Business Studies Prelim

Term

Content

Nature of a business

An organisation that produces goods and/or services to satisfy needs and wants. Businesses generate employment and income, provide choice, encourage innovation and entrepreneurship, create wealth and contribute to quality of life.

Role of business

Businesses produce goods/services, generate profit, provide employment and incomes, create choice, encourage innovation and entrepreneurship, take risks, create wealth and improve quality of life.

Entrepreneurship

The process of identifying an opportunity and taking initiative and risk to establish and develop a business.

Innovation

The development or introduction of new or improved products, services, processes or ideas.

Business risk

The possibility that a business decision will result in an undesirable outcome, such as financial loss.

Business classification

Businesses can be classified by size (SME/large), geographic scope (local/national/global), industry (primary/secondary/tertiary/quaternary/quinary) and legal structure.

SME

Small-to-medium enterprise. SMEs play an important role through employment, income generation, entrepreneurship, innovation, competition and economic growth.

Primary industry

Extracts or harvests natural resources, such as agriculture, fishing, forestry and mining.

Secondary industry

Processes raw materials and manufactures goods.

Tertiary industry

Provides services to consumers and/or businesses.

Quaternary industry

Knowledge and information-based activities, such as research, information technology and data services.

Quinary industry

High-level decision-making and specialised services, often involving senior government, business and community leadership.

Sole trader

A business owned and controlled by one person. Generally easy to establish but the owner has unlimited liability.

Partnership

A business owned by two or more people who share ownership, responsibilities, profits and losses.

Private company

A company privately owned by shareholders whose shares are not publicly traded.

Public company

A company whose shares can be offered to the public and traded on a stock exchange.

Government enterprise

A business owned and operated by government to provide goods/services or achieve public objectives.

Choosing a legal structure

The choice is influenced mainly by business size, ownership and access to finance.

External influences

Factors outside a business that affect operations and decision-making, including economic, financial, geographic, social, legal, political, institutional, technological, competitive and market influences.

Internal influences

Factors within a business that affect operations and decision-making, including products, location, resources, management and business culture.

Stakeholders

Individuals or groups with an interest in, or affected by, a business's activities.

Internal stakeholders

Stakeholders within the business, particularly owners, managers and employees.

External stakeholders

Stakeholders outside the business, including customers, suppliers, competitors, government and the community.

Stakeholder conflict

Occurs when the interests of different stakeholders are incompatible, requiring management to balance competing interests.

Business life cycle

The stages a business passes through: establishment, growth, maturity and post-maturity.

Establishment stage

The business is newly established and focuses on gaining customers, generating sales and surviving.

Growth stage

Sales, customers and market share increase, requiring expansion of resources and operations.

Maturity stage

The business is established and growth slows, often due to increased competition and market saturation.

Post-maturity stage

A business may maintain a steady position, renew itself or experience decline.

Business decline

Can result from poor management, increased competition, changing consumer preferences, technological change, poor financial management or changing economic conditions.

Liquidation

The process of winding up a company by selling its assets and using the proceeds to pay creditors.

Voluntary cessation

The business chooses to cease operating.

Involuntary cessation

The business is forced to cease operating, generally because it cannot meet its financial obligations.

Management

The process of planning, organising, leading and controlling resources to achieve business goals.

Effective management

Effective managers achieve business goals while using resources efficiently, communicating effectively, making decisions, adapting to change and balancing stakeholder interests.

Management skills

Interpersonal, communication, strategic thinking, vision, problem-solving, decision-making, flexibility and adaptability to change.

Interpersonal skills

The ability to interact effectively and build positive relationships with others.

Strategic thinking

The ability to consider the long-term direction of a business and respond to future opportunities and threats.

Vision

A clear statement of what a business wants to become or achieve in the future.

Business goals

Desired outcomes that provide direction for business decision-making, including profit, market share, growth, share price, social and environmental goals.

Staff involvement

Involving employees in business activities and decision-making, which can improve innovation, motivation, mentoring, training and performance.

Classical management approach

Focuses on planning, organising and controlling, with a hierarchical structure and autocratic leadership.

Hierarchical organisational structure

An organisational structure with different levels of authority, where responsibility and instructions flow through the organisation.

Autocratic leadership

A leadership style where the manager makes decisions with limited employee participation.

Behavioural management approach

Focuses on leading, motivating and communicating with employees, often using teams and participative/democratic leadership.

Participative/democratic leadership

A leadership style where employees are involved in decision-making and encouraged to contribute ideas.

Contingency management approach

Management strategies are adapted to suit changing circumstances and the specific situation.

Management approaches comparison

Classical focuses on structure and control; behavioural focuses on people and motivation; contingency focuses on adapting management to circumstances.

Management process

Coordinating key business functions and resources to achieve business goals.

Business functions

The four key functions are operations, marketing, finance and human resources. They are interdependent because decisions in one function affect the others.

Operations

The function responsible for producing goods and/or services and managing the production process.

Production process

The transformation of inputs such as materials, labour and resources into outputs of goods and/or services.

Quality management

Managing processes to ensure goods/services consistently meet required standards and customer expectations.

Marketing

The business function that identifies customer needs and develops strategies to satisfy the target market.

Target market

The specific group of consumers a business aims to sell its goods/services to.

Marketing mix

The combination of marketing strategies used to satisfy the target market: product, price, promotion and place.

Finance

The business function responsible for managing financial resources and financial performance.

Cash flow statement

Shows the movement of cash into and out of a business over a period.

Cash flow management

Managing cash inflows and outflows so the business has sufficient cash to meet financial obligations.

Income statement

Shows revenue, expenses and profit or loss over a period. It helps assess financial performance and profitability.

Balance sheet

Shows assets, liabilities and owner's equity at a particular point in time. It helps assess financial position.

Human resources

The business function responsible for managing employees throughout their employment.

Recruitment

The process of attracting and selecting suitable employees for a position.

Training

Developing employees' skills and knowledge to improve performance.

Employment contract

An agreement establishing the terms and conditions of employment between an employer and employee.

Voluntary separation

When an employee chooses to leave the business.

Involuntary separation

When employment ends because the business initiates the separation, such as through dismissal or redundancy.

Ethical business behaviour

Conducting business activities according to principles of fairness, honesty, responsibility and accepted standards of right and wrong.

Change management

The process of identifying, planning and implementing changes so a business can respond effectively to internal and external influences.

Resistance to change

Opposition from employees or stakeholders towards proposed changes, often caused by uncertainty, fear of job loss, disruption or increased workload.

Managing resistance to change

Resistance can be reduced through communication, consultation, employee involvement, training and support.

Business information systems

Systems used to collect, process, store and communicate information to support business operations and decision-making.

Management consultant

An external specialist who provides advice to help a business solve problems or improve performance.

SME success

Effective planning and management, adequate finance, skilled staff, competitive advantage, technology, strong customer relationships and the ability to adapt contribute to success.

SME failure

Poor management, inadequate finance, poor planning, insufficient market research, competition, over-extension of resources and failure to adapt can contribute to failure.

Personal qualities for establishing an SME

Qualifications, skills, motivation, entrepreneurship, cultural background and gender can influence establishment.

Sources of business information

Government agencies, industry associations, market research, financial institutions, professional advisers and other businesses can provide useful information.

Business idea

An idea for a product or service that could be developed into a viable business opportunity. Competition must be considered when assessing the idea.

Establishment options

A business can be established as a new business, through purchasing an existing business or through a franchise.

Franchise

A business arrangement where a franchisee operates using an established brand, business model and support provided by a franchisor.

Market considerations

An SME should consider the goods/services offered, price and location when establishing the business.

Finance considerations

An SME must consider the source and cost of finance required to establish and operate the business.

Legal considerations

An SME must consider its business name, zoning, health requirements and other relevant regulations.

Human resource considerations

An SME must consider required employee skills as well as wage and non-wage employment costs.

Wage costs

Direct payments to employees for their work, such as wages and salaries.

Non-wage costs

Other employee-related costs, such as superannuation, training and other employment expenses.

Taxation

SMEs must consider federal and state taxes as well as local rates and charges.

Business plan

A formal document outlining a business idea, goals, strategies, resources, operations and financial expectations.

Importance of a business plan

Provides direction, organises resources, assists with obtaining finance, identifies potential problems and provides a basis for monitoring performance.

Situational analysis

Analysis of the business's current internal and external environment before planning.

Business vision

A statement describing what the business wants to become or achieve in the long term.

Long-term growth

Increasing the size, sales, market share or operations of a business over an extended period.

Organising resources

Coordinating operations, marketing, finance and human resources to achieve business objectives.

Forecasting

Predicting future business outcomes using available information and assumptions.

Total revenue

The total income generated from the sale of goods and/or services.

Total cost

The total cost incurred by a business to produce goods/services and operate.

Break-even analysis

Determines the level of sales where total revenue equals total costs, meaning the business makes neither a profit nor a loss.

Cash flow projection

A forecast of expected cash inflows and outflows over a future period.

Monitoring

Regularly checking business performance against goals, budgets and plans.