Year 11 Business Studies - Assessment Task 1

Year 11 Business Studies - Assessment Task 1 Notes

• These study notes summarize the content assessed in Year 11 Assessment Task 1 - Topic Test
• The topic test covers the Nature of Business and Business Management

Nature of Business

• Includes information about the Role of Business, Types of Businesses, Influences in the Business Environment, & Business Growth and Decline

Business Management

• Includes information about the Nature of Management, & Management Approaches

Business

• The organized effort of individuals to produce and sell goods and services that satisfy consumer needs and wants for a profit
• Produce involves the activities undertaken to create goods and services

Key Goals of a Business

• Profit is a key goal
• Growth is a key goal
• Market share is a key goal
• Meeting shareholder expectations is a key goal
• Satisficing Behavior is a key goal
• Productivity is a key goal

Production

• Production combines resources to create products, changing inputs into outputs
• Goods are tangible products
• Services are intangible products

7 Factors Influencing Production

• Management is coordinating the business’s limited resources
• Organizing involves natural, capital and human resources
• Distribution relates to goods/services
• Planning relates to finances, production, and business needs
• Forecasting deals with sales, expenses and profit
• Controlling relates to production
• Marketing deals with products

Roles of a Business - Profit

• Profit is what remains after deducting all business expenses from sales revenue
• Profit is essential to meet daily expenses and provide a return on investment

How to increase Profit

• Increasing sales
• Decreasing costs
• Decreasing expenses

Costs vs Expenses

• Cost of sales are costs associated with the price of goods from manufacturing to sale
• Expenses include the total money spent on running the business

Employment

• Employment refers to having paid work
• There is an agreement between employer and employee
• Employees provide productive resources to accomplish business goals for financial compensation

Income

• Income is money received for providing labor or business income after expenses
• Income can be provided in the form of Wages, Salary, Bonus, Overtime, Commission, Fringe benefits, or Dividends

Choice

• Choice is the act of selecting among alternatives
• Consumers have freedom of choice, plus the opportunity to purchase a variety of products at competitive prices
• Limited choice occurs when stores show a minimal amount of brands
• Limiting choices can help people make decisions faster

Innovation

• Innovation is creating a new or significantly improved product, service, or process
• Invention falls under innovation and refers to developing something totally new

Entrepreneurship and Risk

• Entrepreneurship is the ability and willingness to start, operate, and assume the risk of a business venture with the goal of making a profit
• Risk involves the possibility of loss
• There is no certainty that the idea will be successful

Wealth

• More wealth generates in Australia's economy when there is more produce
• Individual businesses drive economic growth and wealth
• By increasing sales and developing strategies, it promotes the brand
• Good management increases the valuation of the organization
• It increases the value of funds invested in the business

5 Groups That Generate Wealth

• Shareholders
• Lenders
• Employees
• The Business Itself
• Governments

Quality of Life

• Quality of Life refers to an individual's overall well-being
• Quality of Life is a combination of both material and non-materialistic benefits
• People with jobs have opportunities to build self-esteem
• Business research and development has significantly impacted Quality of Life
• Businesses now implement environmentally friendly procedures, responding to quality-of-life issues

Relationships Between Roles

• Entrepreneurship and risk create a business
• This creates incomes and wealth when businesses employ workers
• The products that a business creates provide choice for consumers and can lead to a better quality of life
• Assuming the business is profitable, it creates income and wealth for the owners/entrepreneurs

Types of Business

• Business types can be classified by Size, Geographical Spread, Industry Sector, & Legal Structure

Size of Business

• Businesses can be classified by size, Micro, Small, Medium, or Large

Characteristics of Business Size

• Number of Employees can range from 5-19 for Small, 20-199 for Medium, 200+ for Large
• Ownership can range from Independently owned (Small) to Owned by a few (Medium) to Owned by thousands (Large)
• Most Common Legal Structure is Sole Trader/Partnership for Small & Medium, Public Company for Large
• Decision Making ranges for simple quick processes (Small) , to more complicated decision making (Medium), to complex decision making (Large)
• Sources of Finance can range from Owners (Small), to Shareholder access (Medium), to Cash Reserves (Large)
• Market Share can be Local area for Small, Medium due to regional dominance, or Large for multinational corporations

Microbusiness

• Micro Business has less than 5 employees, including the owner
• Usually working from home
• Often dominated by women, young people seeking self-employment, and people who were retrenched

Microbusiness Statistics

• 90% of small businesses are micro-businesses
• 82% of all non-manufacturing small businesses
• 58% are sole traders + partnerships
• Employs 31% of all people in the private sector
• 54% have no employees

Geographical Spread

• Refers to the presence of a business and the range of its products across suburbs, cities, states, countries or globally
• Geographical spread helps classify a business as Local, National, or Global

Local Geographical Spread

• Has a restricted geographical spread
• Used by consumers nearby
• The majority tend to be small-medium in size

National Geographical Spread

• Business grows and increases products
• Operates in one country
• Operates in multiple locations across several states

Global Geographical Spread

• Operates in, or sells to, multiple countries
• National borders do not represent a barrier to trade
• Conducts a large percentage of business outside its home country
• In a fully developed multinational corporation assets, information, employees, and goods & services all flow freely from one country to another

Industry Sector

• Primary → Secondary → Tertiary → Quaternary → Quinary

Primary Industry Sector

• The industry gathers raw resources
• Business is business as their outputs are the inputs of the Secondary sector

Secondary Industry Sector

• Takes raw materials and processes it to a finished or semi-finished product

Tertiary Industry Sector

• Involves people performing a range of services for other people
• It is the largest and most rapidly growing sector in the Australian economy

Quaternary Industry Sector

• Involves the transfer and processing of information and knowledge
• E.g. telecommunications, property, computing, finance, education

Quinary Industry Sector

• Includes all services that have traditionally been performed at home
• E.g. hospitality, tourism, craft-based activities, childcare

Legal Structure

• There are various types of legal structures each having different implications for the owner and creditors
• Legal Structure is particularly important if the business fails, impacting who has to pay what if the business fails

Incorporated vs. Unincorporated

• Unincorporated: there is no separate legal entity from the owners, for example sole trader or partnership
• Incorporated: a new separate legal entity exists distinct from the owners
• Corporations Act 2001 oversees
• Administered by ASIC
• The company will receive a certificate of incorporation and an Australian Company Number (ACN)

Incorporated Business Allows The Company To

• Hold property
• Be responsible for liabilities
• Have perpetual succession

Unlimited vs. Limited Liability

• Unlimited Liability: the business owner is personally responsible for all debts of the business
• They may have to sell their personal assets to pay the liabilities
• Limited Liability: Feature of corporate ownership, limits each owner's financial liability to the amount of money they have paid for the business shares
• The 'Limited Liability Act' offers a degree of protection to shareholders

Classifications - Sole Trader

• Owned and operated by one person with unlimited liability
• All business assets are owned personally by the business owner
• The business ceases if the owner dies
• The owner is responsible for all debts, and controls the business, so they are entitled to all profits

Sole Trader Advantages

• Low cost of entry & Simplest form
• Complete control & Less costly to operate
• No partner disputes
• Owner's right to keep all profits & Less government regulation
• No tax on profits, only personal income

Sole Trader Disadvantages

• Unlimited liability & End of business when owner dies
• Difficult to operate if sick, and Needs to carry all losses
• Burden of management: The owner needs to perform a wide variety of tasks
• Difficult in raising finance

Partnership

• Partnership is an unincorporated business that is owned and operated by between 2-20 people and has unlimited liability
• Medical practitioners and stockbrokers have an exception to the maximum 20 partner rule in NSW, can have 50 partners
• Veterinarians, architects, and chemists have an exception and can have 100 partners
• Solicitors and accountants can have 400 partners

Partnership - Characteristics

• The assets of the partnership are legally owned by the partners individually, and the business doesn't continue if partners die
• Partnerships are usually a *Joint and Several Liability with each partner responsible for the entirety of any debts owned by the business
• However, Limited Liability Partnerships exist enabling a partnership form where liability is limited to only the amount they contributed, and only for business not personally managed, which was introduced in NSW 1992

Partnership Advantages

• Low startup costs + Less costly to operate
• Shared responsibility & workload, Pooled funds and talent
• Minimal government regulation + No taxes on business, only personal income
• With the death of one partner, a business can keep going

Partnership Disadvantages

• Personal unlimited liability + Liability for all debts (including partners debts)
• Possibility of disputes + Difficult in finding suitable partners
• Divided loyalty and authority

Companies

• Companies are organized as either proprietary (private) or public
• Private Company: An *incorporated business that has between 2 and 50 private shareholders
• Shares are only offered to those people the business wishes to have as part owners
• Shareholders can only sell shares to people approved by other directors
• Must have 'proprietary limited' after its name → pty ltd

Public Company

• Has no limit on shareholders
• Shares are listed on ASX
• Has at least one shareholder
• Has no restrictions on the transfer of shares or raising money from the public by offering shares
• Must issue a prospectus when selling its shares for the first time
• Has a minimum requirement of 3 directors (2 must live in AUS)
• The word 'limited' or 'Itd' goes after its name
• Must publish its audited financial accounts each year (annual report)

Company Advantages

• Easier to attract public finance
• Limited liability
• Can transfer ownership
• Perpetual succession
• Experience management with a board of directors
• Greater spread of risk
• Company tax rate lower than personal income tax rate
• Growth potential
• Recent legislation allows a company to have only one shareholder and one director

Company Disadvantages

• Cost of formation
• Double taxation - personal and company
• Personal liability for business debts if directors knew at the time the business would be unable to pay loans
• Must publish a yearly annual report
• Public disclose → reveals business plans, reducing competitive advantage
• Larger size = more inefficiencies

Government Enterprise

• Government Enterprise are government-owned and operated 'businesses'
• They can be owned and operated by all levels of government
• Government Enterprises may undergo ‘privatisation’, the process of transferring ownership of a government business to the private sector

Franchising

• Franchising is buying the rights from another business to distribute its product under its name
• A franchisor is an individual business that grants a franchise
• A franchisee is an individual or business that purchases a franchise
• Franchising has a success rate of 3x that of an independent business

Franchisor

• The Franchisor will have fast and selective product distribution
• Can avoid costs of construction & Does not have to operate outlets
• The agreement ensures some control & Has Motivated franchisees

Franchisor - Disadvantages

• Can get an Unsuitable franchisee & can have Disagreement over conditions and terms of contract
• The Franchisee has an opportunity to start with limited finances & Guaranteed customer base
• Franchisee benefits from an Established name & Management back-up
• Proven method of business

Franchisee - Disadvantages

• The franchisor retains a great deal of control
• There is Limited scope for individuality in business operation
• Disagreements over conditions and terms of contract
• If too successful, the franchisor may open its own outlet

Factors Influencing Choice of Legal Structure

• Size: As sales increase, the business operations grow to meet higher customer demand. Selecting the right legal structure for business needs
• If sales increase and the business grows that will lead to further expansion
• Ownership is critical in determining legal structure
• Complete control → sole trader
• Shared ownership = partnership
• High degree of control and limited liability = private
• Determine ownership through the number of shares owned in public companies Businesses expand when it requires injections of finance

Finance Sources

Funds will be used to purchase new equipment, undertake research, develop products, hire staff and market products

• Money invested in a business in exchange for equity and supplementary finances

Influences on the Business Environment

• Broken into external influences and internal influences

External influences

• Economic
• Financial
• Geographic
• Social
• Legal
• Political
• Institutional
• Technological
• Competitive situation
• Markets

Internal influences

• Products
• Location
• Resources
• Management
• Business culture

External Factors

• Influence business but business otherwise has no control over

Economic Factors that Influence Business

• Refers to how the fluctuations in the economy impact a business
• Businesses need information on the economy in order to predict possible threats and opportunities

Expansions

• Growing consumer confidence, growing customer spending, increased buisness confidence
• Increased business investment in equipment/expansion/production of goods
• Also in expansions there are increased business profits, higher levels of employment, increasing wages, increasing inflation and increasing interest rates

Contractions

• Falling customer confidence, falling customer spending, decreased business confidence
• Decreased business investment in equipment/expansion/production
• Decreased business profits, lower levels of employment, falling wages, and lower rates of inflation

How Business Reacts to Expansion

• Increased Production Capacity
• Increased prices to capitalise on increased demand
• Hire more employees to cope with increased demand

How Business Reacts to Contraction

• Decrease production capacity
• Decrease prices to maintain sales
• Reduce workforce due to falling demand

Financial

• Pertains to matters that specifically affect the finances of a business
• Interest rates → amount of money payable on business loans Many businesses access debt finance → so interest rates have a significant impact
• Exchange rates → value of one currency expressed in terms of another (1AUD=0.64USD)

Interest Rate Influences - If rates go up

• Costs of borrowing increases
• Restricts lending capacity
• Existing loans become more expensive

Interest Rate Influences - If rates decrease

• the cost of borrowing decreases
• Allows businesses to have more lending capacity
• Assist with business expansion plans

Exchange Rate Importance

The exchange rate is important for businesses that:

• Import from overseas → to use as inputs into the production of Goods and Services
• Export to foreign countries who pay in Australian dollars but must purchase Australian dollars in foreign exchange markets (e.g. If exporting beef to Indonesia and the Australian dollar falls, it's cheaper for Indonesia to buy beef. So a low domestic currency is good for foreigners and boosts exports)
• Sell goods in Australia since that competes with goods made overseas and imported into Australia

Global Finances and Effects

• The global financial market allows Australian businesses to borrow from overseas-based financial institutions
• A business can benefit from borrowing funds overseas at a lower interest rate but benefits may be lost due to unfavourable movements in the exchange rate
• Businesses looking to invest funds should deposit them in countries with high interest rates
• When interest rates are low, businesses take on more debt → but must be aware that if interest rises then debt servicing will increase

Geographical Influence

• Refers to changes in geographic variables: population, demographic and climate
• Has Physical Influences which include Australia's proximity to neighboring country's called the Asia Pacific Region

Geographical Influence - Physical Influences

• Asia Pacific Region: Influences trade in that area due to demand for Australian resources creating business opportunities
• Climate: Seasonal fluctuations demand fluctuate base on climatic factor or climate events

Geographical Influence - Human

• Includes Demographics: Australia's aging population and Asia’s growing middle class which has higher disposable income and more demand for goods and services
• Includes Population Growth: Increased birth rate and migration causing more demand

Globalisation

Business Access

• Increased integration between national economies, that involves the transfer of capital, labour, ideas, finance, tech to Global markets

Globalisation-Implications

• Opportunity for businesses to increase investment and production of goods tailored towards aging demographic
• Businesses may need to increase/decrease production for climate, and aus fast growing economies providing opportunities for Aus export
• Australia can import cheaper from Asia Pacific regions and outsource business to Asia Pacific for reduced cost.

Social Influences

• Social: Trends in culture include concerns for workplace environment
• Greater diversity in cultural backgrounds of the workforce, increased women participation and desire of employees to achive work-life balance

Social Influences - Economic

• Increased concern for environments means Business Practice of not negatively impacting Environment
  • Strategies that minimise waste, recycling and carbon footprint as Consumers wants firsm to be environmentally
  • In otherwords Work-Life Balance
• family workplaces, childcare and flexible hours can impact employee decision diversity, workplaces to manage all aspects of cultural changes and strength of brand reputation for profit with an ethical compliance

Social Influences - Flexible Workplace

• Flexible workplace initiatives may be cost-efficient in the long term staff retention rates, increased productivity, business reputation for status as employee

Legal Influences

• Legal enforecable regulations for operations of busienssses
• All businesses have legal responsibiolties to consumer employees and competitors

Important Legal Laws

• Competition and Consumer Act 2010 (CTH): Promotes fair competition and trade for business and to benefit customers Work Health & Safety Act 2011 (NSW): Protects owners and employees from harm

Fair Work Act 2009 (CTH)

• prevents discrimation against job and sets workplace standards, like minimum pay

Social - Legal

• Income Tax Assessement Act and Corporations Act sets out requiremnts for businesses and law dealings

Implication of Social - Legal

• Business have compliance cost to ensure employee safety
• Prevent unfair advantages and resist business activity

Political Influences on Business

• Refers to influences which arise from the policies

Free Trade Agreement

Occurs when barriers to trade are removed, with low Tariff rates increases access, however some Aus businesses are unalbe to compete

Renewable energy

Australian Govt encouraging Business to use sustainable production methods

Social Reformation + other things

With Priviatisation of goverment, new law tax can impacts on government budget and carbon emissions to have an eco friendly influence

Institutional Influences

• Regulates businsses with fair tradings and law enformcement through ASIC or ACCC
• Gov tax, pollution and worker legislation and also provides for the safety and health within a set regulation of body

Regulatory Bodies

• Government enforces the ACCC to follow fair trade laws and ASIC to follow consumer protections
• NSW Fair TRading: Is the NSW consumer protection to ensure the service and is to make busineses comly with code of practrice

Other

Influences the operation from work to improve conditions with workplace or privatisaton

Competitive Situation

Consistes of what competitors are offering and the marketing strategie, amopunt and the requirements invested

Competive Set Type

Monopoly firms has little compeitors as customsers have no influence has domination to which advertize for a large amopunt to gain more customers

Influences - Technological

• Innovattions to devices makes and impacts tasks which increase connectivity,
• also reduces staff and increases cost while having to train or maintain new machines

Markets Influences

consumer needs which improves

• The access by global protection as it changes the economy with foreign competition

Internal Influences

• Resources which needs talent for location of product that would be sold.

Internal

products is affected buy the businesses operation which would have impacts on structures.

Resources - Type

Requires to supply the correct product for all that comes location and where business is.

All Relates

to type of good to ensure business can be maintained.

Location

Refers a way for the busines to be succesful

Cost

Must be a consideration that needs to be factored

Prox

locate supplyers far from supply and have enough supply in demand

Management

• Defintion: refers to the function of a that helps coordinate to complete objectives

Qualitiies

• Planning is organising, Staffing and more with an effective manager that has good connection towards ethics.

Organization structure

Has the power that must be chain of commands when its to much of power can lead to collabs disputes.

Structure

• Good can culture can be for more people when it comes to be more to give support towards any problems.

Organization Structures

• Type of the idea that business share for each memeber
• Categorsation for how mangers reinforcement to reinforce with structures with heores that influence

Stakeholders

Refer to person or group in the organisations, which must be effeted in all ways.

Influences Stakeholders

• Have a voting for business or responsiblitiy
• Customesr will be willing to express with high expectation
• or soceity is for social environmnet
• Suppyliers give material speed
• Stakeholders provide good info

Implications of Stakeholders + busineses

• Shareholdes will give busines anual report by managing their funds as they provide and ensure fair coditions
• Business should be act with ethical and fair business

Business Growth and Decline

The stages growth a business can have

Business Life cycle + graph

includes where there is the stages of growth, establishment maturity

Stages Graph

• Business can forecast critical and to ensure
• To create the average with right sales, product needs , all to develop
• To ensure cash and need to determine level where the business should and will be

Key Definitions

• A vertical merging

• business with similar product

• Diversiification to merge business completely

Challenges

pressure to which new people are requirred with communication to avoid it.

What does maturity and challenges mean

This refers to the the share and customer loyalty that ensure financial position is stable with routine for the current environment

Stakeholders - Post M

• To see the process of outcomes and results decline from busines
  • the cause factors that come to affect factors consider, such as
• lack of understnading and overall
• or a new plan that has an ethical impact

Cesstation A

• process which will determine that process voluntary
• involunatry will create creaditors

Creaditiors

peiple geting in dept

Bankruptcy

Declare in that will get a ppartenships

Liquidisation

appointed person with intentiions to do for company assets to get credit

Types

A volutary or forced lqi uidtion

Directives and stakeholders

a problems with directors or in general can lead to the failure to the economic with the rest of the business

Nature of Management business, envion

• This leads to all business with other to achieve limit or rapidly increase effectness which can cause problems.
• Review with objectives and organise it with the leding with more action and performance

Skills for the busines

• Set what's appropriate so more people can compair or choose to see the future dierection towards to goal.
• The ability to inspire someone to the core or solving problems.

Skills

Must adjust when ever there are circumtances with change

Buseness goals

Needs to helps with that businesses who aims too with goals.

SMART

A must have skill to achieve time and the most ralistic and the realistic achievabke

goals

Profit maximzaiton by keeping total cost vs revenue or grow the sales by increasibng sizes with the equipment increase.

social

Give community sevrices to people that might otherwise by unempelyed, and to provide good equality to the workplace

economic

Sustainable and balence in both environmatek concern