Role Of Business

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SMEs = Small to Medium Enterprises used to determine size of business. Such as;

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Local business, national business, global business

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Local business

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A local business has a very restricted geographical spread only serving the surrounding area.

E.g newsagent, corner store, hairdresser, mechanic or pharmacy

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National business

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National business is one that operates within just one country

E.g coles. an Australian food retailer.

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Global business

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A global business is a large business with a home base in one country that operates partially owned businesses in other countries.

E.g Coca-cola, LG, McDonalds, Westfield, BHP Billiton etc. are just a few well-known foreign and Australian global businesses

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Industries

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Primary industry, secondary industry, tertiary industry, quaternary industry, quinary industry

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Primary industry

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Primary industry includes all those businesses in which production is directly associated with natural resources.

E.g. farming, mining, fishing, gracing and forestry.

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Secondary industry

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Secondary industry takes the raw materials in primary industry to process it into a finished/semifinished product. (manufacturing businesses)

E.g iron ore, coal and limestone turned into steel < semi-finished

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Tertiary industry

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Tertiary industry are businesses that provide a service. Tertiary involves people performing a vast range of services for other people.

E.g retailers, dentists and banks.

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Quaternary industry

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Quaternary industry includes services that involve the transfer and processing of information and knowledge.

E.g. telecommunication, property, computing, finance and education.

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Quinary industry

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Quinary industry includes all services that have traditionally been performed in the home.

E.g. hospitality, tourism, craft-based activities and childcare. It includes both paid and unpaid work.

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legal structure

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sole trader, partnership, private company, public company, government enterprise

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sole trader

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A sole trader is a business that is owned by one person. The owner may imply other people to work in the business, but the owner or sole trader is the person who takes all the responsibility for the operation of the business. This responsibility may include selling personal assets, such as property for motor vehicles, to pay for the liabilities of the business. > referred to as unlimited liability. •Unlimited liability occurs when the business owner is personally responsible for all the debts of his or her business

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partnership

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A partnership is a legal business structure that is owned and operated by between two and 20 people with the aims of making a profit. A partnership is similar to a sole trader in that the owner and the business are regarded as the same that is, there is no legal entity. Consequently, partnerships also have unlimited liability.

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private company

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A proprietary (private) company is the most common type of company structure in Australia, and usually has between two and 50 private share holders. Private companies often tend to be small to medium, family-owned businesses.

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public company

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The shares for public companies are listed on the Australian Securities Exchange, and the general public may buy and sell shares in those companies. Most public companies are large in size and market a large range of products –

E.g. Woolworths, Telstra, BHP Billiton and Westfield.

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Government Enterprises (also known as GBE = Government Business Enterprise)

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Government Enterprises government-owned and operated. GBEs are owned and operated by all levels of government: federal, state and local.

E.g. Railcard, Australia Post and Great Southern Energy.

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factors influencing choice of legal structure

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Size, ownership, finance

1. size of the business

2. ownership structure

3. finances needed.

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size

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Choosing the right legal structure.

As a business expands, it normally moves from an unincorporated structure toan incorporated structure.

(sole trader and partnership are unincorporated)

(private and public companies are incorporated)

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ownership

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ownership:

have complete control and ownership of a business, then become a sole trader. If the owner wishes to share the ownership with other people, then a partnership is the ideal legal structure. A private company would allow the owner to maintain a high degree of control and it would also offer protection of limited liability. > because a private company structure provides the owner with a large degree of control over who can become a shareholder of the business

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finance

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finance is when a business expands it will require injections of finance. This money will be used to purchase new equipment, undertake research and development, hire more staff, exploit new markets, and open new outlets.

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influences in the business environment (external)

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The external environment includes those factors over which the business has little control, such as: economic, financial, geographic, social, legal, political, institutional, technological, competitive situation, markets

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economic

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economic influence: The Australian economy does experience economic cycles of ‘booms’ and 'busts’. These periods of high and low economic activity referred to as the business cycle.

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financial

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financial influence: There have been enormous changes in global financial markets over the past thirty years. Deregulation of Australia’s financial system began in 1983 and it continues to undergo change. This has resulted in a more flexible, market-oriented approach across the financial sector.

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geographic

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geographic influence: Two major factors that have an enormous impact on business activity are Australia’s Asian nations, especially China. They provide challenging opportunities for business expansion, sales and profit.

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social

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social influences are rapid response to changes in tastes, fashions and culture which canlead to sales and profit opportunities, and business growth.

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legal

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business owners may face an increasing number of legal obligations in every aspect of their businesses. Such as:

legal requirements (eg registration of business name), state taxes (eg stamp duty), OHS laws, workers compensation laws, environmental protection policies

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political

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political influence: Major political change can lead to business uncertainty or business confidence. As governments at all levels win Australia regularly face elections, there is an element of politics in most major issues that affect the business environment.

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institutional

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institutional influence: There are three main institutional influences on business, including government, regulatory bodies and other groups such as trade unions and employer associations.

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technological

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Global technological innovation has increased at a remarkable pace, revolutionisingthe workplace and every aspect of daily life.

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competitive situation

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It can provide the consumer with morechoices, a range of qualities and a variety of prices.

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influences in the business environment (internal)

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The external environment includes those factors over which the business has some degree of control, such as: product, location, management, resource management, business culture.

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products

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products: 1: The type of goods and services produced will affect the internal operations of a business. 2: Product influence will be reflected in the type of business (service, manufacturer or retailer). 3: The types and variety of product would influence the size of the business, as previously mentioned, will be based on the range and type of goods and services produced.

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location

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Location can make the difference between success and failure. A good location is an asset and will lead to high levels of sales of profits. A bad location is a liability that adversely affects sales and profits.

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resources

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resources:

Human Resources: These are the employees of the business and are generally its most important asset. Information Resources: These resources include the knowledge and data required by the business such as market research, sales reports, economic forecasts, technical material and legal advice. Physical Resources: Include equipment, machinery, buildings and raw materials. Financial Resources: Are the funds the business uses to meet its obligations to various creditors.

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management

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management: Rapid advances in technology, coupled with the significant pressures on businesses from increased competition due to forces of globalisation, have resulted in businesses flattering their structures. This means that there are fewer levels of management such businesses can adapt quickly to meet changing consumer needs and market conditions because there are fewer managers who need to approve decisions.

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business culture

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business culture: businesses have their own business (corporate) culture – the values, ideas, expectations and beliefs shared by the staff and managers of the business. Each business develops its own particular way of doing things. The style or character of a business is consequently reflected in its culture.

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stakeholders

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A stakeholder is any group or individual who has an interest in (or is affected by the activities of a business) the business and what it does. Stakeholders in business: managers, employees, shareholders, customers, society/general public and environment.

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business growth and decline:

stages of the business life cycle

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establishment, growth, maturity, post-maturity

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establishment

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The establishment phase is where the business first enters the market. The owner must decide on the location of the business, the types of products the business will sell, how to find motivated, appropriately trained staff and the most suitable legal structure.

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growth

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The growth stage/phase is characterised by increasing sales and revenue for the business. Customers are now aware of the business and/or product and the business begins to increase its market share.

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maturity

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During the maturity phase, business growth and market share begin to slow. The business is faced with increased competition from new entrants.

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post-maturity

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The post-maturity phase has four different stages: steady state, decline, renewal and cessation

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responding to challenges at each stage of the business life cycle

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responding to challenges at establishment, growth, maturity and post-maturity stage..

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Challenges to the establishment phase

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• the most appropriate legal structure for the business (such as sole trader, partnership, private company etc)

• Choosing the right location for the business (whether or not location is considered a critical success factor for the business)

• finding motivated, enthusiastic and appropriately trained staff.

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Challenges to growth stage

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• developing a human resource management policy outlining the roles and responsibilities of staff.

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Challenges to the maturity stage

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• adapting the latest technology to improve the exciting product value chain

• building customers loyalty

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Challenges to the Post-maturity phase

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The decision to take one of four different paths: steady state, renewal, decline or cessation

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Factors that can contribute to business decline

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internal factors: lack of management knowledge, inadequate planning, lack of adequate cash flow and finance incorrect location

external factors: government policies, natural disasters, unexpected competition

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Cessation

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Cessation refers to the closure of a business

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Voluntary cessation

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Voluntary cessation occurs when the owner of a business decides to cease the operation of the business

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Involuntary cessation

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Involuntary cessation is when the closure of the business is forced on the owner. The most common cause of involuntary cessation is the inability of the businesses to repay its debt