Commerce Notes PDF
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These notes cover the basics of commerce, including factors influencing consumer decisions, types of shops, and business regulations, and the concept of opportunity cost. Includes some important business jargon.
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Giaan’s super cool acronyms (GSCA) F actors of consumer decisions(SPADE C MCGC)[Socialmedia, price, age, disposable income, environmental considerations, convenience, marketing, culture, gender, and customer service] C omparison buying, opportunity cost, definition of value...
Giaan’s super cool acronyms (GSCA) F actors of consumer decisions(SPADE C MCGC)[Socialmedia, price, age, disposable income, environmental considerations, convenience, marketing, culture, gender, and customer service] C omparison buying, opportunity cost, definition of value(ACPQ),four prices[Availability, customer service, price, and quality] Types of shops(CDFSRS)[Convenience, discount variety,factory outlet, specialty, retail, and supermarkets] Purpose ACL, Competition and Consumer act, consumer rights(SAFC), ASIC & ACCC [Safe product, accurate to description/sample, full disclosure of terms of sale, and consumer guarantees & warranties] Causes of bankruptcy(DIAGUE), voluntary/court-ordered,ASFA, National Personal Insolvency index [Discord/relationship breakdowns, ill/no health insurance, adverse legal action, gambling/betting, unemployment/lack of steady income, and excessive use of credit cards resulting in interest] Superannuation, compound interesting, budgeting(IFVPFT),impulse buying [Income, fixed expenses, variable expenses, prioritise expenses, follow expenses, and track on paper], redress Business regulations,(REMO)[Regulations, ethicaldecisions, marketing, organisation support] Things to write for exam according to Cusi - overnment regulations G - Fair work act - Taxation law - Market segmentation - Business structures Introduction to Commerce consumeris someone who purchases goods and servicestosatisfy their needs and wants A Adurablegood can beused many times, such as a caror television Non-durablegoods are those that can beused onlyonce, such as a sandwich or a litre of petrol. Tangible: ○ (physical), goods Intangible: ○ (can’t touch), service What an individualgives upto satisfy a need or wantis known asopportunity cost Types of resources There arefour main typesofresources: Land a. These resourcesoccur naturally, such as forests,coal and fertile soil. Labour a. This includes both thephysical and mental effortof people who are working. For example, a cashier or a factory worker. Capital a. These resources aregoods used to make other goods.For example, a tractor is a capital good because it is used to produce crops. Enterprise a. This is the ability tocombine the other resourcesof land, labour and capital toearn a profit. Factors affecting consumer & financial decisions Key factorsaffecting consumerandfinancial decisions: Customer service: ○ Agood experienceevenafter purchasing a productwill add to the overall experience. Price: ○ Price is quite obvious as it has to be bothaffordableand of thebest value. Cultural factors: ○ One’sculturecan heavilyinfluencesomeone’s consumerdecision-making. Marketing and advertising: ○ This is incredibly important to commerce as it has to do withgetting the attentionof potential customers. This includesadvertisements,special product promotions, etc. Gender: ○ Gendercan heavily affect wants, asmen and womenhavedifferent interests. Men could want some weight-lifting products, while women may want some makeup. Age: ○ When one is at acertain age, theirinterests andneeds will start to shift. For example, an infant may want a rattle, while a teenager may want a phone or laptop. Younger people might not worry too much about healthcare, but the elderly will invest more in health insurance. Disposable income: ○ Disposable income is theamount of moneythat’susedfor spending. Themore disposable incomea family has, themore luxuriousitemsthey can purchase along with their needs. Environmental considerations: ○ As the population becomes moreenvironmentally conscious,it is ever more important that companies stress howenvironmentally friendlytheir products are, togain the favourof the consumers. Social media: ○ Since social media already has a lasting impact on society, it can also have a big impact on consumers. Alarge content creator who endorsesa product will persuade their followersto buy that product as well. Convenience: ○ Convenience is important as everyone likes tosavetimewhen travelling to buy a product. It is important tolocate stores in locations that are already popular, such as malls Levels of Product Management There arethree levelsofproduct management: manufacturer,wholesaler, and retailer: Manufacturer ○ Makes the product itself ○ E.g sorbent Wholesaler(retailers buy in bulk) ○ Organisation that acts as a middleman between a manufacturer and a retailer ○ Manufacturer uses them to reach a wider range of retailers ○ E.g Campbell Cash and Carry ○ E.g Costco Retailer(deals with the public) ○ E.g Coles, Woolies - The wholesaler and retailer can be combined(likein Costco), but this isnot native to Australia. - The Manufacturer and Wholesaler can also be combined, - The manufacturer may sell directly to the retailer. How to choose a product T here are many different ways to find out which product is worth buying, but the most used way is called comparison buying. omparison buying is where the consumercompares productsfrom different brandstofinda product C of thebest value. Value: D ifferent factors, such asprice, quality, convenience,and after-sale service. This willminimise the riskof buying a product thatwill leave youunsatisfied. This is used to counter impulse buying, which can cause you to buya product that is not satisfactory. The different types of prices T here are four types of prices at which products sell in passing from the manufacturer to the consumer. These are: 1. Themanufacturer priceis the price at which wholesalerspurchase products. 2. Thewholesale priceis the price at which retailerspurchase products. 3. Therecommended retail priceis thenormal sellingpriceat which stores sell the product. This is the price at which themanufacturer and/or wholesalersuggests the retailer(the person selling directly to the public) sell the product. (This can sometimes be 50 to 100% more than the price paid to the wholesaler.) 4. Thediscount priceis anyprice below the recommendedretail price. The best deal has the best: - Price - Quality - Availability - After Sales Service Ways to purchase a product There are two main ways to purchase products: mail order and online shopping. Mail orderis where someone ticks products off ofa catalogue, then sends it to the company where they send it via mail. Online shoppingis where someone makes a purchaseonline and then collects either in-store or sent via the post. Mail Order Benefits Disadvantages wider range of products A L ose money if product not sent Convenient for disabled people and people from The product can look different from the catalogue remote communities Difficult for refund due to use of P.O boxes Online Shopping Benefits Disadvantages onvenient C ampant scams R Ease of use Risk losing bank account details Variety of products Types of stores T hese shops will havevarious pricesbased on theirvarious advantages. - Discount variety/department stores: - Stores that have a bunch ofdifferent categories,such as clothes. - Supermarkets/hypermarkets - Retail stores: - Stores that specialise inone genreof product. - For example,Officeworks is a tech retailerbecauseit specialises in technological products such as laptops. - Specialty stores: - Specialisein eitherone typeof product or serviceor alimited rangeof a few products. These are also typicallymore expensive. - Factory outlets: - A store where products aresold straight after beingmanufactured, usually because they arein surplus. - Convenience stores: - These stores willcharge more, but that is worth theprice because it is in aconvenient location Planned obsolescence: - When companies decide tomake a product obsoleteonpurpose toforce consumers to use newer productsfrom the company - e.g. planned obsolescence of old iPhones, like removing support services, to force consumers to switch to newer, expensive iPhones). PAYMENT METHOD HOW IT WORKS/ HOSE W ADVANTAGES DISADVANTAGES SUITABLE WHEN DEFINITION MONEY? CASH Hand the cashier the Consumer’s T he consumer can I t can be S uitable in most amount of money the money. keep track of the inconvenient, or if situations, or when object is valued. money you lost. the establishment the money is not a does not accept large amount. cash. REDIT (IN C T he bank gives money to The bank. Earnt through Not unlimited. Suitable in GENERAL) pay the establishments. t rust. s ituations where the consumer has enough credit. CREDIT CARDS T apping a credit card on a The bank. Convenient. You can lose Suitable in most (INCLUDE STORE machine then pay later. t rack of how c onditions. CREDIT CARDS) much you’re spending. DEBIT CARDS T ap on the machine, but onsumer’s C ot prone to N Can lose track of S uitable in most the card must have money. spontaneous how much money situations. money in the account in buying. you have in order to use it. Consumer's account. PAYPAL A method to send money Consumer’s ery convenient V Charged a fee Suitable in most v ery quickly and oney. m and fast. every time you s ituations. electronically. send money. CHEQUE A way to tell the bank to Consumer's ore convenient M Can be slow and Not practical in pay money to someone oney. m than carrying inconvenient. ost situations. m from the payer’s account. around large amounts of cash. DIRECT DEBIT utomate the process A Consumer's Incredibly eed to have N Suitable for making where someone transfer oney. m convenient trust in the r ecurring bills such money out of their company. as electricity, water, account, without the etc. need for them to authorise it. BPAY BPay stands for “bill Consumer's A very convenient Only used for Suitable for all bill payment”. A way to pay oney. m ay to pay off w ills. b ayments. p bills electronically. bills. Z IP PAY/ZIP MONEY A way to “buy now, Consumer's Can be stable for ery easy to be V S uitable in Here’s alinkto help pay later”, is where oney. m the long term. addicted and buy conditions where and anotherlinkto the consumer too many the consumer has help receives the products to the enough financial product first and point where you stability and can then pays the can’t pay them handle the money off in off. afterpayments. multiple instalments. PPLE PAY A Apple Pay is a software onsumer's C ery convenient V nly available to O S uitable in most Here’s alinkto help installed on all Apple money. and non-physical, Apple devices. situations, devices, where the and trusted. especially if the customer can pay consumer has an directly, they can also Apple product. tap using their iPhone. FTERPAY A Another “buy now, pay onsumer's C S ame reason as zip S ame reason as S ame reason as zip Here’s alinkto help later” website. money. pay. zip pay. pay. VISA An app on the phone Consumer's Can be able to May need to Suitable for most PAYWAVE/MASTER where consumers can use money. keep track of authorise the situations. CARD PAYPASS – their digital card from payments on transaction if it is TAP & GO Mastercard or Visa. Consumer's too large. phone. LAYBY L ayby is a “pay now, buy onsumer's C o interest so can N eing replaced by B S uitable in little later” website, active in money. be cheaper than a “buy now, pay situations. the 1950s. credit card. later”. Scams Scams are very prevalent in our society, a byproduct of the ever-improving technology. Types of scams: - romancescams - investmentscams - productscams - servicescams - threatsand extortion scams - jobemploymentscams - unexpected money - impersonationscams - Phone callpersonal information Contracts A contract is alegally enforceable agreementbetweentwo or more people or parties Outlinesthedetailsoftheagreementandtherightsandresponsibilities(o bligations)ofeachof the parties ○ Contracts thatinvolve a lot of moneyshould beonpaper,as any party can readily check and confirm the obligations that were originally as ○ phone scams ○ SMS scams. The most common scams are phishing scams, and we have almost definitely seen them before, whether it be in our emails, messages, or agreed upon. Contracts have six parts: Offers, Acceptance, Awareness, Consideration, Capacity, and Legality. 1. O ffers:Thefirststepofthecontract.Itisaproposalorawillingnesstocontractmadetocreate legal relations once accepted. 2. Acceptance:Whensomeoneelsesignifiestheirwillingnesstoaccept,itistheacceptanceofthe offer. 3. Awareness: If a contract were to be legally binding, the two partiesmustbothbeawarethat they are entering into a new agreement. 4. Consideration:Considerationreferstothebenefit(s)thatthepartiesreceivewhenenteringthe contract. 5. Capacity: This means that one of the parties is recognised in law to be able to commit to a contract. 6. Legality:Contractsareonlylegallyenforceablewhentheyaremadewiththeintentionthatthey arelegaland that the parties intend tolegally bindthemselves to their agreement. Consumer Rights Just like human rights, consumers have rights too. They are protected by four basic rights: - Safe products: Directions for proper use are providedand products are tested to ensure quality. - Accurate product informationand description: E.g.Ingredients are clearly labelled on the package. - Full disclosure of theterms of sale: The full priceis always displayed, especially on any credit contracts. - Consumerguarantees and warranties are honoured: Customerscan expect a refund or exchange if the product is faulty. In addition to these rights, consumers are protected by a single, national law. This law is called the Australian Consumer Law(ACL). It operates withintheCompetition and Consumer Act. This act applies in the same way to all Australian businesses and consumers, regardless of where the consumer shops or where the business is located. The mainpurposeof the ACL is toprotect consumersfrom undesirable business practices, such as: - Misleading and deceptive advertising. - Unconscionable(unreasonable and unethical) conduct. - Misrepresenting the contentsof products, theirplaceof manufactureor their characteristics. - Unfair trade practicesthat restrict competition andcan severely limit the rights of consumers. - False claims regarding goods and services. T heCompetition and Consumer Actis enforced by theAustralian Competition and Consumer Commission (ACCC),each State’s and territory’s agency,and theAustralian Securities and Investments Commission (ASIC). onsumers have many guarantees, which are automatic legal rights. They guarantee that the product C that consumers receive: - Are of acceptable quality. - Are fit for purpose. - Match the description, sample, or demonstration model. - Are legally owned by the seller without any charges (money owing on them). - The seller has spare parts readily available. Services that consumers receive must be: - Provided with reasonable skill and care. - Provided within a reasonable time. - Fit for purpose. T he term caveat emptor (from Latin “Let the buyer beware”) means the acceptance of the risks when buying products, as consumers have many responsibilities as well as rights. This includes purchasing goods and services from ethical and legal sources, paying the correct amount, etc. Help with Consumer Problems T here are a few people that you can turn to if you experience problems when purchasing goods or services. They are: NSW Fair Trading: They are the “police” of the industry, where they make sure that the trades being executed by the trader and consumers are all fair. They also settle individual disputes between the consumer and the trader. ASIC: They regulate the conduct of all companies, and have the power to ban a product if necessary. They enforce the CCA (Competition and Consumers Act), along with the ACCC. ACCC: The ACCC enforces the CCA along with the ASIC. Industry Ombudsman: This is the person who resolves disputes between a consumer and a business. Choice The Media Poor Financial Management and its consequences T here are many potential consequences of having poor financial cmanagement skills, such as being unable to pay off debts (bankruptcy) These include: - Unemployment or loss of income. - Excessive use of credit and interest payments. - Domestic discord and relationship breakdowns. - Ill health or absence of health insurance. - Adverse legal action. - Gambling. Refer to this table for statistics There are also consequences for poor financial management. Consequences of Poor Financial Management Personal Social Legal The guilt of not paying on time. People can view you as unworthy of a loan. arnishees of your wages and bank G accounts. Unable to satisfy their personal needs. S ocial isolation due to not being able to Writ of execution. afford gatherings such as outings to a restaurant. Can affect mental health. Can degredate relationships. You become poor People can view you as untrustworthy Payday Loans - payday loan is generally ashort-term small loanwithinterest ratesand isrepaid at A the borrower’s next pay cheque. - It is generally targeted towardsconsumers strugglingfinanciallyor people who don’t have to money to afford things right now. - There are many dangers with these types of loans like many borrowerscan’t repay their loans due to the high interest rates. Also, many consumershavemultiple payday loans and end up with no money after paying off all of their loans. Long-Term Financial Goals - S uperannuationismoney put aside by your employerfor you over your working life. You canwithdrawthis money under certain circumstances,likeretiring. This helps prevent financial stresswhen you retire and allowsyou to relax or go on vacations. - S aving money in the bankover along periodis a very smart choice to do. It allows you to be financially stable and have the financial strength to recover if something bad happens. - Thelongeryousavecompoundedthe better as theinterestincreasesexponentially. This shows that it is much more worth it to save regularly over a long period. Declaring Bankruptcy A ppointing a trustee to manage your assets and income to pay off debts. Bankruptcy can be initiated by a debtor’s petition (voluntarily) or a creditor’s petition (court-ordered). If youowe more than $5000and can't reach arepaymentagreement, creditors can seek a sequestration orderfrom theFederal Court. Must submit astatement of affairswithin14 days Atrustee, appointed byAFSAwill: ○ Manage bankruptcy ○ Sell most of your assets ○ Distribute the proceeds to creditors. Some personal items and necessary tools for work areexempt from sale You can earn income butmust pay the trustee halfof any amount exceeding a specified threshold. Three years and one day ○ can be extended for non-cooperation. ○ Certain debts, like child support and court fines, remain payable during and after bankruptcy. Permanently onNational Personal Insolvency Index ○ Affects credit rating ○ Ability to act as a company director ○ Travel ○ Asset ownership Business E ntrepeneurs take risksto turn anidea into a business,in order togain profit Abusiness opportunityis anideathat can beidentifiedand taken advantageof to make a profit. Budgeting A budgetis afinancial plancreated totrack yourspendingfor a certain amount of time, usually made to save money. There are 6 steps to a budget: 1. K now your income:This should be your net income after tax, insurance and other related expenses. 2. Determine fixed expenses: These are expenses thatremain consistent in price and frequency. Examples include rent, phone bills and car payments. 3. Determine variable expenses: These are expenses thatoften change within a short period of time, such as travel expenses. 4. Prioritise your expenses: Determine which expensesare needs and which are wants. 5. Follow your spending: Keep track of the money youare spending to make sure you are not spending more than you are earning. This should be reviewed monthly. 6. Keep track: Track your spending and savings and recordthem on a spreadsheet or on pen and paper. Planning for Success Market Research Information gathering about the target market Helps make better and educated decisions ○ Understanding consumer behaviour Needs and wants of consumers can be known Location Important to‘bricks and mortar’ shopsthat rely onpeople walking past the store Online or physical Shopping mall ○ More competition ○ Ease of access (many people will go for a different purpose but shop around) Street ○ Easier to see (outside) ○ Typically more expensive (compete with other facilities like houses) Demographics Changes in makeup of the population Interests of potential and current customers ○ Younger vs. Older people interest Competition Rivalry between business trying to supply the market Encourages strategies and follow-up response by lowering prices Marketing/Advertising Sustainable competitive advantage ○ Ability for a competitor to provide a constant advantage over competitors Target Market - Group of consumers that want to be sold to - Marketing/Advertising activities Key Features of Organisational Structures ype of Legal T Prefix Size Description Example(s) Structures (Privately owned) ole trader S N/A Tiny wned and operated by one O uilders, B (Unincorporated person plumbers, entity - Unlimited Easiest, and cheapest to set up electricians, liability) taxi drivers artnership P N/A Small wned and operated by 2-20 O Uber & Spotify (Unincorporated people called partners entity - Unlimited Share profits and losses liability) rivate Company P ty Ltd P mall - S wned and operated by 2-50 O B Hi-Fi J (Incorporated entity - (Proprietary Medium people called shareholders Meriton Group Limited liability) Limited) (often Must have “Pty Ltd” after its family-owned) name 9% of companies in 9 2016 ublic Company P Ltd (Limited) Large wned and operated by any no. A O pple (Incorporated entity) of shareholders Microsoft (Limited liability) Shares are listed on ASX Tesla (Australian Securities Exchange) for public purchase Must have “Ltd” after its name Incorporated Inc wned and operated by 5 or O ewton N association (Incorporated) more people (NSW Fair Trading) Neighbourhood (Incorporated entity - Small-scale, non-profit and Centre Limited liability) non-commercial Community groups Easy and affordable structure Incorporated (Limited Liability): Own legal entity ○ Can sue and be sued ○ Non-dependent on shareholders/owners Unincorporated (Unlimited Liability): Not it’s own legal entity ○ If the owner/shareholder dies, so does the business Liability: How much a business is dependent on owner(s)/founder(s) Financing a Business There are two main types of sources available to a business Equity (owner/shareholder’s capital, retained profits and ordinary shares) Debt (other people’s money from banks, finance companies and trade suppliers) Equity Pros: Cons: Use your own money Sometimes have to compromise your own assets Lower risk Debt Pros: Cons: Taxation advantages Stress of managing a loan + interest payment o need to sell business/personal assets for N Relies on success of business financing Secured Loan Unsecured Loan Backed by an asset Not backed by an asset Lower interest rates Higher interest rate Steps for a loan: 1. Budgeting, see if repayments can be afforded for 2. Work outhow muchwants to be borrowed 3. Typeof loan (Variable/fixed rate, secured/unsecuredloan) 4. Look forideal rates and termswith different lenders 5. Checkcredit rating 6. Fill in the application and determine the term of the loan (longer = more interest) 7. Determine the frequency of repayments (usually monthly) 8. Read credit contract carefully 9. Sign contract and read terms and conditions carefully 10. Wait for lender to accept application Establishing a Business There are three main ways of going into business: 1. setting up a new business 2. purchasing an existing business 3. purchasing a franchise Advantages of starting a business from scratch Disadvantages of starting a business from scratch T heowner has the freedom to set upthe T here is ahigh riskand a measure of businessexactly as he or she wishes. uncertainty Theowner’s objectivescan be matched Without a previous business reputation, it closer to the business. may provedifficult to secure finance. Theowneris able todetermine the paceof Time is neededto develop a customer growth and change. base, employ staff and develop lines of Theowner has more flexibilityto select the credit from suppliers. location, target market, range of products and If the start-up period is slow, thenprofits level of customer service. may not be generated for some time. There is no goodwill for which the owner has Potential customers may be more difficult to pay. to attract than initially expected or If funds are limited, it is possible tobegin on a unforeseen competitionmay appear, smaller scale especially if the level of planning was inadequate. Advantages of purchasing an established business Disadvantages of purchasing an established business S ales toexisting customerswill generate T heexisting imageof the business may be instant income. difficult to change,especially if the business Agood business historyincreases the has had a poor reputation. likelihood ofbusiness success Thesuccessof the business may have been Stock has already been acquired and is due to theprevious owner’s personality and ready for sale. contacts which may be lostwhen the Equipment is available for immediate use. business is sold. Existing employees can provide valuable It may be difficult to assess the value of assistance. goodwill with the likelihood of paying more than the business is worth. Someemployees may resent any changeto the business operation. Small Business Secrets Time management reatesimplistic goalsand putrealistictime frames C Create subgoals Track progress (logging days to see what you do) Limit social media time Time Management Start early Sensible and realistic planning ○ Advisors, specialists Customer service G ood, personal service Loan to start business and pay it off Familial business are usually highly motivated ○ Small business’s work often get taken by large corporations ○ Employment isn’t as viable for long-term security compared to familial Customer loyaltiesprovide reason for them to comeback Business model T he boss needs authority Quality > Quantity ○ Ensure they get sales for the fewer customers they get Using online platforms for easy advertisement Subscription processes Requires healthy balance of realistic expectations, ambition and experience Location More people = morepotential customersand moreattention ○ Urban areas inconvenientlocations (must besmalltolower premise expenses) Online presence Small Business Trends - S elling lemonade - Market position, being different from your competitors Incorporation of businesses T he Australian Securities and Investment Commission(ASIC)oversees and regulatesthecompany incorporationprocess. To set up a company, you mustdo the following: Determine thetype of companyyou wish to incorporate Decide on anappropriate structureforinternal governance Obtain theconsentof eachproposed directorand asecretary Choose andreservea name for the new company Locate anaddressfor the company’sregistered office Locate aprincipalplace of business Settle on asharestructureand members Make anapplicationto theASICand pay theregistrationfee Receive acertificate of registration 1. B ut before all of this, you would have to decide if incorporation would work best for you, or if a different business structure would be better. A company has its own legal identity and lets you conduct business throughout Australia. Other privileges that you can take advantage of are corporate tax rates and limited liability. 2. When choosing a name, make sure that it is not identical to an existing name. There are also strict guidelines on what characters and terms can and can’t be used. See the ASIC’s website for more details. 3. You must decide on how your company will be governed. It can be governed by replaceable rules, its own constitution, or a combination of both. There are also some guidelines to follow for these two. A share structure must also be decided, which could be either limited by shares, or be an unlimited company that has share capital. 4. If you are an officeholder of your company, you must follow the requirements in the Corporations Act. This includes meeting your legal obligations, which include: Ensuring company details are up to date Maintaining company records and details on the register Paying the appropriate lodging fees and annual review fees as required nofficeholderisultimately responsiblefor a company’sadherence to theCorporations Act. Company A directors are required by law to apply for a director identification number(director ID). Once you havea director ID, it will be unique to you forever. 5. You must get written consent from the people that will fill these roles: Director(must beover 18 years old) Secretary(must beover 18 years old) Member(every companymust haveat least one member) Forproprietary companies, at leastonedirectorandsecretarymustordinarilyreside in Australia. For public companies, at leasttwo directorsmustordinarilyreside in Australia. T he type of company that you want to incorporate affects the documents you need to include in your application for registration. If you wish to set up a company limited by shares or an unlimited company, there will have to be information included that is about: What class of shares each member has agreed to take up The amount that they will pay Whether they will pay fully upon registration If they will beneficially own their shares Investigating business opportunity Market research ○ Planning whattype of businessyou want to run Location - What’sconvenientfor your consumer base?Who is in your location? ○ Quad: Wide open space, Large consumer base, Central Demographics - Typicallyage + gender ○ Main demographic- theclassificationof your consumers ○ Periphery- people whoaren’tpart of the main demographicbut may still purchase your product/service Competition - Who is offering somethingsimplertoyour business? ○ Some different aspects may include alower/highercost, orquality. Target market -Divide demographicintolivelihood/lifestyle ○ Potential targets ○ Certain age groups may have more money than others. Business regulations There are many regulations surrounding businesses. 1. Work health and safety (WHS) Employees shouldn’t be exposed to risks Employees are adequately trained Correct machinery 2. Taxation Income tax (PAYG) ○ Income tax i Company tax Goods and services tax (GST) Fringe benefit tax (FBT) 3. Environmental regulations Protection of theEnvironment Operations Act 1997 Enforced by Environment Protection Authority (EPA) Business Operations hen someone has decided to open their own business, there are a variety of factors that should be W considered. These considerations include: Regulations that affect the business’s operations Marketing strategies that can promote business Ethical decision-making and corporate social responsibility Organisations that can provide support and advice to smaller businesses T he 3 levels of government regulations Federal government regulations: Payment ofPay As You Go (PAYG)income tax and fringebenefit tax, where applicable Deduction of income tax from employees who earn above the minimum taxable wage level possible collection ofgoods and services tax(GST)on behalf of the Australian Taxation Office provisions for employeesuperannuation abiding by unfairdismissal lawswhen dismissing employees not engaging inanti-competitive practices ensuring employee working conditions abide by theNational Employment Standards(annual leave, maximum number of working hours) registration of the business name unless the business carries the name of the owner protecting consumers fromundesirable business practices not engaging inmisleading or deceptive advertising. State government regulations provision ofemployee entitlementssuch as award ratesof pay and conditions abiding bywork health and safety regulations taking out workers’compensation insurance abiding by anypollution controls observing rules relating to thesale of food, cigarettesand alcohol adequate and non-deceptive labellingof all foodstuffsand clothing. Local government regulations: determining land zoning (use) and approving new development applications fire regulations, especially fire prevention facilities parking regulations governing the number of spaces that need to be provided h ealth regulations, especially the safe handling of food the size, shape and location of business signs. Work health and safety: The Work Health and Safety Act (2011) Importance of financial Records for a business Inform decision-making Financial stateof the business Stock on hand Expenses and sales Which products are selling How much to order Taxation requirements Meeting federal and state requirements Activity statement Annual tax return Balance → determine how much tax is payed Legal requirements Monitoring business performance To secure loans To obtain credit from suppliers For potential investors Enable business owners to manage their cash flow Revenue Statement evenue - Expenses = Profit/Loss R Revenue: The income earned by a business; Inflow (sales revenue) Expenses: Costs incurred by a business; Outflow (wages) Profit or Loss: How much the business has earned or lost. Profit evenue - Cost of goods sold = Gross profit R Gross profit - Operating expenses = Net profit Example revenue statement: Steps for completing a revenue statement . 1 rite down business name and time period. W 2. Find sales amount and write that as the first item under Revenue. 3. Find COGS and write that as the next item under Revenue. 4. Calculate Gross Profit by applying the formula and write the amount in. 5. Determine the Operating expenses. 6. Itemise and write down the amount of each operating expense. 7. Total the operating expense. 8. Calculate the net profit by applying the formula. 9. Write in the net profit. Maintaining Financial Records T he purpose of keeping accurate financial records: To inform decision-making ○ Monitor their business’ progress ○ Sales are increasing or decreasing ○ Expenses ○ Which items are most popular ○ Whether they are meeting their goals ○ How much stock and how much they need to order. To fulfil legal requirements ○ Required by law to keep a range of their records ○ These include business registration docs, leases, contracts, income and expense related records, employees, where their business operates from, and insurance docs. To meet your tax obligations ○ Meeting federal and state tax obligations. ○ Activity statements and annual income tax returns. ○ Records of sales, purchases/expenses, year-end income tax, banking, and payments to employees and contractors. ○ Without accurate records, owners might under-pay or overpay on taxes, which can get them in trouble with the ATO. To obtain funding or a loan ○ Funders need to see if business istrustworthy ○ Would otherwise beunlikelyto invest in a businesswhich can’t show it’s financial position. To enable business owners to manage their cash flow ○ Accurate records allow owners to see money available to them ○ Also will allow them to see if it is enough for their obligations 5 steps to prepare a profit and loss statement: 1. Record revenue (income earned from sales) 2. Record cost of goods sold (COGS) 3. Calculate gross profit 4. Record total expenses 5. Calculate the net profit or loss Balance Sheets ttps://www.clickview.net/secondary/videos/9987134/balance-sheets?tocId=video-details h Statement of a business’sfinancial position/snapshotat a particular time. Records the value of assets, value ofliabilitiesandproprietorshipor the owner’s equity. Left hand side shows assets (things they have) and right-hand side shows the things they owe O nce the liabilities are taken away from the assets you are left with the equity Balance sheets: ○ Shows what the business owns and owes ○ Shows the vision of the company ○ It shows how much the owner owns the business Owner’s equity: Money invested into the business by the owners in the first place Can also be any business profits that are retained and re-invested into the business Creditors → Current liabilities Debtors → Current assets Assets = liabilities + owner??? Equity Total assets = Current assets vs non-current assets Current assets are things that you own that can be liquidated quickly for immediate cash Non-current assets are things that maintain their value that maintain their value for more than 12 months Non-current liabilities are things that are owed for more than 12 months. Net current assets, aka working capital is the working capital available to a business to operate day-to-day. Net current adsets = Total current assets minus the tortal current liabilities The balance sheet balances if the total assets meet the total capital. When borrowing money from the bank, it’s a good idea to bring the balance sheet as well, as the bank can verify that the company is able to pay back all of its loans, even if it liquidated everything. Cash Flow Aninflowis money from sales whereasoutflowsarepayments for expenses By regularly comparing the totals of receipts and payments, a business is able to calculate its surplus or deficit of cash. Taxation Records Owners must keep financial records for five years. Types of records needed to be kept: ○ Payments business received ○ Expenses ○ Records of purchases or sales of assets ○ Tax deductible gifts, donation and contributions Promotion Finding Target Markets B usinesses segment audiences to specific focuses for advertisement, creating a target market that a business wants to sell to ○ Age ○ gender ○ income level ○ educational background ○ geographical location ○ lifestyle ○ family structure. Businesses can have primary markets where most of the revenue comes from, including loyal repeat customers Secondary markets are alternatives that businesses could sell to in case loss of interest from primary markets A niche market is a very small, specific segment of a market, such as technicians specifically Marketing Strategies: ○ Brand loyalty: Recognitionof logos andfamiliaritywith buying frombusinesses ○ The internet and media: Mediumused totarget audiences, especially children Unregulatedand therefore ads can bepersonalisedbased onsensitive information ○ Pester power: Targetingyoungaudiences, to make thempestertheirparents into buying products ○ Psychology and Research: Research into thepsychologyofchildrento understandwhat makes advertisementsmemorable ○ Buzz Marketing: Maximisingadvertising by create a‘buzz’or highlyincreasingword of mouth around a product Endorsement and use ofinfluencers/celebrities Regulation ANA(Australian Association for National Advertisers)Code for Advertising & Marketing A Communications to Children states that advertising must not: p ortray images that showunsafeuse of goods or services, encourage dangerous activities or create unrealisticimpressions about safety be misleading or deceptive towards children include sexual images or imply that using a business’s goods or services will enhance a child’s sexuality portray images that may unduly frighten or distress children use popular personalities (including any animated personalities) to advertise or market goods or services to the extent that it is unclear whether it is a commercial promotion or program content ○ Promote unhealthy eating and drinking habits Legal Issues T he Competition and Consumer Act 2010 (Cwlth) is one of the most important laws affecting marketing and business practices in Australia Protects consumers against undesirable practices, such as misrepresenting the contents of products or their place of production, and misleading and deceptive advertising. Examples of misleading and deceptive advertising include: Fine print: where important conditions are written in a small-sized print and so are difficult to read. ○ Fine print should be clear and concise Before and after advertisements: consumers may be misled by ‘before’ and ‘after advertisements, where the comparison is distorted so that ‘before’ images are worsened and ‘after’ images enhanced. ○ Honesty and refraining from digital enhancement in editing Tests and surveys: some advertisements make unsubstantiated claims; for example, stating ‘9 out of 10 people’ prefer a product when no survey has been conducted. ○ Should be honest and be with a large audience/test market Packaging: the size and shape of the package may create a misleading impression of the contents. ○ Should not be deceptive but properly reflect the quality of a product Special offer: advertisements may be misleading or deceptive if they imply that a special offer is available for only a limited period, when in fact the offer is continuously available. ○ To entice consumers into buying a product because it might only be available for a limited amount of time and thus be more valuable Bait advertising: this occurs when a business advertises items for sale at low prices to attract customers to a business, but the items are not available in reasonable quantities. When customers attempt to buy the items at the advertised price, they are told the items are out of stock and are offered a more expensive items ○ Bait consumers into visiting a website/entering a store for a really good offer, only for the items to not be available in reasonable quantities Ethics are standards that make certain things acceptable or unacceptable Truth in advertising: Exaggeration of a product or service and using misleading terms to convince consumers to buy Children's advertising: Advertising to children to appeal to their tastes. Invasion of privacy: Tracking web users without their permission. Creation of needs - Materialism: Product promotion might promote materialism, exacerbating the global rubbish crisis. It can blur the line between advertisement and entertainment. Marketing towards young people Importance of the youth demographic Children will grow up to be adult consumers - interest incultivatingbrandloyalty Children play a role in thepurchasingdecisionsoftheir family Conveniencefor a family e.g.easeofaccesstofoodandentertainment. Price to value -affordablefood that childrenwillnotwaste. Rise insignificancewithdemographicchanges Smallerfamilysizes+ parentshavingchildrenlatermean parents spendmoremoneyon their children thanpreviousgenerations. Methods of marketing towards youth: 1. Brand loyalty - logo recognition has been observed in 6-month-old babies. 2. Social media - advertising + rises if influencers are paid to advertise a product. 3. Pester Power - children constantly asking their parents for a product 4. Psychology - consultation with child psychologists to develop youth-tailored products - occurs at all stages of development T argeting the youth market - Barbie Playline: Standard - model of selling dolls at a lowe price but drawing the market in to buy expensive accessories Mid-range Collectors: Split market of adult collectors and children Collectors Range: $100-$200+ range, marketed exclusively to adult collectors Playline Barbie Holiday Barbie ominant pink colour D S hows a bond between child and adult actors Sparkles that attract children Slower upbeat music Kids are shown playing with the toys Gentle tone of voiceover Fast upbeat music Less pink more natural colours Slide animations with simplistic visual effects High modality/exaggerative language (wonder, Multiple products are advertised as a set but sold imagination, glistens) separately so children pester adults into buying Presented as a good gift for children everything High-end doll ($75) High modality/exaggerative language (coolest, Emphasis on the child’s reaction to receiving the dreamiest) gift (pester power less effective) Excited exaggerated voiceover Cheap price ($5-10) egulating Advertising to Children R Core legislation regulating the market is included in the Competition and Consumer Act and is elaborated further in the Australia Association of National Advertisers (AANA) Code of Ethics 2012. Any breach will be reported to the Advertising Standards Bureau (ASB) to remove or amend the commercial.’ ASB Children’s Code Portray images that showunsafe useofgoodsorservices,encouragedangerous activitiesor create anunrealistic impressionabout safety Bemisleadingordeceptivetowards children Can’t includesexualimagesorlanguage Portray images that may undulyfrightenordistresschildren Usepopularpersonalities(includinganyanimatedpersonalities) toadvertiseormarketgoods or Services that areunclearwhether it is acommercialpromotionorprogramcontent. Promoteunhealthyeating and drinking habits Executive Summary A n overview of the document - the length of it will differ depending on what document you are summarising This is for investors and funders who need a quick summation of a document. Share the info that the reader needs to know Optics: omitting and choosing certain pieces of information What is the problem and how do you intend to solve it? Whatis the goal of your executive summary? ○ Summarise how the business is going Where is the business heading? ○ ○ What is the problem?/What is the goal? ○ The financial health of the organisation/company ○ Proposed solutions Why? ○ Why did they present this information the way they did? ○ Why are you writing an executive report? How? ○ How do you plan to solve the problem? ○ How do you plan to achieve your goal? When? ○ When do you pan to achieve this goal? ○ When do you plan to fix this problem? Who? ○ Who is involved in this executive report? Who is involved in your path to achieve your goals/fix problems? Where? ○ Where do you need to be to achieve your goals/fix problems? Executive summary - Goals n identified problem with the students at Normanhurst Boys High School is that many students eat all A their food at recess, leaving them hungry at lunch. Thus, we determined that a sweet treat would lighten up their moods especially during assessment blocks. We could offer a 50% discount for people without food/lunch to entice customers to not eat until lunch and buy our products. Icy Sprinkles is known for being one of the most reliable and successful stores during the annual Market Day. Not only did Icy Sprinkles sell great products, they also have managed to survive in the midst of many other competitive companies. Most importantly they have offered numerous benefits for their customers which would improve their experience. Although the company is not invincible to the trends in the food industry, such as a rising demand for asian savoury foods, or a general decline. Our formidable competition within other companies that are just as experienced as us, such as Kim’s Kimbap, The Wheel Deal, and Papa Gino’s, as well as newer companies alike. In the face of this strong competition, Icy Sprinkles has persevered and enjoys large profit margins and some of the best customer service. e plan to achieve our goals of making a multi-million dollar company through financial help from W investors and making careful financial decisions. Terminology Consumer and financial decisions Acceptable quality:a product fit for purpose, acceptablein appearance and finish, free from defects, safe and durable Acceptance:when the offeree agrees to the proposal Assets:items of value Bankruptcy:when a person gives up control of theirassets and finances, either voluntarily or by a court order Barter:the swapping or exchanging of one good foranother Book-up:a charge account operated by a trader Budget:a list of income and likely expenditures Capital:goods used to make other goods Caveat emptor:a term meaning ‘let the buyer beware’ Cheque:a written communication ordering your financialinstitution to pay a person a specific amount of money Coincidence of wants:Where one party has somethingyou want and you have something they want Commerce:the buying and selling of goods and servicesbetween individuals and businesses Comparison shopping:contacting (by telephone, internet or in person) a number of sellers to obtain the best deal Consideration:the giving up of something of value Consumer:someone who purchases goods and servicesto satisfy needs and wants Consumer guarantees: a set of rights and remediesfor defective goods and services Contract:a legally binding agreement Creditors:people you owe money to Debt:money owing to external sources; e.g. a bank Disposable income:the amount of money that householdshave available for spending and saving after income tax has been deducted Distribution chain: the ways of getting the productto the customer Drawee:the financial institution that provides chequeaccount facilities Drawer:the person who writes and signs a cheque Durable goods:items that can be used many times E-commerce:the buying and selling of information,goods and services via the internet E-tailer:electronic retailer EFTPOS:electronic funds transfer at point of sale Electronic transfer:the transfer of funds from oneaccount to another via the internet or telephone Enterprise:a project or undertaking that may relateto a business, organisation, community or government agency Fixed expenses:expenses that are the same amountevery time — for example, monthly rent, or a minimum charge of $40 per month for a mobile phone arnishee:a court order that allows an employer orbank representative to take money from your wages G or accounts and give it to your creditors Goods:items that you can see or touch Impulse buying:buying something without giving muchthought as to whether you really need it Income money:received on a regular basis from work,property, business, investment or welfare Interest:the price that must be paid in order touse someone else’s money Labour:the human skills and effort required to producegoods and services Land:naturally occurring resources, such as forests,coal and fertile soil Liquidated:where all company assets are sold in orderto pay the company’s debts Mail order:to buy products, via catalogues, for deliveryby mail Manufacturer:a person or business that makes goods Money:any token, with an agreed value, that peopleaccept as payment in exchange for a good or service eeds:things that are necessary for survival, such as water and food N Non-durable goods:items that can be used only once Offer:a proposal Online shopping:purchasing products over the internet Opportunity cost:what you have to forgo if you chooseto do A rather than B; the value of the next best Alternative:that is forgone whenever a choice ismade Payee:the person who is to receive the money froma cheque Price:the amount of money a consumer is preparedto offer in exchange for a good or service Profit:what remains after all business expenses arededucted from sales revenue Redress:to set right Retailer:a business that sells products directlyto consumers Rip-off:to overcharge or swindle Scam:an illegal business practice Sequestration order: an order from the Federal Court of Australia declaring an individual bankrupt Services: things done for you by others Superannuation:money set aside during your workinglife for retirement; commonly called ‘super’ Trade union:an organisation that represents employeesand tries to improve wages and working conditions Trading:making income by selling goods and/or servicesto customers Unconscionable act:any practice by a seller thatis just not reasonable and often illegal Variable expenses:expenses that change over time,and do not occur on a regular basis. For example, a person may go to a music concert this month to hear their favourite singer and buy a computer game next month Wants:things that are not essential for survivalbut that we would like to have Wholesaler:buys goods in large quantities from themanufacturer Writ of execution:a court order that allows a courtofficial (the sheriff) to seize and then sell some of your property Running a business a ssets items of value business opportunity something an entrepreneur can see as an avenue to success competition refers to rivalry among businesses that try to supply the needs and wants of a market corporate social responsibility when businesses consider the interests of stakeholders, society and the environment when making economic and business decisions cost–benefit analysis a detailed examination of the strengths and weaknesses of different alternatives in order to see whether the benefits outweigh the costs debt money owing to external sources; e.g. a bank demographic factors population characteristics that affect customer spending which include: age, ethnicity, g ender, marital status, family size and income entrepreneur is a person who sets out to build a successful business in a new field. An entrepreneur’s methods are sometimes regarded as innovative. equity funds contributed by the business owner(s) franchise involves buying the rights from another business to distribute its products under its name goodwill the monetary value of a business’s reputation income statement a summary of the income earned and the expenses incurred over a period of trading incorporated refers to the process companies go through to become a separate legal entity from the owner/s incorporation process whereby a company has become a separate legal entity from its owners (shareholders) initiative the ability to be resourceful and decide, in an independent way, what to do and when to do it innovation the process of creating a new or significantly improved product, service or process (way of doing something) liabilities the debts owed by a business to others limited liability if the business cannot pay its debts, a shareholder generally loses only the money he or she invested in the business liquidity the ability of a business to pay its short-term debts on time market research collecting and analysing information about customers and the business opportunities available niche market also known as a concentrated or micro market, a niche market is a narrowly selected target market segment partnership a business owned and operated by between two and twenty people private company an incorporated businesses with between two and fifty private shareholders promotion methods used by a business to inform, persuade and remind customers about its products prospectus a legal document issued by companies that are offering securities for sale resilience the ability to cope with the ups and downs, adapt well to change and bounce back from challenges secured loan where the borrower offers an asset as security for the loan sole trader a business that is owned and operated by one person sustainable competitive advantage this refers to the ability of a business to develop strategies that will ensure it has an ‘edge’ over its competitors for a long period of time target market the group of customers to whom the business intends to sell its products t axation a government levy or revenue measure that can be used as part of the budget to affect the level of prices, the growth rate and the distribution of income unlimited liability when a business owner is personally responsible for all the debts of his or her business unsecured loan where the borrower does not need to have an asset to offer as security, but the interest rate is usually higher vision the clear, shared sense of direction that allows people to achieve a common goal -
