U1, AOS 3 (External environment and planning) Flashcards
Operating environment
Outside stakeholders whom the biz interacts in conducting its business. *some influence over these stakeholders
(suppliers, competitors, customers and special interest groups; double C, double S)
Macro environment
Broad conditions and trends in the economy and society within which a business operates. *Changes macro can affect ALL businesses, no control
(global considerations, economic conditions, legal and gov regulations, societal attitudes/behaviours, tech considerations, CSR conditions; LETSGC)
Key Legal and Gov Regulations
- Business owners must understand relevant laws for their operations when planning their biz
- businesses that don’t obey the law risk losing customers and their reputation, being fined or losing the right to continue trading
- New legislation (laws) relating to: taxation laws, industrial relations (location (zoning)), occupational health and safety, equal employment opportunity (employment regulations), anti-discrimination laws, protection of the environment (enviro laws), trade practices & consumer protection)
Laws related to establishing a new business
- a biz name must be registered with ASIC unless the owner is trading under their own name (in which registration is then optional)
- New business names require an ABN (Australian business number)
- Companies or partnerships require their own tax file number
The location and development of a business premises will be influenced by (Laws related to location)
- Local government zoning (councils)
- Building regulations
- Regulations surrounding position and size of -
- signage
- Fire regulations
- Parking regulations
Health regulations
- Local councils impose health regulations under the Food Act 1984 (Vic)
- Local councils provide businesses with regulations for obtaining operating licenses.
- Health inspectors ensure business owners maintain standards (kitchen layout, correct food handling)
Employment regulations
- Conditions of employment (eg casual, part-time, full-time)
- Unfair dismissal
- Dispute settling methods
- Wages
- Protection of human rights in employment
- Paying tax
- Paying superannuation into employee accounts
- Anti-discrimination regulations
- Work health and safety regulations
check notes for more info
Taxation laws
- apply to all businesses.
- All registered businesses must prepare a BAS regularly, either monthly or quarterly.
- The BAS details the collection of the goods and services tax (GST), and payment of pay as you go (PAYG) income tax instalments on behalf of employees.
- The biz may also have to pay state government payroll tax, as well as tax payable on its own earnings.
- A biz owner will need to plan to comply with tax laws.
*- Business activity statement (BAS): records a business’s claims for input tax credits and accounts for GST payable
- Goods and services tax (GST): is a broad-based tax of 10% on the supply of most goods and services consumed in Australia
Trade practices and consumer protection
- Relevant legislation: Competition and consumer Act 2010 (Cwlth)
- Provides guidelines for fair trading, advertising, credit and consumer protection
- state consumers have the right to buy quality goods fit for purpose.
- If goods are faulty, the consumer is entitled to a replacement or a cash refund
- Also covers product safety, labelling, unfair market practices, price monitoring
Environmental protection legislation
- Relevant legislation: Environment protection Act 1970 (Vic)
- Applies to noise emissions, preventing pollution and environmental damage to the air, water and land
Political influences and other legal egs
- When Russia initiated war with Ukraine this immediately impacted the stock market, petrol prices and caused airlines to take alternative flight paths.
- The government put in laws for businesses to follow regarding COVID e.g. QR check in codes, not having inside dining, no workers in the office, mask mandates etc. A business which financially benefited from COVID was Australia post
Societal attitudes and behaviour - values & beliefs definitions
Societal attitudes/behaviour: ideas, values and beliefs held by people in society
Values/beliefs: shared principles and morals, representing ideals of what’s good or bad, necessary or unnecessary.
Societal attitudes and behaviour - values & beliefs features
- Societal attitudes and behaviours constantly changing
- Values and beliefs determine what people do, what they wear, what and how they eat and where and how they live
- Pressure from society continues to force businesses to make changes to the way they operate
Trend
general direction in which people’s attitudes or behaviour in society is developing or changing
Societal attitudes - Trends
- One trend to think about is the changing demographics - people are getting older, more educated, health-conscious, and value diverse and family-friendly workplaces, but they’re also feeling time-strapped.
- Businesses that adapt to changing demographics likely thrive
- Another trend that may affect business planning is the demand for family friendly and flexible workplaces
Economic conditions
set of influences that relate to economic activity (including interest rates, wages, unemployment, exchange rates and inflation.
(*Business owners must factor in the economy’s condition when planning their business because economic factors greatly influence both businesses and customers.)
4 Economic conditions and influences:
- Interest rates
- Employment levels
- Tax rates
- Business and consumer confidence levels
interest rate
price charged/paid for the use of money that has been deposited/borrowed
interest rate and how they impact a biz
- When interest rates rise, business activity slows down because borrowing becomes costlier (because credit becomes more expensive)
- High interest rates can impact a business’s profits as they will be paying more in loan repayments
- High interest rates also mean that businesses may be less likely to afford to expand or grow as loans will cost more money
less likely to take out a loan bc it’s expensive to pay back - Low interest rates = good opportunity for business growth AND consumers have more money to spend (consumer confidence is high)
Employment levels and how it impacts a biz
- Employment levels fluctuate with the phases of the business cycle
- In an expansion, employment rises, and unemployment falls; in a contraction, it’s the opposite.
- high employment levels = hard to find skilled employees
- Changing employment levels impact business planning
- In economic expansions, businesses struggle to find employees due to labour shortages, leading to higher wages or hiring overseas workers.
- influences business capacity to compete if economic conditions are not great (changed prices)
Tax rate
the % of income or the value of a good, service or asset paid as tax
Tax rate and how it impacts a biz
- Taxes represent a cost to businesses
- Depending on how much a business earns, will determine how much tax they pay
- Tax rates impact business owners’ decisions in planning.
- Tax deductions may prove to be an attractive option when in the planning stage
Business and consumer confidence levels and how it impacts a biz
- When consumers feel secure in their jobs and finances, they tend to buy more.
- When business owners feel confident, seeing stable consumer confidence and finances, they tend to expand their businesses, hire more workers, or take on more debt.
Technological considerations
methods, systems and devices that are a result of scientific knowledge being used for practical purposes.
Technological considerations and its impacts towards a business
- Technology in manufacturing; boosts efficiency, cuts costs, removes repetitive tasks, introduces new products, and enhances quality/variety.
- Businesses must adapt to technology or they’ll fall behind.
- Business owners must consider the + and - of technology
- business’s budget determines what types and how much technology they use/implement. (expensive but cheap in long run but also maintaining)
- maintenances to continue efficient work
- easy to use
- Opens up new markets, presenting opportunities for businesses
Downfalls of technology include
- decrease in the number of employees required
- Rapid change makes product life cycles shorter, requiring constant updates.
- Need to spend more time and money on R&D to remain competitive
- Maintenance costs and large initial investment
Globalisation
means that businesses now operate in a worldwide market.
*notes look at
Global considerations include
- Overseas competitors and markets
- Offshoring labour
- Exchange rates
- Patenting
- trademarks
- copyrights
- Online sales
Global Consideration - overseas competitors & markets, remember
- Important to have knowledge of ALL competitors - locally, nationally and overseas
- biz owners must stay informed of their competitors’ strategies, strengths and weaknesses
- Businesses can also sell their products in overseas markets (Doing so spreads risk but allows it to potentially grow)
- Issues to consider include:
transportation & distribution
Conversion of currency
Taxes
Marketing and packaging requirements
Products may need to be modified to suit the needs of that market
*more on that dot point
Global Consideration - Offshoring labour, remember
- opportunity to use labour in overseas countries
- Take advantage of lower costs eg cheaper labour, cheaper transportation, favourable economic conditions BUT it comes at the cost of local jobs
*Eg: Telstra offshores customer service call centres to India & the Philippines and Ford and Holden recently shut down ALL Australian manufacturing of cars and offshored that process overseas
Offshoring
moving some of a business’s processes/services to same or another business located overseas
Global Consideration - Exchange rates, remember
- Exchange rates are affected by many factors like; Interest rates, Rate of inflation, Balance of trade, General state of the economy, Quality of a country’s governance
- Changes in exchange rates affect businesses that export goods/services or import materias
*more on that dot point
Exchange rate
price of one country’s currency expressed in terms of another country’s currency
Protection of intellectual property at a global level, remeber
- Important that competitors don’t copy any IP such as new inventions, designs, brands as these provide a competitive advantage
- Essential to protect IP at a global level
IP can be protected through
- Patents
- Trademarks
- Copyrights
Protection of IP - Patents, remember
- A legally enforceable exclusive right granted to the owner for the life of the patent
- An Australian patent will generally only protect the rights of the patent owner in Australia
- patent must be obtained in each country the business seeks protection OR…
Patent
exclusive right granted for any device, substance, method or process that is new, inventive and useful (protects a method, invention or process)
Protection of IP - Trademarks, remember
- An Australian trademark only provides protection in Australia
- Similar to patenting, business owners need to seek protection overseas by applying for protection in each separate country
Trademark
A right granted over a letter, word, phrase, number, sound, smell, shape, logo, picture or aspect of packaging (protecs logos, packaging, designs, colours, words, slogans nmd more)
Protection of IP - Copyright, remember
- Generally obtained automatically without the need for registration
- Placing a copyright notice in a prominent place on any work can act as a reminder to competitor
Copyright
Free and automatic protection of original works such as writing, music, art, films, sound recording, broadcasts and computer programs (protecs writing, films, art, songs)
Global Considerations - Online sales, remember
- When planning, businesses need to consider the options of selling through a physical store, online, or both
- Online stores reduce long-term costs (does not have to pay for the premises, electricity, water)
- Online allows businesses to reach a wider market
- Website crashes occur which means no sales
Failing to go online at all can result in being uncompetitive
*more on this dot point
CSR definition
managing a business in such a way that the broader social welfare of the community, including its employees, customers, suppliers and the environment, is taken into consideration when making business decisions.
*Essentially, it means to go above and beyond your legal obligations for the benefit of the community, enviro and customers, employees…
Triple Bottom Line
- the economic, environmental and social performance of a business.
(Businesses no longer should focus on simply making a profit at all costs, they need to consider their environmental and social performance as being just as important)
Being socially responsible can pos result in
- loyal customer base (trust and meets there beliefs/values)
- Business becoming more competitive
- Positive reputation and relationships (enhanced image and more profits)
Being socially responsible can neg result in
- Time consuming (harder/longer to find a csr suppliers or may not be any)
- Complicated to introduce policies and practices that are CSR
- Costly
- Take away the focus from other objectives
CSR - Environmental Considerations
- Important to ensure the business’s production process will not have serious or negative impacts on the environment
- Businesses could: incorporate renewable energy initiatives e.g. solar or wind power into its operations, Source sustainable ingredients
Implement waste reduction strategies e.g. recycling
CSR - planning production in a way that benefits society
- Businesses should ensure the production process does not have serious or negative impacts on community health and social conditions
- A business could: Purchase materials from local suppliers (supports the community by providing employment but also is good for the environment due to less transport involved), Have facilities and use technology which contributes to the health and welfare of staff, Consider how the product is packaged and marketed (safe, reliable), Treat all customers fairly and equitably
Customers
people who purchase goods/services from a business (expecting high quality at competitive prices)
Customers features
- biz must respond to the needs of customers (affordability, high quality, variety)
- biz needs to recognise and assess changes in consumer tastes so it can constantly satisfy consumer needs
- Consumers will seek compensation if they feel they’ve been unfairly treated or purchased a product that doesn’t do what its supposed to
- Consumers put pressure on businesses to be environmentally aware (recycling, environmentally friendly packaging, reduced packaging, reduced emissions etc)
- Consumers put pressure on businesses to treat employees fairly and do not condone exploiting cheap labour (eg; sweat shops Nike, Apple)
- Consumers want healthier food options, gluten free options, fresh food options
Competitors
other businesses or individuals who offer rival, or competing goods or services to the ones offered by the business.
(rivals who sell a similar product/service)
Competitors features
-biz need to be aware of existing competitors and new competitors
- biz must respond to any change in the actions of their competitors
Competitive advantage
the ability of a business to develop strategies that ensure it has an ‘edge’ over competitors
Competitive features
- To gain a sustainable competitive advantage, a business needs to plan to offer a high-quality product or service at the lowest cost.
Suppliers
businesses/individuals that provide materials and other resources to produce the product/service
Suppliers features
- Suppliers supply: Raw materials, equipment, machinery, finance, information
- Good relationship with suppliers is important
- have many suppliers to account for supply chain issues
- Businesses tend to have many different suppliers = less vulnerable to supply difficulties BUT this can result in losing control over suppliers and their activities
Supply chain
is the range of suppliers from which the business purchases materials and resources.
supply chain
- The supply chain begins with sourcing natural resources, then moves to manufacturing for component construction and assembly. Next, the products go to storage facilities before reaching the consumer.
- The supply chain needs to be well managed because production of the business’s goods or service depends on resources.
Supply chain management is critical for the following reasons
- If resources required are not on hand, then nothing can be produced.
- If resources are of inferior quality, it is difficult or costly to produce quality products.
- If the right quantities of resources are not available, the business cannot meet demand for its products.
Sustainability and the supply chain features
- In planning stage, a business must consider where production resources are sourced and how they are delivered.
- Business owners must assess the business location for supplier proximity, delivery efficiency, and consistency in quality and pricing.
- Businesses today expect their suppliers to behave in a socially responsible manner
(Eg: chocolate companies do not want to be seen supporting child slave labour by sourcing their cacao beans from suppliers overseas who use children to pick the beans)
Special interest groups
groups of people who to directly influence businesses to adopt particular policies or procedures
Special interest group egs
- Environmental lobby groups
- Business associations
- Unions
*the operating environment is affected and influenced by a number of associations, organisations and interest groups
Environmental lobby groups
promote environmental issues to the public, government and businesses
Environmental lobby groups info
- Enviro lobby groups will put pressure on the gov to implement new laws around enviro issues
- miners, for eg will receive criticism from lobby groups over their mining activities. They respond by undertaking environmental impact studies & rehab works, which affects their business planning
Business associations *
organisations that support businesses and provide training and education programs, advice and information
Business associations info *
- Australian Chamber of Commerce and Industry (ACCI) speaks on behalf of Australian businesses at national and international levels
- Family Business Australia represents family businesses
- Small Business Association of Australia represents small businesses
Unions
organisations formed by employees and aim to navigate the best possible pay and working conditions
Unions info
- Employee may choose to join a union
- They’re called on to represent their members in the development of new or changed employee agreements - they fight for the best possible conditions and wages for employees
- Business planning may be affected by the considerations of employee safety, rights and conditions
Consumer Groups
lobby businesses based on packaging, priving, safety (eg: choice)
