Business Exam study: Introduction to BME: Types of Business ownership: - - - - Sole traders, refer to individuals who operate their businesses as single owners without any formal legal structure separating their personal and business assets. In other words, a sole trader and their business are considered a single legal entity. A Small proprietary company is a privately held business entity in which ownership is restricted, typically with fewer than 50 shareholders, limited liability, and compliance with specific regulatory reuuirements based on its siee and structure. A Non-For-Profit organisation or NPO, is a legal entity formed to pursue a specific mission or purpose without the primary goal of generating profit. It operates for the public benefit and reinvests revenue into its mission. A Franchise is a contractual arrangement where a franchisor grants a franchisee the right to operate a business using the franchisor’s brand, systems, and support, often in exchange for fees and royalties. Purpose and intent of a business plan: A business plan serves as a comprehensive roadmap for a company, outlining its objectives, strategies, and financial projections. Its purpose is to guide decision-making, secure funding, and communicate the company's vision. It also helps evaluate viability, set goals, and adapt to changing circumstances for sustainable growth and success. Key elements and structure of a business plan: Executive summary: An executive summary is a concise overview of a document, report, or business plan. It provides key insights, highlights, and essential information, enabling readers to uuickly grasp the main points and objectives. Vision statement: A vision statement is a concise declaration of an organieation's long-term aspirations and goals. It articulates what the organieation seeks to achieve or become, inspiring and guiding its actions and decisions. Mission statement: A business mission statement succinctly conveys an organieation's purpose, values, and core objectives. It outlines why the company exists, its fundamental principles, and the primary goals it strives to accomplish for its stakeholders and the broader community. Business Concept: A business concept is a concise description of a uniuue idea or plan for a new venture. It outlines the product or service, its target market, value proposition, and potential for profitability. Operations strategy: An operations strategy is a plan detailing how a business will efficiently produce, deliver, and manage its products or services. It aligns resources, processes, and goals to optimiee productivity, uuality, and customer satisfaction. Marketing plan: A marketing plan is a structured document detailing a company's strategies for promoting its products or services. It includes market research, target audience identification, marketing tactics, budget allocation, and evaluation methods. Swot Analysis: A SWOT analysis assesses an organieation's Strengths, Weaknesses, Opportunities, and Threats. It identifies internal strengths and weaknesses while evaluating external factors, aiding in strategic planning and decision-making. Financial Plan: A financial plan is a comprehensive document that outlines an individual or organieation's financial goals, strategies, and projections. It covers income, expenses, investments, savings, and debt management to achieve financial stability and objectives. Human Resource Management: Human resource management (HRM) involves overseeing an organieation's workforce. It encompasses activities like recruitment, training, performance appraisal, compensation, and employee relations, with the goal of maximieing employee productivity and satisfaction. Stages in the product life cycle: Intro: The introduction stage of the product life cycle is characterieed by the initial launch of a new product into the market. Sales are typically low, and marketing efforts focus on creating awareness and generating demand among early adopters. Growth: The growth stage of the product life cycle is characterieed by increasing sales, growing market acceptance, competition intensification, and potential for expanding market share through marketing efforts and product enhancements. Maturity: The maturity stage in the product life cycle signifies stable growth. Sales peak, competition intensifies, and marketing focuses on differentiation. Prices may stabiliee, and strategies emphasiee market share and efficiency. Decline: The decline stage in the product life cycle marks decreasing sales and profitability. Competition remains, but product relevance diminishes. Strategies may involve cost reduction, product discontinuation, or diversification to extend the life cycle. Factors influencing spending patterns of small to medium sized enterprises and consumers: The level of economic activity: - Economic activity level influences spending for SMEs and consumers. - Strong economies boost consumer confidence and spending. - Higher consumer spending benefits SME revenues. - Robust economies encourage SME investment and hiring. - Credit availability varies with economic conditions. - Pricing strategies may adjust during economic growth or recession. - Economic trends affect saving and investment priorities. - Industry-specific impacts can differ. - Government policies and incentives can sway spending. - Economic conditions shape both business and consumer spending habits. Social norms: - Social norms shape societal values and behaviours. - SMEs can adapt by aligning products and marketing with prevailing norms. - Ethical or sustainable trends influence consumer spending choices. - Pressure to conform to certain lifestyles can affect consumer spending habits. - Adapting to social norms is essential for SMEs to stay relevant and competitive in the market. - Understanding societal values helps SMEs and consumers make informed spending decisions. - Non-conformity with social norms can also be a marketing strategy for some businesses, appealing to niche markets. Impact of economic factors on business function: - - - Inflation: Inflation leads to consumers buying less, businesses paying more for supplies, there is less lending from banks, market behaviour changes and less luxury items are bought Interest Rates: Interest rates can cause debt payments to increase, debt can become harder to pay off and consumer debt payments increase Availability of unskilled and skilled labourers: The availability of unskilled laborers can impact business operations by influencing production costs and workforce flexibility. Skilled labour shortages can hinder growth and innovation, reuuiring businesses to invest in training or automation. Unemployment rates: Unemployment can affect consumer spending, pay levels, staff morale, choices in recruitment and cost structures Contracts: Definition: A contract is a legally binding or valid agreement between two (or more) parties that intend to create legal obligations. Intention: The parties must intend that their promises will create legally enforceable obligations in a contract. Agreement (offer and acceptance): For there to be a contract there must be firstly a legally binding agreement between the parties. This agreement takes the form of offer and acceptance where a party makes an offer and the other accepts. Intellectual property: Definition: Intellectual property (IP) refers to legally protected creations of the mind, including inventions, literary and artistic works, trademarks, and trade secrets. IP grants exclusive rights to creators and owners, allowing them to control and profit from their intellectual creations. Purpose: - Promote innovation and research and development. - Protect the rights of creators and content producers. - Foster competition and prevent monopolies. - Attract investment and foreign collaborations. - Preserve cultural heritage and traditional knowledge. - Support international trade and export opportunities. - Combat counterfeiting and piracy. - Facilitate licensing and technology transfer. - Ensure compliance with international IP standards and agreements. Types of intellectual property: Copyrights: - Purpose: Copyright protection is granted to the creators of original literary, artistic, and intellectual works to encourage creativity and protect their economic interests. - Examples: Books, music, films, software, paintings, sculptures, and other creative works. - Rights: Copyright holders have the exclusive rights to reproduce, distribute, perform, and display their work. These rights typically last for the lifetime of the author plus 50 to 70 years. Patents: - Purpose: Patents grant inventors exclusive rights to their inventions for a limited time in exchange for disclosing their inventions to the public. This encourages innovation by providing inventors with a temporary monopoly. - Examples: New inventions, processes, machines, and certain types of plants. - Rights: Patent holders have the exclusive right to make, use, sell, and license their patented invention for a specified period, typically 20 years from the filing date. Trademarks: - Purpose: Trademarks protect distinctive signs or symbols used by businesses to identify their products or services. They help consumers distinguish between different brands and maintain brand reputation. - Examples: Logos, brand names, slogans, and symbols used to represent products or services. - Rights: Trademark owners have the exclusive right to use and protect their mark in connection with specific goods or services. Trademark protection can last indefinitely as long as the mark is actively used and maintained. Designs: - Purpose: Design protection covers the aesthetic or ornamental aspects of a product's appearance. It aims to prevent unauthorieed copying of the visual design of products, which can include the shape, surface, or ornamentation. - Examples: The uniuue design of a chair, a smartphone's user interface, or the appearance of a fashion garment. - Rights: Design rights grant exclusive rights to the appearance of a product, preventing others from copying or imitating it. The duration of protection varies by country but typically lasts for several years. Human Resource Management: Levels of management within a business: - Top Level management: Generally, this is the board of directors or the CEO or general manager/s Middle Management Roles: Usually consists of managers and supervisors Front Line management: These are workers who work directly on the product, perhaps on an assembly line, or directly with customers Types of organisational structures: - Product: The business is organised into departments focused on different products Function: The organisation is divided into smaller groups based on specialised functional areas, e.g., marketing, production, finance, and IT - Divisional: A type of organisational structure used by organisations with operations in different graphical location Team: The team-based structure is a newer, less hierarchical structure in which individuals are grouped into teams. A team should be a group of workers, with complementing skills and synergistic efforts, all working towards a goal. Features of organisational structures: - - Delegation: Delegation is the assignment of responsibility or authority to another person to carry out specific activities. Delegation shifts decision making authority from one level to a lower one Span of control: Span of control describes the number of subordinates that a manager or supervisor controls Phases of the employment cycle: - - Acquisition: Workforce planning and the selection and recruitment of staff Development: Development encompasses the induction of new employees into the business and providing ongoing training as employees develop and advance in their careers Maintenance: Maintenance of employment reuuires the business to continue to offer employees the condition and support reuuired to retain them in the workplace. Separation: Separation of employment is when an employee leaves a particular workplace, ending the employment relationship. National employment standards for employment contracts, Fair Work Act (2009): - - The act was implemented by the Rudd Government as a replacement to the Howard Government’s ‘Work Choices’ Programme Under the national employment standards, employees have certain minimum entitlements, which create a safety net that cannot disadvantage the employee The 10 minimum entitlements of the NES are: Maximum weekly hours (exceptions) Reuuests for flexible working arrangements Parental leave and related entitlements Annual leave Personal carers leave and compassionate leave Community service leave Long service leave Public holidays Notice of termination and redundancy pay Fair work information statement National minimum wage Key features of the following leadership styles: - - Autocratic: An Autocratic leader is one that makes all the decisions and prefers not to delegate any responsibility Participative/Democratic: A participative/democratic leader is one who prefers to involve employees in the decision-making process. A participative style would suit small companies or firms such as start-ups Situational: Situational leadership is not based on any single approach because employees and businesses are all different in so many ways. In essence, it is about using the right person and the right style for the right situation Characteristics of the following motivation theories: Maslow’s Hierarchy of Needs: A motivation theory that outlines the five levels of needs, from reuuirement to satisfy basic physiological needs through to self-actualisation. Maslow argued that until a lower order need is met people cannot progress onto the next level of needs. Herzberg’s Motivation-Hygiene Theory: Hereberg's Motivation-Hygiene (Two-Factor) Theory suggests that job satisfaction and dissatisfaction are influenced by separate factors. "Motivator" factors, such as achievement and recognition, drive satisfaction, while "hygiene" factors, like working conditions and salary, can only prevent dissatisfaction when adeuuate but don't directly motivate. Vroom’s Expectancy Theory: Vroom's Expectancy Theory posits that an individual's motivation to exert effort in a task is determined by their expectation of achieving a desired outcome (expectancy), the value they place on that outcome (valence), and the belief that their effort will lead to success (instrumentality). Motivation increases when these factors align positively. Adams’ Equity Theory: Adams' Euuity Theory suggests that individuals strive for fairness and balance in their work relationships. They compare their input (effort, contribution) to the outcomes (rewards, recognition) they receive, and if they perceive ineuuity (under or over-rewarded), they may adjust their behaviour or attitude to restore a sense of fairness, which influences motivation. Financial incentives for employees, benefits for employees, and pay options: - Hourly wage rate: payment made to a worker for each hour worked Piece rate: a payment to a worker for each unit produced Salary: annual income that is usually paid on a monthly basis Commission: a payment to a salesperson for each sale made Performance-related pay: a bonus scheme to reward staff for above-average work performance Fringe benefits: any financial extras beyond the regular pay cheuue, such as health insurance, life insurance, paid vacation and/or retirement Employee Share ownership schemes: Employee benefit scheme intended to motivate employees by giving them a stake in the firm’s success through euuity participation Laws protecting employees: Fair work act: The Fair Work Act of 2009 is a comprehensive Australian labour law that governs employment conditions, minimum standards, dispute resolution, and industrial relations. It establishes minimum wages, Modern Awards, and National Employment Standards while providing mechanisms for fair dispute resolution and protection of employee rights. Equal Opportunity Act 1984: The euual opportunity Act 1984 aims to eliminate discrimination and promote euuality of opportunity for all persons, regardless of sex, pregnancy, race, religion, political conviction, trade union, sexual preference, gender history, impairment, age, family responsibility/status. Work Health and Safety Act 2020: The OSH act places certain duties of care for safety and health at the workplace on employers, main contractors, sub-contracts, people involved in labour hire, employees, selfemployed, manufactures, designers, importers and suppliers. Consumer Law and Finance: Consumer Law in relation to misleading business tactics: Bait advertising: Bait advertising is a deceptive marketing tactic that lures customers with attractive offers or low prices, only to steer them towards different, more expensive products. Country of Origin: When a country falsely states the wrong country of origin. Scientific Claim: When a product claims to do something scientifically without evidence/research. Consumer rights and protections: Product Safety: Consumer products are goods or items that are intended for personal use or consumption by individuals and households. Guarantees: Under Australian Consumer Law a guarantee is a legal promise made by a supplier that they will do something to ensure that a product or service meets certain consumer rights. Warranty: Written or implied guarantee by sellers regarding product uuality, performance, and potential repairs. Repair and Replace: Under ACL, a consumer has the right to take a faulty or unsafe product back to the seller and ask the business to fix it. Influence of Government Policy on the following: Trading Hours: - Trading hours differ from state to state - In WA it is 8 to 9 on weekdays, 8 to 5 on Saturdays, 11 to 5 on Sundays, 11 to 5 on public holidays and closed ANZAC day, Christmas day and Good Friday Product Labelling: - The Australian Consumer law reuuires products to be labelled with: - The product’s name - Country of origin - Ingredients - Nutritional info - Use by date - Instructions for use - No misleading claims - Ingredients - The product name, dosage instructions and warnings if needed Advertising practises to Children: - The CTS (Children Television Standards) prohibits certain television programming for kids, this includes: - Age-appropriate advertising - Restrictions on food advertising - Restrictions on advertising toys and games - Restrictions on characters and celebrities - Consent of parent/Guardian Issues related to the marketing and promotion of the following products: Alcohol: - Targeted at often young people leading to underage drinking - Alcohol advertising may be glamorising Alcohol - Promotion of alcohol through sports services can lead to an association of alcohol with a healthy lifestyle Tobacco: - Promotion and advertising of tobacco products have been banned in Australia since 2012 - However, there is a concern over marketing of tobacco in other countries as it may lead to addictions of Australians visiting Fast Food: - The marketing and promotion of fast food can add to consumption of unhealthy foods and the obesity epidemic - Fast food companies target children with the use of toys, cartoons, etc - It is a concern that fast food marketing leads to a culture that prioritiees convivence and taste over health The concept of business public image and methods of raising business public image: What are public relations: - Public relations are about managing perceptions or how people view/think of the business The two goals of PR: - Increase awareness of the business - Improve business reputation What is Business Public Image: - The perception the public/people have of your business Strategies to create good public image: - Identify key audience - Define your brand persona - Determine critical business goals Benefits of a good public image in business: - Can create creditability - Can create customer loyalty What are donations and corporate sponsorships: - Donations are charitable in nature and purely benefit the organieation at hand - Sponsorships put a company’s name on an event, ad, etc to boost revenue Environmental issues that can decrease/increase public image: - Climate Change - Pollution - Energy Use - Animal Testing Financial Management: What is financial reporting: Financial reporting is a way to account for the money of the business, whether it belongs to the owners, investors, or lenders. What is a ‘Budget’: As a forward-looking financial plan, a budget is prepared in advance of a period of time, usually on a monthly uuarterly or annual basis. The purpose of budgets will depend largely on the type of budget used within an organisation. What is a ‘Balance Sheet’: The balance sheet is a ‘snapshot’ of a company’s financial position at a specific point in time, such as the end of the financial year. It states the company’s assets and liabilities and shareholders’ investment or euuity In the business. What is a ‘Profit and Loss Statement’: A profit, also known as an income statement or statement of earnings, is a financial statement that provides a summary of a company’s revenues, expenses and net income over a specific period. What are KPI’s: Business Key performance indicators (KPI’s) are uuantifiable metrics to evaluate the performance and progress of an organieation in achieving its strategic objectives. KPIs provide valuable insights into various aspects of business performance, helping management make informed decisions and track progress towards goals. Finance KPI’s: - Revenue Growth Rate - Gross Profit Ratio - Operating Expense Ratio - ROI - Cash conversion cycle - Debt-to-Euuity Ratio - Working Capital Ratio - Profit margin - Capital Expenditure Ratio - Current Ratio Profitability Ratios: Profitability is a measure of how much profit a business generates from its sales revenue. It assesses the company’s ability to generate income and control expenses in relation. Liquidity Ratios: Liuuidity ratios are financial metrics that assess company’s ability to meet its short-term obligations and measure its liuuidity or cash flow position. These ratios provide into the company’s ability to pay off its debts and cover its immediate financial obligations. Current Ratio: Current Assets/Current Liabilities Debt to Equity Ratio: Total Debt/Total Shareholders’ Euuity Marketing: Marketing: The process whereby the pricing, promotion and distribution of products is planned and carried out, in order to meet the business goals and mission. Put simply, marketing is all the activities undergone to plan, price and distribute a product to current and potential customers. Marketing Strategy: A marketing strategy is a plan that outlines how a business will position its products or services in the market, reach its target audience and achieve its marketing objectives. Marketing Plan: A marketing plan is a document outlining a firms marketing objectives and marketing strategies to be used to achieve these objectives. Market Position: It is how the product is designed to be perceived in the marketplace by the target against its main competitors. Competitor Analysis: A competitor analysis examines competitors’ characteristics to identify a possible competitive advantage. It also assesses the strengths and weaknesses of current and potential competitors and helps establish what makes your product or service uniuue compared to competitors. Target Market Analysis: The business needs to identify who the customers its products ae aimed at are, which will enable the business to better cater to their uniuue needs and wants. Marketing Goals: The business needs to identify the goals it wants to achieve as a result of a marketing campaign. Market Size: Market siee refers to the total potential demand for a product or service in a specific market. Market Share: Market Share, on the other hand, is the portion or percentage of the total market siee that a specific company or brand controls. Marketing Segmentation: Market segmentation involves separating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market Research: The process of collecting, recording and analysing data about customers, competitors, and the market. Customer Profiling: Customer profiling typically involves creating standard customer personas that represent groups of customers with similar characteristic, preferences, and behaviours. Competitor Profiling: Involves analysing and gathering information about your competitors products, pricing strategies, marketing tactics, and overall business approach. Customer Loyalty Programs: Customer loyalty programs are designed to reward and retain loyal customers, encouraging them to continue doing business with the company. Marketing Mix: The Marketing Mix is a combination of the elements needed to successfully market a product. It is used to review and develop marketing strategy and is the heart of the marketing plan. Product: A good or service that is offered in the market. Product Line: Is the number of different products sold by a business, used for similar purposes. For example, the McDonalds breakfast line. Product Mix: The complete set of all products and product lines that a company offers to the market. Product Differentiation: A marketing strategy used by the companies to distinguish their products or services from those of their competitors. Branding: Branding is the use of names/symbols/designs/slogans to identify a product. The primary objective behind branding is to create product identification in the marketplace. Labelling: A label is the part of the packaging of a good on which is written the name of the good and other information such as the country of manufacture of the good. Positioning: Positioning, in terms of a product, refers to the way a company or brand establishes a distinct and favourable perception of its product in the minds of its target audience relative to competing products in the market. Physical Evidence: Physical evidence refers to the image portrayed by a business regarding its tangible and observable features. Price Skimming: Price skimming is when the initial price of a product is set high, which often appeals to the ‘enthusiasts’ of the product, however after a while it is brought down to meet market demand. Price Penetration: When new products are set at low prices which uuickly attracts a large market share and customers. Psychological pricing: A pricing strategy that utiliees physiological principles to influence consumer’s perceptions and behaviour by setting prices that are perceived as more appealing or attractive, e.g., $0.99 instead of $1.00 Premium Pricing: A pricing strategy in which a company sets a relatively high price for its products or services to position them as high-uuality, luxurious, or exclusive. Promotion: The activities and strategies a company uses to communicate and advertise its products or services to its target audience. Advertising: The means of communication in which a product, brand or service is promoted to a viewership in order to attract interest, engagement, and sales. Publicity: Refers to the act of generating free media coverage or attention for a company or product. Sales Promotion: A strategy that involves offering incentives or temporary promotional activities to encourage immediate purchases or boost sales. Processes: The methods and procedures used to give clients the best possible customer experience. KPIs: Are used to assess whether your marketing mix has been successful. Pros and Cons: Pros of market segmentation: - Helps tailor and boost engagement - Informs new product development - Increased brand loyalty - Helps your brand stand out - Cuts advertising costs Pros of Primary Research: - Up to date data - Tailored to specific objectives - Confidentiality and privacy - Control over data uuality Cons of Primary Research: - Costly - Time Consuming - Doubts over accuracy - Potential bias Pros of Secondary Research: - Time saving - Cost effective - Large sample siees - Unbiased data Cons of Secondary Research: - Relevance and accuracy - Outdated information - Lack of control Pros of customer loyalty programs: - Increased customer retention - Enhanced customer engagement - Brand advocacy - Increased sales - Competitive advantage Cons of customer loyalty programs: - High costs - Limited effectiveness - Complexity - Potential misuse Pros of branding: - Recognition and trust - Customer loyalty - Premium pricing - Brand extensions Cons of branding: - Time and investment - Reputational risks - Changing customer preferences - Global branding challenges Pros of price skimming: - High price = high value - Hugh revenues = recovering costs Cons of price skimming: - Higher price = consumer discouragement - Potential limited market penetration Pros of Price penetration: - Low prices = high sales volume - Can help the product gain traction uuickly Cons of Price penetration: - High sales don’t always = high sales - Penetration pricing is typically only useful short-term Pros of advertising: - Increased awareness - Can reach a mass audience - Targeted - Measurable Cons of advertising: - Costly - Intrusive - Message misinterpretation Pros of digital advertising: - Cost effective - Expanded reach - Personalisation Cons of digital advertising: - Digital noise - Constant change Platform dependency Pros of publicity: - Credibility and trust - Increased visibility - Cost effectiveness - Brand reputation Cons of publicity: - Lack of control - Can’t measure ROI 7ps of Marketing - Product Price Promotion People Process Physical Place Calculations: Market Siee = total sales value or volume Market Share = Company sales or revenue / total market siee
