Untitled Flashcards Set

c 1.1 Role of Business

A. Producing goods and services In carrying out their function, businesses must do the following: - Satisfy needs and wants - Utilize resources efficiently - Ensure quality and competitiveness B. Roles of business (economic and social roles) PIECE WIQ - Profit – make a return on goods and services provided - Employment – provide jobs to community - Incomes – provide income to shareholders, owners and employees - Choice – consumers have freedom of choice to buy goods and services - Entrepreneurship – provide individuals to turn passions into reality - Wealth – activity results in higher economic activity - Innovation – existing products are improved - Quality of Life – helps improve consumers life

Topic 1.2: Types of Businesses

A. Classification of business The 4 common methods used to classify businesses are: LISG – Let It Sound Good i) Legal Structure ii) Industry Sector iii) Size iv) Geographic Location i) Classification by legal structure/ownership Businesses can be classified by legal structure as follows: Private sector businesses (or privately owned businesses) which make up: SPPP - Sole Trader - Partnership - Private Company

- Public Company Public sector organisations which make up: - Government Enterprise ii) Classification by industry There are 5 main types of industry groupings or sectors as follows: PST QQ - Primary eg. Agriculture, Mining - Secondary eg. Manufacturing, Gas, Water - Tertiary eg. Transport, Postal, Retail trade - Quaternary eg. Real Estate, Education, Information Services - Quinary eg. Accommodation, Childcare Services iii) Classification by size Businesses can be classified by size as follows: - Small – Less than 20 employees eg. - Medium – 20-199 employees - Large – 200 + employees iv) Classification by geographical spread Businesses can be classified by geographical spread as follows: - Local - National - Global B. Factors influencing choice of legal structure There are three factors that will influence the choice of legal structure a business chooses. They are: SOF - Size of the Business - Ownership - Finances

Topic 1.3 Influences in the business environment

A. External Influences on Business The main external influences on a business include: MET GFC SLIP - Economic - Financial - Technological - Geographic - Social - Legal - Political - Institutional - Market - Competitive Situation Changes in markets - Financial Markets: Finance is now more mobile and accessible than ever before, flowing easily between countries, investors seek favourable returns making it easier for business to access foreign markets - Labour Markets: Remains restricted due to political barriers and border control, skilled migration has increased in Australia, 120,000 working holidays visas in 2019 - Consumer Markets: Global trade has grown significantly since WW2 but GFC and Covid 19 has decreased it slightly. Specialisation in efficient production lowers costs and increases sales and improved tech and comms à reach markets easier Economic influences - Economic Cycle Impact – Businesses are affected by economic cycles (booms and recessions), which influence consumer spending, employment, and overall business activity. - Government Policies and Inflation – Policies aim to maintain steady economic growth while controlling inflation and wages to prevent economic instability. - COVID-19 and Global Recession – The pandemic caused a significant economic downturn, increasing unemployment, reducing incomes, and disrupting industries like tourism and hospitality.

- International Trade and Economic Trends – Global factors such as trade relationships (e.g., Australia-China trade restrictions) and investment trends affect business opportunities and risks. - Consumer Confidence and Business Performance – Economic uncertainty leads to cautious spending, reducing business profits, while economic growth boosts consumer demand and business expansion. Technological influences - Technological advancements and innovation result in increased productivity and efficiency - Tech change à increased availability (more supply) of goods and services à improved quality and cheaper prices - All business must embrace and be aware of technological change it improves sales and reduces costs. Saves time, labour, finances and quality à lowering sale prices à more competitive price Geographical (and globalisation) influences - Changes in demographics of Australian population = sex, age, income, and cultural background - Globalisation, allows business to distribute and purchase a large range of products across the globe, through telecommunications. However, finds business competing on a global scale - Globalisation increases competition, expands markets, enables cheaper materials, greater customer expectations, location flexibility, diversification (if economy falls in one country, impacts business) Financial influences - Deregulation and Competition – Since 1983, Australia's financial system has become more market-driven, leading to increased competition and new banking products for businesses. - Interest Rate Impact – Businesses' access to debt finance is influenced by interest rates; lower rates encourage borrowing, while higher rates discourage it - Global Financial Markets – Businesses can access international finance, and rapid technological advancements have enabled seamless global financial transactions. Competitive situation influences - Market concentration = number of competitors in a particular market. There are four main types:

- Monopoly: complete concentration by one firm in industry, can determine price of any product eg. Aus Post - Oligopoly: consists of small number of larger firms that dominate the market and are able to stay in control of market à spend large amounts of money of advertising à restricting entry of new competitors eg. Banks, Car manufactures, Oil companies - Monopolistic: medium number of buyers and sellers in a market, it is the most common type of market and the g and s’ are differentiated from competitors using advertising, packaging and names. e.g. clothing brands - Perfect: large number of small businesses that sell similar products, very little advertising, only way to increase market share is through price and quality e.g. Fruit and veg growers. Social influences - Business must be aware of the communities needs and wants to satisfy demand - Must respond to changes in community taste, culture and fashion - Three social issues business must be aware of include: - Awareness of the environment: Consumers have become more environmentally aware - Provide family friendly workplaces: Include family friendly practices eg. Flexible hours for mothers - Cater for workplace diversity: Must implement diversity eg. race, gender, sex leading to morale boost Legal influences - The aim of government regulation = promote fair business conduct - Compliance with rules are complex, consuming and costly - Eg. Workplace and safety, equal employment opportunity, anti-discrimination, environment protection, consumer protection Institutional influences - Government: Federal (GST, company tax, employee superannuation), State (pollution control, WHS, payroll taxes) , Local (approving new development, fire regulations)

- Regulatory Bodies: NSW Fair Trading, NSW Environment Protection Authority (EPA), Australian Securities and Investments Commission (ASIC), Australian Competition and Consumer Commission (ACCC) - Other: Employer associations, ASX, Trade and Industry Political influences - Government policies can have a major impact of business environment - Political change can lead to business uncertainty and confidence - As government regularly changes - > constantly effects business environment - Some current issues include, labour market reforms (changes to skilled migration policies, penalty rates), social reforms (paid parental leave, gender workplace diversity, equal gender pay) Taxation (GST, company tax cuts) and environmental management (reduce carbon emissions, banning disposable products) B. Internal Influences on Business The main internal influences on a business include: MR BPL - Management - Resources - Business Culture - Products - Location Management - Management Style – Managers adjust their approach based on tasks, time, resources, and employee needs. - Organisational Structure – Flatter structures enable quicker decision-making and greater individual responsibility, helping businesses adapt to changes. Resources - Human Resources – Employees are the most valuable asset of a business, contributing their skills and knowledge to help meet business goals. - Information Resources – This includes market research, sales reports, forecasts, and legal advice, all necessary for informed decision-making.

- Physical Resources – These are tangible items like equipment, machinery, buildings, and raw materials needed for production. - Financial Resources – Funds used by the business to meet its financial obligations, including budgets, grants, and loans. Business Culture - The shared values, beliefs, and behaviours in a business create its unique culture, which impacts employee satisfaction and success. - Key components include values (e.g., honesty, innovation), symbols (e.g., training programs), rituals (e.g., social gatherings), and heroes (successful employees). Product - Type of Goods and Services – Large or resource-heavy products need structured production, while services like franchises or home-based businesses operate with different internal processes. - Business Type – Services, manufacturers, and retailers have different internal structures; for example, a clothing manufacturer needs production facilities, while a retailer focuses on distribution. - Business Size – Larger businesses require more complex structures, staff, and technology to handle higher production volumes, unlike smaller businesses with simpler operations. Location - Location can determine business success or failure, affecting sales, costs, and operations, even for online and home-based businesses. - High visibility is key for retail and service businesses to attract customers, often requiring prime locations like shopping centres. Manufacturing businesses can choose low-visibility areas and rely on advertising to reach customers. - Prime locations in busy areas are costly but essential for businesses dependent on foot traffic, while manufacturing or online businesses can choose cheaper locations. - Retail businesses need to be close to their customer base, often in shopping centres or strips, while manufacturers prioritize cost-effective transport over location.

- Advances in technology have reduced the importance of location for support services, allowing businesses to access services remotely via the internet and communication tools. C. Stakeholders and the responsibility a business owes to each stakeholder Internal stakeholders: - - - External stakeholders - - -

Topic 1.4: Business growth and decline

A. Stages of the business life cycle (and their characteristics) EGMP -

- - - Different types of mergers and acquisitions include: - - - B. Challenges at each stage

- - - - C. Factors that can contribute to business decline - - - - -

D. Voluntary and Involuntary Cessation - - Important concepts: Insolvency/insolvent – Administrator – Receivership – Liquidation – Bankruptcy