Business Management AT 2 Flashcards

Question

Define incorporation

Answer 1

Incorporation refers to the process that companies go through to become a separate legal entity from the owner/s. As a business grows it may change its ownership structure to that of a company (incorporation). Leads to Limited liability: When the shareholders of a company cannot be held personally responsible for the debts of the business The letters ‘Ltd’ signify that a business is a company that has limited liability. A company can be organised as either a proprietary (private) or public company.

Answer 2

An incorporated business with a minimum of one shareholder and a maximum of 50 non-employee shareholders. Tend to be medium sized, family owned businesses. Shares in this type of business are only offered by the business to those they wish to have as a part owner. A shareholder can only sell their share to someone approved by the directors. It is not listed, bought or sold on the stock exchange. These companies will have “Pty Ltd” after their name. Examples of proprietary companies include small businesses such as, a local grocery store, a local clothes store, a freelance graphic designer agency.

Answer 3

The shares for publicly listed Australian companies are listed on the Australian Stock Exchange (ASX). The general public may buy and sell shares in these companies. Most public companies are large, E.g. Telstra, BHP, Woolworths, NAB.

Answer 4

A minimum of 5 shareholders with no maximum number. No restrictions on the transfer of shares or raising of money from the public via share offers. A requirement to issue a prospectus when selling its shares for the first time. A minimum requirement of three directors (of who two must live in Australia). The word ‘Limited’ or ‘Ltd’ in its name. A requirement to publish its audited financial accounts each year – called the annual report.

Answer 5

Easier to attract public finance Limited liability (separate legal entity) Experienced management (board of directors).

Answer 6

Cost of formation Double taxation (company and personal) Requirement to publish an annual report of audited accounts

Answer 7

Does the owner need the extra legal security offered by limited liability? Will the business need public finance, as is possible with a public company? Will the owners be willing to relinquish control of the company to unknown investors by going public? Is it worth the extra costs associated with establishing a company and preparing separate yearly tax returns?

Answer 8

The way in which the business will run its operations to generate a profit. The business model arises in the earliest stages of planning for a business, however, as a business grows the business model may need to be altered to reflect the change.

Answer 9

What is the main goal of the business? What types of goods or services will the business offer? How will the business sell these goods/services? Who are the target customers? What types of cost will the business expect to incur? Will a new business be established or will a franchise agreement be entered into?

Answer 10

Bricks and mortar, Online, Direct to consumer business, Import and export and Franchise.

Answer 11

They exist solely on the internet, with a small number of offices to support their online presence. Examples are netflix, amazon, facebook and shein.

Answer 12

Online businesses are able to reach customers across the globe via the internet. They also avoid many of the expenses associated with having a physical store, such as rent and wages for shop staff.

Answer 13

Customers are not able to physically see, touch or try an item before purchasing it. Some online businesses may expose customers to the risk of credit card theft when making payments online.

Answer 14

Bricks and mortar is a term that refers to businesses that have a physical location, such as a store in a shopping centre. The most traditional and common business model for many of the biggest retail, manufacturing and wholesale businesses in the world. Nowadays, many traditional bricks and mortar businesses have adapted into bricks and click, to establish an online presence to complement their physical stores. Examples are jb hi fi, kmart, target and woolworths.

Answer 15

Offer face-to-face customer interaction Provide security that comes with being able to physically inspect or test goods prior to purchase.

Answer 16

Costs are much higher Little competitive advantage on price

Answer 17

DTC are businesses that sell their products directly to consumers without any intermediaries, such as retailers or wholesalers. Examples are Blue Apron and BarkBox.

Answer 18

Advantages: A strong focus on and connection with their customer – to build customer loyalty Lower costs – competitive advantage in price Disadvantages: Time consuming and less efficient than selling to retailers that specialise in selling Cybersecurity and data protection

Answer 19

An agreement whereby the franchisor grants the franchisee the rights to use its business name and distribute its goods/services. The franchisor – the business that owns the rights, eg McDonald’s – provides their name, advertising, method of doing business, training methods etc. The franchisee – the person who purchases the business – provides setup money, labour, operates the franchise and agrees to abide by the agreement. Examples are McDonalds and Gongcha.

Answer 20

Advantages: Less problems of starting a new business Higher success rate Well-known brand name and tested formula and operating pattern Disadvantages: Little scope for making independent decisions as the franchisor has control over much of the operations Forgoing the possibility of expanding an original brand as a franchisor

Answer 21

Import and export businesses earn their money from trading goods internationally. The advancement in technology and transport has aided growth in this area in recent years.

Answer 22

Business that is already operating and everything associated with the business is included in the purchase such as the stock and equipment, business premises, employees, an existing customer base, and reputation and goodwill. Goodwill: The monetary value attached to the reputation of a business.

Answer 23

Check if you’re business ready (your skills, capital and hard work. Find the right business (potential to be successful) Do your research (why the business is for sale) Value the business (financial health of the business) Conduct due diligence (legal documents and business operation) Make an offer

Answer 24

Instant income from sales to existing customers Proven record of business, makes getting finance easier Stock and suppliers are in place Equipment is on hand and ready for use Existing employees can give advice and provide knowledge The seller may give advice and training A proven business model increases the chance of success

Answer 25

The existing image and policies may be difficult to change, especially if the reputation is poor The success of the business may be due to the personality or personal contacts of the previous owner Goodwill may be hard to assess and the owner will want lots Employees might resist change

Answer 26

Common reasons to start a new business are: - Recognition of a gap in the market - Development of new goods or services - Desire for independence - Profit (Monetary reward) The most common reason for setting up a new business is the recognition of a gap in the market — where it is clear that existing providers are not catering to the demand for particular goods or services. Another reason is the development of new goods or services — when a person who has created something unique chooses to go into business to market their innovation or invention. Attempting to enter a market that is already well served by existing businesses involves having to attract customers away from competitors.

Answer 27

You can set up your business exactly how you want You can determine things like pace of change and growth No Goodwill, no extra costs If funds are limited, you can start off on a small scale

Answer 28

Because of high risk and uncertainty, money lenders may be unwilling to provide finance. Time is needed to develop a customer base and getting employees recruited and up to speed, and securing trade credit from suppliers If the start up is small or slow, profits may take some time to generate

Answer 29

The people and objects that are needed for the business to function properly.

Answer 30

Natural, labour and capital

Answer 31

Items the business uses that come from the natural environment. Used in the production of many types of goods such as crops, fruits and vegetables. A business must ensure that it uses natural resources wisely and does not harm the natural environment in its operations. Examples are land, water and raw materials (oil, coal etc)

Answer 32

Where will they source their natural resources from? Are the raw materials that they plan to use in production sustainable and reasonably priced? How can they reduce wastage and environmental damage during the production process? Are their products environmentally friendly, and how can they minimise the negative effect of their products on the environment? Are the shops, offices and/or factories of the business designed in a sustainable way that minimises energy usage?

Answer 33

The people that provide their skills, effort and knowledge to the business. Subcontractor a person that is not directly employed by the business but has been contracted to perform certain tasks. An example of a subcontractor is a plumber that goes to the school to fix or an inspector or maintenance. Other examples are owners and employees. A business must ensure that it treats its workers both legally and fairly, and not as just another resource that contributes to the profitability of the business.

Answer 34

How many workers will be needed and what kind of skills will they need? How will the business attract and retain these workers? What kind of training should the business offer to its workers to help them grow and benefit the business? How will the business provide fair pay and healthy working conditions for its employees? What are the legal responsibilities of the business towards its employees? How will the business resolve any disputes that arise with employees? Does the location of the business allow access to the types of workers that it needs?

Answer 35

The tools and machinery that are used to produce goods or perform services. Used to maximise the efficiency of labour. An example is a tractor that helps with the production. Other examples are heavy machinery, commercial buildings and vehicles.

Answer 36

What kind of tools and machinery will be needed? How will the business repair, maintain and replace its capital equipment when needed? Does the business have the right workers with the right skills to operate the machinery they need?

Answer 37

The physical location of a business can determine whether or not it will ultimately succeed.

Answer 38

Different types of business will be suited to different locations and the owner must consider a range of factors when determining the ideal location. Suitable locations include: Shopping centre Retail shopping strip Online presence Home based business

Answer 39

Means by which local councils allocate land for different uses, such as residential, commercial, recreational and industrial. Zoning is designed to keep business activities separate from residential areas and prevent households from being disturbed by businesses operating late at night.

Answer 40

Retail shopping strip, online presence, shopping centre and home based business.

Answer 41

Shopping centres have only existed in Australia for less than 50 years. There is usually one department store, 1-2 supermarkets, other essentials such as post office and bank, as well as retail stores, hairdressers, newsagents etc. There will be many car parks provided. There will usually be undercover parking and walkways. Examples are highpoint and chadstone shopping centre.

Answer 42

Advantages: Good location if a business owner wants to purchase and operate an existing business. A new business in an established shopping centre is more likely to be successful if there are no competitors. Disadvantages Leasing a store in a shopping centre can be expensive A business may need to remain open during the shopping centre's hours, which may be seven days a week The business relies on the shopping centre renewing its lease. If they do not, then the business will be forced to move elsewhere (the location is not permanent)

Answer 43

Shopping strips were traditionally located along major roads and/or close to public transport. An example is Sydney Rd, Elizabeth St.

Answer 44

Advantages: High visibility for passing traffic The costs of locating in a retail shopping strip are less than those of a shopping centre. People who work or live in the local area provide a strong source of customers. Popular locating for 'after hours' Disadvantages: A lack of parking Offer limited protection from the weather.

Answer 45

Most businesses will have some type of online presence to keep up with the competition and benefit of online sales. Some may be online only and not have a ‘bricks and mortar’ store to avoid expenses such as rent. Businesses can use the internet for: Information on products/services. Online ordering/shopping. Accepting payments.

Answer 46

Advantages: Increased access to new customers (instead of people who come to the store from the local area or limited travelling, the store can be reached by a nationwide or internationally) Comfortability - not having to travel and can just buy anywhere. Disadvantages: The costs of planning, designing and maintaining an online presence. Protect personal information.

Answer 47

Some businesses do not need a physical commercial location. They may run their business from their home. An example is a tradesman (plumber, electrician) may do this. The use of internet, computer applications and software, and a mobile phone with relevant apps allows are more affordable and access way to conduct business. Online ordering and payments. Technology has meant that there are now home based retailers now. An example is the use of eBay.

Answer 48

Advantages: The business owner does not face any substantial expenditure on renting or purchasing premises (cause not locating a business). Risk is reduced if the owner is starting a new business. Provides flexibility around when the owner works and reduces commuting time. Disadvantages: Difficult for the owner to keep work and home life separate. Feel isolated from other people and miss social interaction.

Answer 49

Visibility Cost Proximity to customers and suppliers Proximity to competitors Complementary businesses

Answer 50

Visibility is important for retail and service based businesses such as clothing stores and hairdressers. A business wanting high visibility would locate in a prime shopping area, such as a shopping centre or main street. It is of little importance to manufacturing businesses. They arrange to transport their goods to various retail outlets, so they do not need a highly visible location to attract customers.

Answer 51

Leasing or purchasing a central location in a busy shopping centre will be far more expensive than a location with lower levels of passing customer traffic. - Higher levels of passing customer traffic means more potential customers. - The business owner will need to be confident of generating sufficient business to justify the higher cost. Locating in a cheaper, but quieter location may severely impact profit as there is lower levels of passing customer traffic. - If the business is a café or food outlet, passing traffic is a major source of customers, so cutting costs by selecting a less visible location may be counterproductive.

Answer 52

All businesses would choose to locate close to customers and suppliers, both for customer convenience and to minimise the costs of transportation from suppliers. It’s good for retail businesses to be close to customers or easily accessible. An example is a shopping centre with parking etc. Proximity to customers is not an issue for manufacturing businesses. But access to transport is important - for receipt of raw materials, and the distribution of the goods manufactured.

Answer 53

Proximity to competitors is only really an issue for retailers and service providers. It would not make good business sense to set up a business in a shopping centre if there is already one or more of that type of business in the shopping centre, unless the existing business is not satisfying demand. Being the first to establish a particular type of business in a shopping precinct, or otherwise ensuring there are no local competitors, is likely to increase the chances of success.

Answer 54

The proximity of complementary businesses can assist in bringing customers to a new business. Complementary businesses offer goods or services aimed at the same customers. For example, homemaker centres contain shops selling electronics, furniture, bedding etc. Another example is a medical centre with a doctor, a pharmacy, radiology etc.

Answer 55

The business owner can contribute their own funds (equity or capital) - which is an internal source of funds. The business can obtain finance from external sources, such as a bank loan.

Answer 56

Equity refers to the funds contributed by the business owners to start and then expand the business. - If the business is a company, then this contribution is referred to as a shareholder's equity.

Answer 57

Advantages Does not have to be repaid unless the owners leave the business. Cheaper than other sources of finance as there are no interest payments for the business. An owner who contributes the equity to a business retains control over how that finance is used. Disadvantages The owner may expect a good return on their investment, but the small amount of finance may only generate low profits and low returns. Smaller amount of money than external finance options.

Answer 58

Self-funding Family or friends Private investors Shares Crowdfunding

Answer 59

Self-funding When the owner of the business uses their personal finance to fund the business. The owner will not need to share ownership with anyone else. There is a risk that the owner will lose all of their investment should the business fail. This source is also known as bootstrapping - the business financing the operations without borrowing from external sources Businesses who do bootstrapping need to be cautious of their expenses. Family or friends They may expect a share of the profit in return. An easy and quick way to obtain extra finance. This source should be considered carefully as there is a danger that relationships could be adversely affected. Businesses who do this should put the details of the arrangement in writing.

Answer 60

Private investors Business owners may be able to find private investors for their business if an attractive idea and strong business plan can be presented. May contribute funds to the business in return for a share in the business's profit and equity. 'Angel investors' are individuals or businesses that invest in a new business (provide finance). Often willing to provide support and advice to the business owner, as well as receive a return on their investment. Taking on investors means that the owner will lose complete control of the business as the investors are part owners who have a say in how the business operates. Shares A business may raise funds by selling shares in the business. Only companies can make use of this source of finance. Public listed companies can access more capital than private limited companies, because they are able to sell and issue shares to the public known as initial public offering - listing on stock exchange so the public can freely trade the shares (complex and expensive option).

Answer 61

A method of raising finance by using online and social media networks. E.g. Appeal to a large group of people to provide funding for the launch of a new product This may involve setting a goal for the project, providing the details of the project and inviting people to contribute finance. E.g. GoFundMe provides business owners and entrepreneurs with an opportunity to raise money to start or improve a business. Advantages A quick way to raise finance with with few fees. Allows the business owner to connect to potential customers and receive feedback. Gain some guidance on how to improve the business or product. Disadvantages Generating interest in the project requires a great deal of work, and there is no guarantee that the owner will reach their funding target. Damage to business's reputation.

Answer 62

Debt The borrowing of funds provided by banks, other financial institutions, government and suppliers. Debt must be paid back over time, with interest. Sourcing funds from outside the business should result in an increase of earnings and profit. Regular repayments on the borrowings must be made, so the business must generate sufficient earnings to make these payments. There is higher risk for businesses using debt for finance, as the interest and government charges have to be paid on top of the principal amount borrowed. AUS tax system provides tax deductions for interest payments.

Answer 63

Short term borrowing is provided by financial institutions through bank overdrafts, bank bills and bank loans. This type of borrowing is used to finance shortages in cash flow or financing working capital. Generally needs to be repaid within one or two years.

Answer 64

Bank overdraft One of the most common types of short term borrowing. A bank allows a business to overdraw its account to an agreed limit - maintained at a high level and require some security. Assist businesses with short-term liquidity problems like a seasonal decrease in sales. The costs for bank overdrafts are minimal and interest rates are normally lower than on other forms of borrowing. Variable interest rates allow businesses flexibility in managing the finances. Bank bills Short-term securities issued by a business and bought by a bank. A type of bill of exchange and are given for larger amounts, usually over $100,000 for a period of 90-180 days. The borrower receives the money immediately and promises to pay the sum of money and interest at a future time. The bank acting as agent guarantees that the money will be repaid when it is due. Trade credit When a supplier provides products to a business with an agreement to charge for the goods or services later. Businesses are granted a period of time, from 30-90 days before payment is required. No interest charge and it is easy to obtain. If a business has a good credit record, as the business grows purchases increase and trade credit becomes even easier to obtain.

Answer 65

Funds borrowed for periods longer than two years. Can be secured or unsecured, and interest rates are usually variable. Used to finance real estate, plant and equipment. The most common long term borrowing is a mortgage.

Answer 66

Loan A loan intended for business purposes and is used to start a business. May be taken out as a secured or unsecured loan. A secured loan might come with a lower interest rate, but the owner will need to offer up another asset (e.g. home or another business) as security against the loan. A unsecured loan does not require any collateral, but it might have a higher interest rate. A mortgage is a loan on a property, secured by the property of the borrower (the business). The property that is mortgaged cannot be sold or used as security for further borrowing until the mortgage is repaid. Used to finance property purchases, such as new premises, a factory or an office. Repaid, usually through regular repayments, over an agreed period. Consider - amount, type of loan, time, affordability. Leasing Paying money to use equipment that is owned by another party. Enables a business to borrow funds and use the equipment without the large capital outlay required. The lessee (the person or business to whom a lease is granted) uses the equipment, and the lessor (the owner of an asset that is leased under an agreement to the lessee) owns and leases the equipment for an agreed period. Leasing of machinery and motor vehicles is common in business. Cannot usually be cancelled without incurring a financial penalty. Advantages Long-term financing without reducing control of ownership. Permits 100 per cent financing of assets. Lease payments are a tax deduction. Repayments of the lease are fixed for a specific period so cash flow can more easily be monitored (e.g. $50 for one hour) Government grants Governments provide finance to businesses in the form of grants for business development, especially to promote exports. Obtained to start a business through both federal and state governments, such as the Victorian Government's Regional Jobs Fund. Administered through business development departments or small business development centres, which advise individuals on setting up and administering a business. Meet the conditions imposed and be used for a specific purpose.

Answer 67

Terms of finance Suit the purpose for which the funds are required. Short term finance to fund short term assets, vice versa with long term. The business structure Influence financial decisions. Large businesses have more opportunities for equity capital than small businesses. Small businesses have to raise equity from private sources or by taking on a partner. Overall cost The business needs to calculate projected costs of each source of finance in order to make a well-informed decision when planning for its financial needs. Easy - clearly defined rates of interest and terms Difficult - taking on an investor or partner who will receive a share in the profits from business Must project the future profits and value of the business in order to determine what a share of the business is worth. Flexibility A business's circumstances can change quite rapidly, and these changes may often be completely outside of its control. As circumstances change, the way in which the business has sourced its finance previously may no longer suit the needs. Adjust terms of the financial agreement or having the option of exiting the agreement entirely. Risk - paying unfavourable expenses, such as interest on a loan that is no longer needed. Level of control Business owners dedicate a great deal of time, effort and money into their businesses. A business is the reflection of the owner - most owners wish to retain as much control over their business as possible. This level of control can be undermined if the business sources its finances externally. Partners and investors who wish to see a greater return on their investment may have other ideas about how the business should run - result in a source of conflict and overtaking of owner's control.

Answer 68

Legal and financial advice Technological advice Community based services Formal networks private Formal networks federal state and local government Informal networks Business mentors

Answer 69

The owner will seek legal and financial advice to ensure that all the important aspects of the business are planned for. Required during the initial business planning stage to understand the differing structures, taxation and establishment costs. Once established the business will still require advice on an ongoing basis. Solicitors Provide information concerning business formation and structures, registration, contracts, leases, partnership agreements, patents and legislation. Up to date with any changes to company law and can advise the business owner on how best to deal with such changes Accountants Provide valuable advice on all financial management issues and taxation obligations. Access to the latest changes to taxation and financial reporting requirements, and know procedures for recording financial events accurately, speedily and with maximum security.

Answer 70

Establishing an online business presence, networking a number of computers within the business premises or making maximum use of mobile devices can all improve the business efficiency. Purchasing equipment from a supplier who offers advice and backup support, or establishing a relationship with an ICT consultant is important to consider. The federal government has established a website that includes information relating technology in business.

Answer 71

Many business owners are able to join business service clubs such as Rotary, Apex and Lions. Provide business people with an opportunity to engage in community service projects. Membership can put business owners in touch with other local businesspeople. Advice, support and information can be accessed through such local networks. Business Enterprise Centres (BEC) Australia A not-for-profit network of business enterprise centres, which provide support to small business owners. These centres provide information, mentoring, training programs, workshops and seminars, referrals to accountants, solicitors and government programs and access to networks of other businesspeople.

Answer 72

Business owners can access information and support from a large number of professional organisations. Chambers of commerce These are local associations of businesspeople, usually centred on a suburb or region. Provide legal and financial help, taxation advice, explanations of legislation and industrial relations information. Organise training seminars, arrange industry conferences and liaise with government departments. Others are Small Business Association of Australia and Trade associations (specific industry information and assistance).

Answer 73

All levels of government provide a range of services to businesses. Federal gov Delivers assistance, programs and services that support businesses. The Department of Industry, Science, Energy and Resources maintains a website, a contact centre and a national network to streamline access to information, advice, forms and services for businesses. All areas of planning, starting, running and exiting a business are covered on the website, and there are links to other government websites to help business owners find what they are looking for. E.g. Australian Bureau of Statistics (ABS) is Australia's national statistical agency. Provides data about communities, regions, society and the economy to help business owners to make good planning decisions. State gov In Victoria, the Department of Jobs, Precincts and Regions' Business Victoria website provides entry and links to information and support on all aspects of starting and managing a business- advocates, resolves disputes, monitors the small business environment and engages with the small business community. The Victorian Small Business Commission (VSBC) is a statutory office established to enhance a competitive and fair operating environment for small and medium businesses. Local gov Local councils offer advice on land zoning, assist with subsidised land and consider development applications.

Answer 74

Businesspeople can use their network of friends and colleagues, as well as other local business owners to gain information and advice. Active membership of local chambers of commerce, trade associations and service clubs can lead to friendships and contacts that go beyond the formal activities of these bodies.

Answer 75

Small business owners will often seek advice on a regular basis from a person who is experienced or knowledgeable in the field. Provide invaluable advice and strategies to the small business owner on a variety of issues. May charge services, or may simply share their wealth of knowledge out of goodwill. A mentoring relationship can be rewarding for the mentor as well as the mentee.

Answer 76

A SWOT analysis is a planning tool that identifies the business's internal strengths and weaknesses, as well as any opportunities and threats from the external environment. Used to evaluate the business's current situation and interpret information about what the business might do well, where improvements can be made and where the business might be placed in the external environment.

Answer 77

Benefits Relatively low cost. Fairly simple and straightforward to use. Become more familiar with the business as they are making planning decisions. Addressing weaknesses, responding to threats, taking advantage of strengths and seizing opportunities. Assist the owner to develop goals and strategies for achieving them, which can then be written into the business plan. Limitations A SWOT analysis is only a small part of the business planning process. A SWOT analysis may also generate a large amount of information, not all of which may be useful. A SWOT analysis does not provide solutions to weaknesses or threats; nor does it help the business owner choose which strengths or opportunities are the best options.

Answer 78

A business plan is a written statement of the goals and objectives for a business, and the steps to be taken to achieve them. A summary and an evaluation of a business concept. A comprehensive business plan will also assist when arranging finance for the business. The plan provides information that lenders need to know, and it shows that the business is being properly organised and managed.

Answer 79

Benefits Helps test the viability of the business. Identifies the business's strengths and weaknesses. Forces the business owner to justify his or her plans and actions. Indicates the owner's ability and level of commitment. Assists the business to be proactive rather than reactive. Assists in maintaining the business operation, especially focusing attention on the goals and objectives. Limitations It is simply a plan — it does not guarantee the ultimate success of a business. For example, profit may be lower than anticipated, because a range of factors out of the owner’s control can affect it. The business owner may spend excessive amounts of time preparing the business plan rather than creating and selling the business’s product. Business plans need to be implemented; many business owners develop a business plan and then neglect to follow it.

Answer 80

1. Executive summary. This is a one-page document describing the business and its objectives. This is usually prepared at the end of the plan-writing process. 2. Operations plan. This outlines how the business will be set up and the human resource needs. 3. Financial plan. This details how the business will be financed, and projected cash flow, revenue, expenses and profit. 4. Marketing plan. This outlines key information from the industry the business will be entering and the gap in the market that the business will be filling. The marketing strategy is included in this section.

Answer 81

To be socially responsible, a business must not simply abide by the laws and generate the largest profit possible; it needs to consider how it can go above and beyond its basic legal requirements to improve the welfare of its stakeholders, including its employees, customers and the wider community.

Answer 82

Staff morale A business that generally acts in a socially responsible manner is far more likely to attract customers. A failure to do so can result in customers boycotting the business and turning to more socially responsible competitors. Employee retention A business that fails to act ethically towards its employees can damage the relationship it has with its most important asset. Dissatisfied workers are more likely to leave a business, resulting in an expensive process of finding and training new staff to replace them.

Answer 83

A financial cost may occur to reduce the impact of the business’ operations on the environment (e.g. installing solar panels or water tanks). Time consuming - Planning socially responsible practices and then producing policies that reflect them can divert resources from other important tasks. There is no guarantee of a good reputation by conducting socially responsible practices.

Answer 84

Environmental issues. Customer issues. Staffing issues.

Answer 85

Environmental issues When making planning decisions, the business owner should consider the potential impact of their business on the environment E.g. energy use, recycling, waste reduction measures and sustainable materials To determine the impact of the business on the environment, the owner may choose to conduct an environmental audit, a review of the extent to which a business’ activities have an impact on the environment - assess the nature and extent of the business’s impact on the environment and how it can be managed. Demonstrate accountability to stakeholders. Environmental management system (EMS) - implementing an EMS during the planning process will allow the owner to manage the business’ environmental impact in a systematic and methodical manner.

Answer 86

Business owner must plan to meet the needs of customers as without customers, there’s no business. Therefore customer satisfaction is very important - treated fairly and equitably. This can be achieved through reliable and safe products or services. Businesses should not engage in misleading or deceptive behaviour. Businesses that respect and satisfy customers are more likely to experience success.

Answer 87

Given that the decisions a business owner makes will often have a great impact on employees, it is very important that the socially responsible management of staff be considered when planning the business. When planning, the business owner should consider: Fair pay Business owner should ensure that employees are fairly compensated for the work they perform Safe and healthy working conditions Businesses should ensure that workers' health and safety is prioritised. Business should plan to act above and beyond the law, ensure no long term health issues from their work Employing disadvantaged groups May plan to offer employment opportunities to disadvantaged or marginalised members of society

Answer 88

Adopt and implement policies that reflect a commitment to social responsibility Through policies expectations for employees can be set as well as what the company deems to be appropriate behaviour Policies may relate to things including - environmental sustainability, workplace bullying, equal opportunities, employee leave and flexible work arrangements