AOS 1- The business idea

Entrepreurship

The activity of setting up a business or businesses, taking up on financial risks in the hope of profit

entrepreneurial skills

risk-taking skills, leadership skills, innovation skills, communication skills, decision-making skills, networking skills

Risk-taking skills description

An entrepreneur who is a risk taker is prepared to risk their money, time, and career to run their business despite the possibility of failure.

Risk-taking importance

An entrepreneur may gain more access to more opportunities that can help their business grow and become competitive

Leadership skills description

An entrepreneur who demonstrates good leadership skills will share the business's vision with their employees to inspire, support and persuade them to share this vision

Leadership skills importance

Providing employees with a clear picture of what the business is hoping to achieve in the future will likely motivate and encourage employees to work towards achieving this vision.

Innovation skills description

An entrepreneur who has good innovation skills is able to develop new ideas and processes, as well as find new approaches to problems that may arise.

innovation skills importance

can allow a business to distinguish itself from its competitors, or to develop new practices that improve the business's operations.

communication skills description

good communication skills can clearly transfer information to employees and other relevant people, both internal and external to the business.

Communication skills importance

provides a clear vision and direction for employees. It also allows the entrepreneur/manager to listen to feedback from employees which may lead to changes that benefit the business and its operations.

Decision making skills description

is able to select a suitable course of action from a range of plausible options.

Decision making skills importance

The process of starting and running a business will constantly require decisions to be made. Therefore, being able to select the best possible option from a range of alternatives is essential to business success.

Networking skills description

is able to develop business contacts that can provide assistance in the future.

Networking skills importance

can allow individuals outside of the business to offer their support and expertise in particular areas, therefore benefiting the business.

Manager

An individual who has the responsibility of overseeing and handling employees whilst, also running day-to-day business tasks to achieve objectives

Characteristics of successful managers

Communication skills, determination, knowledge, strong ethics, flexibility

determination description

Individuals who are hardworking and focused on achieving specific goals.

Determination contribution to business

driven to put in the significant amount of work required to develop a new business, and effectively plan a business's direction or day-to-day activities

Knowledge description

understanding of the environment they operate in and how to perform the relevant business tasks.

Knowledge contribution to business, manager

enable a manager to choose a course of action that is in the business's best interest when change needs to occur

Strong ethnics description

possessing strong moral values and acting in accordance with these values by engaging in morally-conscious behaviour.

Strong ethnics contribution to business

ensure that all employees, customers, suppliers, and the environment are treated well. The ethics of a business is also becoming a growing concern and consideration of potential customers

Flexibility description

Being able to adopt to situations with ease

Flexibility contribution to business

being able to adapt and change the business's strategy when required, in order to achieve the best outcomes for a business.
As society rapidly changes and customer demands continue to evolve, being able to quickly adapt plans is essential for a business's survival.

Characteristics of successful entrepreneurs

willingness to take calculated risks, strong networking ability, determination, innovative qualities, resourcefulness,knowledge

Willingness to take calculated risks description

to be able to consider and choose when to take appropriate risks, even when the outcome may be failure.

willingness to take calculated risks contribution

gain access to more opportunities that can help their business grow and become competitive.

Strong networking ability description

involves being sociable and helpful so that you can develop business contacts and support networks.

Strong networking ability contribution

allow for individuals outside of the business to offer their support and expertise, which can benefit a developing business.

resourcefulness description

the ability to overcome problems using what's currently available

resourcefulness contribution

can help their business minimise its costs and be as profitable as possible, especially in the developing stages

Motivation to start a business

desire for independence-financial or personal, to make a profit, to fulfil a market need, to fulfil a social need

Personal independence

a person being in control of their own decisions and actions. Have the desire to have full control over their job and be their own boss.

Financial independence

The ability to fund a desired lifestyle without relying on income from another individual.

To make a profit

Involves a business generating more revenue than expenses it incurred.

To fulfil a market need

When a business fills a gap in the market by addressing customer needs that are currently unmet or underrepresented by competitors in the same industry.

To fulfil a social need

Improving society and the environment through business activities.

A business

an organisation where goods and/or services are exchanged for money

Sole trader

A type of business owned by one person

sole trader advantages

- entitled to keep all profits
- owner has full control and decision-making power
- Cheap and simple setup costs

Sole trader disadvantages

- Unlimited liability
- No perpetuity
- Knowledge and skills limited to one owner

Unlimited liability

The owner is personally and fully responsible for all losses and debts of the business

Sole trader examples

Plumbers, hairdressers, and newsagents

Partnership

A type of business owned by 2-20 people

Partnership advantages

- Cheap and simple setup costs
- Greater range of expertise and ideas among partners
- owners share workload

Partnership Disadvantages

- Unlimited liability
- Conflicts could arise between partners due to decision making
- profit needs to be shared

Partnership examples

Law firms, Medical practices, Ben & Jerry's

Private Limited Company (Ltd)

A type of business with 1-50 shareholders with at least one director
shares are offered to people who wish to own a part of the business

Shareholder

A person or institution that has invested money in a corporation in exchange for a "share" of the ownership

Private limited company advantages

- Limited liability
- greater variety of expertise and ideas
- perpetuity

Limited liability

business entity that prevents individuals from being liable for the company's financial losses and debt liabilities

Private limited company disadvantages

- expensive and complex to set up
- Difficult to change structure once a company has been established
- Increased reporting requirements and government regulation

Private limited company examples

7-eleven, cotton on group, meriton

Public listed company

A type of business with a unlimited number of shareholders, and whose shares are freely traded on a stock exchange

Public listed company advantages

- Limited liability
- Greater access to expertise and ideas as more people are involved
- No permission needed to sell shares

Public listed company disadvantages

- Expensive and complex to set up
- Conflicts could arise through decision-making between directors
- Complex reporting requirements such as financial reports that need to be published to the public

Public listed company examples

apple, qantas, myer

Social enterprise

A type of business owned by the founders of the business. The business will produce a good or service in pursuit of profit to fulfil an economic, social, or environmental need

A company

A business that has gone through the process of incoportation, and the owners are shareholders

Social enterprise advantages

- Easier to obtain a customer base
- Community benefits from the businesses activites

Social enterprises disadvantages

- Difficult to obtain high levels of finance from lenders
- May be difficult to obtain a bank loan

Social enterprise example

Thank You company,

Government Business Enterprise (GBE)

A type of business owned by the government which aims to provide an essential good or service to the public in pursuit of a profit

GBE advantages

-Perpetuity
- Delivers goods and services that help the community
-rely on government for initial investment

GBE disadvantages

- Time consuming and costly in reporting to government and decision making
- Have to follow significant 'red tape'- excessive rules

GBE examples

Auspost, VicRoads

Franchising definition

An agreement where franchisor (one party) grants or licences some rights and authorities to franchisee (another party)

How does Franchising work

Franchisor authorises the franchisee to sell their products, goods, services and gives the right to use their trademark and brand name.
In return, the franchisee pays a fee or commission to the franchisor as well as some share of their revenue

Franchisor Advantages

- The business can expand without incurring additional costs
- More recognition by the general community
- Always support from the franchisor

Franchisor Disadvantages

- does not possess direct control over the franchisee
- Has to give some profit to franchisor
- Cannot make all the decisions

Franchising examples

McDonalds, Starbucks, KFC

Business objective

The desired outcome that a business intends to achieve, within a specified period, that will guide the direction and strategies of the business

List of Business Objectives

To make a profit, to increase market share, to fulfil a market need, to fulfil a social need, to meet shareholder expectations, to improve efficiency

revenue

income earned from the sale of goods and services

Expenses

The costs of the business such as materials and wages

To increase market share

A business's portion of the total industry sales for a particular good or service expressed as a percentage compared to it's competitors

To meet shareholder expectations

Ensuring shareholders a return on their investment. Shareholders expect profit in the form of dividends

Dividends

Company's share profits to the shareholders based on the corporation's performance.
Dependent on the number of shares they own

Capital gains

when an individual sells a company's shares at a higher price than they initially purchased them for

To improve efficiency

how well the business uses their resources when producing a good or service

To improve effectiveness

The degree to which a business has achieved its objectives

Stakeholders

an individual or group who has a vested interest in the performance and activities of a business

Internal Stakeholders

Owners/shareholders, managers, employees

External Stakeholders

Customers, suppliers, general community

Owners- stakeholder

Individuals who establish, invest, and have a share in a business, with the goal of earning a profit from it's operations

Managers (stakeholders)

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

Employees (stakeholders)

Individuals who are hired by a business to complete work tasks and support the achievement of it's objectives

Customers (stakeholders)

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

Suppliers (stakeholders)

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

General community (stakeholders)

The individuals and groups who are impacted by a business's operations and decisions, often because they are near the business.

Owners interest

- Establishing and fostering positive relationships with other stakeholders to enhance business reputation and performance
- Receiving a return on their investment

managers interest

- Being recognised for the achievement of business objectives
- receiving appropriate wages and working conditions to reflect their managerial role

Employees interest

- Receiving fair pay and working conditions
- Opportunities to engage in personal and professional development (receive promotions)

Customers interest

Receiving high-quality goods and services at affordable prices

Suppliers interest

Earning a profit from the raw materials and resources they supply

General community

- Observing business activities that lead to improvements in the community and environment
- increasing local employment rate and boosting the local economy

Stakeholder conflict

When different stakeholder groups have different aims and objectives, which can be difficult for a business to satisfy at the same time.

Economic wellbeing

is reflected by the level of income, consumption, and wealth people or households have to support their material living standards

Economy

an area or region that engages in the production, consumption, and distribution of goods and services.

Economic wellbeing contributions

Employment opportunities, taxation revenue, infrastructure, economic growth, international trade, research and development