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BUSINESS STUDIES > BUSINESS PLANNING > Flashcards

BUSINESS PLANNING Flashcards

1
Q

What is a business?

A

The organised effort of individuals to produce, and sell, for a profit, the products (goods and services) that satisfy individual needs and wants.

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2
Q

What do businesses do?

A

Provide consumers with a vast array of goods and services. At the very core of the economy and future and prosperity relies on them.

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3
Q

What is a “product”?

A

A good or service that can be bought or sold.

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4
Q

What are “goods”?

A

Tangible products (can be touched).

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5
Q

What are “services”?

A

Intangible products (experiences/things done for you).

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6
Q

Production

A

Activities undertaken to combine resources to create products that satisfy customer needs.

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7
Q

What is the transformation process?

A

The business process that involves adding value through the conversion of inputs into outputs (goods and services), or more generally, the “production” of goods and services.

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8
Q

Business Inputs: Transformed Resources

A

Materials
Information
Customers
–> transform through value adding

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9
Q

Business Inputs: Transforming Resources

A

Human resources/labour/skills
Facilities
Machinery
Equipment
–> do the transforming

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10
Q

What is “value adding?”

A

The creation of extra or added value as inputs are transformed into output.

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11
Q

Business Outputs

A

Goods and Services
1. Intermediate (semi-finished and goes into production of other goods).
2. Finished

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12
Q

Business Goals

A

Aspirations for a business to achieve a range of personal or professional accomplishments.

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13
Q

Profit Maximisation

A

Profit as an indicator of success,
Reflects total sales revenue.
Relative to expertise required to lower costs.
Difference between Total Revnue and Total Cost = Profit.
Profit: Total Revenue > Total Cost
Maximise profits to create large return on investment and fund business growth.

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14
Q

Market share

A

Businesses share of the total industry sales for a particular product.
- Maintained through retaining customers.
New customer influx.
Promotion = increased sales.

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15
Q

Growth

A

Increase in net worth (value) and/or physical expansion of a business.
- Accumulation of assets.
- Increased sales and profit.

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16
Q

Share price

A

Part ownership - reflects value of a company at a given time.
- ASX (Public)
- Sold by negotiation (Private)

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17
Q

Social Goals

A

Positive Rep
- Community Service
- Provision of employment.
- Social Justice (CSR)

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18
Q

Environmental Goals

A

Environmentally sustainable production decisions.
Renewable and non-renewable resource use.
Policies + processes to achieve sustainable development = needs and wants of the presemy and future generational needs.
Results in positive brand image, increased sales and higher profits.

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19
Q

What is economic contribution by businesses?

A
  • Employment and development of human capital
  • Provision of income
  • Wealth Creation
  • Improvements in Quality of Life.
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20
Q

Economic contribution: Employment

A

Provides employees with an income for their labour –> this is then spent on goods and services by the employee (demand for them) –> Economic growth as their spendings are re-injected back into the economy.

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21
Q

Economic Contribution: Income

A

Macro-economic - GDP (contributes to Gross Domestic Product) which is total value of all outputs produced by country –> economic growth as more money is spent on products within the region.

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22
Q

Economic Contribution: Wealth

A

Wealth - spent on accumulation of assets –> done over time –> generates income and profit through selling –> economic growth.

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23
Q

Economic Contribution: Quality of Life

A

Higher amounts of tax by government –> higher amounts spent by people –> government expenditure of tax revenue distributed to low income earners and on services —> improved quality of life.

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24
Q

Commercial Contribution: Choice

A
  • Variety of goods and services to meet individual needs and wants
  • Creates competition (selling homogenous products to a limited market), more choice for consumers.
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25
Q

Commercial Contribution: Profit

A
  • Profit is the second largest source of household income (after wages and salaries).
  • 19.1% of total income is earned in profits.
  • 11.2% is earned in rent, interest and dividends.
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26
Q

Commercial Contribution: Taxation

A
  • Company tax (private and public companies) is the second largest contributor to the Federal Budget, making up 16.8% of budget revenue.
  • Payroll taxes and the collection of GST on goods and services.
  • Tax is then redistributed through government expenditure into the community on services, facilities, etc.
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27
Q

Commercial Contribution: Innovation and Invention

A

Innovation: creating new or significantly improved products/process (way of doing things).
Invention: refers to the development of something that is totally new (i.e., flight box recorder, prosthetic limb amalgamation).

Reduce resource use, increased capacity to produce more –> higher income, increased productivity, increased output –> greater choice, lower prices, higher quality products, improved standards of living.

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28
Q

Commercial Contribution: Entrepreneurship and Risk

A

Entrepreneur: a person who sets up a business, taking on financial risk in hope of profit.
Entrepreneurship: the activity of setting up a business, taking on financial risk in the hope of profit.

Creates new businesses, contributes to national income, create social change which can lead to community development and steer government policies.

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29
Q

What is ethics?

A

Ethics refers to doing what is right. Often this is deemed by society.

Effective and profitable
OR
Right and expected by society.

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30
Q

Social Contribution: Environment

A

Environmental Sustainability
- Protecting the environment.
- Conserving of resources.
- Contributing positively to the environment, such as limiting pollution.
- Reducing carbon footprint (i.e., recycling plastics, etc)

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31
Q

Social Contribution: Society

A

CSR: Corporate Social Responsibility. Refers to the open and accountable business actions based on respect for people, community/society and the broader environment.
- Doing more than just complying with rules and regulations.
- Places value on financial returns, social responsibility and environmental sustainability.

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32
Q

Social Contribution: Triple Bottom Line

A

TRIPLE BOTTOM LINE: Placing value on the financial returns, social responsibility and environmental sustainability.
- Generally businesses are motivated by a profit incentive.
- Motivation forms so that businesses operate to maximise their profits.
- Concept which broadens a business to focus on the financial bottom line to include social and environmental considerations.
- Measures economic value, environmental impact and social responsibility.

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33
Q

Influences in Establishing A Business: Personal Qualities

A
  • Being calculated, prepared
  • Successful as a result of personal qualities
  • Acutely prepared strategists.
  • Trust, work ethic, ability to create own reality, charisma, creativity, focus, patience, passionate, determined, confident, outgoing courageous.
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34
Q

Influences In Establishing A Business: Rewards of Business Ownership

A
  • Choosing work location
  • Improving status
  • Capital Gains
  • Overcoming unemployment
  • Accepting a challenge
  • Increasing personal wealth
  • Gaining more control over destiny.
  • Profits.
  • Making an investment
  • Choosing who you work with.
  • Independence.
  • Better lifestyle
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35
Q

Influences In Establishing A Business: Qualifications

A

Formal qualifications are conditions that must be fulfilled before a right can be acquired. Can be in specific fields of management, economics, law –> contribute to success by lowering costs to start-up a business (money does not need to be spent to hire someone to do the job if you are qualified to do it). Boosts profit margin and easier to break-even when starting a business.

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36
Q

Influences In Establishing A Business: Skills

A

Ability to carry out/capacity to do tasks correctly. Can be learned (experience, education or training).
- Organisation, admin, sales presentation, time management, customer service, IT, etc.

Contributes to success —> lowers costs when starting a business as you don’t need to pay someone else to do it for you.

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37
Q

Influences In Establishing A Business: Motivation

A
  • Personal drive
  • Driven by different factors
  • Channel drive into productive means to bring vision/idea to reality.

Linked to Entrepreneurship.

38
Q

Influences In Establishing A Business: Cultural Background

A
  • Family background
  • Popular and social cultures contribute to fostering entrepreneurial activities. Inclusion of choice and variety in goods and services (cuisines at restaurants, etc)
39
Q

Influences In Establishing A Business: Gender

A
  • Men tend to be more dominant.
  • Opportunities in the workplace and inequalities in qualifications and experience.
  • Over time, greater acceptance of women.
40
Q

Sources Of Information: Financial

A

Accountants, Bank Managers, Financial Advisors

Undergoing incoporation, need someone to account, taxation, purchasing a business or a franchise, starting a business

41
Q

Sources Of Information: Legal

A

Lawyers, Solicitors, Conveyancers (purchase/sale of property)

Being investigated and need representation, breach of employment, contract, breach of ACCC (Australian Competition Consumer Act 2010)

42
Q

Sources Of Information: Government

A

Business.gov.au, Safe Work Australia, Fair Work Commission, ACCC, NSW Fair Trading

Legal matters (advice), business registration/number.
Fairwork –> conditions and payment, safety

43
Q

Sources Of Information: Business Administration and Support

A

Chamber of Commerce, Business Association

  • admin as a result of incorporation
  • industry wide changes (lockdown and COVID-19)
44
Q

Sources Of Information: Technical Information

A

Uinversities, TAFE, Trade Associations

  • advancements in technology.
  • statistics and trends
  • changes in markets (accessing research on nutrition, etc)
45
Q

Sources Of Information: Technical Information

A

Uinversities, TAFE, Trade Associations

  • advancements in technology.
  • statistics and trends
  • changes in markets (accessing research on nutrition, etc)
46
Q

Business Trends: Examples

A

Globalisation
Social Media
Artificial Intelligence
Healthy eating/health and wellbeing
Urbanisation
Shrinking households
Aging population
Diversity in the workplace

47
Q

Business Trends: How do they present an opportunity?

A
  • New Markets
  • New Products
  • Sales Revenue
  • Profit
  • Market share
    (depending on the need or want of the good or service - customer preference)
48
Q

Business Trends: How do they present a challenge?

A
  • Cost (production = high)
  • Reallocation of resources/restructuring
  • Upskilling and re-skilling
  • Investment (technology, research, development, manufacturing).
49
Q

Influences In Establishing A Business: Competition

A

Consideration of the competitive environment the business operates within, and gaining a competitive advantage through product positioning and brand positioning.

50
Q

Competition: Product Positioning

A

Establishing a perception in the mind of the customer that the product is unique, placing it in a clear and advantageous way in the consumer’s mind.

51
Q

Competition: Brand Positioning

A

Establishing a perception in the mind of the consumer that a brand is better known for a quality good/service. Clear, unique and advantageous in consumer’s mind.

52
Q

Competition: Why is McDonald’s positioned better than other Fast Food brands?

A
  • More stores
  • Product variety
    Competes with all brands (products, such as chicken burgers, etc, that directly compete with other brands and are better quality)
  • Market share = steals customers as a result of multiple menus that cater for various audiences (low-socio and high socio economic which results in market growth)
  • Has breadth and depth
  • Fostered a culture (Macca’s run)
53
Q

Establishment Options: Establishing A New Business (a business set up from scratch for growth).

Advantages

A
  • Owner is free to make decisions
  • Less expensive to establish than buying an existing business or franchise
  • Can choose an ideal location
  • Can select own name
  • No goodwill to pay for (intangible asset, such as market share value).
  • No hidden problems from the previous owners
  • If funds are limited, it is possible to begin on a smaller scale.
54
Q

Establishment Options: Establishing A New Business

Disadvantages

A
  • Harder to obtain debt finance (limited to small companies not making enough profit to pay back potential debts).
  • Can take months or years to break-even and earn a profit; slow to build a customer base.
  • Need to recruit and train staff.
  • No established networks, e.g. suppliers
  • No goodwill with customers
  • Time delays in building, setting up workplace, gaining licenses/permits, business registration
  • No past records of performance
  • No procedures in place
55
Q

Establishment Options: Buying An Existing Business

Advantages

A
  • Business can be purchased as a turnkey operation.
  • Existing financial position and performance can be assessed.
  • Goodwill will already exist
  • Advice and assistance may be sought from existing trained staff and former owners.
  • Business has already passed through difficult establishment and possibly growth phase
  • Easier to obtain debt finance as past financial performance can be used to obtain approval.
56
Q

Establishment Options: Buying An Existing Business

Disadvantages

A
  • Existing limitations (size, procedures, layout)
  • Existing brand image and reputation may be hard to change
  • Inefficient systems and operations
  • May be difficult to assess the value of.
  • Existing contracts must be adhered to (the new owner might have difficulties with the existing landlord)
  • Some employees may resent change.
  • Past success may be based on talent or success of previous owner.
57
Q

Establishment Options: Buying A Franchise

What is a Franchise?

A

A franchise is purchasing the rights to legally trade under the trademark and use the systems of an existing business.

A license to operate under the name of another business.

58
Q

Establishment Options: Buying A Franchise

Advantages

A
  • Lower failure rates: Only about 12% of franchises fail.
  • Expert backing, advice and training provided by franchisor
  • R&D carried out by franchisor
  • Suppliers and materials already established
  • Immediate benefit from franchisor’s goodwill and brand loyalty.
  • Well-planned advertising often exists
  • Volume purchasing is lower.
  • Procedures, inventory control systems and operating manuals available.
  • Selling a proven, well-established profitable product.
59
Q

Establishment Options: Buying A Franchise

Disadvantages

A
  • Franchisor controls the overall operations
  • Threat of Franchise termination at end of contract.
  • Profits (royalties) must be shared with franchisor (results in decreased profit margin).
  • Goals of franchisor may be incompatible with those of the franchisee.
  • Poor service and products provided by one outlet adversely affect other outlets
  • Products may become “out of date” resulting in decreased sales and profits
  • May cost more to establish a franchise than start a new business.
60
Q

What is goodwill?

A

A retained customer base that is of intangible value.

Recurring, creates higher and more consistent profits for business.

61
Q

What is the relationship between goodwill and the asset value of a business?

A

A business is only worth the value of its assets.

Intangible + tangible = $$$

Businesses physical worth is the combined total of its tangible and intangible assets.
Recurring customer base creates higher and more consistent profits, hence increasing the business’s value.

62
Q

Establishment Options: Buying A Franchise

Trends

A
  • Estimated 79,000 units operating in business format franchises consistent with 2014.
  • More than 470,000 people are employed directly in franchising.
  • Sales turnover of the entire franchising sector was estimated at $146 billion.
63
Q

What is REECL?

A

Response Structure:

  1. Recommend
  2. Explain the recommended strategy using business theory. Benefits made clear.
  3. Example; integrate/apply stimulus by explaining how recommended strategy will benefit the business.
  4. Complications or implications of the recommended strategy.
  5. Link back to the question.
64
Q

Legal Compliance: What do businesses need to comply with?

A

Copyright
Licenses
Business Registration
Building Permits
Safe food handling
Signage
Consumer Protection
Trade practices and fair trading
Employment of people
Health regulations.
Trading hours
Development application
Zoning
Patents
Taxation

65
Q

Where do businesses register their business and business name? Why?

A

ASIC (Australian Securities Investment Commission)
This is to prevent other businesses from trading under a similar name.

66
Q

What is Zoning?

A

Local governments control zoning (they restrict where certain businesses can locate or what land can be used for).
This ensures factories and residential areas are not located together.
A new business must inquire with the local council regarding the location of their business and zoning regulations.*

67
Q

What are two health regulations that must be complied with?

A

Public Health Act 2010
Food Act 2003

Can be implemented on a local and state basis (NSW Food Authority)

68
Q

What do Health Regulations concern?

A

Ensure businesses dealing with food sell products which are safe and suitable for human consumption. Some requirements include:
- the temperature for food storage.
- kitchen layout.
- employee clothing requirements.
- time for which food can be kept.
- correct food handling.

69
Q

What is the Competition and Consumer Act 2010?

A

Outlines undesirable or misleading practices that are illegal in trading.
- Misleading or deceptive advertising.
- Unconscionable conduct.
- False or misleading representations regarding goods or services.
- Offering gifts or prizes in connection with the supply of goods and services and then not providing them.
- Bait advertising
- Referral Selling

70
Q

What federal taxation requirements must businesses comply with?

A

Income tax (PAY-G) - employee based on their wages/earnings. Determined by a tax bracket.
Goods and Services Tax (10% on the supply of most goods and services in Australia).
Company Tax (paid on the earnings of a company = lower than personal tax*)

71
Q

What is a state taxation requirement?

A

Payroll Tax (Payable on wages by an employer to their employees on payrolls that exceed $1.2million at a rate of 4.85%).

72
Q

Human Resources: what are employees considered?

A

Human capital
Assets for the business as they generate income.

73
Q

Why are skills important?

A

Lower expense costs by having a pool of qualified applicants with appropriate skills.
More productive, generate income and wealth for the business.
Return > cost.

74
Q

What are general skills?

A

Skills that are looked for in every employee, also known as employability skills. Flexibility, confidence, work ethic, motivation, communication, etc.

75
Q

What are specific skills?

A

Skills that are specific to a certain job (i.e., customer service)

76
Q

What is a Full-Time job? Entitlements?

A

Employment on a fixed contract or permanent basis where employees are required to work 38 hours per week.
Entitlements: annual leave, sick and carers leave, family and domestic leave/written notice when employment ends.

77
Q

Full-Time job implications for businesses?

A

More expensive (payment of leave when employee is not present, more super, on-costs)

78
Q

What is a Part-Time Job? Entitlements?

A

Refers to employment where employees work less than 38 hours per week, with hours usually regular each week.
Pro-rata = part there of.
Entitlements: minimum, similar to full-time employees, but based on hours of work.

79
Q

What are the implications of Part-Time jobs for businesses?

A

Not as expensive as full-time employment, and locks in employees for scheduled hours without payment being expensive like full-time.

80
Q

What is Casual Job and their Entitlements?

A

A person is a casual employee on the grounds that they accept a job offer from an employer, knowing there is no firm advance commitment to ongoing work with an agreed pattern of work. Roster changes each week, irregular hours.
No entitlements, but higher hourly rate.

81
Q

What are the implications of casual employment for businesses?

A

Cheaper, no fixed hours or wages set.
Have a higher wage, but they work irregular hours.

82
Q

What is an Award?

A

Minimum standards of pay and conditions set by the government.

83
Q

What is an Enterprise Agreement?

A

Pay and conditions of employment determined by negotiation between the business and its staff. These conditions and pay MUST be better off than the award –> encourages flexibility and promotes productivity.

84
Q

What is a Common Law Contract?

A

Pay and conditions determined in relation to specific tasks/jobs. Often referred to as Contractors.
This is outside of fairwork = must go to court if there is a dispute.

85
Q

What are Wage and Non-Wage costs?

A
  1. Superannuation - employer must pay 9.5% superannuation of all employees earning more than $450 in a calendar month.
  2. Annual leave - 4 weeks, plus additional 17.5%.
  3. Public Holidays - 3.85%, 10 public holidays in Australia.
  4. Sick leave - 10 days each year, another 3.85%.
  5. Workers compensation insurance - rate varies dependent on the industry.
  6. Payroll Tax - state government tax levied once an employer’s payroll exceeds a certain amount. Threshold in NSW is $750K.
  7. Recruitment - average cost of recruiting = training, lost production.
86
Q

Why is hiring the right employee important for a business?

A

Cost benefit –> wage and non-wage costs lowered.
Higher rates of productivity.

87
Q

Importance of skilled employees?

A

Skilled –> more input. However, higher wage rates which is more expensive for businesses as a result of skill level.
Unskilled –> lower wage rates, not as expensive for businesses in wage, but costs more for training.

88
Q

Why are general skills more important sometimes than job-specific skills?

A

General can apply to any job, job-specific is limited. Employees are more versatile.

89
Q

What are wage costs?

A

All expenses an employer must bear for the employment of an employee. Composed of direct cost (gross salaries and benefits) and indirect cost (legal and conventional employer contributions).

90
Q

What are non-wage costs?

A

Costs to a business that are any fee that needs to be paid to accomodate an employee that isn’t their wage, such as tax, training and insurance fees, pensions, etc.

BUSINESS STUDIES (2 decks)

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