Year 11 Business Management Area of Study 2 – External Environments Business Environments Macro * Global Issues * Economic Conditions * Political and Legal Influences * Societal Attitudes * Technological Developments * Corporate Social Responsibility Status Operating * Customers * Competitors * Suppliers * Special Interest Groups Internal * Employees * Managers * Location * Legal Business Statements Macro and Operating form the external environment Stakeholders Stakeholders are anyone with a vested interest in the activities of the business Important definition for Units 3&4 Macro factors ► Macro factors and considerations include legal and government regulations, societal attitudes and behaviour, economic conditions, technological issues, global issues and corporate social responsibility. ► These factors are important and are outside the control or influence of a business, and therefore businesses need to be able to respond to them. Operating factors ► ► Operating factors are the immediate external factors impacting a business which a business has some control over. The operating environment of a business has a range of factors. ► Understanding these factors will provide the business with improved information on which to base its planning decisions. ► The operating environment is made up of stakeholders that have a direct impact on the operation of the business. Internal Environment (come back to in AOS 3) ► The internal environment is made up of elements created by the people within the business. ► The internal environment consists of factors within a business which a business has control over Similarities & differences between internal vs external environment Similarities & differences between macro & operating factors Textbook reference & Activities ► Complete ► Read the following: pages 66 - 69 ► Questions 2, 5, 7, 11, 13 & 14 MF: Key Legal and Government Regulations ► Legal and government regulations that are relevant to businesses are designed to protect the rights of employees and customers, as well as preserve the environment. ► These regulations are also made to direct businesses to uphold the safety of the community and promote fair competition between businesses. ► If businesses fail to comply with these rules, they risk consequences such as receiving fines, damaging their reputation or losing the right to operate. ► With many new rules and laws being created and updated regularly by all levels of government, business owners should continuously consider how these regulations affect their business’ planning process. Page 62 Key legal and government regulations ► At the macro environment level, a business owner must consider a range of factors, such as: ► Employment laws & regulations ► Environmental protection legislation ► Industry regulations ► Council regulations ► Taxation requirements Employment laws and regulations ► ► ► When hiring employees, business owners should consider the employment laws and regulations that they must comply with. Legislation protects employees by setting minimum wages and working conditions. When planning a business, business owners must recognise their obligation to provide a safe working environment for their employees. ► The Occupational Health and Safety Act 2004 & Occupational Health and Safety Regulations 2017 - ensure Victorian businesses promote employee wellbeing and safety. ► Legislation also protects employees against unfair dismissal, discrimination and provides methods to resolve workplace disputes. ► Equal Opportunity Act 2010 (Vic) Environmental legislation ► ► ► ► Environmental legislation is designed to protect the environment from harmful business activities. Many businesses rely on natural and limited resources such as oil, water and gas. When used improperly, businesses can have a negative impact on the environment. During planning, every business owner must find out whether their business activities will relate to any environmental legislation. Owners must be informed of all relevant legislation at different levels of government as different laws may be developed to protect the environment. Many environmental laws and regulations relate to: • Minimising energy use. • Reducing water use. • Reusing, recycling and reducing waste. • Matters of national environmental significance. Industry regulations ► When starting a business, business owners need to research the unique rules and regulations that apply to their business’s industry. ► Industry regulations may require a business to obtain certain qualifications, registrations, permits or licences. ► To check what rules are relevant to the business, owners can refer to the Australian Business Licence and Information Service (ABLIS). ► For example, businesses that are involved with children require employees to gain a Working with Children Check. Council regulations ► ► Local councils have various rules and regulations that impact business activities. Therefore, many business activities are influenced by the local government. Business owners must become familiar with the local council regulations in the area their business will be operating to avoid legal issues. Taxation requirements ► There are many taxation requirements that a business must fulfil to legally begin operating. ► Some requirements include: ► obtaining an Australian business number (ABN), ► which will enable a business to register for goods and services tax (GST) when necessary. ► The planning stage of a business involves owners applying for the business’s tax file number (TFN) to the Australian Taxation Office (ATO) so the business can be easily identified for taxation purposes. Page 63 Textbook reference & Activities ► Complete ► Read the following: pages 70 - 74 ► Questions 1 - 3, 5 & 7 – 11. MF: Societal Attitudes and behaviour ► Both societal attitudes and societal behaviour impact the ways individuals interact with businesses. As businesses are significantly affected by the way customers act, business owners should investigate common societal attitudes and behaviours during business planning. ► Business values and products should align to what customers place importance on. By appealing to what customers believe in, such as being environmentally friendly, a business is more likely to attract customers. To remain competitive, business owners must constantly monitor changes to common societal attitudes and behaviours. ► Australian society is changing; there have been many waves of immigration since World War II and this has influenced food, traditions, social attitudes and businesses in Australia. They affect businesses as it is the way individuals live, work and consume products which evidently affects how businesses operate. Values and beliefs ► Values and beliefs help people form opinions about how businesses should operate. ► Due to increased communication globally, such as social media, society has become more aware of and concerned about the way businesses operate. There is now an expectation for businesses to positively impact the community and the environment. ► For example, businesses that promote the importance of achieving good health by offering meditation and exercise programs are viewed favourably by customers. ► Businesses can constantly research changing values and beliefs to develop products that suit these opinions, such as offering healthier food options which appeal to the growing awareness of health and wellbeing. Real world example Trends ► Businesses can identify a trend by analysing data for patterns. ► Researching trends provides informative evidence to businesses about people’s changing customer behaviours. ► Businesses should plan their products and activities according to the trends relevant to their target market. By doing this planning, businesses are more likely to attract more customers due to appealing to common desires. Real world example Textbook reference & Activities ► Complete ► Read the following: pages 75 - 78 ► Activity 2.4 ►Questions ► Activity 2 – 6 & 14. 2.5 ►Read the Case Study “The rise of veganism” ►Questions 1–4&6 MF: Economic Conditions ► When planning a business, individuals should consider current and future economic conditions. ► As the economy is a macro factor, individuals are unable to control its effect on businesses and consumers. Instead, individuals should plan to launch their business when economic conditions are strong as businesses are more likely to be successful when the economy and customers are financially stable. ► Individuals can assess current economic conditions using factors such as: ► interest rates ► tax rates ► the level of business and consumer confidence. Interest Rates ► An interest rate is the price charged or paid for the use of money. ► During business planning, individuals must consider the commercial feasibility of their idea. If an individual does not have enough money, they can take out loans to cover initial set up and operations costs. Before taking out a loan, business owners should consider the offered interest rate. ► If interest rates are low, business loans are less costly and loan repayments are easier to manage. ► If interest rates are high, business owners will have to pay more for the amount borrowed. ► Business owners should ensure they are able to afford the current interest rate if they take out a loan. Tax Rates ► All individuals and businesses pay income and other taxes. As part of the planning process, taxation consequences should be taken into account. ► Businesses may look more favourably at activities that are tax deductions when establishing their business. Business owners must consider their tax obligations when planning a business. ► The government determines and applies different tax rates to businesses depending on their structure. Many businesses in Australia pay a company tax rate of 27.5% or 30%. The government also requires businesses to pay several additional taxes, such as Goods and Services Tax (GST). ► During business planning, owners should calculate their expected compulsory tax payments to select the most appropriate business structure. Business owners should also ensure that they can meet all tax obligations to avoid legal penalties from the government. Business and consumer confidence ► When planning a business, individuals should consider the current levels of business confidence and consumer confidence. ► Business and consumer confidence is high when there is a belief that the economy will grow. Whereas, business and consumer confidence is low when economic growth is expected to slow down or the economy is expected to shrink. ► Consumers who believe economic conditions will improve are more willing to spend money as they are optimistic about their financial and job security. ► To take advantage of high consumer spending, individuals should plan to launch their business when confidence levels are high. ► When business and consumer confidence is low, individuals may plan to delay the launch of their business or launch on a smaller scale. Different economic cycles & consumer confidence Textbook reference & Activities ► Complete ► Read the following: pages 80 - 84 ► Questions 1, 3 - 6 & 11 - 13 MF: Technological issues ► As technology has evolved, it has significantly changed the way businesses operate. ► Although developments in technology cannot be controlled, owners should take advantage of the opportunities that technology presents when conducting business planning. ► Business owners should also consider the impact that technology has on the market and customer expectations. ► Business owners that do not plan to use technology to their advantage may risk their business and its products becoming redundant. Technological developments ► When planning a business, owners should consider that technological developments can significantly improve various aspects of their business and its operations. ► Taking advantage of new technology can allow a business to increase its speed of production and precision, as well as offer more convenience to customers. ► As a result, incorporating advanced technology in a business can improve its productivity and effectiveness. If a business does not plan to take advantage of technological developments, its products may become outdated and unattractive to customers. The future of business technology Textbook reference & Activities ► Complete ► Read the following: pages 85 - 88 ► Questions 3 – 6 & 9 - 12 MF: Global issues ► Globalisation has resulted in Australian businesses facing more international competition than ever before. ► Although businesses have no control over the changes in the macro environment, a business owner will still need to consider how global issues can impact their business operations. ► By considering these issues, a business can plan how it will meet customer needs and remain competitive in its specific industry. Businesses that do not plan to consider global issues may lose customer sales and their place in the market. Overseas competitors ► When planning a business, it is important for business owners to consider the actions of competitors within Australia as well as internationally. ► Due to the impact of globalisation, Australian businesses are facing high levels of overseas competition. ► It is important for business owners to develop an understanding of any overseas competitors they may face by investigating how they operate, and identifying their strengths and weaknesses. This planning will enable business owners to consider how they can implement differentiation to distinguish themselves from overseas competitors and build a competitive advantage. Overseas markets ► Business owners can plan to launch their business in both local and overseas markets. ► By doing so, businesses can access a larger and more diverse customer base which can allow a business to reduce its dependence on the local market. ► However, as every overseas market has different legal and government regulations, launching in overseas markets will require more planning in comparison to launching in a local market. ► It is also important that business owners are aware of different customer needs and expectations which will differ across local and overseas markets. ► Businesses may need to adapt their products to suit the customer needs in different markets in order to attract customer sales. How issues with overseas markets can impact business planning Offshoring labour ► When planning a business, a business owner may consider offshoring labour. Offshoring labour allows a business to take advantage of lower labour costs, as hiring workers in some overseas countries may be cheaper than the costs of labour in their local country. ► A business may also use offshoring to increase efficiency or access a more diverse range of skills. For example, the workforce in certain overseas countries such as India consists of software engineers with more specialised skills that are difficult to find in Australia. ► A business owner may consider offshoring labour intensive or time consuming tasks, which can give owners more time to focus their efforts on expanding their business and gaining a competitive advantage in the market. For example, car companies use offshore labour for manufacturing. How issues with offshoring labour can impact business planning Exchange rates ► An exchange rate is the price of one country’s currency expressed in terms of another country’s currency. ► One of the biggest challenges of conducting business outside of Australia is the impact of exchange rate fluctuations. ► The exchange rate directly impacts businesses that purchase resources from overseas countries or sell goods and services in an international currency. ► There are many factors that affect exchange rates, such as political events and economic conditions. As the value of a country’s dollar can fluctuate daily, business owners must anticipate changes in exchange rates and ensure they price their goods and services to account for currency fluctuations. By planning for exchange rate fluctuations, businesses can maintain their profit margins when changes occur. Exchange rate example Currency appreciation is an increase in the value of a currency against another foreign currency. Currency depreciation is a decrease in the value of a currency against another foreign currency. Online sales ► When planning a business, a business owner should consider whether they will establish an online presence. ► Online sales present many opportunities for businesses, including reaching a wider range of customers in both local and overseas markets. Customers can purchase products from a business 24 hours a day, which increases convenience and sale opportunities for a business. ► If a business decides to establish an online presence, they may not require a physical store which can reduce operating costs, such as rent and utilities. As many businesses are now selling products online, not taking advantage of opportunities to expand using online platforms could result in a business becoming less competitive in the market How issues with online sales can impact business planning Protection of intellectual property at a global level ► In AOS 1, we looked at different ways to protect intellectual property. Businesses need to ensure they are protecting it at a global level as they will face overseas competitors who may copy their creations, inventions, brands and designs. By doing so, it takes the business’ competitive advantage. ► They can be protected by: ► Patents - are legal rights granted to a business for any processes, devices, ► Trademarks - are legal rights granted to a business over aspects such as substances or methods that are inventive, new and useful. symbols, words, scents, numbers, sounds or images, which are unique to a business and used to distinguish its products. ► Copyrights - are legal rights that provide business owners with the exclusive right to publish, reproduce or sell its original works such as art, music, films, writing and computer programs. Some real examples that you could use in a SAC. Textbook reference & Activities ► Complete ► Read the following: pages 89 - 92 ► Questions 1 – 9, 11 & 14 MF: Corporate social responsibility ► Corporate social responsibility is going above and beyond legal obligations to operate in an economically, environmentally & socially responsible manner. ► As society becomes more aware of business activities, business owners are expected to be accountable for their actions. A business’s impact on the environment and society is in the public eye, particularly on platforms such as social media and the news. ► For businesses to survive and remain competitive, they must go beyond legal requirements and display consideration for society and the environment. ► Customers are increasingly expecting businesses to exceed legal expectations and have a positive impact on society. To meet the expectation of customers and society, owners should consider the best interests of society and the environment when planning business activities. There are many strategies that business owners could implement to demonstrate CSR. Environmental considerations Protecting and preserving the environment is a key element of ensuring the welfare of the local, national and global society. Business activities, such as producing goods and services, can significantly damage the environment. Social considerations Another element of CSR that businesses need to consider is their impact on society. The goods and services that businesses produce, as well as general business activities, can have a significant impact on society. It is important that business owners plan to reduce any negative social impacts and consider ways that they can positively contribute to society. Environmental & social consideration tables https://www.youtube.com/watch?v=SlqHXinApRg Textbook reference & Activities ► Complete ► Read ► Ben the following: pages 93 – 96 & Jerry CSR case study activity OF - Customer needs and expectations ► Business owners need to consider operating factors as well as macro factors. ► It is important that a business monitors customer behaviour and considers how to best meet their needs. ► Customers are the reason a business exist. ► Customer needs are the essential requirements that customers intend to fulfil with the purchase of a good or service from a business. ► Customer expectations are the values or benefits that customers seek when purchasing a good or service from a business. How have the choices that customers have changed over the years? What has influenced this change? OF - How customer needs and expectations affect business planning Customer convenience: Saving of time and effort ► deliver/express delivery, click and collect, accept afterpay, High quality good or service: high quality and operate as customer needs and expects. ► Work closely with suppliers, product inspections before distribution Social responsibility: ethical decision making ► Ethical materials, reduce waste and pollution Responsive customer service: ► Respond to queries in timely manner, dedicated customer support team, social media, live chat, FAQ page Textbook reference & Activities ► Complete ► Read the following: pages 103 - 106 ► Questions 1 – 7 & 9 - 13 MF - Competitors Behaviour ► When planning a business, it is important for a business owner to consider the behaviour of both local and overseas competitors. ► This can be done via market research. ► Having a detailed understanding of competitors will enable a business owner to make informed decisions about their own products and business direction. Suppliers and the supply chain ► ► When planning a business, a business owner will need to decide which businesses will supply them with the materials needed to produce their products. A business may decide to purchase materials from local businesses or businesses located overseas. Suppliers and the supply chain ► Supplier: supplies the inputs (resources) required for the production process ► These resources can be raw materials, equipment, machinery, finance and information. ► It is important for the business to have good, productive relationships with their suppliers. Why? ► In addition to this, having multiple suppliers is important as the business is less vulnerable to supply difficulties. Supply chain & sustainability ► supply chain: a system of organisations, people, activities, information and resources involved in moving a product or service from suppliers to manufacturers and then on to consumers ► Supply chain needs to be well managed as production of the business’ goods and services depends on the resources. ► During the planning stage, businesses need to consider where their resources are sourced from. Many businesses have come under scrutiny for their supply chain being unethical. Sourcing considerations ► When planning a business, business owners should consider where the business will source its resources from. ► A business may choose to source its resources locally or use a supplier located overseas. ► Resources may also be sourced from a variety of suppliers in both local and overseas markets. ► Sourcing considerations choosing between local vs overseas suppliers: ► ► ► ► ► Time Shipping costs Social responsibility Access to resources Legal regulations Retrieving considerations ► After deciding what resources will be required and where to source them from, a business owner must plan how the resources will reach the business. ► Retrieving resources from a local market requires less planning than if a business was to source resources from overseas markets. ► Retrieving considerations choosing between local vs overseas suppliers ► ► ► ► Road transport Air transport Rail transport Sea transport Special interest groups ► When planning a business, business owners should consider that the operating environment can be influenced by special interest groups. ► Special interest groups seek to pressure businesses to make changes or adopt certain practices. ► Special interest groups represent important groups of individuals, such as employees, business owners, customers and the environment. ► special interest group: a group of people or an organisation seeking or receiving special advantages or privileges ► lobby group: a group that aims to influence organisations or governments in their decision-making processes Unions ► Unions exist to promote fair treatment and wellbeing for all employees in its specific industry. ► Unions are able to significantly influence employment laws and negotiate with businesses to increase wages and working conditions. ► Unions also represent and defend employees when issues such as discrimination and bullying arise in the workplace. ► https://www.youtube.com/watch?v=43crlEBkOSo Business associations Business associations are organisations that advise and support businesses in a particular industry. Business associations provide advice on a business’s rights and responsibilities, as well as a large range of issues that must be considered before starting a business. Business associations ► business association: membership organisation engaged in promoting the business interests of its members ► industry association: representative body for a particular industry group Environmental lobby groups When establishing a business, business owners should consider how their operations are going to affect the environment. When a business chooses to undergo activities that harm the environment, environmental lobby groups often campaign to the public and the government to prohibit that business from continuing. Consumer groups ► These are lobby groups that monitor a business’s performance in terms of its product safety, packaging, pricing, and advertising. Textbook reference & Activities ► Complete ► Read the following: pages 107 - 109 ► Questions ► Coles 1 – 5, 9 & 10 Case Study handout Complete the following ► Using the study design, textbook and your notes make sure you have notes covering every key knowledge point. ► Finish any outstanding class work ► Complete the following questions: ► All the ones that you find difficult. Especially the Exam Practice
