VCE Business Management Units 1 and 2 Complete Study Notes

The Concept of Entrepreneurship and Entrepreneurial Skills

• Entrepreneurship Defined: Entrepreneurship is defined as the process of establishing a business to satisfy a need in the market while simultaneously taking on the associated risks. It involves the capability to turn an idea into a successful business venture.

• Key Challenges: Establishing a business is challenging, time-consuming, and expensive. It requires a willingness to commit and take financial risks, such as investing personal funds or obtaining external loans.

• Entrepreneurial Skills (Table 1.1.1.2):

  • Risk-taking: Preparedness to risk money, time, and career despite the possibility of failure. This allows access to opportunities for growth and competitiveness.

  • Leadership: Sharing a vision with employees to inspire and motivate them.

  • Innovation: Developing new ideas, processes, or approaches to solve problems. This distinguishes a business from competitors.

  • Communication: Clearing transferring information to internal and external stakeholders and listening to feedback.

  • Decision-making: Selecting the best course of action from various options.

  • Networking: Developing business contacts for future assistance and expertise.

• Real-World Example - Lorna Jane Clarkson: Founder of Lorna Jane, a brand with over $134$ stores as of $2021$. She risked her career as a fitness instructor to sell activewear out of her garage to solve the problem of "unflattering" workout clothing.

Personal Motivation for Starting a Business

• Personal Independence: The desire for control over decisions and actions (being one's own boss). It allows for flexibility in hours and working conditions.

• Financial Independence: The ability to fund a desired lifestyle without relying on an employer's income. Wealth is directly related to the success of the business actions.

• To Make a Profit: Generating more revenue than expenses. This is often driven by the belief that earning potential is limited as an employee.

• To Fulfil a Market Need: Addressing customer needs that are currently unmet or underrepresented by competitors (filling a "gap in the market").

• To Fulfil a Social Need: Improving society or the environment through business activities. A business focused on this is called a "social enterprise."

• Statistical Caveat: Approximately $1$ in $3$ Australian start-ups fail within the first year; $3$ in $4$ fail after $5$ years.

• Theory in Action - Veteran Fitness: Owned by Elanor, an ex-army veteran. The business employs retired servicemen and women to help them transition to new careers, fulfilling a social need.

Characteristics of Successful Managers and Entrepreneurs

• Managers: Individuals responsible for overseeing employees and day-to-day tasks to achieve objectives.

  • Managerial Characteristics: Communication skills, determination, knowledge of the environment, strong ethics (moral values), and flexibility (adapting to change).

  • Real-World Example - Rob Scott: CEO of Wesfarmers (Bunnings, Kmart, Officeworks). Possesses high knowledge through degrees and determination as a former dual Olympian (silver medal in rowing, $1996$).

• Entrepreneurs: Individuals who start businesses and take risks.

  • Entrepreneurial Characteristics: Willingness to take calculated risks, strong networking ability, determination, innovative qualities, resourcefulness (solving problems with available means), and knowledge.

  • Real-World Example - Janine Allis: Founder of Boost Juice. She worked close to $100$-hour weeks for the first $3$ years without making money and grew the business into Retail Zoo (Boost Juice, Betty's收 Burgers, Salsas, Cibo) with over $600$ stores in $13$ countries.

Sources of Business Opportunity

• Innovation: Creating new ideas or significantly improving existing ones. Examples include the evolution from the Ford Model T ($1908$) to the Ford Mustang ($2020$).

• Market Opportunities: Identifying gaps where customer expectations are not being met. Factors include changing demographics, societal attitudes (e.g., shift away from credit cards to Afterpay), and changing laws.

  • Real-World Example - Afterpay: Founded in $2014$, providing a "buy now, pay later" service that is interest-free, capitalizing on millennials' aversion to credit card interest (only $6.9\%$ of users under $35$ have a credit card).

• Changing Customer Needs: Transitions in consumer desires, such as the need for convenience (online stores), technology (smartwatches), or ethical packaging ($100\%$ biodegradable).

• Research and Development (R&D): Directing resources toward discovering and testing new products/processes to gain a competitive advantage.

  • Real-World Example - Apple: Uses the "AppleSeed" program to gather customer feedback on products before public release to ensure they meet needs perfectly.

• Technological Development: The invention of tools to solve problems and enhance processes (e.g., Robotics producing $350$ phones per minute at Apple).

• Global Markets: Trading products across the world. For Apple, $60\%$ of net sales come from outside the US as of June $2022$. Accessing global inputs (Peru gold, Chile copper) also reduces costs.

Goal Setting and Decision-Making

• Business Goals: Specific targets a business wants to achieve in a time frame. Categorized as:

  • Financial Goals: Increasing revenue, profit margins, or productivity.

  • Social Goals: Environmental impact reduction, community issues, or employee welfare.

• SMART Goal Criteria:

  • Specific: Clearly defined aims.

  • Measurable: Quantifiable to track progress.

  • Attainable: Challenging but possible.

  • Relevant: Beneficial to the business.

  • Time-bound: Specific deadlines.

• Lego Group Example: Goals include $100\%$ recycled packaging by $2025$ and a gender-balanced organization by $2032$.

Business Concept Development and Protection

• Business Concept: A brief outline of the idea, main selling activities, and competitive advantage.

• Intellectual Property (IP): Original creations of the mind. Legal protections include:

  • Trademark: Protection over names, symbols, and packaging (e.g., Nike logo).

  • Patent: Exclusive rights to innovative devices or processes (e.g., lightbulb).

  • Copyright: Automatic protection for art, writing, and music (e.g., film).

  • Domain Name: Unique website address registration.

Market Research and Initial Feasibility Studies

• Market Research: Investigating industry activities, customers, and competitors using qualitative (opinions) and quantitative (numbers) data.

• Initial Feasibility Study: A researched evaluation of viability. Areas include:

  • Market Feasibility: Long-term industry success potential.

  • Operational Feasibility: Resource accessibility (equipment/employees).

  • Commercial Feasibility: Affording start-up costs and potential for profitability.

  • Technical Feasibility: Skills of the owner.

  • Legal Feasibility: Compliance with regulations.

Businesses’ Contribution to the Wellbeing of a Nation

• Economic Wellbeing: Measured by income and wealth levels.

  • Employment: Small businesses are Australia's largest employers.

  • Taxation Revenue: Profit tax funds public services like healthcare.

  • Infrastructure: Businesses build and maintain roads, rail, and water facilities.

  • Economic Growth: Measured by GDP (Gross Domestic Product). Increases material living standards.

  • International Trade: Exporting (selling overseas) fuels the local economy (e.g., Coal industry contributed $\$39.17$ billion in $2021$).

• Social Wellbeing: Measured by non-material living standards like happiness, low crime, and environmental quality.

Fostering a Culture of Business Innovation

• Government investment in R&D: Programs like "Innovation Connections" and tax incentives (offsets for businesses spending at least $\$20,000$ on R&D).

• Council Grants: One-off financial payments from local government to support development (e.g., Whitehorse Business Grants Program providing $\$1,000$ to $\$10,000$).

• School-based Programs: Initiatives like "$\$20$ Boss" by Young Change Agents where students start a business with $\$20$ to learn enterprise skills.

• Regional Start-up Hubs: Physical spaces (e.g., LaunchVic, Melbourne Innovation Centre) providing office space, mentoring, and networking for a low cost.

Types of Business Structures and Business Models

• Business Structures:

  • Sole Trader: One owner, unlimited liability, unincorporated. Full control but personal assets at risk.

  • Partnership: $2$ to $20$ owners, unlimited liability, shared responsibility.

  • Private Limited Company (Pty Ltd): Up to $50$ shareholders, limited liability, incorporated (separate legal entity). Shares are not public.

  • Public Listed Company (Ltd): Unlimited shareholders, shares traded on ASX, complex reporting required.

  • Social Enterprise: Reinvests at least $50\%$ of profits into social/environmental causes (e.g., STREAT helping homeless youth).

  • Government Business Enterprise (GBE): Government-owned but self-funded (e.g., Australia Post).

• Business Models:

  • Online: 24/7 trading via internet (Brokerage, Subscription, or Advertising models).

  • Direct-to-Consumer: No intermediaries (wholesalers/retailers).

  • Bricks-and-Mortar: Physical storefront; allows face-to-face interaction.

  • Franchise: Licensing a business system/name to a franchisee (e.g., McDonald’s).

  • Importer/Exporter: Buying/selling across international borders.

Internal and External Environments

• Internal Environment: Factors within a business that the owner has control over (e.g., location, resource choice, business structure).

• External Environment:

  • Operating Factors: External stakeholders with some control (e.g., customers, competitors, suppliers).

  • Macro Factors: No control (e.g., legal regulations, economic conditions, technological advancements).

• SWOT Analysis: Planning tool used to identify Internal Strengths, Internal Weaknesses, External Opportunities, and External Threats.

Resource Needs and CSR

• Resources:

  • Natural: Raw materials like land, water, oil.

  • Labour: Human skills and qualifications provided by employees.

  • Capital: Man-made goods like machinery, tools, and factories.

• Corporate Social Responsibility (CSR): Ethical conduct beyond legal obligations. Includes sourcing sustainable resources (e.g., Fairtrade chocolate), providing supportive working conditions, and employing disadvantaged groups.