Role and Nature of Business

Nature of Business

• Focus is on the role and nature of business in a changing environment.
• Businesses producing goods or services are sold in a market of buyers and sellers.
• Common attribute of all businesses is that they produce something sold in a market.
• Businesses' impact is substantial on our lives.
• Role involves production and sale of products that satisfy needs/wants for profit.
• Business undertakes activities to provide products demanded by customers.
• Production is activities that combine resources to create products for customers' needs.

Role of Business

• Producing goods and services is the nature of business.
• Goods are tangible, can be touched, owned, and stored (e.g., cars, phones).
• Services are intangible, consumed at the point of delivery, and cannot be owned or stored (e.g., haircuts, legal advice).
• Profit remains after all expenses, costs, and taxes.
• Employment is a contractual relationship where labor is exchanged for compensation.
• Incomes: Money from sales, investments, or other sources, after deductions.
• Choice: Selection of options available to consumers or companies when making decisions.
• Innovation: Developing new ideas, products, to create value / meet needs.
• Wealth: Accumulation of resources/assets contributing to economic value.
• Entrepreneurship: Creating/managing a new business venture to capitalize on market opportunities.
• Risk: Potential for loss or failure associated with business decisions.
• Quality of life: Wellbeing and satisfaction of stakeholders, encompassing work-life balance, job satisfaction, health, and environmental conditions.

Types of Business

• Micro enterprise: 1-5 employees.
• SME: Limited employees and revenue, defined by specific thresholds. Small: 5-19 employees. Medium: 20-199 employees. SME plays a role in driving innovation/employment.
• Large: Employs many people, generates substantial revenue, complex structures.
• Local: Serves customers in a specific area, focusing on community needs.
• National: Operates across a country, focusing on local market needs/regulations.
• Global: Conducts transactions across countries, integrating diverse markets/resources.

Legal Structures

• Sole trader: Individual independently running a business, responsible for all aspects.
• Partnership: Collaboration between individuals/entities to operate a business/share profits.
• Private: Owned by individuals/small group; shares not traded publicly.
• Public: Sells shares to the public through a stock exchange.
• Government: Owned/operated by the government, provides goods/services in public interest.
• Stakeholder: Anyone affected by a company's actions, decisions, and performance. Examples include employees, managers, customers, and the environment.

Factors Influencing Legal Structure

• Size: Smaller businesses may opt for ease of operation and lower cost, while larger businesses may require more complex structures to manage liability and tax implications.
• Ownership: Influences liability, control, taxation, ability to raise capital, impacting profits
• Finance: Access to capital, taxation, liability concerns and the ability to raise funds through equity or debt.

Industry

• Primary: Transforms raw materials into basic products (e.g., agriculture, mining).
• Secondary: Transforms raw/semi-finished products into finished goods (e.g., manufacturing, construction).
• Tertiary: Transforms materials into finished products through processes like assembly and focusing on quality control. Adds value (e.g., supermarkets, services).
• Quaternary: Focused on knowledge-based activities (e.g., research, IT, consultation).
• Quinary: Involves high-level decision-making, advanced skills and knowledge (e.g., healthcare, education).

Influences in the Business Environment

• External influences: Economic, financial, geographic, social, legal, political, markets.
• Internal influences: Products, location, resources, management, business culture, stakeholders.
• Business environment: Influenced by internal & external factors; the external environment includes uncontrollable factors, internal has control.

Business Growth and Decline

• Stages include establishment, growth, maturity, post-maturity.

Business Decline

• Factors: Poor location, cash flow, failure to plan, competition, customer needs, growth, management skills.

Business End

• Voluntary cessation: owner wanting to cease the business.
• Involuntary cessation: Being forced by others.
• Liquidation: Independent person (liquidator) sells all assets.

Responsibilities to Stakeholders

• Internal stakeholders: Employees (fair wages/safe conditions). Management (transparent comms). Shareholders (updates).
• External stakeholders: Customers (high-quality/sustainable products). Suppliers (ethical sourcing). Regulatory agencies (comply with laws).

Australian Business Expansion

• Frank Green (est. Melbourne, 2013) focuses on sustainable drinkware/containers. Has expanded internationally by focusing on targeting growing demands

External Changes Contributing to Growth

• Lifestyle changes, demand for service, household income
• Tertiary: The rise of digital tech and e-commerce expands retail and health sectors. Increased demand for convenience in hospitality.
• Quaternary: The emphasis on innovation drives growth in research, i.e IT services and consulting. The educational factor enhances the sector.
• Quinary: Demands for social services, health, and environmental management increase with societal values. Awareness increase with healthcare and tech.