business

nature of business 

role of business

nature of business

What does a business do?

• provide goods and services

• provide an income

• distribute / transport goods

• provide employment

• advertise and market product

• manufacturing

forecasting:

The main role of a business is to produce and sell (for a profit) that satisfies a consumer’s wants and needs

producing goods and services

Roles in business

types of businesses

identifying and classifying

size

geographical spread

local

• serves surrounding area

• cannot offer a range of products to customers who live in another suburb / town

• customers and employees live near by

• small - medium in size

eg: pure brew

national:

• operates in 1 country

eg: yo chi, coles, myer

global:

• large company

• branches in multiple countries

eg: apple, h&m

industry sector

when businesses are involved in similar types of production, they are grouped together as an industry.

primary: a collection of natural resources

eg: BHP mining

secondary: turns outputs into semi-finished or finished products

eg: apple, bakers, chefs

quaternary: the transfer and processing of information and knowledge

eg: IT services, education

tertiary: performing a vast range of services

eg: hairdressing, doctors (gp)

quinary: services that are usually performed in the home

eg: dry cleaning, daycare, hello fresh

legal structure

Small to medium enterprises 

economic contribution:

• ballence of payments:

• record of a countries trade in 1 year with the rest of the world

• >90% of Australianexsporters are SMEs, they earn 50% of the revenue

• innovation and invention:

• SMEs are australias main source of innovation 

• 40% of SMEs regularly innovate

• GDP:

• total value of goods and services prodused in 1 year

• SMEs contrubute to 50% of australias gdp

• Employment: 

• employs 8 million people

• more likely to try and maintain existing employees in economic downturn than large companies

Role: 

• produces 50% of the products made each year

• employ 70% of the privite sector

Characteristics: 

• local markets and locally based

• independently owned and operated

• personilied services

• has 5 - 199 employees

Success and failure:

Success: 

• Entrepreneurial abilities

• Access to information

• Flexibility 

• Money 

• Risk 

• Adaptability 

Failure 

• New taxes 

• Change in government policy 

• Debt

• Negative cash flow

• Compatition  

• Lack of experience 

• Economic downturn  

Factors influencing choice of legal structure 

Size:

as a business increases in size, the legal structure likly changes from a sole trader / partnership to a private or public company

Ownership:

If a business owner wants more control → sole trader 

if a business owner wants limited liability → public or private

Finance:

difficult for sole traders to raise funds because of unlimited liability. They may incorporate to make funds easier to get 

influences in the business environment

Stakeholders  

Internal influences 

Products:

• The types of goods and services 

• Type of business (service, manufacturer, retailer)

• Size of business 

Location:

Visibility:

• Type of business concerning customer contact 

  • retail → needs to be seen

  • manufacturing → does not need to be seen

Cost:

• Busy location → more expensive 

  • Manufacturing → large sites, low visibility

  • Online store → not influenced on location 

Proximity to suppliers:

• Level of transport needed for proper function

• Large quality + raw materials = near suppliers

Proximity to customers:

• Retails → customer convenience 

• Manufactoring → transportation of goods to customer 

Proximity to support services:

• Small business = outside services 

• Large business = use own services

  • Accountants

  • IT

  • Lawers 

  • Payroll

Management:

Traditional = less fluid: 

• Conservative

• Hieritical 

• Power not shared 

New = more fluid:

• People centered 

• Modern forward thinking

• Performance management

Resources:

Human resources:

• Employees of the business → most important asset 

• Employee complaints  

Information resources:

• Knowledge and data → Market research, sales support, legal 

Physical resources:

• Equipment

• Building

• Raw materials

Financial resources:

• Funds the business uses

Business culture:

Elements of business culture:

Values: The basic beliefs and values that all employees share

Symbols: Events or objects that represents what the business believes in  

Rituals, rights and celebrations: Routine behavour that the business takes part in to create a sense of belonging

Heros: Successful employees that act as an example for other employees 

External influences 

Competitive situation:

• Aiming to produce the best product at the lowest price

• Having a COMPETITIVE ADVANTAGE

• Less competitors = less competition 

Economic:

• Booms:

  • Spending more  

  • Producing more

  • Highest point of economic activity 

  • Eg: december / christmas 

• Recessions 

  • Spending less

  • Producing less

  • Eg: before paycheck 

Financial:

• The ability to access money overseas

  • Globalisation

  • Online banking

• Circulation of money 

Geographical:

• Location affects where businesses buy and sell

  • Eg: australia in the asia-pacific market - trades with china 

• Demographics affects who the business sells to 

• Globalisation 

  • More competitors

  • Better labor 

  • Customer expectations higher

Institutional:

• Regulation in business 

• Eg: trade unions 

Legal obligations:

• Staff wellbeing 

• Paying tax

• Workplace health and safety

• consequences 

  • Fines 

  • Prision

  • Loss of reputation / consumer trust

Markets: 

• Financial - accessing funds overseas 

• Labour: increase demand for skilled workers

• Consumer: selling to a global market  

Political: 

• governmental impacts through politics 

  • Environment 

  • Taxation 

  • Social reforms 

  • Environmental management 

  • Eg: carbon tax

• Organisations that regulate business activity 

  • Unions

  • ASX

  • Nsw fair trade

  • EPA (environmental protection agency)  

Social:

• Identifying and responding to changes in:

  • Taste

  • Fashion

  • Trends

  • Preference 

• Divercity-having a diverse workforce in the business 

• Environmental awareness - consumers want products to be environmentally friendly

Technological:

• Efficient and easier 

• Eg: online accounting, robots 

influences in SMEs

Personal qualities GEMS QC:

qualifications

Type of business and who is involved

• Education

  • Hsc

  • Tafe

  • Uni degree

  • Courses

• Training

• Previous experience

Skills

• Organisation

• Leadership 

• Customer service

• Marketing

• Stock control 

• Computer skills

Motivation 

The types of ways people are motivated to influence how they will start their business and future business decisions

Entrepreneurship 

• Level of innovation 

• Motifation 

• Sense of freedom of where and when to work 

• Control 

• Full attention 24/7

Cultural background

The traditions and beliefs that influence business decisions

• Work ethic

• Type of product

• Food

• Religion

Gender 

• Women are more likely to start their own business than men

• ⅓ of SMEs are operated by women

Sources of information 

The places and ways people get advice and assistance

• Professional advisors 

  • Accountants - Financial management and tax obligations

  • Solicitors - Business formation and structure. Legal documents (eg: contrasts, leases, partnership agreements, patents, etc…)

  • Bank managers - Information and advice on finance, sources of finance, and basic business management

• Business contacts

• Business in the same market 

• Online websites 

• Trade associations

• Government agencies 

Business idea 

The initial idea that the business is based on. Needs to allow for a competitive advantage. 

3 main initial ideas:

1. Original idea

2. Improvement to an already existing product or service

3. New product or service the is not at all available

Sources of a business idea can come from the business owners own experiences, interests, abilities, or imagination. As well as external factors such as:

• Surveys 

• Books

• Internet 

• Government stats 

Establishment options

Market 

Who?

• Target market 

• Market research 

Price 

• Market price 

• Competitors price

• Cost + margins pricing 

Location 

• Visibility 

• Proximity to supplies 

Finance  

Decions based on the type of finance and its costs

Debt:  loans from banks - need to pay interest

Equity: money from owners savings - need to save money, might not get a return on investment (investing in own business vs investing in other companies)

Legal factors 

Obligations of an SME to follow rules and regulations when starting a business

Local → State → Federal 

Risks when not following regulations: losing customer, bad reputation, fines, losing trading rights 

1. Business name 

• Every business name must be registered unless its the business owners name. 

• Ending of business name depends on the legal structure and the number of owners

Registering name → no legal right to name 

Trademarking name → Legal rights over name 

2. Zoning 

• Regulations to separate activities that dont belong together 

Eg: Residential and industrial

3. Health regulations 

• Stadards that businesses have to follow to get a lilacane to allows them to oppartate

  • Tempurature of food

  • Time of food in room temperature 

  • Kitchen layout

  • Employee clothing 

4. Trading practises 

• Regulations for:

  • Prices 

  • Product quality / standards

  • Trading practises 

Human resources

Who to hire and how many?

Skills: Hire people that have skills the business is lacking

Cost: The money and benefits they earn < The money they make for the company

Taxation 

Federal tax:

• Pay as you go (PAYG)

• Fringe benefits tax (FBT)

• Goods and services tax (GST)

• Company tax 

• Capital tax 

State tax:

• Stamp duty 

  • Stamp says ‘paid’ on documents to give evidence of the transaction