Embed Size (px)
Citation preview
Year 11 Business studies
Nature of Business
The role of business
o Producing goods and services
- Goods; items that can be seen or touched
- Service; things done for you by others
- Production; activities undertaken by a business that combines the resources to create
products that satisfy customers wants and needs
o Profit
- Return or reward that business owners receive for producing products that consumers want
and need. Revenue relates to operating expense as they are what are needed to be
deducted before product can be finalised.
Profit = sales – expense
o Employment
- Employees earn $ spend $ on g/s ^ business production
o Income
- Commission, wage, salary, shareholder dividend
o Choice
- act of selecting amount alternatives
- Freedom of choice = ability to shop around.
o Innovation
- creates new products = more consumer choice
- Consumer can find products that satisfy their wants
o Entrepreneurship and risk
- start and own a business
- Usually their own business or a bank loan
- Possibility of earning profit – not guaranteed
- 2 main risk:
Not getting income
Losing the money, they invested at the start
o Wealth creation
- businesses create wealth within the economy
- Paying taxes
- Paying employees
- Borrowing from lends
- Buying from other businesses.
o Quality of life
- wellbeing
- If consumers are concerned with environmental sustainably businesses will go out their way
to produce environmentally sustainable products and materials.
Types of businesses
Classification of business
o Size
- Micro – business: < 5 employees
- Small: 5-19
- Medium: 20-199
- Large: > 200
o Local, national, global
- Local: very restricted by geographical spread
- National: operates in just one country
- Global: multi-national cooperation
o Industry
Industry Definition Examples
Primary Businesses involved in the collection of
natural resources
Agricultural
Mining
Secondary Taking raw materials and making it into a
finished or semi- finished product
Manufacturing
Utilities
Construction
Tertiary Services Wholesaling
Retailing
transport
Quaternary Information and knowledge Info media & communic.
Education
Real estate
Quinary Services that have traditionally been
performed @ home
Hospitality, health
Arts and recreation
o Legal structure
- Sole trader: owned and operated by one person
- Partnership: owned and operated by between 2-20 people
- Unlimited liability: when the business owner is personally responsible for all the business
debt
- Incorporated = company
Private and public companies
- Unincorporated = business
Sole trader and partnership
- All companies are incorporated enterprises
- Private company usually has < 50 shareholders
Pty Ltd – proprietary limited
Limited liability
- Public company unlimited # of shareholders
Ltd – limited
Stock exchange
Has to go through incorporation
Separate legal entity from its owners
Factors influencing choice of legal structure
o Size, ownership, finance
Influences in the business environment
External influences
o Economic
- How the business cycle influences on how a business can operate
- Downswing/recession and money isn’t efficiently flowing through the economy;
business decisions harder
restricted on the amount of resources to make their products
consumers won’t have enough money to consume their product
- Upswing/peak evidently so will businesses.
increase in wages/salaries and consumer spending
o Financial
- Where business source funds – interest rates
- taxes business has to pay
- if a business can borrow $ easily and cheaply which will increase profit
o Geographic
- Location of your country in relation to other countries and economics
- Trade - Closest countries to trade to
- Easy to get resources
- Distance
o Social
- Responding to consumer trends
- i.e. Taste, fashion, culture
- Businesses need to keep up with social trends
- Environmental sustainability.
o Legal
- abide by laws of the country
- provide a framework for how to act and operate
- penalties if don’t comply
- accept legal responsibilities they owe to stakeholders
o Political
- Change in government
- New legislation or regulatory shifts – impact on how businesses operate
o Institutional
- Govt: each level of govt imposes range of regulations on business to protect dealings with
consumers and competitors
- Regulatory bodies: monitor and review the actions on business
- Other: affect how businesses operate in Aus. (unions)
o Technological
- Improved efficiency
- Improve quality and range
- Rapidly transmit info to customers.
o Competitive situation
- Competitors – any similarities
Size, resources, capabilities, product range and quality, marketing strategies.
- Provide more choice
- Greater efficiency in production
o Markets
- The exchange of g/s
- Performance measured by sales revenue, market share
Internal influences
o Products
- Type pf g/d that matches consumer wants/needs
- Reflects on business structure (service/manufacturer/retailer)
- Size of business based on product and range.
o Location
- Constant flow of people walking past the store
Customers increase # of sales and profits
- Customers convenience and visibility
- Prime location = customer convenience and viability
o Resources
- Human resources: employees, most important asset
- Information resources: market research, sales report, legal advice (economic forecast)
- Physical resources: equipment, machinery, buildings and raw materials
- Financial resources: funds – from loan, shareholders, profit, savings
- Skills and expertise of the management team in coordinating the businesses resources will
largely determine whether objectives are achieved.
o Management
- Make or break a business
- Hierarchy: many levels of management
- Flattened: more responsibilities to individuals
- Way a business makes decisions and operates critical influence on the success of the
business.
Hierarchy Flattened
Task centred People centred
Highly layer Flexible structure
Power not share Equal power share
Traditional, conservative Modern
‘do it our way’ Do it the best way’
o Business culture
- Values
- Symbols
- Rituals
- Role modes
- Shared by staff and managers
Stakeholders
- People and groups that interact with the business and have vested interest in its activities
- Examples
Society/general public
Employees/managers
Shareholders
Customers
Environment
Business growth and decline
Stages of the business life cycle
o Establishment
o Growth
o Maturity
o Post-maturity
Responding to challenges ta each stage of the business life cycle
Factors that can contribute to business decline
Voluntary and involuntary cessation – liquidation
Business Management
The nature of management
Features and effective management
– Resolve conflict
– Carry out negotiation
– Ensure service is delivered
Skills of management [table]
Skill Definition Characteristics Application to the workplace
Interpersonal skills
The ability to work and communicate with other people and to understand their needs.
Managers get their work done through other people (working through the strengths of other people). They have empathy.
Managers use interpersonal skills to communicate, motivate, lead and inspire those around them.
Communication
How you deliver the interpersonal skills.
- Verbal communication - Written compunction - Non-verbal communication
(body language)
- Friendly - Direct communication - Listening to employees - Respectful to others
Strategic Thinking
Creating a plan for the business to receive the best results. A direction that mangers want the business to go towards.
- Not afraid to take risks - Stay organised - Ask others for their input
Asking the right questions to find the best way to achieve a goal.
Vision
Not only do they have to do the thinking, they must then articulate a clear statement of that direction.
Expresses what the business will, and importantly won’t do.
- Achievable - Benefits the business
Problem-solving
& Decision-making
Problem solving means finding solutions to difficult or complex issues. Decision making is choosing the best choices that will create the best outcomes.
Solving issues directly or putting in place people and processes to solve them. Decisions that will impact in the short term, medium term, and long term.
- Recognise there is a problem to solve
- Try and solve it keeping in mind how it affects others.
achieving business goals
o profits, market share, growth, share price, social, environmental
- The 6 goals of a business:
Profits (revenue – expenses)
Market share (portion of market revenue earned by the business)
Growth (growing revenue and geographic scope)
Share price (for public companies)
Social (impact of the business on its surrounding community)
Environmental (external influence [legal and ethical compliance])
o achieving a mix of the above goals
- Triple bottom line; economic, social and environment.
- How businesses are judged. Shareholders and investors
- Economic: financial, profitability
- Social:
treating employees well (affects reputation with consumers and reputation of
employer in general, and employee productivity)
fair trade
- Environmental:
Affects reputation. Consumers won’t buy from a business that harms the
environment.
Legal requirements
Waste
- Smart goals
- Specific; emphasise what’s important
- Measurable; you must be able to see change occur. Helps business stay on track
- Achievable; challenging but not be too far out of the business’s reach
- Realistic; owner and employees must agree on goals
- Time bound; goals must have deadlines and sub-deadlines.
Flexibility & adapting to
change
Looking for ways to find something that works more efficiently than what you already have.
Strengths /weaknesses - internal influences opportunities /threats - external influence
Flexible to be able to change and modify schedules / commitments / plan
- If the manager is inflexible then the problem can get bigger.
Reconciling the conflicting interests of
stakeholders
Managers have to make decisions where the interests of various stakeholders are prioritised.
negotiation, consultation, stakeholder engagement (providing information to, and listening to, stakeholder groups) to influence decisions.
Put the stakeholders first before making a decision that affects everyone.
o staff involvement – innovation, motivation, mentoring, training
- innovation - new ideas
- motivation – motivate staff
- mentoring – develop new skills in the staff by:
coaching
providing feedback
modelling cultural norms in the business
- training – building skills in staff to perform their current role.
Management approaches
classical approach
o management as planning, organising and controlling
- classical management has an autocratic (absolute power) leadership style, and that scientific
management is within classical management, as are administrative (organisation) and
bureaucratic (controlling)
- scientific management observation and measurement of all of the processes that workers
undertook – finding the most efficient way to complete the job
- increased productivity by treating the workers as robots - to do what they were told, and not
to do anything that would reduce productivity.
o hierarchical organisational structure
- Many levels of management
- Management hierarchy
o autocratic leadership style
- Absolute power – singular
- Keeps workers on their feet
behavioural approach
o management as leading, motivating, communicating
- Working together as teams
- Participative/democratic leadership style
o teams
o participative/democratic leadership style
contingency approach
o adapting to changing circumstances
- being adaptable, using the style of management that best suits the situation.
- contingent upon, or change in response to, particular circumstances facing the business.
Management process
coordinating key business functions and resources
operations – heart of the business
o the strategic role of operations is to achieve a competitive advantage thus enabling the business to
achieve profitability. A competitive advantage can be achieved through differentiating products
and/or cost leadership whilst ensuring quality is maintained (meeting customer expectations).
o Efficiency: keeping costs down w/o compromising quality.
o the production process
o TransformED – used to create value
Materials (changed)
Information (used up)
Customers (service business i.e. Hairdresser)
o TransformING – remain in the business for future transformation process.
Labour
Facilities (warehouse, technology)
o The process of adding value
o Inputs “adding value” outputs
o quality management
1. Quality Assurance – proactive measures to ensure quality (i.e. before pizza made)
2. Quality Control – Reactive: detecting defeats (i.e. after pizza made, but before consumer)
3. Total quality management – quality is a company-wide commitment.
Marketing
The strategic role: the belief that the customer is at the core of all business activities that all sections of the
business are involved in satisfying customer needs while achieve business goals.
o identification of the target market
Intended group of customers for a given product.
Conduct market research ask Q’s surveys
Mass market: aimed at all customers
Market segmentation: where market is split into small groups
Demographic: population characteristics: age, gender, income, education
Geographic: where people live
Psychographic: opinions, lifestyle, personality
Behaviour: how often they purchase, loyalty, price sensitivity
Niche market: small or specific target market
o marketing mix
product (packaging)
Well-designed packaging gives a positive impression of the product. Helps inform,
promote and protect product.
Branding – powerful marketing tool, name, term, symbol and design
Promotion – inform, persuade and remind customers about business’ products with aims of:
Attracting new customers
Increasing brand loyalty
Encouraging existing customers to purchase more of a product.
o Personal selling, sales promotion, publicity and advertising
Price
Cost and margin (profit)
Market price: considers supply and demand
Competitor’s price
Discount price
Place – how product gets to consumer
Producer consumer (simplest channel that involves no intermediate)
Producer retailer customer (retail is an intermediate who then sells to
consumer)
Producer wholesaler retailer customer (most common method)
Exclusive distribution i.e. tiffany + co.
Selective distribution i.e. iPhone, country road, seed
Intensive distribution – widespread, available everywhere i.e. coca cola
Finance
The strategic role of finance is to provide the financial resources available to implement the strategies
necessary to achieve the goals/objectives of the business.
PLEGS
1. Profitability
2. Liquidity
3. Efficiency
4. Growth
5. Solvency (combination of debt and equity)
o cash flow statement
shows cash in and cash out over a series of periods (normally months)
opening balance + cash in – cash out = closing balance.
o income statement/profit and loss
purpose to track – profitability,
efficiency (minimising costs –
COGS), growth
shows the amount of inventory
sold by the end of a period and the
expenses paid
profit = sales – expenses (COGS
and other expenses)
Profit = sales – COGS –
expenses
Profit = Gross profit –
expenses
gross profit shows the
mark up (cost of materials)
o balance sheet
what you own vs. how you paid for it (funded)
ALOE: Assets = Liabilities + Owners Equity
Moment AT time
Rent and leases DON’T belong on balance sheet
human resources
o the strategic role of HR is to create and develop an affective workforce that shares the vision of the
business. Thus, enabling the business to achieve the triple bottom line.
o Recruitment
- 1. Identifying staffing needs – job analysis: systemic study of each employees’ duties tasks and
work environment.
- 2. Recruitment – attract qualified job applicants
o Job description: statement of employee’s duties, tasks etc.
o Job specification: key qualifications needed to perform a particular job in terms
of education, skills, and experience.
- 3. Selection – gathering info about each applicant for a position then using that info to choose
appropriate applicant. (resume, background checks, interview)
o Training
- Training is the process of teach staff how to perform their job more effectively by boosting
their knowledge and skills
- Development is activities that prepare staff to take greater responsibilities in the future.
- Dispute resolution: team building exercise, engaging workshops, social club, yearly review.
o employment contracts
- momentary and non-monetary benefits (i.e. car)
- employment contracts: legally binding, formal agreement between an employer and
employee. These include;
o award (minimum)
o enterprise agreement (group same pay)
o common law contract (individual)
o separation – voluntary/involuntary
- voluntary separation when an employee chooses to leave the business of their own free will
o retirement, registration/ quitting, voluntary redundancy
- involuntary separation is when an employee is asked to leave the business against their will
o retrenchment, dismissal, involuntary redundancy (job no longer required)
o ethical business behaviour
Management and change
responding to internal and external influences
managing change effectively
o identifying the need for change
- business information systems
o setting achievable goals
- SMART goals
o resistance to change
o management consultants
