Business Studies Syllabus Notes

Role of Business

Goods

• A tangible item that can be seen and touched. It involves production with inputs, machines and inventory management 

Services

• An intangible action that is performed by a person or machinery. It provides value or solves a problem for consumers 

• Inputs need to go through a transformation process to become an output (a good or a service)

Gross Domestic Product

• Countries aim for a positive, steady economic growth (the ability to produce more goods and services over time) 

• This is measured in GDP, either nominal (total dollar value of production) or real GDP (total volume of production) 

Profit 

• By adding value to inputs to create merchantable outputs, businesses generate profit. It is the surplus of revenue over costs.(Revenue - Costs = Profit/Loss)

Employment 

• Businesses provided employment by hiring skilled individuals to perform various activities

• Small businesses employ 66% of the workforce in Australia. 

Incomes

• Earnings derived from employment, investments or business ownership.

• Supports individual needs and drives consumer spending

• Salary: set amount that is paid throughout the year in fixed amounts 

• Wage: An amount which is paid per hour of work 

• Bonus: additional payment made to promote incentive in the workforce 

• Commission: A percentage of money earned from the sale of goods or services 

• Dividends: A sum (Percentage) of money paid from businesses to stakeholders

Choice 

• Businesses offer consumers a range of goods and services, increasing their ability to select products that suit their needs, preferences and budgets

• Businesses feel compelled to differentiate themselves, causing innovation and new goods and services.

Innovation

• Creating an improvement to an existing goods and/or service, 

• Leads to competitive advantages, cost reductions and societal benefits (environmental sustainability) 

Entrepreneurship and Risk

• An Entrepreneur is someone who transforms an original idea into a new business

• There are many risks, such as financial risk (when returns are less than expected, unable to pay debts), market risks (demand may not meet expectations due to poor targeting or competitor actions) and Environmental risks (natural disasters or climate change impacts, bushfires disrupting Australian vineyards)

• Canva disrupted traditional design industries by providing user friendly, affordable design tools. 

• Untapped markets - A market where demand has not been met yet, by an existing product

Wealth

• The total value of all assets owned by a person or business

Quality of life 

The overall wellbeing individuals encompassing both material and non-material aspects 

• Businesses enhance quality of life by providing products that meet the wants and needs of individuals 

• Businesses are vital to the economy as they provide; Employment and income 

Types of Businesses

Small to Medium Enterprises (Businesses) (SME) and large.

• Some ways to determine if a business is an SME is through the number of employees, number of owners, market share or legal structure

• A main way to determine the size of a business is the number of employees. Less than 200 employees classifies it into an SME, less than 5 being a micro business, less than 20 being small, and less than 200 being medium

• Market share refers to how a business is performing relative to its competitors. It is the percentage of total industry sales earned by a business over a specific period. 

• The ATO defines a small business for concession purposes, with a revenue turnover of less than 10 million.

• 99.8% of all businesses in Australia are small businesses, employing 66% of the total workforce. 

• Micro businesses have close community ties, are self-financed with limited resources and often lack formal systems and structures. 

• Small businesses lack certain costs, unable to buy machinery that may automate some processes.

Local, National and Global 

Industries - Primary, Secondary, Tertiary, Quaternary, Quinary 

*The final two are apart of Tertiary 

Sole Trader and Partnership (Unincorporated) 

General

• The owner/s and the business are the same entity - There is unlimited liability and the business does not continue after the owner/s die

• Unincorporated businesses are required to obtain an Australian Business Number (ABN) upon starting the business 

• They must also register a Business name if not using their own or partners name via the Business Registration service and Australian Securities and Investments commission (ASIC) 

• If turnover exceeds $75,000 the business owner/s must register for goods and services tax (GST)

• These businesses can employ others however they must acquire worker’s compensation and needs to follow legislations: Pay as you go (PAYG) or Superannuation contributions  

Soletrader 

An individual running a business on their own 

• Business income become part of Owner’s personal income 

• The business uses the owner’s tax file number (TFN) - business income is reported on personal tax return 

• Sole Traders have unlimited liability - they may sell personal assets to cover business debts, and if the business is sued the owner is also sued 

• They are fully responsible for all business management 

Partnership

A business owned by between 2 - 20 people, who share profits and losses

• Medical Practitioners, Solicitors, Architects and Chemists can have over 20 partners according to the: Corporations Act 2001 (Cth) 

• Before entering into a partnership, parties must form a contractual Partnership Agreement outlining legal responsibilities and arrangements 

• Partnership Act 1892 (NSW) helps provide legal framework between partners

• Silent Partners are able to invest funds into a business and receive limited liability 

• They receive a share or dividends of the businesses profit without having to manage the business under the: Limited Partnership Amendment Act 1991 (NSW) 

Private Company and Private Company (Incorporated)

Private Company - (Ltd - limited liability) - Includes Target

• Shares are publicly available for purchase on the ASX

• They have at least 3 directors and 1 shareholder

• There is no maximum for the amount of shareholders they can have - owners may eventually lose control

• They comply with disclosure requirements and a prospectus for public offerings

• They are subjected to corporate tax rates and need to produce annual financial reports

• Greater public and media scrutiny, which can impact the company's reputation and operations.

• Higher costs associated with compliance, but can raise a high amount of capital.

Private Company - (Pty Ltd - Proprietary, meaning private ownership and limited means limited liability) - Includes Woolworths, JB Hi-Fi

• Privately owned entity, where shares are not publicly listed. They can invite shareholders

• They have at least 1 director and 1 shareholder.

• Their maximum shareholders are 50 non-employees, such as potential investors, family or employees who are offered shares in the company. These shareholders require permission to sell shares, which can be restrictive. 

• They are subject to corporate tax rates and must comply with ASIC regulations.

• There are less stringent reporting requirements, leading to greater privacy regarding financial information. 

• They have limited liability for shareholders.

Directors - Company (Incorporated)

• Directors run the business and make key decisions, ensuring compliance with laws and managing the company’s operations. 

• May be personally liable for false or misleading statements about companies finance and risks. 

• Financial institutions require directors to give personal guarantees for business loans, which can put their personal assets at risk - companies can insure against this risk with personal guarantee insurance.

Prospectus - Before selling shares publicly, they need to disclose the nature of the company, including financial risks and benefits, which will then be disclosed to the public. 

Share Market 

• Allows for a business to sell shares in the primary market (shares sold by the business) 

• New shares can be issued as new issues. The process of listing is known as a float. 

• The first time a company offers shares to the public is known as an initial public offering

• Can be resold with the help of a stockbroker in the secondary market (an individual selling the shares they bought from the primary market, business does not profit) 

• Typically done on the ASX.

Government Enterprise

• Fully owned by the government and overseen by a minister or government appointed board. They report to parliament or other government authorities, for example: Australia Post or Sydney Water

• Main goal is to provide public goods and services rather than maximise profits. They manage essential infrastructure, utilities and postal services. 

• Legally separate from the government, can be sued, sue  or enter contracts. 

• Privatisation is where a previously government owned enterprise becomes a part of the private sector businesses. - Such as the Commonwealth Bank in 1991

Size

• Most Businesses are small to start → sole trader or partnership (SMES)

• At a certain point sales increase, leading to expansion, needing more capital, change in legal structure or shareholders to invest

• Some expand and become international companies

Ownership

• Sole traders are given full control 

• Partnerships have shared decisions and ownership

• Private have high degree of management and limited liability, more choice on shareholders

• Public have thousands of shareholders (ASX), owners needing at least 50% to maintain control

Finance

• Sole traders are given all profits made from the company

• Venture capital - money invested into a small business

• Public and Private - incorporation allows access to various funds like loans from a bank. 

Influences In the Business Environment

External Influences 

Economical

• The economy is the idea that resources are scarce, but human wants are unlimited, nations must decide what,how,how much, and for whom to produce

Simple Terms - the system of producing, distributing and consuming goods and services.

• Economy is measured in GDP, if a country's resources are used well, the economy will grow

• A low and stable inflation, ensured by the RBA, helps to keep economic growth 

• If the economy grows more quickly than the factors of production can support, inflation will tend to increase. 

The Business Cycle

• Economy does not grow at a constant rate, it experiences fluctuations known as the business cycle. 

• Recovery - Increase in customer spending, business investments and sales and profits, unemployment falls 

• Effects on businesses - SMEs find it easier to enter and thrive in the market, businesses may face logistical challenges as demand outpaces supply. 

• Recession - Decrease in customer spending, business investments, sales and profits, unemployment rises.

• Effects on businesses - Lower business sales means businesses dismiss employees and reduce production, expansion plans are postponed. 

• Peaks - Highest levels of wage and salaries, Business operates at full capacity, low levels of unemployment, which could result in an increase in inflation

• Effects on businesses -Overproduction or excessive competition may lead to reduced privacy power. 

• Troughs - Lowest levels of wage and salaries, Business operates at full capacity, low levels of unemployment, which could cause inflation to stay stable or fall. 

• Effects on businesses - Businesses fail due to decreased revenue, increased costs and difficulty accessing credit, may take advantage of government expansionary policies to stimulate growth (low interest rates)

Government Policies - Economic 

• Monetary policy by the RBA controls inflation, money supply and interest rates, usually through the cash rate.

• Lowering the cash rate = reduction in borrowing costs, encouraging spending and investment, stimulate business operations by reducing the cost of financing

• Increasing the cash rate = control of inflation by making borrowing expensive, dampening demand and slow business investment, leading to a decline in business revenue.

Fiscal Policy 

• The government's use of spending and taxation to influence the economy. Controlled by the federal government in Aus, and includes decisions about government spending on infrastructure, public services and welfare, as well as setting tax levels.

• Downswings or Recessions = Spend more than it collects from taxation revenue, increasing spending and reducing tax. THis stimulates demand for, and production of, goods and services. 

• Expansions or Booms = Reducing spending in the economy. Taxes will be raised which limits consumer spending and demand for, and production of, goods and services. 

• Impact on Businesses = Government may give grants and fundings to businesses to encourage them to produce. Lower taxes = increase spending = highers business capital

• Example = During Covid, the government introduced Jobkeeper payment, giving employers a wage subsidy (a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low) for eligible employees to help keep employees and firms connected.

Financial

• Exchange rates are the values of one currency expressed in another. This is important for a business that 

→ Imports inputs from overseas businesses to use in their production processes

→ Sells goods to overseas consumers (consumers will pay in AUD but need to first purchase them)

→ Sells goods in Australia that competes with goods which are made overseas and imported into Australia 

• When the exchange rate increases, it is called appreciation (for example, 2012 having $1 AUD for $1.10 USD). Meaning an Australian dollar buys more of a foreign currency

• When the exchange rate decreases, it is called depreciation (for example, 2025 having $1 AUD for $0.62 USD). Meaning more Australian dollars needed to buy  a foreign currency

• Depreciation means that:

→ Imported goods are more expensive for an Australian importer 

→ benefit Australian exporters because it makes them goods and services cheaper for overseas consumers - better deal for other countries

→ Benefit Australian businesses who support inputs locally and produce domestically in comparison to Australian Businesses that import goods to sell - better deal for Australian owned inputs rather than overseas ones. 

Deregulation - the removal or reduction of government controls over financial markets, increasing competition and access to funding sources

Debt Finance - Borrowed money that must be repaid within a specified time period and will incur interest charges

Equity Finance - Raising capital by selling shares of ownership in a business.

Geographical 

• Such influences include their physical location, natural resources, the climate, physical infrastructure and the demographics of Australia's population

Social - Societal calls for ethical and environmentally responsible practices.

• The attitudes, values and expectations of a society, where if a business meets said expectations, it increases demand for production, leading to greater profits. 

• Businesses are expected to contribute to society through initiatives like sponsoring sports teams or making donations, which can enhance reputation and boost demand. 

• This also includes demographic changes like age, gender and income levels, or culture trends, where businesses must adapt to stay relevant → not adapting can damage a businesses reputation.

• Social media means businesses can communicate between consumers to find what influences a purchase, preferences, how societal issues like sustainability or social responsibility, impact their choices. Thus, businesses can adapt their marketing strategies or hiring process (with inclusivity) to cater to a broader audience. 

Legal 

• Legal regulations encompass Acts of Parliaments that regulate business activities, dictating permissible actions - determining the legal framework that a business needs to operate in.

• Failure to comply results in fines, legal action and damage to the business’ reputation

• Businesses need to integrate legal compliance into their operational processes, conducting regular audits and updating practises to align with new laws and regulations

Examples of Laws

Political

• Stemming from government actions, policies and decisions that change the economic environment a business operates in (depending on the political parties stance)

• This can include governmental grants and tax benefits which encourage business growth and innovation. 

• Such policies are GST (10% tax added to products), Tariffs and customs (the cost to import raw materials or finished goods), or Carbon Emissions Targets (grants and reduced operating costs for investing in renewable energy, where businesses can save up to $80,000 per year) 

Governmental 

• Each types of government imposes a range of regulations, where non-compliance causes penalties, legal action or reputational damage

Federal Government 

• Payments of taxes for employees and for businesses with company tax and GST

• Provision of employee superannuation

State Government

• Provisions of employee entitlements (workers compensation, WHS requirements)

Local Government 

• Approving new development and alteration applications

• Size, location and shape of business size

Technological 

• The application of scientific knowledge and tools to create, produce, distribute and manage goods and services. Comes in the form of technological advancements

Competitive Situation 

• The level of competition a business faces from other businesses in the same industry 

• In a highly competitive markets need to innovate and improve their offerings to increase their market share 

• Market Leader - the business that holds the largest market share and sets industry standards

• Sustainable competitive advantage - long term strategies that allow them to maintain an edge over the competitors. 

Monopoly - Examples include Sydney Water, Australia Post and Sydney Trains. 

• One firm dominates the entire market, with no close substitutes for its goods or services. This means they have the ability to set the price, where the customer has no influence over it. 

• By Innovating, they can help maintain the monopoly position and potentially expand into new markets 

• They may invest in maintaining or strengthening their barriers, such as patents or exclusive access to resources.

• There are very high barriers to enter as a new competitor, including high capital costs, patents preventing others from offering the same and strict government licenses.

Monopolistic - Examples include Clothing manufacturers, Medical Services and Restaurants 

• Many firms sell similar but differentiated products in the market

• There is an increased pressure to differentiate themselves based on pricing, product design and promotion in order to create brand loyalty

• Competitive pricing, marketing or product innovation may occur to make their products more enticing for consumers

• Low barriers to enter as a competitor, new firms can enter easily, often by differentiating their products.

Oligopoly - Banking (Westpack, ANZ, NAB, CommBank) or Grocery Retailers (Coles, Woolies)

• Few large firms dominate the market, where products are either differentiated or similar

• They can control the market as they have the resources to promote and bulk buy, preventing smaller competitors from gaining significant market share

• Actions of one firm influences the others, leading to competitive behaviour - price wars or non-price competition (ads). 

• High barriers to enter as a new competitor 

Perfect Competition - Fruit and Vegetable Growers 

• Many firms offering identical products

• There is intense competition because firms sell identical products at the market price

• They have little control over prices, which pressures them to be cost efficient to survive in a competitive market 

• Most will focus on short-term profits

• Very low barriers to enter

Easy Of Entry

• How easy or difficult it is for new businesses to enter a market. Low entry barriers means more firms can join the market, increasing competition. It can be affected by: 

→ Market Concentration (how many businesses are in the market)

→ Capital requirements (high initial investment can deter new entrants) 

→ Regulations (strict regulations can make it harder for new business to start) 

→ Technology (advanced technology can be a barrier if new firms can afford it)

Local and Foreign Competitors - Impacts market dynamics. 

• Competing with nearby, local businesses drives innovation and efficiency, since these businesses can more easily adapt and better understand the market 

• Foreign competitors can bring new products, technologies and business practices, increase competition and force local businesses to improve their offerings and reduce prices. 

Marketing Strategies 

• Includes the extent of marketing, which is dependent on: 

→ Size of the Market - existing and potential customers 

→ Size of the Business - Larger businesses are more likely to invest in marketing 

→ Number of Competitors - More competitors = More need to market to increase market share and stand out 

→ Nature of the Product -  The type of product will determine whether extensive marketing is needed. - Postage Stamps require less marketing than an Iphone 15

Markets 

• Any setting where economic transactions occur, involving goods, services, information or currency, even when no legal tender is exchanged. It is not necessarily a physical space. 

• The major market changes impacting a the managers of each key business function are: 

→ Changes in the financial/capital markets 

•  Involves changes in borrowing costs/interest rates.. High interest rates discourage expansion, low interest rates encourage it. 

• Easier access to funding through the rise of digital payment systems allows for expansion and innovation, increasing competitiveness.

→ Changes in labour markets 

• The supply and demand for workers, influenced by wage rates, skills and employment conditions.

→ Changes in consumer markets

• The purchasing behaviours, preferences and demand of individuals and households for goods and services. 

• These changes can be from global trade patterns, demographic shifts and technological advancements. 

→Changes in the protection against foreign producers

• Tariffs - Taxes on important goods and services

• Quotas - Limits on the quantity of imported goods

• Subsidies - Government payments to domestic producers