The Nature of BusinessRole of businessThe nature of businessProducing goods and services

- InputProductionOutput (goods and services)- A business will add value to the inputs transforming them into an output, the more value added the more expensive

a good or service will be- Good: tangible item (can be seen or touched) e.g. car, phone etc.- Service: intangible item, provided by an individual or organization e.g. hairdresser, plumber (improved by

qualifications and experience

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PIECEWIQFunction Definition Internal Factors External Factors Examples Profit Amount of revenue

gained by a business which exceeds operating cost

-Expenses-store location-decision making

-Market-trends-inflation -laws/regulations

-Apple-ANZ-QANTAS-Coca Cola

Income Amount of money received by a person for providing their labour or services for a business from a return on its investment or sale of goods/services

-Employees-shareholders-innovation

-Demand for product -cost of producing product-innovation

-Apple-Samsung-IKEA-QANTAS

Entrepreneurship and risk

The drive and willingness to develop, organise and manage a business along with all the risks in order to make a profit

-motivation and determination-level of risk-resources

-competition- demand- skill level

-Tesla-PayPal-Snapchat-Facebook

Choice Providing alternatives in order to satisfy consumer needs and wants as well as boost sales

-skills of employees -cost of production-location

-demand of good/service-trends -expenses

-EBay-Amazon-Mars-Nestle

Employment Paid agreement between employer and employee that the employee will provide services/skills to job

-minimum wage-workplace culture-candidates

-employment- legislation-poaching-economic -conditions

-Woolworths-Google-Coles (Wesfarmers)-McDonalds

Wealth Generation of money for Australian economy by production of goods and services from individual businesses

-skills -management-investment-range of goods and services-pricing

-demand-tax rate-competitors

-Apple-Amazon-ANZ-CBA

Innovation Improvement on something already established in the market

critical thinking-resources available-cost-time

-government policies -skills -consumer trends -competitors

-Apple-Samsung-Tesla-Amazon

Quality of life Overall well-being of an individual and is both material and non-material benefits such as health, comfort and happiness

-working environment-choice of products-wages and salary of employees

-social expectations and trends-economic condition-profit levels

-Unilever-QANTAS-Woolworths-Coles

Types of businessClassification of businessSize

Businesses can be classified by size and usually into three main categories- small, medium and large. Micro businesses also exist and are defined as having less than 5 employees. We classify the size by the number of employees but there are other factors we can use.

Small Medium LargeNumber of employees Less than 20 20-199 200 or moreOwnership Independently owned

and usually operated by 1-2 people

Owned and operated by a few people/private shareholders

Owned by thousands of public shareholders

Legal structure Sole traderPartnership

PartnershipPrivate company

Public company

Decision making - Usually by owner- Simple and quick implementation of decision

- Owner is responsible for most decision- More complicated process- Slower implementation

- Complex decision making due to board- Senior and middle management- Slower implementations

Finance Owner (from savings or loan), difficult to access a loan

Owners/partners own savings or loan and/or private shareholders, easier accessibility to loans

Many sources:- Cash reserves- Retained profit- Sale of shares- Loans

Market share Small, usually in a local area

Medium, dominance in geographic region

Large, esp. for multinational corporations

Examples - Corner store- Local mechanic- Hairdressing salon

- Services club- Motel/hotel- Factory

- QUANTAS- Westpac- Woolworths

Local, national and globalLocal- A business that has very restricted geographical spread- Usually small to medium business- Serves surrounding area- E.g. newsagent, corner store, pharmacyNational - A business that solely operates in one country- As it expands, it will eventually run out of new customers to sell to- Domestic market can become saturated- Can decide to export products to other countries- E.g. Woolworths, ColesGlobal- A business that is very large and has branches in many different countries- Also known as multinational corporation or transnational corporation- Conduct a large percentage of their business outside their home business- E.g. Coco-Cola, McDonalds, Mazda, Nike

Industry

Legal structureLegal Structure

Definition Advantages Disadvantages Considerations Extra

Sole Trader -A business owned and operated by one person-Simplest structure and inexpensive to set up-Liable for all debts (unlimited liability)

-Lower cost of entry-Operated by their own-Do not pay payroll tax or superannuation -Make all the decisions-Less government regulations

-End of business with owner dies-Hard to raise finance-Burden of management -Long hours-Lack of expertise-High stress levels-Lack of borrowing capacity

-Affordability to cover costs-High responsibility-Innovative mind-Ability to take risks-Location of business-Finance-Must know law regulations

-Small enterprises-Mainly tertiary business-Unincorporated (business and owner are the same entity)-E.g. Pendle Hill Bakery, Uber drivers, Trott’s Florists

Partnership -Formed between 2 and 20 people-In a limited partnership, liable for the debt to the amount invested-In an unlimited partnership, liable to pay debts off whether or not they go over investment amount

-Will outline all responsibilities, decisions, expectations-Shared and equal responsibility -Low start-up costs-Shared contribution of finance-Greater access to ideas-Shared decisions-Greater borrowing capacity-Reduced government rules

-Finding a suitable partner-Disputes-Loyalty among partners-Unlimited liability-Profit has to be split-Some partners may not share responsibilities-Liable to the debt of the business

-Would it be better off to be sole trader and make all decisions?-Who to be a partner with-Finance-Partnership agreement-Borrowing capacity

-Local-Small to medium-Mainly service industries-Unincorporated-E.g. medical, vets etc.; Smith Hancock Chartered Accountants, Decision One Pty Ltd, Tresband Scientific Pty Ltd

Legal Structure

Definition Advantages Disadvantages Considerations Extra

Private Company

-Not on the ASX-Pty Ltd after business name

-Owners and business are separate

-Less resources (only 50 members)-Shareholders

-Not required to publicly disclose financial info

-Local, national-Most industries-Incorporated (Inc.)

Business classification according to

industry sector

Primary-Production is directly associated with natural resources-E.g. farming, mining, fishing-Employs about 4% of labour force-60% of all exports come from these industries

Secondary -Takes the output of firms in primary sector and process into finished product -E.g. iron ore and coal into steel, car manufacture

Tertiary -Provide a service-E.g. retailers, dentists, banks-Aprox 3 out of 4 employees work in this industry-Divided into two sectors: quaternary and quinary

Quaternary -Services that involve the transfer and processing of information and technology-E.g. telecommunication, property, education

Quinary -Services that were traditionally performed in the home-E.g. hospitality, tourism, childcare-predicted to expand rapidly- many small businesses are in this sector

-Between 2 and 50 private shareholders-Shareholders have to be asked to join

-Provides limited liability protection to shareholders-Much more organised because only people the business trusts are elected as shareholders (max 50)-Doesn’t follow restrictions the government puts on public companies

can’t leave easily-More partners the less control-Lack of public confidence as its affairs and unknown-Poor protection for minor shareholders

-Don’t need all shareholder approval for decisions-Where to set up company-How many shareholders to have and who-Can focus on long-term growth rather than focusing shareholders

-E.g. Ecosave Pty Ltd, Fire Protection and Design Management Pty Ltd, W Griffiths & Co Pty Ltd

Public Company

-A company with securities (equity and debt) owned and traded by the general public through the public capital markets-Shares are openly traded and distributed-Ownership between shareholders, board and management

-Sells shares to public to generate finance-Well known and reputable-Extra finance created through offerings which involves the creation and sale of shares (floats)-Risk is spread-Able to receive dividends

-Expensive to start on ASX ($500 000 min)-More requirements-Disclose data about business and performance publicly-Vulnerable to takeovers-Must hold board meetings-Share prices change

-Is it better form of structure when so expensive to list on ASX?-Set Up-Will a partnership or private company allow us to reach our objective?

-National-Can be part of global company-Large-All industries-Incorporated-E.g. Google Inc., Mazda, QUANTAS, JBHI, Myer, Coles

Franchise -Buy the rights and brand name of a business-Franchisor is the person you buy the brand off-Franchisee where you buy into the franchise

-Little growth risk-Established brand-Established plans-High success rate-Support from franchisor-Management training provided

-Can’t use own ideas-Expensive business to establish-Formal agreement for set period of time-Bad franchisees can affect reputation of the franchise

-What are the benefits of franchising?-Do I have enough funds?-Length of contract-High expectations from franchisor

-National-Fastest growing set-up structure in Australia-Mostly in tertiary (quinary) industry-E.g. Subway, McDonalds, Boost Juice, KFC

Government -Government owned and operated-Provide essential community services

-Large number of jobs for people in public sector-Reliable-Recognised-Secure funding-Contributing to Australian economy-Large market share

-Strict rules and regulations-Less innovation-Not as profitable as privately owned-Little power and control as have to follow Government procedures

-How much should be retained or sold-How much to sell for-Hard to invest into from Government-Back lash may happen

-National-Large-RailCorp, Australia Post, Defence Housing Australia, Sydney Trains

Factors influencing choice of legal structureSize

- Generally, moves from an unincorporated business to an incorporated business as the business grows e.g. a small business would usually be a sole trader or partnership

- A business that has expanded may also list as a public company to raise finance through floating of sharesOwnership structure

- Depends on the amount of control the owner wants to have over the business Sole trader: total control

Partnership: control is shared between partners Private company: to raise funds still high degree of control Public company: once shares have floated the ownership and control becomes fragmented into many

thousands of partsFinance

- Where are you going to obtain the finance from?- Sole traders and partnerships may find it difficult to obtain finance- A company can always offer new floats- Venture capital (investors take an equity position (own part of it) and provide supplementary finance) is a way for

small businesses to gain finance

Influences in the business environmentExternal influencesEconomic

- Businesses are dependent on the economic environment and conditions- Boom: high business confidence with spending and employment - Bust (recession): poor confidence and thus limited spending and high unemployment - The economy goes through cycles

- How a business responds to the cycles will result in their survival or notFinancial

- Relates to the financial systems of banks, borrowing and lending- Globalisation and deregulation of the financial sector have resulted in more competition from international financial

institutions entering Australia- Affects a business’s ability to raise funds and make wise investment decisions

Geographic- An enormous impact on business activity are Australia’s geographic location within the Asia–Pacific region - Further changes that are likely to have a profound effect on business activity in Australia originate from changing

demographic factors. Demography is the study of particular features of the population, including the size of the population, age, sex, income, cultural background and family size. Changes in any of these factors can lead to changes in demand levels and the nature of products and services.

- Another important geographical influence is that of globalisation. The Earth is a global community whose individual members are linked through the mechanism of international trade: the buying and selling of goods and services between nations.

Social- Relates to the people and groups in our society and the way they interact and behave towards each other

o Attitudes, values and lifestyles- Examples:

o Multiculturalism and equal opportunityo Increased number of women in the workplaceo Environmental awareness

Legal- Both State and Federal Governments mandate these influences through statue law- Statue law is the law made by the Government- All businesses must adhere to these laws- There is often a lot of bureaucracy when doing business

- The laws that affect a business range from workplace health and safety, industrial relations, marketing, taxation, equal employment opportunity

- Examples:o Competition and Consumer Act 2010 (Cwlth), this Act replaced Trade Practice Act 1974 (Cwlth)o Australian Consumer Law 2011 (Cwlth)o Work Health and Safety Act 2011 (Cwlth)o Fair Work Act 2009 (Cwlth)o Sex Discrimination Act 1984 (Cwlth)o Anti- discrimination Act 1977 (Cwlth)

Political- Political factors relate to the activities and decisions of three levels of government- local, state and federal- and to

some degree international protocols. - The decisions and activities of governments often result in laws or regulations, so there is a strong connection

between political and legal influences.- Government policies have a considerate impact on the business environment. Major political change can lead to a

business uncertainty or lack of confidence Institutional

- Regulatory bodieso Organisations that monitor and review the actions of businesses and consumers in relation to certain issues

and the appropriate legislationo Ensure that businesses conduct themselves fairly in relation to the consumer, the community and other

businesseso Examples:

Australian Competition and Consumer Commission (Federal) Australian Securities and Investment Commission (Federal) Office of Fair Trading (NSW) Department of Environment and Conservation (NSW)

- Trade Uniono National body that represents employees in employment matters and industrial disputeso Examples:

Transport Workers Union Teachers Federation

- Employer associationo National body that represents the employer in an industrial disputeo Examples:

Australian Chamber of Commerce and Industry National Farmers Federation Australian Industry group

Technological - Technological change is constant in the ever-changing business environment. If a business does not respond to

technological change appropriately then they will fall behind the competition who does quickly. - Forms of technology that can influence a business’ success or failure:

o Apps i.e. Instagramo Operational systemso E-Procuremento Robotso CAD (Computer Aided Design)o CAM (Computer Aided Manufacturing)o Self-serveo Payment methods i.e. PayPal, pay passo E-commerce

- Reasons to implement technology

o Reliabilityo Cost savingo Reaching larger target marketo Efficiencieso Greater Economies of Scale (cheaper to produce bulk rather than 1 or 2)o Communicationso Reduces lead times (wait times)o Safer o Perfection; eliminates errors/mistakeso Maintaining quality and consistencyo Increase productivity

- Reasons against implementing technologyo Lack of fundso Resistance to technology (older workers and those who don’t have knowledge)o Lack of experienceo Losses in jobs -> unemployment -> redundanto Business on people and still need themo Technology will become obsolete and continually updates making it costly

Competitive situation- Sustainable competitive advantage (strategies over competitors)

o A sustainable competitive advantage refers to the ability of a business to develop strategies that will ensure it has an ‘edge’ over its competitors for a long period of time.

- Market concentration (number of firms within an industry)o Market concentration refers to the number of competitors in a particular market. There are four main types

of market concentration: Monopoly, Oligopoly, Monopolistic competition and Perfect competition.- Types of market concentration:

o Monopolyo Oligopolyo Monopolistic competitiono Perfect competition

Changing nature of markets - Changes in financial/ capital markets

o Finance is more readily available and flows easier between countrieso Much easier for individuals and businesses to access overseas share markets and purchase equity in foreign

companies- Changes in labour markets

o Companies now employ migrants and expatriateso Employment has become global

- Changes in consumer marketso Increase in globalisation consumers have more range of products and services offered to themo Improved technologies and communications have changed the marketso Internet people are able to purchase a greater range of products and businesses are able to access a

greater market

Internal InfluencesProducts

- Product influences affect a range of internal structures and operations with the business.o The range of goods and services refers to the number produced by the business. The larger the number, the

more internal impact it will have on the business as it will need to expand operations and internal structures to accommodate the changes.

o Product influence will be reflected in the type of business (service, manufacturer or retailer).o The size of the business will influence the range of products and services offered by the business and the

level of technology used.Location

- Customer convenience- Visibility- Proximity to suppliers- Customers- Support services

Resources- Human

o These are the employees of the business and are generally its most important asset.- Information

o These include the knowledge and data required by the business such as market research, sales reports, economic forecasts, technical material and legal advice

- Physicalo Includes equipment, machinery, buildings and raw materials

- Financialo These are the funds the business uses to meet its obligations to various creditors

Management - Advancements in technology as well as an increase in competition due to globalisation has led to the removal of

management levels- Businesses are therefore able to adapt quickly to changing consumer needs and wants- Reducing the levels of management has given greater responsibility to employees

- Business has moved away from traditional classical scientific approach to a behavioural approach

Business Culture- Refers to the values, ideas, expectations and beliefs shared by members of the organisation- Business culture can therefore significantly influence how a business operates through the values, symbols, rituals,

rights and celebrations, and heroes

StakeholdersA stakeholder is someone (or group) which has a vested interest into a business. The stakeholders can be both internal and external, internal within the business and external, outside the business. In business, there are many stakeholders who all have different interests into a business for a variety of reasons.

Stakeholder Reason of interest Business responsibility to the stakeholder

Potential causes of conflict

Employee Income/ moneyWorkWant promotion/ Pay rises if they are skilledIncrease their skills

Fair working conditionsEntitlements Job security Provide a safe working environment

Unfair working conditionsPay disputesWorking conditionsLeavesHoursFlexibility

Managers/Owners

PayJobPromotionSkill developmentReputation

Provide workTreat employees correctlyAbide by regulations

Conflict of ideas between management and the businessUnfair working conditions Pay disputes Working hours Work load Legal obligations: Red Tape

Customers PriceThey want the business to produce high quality products at reasonable prices.

To have excellent customer serviceTheir good/service is of good qualityProvide the customer of a productListen to customer feedbackReaching the target market

Misleading and deceptive marketingPoor qualityDelivery issuesDissatisfaction with productSafetyNegligence under civil law Price too high

Society Choice of goods and servicesPrice of goods and servicesWhere products are made i.e Made in AustraliaExploitation of labourEnvironmental friendly products

Fair and honest business practicesCustomer feedbackRespond to societal needsSocial AwarenessMarketing Good customer serviceReturning items as stated on receipt

Business policies and practicesPolitical ConflictsEthical IssuesEnvironmental issuesBusinesses are going overseas- no jobs in Australia

Environment Animal crueltySocial TrendsEthically sourcing resources Climate Change

Meet ethical standardsFollow legislationConsider environment in business decisionsSustainable palm oil

Breaking environmental lawsProtests from environmentalistsFinancial investment Being environmentally friendly can be more expensive

Shareholders/ Investors

Growth of the companyMoney from dividend Keep the business operatingSustain the business in an economic trough.

Provide clear financial status of the businessDividendto hold an annual general meeting to give the shareholders the opportunity to ask questions of the Board of Directorsto allow shareholders to buy and sell their shares as they wishto divide surplus assets upon the company’s closure.

No dividendsShare prices dropsOwners want to retain more ownershipNo meetings with shareholdersThe reputation of the business fallsBoard of directors make a bad decisionRestrictions are made on the sale of sharesBusiness fails to listen to its shareholdersShareholders selling large amounts of shares to untrustworthy people

Business growth and declineStages in the business life cycle

Characteristics Challenges Marketing strategies External Examples

used influences impacting

Establishment

Slow sales, sometimes erratic and small

Customer base, takes a lot of time to operate

Learning about business operation as you go

Business is not known in the market, lack of reputation

High vulnerability and failure rate within the first five years

Detailed planning required

Long hours

Financial - start off with no profit and limited finance

Competition - which will be hard as they are not a very well-known

Geographical location - Physical businesses need to choose their location wisely, to ensure they have a large enough customer base

Economy - Businesses need to take the economy into account, as it governs spending habits

Social – staying up to date as possible to attract consumers

Flyers Posters Word of mouth Emails Most inexpensive forms of advertising are employed by small businesses as they are usually all the business can afford.

Financial status: availability of funds

Geographic location: high consumer traffic is required as the company is not as well known

Competition from both small and large businesses

Economic

Miniso (Australia)

Kaufland (Australia)

TK Maxx (Australia)

Lidl (Australia)

Growth Making sure there is enough supply to meet demand

Generating a consistent source of income and taking on new customers

High level of marketing strategies

Putting more staff on

New ideas and ranges of products

Growth strategies including: take overs, acquisitions, mergers, diversification, integration (backward and forward)

Dealing with increasing revenue

Increasing customers

Accounting management

Effective management

Meeting increasing demand

Running out of money and market competition

Dividing time between new demands

Celebrity endorsements

Television commercials

Interviews Events Publicity Offers Word of mouth

Competition Technology Markets Financial Economic

Miniso Atlassian TK Maxx Jim’s

services Amazon Alibaba

Maturity Increased levels of

Reorganisation and rethinking of

Emails Loyalty programs

Technology Competitors

Woolworths Coles

structured planning which could lead to the restructuring of the business

Formal organisational structure

Complacency Sales are

increasing but at a much slower rate than growth

operations and future Trying to maintain profits at previous levels Keeping costs to a minimum Maintain customer loyalty from increasing number of competitors Incentives to keep best employees from leaving to the competition

Advertising, TV and print Offers Word of mouth

Changing markets Social Economic

Qantas CBA NAB

Renewal A company attempts to tap into new areas of growth and expanding the range of services and products the business offers

Aims to increase market share and move into new markets in order to find new profit channels and increase its profits.

Similar to establishment, because the new products and services which the business may offer may unsuccessful and disastrous.

This phase requires careful planning and investments to succeed and help the business expand. Preventing decline and to sustain its profit which can be a huge challenge for the business when there are a number of competitors competing. Finding the extra finance to invest into R and D Adopting a culture of change amongst your employees, a new direction Not meeting expected sales levels Alternatives names are Regeneration and Revival

Advertising including TV and print

Offers Publicity Public Relations Word of mouth

Competition Changing markets (consumer tastes and trends) Social Economical Financial

Fairfax Media and Nine (Merger) Pizza Hut Woolworths

Steady Neither declining nor expanding

Cannot remain steady forever

Main goal - satisfying consumer demands and maintaining profit levels

Doesn’t continue expenditure on research and

Loss of competitive advantage

Loss of skills Business can

become unsustainable

Following trends and keeping up with customer needs

Average strategies

Word of mouth Existing

strategies from maturity

No new forms or growth of strategies

Competition Economic Financial Changing

markets

Coles IGA Cotton On

development Just managing

to cover operational costs

Decline Decrease in sales and preference for the product fails

Lower profits Cost of

production increase

Decrease in advertising as money goes into other products

Market will decline

Lose customers to newer and better products/services

Falling sales and profits

Sales will fall and so profits too will fall

Lack of profits results in a lack of funding for advertising and thus will result in a loss of their market share

Product withdrawal

Products have to be withdrawn to prevent the further loss of profits

Reducing prices Selective

distribution Withdrawing

unprofitable products

Repositioning or reinvigorating product/service

Reducing advertising to reduce spending whilst still reaching existing/loyal customers

Changing technology

Economy Competition Geographical Businesses

which produce in other countries are advantaged as they can attain cheaper labour costs.

Doughnut Time

Myers Avon

Cosmetics Oroton Pumpkin

Patch Hard copy

of newspapers i.e. SHM, Daily Telegraph

Growth Strategies

- Mergers: Merging with another business that is similar to combine all of their resources to create a new business i.e. Nine and Fairfax, BHP and Billiton. (Similar levels of controls between the companies)

- Takeovers: One business takes control of another business by purchasing part of it and controlling an interest into it. E.g. Richman Pty Ltd Editing takeover a share in Poorman

- Pty Ltd Producing to create Richman Editing and Producing Pty Ltd

- Vertical Integration: A business will expand at different but related levels in the production of a product. Backward vertical integration is when a business goes backwards to supply an input. (cheaper, quality, don’t have to rely on other companies) Forward vertical Integration is where you invest in a place to sell a product.

- Horizontal Integration: A takeover or a merger of another business who produces similar products.- Diversification: Merger or takeover in a totally different industry

Factors that can contribute to business decline- There is not just one factor that contributes to the decline of a business, rather several factors. The ever-

competitive business environment is a key factor but all business is not limited to this.The two main factors are:

1. Undercapitalization: not enough money invested into the business2. Lack of management: not having the skills or resources to effectively manage the business

Voluntary and involuntary cessation- liquidation

- Cessation refers to the closure of a business. The owner may decide to cease the operations of a business for a number of reasons. The cessation of the business may be a voluntary decision made by the owner. Alternatively, the closure may be forced on the business by external interests, this is known as involuntary cessation.

- The cessation (closure) of a business differs for a sole trader, partnership and companies.

Sole trader/ partnership Private/ public companies

Bankruptcy: where a business is unable to pay its debts

Voluntary: own accord Involuntary: forced out

Voluntary administration: An external third party comes in to operate the business hoping to rectify the situation

Liquidation: Selling a business’ assets to convert into cash (usually to pay off debts)

Voluntary Involuntary

Business ManagementNature of managementFeatures of effective management

- Plan- they must be good at planning, considering long-term goals and short-term objectives- Organised- makes decisions to organise resources in the most efficient and productive combinations- Lead- motivates staff using the most appropriate methods and styles of leadership- Control- controls the business and takes corrective action if it deviates from the business plan. Key decisions of a

manager

Skills of managementInterpersonal

- These are the skills that are needed to work, communicate and relate with others. It also incorporates the ability to understand their needs.

Communication- This is the exchange of information between people. Communication can be verbal and non-verbal. It is important

that a manager is able to pick on the non-verbal cues.Strategic thinking

- Strategic thinking allows the manager to see the business as a whole rather than in small parts- seeing the broad long-term view of the organisation- ‘the big picture’. It involves thinking about the future direction a business wants to go and what goals the business wants to achieve

Vision- Is the clear, shared sense of direction that allows a business to attain a common goal. Vision is the essential element

in management- without vision there can be no sense of cooperation and commitment towards achieving business goals. A leader is the driver of vision

Problem solving- This is a broad set of activities involved in searching for, identifying and then implementing a course of action to

correct an unworkable situationDecision making

- This is the process of identifying the options available and then choosing a specific course of action to solve the problem. Managers today are often confronted with complex, challenging and stressful decision-making demands

Flexibility and adaptability to change- Flexibility refers to the activity of a manager to be flexible to changing circumstances- they can go with the flow. An

ineffective manager is not able to be flexible and will resist changing circumstances. A manager needs to be proactive- thinking in a positive frame of mind with forward planning.

Reconciling the conflicting interests of stakeholders- There are a number of stakeholders in a business that we have identified previously. A manager must be able to

reconcile conflicting interests between these groups. A number of the previous skills will be used by a manager to overcome the conflict, for the best outcome for all.

Achieving business goalsSMART goals

- Specific

- Measurable- Achievable- Relevant- Time-bound

Profits- A major indication of a business’s success is the size of their profit- Profit maximisation occurs when there is a maximum difference between the total revenue (that is the number of

sales made multiplied by the price) coming into the business and total costs being paid out- A way to maximise profit is to increase sales

o Lowering the priceo Marketing campaigno Innovative productso Better services

Market share- Market share refers to the business’s share of the total industry sales for a particular product- Usually a goal for only large businesses- Increasing market share is an important goal for businesses that dominate the market because small market gains

often translate into large profits- A strategy to increase market share is promotion

o Methods used by a business to inform, persuade and remind a market about the business’s productso Can be used to convince new customers to try a producto Maintaining established partners loyalty

Growth- Usually businesses want to grow- Internal growth

o Employing more peopleo Increasing saleso Introducing innovative productso Purchasing new equipmento Establishing more outlets

- External growtho Merging with or acquiring other businesses

- Maximising growth is a goal for both SMEs and large businesses- Small business owners are content to maintain the existing size of their business to:

o Avoid the added pressures of expansion/ desire for quiet life or particular lifestyleo Keep control over the business’s operationso Maintain personal contact with the customers

Share price- A share is a part ownership of a public company- Reasons to buy shares:

o Purchase shares in the hope of selling them for a higher priceo Owning shares entitles an investor to a part of the company’s profits (dividends)

- For companies to be successful they need to maximise the returns of their shareholderso Achieved by keeping the share price rising and paying back healthy dividends

Social- Community service

o Business sponsorship of a wide range of community events, promotions and programs- Provision of employment

o Most large businesses do not regard employment of people as a main goalo Many small business owners look at the continuity of their business e.g. employing family members who

otherwise might be unemployed- Social justice

o A business may be concerned for social justice such as adopting a set of policies to ensure employees and other community members are treated equally and fairly

Environmental- Enlightened businesses are adopting practices of ‘recycle, renew and regenerate’, as well as adopting a ‘green’

attitude, and developing products and creating ideas that are environmentally friendly

Achieving a mix of the above goals- It is difficult for a business to achieve all its financial goals simultaneously as the links between the goals make some

of them incompatible- Maximising profit is often considered the business’s main goal however this may not be achievable or appropriate

due to the following reasons:o Present profit levels may be maximised by eliminating some expenses but this may reduce long term profits

A decision to reduce the amount spent on advertising may reduce expenses in the current period but it may reduce the level of sales in the long term

o If profits are maximised due to higher prices than lower costs, managers may prefer lower profits to discourage potential competitors from entering the industry

o Managers may decide to limit profits by keeping prices down to maintain good customer relations o Businesses should be careful regarding how they got about achieving the goal of profit maximisation

Shouldn’t involve short-term exploitationo In large public companies the shareholders do not usually decide how production is to be organised. The

shareholders gain the profits, but it is the directors and managers who make the operational decisions resulting in management pursuing other goals

Staff involvement- Staff involvement means involving employees in the decision-making process and giving them the necessary skills

and rewards- A work environment that maximised employee involvement and satisfaction has high levels of labour productivity- Innovation

o Businesses should encourage an innovative business culture by recognising and encouraging one of the most important sources of innovative ideas: employees

o An intrapreneur is an innovate employee who takes on the entrepreneurial roles within a business- Motivation

o Refers to the individual, internal process that directs, energises and sustains a person’s behaviouro Individual employees respond differently to various motivational techniqueso Good managers should be good motivators

- Mentoringo Process of developing another individual by offering tutoring, coaching and modelling good behaviouro Teaching new employees what the business expects of them helps strengthen their dedication and

commitment to the business- Training

o Employee training generally refers to the process of teaching staff how to perform their job more efficiently and effectively by boosting their knowledge and skills

o The goal of training is to improve employee productivity

Management ApproachesClassical ApproachManagement as:

- Planning: the preparation of a predetermined course of action for a businesso Strategic (long term): Planning for the following three to five years. This level of planning will assist in

determining where in the market the business wants to be, and what it wants to achieve in relation to its competitors.

o Tactical (mid-term): Planning is flexible, adaptable planning, usually over one to two years, that assists in implementing the strategic plan. Tactical planning allows the business to respond quickly to changes. The emphasis is on how the goals will be achieved through the allocation of resources.

o Operational (day to day): Planning provides specific details about the way in which the business will operate in the short term. Management controls the day-to-day operations that contribute to achieving short-term actions and goals. Examples of operational plans are daily and weekly production schedules.

- Organisingo Determining the work activities: Work activities required to achieve management objectives must be

determined.o Classifying and grouping activities: similar activities can be grouped together to improve efficiency

o Assigning work and delegating authority: determine who is to carry out what work and who has the responsibility to ensure that the work is carried out. Delegation involves ensuring that the person who has been given responsibility does carry out the processes.

- Controllingo Establish standards in line with the firm’s goals and influences from employees, management, industry and

governmento Measure performance and determine how comparisons will be made against standards or benchmarkso Take corrective action - changing activities, processes and personnel to ensure that the goals of the business

have been met.Hierarchical organisational structure

- Division of labour- Chain of command (how many levels- long or short)- Span of control (how many- narrow or wide)

Autocratic leadership style

Behavioural Approach Management as:

- Leadingo A leadership style refers to a leader’s behaviour characteristics when directing, motivating, guiding and

managing a group of people. Different managers will all have different understanding and characteristics in their leadership

style. A behaviourist leader will delegate and form teams to give control to their workers in teams.

o The shift moved management from a production orientation (classical leadership theory) to a leadership style focused on the workers' human needs for work-related satisfaction and good working conditions.

- Motivatingo Motivation is defined as the force that causes an individual to behave in a specific way: a highly motivated

person works hard at a job; an unmotivated person does not.o Factors such as trust, respect for the individual, positive reinforcement, empowerment, enhancing self-

esteem, employee participation, rewarding team performance and employee encouragement help to motivate employees.

o Whether there is an autocratic or democratic management style, it is important to implement motivation methods:

Energising and encouraging employees to achieve the business’s goals Introducing teamwork and splitting the workload Establishing a routine Friendly competition Providing an effective reward system Redesigning jobs:

job enlargement (increases the variety of tasks a job) job rotation (assigns people to different jobs or tasks temporarily) job enrichment (provides an employee with more responsibility and authority.)

Creating flexibilityo Some people are motivated by the stick (punishment) whilst others are motivated by a carrot (reward)

approach. An effective manager who understands this will gain the greatest output of their workers. - Communicating

o Managers must be able to receive accurate information to determine plans, and they must be able to send accurate information for the plans to be implemented. When information is accurately sent and received, everyone in an organization can be informed.

o Provides Clarity: Effective communication reduces the cost associated with conflicts, misunderstandings, and mistakes.

o Builds Relationships: A business that promotes open communication reduces tensions between employees. People are more likely to seek help with problems and suggest solutions and improvements.

o Creates Commitment: When employees feel like o Defines Expectations: Gives Direction for both management and the employees of what they are to

do in the organisation to achieve the overall strategic goals of the businessTeams

- Organisations rely less on traditional pyramid structures, but more on collaboration- This ideal represents the nature of leadership in a flat organisation- An even playing field allows organisations to leverage employee talent, passions and expertise to better apply these

to business challengesParticipative/democratic leadership style

- Inviting employees to take part in organizational decision making- The main principles of a participative/democratic leadership style:

o Facilitate the conversationo Openly share information and knowledgeo Encourage people to share their ideaso Synthesise all the available informationo Take the best possible decisiono Communicate their decision back to the group

- Collectiveo All decisions are taken by the group. During the decision-making phase, the group usually develops

responsibilities of each member - Autocratic

o This style of leadership revolves around the idea that although possible solutions are discussed between employees, the final decision is still made by the leader, alone.

- Consensuso The leader gives up control and responsibility of decision-making, which in turn, leaves the responsibility

entirely to the group, or employees. - Democratic

o This leadership style encourages participation in discussion, however, the final decision is taken solely by the leader. The leader usually communicates it back to the group, which may work on discussing and resolving any possible objections.

Contingency approachAdapting to change circumstances

- Known as the “backup” plan- there is no universal or best way to manage a business. - A business organisation and its subsystems must fit with the environment in which it operates and to be flexible and

adaptable to the changes in that environment. - When a manager makes a decision, they must take into consideration not only the aspects of the current

environment but also prepare from things that result from an uncertain future- A business that can meet customers’ needs more effectively than its competitors, it market share increases, the

value of the business grows and its share price improves

Management ProcessCoordinating key business functions and resources

- In successful, competitive flexible businesses the various business functions (Marketing IT, HR, Finance, R&D, Operations) are effectively coordinated. Coordination involves making sure different parts of a business work together effectively and that resources are organised to allow for this.

- Coordinating is about making sure all of the functions are working towards common goals.- Each function is interdependent of each other- that is they need to work together and not in isolation.

OperationsGoods and services

- Operations management is concerned with the producing and manufacturing of an output- good or service- There are three main aspects of operations management

o Inputs The resources which are needed to carry out the transformation process There are two main types of inputs

Transformed (changed in the transformation process) (materials, information, customers) Transforming (those carry out the transformation process) (facilities, human labour)

The main inputs can be classified as: Materials Capital equipment Labour Information Time financial

o Transformation Taking STM to make an ETM Different products/services have a different process The more elaborate the product generally the more transformation is needed Efficient and cost leadership businesses will produce EOS

o Outputs Most businesses today will sell both goods and services

The production processesQuality management

- Concerned with the outputs of a business, in that they are meeting customers’ expectations- Consumers are significantly influenced by businesses which have high levels of quality - Businesses which don’t implement quality management practices into their inputs and transformation processes

will notice that they may have a high number of issues- Implementing quality management is important for the following reasons:

o Reputationo Minimise wasteo Increase selling costso Increased efficiencyo Reduced variationo Reduced complaintso Reduced warranty claimso Higher levels of productivity

- Main aspects of quality control:o Control

Tests and inspections throughout the production process Minimise defaults

o Assurance Correct systems and procedures in place to enable the business to meet standards

o Improvement Ongoing, business wide commitment to excellence that is applied to every aspect of the business

operation Employee empowerment (giving employees a voice) through quality circles

Quality circles are groups of workers who meet to solve problems relating to quality Continuous improvement involves an ongoing commitment to perfection

Marketing- The culmination of various activities to meet the needs of current and potential consumers and to also make the

product/service known to consumerso Researcho Promoting

o Placingo Designing productso Pricingo Meeting consumer needso Forecastingo Planningo Coordinating o Developing strategies

Identification of the target market- A target market is the main group of consumers a business will direct its marketing strategies to- A primary target market is the group of customers that the strategies are directed to- A secondary target market can also be influences by their strategies but aren’t specific to this market- To identify a target market a business will break the total market into smaller markets (market segmentation)

Demographic Geographic Psychographics Behavioural

-Age-Religion-Sex-Income-Education-Ethnicity

-Rural-Urban-Suburban-Climate-Landforms-Size

-Motives-Behaviours-Lifestyle choices-Personality-Socioeconomic groups

-Loyalty-Usage-Price sensitivity

- Target market o Use its marketing resources more efficientlyo Better understand the consumer buying behaviour of the target marketo Collect data more effectively and make comparisons within the target market over timeo Refine marketing strategies used to influence consumer choice

- Niche o Narrowly selected target market segment

Marketing mix- The marketing mix refers to the combination of the four P’s

o Product A consumer will keep purchasing a product if it meets their needs and wants and provides them with a

sense of security Businesses hope to establish a relationship with their customers to be a repeat customer in purchasing

their product Positioning plays a role in product, it is how the product is able to gain an image in the consumers mind The business needs to determine the products:

Quality Design Name Warranty and guarantee Packaging Labelling Exclusive features

Product positioning refers to the development of a product image Customer service also is highly important for a business and gives a business an upper advantage

compared to other competitors An important development is the brand and associated brand logo

o Price Often difficult to determine a price of a product: a price which is not too high or too low affecting the

positioning of the product There are four methods which a business can use:

Competitiono Selecting a price at, below or above your competitors

Cost pluso Adding the total cost of production and then a mark-up for a profit

Marketing supply and demando The interaction between the quantity and quality of the product available (short supply

= high price, high supply = low price) Discount pricing

o Offering a discounted price to get demand for the product or to sell quicklyo Promotion

The point of promotional strategies is to: Raise awareness of a product/service Inform consumers Persuade you against the competition Maintain customer loyalty

Selecting the correct promotional strategies to your target market is key The main forms of promotion are:

Personal sellingo A sales assistant outlines the features of the good or service to the customer

Sales promotiono Activities and materials are used to attract interest and support for the good or service o E.g. free samples, coupons with cash coupons, loyalty programs

Publicity o Enhance the image of the product, highlight a business’s favourable features and help

reduce any negative image that may have been created Advertising

o Print or electronic mass media are used to communicate a message about the producto Used to attract potential customers, create a demand for the product and communicate

essential information Changes in technology are having a significant impact on how businesses promote their products

The internet has become an effective advertising tool used by businesses to deliver specific messages to its target market

o Place Involves the distribution channel, channel choice and transportation of product/service Businesses have to decide how to transport and store the product and then which outlets will be selling

their products There are three main distribution channels:

Producer to consumer- This involves no intermediaries (no middleman). Markets, car repairs. Producer to retailer to customer- The retailer is the intermediary who buys from the producer and

resells to the customer. Furniture store, fruit. Producer to wholesaler to retailer to customer- Most common method. A wholesaler is an

intermediary who buys in bulk from a producer, then sells in smaller quantities to retailers. Supermarkets are an example.

The more channels a product goes through, generally the more expensive the cost of the product Channel choice of locations that a product will be sold:

Intensive: saturating the market and can be found in various locations. i.e. Coca Cola. Selective: Using only a moderate proportion of possible outlets. The customer is prepared to travel and

seek out a specific retail outlet that stocks a certain brand. i.e. Calvin Klein. Exclusive: This is the use of only one retail outlet for a product in a large geographic area. This method

of distribution is commonly used for expensive products. i.e Tesla.Finance

- Finance is concerned with providing and managing funds that will enable goods and services to be produced

- Accounting is the information that can be provided by analysis and interpretation of financial data - Accounting is a managerial and administrative tool that involves the recoring of finacial transactions, so that a clear

summary of what has happened to the money coming in and going out can be traced over time- The three-main accounting/financial reports or statements are:

- Accounting is useful as it provides information in statements about each of the following as it relates to the business:o Financial statuso Cash statuso Financing or funding informationo Cash flowso Profitability and return on investment o Trends in earnings, borrowings and sales that together indicate the risks the business faces

Cash flow statement- Shows the movement of cash receipts and cash payments - Vital for the business to assess whether money inflows can match money outflows- Cash flow statements are closely related to budgets which are estimates of anticipated future cash flows

Income statement - Summary of the income earned and the expenses incurred over a period of trading

o Sales/ Revenue/ Incomeo COGS = Cost of Goods Sold (inventory that has been purchased to sell) (OS + P - CS) (Opening Stock + Purchases -

Closing Stock)

o Gross Profit: the profit before all expenses and taxes have been taken out (Sales – COGS)o Expenses o Net profit: the profit after all expenses and taxes have been taken out (Gross profit – expenses)

-Balance sheet

Financial term DescriptionCash flow statement A statement which shows all of the inflows and outflows of a business, and also the cash

remaining at the end of the monthWorking capital Current assets less current liabilities.Intangible An asset that is not a material object: it cannot be seenstock Resources owned by a business that can be used to generate income.Sundry Items that need not be specified.Good will The value of favourable attitude that a business generates from all sources: customers,

employees and others.Accounts payable Money that is owed to another business/ person.Assets Value of goods for sale at a certain time.Capital The amount of money that a person invests into the business.Creditor A person who money is owed to.

Current assets An asset that will be converted into cash within a 12-month period.Mortgage Money raised to buy a fixed asset: the security for the loan is the asset itself.Current liability A liability that has to be met within 12 months.Equity finance Finance which is sourced from inside in the business, generally in the form of retained profits or

capital.Balance sheet A statement that shows at a certain date, what a business owns and what it owes.Debtor A person who owes money.Overdraft An overdrawing of your account up to a certain limit.Drawings Money or goods taken from a business by the owner in lieu of profits.Net profit The amount left over after taking into account revenues from all sources, and expenses and

losses of all kinds.Gross profit The difference between the cost of goods sold and the amount of money received from the sale

of those goods.Non-current assets Assets held over a long period in order to earn revenue.Debt An amount owed.Debt finance A source of finance which is sourced from outside the business from external lenders, including

banks (mortgage).Budget A plan of future income and spending.Fixed assets Fixed assets, investments and intangibles.Revenue statement A financial report of income and expenditure determining net profit.Non-current liabilities Mortgages and other long-term loans. Accounts receivable Money which is owed to the business by customers

- The balance sheet is used to help owners to keep a watch on their debt and equity levels, compare financial performance and assist with financial performance

- Assetso Items of value to the organisation that can be given a monetary valueo Current assets

Items whose value is expected to be used up, or tuned over within 12 months E.g. bank savings, cash on hands, debtors, stock

o Non-current assets Items that have an expected life of three to five years or longer E.g. buildings, land, machinery, technology, vehicles

o Intangible items Things of worth that have no physical substance E.g. goodwill, trademarks, designs, copyright and patents

- Liabilitieso Items of debt owed to outside parties and organisations and include loans, accounts due to be paid by the

business, mortgages, credit card debt and accumulated expenseso Current liabilities

Those in which the debt is expected to be repaid in the short term (12 months or less) E.g. bank overdrafts, credit card debts, accounts payable, accrued expenses

o Non-current liabilities Long term debt items E.g. mortgages, leases, debentures, retirement benefit funds

- Owner’s equityo The owners give a business money for it to acquire resources and begin operating o Over time a successful business will have its owner’s equity amount increase in valueo Owner’s equity is considered to be a liability from the point of view of the business because it is a type of debt

the business carries

Human Resources- Concerned with maintaining the employment relationship between the employers and the employee

Recruitment- Process of gaining potential candidates for a job- Job analysis

o Studying the job in detail to understand what goes into the job description and behaviours required in the job- Job description

o What roles and responsibilities will be completed in the job role - Job specifications

o What qualifications and experience is needed to be able to complete the job successfully - Selection

o Selecting the best candidate from the pool of candidates through the recruitments processTraining

- Trainingo Providing opportunities to develop new skills

- Developmento Developing upon current skillso Number of training and development methods available:

Informal on-the-job Whereby an employee learns by doing the work whilst supervised by an experienced employee Costs the business little money and resources, thus the reason lower skilled jobs use this

method Formal off-the-job

Whereby employees will go to experienced organisations that specialise in training the skills Full-time employees will generally go on this form of training and development and is often

used for highly technical and skilled employees Conferences and seminars

Experts and learners meet together to discuss new methods, evaluate research papers, discuss problems and exchange ideas

- Inductiono The process that introduces a new employee to the systems and procedures of the organisation

Employment contracts- Maintenance

o Involves an organisation remunerating and compensating their employees for the work that they have done- Remuneration

o Monetary o Non-monetary o A business will use a combination of the two rewards to retain their most efficient and productive workers o When developing a remuneration package an organisation must consider:

The employee performance (efficient, effective, KPIs, set targets) Qualifications i.e. PhD, degrees, diplomas Financial situation of the business i.e. making profits or not Economic conditions

Recessions → cut down, reduced bonuses Booms → increases in wages, bonuses, commission

Global conditions (FDI, exchange rates, interest rates) Competition

Separation- Separation is the ending of the employment relationship- Voluntary

o Occurs when an employee chooses to leave the business of their own free willo There are three types:

Retirement Occurs when an employee decides to give up full-time or part-time work

Resignation The voluntary ending of the employment relationship People resign for a variety of reasons including:

o Offer of a promotion with another businesso To start their own businesso Boredom with their present jobo Change of lifestyle

Redundancy When a particular job a person is doing is no longer required to be performed Voluntary redundancy occurs when the business wishes to reduce either the size or nature of its

workforce and decides how many employees should be ‘let go’. Employees are then informed of the situation and given the opportunity to nominate themselves for voluntary redundancy. Employees who choose voluntary redundancy are offered a redundancy package

- Involuntaryo Occurs when an employee is asked to leave the business against his or her willo There are three types:

Retrenchment When a business dismisses an employee because there is not enough work to justify paying him

or her Dismissal

Occurs when the behaviour of an employee is unacceptable and it then becomes necessary for a business to terminate the employee’s employment contract

Unfair dismissal occurs when an employee dismisses an employee for discriminatory reasons. Some examples of discrimination under Commonwealth workplace relations laws include dismissal because of:

o Absence from work due to illnesso Either belonging or not belonging to a trade uniono Race, colour, sex, sexual preference, age, disability, marital status, family

responsibilities, pregnancy, religion, political opinions, ethnicity Redundancy

If no employees volunteer to become redundant, then the business may be forced to decide which employees will be made redundant

Maintenance: Legal Legislation

Fair Work Work Health and Safety

Workers Compensation Anti- discrimination

Affirmative Action (Equal Employment

Opportunity)

State or Federal Legislation

Federal State (NSW) State (NSW) State(NSW)

Federal

Name and Year of the Act

Fair Work Act 2009

The Work Health and Safety Act 2011

The Work Health and Safety Act 2011 (NSW)

Anti-Discrimination Act 1977

Affirmative Action (Equal Employment Opportunity for Women) Act 1986

Main aspects of the Act.

Govern employee/employer relationships, providing a safe environment for both parties. It provides a net of minimum conditions, including minimum wages in awards.

Provides a framework to protect the health, safety and welfare of all workers at work. It also protects the health and safety of all other people who might be affected by the work.

All workplaces must take out workers compensation insurance. It covers employees who have been injured at work, an employee must notify their employer as immediately if they have been injured at work.

Workplace discrimination including: race, colour, gender, age, religion, marital status

Racial vilification

Sex Discrimination/ Sexual Harassment

Age Discrimination

An organisation that has over 100 employees must have an affirmative action program

Promote gender equality in the workplace

Improve workforce participation, particularly for women

Recognise the importance of equal remuneration

Who administers the Act?

Fair Work Ombudsman

NSW State Government

WorkCover NSW NSW Department of Justice

Equal Opportunity for Women in the Workplace AgencyFair Work Ombudsman

What are the employer requirements as part of the Act?

Must provide award rates and entitlements to their employees.

They must be up to date with the national minimum wage standards as well.

They must treat all their employees fairly and must not discriminate on the grounds of sex, age etc. in terms of the Anti-Discrimination Act 1977.

- The workplace itself, or the workplace layout does not put workers at risk areas

- Facilities for workers - such as kitchen, toilet, washing and changing facilities if required

- Development of safety procedures within the workplace

- Must setup a WHS Committee if there are over 20 employees

Pay workers compensation insurance

Keep a register of injuries at the workplace

Notify insurer of injuries within 48 hours

Establish an injury management plan for the injured worker to return to duty

Pass on compensation remuneration to the injured worker

Employers must not discriminate against their employees or potential employees and must also not allow discrimination and harassment to occur with their organisations

Employers must not limit the employee’s access, to opportunities for promotion, transfer or training, or to any other benefits associated with employment. They must not subject employees to detriment.

To develop an affirmative action program if they have over 100 employees

Developing a policy statement informing all staff members to inform all staff members that an AA policy has been set

Must comply with the discrimination provisions in the Fair Work Act

What are the employee requirements as part of the Act?

To know and understand their rights, especially the 10 National Minimum Standards’

Understand the appropriate Award they should be remunerated under

To act in good faith and not to do any activity that may harm oneself or other employees

Follow instructions

Undertake appropriate levels of training

Notify employer immediately of any injury that has occurred at the workplace

To provide truth in all information provided to Worker Cover

To communicate to the employer progress of the injury

To provide medical information to WorkCover and employer if required

To follow the guidelines of the act and not to intentionally discriminate against colleagues

To follow workplace policies in regards to discrimination

To notify employers of discrimination in the workplace

To avoid discrimination of women in the workplace

To notify employers of sexist remarks/ dicrimination in the workplace

To follow the guidelines in the AA program/ policy of the organisation

Current case relating to the

A case of racial abuse at Australia Post in June 2017; a

Samantha Gaye Curran and Skilled Engineering Ltd.

legislation being breached

supervisor made highly offensive and distressing racist comments to a delivery driver

“The driver alleged that he was subjected to racial discrimination. He therefore had to satisfy the court that he had been treated less favourably than others and had suffered some loss or harm because of his race.

The case was heard by the Federal Circuit Court of Australia, which found that the racist comments were made and that they were racial discrimination under the Act.”

(2004)She said that she was treated unfairly compared to a man in the same position as her. She claims that the employer said during an interview that she didn’t get hired because she was a woman. The job in questions was trades assistant.The outcome was that the case was dismissed.

Management and Change

Types of change1. Transformational change often results in a complete restructure throughout the whole organisation2. Incremental change results in minor changes, usually involving only a few employees3. Structural change refers to changes in the business’s structure

OutsourcingContracting of some organisational operations to outsides suppliers. Outsourcing has a profound impact on businesses. Many businesses have rearranged their workforces to employ a minimum full-time staff and use as many people from outside the business as possible to keep costs low.

Flat structuresGreater levels of accountability and responsibility are transferred to frontline staff. Businesses with flat structures are characterised by fewer formal reporting controls, sharing of best practice methods, learning focused on the business’s needs, a supportive learning environment and focus on continuous improvement.

Work teamsTeamwork allows businesses to be more flexible and responsive. Teams also motivate employees to be more creative, to develop a broader view of goals, and to contribute across the entire business.

To manage change there are a number of steps a business can take to manage it successfully:1. Identify the need for change2. Set achievable goals3. (Minimising) resistance to change (financial, change, inertia of management, staffing (deskilling, redundancies,

acquiring new skills))

4. Management consultants and change agents (someone who is experienced in initiating change, usually an external person)

Ethics- Ethics are standards that define what is acceptable and what is not. Business ethics are the application of moral

standards to business behaviour (it is not concerned with the legal obligations, but what is right and wrong)- Many businesses will have a Corporate Code of Conduct which sets the ethical standards for all managers and

employees.- The more ethically responsible a business is, generally the greater the reputation they will have, thus increasing

sales and profits.

CHAPTER 3: BUSINESS PLANNING

3.1) SMALL TO MEDIUM ENTERPRISESDEFINITION:

○ 20 or fewer employees if the organisation is non-manufacturing (services) ○ Fewer than 100 employees if involved in the manufacturing of goods○ Microbusiness: less than 5 employees

ROLE○ Production: 50% of all products ○ Research & development: 20%○ Exports: increasing amount ○ Employment: 73% of private sector

ECONOMIC CONTRIBUTION○ GDP: 50% of total output is provided by SME’s ○ Created 80% of Australia’s employment gains in the past 10 years○ BOP ○ Inventions and innovations

SUCCESS/FAILURE● 5 common keys to SME success

○ Flexibility○ Reputation ○ Entrepreneurial activities/abilities○ Access to information○ Focus on market niche

● Reasons for failure ○ Failure to plan ○ Economic downturn ○ Leadership crisis○ Illness○ Poor customer service

3.2) INFLUENCES IN ESTABLISHING A SMALL TO MEDIUM ENTERPRISE

PERSONAL QUALITIES

Qualifications○ No qualifications are necessary, but some do require official qualifications to operate

Motivation○ Personal drive and desire to achieve

Entrepreneurship○ Assuming the risk of starting a business

Cultural Background

○ Arising from your community’s traditions and beliefs○ Arising from your community’s long held experience in a particular

trade or commercial operation

Gender○ Women are now setting up more small businesses than men

Skills

SOURCES OF INFORMATION ○ Professional advisors ○ Accountants○ Solicitors ○ Bank managers○ Management consultants ○ Trade associations ○ Unis and TAFES ○ Community based services

THE BUSINESS IDEA○ Concept developed by individual or group that has possibility of being implemented into the establishment of a

profitable business ○ COMPETITION

○ Making an assessment of competition by identifying how successful competitors are in terms of competitive advantage, market share, new products, services etc

ESTABLISHMENT OPTIONS

Establishment Option Definition Advantages Disadvantages

Starting from scratch ○ When one has created something unique, and recognises a gap in the market

○ Owner has freedom to set up as preferred

○ Owner can determine pace of growth

○ High risk and uncertainty

○ Time is needed to set up

○ Start-up is slow

Buying an existing business

○ Everything associated with the business is purchased

○ Purchaser needs to know WHY the business is for sale

○ Sales to existing customers generate income

○ Good business history = success

○ Image may be hard to change

○ Employee resentment

Franchise ○ Avoids many problems when starting a new business

○ An established business formula

○ Immediate benefits from franchisor’s goodwill

○ Franchisor often offers training

○ Little scope for individuality

MARKET CONSIDERATIONS

GOOD OR SERVICE?

PRICE ○ Percentage markup - add a % to the cost ○ RRP - price recommended by wholesaler or manufacturer

○ Price leadership and competition - following a major business who sets a price ○ What the market will bear - auction - auction reading consumer sentiment

LOCATION○ Shopping centre vs shopping strip

ONLINE ○ Email, internet research, website, online banking

FINANCEFinance refers to the funds required to carry out the activities of a business

SOURCES ○ Equity - funds contributed by the owners○ Debt - money obtained through loans○ How much will depend on the type, the source and the length (term)○ No interest on equity but profit is paid to owners○ Unlimited vs limited liability can be considered the cost of equity finance

Short Term Debt Medium Term Debt Long term debt

Bank overdraft Term Loan Mortgage

Trade credit Personal loans

Bank Bills Leasing

COST ○ How much will it cost to start the business?

○ Establishment costs - expenses in setting up the business ■ E.g - legal fees, furniture, equipment, phone and electricity connection

○ Operating costs - the running costs of the business over a year ■ E.g - wages, advertising, insurance, interest repayments, vehicle running costs

LEGAL

BUSINESS NAME○ Sole traders can operate under their own name ○ Business name registration service is managed and administered by ASIC (Australian Securities and Investments

Commission)

ZONING○ Small businesses in the establishment stage are influenced by zoning of land within the Local Government Area ○ Zoning policy ensures that structures that business erect comply with that policy and also with state and local

government environmental planning policies ○ Ensures that business carried in a particular planning zone is an appropriate use

HEALTH & OTHER REGULATIONS○ Local councils often oversee building supervision, including management and removal of asbestos, food hygiene,

litter control, noise control and pollution ○ Workplace safety for both employer and employees that work in the business - SWA (Safe Work Australia) oversees

WHS regulations

HUMAN RESOURCES MAIN SOURCES OF EMPLOYEES FOR A BUSINESS

○ Temporary/casual services ○ TAFE/Uni/Schools ○ Internal searches ○ Word of mouth○ Private employment/ recruitment agencies ○ Job services ○ Advertisements

SKILLS○ General: skills transferable from one workplace to another○ Specific: skills often required by law to perform a particular job

COSTS ○ Wage: business needs to observe any legal requirements such as enterprise agreements or contractual

arrangements ○ Employee benefits - leave, superannuation scheme etc ○ Business will have to ensure the employees against accidents or illnesses ○ Non wage: providing rewards to staff that aren't financial (eg: personal satisfaction, job enrichment, positive work

environment)

TAXATION

Tax Leveled

Income Tax ○ Taken from employee’s salary/wage directly

Federal government

Fringe Benefits Tax ○ Provision of benefits to an employee (eg: cars)

IN PLACE of salary/wage

Federal government

Goods & Services Tax ○ 10% of most goods and services in Aus

Federal government

Company Tax ○ Paid on earnings of a company

Federal government

Capital gains Tax ○ Calculated on profit made on sale of assets

Federal government

Stamp Duty ○ Documents that give evidence to transactions

NSW government

Land Tax ○ If land is higher than $376k

NSW government

Payroll Tax - Payable on wages paid to employer over $638k

NSW government

3.3) BUSINESS PLANNING PROCESSA business plan is the ‘roadmap’ for future growth and development within a business. It sets out the desired goals and direction of the business

ELEMENTS OF BUSINESS PLAN 1) Executive summary2) Goals 3) Strategies 4) Business description and outlook - situational analysis 5) Management and ownership 6) Operation plans 7) Marketing plans 8) Financial plans 9) HR plans

BENEFITS OF DEVELOPING A BUSINESS PLAN ○ Tests viability of a business ○ Assists a business to be productive rather than reactive○ Assists in maintaining business operation especially focus on goals and objectives ○ Indicating owner’s ability and level of commitment ○ Forces the small business owner justify his or her own plans and actions ○ Identifies the business’ strengths weaknesses

SOURCES OF PLANNING IDEAS● Info for planning can come from many resources:

○ Internal sources (management & employees)○ External sources (economical, political, social, technological, geographical sources have impact on business) ○ Specialists can also help (accountants, bank, solicitors)

SWOT ANALYSIS ● Strengths, weaknesses, opportunities, threats

VISION A vision statement broadly states what the business aspires to become in the future.

GOALS / OBJECTIVES Long term growth - maintaining profits over time by continually expanding

○ Does not happen by accident - requires comprehensive, strategic planning ○ Exploiting the business’ competitive advantage

Strategies can include: ○ Customer feedback ○ Supplier + customer partnerships

○ Product innovation ○ Sigma sis - a management approach

ORGANISING RESOURCES Organising is determining what is to be done, who is to do it and is to be done

STEP 1 - DEVELOP PLANS AND ESTABLISH GOALS STEP 2 - DETERMINE ACTIVITIES STEP 3 - GROUP ACTIVITIES (in terms of finance, hr, marketing, operations)

When you establish a business you need to know what resources you need, what activities you need and how it relates to the key business functions.

FORECASTING

TOTAL REVENUETotal amount received from sales calculated by multiplying the price by quantity sold

P x Q = TR

TOTAL COST Sum of fixed (stay that way no matter) costs and variable (costs that change) costs

● Fixed costs: costs that do not vary regardless of how many units you produce ● Variable costs: costs that depend on the numbers of goods and services produced

FC + VC = TC

BREAK EVEN ANALYSIS Used to determine the level of sales that need to be generated to cover the total cost of production

BEQ = FC / (P - VC(p.u))*Break even point is units sold not money

CASH FLOW PROJECTIONS○ Most important financial tool available to a business ○ Shows the changes to the cash position brought about by the operating, investing and financial activities of the

business

○ Month by month projections of cash inflows and outflows ○ Tells the managers how much cash and capital is needed and when

○ Different from cash flow statement in that one projects into the future while one states what has happened in the past

MONITORING AND EVALUATIONS Monitoring: the process of measuring actual performance against planned performanceEvaluating: the process of assessing whether the business has achieved stated goals - has the business achieved goal, if not, where and why not

You can monitor and evaluate sales, budgets and profit

CORRECTIVE ACTION○ If goals aren’t achieved, something needs to change○ Are standards too unrealistic?○ Have external influences changed?○ Goals and standards, product, material, management practices, marketing strategies, personnel changes

3.4) CRITICAL ISSUES IN BUSINESS SUCCESS AND FAILURE

IMPORTANCE OF A BUSINESS PLAN ○ Helps test viability of the business○ Assists business to be proactive rather than reactive○ Assists in maintaining the business operation, especially focusing attention on the goals and objectives ○ Indicates the owner’s ability and level of commitment ○ Forces the small business owner to justify his or her plans and actions ○ Identifies the business’ strengths and weaknesses

MANAGEMENT - STAFFING AND TEAMSModern definition of management: working with and through other people to achieve business goals in a changing environment

○ Managers are crucial to the success of the business○ Business must employ the right people○ Strategies to improve staffing:

○ External recruitment to find the right people to employ ○ Conducting a skills audit ○ Keep a skills inventory

○ Teams can have greater benefits than individual work ○ Development and training of team leaders and team members

IDENTIFYING AND SUSTAINING COMPETITIVE ADVANTAGERefers to the strategies used by a business to gain an ‘edge’ over its competition

Strategy 1 - Price/cost strategy ○ Leading on costs - lower prices ○ Efficiency of operation - streamlining production process○ Low cost - finding the cheapest labour to do the work in your business ○ Economies of scale - reducing the costs of input by increasing the level of output ○ Technology - replacing expensive workers with cheaper machines

Strategy 2 - Differentiation ○ Offering something not already offered by rivals ○ High product quality ○ Innovative design ○ Positive brand image ○ Top quality service

Evaluating long term success

○ Sustaining the competitive advantage is crucial for long term success ○ A business can protect itself by:

○ Research + development ○ Intellectual property rights (patent, trademark) ○ Exclusive contracts with suppliers○ Lobbying government to limit foreign competition ○ Dynamic management to stay ahead of competition

AVOIDING OVEREXTENSION OF RESOURCES Excessive expenditure at startup that is financed through debt is dangerous.

Strategies to avoid financial overextension ○ Leasing instead of purchasing ○ Planning and forecasting ○ Raise capital instead of borrowing ○ Start small and then grow

Strategies to avoid stock and employee overextension ○ Appropriate inventory management systems ○ Use technology instead of workers; outsourcing

USING TECHNOLOGY ○ Leading edge technology: newness means problems can arise from choosing wrong product or application○ Established technology: cost, performance and servicing of technology is readily available (eg: internet usage)

ECONOMIC CONDITIONS○ Businesses must be able to respond to changes in economic conditions and also be aware of potential changes ○ Can place businesses and entrepreneurs at economic risk ○ If change is not managed, the business can fail