Prelim Business Studies Study Notes: by Andrew Newbound

Prelim
Business Studies
Study Notes
By Andrew Newbound
Andrew Newbound 2013
The Nature of Business

Topic 1
Role of Business
Topic 1.1
What is A Business
A
collection of activities that are

performed to design, produce, market,
deliver and support its goods and
services.
Its owners do this to receive benefits
The Nature of a Business

- Produce goods and services
Goods
Tangable object
The clothes we wear, foods we eat,
television sets we watch and cars we
drive
Services
Coles, Woolworths, Aldi

Intangible
Increase
in services, decrease in goods

Profit
Difference
between the price at which a

good or service is sold and the costs of
getting the good or service to market
Gross profit
Net
profit
Employment
Workforce
had changed
Skilled jobs
Young people in education and training
Aging
Increase in female participation
10,000 fewer people employed in
manufacturing than 5 years ago
Businesses
moving to low cost countries

Incomes
Employees
reward for working in a
business
Choice
Market
economy
Customer demand determines what

products will be sold in the market
Regulation
to protect consumers
Dangerous products
False claims
Regulation
Government affected by a free market lobby

Restrict
the market
Innovation
A
new idea that relates to a better

product, a service or a way of doing
something
Niche market
Buyers with specific, unmet needs
Entrepreneurship and Risk

Risks
associated with marketing new

ideas for products or new ways of
marketing or distributing better and
cheaper products
Wealth
Wealth
creation
People invest in business

Want
to grow the value of their wealth over
time
Dividend
Payment of a share of profits

Businesses retain 50% to fund future
growth
50% in form of dividend
Quality of Life
Providing
appropriate rewards for work

Challenging and interesting work
A safe working environment
Effective training
Enable employees to do work well
Influences in the
Business Environment
Topic 1.3
The Business Environment

Anything
that affects the operation of a
business
Efficient Managers
Constantly
monitoring the business

environment to pick up any change that
may impact upon their business
External Influences on
Business
Outside
the control of a businesss

managers
External Influences
Economic
Attributed
to the economic cycles
Predictable long-term pattern of changes

in the national income
Economic Cycle
Economic Cycle
Economic Cycle
Australia
Sustained growth in spending for ~17yrs

following 1992 recession
Loss in confidence
2008/09
GFC
Rapid decrease in spending
Monetary policy
Determined
by RBA
Stabilise economic activity
Economic Cycle
Recession
Unemployment rises
Spending falls
2 consecutive quarters of negative growth
Inflation
Demand begins to outstrip supply

RBA decreases interest rates
Reserve Bank of Australia

Stability
of Australias currency
Maintenance of full employment
Economic prosperity of people of
Australia
Welfare of people of Australia
2009 GFC
US
householders defaulting on
mortgages
Those reliant on such funds could not be

payed
Economic
stimulus
Minimise impact of downswing

$53 billion by Rudd Labor Government
$900
per household
Recessionary Cycle
Boom Cycle
Financial
More
significant with deregulation and

globalisation
Important
Business inputs must be financed

Raw
materials
Equipment
Financial Derivatives
Financial
securities
E.g. contract
Enable
businesses to manage risk more

efficiently
Contract between apple growers and

apple pie manufacturers
Ensure
price doesnt change
Bad for either if price changes
Financial Derivatives
Qantas
Hedging
Transferred risk of fuel prices to hedge

fund
Business
specialising in risk management
Competitive advantage over Virgin when

fuel prices rose
Geographic
Location
of a business
Australia in Asia Pacific region
Access to rapidly growing markets

China
India
Lower
Mines
transport costs
in regional Australia
Difficult to get skilled labour

Fly-in-fly-out
workforce
International Trade
All
economic transactions that take

place between consumers, businesses
and governments in different countries
Businesses specialise in goods and
services that are produced more
efficiently
Social
Attitudes,
values and beliefs of a society

Changes in fashion
Make companies involved very

susceptible
Aging
population
Opportunities
Leisure
and travel needs

Heath and medical needs
Social
2
income families
More women working full time
Opportunities
Prepared
Healthy
and takeaway meals
lifestyle
Rejecting soft drinks for bottled water
Immigration
Diverse Australian population

Legal
Framework
of laws and regulations that

governs the operations of a business
Fair Work Act 2009
Smaller number of awards and minimum

conditions for employers
Political
Ideas
that come from the political

parties
E.g.
Resources rent tax

Carbon tax/emissions trading scheme
Not
possible to insure against
Political
Political
Institutional
Not
only established organisations
Unions
Trade associations
More
importantly
Established practices/customs in a
business
Change
= essential
Make change more difficult
Technological
Important
because of rate of change

How things are done in business
E.g.
US car making process

= completely automated
Woolworths
Minimise
component in distribution
Saved over $4.5 billion with new system
Competitive Situation
Market
where other businesses are

providing products to meet the same
consumer need
Competitive Situation
Types Of Market Concentration

Monopoly
Oligopoly
Consists
firm
No competitors
E.g.
Australia post
Railcorp
of a small
number of larger
firms that dominate
the market
E.g.
Banks
Oil companies
Car manufacturers
Types Of Market Concentration

Monopolistic
Competition
Large number of
buyers and sellers
Differentiated goods
E.g.
Clothing
manufacturers
Local retailing
Perfect Competition
Large number of
small businesses
that sell products
that are the same
or similar
E.g.
Fruit & vegetable

growers
Markets
Market
Place in the commercial world where

goods and services are sold
Internal Influences
Things
managers can influence
Products
Businesses
competing to produce a
product that better meets the needs of
the competitors
Location
Resources
Resources
Way
are acquired
Affect
Quality
value
Management
Attitudes
Manager
Employees
Best
and values
practice
Way the competitive businesses in the

industry do things and clearly involves ideas
Efficiency
Quality
production
High levels of customer services
Management Flight Centre

Family,
village, tribe
Business teams
Stakeholders
Any
group/individual on whom the

decisions/ actions have an impact
have an interest in things a business

does
Shareholders
People who have a share in the

ownership of a company
Stakeholders
Types of Businesses
Topic: 1.2
Size
Local, National, Global
Global: Advantages
Most
efficient production resources

Distribute risk
Geographic
Currency
fluctuations
Industry
Industry
Industry
Shifts
away from primary industry into

the services sector
Developed nation
Primary
sector < tertiary sector
Feeds into other aspects of the economy
Legal Structure
Legal Structure
Legal Structure
Legal Structure
Cooperatives
Group of people with a common interest

Members invest in co-op which carries out their
buying/selling for them
Often used in agricultural industries
7 members
Not required to pay tax on profits
Limited liability
Legal Structure
Types of Businesses
for Legal Structures
Not
all legal structures suitable for all

businesses
If the shoe fits
Sole
trader
All decisions = direct actions of manager

Name does not make a separate legal
enterprise
Types of Businesses
Partnership
agreement
Reduce likelihood of disputes

Profit
distribution
Working arrangements
Structure changes
What happens if money is owed to creditors
Types of Businesses
Medium
Large business = company
High amount of finances needed

Specialist managers
Large enough to avoid downside of
limited liability
Sole Trader
Advantages
Low
cost of entry
Simplest form
Complete control
Less costly to operate
No partner disputes
Owners right to keep all
profits
Les government regulation
No tax on profits, only on
personal income
Disadvantages
Unlimited liability for debts
End of business when owner
dies
Difficult to operate if sick
Need to carry all losses
Burden of management
Need to perform a variety of
tasks
Difficulty in raising finance
for expansion
Partnership
Advantages
Low start up costs
Less costly to operate
Shared responsibilities and
workload
Pooled funds
Minimum gov regulation
No taxes on business profits
Business can keep going
upon death of 1 partner
Disadvantages
Unlimited
liability
For all debts
Disputes
Difficulty
in finding
a suitable partner
Divided loyalty
and authority
Company
Advantages
Public finance
Limited liability
Can transfer ownership
Perpetual succession
Long life
Experienced management
Greater spread of risk
Lower company tax rate
Growth potential
Only need 1 shareholder and 1
director
Disadvantages
Cost of formation
Double taxation
Personal liability for debts if
directors knew that business
was unable to pay debts
Yearly report of audited
accounts
Public disclosure
Inefficiencies from becoming
too large
Franchise Arrangement
- Franchisor
Advantages
Fast and selective
product distribution
Avoids costs of
construction
Does not have to
operate outlets
Agreement ensures
some control
Motivated franchisees
Disadvantages
Unsuitable
franchisee
Disagreement
over conditions
and terms of
contract
Franchise Arrangement
- Franchisee
Advantages
Limited finances needed
Guaranteed customer
base
Established name
Management
back-up
Proven methods of
business
Disadvantages
Franchisor retains great
deal of control
Limited individuality
Disagreements over
conditions and terms in
the contract
If too successful,
franchisor may open
own outlet
Boost Juice Case Study

80%
of businesses fail in first 3 years of

operation
20% of franchises fail in first 3 years of
operation
Business Growth &

Decline
Topic 1.4
The Business Life Cycle

Series
of predictable phases businesses

experience as they develop
Establishment
Characteristics
Customers not familiar with
product
Retailers reluctant to put on
shelves
Takes time to establish product
Expenses higher than sales
revenue
Negative profits
Businesses lose money in
establishment stage
Strategies
Adequate savings to
address cash problems
Effective marketing
strategies
Undertake business
courses to develop
management skills
Research government
regulations
Growth
Characteristics
Rapid
increase in sales
Pressure on resources,
particularly cash and
labour
Cash problems
develop
Competitors attracted
by increasing sales
Strategies
Prepare to work even
harder
Effective credit policy
to collect debts
Consider factoring
Select time to employ
professional managers
Maturity
Characteristics
Sales
level off
Market is saturated
Time to employ
professional
managers
Focus on remaining
competitive
Strategies
Focus on cutting costs
Examine all aspects of
value chain to cut
costs
Diversify into new
products
Find new ways to grow
value of business
Post-maturity
Characteristics
Final stage of life
cycle
Falling sales and loss
of market share
Cash flow problems
emerge
Business starts to
decline
Strategies
Improve the competitive
position of the business
through cost cutting
Renewal may be a
possibility with new
products
New managers with new
ideas
Manage the closure
effectively and ethically
Integration
Factors Contributing to
Business Decline
Failure
to embrace change
Products
Technology
Production techniques
Lack
of finance
Business culture
Environmental influences
E.g. economic recessions

Voluntary Cessation
Owner
decides to end business
E.g.
Retire
Business purchased by another and
customers, employees etc. are
incorporated
All
stakeholders interests are considered
Involuntary Cessation
Forced
ending of a business
Creditors take legal action to wind up
business
Liquidation
Turning
assets into cash

Distributed to secured creditors
Remaining distributed to unsecured
creditors
Sometimes at a proportionate amount

E.g.
50c in $1
Sole Trader Cessation

Voluntary
Pay bills and stop trading
Involuntary
Court orders trading to cease

Debts paid
Bankruptcy may be declared
Death
of owner
Business may die too

OR succession
Partnership Cessation
Dissolved
Arrangements set out in Partnership

Agreement
If not Partnership Act honoured
Can occur
A partner dies
A partner is declared bankrupt
A partner committed fraud
By court order due to creditors not being paid
Company Cessation
Wound up
Voluntary
Acquire solvency declaration so can pay bills

Profits divided amongst owners
Trading ceases
1.
2.
3.
Involuntary
Courts order a liquidator
1.
2.
3.
Assets turned into cash
Creditors paid in order of priority

Owners, shareholders liable to value of ownership
Problems Arising From

Liquidation

Liquidation

Liquidation
Business Management
Topic 2
Nature of Management
Topic 2.1
Management
Business
activities
Planning
Leading
Organising
Controlling
Process
of working with and through

other people to achieve business goals
Features of Effective
Management - Orica
Maintain
business culture
Safety, health and the environment

Trust
Commercial ownership
Own
something to make money out of it
Features of Effective
Management - Orica
Maintain
Creative customer solutions

Good
business culture
customer service
Working together
Collective
knowledge
Increase sales
Effectively use limited resources
Skills of Management
RSVP DA FIC
Skills of Management
Communicate
effectively
Lead
Delegate
Motivate
Negotiate
Richard Branson
Interpersonal
Negotiation
ACCC
Motivation
Communicating
Media
Communication
Transmission
of ideas and information

throughout a business
Conveying meaning
Correct translations if necessary
Avoiding
ambiguity
Analogies dont add confusion
Communication
Listening
Ideas of others taken into consideration
Efficient
use of technology
Employees can quickly grasp concepts
Strategic Thinking
Achieve
future goals in uncertain

business environment
Fluctuations in economic cycle
Strain
on credit
Maybe cut unnecessary spending

Maybe put future projects on halt
Vision
Manager
imagines what business would

be like in a period of time
Business as a whole strive towards
common goals
Without
Unable to best manage a business
Problem Solving
Address
problems as they arise within a

business
Problem Solving
Decision Making
Choose
between alternatives
Best make positive decisions for the
business
Acquire and analyse information
Anticipate competitors moves
Resource allocation
Without
Competitors gain advantage

Flexibility
Tackle
challenges in dynamic business

environment
2009 GFC
Reduced customer demand

Tackled incorrectly
Inadequate
resources upon market return
Adaptability to Change
Adapt
to changes in consumer demand

McDonalds
Consumers wanted healthy lifestyle

New, healthier products
Healthier means of manufacture
Kmart
Consumers wanted cheaper products

Removing underperforming and expensive items
Everyday Low Prices
Reconciling the Conflicting

Interests of Stakeholders
Stakeholders
have different goals
Customers: Max benefits
Shareholders: Min
costs
Employees: Max benefits
Shareholders: Min
costs
Business: Max benefits
Suppliers: Min costs
Community: Max benefits

from things like low pollution
levels
Shareholders: Min
costs
Reconciling the Conflicting

Interests of Stakeholders
Mining
company caused high lead levels

in children
Decide on stance on issue
Problem solving
Decide on alternative
Decision making
Reduce dividends to
shareholders
Decision making
Pay out annual

compensation
Interpersonal (how much)
Pay out 50% of all medical

fees immediately
Interpersonal (how much)
Reduce corporate bonuses
Interpersonal
(how
much)
Andrew
Newbound
2013
Demonstrate out objective
Communication
Achieving Business Goals

What
a businesss stakeholders want it to

achieve
Profit
Difference between revenue and cost incurred
Dividends
Portion of profit distributed to shareholders
Retained
profits
Portion of business profit kept by business to

sustain future growth
Market Share
Percentage of the market a particular
businesss products has
Reducing price of products
Able to increase revenue

Increase
Less profit per individual product

If
overall profits
cost of production is constant
Less innovation
Other
mechanism of increasing market share

Growth
Increase
in business revenues from year to year

Opening additional stores
JB Hi Fi
Selling
BHP Billiton
Luring
more existing products at higher prices

clientele
Better than competitors

Offering something that competitor cant
Increasing
value
Growth
JB
Hi Fi
Rapid growth
Harvey
Norman
Maturity stage
Constant growth
Low
in comparison
Share Price
Price
at which shares are bought and

sold on the secondary market
JB Hi Fi
1000% growth from 2003-2010 (since

listing)
Increase in market share reflective
40% profit returns in half year period
Social
Providing
employment
Specific initiatives such as mentoring
indigenous people to get full time work
Environmental
Concerned
with sustainability
Walmart
Sell products that sustain resources and

the environment
Throughout
whole supply chain
Cannot sell products without
Meaningful contribution
Achieving a mix of the above

goals
Walmart
Specific goals across supply chain

Barcode tracking technology
Reduce
staffing levels
Cut costs
Environmental
Reduce
greenhouse gas emissions
Staff Involvement Innovation

Kmart
Mt Druitt
Dressing up as characters of products

they sell
Boost
sales
Entice customers into the stores
Excitement for less profitable products
Staff Involvement Motivation
Make staff enjoy the workplace more
Boost sales, effectiveness
Staff recognise their contribution to

business success
Kmart
Rewarding good performance

Kmart
gift cards
Bonus pool
Every
1% of sales above budgeted amount

Staff Involvement
Training
Employees
are able to perform their role
well
Kmart
Induction
Continuous training
Particularly
in customer service
Main competitive advantage
Staff Involvement - Mentoring

Experienced
person trains and counsels

another employee
Expensive
Highly effective
Highly effective and proficient members

Difficult
aspects of the role
Management
Approaches
Topic 2.2
lassical approac
Planning
Setting
of targets and goals

Setting time frames
Prioritise activities
Suggest resource/financial allocation
Defines parameters
lassical approac
Organising
Allocates
the actual resources and
money
Determines organisational design
Assigns work to employees
Sets the channels of communications
lassical approac
Controlling
Reviews
actions undertaken
Creates performance reports
Accounts for variance between planned
and actual performances
Suggests new parameters
lassical approac
Hierarchical organisational
structure
Small
spans of command
Managers only in charge of a small group

of people
4-14
Division
of labour
Job divided into small, usually unskilled

tasks
Rigid
subordinates
chain of command
Strict line of authority from top to bottom

lassical approac
Autocratic Leadership
Style
High
level of direction
Little/no participation of subordinates
lassical approac
Taylor
Taylors
four principles of management
Develop
Select
Divide
Cooperate
Eliminate
wasted movements
Best qualified workers for a job
Incentive systems
lassical approac
Henri Fayol
More
focussed to all managers than

Taylor
Lowest level
Universal
set of functions
Widely followed by managers today
lassical approac
Fayols 14 Principles
Behavioral
approach
Behavioural approach
Behavioral
approach
Teams
Self
managing teams
Dont need close supervision

Wider
Flat
span of control
organisational structure
Behavioral
approach
Participative/democratic
leadership style
Open
communication channels
Gain feedback
Better business decisions
More
motivated employees
Loyalty
Productivity
Behavioral
approach
Theorists
Behavioral
approach
The Hawthorne Studies

Western
Electric Company
1924-1932
Productivity
increased when the lighting

was turned up OR down
Being accepted by the group
Behavioral
approach
The human relations

movement
Importance
of employee satisfaction
Behavioral
approach
Douglas McGregor
Behavioral
approach
Abraham Maslow 5 Needs
Comparative
Classical-scientific approach
Behavioural approaches
Contingency approach
Uncertain
future
Competitors react to changes more
quickly
Business can meet customer needs
more effectively than competitors
Market share increases
Important
to react quickly
Management Process
Topic 2.3 Volume 1
Business Functions
Interdependence
The different functions of the business

working together in order to achieve
something
Synergy
The whole is greater than the sum of the

individual parts
Business Functions
Coordination
Ensuring
that the different parts in a

business work together effectively
Incitec Pivot
Goals in all 4 functions

Communicate goal
Improve employee productivity
$530 million net profit
Operations
Transforming
inputs into outputs
Quality
Repeat business
Word-of-mouth new business
Above competitors
The Production Process

Series
of stages a product progresses

through to be transformed
Adds value to product
Quality Management
Quality
Manufacture of services to meet predefined standards/specifications

Customers switch if dont
Coca
Cola
Contain advertised amount

Taste like Coke
Be carbonated
Quality Management
Minimisation
of variation to defined
limits
Building systems and procedures to
ensure
Standards Australia
Develops
and maintains expectations of

certain products
Safety
Performance
Reliability
Works
with international standards

agencies
Positive contribution to Australia

Purchasing/supply chain
management
Supply
Range of suppliers from which the

business purchases materials and
resources
Lead
chain
time
Length of time it takes for the business to

actually meet the needs of the customer
through provision of the good or service
the customer/client seeks
Purchasing/supply chain
management
Supplier
rationalisation
Process a business goes through when it

reviews and reduces the number of
suppliers it purchases from
Best
value for money
Quality assurance
Systems
and procedures to ensure

error/fault will not occur
Incitec Pivot
Computerised bag loading

Exact
quantity in each bag
Much growth in recent years
Total Quality Management

(TQM)
Japanese
concept
Constantly striving to improve all aspects

of the business
Kmart
Highest possible level of customer service

Assist
customers who require assistance

immediately
Kansei
24hr trading to improve convenience

Management Process
Topic 2.3 Volume 2
Role of Marketing
Find
out what customers want and

develop products that will meet what
they want
Target Market
The
component of the total market

which the business will focus its
marketing
Identification of the Target

Market
Market
segmentation
Breaking down market into small,

manageable bits
Coca Colas lack of products for infants
Differentiated
marketing
Focusing marketing on a number of

segments
Fords range of products
Customer Characteristics
Geographics
Where consumer lives
Demographics
Features of the population
Psychographics
Characteristics of the target market
Marketing Mix
Combination
of the 4Ps to achieve

business objectives
Product
Differentiation
Adding features not offered by others
Brand
Positioning in market
Associating logo/name/symbol with
characteristics
Reliability/syling/value
for money
Pricing
Penetration
Setting prices below competitors

Woolworths and Coles price wars
Suited for markets with competitors
Skimming
pricing
pricing
High prices only attracting top end of market

Maximise profits
Quickly recoup production costs
Few competitors
Promotion
Promotion
Place
Management Process
Topic 2.3 Volume 3
Cash Flow Statements

What
is going in and going out on a

daily basis
Expenditure
Capital
expenditure
Money a business invests in assets

E.g. property, equipment, computers
Revenue
expenditure
Cash a business spends to generate

revenue
E.g. advertising, stock
Credit
Bank
loan
Allows a business access to large amounts of

funds paid back over an extended period of
time with interest
Overdraft
A good source of short-term finance with a

pre-approved credit limit
Trade
credit
Extended trading terms offered to encourage

higher sales
Reduce sales price to improve

cash flow
Able
to pay creditors on time

Prevent wastage
Generate cash
Increase volume of sales
Cash Flow Statement

Jan
Feb
Mar
Opening
Balance
$2000
$4000
$0
Cash Inflow
$5000
$2000
$3000
Cash Outflow
$3000
$6000
$5000
$0
-$2000
Closing Balance $4000
Definitions
Liquidity
Ability to pay short term debts
Profitability
Measure of the effectiveness of using

resources available to a business
Resources
Assessment of business
performance
Income Statement
Measures
the performance of a business
AKA
Profit and loss statement

(P&L)
Revenue statement
Statement of earnings
Brackets
deduction
Formulae
ypical Income Statement

Revenue Statement of PMQ Motor Supplies for year ending 30 June
2006
$
Revenue (Sales)
300,000
Opening Stock
50,000
Purchases
40,000
Closing Stock
35,000
Total COGS
55,000
Gross Profit
245,000
Expenses
Wages
105,000
Electricity
15,000
Advertising
25,000
Total Expenses
145,000
Gross Profit Ratio
Reflects margins between the business

purchasing costs and its selling costs
Gross Profit Ratio

Solving
a change
Cheaper supplier
Buy in bulk
Hold less stock
Buy local
Alternative warehousing Absolute last alternative
Increase mark-up on good/service
Gross Profit Ratio
Net Profit Ratio
Reflects
operating costs/expenses of the

business
Improve
Decrease expenses faster than sales

Increase stock turnover
Net Profit Ratio
* Especially if compared to
GPR
Expense to Sales Ratio
Necessary
Higher expenses create less profitability

Should not rise faster than sales
Ratio Answer Process
Revenue Statement Strategies
Assets
Anything
the business owns that has

financial value and will provide future
economic benefit to the business
Assets
Liabilities
Any
monetary amounts owed as the

result of past events
Owners Equity
The
money the business is worth to the

owners
Balance Sheet Definitions
Liquidity
Whether
the business has enough cash

in and short term assets to cover debt
Highly liquid assets
Can be changed into cash quickly
Safe working ratio =

2:1
Expressed as a ratio
_:1
Solvency
AKA
Debt to equity
AKA Gearing
Ability of the business to repay debts as
they fall due
Insolvent
Cannot pay debts on time
Indicates
long term stability

Relationship between debt and equity
funding
Solvency
Expressed as a ratio
_:1
High >
1.5:1
Solvency
Improve working capital and

liquidity
Improving the solvency
Management Process
Topic 2.3 Volume 4
Human Resources Process
Recruitment
Pool
of potential applicants is developed

for jobs
Internally
Transferring between roles
Externally
External means
Best
possible candidate to apply
Selection
Choosing
1.
2.
right person for job

Candidates apply for job
Series of interviews/employment tests
Eliminated at each stage
.See
if employee is adequate for the task
Training and development

Training
Providing skills required to do job well
Development
Employee is made more valuable resource

to company
Up skilling
Prepare employees for FUTURE jobs,
responsibilities
Modern Awards
Basis
of employment
10 key aspects of employment
Ensure fairness for workers in negotiating

contracts
Wages
Leave
Dispute
resolution
Enterprise Bargaining
Employees
in a certain enterprise
bargain as a collective
Higher wages
Trade offs
E.g. increase in productivity
Separation
Voluntary
Employee leaves of own choosing

E.g. redundancy
Agreed
by employee
Involuntary
Employee is dismissed
Not
of own choosing
Ethical Business
Behaviour
Lack
of trust
Between customer and seller

E.g. online business arrangements
Bribery
Acceptable in 1 location, not another
Ethical Business
Behaviour
Environmental
Profitable
Negatively
Online
issues
affect environment
scams in general
Damage a company
Management and
Change
Topic 2.4
Internal influences
External Influences
The Change Process
Business Information Systems

Planned
system
Collect info from internal and external
environments
Store, process and disseminate date
Form managers require
Setting Achievable Goals
Resistance to Change
Financial
costs
Purchasing new equipment

Redundancy payments
Retraining
Reorganising plant layout
Inertia
of managers/owners
Resistance to Change
Cultural
incompatibility in mergers and

takeovers
Staffing
Deskilling
Acquiring new skills
Loss of career prospects
Management Consultants
Possess
greater understanding of best

practices within industry
Best manage change
Set out framework
Meet objectives
Business Planning
Topic 3
Small to Medium
Enterprises
Topic 3.1
Business Size
ATO
Business Size
Small
business
Independent ownership and operations
SME
A business employing fewer than 15

employees
Role of SMEs
Employment
99% of Australian workforce

Retain during GFC
Part
of supply chain
Meet needs of community
Acutely aware
Innovation
Risk taking nature

Gross Domestic Product (GDP)

Sum
total value of goods and services

produced in Australia in a year
SMEs produce 58%
Success and/or failure of SMEs

Fail
Success and/or failure of SMEs

2009
= higher failure rate than 2008
Decline in consumer confidence

GFC
Inadequate
Retail
funds to repay liabilities
is most susceptible
Cut by consumers in economic weakness
Retained Profits
Proportion
of businesss profits kept

within the business
Not distributed to owners
Promote
growth
Influences in Establishing a
Small to Medium Enterprise
Topic 3.2
Qualifications
Recommended
Certificate IV in small business

management
Diploma of business
Bachelor of Business
Skills
Interpersonal
skills
Vision
Communication skills to communicate
vision to others
Motivation
Desire/willingness
to do something
Work within the business comes easier
Maximise productivity of other coworkers
Entrepreneur
Organises
and operates a business

Prepared to take greater than normal
financial risks
High risk = high return
Entrepreneurship
Entrepreneurship
Willingness
and ability to turn ideas and

capabilities into reality
Entrepreneur
Identifies a need
Develops the idea
Takes risks
Develops strategies
Is motivated
Entrepreneur
Persistent
Committed
Patient
Positive
Optimistic
Works long hours
Active
Hard working
Practical
Reliable
Helpful
Organised
Motivated
Versatile
Flexible
Efficient
Dependable
Entrepreneur
Experienced
Realistic
Dynamic
Responsible
Problem
Determined
solver
Punctual
Quick
thinker
Self confident
Has
integrity
Thorough
Cultural Background
Ideas,
customs may lead down path

Expectations of individual within culture
Gender Influence
Business
opportunities accessible to
women
Ecommerce
Retail
Hospitality
Health roles
Children
Hair dressing
Sources of Information
Competition
Several
businesses try to meet

customer needs more effectively than
rivals
Type of market
mass broad market

niche specialised market
How
to make business competitive
Develop customer base

Gain market share from competitors
Establishment Options New
Establishment Options
Existing
Establishment Options
Franchise
Goodwill
The
value of the reputation of a

business
Difference between total value of assets
and the sale price of the business
Existing Business Advice
Thoroughly check operations
Work in business
Finances more likely to lend
Access to financial records
Goodwill may be associated with owner,

not business
Intellectual property
Any invention/creation of the owner

considered to be their property
Franchise
Equipment
Supplies
Training
Ongoing
management assistance
Collective buying power
Brand recognition
Competitive advantage
Marketing
Differentiation of product
Unique brand
Loyalty
Location Visibility
Attract
passing trade
Easy to find for customers and suppliers
More important for retail than
manufacturing
Location Cost
Purchase
vs lease premises
Areas with higher lease/rend
Lease
Tax deductable
Negative impact on cash flow
Location
Proximity to Suppliers
Cost
of transport
Timing of delivery of stock
Proximity to customers
Accessible to target market
Location
Proximity to Support Services
Activities
needed to assist core

operations/prime functions of business
Outsourcing of various functions
Accountant
Marketing specialist
Access
to technology
Internet reduces importance of this
Finance Sources
Cost of Borrowing
Interest
you pay
Zoning
Not
all businesses are permitted in all

locations
Environmental Act
Particularly important for home
businesses
Training
Employees
gain skills needed to do job
well
Wage and non-wage outcomes

Wage
Annual salary
Non-wage
Other financial benefits

Superannuation
Annual leave loading
Fringe benefits
Taxation Federal Taxes
Company tax
PAYE tax
Pay as you Earn income tax on employees

Forwarded by businesses to Fed. Gov.
GST
30% tax levied on the business profit
Imposed on most private consumption (10%)
FBT (Fringe Benefits Tax)
Applied to non-wage benefits

Taxation State Taxes

Payroll
Payed by employers whose payroll >$50k
Land
tax
tax
A tax payed of 1.6% of the value of the

land of all land owners in NSW
Taxation State Taxes

Superannuation
9% of the salary paid into a complying

fund
Registered
with the Insurance and

Superannuation Commission
Leave
loading
17.5% on top of the employees salary for

prescribed period of leave
Superannuation
Quarterly
contribution of 9%
Workers <70 years
$450+ per month
Full time workers
The Business Planning

Process
Topic 3.3
SWOT
AL
N
R ME
E
S
T
IN SES
AS NT
L
A
RN ME
E
T SS
X
E SE
AS NT
Vision
Ideal
of what a business will look like if

all goes to plan
3-5yr period
Long Term Growth
Vision & Mission

Statements
Organising Operations
Market Analysis
Determining
whether a business has

sufficient potential market in order to
succeed without being squeezed out of
the market
External influences
Sales Forecasting
4Ps
Market Analysis
Market Analysis
Key Success Factors
Forecasting
Giving
managers the best possible

information they need to make the best
possible decisions in an uncertain
environment
Break-even Analysis
Break-even
A state where
No gain, no loss
Total revenue
Amount of money brought into a business through
the sale of its products
Total costs
Amount of money the production consumed for a
business
Break-even Analysis
Cash Flow Projections

Forecasting
of the quantity of finances

moving from one aspect of a business to
another
Set out basic cash requirements
Cash Flow Management

Credit
policy
Generous discounts to customers who
pay early
Link periods of surplus with large, fixed
payments
Sales Reports
Budgets
Form
of highly effective control

Determine how successful a business
plans are
Taking corrective action
Corrective Action Reports

Prevent
Repeat mistakes
Loss of customers
Dissatisfied customers
Poor quality products
Unhappy staff
Corrective Action Reports

Better
staff morale
Reason for new customers
The Business Plan

Executive
Summary & Overview

Operations plan
Daily operations
Systems & Procedures
Physical Layout
Organisational structure
The Business Plan

Marketing
plan
Market research and target market

Sales Objectives
Analysis of competition
Marketplace potential
Marketing strategy and promotional
activities
The Business Plan

Financial
plan
Set-up Cost
Cash flow Forecast
Record-keeping systems
Assets and Liabilities
Critical Issues in
Business Success and
Failure
Topic 3.4
Business Plan Components
Business Plan Types
Management -Staffing
Impact
upon costs, costs through profits

Overall productivity
Teams
Employees feel a more significant

component of business success
Trend Analysis
Effective
management
Gauge past events
Market segmentation
Rapid response to issues
Over-extension
Holding
too much stock

Investing too much in plant & machinery
Spending heavily on advertising
Without results
Too
many staff
Over-extension
Borrowing
too much capital
Highly geared
Failing
to collect money owing

Excessive drawings
Finance Advice
Use
personal savings
No debt servicing costs
Lack
Primary reason for failure

Under capitalisation
Loan
of finances
requirements
3 years financial statements

Tax returns
Business plan
Sales projections
Finance Advice
Budgeting
Sufficient income
Check industry average
Business
is vital
plan
Effective management of savings
Avoid Overextending
Financially
Business planning
Cash flow projections

Establishment costs
Budgets
Financial statements
Business goals and objectives
Avoiding overdependence on debt

financing
Avoid problems in weak economy

Avoid Overextending
Financially
Long
term financial planning
Anticipates future problems

Plan future direction
Growth
Start
and expansion
small
Expand slowly
E-Business
Using internet to conduct business
Find information
Communicate via email
Online working, paying accounts
Research market conditions, industry
trends, economic forecasts
Markets goods and services via its
website
Lodge forms, apply for licences
E-Commerce
Buying
and selling of goods and services

via the internet

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Prelim Business Studies Study Notes: by Andrew Newbound

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Prelim

Andrew Newbound 2013

The Nature of Business

Andrew Newbound 2013

Andrew Newbound 2013

collection of activities that are

Andrew Newbound 2013

The Nature of a Business

Coles, Woolworths, Aldi

in services, decrease in goods

between the price at which a

Andrew Newbound 2013

moving to low cost countries

reward for working in a

Andrew Newbound 2013

Customer demand determines what

Government affected by a free market lobby

new idea that relates to a better

Buyers with specific, unmet needs

Andrew Newbound 2013

Entrepreneurship and Risk

associated with marketing new

Andrew Newbound 2013

People invest in business

to grow the value of their wealth over

Payment of a share of profits

appropriate rewards for work

Enable employees to do work well

Andrew Newbound 2013

Andrew Newbound 2013

The Business Environment

that affects the operation of a

Andrew Newbound 2013

monitoring the business

Andrew Newbound 2013

the control of a businesss

Andrew Newbound 2013

Andrew Newbound 2013

to the economic cycles

Predictable long-term pattern of changes

Andrew Newbound 2013

Andrew Newbound 2013

Andrew Newbound 2013

Sustained growth in spending for ~17yrs

Demand begins to outstrip supply

Andrew Newbound 2013

Reserve Bank of Australia

Andrew Newbound 2013

Those reliant on such funds could not be

Minimise impact of downswing

Andrew Newbound 2013

Andrew Newbound 2013

significant with deregulation and

Business inputs must be financed

Andrew Newbound 2013

businesses to manage risk more

Contract between apple growers and

price doesnt change

Bad for either if price changes

Andrew Newbound 2013

Transferred risk of fuel prices to hedge

specialising in risk management

Competitive advantage over Virgin when