BUSINESS STUDIES

PRELIMINARY T O P I C 1 : N AT U R E O F B U S I N E S S - R O L E O F B U S I N E S S

A . N e w m a n

SYLLABUS LINKS

Business Studies Stage 6 Syllabus

WHAT IS BUSINESS?

According to well-known professors William Pride, Robert Hughes, and Jack Kapoor, business is

'the organized effort of individuals to produce and sell, for a profit, the goods

and services that satisfy society's needs.' A business, then, is an organisation which seeks to make a profit through individuals working toward common goals.

WHAT IS BUSINESS?Characteristics of businesses:Organised - Some businesses may be organized in a way that requires constant cooperation and communication with other employees. Other businesses may not require as much contact with other employees but may instead rely on automated workflows.Societal need - for example, a grocery store satisfies the need to be able to purchase food for ourselves and our families.Profit seeking – a business will be centered on profit, as opposed to a non-profit organization seeking donations and funding to help vulnerable people.

WHY IS BUSINESS IMPORTANT?• Brainstorm: what were the last 10 businesses

you interacted with?• Write these businesses down in a list, then

next to their name, identify the way/s that the business benefited you.

• Mind Map: Create a mind map of impacts of business on you. You can use ideas from your brainstorming, and add positive impacts that are less obvious.

WHY IS BUSINESS IMPORTANT?

SMEs = SMALL-MEDIUM ENTERPRISESSMALL BUSINESSThe ABS defines a small business as a business employing fewer than 20 people. Categories of small businesses include:• Non-employing businesses (sole proprietorships and

partnerships without employees)• Micro-businesses (employing between 1 and 4 people

including non-employing businesses)• Other small businesses (businesses that employ between 5

and 19 employees)

MEDIUM BUSINESSMedium sized businesses employ between 20 and 199 employees while large businesses employ 200 employees or more.SOURCE

WHY IS BUSINESS IMPORTANT?• Businesses play a crucial role in our society, largely

determining our standard of living.• Small to medium enterprises (SMEs) make up over 98

per cent of all businesses in Australia.• The one common feature shared by both the largest

and the smallest business is that they produce a product — goods or service — which is sold in a market where buyers and sellers meet.

• Businesses have an enormous impact on our lives every day.

• Businesses play a crucial role within the Australian economy.

WHAT DOES BUSINESS DO?

A good is a type of product that is tangible or physical and is usually created by a process of manufacturing or production.

GOODS

SERVICES

Many business portfolios consist of a mix of goods and

services that they offer to potential consumers

Tangible/physical means that the good can be touched, felt and held and has a physical dimension.

Intangible means that the good has no physical dimension and only exists while it is being utilised or performed.

A Service is a non-physical product that is created through the skills, expertise and effort of a person and is intangible in nature.

When we go shopping we are choosing from a range of finished products — products that are ready for customers to buy and use. Rarely do we stop to think about all the operations that have occurred to transform raw materials into finished products ready for consumption. Business enterprises undertake many activities to provide the products demanded by customers, however, by far the most important of all these activities is production. 

Production refers to those activities undertaken by the business that combine the resources to create products that satisfy customers' needs and wants.

1. PROFIT 2. EMPLOYMENT3. INCOMES4. CHOICE5. INNOVATION6. ENTREPRENEURSHIP AND RISK7. WEALTH AND QUALITY OF LIFE

PROFIT

Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses needed to sustain the activity.

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Profit Expenses

RevenueRevenue is the

amount of money that a business actually receives during a specific period – cash flowing into a business.

Two of the main revenue items are sales & service fees.

Expenses are costs that occur as part of running a business – cash flowing out of a business.

Typical examples of expenses include purchases, insurance, wages, rent, bank fees and charges.

EMPLOYMENTThe number of employees hired by a business at any time will largely depend on the nature of the products and the number of customers who wish to purchase the products. Generally, the more that is sold the more employees a business will hire.

Large businesses employ thousands of people within their organisations. However, the Small-Medium Enterprise (SME) sector is a major source of employment in Australia, accounting for about 50 per cent of all private (non-government) sector employment — approximately 5.3 million people.

INCOMES Income is money received by a person for providing his or her labour, or a business from a return on its investments.

A wage is money received by workers, usually on a weekly basis, for services they provide to an employer.

A salary is a fixed amount of money paid on a regular basis, usually fortnightly or monthly, to a permanent employee of a business.

Shareholders are people who are part owners of a company because they own a number of shares.

A dividend is part of a business’s profit that is divided among shareholders.

Many businesses require staff to conduct their operations. These employees provide their labour and in return receive an income through:• wage, or• salary

A business receives money from the sale of its products. As previously outlined, this is called sales revenue. From this revenue, all the expenses incurred in operating the business must be deducted. The amount that remains is the business’s profit. This becomes the business owner’s property and consequently their income.

If the business is a private or public company, it will have many owners referred to as shareholders. (A share is a part ownership of a company.) Usually, some or all of a company’s profit is divided among shareholders. This type of income is called a dividend.

CHOICE• Brand

• Size• Price• Taste/smell/sound• Quality or quantity• Sustainable practice/produce• Style or features

Freedom of choice exists when consumers can ‘shop around’ and select from a range of competitors’ products.

The more competition there is, the greater the choice available to consumers. It is businesses, all competing with one another, that are responsible for the wide range of products in the shops.

INNOVATIONInnovation is the process of translating an idea or invention into a good or service that creates value or for which customers will pay.

An innovation must be replicable at an economical cost and must satisfy a specific need.

Innovation involves deliberate application of information, imagination and initiative in deriving greater or different values from resources, and includes all processes by which new ideas are generated and converted into useful products.

In business, innovation often results when ideas are applied by the company in order to further satisfy the needs and expectations of the customers.

WHO CARES ABOUT INNOVATION?Department of Industry, Innovation and Science - Business.gov.au

What is innovation?Innovation generally refers to changing processes or creating more effective processes, products and ideas.

For businesses, this could mean implementing new ideas, creating dynamic products or improving your existing services. Innovation can be a catalyst for the growth and success of your business, and help you to adapt and grow in the marketplace.

Being innovative does not only mean inventing. Innovation can mean changing your business model and adapting to changes in your environment to deliver better products or services. Successful innovation should be an in-built part of your business strategy, where you create a culture of innovation and lead the way in innovative thinking and creative problem solving.

Innovation can increase the likelihood of your business succeeding. Businesses that innovate create more efficient work processes and have better productivity and performance.https://www.business.gov.au/info/run/research-and-innovation

INNOVATIONThe $12 million Boosting Business Innovation Program aims to accelerate innovation in New South Wales (NSW) by supporting greater collaboration between research organisations and their business communities.

The two-year program will help unlock access to technology, equipment, research and expertise to build an innovation ecosystem and stimulate economic growth right across NSW.

Boosting Business Innovation will:• further a networked innovation ecosystem across NSW• leverage additional external funding• support small to medium enterprises (SMEs) who want to scale up and innovate• grow the regional start-up sector and create innovation clusters across the state• provide access to high tech equipment and technical expertise research by SMEs

and start-ups through TechVouchershttp://www.industry.nsw.gov.au/business-and-industry-in-nsw/innovation-and-research/boosting-business-innovation-program

INDUSTRYEXAMPLE

References:

Riordan, P. (2015). Go-getters with a Germanic vision for eyewear disruption. Financial Review [website]. Retrieved from: http://www.afr.com/news/gogetters-with-a-germanic-vision-for-eyewear-disruption-20151103-gkpfcb#ixzz4Xcbq6nli 

ENTREPRENEURSHIP AND RISK

WATCH:

• Shark Bites: Aussie Entrepreneurs [2min]

• Shark Bites: Untapped Areas [1.39min]

Entrepreneur:

a person who sets up a business or businesses, taking on financial risks in the hope of profit

ENTREPRENEURSHIP AND RISK

Entrepreneurship: Do you have what it takes?

Assess your own entrepreneurial ability by completing the following questionnaire:

Questions Yes No

a) Are you willing to take moderate risks?

b) Are you easily motivated?

c) Do you get on well with other people?

d) Is your health excellent?

e) Do you set realistic goals?

f) Are you prepared to except responsibility?

g) Can you tolerate failure?

h) Do you have a positive self-image?

i) Are you well organised?

j) Are you a hard worker?

Richard Branson

Read the article about Richard Branson as well as your own research and make a list of at least FIVE keys to success.

HERE: What is one specific strategy that Richard Branson says led to his success?

HIDDEN: What is one personal quality (not identified by Richard Branson), that you feel this article demonstrates?

HEAD: What piece of advice would you ask Richard Branson about his success?

Entrepreneur: a person who sets up a business or businesses, taking on financial risks in the hope of profit

ENTREPRENEURSHIP AND RISKRead the article about Richard Branson and make a list of at least FIVE keys to success. You could continue this research with other articles and successful entrepreneurs.

https://www.virgin.com/entrepreneur/richard-bransons-secrets-success

Other interesting links about entrepreneurship:• http://

www.theage.com.au/nsw/the-hatchery-universities-where-young-people-learn-how-to-become-enterpreneurs-20161214-gtaz2a.html

• http://www.businessinsider.com.au/ring-doorbot-shark-tank-goldman-sachs-2017-1

• http://www.afr.com/leadership/innovation/university-of-wollongong-sets-up-a-10-million-seed-fund-for-startups-20170202-gu4fer

• http://www.theherald.com.au/story/4343087/sweet-success-for-urban-hum/

WEALTH AND QUALITY OF LIFE THE DISTRIBUTION OF THE WEALTH CREATED BY A

BUSINESS

REVIEW: WHY IS BUSINESS IMPORTANT?