Role of Business in Society

Role of Business

• Businesses produce products (goods or services).
• They buy and sell items for profit, aiming to satisfy customers.
• Production combines resources to create products meeting customer needs.
• For example, combining manufactured resources and hard drives with human resources produces computers.

Profit

• Profit drives businesses to take risks.
• It is the reward owners/shareholders get for investing money.

Employment

• Businesses employ people, paying workers salaries for comfortable living.
• Employment helps the economy by enabling people to buy goods and services.
• Small-to-Medium Enterprises employ approximately 50% of workers in Australia.

Income

• Businesses provide direct income as wages/salaries.
• Private/public companies have shareholders who receive dividends.

Types of Income

• A wage is money paid to workers for services, usually hourly or daily.
• A salary is a fixed regular payment, usually fortnightly or monthly and is for permanent employees.
• A bonus is added to a person's wages for good performance.
• Overtime refers to work done outside regular hours, paid at higher rates.
• Commission is a percentage of sales price received by a salesperson.
• Fringe benefits supplement an employee's money or wage salary, such as a company car.

Choice

• Businesses in strong competition provide customer choice.
• Woolworths or Coles have about 25-30000 items, although major companies dominate.

Innovation

• Businesses are a major source of innovation and try to make better products than competitors.
• This drives technological advancements.

Entrepreneurship and Risk

• Entrepreneurship is the ability and willingness to start, operate, and assume business risk for profit.
• Entrepreneurs start, operate, and assume business risk to make a profit, and they find new ways to promote their goods.

Wealth

• Superannuation is the main source of financial wealth for Australians.
• Superannuation is paid automatically by employers, currently at 11% of worker's income.
• Super funds invest in the stock market or property, allowing workers to pay for their retirement.

Quality of Life

• Official measurements include health and education.
• Things that help the general 'quality of life' are related to income.

Types of Businesses

• Size classifications: small to medium enterprises (SMEs), and large.

Small Businesses

• Business types: corner stores, local mechanics, hairdressing salons.
• Number of employees: fewer than 20.
• Legal structure: sole trader or partnership.
• Ownership: independently owned, operated by 1-2 people.
• Decision making: owner responsible for most decisions.
• Source of finance: owner's savings; difficulty accessing loans.
• Market share: small, local; not dominant in the industry.

Medium Businesses

• Business types: services clubs, motels/hotels, engineering factories.
• Number of employees: 20-199.
• Legal structure: partnership or private company.
• Ownership: owned and operated by a few private shareholders.
• Decision making: owner responsible for most decisions; complicated by directors' influence.
• Source of finance: owner's savings, loans, or private shareholders; easier access to loans.
• Market share: medium; some market dominance.

Large Businesses

• Business types: Woolworths, Qantas, National Australia Bank.
• Number of employees: 200+.
• Legal structure: public company.
• Ownership: owned by thousands of public shareholders.
• Decision making: complex, divided among directors and management.
• Source of finance: cash reserves, retained profit, sale of shares, loans.
• Market share: large, especially for multinational corporations.

Local Businesses

• Traditionally: newsagents, cafes, corner shops, hairdressers.
• Serves the surrounding area and can not offer products to another suburb.

National Businesses

• Operate within only one country. Example Coles, David Jones, Belle Property
• As a business expands nationally, it may choose to export.

Global Businesses

• Also known as multinational corporations.
• Operate in multiple countries.
• Local and national business restrictions do not apply to TNCS.
• Manufacturing is set up in countries with the cheapest production costs.
• Headquarters are in countries with the lowest taxes.
• Eg: Toyota, coca cola, nike, google

Industry Types

• Primary: involves collecting natural resources; provides food requirements (farming, mining).
• Secondary: turns raw materials into finished or semi-finished goods (car and steel manufacturers).
• Tertiary: involves providing services (retailers, dentists, banks, health workers).
• Quaternary: involves transferring and processing information (telecommunications, computing).
• Quinary: includes services traditionally performed in the home (hospitality, childcare).

Legal Structure

• Refers to how the ownership of the business is registered.
• Key factor is whether ownership is open to the public or remains with a select group.

Sole Trader

• Is owned and operated by one person.
• It's easy to establish legally.
• Has unlimited liability
• The owner and business are not separate legally

Partnership

• Owned by 2-20 people.
• Business and owner are not separate legally.
• 'Partnership agreement' is recommended to sort out debts and finances.

Private Company

• It is incorporated.
• Is a separate legal entity.
• Owners/shareholders have limited liability.
• It is usually between 1-50 owners.
• Is not listed on the stock exchange.
• Must pay company tax.

Public Company

• Type of company.
• Is incorporated.
• Is listed on the stock exchange.
• The public can buy shares.
• It is generally large.
• Must pay company tax.
• Do not get mixed up with publicly owned (gov) enterprises

Government Enterprise (GBE)

• It is government owned and operated.
• Makes up a small percentage of total businesses.
• It is often very large, like Sydney Water and Aus Post

Factors Influencing Choice of Legal Structure

• When starting a business, the owner chooses the legal structure, considering responsibility, debt, and regulations.
• Size, ownership, and finance are also important.

Ownership structure Factors

• Structure is chosen depending on how much control they want to give up to grow the business
• Sole trader: Complete control over all parts of the business but owner has unlimited liability
• Partnership: You share ownership and are happy to relinquish full control, but only with a small group of professionals in the same field
• Private Company: To keep control over who the owners are and they want limited liability
• Public Company: Raise money and are not concerned about who owns the company

Finance structure Factors

• Most businesses are established with a limited amount of capital
• Growth of a business is often accompanied by an increase in demand for financial resources
• Owners may need new investors, achieved by offering a partnership or to increase protection, by initiating the development of a private company
• Sole traders and Partnerships = difficult to get bank finance. Answer is Venture Capital = money in small business or the investors own part of the business

Influences in the Business Environment.

• Business Environment: The surrounding conditions in which a business operates in and can be divided into two categories; external and internal
• External Influences: The influences outside the control and operations of a business that can considerably influence the day-to-day and long term operations of a business

External influences

• Economic, financial, geographic, social, legal, political, institutional, technological, competitive situation, markets

Economic Influences

• The economic cycle refers to periods of growth and recession that occur as a result of fluctuations in the general level of economic activity Economic Influences refers to the factors that relate to the economic activity in a country or region (eg. Interest rates, wages, unemployment, exchange rates) Economic forces have great impact on both businesses and consumers --> influence of a business's capacity to compete with customer willingness and ability to spend

Financial Influences

• Deregulation has resulted in a more flexible, market-oriented approach across the financial sector & has resulted in the opening up of the financial industry to greater competition
• This has also allowed international factors to have a greater influence on Australia's money market as foreign financial institutions have entered the marketplace
• Deregulation refers to the removal of government regulation from industries to increase efficiency and competition
• 2 Mains sources of finance for business: are both greatly influenced by the level of interest rates

Debt Finance

• As interest rates increase, businesses will become more "cautious" about taking on extra debt, as interest rates decrease, businesses will take on more debt This is because it is more expensive to acquire and service the borrowed funds and requires a higher level of profit to make the finance worthwhile

Equity finance

• Equity finance tends to decrease as interest rates increase
• This is because equity financing involves selling part of the business to new owners

Geographic Influences

• Geographic influences refer to the effects the climate, natural resources, topography, physical infrastructure, and location have on a business
• Influences on Australia includes its location in Asia-Pacific region & population shifts from rural to urban areas from inland to coastal regions
• Also the increasing average age of Australia's population & variations in the number of refugees and skilled migrants accepted into Australia
• Demographic factors also affect business activity & changes in any of these factors can lead to changes in demand levels and the nature of products and services Eg: A business cannot do much about Australia's aging population, but they can take advantage of the changes (by offering pension discounts, or more services for older people)

Social Influences

• Changing consumer tastes and preferences, fashions and habits can be a threat or an opportunity & are Attitudes and values of society such as attitudes to health and fitness can be a big threat or opportunity for a business
• Other than the health/diet consciousness of people today, there is also a concern for the environment, so businesses are all jumping on the 'green' bandwagon (recycled packaging, planting trees to be 'carbon neutral')
• Case Study Coca-Cola: What has coca-cola done to appeal to the changing tastes of its concumers?
• Introduced Low Sugar Options, Coca-cola creations & Different Drinks and Flavours to suit the tastes of Different Countries

Legal Influences

• Aim of government regulation in business is to promote fair conduct, focusing on environmental and consumer protection.
• Regulations extended by professional associations establish codes of practice.
• Local Government regulates zoning, fire regulations, health, and parking.
• State Government regulates employee entitlements and gives licenses to tradespeople.
• Federal Government enforces Competition and Consumer Act 2010.

International Influence

• Australia involved in lots of free trade agreements --> Affects businesses through regulation, reduction in trade barriers

Regulatory bodies

• Regulatory Bodies- enforce government regulation
• Department of Fair trading

Controlled for NSW gov & protects consumers, takes care of licensing, Sets product safety standards

• Australian Competition and Consumer Commission

Controlled by Cwth gov & looks for: anti-competitive behavior, Mergers that might decrease level of competition, Misleading and deceptive advertising & Environmental Protection Authority

Political Influences

• Major political change can result from an election, leading to business uncertainty.
• Signing new free trade agreements with other countries can be a serious threat or opportunity.
• Federal Government can privatise businesses or provide assistance to Aussie business trading overseas.

Institutional Influences

• 3 Main influences are gov, regulatory bodies and 'other' (EPA = enforce environmental laws, ATO enforces gov tax policies, ASIC regulates financial institutions and Trade Unions protect the interests, pay and working conditions of employees)

Technological Influences

• New products, machinery, ideas.
• Businesses must always look at the changing technological environment and adapt to it, changing business practices to keep up with the times

Competitive Situation Influences

• Is that businesses want to have and maintain competitive advantage over others
• -> This Is called sustainable competitive advantage --> Can develop a sustainable competitive advantage through; Cost, Value, Quality, Brand image, Service and Flexibility Number of competitors, substitutes, ease of entry, marketing strategies, local and foreign competition

Markets Influences

• 1980-1990s these protections started to be taken away
• SOME industry sectors suffered (Eg local car industry, textiles, clothing and footwear).Manufacturing sector as people could be cheap clothes and cars from china, japan
• Some industries have done very well from exports (mining businesses, service exporters)
• The main management response when it comes to dealing with this issue is OUTSOURCING --> A business focuses on its prime function and outsources everything else (sends the work to another country)

Product Influences

• Refers to how the products a business makes may influence how a business is structured.
• There are three types of product influences: Types of goods and services produced, Product influence, and Location Range of goods and services.

Products – types of goods and service production

• If the goods are large, or require many raw materials, there will need to be structures in place to organise and monitor the process of production
• Amount of goods and services produced --> If there is a very large quantity of goods produced, it would contribute significantly to the business as it will need to expand operations and internal structures to accommodate changes"

Product Influence

• product influence: some goods and services require extensive preparation while others don't require it as much
• Location Range of goods and services: the range of goods and services produced, the level of technology utilized and the quantity of goods and services produced all contribute to the size of a business --> the larger the business, the greater it wil influence the internal structure"

Marketing application for the theory of Product influences

• discuss issues for consideration by the franchise owner. Product complexity, Regional trends & exclusivity, Worker rights, Dietary suitability

Location influences

• Location affects how the business operates as a bad location can negatively affect sales and profit, a population in a populated location (main street, shopping centre) means a constant flow of customers ensuring a steady revenue
• Also certain regions have restrictions on advertisement which could result in sales decline

What is Resource Management

• In business, "resource management" refers to the process of planning, scheduling, and allocating a company's resources to achieve maximum organisational value by ensuring the right resources are available at the right time for the right tasks, optimising efficiency and minimising waste.
• There are 4 main Types of Resources available for use: Human, Information, Physical and Financial.

Hiring and Retention challenges

• High employee turnover requires constant recruitment --> Incentives = employee discounts, flexible schedules, career growth, Inclusive hiring approach (young workers)
• Efficiency in staffing, Productivity ,Consistent food quality and fast service
• AI-driven menu boards and predictive analytics for sales forecasting and IT systems optimize supplier operations and supply chain efficiency

Management

• The leadership and decision-making process undertaken within a business.
• Management styles are determined by the manager's choice of which is most suitable for their business: nature of the tasks like resources, employee experience, personal values and attitudes towards creating decisions and directing staff to do tasks

Organisational structure influences the management of a business.

• Traditional Task/activity-centred, hierarchical structure ,autocratic focused, power exclusive, conservative/centralised, labour division & Narrow span
• Modern People-centred, flexible structure, democratic views, power equality amongst all contemporary.Communication by consensus

Cross Training Programs

• A Cross-Training Program helps to increase efficiency & helps staff to assist in multiple roles (eg, counter staff in kitchen)

Flat Organisation structure

A flat organisation structure few hierarchical layers prevent miscommunication & initiatives like "open door", helps increases faster decision making in and ideas

Business Culture

• The set of behavioural and procedural norms that can be observed within a company categorized by: leadership styles, shared values and beliefs, cultural diversity and rewarded systems

Business Cultures within the company

• People Centricity,Safety & Respect (for safety), Diversity/Inclusion, Individual Learning & benefits/Rewards

Stakeholders

• Stakeholders: A stakeholder is someone (an individual, group or organisation) that has a 'special interest' in the business.
• A business has a lot of control over its internal stakeholders but little or no control over external stakeholders.

Responsibilities

• Management of business serves the interest of stakeholders

Business growth and decline

• Stages of the business lifecycle- Establishment, Growth, Maturity and Post maturity

Business Management

• The Skills of management are interpersonal, communication, strategic thinking, vision, problem-solving 1.3 achieveing business goals such as profits, markret share, goal and environment

Managment Approaches

• classical approach involves management as planning , hierachical organisation and autocratic leadership
• beahvioural appraoch is manageents as leading, motivating with participative or democratic leadership
• Continency approach is adapting into changing environments

Management process

• Operation, marking and finanance must be co ordinations, as well as human recources.

Managment and change

• Managments should respond to internal and exernal environments an managing change effectively by setting easy goals, and identify need for change.