Business Management Textbook PDF

TOPIC 1UNIT 3 AREA OF STUDY 1 Business foundations OUTCOME 1 On completion of this topic you should be able to analyse the key characteristics of businesses, their stakeholders, management styles and skills, and corporate culture. LEARNING SEQUENCE 1.1 Overview....................................................................................................................................................................4 1.2 Types of businesses..............................................................................................................................................7 1.3 APPLY YOUR SKILLS Analysing and discussing social enterprises............................................... 17 1.4 Business objectives............................................................................................................................................ 20 1.5 Business stakeholders...................................................................................................................................... 27 1.6 Potential conflicts between stakeholders and corporate social responsibility considerations...................................................................................................................................................... 34 1.7 EXTEND YOUR KNOWLEDGE Stakeholders and corporate social responsibility.....................40 1.8 Management styles............................................................................................................................................ 43 1.9 The appropriateness of management styles.............................................................................................50 1.10 APPLY YOUR SKILLS Management styles............................................................................................... 53 1.11 Management skills.............................................................................................................................................. 56 1.12 The relationship between management styles and skills.....................................................................68 1.13 Corporate culture — both official and real.................................................................................................69 1.14 APPLY YOUR SKILLS Styles, skills and corporate culture................................................................. 72 1.15 Review..................................................................................................................................................................... 77 1.1 Overview Hey students! Bring these pages to life online Watch Engage with Answer questions videos interactivities and check results Find all this and MORE in jacPLUS 1.1.1 Why it is important There are approximately 2.375 million businesses in Australia. Of these, the vast majority are relatively small and have fewer than 20 employees. These are often sole traders or partnerships. Other businesses are set up as companies, social enterprises and government business enterprises. Wesfarmers is one of Australia’s largest companies, employing over 200 000 employees. These employees might work for Bunnings, Officeworks, Target, Kmart or one of Wesfarmers’ energy, fertiliser or insurance interests. All of these different types of businesses have objectives and stakeholders with vested interests in the business. Management is the key to the success of a business. This means that there must be efficient and effective coordination of all the efforts of people and other available resources to achieve business objectives. In this topic you will be studying different types of businesses, their objectives and stakeholders, areas of management responsibility, management styles and skills, corporate culture, and the relationships between each of these. CONTEMPORARY CASE STUDIES For the purposes of VCE Business Management Units 3 & 4, students are expected to be able to reference contemporary business case studies from the last four years. Students are expected to be familiar with the two main types of business: manufacturing businesses services businesses. Manufacturing businesses can be described as businesses that ‘make something’. They produce a physical good or product that consumers generally purchase from a retailer (such as Coles, Woolworths or Myer). Services businesses, on the other hand, provide a service — they perform some task for the customer rather than the customer perform it for themselves. These services include hairdressers, taxis, banks, schools and the retail stores that consumers purchase their goods from. In Topic 3, Area of Study 3 (Operations management), these business types and what they do will be more closely examined. 4 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition CONTEMPORARY CASE STUDY MANUFACTURING BUSINESS: Yakult Number of employees Approximately 150 CEO Yakult Australia Pty Ltd Managing Director, Mr Kenji Ono Head office (Yakult Australia) Dandenong, Victoria Revenue US$29.33 million (approx. A$40 million) Flagship products Yakult’s parent company (Yakult Honsha) is involved in the production of pharmaceuticals, skin care, foods and other beverages containing beneficial bacteria. Yakult Pty Ltd is known for its fermented milk-based drink of the same name, developed and first produced in 1935 in Japan. The inventor of the product commenced Yakult Honsha Co. Ltd in Japan in 1955. The company opened its first factory in an English-speaking country in Dandenong, Victoria in 1994 and Yakult Australia Pty Ltd was born. The product is wholly-produced at the Dandenong factory, with all ingredients sourced locally except the patented bacteria strain. As a manufacturing firm Yakult is estimated to employ approximately 150 people throughout New Zealand and Australia, and can manufacture around 350 000–400 000 bottles daily. CONTEMPORARY CASE STUDY SERVICE BUSINESS: Commonwealth Bank of Australia Number of employees 48 900 CEO Commonwealth Bank of Australia Matt Comyn (Chair — Paul O’Malley) Head Office Sydney Revenue $17.46 billion (2021) Net profit $8.65 billion (2021) Flagship products Banking, home loans, insurance, investing and super, business support The Commonwealth Bank of Australia (CBA), or CommBank, is an Australian multinational bank with businesses across New Zealand, Asia, the United States and the United Kingdom. It provides a variety of financial services including retail, business and institutional banking, funds management, superannuation, insurance, investment and broking services. The Commonwealth Bank is the largest Australian-listed company on the Australian Securities Exchange as of August 2015, with brands including Bankwest, Colonial First State Investments, ASB Bank (New Zealand), Commonwealth Securities (CommSec) and Commonwealth Insurance (CommInsure). Its former constituent parts were the Commonwealth Trading Bank of Australia, the Commonwealth Savings Bank of Australia and the Commonwealth Development Bank. Founded in 1911 by the Australian government and fully privatised in 1996, the Commonwealth Bank is one of the ‘big four’ Australian banks, along with National Australia Bank (NAB), ANZ and Westpac. The bank was listed on the Australian Stock Exchange in 1991. TOPIC 1 Business foundations 5 1.1.2 What you will learn Key knowledge Use each of the points below from the VCE Business Management Study Design as a heading in your summary notes. Key knowledge Subtopic Types of businesses including sole traders, partnerships, private limited companies, public 1.2 listed companies, social enterprises and government business enterprises Business objectives including to make a profit, to increase market share, to improve efficiency, 1.4 to improve effectiveness, to fulfil a market need, to fulfil a social need and to meet shareholder expectations Stakeholders of businesses including owners, managers, employees, customers, suppliers and 1.5 the general community Characteristics of stakeholders of businesses including their interests and potential conflicts 1.6 between stakeholders Management styles including autocratic, persuasive, consultative, participative and laissez-faire 1.8 The appropriateness of management styles in relation to the nature of the task, time, experience 1.9 of employees and manager preference Management skills including communication, delegation, planning, leadership, decision-making 1.11 and interpersonal The relationship between management styles and management skills 1.12 Corporate culture, both official and real 1.13 Key skills These are the skills you need to demonstrate. Key skills Identify, define, describe and apply business management concepts and terms Interpret, discuss, compare and evaluate business information and ideas Analyse case studies and contemporary examples of business management Apply business management knowledge to practical and/or simulated business situations Source: VCE Business Management Study Design (2023–2027) extracts © VCAA; reproduced by permission. Resources Resourceseses Digital document Key terms glossary Weblinks Commonwealth Bank of Australia (CBA) Yakult 6 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition 1.2 Types of businesses KEY KNOWLEDGE Types of businesses including sole traders, partnerships, private limited companies, public listed companies, social enterprises and government business enterprises Source: VCE Business Management Study Design (2023−2027) extracts © VCAA; reproduced by permission. 1.2.1 Types of businesses There are a number of different types of businesses. Three common legal structures used by businesses in Australia are: sole traders, whereby an individual owns and runs a business; partnerships, whereby a small group of people will own and run a business together; and companies, which are owned by shareholders. We will explore both private limited companies and public listed companies in this subtopic. Each of these structures has certain advantages and disadvantages. Two other types of businesses are social enterprises and government business enterprises. Types of businesses Government Social Sole trader Partnerships Companies business enterprises enterprises Resources Resourceseses Video eLesson Types of business structure (eles-2924) EXAM TIP The Unit 3, Area of Study 1 outcome states that you need to ‘be able analyse the key characteristics of businesses’. An analysis provides detail and breaks a larger concept into smaller parts. This suggests that you should know the main features of each type of business and the relationship between them. 1.2.2 Sole trader A sole trader business has one person who owns and runs the business. The business any activity conducted owner may employ other people to work in the business, but the owner or sole by an individual or individuals trader is the person who provides all the finance, makes all the decisions and takes to produce and sell goods and all the responsibility for the operation of the business. services that satisfy the needs of society, as well as making profit This type of business is easy to establish, as the only legal requirement specific shareholders (or members) the to a sole trader is that the name of the business must be registered with the owners of a company sole trader a business owned Australian Securities and Investments Commission (ASIC), but only if it is and operated by one person different from the name of the owner. A sole trader is not regarded as a separate legal entity — that is, the owner and the business are regarded as the same. This TOPIC 1 Business foundations 7 means that if the business is sued, then the owner is sued. Also, if the business enters a legal contract, then the owner is the one entering the contract. If the business runs into financial difficulties, the owner has the financial problem and is personally responsible for any business debts. This responsibility is known as unlimited liability, and may involve the owner having to sell personal assets, such as property or motor vehicles, to pay for the liabilities of the business. The advantages and disadvantages of being a sole trader Personal (unlimited) Advantages liability for business debts End of business when Low cost of entry owner dies Simplest form Difficult to operate if sick Complete control Need to carry all losses Less costly to operate Burden of management No partner disputes Need to perform wide Owner’s right to keep variety of tasks all profits Difficulty in raising Less government finance for expansion regulation Profit is taxed as personal income Disadvantages 1.2.3 Partnership A partnership is a business owned by two or more people. Most partnerships have a maximum of 20 partners. There are exceptions to this number, including medical practitioners and stockbrokers (allowed up to 50 partners); veterinarians, architects and chemists (allowed up to 100 partners); and solicitors and accountants (allowed up to 400 partners). A partnership is similar to a sole trader in that it is not a separate legal entity from the partners — that is, the owners and the business are regarded as the same. Like sole traders, the partners in a business are also subject to unlimited liability, and so could be personally responsible for the debts of the business. A partnership can be made verbally or in writing, or by implication (i.e. if two people set up a business together without a legally binding partnership agreement). A written partnership agreement is not compulsory, but it is certainly worthwhile if disputes arise. A partnership agreement usually has a standard set of conditions (see the following ‘Did you know?’ feature). Limited partnerships were introduced to allow one or more partners to contribute unlimited liability refers to when financially to the business but take no part in running the partnership. In this case, the business owner is personally the partner is referred to as a silent or sleeping partner. The main reason for their responsible for all the debts of their investment is to add more capital or finance to an existing partnership. business partnership a business owned by While a sole trader pays tax using their personal tax file number, a partnership has its two or more people (generally a own tax file number — separate from those of each of the partners — and lodges its maximum of 20) profit what is left after business own tax return. Once the ATO has assessed the partnership’s tax return and all taxes expenses have been deducted from have been paid, the profits are divided among the partners according to the partnership money earned from sales (revenue) agreement. Each partner then adds their share of the profit (or loss) to their personal income to be assessed by the ATO. 8 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition The advantages and disadvantages of a partnership Personal unlimited Advantages liability Liability for all debts, including partner's Low start-up costs debts, even before the Less costly to operate partnership has begun than a company Possibility of disputes Shared responsibility Difficulty in finding a and workload suitable partner Pooled funds and talent Divided loyalty and Minimal government authority regulation No taxes on business profits, only on personal income On death of one partner, Disadvantages business can keep going DID YOU KNOW? A partnership agreement may contain any of the following points: How long the partnership will exist The amount of money that each partner contributes How the profits and losses will be shared The duties of each partner Limitations on the authority of the partners How the partnership may be dissolved Methods of resolving disputes. 1.2.4 Incorporation Many businesses that have begun as sole traders or partnerships may find that, as their business grows, there are advantages in changing the ownership structure to that of a company. This process is known as incorporation. The process of incorporation is governed by the Commonwealth Corporations incorporation the process that Act 2001, and is administered by the Australian Securities and Investments businesses go through to become Commission (ASIC). In order for a business to become incorporated, a company a registered company and a name must be registered with ASIC, which will issue a certificate of incorporation separate legal entity from the owner/shareholder and an Australian Company Number (ACN). Directors must be appointed to run limited liability refers to when the company on behalf of the owners. Once incorporated, the company has a the shareholders in a company separate legal identity to its owners, who are now known as shareholders (referred will not be held personally to in the Corporations Act as ‘members’). responsible for the debts of that business Incorporation also brings to the shareholders the benefits of limited liability. In liquidation the process of selling limited liability companies, the most money that a shareholder can lose is the off the assets of a business in order to repay creditors, with any amount that he or she paid for their shares. If the company goes into liquidation, assets remaining to be distributed the shareholders cannot be forced to sell their personal assets to pay for the among shareholders debts of the business. This same protection does not extend to the directors of a company, as they have an obligation to ensure the company obeys the law and acts in the interests of the shareholders. TOPIC 1 Business foundations 9 Financial institutions often ask directors to give personal guarantees for some business loans. Under some circumstances, therefore, directors can be forced to sell their personal assets to help pay for business debts. To offset this risk, companies can insure against such an event. The letters ‘Ltd’ signify that a business is a company that has limited liability. A company can be organised as either a proprietary (private) or public company. DID YOU KNOW? If directors make false or misleading statements or omissions, if they fail to appoint a secretary or if they recklessly borrow money knowing that the debts probably will not be repaid, then the protection offered by the company in being a separate legal entity will not cover the directors. Directors accused of such unlawful behaviour may face common law suits and criminal charges. 1.2.5 Private limited companies A private limited company is the most common type of company structure in Australia. Private limited companies must have at least one shareholder and a maximum of 50 non-employee shareholders (members who aren’t employees of the company). A private company must also have at least one director. Therefore, it is quite possible for a private limited company to be owned by a single shareholder, who is also the director of the company. Private companies tend to be small to medium-sized, family-owned businesses. In many cases, one family owns most of the shares in a private company. Shares in a private company are offered only to those people whom the business private limited company an wishes to have as part owners. Shareholders can sell their shares only to people incorporated business that has a approved of by the other directors. This is why such a company is called a ‘private’ minimum of one shareholder and company. It is not listed on, and its shares are not sold through, a stock exchange. A a maximum of 50 non-employee shareholders, and whose shares are private company must have the words ‘Proprietary Limited’, abbreviated to ‘Pty Ltd’, offered only to those people whom after its name. the business wishes to have as part owners Sometimes the decision is taken to close a business. However, closing a private directors (of a company) the people company is much more complex than closing a sole-trader business or a partnership. who have overall responsibility for All shareholders of the company must agree to the company being wound up. managing the company’s business activities A liquidator (an external party appointed to carry out the liquidation process) will assets items of value owned by a manage the process of selling the company’s assets, paying its debts and distributing business funds from the asset sales among the shareholders. ESTABLISHING A COMPANY Companies are established subject to the provisions of the Corporations Act 2001 (Cwlth). These provisions include the following: Part 1.5 — Small business guide 3 Setting up a new company 3.2 Setting up a company To set up a new company themselves, the operator must apply to ASIC for registration of the company. To obtain registration, a person must lodge a properly completed application form with ASIC. The form must set out certain information including details of every person who has consented to be a shareholder, director or company secretary of the company. A proprietary company limited by shares must have at least 1 shareholder. The company comes into existence when ASIC registers it. 10 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition s.113 Proprietary companies 1. A company must have no more than 50 non-employee shareholders if it is to: a. be registered as a proprietary company; or b. change to a proprietary company; or c. remain registered as a proprietary company. The cost of registering a company ranges from $422 to $512 depending on the size of the company (as at March 2022). In addition, forms must be lodged every year to ensure the register of companies is kept up-to-date. There is no additional fee charged for this, but a late fee may be charged if updated forms are not lodged on time. The advantages and disadvantages of private limited companies Advantages Cost of formation — more expensive than either a sole Easier to attract finance trader or partnership Limited liability — The company is taxed on separate legal entity any profits and dividends, Easy transfer of ownership and the income from the A long life/perpetual company to the shareholder succession — a company is taxed as personal income does not have to be wound Personal liability for business up in the event of the death, debts if directors knew that disability or retirement of debts could not be paid any person involved Requirement to produce Experienced management an annual report of audited through board of directors accounts Greater spread of risk Public disclosure — reporting Company tax rate is lower of certain information than personal income Rapid growth may lead to tax rate inefficiencies Growth potential Can have one shareholder and one director Disadvantages 1.2.6 Public listed companies The shares for a public listed company are listed on the Australian Securities Exchange, and the general public may buy and sell shares in this type of company. Whereas private companies tend to be small or medium-sized businesses, most public companies are large in size and market a large range of products — for example, Telstra, BHP, Woolworths, Virgin Australia and Westpac. A public company has: a minimum of one shareholder, with no maximum number no restrictions on the transfer of shares or raising of money from the public via share offers a requirement to provide certain information when selling its shares for the first time a minimum requirement of three directors public listed company an (of whom two must live in Australia) incorporated business with a the word ‘Limited’ or ‘Ltd’ in its name minimum of one shareholder a requirement to publish its audited financial accounts each year — included (and no maximum), and whose shares are openly traded on the in an annual report. Australian Securities Exchange TOPIC 1 Business foundations 11 The advantages and disadvantages are much the same There are over 2200 public companies listed on for both private limited and public listed companies. the Australian Securities Exchange. The share However, public listed companies can attract extra price for each company changes according to capital by issuing shares on the share market. This demand and supply. If a company is considered means that there is a greater potential for growth. a ‘good buy’, its share price is likely to rise (green However, because of this capital-raising capacity, public indicates the stock or share price is rising, and red listed companies are required to abide by stringent indicates the share price is falling). compliance rules and disclose corporate financial information. A public listed company is a highly complex business structure and it requires greater accountability and compliance than a private limited company. 1.2.7 Social enterprises A social enterprise is a business that produces goods and services for the market, but operates with the primary objective of fulfilling a social need. The business may make a profit, but will concentrate on some sort of community or environmental need. A majority of the The Big Issue magazine is a social enterprise profit that the social enterprise makes will be that promotes social inclusion and works to reinvested back into the business so that it can continue to alleviate poverty in Australia. It employs homeless, fulfil the social need, or will be distributed to meet the marginalised and disadvantaged people, who community or environmental need. There are an estimated sell the magazine on the street. Each vendor 20 000 social enterprises in Australia. In 2022, the purchases magazines and then sells them for twice Victorian Government stated that there were more than the price, earning the difference. 3500 social enterprises trading across metropolitan and regional Victoria — employing approximately 60 000 people and contributing $5.2 billion to the Victorian economy. In Australia, a social enterprise can operate in many ways — it can take the form of a cooperative (a business that is owned and operated by the group of members) or a privately owned business. A social enterprise will often run just like a commercial business. Unlike charities, social enterprises do not rely on donations as their main source of income. Some social enterprises will obtain funding from the government to support their social goal. Fundamentally, they exist to benefit society, rather than solely for the pursuit of profit. Some examples of typical social needs that may be addressed by social enterprises include: providing opportunities for local unemployed people developing skills, providing vocational training or lifelong learning opportunities for disadvantaged people in the community creating accessibility to a better quality of life for disadvantaged members of the community providing essential services to disadvantaged communities focusing on waste minimisation and recycling. social enterprise a business with the objective of fulfilling a social need 12 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition The advantages and disadvantages of social enterprises Difficulty in obtaining Advantages capital to start the business — it can be hard to find finance Can open up new Significant operating markets — the social costs — social enterprise may meet a enterprises will often need that commercial take on costs that businesses choose conventional businesses not to would not Meeting a social need It can be difficult to can have a positive focus on both social effect on profit and and financial objectives. market share. Disadvantages DID YOU KNOW? When the sole petrol station in the town of Yackandandah closed down in 2002, the Yackandandah Community Development Company was established to secure the future supply of local fuel. The local community wholly owns it, with most of its shares held by residents of the town. The enterprise now sells hardware, produce and farm products as well as fuel. Fifty per cent of the profits are returned to the shareholders and the rest is invested in community projects. In the 2020–2021 financial year, the business sold almost 3 million litres of petrol, delivered a surplus of $262 639 before tax and provided $11 686 in community sponsorship. 1.2.8 Government business enterprises government business enterprise (GBE) a type of A government business enterprise (GBE) is a type of business that is business that is government owned and operated government owned and operated. Like companies, GBEs participate in revenue the income that a commercial activities with the goal of making a profit. We may not always business earns from the sale of think of them as being businesses, but they actually run just like companies. goods and services to customers However, GBEs carry out government policies while they deliver community services. They operate at both NBN Co was established as a business in April the federal and state level of government. 2009, tasked with designing, building and operating Australia’s National Broadband Network. Like a GBEs also aim to increase the value of their assets privately owned enterprise, a GBE will have a chief and returns to their shareholder (the government). executive officer (CEO). Stephen Rue (CEO at NBN A board of management or board of directors usually Co) announced revenue totalling $4.6 billion for the controls a GBE, with government input into the board. year ended 30 June 2021. The government maintains a strong interest in the performance and financial returns of the GBE. Typically, GBEs are large businesses that employ many people. Some of the largest employers in Australia are GBEs. Australia Post, NBN Co and VicRoads are examples of GBEs in Australia. VicRoads is also a statutory corporation — an Act of Parliament (a law) had to be passed to establish it. TOPIC 1 Business foundations 13 The advantages and disadvantages of government business enterprises Political interference in Advantages the day-to-day operation of the GBE Inefficiencies caused by Able to carry out government ‘red-tape’ — government policies excessive regulation or delivering community rigid conformity to rules services in areas where Management of GBEs can private sector businesses be less effective than that might hesitate to invest of the private sector. Can operate with some There can be less independence from accountability within a GBE, government resulting in less productivity. Provision of healthy competition to businesses operating in the private sector — this can lead to lower prices in the markets where GBEs are competing Disadvantages DID YOU KNOW? Over the past 30 years, there has been a worldwide trend to privatise GBEs. This means they are sold to the private sector, and then run as profit-making businesses. This process is known as privatisation. During the 1990s, the Australian Government privatised a number of public sector businesses, including Telstra, Qantas and the Commonwealth Bank. The Victorian Government has privatised gas, Melbourne rail services and electricity. Resources Resourceseses Weblink Defence Housing Australia KEY IDEAS Each type of business has certain advantages and disadvantages. A sole trader is a business owned and operated by one person. A partnership is a business owned and operated by a minimum of two people, and generally a maximum of 20. A private limited company is an incorporated business that has a minimum of one shareholder and a maximum of 50 non-employee shareholders, and whose shares are offered only to those people whom the business wishes to have as part owners. A public listed company is an incorporated business with a minimum of one shareholder and whose shares are openly traded on the Australian Securities Exchange. A social enterprise is a business that produces goods and services for the market but operates with the primary objective of fulfilling a social need. A government business enterprise is a type of business that is government owned and operated. 14 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition 1.2 Exercises Students, these questions are even better in jacPLUS Receive immediate Access Track your feedback and access additional results and sample responses questions progress Find all this and MORE in jacPLUS 1.2 Quick quiz 1.2 Exercise 1.2 Exam questions 1.2 Exercise TEST your understanding 1. Explain the difference between a sole trader and a partnership. 2. Identify three advantages and three disadvantages of setting up a business as a sole trader. For each advantage and disadvantage, explain why you believe it is an advantage or a disadvantage. 3. Outline the advantages and disadvantages of a partnership. 4. Eve operates a successful homemade-casserole business as a sole trader. She is interested in taking on partners in her business. a. What advantages will Eve gain from a partnership arrangement that she does not have as a sole trader? b. What disadvantages could Eve experience from the partnership arrangement? 5. Explain what limited liability is and how it affects shareholders in a company. 6. Explain the key differences between a private limited company and a public listed company. 7. Identify what you believe to be the three main advantages and three main disadvantages of a private limited company. Explain each selection. 8. Outline the advantages and disadvantages of a public listed company. 9. In what ways does a social enterprise differ from a company? 10. Summarise the advantages and disadvantages of a social enterprise. 11. What is the main purpose of a government business enterprise? 12. Outline the advantages and disadvantages of a government business enterprise. APPLY your understanding 13. Shane is planning to manufacture home water filtration units and sell the products locally. He then wants to use the proceeds of these sales to provide the same product to communities in developing countries. Explain to Shane why a social enterprise would be an appropriate business type for this idea. 14. Construct a table with six columns labelled as in the example below. From the list of businesses provided, write each name in the correct column for its particular business type. The first business has been entered for you, as an example. Ray Coulton Carpentry Rural Services Co-op Tynan Motors Pty Ltd Fairfax Limited Perpetual Water Jacinta’s Newsagency M&M Communications Tip Top Bakeries Pty Ltd Newcrest Mining Ltd Bigga Community Group Paul Banwell Motors Sue King Plumbing Ozemail Limited Tynan Motors Pty Ltd R&R Antiques Pty Ltd Government Private limited Public listed Social business Sole trader Partnership company company enterprise enterprise Ray Coulton Carpentry 15. Use internet sources to research a social enterprise. An example is KereKere. Answer the following questions for the social enterprise that you find. a. Who owns the social enterprise? b. Who manages this business? c. What is the objective of the social enterprise? d. How does the business contribute to the community? TOPIC 1 Business foundations 15 16. Use the Defence Housing Australia weblink in the Resources tab to find out what this government business enterprise does. Answer the following questions. a. Who owns Defence Housing Australia? b. Who manages this business? c. What is the objective of Defence Housing Australia? d. How many staff does Defence Housing Australia employ? 1.2 Exam questions Question 1 (2 marks) Source: Adapted from VCE 2020, Business Management Exam, Section B, Q.1; © VCAA Case study Below is an extract of a speech delivered to the shareholders of Manitta Mining by its Chief Executive Officer at its annual general meeting on 7 August 2020. Our business faces significant challenges. Staff turnover has increased significantly over a five-year period. The business’s share price on the Australian Securities Exchange (ASX) has decreased by 15 per cent over the same five-year period. Sales are also down and the company has struggled to reduce the number of workplace accidents in our mines. Using evidence from the case study, outline what type of business Manitta Mining is. Question 2 (2 marks) Source: VCE 2019, Business Management Exam, Section A, Q.1a; © VCAA ChocYum Pty Ltd is a manufacturing business located in regional New South Wales. It prides itself on manufacturing chocolate products of the finest quality for major retailers in Australia, New Zealand and the United Kingdom. Outline the characteristics of a private limited company. Question 3 (2 marks) Source: VCE 2018, Business Management Exam, Section A, Q.1a; © VCAA 123 Childcare Centre is a business operating as a partnership. It provides childcare services for children aged five and under. Mary Kidd, one of the partners at the centre, wants to meet the demand for high-quality and reliable childcare in her local area. However, employees complain of long hours and their motivation is low. Staff turnover is a problem and Mary is unsure of how to address this. Define the term ‘partnership’ as a type of business. 16 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition Question 4 (2 marks) Source: Adapted from VCE 2018, Business Management Exam, Section B, Q.1; © VCAA Case study The Daily Swell is a local print and online newspaper. The following is an extract from an article the paper printed recently about a local business. Regional Community Hub for All Tessa Adams and Charlie Liu opened Ocean Skate Hub in 2017. It is a social enterprise aimed at servicing the needs of the local youth community. It offers indoor and outdoor skate parks, and youth and homework clubs. It also operates a sports shop and cafe. Describe one feature of a social enterprise like Ocean Skate Hub. Question 5 (3 marks) Source: VCE 2017, Business Management Exam, Section A, Q.1a & b; © VCAA Gadget Industries has recently changed its business structure from being a sole trader to a partnership. The business has also employed a new Human Resource Manager to oversee this area of management responsibility. a. Define the term ‘sole trader’. 1 mark b. Outline one reason why a business may choose to operate as a partnership rather than as a sole trader. 2 marks More exam questions are available online. 1.3 APPLY YOUR SKILLS Analysing and discussing social enterprises PRACTISE YOUR SKILLS Identify, define, describe and apply business management concepts and terms Interpret, discuss, compare and evaluate business information and ideas Analyse case studies and contemporary examples of business management Apply business management knowledge to practical and/or simulated business situations Source: VCE Business Management Study Design (2023−2027) extracts © VCAA; reproduced by permission. There is an increasing group of entrepreneurs across the globe setting up businesses to tackle social issues, Social enterprises use their profits to help communities. ranging from unemployment to empowering women and girls and fighting poverty. These businesses are referred to as social enterprises: commercially viable businesses that are established to achieve social objectives, rather than focus on making profit for shareholders or owners. A social enterprise will typically seek to generate a profit from its trading activity to continue to tackle social problems and improve communities or the environment. TOPIC 1 Business foundations 17 CASE STUDY Vanguard does the laundry to provide jobs Luke Terry is the founder of Vanguard Laundry Services which employs more than 40 people and cleans 20 tonnes of linen a week Luke Terry, Managing Director of for 90 commercial clients. Vanguard Laundry Services In his former role as CEO of Toowoomba Clubhouse, a not-for-profit organisation supporting people with a lived experience of mental illness and struggling to secure employment, Terry had people from the local community asking him if he could help them to find a job. After searching locally, he received an offer to take care of the washing for St Vincent’s Private Hospital in Toowoomba. He spent three years fundraising — raising $6 million from more than 100 sources — and Vanguard was finally established when the laundry facility opened at the end of 2016. Since then, the social enterprise has experienced rapid growth and has had a substantial social impact. As a social enterprise, the Vanguard laundry provides jobs to unemployed people who have a lived experience of mental illness. Any surplus it makes is reinvested back into improving the laundry services or supporting local mental health employment projects. As the Managing Director of the business, Terry believes that the social enterprise business model is healthy for staff and for the wider community. Many of Vanguard’s employees suffer from bipolar disorder, depression, anxiety or physical health problems. For them, having a job brings a number of benefits. A Swinburne University study funded by the AMP Foundation evaluated the mental health and wellbeing impacts of Vanguard. The study found that fewer than a third of Vanguard’s employees had significant employment experience before starting work at Vanguard. It was also found that after just one year, Vanguard workers were much less likely to rely on welfare. Furthermore, the employees were less likely to visit hospital and almost 80 per cent said they simply felt better. One of Vanguard’s goals is for its workers to, eventually, move on to other employment. The business has staff dedicated to supporting welfare and career development, and also offers courses on money management and quitting smoking. In recent years, Vanguard has worked with the support of its partners. COVID-19 caused volume of sales to drop by 80 per cent in 2021, which had a significant impact on the business. However, Vanguard remains very much in business and 2022 saw the establishment of a new partnership with ‘Hello Good World’. CASE STUDY i=Change supports retailers in donating to global development projects Jeremy Meltzer, a Melbourne-based entrepreneur, founded i=Change in 2013. It is a social enterprise that funds global development projects — Jeremy Meltzer, founder of typically ones that aid impoverished women and girls. The business partners i=Change with online retailers to encourage them to integrate social responsibility into their e-commerce platforms. Meltzer was inspired to establish i=Change after becoming increasingly aware of the systemic violence and abuse facing women and girls across the globe. He lived for some time in Cuba and was shocked at how violence against women appeared to be considered ‘normal’ across Latin America. Over the last 10 years, in an attempt to understand this issue, Jeremy has met with NGOs and communities in many countries around the world. Jeremy also makes Yellingbo olive oil with his father on their family grove. Over 10 years ago in New York, wishing to find a way for Yellingbo to give back, Jeremy arrived on an idea to have his partner businesses (NGOs with a 18 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition focus on women’s development) donate two dollars to a charity of the customer’s choice with each purchase of the oil. Meltzer decided to develop the idea into something bigger that could be offered to other e-commerce businesses. The i=Change model involves online retailers committing to a donation with every sale — usually $1 — and customers choosing where the donation goes, via the i=Change platform, at checkout. The customer can click a link to read about the life-changing project that the business will be donating to, or can choose to donate more if they wish. Customers can also share their choice. The entire donation is forwarded to the charity project of the customer’s choice — the social enterprise does not keep any proportion of a donation. Instead, i=Change charges its retail partners a separate fee for use of the platform. Meltzer believes strongly that social enterprises need to be successful businesses in order to have an impact on the area of social change that is being focused on. He says a social enterprise needs to be profitable to be able to pay employees and continue to use the profits to achieve its chosen social objectives. i=Change currently has more than 40 participating retailers, including brands such as Pandora and Camilla, and, by 2022, it had reached over $5.8 million in donations. It has partnered with over 36 charities and NGOs across the world, donating to causes ranging from providing housing for refugee families in Australia, to preventing child marriage in Bangladesh, to keeping girls in school in Zimbabwe. Resources Resourceseses Weblink Social Traders 1.3 Exercises Students, these questions are even better in jacPLUS Receive immediate Access Track your feedback and access additional results and sample responses questions progress Find all this and MORE in jacPLUS 1.3 Exercise 1.3 Exam questions 1.3 Exercise TEST your skills 1. Read the ‘Vanguard does the laundry to provide jobs’ case study. Outline why Luke Terry established Vanguard Laundry Services. 2. Identify what Vanguard’s objective is. 3. Explain what Vanguard does with any surplus it makes. 4. Outline the benefits that Vanguard brings to the Toowoomba community. 5. Read the ‘i=Change’ case study. Outline i=Change’s business objective. 6. Outline how Meltzer’s online cause-based marketing platform works. 7. Why does Meltzer believe that social enterprises need to be profitable businesses? APPLY your skills 8. Using internet sources, find an example of a social enterprise. For example, you might use the Social Traders weblink in the Resources tab to identify names of social enterprises in Australia. a. What is the objective of the social enterprise? b. Explain how the social enterprise achieves its objective. TOPIC 1 Business foundations 19 9. Identify whether or not the following businesses are social enterprises. Justify each response. a. Sports4U Pty Ltd designs, develops and sells sporting apparel, including compression wear and general fitness garments. Its mission is to advance human performance through the development of the best available athletic garments at the lowest possible prices. b. Delia is a sole trader operating a landscape gardening business. She started the business to pay off her and her husband’s mortgage. c. Christine owns a café that has environmental and social objectives. It provides jobs for young people with learning difficulties and other disabilities. As well as being used to provide training programs, revenue from the café funds other local community programs. d. Ossivision Australia is a private company that has an objective of aiding the homeless community. The business puts the proceeds from the sale of its sunglasses towards acquiring blankets and distributing them to the homeless. e. Assistenz Health is a public company that produces and distributes health care products to pharmacies. Its vision is to improve health care while creating unprecedented value and opportunity for customers, employees and investors. 1.3 Exam questions Question 1 (2 marks) Define the term ‘social enterprise’. Question 2 (4 marks) Discuss the use of a social enterprise as a type of business. More exam questions are available online. 1.4 Business objectives KEY KNOWLEDGE Business objectives including to make a profit, to increase market share, to improve efficiency, to improve effectiveness, to fulfil a market need, to fulfil a social need and to meet shareholder expectations Source: VCE Business Management Study Design (2023−2027) extracts © VCAA; reproduced by permission. 1.4.1 Business objectives Every business should have an objective. An objective gives a business direction; that is, it provides the business with a path to follow, increasing its chances of being successful. The most common business objectives, and the ones included in the VCE Business Management Study Design (2023–2027), are shown in the diagram below. Business objectives To meet To increase To improve To improve To fulﬁl a To fulﬁl a To make a proﬁt shareholder market share efﬁciency effectiveness market need social need expectations To make a profit Making a profit is an objective that is central to most businesses. Profit is what is objective a desired outcome or left after business expenses have been deducted from money earned from sales specific result that a business (revenue). A loss occurs when the expenses exceed the revenue. For example, if intends to achieve business expenses totalled $100 000 per year and revenue from sales was $300 000, the business would have made a profit. 20 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition The Port Arthur Historic Site Management Authority is responsible for the Port Arthur, Coal Mines and Cascades Female Factory historic sites. The GBE has objectives so that its management and employees know what to do to ensure that the enterprise is successful. A major indicator of a business’s success is the size of its profit, so many businesses not only want to make a profit, they want to maximise their profit. A business may have other objectives that will support it in achieving its main objective of making profit, such as increasing sales, expanding the business or increasing market share. To increase market share Market share is a business’s proportion of total sales in a market or an industry. This is easy to visualise using a pie chart that shows the percentage of sales the business has in relation to all its competitors. For small to medium-sized businesses, increasing market share is usually measured against local competitors. For example, a suburban shopping centre may contain four competing cafés. Each will be trying to increase market share against the other three local competitors by offering better-quality food and drink, better service or cheaper prices. Larger businesses are often competing for increased market share on a national, Australia-wide basis. Such businesses often develop an extensive product range, using many different brand names, to gain an extra few percentage points of market share. Small market share gains often translate into large profits for these businesses. market share the proportion of To improve efficiency total sales in a given market or industry that is controlled or held In order to sell a product or provide a service to customers, a business will use by a business, calculated for a resources (inputs) to produce the product or service (an output). specific period of time industry the classification of A business will hope to use these resources efficiently — to minimise the groups of businesses related to the particular good or service they resources used and/or to maximise the outputs generated from those inputs. This produce can be achieved by using up-to-date technology and innovative processes, having competitors other businesses highly skilled employees or using the best quality components for the product so or individuals who offer rival, or waste and inefficiencies are reduced. competing, goods or services to the ones offered by the business Improving efficiency will reduce the waste generated by the business, which will efficiency how well a business reduce the costs of the business. uses resources to achieve objectives TOPIC 1 Business foundations 21 To improve effectiveness Effectiveness refers to how successful a business has been in terms of achieving its effectiveness the degree to which stated objectives. A business may set a target for itself of increasing net profit by a business has achieved its stated 10 per cent in the coming year. If it increases profit by 10 per cent, the business has objectives been effective; if profit increased by 8 per cent, then it hasn’t been as effective as it planned. The business should be able to consider its effectiveness in relation to all the objectives that it set, either short- or long-term, and should always be looking to improve in these areas. To fulfil a market need For many businesses, their purpose is to fulfil some sort of market need. For example, a business may exist to meet customer expectations or provide a good or service that is not otherwise available to a market. In some cases, it is quite possible that small businesses may be able to meet specific market needs more efficiently than larger businesses. For example, a small general store in a rural area may have the objective of meeting the specific needs of a local community, whereas larger food retail businesses might struggle to meet these needs. A business may have other objectives that will support it in fulfilling a market need, including objectives related to the function of the product as well as quality, price and convenience. To fulfil a social need Sometimes a business will aim to fulfil a social need. This objective involves the production and/or selling of goods and services for the purpose of making the world a better place. A business with such a focus may generate an income, but its primary purpose is the common good. Objectives related to fulfilling social needs might include improving human wellbeing, such as providing opportunities for local unemployed people or assisting disadvantaged people in the community, or focusing on the environment, such as minimising waste and recycling. To meet shareholder expectations Making profit is the primary objective of many businesses. This is particularly important for investors in a company — its shareholders. Shareholders expect to make a return on their investment. They expect the business that they have invested in to make a profit, as they receive a proportion of the profits (called dividends). They also make a capital gain if the value of a company’s shares increases. If the part of the profit gained by the company is returned to shareholders, or the value of a company’s shares increases, then shareholders will have their expectations met. 1.4.2 Setting business objectives Businesses develop objectives and related strategies to provide direction to stakeholders. Performance is analysed using key performance indicators. Set objectives Develop strategies Analyse performance Key performance indicators 22 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition As businesses seek to achieve different things, each business will have different objectives. It is obvious that most businesses exist to make a profit and will consequently measure their performance against objectives established around profitability (sales, market share, returns on investment). Many businesses today, such as Bendigo and Adelaide Bank, include customer service, community involvement, the environment and concern for employees within their objectives. Bendigo and Adelaide Bank focuses on customers, communities and partners, and sustainable earnings and growth. Government business enterprises will, of course, have objectives reflecting the provision of services to the community. VicRoads’ objective is to deliver social, economic and environmental benefits to communities. It does this by managing Victoria’s roads and transport. Social enterprises exist to achieve objectives in addition to making a profit. If there is a profit motive, that profit is used to further help those in need. The primary objective of a social enterprise is not to make profit to distribute to shareholders. For example, The Social Studio is a social enterprise; its objective is to raise awareness of the refugee experience. Although making a profit is crucial for the long-term survival of most businesses, concentrating on this objective to the exclusion of all others may eventually harm the business. Poor customer service, low staff retention rates and damage to the environment or to the business’s reputation are some likely consequences when a business is focused solely on making profits. Objectives from a range of businesses Bakers Delight (private limited company) Vision ‘To be the world’s best fresh bread retailer’ VicRoads (government business enterprise) Purpose ‘... to deliver social, economic and environmental beneﬁts to communities throughout Victoria by managing the Victorian arterial road network and its use as an integral part of the overall transport system’ The Social Studio (social enterprise) Objective ‘To create awareness and change public perceptions for people who have experienced being a refugee’ Commonwealth Bank (public listed company) Vision ‘To excel at securing and enhancing the ﬁnancial wellbeing of people, businesses and communities’ TOPIC 1 Business foundations 23 COMMUNICATING OBJECTIVES Businesses communicate their objectives in many different ways. The objectives of a small business are often found in the business plan. The objectives of larger businesses are often clarified in a vision statement, which broadly expresses what a business hopes to become; or in a mission statement, which formally expresses the reasons for a business’s existence, its purpose and its method of operation. Sometimes business objectives may be expressed in a ‘purpose’, a ‘values statement’ or as ‘strategic priorities’. In whatever form they take, the objectives are usually communicated to stakeholders using noticeboards, websites or annual reports. 1.4.3 Developing business strategies Once a business has established a set of specific objectives, the next step is to determine what needs to be done to achieve the objectives. Strategies outline how the business will attempt to achieve its objectives — they are a series of actions undertaken to achieve an end result. For example, a strategy to achieve the objective of increased profit may be the introduction of a new product range. Successful businesses develop a range of different strategies to achieve objectives in different areas of management responsibility. A marketing objective, for example, might be to increase market share by 10 per cent. Strategies to achieve this might include: targeting a new group of customers increasing sales by using a new promotional campaign increasing the number of distribution outlets improving the performance or quality of the existing product. A business needs to make sure all the objectives and strategies are linked. Money will be required, for example, to implement the marketing strategies, so the finance strategies need to reflect this link. 1.4.4 Analysing performance After determining the business’s objectives and strategies, management will eventually need to ask, ‘How well did we do?’ Performance is analysed by determining whether the business objectives have been achieved. This can be done by constantly asking the following: How is the business performing? How does the business’s performance compare to that of similar businesses? Is the business performing as planned? Has the business’s performance improved over time? Once measurements have been collected, businesses can identify and investigate any vision statement states what the discrepancies in comparison with original planned objectives. The business needs to business aspires to become ask whether the desired results were achieved and, if not, where and why they failed. mission statement expresses why If strategies were successful, the business should examine what made them a success the business exists, its purpose and and reuse these strategies. By analysing successful operations, the business may also how it will operate strategies the actions that a identify weak spots that can be improved. business takes to achieve specific objectives Businesses use key performance indicators (KPIs) to precisely analyse key performance indicators (KPIs) performance. KPIs are criteria used as a measure of the success, or the efficiency specific criteria used to measure the and effectiveness, of a particular area of a business’s operations. Examples of key efficiency and/or effectiveness of performance indicators that relate to some of the business objectives we have explored the business’s performance can be seen in the following table. KPIs are covered in more detail in topic 4. 24 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition Business Key performance objective indicator (KPI) How the KPI can be used to evaluate performance To make a Net profit figures An improvement in net profit means that the business has improved its profit performance, either by earning more revenue or by reducing expenses and costs. To increase Percentage of An increase in market share suggests that the business is performing market share market share successfully, as it has a greater proportion of the sales in the market. To fulfil a Level of wastage If the amount of unwanted or unusable material created by the production social need process is reduced, then the business has reduced its impact on the environment. It has also improved efficiency. Resources Resourceseses Weblinks NAB Australia Post KEY IDEAS A business objective is a desired outcome or specific result that a business intends to achieve. Business objectives include ‘to make a profit’, ‘to increase market share’, ‘to improve efficiency’, ‘to improve effectiveness’, ‘to fulfil a market need’, ‘to fulfil a social need’ and ‘to meet shareholder expectations’. After a business has determined its objectives, it will develop strategies to achieve those objectives, and will eventually analyse performance using key performance indicators. 1.4 Exercises Students, these questions are even better in jacPLUS Receive immediate Access Track your feedback and access additional results and sample responses questions progress Find all this and MORE in jacPLUS 1.4 Quick quiz 1.4 Exercise 1.4 Exam questions 1.4 Exercise TEST your understanding 1. Identify why businesses should analyse their performance. 2. Differentiate between effectiveness and efficiency. 3. Outline the difference between an objective and a strategy. 4. Explain the importance of business objectives. 5. Examine the four businesses’ objectives outlined in the figure at the end of section 1.4.2, and then answer the following questions. a. Are there common features of these objectives? What are they? b. What are the differences between these objectives? c. Would it be important for employees, managers and customers to be familiar with a business’s objectives? Why? TOPIC 1 Business foundations 25 APPLY your understanding 6. What are your objectives for this year? Do you have a strategy to achieve those objectives? Complete the following table to see how strategies are linked to objectives (both personal and business ones). The table has been started for you. Business Personal objective Strategy to achieve it objective Strategy to achieve it Get an ‘A’ in 1. Read textbook Increase 1. Launch new advertising campaign VCE Business 2. Complete homework profit 2. Improve customer service training Management 3. 3. 7. Use the NAB weblink in the Resources tab to determine NAB’s objective. List the strategies you find. 8. Use the Australia Post weblink in the Resources tab to find out what type of business it is. Outline Australia Post’s objectives. 1.4 Exam questions Question 1 (2 marks) Source: VCE 2020, Business Management Exam, Section A, Q.1a; © VCAA In 2017, John was employed as the manager of a bakery with 80 employees. In 2020, the business has had the following business objectives: to increase profits by 10% to reduce staff absenteeism by 20%. John has adopted an autocratic management style. Define the term ‘business objective’. Question 2 (2 marks) Source: VCE 2018, Business Management Exam, Section A, Q.1b; © VCAA 123 Childcare Centre is a business operating as a partnership. It provides childcare services for children aged five and under. Mary Kidd, one of the partners at the centre, wants to meet the demand for high-quality and reliable childcare in her local area. However, employees complain of long hours and their motivation is low. Staff turnover is a problem and Mary is unsure of how to address this. Describe a business objective (other than ‘to make a profit’) that would be relevant to 123 Childcare Centre. Question 3 (3 marks) Distinguish between the objectives ‘to make a profit’ and ‘to increase market share’. Question 4 (2 marks) Explain the business objective ‘to meet shareholder expectations’. Question 5 (4 marks) Anja has established a social enterprise called ‘Social Bikes’. Describe two business objectives that Social Bikes will need to achieve. More exam questions are available online. 26 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition 1.5 Business stakeholders KEY KNOWLEDGE Stakeholders of businesses including owners, managers, employees, customers, suppliers and the general community Source: VCE Business Management Study Design (2023−2027) extracts © VCAA; reproduced by permission. Businesses have many stakeholders. ‘Stakeholders’ refers to the people and stakeholders groups and groups that interact in some way with the business and have a vested interest (or individuals who interact with stake) in its activities. the business and have a vested interest in its activities Each business will have many stakeholders that they need to consider. Stakeholders have a vested interest in the company, and successful businesses are actively aware of their stakeholders’ interests. ity mun Ow com ne rs al er n Ge Suppliers Managers Business stakeholders C es us to lo ye me mp rs E Stakeholders come from various areas of the business world: some stakeholders work for the business or have an ownership interest, while some interact with the business in a commercial or social manner. All stakeholders are important as they can impact how a business conducts itself. 1.5.1 Owners A business may be owned by a sole trader, by partners or by a number of shareholders. The extent to which the owner is involved in the management or daily operations of the business will affect their vested interest in its activities. For example, a sole trader or a partner will have a direct say in what the business does. The owners who manage or operate the business on a day-to-day basis will probably have a very personal vested interest in the business — they are likely to depend on the success of the business for their income or wealth. Furthermore, the performance and conduct of the business can affect the reputation of the owner. For example, operating a business that is known to have dishonest dealings with other stakeholders is likely to reflect poorly on the characters of the owners of the business. Alternatively, the failure of a small business might leave a sole trader or partner in debt. TOPIC 1 Business foundations 27 Shareholders Shareholders is the name given to owners of a company. In a private limited company, there can be up to 50 shareholders. In a private listed company, the number of shareholders is effectively unlimited. Shareholders have an ownership interest and have a say in the conduct of the company as they are able to vote at an annual general meeting (AGM). The number of votes equate to the number of shares owned. They also receive a portion of the distributed profits according to the number of shares held. In the first half of the 2022 financial year, the Commonwealth Bank of Australia declared a net profit after tax (NPAT) of $4741 million and provided a $1.75 dividend for each share held. A shareholder with 1000 shares would therefore have received $1750 as a return on their investment. Socially responsible companies are an attractive proposition to many shareholders; however, the primary objective for most shareholders is to make a profit from their investment. manager the person who has the responsibility for successfully achieving the objectives of the business 1.5.2 Managers Managers have the responsibility of running a Managers are key to the success of a business. profitable or successful business. These people must ensure that the strategies that the business has implemented will achieve its objectives. Poor financial performance, for example, would result in the manager(s) reviewing the business’s strategies, processes and employee performance. In return, management staff expect to be fairly remunerated, including through a salary and other benefits. Most managers today understand that socially responsible activities should lead to increased sales. There are many complex legal issues that managers must contend with today, however, and introducing new socially responsible policies and procedures can be expensive and time-consuming. Management could introduce new technology to reduce waste and 28 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition improve productivity so that the business remains competitive, helping to boost sales and profit, but this could mean that employees lose their jobs. Management could offer employees higher wages and better working conditions, but they may be forced to raise the price of products to cover this cost, leading to a fall in sales. Managers must endeavour to satisfy as many stakeholder expectations as possible while making sure that their position in the business is secure. 1.5.3 Employees Employees are the people who work for the business. Their contribution is vital FareShare is a social as they are involved in the manufacture or production of the good or service enterprise that gives that the business sells. The quality of the product depends on their skill and away healthy meals commitment to the process. Employees should be valued as members of the to the hungry and business by being paid fairly, trained properly and treated ethically. Employees homeless. Staff and need to know that their job is secure in the long term. If businesses can provide for many volunteers run it. their needs, employees will be more inclined to put effort into work tasks and will be motivated to meet customer expectations. DID YOU KNOW? Many businesses now publish a specific stakeholder report. The Conversation — a network of not-for-profit media outlets publishing news stories and research reports online, with accompanying expert opinion and analysis — does just this. For the past decade, The Conversation has provided a yearly stakeholder report that recognises the many groups of people who contribute to its operation. 1.5.4 Customers Customers expect to purchase quality products at reasonable prices and they expect to receive high levels of service. They are becoming more aware of socially responsible businesses and this is one of the factors they consider when employees the people who work for the business and who expect making purchasing decisions. Many customers wish to purchase products from to be paid fairly, trained properly businesses they know have acted in a socially responsible manner. A business and treated ethically in return for needs to be aware of changes in customer preferences and tastes, and respond to their contribution to production these so that it can continue to satisfy their needs. For example, a business might customers the people who purchase goods and services introduce more environmentally friendly products to its range to ensure its future from the business, expecting high profitability in response to changing customer expectations. quality at competitive prices Customers are seeking more energy-efficient options to lower energy expenses and reduce impacts on the environment. TOPIC 1 Business foundations 29 1.5.5 Suppliers Suppliers provide resources to a business that will be used in Businesses rely on suppliers to provide its production process. Resources can include raw materials, resources to be used in their production equipment, machinery, finance and information. It is essential processes. for the business to develop good relationships with suppliers to ensure the timely delivery of quality resources. In return, suppliers expect to be paid promptly and in full. It is also in each supplier’s best interests to ensure that the resources supplied are of high quality, and delivered in the right quantities at the right times, as this will ensure a profitable business. Most businesses will have multiple suppliers providing a range of equipment and materials to ensure a constant supply of resources. Many businesses today expect their suppliers to behave in a socially responsible manner, and believe that their relationships with suppliers also need to meet corporate social responsibility considerations. 1.5.6 The general community Founded in 2009, R U OK? is an Australian non-profit suicide prevention organisation A business has a responsibility to the general community to be that advocates for people to have a good corporate citizen. Members of the community expect meaningful conversations with others that a business will give back to society something of what they about mental health. take out in generating profit. A socially responsible business is likely to participate in community projects and activities. For example, She Wear — which supplies footwear and accessories for women at work — supports a large number of charities and community causes. For its first two years, the company donated to the National Breast Cancer Foundation, mental health organisation R U OK? and the RSPCA — organisations that She Wear founder Stacey Head believed resonated with herself and with her customers. Over the years the company has donated over $45 000 to organisations and individuals in need around Australia. In February 2020 it sent care packages to women who had been affected by the summer bushfires and the droughts. Over $13 000 worth of product was sent to women in need, including She Wear work boots, clothing and socks. Telstra encourages staff to become involved in issues they are passionate about by providing an annual day of paid volunteering leave. In 2020, staff from Telstra’s Gippsland branch chose to use this day to assist CFA volunteers who had fought the bushfires over summer. Over 10 kilometres of damaged farm fences were replaced with new fencing, assisting six local families of firefighting volunteers. Members of the community increasingly expect businesses to show concern for the suppliers businesses or individuals environment. Some might be worried about businesses using valuable land resources who supply materials and other or showing disregard for carbon emissions. They may be concerned about waste resources to a business so that it disposal or pollution. There is growing pressure for businesses to adopt sustainable can conduct its operations operating policies. Increasingly, businesses are making decisions that will allow them, and the rest of society, to continue to interact with the environment. For example, Wesfarmers Ltd strives to source products in a responsible manner, while working with suppliers to improve their social and environmental practices; to reduce the emissions intensity of its businesses; and to reduce its waste to landfill and water use. In its 2021 Sustainability Report, Wesfarmers outlined how it had reduced greenhouse gas emissions across the Group by 9 per cent. Furthermore, the Bunnings, Kmart and Officeworks groups have 100 per cent renewable electricity usage targets for 2025. 30 Jacaranda Key Concepts in VCE Business Management Units 3 & 4 Seventh Edition The stakeholders of businesses and their interests Stakeholders Interests Owners Want the business to make profit — they may depend on the success of the business for their income or wealth Shareholders want the business that they have invested in to make profit as this affects the value of their shares and the amount of dividends they receive Will typically want the business to conduct itself in a socially responsible manner Managers Want the business to perform financially and, in return, expect to be fairly remunerated Will typically want the business to be socially responsible as this is likely to lead to increased sales Need to satisfy as many stakeholder expectations as possible while making sure that their position in the business is secure Suppliers Must provide quality materials that are delivered reliably (in the right quantities at the right times) to ensure that the business makes a profit Expect to be paid promptly and in full Employees Expect to be paid fairly, trained properly and treated ethically in return for their contribution to production Need to know that their job is secure in the long term Customers Expect to purchase quality products at reasonable prices and to receive high levels of service Are becoming increasingly aware of socially responsible businesses, and many will purchase products from businesses they k

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