1. Unit 1 Business Management 2011
AOS 1 – Introducing Business

2. Key knowledge
This knowledge includes
• Features of organisations including for profit and not-for-profit organisations;
• Objectives of different types of organisations;
• Distinctions between small, medium and large businesses;
• The contribution of small business to the economy;
• The internal and external (operating and macro) environments of a business;
• Business ethics and socially responsible management and their impact on various stakeholders.

3. Key Terms Business Small business Franchise Micro business
Large business
Not-for-profit organisation
Charity
Internal environment
External environment
Operating environment
Macro environment
Social responsibility
Business ethics
Entrepreneur
Incorporated business

4. Organisations

5. What is an organisation?
Organisation = 2 + people with a common goal
Business = an organisation that provides goods or services to consumers in order to make a profit

6. Types of organisations
FOR PROFIT organisation The focus of FOR PROFIT organisations is profit attainment and growth.
NOT-FOR-PROFIT organisation
The focus of NOT-FOR-PROFIT organisations is on providing specific service to the community.

7. Examples of organisations
Work place
Sporting clubs
Organisations
Charity groups
School

8. Industry Sectors

9. Industry sector
Industry sector is the different types businesses/ organisations producing goods and services in the same industry or business area.
Accommodation, Cafes and restaurants
Agriculture, forestry and fishing
Communication services
Construction
Cultural and recreation services
Education
Electricity, Gas and water supply
Finance and insurance
Government Administration and Defence
Health and community services
Manufacturing
Mining
Personal and other services
Property and business Services
Retail trade
Transport and storage
Wholesale trade

10. Small business

11. Small business
FACT
“small businesses make up over 96% of all businesses in Australia”.

12. Distinctions between small, medium and large businesses
In classifying businesses as either small, medium or large you need to consider:
The number of employees
The type of business ownership
The level of independence in decision-making
The size of the market share (the percentage or proportion of the total available market or market segment that is being serviced by a company. ...)
How the business is financed

13. Small, medium or large? Feature Small Medium Large Employee #
Micro 1-5
Up to 20 – non manufacturing
Less than manufacturing
200+
Ownership
1 -2 owners Independent
Few owners
Mostly private
Many public shareholders
Legal structure
Sole trader (1)
Partnership
Private company
Public company
Decision making
Owner
Simple
Owner and possibly directors
Directors and mgmt
Complex & may be slow
Sources of finance
Owner’s funds
Hard to get loan
Owner/partners funds
Easier to get loan
Numerous – cash reserves, profits, shares, loans
Market share & location
Small, not dominant
Local
Medium, some dominance in a region
Large, dominant, National/Multi national

14. Example Size: Large Business More than 200 employees Legal structure:
Public organisation
Ownership:
Many public shareholders
Decision making:
Directors and managers
Sources of finance:
Investors/shareholders/banks...
Market share / location:
Large dominant – national locations

15. Corner Milkbar
Size: Small business 1-5 employees Legal structure: Sole trader/partnership Ownership: 1-2 owners / independent Decision making: Owner Sources of finance: Owner /bank loan Market share / location: Small / 1 location

16. Micro Business
A very small business that employs fewer than five people. Many micro businesses are also ‘home-based businesses’. The micro business main place of operation is usually the owners home.
According to ABS more than 70% of small businesses in Australia are home based businesses.

17. Examples of Micro businesses

18. Franchise
An arrangement that allows one organisation with a product, idea, name or trademark to grant certain rights and information to an independent business owner. In return the business owner pays a fee and royalties to the owner.

19. Features of organisations
Profit
Not for profit
Eg: ________________
Are financially and socially accountable for actions
Objective: profit, market share
Ownership: sole traders, partnership or shareholders
Profits: distributed to owners
Employees: paid
Eg: _________________
Are financially and socially accountable for actions
Objective: social goals
Ownership: not owned per say
Profits: Used to cover costs and surpluses re-invested
Employees: paid or volunteers

20. Objectives of organisations
ALL organisations, whether they are for- profit and not-for-profit, should all set objectives – this increases their chances of success.
Major objectives include:
Financial objective
Social objectives
Personal objectives of managers and owners

21. 1. Financial objective Every business wants to make a profit!
A business may set several objectives to achieve its main objective of increasing profit:
Increase sales
Increase market share
Expand the business

22. 2. Social objective
All organisations operate within a community and have certain responsibilities. The main social objectives are:
Community service
Social justice
Ecological sustainability

23. 3. Personal objectives of manager and owners
Business owners normally have a number of personal objectives:
Be their own boss
Make money
Power
Satisfy a gap in the market

24. Mission and Vision Statements

25. Mission and Vision statements
It is vital for an organisation to have a mission and vision statement and every organisation should have one. It provides the organisation and the people involved clarity and a clear sense of direction.

26. What is the purpose of a mission statement?
A mission statement is a brief description of a company's fundamental purpose. A mission statement answers the question, "Why do we exist?“
The mission statement articulates the company's purpose both for those in the organization and for the public.

27. What is the purpose of a vision statement?
A vision statement is sometimes called a picture of your company in the future but it’s so much more than that. Your vision statement is your inspiration, the framework for all your strategic planning.
A vision statement may apply to an entire company or to a single division of that company. Whether for all or part of an organization, the vision statement answers the question, “Where do we want to go?”

28. Differences
The Mission statement focuses on the organisations present state. The Vision statement focuses on the organisations future.

29. Example of a Mission Statement
Mercedes Benz
We commit ourselves to:
Total quality management (TQM) through a process of continuous improvement;
Motivate our internal customers to meet the expectations of our external customers;
A culture of clear and transparent responsibility through leadership by example;
An effective communication, to achieve maximum co-operation and ensure team work For the achievement of positive results.

30. Example of a Vision statement
Ford
To become the world's leading Consumer Company for automotive products and services.

31. Legal structure

32. Legal structure Sole trader – Partnership – Private organisation-
Public organisation -

33. Sole trader (also known as sole proprietorship)
One owner
Responsible for all the decision making of the business
Responsible for all the money that is put into the business
Legally responsible if the business fails
All profits and loses accrue to the owner.

34. Partnership Two or more people work together Shared assets
Shared profits
Each partner is jointly responsible for all the debts incurred by the business
If one partner leaves the business could fail if another partner is not found
If business fails partners are fully responsible

35. Private and public organisation/company
Larger companies are usually public companies
Often family companies
Public companies are recognised by the word ‘Limited’ ‘LTD’ after their name
Private companies have the letters ‘PTY LTD’ after their names meaning ‘proprietary limited’
Unlimited number of shareholders
Public can purchase their shares
Restricted to a maximum of 50 shareholders
Shares can only be traded with permission of other shareholders.
Legally obliged to publicly report their activities

36. How are public/private companies different from sole traders and partnerships?
Sole traders and partnerships are considered as one with their business so if the business fails they fail.
Public and private have their own independent legal entity so if the business fails the owners/ shareholders are only liable for the amount they invested.
Eg. If you invest $100 you only loose $100.

37. Legal structure
Advantages
Disadvantages
Sole trader
Owner makes all the decisions for the business
Must invest all the start up costs
Partnership
Share the investment costs
Tensions between partners can cause problems for the business
Private company
The business can have up to 50 shareholders investing in their company
only limited to 50 share
Public company
Can trade on the share market
Any decisions made need to go through share holders

38. Business environments

39. Business environments
Conditions which businesses operate within
Internal environment = factors within the business over which the business has some control
External environment = factors outside the business. Two areas:
Operating environment – external factors who have a direct impact on the business
Macro environment – broad operating conditions (forces) which all businesses operate under but have no control over.

40. Business environments
Internal:
Employees
Management & Management styles
Corporate culture
Policies
Management structure
Owners
Operating:
Customers
Suppliers
Competitors
Regulatory bodies
Interest groups and trade unions
Macro:
Economic
Legal
Environmental
Social
Political
Technological
Internal
External: Operating
External: Macro

41. Internal Environment
One of your employees is rude and provides poor customer service all the time. How can this affect your business?
Your business has a strong culture – all staff follow policies and procedures, objectives are clear and sales targets are always met. How does this affect your business?

42. External Environment - Operating
You never pay your suppliers on time and you are rude to them when they deliver your products. How can this affect your business?
You are always a step ahead of your competitor – offering better deals and customer service. How does this affect your business?

43. External Environment - Macro
An earthquake destroys your business and you are left with nothing. How does this affect your business?
You own a chocolate shop, the government introduces a ‘Chocolate is healthy’ campaign. How does this affect your business?

44. Remember
Internal environment – deals with everything that goes on INSIDE the business
External Environments – Operating and Macro – deal with things that affect the business from the OUTSIDE

45. Stakeholders

46. stakeholders
Stakeholders are individuals or groups that have a vested interest in the activities of an organisation.
Two important issues which are of increasing concern to stakeholders are:
Is the business conducting its operations in an ethical or fair manner?
Is the business acting in a socially responsible manner?

47. Who are the business stakeholders?
community
suppliers
customers
shareholders
BUSINESS
employees
competitors
Creditors / banks
government
management

48. The contribution of small business to the econony

49. The contribution of small business to the economy
= a system set up to determine what to produce, how to produce and to whom production will be distributed to.
Small business helps our economy as it:
Generates jobs
Around 30% of Australia’s economic activity is generated by small business
Develops entrepreneurs
Offers services med-large businesses may/can’t offer

50. Ethics and Socially Responsible Management

51. Ethics & socially responsible management & its impact on stakeholders
Business ethics = application of moral standards (what’s socially considered right or wrong) to business behaviour
Corporate social responsibility (CSR) = accountability to stakeholders. Business decision making which considers the community and other stakeholders. Goes beyond legal requirements.
Behaving ethically and with social responsibility are increasingly imported and expected today. These decisions affect stakeholders

52. Ethical issues
Behaving fairly and honestly in business (this applies to both the business and consumer)
Truthful communication in business (false or misleading promotion is both unethical & illegal)
Dealing with employees ethically (leads to healthy workplace relations)
Conflict of interest (some has competing personal or professional interests)
Business owners should strive to act honestly, with integrity and consideration for all stakeholders
A business’ culture will affect behaviour of people within a business
A business may implement a code of conduct to encourage ethical behaviour