Business Planning

Unit 1: Influences in establishing an SME

1.1 Definition
- The exact definition is not defined, however it can be divided into categories such as
personalised
personalised service, local ar!ets, independentl" operated, independentl" owned, closel"
controlled b" owner#operator, not doinant in the industr", locall" based, bul! of capital
provided b" owner, reliant on internal support services, owner responsible for decision
a!ing and less than $% eplo"ees for non-anufacturing
non-anufacturing and 1%% for anufacturing&
anufacturing&

1.2 Role
- The nuber of SMEs fluctuates over tie according to the state of the econo"&
- In recent "ears, SMEs have created an" 'obs, becoe ore innovative and are
increasingl" entering overseas ar!ets&

1.3 Economic Contribution

- (n econo" is a s"ste used to deterine what to produce, how to produce and to who
production will be distributed
- SME)s contribute to the econo" through:
Gross Domestic Product (GDP)
- *+ is thet he total one" value of all goods and services produced in (ustralia over a one
"ear period, easures econoic growth&
- (S estiates SMEs contribute about .%/ to *+&
Emploment
- Eplo"ent !eeps the econo" health" and eplo"ees spend their wages which support
other businesses&
- SMEs eplo" 0/ of private sector eplo"ent and are ore li!el" to aintain existing
eplo"ees during econoic downturn&
- The" contribute to revenue raised through tax which benefits societ" as a whole&
Balance of Paments (B!P)
- 2 is an accounting record of all onetar" transactions between (ustralia and the rest of
the world over one "ear&
- SMEs are often ore successful at exporting than large businesses
businesses as the adaptabilit" and
flexibilit" of SMEs a!e the ore responsive to the needs of overseas ar!ets&
- To aintain a favourable balance of pa"ents, exports ust be greater than iports&
"n#ention and "nno#ation
- SMEs are the ain source of ost inventions and innovations in (ustralia&
- Invention and innovation are the heart of our econo" as the" iprove efficienc" and
increase productivit"&
- SMEs spend a large aount on 34+&
- 34+ is intended to develop new ideas and iproveents in production however it is
difficult for SMEs to obtain ade5uate finance as the" are perceived as high ris!&
- Innovation aong SME eplo"ees is uch higher t han larger businesses&

1.$ %uccess and &ailure

- 6 out of ever" . SMEs fail within first "ear&
- Soe factors that
t hat deterine business success:
- 7ocation&
- oo!-!eeping
oo!-!eeping standards&
- (ccess to finance&
 - (daptabilit" 4 flexibilit" to change&
- (ccess to inforation and resources&
- +eand&
- Entrepreneurial abilit"&
- ( SME has failed when it is:
- unincorporated and declared ban!rupt&
- incorporated and either forced into li5uidation or voluntar" cessation&
- The ost coon causes of SME failure are anagerial inexperience and incopetence
undercapitalisation, and lac! of planning&

Unit $: Influences in establishing an SME

2.1 Personal 'ualities

- ersonal 5ualities, otivation, experience and entrepreneurship are the priar" influences
on an individual)s decision to establish a business&
- usiness 5ualifications and s!ills can be attained through experience, education and#or
training&
- These factors will affect planning decisions on issues such as the t"pe and si8e of
business, the business location, and the individual)s own role&
- (n entrepreneur is soeone who starts, operates and assues the ris! of a business
venture in the hope of a!ing a profit&
- (n entrepreneur ust have a range of s!ills and characteristics to own and operate a
business successfull"&
- There are other influences at wor!, including cultural bac!ground and gender&
'ualifications
- 9o foral acadeic re5uireents to coence operating but there are tertiar" courses
available that give "ou !nowledge and understanding of what is re5uired to successfull" own
and operate an SME&
- nowledge and understanding can coe fro experience and wor!ing for other
businesses&
%ills
- ;an be attained through experience, education and#or training:
- Experience
- <or!ing as an eplo"ee allows "ou to develop new s!ills as a result of
training or exposure to various aspects of the business)s operations&
- The best wa" to gain business experience is to wor! in the t"pe of business
in which the" intend to becoe self-eplo"ed&
- (n experienced person will understand and be realistic about the financial
and personal deands that the business will have on the&
- Education and#or training
- ;ourses are available in an" business and industr" fields, however are
expensive and ta!e a long tie to coplete&
- Soe governent agencies provide opportunities to learn about starting a
business =eg& the usiness Enterprise ;entres in 9S<>&
- (llow the business owner to develop the essential s!ills for establishing a
business such as accounting, coputer s!ills, staff anageent, business
adin and ar!eting&
oti#ation
- +esire to transfor an idea into a successful product b" capturing the attention of potential
custoers&
- usiness owners otivated b" the rewards the" believe can be gained fro business
establishent in both onetar" and non-onetar" reward edius&
Entrepreneurs*ip
- Entrepreneurs ust be:
- prepared to ta!e a ris! and incur the results of the ris!, either success or failure&
- confident in decision a!ing and be able to ta!e responsibilit" for decisions&
- willing to succeed&
- creative and have flair, which allows the to create or sei8e new business
opportunities&
- able to set goals and have a vision for the future, including ad'usting business to
changing environent and setting new goals as others are achieved&
- continuall" ad'usting to changing business, econoic and custoer ar!ets&
Cultural Bacground
- ;ounit")s traditions and beliefs =e&g& high wor! ethic in fail">&
- Experience in certain trades or services =e&g& Thai person coo!ing Thai food>&
Gender 
- <oen own approxiatel" 1# of all sall businesses in (ustralia&
- <oen setting up business fro hoe is the fastest growing sector of the (ustralian
econo"&

2.2 %ources of "nformation

- SME owners need assistance fro the governent and private support agencies who
possess a variet" of s!ills&
- ( variet" of support services exist to provide assistance to a business owner who lac!s
experience& Soe of the are free, and soe are in the for of other businesses that
charge for their services&
Professional +d#isers
- (ccountants provide valuable advice on all financial anageent issues and taxation
obligations& The" have access to the latest changes to taxation and financial reporting
re5uireents&
- Solicitors provide inforation concerning business foration and structures, registration,
contracts, leases, partnership agreeents, patents and legislation
- an! Managers provide inforation and advice on financial services, sources of finance
and basic business anageent
- Manageent ;onsultants provide advice on the best wa" to anage and operate business
while being ore ob'ective and unbiased
Go#ernment +gencies
- 7ocal *overnent provide advice on land 8oning, consider developent applications,
assist with subsidised land&
- The State *overnent offers progras such as:
- 9S< +epartent of State and 3egional +evelopent who provide inforation and
advice on starting a new business, bu"ing a business, anaging a sall business
and enterprise agreeents&
- usiness Enterprise ;entres (ustralia provides advice to SME owners on how to
establish a business and create business plans&
- ?ederal *overnent offers progras such as:
- www&business&gov&au which services businesses of all si8es with advice&
 - (usIndustr" provides advice on overseas exports and research and developent of 
new products and grants&
!t*er %ources
- ;habers of ;oerce offers legal and f inancial help, econoic and tax advice,
explanation of legislation and industrial relations inforation&
- Sall usiness (ssociation of (ustralia and 9ew @ealand is a lobb" group of SME owners
that provide a foru for exchanging news and views relating to SME atters&
- Trade (ssociations have specific industr" info and advice&
- 7ibraries and 3eference Material allow access to reference aterial and the abilit" to locate
specific aterial&
- (ustralian ureau of Statistics provides data on social, econoic and deographic trends&

2.3 ,*e Business "dea-Competition

- ( business idea describes the core activities of the business, and the specific features and
value of the goods or services it provides&
- ( business opportunit" is soething an entrepreneur can see as an avenue to success&
- 2pportunities a" arise due to either a Agap) in the ar!et, or an interest or hobb"&
- Successful identification of a gap in the ar!et is the !e" to establishing an appealing
business& If there is no gap in the ar!et, businesses need to do soething exceptional to
draw custoers awa" fro existing businesses&
- ;opetition is rivalr" aong businesses that see! t o satisf" a ar!et&
- SME owners ust decide how to a!e a business copetitive& This can be done b" either
reducing the costs of production or providing soething not alread" available&
- usiness needs to decide whether to target the product to the ass or a niche ar!et:
- To help identif" the level of copetition and ain copetitors&
- To help decide how to ar!et and achieve a larger ar!et share&
- <a"s to achieve copetitiveness include:
- 7owering production costs, which attracts ore custoers&
- +ifferentiation of product and a!ing it uni5ue or better than copetitors&

2.$ Establis*ment options

- Starting a copletel" new business or purchasing an existing business are the two ain
wa"s of going into business&
- <hen purchasing an existing business, it is essential for the potential purchaser to !now
wh" the business is for sale&
- u"ing a franchise to a!e use of an existing brand nae and reputation is also a popular
wa" to going into business&
e/ Business
 (dvantages +isadvantages

- The owner has the freedo to set up
the business as the" wish&
- The owner is able to deterine the
pace of growth and change&
- There is no goodwill for which the
owner has to pa"&
- If funds are liited, its is possible to
begin on a saller scale&
- There is a high ris! and uncertaint"&
- <ithout a previous reputation, finance a"
be difficult to access&
- Tie is needed to develop a custoer base,
eplo" staff and develop lines of credit&
- If start-up is slow, then the business a" not
generate profits for soe tie&

E0isting
 (dvantages +isadvantages

- Sales to existing custoers will
generate instant incoe&
- ( good business histor" increases the
li!elihood of business success&
- Easier to obtain finance&
- Stoc! has alread" been ac5uired&
- The seller a" offer advice and
training&
- E5uipent is available for iediate
use&
- Existing eplo"ees can provide
assistance&
- Existing iages and policies a" be difficult
to change&
- The success a" have been due to the
previous owner)s contacts and personalit"&
- It a" be difficult to assess the value of
goodwill&
- If the preises are leased, there a" be
difficulties with the landlord&
- Soe eplo"ees a" resist an" change to
the business operation&

&ranc*ise
 (dvantages +isadvantages

- The franchisor often provides training&
- The franchisee does not need to have
previous experience&
- The investent ris! a" be lower&
- E5uipent and preises design are
usuall" established and operational&
- <ell-planned advertising often exists&
- Bolue bu"ing is possible, resulting in
cheaper stoc!&
- The franchisor controls the operations&
- The threat of terination can be carried out
in certain circustances&
- rofits ust be shared with the franchisor&
- ;ontacts a" be biased in favour of the
franchisor&
- The goals of the franchisor a" differ fro
that of the franchisee&
- The franchisee a" erel" feel li!e an
eplo"ee, but without benefits or securit"&
- The franchisor ust share an" burden of the
franchisor)s business ista!es&

2. aret
Goods and ser#ices
- usinesses will fail without a ar!et to purchase their products&
- It is iportant for businesses to underta!e a ar!et anal"sis&
- Mar!et anal"sis is collecting, suari8ing and anal"sing inforation about the ar!et&
Price
- If the price is too high, it leads to a decline in sales and is difficult to achieve a profit&
- rice-setting strategies:
1& ercentage ar! up: increase cost prices b" a fixed percentage to give a selling
price&
$& 3ecoended retail price: recoended price b" wholesaler or anufacturer of
goods to be sold&
& rice leadership and copetition: a!ing sure that t he price is in line with
copetitors&
6& <hat the ar!et will bear: deterining how uch consuers will be willing to pa"&
ocation
- +ifferent businesses are suited for different locations&
- 2nline resence eans businesses are no longer liited to dealing with people ph"sicall"&
Soe advantages of this is due to:
 - It is easier to access
- 7ocation a" be considered uniportant
- Eas" for hoe-based businesses&

2. &inance
- ( business cannot coence without finance to enable it to pursue its activities&
- SME owners ust deterine how their business will be financed throughout the life of the
business&
- usinesses can obtain funds fro either internal =e5uit"> or external =debt> sources&
- +ebt finance is one" obtained through loans and ust be paid bac!&
- Short ter debt finance is less than one "ear and exaples include ban! bills, ban!
overdraft and trade credit&
- Mediu ter debt finance is one to five "ears and exaples include ter loans, personal
loans and leasing&
- 7ong ter debt finance is over five "ears and exaples include ortgages&
- E5uit" is the funds contributed b" the owner=s> of a business to start and expand the
business&
- The business owner ust estiate the establishent costs =expenses that ust be paid to
coence the business> and operating costs =the running costs for a full "ears operation>&
- The t"pe of finance will influence cost of capital&
- ?or debt finance the cost is interest&
- ?or e5uit" finance the cost is the return =dividend for copanies> paid at the end of
the financial "ear =if profit is ade>& The cost of e5uit" finance could also be
easured in liabilit" as unincorporated businesses can have business and personal
assets sold to recover debt, whereas incorporated businesses are liited to assets of 
copan" and investents&

2.4 egal
- (ll business owners have a legal obligation to observe the statutor" regulations when
coencing and operating a business&
Business name
- Ever" business nae ust be registered =except when the nae is that of the owner and
no t" 7td, ;o, etc& at the end>&
- If two traders want to register the sae nae, the first applicant for registration is accepted
but the second ust register a different nae&
5oning
- 7ocal governent controls 8oning regulations to plan areas for set purposes =eg&
residential, warehouse> and to assist planning&
- 2wners ust in5uire with the local council to deterine which 8oning regulations a"
appl" to the&
6ealt* regulations
- 7ocal councils have re5uireents and standards for businesses to eet to receive a
license to operate their business&
- Cealth inspectors assess the business regularl", often without warning& This is to ensure
that the business aintains these standards&
- The Trade ractices (ct 1D06 =;wlth> is a federal governent statute that ais to:
- roote fair trade and copetition in the ar!etplace&
- rotect both consuers and businesses fro deceptive or isleading practices&
2.7 6uman Resources
- 2ne of the ost iportant influences when establishing a SME is staffing&
- If a SME owner decides to hire staff, an" sources are available including advertiseents
in edia, teporar"#casual services, schools, universities, T(?Es, internal searches, word of 
outh, private eplo"ent, recruitent agencies and ob Services (ustralia&

2.7.1 %ills
- S!illed eplo"ees are highl" productive and result in creating wealth for the business& It is
iportant for businesses to aintain the s!ill level of their eplo"ees&
- Training is also an option to develop the s!ill base of existing eplo"ees&

2.7.2 Costs
- ( business will onl" eplo" soeone if the return is greater than the cost&
- 2n-costs are pa"ents for non-wage benefits, including long service leave, wor!ers)
copensation, superannuation, sic! leave and annual leave loading&

2.8 ,a0ation
- Taxation is the copulsor" pa"ent of a proportion of earnings to the governent&
- In order to operate a legitiate businesses, all taxes ust be paid&
- (n (9 is given to ever" business and is used when dealing with governent departents
and agencies =e&g& (T2>&
&ederal 9 %tate ta0es
- Tax is an iportant source of funding for all levels of governent&
- ?ederal Taxes include copan" tax, group tax =iposed on eplo"ee>, *ST and fringe
benefits&
- *oods and services tax =*ST> is a 1% per cent value added tax iposed on ost goods
and services&
- The custoer pa"s *ST when bu"ing goods and services, which is passed on t o the
business that in turn passes it on to the (ustralian Taxation 2ffice =(T2>&
- *ST collection and pa"ents to the (T2 are recorded on the business activit" stateent
=(S>, which is also the eans b" which a business can clai input tax credits&
- State taxes include stap dut" =leases, ortgage, car registration>, land tax and pa"roll
tax&
ocal rates and c*arges
- Taxes iposed b" local governents include:
- 7ocal land rates&
- <ater and sewerage&
- <aste anageent service&
- +evelopent and building approval fees&

Unit : The usiness lanning rocess

3.1 %ources of Planning "deas

- ( business plan is a written stateent of the goals for the business, and the steps to be
ta!en to achieve the& It is a suar" and an evaluation of a business concept in written
for&
- ( business plan will also assist the SME owner when arranging finance for the business&
- Soe benefits of a business plan include:
- Identif" business strengths and wea!nesses&
- (ssist the business to be proactive not reactive&
- Indicates the ownerFs abilit" and level of coitent&
- ?orces the owner to focus&
- The internal and external business environents are sources of planning ideas&

3.1.1 %ituational +nalsis

- S<2T stands for strengths, wea!nesses, opportunities, threats
- ( situational =S<2T> anal"sis can be used at all stages of the planning process&
ST3E9*TCS <E(9ESSES
Internal factors Internal factors
e&g& what is the business good atG (re e&g& poor technolog", poor location,
our eplo"ees otivatedG unotivated wor!force

223TU9ITIES TC3E(T
External factors External factors
e&g& econoic boo, low interest rates, ;opetition is usuall" one
potential overseas ar!ets e&g& new regulations =ipacting the
business>

3.2 :ision; Goals and-or !b<ecti#es

- The vision stateent broadl" states what the business aspires to becoe&
- Bision stateents guide and direct the business owners, anagers and eplo"ees&
- 2nce the goals have been established, a SME owner deterines the ob'ectives&
- 2b'ectives are specific stateents detailing what a business needs to do to accoplish its
vision&
- Strategic goals, tactical and operational ob'ectives are deterined b" different levels of
anageent&
- Man" businesses strive to achieve three broad goals:
- ?inancial =e&g& axiising profit, increasing ar!et share, increase share price>&
- Social =e&g& counit" service, provision of eplo"ent, social 'ustice>&
- ersonal =e&g& individual preferences>&
- 7ong ter growth is the abilit" of a business to continuall" expand&
- Strategies to achieve long ter growth:
- ;ustoer feedbac!&
- Supplier and custoer partnerships&
- roduct innovation&
- Siga six: anageent approach that attepts to iprove perforance b"
iproving 5ualit", reducing costs and creating new opportunities and a!ing DD&DD/
of all anufactured products defect free&
- 7onger ter growth depends on a business)s abilit" to develop and use its asset structure
to increase sales, profits and ar!et share&

3.3 !rganising Resources

- (n organisational structure is the fraewor! in which the business defines how tas!s are
divided, resources are used and departents are coordinated&
- 3esource allocation is the efficient distribution of resources to eet established goals&
3.3.1 !perations
- +efined as transforing inputs into f inished or sei finished goods&
- 9ecessitates the need to source e5uipent, supplies, !nowledge, storage and
warehousing as well as deliver" s"stes&
- (lso deterines the:
- T"pe of e5uipent and raw aterials and their suppliers and cost&
- Storage, warehouse and deliver" s"stes re5uired to operate&
- 7evel of technical expertise re5uired for axiu production &
- The business a" need to utilise ;(+ =coputer aided design> and ;(M =coputer aided
anufacture> to axiise efficienc"&

3.3.2 areting
- (ll sections of the business ust be involved in eeting custoer needs and wants&

3.3.3 &inance
- 9ew business ventures re5uire funds to operate&
- It is necessar" to copare various sources of finance to obtain the best rate&
- The aount of e5uit" =business ownership> that the business owner is willing to hand over
in order to obtain financing ust be deterined, so that ownership is aintained&
- It is possible to explore governent funding and grants that include onetar" and financial
assistance that does not have to be repaid&

3.3.$ 6uman Resources

- Eplo"ees are an SMEs ost iportant resource&
- ( rigorous recruitent and selection processes is necessar" to the functioning of the
business&
- (ll legislation ust be abided b", including anti-discriination and e5ual eplo"ent
opportunit" laws&

3.$ &orecasting
- ?orecasts are a businessFs predictions#pro'ections for the future&

3.$.1 ,otal Re#enue 9 ,otal Cost

- These forecasts attept to predict the aount of one" a business will receive fro sales
=revenue> and the aount of expenses the" will incur =cost>& These estiates can be ade
b" deterining the deand for the businesses product and the aount of copetition&
- Total revenue is the total aount received fro sales& This figure is calculated b" the
5uantit" of goods sold ultiplied b" the price that the")re sold for or T3 H  x 
- Total cost is the su of fixed and variable costs& It is categorised into two parts:
- ?ixed costs are costs that do not var" regardless of how an" units of a good or
service are produced&
- Bariable costs are costs that depend on the nuber of goods and services
provided&
- The forula for total cost is ?; J B; H T;&

3.$.2 Brea=e#en +nalsis

- ( brea!-even anal"sis deterines the level of sales that need to be generated to cover total
production costs&
- The forula for this is rea!-even SalesH ?ixed ;ost#=Selling rice K Bariable cost per unit>

3.$.3 Cas* &lo/ Pro<ections

- The cash flow pro'ection shows the changes to the cash position brought about b" the
operating, investing and financial activities of the business&
- It is set out the sae as cash flow stateents but a!es predictions&
- If a business has too uch cash sitting idle, resources are being used inefficientl" or the
business is underinvested&
- It also shows how uch investent is needed and the health of the wor!ing capital in the
business and overall efficienc"&

3. onitoring and E#aluations

- Monitoring involves observing changes and loo!ing at the external influences on the
business&
- ?irstl", the business ust establish a perforance standard& ( perforance standard is a
forecast level of perforance against which actual perforance can be copared&
- Secondl", the actual perforance is evaluated against the perforance standard&
- " doing this, a business owner can evaluate the effectiveness of the business plan&
- Evaluating is about coparing against standards and planned goals&
- Soe coon evaluations include:
- ?igures fro past and present in order to trac! iproveent
- ( business plan in order to onitor goal progress
- ( budget in order to copare figures
 - The owner needs to evaluate whether the business operations achieved the desired
results and wh"&
 - Monitoring and evaluating can ensure the long ter success of the business&

3..1 %ales
 - Sales anageent control involves coparing budgeted sales against actual sales and
a!ing changes where necessar"&

3..2 Budgets
- ( budget is the business)s financial plan for the future outlining how the business will use its
resources to eet its goals
- ( budget:
- contains pro'ections of incoes and expenses over a set period of tie&
- enables constant onitoring of goals and t heir progress&
- is used in planning and onitoring aspects of a business&
- needs to be regularl" copared with actual revenue and expense aounts&
- allows for odifications if there are discrepancies&

3..3 Profit
 - 3easons wh" profit ust be carefull" onitored and evaluated:
- rofit as reward: it is the return#reward that business owners receive for ta!ing the
ris!s in business operations&
- rofit axiisation: ain goal of a business&
 - rofit as a source of finance: profits need to be reinvested to ensure that the
business can grow&
- rofit as a perforance indicator: indicates business perforance&
- rofit as a dividend pa"ent: for incorporated businesses, soe profit is allocated
to shareholders&

3. ,aing Correcti#e +ction

 - ;orrective action is iportant to ensure the business can continue to function&
 - Modif"ing is the process of changing existing plans, using updated inforation, to shape
future plans
- If perforance standards cannot be et, the situation cannot continue and the business
owner ust underta!e corrective action#odification&

Unit 6: ;ritical Issues in usiness Success and ?ailure

$.1 "mportance of a business plan

- usiness plans are essential for owners#anagers because:
- The" allow the owner to clearl" define the goals, and future pro'ections&
- The" assist in the securing of finance fro ban!ing institution or investors&
- The" reflect the s!ills and abilities of the business owner&
- ( business plan ust:
- Cave a concise stateent of goals&
- Cave detailed strategies for achieving goals&
- Cave tools for easuring perforance =brea!-even anal"sis, forecasted profit 4
loss, ar!et research>&
- e able to be presented to sta!eholders, investors, potential sources of finance,
accountants etc&
- 3eflect the s!ills and abilities of the owner&

$.2 anagement
- Manageent coordinates resources =inputs> to achieve the stated business goals&
- 3esources need to be allocated and used efficientl" to axiise 5ualit" and iniise
costs&
- Manageent ust a!e the best use of liited resources&
- Manageent is responsible for the business achieved its goals&
- ( anager)s s!ill is the ost critical factor in deterining a business)s success or failure&
%taffing
- (s eplo"ees are a business)s ost iportant resource, necessar" resources need to be
allocated to hire good eplo"ees&
- 2utsourcing the recruitent process is becoing ore coon as it can be costl" and
tie consuing when done in-house&
- ( s!ills audit details the s!ills base of all eplo"ees in order to get the right ix of
eplo"ees, plan s!ill ac5uisition and future training needs, identif" wea!nesses in s!ills&
- ( s!ills inventor" is a database that outlines the s!ills, abilities and 5ualifications of
eplo"ees&
- (ppraisals are the process b" which an eplo"ee)s wor! behaviour is evaluated and the
results are used to provide feedbac!, showing where iproveents are needed and wh"&
- The" can be used as a wa" of assessing s!ill base and deterining training needs and
who will be prooted, deoted, retained or fired&
,eams
- enefits associative of tea wor! include:
- Idea sharing&
- Infored decision a!ing&
- 7ess need for supervision eaning eplo"ees onitor each other closel"&
- Eplo"ee cooperation&
- Iproved output&

$.3 ,rend +nalsis

- Trend anal"sis is a process of investigating changes over tie and loo!ing for a pattern
=trend> in order to predict the future&
- Trend anal"sis is a powerful tool which assists SME owners achieve business success
helping with forecasts&
- ( trend anal"sis highlights patterns and changes in business perforance&
- Sales, revenue, operating costs, gross and net profit can be graphed&
- Trends are used to forecast changes when budgeting for the future&

$.$ "dentifing and %ustaining Competiti#e +d#antage

- usiness success and failure is lin!ed =in the long ter> to a business)s abilit" to develop a
strateg" that allows it to gain a copetitive advantage over other copetitors in the ar!et&
- ( copetitive advantage is where a business does soething better than a copetitor and
has the edge on copetitors in a particular area of production&
- Sustainable copetitive advantage is a copetitive advantage that is aintained over tie&
>as to maintain a competiti#e ad#antage?
1> ;osting and pricing strategies - Undercutting copetitors
- 3educing production costs
- 3educing input costs
- Specialising labour in production
- (utoation =replace labour with achines
- 2utsourcing expensive parts of the process
- Increased production =in bul!> reduces unit costs
- 2verseas production is cheap labour 

$> +ifferentiate products
- roduce high end 5ualit" or low end throw awa"
goods
- Cave an innovative design
- rand nae and iage
- 7ocation and level of service
- Mar!et research K pitching ar!eting at target
ar!ets

> Sta"ing ahead of copetitors - 3esearch 4 product developent

- atents and cop"rights on inventions
- ;reating barriers for entr" to copetitors
- 7obb"ing governent and interest groups
- Exclusive contracts with other businesses

$. +#oiding o#er=e0tension of finance and ot*er resources

- ( business can overextend financiall" b":
- using hire purchase and#or leasing coitents ade on cars, e5uipent etc&
- purchasing excess stoc!&
- eplo"ing too an" staff for the business current needs&
- 2verextending expenditure can create a high degree of business ris!&
- To avoid overextending financiall", a business should:
- underta!e thorough planning&
- avoid over dependence on debt financing&
- engage in long-ter financial planning&
- grow at a sustainable rate&
- 2verextension of stoc! ties up a business)s cash and can lose revenue&
- 2verextension of staff results in eplo"ing too an" staff&

$. @sing ,ec*nolog

- 9ew technolog" changes the wa" business operates&
- (dvantages include :
- More efficient production ties&
- Easier counication =resulting in reduced dela"s, reduced labour costs, realtie
sharing>&
- E-business is using the internet to conduct business =e&g& eails, schedules, licenses>
- E-coerce is using the internet to bu" and sell goods and services&
- Using new technolog" incur an initial cost however, the long ter benefits are far greater&

$.4 Economic Conditions

- The econo" affects the countr" as a whole& The better the econoic situation, the ore
willing custoers are to spend one"&
- ( nation)s econo" will experience periods of boo and recession&
- In periods of strong econoic activit", consuer spending, sales of goods and services,
production, and profits are rising&
- In periods of wea! econoic activit", consuer spending, sales of goods and services,
production, and profits are falling&
- Econoic indicators include:
- Inflation&
- Spending levels&
- +eand&
- Econoic growth&
- Uneplo"ent rates&
- Savings&
- Interest rates&
- ?oreign investent&
- ;urrenc"&