Business U1AOS3- External Environment

• Operating Environment


  The specific outside stakeholders with whom the business interacts in conducting your business
• Operating Environment consists of


  • Suppliers
  • Competitors
  • Customers
  • Special interest groups
• Suppliers are those businesses or individuals that supply the materials and other resources that the business needs to conduct its operations
• Competitors


  Other businesses or individuals who procedure and sell rival, or competing, goods or services to the ones offered by the business
• Customers


  The people who purchase goods and services from the business, expecting high quality at competitive prices
• Special interest groups


  The groups of people who attempted to directly influence or persuade a business to adopt particular policies or procedures, including lobby groups, business associations and unions
• Macro Environment


  The broad conditions and trends in the economy and society within which a business operates (business has no control over)
• Macro Environment consists of

  • Corporate social responsibility considerations (CSR)
  • Global issues
  • Economic conditions
  • Legal and government regulations
  • Societal attitudes and behaviours
  • Technological considerations
• Corporate social responsibility considerations (CSR)


  The pressures on a business to take into account environmental considerations to ensure broader social welfare
• Global issues


  The pressures that arise as a result of businesses operating in worldwide markets and competing on a global scale
• Economic conditions


  The set of influences that relate to economic activity, including interest rates, wages, unemployment, exchange rates and inflation
• Legal and government regulations


  The laws or regulation made by parliaments and courts, which affect how businesses operate and behave
• Societal attitudes and behaviours

  The factors relating to changes in the attitudes, behaviour, tastes and lifestyles if communities on a local national and international scale
• Technological considerations


  The issues related to the growing use of tools, techniques ot systems
• Key legal and government regulations businesses need to consider in the planning stage

  • Health regulations
  • Ownership (sole trader, partnership, company)
  • Consumer protection (refunds, misleading and deceptive advertising, unconscionable conduct, product tabling)
  • Building permits
  • Safe food handling
  • Patents
  • Signage
  • Trade practices and fair trading
  • Development application
  • Trading hours
  • Taxation
  • Employment of people
  • Licences
  • Business registration
  • Copyright
  • Zoning
• Levels of government


  • Federal Government
  • State Government
  • Local Government
• Key legal and government regulations businesses need to comply with

  • Payment of taxes for employees (earning above minimum taxable income level) and for businesses with company tax and GST
  • Provision of employee superannuation
  • Observance of customs regulation
  • Abiding by relevant legislation that would affect business operations
  • Provision of employee entitlements, including workers compensation work health and safety (WHS) requirements, award rates of pay and entitlements
  • Payment of payroll taxes
  • Abiding by relevant state legist;ation (health, trade practices, employment)
  • Abiding by pollution controls
  • Approving new development and alternation (to existing building) applications
  • Fire regulations
  • Parking regul;ations (provision of parking by new businesses)
  • Size, location and shape of business signs
• It is essential that business owners have sound knowledge of the laws that will affect their operations when they are planning their business
• Businesses that do not obey the law risk losing customers and their reputation, being fined or losing the right to continue trading
• There have been a number of changes to laws in the last 20 years which impact businesses
• New legislations that impact businesses

  • Taxation
  • Industrial relations
  • Occupational health and safety
  • Equal employment opportunity
  • Anti- discrimination
  • Protection of environment
• Laws related to establishing a new business

  • Business name must be registered with the Australian Securities and Investment Commission (ASIC) unless the owner is trading under their own name, in which registration is optional
  • New business names require an ABN (Australian business number)
  • Companies or partnerships require their own tax file number
• 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)
• Some health regulations relate to

  • Temperature of food storage
  • Kitchen layout
  • Employee clothing requirements
  • 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
• It's unlawful to discriminate against an employee or potential employee on the basis of age, impairment, marital status, physical features, political belief, gender, race, religious belief or sexual orientation
• Employers must take steps to eliminate discrimination, sexual harassment (Weinstein, Craig Mclachlan etc.) and victimisation
• Work health and safety regulations

  • Each state has its own health & safety laws
  • Main objectives: Eliminating risks to health, safety or welfare of employees
  • Ensuring health and safety of the public is not placed at risk
• Taxation 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
  • Taxation laws apply to all businesses
  • All registered businesses are required to prepare a set of accounts — the business activity statement (BAS) — at regular intervals, 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 business may also have to pay state government payroll tax, as well as tax payable on its own earnings
• Trade Practices and Consumer Protection

  • Relevant legislation: Competition and consumer Act 2010 (Cwlth)
  • Provides guidelines for fair trading, advertising, credit and consumer protection
  • State that consumers have the right to purchase good quality goods and 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
• Societal attitudes and behaviours

  • Societal attitudes are the ideas, values and beliefs held by people in society
  • Societal attitudes and behaviours are constantly changing
  • Values and beliefs refer to the shared principles and morals of a group of people - ideals about what is good or bad and necessary or unnecessary
  • 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
• Trends


  • A trend is the general direction in which people's attitudes or behaviour in society is developing or changing
  • One trend to consider is the demographic - the characteristics of the human population eg ageing, overweight, more educated with uni degrees, health conscious, wanting diverse workplaces and family-friendly workplaces, time-poor
  • Another trend that may affect business planning is the demand for family friendly and flexible workplaces
• Economic Conditions


  Economic conditions: refer to the set of influences that relate to economic activity, including interest rates, wages, unemployment, exchange rates and inflation
• Business owners need to consider the state of the economy when planning a business as economic forces have an enormous impact on both businesses and customers
• They influence a business's capacity to compete and customers' willingness and ability to spend
• When the economy is in a slump, spending is low & unemployment levels rise. When it is at a peak, spending is high
• Interest Rates


  • Interest rate: is the price charged or paid for the use of money that has been deposited or borrowed, way to bring interate down is to make inflation higher, make people stop spending
  • Typically, interest rates rise in periods of inflation
  • A rise in interest rates tend to stifle business activity (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
  • Low interest rates = good opportunity for business growth
  • Low interest rates = consumers have more disposable income to spend
  • To make more profit, businesses may cut staff, increase prices, change supplier etc
• Employment Levels


  • Employment levels fluctuate with the phases of the business cycle
  • During an expansion, employment levels will rise while unemployment levels will fall whereas during an economic contraction, it is the opposite
  • Changing employment levels impact business planning
  • In times of economic expansion, businesses may find it difficult to hire suitable employees due to labour shortages (most people are already employed) - results in businesses having to pay higher wages to attract suitable staff or consider overseas workers