2006 Business Studies Notes

YEAR 11 1/2 yearly SUMMARY
Bus-business
Nature Of a Business
PRODUCTION AND CREATING VALUE/BENEFITS
Terms:
Business- organized effort of individuals to produce and sell for a profit the products that satisfy
needs and wants of customers
Finished product- one ready for customers to buy and use
Production- activities undertaken that combine resources to create products which satisfies needs
and wants
Ingredients of production: natural, capital and labor resources
Intermediate product- product produced then used as input by another business

Value of production = value of sales value of intermediate products sold
- Total value added in monetary terms
Value added- difference b/w raw materials and amount received when product is sold
Input - materials with which a business starts
Output- final products ready to sell and achieve profit from.
Value adding- creation of extra/added value through the stages of production
Operating expenses- costs involved in day-to-day production
Wealth creating- adding to the economy
Small businesses are important for these reasons1. Satisfy needs and wants of consumers- consumers personal needs and wants are
addressed and businesses satisfy these at a hope of making a profit.
2. Improves standards of living - goods and services are made to save time, money or lives.
3. Increases wealth in economy- businesses pay taxes which contribute to running of
economy
4. Employment- approximately 80.85% of Australians are employed by small businesses.
Questions:
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What is the function of a business? = To turn inputs into outputs by adding value to it through
manufacturing. Also to satisfy the needs and wants of consumers. They also exist to provide
employment to the community.
How do businesses achieve their function= businesses first decide on creating their final
product. They collect their inputs and get skilled employees to prepare the input into a final product
and pays employees before making a profit.
Why are businesses important? = Reasons why businesses are important are:
They contribute products/ services and opportunities to our society
They serve the needs and wants of consumers and come up with goods/services
according to society demands
What activities are undertaken by a business?=

1. Production- creating goods and services
2. Organizing natural, capital and human resources
3. Distributing goods and services (products)
4. Planning finances, production and business needs
5. Forecasting sales, expenses and profit
6. Controlling production-n quantity and quality
7. Marketing products
8. Management- coordinating the business's limited resources in order to achieve specific
goals.
Importance of small-mid businesses
These businesses play an important role in Australia as they are a major source of
employment and their total output adds to the economic growth and well being of Australia.
52% of private businesses are small businesses. Also they earn more profit so they pay
more taxes than large businesses.
Many have established profitable overseas markets, which generates much needed export
income. This has an important on Australians balance of payments.
Research and development undertaken adds to the number of inventions and innovations
in Australia. Small businesses provide 40% of all the products produced each year.
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The total impact of individual small businesses is huge.
SOCIAL AND ECONOMIC ROLES OF BUSINESS

Terms:
Innovation- something established is improved upon
Invention- producing a new product
Research and Development (R&D)- activities undertaken to innovate, invent and develop more
ways of marketing and distributing
Quality of life- overall well-being; combination of both material and non-material benefits
Choice- act of selecting among alternatives
Entrepreneur- someone who starts, operates and assumes the risk of a business venture in the
hope of making a profit
The economic role of businessesWealth Creation
Individuals can
Employment
Businesses
Innovation
Businesses provide
purchase part of a
provide almost
the incentive and
business so when
80% of
resources needed to
profits are made,
opportunities for
maintain continuous
the individual gets
employment in
research and
part of the profit

Governments
Australia
development program
Companies, which are
make profit as
innovative, have
businesses give
products that are
them profit for
innovative, which lure
existing of
people to buy existing
businesses
products, which help
Consumers can
them to make a profit.

Innovation makes
purchase a
consumers lives easier
product and add
and more advanced.
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value
Owners and
investors can
receive money if
sales exceed
normal prices
Wholesalers could
also get money ad
their amount on
products could
increase.
IDENTIFICATION OF RELEVANT STAKEHOLDERS

Stakeholder- person who has interest or is affected by a business; e.g. suppliers/creditors,
employees, shareholders
Stake holder
Shareholders are
Employers
Internal- directly affected by

matters of a business and can
influence and touch a business
in some way
Internal shareholders as they
are part of a business when
there is a loss or gain.
Businesses provide them a
return on investment and
information on the running and
management of the business.
Provide employees a safe
working environment and
training. They are paid in
wages and holidays and sick
leave are provided.
Customer
External- cannot influence a

business but are affected by
them
Businesses provide quality

goods and services, which
satisfies consumer needs and
wants. Goods and services are
sold at fair prices.
Businesses take undertake
safe and environmentally
aware operations and treat the
land with sustainability.
Environment
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Government
External stakeholder because

it cannot influence business
policies. A business pays
appropriate taxes to the
government and abides by its
legislations and the
government in return ensures a
safe business environment
Businesses pay debts to the
suppliers/creditors on time and
act ethically and honestly with
products/services given.
Suppliers and creditors
BUSINESS GOALS
Financial goals- goals focusing on financial success
Financial:
Increasing profit of employees

Increasing return on investment (whether land, shares, other assets)
Increase sales
Taking and capturing market share
Social goals- aiming to bring benefit to sectors of the community; are to build reputation and to
ensure community is satisfied
Provide community services e.g. donation to charity

To introduce sustainable practices in a workplace e.g. using recycled paper
Pursue social justice issues in the workplace e.g. in employment e.g. occupational and
health act
Provide employees with employment, income and career/opportunity paths. E.g. giving
jobs
Personal goals- not planned by bus but may affect it
Increase power and status

Increase wealth
Provide business opportunities for family in present or future
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Write about a case study relating to social/financial/personal goals.

Social goals- Mc Donald's
Mc Donald's is a worldwide franchise that has huge social goals. They do lots of charity work and
help people in need in Australia. Local fundraisers e.g. fundraising balls are held quarterly every
year. Principal store promotions e.g, collecting $1 from every Big Mac on Mc Happy day is held
yearly. They have also established its own charity called the "Ronald Mc Donald House Charity".
Reasons for existence of the charity are to:
To build accommodation near hospitals for families with seriously ill children.
To have "catch up" learning programs where sick children are provided an education.
To support umbilical cord blood banks
The running of the running of the restaurants and charities are different as McDonalds the
restaurant has 22% of its money also going to charity to sponsor the charity work McDonalds does.
The charity uses this money for its resources/staff. Mc Donald's are also sponsors of sporting and
TV events that are important in society. Ronald mc Donald teams up with coca-cola who gives
charities free coke machines at every house and free coke to use in McDonald restaurants.
Market share- proportion of a products total market and bus. controls

COORDINATING THE BUSINESS
Coordinating- management task of ensuring parts of the business operate well with each other
Synergy- whole being greater than sum of parts; known as 1+1=3 effect
Effective coordination ensures minimal wastes, greater efficiency and superior products
Requires coordination of human, financial, physical and information resources
4 basic functions of managing (PLOC):

o PLANNING- establish objective, plans to achieve objectives
o LEADING- motivate, direct and guide, inspire
o ORGANISING- coordinate resources, delegate tasks, manage info, manage flow
of funds
o CONTROLLING- evaluate performance, monitor progress, execute corrective
action
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BUSINESS ENVIRONMENT
Business environment- surrounding conditions
-
Internal- micro environment; the bus has some degree of control
External- macro; the bus has little control over
BUSINESS LIFE CYCLE

Business life cycle- stages of growth and development a bus experiences
4 stages: establishment, growth, maturity, post maturity
ESTABLISHMENT
Sets up to build solid foundation or failure
Decisions need to be made legal structure, financial backing, location, costs, HR
Costs high, returns low needs to promote and build clientele
Employing and also borrowing of money/ land other assets
Little output due to lack of money
Challenges:
1. Choosing an appropriate product with distinctive advantage over the competition.
2. Finding the right size and location of premises
3. Finding the best angles for marketing
4. Anticipating the business entire financing requirements throughout its establishment phase
GROWTH
Accelerated growth, customer base, supplier network
Need to: develop HR management, policies, continual improvement in working capital,

financial management, outsource, control inventories, develop long term goals
The challenges for a business are:
Ensuring that the quality of service or production is maintained as output grows
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Developing accounting and financial information systems which provide management with
detailed information about the performance of the different aspects of the business
Managing cash flow and taking into account the financial requirements involved in
expanding the business
Taking the opportunities of improving economies of scale with the increased production
levels
Sustaining growth and not letting the successes of the business create a sense of self
satisfaction or laziness
Recruiting new employees and delegating responsibility
Redefining the role of management so that the manager's workload is not overwhelming.
MATURITY
Increased comp sales stage
Professional managers used
The responsibilities faced in this stage:
Staying responsive to changes in consumer demands
Identifying opportunities for innovation in products and services
Sustaining the motivation of management and staff and avoiding laziness or complacency
Rationalizing business operations and minimizing costs
POST MATURITY
Three stages: steady state, decline and renewal
STEADY STATE
left to operate at current level neither expanding or declining
only satisfying customer and maintaining profit
DECLINE
sales slow fail
difficult to overturn
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RENEWAL
increase in sales and profits
undergoes revival
Video: Futura graphics- a business by Sofia, Steve and Penelope.

Establishment-steve and Sofia sell t-shirts at local craft markets. They decide to establish a shop.
They had to bribe the council for allowing of shop and had devised a plan to deligate roles in the
business.
Incorporation- a year later they are experiencing cash flow difficulties and dont have the necessary
cash to purchase new equipment and undertake marketing. They had been employing people
overtime and had investments that people wanted to buy
Growth- futura graphics has grown quickly and in 2 years a thriving business but with this growth
comes problems. They are having financial worries
Diversification- futura grows but has a new competition called Lookers who grab some of futura's
market share with highly competitive pricing. Futuras response was to have penelops son as a spy.
They had got some marketing strategies and had people lie/fib about their company.
Crisis- the business reaches a place where their surfing line fails in the market place. Their
response to this crisis is to cut costs and switch/remove items. Sales go down and they liquidify
their items. They get to a point of deciding to shut down their business but then bounce back again.
Renewal- they are faced with several difficult decisions like:
1. Getting employees to stick with company
2. Starting to make decisions together and being able to trust one another
3. Exceeding products when business is restructured
4. Selling directly to the public
1. The definition of a small business according to the Australian bureau of statistics are:
Employing fewer than 50 employees
With an annual turnover of less then $10 million
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Having an asset value of less than $5 million. They are independently owned and operated and is
closely controlled by the owner/manager. The decision-making is done principally by the
owner/manager. Most of the operating capital is contributed by the owner/manager.
Three main areas of small businesses are:
Construction- there is a need for constructing infrastructure regularly for personal/business
purposes. These are spread out evenly and have a significant importance as we need
maintenance of our infrastructure and also need to expand areas occasionally. It doesnt need
much skill, which attracts people, as it's easy to get into this business.
Property and business- people need to buy/sell houses and need a real estate in every suburb.
They also a need for services on how to maintain their house and other assets e.g. cars, property
area etc.
Retail- we wear clothes all day, everyday so there are establishment and existence of businesses
as they feel consumers would want a variety of clothing's and different types. Also that you can
make profit in this industry.
BUSINESS FAILURE
Solvency- where debts can be paid
Insolvency- inability to meet debts
Bankruptcy- declaration that a bus is unable to pay off debts
Realization- converting assets into cash
Voluntary cessation- when you stop operating bus at own agreement
Involuntary cessation- forced to stop trading
Creditor- people/bus who are owed money
Liquidation- when business goes under converts assets into cash
Voluntary administration- independent administrator appointed to operate bus in hope of trading
out of financial problems
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Market share- percentage of the total sales of a product captured by a particular business in the
industry during a set time period.
Undercapitalize- the situation in which owners of a business provide insufficient capital (funds) to
meet the high cost of establishment
Break even analysis- technique commonly used to assess expected profitability of a company or
single product. It determines of what point revenue equals expenditure.
Write about business relating to business failure:
Case Study-Baby thinks it over

1. The Jurmains invented the Baby Think It Over in order to make a product to educate
teenagers about the responsibilities of parenting in an effort to help reduce the rate of teen
pregnancy.
2. Baby Think it over simulates a real life baby where the teen parents take care of the
baby, which educates the teens on the responsibilities of parenting.
3. The Jurmains have exported their products to Canada, United Kingdom, Australia, New
Zealand, Germany and Japan
4. They have also added a drug-effected version of the product that has an anguished cry,
body tremors and a delayed response to care. This has been introduced to educate teens
on the dangers of using drugs while pregnant.
5. BTIO Educational Products Inc. may face challenges, as demand might get higher with the
increase in drug and alcohol use, which means they might have to increase production and
employees.
6. BTIO educational products have been successful as they provide educational institutes a
practical way to teach teenagers about the dangers of drug and alcohol use during
pregnancy and the responsibilities of parents without endangering the lives of real babies.
MERGERS AND TAKEOVERS

Merge- when 2 bus combine resources to become a new organization
Takeover- when one bus takes control of another by purchasing a controlling interest in it
Vertical integration- bus expands at different levels of production and marketing
Backward vertical integration- integrating with suppliers
Forward vertical integration- integrating with firm it sells to
Horizontal integration- merge/takeover with firm in similar industry
Diversification/conglomerate diversification- merge/takeover in an unrelated industry
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BUSINESS ENTITIES
Business entity- any organization involved in production
4 ways to classify a business: legal structure, public/private sector, industry and

international/transnational/national
Incorporated- a separate legal body from its owners

Unincorporated- entity + owner = 1
Sole trader- business owned and operated by one person
Advantages
Cheapest body
Disadvantages
unlimited liability
Complete control
bus dies when owner dies
less costly
burden of management
all profits
difficult to expand
simplest form
less regulation
no disputes
Partnership- owned and operated by 2-20 people

Advantages
low start up
Disadvantages
unlimited liability
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less costly
disputes
pool funds and talent
divided loyalty and authority
less regulation
difficult to find partner
shared responsibility and workload
COMPANIES
Company- incorporated, registered separate legal entity
To become incorporated: 1) lodge an application with ASIC and receive cert. of Incorporation
2) complete Memorandum of Association and Articles of Association
3) Receive ACN, pay fees to ASIC
Prospectus- document stating financial info, assets and liabilities, future prospects; issued by
public companies to shareholders annually
Public companies: min. of 5 shareholders, listed on ASX and no restrictions on transfer of

shares, audited financial accounts
Limited liability- limits owners financial liability; if company goes into liquidation they cant be
forced to sell their personal assets
Memorandum of Association- document governing relationships b/w third parties. States: name,
purpose, initial capital, liabilities of shareholders, statement that subscribers wish to form a
company
Articles of Association- set of rules of by-laws that govern the internal running of company of incl.
share transfers, election/removal of directors, meetings, profit distribution, etc.
Proprietary (private) companies has 2-50 shareholders, small-medium size, usually family
owned
Cooperative- group who join for a particular purpose

Trust- relationship where trustee holds trusts property on behalf of beneficiary; trustee not liable for
debts
Franchise- license to sell or manufacture someone elses products as your own; a license to
operate and individually owned bus as if it is part of a chain of outlets/stores
Franchisor- individual granting franchise
Franchisee- person buying franchise
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CLASSIFICATION BY INDUSTRY SECTOR

Industry- bus involved in similar types of production
Primary industry- collection of raw materials; beginning of production
Secondary industry- taking raw materials and making it into a product
Tertiary industry- performing a service
Quaternary industry- services involving transfer and processing of info and knowledge
Quinary industry- services traditionally performed at home
CLASSIFICATION BY PUBLIC/PRIVATE OWNERSHIP
Public business enterprise (PBE)- govt. owned and operated; 3 types:
Govt statutory body- established under Act of Parliament to

carry out specialized function
Govt corporation
Semi govt authority
Private business enterprise- bus owned and operated by private individuals

Privatization- transferring from govt. bus to private sector
SELECTING THE RIGHT LEGAL STRUCTURE
4 main factors to consider: size of bus, ownership structure, finance, privatization
Float- raising capital through sales of shares

Venture capital- money invested in struggling bus, which has potential
CLASSIFICATION ACCORDING TO GEOGRAPHICAL SPREAD
International bus- produces output in one country but exports
Transnational Corporation (TNC) - home base in one country operating partially/wholly in other
countries
Multi domestic corp.- in many countries acting independently w/ own domestic market
Global bus- around the world; produce and sell specialized product
SMEs IN AUSTRALIA
Quantative measurement- based on stats
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Qualitative measurement- way bus is organized, structured and managed

DFAT- Dept. of Foreign Affair and Trade; uses # of employees defines SMEs as: manufacturing
b/w 100-500 employees; non-manufacturing b/w 20-500 employees
ABS- Aust. Bureau of Statistics; defines SMEs as manufacturing <100 employees; non
manufacturing <20 employees
Wiltshire Committee- 1 or 2 persons making critical decisions, relies on support services and
employees <100 people
Turnover- volume of sales in monetary terms or quantity
Microbusiness- <5-employee incl. owner
SOHO- small office, home office
GDP- Gross Domestic Product; total monetary value of goods and services produced in Aust.
BOP- Balance of Payments; records of countrys trade and financial transactions globally
Austrade- operate programs encouraging exports
SUCCESS AND FAILURE OF SMALL BUSINESS
5 pointers to success: entrepreneurial abilities, access to info., flexibility, focus on market

niche, reputation
Small bus has failed when 1). it is unincorporated and declared bankrupt
2). Incorporated and liquidated
High technology (hi-tech)- new and innovative bus depending on advance scientific and
engineering knowledge
Value chain: R&Ddesignproductionmarketingdistributionservice
THE BUSINESS ENVIRONMENT AND ITS IMPACT
Economic cycles- periods of growth (boom) and recession (bust) that occur as a result of
fluctuation in general level of economic activity
The economic cycle
The level of economic activity in country is determined by economic cycle.
It is impossible to save when a boom/recession period will happen. There are upswings and
downswings of the economy.
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Boom
High employment, inflation increase, wage increase, increased consumer spending and high
confidence by consumers, government and businesses
Down swing
Loss of confidence by consumers, government and business sales growth decreases, increased
unemployment and increase in competition between businesses.
Recession
Increased unemployment, decrease in sales (maybe inflation), not many wage rises, consumer
spending decreases and low confidence by consumers
Upswing
Sales start to increase and businesses conditions improve. Employment levels increase a
consumer confidence increases.
Customer tastes- influenced by income, age, fashion and trends

Productive diversity- range of products produced by a business
Sustainable competitive advantage- ability of a business to develop strategies to ensure it has
an edge over its competitors
4 types of market concentration: Monopoly- complete control and there is no substitute

product or services for these businesses and has the ability to decide the price of the product,
as there are no competitors.
Oligopoly- small no. of larger firms have greater control of
market and where there are few competitors (between 3-12).
These businesses are able to determine the price, as there
are so few of them. E.g. banks, supermarkets
Monopolistic- large no. Of buyers and sellers in a particular
market as this is a market where there is many sellers and
more variety and some are able to influence the price of the
products because they have market power. Their products are
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not exactly the same as there are minor differences in

packaging, customer service and distributing.
Perfect- sells similar products unable to differentiate
products. There is normally minimal advertising, as it doesnt
necessarily increase market share. This can normally be done
through competitive pricing.
Ease of entry- ability to establish within in an industry
Local competitors- competitors which produce/sell in the same market
Deregulation- removal of govt laws
MARKETING
Marketing- total system of interacting activities designed to plan, price, promote and distribute to
customers
Product differentiation- same products appearing different
Substitutes- a direct alternative
Target market- group w/ similar characteristics, which a bus is aimed
Niche market- breaking down market into groups w/ similar characteristics
Mass market- market in general all consumers
Market segmentationPOLITICAL/LEGAL INFLUENCES
Advantages
conducted on equitable basis
Disadvantages
restricts free operation
certain standard of quality
control bus impact on environment
provision of assistance for bus seeking
fees and charges
market o/s
ETHICAL AND SOCIAL RESPONSIBILITIES
Bus ethics- application of moral standards to bus behavior
Conflict of interest- taking advantage of a situation for their own gain
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Ethically responsible
act honestly/morally
Socially responsible
Structures organization fitting environ.
Laws
honour commitments
not engage in deceptive practices
Good rep
Provide safe work environ.
Recognizes contribution
Enlightened self interest- belief bus helps itself when solving societys problems
Social audit- report of what bus has done and is doing regarding social issues
DHARMA- managers acting ethically; free of self interest
KEY BUSINESS FUNCTIONS
4 key business functions:

o Operations- process involving production
o Accounting and finance
o Employment relations
o Marketing
Outsourcing- contracting out some bus functions

Planning- the process of deciding what is to be done, when and how it will be done and who will do
it. Plans provide direction for action
Controlling- the process of measuring whether the objectives set out by planning have been
achieved. Controlling involves measuring the actual performance, comparing the performance to
targets and correcting variations from targets
functional structure- organizes business around the different functions, a product structure
organizes employees around specific products
Division of labor- separates parts of jobs to different people. The advantage of this is greater
efficiency
The span of control- the number of people who report to a manager
The chain of command- the line of authority. The biggest boss is at the top and etc
Interdependence- key bus functions working together
Mission statement- written statement summarizing aims and goals
Vision statement- written statement summarizing hopes for the future
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Separation- division of funcs into specialized units

Marketing
Marketing maximizes profitable sales. It is the total system of business activities designed to plan,
price, promote and distribute want-satisfying products and services to markets in order to achieve
the objectives of the business
The target market can be either:

- Market aggregation (seeing the target market as one single unit)
- Market segmentation (breaking the market into smaller sections)
Furthermore, market segmentation can be divided into:

Concentrated marketing (focusing on one single segment)
Differentiated marketing (targeting a number of different segments)
4 variables when segmenting:
Demographics- (age, gender, income, religion etc)

Geographic- where consumers live (city/town, urban/rural)
Product related- tangible or intangible
Psychographics- (social class, life style, personality)
4 Ps: product, price, place, promotion
Product- is a set of tangible and intangible features. Strategies includes extension adding
new products, contraction when a business stops making a product and rejuvenation
redesigning/repackaging a product
Price: 4 methods of calculationo Cost plus margin- adding % for profit

o Market price- according to production and quantity customers want
o Competitors price- below/equal/above competitors
o Discount- reduced price
Promotion: Promotion is the approaches used to get a good or service noticed by potential
customers. Approaches used are personal selling, sales promo, publicity, advertising,
sponsorship
Place is where the exchange between buyer and seller occurs. Placing strategies include
intensive (where product is available at every possible outlet i.e. coke), selective (wide
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distribution of products without intensive i.e. shampoo at hairdresser) and exclusive (limited
supply, implies elitism)
Marketing environ: technical forces, competitive forces, political forces, economic changes,
legal forces, societal forces
ACCOUNTING AND FINANCE

Accounting- management tool; provides info on financial affairs
Credit rating- scale summarizing financial track record from view of lenders
Records- bookkeeping; summarized into reports and statements
Audits- where errors are corrected
Accountability- when a bus acts in best interest of its owners
Stewardship- accurate info summarized and based on true and actual transactions
Accounting provides info about financial status, cash status, financing info, cash flows,
profitability, trends in earning and borrowing
Finance- how a bus funds

FINANCIAL STATEMENTS
Balance statement
Records the vale of business assets and liabilities at particular dates and differs from a revenue statement
as it accounts for assets and liabilities of business rather than income and expenses. Assets are anything
owned that adds value to the business. Liabilities- something business owes and must be calculated a given
date than over period of time
All assets= all liabilities
Current assets- business intends to convert into case within accounting period. E.g.
Cash on hand or at bank/institution
Stock (inventories)
Accounts receivable
Non- current- business assets use to carry out operations and dont intend to convert into cash in the
accounting period. E.g. motor vehicles, furniture, land/buildings, fixture and fittings, furniture
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Intangible assets:
Patents
Reputation
Copyright
Trademark
Goodwill is value placed on business reputation or size of customer base
Liabilities include
Current- debts the business owes to stakeholders outside the business which must be paid off in full within
accounting period and include:
-Overdrafts, short-term loans or accounts payable
Non-current- long term liability in accounting period which is extended as long as needed an includes
mortgages and term loans
Assets= liabilities + owners equity
Cash flow statement- records cash transactions of a business over a period of time and accounts for cash
inflows and outflows creating a balance
Purpose- ensures business had adequate level of cash and liquidity within a business and prepared each
month to record times business experiences cash shortages or surpluses. It's crucial for:
-Cash to proximate suppliers as needed to provide stock and can mean potential fall in sales and ultimate
profitability in no existence of it
-Business may become insolvent leading to cessation of business
Cash flow statements classified into:
Cash receipts- flow of cash into business and rises as cash does. Occurs when increase in sales, debaters
paying back to business, business assume funds from bank in form of loan or overdraft and business selling
off non-current asset/s
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cash payments- increase in expenses and less cash flow. Occurs when there is increased cost of wages,
increased expenditure on stock and inflation within economy
key uses of financial statement:
-
Summary of financial transactions of a business over a period of time. The information

contained in the financial statement is analyzed and used by management to assist
making business decisions.
It can be used to measure business performance and expected and planned performance.
Revenue statement:
Records expenses and income of business over a defined period. It shows the profitability over given period
and commonly prepared at the end of each month.
Revenue- money flowing into business which business earns by arriving out its operations
PLANNING AND CONTROLLING

Strategic plan- long-term plan/goal that requires the commitment of each business function
Operational plan- short-term plan helps bus manage and achieve goals
Planning- managerial and leadership task involves looking ahead to see whether the bus is doing
what it needs to achieve market potential
FUNCTIONAL AND MARKET STRUCTURES
Functional structures- operations organized according to key functions and geographic factors.
They are either specialized into divisions according key functions to meet the needs of a market
Market structures- types of organization based around markets/consumers
DIVISION OF LABOUR
Division of labour- separation of power that occurs within an organization on the basis of
responsibility and expertise
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Labour- a bus workforce

Managers- people who have greater responsibility; makes decision affecting resource use, use of
funds and charges to behave ethically
SPAN OF CONTROL/CHAIN OF COMMAND
Span of control- no. of people for whom a manager is directly responsible as well as the ratio of
managers to subordinates across successive layers
Downsizing- reducing labour and encourage more flexible skills
Chain of command- flow of authority from snr management to supervisors then workers
MANUFACTURING BUSINESSES
ETM- elaborately transformed manufactures; goods highly processed and valued complex b/c of
amount of processing done
STM- simply transformed manufactures; characterized by ability to be further processed
PURCHASING/SUPPLY CHAIN MANAGEMENT
Supply chain- range of suppliers from which bus purchases from
Lead time- length of time taken to meet needs of customers thru provision of good/service
Supplier rationalization- process bus goes thru when it reviews and reduces no. of suppliers
CIM- computer integrated manufacture; manufacturing process characterized by linking key bus
functions
MRP- materials requirements planning; anticipate levels of demand for a product and order
supplies of required inputs accordingly
ROSTERING/SCHEDULING
Rostering- process of organizing workers in the bus so that work can be completed; forming a
timetable showing availability of employees
Main tools used to schedule: 1) Program Evaluation Review Technique (PERT)

2) Critical Path Analysis (CPA)
3) Gantt Charts
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PERT and CPA show what needs to be done and how long it takes and order. Gantt charts
outline activities, order and expected time.
TASK DESIGN
Task design- classifying job activities in ways that make it easy for an employee to perform and
complete the task successfully
Process: 1) define what needs to be done in a general statement

2) Analyze job into duties
3) Allocate difficulty and time
4) Match tasks to awards
5) Articulate task via job descriptors and pay a scale to allow a range of experience in
a range of work settings

Plant layout is the physical organization of the plant. Can be:
- Function Layout all machines undertaking the same process located together
- Product Layout traditional assembly line, each process is completed in order
WAREHOUSING
Warehousing- storage of raw materials and inventories
Warehouse should be located in an area accessible to transport b/c helps distribute product to
markets, helps employees access site, it depends on cost however.
TECHNOLOGY
Telecommute- travel to work electronically
Robotics- highly specialized form of technology capable of complex tasks
CAD/CAM
CAD- computer aided design; computerized design tool that allows bus to create product
possibilities from a series of input parameters; a computerized graphical design that generates 3D
diagrams from a set of input data
CAD designs a sequence of steps needed to be taken to create desired products in shortest
lead time possible
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CAM- computer aided manufacture; software that controls manufacturing processes; can be linked
to CAM to allow instantaneous manufacture of designs that are accepted by clients
INVENTORY CONTROL
Stock take- the physical counting of goods to determine how much of each stock item the bus has
at a certain point
JIT- just in time; ordering stock when needed saves bus on storage costs, handling costs,
stocktaking, security and problems associated with slow turnover
PRODUCT LAYOUT/OFFICE LAYOUT/PROCESS LAYOUT
Mass production- characterized by manufacture of high volume of constant quality goods
Work stations- desk areas required by office workers
Process layout- characterized by grouping together machinery with similar function
QUALITY MANAGEMENT
2 types- quality assurance and quality control
Quality assurance- is a pre-control process; characterized by a series of steps taken prior to

processing to ensure quality goals are met
Quality control- a series of controls designed to bring attention to areas where quality parameter
are not met
TOTAL QUALITY MANAGEMENT (TQM) AND KAIZEN
Kaizen- a system of continuous improvement
TQM based on 4 principles: kaizen, prevention, focus on customer and client, whole bus
responsibility
RECORDS MANAGEMENT
Records management- an administrative task involving collection of data
EMPLOYMENT RELATIONS
Employment relations- types of interactions among people
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Human resource manager- coordinates activities involved in acquiring, developing, maintaining

and separating organizations human resources
Human resource management- effective management of formal relationship b/w employee and
employers
HR CYCLE
Acquisition - involves three key stages

1. Identifying staffing needs (by analyzing tasks involved in jobs and creating a job
description)
2. Recruiting (making contact with suitably qualified people)
3. Selection (identifying the best possible candidate for the job
Development- can be achieved through training, either on or off the job
Maintenance- is keeping the employees. This can be done through monetary benefits (pay
rise, etc) or non-monetary (company cars, discounts, etc)
Separation- can be voluntary (retirement, resignation, etc) or involuntary (redundancy,

retrenchment, dismissal etc)
ACQUISITION OF HR
HR planning- development of strategies to meet the bus future HR needs
Natural attrition- normal loss of employees from retirement, resignation and promotion
Replacement chart- list of key personnel with possible replacements
Job analysis- systematic study of each employees duties, tasks and work environment
Job description- written statement describing duties, tasks and responsibilities
Job specification- list of key qualifications needed to perform a particular job in terms of skills and
experience
RECRUITMENT AND SELECTION
Employment process- bus matches staffing needs with available HR
Recruiting- process of attracting employees
Employee selection- gathering info abt applicants for a position then using info to choose the
most appropriate applicant
Orientation- process of acquainting new employees with and their job
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TRAINING AND DEVELOPMENT OF HR

Employee training- process of teaching staff
Development- preparing supervisors and managers to assume greater levels of accountability and
responsibility w/in an organization
Performance appraisal- formal assessment of how efficiently an employee is working
DATABASES
Skills inventory- database containing info on skills, abilities and qualifications of existing staff
SEPARATION OF HR
Separation- ending of employment relationship
Voluntary separation- employee chooses to leave the bus
Retirement- employee decides to give up full time work
Redundancy- a particular job is no longer required
Involuntary separation- employee asked to leave
Retrenchment- dismissing an employee b/c not enough work to justify pay
Dismissal- behaviour is unacceptable and becomes necessary to terminate contract
five classifications for employees: casual, probation, temporary, fixed term contract, permanent
RIGHTS AND RESPONSIBILITES

Employee contract- legally binding formal agreement b/w an employer and employee
Rights and responsibilities:
Employer
Providing work and tasks
Employee
Obey lawful and reasonable commands
Payment of income and expenses
Use skill and care
To abide by and meet requirements of
Act in good faith
industrial relations legislation

EEO AND DISCRIMINATION
1. Anti Discrimination Act 1977 (NSW)- makes it unlawful to discriminate b/c sex, race,
marital status, disability, homosexuality, age
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2. Affirmative Action (EEO for women) Act 1986 (commonwealth)- strives to correct
imbalances
OCCUPATION HEALTH AND SAFETY
4 main aims: 1) ensure health and safety and welfare

2) Protect other people in the workplace
3) Promote a working environment, which needs to be adapted to physical and
psychological needs
4) Provide a simple framework for protection of employees
ESTABLISHING A BUSINESS
Entrepreneurship: a business provides the opportunity to be an entrepreneur. An

entrepreneur is a risk taker, they take educated risks. Any person owning a business is an
entrepreneur
Personal qualities:
i.
Determination: to succeed in a business you must be determined to
reach your goals
ii.
Dedication: you must be dedicated to your work and give 100% to ensure
you have a good chance at success
iii.
Organised: there is a lot of paper work and legalities when it comes to
businesses. Being organised will prevent any loss of files such as tax files
iv.
Experience: knowing what you are doing will really help the business as it
will run more smoothly and if you have experience you will know what to
expect so you can be prepared or you will know what is required so you
can budget
v.
Motivation: if you stay motivated you will be more inclined to succeed
vi.
Creative: being creative will greatly assist the business, especially when it
comes to things such as marketing
vii.
Initiative: taking initiative and leading the way will help you stay focused
viii.
Independent: if you are not afraid of being on your own, you will learn
how to cope individually and keep the business running
ix.
Skilled: if you are already skilled in the area that you are going into it will
make things a lot easier as you already know what you are doing
x.
Reputation: having a good reputation will give the business goodwill
faster and will allow the business to be more widely recognised in a good
way
Other influences
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i.
Culture: culture is beliefs and rituals. The way people act, dress, their customs
etc. culture could affect your business because:
a. Religious beliefs: how you dress, presentation. What you produce, marketing,
operating and trading hours
b. Family background: may limit your business options, can influence the
structure of a business
c. Language: the type of business you go into and your cliental
Skills and traditions: different cultural groups specialise in different areas creating different talents
IDENTIFYING BUS OPPORTUNITY
Sources of information: The sources of information to help identify business

opportunities include things such as small business conventions, financial advisors,
industry seminars, trade shows and also:
a. business publications: a wide range of reports on countries and
individual sectors are published on a regular basis and these often
identify emerging business opportunities eg: news papers, BRW etc
b. Observation: observing the business environment can often give clues
that eventually lead to a business opportunity. Keeping up to date with
the news and developments that affect the business environment can
similarly suggest ways to take advantage of your observations
c. Investigation: following up on a promising observation with more
detailed investigations provides another source for relevant
knowledge
d. Inspiration: while many business ideas are the result of careful
consideration and deliberate attempt to looking for opportunities,
some are more inspired. Following this up with investigation and
action might be the path to entrepreneurial success
After identifying various business opportunities an entrepreneur can access information
from a variety of sources help to determine the viability of the business idea. These
sources can include
- accountants
- solicitors
- management consultants
- market research agencies
- previous owner of the business
- federal government departments and agencies such as;
Business Entry point, National office of Economic
Information, Department of the Industry eg: Tourism
- state government agencies such as; the department of
state and regional development
- local government; zoning regulations, health regulations,
planning
- chamber of commerce
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- franchisor
- Australian taxation office
Considerations: There are important practical considerations that must be taken into
account even with a well researched and potentially lucrative business opportunity.
- do you have the time to invest in the project
- is it something that you are really interested in
Skills, financing and competition are three important practical areas that an entrepreneur
must consider before thy can being confident that the business opportunity is worthwhile.
Skill Requirements: depending on the skill requirements for the business, a business operator
should have a skill set that is relevant to the operations of the business. This is especially important
in a small business start up. If the business owner is lacking experience or ability in any crucial
areas, they must either quite the skills or else find someone appropriate to join the venture. Two
methods of gaining skills. (i) Education; T.A.F.E, University, School. (ii) Work experience
Finance: an initial investment is almost always required in any business venture. If the initial
finance needed is not available, the project cannot go ahead. Identifying the full financial needs of
the business over its first years of operation is especially important. Two components must be
considered. (i) personal wealth; personal assets less any liability. (ii) availability of debt finance; if
you have the ability to borrow money
Competition: how many other businesses compete in the same market. When assessing the
competition you need to consider the market size and market power over competitors
The business idea: Once an opportunity and consideration of the practical factors, the
business person can be said to have a business idea. The business idea can not go ahead
if there is no finance, or without sufficient savings
IDENTIFYING TARGET MARKET
Demand by consumers creates business opportunity; businesses can only exist because
there are people who are prepared to buy their goods. Getting started requires a good
understand of the target markets. Once the target market has been identified decisions
regarding; location, services, pricing and marketing can be made to ensure business
success. Market research helps to identify the needs of the markets.
Potential customers and their needs: potential customers are all the individuals, groups
or businesses that may buy your product. Understanding the needs of these customers
allows a business to tailor its operations to best meet those needs. Doing this can increase
revenue. Using market research, which involves surveying a sample of the population to
build knowledge about people, can greatly assist when identifying potential customers and
their needs
identifying intermediate and/or final customer markets
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i.
Mass market: product (in theory) could be consumed by almost

everyone. They are generally marketed to the widest possible audience
ii.
Niche market: product only designed for a sector of the community. Niche
markets usually conduct marketing so that it is focused only on the
relevant sectors of the community
The two categories, Niche and Mass, reflect the proportion of the population who potentially could
be new customers
iii.
Potential market: potential markets exist where existing products /
services dont satisfy consumer needs
DETERMINING COMPETITIVE ADVANTAGE
Businesses need to distinguish their businesses from the competition. To maintain and
increase market share, the business must establish an advantage of some sort over the
competition
i.
value
- in many markets customers pay a higher price for a
service that offers additional value or benefits
- rather than varying the price of their services, they
emphasise the quality of the service / range of products
and convenience
ii.
benefits
- businesses may offer benefits such as loyalty cards (eg:
Boost juices)
- Discounts or a free product after a certain period of time if
they have been a loyal customer. Some insurance
companies offer something like, if you havent had a
claim in 3 years your premium goes down
iii.
price
- the business operator may choose to sacrifice some of
their profit in order to reduce prices
- in extreme cases businesses with enough savings in
reserve may price their product below cost to build up
larger customer base
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KEY CONSIDERATIONS IN SETTING UP A BUS
Starting from scratch
Advantages
Freedom to establish as they wish
Disadvantages
High risk
Able to determine pace of growth
Develop customer base
No goodwill
Doesnt generate profits quickly
Possible to begin on smaller scale

Buying an existing business
Advantages
Sales to existing customers
Disadvantages
Existing policies and image hard to

change
Maybe good history
Proven track record
Difficult to assess goodwill
Stock already acquired
Leased premises difficulty w/
Advice and training
Equipment and existing employees
landlord
Employees may resent change
Franchise
Advantages
Training
Disadvantages
Franchisor controls operations
No experience needed
Threat of franchise termination
Lower risk
Profits shared w/ franchisor
Equipment and premises design
Service fee for advice
established
Often required to purchase stock from
Well planned marketing
Volume buying cheaper stock
franchisor
Contracts may be biased
CONSIDERING THE LOCATION

i.
visibility
-
visibility refers to the view the public get of the business

it can be classified as high or poor
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ii.
visibility is advantageous as it creates:

higher potential sales
consumer awareness of the store and product
potential for advertising
increased opportunity for walk in traffic
some businesses do not regard visibility as a high priority
eg: manufacturing
business which rely on visibility tend to be retial and
customer services
cost
-
cost for business location depends on the nature of the

ownership of the business
premises can be occupied by a business either as;
freehold: advantage is the business has the right
to make any alterations it wants and the
disadvantage is the high cost
Lease hold: means the business pays rent to the
owner of the premises entitling them to exclusive
use of the property for a set period of time.
Advantage is that it is cheap and does not tie up
the capital of the business. The disadvantage is
the restrictions placed upon the business in
terms of making alterations and when the lease
expires the business may have the move out
iii.
proximity to suppliers
- one way to reduce costs is to be close to suppliers
because you are then closer to raw materials
- perishable products may consider being closer to
suppliers
- Transport networks create links reducing the time for
delivery. Some businesses locate close to major transport
links to improve delivery and distribution channels
iv.
Customers
retail and service based businesses want to located close

to their customers
- manufacturing businesses do not regard it as high priority
- locations close to customers tend to be more expensive
Support services: is any function of a business either within or external to the business which
-
assists the business in carrying out its prime function. Some support services such as I.T support
may be advantageous for the business to locate near by, however other support services where
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location isnt relevant is due to technological advances in communications eg: accounting,

marketing
CAPITAL
Source: businesses can either have debt finance or equity finance.
Equity finance: when establishing a business, equity can be raised by inviting other individuals or
businesses to share in the ownership of the business or from personal wealth. Some sources of
equity finance include:
i. Personal wealth
Retained earnings; the existing business earnings to finance the new operation. Instead of
distributing the earnings as profit returns to the owners, the owners may decide to use the existing
businesses profit to establish the new business
Share capital; selling shares in the business , public / private company
Partners; from a partnership, invite new partners
Venture capital; venture capital is money invested by an individual company into the company.
Usually venture capitalists invest between $1-10 million. A venture capitalist is an individual
company who sources funds from investment banks and financial institutions and invests on their
behalf in a high risk but generally high returning company. Venture capitalists will take a
shareholding (usually less than 50%) and an active role in management. After the businesses has
been established for a few years (3 5 years) the venture capitalist will look to sell their
shareholding in the business
Debt finance: money borrowed from sources outside the business which must be repaid with
interest. Some sources of debt finance include:
bank overdraft:
What is it? Bank gives you permission to borrow a certain limit of money Means you can overdraw
on your account. It allows the business to write cheques to pay suppliers for stock
How long does it last: You must pay them off generally within 30-60 days
Type of loan facility: It is a short term loan.
IT IS THE MOST COMMON FORM OF SHORT TERM LOAN
FACILITY FOR A BUSINESS.
trade credit:
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What is it: suppliers of the stock to a business may extend credit. Business is not required to pay
for stock immediately Interest is not generally payable unless business doesnt pay back within set
time
How long does it last: usually around one month
Type of loan facility: short term loan
Commercial Bill of Exchange:
What is it: one business borrowed from another business. Drawn up and exchanged with another
business for cash. When the bill expires it must be bought back from the holder. Theyre sold at a
discount to the face value
How long does it last: Bill varies between 30 180 days which when the maturity date expires
Short term loan:
What is it: borrowing any money from a financial institution for a period of less than one year.
These loans tend to be for smaller amounts
How long does it last: less than one year
Mortgage:
What is it: money borrowed from a bank. Used to purchase property, physically on land.
Repayments consist of principal amount borrowed and interest
How long does it last: 10 30 years
Type of loan facility: long term loan
Term loans:
What is it: money borrowed used to purchase equipment, pay for expansion of business, pay for
new business opportunities. Generally used to pay for other assets, not property.
How long does it last: 1 10 years
Type of loan facility: medium to long term loan
Leasing:
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What is it: for a fee, a business is granted exclusive rights to use designated property or equipment
for an agreed period of time. It frees up much needed capital rather than tying it up in not current
assets eg: equipment
How long does it last: stated in the contract, can vary
Type of loan facility: short / medium / long (as above)
other sources of finance:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
insurance companies
merchant businesses
superannuation and mutual funds
credit unions and building societies
suppliers
government
debt or as a grant
state government programs
Federal government programs, New Enterprise Incentive Scheme

Technology Diffusion program:
The program assists small and medium firms accelerate their adoption of appropriate new
technologies. The program raises awareness of new technologies and management practices and
assists businesses identify, evaluate and adopt the most appropriate ones for them. This results in
improved production, business process, products and services
New Enterprise Incentive Scheme:
What is it: The NEIS is a self employed program that helps eligible unemployed people become
self supporting and independent of Social Security payments by establishing their own business.
What is provided: NEIS provides training, an allowance (for up to 52 weeks), business advice and
mentor support. NEIS applicants are evaluated on personal and business criteria and are assessed
on a competitive basis.
To be eligible you must: be registered with Centrelink as seeking employment, be at least 18 years
of age, be receiving an unemployment allowance or any other forms of income support, not be an
undischarged bankrupt, not have received the NEIS allowance in the previous two years or
previously for the same business activity.
Further information: www.ausindustry.gov.au/tdp
Export Market Development Grants Scheme:
What is it: EDMG, administered by Austrade, provides assistance to small and medium Australian
exporters to develop export business for tradeable goods, services and intellectual property and
know-how by repaying part of their promotional expenses.
To be eligible: Australian based enterprises spend at least $15 000 on eligible export promotion
p/a, total business turnover less than $50 million and export earnings less than $25 million in the
grant year.
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What is provided: up to 50% of export promotion and marketing expenses is reimbursable, less the
first $15 000. Maximum grant $200 000 p/a; minimum grant $2, 500 (for the first two years)
Further information: www.austrade.gov.au
cost
Debt:
i.
ii.
iii.
interest payments
principal amount
establishment fees and charges (statistic: banks make $24 billion per
year. 50% of that is through establishment fees)
Equity:
profit proportional to the amount of equity
dilution of partnership, means sharing control
Gearing: gearing refers to the proportion of debt finance compared to equity finance.
Highly geared: relying to heavily on debt, more debt than equity BAD
Low geared: relying more on their equity than debt GOOD
Businesses can either be classified as having a high gearing ratio (highly geared) or a low gearing
ratio (low gearing). For most small businesses the generally accepted level of gearing is between
0.4 - 0.6 : 1.
A high gearing ratio exists when the value of debt is greater than or equal to the value of equity eg:
1:1 or 3.7:1
FORMULA FOR GEARING RATIO:
DEBT FINANCE = Gearing ratio
EQUITY FINANCE
D=G
E
Written as a decimal point or percentage
Debt : equity
LEGAL CONSIDERATIONS
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registration of a business name

a. Why do you register: business names are registered for tax purposes and to
identify the various businesses operating. To prevent any other businesses
from using the name you must trade mark it, merely registering it will still allow
other businesses to use that name. Not all businesses have to register. If the
owner is using their own name as the name of the business such as John
Smith and Co, then they dont have to register.
b. How much does it cost: $126.00
c. Who do you register with: you register with the Department of Fair Trading,
and you must re-register every three years
zoning
d. what is zoning: zoning refers to the regulations placed on the land use of an
area. The regulations state where certain businesses can operate and where
others cant. The zoning laws reflect the changing demands of an area.
e. what is the purpose of zoning: the purpose of zoning is to minimise conflict
between land uses and use of land for different purposes
f. Where does zoning apply: Zoning classifications apply to individual blocks or
entire areas Businesses which are run from home may avoid zoning
restrictions
g. who controls zoning regulations: local government eg: North Sydney Council
h. types of zoning:
- residential housing
- residential / neighbour hood business
- commercial
- industrial (heavy and light)
- transport
- waterfront
- public / private recreation
- bushland
i. Other local government regulations: for any developments, businesses must
submit D.As (development applications). They need to be submitted for:
a. planning approvals
b. building approvals
c. waste disposal and management approvals
d. hazardous material storage certification
health regulations:
j. What do health regulations aim to do: the regulations aim to protect
employees and consumers from unsafe business practices.
k. Who do they apply to: certain businesses are subject to certain health
regulations. They apply to:
i. premises: ensuring the physical structure is clean
ii. operations: ensuring the operation functions meet stated guidelines
Specific types of businesses are subject to stringent health regulations. These
include:
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l.
1. Food service businesses health regulations relate to:

- food storage
- food servicing equipment
- storage and serving temperatures
- kitchen layout
- floor and wall tiling
- employee clothing
- food handling procedures
2. Skin Penetration Businesses
- hairdressers
- acupuncturists
- tattoo parlours
- body piercing
3. Cooling towers
- cooling systems of many businesses require cooling
towers to be installed
- these must be cleaned, maintained and expected yearly
- improper management can result in the growth of
Legionella bacteria which put staff and consumers at risk
Who is responsible: the local government. They send out health inspectors to
the businesses to make sure they are complying with the regulations
trade practices
m. What is the trade practices act: The Trade Practices Act (1974) is a federal
law. There are separate Acts for each state. The New South Wales Trade
Practices Act only applies to New South Wales.
n. What does it aim to do: It governs the conduct of businesses when dealing
with customers and other businesses. It aims to
- protect consumers from unfair and misleading practices
- regulate the behaviour of businesses to encourage
competition:
lower prices
choice for consumers
awareness / education
service and quality
o. who is it administered by: ACCC (Australian Competition and Consumer
Commission
p. what areas are regulated by the TPA:
- false and misleading advertising
- competition
- price discrimination
- abuse of market power
- price maintenance
patents:
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q. What is a patent law: it is legal protection of an invention / product. It protects

intellectual property
r. what is a patent: it is intellectual property
s. where does it apply: it applies internationally including the country in which it
was registered. In Australia it lasts up to 20 years
t. what does it aim to do: it recognises the right to ownership of intellectual
property. The legal protection of a device, substance, method or process
which has been invented and is useful.
u. Types of intellectual property:
- copyright
- trade mark
- design
trade secrets (confidentiality agreements)
ESTABLISHING SUPPLY AND DISTRIBUTION NETWORKS
Establishing supply and distribution networks: supply and distribution networks are
important when getting a business started. Businesses want to be able to deliver their
products to maximise the number of potential customers. Businesses want to have reliable
access to high quality inputs at a low level cost
Supply:
1. what is a supply network: a supply network is simply the
group of companies chosen to supply the input materials and
services that the business need. New suppliers can be used
to create products and services that are different or better to
those already on the market. Market differentiation can often
be achieved by importing supply from other countries or
sourcing goods from smaller scale, high quality producers
2. what does it aim to do:
- minimise cost
- maximise the reliability of supply
- maximise the quality of inputs
Distribution: distribution networks play an important role in maximising sales. These networks can
be indirect or direct:
a. Direct: direct distribution is where the business
supplies the product directly to the consumer and
collects the payments
b. indirect: indirect distribution is where products are
sold in significant quantities to other businesses that
sell those products to consumers at an increased
price
Hiring staff: for most businesses, labour costs are the single biggest expense. There are
many ways to hire staff such as:
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Advertisement: reaching a larger number of people will generally increase the chances of finding
the right person for the job. The advertisement should give a brief description of the position; skills
needed and will usually ask the applicant to provide a CV. It is important to then hold an interview
that is focused on the requirements for the job.
Job Agency: for a fee an employer can go to an employment agency and hire a worker through
them. They agency will identify the most suitable employee they can find and then set up an
interview. Advantage of using an agency is that it saves the employer time and energy
Personal contact: employing someone already known to the business is common. Downside to this
is that it is a lot harder to dismiss an employee with whom the employer had a relationship with
prior to employment
Personal recommendation: someone who comes with the recommendation of a friend whose
judgement is respected by the employer is more likely to be an effective employee than someone
who was not previously known to the employer.
OUTSOURCING
what is out sourcing: the contracting of a person or other business to carry out one or more of the
business functions
Why do businesses outsource: outsourcing is a consequence of the need to specialise and all
companies must do it at some degree. Business operators often choose to specialise in doing a
small number of things well and outsourcing more of their functions. Businesses generally
outsource because they dont have the facilities or skills to do the job, eg: accounting or advertising
what role does each party play: the business is the contractor because they have a contract with
the business to provide a service
what are the two principals behind outsourcing:
a. lower costs that come with specialisation
b. quality and reliability that expertise bring
Operations: on a per unit basis, most services are cheaper to provide in larger rather than smaller
quantities such services are said to possess economies of scale. When a company grows or
finds itself spending large amounts of money with one contractor it may decide to buy the
equipment and skills necessary to provide the service in house.
Marketing: Successful marketing is a crucial factor that influences the fortunes of new businesses.
The importance of marketing effectively motivates many companies to outsource these services to
professionals. Large companies generally have their own marketing departments
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Accounting: accountants provide specialist knowledge on taxation issues, finance, assessing the
viability of a new business and the profitability of an existing one. Outsourcing the accounting
function can ensure a reliable assessment of a small business
Staffing: if things dont work out between the employer and the employee, then the process of
dismissing a staff member can be complex and can involve legal action. If you have hired through
an employment agency, the employer has no ongoing commitment to that worker and can
immediately dismiss them if unsatisfied. Contract workers do not get many entitlements and
benefits. This means they have less secure sources of income because they dont know when they
will be working. Temps or temporary positions are still the most commonly outsourced position.
Job agencies fulfil similar function to labour hire firms except that they find employees who are then
employed by the company itself
TAXATION
Taxation: most taxes are collected by the Commonwealth Government including company, income
and the GST tax
FEDERAL TAXES:
Company tax: for incorporated businesses. It applies from July 2001 at a rate of 30% profit which is
the level of income minus deductions. Paid at different points in the year depending on the size of
the businesses turnover.
Goods and Services Tax (GST): The GST is a 10% tax on all goods and services sold with a few
exceptions. Companies with a turnover in excess of $50 000 p/a need to have an ABN and must
collect the GST at a rate of 10%. Any GST paid by a business on its input materials can be claimed
back by the tax office. GST returns can be filed monthly, or quarterly depending on the turnover of
the business
Pay As You Go tax (PAYG): A business must take PAYG tax out of the pay of all employees each
month, according to the tax scale and the persons income level
Capital Gains Tax: Companies are liable to pay CGT on any profits made on the sale of assets
such as real estate, goodwill and shares
STATE TAXES
Stamp duty: payable as a percentage of the purchase price of selected assets. Eg: cars, land etc
Payroll Tax: based on the total amount of wages paid to employees per year. In NSW businesses
with an annual payroll over $600 000, pay a payroll tax at a rate 6%
On-costs: businesses must also pay a range of costs for labour in addition to wages. Businesses
must pay workers compensation, holiday leave and superannuation
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Superannuation: compulsory feature of wage structures in Australia. Means of ensuring incomes

for people in retirement as governments are unlikely to be able to afford to provide the aged
pension in future decades due to the ageing population. All employers must establish a
superannuation accounts for employees who earn more than $450.00 per month. It is 8-9% of their
pay. The money belongs to the worker but it cannot be obtained until they reach retirement age.
Workers compensation: covers any injury/death of an employee while carrying out their duties.
Calculated as a percentage of the businesses total payroll
Holiday leave: 17.5% of the employees pay during their first four weeks of annual leave
DEVELOPING A BUS PLAN
Bus plan- written statement of goals and objectives for the bus and steps to be taken to achieve
them
10 steps to making a BP: 1) ownership structure- who owns and is responsible for
business?
2) Products and services- what products and services will the
business be selling?
3) Market info- who, size, competitors of a target market
4) Market plan- how business will promote 4 p's
5) Sales plan- who will be involved in selling of product/service anad
what dveloment satrategies can be implemented in the future
6) Operations plan- where will the business be located, its layout and
machinery
7) Financial plan- capital needed to commence the business and
what finance will be adequate and who'll provide it
8) HR plan- how many and how employees will be recruited and
what training and development of employees is needed
9) Bus environment- what are the prevailing external environmental
conditions and how these factors affect the business
10) Risk management- how business will deal with diverse mattes
such as increased competition; obsolete stock, general insurance and
product liability. What type of planning is needed to prevent disaster?
Planning- process of formulating objectives and determining how to achieve them
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Features of a business plan include:

Executive summary- a brief overview of the plan
Objectives/goals-what the business hopes to achieve
Strategies- how a business will attempt to achieve the objectives
Business description and outlook- an overview of the industry in which the business will operate
Management and ownership- the nature and type of organizational structure
Operational plans- details the production process and the people required now and in the future.
Marketing plans- the product, price, promotion and distribution details
Financial plans- description of businesses financial needs and methods for evaluating its
performance
Purposes and benefits of a business plan
Act as map for establishing, expanding and operating a business
Provide information required by financial institutions when finance is being sought
Show the feasibility of the business on paper before any money is commiited to the venture
Outlining procedures for organizing and operating the business
Helps maintain a clear focus and direction for the business
Act as a reference point when evaluating business success
Benefits include:
Forces business owner ton justify his/her actions
Identifies the business's strengths and weaknesses
Tests viability of a business
Assists in maintaining the business operation especially focusing on the goals and
objectives
Indicates owners ability and level of commitment
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Helps owner be proactive than reactive
Business plan needs to analyse the whole business by examining all parts of the operation and as
a result each part of the business can function effectively and achieve its objectives helping overall
success of the business
Information is essential to prepare the business plan and needs to be updated, accurate and is
obtained from different sources within and outside the business. Research and development use to
to contribute to planning. Managements attitude to environemnbt matters, technology and availibity
of resources iflucence decisions about planning and may include the firms organizational
objectives.
External enviro is a soruce of idea for planning as ec0onomical, social, technological, geographical
and legal factors may have an effect on the business.
SOURCES OF PLANNING IDEAS
SWOT- strengths, weaknesses, opportunities, threats, analyses internal and external environment
Helps to set new objectives
e.g. of a swot analysis
strengths
satisfying consumer needs
enthusiasm and commitment to business
working business plan
good customer base
flexibility in adopting new methods
weaknesses
poor cash flow
irregular invoicing
failure tom compete paperwork
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undercutting on a job
opportunities
sound advice from her accountant
ability to provide personalized service
possibility of taking over dissatisfied customers from other businesses
threats
economic downfall
fall in new house construction
payment default by 2 major customers
Market analysis- involves collecting, summarizing, analyzing info abt state of market, customer,
threats and opportunities and any adv/disadv it has over competitors
Sales of objectives- desired level of sales
Unit sales- a measure of the actual no of products sold
Dollar sales- measure of total monetary value of bus sales
Social justice- bus terms adopting a set of policies to ensure that employees are treated
equally
Function structure- organizing bus according to different activities or functions w/in it
FORECASTING
Forecasts- predictions about the future
Break even analysis- determines level of sales that needs to be generated to cover the total cost
of production; total sales revenue = total operating costs
Importance- management can determine the level of sales required to obtain a profit. Also
can be used to determine the effect on profit if sales increase or decrease.
Break even sales can be calculated using formula:

Quantity= total fixed price
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Unit price-variable costs per unit

e.g. better rackets produces different lines of tennis goods including racquets, tennis balls and
tennis bags. It plans to introduce a new style of tennis racquet and estimates the new racket should
be priced at $200. Fixed costs are $600000 and variable costs are $80 per racquet. The number of
units, which need to be produced to break even:
q= 600000
200-80
=600000
120
=5000 units
break even analysis is point where sales equals costs and no money is lost but no profit is
made.
Decision tree- a diagram that reps different courses of action, possible outcomes of each action
and the probability of success; presents alternatives as branches
Decisions trees can help to determine:
Whether to develop a new product
The amount of marketing needed for a new product
Whether to invest in new plant and equipment
Whether to expand into new markets
Whether to increase prices
Responses to questions that arises in research and development
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e.g. of a decision tree

a toothpaste manufacture decides to develop a new line of toothpaste. Its estimated if the new
toothpaste is a success that the company will make $150,000 in the first promotion. However if not
popular there will be a loss of 80,000. the company plans to do a number of promotions over the
next two- three years and estimates the costs of marketing to be $50,000. it must consider the
consequences of taking one or other possible branches of decision tree.
Decisions
Well received
$0 (profit or loss)
Not well received
$0 (profit or loss)
Decisions
150,000 (profit)
Decisions
$80,000 (loss)
Budgets reflect the strategic planning decisions about how resources are to be used and
provide financial information for specific goals of a business and are used in strategic,
tactical and operational planning. Budgets enable constant monitoring of objectives and
whether they are being achieved. Budgets emphasizing the corporate objectives of the
business and provide a basis for administrative control, direction of sales, control of
expenses and production cost control.
It accounts for various factors such as :

1. Review of past figures and trends and estimates gathered from relevant departments in
the business
2. Potential marketers or market share and tends and seasonal fluctuations in the market
3. Proposed expansion or discontinuation of projects
4. Proposals to alter price or quality of products
5. Current orders and plant capacity
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6. Considerations from external environment

Types of budgets include:
Capital expenditure- planned expenditure on items such as plant and machinery and the
expected revenue to be generated from these items. Capital expenditure budgets are part
of longer term planning and the strategic planning process.
Cash budgets- plans of anticipated receipts and payments and the resulting cash balance.
They indicate ash requirements during a period, usually for time periods between 1 month
to 1 year. Determine whether business can meet financial commitments, anticipating
shortfall or determining excesses of cash, which could be invested. It is complete when all
other budgets are as it incorporates these
Raw materials- labour hours budgets and production budgets are used in manufacturing
firms to estimate the amount of raw materials that needs to be purchased to produce the
products. Raw materials include stock, work in progress, semi finished goods, components
parts and subcontracted work.
Labour hours budgets estimate the amount of labour required in the production process
and their cost. Labour hours include direct and indirect labour and overtime.
Production or output budgets- estimate the cost of materials, labor and overheads required
generating the amount of production that achieves the forms objectives. That is the
determines the cost of output once the volume of output has been determined. The
production budget analyses the elements that make up the production costs and therefore
combines the information from the raw materials budget and labor hours budget.
MONITORING AND EVALUATING
Basic steps of planning context: 1) analyse bus environment

2) set goals and objectives
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3) Establish strategies
4) Implement plan
5) Monitor performance
6) Evaluate performance against planned performance
7) Modify plan if necessary
Monitoring- process of measuring actual performance against planned performance through
knowing what business wants to achieve and are they being achieved. These should be
considered at every stage of the business plan and such monitoring involves establishing forecast
performance standards and comparing actual performance with forecast performance.
Performance standard- forecast level of performance against which actual performance can be
compared. E.g. 5% increase in monthly sales
Evaluating- process of assessing whether the bus has achieved stated goals
Controlling- process of measuring the bus performance against its plan and taking corrective
action if necessary. Three specific areas include:
Sales- comparing budgeted sales against actual sales and making changes where
necessary and are important for credit and cash sales. Money should be kept securely to
avoid theft and should be banked promptly. Separation of duties and electronic banking
reduce fraud. Management of credit sales is an important aspect as time lags between the
purchase of inventories, the credit sales transaction and the collection of amounts owing
may cause cash flow problems for management. Control is needed to minimize time lags.
Marketing reports- effective marketing control hinges on the quality and quantity of the
market reports available to the owner and the time taken to prepare them. The control
process should allow a rapid flow of information so the owner can detect any differences
between actual and planned levels of performance.
Budgets- should be prepared and regularly compared with actual revenue and expense
amounts to detect any discrepancies. E.g. once the owner has determined the goals they
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can then estimate the business's various costs and its revenue. A profit budget will
establish the viability of the business by predicting how much profit is likely to be made
form expected sales.
Modifying the process and changing existing plans using updated information to shape
future plans.
ELEMENTS OF BP
Structure of plan:
Part ADescription of business- location, owners, market, products and ownership structure. Purpose of
plan. Concise statement of the business's goals. Situational analysis- investigation of marketing
opportunities and potential problems.
Part B- description of products, production process, future research and development plans and
skills analysis- personal needs and requirements
Part c- analysis of existing competition. Sales forecast, predicting market growth and marketing
strategies for 4 p's
Part d- finance plan- breakdown of present financial requirements, financial forecasts for the next
3-5 years, an accurate system of record keeping and financial control strategies.
Situational analysis- detailed description of internal and external environment
Strategy- plan defining approaches to achieve specific objectives
Skills audit- systematic process establishing current skills levels and future skills requirements
Skills inventory- computerized database containing info on skills and experiences of present
employees
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Market analysis involves: research of market size, number and size of competitors, overall
market growth, average profit level for each competitor, segments of market bus intends to
target. Location of target market and info on target
Marketing strategy- plan outlines how bus will use its resources to achieve marketing objectives
Cash flow projections- show changes to cash position. From info owner can estimate the bank
balance and identify extent and duration of possible cash shortfalls
Profit and loss projections- consists of monthly forecasts of sales, cost and profit
Balance sheet projection- provides info on total assets and liabilities
Break even point- helps owner determine profitability of diff combinations of resources; reps level
of sales that must be reached before any profit is made
Financial controls- tools used to monitor and control the financial aspects
Changes affecting a BP include: changes to tech, competition, economy, customers needs
COMPETITIVE ADVANTAGE
Price cost strategy- wanting to be leader w/in industry; leads way by achieving lowest production
costs that in turn allow reduced product price
Efficiency of operation- ability to streamline processes in bus
Economies of scale- reduce cost of inputs and increase level of outputs
Low cost labour- decrease labour and use tech
Differentiation strategy- offering something not offered by competitors
ENSURING LONG TERM SUCCESS
Must be able to resist actions of competitors who introduce new strategies
Limit advances of competitors a bus must protect itself and reduce opportunities available
to competitors. Achieved through: R&D, copyrights, patents, contracting w/ suppliers, lobbying
govt to limit foreign competition
AVOIDING OVEREXTENSION OF FINANCING

Bus planning- involved completion of cash flow projection, preliminary establishment costs,
personal financial budgets and financial statements
Avoid overdependence on debt financing
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Do long term financial planning
USING TECHNOLOGY
Technology available: communication equipment, machinery. Internet, transportation of

products and raw materials, customer transaction
Non material tech- includes knowledge, processes and methods

MANAGING CASH FLOW
Cash flow- money coming into bus in form of cash receipts and money leaving as cash payments
3 main probs will affect bus cash flow and lead to danger of failure: poor stock
management, collection of debt, personal use of funds
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2006 Business Studies Notes

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2006 Business Studies Notes

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YEAR 11 1/2 yearly SUMMARY

Ingredients of production: natural, capital and labor resources

Intermediate product- product produced then used as input by another business

YEAR 11 1/2 yearly SUMMARY

They contribute products/ services and opportunities to our society

What activities are undertaken by a business?=

YEAR 11 1/2 yearly SUMMARY

The total impact of individual small businesses is huge.

SOCIAL AND ECONOMIC ROLES OF BUSINESS

the incentive and

profits are made,

the individual gets

part of the profit

products that are

them profit for

innovative, which lure

people to buy existing

products, which help

them to make a profit.

consumers lives easier

product and add

and more advanced.

YEAR 11 1/2 yearly SUMMARY

IDENTIFICATION OF RELEVANT STAKEHOLDERS

Internal- directly affected by

External- cannot influence a

Businesses provide quality

YEAR 11 1/2 yearly SUMMARY

External stakeholder because

Suppliers and creditors

Increasing profit of employees

Provide community services e.g. donation to charity

Personal goals- not planned by bus but may affect it

Increase power and status

YEAR 11 1/2 yearly SUMMARY

Write about a case study relating to social/financial/personal goals.

Market share- proportion of a products total market and bus. controls

Requires coordination of human, financial, physical and information resources

4 basic functions of managing (PLOC):

YEAR 11 1/2 yearly SUMMARY

Internal- micro environment; the bus has some degree of control

External- macro; the bus has little control over

BUSINESS LIFE CYCLE

4 stages: establishment, growth, maturity, post maturity

Sets up to build solid foundation or failure

Decisions need to be made legal structure, financial backing, location, costs, HR

Costs high, returns low needs to promote and build clientele

Employing and also borrowing of money/ land other assets

Little output due to lack of money

Accelerated growth, customer base, supplier network

Need to: develop HR management, policies, continual improvement in working capital,

The challenges for a business are:

Ensuring that the quality of service or production is maintained as output grows

YEAR 11 1/2 yearly SUMMARY

Recruiting new employees and delegating responsibility

Increased comp sales stage

Professional managers used

The responsibilities faced in this stage:

Staying responsive to changes in consumer demands

Identifying opportunities for innovation in products and services

Rationalizing business operations and minimizing costs

Three stages: steady state, decline and renewal

left to operate at current level neither expanding or declining