External Influences
What is the name of Australia's central financial institution and what is its role during an economic recession?
If a recession happens, regulation from the Reserve Bank of Australia (RBA) occurs to stop banks from drastically increasing interest due to the poor economic state of an average individual. E.g: COVID made interest rates fall as the reserve bank regulated this in response to the pandemic.
What is a complementary business?
Complementary businesses refer to venues close to each other providing services that benefit the other. This is often in the form of drawing more customers. E.g: Aquarium and a gift shop.
Name the four stages of the business life cycle
Establishment, Growth, Maturity, Post-maturity
Identify one problem a business can face in the growth stage and give three specific examples
Expansion can lose control and contribute to negative cash flow, for example:
1. Demand is too high for the supply to cater to
2. Diversification of products/services may lead to loss of business identity or brand name
3. Lack of experience related to expansion can lead to major losses.
Name the four types of market concentration and give an example for each
Monopoly is when an industry has complete saturation of the market.
Oligopoly means that the number of competitors is minimal but the competing industries are all large.
Monopolistic Competition means a large number of competitors. Generally differentiated by quality of product or public opinion.
Perfect Competition is a large number of small businesses selling similar or the same product. Smallest amount of advertising.
Identify the four factors a business must consider when choosing their physical store location? Briefly explain each one
Visibility: How capable of being seen the business is to the public eye. Customers are lazy and want ease of access unless the store has some niche appeal.
Proximity to customers: How close a business is to an active customer base.
Proximity to supplier: Generally not much of an impact unless the products sold are large and expensive to ship. Can also be good if you are aiming to sell goods from overseas manufacturers.
Cost: To set your shop up in certain locales the rent our property value will increase depending on the probability of high foot traffic.
Describe the features and characteristics of sales, marketing and cost in the establishment stage
Sales will likely start slowly and will naturally be highly erratic.
Marketing will be focused on the promotion of the business itself and their product availability/benefits. It is also likely to be inexpensive due to limited funds.
Cost is very high at the start of a business as insurance, the building itself, equipment and stock all have to be taken into account.
Identify the difference between management styles in the establishment and growth stage
Establishment: Management style is generally informal as business culture hasn’t been established, erratic sales, employees and funds will contribute to a high workload, a bi-product of a new businesses’ natural lack of staff.
Growth: Management will be far more formal and will have structure (organisational, flat or a hybrid). Specialized departments and line managers/supervisors will emerge for the select delegation of tasks to decrease overall workload.
What is the difference between a trade union, employer association & trade and industry association?
Trade unions refers to unions of laborers fighting against the government for better wages and working conditions.
Employer Associations developed as a response to trade unions as this represents the interest of those who employ traders. The aim is to negotiate with the demands of the trade union.
Trade and Industry Associations also represent the interest of employers on a larger scale (national). They are generally grouped by type of employer or field of work.
Identify four aspects of business culture and briefly define them
Values: A specific culture that the business centers their style of work around. E.g: Oxford’s values of professionalism and academia require their employees to meet that reputation.
Symbols: An event or object used to represent the business beliefs. E.g: School crest symbolizes focus on reaching full potential.
Rituals, rites and celebrations: Routine patterns used to establish business identity and foster their personal culture. E.g: Business conferences and anniversaries.
Heroes: High performing employees are used as an example for others to strive through awards or sometimes monuments. This comes through monetarily and honorarily.
Describe the typical features and characteristics of employees in the establishment stage
Employees will be limited and likely not permanent as the manager has to find staff suitable to the required work ethic and culture, a process that can heavily vary in length.
In the growth stage, what do businesses tend to invest in to decrease admin workload and gain a more detailed and controlled overview of finance?
Financial management software and resources such as MYOB, Xero and accountants
Identify four regulatory bodies and briefly describe what they do. (Hint: Two are on a state-level (NSW) and the other two are on a federal level)
NSW Environment Protection Authority (EPA) regulates pollution and waste control in the state NSW. Can also offer advice and incentives to businesses in exchange for supporting their cause.
NSW Fair Trading refers to the regulation of the goods exchange between business and consumer in an ethical sense.
Australian Securities and Investments Commission (ASIC) is on a federal level and refers to financial protection and advice towards investment. They aim to make sure all businesses are compliant with federal regulations and run the business name register.
Australian Competition and Consumer Commission (ACCC) regulates the action of anticompetitive conduct, e.g: cartels, exclusive dealing and monopoly.
Identify the four types of business resources and give an example for each
Human: How many humans a business has to use to their advantage.
Information: So businesses have stockbrokers to gain data and financial advice in order to grow their business.
Physical: The physical items such as products, machinery and the building itself.
Financial: The funds to operate.
Justify why profit and cash flow initially start off at a loss/negative in the establishment stage.
Profit will match the pattern of sales but will likely start at a loss due to early surplus of products. Profit will likely be reinvested into the business to possibly pay off debt or upgrade current customer services.
Cash Flow is just money going in and out of a business, a process which is essential to stay positive for an establishing business. However, their will naturally be negative flow necessary for the buying of stock, with positive cash flow being erratic and non-indicative.
High costs!
Fill in the blanks:
_________ stock and removing ________ stock is best approached in the growth phase to continue this upward climb for as long as possible.
Diversifying, obsolete
What does CSR stand for? Give two examples of a business displaying good CSR, then outline what the benefits of this might be.
Corporate social responsibility
Examples include: Environmental sustainability, social/charitable initiatives
Benefits: Good PR/media coverage thus improved brand image -> Word of mouth -> Increased customer perception and thus customer base -> Increased revenue and profit
What are four factors that a company must consider when deciding on their organisational structure?
Nature of the task refers to the style of work that needs to be done.
Time and Resource Constraints often benefited by a flat structure as issues in a business are quickly transferred management due to the effective communication inspired by this style.
Experience, personalities, values, beliefs and skills of the employee can lead towards a more suitable management structure.
Manager’s preference: corruption of the manager or lack of empathy can lead to the opinion of a manager superseding employee opinion and can lead to their desired management structure regardless of the former point. Vice Versa.
What is the failure rate of newly established businesses?
33% percent of new established businesses fail
What are two reasons for the significant decrease in failure rate during the growth period?
Businesses have their profit and insurance to support them + the option of forming partnerships to salvage their earnings