Yr 11 Business Studies Study Notes.pdf

9.1 Preliminary Topic - Nature of Business: Role of Business: The Nature of Business: Producing goods and services: What is a business?​ the organised efforts of individuals to produce and sell (for a profit), products that satisfy an individual's needs or wants Products can be broken up into two ca...

9.1 Preliminary Topic - Nature of Business: Role of Business: The Nature of Business: Producing goods and services: What is a business?​ the organised efforts of individuals to produce and sell (for a profit), products that satisfy an individual's needs or wants Products can be broken up into two categories: → ​Tangible:​ A product of physical nature e.g. goods (phones, food etc.) →​ Intangible:​ A product of non-physical nature e.g. services (healthcare, education etc.) Importance of the business to the economy: → provides good and services as well as diversity and convenience → injections of money into the business cycle (leakages through household sector paying for products → stability as there is a balance.) reduces unemployment → less reliance on tax money and a higher standard of living Profit: → return or reward that businesses and owners receive for producing products for consumers ​sales revenue​ -​ operating expenses = profit Employment: → the numbers of employees hired by a business will depend on the nature of the products and the number of consumers that wish to purchase the products e.g. the more that is sold, the more employees are needed → larger business need more employees and vice versa Incomes: → income is the amount of money a person receives for their labour (wage/salary) → the remainder of money after deductions is the ‘​business profit’​ and becomes ​‘business owner profit’ ​and consequently ​‘owner income’ → ​the part of a business’s profits that are shared among shareholders is called a ​‘dividend’ Choice: → the act of selecting amongst other alternatives → ​‘freedom of choice’ → businesses compete with each other to provide the most product selection available Innovation: → improvements on an established product: aim to satisfy cont. society → new technological developments lead to: new products, new markets and new business opportunities Entrepreneurship and risk: → individuals who transforms their ideas into a business that develops, produces and provides a certain product in an untapped markets → risky through no previous history of customer demand or guaranteed returns Wealth Creation: → the more that is produced, the more wealth is generated into the economy → profit created due to business activity → which is distributed to society through taxes etc. Quality of Life: → ‘the overall well being of an individual, that is a combination of material and nonmaterial benefits’ Types of Businesses: Classification of business: Legal Structure:​ ​e.g sole trader, partnership, private company, public company, government enterprise Location:​ Local: businesses in immediate environment → usually SME’s e.g cafe etc. National: operate through Australia e.g Coles and Woolies etc. Global: operate worldwide → not limited to national borders TNC’S: businesses that have production facilities in various countries Size:​ Small: fewer than 20 employees for non-manufacturing, independently owned, owners contribute most of funds Large: more than 20 employees for non-manufacturing, owned by many people, shared control etc. Industry:​ ​Primary: provide raw materials needed in other industries e.g iron ore, timber Secondary: use raw materials to produce goods e.g manufacturing steel Tertiary: provide services → Quaternary: provide service in the fields of IT and telecommunication/media → Quinary: provide domestic services e.g child care, tutor etc. Legal Ownership: Incorporated:​ legal business/separate entity from owners e.g companies Public companies Private companies ‘Ltd’ ‘Pty Ltd’ Unlimited number of shareholders 1-50 shareholders Limited liability Limited liability Unincorporated: ​hasn’t undergone legal process, affairs of owners may be separate, but must still pay debts etc. e.g sole traders Sole Trader Partnerships Limited Govt Partnerships Organisations One owner Two or more owners Used for risky Owned by business ventures government  Unlimited liability Unlimited liability Money is given GBE’s (Govt through investments Business by a silent partner Enterprise) Complete control Possibility of control Limited partner role Privatisation → disputes is to just invest selling of GBE’s to private sector No perpetual Shared workload Unlimited liability E.g Qantas, Telstra succession All P/L kept by Shared P/L owner Factors influencing the choice of legal structure: Size Ownership Finance Privatisation If the business is Ownership and The amount of funds Governments also small, it might control are a factor readily available to have to decide on consider a sole as sole traders have the business the most appropriate trader or where more control, influences the legal entity as in the past more appropriate whereas it is split structure e.g more they have sold off with business that funds = larger GBE’s e.g Telstra have more owners business Influences in the business environment: External Influences:​ factors that are outside the business, which the business has little control over Economic Influences: Availability of Levels of Interest Rates Inflation Rates Credit Disposable Income Determines the Influences spending Influences the cost Determines the spending patterns of patterns → money of borrowing price levels of goods consumers left over after paying and services liabilities Economic Cycles: → fluctuation in economy due to varied levels of consumer spending Upswings: Boom: high levels of consumer confidence, higher inflation and unemployment is low Expansion: assets are increasing, consumer confidence is growing, decreasing unemployment Contractions: Depression: lowest level of consumer confidence, low economic activity, high unemployment Recession: consumer confidence decreasing, lowering activity, rising unemployment Macroeconomic policies: → influence demand in economy as Governments do not allow the economy to be increased booms/contractions as it isn’t beneficial for the environment Monetary policy:​ influence that the government has on interest rates to stimulate/regulate/ decrease economic growth Fiscal policy: ​influence economic growth through influencing government spending and taxation Financial Influences: →​ Deregulation​: began in 1983 and is the removal of government restrictions on financial markets, e.g. privatisation of CBA → ​Financial Deregulation:​ opened up the financial industry to greater competition e.g allowed businesses to source funds from intl. Banks Geographical Influences: → Demography: businesses target various demographics e.g. Australia’s aging population → Globalisation: the removal of barriers between nations → allowance of trade globally, increase of competition on a wider scale due to exporting opportunities Social Influences: → Multiculturalism and Product diversity → widens and diversifies entrepreneurial opportunities through businesses that relate to ethnic groups e.g Lebanese restaurants → Also allows for the unrestricted overseas exportation of products to overseas stakeholders Legal Influences: → Governments make laws that regulate business operations → done to protect consumers and encourage workplace health and safety through compensation Cover areas such as: WHS, Taxation, Worker’s Compensation, Industrial Relations, Discrimination, Equal Employment -​ ‘Competition and Consumer Act 2010’ (administers and enforces competition and consumer protection laws) Political Influences: → Taxation: GST, Social Reforms: paid parental leave, Labour Market Reforms: Australian Workplace Agreements (AWA’s) and Environment Management: Carbon Tax Role of Government: ​set the ground rules on how a business should conduct their operations as well as the production of goods and services in accordance to regulating and minimising pollution, wastage of resources, etc. Local Govt State Govt Federal Govt Zoning:​ concerned where the ‘Fair Trading Act 1987’ Taxation:​ tax businesses on business activities take place Protects consumers from their earnings as well as unfair business practices base taxing off of GST Health regulations: Dept. of Fair Trading: Corporations Law: Inspectors regularly check enforces the law and regulates business businesses to ensure that provides information for behaviour, Protects health standards and sanitary consumers and consumers, ensures practices are being upheld e.g businesses on various competition and fair dealings restaurants to protect the local issues with businesses community Institutional Influences: Regulatory bodies: ​a body that has been set up to monitor the actions of businesses and consumers e.g. ​Department of Fair Trading ​(promotes a fair marketplace for consumers and businesses by maximising trader compliance with policies through education) , Australian Securities and Investment Commission (ASIC​, is a corporate markets and financial services regulator) ​Australian Competitive and Consumer Commission (ACCC​, maintain and promote competition and remedy market failure ) Competitive Situation Influences: → competition has positive effects on the market e.g increased variety and price-skimming Number of Competitors: Monopoly: ​usually GBE’S → only one seller of a particular product e.g Sydney Water Oligopoly: ​only a few businesses provide the same product to the whole market e.g. increased competition and globalisation on petrol has meant there are more competitors Perfect Competition:​ where a large number of businesses provide the products e.g hairdressers Local and Foreign Investors: ​overseas markets provide opportunities for Aust. businesses in the same way that the Aust. markets provide opportunities for foreign businesses Marketing Strategies​: allow the business to increase market share → more competitive Substitutes:​ can increase the level of competition as a ‘substitute product’ is two different products that have the same function Changes in Markets Influences: Financial Labour Consumers More mobile and flows Political and demographic Countries are not achieving easily between countries barriers → trend will cost savings specialising in continue due to restrictions effectively produced on unskilled labour products → results in cheaper prices and increased sales revenue International financial flows Trend 1: Movement of Improved technologies and have increased rapidly → large numbers of people communication also investment opportunities of temporary skilled influence consumer markets and access to international migrant workers ​→ share markets important especially to Australasia GFC and contractions cause Trend 2: Growing demand Emergence of internet and a constantly revitalised for highly trained innovative methods and market and changes employees ​→ increased businesses → taking mobility and increased price advantage of economies of for trade-related services scale Internal Influences: Product Influences: → ​range of goals provided and core product will impact size of operations and varied business structures to achieve maximum productivity → the size of the business, product range, volume of sales and technology utilised will all impact on the structure chosen → ​Three main factors: ​types of good and services produced, the type of business, and the size of business Location Influences: → Factors:​ Visibility, Cost, Proximity to suppliers, Proximity to customers, Proximity to support services. → ​Prime location: customer convenience + visibility. → ​If the business is not convenient and visible, customers may not make the effort to find it and optimum customer flow is achieved. → ​Must consider: ​costs of obtaining premises and inventory, cost of employment, marketing costs, utilities etc. and the cost of interest on finances Resources: Human Financial Information Physical The employees of The funds the The knowledge and The equipment, the business and business uses to data required by the machinery, buildings are generally the meet its obligations business e.g market and raw materials most important to various creditors research & forecasts Management: → As the business environment is more dynamic, management structures must change → Flatter Organisational Structures (FOS) → giving more responsibility to employees → Collaborative workplaces allow for a more inclusive and flexible structure Less Fluid Structure: ​Traditional More Fluid Structure: ​New/emerging structure structure Task centralised Decentralised Division of labour:​ specialisation Division of labour:​ multitask-skilled Rigid Structure and Style:​ hierarchical, Flexible Structure and Style: ​flat, autocratic monolayered, democratic/participative Performance appraisal:​ ‘do it our way’ Performance appraisal:​ ‘do it the best way’ Span of control/delegation:​ narrow, with Span of control/delegation: ​wide, workers controlled and dependent, communication and delegation by consensus top-down and agreement Traditional and conservative Modern and contemporary Business Culture: → refers to the values, ideas, expectations, and beliefs shared by members of the organisation → directly impacts upon the relationship between management and employees Values Celebrations Symbols Heroes Businesses shared Routine behaviour Consist of events/ Are the business’s basic beliefs patterns in a objects that are successful business’ life used to represent employees who business’ beliefs reflect values Include:​ honesty, Include:​ social Include:​ competitive Provide an example teamwork, gatherings which sports, employee to other employees employee provide a sense of development participation and belonging through training innovation etc. Stakeholders: → any group or individual who has an interest or is affected by the activities of the business RIGHTS AND RESPONSIBILITIES OF and TO STAKEHOLDERS: Shareholder Managers Employees Consumers Society Environment Provide info Support the Fair pay and Quality Fair and Care and about actions of conditions products at honest preservation business management fair prices business performance practices Produce an Provide Provided a Service Ethical Responsible annual report adequate safe working during and business environment and hold resources environment after sales decisions management general such as and meetings training and elimination of communication discrimination and/or harassment (abuse) Manage Provide Access to Safe Return to Adoption of funds to top-level training and environment the ecologically ensure commitment development and community sustainable dividends and support protection for support practices and through from through implementing corporate deception profits policies policies Business Growth and Decline: Stages of the business cycle: 1. Establishment: Main Characteristics Main Challenges Scarce buyers Choosing an appropriate product High production costs Differentiating products from competition Limited production capacity Choosing right size/location of premises Technical problems Working out the best marketing strategies Customer resistance Forecasting business financial requirements Expenditure greater than revenue Developing plans and strategies Investing heavily to build sales Negative profit margins until growth begins 2. Growth: Main Characteristics Main Challenges Increased market awareness Maintenance of product/service quality as output grows Introduction of new products Developing accurate accounting and financial systems Improved product quality and distribution Managing cash flow and forecasting future Need for capital caused by expansion Improving economies of scale High investment requirements Sustaining growth Increasing sales volume and profit margins Recruiting employees and delegating responsibility Increased specialisation Redefining the role of management Greater inventory control INFORMAL MANAGEMENT STRUCTURE 3. Maturity: Main Characteristics Main Challenges Levelling off of sales Staying responsive to changes in consumer demand More market competitors Identifying opportunities for innovation A focus on productive efficiency to maintain Sustaining motivation of staff and profit margins management A drop in investment requirements Rationalising business operations and minimising costs Pricing competition becomes more severe Professional managers give business a more formal structure and allow for preservation of market share Departments are developed and people with specialist skills are placed accordingly 4. Post Maturity: → Generally three possibilities for a business, it could: 1. Remain in a steady state 2. Experience renewal 3. Experience a decline or cessation 1. STEADY STATE: Main Characteristics Main Challenges Sales continue to be profitable Understanding the changing tastes and preferences of the customer bases 2. RENEWAL: Main Characteristics Main Challenges Introduction of new products and services Shifting into new or related markets where there are greater growth opportunities New acquisitions via merger or takeover Orienting the management and staff towards change Discovery of new markets 3. DECLINE: Main characteristics Main challenges Loss of market share Sustaining profit and market share Profits fall Products become obsolete FINAL STAGE​: CESSATION Cessation: → reasons for business failure may be internal or external factors to the business: Internal Factors: External Factors: Poor management Red tape and government bureaucracy Inadequate planning Excessive competition Inadequate cash and debt recovery Natural disasters Weak location → or voluntary or involuntary: Voluntary Factors: Involuntary Factors: Requirements of the owner Death of an owner Inability to make profits/break-even Bankruptcy Business has served its purpose Insolvency Change in owner’s investment focus Involuntary Cessation: → most businesses finish involuntarily (owner forced to cease trading and ‘cut its losses’ by the creditors of the business) Includes: - Bankruptcy: ​declaration of inability to repay debts and is usually involuntarily by the business creditors who apply for a bankruptcy order, where if approved the remaining assets of the business are sold and divided → ​realisation: ​process of converting assets into cash - Voluntary Administration:​ when an independent administrator is appointed to operate the business out of its financial problems and affairs, if successful: may resume normal trading, if unsuccessful: the business goes into liquidation - Liquidation:​ occurs when a company is in financial strife and a liquidator is appointed to take control of the business with the intention of selling company assets  to pay creditors → ​liquidator: ​take possession and realise company assets to pay creditors, investigate and report possible offences, scrutinise reasons for failure, finally dissolve company → can also be in receivership: business has a receiver take charge (business not wound up necessarily) → ​insolvency:​ occurs when a company is not able to pay debts when they fall due Two types of insolvent liquidation: → ​creditors (voluntary) liquidation:​ 1. Creditors vote for liquidation following vol. admin or 2. Company’s shareholders agree to liquidate → ​court (involuntary) liquidation:​ court appoints a liquidator to close up the company after an external application/complaint 9.2 Preliminary Topic - Business Management: Nature of Management: → manager is an individual who coordinates business resources in order to achieve goals → process of working with and through other people to achieve business goals in a changing environment Features of Effective Management: → Management has four functions: ​POLC → ​Important to ​economy​ because: key to competitive market and job creation dependent on better management skills → Important to ​individual businesses:​ provide direction and vision, implement change, make decisions, coordinate activities, largely determine success P​LANNING O​RGANISING L​EADING C​ONTROLLING Setting up strategic, Using an Motivating Monitoring and evaluating tactical and operational organisational employees to work performance and making plans, establishing roles structure and set of hard by example to adjustments to and allocating procedures to achieve goals plans/procedures to achieve resources implement plans goals → ​achieves business goals through implementing right change at the optimal time: → ​goals include:​ increase profits, market share, share price and growth, improve society and the environment → ​efficiency:​ relates to achieving maximum output with minimum levels of input (smart allocation of resources, time, finance etc.)  Skills of management: Skill Definition Characteristics Application Interpersonal Skills needed to work and → communication, → resolving issues, developing communicate with others motivation, leadership, business culture, appreciating to understand their needs inspiration needs of others and providing welcoming environment Communication Exchange of information → concisity, → emails and calls, resolving between people: sending body-language, conflict, proposing strategies and receiving messages friendly, charisma and leading/instructing Vision Clear and shared sense of → leadership, → instructing employees, direction that allows communication, fulfilling business goals, leading people to attain common motivation, inspiration by example goals Problem-solving Broad set of activities 1.​ Identify, ​2. ​Gather → solving problems that relate involved in identifying and info, ​3 and 4.​ Develop to the business then implementing courses and analyse solutions, of action to problem 5.​ Implement, ​6. Evaluate Decision-making Process of identifying → problem-solving → making decisions that relate options available and skills, quick-thinking to the business choosing the most effective Flexibility Ability to change according → proactivity and → changing circumstances, to circumstances reactivity rapidly evolving environment Reconciling the Ability to satisfy as many → align with the → being able to satisfy as many conflicting stakeholders are possible interests and people as possible will lead to interests of expectations of increased profit and morale stakeholders stakeholders Stakeholder Ability to attract various → communication, → acknowledge that a positive engagement and significant numbers of ethically moral and business image will be stakeholders to the safe practices maintained through satisfied business stakeholders Achieving Business Goals: Definition:​ desire outcome that an individual or business intends to achieve Importance:​ serve as targets, measuring performance, motivation and commitment. Setting goals:​ ​SMART: ​specific, measurable, achievable, realistic and timebound  Financial goals: Maximise profits Increase market share Maximise growth Increase share price Occurs when there Refers to he business Internal growth: Ownership of a business is a maximum share of the total industry employing more people, 1) purchased for profit positive difference sales which is measured increasing sales, 2) entitles an investor to between total in % innovation, new part of a company’s revenue and equipment or more profits (dividends) expenses Dominating market share outlets correlates with large Companies must Revenue - profits External growth: maximise returns to Expenses = Profit achieved by mergers shareholders and takeovers Non-financial goals: Social Personal Environmental Benefiting the community May include higher income, Economic growth must be through community service improved financial security → achieved sustainably and there (events), provision of not usually made public must be a balance between employment (employing family economic and environmental members) and social justice Motivate the owner and concerns such as sustainable (abiding by legislation and underpin the liability of the development treating people right) business Achieving a mix of business goals: → difficult for a business to achieve all financial goals simultaneously with each other as well as non-financial goals due to incompatibility e.g. emphasis on ecological goals may be viewed as unrealistic when achieving financial goals due to the associated expenses are often higher than regular practice → management must decide on which goals to prioritise in order to satisfy as many stakeholders as possible Staff Involvement: → Staff involvement means involving employees in the decision-making process and giving them the necessary skills and rewards. → A work environment that maximises employee involvement and satisfaction has high levels of labour productivity. Innovation: → Businesses should encourage an innovation business culture by recognising and encouraging one of the most important sources of innovation ideas: employees. → An entrepreneur is an innovation employee who takes on the entrepreneurial roles within a business. Motivation: → Motivation refers to the individual, internal process that directs, energises and sustains a person’s behaviour. → Individual employees respond differently to various motivational techniques. → Good managers should also be good motivators, encouraging employees and using positive reinforcement to influence behaviour. Mentoring: → Mentoring is the process of developing another individual by offering tutoring, coaching and modelling acceptable behaviour. → Teaching new employees what the business expects of them helps strengthen their dedication and commitment to the business. Training: → Employee training generally refers to the process of teaching staff how to perform their job more efficiently and effectively by boosting their knowledge and skills. → The goal of training is to improve employee productivity. Management approaches: → Knowledge about management today is the result of a long and continuing innovation process as ideas evolved over time. → The business’s management approach will have an enormous impact on all aspects of the business’s operations. 1) Classical Approach: Organisation/Allocation of tasks:​ staff perform same tasks (task specialisation), time and motion studies to reduce inefficiencies, division of labour into function-related units (strict control of tasks), appraisal/rewards based on production standards Organisational Structure: ​hierarchical, linear flow of info (greater chain of command), strict channels of top-down responsibility (narrow span of control), grouped into specialised activities based on functions, products, and supervisory control Levels of management:​ many levels with outlines roles, responsibilities and positions, courses of action decided by management, bureaucratic authority (effective means of controlling workforce) → intrinsic and extrinsic motivation to motivate employees due to repetition of tasks (prone to laziness and lack of commitment) Management styles: ​Autocratic (do it this way) Characteristics include: → High degree of direction, reliance on authority and obedience → Little participation in decision making and freedom for employees → Simple and repetitive tasks Includes POC: Planning ​– setting goals and working out the best ways of achieving the goals in a changing environment by using a strategy for example: Strategic planning – Long term planning (5- 10 years),  Tactical – mid term planning (2-5 years) and Operational – day to day running of the business Organising ​– designing a framework, actions taken by management to make the plan work such as: determining the work that needs to be done, allocating resources, assigning work to staff members Controlling ​– ways to measure what is happening in the business, comparing what is happening with what was planned by the managers. 2) Behavioural Approach: Organisation/Allocation of tasks to staff: ​recognition that workers have social and economic needs, teamwork and informal work groups → productivity Includes LMC: Management as leading, motivating, communicating Leading: ​directing people, communicating, resolving conflict involves: managing change, guiding and directing, motivating and inspiring, solving problems, getting the job done Motivating:​ giving workers desire to work at a high standard this is done by: → Non monetary rewards eg. awards and recognition → Monetary rewards eg. cash bonuses Communicating: ​management role are carried out by interacting and communicating with others. Organisational structure:​ hierarchical → more consultation with workforce but still not participative partnership Levels of management:​ less management levels. Development of people and management skills, communication and motivation skills Teams:​ productivity and efficiency is claimed to be higher when people work in a team structure, a feature of modern business. Team structures​: eliminate middle management, short chain of command, wide span of control, increased job satisfaction from feeling apart of a team, each team responsible for production functions Management style:​ participative and democratic leadership style (‘do it the best way’) → Managers encourage employee participation in decision-making and open communication channels → Authority will be shared + effective when business environment is undergoing rapid change  3) Contingency Approach: → flexibility and adaptation of a variety of ideas and theories that best suits the changing business environment and the business’s requirements Adapting to changing circumstances: → All aspects of the business environment should be considered and prepared for uncertain future when making a decision. → Reacting quickly to change by thinking strategically about the future → Be responsive to changes in the environment and adapt to suit situations → The nature of work can change due to technology → Managers need to borrow and blend from a wide range of approaches Management Process: Coordinating key business functions and resources: - Division: separation of 4 business functions to improve efficiency and effectiveness - Interdependence: mutual reliance on each other to work effectively - Synergy: interact with another/work as a team to achieve goals - There is a constant flow of information 1. Operations: - Business processes that involve transformation and the production - Operations Management: activities managers engage to produce a good/service → ​Goods and/or services - Goods and/or Services: manufacturer transform inputs into goods/services → tangibles/intangibles - Businesses account for both → service for a good = satisfaction = more money = competitive edge →​ ​The Production process Inputs:​ resources used in the production process (materials, etc) - Transformation: conversion of inputs (resources) into outputs (good/service) PROCESS Elaborately Transformed Manufactures (ETMs) - Highly processed and valued (complex) products → phone/car Simply Transformed Manufactures (STMs) - Small amount of ​value added - Ability to be further processed Value Added - Transformation of inputs for consumer’s benefit - Raw materials are transformed into intermediate or finished products through the various stages of production = adding value to end product - Applied during process to both ETM’s and STM’s Outputs:​ end results of a business’s efforts → good/service - Must be responsive to consumer demand. They are paying for it → expectations - If expectations met = satisfaction → ​Quality Management - Quality:​ degree of excellence of goods/services and its fitness for a stated purpose → eg. reliable, durable, easy to use, well-designed, delivered on time - Quality Management:​ strategy to ensure business’s products meet consumer expectations → eg. minimise waste/defects, strictly conform to standards, reduce variance in final output - Quality Control:​ use of inspections during the production process at various points to check for problems/defects (reactive strategy) Strategies to maintain quality control in a Strategies to maintain quality manufacturing​ business control in a ​service-based​ business - Ensuring standards are met - Inspection of employee - Specifications/benchmarks are set before performance physical checks - Actual performance compared with criteria  - Quality Assurance​: setting standards in a business and meeting them → proactive strategy - Total Quality Management (TQM):​ on-going commitment to excellence applied in every aspect of the business’s operations. → create defect-free production process and maintain customer focus in operations TQM APPROACH Main Description Impact on TQM Employee - problems solved by employee - saving costs for Empowerment involvement and quality circles businesses Quality Circles:​ team of max. 10 workers meet regularly to solve problems regarding quality. Continuous - On-going commitment to - Emphasises continuous Improvement perfection improvement within - Improvement of ways things are business e.g culture “​Kaizen​” done Customer Focus - Consider customer requirements - Higher standards: team and demands realise they are serving a customer 2. Marketing: →​ ​Identification of the target market - Marketing Concept: Customer satisfaction is the key objective of business operations - Mass Marketing: large range of customers - Target Market: group of people with similar characteristics - Market Segmentation (niche): division of total market into smaller markets based on certain characteristics. → demographic, geographic, lifestyle and behavioural → ​Marketing mix: 1. Product:​ developed good/service to meet needs of customer - Tangible benefits​:​ physical attributes of product (design/style of product) - Intangible benefits​:​ indirect benefits consumer gains (prestige, after-sales service) - Branding​:​ use of names/terms/symbols to identify particular product →  distinguishable →​ Assurance of Quality: ​increases loyalty and firms can sell their products if customer brands - Packaging​:​ development of product’s container 1) Functional Role: protects/stores products while transported and displays basic info. 2) Branding Role: create positive image and communicate brand’s attributes → Packaging Considerations: environmentally responsible packaging - Positioning​:​ perceptions customers have about a product relative to competitors 1) Product Users: image in consumer’s mind about types of people using product 2) Product Usage: image in consumer’s mind about how product can be used by them 3) Competition: openly positioning a product in relation to its competitors 2. Price:​ amount business charges for product → takes into account production cost and position in market → Pricing Strategies: Penetration Policy​: fast sales Loss Leader​: fast sales - Gain large amount of market share by - Providing limited number of goods at price offering low prices compared to that generates minimal profit or a loss. competitors. Encourage to enter store → buy other Encourages consumers to switch over. products Price Skimming​: greatest financial return Price Points​: greatest financial return - setting product’s price at a high level and - set different prices for similar products. reducing it over time (new products). - create slightly differentiated versions Successful = little/no competition in market changing the price for each version. 3. Promotion:​ strategies to attract the attention of consumer → Promotion Mix: ​endeavours to generate interest and awareness of a particular product/brand 1) Personal Selling​: direct communication between firm and customer with intent to sell 2) Advertising​: mass communication that gives customers information about product low cost 3) Below-the-Line​: non-media promotion. Inducing product trial for potential customers 4) Public Relations​: firm’s image to public by developing/fostering positive relations 5) Sponsorship​: purchase of a right to associate a sponsor’s name 4. Place: ​availability & physical distribution of product (businesses must consider transportation method) 1) Intensive Distribution​: saturate market → maximise sales 2) Selective Distribution​: limited number of outlets → only good reputation outlets 3) Exclusive Distribution​: very few or one outlet in a specific geographical area → used to create image & prestige for product 3. Finance: → ​Internal Sources of Funds:​ equity finance - Owners Equity: funds contributed by owner/s - Retained Profits: accumulated profits of a business after ALL costs & expenses deducted → External Sources of Funds:​ debt finance Short Term (less than a year) Long Term - Overdraft: business allowed to withdraw - Mortgage: security of a loan is a piece of more money than actually available in property. Bank or lender can sell asset to business from a bank recover money. - Bank Bill: business writes bill to bank - Debentures: NO BANKS. Company agreeing to repay amount borrowed after a makes loans to another, promises to pay period of time. Bank distributes money full amount later, and make regular interest access from other firms, guarantee payments. Loan held against asset. repayment → Bill of Exchange - Leasing: ongoing payments by lessee - Trade Credit: suppliers provide allowing them to use particular asset owned good/service to business on credit with by lesser. Preserves firm’s funds instead of repayment later spending a lot to purchase it. - Factoring: selling of accounts receivable to - Unsecured Notes: loans not backed by an a company at a discounted rate to their face asset or collateral. Risk to investors → value. higher interest rate. Key uses of financial statements: → Provide an opportunity to statistically analyse the successes and failures of business decisions and actions. → Enable management to make informed decisions and allow managers to identify problems, change and plan for the future. → Enable the owners to determine how profitable the business was, evaluate the performance of directors and managers and assess the net worth of the business through the balance sheet. → Investors use the financial statements to guide their decisions on profitability and growth. → A creditor is an individual or organisation owed money by a business because they supplied that business with goods 'on credit' 'On credit' means that the supplier (creditor) supplied goods that were ordered by the business but not yet paid for. 1. Cash flow statement: - shows movement of cash receipts (inflows such as money from sales) - Liquidity: amount of cash business has access to and how readily it can ​realise assets to repay - information about the liquidity of the business - vital as business can asses whether inflows match outflows - can be made for future anticipated cash flows - Inflows:​ sales, interest and ​Outflows:​ payments 2. Income statement (revenue, profit & loss statement, financial performance) → income e​arned and expenses incurred over a period of time → revenue, expenses, profit: Cost of Goods Sold (COGS): opening stock + purchases - closing stock Gross Profit: Sales - COGS Net Profit: Gross Profit - expenses Selling Expenses: process of selling good/service Administrative Expenses: cost directly related to general running of business Finance Expenses: cost associated with borrowing money from outside sources Expenses: 3. Balance sheet (financial position) - Business’s assets and liabilities at a particular time - ALOE: Assets + Liabilities = Owner’s Equity - Current: short term and to be converted into cash or paid within 12 months - Non Current: long term and NOT be converted in cash or paid within 12 months - Assets: Items of value to business that has monetary value - Liabilities: Debts of the business owed to other firms - Owner’s Equity: Funds contributed by owner/s 4. Human Resources: →​ Recruitment: - Acquisition:​ Need to identify staffing needs: → ​Sales Forecast ​→ determine future sales (quantity of labour) → ​Job Analysis​ → evaluate key features of job and necessary skills - Attracting/seeking potential employees that have skills, abilities and knowledge the business needs Internal External - Transfer of - Advertisement employees - Employment National: federal government service to find candidates for junior positions - Promotion - Job Network: federal government funded private employment agencies of - Executive Searchers: employment agencies used to fill senior positions employees - Campus Interviews: large businesses recruit uni students by holding interviews at universities/schools → ​Development: Aim of training:​ increase employee’s abilities and improve their performance. Improve income, productivity, quality and ability to cope with change eg. use new technology for competitive advantage - Business invests in training, but will receive a great outcome  On the Job Training Off the Job Training - Hands on experience like - External courses undertaken by employees apprenticeships, traineeships and (TAFE, university, etc) supervisory assistance - Advantage: trained by professionals - Disadvantage: productivity of - Disadvantage: removed employee from business will suffer while workplace → no productivity. Also expensive, not employee is developing skills developed for specific needs of business →​ Maintenance: → reduces absenteeism, staff turnover and workplace disputes → business needs to ensure employees are happy & satisfied → motivated Monetary Benefits Non-Monetary Benefits - Cash payments - Job satisfaction (utility) - salaries/wages - Fringe benefits - May not motivate workers if - Healthy and safe workplace there’s no job satisfaction - Flexible hours - Superannuation → Employment contracts - Legally binding formal agreement between employee and employer - Award:​ minimum conditions. Inflexible → doesn’t suit all employees & same rates for ALL - Enterprise Agreement:​ negotiation between an employer and a union or a group of employees - Common Law Contract:​ employers and employees have the right to sue for compensation if either party does not fulfil their part of the contract. → ​Separation - Voluntary/Involuntary Voluntary Separation Involuntary Separation - Retirement ​(65 years) - Redundancy:​ skills no longer needed - Resignation​ → stop work for a (can be voluntary) → redundancy packages particular season → new job, family, unhappy with current - Retrenchment:​ slowdown in sales → job business can’t afford employees → requires notice (2 weeks), if not, - Dismissal: employer doesn’t need to pay out Summary dismissal: ​misconduct (theft, employee wages or entitlements lying) breaking law = instant dismissal Or for less serious misdemeanours need to be given 2-4 week notice. Ethical Business Behaviour - Business ethics:​ is the application of moral standards to business behaviour - Conflict of Interest​: occurs when a person takes advantage of a situation or piece of information for his or her own gain rather than for the employer’s interest. Ethical business behaviour characteristics include: - fair and honest business practices​ → laws/regulations as well as being truthful - decent workplace relations​ → treating staff with respect - conflict of interest situations​ → no bribes or collusion - accurate financial management ​→ audits = independent check of accuracy of records - truthful communication​ → advertisement Management and change: → may be as a result of:​ changing consumer preferences, changing markets, change in production methods, change in work practices → ​effective managers ​can create opportunities for the business by anticipating changes in the business environment Responding to internal and external influences: - Require continual analysis and rethinking of strategic direction of business External Internal - Changing markets - New technology - Financial, economic, legal, social, - New business culture political, geographical, technological - Outsourcing - New organisational structure - Transformational change: ​complete restructure throughout a whole organisation - Incremental change: ​minor changes, usually involving only a few employees Managing change effectively: → Identifying the need for change: ​influences pressure and requires continual analysis and reevaluation of the strategic direction of an organisation → remain competitive - Reasons:​ The business is no longer compatible for the environment, there is no clear vision or strategy for the future, the local environment is changing, the culture of the business is not sufficiently directed at maximising its performance - A business information system (BIS)​, also referred to as a​ management information system (MIS)​, gathers data, organises and summarises them, and then converts them into practical information to be implemented by managers who use them to make decisions and evaluate results → ​Set achievable goals:​ must be SMART, and continually monitored/adjusted where appropriate - management must adopt a holistic approach, setting goals in terms of technology, structure and strategy. - Quantitative goals: ​sales targets, profit expectations, budgets - Qualitative goals:​ perception of a business image and staff morale →​ Reasons for resistance to change: Financial Inertia Staffing - Lack of funds in adopting - not willing to leave comfort - resistance to learning new new technology zones technology - Lack of accessibility to - lack of confidence and - reduction in promotional funds risk-taking opportunities - Cost of training employees - threatened by new procedures → may lead to reduction of staff - Strategies for overcoming resistance: → Creating a culture of change;​ identify individuals who could act as supportive change agents (positive leadership; encourages and promotes the change) → ​Management consultants: ​someone who has specialised skill or knowledge within an area of business - Aim:​ help businesses improve performance by investigating existing business problems and development plans for improvement → aware of best practices = highest standard practices in industry → Consultants can be especially helpful in providing change management advice - a methodical approach to dealing with change, both from the perspective of a business and on the individual level - Change agents:​ must be identified/can be internal or external stakeholders → staff must be convinced for the need for change by raising awareness and sharing vision → power, resources and a team approach must be adopted to implement change effectively