Business Management

• Entrepreneurship is the process of establishing a business to satisfy a need in the market whilst taking on the associated risks.
• Internal environment


  Factors within a business that a business has control over
• External environment


  Surrounding factors that can impact a business, which it has minimal control over
• Macro factors


  • Social conditions
  • Legal conditions
  • Technological conditions
  • Global conditions
  • Economic conditions
• Macro factors


  Social, legal, technological, global, and economic conditions that a business operates in and has no control over
• Operating factors


  Primary external factors impacting a business that it has some control over
• Internal and external business environments


  Can influence and affect each other
• Business has control over internal environment


  Can influence the impact of its activities and decisions on the external environment
• Business cannot control external factors


  Changes in conditions of the external environment often have a more significant effect on the internal environment of a business
• Internal environment


  • Types of businesses
  • Types of business models
  • Purchasing an existing business vs establishing a new business
  • Business resource needs
  • Business locations
  • Sources of finance
  • Business support services
  • Business planning
• Operating environment


  • Customer needs and expectations
  • Competitors' behaviour
  • Suppliers and the supply chain
  • Special interest groups
• Macro environment


  • Legal and government regulations
  • Societal attitudes and behaviour
  • Economic conditions
  • Technological considerations
  • Global considerations
  • Corporate social responsibility
• Sole trader


  A business structure that is owned and operated by one individual
• Factors affecting the choice of business structure - sole trader

  • Risk: High level of risk as the owner invests their personal savings and has unlimited liability
  • Resources: Limited skills, expertise and financial resources of the owner
  • Level of control: High level of control as the owner has full power over all business decisions
  • Cost: Low set-up costs and the owner can retain all of the business's profits
• Partnership


  A business structure that is owned by two to 20 owners
• Factors affecting the choice of business structure - partnership

  • Risk: Risk is shared between all of the partners, and partners are all held personally responsible for business debts
  • Resources: Greater access to skills, expertise and finances contributed by all partners
  • Level of control: Control and decision-making is shared between the partners
  • Cost: Low set-up costs
• Private limited company


  An incorporated business structure that has at least one director and a maximum of 50 shareholders
• Factors affecting the choice of business structure - private limited company

  • Risk: Shareholders have limited liability
  • Resources: The business can raise finances by selling shares, and has greater access to expertise and knowledge
  • Level of control: A shareholder who owns less than 50% has limited influence, while a shareholder who owns more than 50% has increased decision-making power
  • Cost: It is an expensive structure to set up and operate
• Public listed company


  An incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX
• Factors affecting the choice of business structure - public listed company

  • Risk: Shareholders have limited liability
  • Resources: Greater access to expertise and ideas, and finances can be obtained by selling more shares
  • Level of control: Shareholders are legally restricted from making general business decisions, and the directors have a high level of control
  • Cost: Expensive business structure to establish, operate and maintain
• Social enterprise


  A type of business that aims to fulfil a community or environmental need by selling goods or services
• Factors affecting the choice of business structure - social enterprise

  • Risk: High level of risk in balancing social and financial objectives, and liability depends on the legal structure
  • Resources: The government and other businesses are likely to provide resources and financial support
  • Level of control: Control and decision-making depends on the legal structure
  • Cost: More expensive to set up and run due to socially responsible and ethical materials, and difficulty obtaining bank loans
• Government business enterprise (GBE)


  A business that is owned and operated by the government
• Factors affecting the choice of business structure - government business enterprise

  • Risk: Limited risk as the government owns and designates the business
  • Resources: Access to enough resources as the government appoints GBEs
  • Level of control: High level of government regulations and reporting, and the government has strong interests in the financial performance
  • Cost: Expensive to maintain and comply with legal requirements, but less expensive to set up with government investment
• Business model


  A plan that identifies how the business will operate to make a profit
• Online business


  A business model where goods and services are traded via the internet
• Advertising model


  Other businesses pay for promotional space on this business's website to promote their products
• Brokerage model


  Buyers and sellers are brought together to exchange products online. Money is earned by charging sellers a fee when sales are made
• Merchant model


  The business makes direct sales to consumers via the internet
• Subscription model


  Businesses regularly charge customers a fee in order to log into and use the website or application
• Advantages of online business

  • Customers can order products at any time
  • Businesses are able to develop a wider customer base as the internet provides a global market reach
  • There is greater customer convenience
  • Online websites can be set up quickly
  • Operating online is less expensive than having a physical store presence
• Disadvantages of online business

  • Customers cannot touch, try, or feel a product so they may be reluctant to purchase it
  • It is difficult to offer customer service online
  • Online security issues may have the potential to negatively impact a business's reputation
  • Time is needed to train employees to fulfil online orders and use other features of the website
  • Development and maintenance of the website software can be costly
• Direct-to-consumer business


  A business model where the business's products are sold directly to consumers with no intermediaries involved
• Advantages of direct-to-consumer business

  • There is greater customer convenience
  • There is direct control over the brand presence and advertising
  • More reliable sales data and customer information can be obtained
  • A direct-to-consumer business model can save time
  • Obtain higher profit margins
• Disadvantages of direct-to-consumer business

  • There could be difficulty in growing the business
  • There could be a high level of competition
  • The business may not be able to reach as many customers
• Bricks-and-mortar business


  A business model that has a physical store presence
• Advantages of bricks-and-mortar business

  • Customers can see, feel, and test products before purchase
  • Products can be displayed and promoted
  • Customers and employees can have face-to-face interactions, allowing strong customer relationships
  • Brand recognition can be established
  • Customers can obtain instant gratification and reward from the purchase of the product
• Disadvantages of bricks-and-mortar business

  • Customers must physically access the store which may be difficult
  • Customers may find it inconvenient if they experience crowded stores or long queues
  • In busy periods, employees may feel stressed and overwhelmed
  • Time is required to train employees who work in the store
  • It is time-consuming to establish a physical location
  • Far more expensive to establish and operate as costs need to be paid
• Franchise


  A business model that grants another person the right to operate under its name, use its business systems, and sell its goods and services
• Advantages of franchise


  • Support and advice can be provided by the franchisor
  • The business may have already established a good reputation with strong customer loyalty
  • Reduced risk of business failure as operations systems and reputation are already established
  • There are established systems and processes in place so the time
  • Sales are likely to be high as there is already customer awareness