Year 11 Business Studies

a business

an enterprise; an organisation which supplies goods or services or achieves a specific result

public sector

government controlled organisations, central or local, which supply goods or services either for a profit or not-for-profit

private sector

businesses owned and controlled by individuals, which sell goods or services, usually for profit

inputs

resources

outputs

goods and services

factors of production

land, labour, capital, enterprise

labour

human input, both mental and physical

capital

finance and machines, roads, transport and buildings which human beings have created in order to produce other goods and services

primary industry

the collection or extraction of natural resources

secondary industry

involves the transformation of raw materials into goods.

tertiary industry

the service sector, which provides services to the general population and businesses, including retail, sales, transportation and restaurants

quaternary industry

services that involve the transfer and processing of information and knowledge, such as education, IT, banking, real estate, office work, film and theatre

quinary industry

services that have traditionally been performed at home, such as gardening, cleaning, unpaid work, childcare, accommodation, and domestic services

value added

the difference between the price of the finished goods/service and the cost of inputs involved in making it

small businesses

a business with fewer than 20 employees

sole trader

a business owned and operated by one person, which does not need to be registered, and with unlimited liability

partnership

a business owned and operated by two or more people, with shared capital investment and shared responsiblities, and unlimited liability

unlimited liability

the debts of the business and also the debts of the owners, as they are considered by law to BE their businesses

company

a business with limited liability, that is a separate legal entity from the people who have a financial interest in it, such as shareholders

shareholders

the people who have a financial interest in the business, who are taxed separately from the company on the income they receive from it.

Ltd

limited liability, whereby shareholders cannot be taken to court for settlement of company debts

company trading name

the name the business trades under, which is often different to its legal name

private limited companies

shares are owned by a single shareholder or within a private group, such as a family, which enables shareholders to retain control

public limited companies

members of the public can invest in the company as shareholders, as their shares are publically listed on the stock exchange

franchise

a licence for a person to operate the business in exchange for a fee and/or profit share, such as McDonalds

entrepreneur

a person who organises, operates, and assumes the risk for a business venture

characteristics of an entrepreur

creative, innovative, flexible, risk taker, initiative

innovation

making new inventions into marketable products, or improving the efficiency of existing businesses and ways of increasing profits

business aim

a long term goal, which describes what the business wants to do

mission statement

how the business aims are communicated to stakeholders

stakeholders

anyone with a vested interest in the business e.g. customers, directors, suppliers, Inland Revenue

objectives

break down the business aims into SMART goals

SMART objectives

goals which are specific, measurable, achievable, relevant, and timed e.g. to increase the number of customers by 20%

aim

a long term goal which describes what the business wants to be or do e.g. to expand the business into the Auckland market

four main financial goals of a business

profit, increase market share, growth, survival

The number of small businesses which fail in their first five years

70%

social goals

goals which have a positive influence on the community; acting in an ethical manner e.g. to foster pride and maintain Maori culture, language and arts

market research

the process of finding out about the needs of consumers and the activity of competitors

primary research

field research; collecting new data first-hand e.g. interviews, surveys, focus groups

secondary research

desk research; assessing existing data that has been collected for a different purpose

target market

the characteristics of a business' potential customers e.g. age, gender, income level, interests, family status, employment, location, etc

external influence

includes those factors over which the business has little to no control, such as government policy, technology, economic conditions and social attitudes

economic influences

relate to the factors in economic activity of a region, country or the world, this includes interest rates, unemployment, exchange rates and inflation

Information on Economic growth contribution to businesses

• economic growth

•  inflation trends

•  average weekly trends

•  consumer confidence

• interest rates

•  consumer spending

Financial Influences

Deregulation of Australia’s financial system resulted in a flexible, market-oriented approach across the financial sector

Geographic influences

refer to the effects climate, natural resources, topography, physical infrastructure and location have on a business

Social Influences

are values and beliefs held by people in a particular society, affecting the way people behave

Environmentally conscious

Environmental sustainability means that business operations should be shaped around practices that consume resources today without compromising access to those resources for future generations.

Workplace diversity

Requiring businesses to effectively manage employees diversity and cater for their specific needs. A business that becomes known as fair and equitable will also have a better chance of attracting and retaining staff.

Legal influences

are laws passed that require businesses to stop or start doing something

Political Influences

Politics lead to business uncertainty or business confidence. As governments at all levels in Australia regularly face elections, there is an element of politics in most major issues that affect the business environment.

Institutional Influences

1. Government, 2. Regulatory, 3. Other institutions

Technological issues

relate to the growing use of tools, techniques or systems by businesses to solve problems or to serve a purpose in operations

Competitive situation Influences

Competition between businesses to be the ‘market leader’ or to win customer loyalty can benefit the consumer and the business.

Sustainable competitive advantage

refers to the ability of a business to develop strategies that will ensure it has an ‘edge’ over its competitors for a long period of time

Factors influencing business competitiveness

Number of competitors

Ease of entry

Local and foreign competition

Market Influences

Changes in financial/capital

Changes in labour markets

Changes in consumer markets 

Internal influences

 products, location, resources, management and business culture 

Product Influences

Product influences affect a range of internal structures and operations within the business.

Location Influences

The choice  location is one of the most important decisions business owners will have to make.

Location choice factors

visibility

cost

proximity to customers

proximity to suppliers

support services

Resource influences

human resources

information resources

physical resources

financial resources

human resources

These are the employees of the business and are generally  its most important asset.

 information resources

These resources include the knowledge and data required by the business such as market research, sales reports, economic forecasts, technical material and legal advice.

 physical resources

which include equipment, machinery, buildings and raw materials.

financial resources

which are the funds the business uses to meet its obligations to various creditors.

Management influences

A manager’s style is essentially their way of doing things — their behaviour and attitude when making decisions, when directing and motivating staff to undertake set tasks, and when implementing plans to achieve business objectives.

stakeholders

the people and groups that interact in some way with the business and have a vested interest in its activities.

cash flow

the money coming into the business in the form of cash

receipts, and the money leaving the business as cash payments

the establishment stage

the first stage

The overriding concern is to get the business on a solid foundation.

requires enough sales to be generated to bring in the much needed income,

challenges faced in the establishmebnt stage

survival, and setting a firm foundation for future growth

undertake inexpensive promotion strategies

establishing a customer base

high fixed costs

lack of money

growth stage

Sales increase, and the cash flow is normally positive. A customer base has been established, with regular clients accounting for a large percentage of total sales.

feature and challenges in the growth stage

to constantly increase the average level of sales

development of new products to satisfy market

production costs tend to decrease due to economies of sale

merger

when the owner of two separate businesses agree to combine their resources and form a new organisation

maturity stage

This third stage of the business life cycle presents unique challenges to the owner. It requires a significant reevaluation of how the business should be operated to ensure survival.

features and challenges of the maturity stage

market saturation, market hardening

rate of growth slows and eventually plateaus

if costs are not able to be controlled, then the cash flow position starts to deteriorate

Post maturity stage

the final stage

the 3 possible outcomes in the post-maturity stage

1. Steady state

2. decline

3. renewal

challenges in the post maturity stage

cash flow may decline in the short term as money is spent on research and development of new products and markets

anticipated sales may not eventuate due to inaccurate forecasts, poor timing or inappropriate marketing strategies.