage of the private sector workforce do SMEs employ?

About 70%.

What share of Australia's total exports do SMEs generate?

The majority of Australia's total exports.

What share of R&D spending is accounted for by SMEs?

About 20% of all money spent on Research & Development.

What share of all products produced per year are SMEs responsible for?

At least 50%.

Approximately what percentage/dollar value of Australia's GDP is contributed by the SME sector?

About 50%, approximately A$560 billion.

How many people do SMEs employ in Australia, and what percentage of private employment is this?

7.5 million people, representing 73% of private employment.

What are the key strategies for SMEs entering the global market?

Selling directly to overseas customers (via websites), marketing through a local distributor, forming a joint venture with a local business partner, and using innovative business models.

What proportion of SMEs fail within their first 5 years?

7 out of every 10 SMEs.

List common reasons for SME failure.

Failure to plan, lack of information, leadership crisis, inaccurate record keeping, incorrect marketing strategy, poor location, lack of financial planning, negative cash flow, new competitors.

What ABS statistic describes early SME failure?

1 in 4 businesses fail within their first year — about 80,000 Australian small businesses fail each year.

When is an unincorporated business declared a failure, versus an incorporated business?

Unincorporated: declared bankrupt (a legal process of distributing property among creditors). Incorporated: forced or voluntary liquidation.

What kind of financial assistance does government offer SMEs?

Grants and subsidies, especially targeting exporting, innovation, start-up and commercialisation, plus industry-specific grants (e.g. agribusiness, manufacturing, tourism).

List the 6 key steps in the business planning process.

1) Sources of Planning Ideas, 2) Vision, Goals and/or Objectives, 3) Organising Resources, 4) Forecasting, 5) Monitoring and Evaluations, 6) Taking Corrective Action.

Define a business plan.

A written statement of the business's goals and the steps to be taken to achieve them; it should be flexible and regularly reviewed.

List the benefits of having a business plan.

Identifies strengths/weaknesses, forces justification of owners' plans, tests business viability, helps be proactive rather than reactive, maintains focus on goals.

Define a situational analysis.

A collection of methods managers use to analyse a business's internal and external environment (e.g. SWOT analysis).

What does SWOT stand for and what does each part analyse?

Strengths and Weaknesses = internal factors the business can control; Opportunities and Threats = external factors outside the business's control.