02/03/2018

BUSINESS MANAGEMENT
UNIT 1: AOS 1 THE BUSINESS IDEA
UNIT 1: PLANNING A BUSINESS
Businesses of all sizes are major contributors to the economic and social wellbeing of a nation. Therefore, how businesses
are formed and the fostering of conditions under which new business ideas can emerge are vital for a nation’s wellbeing.
Taking a business idea and planning how to make it a reality are the cornerstones of economic and social development. In
this unit students explore the factors affecting business ideas and the internal and external environments within which
businesses operate, and the effect of these on planning a business.

AREA OF STUDY 1: THE BUSINESS IDEA

In this area of study students investigate how business ideas are created and how conditions can be fostered for new
business ideas to emerge. New business ideas are formed through a range of sources, such as identifying a gap in the
market, technological developments and changing customer needs. Students explore some of the issues that need to be
considered before a business can be established.

OUTCOME 1: KEY KNOWLEDGE

On completion of this unit the student should be able to describe how and why business ideas are created and developed,
and explain the methods by which a culture of business innovation and entrepreneurship may be fostered in a nation.

CHAPTER 1 SUMMARY
A. Distinction between Businesses
i. Number of employees
1. Small: Less than 20
2. Medium: 20-199
3. Large: 200 or more
ii. Type of ownership
1. Small: Independently owned, usually operated by 1-2 people
2. Medium: Owned and operated by a few people, and/or private shareholders.
3. Large: Usually owned by unlimited public shareholders (public company) or owned by up to 50
private shareholders (private company) or government owned (local, state or federal).
iii. Legal structure
1. Small: Sole trader or partnership
2. Medium: Partnership or private company
3. Large: Company – public, private or government.
iv. Decision making
 1. Small: Owner is responsible for all decisions.
2. Medium: Owner(s) responsible. Can be slower if not everyone agrees, more complex decisions
than small businesses.
3. Large: More complex decision making due to many levels of management and directors.
v. Sources of finance – access to funs
1. Small: Owner’s savings, difficulty in accessing loans.
2. Medium: Owner’s/Partner’s savings, loan or private shareholders. Easier access to loans.
3. Large: Many sources including cash reserves, retained profit, sale of shares and loans from
domestic and overseas institutions.
vi. Market share
1. Small: Small, usually local area, not dominant in industry.
2. Medium: Medium, regional area, some market dominance.
3. Large: Large market share, especially for multinational corporations (branches in many
countries)
vii. Others factors – where is the business based?
1. Small: One business not several
2. Medium: Can be more than one, can be state based.
3. Large: Usually more than one, usually state.
B. Stakeholders
i. Customers
1. People who buy businesses goods/services
2. Want good service and want to be able to purchase the best quality product at the best price.
ii. Suppliers
1. Supply resources to the business allowing it to conduct operations.
2. Want a successful business so that they can continue to supply goods/services into the future to
ensure continued income stream.
iii. Government
1. Local, state and federal levels of government
2. Collect taxation revenue which assists government budgets and providing infrastructure to society.
iv. Shareholders
1. Not usually involved in day to day activities, however will have voting rights.
2. Want organization to maximize its profits to ensure a return on their investment.
v. Employees
1. Work for the business
2. Want fair wages, reasonable conditions and remuneration, a safe work place and ongoing
employment.
vi. Society
1. People other than employees and customers who are affected by the businesses actions.
2. Employment opportunities to community, waste disposal, location and opening hours.
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 C. Ethical Issues – doing what’s morally right
i. Behaving fairly and honestly in business
1. Society expects businesses to tell the truth and not mislead consumers. Customers and suppliers
expect to be dealt with fairly and with honesty
ii. Truthful communication
1. Advertising presents many ethical dilemmas. Misleading advertising is unethical and illegal.
Businesses must be careful and ethical when advertising
iii. Dealing with employees ethically
1. The way a business communicates and treats their employees often raises ethical eyebrows.
iv. Conflict of interest
1. This is where a piece of information can be used to one person’s advantage and they gain from
this, other examples include manager’s being offered gifts or payments to persuade them to choose
a particular supplier.

1. SOURCES OF BUSINESS OPPORTUNITY SUCH AS INNOVATION AND

ENTREPRENEURSHIP, RECOGNISING AND TAKING ADVANTAGE OF MARKET
OPPORTUNITIES, CHANGING CUSTOMER NEEDS, RESEARCH AND
DEVELOPMENT, TECHNOLOGICAL DEVELOPMENT AND GLOBAL MARKETS
Identifying business opportunities 2.1
v. A set of circumstances that a person can perceive as an avenue to success. Potential business owners are
always searching for new opportunities. There are many sources of opportunity for business ideas. Successful
business managers and entrepreneurs will be quick to seize their opportunities.
D. Innovation
i. Definition: refers to the process of creating a new good, service or process (way of doing
something), or significantly improving an existing one. It often provides opportunity for the
establishment of a new business. 
E. Entrepreneurship
i. The ability and willingness to start, operate and assume the risk of a business venture in the hope of
making a profit.
F. Market opportunities
i. Opportunities that arise from a change in customer needs and turn them into potential business
ideas.
G. Changing customer needs
i. Changing incomes, tastes and fashions, prices of complementary and substitute goods and services,
population, expectations about the market and changes in the number of potential customers.
H. Research and development
i. A set of activities undertaken to improve existing products, create new products and improve
production processes.
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 I. Technological development
i. Refers to applications of knowledge that have changed people’s lives and the way a business
operates.
J. Global markets
i. Goods and services that are exchanged between businesses and customers worldwide.

2. THE PERSONAL MOTIVATION BEHIND STARTING A BUSINESS SUCH AS

THE DESIRE FOR INDEPENDENCE BOTH FINANCIALLY AND PERSONALLY,
TO MAKE A PROFIT AND TO FULFIL A MARKET AND/OR SOCIAL NEED
The personal motivation behind starting a business 2.2
i. The success or failure of a business depends largely on the owner’s abilities, resources, enthusiasm,
initiative, level of management expertise, decision-making skills and, above all else, motivation.
Two of the most crucial questions that a potential business owner must ask themselves are:
ii. Am I motivated enough to want to do this?
iii. Do I possess the appropriate qualities required to operate a business?
B. Desire for independence
i. Someone wants freedom in their work, such as when and where they work, with whom they work
and whether they work from home. The potential for long term financial independence is also a
motivating factor.
C. To make a profit
i. Someone willing to work hard may believe they can earn much more working for themselves in
comparison for someone else. However, many businesses lose money in the early start-up phase but
the hope is that the owner will earn more from being self-employed. 
D. To fulfil a market need
i. The good or service might not be available where there is a demand for it.  
E. To fulfil a social need
i. A social enterprise may be established to meet this need. This is a business that makes a profit but
concentrates on some sort of community or environmental need. The profits will be reinvested back
into the business. 
ii. Some examples including providing opportunities for local unemployed people, developing learning
opportunities for disadvantaged people in the community, creating access to a better quality of life
for disadvantaged people, focus on waste minimisation and recycling. 

3. THE IMPORTANCE OF GOAL SETTING IN BUSINESS

The importance of goal setting 2.3

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 i. A goal describes what a business expects to achieve over a set period of time. Without a goal, a
business has no defined purpose. Goals provide a business with direction, and helps to measure
results. They can help a business owner develop and implement ideas.
ii. S: goals should be clear and focused e.g. ‘obtain 500 new customers in the market’.
M: goals should be measurable, i.e. they should contain numbers to allow the business owner to
know whether they are on track, just as a sport game has a scoreboard/scorekeeper.
A: goals should be challenging but realistic. An attainable goal usually addresses the question ‘how
can the goal be accomplished?’
R: goals should be worthwhile, support other goals and be based on current market conditions.
T: a deadline or time limit should be set.
B. Goal setting in business
i. Financial goals
1. To make profit
2. Increase sales
3. Increase market share
4. Expand the business
5. Maximising the return on investment: The return on investment is a positive or negative
percentage that relates the money gained or lost on an investment to the cost of that
investment. It’s usually taken to mean that the return on the investment occurs over a 12-
month period.
ii. Social goals
1. Community service: business sponsorship
2. Provision of employment
3. Social justice: making sure anyone involved in the business is treated equally and fairly.
4. Ecological sustainability: protecting the environment, leading to policies for conservation,
recycling and restoration.
iii. Personal Goals
1. To earn a higher income
2. Not normally made public but still extremely important.

4. THE CHARACTERISTICS OF SUCCESSFUL BUSINESS MANAGERS AND

BUSINESS ENTREPRENEURS AND HOW THESE CHARACTERISTICS
CONTRIBUTE TO BUSINESS SUCCESS
Characteristics of successful business managers 2.4
i. A business manager runs a business on a day to day basis, so that it makes a profit.
ii. Prefer to minimize risks and make calculated decisions where the outcome is reasonably clear.
iii. Motivation and ‘entrepreneurial spirit’

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 iv. No set checklist that guarantees success, however the following characteristics are helpful in
managing a business:
1. Am I self-motivated, with a desire to succeed?
2. Am I self-disciplined enough to start and follow through long-term projects?
3. Am I healthy enough to withstand the extra workload and stress involved?
4. Do I have leadership qualities to assist in managing and motivating others?
5. Do I have good organisational and administrative skills?
6. Am I willing to take managed risks?
7. Do I have the ability and willingness to learn new skills?
8. Can I make decisions based on logic rather than emotions?
9. Am I able to listen to others’ advice as well as communicate my ideas to others?
10. Am I reasonably at ease in my relationships with people, and sensitive to the needs of
others, especially employees and customers?
11. Am I prepared to work long hours?
12. Am I prepared to receive lower financial returns in the early years than I would receive if
I worked for someone else?
B. Characteristics of successful business entrepreneurs
i. Willing to seize opportunities to start and operate a business as well as take risks to try and make a
profit.
1. Demonstrate initiative, innovation and enterprise.
2. Motivation can come from unexplored markets.
ii. Entrepreneurs tend to have:
1. A shared vision: everyone works together toward the same goal.
2. Enterprise: the effort made by somebody to creatively achieve something new.

5. THE IMPORTANCE OF BUSINESS CONCEPT DEVELOPMENT

Business concept development 2.5
i. Describes the core activities of the business and specific features and value of the goods and
services it provides.
ii. Creating and building on the gap in the market you have identified.
1. Complete market research to see what you need to start business.
a. What suppliers you will source from
b. Who your clients/customers will be
iii. You have one of the three motivational reasons to start your own business:
1. You have many personal qualities and want to undergo some training for area that you
‘could improve’.
2. You have an idea of what you want to sell or provide as a service. You believe your idea is
something that the market needs or lacks.
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 3. The source of a concept may come from own experiences, interests, abilities or
imagination generated by:
a. Listening to people
b. Reading
c. Visiting displays and exhibitions for new technology or products from overseas.
d. Accessing government statistics and research information.
e. Identifying a gap in the market
f. Determining improvements that could be made to an existing product.
B. Protecting a business idea
i. An idea/concept is referred to as intellectual property (IP).
ii. IP is any creation of the mind such as a new invention, brand, design or artistic creation.
iii. They can have commercial value ($) or provide competitive edge or advantage.
C. Methods to protect your IP
i. Trademark: Granted rights over a letter, word, phrase, number, sound, smell, shape, logo, picture
or aspect of packaging that a business will use for its good or service. Legally enforceable.
ii. Patent: Granted rights for any device, substance, method or process that is inventive or useful.
Legally enforceable.
iii. Copyright: Free and automatic protection of original works such as writing, music, art, films,
broadcasts and computer programs.
iv. Design Rights: Rights given to the owner to commercially use, license or sell a design.
v. Domain Name: The businesses unique address on the internet, nobody else can use or register it.

6. THE RELATIONSHIP BETWEEN BUSINESS OPPORTUNITIES AND BUSINESS

CONCEPT DEVELOPMENT
Relationship between business opportunities and business concept development
i. Business owner takes an idea, assesses it and begins to turn it into an actual business – the business
concept.
ii. The business concept is derived by the owner’s motivation, their goals and personal qualities.

7. MARKET RESEARCH AND INITIAL FEASIBILITY STUDIES

Market research and initial feasibility studies 2.6
i. Determining facts and figures to establish whether a business would survive and generate profit is
vital before starting a business.
ii. Making decisions based on reliable information helps minimize risk of failure.
iii. Two ways to establish how viable the business will be are to conduct a feasibility study and do
market research.
B. Initial feasibility studies
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 i. An assessment of the practicality and potential for success of a proposed business idea.
1. Assessment of the market: analyzing the level and type of demand, who and where
potential customers are, why they will buy the product, who the present and future
competitors are, and what the businesses competitive advantage is (how will they stand
out from competitors).
2. Consideration of operations: describing the product that will be sold, the resources
needed (factory plant, equipment, materials, staff), the location of the business and legal
requirements.
3. Analysis of Commercial Feasibility: considering the strengths and weakness of the
business concepts as well as the opportunities and threats the business might fact (SWOT
analysis), how long it will take before the business has its first sale, determination of price,
how much finance is needed to start the business, as well as forecasting sales/profit.
4. Analysis of owner’s management ability: what qualities does the owner possess?
(remember 2.4)
5. Understanding if other have tried this idea: If they failed, why did they fail?
ii. Strengths
iii. Weaknesses
iv. Opportunities
v. Threats
C. Initial market research
i. The process of systematically collecting, recording and analysing information concerning a specific
market.
1. Identify: what information is needed to make a decision about the potential of the
business.
2. Gather: the relevant information from appropriate sources, e.g. interviews, surveys.
3. Analysing and interpreting: the relevant results to extract the information required to
make decisions. – most important step

ii. Market conditions: the features of a market into which a new good or service is to be introduced,
and include such factors as the:
1. Number of potential customers
2. Level of competition
3. Potential for growth
iii. Market conditions for a particular good or service can often be determined by finding answers to the
following questions:
1. Is the business concept entirely new or does it already exist?
2. Who will buy the product?
3. Why will they buy the product?
4. What needs and wants have to be satisfied?

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 5. How big is the market?
6. Where is the market?
7. Who are the competitors?
8. What makes this product different from what already exists?

8. THE CONTRIBUTION THAT BUSINESSES MAKE TO THE ECONOMIC AND

SOCIAL WELLBEING OF A NATION
The contribution of business to the nation 2.7
A. The Economy and Economic Wellbeing
i. An economy is set up to answer the three basic questions of: what to produce; how to produce;
and for whom to produce. The Australian economy is a market capitalist economy, meaning that
the market (consisting of private buyers and sellers) determines what to produce, how to produce and
for whom to produce, with little to no government intervention.
ii. Business contribution to employment and taxation revenue
1. Businesses ensured that people are employed, and plat a large role in employment growth.
A person who is employed will earn a wage, and is thus able to purchase goods and
services, contributing to the circular flow of the economy.
2. The ABS estimates that 4.7 million Australians were employed in small businesses in June
2014, with a combined 6 million employed in medium-size and large businesses.
3. Businesses in Australia pay taxes, helping to contribute to taxation revenue. Employees
must also pay taxes, further contributing to taxation revenue.
iii. Business contribution to economic growth
1. Economic growth refers to an increase in the real value of goods and services of a period,
and is most commonly measured by growth in the gross domestic product (GDP), which is
the monetary value of finished goods and services produced in Australia over a period of
time.
2. Businesses contribute to economic growth by producing goods and services.
3. Growth occurs when a nation increases real value of goods and services over a period of
time.
iv. Business contribution to export earnings
1. Exports are goods and services sold to another country, with the aim of extending sales
and market penetrations.
2. Free trade agreements
3. Contributes to Australia’s Balance of Payments (BoP) which is a record of a country’s
trade and financial transactions with the rest of the world. (Basically it is a record of
money coming in and going out of Australia) – favourable when more money is coming in
then going out.
4. Exporting products and services creates jobs, boosts incomes and improves our living
standards – general welfare (we would rather be exporting than importing). 
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 v. Business contribution to research and development
1. Businesses undertake research and development to expand their knowledge of products
and processes. E.g. research for cancer cures.
2. R & D is about finding new ways to do things and results in improved efficiency and
productivity.
B. Social Wellbeing
i. Is how well a nation’s people live, gives access to basic needs and services.
1. Wellbeing can be determined using economic measures such as GDP, income, level of
employment and the consumption of goods and services.
2. It can also be determined through non-economic measures including personal happiness,
self-fulfillment, crime and death rates, environment quality and political freedom.
However, these are difficult to measure accurately.
ii. Business contribution to career and social wellbeing
1. The opportunity to build self-esteem,
2. A sense of belonging
3. A sense of contributing to the needs of society.
4. A job is more than income.
iii. Business contribution to innovation
1. Helped solve major problems.
2. Business R&D has impacted the way we live and our wellbeing.
3. New innovations such as the iPad and mobile phone have changed our quality of life
significantly.
iv. Business contribution to corporate social responsibility
v. Refers to managing a business in a way that the broader social welfare of the community, including
its employees, customers, suppliers and the environment, is taken into consideration when making
business decisions.
1. Customers often support businesses who are socially responsible and will refuse to
purchase a business’s product if they find out that a business is exploiting employees,
accepting bribes or polluting.
2. Can be expensive at first, but worth it in the long run.
3. People want to be proud of the business they work for.
4. Forces businesses to look after employees, environment, etc.

9. THE METHODS BY WHICH A CULTURE OF BUSINESS INNOVATION AND

ENTREPRENEURSHIP MAY BE FOSTERED IN A NATION, SUCH AS
GOVERNMENT INVESTMENT IN RESEARCH AND DEVELOPMENT,
COUNCIL GRANTS FOR NEW BUSINESSES, BUSINESS MENTORSHIPS,

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SCHOOL-BASED EDUCATIONAL PROGRAMS IN ENTREPRENEURSHIP, AND
THE CREATION OF REGIONAL BUSINESS START-UP HUBS
Methods for fostering a culture of business innovation and entrepreneurship in a nation 2.8
i. Promotion of innovation and entrepreneurship – Businesses such as Google and Apple nurture
innovation and entrepreneurship through the use of collaboration, new technology, active support
systems, time provided for creativity and by not shunning failure. Similarly, a nation may encourage
a culture of business innovation and entrepreneurship. Businesses can do this through their activities,
but governments at all levels can also promote innovation and entrepreneurship through policy and
financial assistance.
B. KEEPING IDEAS/CONCEPTS IN AUSTRALIA, HELPING OUR ECONOMY THROUGH THE USE OF:
C. Government investment in research and development
i. Is expensive, but state and federal governments support businesses through:
1. Direct funding
2. Tax incentives
3. Funding is provided to universities and agencies like the CSIRO and businesses.
D. Council grants for new businesses
i. Local councils facilitate information sessions and small business grants.
ii. Objective is to encourage establishment,
1. Growth and retention of creative and sustainable businesses.
E. Business mentorships
i. A business mentor is a person with extensive business experience and knowledge who can guide a
business owner with less experience.
1. Advice, help set goals, maintain perspective, expand their networks and grow.
ii. Business mentorship refers to relationship between mentor and mentee.
1. Can be formal or informal.
F. School-based educational programs in entrepreneurship
i. Awareness of entrepreneurship can be improved through education and information programs.
Schools teach courses in economics and business, including VCE Business Management, so that
students have some knowledge of entrepreneurship. Many programs also allow students to
experience entrepreneurship.
ii. Each program differs slightly but all are centered around developing business ideas and
testing/examining the viability of these ideas within a given market.
iii. Awareness of entrepreneurship can be improved through education and information programs such
as the $20 Boss program, the Getting Down to Business program and I Plan a Business (iPAB)
competition.
G. Creation of regional business start-up hubs
i. Small Business Centers Victoria (SBVC) provides a range of small business services in Victoria.

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 They provide subsidized (reduced cost) premises, advices, services and support to new and emerging
businesses to assist them in becoming profitable. Because they are locally based they have an
understanding of regional issues affecting individual businesses and is able to tailor their advice to
suit the business.
1. Getting started
2. Business management skills
3. Financial management skills
4. Business planning
5. Mentoring for business
6. General business advice

09/04/2018

UNIT 1 AOS 2: EXTERNAL ENVIRONMENT

AREA OF STUDY 2: EXTERNAL ENVIRONMENT
The external environment consists of all elements outside a business that may act as pressures or forces on the
operations of a business. Students consider factors from the external environment such as legal, political, social,
economic, technological, global and corporate social responsibility factors and the effects these may have on the
decisions made when planning a business. Students investigate how the internal environment relates to the external
environment and the effects of this relationship on planning a business.

OUTCOME 2: KEY KNOWLEDGE

On completion of this unit the student should be able to describe the external environment of a business and explain
how the macro and operating factors within it may affect business planning.

10. BUSINESS ENVIRONMENTS

Business environments 3.1
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 i. Refers to the surrounding conditions in which the business operates. It can be divided into two broad
categories: internal and external. The internal environment (sometimes called micro) includes those
factors that a business has some level of control over. The external environment includes those
factors which a business has little or no control over. It can be divided further into two categories:
operating and macro. The operating environment includes factors a business has little or no leverage
over and the macro environment includes factors a business has no control over.
B. The internal environment
i. Made up of elements created by people within the business.
1. Managers: Responsibility for success of achieving business objectives. Effective
management leads to success.
2. Location: Location of business will determine whether or not a business is visible and/or
accessible to potential customers. Good location is an asset.
3. Legal Business Structure: Most appropriate legal structure for the business can influence
success: sole trader, partnership, company – public or private. These all have advantages
and disadvantages.
C. Operating (external) environment
i. The ‘task’ environment – factors a business has less or no control over.
ii. Includes stakeholders the business interacts with while conducting business.
1. Customers: the people who purchase goods and services from the business, expecting high
quality at competitive/low prices.
2. Competitors: other businesses who produce and sell rival or competing goods or services
to the ones affected by the business.
3. Suppliers: businesses or individuals who supply materials and other resources.
4. Special interest groups: people who attempt to directly influence or persuade a business to
adopt particular policies or procedures, including lobby groups and unions.
D. Macro (external) environment
i. The ‘broad’ environment. The business has no control over these.
1. Political and legal influences: laws or regulations made by parliaments.
2. Economic influences: what’s happening in our economy and other economies that we deal
with.
3. Technological influences: development of technology in our world.
4. Social influences: trends, changes in attitudes, tastes and lifestyles of communities.
5. Global influences: worldwide markets and competition on a global scale.
6. CSR issues: take into account its operations of broader social welfare.

11. AN OVERVIEW OF KEY LEGAL AND GOVERNMENT REGULATIONS

AFFECTING BUSINESSES IN THE PLANNING STAGE
Key legal and government regulations 3.2
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 i. Businesses have very little control over these forces as they are macro. Each level of government in Australia
imposes its own direct and indirect regulations to which all businesses must abide by.
B. Laws related to establishing a business
i. Business name must be registered with Australian Securities and Investments Commission (ASIC),
unless an owner is trading under their own name, where this is optional.
ii. New name registrations need an ABN (Australian Business Number), and a partnership or a
company need a tax file number (TFN). Companies also need an Australian Company Number
(ACN) and need to receive a certificate of registration.
C. Taxation arrangements/laws
i. These apply to all businesses.
ii. Registered businesses are required to prepare a set of accounts – business activity statement (BAS)
at regular intervals, either monthly or quarterly.
1. The BAS details the collection of the goods and services tax (GST) and payment of pay as
you go (PAYG) income tax installments on behalf of employees.
iii. A business may have to pay state government payroll tax, as well as tax payable on its own earnings,
meaning a business owner will need a plan to comply with tax laws
D. Employment regulations
i. Covers the following:
1. Conditions of employment
2. Unfair dismissal
3. Dispute settling methods
4. Protection of human rights in employment
5. Employer responsibilities for tax payments on behalf of employees.
ii. Employee welfare is provided for through OH&S legislation
iii. Business owners need to be aware of their legal responsibilities when recruiting, in regard to discrimination
and equal employment opportunities.
E. Trade practices and consumer protection
i. Fair trade and competition.
ii. Consumers have the right to purchase goods that are of good quality and fit for the purpose for which they
were bought.
1. If this is not met then the consumer has the right for a refund or exchange of the good as the
business owner has breached the contract.
iii. The competition and consumer act covers:
1. Product safety and labelling
2. Unfair market practices
3. Price monitoring
4. Industry codes
F. Environmental protection legislation

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 i. Covers protection and management of matters of national environmental significance.
ii. In Victoria, it applies to noise emission, preventing pollution and damage to air, water and land.
G. Laws related to location
i. Will be influenced by local government zoning and building regulations, as well as regulations relating to
position and size of large signage.
ii. Also includes fire regulations and parking regulations.
H. Health regulations
i. Factors a business must meet to obtain a license to operate:
1. Temperature for food storage
2. Kitchen layout
3. Employee clothing requirements
4. Correct food handling
I. Work health and safety regulations
i. Securing health, safety and welfare of employees
ii. Eliminating risks to health, safety or welfare
iii. Ensuring health and safety of public isn’t at risk by conduct of undertakings by employers
iv. Providing for involvement in the formulation and implementation of health, safety and welfare standards.

12. SOCIETAL ATTITUDES AND BEHAVIOUR SUCH AS VALUES, BELIEFS

AND TRENDS
Societal attitudes and behaviours 3.3
i. Societal attitudes are the ideas, values and beliefs held by people in a particular society. Behaviours
are the actions that express these attitudes. They affect how we live, work and consume products, as
well as how businesses operate and how stakeholders view the business in which they have an
interest.

B. Values and beliefs

i. Refers to the shared principles and morals of a group of people or society – ideals about what is
good or bad and necessary or unnecessary.
ii. Reflected by the way people live:
1. Determine what people do, wear, eat, spend spare time, customer service etc. and how they
treat others and what they prioritise. These attitudes need to be assessed and considered by
the owner during planning.
iii. Constantly changing.
iv. Pressure from society has influenced businesses to do the right thing, as technology gives people
more of an insight into a business.

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 C. Trends
i. The general direction in which people’s attitudes or behaviour in society is developing or changing.
ii. Businesses should consider their demographic (characteristics of the human population e.g. age,
wealth) , as businesses who plan for changing demographics are more likely to be successful.
iii. Another trend is the demand for business to provide family-friendly workplaces, growing belief for
catering for workplace diversity – e.g. employing someone with a disability, it’s expected that the
business would take the necessary steps to ensure the needs of the employee are met in order for
them to perform their job appropriately.

13. ECONOMIC CONDITIONS SUCH AS HOW INTEREST RATES, TAX RATES,

BUSINESS AND CONSUMER CONFIDENCE LEVELS AFFECT BUSINESS
PLANNING
Economic conditions 3.4
i. Refers to the many influences that relate to economic activity in a country, region or the world and
includes interest rates, wages, unemployment, exchange rates and inflation.
ii. Economic forces have an enormous impact on businesses and customers, such as the businesses’
capacity to compete and customers willingness and abilities to spend.
1. Economic growth: boom
2. Recession: bust
iii. Expansion
1. Increasing customer spending
2. Business expectations increasingly optimistic
3. Increasing business investment
4. Sales and profits rising
5. Unemployment falling
iv. Contraction
1. Decreasing consumer spending
2. Business expectations pessimistic
3. Sales and profits falling
4. Unemployment rising
v. Peaks
1. Wages and salaries at high levels
2. Business operating at full capacity
3. Sales and profits at highest levels
4. Low level of unemployment
vi. Troughs
1. Wages and salaries at low levels
2. Business operating below full capacity
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 3. Sales and profits at lowest levels
4. Consumer spending at lowest levels
5. High level of unemployment
B. Interest rates
i. The price charged or paid for the use of money.
ii. It’s used to calculate the proportion of a loan that is charged as interest to the borrower.
1. Or the proportion of a deposit paid to the depositor.
iii. Typically expressed as an annual percentage of the total amount loaned or deposited.
iv. High interest rates reduce likelihood of a business making large a profit, falling interest rates make loans more
affordable.
v. In business, interest represents a cost involved in making revenue.
C. Tax Rates
i. The percentage of income or value of a good, service or asset paid as tax.
ii. In Australia, income and company tax is imposed as a percentage of net income.
1. Land tax is levied on the value of an asset
2. Tax rates influence a business’s decisions.
D. Business and consumer confidence levels
i. Refers to how businesses and customers are feeling about the economy.

14. TECHNOLOGICAL ISSUES SUCH AS HOW THE MARKET MAY CHANGE IN

THE FUTURE AND DEVELOPMENTS IN TECHNOLOGY
Technological Issues 3.5

i. Refers to issues relating to the growing use of tools, techniques or systems by businesses to solve problems or
serve a purpose. (macro environment)
ii. Appropriate technology can improve efficiency and productivity, create new products and improve
quality and the range of goods and services available.
1. Businesses must adapt and monitor tech innovation, helps to keep competitive advantage and
reduces chances of products falling out of favour.
2. Failure to detect and adopt new tech can result in a business becoming rapidly obsolete.
B. Development in technology
i. Upsides:
1. Increase chances of consistent quality and completes tasks humans struggle to.
2. Technology has made communication instant.
3. Business owner must consider benefits and limitations
4. New tech allows businesses to transfer info, opening up opportunities for global markets.
ii. Downsides:
1. Leads to decrease in number of employees
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 2. Life cycle of products is shorter because they need to be updated and upgraded regularly.
3. Businesses spend more money on r&d to stay ahead of competition.

15. GLOBAL ISSUES SUCH AS OVERSEAS COMPETITORS, OVERSEAS

MARKETS, OFFSHORING LABOUR, EXCHANGE RATES, PATENTING,
COPYRIGHTS, TRADEMARKS AND ONLINE SALES
Global issues 3.6

i. Includes overseas competitors and markets, offshoring labour, exchange rates, protection of IP at a global
level and online sales.
ii. Refers to a business expanding and operating worldwide.
iii. Creates chances to buy/sell internationally and create a level playing field.
B. Overseas competitors and markets
i. Business going overseas will need to establish a competitive edge
ii. Requires extensive knowledge – strategies and SWOT
iii. Innovating is important
iv. Selling overseas spreads risk and allows rapid growth
v. Distribution and transportation can be an issue
C. Offshoring labour
i. Refers to moving parts of a business process to the same or another business located in another country.
ii. Contentious issue in modern society, must be considered carefully
iii. Done because it’s usually cheaper.
D. Exchange rates
i. The price of one country’s currency expressed in terms of another country’s currency.
ii. Affected by:
1. Interest rates
2. Inflation
3. Balance of trade
4. Political stability
5. General state of economy
6. Quality of governance
iii. A depreciation (fall in value of country’s currency) will make exports cheaper and imports more expensive.
iv. Affects:
1. Financial transactions
2. Demand for products
3. Price of imported materials
E. Protection of IP globally
i. Patents, trademarks, copyright.
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 F. Online sales
i. Reduce long term costs as business no longer pays for physical location, water and electricity.
ii. Will reach wider market
iii. Can be expensive to maintain a well-run website, websites can crash.
iv. Not going online could result in the business becoming uncompetitive.

16. CORPORATE SOCIAL RESPONSIBILITY ISSUES SUCH AS

ENVIRONMENTAL CONSIDERATIONS AND PLANNING THE PRODUCTION
OF GOODS AND SERVICES WHICH ARE IN SOCIETY’S BEST INTERESTS.
Corporate social responsibility issues 3.7

i. Businesses should constantly think about their triple bottom line – where they consider profit, impact upon
society and the environment.
ii. Businesses who are socially responsible have improved business performance
iii. Customers actively support businesses that are csr
iv. These businesses tend to have better relationships with stakeholders: (customers, suppliers, competitors,
employees, shareholders and owners)
1. Other businesses
2. Government
3. Media
4. Suppliers
5. Broader community
v. THE TRIPLE BOTTOM LINE REFERS TO THE ECONOMIC, ENIVRONMENTAL AND SOCIAL
PERFORMANCE OF A BUSINESS.
B. How can a business be socially responsible?
i. Not just about helping the local community
1. Avoid conflicts of interest
2. Develop employee skills
3. Ensure fair price is paid for all materials
4. Minimise waste and pollution
5. Conserve use of energy
6. Protect health and safety of customers
7. Become community involved
8. Ensure business is free of corruption
9. Work with suppliers to ensure they’ve got socially responsible policies in place
10. Deal with employees honestly, fairly and with respect.
ii. CSR is also about the welfare of the environment and employees.

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17. CUSTOMER NEEDS AND EXPECTATIONS
Customers and competitors 3.8

A. FOUR MAIN STAKEHOLDERS

i. Customers:
1. People who purchase goods and services from the business, expecting high quality at competitive
prices
ii. Competitors:
1. Other businesses who produce and sell competing goods and services.
iii. Suppliers:
1. Businesses or individuals that supply materials and other resources that the business needs to
conduct its operations.
iv. Special interest groups:
1. Groups who attempt to directly influence or persuade a business to adopt particular policies or
procedures, including lobby groups, business associations and unions.
B. How do customers impact a business
i. Without customers, a business wouldn’t exist.
ii. Main interests include:
1. High quality products
2. Value for money
3. Fast delivery
iii. They are knowledgeable and aware of when being treated unfairly. Can voice displeasure.
iv. Put pressure on businesses to be environmentally responsible, have healthier options etc.
v. Tastes are constantly changing so a business needs to keep up to stay viable and profitable.

18. COMPETITORS’ BEHAVIOUR

Customers and competitors 3.8

A. How do competitors impact a business?

i. Businesses must respond to a change in action of competitors.
ii. Potentially may look to buy out a competitor making the business more competitive (potentially globally)
whilst also creating new challenges for existing competitors.
B. Why keep lookout on your competitors?
1. Inspiration
2. See if/what they’re doing better
3. Improve potential plans by gathering data
20
 4. Discover new strategies
5. Tap into a gap in the market

19. SUPPLIERS AND THE SUPPLY CHAIN, SUCH AS THE RESOURCES

REQUIRED FOR A BUSINESS AND CONSIDERATIONS ABOUT WHERE
THESE RESOURCES ARE SOURCED AND HOW THEY REACH THE BUSINESS
Suppliers and special interest groups 3.9

A. Suppliers and special interest groups

i. Supply resources needed during production process such as:
1. Raw materials
2. Equipment
3. Machinery
4. Finance and information
ii. Good relationship with suppliers guarantees efficient running of business.
iii. Businesses usually prefer to have a number of suppliers, means they are less vulnerable to supply difficulties
and impact of price rises.
iv. Important to develop reliable network of suppliers, having only one is a disadvantage.
B. The supply chain
i. The network of suppliers from which the business purchases resources.
ii. Starts with:
1. Sourcing of natural resources
2. Manufacturing (component construction)
3. Assembly
iii. Supply chain moves to storage before reaching consumer.
iv. Needs to be well managed because production of goods and services depends on resources.
v. Supply chain is critical for following reasons:
1. If resources are not on hand, nothing can be produced
2. If resources are of inferior quality, it’s difficult or costly to produce quality items.
3. If the right quantities are not available, the business cannot meet demand for its products.
C. Sustainability and the supply chain
i. A business must consider where the resources it obtains are sourced and how they reach the business.
ii. Owner must assess:
1. Location
2. Distance to suppliers
3. Efficiency of delivery
4. Rate that stock is used
5. Consistency in quality
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 6. Pricing
7. Comparison with other suppliers to identify if they can better meet business needs.
iii. Businesses today expect their suppliers to behave in a socially responsible way and believe that relationships
with suppliers also need to meet CSR considerations.

20. SPECIAL INTEREST GROUPS SUCH AS ENVIRONMENTAL LOBBY

GROUPS, BUSINESS ASSOCIATIONS AND UNIONS
Suppliers and special interest groups 3.9

A. Special interest groups

i. Are the groups who attempt to directly influence or persuade a business to adopt a particular policy or
procedure.
B. Specific issue groups
i. Formed to focus on one area like youth employment, civil liberties or environmental protection.
ii. Environmental lobby groups
1. Specific issue group that promote environmental issues to the public, government and businesses.
2. Companies like Rio Tinto and BHP often receive backlash for mining, therefore planning is
affected as they respond by undertaking environmental impact studies and rehabilitation works.
C. Business associations
i. Organisations that support businesses through provision of training and educational programs, advice and
information.
D. Unions
i. Groups formed by employees in an industry, trade or occupation to represent them in efforts to improve
wages and working conditions.
ii. Business planning may be affected by these considerations.
E. Consumer groups
i. Lobby groups that monitor a business’s performance in terms its product safety, packaging, pricing and
advertising.
ii. Australia’s leading consumer group is CHOICE.

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25/5/2018

UNIT 1 AOS 3: INTERNAL ENVIRONMENT

AREA OF STUDY 3: INTERNAL ENVIRONMENT

The internal environment affects the approach to and success of business planning. The owner will generally have
more control over the activities, functions and pressures that occur within a business. These factors, such as business
models, legal business structures and staffing, will also be influenced to some extent by the external environment.
Students explore the factors within the internal environment and consider how planning decisions may have an effect
on the ultimate success of a business.

OUTCOME 3
On completion of this unit students should be able to describe the internal business environment and analyse how
factors from within it may affect business planning.

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21. BUSINESS RESOURCE NEEDS AND THE FACTORA AFFECTING THEIR
CHOICE: NATURAL LABOUR AND CAPITAL RESOURCES
Internal factors affecting business planning: resource needs 4.1

A. Natural
i. Items used by the business that come from the natural environment.
ii. Businesses should consider the following factors when planning for their resource needs:
1. Are their products designed environmentally friendly, and how can they minimize the negative
effect of their products on the environment?
2. How can they reduce wastage and environmental damage during the production process?
3. Are the raw materials that they plan to use in production sustainable, accessible and reasonably
priced?
4. Are the shops, offices or factories of the business designed in a sustainable way that minimizes
energy usage?
5. Where will they source their natural resources from?
B. Labour
i. Refers to the people that provide their skills, effort and knowledge to the business. A business can also hire a
subcontractor.
1. How many workers will be needed and what kind of skills will they need?
2. How will the business attract and retain these workers?
3. What kind of training should the business offer to its workers to help them grow and benefit the
business?
4. How will the business provide fair pay and healthy working conditions for its employees?
5. What are the legal responsibilities of the business towards its employees?
6. How will the business resolve any disputes that arise with employees?
7. Does the location of the business allow access to the types of workers that it needs?
C. Capital
i. Refers to the tools and machinery that are used to produce goods or perform services.
1. What kind of tools and machinery will be needed?
2. How will the business repair, maintain and replace its capital equipment when needed?
3. Does the business have the right workers with the right skills to operate the machinery they need?
ii. Important because they maximise efficiency of labour.

22. BUSINESS LOCATIONS AND THE FACTORS AFFECTING CHOICE OF

LOCATION
Business location 4.2

A. Different types of business locations

24
 i. Different businesses will be suited to different location. Local government zoning determines where some
types of businesses can operate. Designed to keep business activities separate from residential areas. Sets
aside commercial and industrial zones and it is in these areas that most businesses will operate.
ii. Shopping centres
1. What are the downfalls/benefits of having your business located in a shopping center?
a. Lots of parking, many different types of stores.
iii. Retail shopping strips
1. Busiest strips located near public transport, offer high visibility, popular because open later than
shopping centers.
2. Lack of parking
iv. Online presence
1. Setting up and maintaining website to provide info about available products/services or how
customers can order online.
2. Using online sales platforms such as eBay
3. Accepting online payments
4. Making sure customers can find the website through paid online advertising and Search Engine
Optimisation (SEO) tools.
5. Can be convenient, but is risky due to cyber criminals.
v. Home-based businesses
1. Plumbers, electricians and painters don’t need a physical location as they provide services in the
customer’s home/business.
B. Factors affecting choice of business location
i. Zoning
1. Local government zoning dictates where some types of businesses can operate.
2. Sets aside residential, commercial and industrial zones.
ii. Visibility
1. If a business wants high visibility, they should locate their business in a prime shopping area, e.g.
shopping centre or main street.
2. Businesses such as manufactures don’t need highly visible as they transport their goods to outlets.
3. Prime location = Customer convenience + Visibility
iii. Cost
1. Leasing/purchasing a central location in a busy shopping centre will be far more expensive than a
location with lower levels of passing customer traffic.
2. For a café/food outlet, passing traffic is a major source of customer so cutting costs by choosing a
less visible location can be counterproductive.
iv. Proximity to customers and suppliers
1. Must be convenient for customers, so a convenient location is key.
v. Proximity to competitors
1. Unwise to establish new business near businesses of the same type, unless customer demand isn’t
being satisfied.
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 vi. Complementary businesses
1. Offer goods/services targeted at the same customers e.g. an doctors and a pharmacy.

23. SOURCES OF FINANCE AVAILABLE TO ESTABLISH A BUSINESS AND

THE FACTORS AFFECTING THE CHOICE
Sources of finance 4.3
A business cannot start without funds. Funds come from people/institutions. Classified into the owner contributing
their own funds (equity, capital, internal) or by obtaining finance from external funds.
EXTERNAL FUNDS (debt)
SHORT TERM: bank overdraft, bank bills, trade credit
LONG TERM: mortgage, leasing.
INTERNAL FUNDS (grants): owners personal funds.

A. Equity
i. Refers to the funds contributed by the business owners to start and then expand the business.
ii. If it’s a company, is referred to as shareholder’s equity.
iii. Doesn’t have to be repaid unless owners leave business.
iv. Cheaper because no interest has to be paid
v. Disadvantage is that owner expects good return, but may only generate low profits.
B. Debt (External)
i. Is the funds contributed by the owner(s) of a business to start and build the business.
ii. Must be repaid with interest
iii. Sourcing funds from outside the business should result in increased earnings and profits
iv. Higher risk source of finance as interest and government charges have to be paid on top.
v. Used to finance temporary shortages in cash flow or finance capital.
vi. Finance capital is the funds available for the short-term financial commitments of a business.
vii. Generally has to be repaid within 1-2 years.
C. Short-term borrowing
i. Provided by financial institutions through bank overdrafts, bank (commercial) bills and bank loans. This type
of borrowing is used to finance shortages in cash flow or finance working capital.
ii. Working capital is the funds available for the short-term financial commitments of a business.
iii. Generally paid back in 1-2 years.
D. Bank overdraft
i. Refers to the bank allowing a business or individual to overdraw their account up to an agreed limit got a
specified time, to help overcome a temporary cash shortfall.
26
 ii. One of the most common types of short-term borrowing.
iii. Costs are minimal and interest rates are lower than other forms of borrowing.
iv. Interest rates are generally variable meaning it’s paid on the outstanding balance daily.
v. This type on interest rate allows a business to flexibly manage their finance.
vi. Banks require the agreed limits to the overdraft to be maintained at a high level and require some security.
vii. Repayable on demand, but not common.
E. Bank Bills
i. Short-term securities issued by a business and bought by a bank.
ii. Borrower receives money immediately, promises to pay back the sum of money and interest at a future time.
iii. Type of bill exchange and are given for large amounts, usually over $100,000 for a period of 90-180 days.
iv. The bank acting as an agent guarantees that the money will be repaid when it is due.
F. Trade Credit
i. Exists when a supplier provides products to a business with agreement to charge for them later.
ii. 30-90 days until payment required, no interest, easy to obtain.
G. Long-term borrowing
i. Relates to funds borrowed for periods longer than 2 years.
ii. Can be secured or unsecured, interest rates usually variable, most common long-term in a mortgage.
H. Mortgage
i. A loan secured by the property of the borrower (the business)
ii. Repaid over an agreed time, such as 15 years.
iii. The property mortgaged cannot be sold or used as security for further borrowing until the mortgage is repaid.
iv. Used to finance property purchases, such as new premises, a factory or an office.
I. Leasing
i. A way of financing the purchase of assets without a large initial capital outlay.
ii. The lessee is the person or business to whom a lease is granted.
iii. A lessor is the owner of an asset that is leased under an agreement to the lessee.
iv. Leasing machinery and vehicles is common in a business.
v. Interest rates may be higher
vi. Advantages include:
1. Provides long-term financing without reducing control of ownership
2. Permits 100% financing of assets
3. Lease payments are a tax deduction
4. Repayments of the lease are fixed for a specific period so cash flow can more easily be monitored.
J. External sources of finance: grants
i. Government can also provide finance to businesses in the form of grants for development, especially to
promote exports.

27
 ii. Grants can be obtained through state and federal governments, however federal government grants must meet
conditions imposed and be used for a specific purpose.
K. Factors affecting choice of finance
i. Terms of finance: the amount of the repayments and frequency at which they must be made.
ii. Business structure: large businesses have more opportunities for equity capital than small businesses who
have to raise equity from private sources or by taking on a partner.
iii. Overall cost: overall cost of each alternative source of finance helps make a decision when planning for
financial needs.
iv. Flexibility: circumstances can change rapidly, so a business needs to be able to adjust.
v. Level of control: owners wish to retain as much control over their business as possible.

24. COSTS AND BENEFITS OF PURCHASING AN EXISTING BUSINESS

COMPARED WITH ESTABLISHING A NEW BUSINESS
Purchasing an existing business or establishing a new business 4.4

A. Purchasing an established business

i. The business is already operating and everything associated with the business is included in the purchase –
stock and equipment, premises, employees, existing customer base, reputation and goodwill (the monetary
value attached to the reputation of the business).
ii. It’s important for the potential purchaser to know why the business is for sale. They must also carefully
examine financial records.
iii. If the business has been struggling, it may not be a good purchase.
iv. One aspect of the financial statements that is difficult to estimate is the value of goodwill. The seller may
overestimate the value of the reputation of the business, so it would be important to meet with an accountant
to confirm the value.

v. COSTS AND BENEFITS OF PURCHASING AN EXISTING BUSINESS

Benefits Costs
Sales to existing customers generate instant income Existing image and policies of business may be
difficult to change especially if business has a poor
reputation

A good business history increases likelihood of Success of business may have been due to previous
business success owner’s personality and contacts, so may be lost
when sold

A proven track record makes it easier to obtain May be difficult to assess the value of goodwill with
finance likelihood of new owner paying more than the
goodwill is worth

Stock has already been acquired and is ready for Some employees may resent any change to business
28
 sale operation

Seller may offer advice and training /////////////////////////////////////////////////////////

Equipment is available for immediate use /////////////////////////////////////////////////////////

Existing employees can provide valuable assistance /////////////////////////////////////////////////////////

/////////////////////////////////////////////////////////
B. Establishing a new business
i. May be due to identifying a gap in the market or development of a good/service.
ii. Attempting to enter a market that is already well served is difficult.
iii. A business can avoid many of the problems of starting a business by entering a franchise agreement.
Under a franchise agreement a person buys the rights to use the business name and distribute products or
services of an existing business.
iv. Elements of establishing a new business and an existing business involved.
v. COSTS AND BENEFITS OF SETTING UP A NEW BUSINESS
Benefits Costs
Owner has freedom to set up business exactly as High risk and measure of uncertainty without a
they want previous business reputation, may prove difficult to
secure finance

Owner can determine pace of growth and change Time is needed to develop a customer base, employ
staff and develop lines of credit from suppliers

If funds are limited it’s possible to begin on a If the start-up period is slow then profits may not be
smaller scale generated for some time

25. TYPES OF LEGAL BUSINESS STRUCTURES SUCH AS SOLE TRADER,

PARTNERSHIP, PRIVATE LIMITED COMPANY, PUBLIC LISTED COMPANY
AND THE FACTORS AFFECTING THE CHOICE OF BUSINESS STRUCTURE
Types of legal business structure: sole traders and partnerships 4.5

A. Different types of legal structure

i. Sole trader: unincorporated
ii. Partnership: unincorporated
iii. Company: Public or private, incorporated

iv. Incorporation refers to the process that companies go through to become a separate legal entity from the
owner(s)

29
 v. An incorporated business has its own separate legal existence. Regardless of what happens to owner(s),
business can continue to operate.
vi. An unincorporated business has no separate legal existence from owner and will either be a sole trader or
partnership.
vii. Most common legal structure in Australia is the unincorporated enterprise, because this is the easiest and
cheapest to establish.
B. Sole trader business
i. A business owned and operated by one person.
ii. Unlimited liability is when the business owner is personally responsible of all the debts of their business.
iii. Factors to consider include:
1. Is the owner prepared to risk the unlimited liability of operating their business?
2. Will the owner have enough finances, skills and expertise to establish and grow the business?
3. Is the owner prepared to take complete responsibility of the business in exchange for complete
control and the right to keep all profits?
4. Does the lower cost of establishing and maintaining a business as a sole trader outweigh the
benefits of incorporation?
Advantages Disadvantages
Low cost of entry Personal (unlimited) liability for business debts
Simplest form End of business when owner dies
Complete control Hard to operate if sick
No partner disputes Need to carry all losses
Owner’s right to keep all profits Burden of management
Less government regulation Must perform wide variety of tasks
No tax on profits only personal income Difficulty in raising finance for expansion
C. Partnership
i. Requires minimum of 2 and maximum of 20 partners
ii. Some exceptions:
1. Medical practioners & stockbrokers: 50 partners
2. Vets, architects & chemist: up to 100 partners
3. Solicitors & accountants: up to 400 partners
iii. No separate legal entity
iv. Partners are financially responsible for any debts (unlimited liability)
v. Partnership agreement can be made verbally, written is not compulsory.
vi. Limited partnerships: were introduced to allow one or more partners contribute financially to business but
take no part in running partnership. Referred to as silent or sleeping partner.
Advantages Disadvantages
Low start-up costs Personal unlimited liability
Less costly than a company Liability for all debts including partner’s debt’s,
even before partnership has begun
Shared responsibility and workload Possibility of disputes
Pooled funds and talent Difficulty in finding a suitable partner
Minimal government regulation Divided loyalty and authority
No taxes on profit, only wages
30
 On death of 1 partner, business can keep going.
vii. Factors to consider:
1. Are the owners prepared to risk unlimited liability of operating their business?
2. Will the prospective partners have enough finance skills and expertise to establish and grow the
business?
3. Do individuals believe that prospective partners will act in best interests of business?
4. Is each individual certain that their prospective partners will not expose them to personal debts?
5. Can prospective partners foresee disputes arising due to a clash of personalities/opinions?

26. TYPES OF BUSINESS LEGAL STRUCTURE SUCH AS COMPANIES

Types of legal business structure: companies 4.6

i. As a business grows, there are advantages to changing ownership structure to become a company. This is
known as incorporation.
ii. Results in company having a separate legal entity, to its owners who are now shareholders.
iii. Results in limited liability for shareholders – not personally responsible for the debts of the business unlike
sole trader/partnerships.
iv. This protection does not extend to the directors of a company, as they have an obligation to ensure company
obeys law, and acts in interests of shareholders.
v. Ltd means a business has limited liability. A business can be organised as either:
1. A proprietary (private) or pty
2. Public company
B. Private companies
i. Most common company structure is 2-50 private shareholders
1. Usually a small-medium business, likely family owned businesses.
ii. Shares are only offered to those people the business wishes to have as part owners.
C. Public Companies
i. Listed on the ASX (Australian Stock Exchange), general public may buy/sell shares.
ii. A public company has:
1. Minimum of 5 shareholders, no maximum
2. No restrictions on transfer of shares or raising of money from the public via share offers.
3. Requirement to issue a prospectus when selling shares for the first time. (legal document that
provides details about investment in the company).
4. Minimum requirement of 3 directors, 2 who must live in Australia.
5. The word ‘limited’ or ‘ltd’ in its name.
iii. Advantages/Disadvantages
Advantages Disadvantages
Easier to attract public finance Cost of formation
Limited liability – separate legal entity Double taxation – company and personal
Easy transfer of ownership Personal liability for business debts if directors
31
 knew at the time the business couldn’t pay loans
Long life – perpetual succession Requirement to publish annual report of audited
accounts
Experienced managers - directors Public disclosure – reporting of certain info
Greater spread of risk Too much growth – resulting in inefficiencies.
Company tax rate lower than personal income tax
rate
Growth potential
As per cent legislation, ability to have only one
shareholder and one director
iv. Factors to consider:
1. Does the owner need the extra legal security offered by limited liability?
2. Will the business need public finance, as is possible with a public company?
3. Will the owners be willing to relinquish control of the company to unknown investors by going
public?
4. Is it worth extra costs associated with establishing a company and preparing separate yearly tax
returns?

27. TYPES OF BUSINESS MODELS SUCH AS ONLINE BUSINESS, BRICKS AND

MORTAR BUSINESS, SOCIAL ENTERPRISE, FRANCHISE, IMPORTER AND
EXPORTER
Types of business model 4.7

i. A business model is a plan that outlines how the business will run its operations to generate a profit.
ii. Elements to consider when planning a business model:
1. What is the main goal of the business?
2. What type of goods/services will the business offer?
3. How will the business sell these goods/services?
4. Who are the target customers?
5. What types of costs will the business expect to incur?
6. Will a new business be established or will a franchise agreement be entered into?
B. Online businesses
i. Due to the rapid growth of the internet recently, businesses have evolved into online businesses, meaning
their goods/services and other info is listed online. Some of the fastest growing and most successful
businesses no longer have factories, warehouses, shops or face-to-face customers and are based solely online,
or are able to take advantage of new business opportunities through technology such as apps.
ii. Able to reach customers around the world, avoid many expenses involved with having a physical store.
iii. Exposes customers to online theft, unsatisfied customers who weren’t able to physically inspect products
before purchase.
C. Advertising-based websites

32
 i. Offer free access to people and generate revenue through advertising. Other business will pay a website to
feature their advertisements because it reaches their target markets. This is how many blogs have grown into
successful businesses. (Sponsorships?)
D. Freemium
i. Websites and applicant that provide free services and gain profit through subscriptions such as Spotify.
E. Brokerage
i. Websites such as eBay brings buyers and sellers together in exchange for a brokerage fee when sales are
made.
F. Merchant
i. Online sellers who use their own websites or brokerages (eBay). Usually buy in bulk from
wholesalers/manufacturers and sell products to customers to make a profit.
G. Bricks and Mortar
i. Are businesses that have a physical location such as a store or shopping centre.
ii. Chosen model for many of the world’s biggest retail, manufacturing and wholesale businesses.
iii. Offers face-to-face interaction and security of physically inspecting & paying.
iv. More expensive to establish and maintain which makes it difficult to keep competitive prices.
v. Many b&m businesses have adapted online presences to complement physical stores. Referred to as ‘bricks
and clicks’.
H. Import and Export
i. Earn their income by trading goods internationally.
ii. Source goods from overseas that will be competitively priced on Australian market due to superior quality,
cheaper cost of purchasing (from overseas manufactures).
iii. Shipping, distribution, taxes on imports known as tariffs.
I. Franchise
i. An agreement thereby the franchisor grants the franchisee the rights to use its business name and distribute its
goods/services.
Advantages Disadvantages
Avoid problems of starting a new business Little scope for making independent decisions
Well recognized name and established trademarks Profits and fees and are favourable to the franchisor
Success rate is 3x of an independent business Franchisee’s business forgoes the possibility of
expanding an original brand as a franchisor.
Back up by managerial expertise
J. Social Enterprise
i. Aims to improve well-being of others (rather than focus on profits through its business activities)
ii. Still needs to earn enough to fund the business.
iii. Operates by relying on volunteers to run the business, receive donations and grants, crowd funding to raise
money.
Advantages Disadvantages
Relies on assistance from government and local Relies on donations.
community

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28. BUSINESS SUPPORT SERVICES SUCH AS LEGAL, FINANCIAL,
TECHNOLOGICAL, COMMUNITY-BASED, FORMAL AND INFORMAL
NETWORKS AND BUSINESS MENTORS
Business support services 4.8

A. Legal and financial advice

i. Evaluating the different types of legal structures and understanding the legal requirements involved in each of
the alternative types of structure.
ii. Solicitors
1. Consulting a solicitor (lawyer) especially if a partnership is going to/has been established so that
a legally binding document agreement can be drawn up. (Professional who provides advice on
legal matters such as business formation, registration, contracts and legislation).
iii. Accountants
1. Consulting an accountant to understand tax requirements and financial costs associated with each
structure. (A professional who provides advice on all financial management issues and tax
obligations).
iv. Bank managers
1. Valuable source of information/advice on financial services, sources of finance, and basic business
management. Wide range of experience and access to bank resources.
B. Technological advice
i. Establishing online presence, networking computers within business premise & making maximum use of
mobile devices to improve efficiency.
ii. Purchasing of equipment from dealers who offer advice and backup support, or establishing a relationship
with and ICT consultant.
iii. Federal government established Digital Business website, which provides free practical advice on online
presence, online marketing, social media & e-commerce.
C. Community-based services
i. Focus is to provide businesspeople with an opportunity to engage in community service projects, it can also
put owners in touch with other local bus. people. (Such as Rotary, Lions).
ii. Business Enterprise Centre (BEC) Australia
1. Is a not-for-profit network of BECs, providing support to small business owners.
D. Formal networks: private
i. Business owners can access info and support from professional organisations.
ii. Chambers of commerce
1. Local associations of businesspeople, usually centered on a suburb or region.
2. Provide legal & financial help, taxation advice, explanations of legislation and industrial relations
information.
3. Organise training, arrange industry conferences and liaise with government departments.
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 iii. Victorian Employers Chamber of Commerce and Industry (VECCI)
1. State’s main employer group & Australia’s largest multi-industry employer organisation.
2. Concerned with human resources and industrial relations issues and provides support for members
who may be in dispute with their employees.
iv. Small Business Association of Australia and New Zealand
1. Lobby group providing a forum exchanging news relating to small business matters.
v. Trade associations
1. Offer specific industry information and assistance
E. Formal networks – federal, state and local governments
i. Federal government
1. Operates business.gov.au website as a service to all businesses. Offers access to gov. departments.
ii. State government
1. Department of Business and Innovation’s Business Victoria website provides entry and links to
info and support on all aspects of starting a business.
iii. Local government
1. Offer advice on land zoning, assist with subsidized land and consider development applications.
F. Informal networks
i. Mentoring
1. Experienced & knowledgeable person who provides invaluable advice and strategies to the small
business owner. Mentor may charge for or simply share their knowledge out of good will. Can be
rewarding for both.

29. PLANNING TOOLS SUCH AS A SWOT ANALYSIS

Planning tools and business plans 4.9

i. Strengths, weaknesses, opportunities and threats as well as any opportunities and threats from the external
environment.
STRENGTHS
What are our strengths?
What is the business good at?
Is our product popular?
Are our customers loyal?
Do we have a skilled and
motivated workforce?
Do we function efficiently?
Are we in a solid financial
position?
Is our equipment state of the
art?
WEAKNESSES
What are our weaknesses?
Do we have competent managers
and staff?
Is our computer system obsolete?
Have we experienced past
failures?
Have we been upgrading our
facilities to keep peace with
others?
OPPORTUNITIES
What are our opportunities?
What will new tech bring for us?
Is the national economy strong?
Are interest rates low?
What are our possible new
markets?
What other businesses can we
acquire to expand the business?
THREATS
What are our threats?
What trends have been evident
in our markets?
Are there new laws regulating
what we do?
Are there new competitors?
Are current competitors taking
over our market share?

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30. FEATURES AND CONSTRUCTION OF BUSINESS PLANS AND THE
BENEFITS OF USING THEM
Planning tools and business plans 4.9

A. Market research
i. Collecting and analysing data (quantitative) and information (qualitative) to assist business in understanding
customers and competitors.
ii. Business can conduct prior to starting the business to establish whether there is room in the market for the
business.
B. SWOT analysis
i. Strengths, weaknesses, opportunities and threats.
C. Business Plans
i. Map/guide which business journey can be plotted
ii. Is a written statement of goals/objectives and steps taken to achieve them.
iii. Best results come from effective management and detailed planning.
iv. Will assist business in accessing finance – shows business is organised.
v. Living document – change as the business changes.
D. How to plan
i. Is a process, series of actions to achieve an objective, any business with a plan has direction, ultimately saves
money, time, effort and increases chances of success.
E. Business plan elements
F. Executive summary
i. Usually prepared at the end of plan writing process.
1. Registered business name
2. Business legal structure
3. ABN and ACN if applicable
4. Location
5. Date established
6. Owner names, relevant experience and qualifications
7. Products/services
8. Business goals and objectives
9. Target market and outline of marketing strategy
10. Financial plan outline including sales, profits forecast, startup capital required
11. Mission/vision statement
G. Operations Plan
i. Outlines how business will be set up and the hr needs. People and processes business will use to achieve
objectives.
1. Suppliers
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 2. Plant and equipment required including costs (cars, computers)
3. Current items of inventory (stock)
4. Tech and software required including cost
5. Trading hours including details of peak trading periods
6. Payment methods accepted
7. Credit policy
8. Warranties and refunds
9. Membership and affiliations e.g. industry associations
H. Financial Plan
i. Details how business will be financed, projected cash flow, revenue, expenses and profit.
1. Balance sheet (net assets & liabilities of business)
2. Expected volume of sales
3. Estimated profits and losses
4. 5 year forecast of expected cash flow
5. Break even analysis – calculates at what point business should start making a profit.
I. Marketing Plan
1. Description of market
2. Industry analysis or evaluation
3. SWOT
4. Pricing
5. Methods of sales and distribution
6. Profile of customers
J. Following 11 sections should be included:
1. Title or cover page
2. Executive summary
3. Business profile and details
4. Legal details and considerations
5. Insurance and risk management
6. Sustainability plan
7. Products/services
8. Operations plan
9. Marketing plan
10. Financial section
11. Appendices

31. CORPORATE SOCIAL RESPONSIBILITY MANAGEMENT ISSUES

REGARDING BUSINESS PLANNING
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Corporate social responsibility in the internal environment 4.10

A. Why corporate social responsibility?

i. Customers are growing more aware of the impact businesses have on broader community.
ii. More likely to attract customers if socially responsible.
iii. If not socially responsible, negative impacts on employees means they’ll likely leave.
B. How can a business be socially responsible in the internal environment?
i. Fair pay:
Businesses are shifting production overseas where labour is cheaper and exploitation laws are not enforced.
Businesses should consider whether they are compensating worker fairly for tasks they perform regardless of where
they are from.

ii. Safe and healthy working conditions:

Should ensure this is highest priority. Must ensure there are no long term health consequences of being employed by
the business.

iii. Socially responsible policies:

Needs to ensure policies it develops reflect a commitment to social responsibility. Through these the business can set
expectations for employees and define appropriate behavior. Businesses can develop policies in areas of
environmental sustainability, workplace bullying, equal opportunities, employee leave and flexible work
arrangements.

iv. Employing disadvantaged groups:

Makes a positive contribution. People from prison, rural indigenous communities or who suffer from mental/physical
disabilities find it hard to find work. Government recognizes difficulty that certain groups have finding employment
and will subsidies businesses for employing them.

C. Environmentally friendly practices

i. Should take into account sourcing of materials and sustainable and ethical suppliers.
ii. Supply chain management is important.

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