Preliminary Topic: Nature of Business

Students learn about Summary Notes Case Study

1. Role of business
The nature of a business
The role of a business is to satisfy the never- ending needs and wants of
consumers. A business can be defined as the organised effort of individuals to
produce and sell, for a profit (goods and services) that satisfy individuals needs
and wants.

o Producing goods and services

http://economictimes.indiati
A product is a good or service that can be bought or sold. mes.com/news/international/
Goods are items that can be seen or touched. business/rising-demand-for-
Services are things done for you by others. goods-and-services-fuels-
economic-growth-for-
When we go shopping we are choosing from a range of fi nished
mexico/articleshow/29645501
products products that are ready for customers to buy and use. .cms Case study relating to the
Business enterprises undertake many activities to provide the products rising demand of goods and
demanded by customers. services.
However, by far the most important of all these activities is production.
Production refers to those activities undertaken by the business that
combine the resources to create products that satisfy customers needs
and wants.
http://www.smh.com.au/busi
Businesses receive sales revenue (money) from its customers through ness/google-profit-jumps-to-
us34bn-as-revenue-shines-
the selling of products.
20140131-31qys.html-
o Profit They also pay out money to cover the expenses associated with Google making 3.4 Billion
operating the business operating expenses dollars in profit after making
For a business to make a profit, its sales revenue must be greater than huge revenue.
its operating expenses.
 Profit = Sales Revenue Operating Expenses
As profit becomes the property of business owners, it can be regarded
as the reward that they receive for producing products that consumers
want.

Consumers earn money by working jobs provided by businesses, which http://www.smh.com.au/busi

they in turn use to purchase products. ness/mining-and-
o Employment Number of employees hired will depend on the nature of products and resources/dday-for-bp-
employees-fiveyear-plan-
the market demand for that product.
20140203-31xbp.html Bp
The higher the demand, the more employees a business will hire. Mmaking a long term plan that
The SME (small-medium enterprise) sector is a major source of will keep the employees
employment in Australia, accounting for ~ 50% of all non-government employed in their company.
sector employment.

Income is money received by a person for providing their labour, or a business

http://www.ny1.com/content/
from a return on its investment.
o Incomes lifestyles/money_matters/203
Employees provide their labour and in return receive either a:
015/lower-income-families-
a) Wage: money received by workers, usually on a weekly basis, for find-tax-relief-from-volunteer-
services they provide to an employer programs Article relating to
b) Salary: a fixed amount of money paid on a regular basis, usually families with lower incomes
fortnightly or monthly, to a permanent employee and how this affects the
A business will receive its income (profit) after all expenses have been deducted amount they pay in taxes.
from sales revenue.
Private and public companies have many owners referred to as shareholders
who receive income in the form of dividends.
If the business is a private or public company, it will have many owners referred
to as shareholders. (A share is a part ownership of a company.) Usually, some or
all of a companys profi t is divided among shareholders. This type of income is
called a dividend.
o Choice Choice is the act of selecting among alternatives. http://www.businessweek.co
Consumers have freedom of choice and the opportunity to purchase a m/articles/2014-01-
variety of products at competitive prices due to increasing competition. 30/lenovo-takes-on-apple-
and-samsung-in-smartphone-
Freedon of choice exists when consumers can shop around and select
market Lenovo trying to create
from a range of competitors products. competition with the leading
More competition, greater the choice for consumers. smart phone companies, giving
Eg. Purchasing a new toothbrush, finding at your local supermarket greater choice for people
many different brands, designs, colours, shapes, textures, packaging, wanting to buy a new smart
prices, size, etc. phone.

o Innovation a. Innovation is an improvement on something already established http://www.fastcompany.co

b. An invention is the development of something new m/3025953/tech-
Many SMEs are build on product innovation, as they constantly research, forecast/apples-iwatch-could-
develop and test new ideas and products. charge-with-magnets-and-
Finding new and better ways of doing things has resulted in improved efficiency, sunlight Apples latest product
innovation
and increased productivity.

o Entrepreneurship and risk Entrepreneurship and Risk http://www.businessinsider.c

An entrepreneur is someone who starts, operates and assumes the risk om.au/16-australian-
of a business venture in the hope of making a profit. entrepreneurs-share-the-
They are prepared to take the risk of starting and operating a business most-valuable-life-lessons-
venture; of turning their dreams and passions into a livelihood. theyve-learned-2013-11 - 16
entrepreneurs share real life
There is a high degree of risk as they usually explore untapped markets experiences.
with no track record of proven consumer demand or guaranteed
returns.
But for those whose ideas translate into a successful business venture,
the profits are often huge.
 o Wealth and quality of life Quality of life refers to the overall wellbeing of an individual, and is a
combination of both material and non-material benefits. http://www.ns.dailybusinessb
As business activities play a vital role in our lives, businesses have a uzz.ca/Provincial-News/2014-
responsibility to provide consumers with what they want and minimise 01-28/article-3592674/NS%3A-
what they dont want. Inspirational-speaker-talks-
Wealth Creation small-business,-wealth-
a. During trading periods, businesses receive money from customers in creation-in-Halifax/1 Darren
Weeks who heads a company
exchange for products
called Fast Track to Cash Flow
b. They must also pay out money to other businesses to cover operating is in Halifax presenting
expenses seminars on How to Get Rich
Operating expenses are the costs involved in the day-to-day operation of the in Canada at the Lord Nelson
business. The difference between the two amounts, the value added, represents Hotel.
the wealth created by the business.
Wealth Created = Sales Revenue Operating Expenses
The wealth is then redistributed to employees, governments, lenders, owners
and shareholders.

2. Types of Businesses
Classification of business
o Size: Small to medium
enterprise SMEs
Small Businesses http://au.finance.yahoo.co
Business Type- Corner store, Local mechanic, Hairdressing salon m/news/harsh-winter-
Number of employees- Less than 20 employees chills-small-businesses-
Type of ownership- Independently owned and operated by usually one 010102330.html- Article on
or two people how small businesses have
Most Common legal structure- Sole trader, Partnership been effected bby the
Market Share- Small climate during different
Decision making- Owner responsible for majority of decisions; simple parts of the year.
and quick implementation of decisions
Sources of Finance- Owner (usually from own savings or a loan);
difficulty in accessing loans
Medium Businesses
Business Type- Services club, Motel/hotel, Engineering factory
Number of employees- 20- 199 employees
 Type of ownership- Owned and operated by a few people and/ or
private shareholders http://www.franchise.net.a
Most Common Legal Structure- Partnership, Private company u/news/the-top-10-small-
Market Share- Medium, due to dominance within a geographic region; to-medium-sized-business-
Decision making- Owner basically responsible for majority of decisions; trends-f article on the
more complicated decision making with slower implementation, due to trends of small and medium
influence of directors businesses.
Sources of finance- Owners/partners own savings or a loan and/or
private shareholders; easier accessibility to larger loans
o Size: Large Large Businesses http://www.miamiherald.co
Business Type- Woolworths, Qantas, National Australia Bank m/2014/02/12/3929311/he
Number of employees- 200 or more employees alth-care-tweak-big-
Type of ownership- Owned usually by thousands of public shareholders companies.html Talks about
Most Common Legal Structure- Public company (numerous) how in America, Obama
Market Share- Large, especially for multinational corporations that changes to the health care
dominate the markets of many countries rules benefits large
Decision making- Complex decision making, due to division of companies greatly.
responsibilities among directors, senior and middle management;
possibly slow implementation of decisions, due to the layers of
management
Sources of finance- Many sources, including cash reserves, retained
profit, sale of shares, and loans from domestic and overseas institutions
o Local, national, global
A local business, such as a newsagent, corner store, hairdresser, mechanic or
pharmacy, has a very restricted geographical spread. It serves the surrounding Example of local
area and is in no position to offer a range of products to another suburb or business- Sams
town. Local businesses such as these will frequently be used by consumers who Cheap Cut (barber)
live nearby. The majority of local businesses tend to be small to medium in size.

As a business grows, it increases its range of products and the area it serves. As
it does this, it develops into a national business one that operates within just Example of national
one country. Coles, for example, commenced trading in 1914 as G.J. Coles business-Woolworths
variety store in Collingwood, Victoria. Started by George Coles and his brother
Jim, it employed six people. Today, Coles is a leader in Australian food retailing,
with more than 100 000 employees and over 11 million customer transactions a
week.
A global business, commonly referred to as a transnational corporation (TNC), Example of global
is a large business with a home base in one country that operates partially business- McDonalds
owned or wholly owned businesses in other countries.

Reasons for Business expansion:

1. Increase in sales- As a businesss products become more widely known,
sales increase. To satisfy this increase in consumer demand, a business
will expand by establishing stores in new locations.
2. Desire to increase profits- Most business owners would like to increase
their profits. One way to do this is to serve a wider market, because this
normally results in further sales growth leads to further growth. In
the long term, this increases the businesss profits.
3. Increase in market share- At the start of a businesss growth period, it
faces increased competition as new competitors enter the market. This
begins the struggle for market share. Competitive conflict is expensive,
and often the small, weak firms do not survive. Eventually, the
remaining businesses start to reap the rewards of their investment.
4. Global consumers- There is increasing uniformity among consumers
around the world. For example, the same television commercials are
shown across the globe. Internationally, millions of people want to
purchase a particular brand of soft drink, jeans, sunglasses, computer or
car. Todays consumers have access to the internet and are more likely
to want to purchase foreign-made goods. Over the last decade, e-
commerce (online shopping via the internet) has become the most
commonly used method of purchasing products from overseas.
o Industry: Primary Primary industry includes all those businesses in which production is directly
associated with natural resources. All production begins here. Examples of these
businesses include all types of farming, mining, fishing, grazing and forestry.
Even though this sector employs only 4 per cent of the labour force, its role is
essential because it provides all of our food requirements. As well,
approximately 60 per cent of all our exports come from these industries.

o Industry: Secondary
Secondary industry involves taking a raw material and making it into a
finished or semi-finished product.
For example, iron ore, coal and limestone are turned into steel a
semifinished product that is then used to manufacture cars.
Steel and car manufacturers are both examples of secondary industry
businesses.

o Industry: Tertiary
Tertiary industry involves performing a service for other people.
Examples include retailers, dentists, solicitors, banks, museums and
health workers.
Today, about three out of every four employees and two out of every
three businesses are classified as tertiary.
Due to this increase in numbers, the tertiary sector has been subdivided
into two other sectors: quaternary and quinary.

o Industry: Quaternary
Quaternary industry includes services that involve the transfer and
processing of information and knowledge.
Examples include telecommunication, property, computing, finance and
education.
The quaternary sector is expected to undergo dramatic change over the
next 20 years due to the rapid advances in telecommunications.
Expansion in e-commerce and internet-based business activity will see
an increase in the number of people employed in information
processing and analysis.
o Industry: Quinary
o Legal structure: Sole trader
Quinary industry includes all services that have traditionally been
performed in the home.
Examples include hospitality, tourism, craft-based activities and
childcare.
It includes both paid and unpaid work.
Demand for quinary-type services is estimated to expand rapidly during
the next two decades, due to social and lifestyle changes, as well as an
increase in the number of two income households,
Is a business that is owned and operated by one person.
Owner may employ other workers, but the owner or sole trader is the
person who provides all finance, makes all the decisions, takes all the
responsibility for the operation for the business.
Only legal requirement, the name of the business be registered if the
names is different from that of the owner. If so, it must be registered
with the Department of Fair Trading.
The owner and the business are regarded as the same, meaning if the
business is sued, the owner is sued.
If the business runs on financial difficulties, the sole trader is solely
responsible.
The responsibility may include selling personal assets to pay for the
liabilities if the business, this being referred to as unlimited liability.
o Legal structure: Partnership Is a legal business structure that is owned and operated by between two
and 20 people, with aim of making profit.
Exceptions to this number- medical practitioners, stockbrokers,
veterinarians, architects, chemists.
Similar to sole trader in that the owner and the business are regarder as
the same; that is, there is no leagal entity. http://businesscasest
Have unlimited liability. udies.co.uk/business-
Can be made verbally or in writing by implication.
Limited partnerships introduced to allow one or more partnerships to
theory/strategy/legal
contribute financially to the business but take no part in the running of -forms-of-
the partnership. business.html#axzz2t
The main reason for their investment, to add more capital or finance to FKGYtB8 legal
an existing partnership.
structure of
businesses

o Legal structure: Private Usually between 2-50 private shareholders.

company Shares only offered to those people the business wishes to have as part
owners.
Shareholders can only sell their shares to people approved of by the
other directors.
A private company must have the words proprietary limited,
abbreviated to Pty Ltd, after its name. The main advantage of a private
company is that shareholders have limited liability protection.
 o Legal structure: Public The shares for public companies are listed on the Australian Securities
company Exchange, and the general public may buy and sell shares in those
companies.
Whereas private companies tend to be small or medium-sized
businesses, most public companies are large in size and market a large
range of products for example, Woolworths, Telstra, BHP Billiton and
Westfield.
A public company has:
- at least one shareholder, with no maximum number
- no restrictions on the transfer of shares or raising money from the
public by offering shares
- to issue a prospectus when selling its shares for the fi rst time
- a minimum requirement of three directors (two must live in Australia)
- the word Limited or Ltd in its name
- To publish its audited financial accounts each year, its annual report.

o Legal structure: Government
enterprise
Government enterprises are government-owned and operated. (They
are also known as government business enterprises GBEs.)
Dues to privatisation, some government enterprises have become
public companies.
Examples of government enterprises- Australia Post, Railcorp.

Factors influencing choice of legal Size of the Business

structure As sales increase, business operations will grow to meet the higher level of
o Size consumer demand. This will ultimately lead to a change in legal structure.
Most businesses start off as a small or micro enterprise, sole trader or
partnership.
As sales increase and the business continues to grow, further expansion
will be needed and the business becomes medium- sized.
The business will need to purchase new plant and equipment, which
requires the injection of more capital- partnership or private company
might be suitable with new partners bringing with them extra finance
 skills and expertise.
If it continues to grow- national or transnational corporation to finance
this large expansion, it will be necessary to show from a large pool of
available finances.
A float is the raising of capital in a company through the sales of shares
to a company.
A prospectus is issued, the business is listed on the Stock Exchange and
shares are offered for sale.
A prospectus is a document giving details of a company and inviting the
public to buy shares in it.
Ownership Structure
o Ownership A sole trader has complete control and ownership of the business.
In a partnership, the ownership is shared amongst the partners.
A private company would allow owner(s) to maintain a high degree of
control whilst also offering the protection of limited liability.
Public companies give ownership to thousands of small individual
shareholders. Those with more shares have more ownership and control
of the business.
Finance Needed
o Finance Finance will be needed for two basic purposes:
1. To establish or purchase the business.
2. To finance the day- to- day running of the business.
The money will often need to be paid before the money is received from the
sale of goods to customers.
Sole traders and partnerships, because of their exposure to risk, can find it
difficult to obtain adequate finance.
One option is venture capital- money that is invested in small and
sometime struggling businesses that have the potential to become very
successful.
Incorporated businesses either proprietary or public companies raise finance
from selling shares.
3. Influences in the business
environment Global Financial Crisis 2009
External influences was caused in the US due to
o Economic Australian economy experiences economic cycles of boom and busts the increase in number of
These periods of high and low economic activity, refered to as the homeowners defaulting on
business cycle or economic cycle. their mortgage payment.
Boom- Period of time during which sales or business activity increase rapidly. The repercussions of this
Bust- Period of time where economic growth decreases. Also known as a financial disaster affected
recession. many financial systems and
The business cycle stock markets leaving many
1. Prosperity- the 2. Business faces a unemployed.
3. Recession is
business starts off downturn- gradual
Swan cleaning service had a
reached major collapse in May 2013
with a boom. decrease in
putting 2500 cleaners out of
business activity. work.
5. Business has a 4. Upturn- business
boom period and gradually increases
prosperity is business activity
restored.

Once prosperity is restored the business cycle is complete.

Business cycle is a basic feature of our economic system.
Level of Economic activity is not constant it fluctuates over time.
Fluctuation- total incomes, spending and employment rises and falls.
Recession Period
There are four main characteristics of a recession period:
1. Unemployment levels rising.
2. Inflation may remain stable or fall.
3. Wages are less likely to rise.
4. Level of spending decreases.
 The Recessionary Cycle

o Financial Global financial markets have changed dramatically over the last thirty years due Workplace deregulation
to two main factors:
won't boost productivity
Deregulation http://theconversation.com/work
Globalisation place-deregulation-wont-boost-
Deregulation productivity-22942
Deregulation: The removal of government regulation from industry, with This article argues that
businesses are not able
the aim of increasing efficiency and improving competition. to function as
Deregulation has allowed a more flexible, market-oriented approach in productively without the
the financial sector. government systems
Deregulation opens the financial industry to greater competition. that are in place in
regulated businesses.
Globalisation All businesses need
Globalisation allows large businesses to acquire finance from worldwide some level of regulation
sources. to ensure maximum
productivity, with
regulation comes order.
o Geographic Major Impacts on Business Activity
Australias geographic location within the Asia Pacific region
Economic grown in a number of Asian nations, especially China - provide
challenging opportunities for business expansion and sales and profit
Demography
 Globalisation
Demography- the study of particular features of the population, age, sex, http://www.sys-
income, cultural background and family size. con.com/node/2977254
Changes in the demography of a countrys population can lead to changes in
demand levels and the nature of products and services. Unprecedented
Transformation in Care
Delivery across
Australia and Asia-Pacific to
drive Innovation and
Major demographic issue Efficiency

Considerable impact on businesses

=
Changes in the age structure of our population
Greying of Australian population, baby boomers people born between 1946
and 1964 now reaching retirement age.

Effects
Skill shortages in the workforce
Increased demand for age-related services
Globalisation- a process that involves the breaking down of barriers between
countries, allowing them to become more connected, resulting in increased
flows of goods, money, people and ideas.
Important geographical influence
Earth is now a global community whose individual members are linked
through the mechanism of international trade; the buying and selling of
goods and services between nations
Nations are closely linked now more than ever before
Assisted by technological revolution: communication & computers
Trade, exploration and the movement of people and ideas globally have
been occurring for centuries
New communications, information and transportation technology has
 redefined our concept of time and distance
Dominos People Powered
o Social Social influences, such as changes to fashion and culture, have the Pizza
capacity to affect business sales and profits. Talks about how Dominos
Rapid identification and response to these changes is using the opinions of
Leads to sales & profit opportunities people to make their
Leads to business growth products how their
Failure to respond consumers like it.
Threaten business stability & viability
(McCain Times 100
Case Study)- Talks
Businesses have legal responsibilities to customers and competitors in about what McCain needs
o Legal the way in which they provide goods and services. to fulfill for it to be legal to
Most businesses are willing to comply with regulations sell to the public.
Often time consuming and costly
Regulations can be confusing and contradictory
Essential for business owners to have a working knowledge of laws
affecting operation so they: Happy Birthday GST, and
Can avoid penalties many happy tax returns
Understand and accept the legal responsibilities they owe to Goods and Service Tax- Broad
stake holders bases tax of 10% on the supply of
most goods and services
consumed in Australia.
The GST had a major impact on
Government policies have considerable impact on the business many aspects of business
o Political environment. operations because businesses
Major political change can lead to business uncertainty or business became responsible for collecting
the tax on behalf of the
confidence.
government.
Example of dominant political issue affecting Australian businesses- the Had a particularly large effect on
introduction of GST, in July 2000. individuals and businesses when it
was introduced as it was a whole
new expense which hadnt
previously existed.
Continues to effect business
environment and individuals.
 ACCC puts businesses on
o Institutional Three Main Influences notice over use of drip
Government pricing to boost prices in
Regulatory Bodies online bookings
Other ACCC has warned it is likely
Government to take legal action against
drip pricing with online
purchases.

The practice is a detriment

to both competition and
consumer.

This is a great example of

the regulatory organisation
taking action for the well
Regulatory Bodies being of competitive
These are organisations monitor the actions of businesses in order to make sure businesses who are trying
they are conducting themselves fairly to consumers, competition and to be truthful and
communities. consumers who are tricked
by the gradual increase in
price as the transaction
progresses.
 http://businesscasestudies.
o Technological What is it? co.uk/jessops/responding-
The advances in how businesses interact and how well they perform to-changes-in-the-market-
Businesses can increase efficiency and productivity, environment/introduction.
External environment html#axzz2tojvIrxz.
Provides businesses the opportunity to adopt A case study about an
Who is affected English photographic
Businesses in all the types of industries business and the changes
Allow the work to be made easier that it had to make to
satisfy changing consumer
The secondary and quaternary sectors
wants/needs.
Secondary Sector
The introduction of industrial robots
E.g. hi-tech robotics in many manufacturing industries such as car and
steel manufacturers
Quaternary Sector
Where services transfer and process information and knowledge
E.g. telecommunications, finance and computing services
So why do businesses have to adapt?
Must adapt to the appropriate technology
If a business is slow to adapt it is likely to fall.
Its competition will be able to get a greater market share
o Competitive situation Nature of Competition Competing within a
Businesses are constantly competing in order to gain the devotion of their changing world A Rolls-
customers and establish themselves as the market leaders in their industry, Royce case study
while endeavoring to achieve a sustainable competitive advantage. - This case study explains
Benefits: how the aero-engine
Consumers: wider variety of choice, qualities and prices. market is an oligopoly,
Businesses: improved efficiency in production, products of greater with very few other
quality and lower cost. companies producing
Sustainable competitive advantage: these engines, but it is
the ability for a business to develop strategies that will ensure that it is favoured becoming a more
over competitors for a long period of time competitive market, and
Ease of
entry
into a
Rolls-Royce need to step
market
for a up their marketing
new
business techniques and
effeciency.
Marketi
ng
Factor Local
strategie
s Influencing and - Competition in this
a Businesss foreign
employe
d by
Competitive
ness
competi
tion
market is intensified as
competi
tors each manufacturer has
tried to improve its
Number volumes and market
of
competi
tors
share. Customers are
expecting higher levels of
Ease of Entry service eg. Shipping of the
Defined as the ability of an individual or individuals to install a business, parts or after care service.
within a specific industry. The ease of entry is determined by the class of - Although, it reports that
market concentration: the aero-engine industry
Array of small firms entry is not difficult, as businesses are small and is extremely difficult to
it is more affordable for the business to gain some control over the enter into.
market (monopolistic and perfect competition).
Few firms dominating industry entry is difficult, as firms are larger
with heighted sufficiency and resources (oligopolies).
Only one firm dominating industry entry is impossible, as one firm
 dictates the selling of all resources (monopoly).
Local Competitors
Renowned as competitors in an identical market who produce or sell goods and
services. All competitors deal with similar variables, including:
Labour costs
Transport costs
The economy
Cost of stock/Raw materials
Foreign Competitors
Recognised as businesses often situated overseas or offshore, who endeavor to
sell their goods and services in Australia, competing with local businesses.
Foreign businesses who market their products in Australia are inclusive of, Apple
Inc., Samsung and Rolls-Royce Limited.
The number of competitors: commonly, the higher numbers of
competitors is linked to a greater need for marketing.
The nature of the business: referring to the form of the product and the
level of marketing at which it requires.

o (Changes in) Markets http://www.kpmg.com/glob

Financial/ Capital Markets al/en/topics/changing-
Flow of capital expanded rapidly. markets-business-
Capital flows are favourable. environment/pages/default.
easier for individuals and businesses to access overseas share markets aspx
Labour Markets Talks about changing
labour market less global markets and business
Political barriers environment
Australia experienced increased demand for skilled labour
Increased demand
Australian Government

Consumer Markets
Huge growth in the amount and value
Countries are achieving cost savings
 This generally results in higher sales.
Internal influences Advancements in technology have changed consumer markets
http://articles.economictim
o Products Information es.indiatimes.com/2014-03-
Goods physically large require many raw material inputs. 07/news/48005408_1_coke
there will need to be structures in place to organise and monitor the -zero-consumers-coca-cola-
processes involved in production. life
The range of goods and services number produced by the business.
The larger the range, the more internal impact it will have on the
business as it will need to expand operations and internal structures to
accommodate the changes.
Types of businesses
Product influence is reflected in the type of business (service,
manufacturer or retailer).
Internally, a service provider will be structured differently to a
manufacturer or retailer
The range of goods and services number produced by the business.
Some goods or services require extensive preparation, while others are
merely deliverers.
Size of the business
Based on the range and type of products produced, level of technology,
and the volume of products produced.
E.g. Larger businesses produce more goods and services.
Which will influence the internal structures and operations of the
business.
Resources
The four main resources available to a business are:

Human resources. The employees of the business. Generally its most

important asset.
Information resources. Resources including knowledge and data
required by the business such as market research, sales reports,
 economic forecasts, technical material and legal advice.
Physical resources. The equipment, machinery, buildings and raw
materials.
Financial resources. The funds the business uses to meet its obligations
to various creditors.
Eg. What resources would you need for a school musical?

o Location Difference between good and bad location

A good location will attract more customers, leading to a higher level of Enterprise Rent-A-Car is a
sales. service business and its
A bad location is generally not as easily accessible or attractive to customers include:
customers hence, gaining no sales. - businesses, who may
The location of the business must be convenient and preferably well require regular car rentals
known, where the business must be visible so that customers can take for their staff or visitors
notice of it when passing by. - individual customers, who
It is beneficial to be located next to a complementary business: a may want to hire a car
business that sells a similar range of goods and services, because when they are on holiday or
customers would be aware of the site. if their own vehicle has
Location factors: been involved in an
Visibility accident.
Cost Enterprise aims to
make their location
Proximity to suppliers
easily accessible,
Proximity to customers
and close to their
Proximity to support services.
customers
 Where are retail businesses (clothing stores or cafes) usually located? Locating branches
Retail businesses are very dependent on location. The better the location of in central areas with
these businesses the higher level of success. They are usually located high customer
somewhere convenient for their market, with a high level of customer traffic. traffic Enterprise
can increase
Where are non retail businesses (manufacturing or wholesaling) usually awareness of its
located? services
Non retail businesses are more reliant on the accessibility to transport The new Enterprise Rent-A-
facilities, used for shipping goods or distributing products. Anywhere Car branch at Heathrow
convenient to raw material suppliers with good transport links is airport has a convenient
suitable. and accessible position
Visibility between the airport
Businesses that require a high visibility are located in prime shopping junctions and motorways,
areas (shopping centres or main streets). so that customers coming
The visibility of a location is not as much of a concern for businesses in from different directions
the secondary industry. They can be located in a low visibility location can find it easily.
and then advertise to their appropriate customers.
Cost
Business that rely on high levels of customer traffic require a central
location in busy areas, where the cost of the location would be more
expensive.
Businesses that do not rely on passing customer traffic search for lower
cost sites.
The location of businesses is no longer as important as before due to
advancements in technology, where businesses are able to
communicate with their customers through computers, especially the
internet.
Proximity to Suppliers
This is an important consideration for some businesses, but not for all.
A business that relies on bulky raw materials or finished goods
(manufacturers), has significant transport costs.
In order to reduce these costs, these businesses need to locate closer to
their suppliers.
 Proximity to Customers
The importance of proximity to customers depends of the type of
business.
Retail businesses must locate as close to customer base as possible
(prime shopping areas).
Manufacturing businesses may decide that it is more effective to
transport their products to their customers instead of locating close to
them.

o Resources http://www.miningaustralia
Managing Resources .com.au/news/wa-
The quantity and quality of these resources will vary performs-strong-in-2012-
But by combining them the goods and services demanded by consumers with-record-resources-m
are produced
These are only general categories of resource
In reality a manager must choose from many specific resources within
each category
Knowledgeable and efficient managers are needed to gather, select, and
coordinate the appropriate resources
o Management and the
business culture Flight Centre
Management
Adopted modern
Businesses have flattened their structures due to increased competition
organisational
from globalisation
structure
Can adapt quickly to meet demands of changing consumer needs and
Consists of only four
market conditions
layers
Less people to approve decisions thus allowing the flow of work to occur
Business teams on
rapidly
bottom, then
Traditional Organisational Structure leadership teams,
Centralised Power not shared then national
Task/activity centred Workers controlled
leadership teams,
Division of labour Communication: top-
regional leadership
Rigid structure down
Delegation: top-down
and finally the
Autocratic
Employment relations:
management style pluralist
 global board.
Everyone who
works at Flight
Centre is allowed to
Emerging Organisational Structure participate in
business, area and
Decentralized Equal power sharing
national leadership.
People Centred Workers independent
Managers or
Multi-task, multi-skilled Communication: leaders do the same
Flexible structure: flat Consensus work as other
Democratic style Delegation by employees
Performance management agreement
style Employment
Relations: Unitary
Case Study- Pizza Hut
Business Culture http://www.wwltv.c
What is it? om/news/Pizza-
The values, ideas, expectations and beliefs shared by the staff and Hut-embarrassed-
managers of the business. after-West-Virginia-
Reflected in the way a particular business goes about doing certain store-manager-
things, the style or character developed by a business is displayed in its pees-in-stores-sink-
culture. 246222401.html
Created a negative
business culture
High ranking
member of the
business not
displaying correct
etiquette and acting
as a poor role
model for his
employees.
Culture and
Officially reputation of the
Official culture shown in the policies, goals or slogans of a business. business were
Unwritten or informal rules that guide how people in the business tarnished.
behave, such as the dress code, the language staff use, customer Actions of a single
services policies, as well as the way staff interact with each other. high ranking
Informal atmosphere and casual dress as opposed to a formal individual created a
environment with more rigid standards. snowball effect for
A Managers Role the company
Through understanding effective managers will use the businesss
culture as a vital tool to encourage positive change.
A manager who lacks understanding or who promotes a negative
business culture is likely to experience negatives outcomes from their
employees

Managers are responsible for recruiting suitable staff and providing

them with adequate training to meet the expected values of the
business, for example in customer service.
Management must continually reinforce positive values by being role
models and rewarding positive behaviour.
Importance
Businesses with a healthy, positive business culture are more likely to be
successful, because such a workplace is perceived by the employees to
be more positive and suited towards their own needs.
Employees who have a clear understanding of their requirements are
able to work more positively and feel better about their work.
Values
Businesss basic beliefs, shared among its employees. These can include:
Honesty
Hard work
Teamwork
Quality customer service
Employee participation
 Innovation
Symbols
Events or objects that are used to represent something the business
believes to be important.
actions speaking louder than words.
Competitive sports are a key feature of the businesss culture in order to
help strengthen team cohesion and loyalty.
Employee development and loyalty through the use of training and
development programs.
Rituals, Rights and Celebrations
Routine behavioural patterns in a businesss everyday life.
Regular social gatherings can be held to help develop a sense of
belonging among employees who normally work in small teams during
the week.
These can include:
Lunch meetings
Team building/sessions or exercises
External Social activities
Heroes
Businesss successful employees who reect its values and, therefore,
act as an example for others.
These employees are rewarded for their performance and are used as a
role model to encourage other employees within the business to
achieve their maximum potential.
Formal Business Structure
Place an emphasis on bureaucracy and hierarchical management
structures as well as dened job titles and certain individuals having sole
areas of responsibility.
These businesss often have prevailing cultures that emphasise
accountability, communication and cooperation.
They also tend to conform to a culture of loyalty and respect for
superiors.
 Informal Business Structure
Informal businesses with atter management structures, less
departmentalisation and fewer dened spans of control often exhibit
highly exible, innovative and risk-taking cultures.
Each individual within the business has a greater responsibility which is
more evenly distributed throughout.
More employee focused and less linear in its line of command.

The business life cycle refers to the stages of growth and development a
business can experience.

4. Business growth and decline

Stages of the business life cycle
 The first stage in the life of a business is its birth or establishment.
The overriding concern is to get the business on a solid foundation.
This requires enough sales to be generated to bring in the much needed
income, which will be used to pay expenses and to generate a positive
cash flow.
o Establishment The main features and associated challenges of the establishment stage
are outlined in table
 The second stage is a time of accelerating growth. Sales increase and the cash
o Growth flow is normally positive. A customer base has been established with regular
clients accounting for a large percentage of total sales. The business undertakes
the development of new products to satisfy different market segments. More
emphasis is placed on marketing and the use of complex computerised
accounting procedures. In family-owned businesses, other members of the
family usually take up specialised supervisory and management roles. The
business has somewhere between 10 and 15 employees. Loyalty to the business
is strong, with many of these businesses taking on the culture of an extended
family. The business has a good reputation in the community, and owners
develop a sense of pride in the products and personal service on which the
business has built and flourished. However, with growth comes complexity,
responsibility and the need for long-term planning.
 The growth in sales levels off as the business is selling the same value of
o Maturity products year after year
The market for the product is saturated
E.g. Everyone who wants a plasma TV has one after a certain time
In this phase it is usual to employ professional managers as they have
the skills to grow the value of the business by making it more
competitive
Cost cutting is the way to success in the maturity phase

o Post-maturity
Responding to challenges at each
stage of the business life cycle
Once a business reaches this, the final stage, it is faced with three possible
outcomes, these being:
1. Steady state to keep the business operating at the level it has been during
the maturity phase
2. Decline falling sales and profits ultimately resulting in business failure
3. Renewal increasing sales and profits due to new growth areas.
The post-maturity stage represents many opportunities but also many threats.
The decisions made by the owner will be crucial for the future survival of the
business. By constantly monitoring the business environment, the business
owner should be able to select the most appropriate path for the business to
take.
Steady State
A business in a steady state is neither declining nor expanding. Such a business is
satisfying customer demand and maintaining profit levels. It displays some of
the characteristics of a business in the maturity stage. One significant difference,
however, is that it does not continue expenditure on research and development.
The owner is more content to produce what it has in the past and rely on
marketing replacement products. Eventually the business environment will
change and the business will be adversely affected. Ultimately, this steady state
becomes very unstable and the business stagnates. It eventually loses sales and
its competitive edge. When this occurs, the business enters another stage of the
business life cycle decline.
Decline
As customers stop buying the businesss products the cash flow will be seriously
affected. Eventually profits will also decline. This process of decline becomes
difficult to reverse for the following reasons:
1. It becomes difficult to borrow money because financial institutions are
reluctant
to lend money to high-risk businesses.
2. Suppliers will restrict their credit facilities and may insist on cash payments.
3. Products become obsolete, leaving the business with unsold stock.
4. Well-qualified employees may begin to leave and seek better opportunities.
The longer the business attempts to stagger on, lurching from one crisis to the

Factors that can contribute to
business decline
next, the greater the risk of failing and ceasing operations cessation.
Renewal
Business decline can be avoided by carefully planned strategies that result in
new markets being tapped and satisfying previously unmet demand. The
business under goes a revival. Sales, cash flow and profits all begin to increase
once again. Even a business in decline can be turned around and placed on a
path of renewal. An extensive market research program needs to be undertaken
to assist in the forecasting of future consumer trends. The more successful the
forecasting, the more able the business is to be proactive; that is, it can
anticipate and plan for future changes. Businesses that tend to be reactive; that
is, respond to changes after they have occurred, usually respond too late and
lose valuable market share. Renewal is as much about planning and timing as it
is about successful marketing strategies.
 Voluntary and involuntary cessation -
liquidation
Voluntary Cessation
A business may cause operations and voluntarily wind up its affairs.
Assets owned by business sold.
Business stopps operating because the owner may wish to retire, want a
change in lifestyle, or in the case of a sole trader, has died.
Most business cease to trade out due to failure.
To prevent this accumulation of debt, the owner will need to cease
operating the business of their own accord; that is, undergo voluntary
cessation
Involuntary Cessation
Involuntary cessation occurs when the owner is forced to cease trading
by the creditors of the business.
Creditors are those people who are owed money.
As the business continues to decline, creditors become worried about
money owed and force the business owner into winding up the
business.
 Liquidation
If a company is in financial difficulty, its shareholders, creditors or the
court can put the company in liquidation.
Liquidation occurs when and independent and suitably qualified person-
the liquidator is appointed to take control of the business with the
intention of selling all of the companys assets in an orderly and fair way
in order to pay the creditors.
A company in liquidation can also be in receivership.
Receivership is where a business has a receiver appointed by creditors
or the courts to take charge of the affairs of the business. Unlike
liquidation though; the business may not necessarily be wound up.