Business: Goods, Services, and Society

• A business involves producing goods and services, satisfying needs and wants, providing employment, improving quality of life, fostering innovation, and generating profit.

Producing Goods and Services

• Businesses transform inputs like labor, raw materials, and capital into tangible goods and intangible services.
• Goods have tangible qualities based on components
• Services rely on the skills and expertise of the provider.

Satisfying Needs and Wants

• Businesses adapt to changing societal trends such as healthier diets, environmental sustainability, and the rise of streaming and social media.

Employment

• Businesses create jobs and provide income to employees, adhering to legal requirements regarding work health and safety, anti-discrimination, and minimum working conditions.
• Income is influenced by skill level, business performance, and can improve the employee's quality of life.

Quality of Life

• Businesses enhance quality of life through technology, access to information, global connectivity, convenience, and advancements in healthcare.

Innovation

• Innovation involves improving product features with technology to offer consumers more advanced options.
• Businesses use market segmentation to target products to different consumer groups (choice).

Profit

• Profit motivates business owners, acting as a financial reward for risk-taking (revenue - expenses = profit).
• Strategies to increase revenue include pricing adjustments, improved customer service, and expanded product ranges or locations.
• Expenses can be reduced by finding alternative utility providers or suppliers, although this can affect product quality, or by reducing the workforce, which might have long-term cost benefits.

Entrepreneurship and Risk

• Entrepreneurs develop business ideas and take on financial risks to turn those ideas into reality.
• Start-up costs can require financial resources for rent, supplies, staff, and equipment.
• Wealth is the financial reward achieved through a successful business.

Classification of Businesses

Size of Businesses

• Businesses are classified by size as micro, small, medium, or large, with SMEs (small to medium enterprises) making up 98% of Australian businesses.
• Size can be determined by the number of employees: micro (<5), small (5-20), and medium (20-200).

Geographic Reach

• Businesses can be local, national, or global.
• Local businesses operate in a limited area.
• National businesses operate within one country.
• Global businesses, or transnational corporations (TNCs), operate in multiple countries with free flow of finance, assets, technology, information, employees, goods, and services.

Industries

• Businesses operate in primary, secondary, tertiary, quaternary, or quinary industries.
• Primary industries involve natural resources.
• Secondary industries manufacture goods.
• Tertiary industries provide services.
• Quaternary industries focus on information processing.
• Quinary industries include services traditionally performed at home.

Legal Structure of Businesses

Sole Trader

• Owned and operated by one person.
• Advantages include full control, profit retention, and low-cost entry.
• Disadvantages include financial responsibility for losses, unlimited liability, management burden, and being unincorporated.

Partnership

• Involves 2-20 owners.
• Advantages include shared interests, complementary skills, shared financial risk, and increased expertise.
• Disadvantages include potential disputes and unlimited liability.

Private Company

• It is incorporated as a separate legal entity with limited liability.
• Shareholders (1-50) contribute capital and receive dividends but require existing investor approval for new shareholders.
• Advantages include increased funds, shared skills, reduced workload, and limited liability.
• Disadvantages include potential disagreements and high start-up costs.

Public Company

• Has limited liability and open ownership through shareholding.
• It can raise capital through public share offerings.
• Profits are distributed as dividends, and requires a minimum of 5 shareholders.

Public Business

• Owned and operated by the government, often providing essential services with limited competition.
• Can be privatized into a public company, shifting its focus to achieving profit for shareholders.

Factors Influencing Legal Structure

• Size, ownership, and finance influence the legal structure of a business.
• Businesses may transition from unincorporated to other structures as they grow, requiring more financing or to achieve limited liability.

Influences on the Business Environment

• Influences, both internal and external, affect a business's operations, finance, marketing, and human resources.

External Influences

• These are outside the business’ control
• Include social, legal, economic, technological, financial, geographic, political, institutional, competitive situation, and market factors.

Social

• Refers to changes in culture, values, tastes, and fashions that include environmental sustainability, flexible working conditions, and equity.

Legal

• Laws and regulations restrict business activity to defend social goods, such as WHS, minimum wage, and consumer protection.

Economic

• Influences business performance through boom and recession cycles.
• Booms feature increased employment, spending, and business confidence, but can lead to inflation.
• Recessions involve rising unemployment, reduced spending, and declining business revenue.

Technological

• Involves the use of capital and machinery, and offers speed and efficiency but can be costly and become outdated.

Financial

• Concerns the movement of funds, including access to borrowing, interest rates, and exchange rates.

Geographic

• Includes a nation’s location, proximity to supplies, and values.

Political

• Reflects values and beliefs that drive political decisions and laws.

Institutional

• Government organizations implement policies, such as ASIC for financial reporting, NSW Department of Fair Trading for consumer support, Fair Work Australia for employment standards, Human Rights Commission for anti-discrimination, ACCC for advertising complaints, and Safe Work NSW for workplace safety

Competitive Situation

• Includes brand awareness, reputation, and ease of market entry.

Markets

• Are influenced by globalization, tariffs (taxes on imports), access to labor, and market size.

Internal Influences

• Include products, location, resources, management, and business culture, all controlled by the business.

Products

• Involves type of goods and services produced, level of technology, human labor, access to suppliers, and logistics.

Location

• Decisions consider visibility, cost, and proximity to customers, suppliers, and support services.

Resources

• Include financial (debt or equity) and staff.

Management

• Includes leadership styles, management team, decision-making processes, and organizational structure.
• Modern firms are moving toward flatter structures by delegating more autonomy to employees in decision-making, using team-based structures to lift business culture and performance.

Business Culture

• Is the collective attitudes, values, ideas, beliefs and expectations that are shared by management and staff of a business
• A healthy, vibrant, positive culture that celebrates risk-taking, rewards contributions and ideas, and provides deep purpose.

Stakeholders

• Are affected by the operations of a business and include suppliers, customers, owners, managers, government, community, and competitors.

Business Life Cycle

• The phases include establishment, growth, maturity, and post-maturity (decline).

Establishment Stage

• Involves decisions on location, products, staffing, and legal structure.
• Challenges include generating revenue, controlling costs, marketing, and complying with regulations.

Growth Stage

• Features increased sales, advertising, and customer awareness.
• Management focuses on organization, budgeting, and staffing, with a risk of a shift to an autocratic style.
• Challenges include satisfying customers, stock control, and meeting demand.

Maturity Phase

• Involves slowing growth, increased competition, and market saturation.
• Strategies focus on maintaining customer loyalty and motivating staff.

Post Maturity Phase

• Can lead to decline due to technology, poor management, changing tastes, competition, or other factors.
• Decline can lead to business cessation (closure), with assets sold to repay debt through liquidation.