The Nature of Business Slide Show

8/7/2019 The Nature of Business Slide Show

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Needs & Wants

Needs something that is essential for

survival eg water, food, shelter.

Wants something that we desire but is not

essential for survival eg TV, DVDs, cars etc.

Q. As individuals is it possible tosupply all our needs and wants?


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The Individual and the Organisation

There are over 900,000 businesses inAustralia. This indicates that organisations

are able to achieve collectively whatindividuals cannot. Businesses cancombine the factors of production (capital,labour and land) more effectively and

efficiently by an organisation.


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What is a business organisation?

Made up of a group of people

People work as a group/team

As a team, people achieve a commongoal (financial, qualitative, status andprestige)


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Business Goals - Financial

Profit maximisation

Return on investment

Increased market share Increased sales revenue

Diversification


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Business Goals - Qualitative

Community service

Environmental concern

Employment conditions


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Business Goals - Personal

Prestige

Own boss

Satisfaction Expansion

Survival


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Types of Systems

Closed blocks out ideas, information andother factors eg communist Russia and Cuba

Free Enterprise businesses supply the

market with goods or services they wish butthere is government intervention as it acts as aregulator, distributor, competitor and monitorof business activity.

Laissez faire no government intervention inthe economic affairs of the economy.


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The Free Enterprise System

The means of production, distributionand exchange are privately owned

The use of resources is determined bysupply and demand

Demand is how much the consumer iswilling to buy at a particular price level

Supply is how much the producer iswilling to provide to the market at a givenprice level


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Characteristics of a free system

Characteristic Explanation

Private ownership ofthe means ofproduction,distribution andexchange

The factors of production (resources) are owned by privateindividuals and groups.

Freedom of enterprise

Individuals are free to pursue the satisfaction of their wants inalmost any way they choose.

Business organisations have the right to establish and operatealmost any business they wish to.

Workers have the freedom to choose their type of employment.

Consumers have the right to purchase goods and services that willsatisfy their wants and needs.

Consumersovereignty

Consumer demand dictates to the business organisation what andhow much to produce.

Profit motive Profit is the reward for the successful entrepreneur.

Profit may also motivate the performance of the employee.


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Factors of Production

1. Enterprise the ability to combine land,labour and capital to produce aproduct. The individual who organisesthis process is called an entrepreneur.


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2. Capital physical goods made bylabour that can be used to createfurther goods and services.

Fixed Capital factories, machinery,transportation, warehouses.Working Capital includes products inthe process of manufacture and stockheld by organisations.


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3. Labour physical or mental effort usedby businesses to produce goods orservices. An organisation must ensurethat it has a productive and highlymotivated staff. Businesses will providechild care facilities, gyms, pools,

bonuses.


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4. Land all natural resources used toproduce a product. The Body Shopuses high-grade tea-tree oil fromThursday Island; Golden Circle usespineapples from the local area; miningcompanies mine minerals and ores.


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The Role of Profit

It forces the development of new goodsand services.

It drives competition. Much of the allocation of resources is

determined by the profit motive.


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Activities of Business Organisations

1.Marketing

Traditionally, businesses had no trouble

selling what they produced. However,today, any organisation that fails tounderstand the needs and wants of themarketplace is doomed.


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Marketing

When Ford dealers came to Henry Fordand explained that General Motors wasmarketing cars in different colours, HenryFords response was simple:

You can have them any colour you wantas long as its black.


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Marketing

Is about:

Discovering what the customer wants

Develop a strategy to achieve this Make a profit at the same time!

A marketing department finds out what

people want and persuades potentialcustomers to become actual customers.


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2.Operations

All processes involved in transforming

inputs such as raw materials and labourinto outputs or finished products.

Operations managers plan how and whereto produce products, schedule work andmake sure the necessary materials andequipment are available.


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3. Human Resources

Arguably, a businesses greatest asset

New management approaches aim to bringemployees and management together toachieve its objectives

If employees are motivated, productivity will

improve and therefore profits HR involves balancing a concern for getting

the job done with a concern for the worker


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4. Finance

Skilful management of finances is

critical to a businesses survival Financial plans are essential

Skilful planning ensures that the

business has adequate funds to meetshort and long-term growth


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Stakeholders Interests

Many groups (stakeholders) have an interest (stake) inthe performance and activities of business because ithas an impact on them.

Owners/shareholders Managers Investors/lenders Employees Trade Unions Suppliers

Customers Government Local community International community


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Business Environment

1. Internal

2. External


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Internal Environment Job Design

The internal environment deals with those forceswithin the organisation that the business is ableto control and monitor.

Manager decides which tasks are to be

performed by which people. Manager decides which technologies are to be

used. Example Australian car manufacturers use a

conveyor-belt system whereby each individualspecialises in one part of the process. InSweden, Volvo cars are assembled by teamsand each team performs several tasks ofvarying complexity and duration.


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Internal Environment Work Units

Organisations will devise systems thatenable jobs to be done. They break the jobdown for work units (departments). Workunits will have specific roles and functions.Example Operations, Human Resources,Finance.


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Internal Environment Corporate Culture & Values

A term used to describe the shared valuesand beliefs of the people in anorganisation. It is their idea of what isimportant and how things work in theirparticular organisation. A businessesMission Statement often reflects its values

and culture. It outlines the broad tasks theorganisation wants to achieve.


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Corporate Culture

Often expressed in corporate slogans such asAustralia Posts Delivering more than everandTelstras Making Life Easier.

Usually unwritten but will be found amongthings such as customer relations, style ofdress and language used, attitudes ofmanagement towards their staff, relationsamongst staff, budgets and other statementsof the organisations priorities.

Linked to ethical behaviour


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Cultivating Corporate Culture

Management being role models

Management recognising and rewardingappropriate action

Management communicating desired culture(networks, newsletters, magazines)

Recruitment and selection practices in line

with the desired culture Training in line with the desired culture


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Internal Environment Social Responsibility

Businesses have a significant impact on society, theenvironment and individuals. They have to make surethat the community is not harmed by its actions butbenefits them. Social responsibility refers to the actionsof the organisation.Being responsible can be rewarding while providingvaluable public relations and promotion. Sponsoring local sporting teams Donations

Providing community facilities John West Dolphin safe tuna Ronald McDonald House


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Internal Environment Business Ethics

Business ethics relates to the decisionsand actions of individuals within theorganisation. Decisions made by

managers affect the health, safety, moraleand behaviour of staff and the community.

Whistleblowers will often disclose to themedia when someone within anorganisation is engaging in an illegal,immoral or unethical acts.


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External Environment Natural Domain

Businesses must attempt to embrace bothprofit maximisation and a sustainableapproach to the environment.

Many businesses are now actively involvedin sustainable development, environmentalauditing, clean technology, energy efficiencyand monitoring their impact on theenvironment.

These businesses see it as a win-winoutcome community wins, the businesswins and the natural environment wins.


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External Environment Socio-Economic Domain

A business must reflect the community inwhich it operates and its values, customs andmorals are shaped by the values of that

community. Examples BHP and AMP recognise the

change in the role of women by providing in-house child-care facilities. This has increasedproductivity and therefore profit.

In Japan to become part of an organisation isto become part of a family unit.


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External Environment Technological Domain

Technology turns inputs into outputs

Businesses must keep up with advancesin technology

The Internet allows the organisation tohave access to information at the pressof a button so they can monitor emerging

developments that will affect them Technology has brought about robotics

and automation


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External Environment Legal & Political Domain

Business is governed by many rules, regulations andlaws and can be pressured by interest groups

Zoning and building local

Anti-discrimination laws federal and state

Fair competition federal and state

Occupational health and safety federal and state

Taxation federal

Imports and exports - federal

Human rights obligations at the international level


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External Environment Economic Domain

The economy affects all organisations and itsstate can be shown in figures (economicindicators) such as:

Consumer spendingThe level of unemploymentWage ratesBusiness investment Interest ratesForeign exchange rates (the value of the

Aussie $)


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Economic Effects

An increase in interest rates, curbs consumerspending and makes it more difficult fororganisations to borrow money.

A slowdown in consumer spending directlyaffects sales and therefore profit, expansionetc.

A fall in the Aussie Dollar on foreign exchangemarkets makes it more expensive to importgoods.


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Business Ownership Sole Traders

Advantages

Simple and easy to establish

Low-cost entry into business

Feeling of control from being

own boss Flexibility to make all

decisions

Receive all profits andbenefits

Less government regulations

No tax on profits, onlypersonal income

Disadvantages

Unlimited liability personallyresponsible for all debts andlosses even if it means sellingpersonal assets

The business ceases whenthe owner dies

Difficult for the owner to taketime off for holidays/illness

No one to share stress and

decisions


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Business Ownership - Partnerships

Advantages

Simple, flexible form ofbusiness

Low-cost start and operation Shared responsibilities and

work load Funds and talent can be

pooled Easier to raise finance and

loans No tax on business profits,only on each partners income

If one partner dies, thebusiness can keep going

Disadvantages

Each partner is personallyliable without limit for the debts

of the business or the otherpartner Partners must consult with

each other before makingdecisions

Possible disputes Selling the partnership or

ceasing the partnership can becomplicated

Finding suitable new partnersis difficult

Most common type of business in Australia. There needs to be a minimumof 2 partners and maximum of 20 in this type of ownership.


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Business Ownership Private Company

Advantages

Limited liability

shareholders cannot becalled upon to settle thecompanys debts

Greater amounts ofcapital can be raised

Greater sources ofmanagement expertise The company pays tax

on profits

Disadvantages

Expensive to set up Governed by many laws

and regulations Expensive to maintain

annual fees apply

Minimum 1 and maximum 50 shareholders. Usually chosen for family-based businesses. Contains Pty Ltd in its name.


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Business Ownership - Other

Public Company

Company is listed at theASX

Shares bought and sold by

a stock/share broker Shareholders are the

actual owners

Board of Directors run thecompany on a day-to-day

basis Profit is distributed to

shareholders and is calleda dividend

Cooperatives

Formed by groups ofpeople working towards acommon goa

Owned and controlled bymembers who use thecooperatives service

Active in agriculture, credit,education, housing, retail

Examples Golden Circle,Sandgate FishermensCooperative


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Business Ownership - Other

Franchise

Business has purchasedthe right to operateunder a particular brand

name Example McDonalds,Hungry Jacks, Dominos,Mitre 10, Coca-Cola,Pizza Hut, Jims Mowing

Government BusinessOwnership

Called publicownership

Private businesses findit too costly to provideand operate certainactivities eg railways,health services, watersupply etc so the

government providesthem. Examples Qld Rail,

Ergon, ABC

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The Nature of Business Slide Show