Types of Businesses by Size

• A business's primary goals are to maximize profits and minimize expenses.
• Small to medium enterprises (SMEs) comprise 50% of the workforce, contribute to national income and living standards, and increase customer choices.
• Profit is calculated as revenue minus expenses, and it serves as a reward for business owners.
• Employment relies on the knowledge, skills, and effort of human resources; income for labor is a factor income.
• Companies have downsized to maintain competitiveness, resulting in employee redundancies.
• The SME sector makes up 50% of the Australian workforce.
• Income forms the basis of a nation's living standards and drives economic growth.
• Shareholders receive income through dividends, while employees receive wages or salaries.
• Research and Development (R&D) helps businesses differentiate products, improving or creating new ones.

Types of Business by Size

• Large businesses employ 200 or more people, often use the public company legal structure, and have thousands of shareholders (e.g., Woolworths, Qantas).
• Medium businesses employ 20-199 people, commonly operate as privately owned or partnerships, and are owned by a few people or families (e.g., small manufacturing businesses).
• Small businesses employ fewer than 20 people, often use the sole trader or partnership legal structure, and are owned by one or two people (e.g., corner shops, mechanics).

Classification of Business by Geographical Spread

• Local businesses have a very restricted geographical spread (e.g., newsagents, hairdressers).

• National businesses operate within one country (e.g., Coles, Myer).

• Global businesses, also known as TNCs/MNCs, operate in two or more countries, often setting up manufacturing where labor is cheap.

• Multinational corporations (MNCs) have subsidiaries in multiple countries and a centralized management structure.

• Transnational corporations (TNCs) integrate businesses using local efficiencies, specializing functions in a worldwide network with a decentralized management structure.

Classifications of Businesses by Industry

• Primary industries involve production from natural/raw resources.
• Secondary industries involve the production of finished or semi-finished goods.
• Tertiary industries perform services.
• Quaternary industries provide services involving the transfer and processing of information and knowledge.
• Quinary industries involve domestic services traditionally done at home.

Sole Trader

• A sole trader is solely responsible for conducting business, with no legal separation between the business and the owner.

• The owner has unlimited liability, meaning they are personally liable if the business is sued.

• Venture capital may be used in expansionary phases.

• Pros: Owner makes all decisions, it's easy and inexpensive to establish. The owner keeps all profits.

• Cons: Owner bears all losses, is personally liable for debts, and their assets are at risk.

Partnership

• A partnership is formed when two or more people join to operate a business.

• The business is not a separate legal entity, and partners have unlimited liability.

• Pros: Shared responsibility, easier to raise finance, low establishment costs, and partners can specialize.

• Cons: Partners have unlimited liability, are responsible for a partner's debt, and disagreements may occur.

Companies

• A company must be "incorporated," meaning it meets legal requirements and is a separate legal entity from its owners.
• Incorporation allows the business to buy property and incur debt in its own name, resulting in limited liability for the owners.

Private vs Public Companies

• Private companies (Proprietary Limited, "Pty Ltd") have 1-50 owners who buy shares.

• Pros: Shareholder liability is limited, shares can be bought and sold, it's easier to increase owners, and there's perpetual succession.

• Cons: Higher establishment costs, shares aren't publicly listed, the company must send documents to ASIC, and lenders may seek personal guarantees from directors.

• Public companies ("Ltd") have more responsibility during setup, shares can be owned by the public and listed on the stock exchange.

• Pros: Easier to attract financing, limited liability for shareholders, easy transfer of ownership, perpetual succession, a board of directors. The company tax rate is lower than personal rates.

• Cons: High establishment costs, significant legal requirements, must publish annual reports, public disclosure of information, can become too large and inefficient.

Government Business Enterprises (GBEs)

• State and federal governments establish GBEs for activities in the public interest (e.g., ABC, Australia Post).
• Many GBEs have been privatized (e.g., CBA, Qantas, Telstra).

Franchises

• Franchises involve buying the rights from a business to distribute a product under their name (e.g., McDonald's).

• The franchisor provides the name, training, operations method, management skills, and materials.

• The franchisee provides startup money, labor, operates the business, and abides by the agreement terms.

• Pros: High success rate, support provided, guaranteed customer base, established name, proven track record.

• Cons: Limited individuality, disagreements may occur over the agreement.

Summary of Legal Structures

• Choice of legal structure is important based on business size, ownership structure, and financing needs.

The Nature of Business: Influences

• Business environment influences are both external and internal.
• External: economic, financial, geographic, social, legal, political, institutional, technological, competitive, and markets.
• Internal: production, location, resources, management, business culture, and stakeholders.

Economic Influences

• Changes in the economic cycle.

• Fluctuations in the Australian dollar (AUD).

• Inflation rate.

• Monetary policy.

• Changes in the economic cycle are predictable long-term patterns in national income/GDP, with four stages: expansion, prosperity, contraction, and recession.

• Recessions lead to less sales and falling wages, while booms lead to inverse effects. Government intervention may occur during a global crisis.

• AUD fluctuation: Appreciation makes exporting expensive and importing cheaper.

• Inflation: Rising prices discourage spending, leading to less revenue for businesses and potential downsizing.

• Monetary policy: Higher interest rates increase the cost for businesses to borrow money and pay off debts.

Financial Influences

• Finance is a crucial element due to the need to finance inputs like raw materials.
• Globalized financial markets allow businesses to use international institutions for financing.

Geographic Influences

• Location impacts businesses globally.
• Australia's location in the Asia-Pacific region provides access to growing markets like India and China.

Social Influences

• Social influences are the attitudes, values, and beliefs of a society.
• Examples include aging populations, women in the workforce, healthy lifestyles, environmental concerns, and immigration.

Legal Influences

• Legal influences are the framework of laws and regulations governing business operations.
• Local: zoning, fire, and parking regulations.
• State: anti-discrimination, WHS, and sale of goods acts.
• Federal: fair work, competition and consumer, and corporations acts.
• International: WTO, and APEC.

Regulatory Bodies

• ACCC and ASIC are federal regulatory bodies.
• Workcover and the Office of Fair Trading are NSW state bodies.

Political Influence

• Political influences are ideas from political parties on how businesses should operate ethically (e.g., carbon taxes).

Institutional Influences

• Institutional influences are bodies that can influence businesses.

• Examples include government/regulatory bodies, trade unions, and industry, trade, and employer groups.

• Trade unions protect worker rights and aim to improve working conditions.

• Industry, trade, and employer groups are national bodies representing employers, often holding power with the government.

Technological Influences

• Technological influences are Products, machinery, ideas, and methods evolve operations over time, including computerization and automation.

Competitive Situation

• Competitive situation involves businesses providing products and services that meet the same need, with the number of competitors being a factor.

• Monopoly: one firm sets price (e.g., Cityrail, Australia Post).

• Oligopoly: few large firms prevent competitors (e.g., banks, Optus/Telstra/Vodafone).

• Monopolistic competition: similar goods with different packaging and branding (e.g., local retailers, plumbers).

• Perfect competition: many small businesses selling identical products, competing on lower prices (e.g., fruit and vegetables).

• Ease of Entry: Entry is impossible in monopolies, difficult in oligarchies, and easier in monopolistic and perfect competition.

• Local vs Foreign: Local competitors struggle with foreign competition's low production costs. Tariffs may protect domestic jobs.

• Marketing Strategies: Viral strategies differentiate products.

• Product differentiation through substitutes.

Market Influences

• A market is a place where goods/services are sold, including financial, labor, and consumer markets.
• Finance: finance is bought and sold (interest). Easier access to funding but might GFC.
• Labor: movement is less free; businesses move where labor is cheap.
• Consumer: cheap labor has led to changes in consumer behavior. Management has adapted by outsourcing labor.