Cambridge

VCE
BUSINESS
MANAGEMENT

Julie Cain
Units 1 & 2 Gillian Somers
Third Edition Debbie Sekula
Rebecca Jepson
Area of Study summary graphic
organisers created by Sonya Musgrave
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Shaftesbury Road, Cambridge CB2 8EA, United Kingdom
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© Cambridge University Press 2022

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  iii

Introduction
Congratulations on choosing to study VCE Business Management! We think it is a fantastic subject which
offers knoweldge you can put into practical use in your future work or studies. The author team is comprised
of highly experienced Business Management teachers, who wish you the best for your VCE studies.

About the author team

Julie Cain is the Campus Principal – Senior School at Mount Waverley Secondary College. She has
tutored pre-service teachers at university level, is on the Board of Directors of the Victorian Commercial
Teachers Association (VCTA) and currently holds the position of President. She is an experienced VCE
Business Management, Commerce and Humanities teacher. Julie spent many years assessing VCE Business
Management exams, and is a regular presenter at teacher professional development sessions and the annual
VCTA Comview Conference. She is also a regular contributor to the VCTA COMPAK teachers’ journal and
develops assessment materials for a number of organisations.

Gillian Somers is an education consultant who has regularly presented professional development sessions
for teachers and student revision lectures in the area of VCE Business Management. Gillian has been actively
involved in consultation, auditing, reviewing and assessing for the Victorian Curriculum and Assessment
Authority (VCAA). She edited the Business Management section of the VCTA journal COMPAK for many years
and regularly contributed to the journal and its annual conference COMVIEW. Previously, she was the Senior
Business Management teacher and VET Coordinator at Trinity Grammar School, Kew. She is a member of the
VCTA Advisory Committee for Business Management.

Debbie Sekula has worked in Victorian secondary schools for over 20 years with extensive experience
teaching VCE Business Management, Legal Studies and English. Debbie has worked in curriculum leadership
positions for many years, leading the development, documentation and implementation of the Victorian
Curriculum and managing the implementation of VCE at a school level. Debbie is a member of the
Business Management Advisory Group of the VCTA and is a mentor to early career Business Management
teachers. She is a contributor to the VCTA journal COMPAK and has been a VCAA assessor for VCE Business
Management exams.

Rebecca Jepson is an experienced Business Management and Commerce teacher, a qualified Careers
Practitioner, and an experienced VCAA Assessor for Business Management. Rebecca is a member of the VCTA
Advisory Committee for Business Management, contributing to their publication COMPAK, and is a regular
presenter at their annual conference Comview.

About the contributor

Sonya Musgrave is an accomplished Business Management teacher with industry experience as a Business
Analyst and Logistics Controller. Sonya developed her graphic organisers to assist students and teachers to
organise, clarify and simplify the curriculum.

Thank you

The Publisher would like to thank the following teachers for their time and expertise in reviewing the text:
Grace Ciavarella, Brandon Wong, Tracey Seach and Jo Quinn. Your feedback was invaluable and we really
appreciate your contribution to the new edition.

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iv

Contents
Introduction  iii
How to use this resource  vii
How to unpack assessment questions  viii
Key skills-based terms used in outcomes and assessment questions  x
Overview of Areas of Study and assessment  xi

UNIT 1 PLANNING A BUSINESS  2

Area of Study 1 THE BUSINESS IDEA  3
Chapter 1 The business idea  4
1.1 Businesses in Australia  6
1.2 Motivation behind starting a business  7
1.3 Characteristics of successful business managers and business entrepreneurs  10
1.4 Sources of business opportunity  16

Chapter 2 Business concept development: ‘getting off the ground’  28

2.1 The importance of goal setting and decision-making  30
2.2 The importance of business concept development  36
2.3 The relationship between business opportunities and business concept development  37
2.4 Market research and feasibility studies  38

Chapter 3 Business contributions to society: innovation and entrepreneurship  44

3.1 Business contribution to the economic and social wellbeing of a nation  46
3.2 Building a culture of innovation and entrepreneurship  52
Unit 1 Area of Study 1 review  66

Area of Study 2 INTERNAL BUSINESS ENVIRONMENT AND PLANNING  75

Chapter 4 The internal business environment: planning business structures and models  76
4.1 Internal and external environment  78
4.2 Choosing the legal business structure  81
4.3 Types of business models  88
4.4 Purchase an existing business or establish your own?  97

Chapter 5 Resourcing, locating, financing and support services for a business  102
5.1 Business resource needs and the factors affecting their choice  104
5.2 Business location and factors affecting choice of location  107
5.3 Sources of business finance  112
5.4 Government and community-based support and assistance  123

Chapter 6 Business planning and corporate social responsibility (CSR)  134

6.1 Planning  136
6.2 The business plan  141
6.3 Corporate social responsibility considerations  151
Unit 1 Area of Study 2 review  156

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  v

Area of Study 3 EXTERNAL BUSINESS ENVIRONMENT AND PLANNING  165

Chapter 7 External business environment and planning: macro factors  166
7.1 An overview of the external environment: part 1  168
7.2 An overview of the external environment: part 2  179

Chapter 8 External business environment and planning: operating factors  194

8.1 Customer needs and expectations  196
8.2 Competitors’ behaviour  199
8.3 Suppliers of business resources and the supply chain  201
8.4 Special interest groups  204
Unit 1 Area of Study 3 review  212

UNIT 2 ESTABLISHING A BUSINESS  220

Area of Study 1 LEGAL REQUIREMENTS AND FINANCIAL CONSIDERATIONS  221
Chapter 9 Establishing a business: legal requirements and external professionals  222
9.1 Key legal and government regulations  224
9.2 The role of external professionals when establishing a business  237

Chapter 10 Establishing a business: policies and procedures  242

10.1 The importance of establishing bank accounts, financial control systems and record-keeping strategies  244
10.2 The importance of choosing appropriate suppliers  252
10.3 Policies and procedures relating to legal requirements  257
10.4 Technological and global issues  260
Unit 2 Area of Study 1 review  268

Area of Study 2 MARKETING A BUSINESS  276

Chapter 11 Marketing the business  278
11.1 Relationship between marketing, establishing a customer base and
business objectives  280
11.2 Factors affecting the establishment of a customer base and the creation of a
brand identity  283
11.3 Market research practices  289
11.4 Target market attributes  294

Chapter 12 Marketing mix, product life cycle and marketing strategies, features and value of customer
relations and technological developments in marketing  306
12.1 The 7Ps of marketing  308
12.2 Product life cycle  332
12.3 Features and value of customer relations strategies  335
12.4 Technological developments in marketing  339

Chapter 13 Public relations and corporate social responsibility management considerations  348
13.1 An overview of public relations and its relationship to business objectives  350
13.2 Public relations strategies: planned and crisis public relations  355
13.3 Corporate social responsibility management considerations regarding
establishment of a customer base  366
Unit 2 Area of Study 2 review  370

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vi

Area of Study 3 STAFFING A BUSINESS  379

Chapter 14 Staffing a business  380
14.1 Relationship between the performance of staff and achieving business objectives 382
14.2 Identification of staffing needs of the business  384
14.3 Effects of developments in technology on staffing needs  387

Chapter 15 Recruitment and selection of staff  392

15.1 Job analysis and its relationship to job design, job description and job specification  394
15.2 Recruitment methods  398
15.3 Selection methods  404

Chapter 16 National Employment Standards, employer and employee expectations,

legal obligations for staffing, employee induction and CSR considerations
relating to staff  414
16.1 Overview of the National Employment Standards (NES)  416
16.2 Employer expectations  420
16.3 Employee expectations  424
16.4 Legal obligations for staff  428
16.5 Purpose and common methods of employee induction  431
16.6 Corporate social responsibility management considerations when establishing staffing for a business
and overseas recruitment  433
Unit 2 Area of Study 3 review  440
Glossary  447
Index  456
Permissions acknowledgements  468

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  vii

How to use this resource

Book structure
• All chapters have been closely aligned to the VCE Business Management Study Design 2023–2027.
• This book for Units 1&2 contains two units, and six Areas of Study.
• Each unit and Area of Study starts with an overview taken directly from the VCAA Study Design.
• We have tried to make the book’s alignment to the curriculum very clear for you. For example, each
Area of Study starts by listing the chapters included and each chapter opens with a ‘What’s ahead’
visual showing the main sections of the chapter.
• Chapters start with an engaging ‘Kickstarter activity,’ which can be used to spark classroom discussion.
• Each chapter has a ‘Chapter overview’ that lists the ‘Key knowledge and Learning intentions’ for the
chapter. These are based on the key knowledge and key skills of the Study Design.
• Each chapter is divided into numbered sections, and each of these sections covers a key knowledge
dot point from the Study Design.
• Each chapter section starts with ‘Learning intentions’ to drive your inquiries into VCE Business Management.
• At the end of each chapter section are review questions and at the end of each chapter are end-of-
chapter activity questions.
• At the end of each Area of Study you will find a summary section featuring a range of revision tools for
your preparation for assessment tasks.

Activity types
This series uses a range of activity types including the following:

• Activities (activities that scaffold important concepts and skills from the Study Design)
• Case study analyses
• Reviews (questions in both print and digital formats)
• End-of-chapter activities, which include a range of tasks for you to complete, including extension questions.

Digital resources
This series uses the interactive Edjin platform, and includes both a student and a teacher edition.

In the Interactive   Textbook version of this book students will find the following key resources:

• Downloadable worksheets for all activities

• Success Criteria checklists (aligned to each chapter’s Learning goals, for students to self-assess their
progress)
• Interactive Scorcher quizzes (timed, competitive and fun tests of knowledge)
• Interactive Review activities (digital questions to summarise each chapter section)
• Videos
• Suggested solutions to all activities (enabled by teacher)
• A PDF downloadable version of the student textbook.

In the Online Teaching Suite, teachers will find:

• Exam generator – a powerful tool featuring scores of VCAA-style examination questions, and model
answers. This tool allows you to create practice assessment tasks that you can assign to your classes.
You can filter questions by Area of Study, mark allocation, or key term.
• Additional downloadable practice exams and SACs
• Reporting tools to track the progress of your classes and students
• PowerPoint summaries of each chapter
• Teaching programs
• Suggested solutions to all activities (access for students can also be enabled).
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viii

How to unpack assessment questions

This guide may help you to approach certain questions in this text. Although there is no external
examination for Units 1&2, questions are written in a VCAA-examination style to help you become
familiar with these types of questions.

You will need to refer to this table when looking at the ‘Extended response question – let’s unpack it’
feature at the end of each Area of Study.

A Annotate the Before writing anything, read the question carefully and
command word completely to work out exactly what it is asking you to do.

Identify the command word (e.g. discuss, evaluate, analyse). This

will inform the structure of your response.
B Brackets around
Does the question ask you to do more than one thing? Does it
different parts of
have more than one part?
the question
– If it does, put brackets around the separate parts.

C Count the marks Look at the marks available: think about what you need to
include to get all of the available marks.

• Consider the command word. This might highlight that the

question is one mark per point.
• Questions with five or more marks are often holistically
marked.
– Consider how you can construct an in-depth response.

D Determine key Identify key concepts in the question so you can identify the key
words to use terms you need to use.

• Ask yourself: what is the question about?

• Identify the key knowledge the question is drawing on and
ensure that relevant terms are used.

E Evidence Use the stimulus. If the question states ‘using the data’ or ‘using
If required the diagram’, ensure that your response contains information
from this stimulus.

Provide evidence to support your evaluation or justification to

add complexity to the response.

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  ix

Example question
Describe the importance of goal setting and decision-making when establishing a business.
Identify and justify two characteristics of successful business managers and how these
characteristics contribute to business success. (5 marks)

EXTENDED RESPONSE QUESTION – LET’S UNPACK IT

Task words
Describe: Provide a detailed account of something

Identify: Determine or establish as being a particular

thing. To determine the key characteristics or features
Limiting word
Justify: Give valid reasons or evidence to support an Determines the
answer, or conclusion, or response involved in the number of examples
stimulus material you must use

Describe the key characteristics of this style and identify and justify two management skills
which you believe will be important to help them to grow their business. (5 marks)

Study Design requirements Marks allocated

Key knowledge: The importance of
goal setting and decision-making
in business.
The characteristics of successful
business managers and ow these
contribute to business success.

Hints:
• This question has multiple parts and requires all parts to be completed to gain full marks.
• There is a range of other skills that could be identified and justified

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x

Key skills-based terms used in outcomes

and assessment questions
The following explains common terms used in assessment questions and activites in this resource.

Term Definition

Analyse Identify components/elements and the significance of the relationship between them; draw out and
relate implications; determine logic and reasonableness of information

Apply Use; employ in a particular situation or context

Compare Recognise similarities and differences and the significance of these similarities and differences

Define Give the precise meaning and identify essential qualities of a word, phrase, concept or physical
quantity

Describe Provide characteristics, features and qualities of a given concept, opinion, situation, event, process,
effect, argument, narrative, text, experiment, artwork, performance piece or other artefact in an
accurate way

Discuss Present a clear, considered and balanced argument or prose that identifies issues and shows the
strengths and weaknesses of, or points for and against, one or more arguments, concepts, factors,
hypotheses, narratives and/or opinions

Distinguish Make clear the differences between two or more arguments, concepts, opinions, narratives, artefacts,
data points, trends and/or items

Evaluate Ascertain the value or amount of; make a judgment using the information supplied, criteria and/or
own knowledge and understanding to consider a logical argument and/or supporting evidence for and
against different points, arguments, concepts, processes, opinions or other information

Examine Consider an argument, concept, debate, data point, trend or artefact in a way that identifies
assumptions, possibilities and interrelationships

Explain Give a detailed account of why and/or how with reference to causes, effects, continuity, change,
reasons or mechanisms; make the relationships between things evident

Identify Recognise and name and/or select an event, feature, ingredient, element, speaker and/or part from a
list or extended narrative or argument, or within a diagram, structure, artwork or experiment

Interpret Draw meaning from an argument, point of view, description or diagram, text, image or artwork and
determine significance within context

Investigate Observe, study or carry out an examination in order to establish facts and reach new conclusions

Justify Show, prove or defend, with reasoning and evidence, an argument, decision and/or point of view using
given data and/or other information

List Provide a series of related words, names, numbers or items that are arranged consecutively

Outline Provide an overview or the main features of an argument, point of view, text, narrative, diagram or image

Propose Suggest or put forward a point of view, idea, argument, diagram, plan and/or suggestion based on
given data or stimulus material for consideration or action

Provide reasons/ Justify your choice or answer; give valid reasons or evidence to support an answer or conclusion
justify

Recommend Put forward and/or approve (someone or something) as being suitable for a particular purpose or role

Summarise Retell concisely the relevant and major details of one or more arguments, text, narratives,
methodologies, processes, outcomes and/or sequences of events

Source: © VCAA, Glossary of Command Terms

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  xi

Overview of Areas of Study

and assessment

Planning a business and establishing a business

The VCE Business Management Study Design outlines the following Areas of Study and the relevant school-
assessed coursework that must be undertaken for the course.

UNIT 1 PLANNING A BUSINESS: AREAS OF STUDY

1 The business idea

2 Internal business environment and planning
3 External business environment and planning

UNIT 1 COURSEWORK ASSESSMENT CHART

Number Outcome Assessment tasks

1 Describe a process for creating All assessments at Units 1&2 are school-based. Procedures for
and developing a business idea, assessment of levels of achievement in Units 1&2 are a matter
and explain how innovative and for school decision.
entrepreneurial practices can For this unit students are required to demonstrate three
contribute to the national economy outcomes. As a set these outcomes encompass the Areas of
and social wellbeing. Study in the unit.
Suitable tasks for assessment in this unit may be selected from
2 Describe the internal business
the following:
environment and analyse how
factors from within it may affect • a case study analysis
business planning. • short-answer and extended-answer structured questions
• a business research report
3 Describe the external environment • an interview with and a report on a chosen business
of a business and explain how the • a school-based, short-term business activity
macro and operating factors within • a business simulation exercise
it may affect business planning. • an essay
• a business survey and analysis
• a media analysis.

Source: © VCAA, VCE Business Management Study Design 2023–2027, p. 12; reproduced by permission

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xii

UNIT 2 ESTABLISHING A BUSINESS: AREAS OF STUDY

1 Legal requirements and financial considerations

2 Marketing a business
3 Staffing a business

UNIT 2 COURSEWORK ASSESSMENT CHART

Number Outcome Assessment tasks

1 Outline the key legal requirements and All assessments at Units 1&2 are school-based.
financial record-keeping considerations when Procedures for assessment of levels of achievement in
establishing a business, and explain the Units 1&2 are a matter for school decision.
importance of establishing effective policies For this unit students are required to demonstrate
and procedures to achieve compliance with three outcomes. As a set these outcomes encompass
these requirements. the Areas of Study in the unit.
Suitable tasks for assessment in this unit may be
2 Explain how establishing a customer base
selected from the following:
and a marketing presence supports the
achievement of business objectives, analyse • a case study analysis
effective marketing and public relations • short-answer and extended-answer structured
strategies and apply these strategies to questions
business-related case studies. • a business research report
• an interview with and a report on a chosen business
3 Discuss the importance of staff to a business, • a school-based, short-term business activity
discuss the staffing needs for a business, and • a business simulation exercise
evaluate staff-management strategies from • an essay
both an employer and staff perspective. • a business survey and analysis
• a media analysis.

Source: © VCAA, VCE Business Management Study Design 2023–2027, p. 16; reproduced by permission

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ISBN 978-1-009-20257-2 © Julie Cain et al 2023 Cambridge University Press
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 UNIT 1
PLANNING
A BUSINESS
UNIT DESCRIPTION
Businesses of all sizes are major
contributors to the economic and social
wellbeing of a nation. The ability of
entrepreneurs to establish a business
and the fostering of conditions under
which new business ideas can emerge
are vital for a nation’s wellbeing. Taking
a business idea and planning how to
make it a reality are the cornerstones of
economic and social development. In
this unit, students explore the factors
affecting business ideas and the internal
and external environments within which
businesses operate, as well as the effect
of these on planning a business. They
also consider the importance of the
business sector to the national economy
and social wellbeing.

Source: © VCAA, VCE Business Management Study

Design, 2023–2027, p. 9; reproduced by permission

AREAS OF STUDY IN THIS UNIT

1 The business idea

2 Internal business environment and planning

3 External business environment and planning

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 AREA OF STUDY 1
THE BUSINESS IDEA

AREA OF STUDY DESCRIPTION OUTCOME 1

In this Area of Study students investigate On completion of this unit, the student
the concept of entrepreneurship. They should be able to describe a process for
consider how business ideas are created creating and developing a business idea, and
and how conditions can be fostered for new explain how innovative and entrepreneurial
business ideas to emerge. New business practices can contribute to the national
ideas come from a range of sources, such as economy and social wellbeing.
identifying a gap in the market, technological
To achieve this outcome the student will draw
developments and changing customer
on key knowledge and key skills outlined in
needs. Students explore some of the
Area of Study 1. [These are listed at the start
considerations to be made before a business
of each chapter.]
can be established as well as the importance
of businesses to the national economy and Source: © VCAA, VCE Business Management Study Design,
social wellbeing. 2023–2027, p. 9; reproduced by permission

Source: © VCAA, VCE Business Management Study Design,

2023–2027, p. 9; reproduced by permission

CHAPTERS IN THIS 1 The business idea

AREA OF STUDY
2 Business concept development: ‘getting off the ground’

3 Business contributions to society: innovation and

entrepreneurship
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 CHAPTER 1
The business idea

‘The way to get started is to quit talking and begin doing.’

Walt Disney (1901–1966)

About the author:

Walt Disney was an American entrepreneur,
animator, writer, voice actor and film producer.

KICKSTARTER ACTIVITY
1 Explain the link between this quote and entrepreneurship.
2 Why is it important for someone wanting to start a business to
‘begin doing’?

CHAPTER OVERVIEW

In this chapter, you will examine the concept of entrepreneurship, the

personal motivation behind starting a business and the characteristics
of successful business managers and entrepreneurs. You will also be
introduced to sources of business opportunity, such as innovation,
taking advantage of market opportunities, taking advantage of
changing customer needs, research and development, technological
development and global markets.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will
be able to:

Examine the concept of 1.1 Businesses in Australia

entrepreneurship 1.1.1 Examine, describe and apply the concept of
entrepreneurship when planning a business

Describe the personal 1.2 Motivation behind starting a business

motivation behind starting a 1.2.1 Describe the personal motivation behind
business such as the desire starting a business including the desire for
for financial and personal independence, desire to make a profit, and fulfil
independence, to make a profit a market and/or social need
and to fulfil a market and/or
social need

Describe the characteristics of 1.3 Characteristics of successful business managers and

successful business managers business entrepreneurs
and business entrepreneurs 1.3.1 Describe the characteristics of successful
and how these characteristics business managers and entrepreneurs
contribute to business success

Sources of business opportunity 1.4 Sources of business opportunity

such as innovation, recognising 1.4.1 Sources of business opportunity
and taking advantage of 1.4.2 Innovation
market opportunities, changing 1.4.3 Market opportunities
customer needs, research and 1.4.4 Customer needs
development, technological 1.4.5 Research and development
development and global markets 1.4.6 Technological development
1.4.7 Global markets

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 1
The business idea

1.1 Businesses in 1.2 Motivation behind 1.3 Characteristics of 1.4 Sources of business
Australia starting a business successful business opportunity
managers and business
entrepreneurs

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6 Unit 1 | Planning a business

1.1 Businesses in Australia

Learning intentions – at 1.1.1 Examine, describe and apply the concept of
the end of this chapter entrepreneurship when planning a business
section I will be able to:

Entrepreneurship and entrepreneurs are important

entrepreneurship
the ability to in any economy and society and provide many benefits,
‘think outside the as they think ‘outside the box’ and take advantage of Entrepreneurship
box’ and come
opportunities that may arise. This supports the type and
up with new and
different ways variety of products and services available to customers and
of seeing things. also can provide a source of employment in the economy.
This ability and
Entrepreneurship can be defined as an individual who
skill set often see
new products creates a new business, bears most of the risks and enjoys
developed. the rewards. An entrepreneur is usually an innovator and a
source of new ideas, products and services. Personal
entrepreneur an
motivation
individual who
creates a new
Entrepreneurship is important for the economy and society as
business, bears it allows for new ideas and can improve the standard of living The
most of the risks for many people. There are a number of programs in place to business
and enjoys the idea
rewards. An
assist individuals and businesses to innovate and develop new
entrepreneur businesses and products. The Commonwealth Government,
is usually an for example, has a range of grants and supports in place.
innovator and a Characteristics
source of new
Since 2014 there has been an Accelerating Commercialisation
ideas, products service that has supported businesses. Over 500 grants
and services. have been awarded, covering up to 50 per cent of the cost
and the business needs to match the funding provided. The
service helps businesses to expand their networks through
connections to supporters, investors and potential partners.
Sources of
The government also offers an Entrepreneurs Programme business
that assists in shortening the development life cycle of opportunity
new ideas to get them into production and to the market.
Examples of businesses supported through this program
Figure 1.1 Many factors need to be considered
include 3DMorphic, which is an automation method for the when planning a business.
rapid turnaround of 3D printed implants for surgical patients.
Another example of a business to receive assistance is Investfast, which developed software for
financial services companies to prevent money laundering and increase financial compliance. Forty
First Floor is another successful recipient working on commercialising an event entertainment
app called ‘Crowd Canvas’, which transforms audience smartphones into active dynamic pixels to
complete audio/visual light and sound shows.
Source: Business.gov.au website, News section

REVIEW ACTIVITY 1.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Define the following concepts:

a entrepreneur b innovation.
2 Explain the connection between entrepreneurship and innovation.

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 Chapter 1 The business idea 7

1.2 Motivation behind starting a business

Learning intentions – 1.2.1 Describe the personal motivation behind starting a
at the end of this business including the desire for independence, desire to
chapter section I will make a profit, and fulfil a market and/or social need
be able to:

People decide to start a business for a variety of

reasons. These include those outlined in Figure 1.2.
Independence
The reasons people start their own business vary.
Some of the main reasons include: Fulfil a Freedom
• A desire for independence. Being a business market
need
and
flexibility
owner means being in control and assuming
responsibility for decision-making.
• A self-employed person has freedom to
innovate and problem-solve without needing Motivation
to ask for permission. There is more potential for Fulfil a Be ‘your
flexible working hours and conditions. social own
need boss’
• Potential wealth and financial independence,
especially if the business is successful.
• Filling an identified gap in the market. Many
small businesses are founded because someone Develop Success
a business and
recognised there was an unfulfilled market need
niche wealth
and a gap as a product or service was not available.
• Fulfilling a social need. Social enterprises
are businesses that trade for community Figure 1.2 There are many things that motivate a person to start their
own business.
benefit, selling products for the sole purpose
of delivering social or environmental benefit to
communities. For many people the motivation behind starting a business is to give back or
innovation a
provide a service to benefit society. Social enterprises operate using a business model and new or improved
aim to create profits. Unlike other business models, however, these profits are distributed to product/s or
social causes, not shareholders/owners. method/s of
doing things
and is often the
Motivation to establish a social enterprise includes: impetus for a

• to provide employment, training and support for targeted groups new business
venture
• to meet a community need
• to generate profits that can be redistributed to social programs, charities and foundations. social enterprise
private-sector
business that
A person starting a business must assess whether or not they are doing so for the right reasons. distributes profit
They must clearly identify and evaluate: to benefit the
community rather
• their personal objectives in starting a business than individual

• the things that are important to them (family, lifestyle, interests, wealth and status)
shareholders

• whether the business idea can realistically satisfy their personal objectives
• whether operating the business will allow them to access things that are important to them.

For example, a person considering opening a business requiring them to work 80 hours a week,
and who also sees family and lifestyle as personal priorities, will find the business simply will
not allow them to achieve these priorities. A person who values wealth and status, and who is
prepared to work long hours, would be better suited to that particular business.
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8 Unit 1 | Planning a business

ACTIVITY 1.1
Research a social enterprise
Select one of the following social enterprises:

• Ceres Fair Food

• StartSomeGood
• Gecko Traxx
• White Box Enterprises
• Spare Harvest
• GG’s Flowers & Hampers.

Research and answer the following questions:

a When was this enterprise founded and by whom?

b What were the original aims of the founders?
c What activities does this enterprise engage in?
Figure 1.3 Motivation for some businesses is to
d Who benefits? How do they benefit?
meet a community need.
e In what ways does this social enterprise operate
as a business?

The following case studies provide two examples of individual motivation that led to the
establishment of a business.

CASE STUDY
1.1

Allbirds
(sustainability)

Allbirds was started in New Zealand and now recognised brand. It sells shoes, lounge clothes
operates from Silicon Valley in the USA. It and accessories.
makes carbon-neutral sneakers from merino
wool and natural materials. It turns sugar cane Tim Brown (co-founder) believes that the
into foam soles and makes shoe laces out of business’s focus on sustainable products is now
recycled bottles. seen as a mainstream idea. It is continuing to
work on a number of new sustainable products.
The business debuted on the Nasdaq (US Stock
Exchange) and after the first day of trading was Source: Adapted from Jessica Yun, ‘“Built to meet
valued at $US4 billion. The company is known this moment”: Inside Allbirds’ $5.5b Nasdaq debut’,
for its green credentials and is now a globally The Age, 5 November 2021.

CASE STUDY ANALYSIS

1 Describe the products produced by Allbirds.
2 Identify and describe why the business has successfully debuted on the Nasdaq.
3 Describe the likely motivations behind the establishment of this business.

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 Chapter 1 The business idea 9

CASE STUDY
1.2

Social enterprise:
Blaze Your Trail

Jessica Macpherson spent twelve years enterprise to recruit new talent and hire a
building and leading Melbourne charity St more diverse workforce. This includes global
Kilda Mums. She then decided to launch a technology consultancy MTX, which launched
technology training social enterprise called in Australia and is partnering with Blaze Your
Blaze Your Trail. It provides technology training, Trail. Its staff are contributing to training and
mentoring and employment placement for mentoring programs and MTX is aiming to
migrants enabling them to get a start in the employ candidates out of the program.
workforce. Most of its placements have been
with Salesforce as the company provides its Source: Adapted from Cara Waters, ‘Charity founder
platform free to charities and is widely used. blazes own trail with tech training’, The Age,
28 September 2021.
Blaze Your Trail has also seen interest from
large businesses who want to use the social

CASE STUDY ANALYSIS

1 Explain how Blaze Your Trail is supporting people to return to the workforce.
2 Describe the motivation behind starting Blaze Your Trail.
3 Explain why other businesses have joined with Blaze Your Trail. Discuss the benefits for the
participants and the businesses involved.

REVIEW ACTIVITY 1.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Define the following concept: gap in the market.

2 List and explain three possible motivations for going into business.
3 Explain how the motivation for commencement of a social enterprise might be both
different and similar to the motivation for entering into another type of business.

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10 Unit 1 | Planning a business

1.3 Characteristics of successful business

managers and business entrepreneurs
Learning intentions – at 1.3.1 Describe the characteristics of successful business
the end of this chapter managers and entrepreneurs
section I will be able to:

Certain personal qualities and characteristics are recognised as being advantageous to starting
a business. These are outlined in Table 1.1.

Table 1.1 Characteristics of entrepreneurs

Characteristic Explanation

Risk taker A start-up business requires an owner to risk personal assets. He/she must be able
to live with the possibility of failure. Calculated risk takers who do their homework,
and who are constantly looking for advice and mentors, are usually more successful.
Fear of uncertainty and potential failure is often a deterrent to the establishment of
a business.

Ability to ‘think outside People who are able to devise original ideas, come up with different ways of
the box’ approaching things and who recognise opportunities others cannot are more suited
to starting a business. Successful business operators are often rule breakers who defy
conventional wisdom.

Innovative thinkers Successful business operators are usually able to come up with new ideas, then
develop and improve them. This often requires creativity and inquisitiveness.

Resilient A business operator must be prepared to persist and persevere over the long term.
Patience and determination are required to see things through. Establishment of a
successful business may require years of hard work. Success rarely happens overnight.

Having a vision The ability to spot an opportunity and have a clear goal as to how this can be achieved
requires curiosity, an open mind and listening skills.

Possessing confidence Self-belief and enthusiasm are business assets. Successful business development
requires a person to possess the self-assurance that they have something the market
needs or wants to buy, plus the confidence that they can provide it.

Ability to work Successful entrepreneurs are often intrinsically motivated to achieve personal goals
independently (self-starter) and enjoy challenges, and are naturally competitive.

Goal setting To be successful there needs to be the ability to set goals and work towards achievement.

Accept responsibility and This may mean that they make decisions that are not always right. Being resilient and
learn from mistakes being able to start again is important.

(continued)

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 Chapter 1 The business idea 11

(continued)

Flexible Having the ability to change direction when required is important when responding to
changing tastes, consumer demands and alterations in market conditions. A successful
business is able to change course quickly when things do not go to plan. To do this, the
business owner must be nimble, adaptable and able to make decisions both quickly
and adeptly.

Capacity and drive for Running a business is time consuming. Being a ‘doer’ is required to put ideas into
hard work and practicality practice.

Ambition Being ambitious is required to achieve long-term goals.

Ethical Clients and customers will lose interest in those who lie and cheat. Long-term business
success therefore requires an ethical approach.

ACTIVITY 1.2
Read the descriptions of the qualities and skills of these potential business owners set out in
paragraphs a–d below and answer the questions that follow.

a Surjeet is a qualified chef who has worked in an Indian restaurant for five years. He is
highly regarded in the industry and is thinking of opening his own restaurant. He has a
temper and often gets angry when dealing with staff and customers. His wife works in
marketing. Surjeet’s friends say that he is a very determined person who wants to have
10 restaurants within the next five years.
b Mila is a professional dancer with extensive experience appearing in stage and
television shows and is highly regarded by those who have worked with her. She is
very quiet, lacks confidence and finds it difficult to talk to groups of people. Mila loves
working with children and quickly builds rapport with them. She also has a teaching
qualification.
c Owen has just finished Year 12. He has good computer skills, is confident and often
helps his family and friends with computer issues. He wants to set up his own computer
repair business. He completed a number of subjects; however, his results in English
were very low.
d Lydia is sports mad. For eight years she has worked in a chain of stores that sell
sporting shoes, but has recently become very disillusioned after being passed over
for promotion. Lydia feels that her selling skills and technical expertise in fitting sports
shoes are better than anyone else in this industry.

1 Identify the skills Surjeet possesses that could help his new restaurant succeed. What
personal qualities could hinder his chances of success and why? Suggest how Surjeet
could work towards future improvement.
2 Assess whether Mila should start her own dance school. Identify the skills she has that
would help her. Advise how she could learn to overcome her shyness when working with
others.
3 Identify the skills Owen should try to acquire before he starts his own computer repair
business. Recommend somewhere that he could acquire these skills.
4 Propose two actions that Lydia should take. Justify your answer.
5 Suggest and justify an appropriate type of small business for each person.

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12 Unit 1 | Planning a business

CASE STUDY
1.3

Traits of successful
entrepreneurs

Success has nothing to do with introversion, parts of a business from product creation to
extroversion, or personality type. There’s business operations. Being an entrepreneur
a key set of traits that set truly successful often requires out-of-the-box thinking to find
entrepreneurs apart and allow them to achieve creative ways to finance a product, raise
success. brand awareness, get things done cheaply and
manage the competing demands on them.
1 Have a driving force behind what you do

5 Relationship building
David Kollar, founder of clothing brand Kollar
Clothing, learned that the way you dress can
Relationships with others such as suppliers,
have an impact on your confidence from a
retailers and customers are important if a
young age. He took inspiration from observing
business is going to be successful. Building
people that were well dressed and projected
relationships is important; maintaining them is
confidence to inspire his line of clothing, and
key to long-lasting success.
made it his goal for his business.

2 Be a self-starter

Formal education is not always needed to

become a successful entrepreneur. Many of the
world’s most successful entrepreneurs don’t
have degrees or formal qualifications. What they
do have is a desire to learn, grow and develop
themselves. David Kollar, Richard Branson and
Lindsay Fox, for example, are all self-taught.
Figure 1.4 David Kollar is the founder of Kollar Clothing.
3 Resilience
6 Tenacity

You have to be ready for whatever comes

your way as an entrepreneur. Successful Drive, determination and persistence are

entrepreneurs are able to adapt, pivot, reframe, qualities that all successful entrepreneurs

reimagine, or reinvent their products or brand. believe is vital to their success. Being willing to

If there is no resilience then it is unlikely that a push through challenges, deal with adversity

person can overcome setbacks and challenges. and pursue opportunities are all important.
Most entrepreneurs are willing to take risks and

4 Creativity and problem-solving not afraid to take on challenges.

Source: Adapted from ‘Traits of successful

Creativity is basically a requirement for
entrepreneurs’, Forbes.com.
entrepreneurs, and it’s applicable to all

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 Chapter 1 The business idea 13

CASE STUDY ANALYSIS

Read the case study and watch the video to answer the
following questions:
1 Why are there common characteristics that many
entrepreneurs possess?
2 Of the six traits listed in the article (or of those mentioned
in the video from Harvard Business School), which do you
believe are the three most important? Justify your answer.
3 Select and investigate one of the following successful
entrepreneurs:

• Janine Allis
• Lindsay Fox Figure 1.5 Mike Cannon-Brookes and
• Mark Zuckerberg Scott Farquhar founded Atlassian.

• Elon Musk
• Rupert Murdoch
• Richard Branson
• Mike Cannon-Brookes and Scott Farquhar.
4 Describe how each founded and grew their business. Video 1.1
5 Identify the key qualities and skills demonstrated by the entrepreneur and explain how they Traits of
contributed to the success of the business. successful
entrepreneurs

ACTIVITY 1.3
The Global Entrepreneurship Index is an annual index that measures the health of the
entrepreneurship ecosystems in 136 countries. It then ranks the performance of these against
each other, and each country in the survey is given a score. The scores are out of 100 and are
based on the best attitude and potential for overall entrepreneurship.

This provides a picture of how each country performs in both the domestic and international
context. The figure sets out the position Australia holds.

2019 2018 2017 2016 2015

1 United States 86.80 83.61 83.37 86.20 85.00
2 Switzerland 82.20 80.45 77.96 67.80 68.60
3 Canada 80.40 79.25 75.60 79.50 81.50
4 Denmark 79.30 74.31 74.06 76.00 71.40
5 United Kingdom 77.50 77.75 71.29 67.70 72.70
6 Australia 73.10 75.45 72.51 78.00 77.60
7 Iceland 73.00 74.15 73.49 68.90 70.40
8 Netherlands 72.30 68.15 67.79 65.40 66.50
9 Ireland 71.30 73.72 70.96 65.60 65.30
10 Finland 70.20 67.90 66.91 61.80 65.70

Figure 1.6 The Global Entrepreneurial Index for 2019

1 Why is the Global Entrepreneurship Index completed every year? Why is it an important
source of information?
2 Australia is rated sixth on the list. Why does the index investigate the best attitude and
potential for overall entrepreneurship?
3 Explain the benefits of a business having the right attitude and potential for entrepreneurship.

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14 Unit 1 | Planning a business

While there are a number of traits and characteristics that business managers and business
entrepreneurs need to possess, there are also skills that will assist a person successfully running
their own business. These skills are set out in Table 1.2.

Table 1.2 Skills to run a successful business

Skill Explanation

Technical skills and These include specific skills needed for a business; e.g. lawyers
qualifications need to be qualified, and a swimming school operator needs
knowledge about how people learn to swim.

Communication skills and These are required to successfully deal with a range of people
negotiation skills the business comes into contact with. Examples include staff,
customers, suppliers and government agencies.

Leadership skills These skills are important as the person starting the business
might have to lead the business while also leading staff. They
need to be able to motivate and inspire others and work towards
achieving their goals and objectives.

Strategic thinking and It is important to take a long-term view of the business and devise
analytical skills a plan to achieve the goals that have been set.

Planning skills This includes time management and organisational skills. Owners
have to make sure they can coordinate and plan for all aspects of
the business.

Financial management It is crucial that the financial position of the business is continually
skills monitored and evaluated.

Sales and marketing skills These are important as the owner needs to promote the business
to reach potential customers.

Technology skills Knowledge of relevant software packages is important.

Figure 1.7 Successful business owners require a wide range of skills.

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 Chapter 1 The business idea 15

ACTIVITY 1.4
Refer to the list of personal skills and qualities below. Consider which of these you think you
already have, which you need to acquire, and how you could acquire those you are lacking.
Place this information in a table (such as the one below) in your workbook or notes.
• Technical skills • Leadership skills
• Strategic thinking and analytical skills • Technology skills
• Financial management skills • Planning skills

An example is completed for you.

Skill Why is this skill Self-evaluation – Self-evaluation – Strategy for

necessary in small positives negatives developing
business? expertise in this
area

Communication To deal effectively I am good at I need help when TAFE course.

and negotiation with all aspects communicating communicating Read book on body
skills of the business, with my peers on a with large groups. language.
including selling, one-to-one basis. I do not read the Ask a friend for
staff, government I write very clearly. body language of assistance.
agencies and I speak two other people well.
suppliers languages.

ACTIVITY 1.5
Identify and explain the skills required to successfully complete the following business-related tasks:

1 Manage staff on a day-to-day basis.

2 Ensure that all financial obligations are met.
3 Select and operate an appropriate computer program.
4 Successfully make sales.
5 Plan the steps to produce a product or deliver a service.

REVIEW ACTIVITY 1.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Outline an example of when an entrepreneur or business operator would require the following:
a communication skills
b negotiation skills
c financial management skills
d marketing skills
e technical skills.
2 Write a paragraph to describe five qualities usually found in successful entrepreneurs.
Explain how each quality would be advantageous when starting a new business.

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16 Unit 1 | Planning a business

1.4 Sources of business opportunity

Learning intentions – at the end of 1.4.1 Sources of business opportunity
this chapter section I will be able
to describe and understand the 1.4.2 Innovation
following:
1.4.3 Market opportunities

1.4.4 Customer needs

1.4.5 Research and development

1.4.6 Technological development

1.4.7 Global markets

There are a number of opportunities a business can seize or take advantage of particularly
when trying to establish and build a business. These include those in Figure 1.8.

Research and
development

Global
markets Innovation

Business
opportunity

Technological Market
develpment opportunities

market niche
where a business
can find a gap
Customer
or space in needs
an industry or
market. It usually
means that there
is something Figure 1.8 There are a number of business opportunities that arise.
unique about
their product
or service so All businesses need to continually look for new opportunities to either start, diversify, or continue
customers will to grow their business if they are to remain successful. Large businesses continually look at ways
buy from the
business.
to increase their presence, sales and profits. Many small businesses need to look for any market
niches or gaps that may exist in the market as this allows them to grow and be successful.

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 Chapter 1 The business idea 17

Innovation
Innovation is a new or improved product/s or method/s of doing things and is often the
impetus for a new business venture. An innovation can be a whole new product or a variation
on an existing product that improves it, such as colour, design, or features. Innovation can be a
catalyst for further success and growth, enabling a business to become increasingly competitive
in the marketplace. Innovation may come from scientific research, changes in work practices
and often improvements in technology. Original thinkers are frequently sources of innovation.

Successful entrepreneurs are usually able to think innovatively and/or identify innovations that have
potential for success. Innovation is the tool of the entrepreneur, the means by which they can exploit
change. When looking for innovative ideas, an entrepreneur might examine any of the following:

• new services
• new products (the most common form of innovation)
• new production techniques (these may reduce production costs by either allowing a
product to be made for a lower cost or creating a more complex product)
• new marketing techniques (allowing a product to be promoted in a different manner,
gaining more attention from potential consumers).

CASE STUDY
1.4

Innovation:
Quantum Brilliance

Quantum Brilliance has found a way to from the size of the computer and the fact that
make quantum computers more accessible, it does not need to be stored in super-cooled
potentially contributing to the solution to the fridges and vacuum chambers to function.
world’s pending information storage issues.
Quantum Brilliance is a spin-out company from The company was supported by the
the Australian National University in Canberra Commonwealth Government through a grant
and has developed the world’s first room- from AusIndustry, which gave it an Accelerating
temperature quantum computer that is small Commercialisation grant and money from the
enough to fit inside a lunchbox. Innovations Connections.

This is a significant innovation because current The computer will be deployed to the Pawsey
storage space for information is finite and the Super Computing Centre in Perth to assist in
world will continue to need more processing the development of a supercomputing centre.
power to be able to handle complex problems. It is estimated that there is potential for up to
10 000 new jobs and $2.5 billion each year in
It is estimated that within 20 years computers revenue by 2040.
will not have the capability to power all of the
machines in the world. The innovation comes Source: Adapted from business.gov.au website.
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18 Unit 1 | Planning a business

CASE STUDY ANALYSIS

1 Explain why innovation is important for Australia.
2 How will this product assist other businesses in Australia and around the world?
3 Explain why the Commonwealth Government provides grants and money to businesses
and individuals looking at new products and services.

Market opportunities
A successful business entrepreneur is able to see
opportunities that others may fail to recognise.
The source of most business opportunities is
change. As society’s needs and wants evolve and
change, so too do the types of goods and services
people want to purchase.

Examples of market opportunities include:

• If the type of people (demographic)

moving into an area is changing, so too
will the products that market seeks to buy.
For example, if young families move into a
specific area, demand for child-care services or
Figure 1.9 Many businesses are taking advantage of the increased
interest in healthy living.
children’s clothing will increase.

demographic
• If government changes a law, often a business opportunity emerges. A change in laws
the population
regarding superannuation might see an increased demand for financial planning businesses.
in a particular • As societal attitudes including lifestyles change, so does consumer demand. For example,
age group, increased community interest in healthy living has seen demand for personal training,
type, or
target market
dieticians and weight-loss services increase.
to which a • Many entrepreneurs have converted a hobby into a money-making opportunity. Celebrity
business will chefs and fitness experts are examples of people who have recognised and taken advantage
try to attract
and target
of market opportunities.
their product • An entrepreneur looking for inspiration should look around and make observations
or service regarding how things could be done better, or what things are not being done at all. Often
the simplest ideas and observations can be the beginning of a business.
• The media can also be used as a source of ideas for a business concept. Regular observation
of the media can provide inspiration and innovative ideas. Television shows focusing on
entrepreneurship, such as Shark Tank, may be useful. Similarly, news and current affairs
articles often report changes in consumer needs or fashions. For example, a study about
incidence of childhood obesity may be the impetus for a healthy fast-food outlet or a gym
designed for children.
• Trade shows and exhibitions provide opportunities to see new products and obtain ideas,
and there may be opportunities for the rebranding of existing products. They also provide
opportunities to make important contacts and to network.

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 Chapter 1 The business idea 19

CASE STUDY
1.5

Betty’s Burgers:
market
opportunities

The parent company of upscale fast food outlet A move into more focus on the alternative
Betty’s Burgers has distinguished itself from its meat movement will be a key growth driver
rivals, criticising their overcomplicated menus for the business. The Betty’s Burger menu
as the business prepares to add new meatless currently features two non-meat options, one
options and capitalise on Australia’s economic with a crispy puff rice patty and another with
reopening. mushroom, as the company sees this as a
trend in the market. The business wants to be
The burger chain has benefited from the seen as a leader in the environmental, social
COVID-19 pandemic and increased sales. It is and governance space. While Betty’s Burgers
looking at expanding the number of stores it sales exploded during the pandemic, the
has in Australia. chain’s focus was in-restaurant dining, and the
company hopes to capitalise on the return of
Betty’s Burgers competes with the likes of in-house dining as lockdowns subside.
Grill’d in the premium end of the burger Despite widespread concerns about shortages
market, as distinct from mass market chains in the hospitality sector, the business stated it
such as McDonald’s and Hungry Jack’s. It had no trouble hiring workers.
believes its smaller menu means it can manage
its operations more easily. Source: Adapted from Jessica Yun, ‘Burger wars
Betty’s Burgers swipes at rivals amid lofty plans to
Its parent company Retail Zoo also owns the expand’, The Age, 10 November 2021.
Boost Juice, Cibo Espresso and Salsas chains.

CASE STUDY ANALYSIS

1 Describe how a business can take advantage of market opportunities to expand.
2 What does Betty Burgers believe makes it different from other burger chains?
3 Explain why it is important for a business to continually look for new market opportunities.

Customer needs
An entrepreneur is able to recognise signs indicating customer needs and wants. They may
spot a change creating a favourable condition that the business can take advantage of, a
changing trend, or an increasing demand for a product by a demographic group that has yet
to be recognised by its competitors. Often such a change creates a gap between customer
demand and supply. This is a result of people changing the types of products they wish to buy.
Successful businesses recognise changes in consumer demand and take advantage of these.
This is known as recognising a gap in the market.
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20 Unit 1 | Planning a business

ACTIVITY 1.6
Identify two potential ideas for a new business that could arise from each of the following
scenarios:

1 A news report reveals that home burglaries are increasing.

2 A government study finds a link between fast foods and increased childhood obesity.
3 Melbourne is chosen as the venue for a major sporting event.
4 Studies find that many people do not have sufficient time to prepare healthy meals.
5 Statistics show a significant number of retired people living in an area.

CASE STUDY
1.6
Customer needs:
gender-neutral
children’s clothing

Designer Gary Bigeni has developed a new Associate Professor Michelle Telfer, director of
children’s clothing collection for children the Royal Children’s Hospital’s Gender Service
between 18 months and five years old. in Melbourne stated: ‘Gender-neutral clothing
provides an expansion of options for young
‘They’re just colours, and they’re just clothes’, children.’
Bigeni said. ‘They should be for everyone.’
With items priced from $60 to $80, Bigeni’s
Begeni sees the product range as an expansion children’s collection is made-to-order, like his
on his focus on inclusivity. Before creating adults’ range, in the interests of sustainability.
his over-sized, hand-painted children’s styles, The over-sized approach is a way of tapping
with no fastenings for quick changes, Bigeni into current trends as well as extending the
consulted friends with budding families on lifespan of a T-shirt dress.
their preferences. He found that some people
believed some girls clothing was fussy or Source: Adapted from Damien Woolnough,
impractical for active play. Boys clothing was ‘Ditching boys and girls from children’s clothing at last’,
often limited in colour and pattern choices. The Age, 20 November 2021.

CASE STUDY ANALYSIS

1 Explain why it is important for a business to be able to change and respond to
customer needs.
2 Explain how Bigeni identified a gap in the market and changing customer demand.

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 Chapter 1 The business idea 21

Research and development

Research and development are often the
sources of new business ideas that lead to
innovation. They are an important means
for achieving future growth and continuing
to offer a relevant product in the market.
Research and development help to drive
technological improvements that lead
to greater productivity and increased
economic growth.

Inventors and entrepreneurs are always

looking for partners in business concept
development. It is also possible to identify
new products and technologies for potential
development through observation of a
particular target market and an analysis of
products they might be interested in. For Figure 1.10 Research and development are often sources of innovation.
example, increasing community concerns
about personal security could translate into a market for security products and services.

Another option is to research and develop ways of adding value to an existing product for
consumers. An example of this is providing environmentally friendly options for a cleaning
product or changing packaging to use biodegradable materials.

CASE STUDY
1.7

Research and
development:
Catapult

Catapult was a start-up company that analytics to monitor and measure athletes. Its
successfully commercialised sport technology hardware and software solutions have been
and exported it to the rest of the world. Catapult used by more than 500 sports teams and
was born out of a collaboration between the organisations worldwide. It has come a long
Australian Cooperative Research Centres way in a short time and is radically changing the
(CRC) Program and the Australian Institute of way elite athletes are coached and managed.
Sport (AIS) in 1999. It is now listed on the ASX
(Australian Stock Exchange) and employs more It was able to develop the ideas and
than 300 people across 25 countries. technology through support from the Victorian
Government through Invest Victoria.
It provides elite sporting organisations and
athletes with detailed real-time data and Source: Adapted from Invest.vic.gov.au website.
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22 Unit 1 | Planning a business

CASE STUDY ANALYSIS

1 Explain why it is important for a business to engage in research and development.
2 Describe the role of partners such as Invest Victoria in assisting businesses to undertake
research and development of a product or service.
3 Go to the website www.invest.vic.gov.au or another state or federal website and identify
one business that has been supported to develop a business idea.

Technological development
The development and impending availability of new technologies can be another source of
ideas for a new business. Technology is usually developed to meet a human need. Businesses
can apply technology in a range of different ways. This is set out in Table 1.3.

Table 1.3 Technology and innovation

Technology used in:

• planning stage
Production
• production processes
• consistent quality.

Use of internet and online sales

Marketing
Social media to market and reach customers

Financial Payment systems; e.g. EFTPOS, PayPal and Afterpay

For example, the growth and development of the internet, coupled with hand-held devices
capable of mobile internet access, has enabled the formation and development of many new
business ideas. Airbnb and Uber are two examples. The development of drone technology
is another area of technological development offering numerous possibilities for business
application. Concerns with protecting personal and business data has also seen an increased
need for businesses to develop ways to counter cyber-attacks.

ACTIVITY 1.7
Select one of the following recent Victorian start-ups with a technology focus:

• Etsy
• Afterpay
• The Trade Desk
• Seer
• My Plan Manager
• Canva.

1 Investigate the background of developing the business.

2 Identify the skills and qualities of the key developers.
3 Discuss the potential application of the start-up for business locally and globally.

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 Chapter 1 The business idea 23

CASE STUDY
1.8

Technology: cyber
security

Jason Edelstein knows how to pick locks, avoid Since the start of COVID-19, there has been a
security cameras, bypass electric fences and proliferation of digital crime.
dodge guards. He has broken into data centres
and critical infrastructure sites and stolen There have been a number of high-profile
sensitive information. ransomware attacks, including on Toll Group,
that have wreaked havoc on essential service
However, none of this is illegal. Edelstein is providers. The Reserve Bank of Australia this
a senior executive at CyberCX – Australia’s month warned a successful cyber-attack against
largest cybersecurity firm. a major bank was ‘almost inevitable’.

His team of hackers is hired by companies, Edelstein says larger businesses have been
including the biggest banks and energy taking cybersecurity seriously for at least five
suppliers, to find weaknesses in their security. years. There are laws that mandate yearly
While breaking-and-entering seems a world penetration testing for some industries, and
away from digital hacking, Edelstein says well-resourced companies are throwing money
they’re not so different: ‘It requires out of the at innovative solutions to avoid compromising
box thinking.’ customer data or suffering a reputational hit.
Demand for these services is likely to grow.
He started his career in accounting and then
shifted his career into cybersecurity. Now he Source: Adapted from Charlotte Greive, ‘Meet
leads the penetration testing division, a fast- the ethical hackers fighting the rising threat of
growing and eclectic group of ‘ethical hackers’ cybercrime’, The Age, 12 November 2021.
who blend complex coding with a penchant for
breaking the rules.

CASE STUDY ANALYSIS

1 How can technology lead to innovative and new business processes?
2 The case study discusses the developments in the cybersecurity area. Explain why this is
becoming an important issue for businesses.

Global markets
Looking overseas can reveal innovation and ideas that have not yet reached Australia. The first
person to import a new idea from overseas can profit very handsomely. Often franchises that
have been successful overseas are successfully introduced into the Australian market.
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24 Unit 1 | Planning a business

There have also been several

Australian entrepreneurs who have
realised the value of Australian
goods and services and taken
these overseas to build successful
businesses. Melbourne-style cafes,
for example, have been opening
over the past decade in New
York, offering their unique mix
of top baristas, good food and
quality service. Many Australian
businesses have been successful
Figure 1.11 Australian businesses have been successful accessing global markets.
overseas and this is recognised.

Because labour costs are high in Australia, businesses also have to be efficient to keep
themselves competitive. Further, there is no language barrier in the USA. Showpo is an
Australian fashion retailer currently experiencing rapid growth. They have seen increased sales
and have focused on a pop-up store in Los Angeles.

CASE STUDY
1.9

Accessing global
markets

Manufacturing in Australia has had a long and However, COVID-19 has changed this. In 2020,
proud history; however, during the last 30 supply chains around the world were disrupted
years many companies have been unable to and the cost of freight nearly doubled. Some
complete with other countries due to costs Australian businesses were also affected by a
related to distance, higher wages and the price deteriorating trade relationship with China.
of energy. Governments and large corporate
companies offshored manufacturing projects, The Australian Government announced a new
rather than support local business and spend ‘Modern Manufacturing Strategy’ to stimulate
the money in Australia. the Australian economy. A number of priorities
were identified including:
Manufacturing only accounts for 5.4% of total
employment in Australia. Many things that 1 Resources Technology and Critical Minerals
we import could be made here, but many Processing
2 Food and Beverage
manufacturing companies produce offshore as
3 Medical Products
the cost is much lower.
4 Recycling and Clean Energy
5 Defence
6 Space.

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 Chapter 1 The business idea 25

With renewed attention and financial • Beauty and the Bees is an all-natural eco-
investment, Australia’s manufacturing industry friendly hair and skincare range sourced
will be re-energised and more appealing to from Tasmania’s mountains, seas, farms
companies that are making products here and and rainforests. Jill Saunders is the founder
are looking to export them overseas. and harnesses these natural resources for
her hair and beauty products, which are
For a business to move into the global made from Tasmanian leatherwood honey.
market there needs to be clear objectives and Jill started at Salamanca market with a card
the ability to be dynamic and agile in their table. Now she has a 930-square-metre
approach to business. factory employing eight staff, and a retail
store that is renowned for its quality
Two examples of Australian businesses that products and friendly service. In 2013, Jill
have been successful in the global market are: and her business partner identified the
USA as a key market and began selling via
• AirPhysio, who started in 2016 to help with Amazon.com. By 2021, the brand was in
people with respiratory conditions like the top 5% of sellers on the site. The move
asthma, bronchiectasis and cystic fibrosis. into the USA has been so successful that
It manufactures a mucus clearance and it now represents 80% of the company’s
lung expansion device that uses an all- total revenue. Jill notes that making sure
natural process called Oscillating Positive her brand remains fresh in the market is
Expiratory Pressure (OPEP). Its product is key. Choosing where to manufacture their
now sold in five different continents. Co- products has also been important. Jill is
Founder Paul O’Brien always had a vision moving production out of Tasmania into
to go global, and this mindset helped him Melbourne due to the cost of logistics
develop his business the right way from and freight.
the start. Paul also says that being able to
look outside the box and move quickly are Source: Adapted from dearinassociates.com website.
extremely important factors.

CASE STUDY ANALYSIS

1 Explain why the Australian Government implements programs and support for Australian
businesses to move into the global market.
2 Look at the two case studies and describe the main ideas of the owners and how this has
assisted them in moving into other markets overseas.

REVIEW ACTIVITY 1.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain how each of the following changes in an area could create an opening for a new
type of business:
a a large number of families with young children move into an area
b a new university is being built in a regional town
c a large number of retirees move into an area
d residents in a local area believe in the importance of conservation.

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26 Unit 1 | Planning a business

Chapter 1 review
Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 1, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Key concepts
Entrepreneur Entrepreneurship Social enterprise

Innovation Market niche Demographic

Extension questions
1 Research a successful Australian business. Identify:
a when the business was founded and by whom
b the probable motivation for commencing the business
c the reasons why this business has been successful
d the skills and qualities held by management.
2 Investigate one of the following successful family-owned businesses and complete the
questions from Question 1:
a Peregrine Corporation
b Linfox Logistics
c Visy
d Westfield
e Consolidated Travel.
3 Conduct an interview with a small business owner. Investigate:
a what the owner’s motivation was for going into business
b the personal qualities of the business owner that enabled them to successfully develop
their business
c the skills that the business owner possessed
d how the business owner used any innovation or specialisation that set them aside from
competitors.

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

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 Chapter review 27

Success criteria – I am now able to: Linked questions Completed

(Y/N)

1.1 Businesses in 1.1.1 Examine, describe Review activity 1.1: Part 1 & Part 2 Yes No
Australia and apply the concept of
entrepreneurship when
planning a business

1.2 Motivation behind 1.2.1 Describe the Activity 1.1 Yes No

starting a business personal motivation Case study 1.1: Q3
behind starting a business Case study 1.2: Q2
including the desire for Review activity 1.2: Part 1 & Part 2
independence, desire to
make a profit, and fulfil a
market and/or social need

1.3 Characteristics of 1.3.1 Describe the Activity 1.2 Yes No

successful business characteristics of Activity 1.3: Q3
managers and successful business Activity 1.4
business entrepreneurs managers and Case study 1.3
entrepreneurs Review activity 1.3: Part 1 & Part 2

1.4 Sources of business 1.4.1 Discuss sources of Extension Yes No

opportunity business opportunity

1.4.2 Innovation Case study 1.4 Yes No

1.4.3 Market opportunities Activity 1.6 Yes No

Case study 1.5
Review activity 1.4: Part 1 & Part 2

1.4.4 Customer needs Case study 1.6 Yes No

1.4.5 Research and Case study 1.7 Yes No

development

1.4.6 Technological Activity 1.7 Yes No

developments Case study 1.8

1.4.7 Global markets Case study 1.9 Yes No

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.
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 CHAPTER 2
Business concept development:
‘getting off the ground’

‘Starting out on the right foot is SO important. Especially when it comes to

getting your business or side-hustle up and running. And the best way to
get on that right foot is to have a plan.’
Mia Freedman

About the author:

Mia Freedman is the co-founder and chief creative
officer of the Mamamia Media Group, Australia’s largest
digital women’s media company. She manages the
world’s largest women’s podcast network.

KICKSTARTER ACTIVITY
1 Explain what this quote suggests for future business owners.
2 Predict two areas that you think should be part of a plan for new
businesses and give a reason as to why the identified areas are important.

CHAPTER OVERVIEW

The process of establishing a business can be lengthy; however,

investing time in the process supports a successful start to the
business. To establish what is important, business goals need to be
determined along with the mission and vision statement. As part of
the business concept development, market research is essential and
is followed by a feasibility study that ascertains whether the business
idea can become a viable business.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter
I will be able to:

Importance of goal setting and 2.1 The importance of goal setting and
decision-making in business decision-making
2.1.1 Define goal setting and decision-making
2.1.2 Explain their significance to business
2.1.3 Describe types of goals: mission, vision,
values statements and objectives

Importance of business concept 2.2 The importance of business concept development

development 2.2.1 Describe the process of business concept
development
2.2.2 Explain the importance of business concept
development in a business

Importance of business concept 2.3 T

 he relationship between business opportunities
development and its relationship and business concept development
with business opportunities 2.3.1 Describe the relationship between business
opportunities and business concept
development

Market research and initial 2.4 Market research and feasibility studies
feasibility studies 2.4.1 Describe the role of market research and
feasibility studies in business concept
development

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 2
Business concept development:
‘getting off the ground'

2.1 The importance of 2.2 The importance of 2.3 The relationship 2.4 Market research and
goal setting and business concept between business feasibility studies
decision-making development opportunities and
business concept
development

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30 Unit 1 | Planning a business

2.1 The importance of goal setting and

decision-making
Learning intentions – 2.1.1 Define goal setting and decision-making
at the end of this
chapter section I will 2.1.2 Explain their significance to business
be able to:
2.1.3 Describe types of goals: mission, vision, values
statements and objectives

Decision-making is a process that requires a choice to be made from a number of alternatives.

decision-making
the process of The ability to make clear decisions that are informed and future oriented is an essential
making a choice leadership skill. It is required from the conception of the business idea through to the business
between two or
start-up-from establishment to expansion by increasing market share.
more alternatives

Without decisive decision-making a business will have no idea about where it is at or to where it
is heading. It is likely to maintain the status quo (existing state of affairs), which will lead to the
business falling behind. Leaders with solid decision-making skills are
necessary to build an organisation that will stand the test of time and
keep ahead of its competition.

Making the right decisions is crucial to the success of any business.

Decision-making is proactive and aims to resolve a problem to
prevent further issues or to pursue a potential opportunity. Gathering
the right information from reliable sources and from those impacted
by business activity, such as employees, suppliers and customers,
assists in working towards making a good decision. A good decision
will be transparent, and as a result of consultation with employees,
suppliers and customers, good decisions are more likely to be
Figure 2.1 Decision-making is a vital skill for
accepted by those who are impacted and will be implemented with
business owners. greater success.

Business opportunity Conduct initial

recognised market research

Protecting intellectual property

through patents, trademarks,
copyright etc.

Establish business values,

goals, missions, Conduct feasibility study
vision and objectives

Figure 2.2 The business concept development process

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 Chapter 2 Business concept development: ‘getting off the ground’ 31

7 STEPS TO EFFECTIVE DECISION-MAKING

Decision-making is the process of making choices by identifying a decision,
gathering information, and assessing alternative resolutions. 7
Using a step-by-step decision-making process can help you make
more deliberate, thoughtful decisions by organising 6
REVIEW YOUR
DECISION
relevant information and defining alternatives. This
approach increases the changes that you 5TAKE ACTION

will choose the most satisfying

alternative possible. 4 CHOOSE
AMONG
3 WEIGH THE ALTERNATIVES
EVIDENCE
2 IDENTIFY
ALTERNATIVES
1 GATHER
INFORMATION
IDENTIFY
THE DECISION
Figure 2.3 Effective decision-making includes analysing alternatives to inform the final decision.

Decision-making is more effective when it is aligned with the goals of the business. This
business goals
provides consistency in approach and moves the business towards achieving its goals. represent the
Business goals are broad statements that set out where the business sees itself in the future. aspirations of
the business and
They represent the aspirations of the business and its owners. A business goal might be ‘To be
describes what a
the largest seller of electronics in the country’. This optimistic but generalised statement is often business aims to
focused on the customer and creates a corporate culture centred on meeting customers’ needs. accomplish

goal setting
Without clear goals, a business will have no defined purpose and nothing to strive for. As a the process
result, the business is likely to stagnate and struggle to achieve success. The absence of goals is of identifying
desired aims
akin to a person setting out on a journey with no destination in mind, which may work for some and the steps to
on a personal level, but will undoubtedly fail in a business setting. achieve them

Goals and how they are to be achieved

must exist in every aspect of business
planning, guiding decision-making
and prioritising tasks. Goals provide a
collective sense of purpose for a team
to collaborate and motivate employees,
and will help set targets for the business
to work towards achieving. The first
step of planning for a business is the
establishment of clear goals that
require smart decision-making by
management. This process of developing
and establishing goals is known as goal
setting, and is reinforced up by the
introduction of tangible objectives, which
will be discussed later in the chapter.

Figure 2.4 All businesses must establish goals and objectives.

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32 Unit 1 | Planning a business

CASE STUDY
2.1

Brambles and its

2025 sustainability
goals

Brambles helps move more goods to more Goal 1: Planet Positive

people, in more places than any other
organisation on Earth. Its pallets and containers Objectives: Forest Positive, Climate Positive,
form the invisible backbone of the global supply Waste Positive
chain and the world’s biggest brands trust • Sustainably grow two trees for every
Brambles to help them transport their goods tree used
more efficiently, sustainably and safely. • 100% of electricity to be renewable and
carbon neutral by 2025
Brambles primarily serves the fast-moving • Zero product materials sent to landfill,
consumer goods (e.g. dry food, grocery, and innovate with closed loop products
health and personal care), fresh produce,
beverage, retail and general manufacturing Goal 2: Business Positive
industries. The [Brambles] Group employs
approximately 11,000 people and owns Objectives: Supply Chain Positive, Positive
approximately 630 million pallets, crates and Collaboration, Workplace Positive
containers through a network of more than 850 • Implementation of ‘share and reuse’
service centres. Brambles operates in more model within the supply chain to increase
than 60 countries with its largest operations in environmental benefits
North America and Western Europe. • Increase customer collaboration through
Zero Waste World Initiative
• Create positivity in the workplace through
diversity, increased number of women in
management

Goal 3: Communities Positive

Objective: Food Positive, Circular Economy

Transformation, Positive Impacts for People
and Our Planet
• Collaborate with food banks to serve
rescued food to 10 million people
• Advocate and educate one million people to
be involved in the circular economy
• Develop natural and social capital accounting
approaches to measure performance
Figure 2.5 Brambles’ 2025 Sustainability Goals

Source: Extracted from information on

Brambles website.

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 Chapter 2 Business concept development: ‘getting off the ground’ 33

CASE STUDY ANALYSIS

1 Go to the Brambles Website and research Brambles’ 2025 Sustainability Goals.

2 Select one of the three goals and examine and outline the strategies employed by
Brambles that aim to support their 2025 Sustainability Goals.
3 Are these goals aspirational or realistic? Justify your response.
4 Research the term ‘circular economy’ and outline how Brambles aims to achieve this within
their workforce.

Types of business goals

1 Values statement: this must be established as it details the priorities and principles
values statement
important to the business and the people within it. A values statement demonstrates what a statement that
the business stands for, its principles and beliefs. Core values often form part of the culture outlines what
the business
of a business, establishing expectations about how employees should work together to
sees as its values
optimise outcomes. and centres on
2 Mission statement: this is a global statement that defines the purpose of the business, and integrity, honesty
and ethical
the reason for its existence. The mission statement should be inspiring, catchy and timeless.
behaviour
3 Vision statement: using the values of the business, the next step is to construct a vision
statement that defines the long-term aspirations of the business and complements the mission
statement
mission statement by demonstrating the value of the purpose of the business. a statement
that defines a
A business must initially clarify its overall purpose or reason for existence. Business goals and business’s core
purpose and
objectives are both future-oriented. They both provide a focus and direction for the business. focus
They both reflect the mission and vision of the business. The difference is that goals describe the
vision statement
intended future direction of the business, and objectives describe how that goal may be achieved. a statement that
outlines the
The purpose of the ABC (Australian Broadcasting Corporation), as an example, is to deliver aspirations and
values of the
valued services that reflect and contribute to Australian society, culture and identity. The business
ABC’s vision is to be the independent home of Australian conversations, culture and stories.
business
The organisation’s values form the foundation of how employees are expected to work – with
objectives
Integrity, Respect, Collegiality and Innovation. The business objectives for 2021 included the stated,
strengthening local connections, investing in the future workforce and remaining as Australia’s measurable
targets to
most trusted source of news and information.
determine how
a business will
achieve its goals

Business objectives SMART

objectives
Business objectives are the steps a business must take to reach its goals and are used to measure or goals that
are Specific,
the degree of success and progress towards goal achievement. As such, they are crucial for the Measurable,
goal setting process. To achieve the example of the goal ‘To be the largest retailer of electronics Attainable or
in the country’, an objective for the business may be ‘We will open a store in every city and every Achievable,
Relevant or
major town in the country by the end of 2025’. Realistic, and
Timely or
Business objectives are typically developed following the acronym SMART (Specific, Timebound

Measurable, Attainable or Achievable, Relevant or Realistic, and Timely or Timebound). To

be specific, business must determine what they wish to accomplish and stipulate the steps
required to achieve its stated goals.

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34 Unit 1 | Planning a business

Goals or business objectives are typically

measurable, such as the number of sales
or the number of customer complaints. To
be attainable and relevant encourages 1 Values statement: core priorities and principles
employees to get on board and work important to the business as a whole.
towards attaining achievement.
2 Mission statement: central purpose or reason
Determining a time for completion or for the business.
success assists in working towards
achieving the end result. 3 Vision statement: long-term aspirations of
the business.

4 Strategic goals: long-term whole goals for the

entire business organisation. Set by executive
management (two to five years).

5 Tactical/departmental objectives: medium-

term goals set by middle management for one
department/division (one to two years).

6 Operational objectives: short-term goals set by

frontline management for one team/shift
(daily, weekly, monthly).

7 Individual objectives: personal goals set by

one employee.

Figure 2.6 The hierarchy of objectives

When devising business objectives for a business, the following aspects of business
performance should be considered for inclusion in its objectives:

• profit/profitability: targets for levels and projected growth in profit over a period of time
• efficiency: targets for improvements in the relation to the costs of production
• expansion goals: for example, to increase the number of outlets and open up in new markets
• meeting the needs of shareholders who will be most satisfied with increased dividends and
improved share prices
• satisfaction levels of both customers and staff: for example, to achieve an annual staff
turnover rate of less than 5 per cent
• corporate social responsibility and environmental sustainability goals, as outlined in
Case studies 2.1 and 2.2.

Table 2.1 Examples of business goals and related objectives

Business goal Related objectives

‘We seek to be the leading manufacturer • To increase sales by 10% annually over a
and supplier of uniforms in the Southern four-year period
Hemisphere.’ • To achieve a 30% market share within five
years

‘Our goal is 100% customer satisfaction.’ • To reduce the number of customer

complaints by 50% within 12 months
• To achieve 95% positive rating on customer
surveys over a six-month period

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 Chapter 2 Business concept development: ‘getting off the ground’ 35

CASE STUDY
2.2

Ramsay Australia

This case study is available in the Interactive Textbook.

ACTIVITY 2.1
Visit the website of two of the following businesses:

• Telstra
• Westpac
• David Jones
• Rio Tinto.

Locate the mission/vision and values statement. Identify the following for each:

a purpose of the organisation

b its basic philosophies and values
c the goods or services offered
d the target market.

REVIEW ACTIVITY 2.1

Part 1: Digital quiz
Please see the Interactive Textbook to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.

1 Outline the steps that can be undertaken in a decision-making process. Explain why
effective decision-making is important for a business.
2 Discuss the differences and similarities between business goals and business objectives.
3 Identify and explain the relationship/link between business values, mission and vision
statements.
4 Classify each of the following as a business goal or a business objective:
a be the leading producer of hand-held devices in the world
b increase sales by 30 per cent over two years
c launch three new product lines by the end of the financial year
d increase profitability
e reduce the use of paper in the office
f distribute electronic notebooks to all staff within three months
g produce and distribute to dealers 10 000 vehicles by year’s end
h open six stores by the end of the year.
5 Explain why goal setting and decision-making are important in a business.

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36 Unit 1 | Planning a business

2.2 The importance of business concept

development
Learning intentions – 2.2.1 Describe the process of business concept
at the end of this development
chapter section I will
be able to: 2.2.2 Explain the importance of business concept
development in a business

business
The business concept development process is
a multi-stage process. The initial idea or business Initial idea or business concept
concept an idea
for a business opportunity may have come from a variety of
including the
actual product,
sources, such as recognising changing customer Conduct market research
the target needs, a development in technology, or the
market plus opportunity to expand globally. Sources of
the proposed Refine the business concept
competitive
business opportunities were covered in Chapter 1.
advantage
Conducting market research assists in Conduct feasibility study
understanding the market, including the
competition and the wants and needs of
Write a business plan
potential customers, and opens an opportunity
to refine the original business idea. Results Figure 2.7 The business concept development process
from market research can identify strengths,
weaknesses and opportunities that will be
useful for considered strategic planning.

Once an idea for a business has been determined, the products or services identified, and
viability whether
the initial industry research completed, the next stage should be to conduct a feasibility
the business study, which includes an evaluation that considers the viability of the business idea. What is
is capable of considered feasible will vary depending on the desired return on investment and the degree
developing and
growing
of risk an entrepreneur is prepared to take. Likely risks and rewards in establishing the business
and the viability of the business need to be assessed through a feasibility study.

The business concept development process is important as it requires a business to thoroughly

consider their idea from all angles, meaning that potential problems or difficulties can be
prevented or minimised. Further to this, by conducting market research and feasibility studies it
also ensures that the idea is in the best position to address consumer wants and sustain its place
in the market. In these ways, the process works to give a business the best starting point possible.

REVIEW ACTIVITY 2.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Outline the business concept development process.

2 Explain why business concept development is important for a business.

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 Chapter 2 Business concept development: ‘getting off the ground’ 37

2.3 The relationship between business

opportunities and business concept
development
Learning intentions – 2.3.1 Describe the relationship between business
at the end of this opportunities and business concept development
chapter section I will
be able to:

Business opportunities can arise from a wide range of possibilities by taking advantage of
market opportunities, changing customer needs and the pursuit of global markets. Research
and development often provide opportunities that lead to innovation. Creating new business
opportunities is often exciting, especially for entrepreneurs who have the resources to take risks
in what they perceive are opportunities. Developing the business concept is a process that turns
the potential business idea or opportunity into an actual business.

To progress from the initial idea to business

concept development, market research
needs to be undertaken to gain a general
understanding of the industry that the
business will be part of and to assess if
there is a potential market. For instance, a
would-be business owner who believes that
opening a coffee shop could be a good idea
should initially research into the general
hospitality and fast-food industry. Following
this, more targeted research should be
undertaken such as analysing market trends
in the cafe industry, competitors and the Figure 2.8 Market research provides important information and provides an
opportunity for further refinement.
supply and pricing of coffee. The potential
business owner should also be looking for opportunities that would allow them to differentiate
their business from others (e.g. sourcing and selling organic and biodegradable coffee pods).
The information gained from market research supports the next stage of concept development:
the feasibility study.

REVIEW ACTIVITY 2.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain the relationship between business opportunities and business concept

development.
2 Which process should come first: the business opportunity or business concept
development? Justify your response.

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38 Unit 1 | Planning a business

2.4 Market research and feasibility studies

market research
a systematic
Learning intentions – 2.4.1 Describe the role of market research and feasibility
approach at the end of this studies in business concept development
that assists a chapter section I will
business to make
decisions about
be able to:
consumers and
the marketplace

Market research should be undertaken by anyone intending to

go into business. It will assist to identify and evaluate the industry
in which they will be operating. It will also indicate whether there
Focus are sufficient customers or clients willing and able to pay for the
groups goods and services being offered. The initial market research
undertaken when the business concept is being developed should
Trade
Interviews look at obtaining answers to the following questions:
associations

Market • Will the product or service be attractive to customers or clients?

research • Who will be the potential customers or clients?
• Who will be the competition?
Government
Libraries
• In what potential areas or ways would the business be able to
agencies gain a competitive advantage?

Obtaining answers to these questions may require talking to

Surveys
potential customers or clients, creating surveys and analysing the
results, interviewing other business owners, running focus groups
and conducting online research into business trends. Further
Figure 2.9 Market research is an important aspect of
conducting a feasibility study for a business proposal. information on market trends or industry movements can be
gained through reading previous research undertaken by business
professionals, market reports and industry analysis.

CASE STUDY
2.3

The importance of
market research

Market research is the process of gathering, It has been established that the majority of
recording and analysing qualitative and product or company failures come from the
quantitative data. This data usually relates fact that little to no market research was done
to a specific market’s characteristics. Market beforehand. As it is said, failing to prepare
researchers use techniques like feasibility is preparing to fail. So, wherein lies the
studies, advertising evaluation, customer importance of market research and what are
satisfaction surveys, mystery evaluations, the benefits associated with it?
tracking studies and so forth.

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 Chapter 2 Business concept development: ‘getting off the ground’ 39

1 Identifies new products or services that will help you counteract any downward
trends that may affect your business. Upward
Market research can help you to discover what trends can, in turn, be utilised to progress your
new products or services the market needs business.
and how you can provide that. Key issues with
developing a certain product or services can be 5 Keeps your company ahead of competitors
identified and it can help you to avoid expensive
mistakes with its development. It also helps you Comparative studies are great for tracking the
establish the factors that are most important to progress of your competitors in comparison
customers and how you can incorporate those with your company’s progress. If they
factors into what you want to bring to the market. are moving far ahead of you, it is a great
opportunity for you to learn what they are doing
2 Identifies potential customers differently to you. Business strategies can be
developed to move ahead of your competitors.
Demographic data such as gender, age,
income, occupation and lifestyle can help you 6 Helps to understand existing customers
to understand your customer base in-depth.
If you know what your current customers Market research can help you to understand
look like, you can know who to market your existing customers on a deeper level. Your
products or services to in the future. Marketing customers are complex and what they may
to the wrong type of customer can lead to the have needed before may not be what they need
product performing poorly. now. To be successful you need to check the
pulse of your customer base regularly. What
3 Establishes viability of a product or service are their immediate needs? What are their
thoughts on your company and products?
If your company is already planning on
bringing a new product or service to the 7 Assists in realistic goal setting
market, you need to first establish whether
the market is open to it. Will the product be Real-time data about your market and your
welcomed? Is the product needed by the customer base can help set goals that are
customers you are targeting? Will it be viable attainable. If unattainable goals are set,
and what is its potential to succeed? resources will be stretched [and] the business
is likely to fail before it’s started.
4 Anticipates and discovers future market trends
Source: Extracted from information
By knowing your market and the trends that are Onsightapp website.
arising in the future, you can develop strategies

CASE STUDY ANALYSIS

1 Describe why market research is beneficial in developing a business concept.

2 Harry and Tegan have come up with a great business idea. They are convinced that creating
a new vitamin-infused iced tea will be an absolute winner and are prepared to put all of
their life savings into opening up a kiosk near the local train station. They’re surprised to
hear your suggestion to do some market research.
a Suggest three reasons as to why market research is valuable in developing their
business concept.
b Predict how the business idea may further develop as a result of market research.

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 40 Unit 1 | Planning a business

Initial feasibility study

The market research already conducted will show whether the market can sustain the business.
Using the information gathered about the industry and the potential customer base, the
entrepreneur will now need to determine whether the business idea is feasible. In other words, they
need to determine if the business they wish to establish can survive and be profitable. This is known
feasibility study as a feasibility study, and this is a crucial aspect of the initial research required to start a business.
initial research
that is required
to determine A feasibility study includes an analysis of factors that are likely to impact the business, such as
whether the economic, technological and legal factors. A viable business has the potential to survive and be
business concept profitable. A detailed feasibility study shows whether it is worthwhile to proceed with further
is potentially
viable development of the business concept. The feasibility study may also identify reasons not to proceed.
The evaluation aspect of the feasibility study will assist in determining if a business is viable.

The report from a feasibility study should contain:

• a description of the business idea, products to be sold, services to be offered, the personnel
required to operate the business and an overview of whether the business will succeed
• profiles of the key people involved, including background, skills, personal qualities and
qualifications
• a description of the market – who and where the customers are, the size of the market and
expected sales based on costs of production. This market analysis sets out the level and
types of demand there are for the products to be sold and the capacity for growth.
• supply analysis – looking at the life cycle of the industry and whether it is a good time to be
entering into it. For example, if the products of competitors have been selling well for a long
time, it is likely that demand will begin to drop off in the near future.
• whether there is a threat of substitute products entering the
market in the future
• an assessment of the competition, their strengths and weaknesses
and how a competitive advantage might be gained
• an assessment of financial feasibility. This involves preparation
of a sales forecast, an estimate of start-up and working capital
requirements, an estimate of profitability, an assessment of
financial viability, and a simple break-even analysis.
• location and site layout – whether these are likely to affect the
success of the business
• the personal circumstances of the person driving the business
idea, including their financial situation, skill set, expertise and
experience in the particular industry, as well as their level of
commitment to the business idea
Figure 2.10 A feasibility study is vital in determining if
the business idea is suitable.
• a brief analysis of the proposed operation.
A detailed feasibility study shows whether it is worthwhile to proceed with further development
of the business concept. The feasibility study may also identify reasons not to proceed.

intellectual
property (IP)
the property
rights over the
Protecting intellectual property
creations of
mind or intellect
Once a business concept and associated original ideas, known as intellectual property (IP),
and can include have been created and developed, it is important for the idea to be protected so that others do
an invention, not copy or take the idea for their own pursuits. This involves registering the original ideas or an
trademark, or
original design
idea from the workplace as one’s property. Registration of intellectual property must be made in
every country where the business intends to trade.
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 Chapter 2 Business concept development: ‘getting off the ground’ 41

Types of intellectual property include:

• patent: granted for exclusive exploitation of any

device, substance, method, or process that is
new, inventive or useful
• trademark: a right granted for exclusive
exploitation of numbers, letters, words, phrases,
sounds, smells, shapes, logos, pictures, an aspect
of packaging, or combination of these
• design: features of shape, configuration, a
pattern or ornamentation that make a product
unique
• copyright: original expression of ideas (not the
ideas themselves); for example, in art, songs,
literature, films, computer programs, articles and
photos Figure 2.11 Without protecting ideas, businesses will not

• trade secrets/confidentiality: intended to stop receive the full benefits of their ideas and inventions.

employees from releasing your ideas to others; for

example, a secret recipe.

ACTIVITY 2.2
Identify the type of intellectual property involved in each of the following scenarios:

a a rock band composes a new song

b a fashion designer produces a new collection of clothes
c a company designs a new logo
d an author writes a new novel
e a chef devises a recipe for a new type of dessert
f a business designs new packaging for its products
g an architect designs a house
h a photographer takes a photograph
i a school devises a new slogan/motto.

REVIEW ACTIVITY 2.4

Part 1: Digital quiz
Please see the Interactive Textbook to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the
Interactive   Textbook.

1 Explain what market research is. Discuss the

purpose of market research in developing the
business concept.
2 Outline the strategies that are used in market
research.
3 Why does intellectual property need to be
protected? Suggest two consequences that could
occur if intellectual property was not protected.
Figure 2.12 Nike secured a trademark for its
4 Describe what a feasibility study is and explain Air Jordans in June 2021, preventing copies
why it is important in developing the business being manufactured by competitors.
concept.

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42 Unit 1 | Planning a business

Chapter 2 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 1, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Key concepts
Decision-making Business concept development Goal setting

Mission statement Vision statement Values statement

Business objectives Market research Feasibility study

Extension questions
Julie and Adam are partners in their business, Chef’s Night In: a service business where chefs
can be booked to shop, prepare, cook and serve a restaurant-style meal in the comfort of their
clients’ home.
They have developed a values statement for the business with the guiding principles for Chef’s
Night In as follows:
• Integrity: to maintain the highest ethical standards and honesty in all our dealings and
relationships with employees, customers, suppliers and the community
• Excellence: to use only the best-quality natural ingredients
• Environment: to adopt sustainable business practices
• Social: to strive to improve the quality of life for employees and their families.
1 Referring to the values statement of Chef’s Night In, propose:
a a mission statement
b a vision statement.
2 Propose three business objectives using the SMART acronym.
3 Julie believes that Chef’s Night In should expand its current services to offer a food box
delivery service that contains all of the ingredients plus recipes for customers to cook
a delicious meal at home. Advise Julie about next steps that should be followed as she
explores the viability of her business idea.

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 Chapter review 43

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

2.1 The importance 2.1.1 Define goal setting and Activity 2.1 Yes No
of goal setting and decision-making Case study 2.1
decision-making Review activity 2.1: Part 1 &
Part 2

2.1.2 Explain their significance to Review activity 2.1: Part 1 & Yes No
business Part 2 (Q5)

2.1.3 Describe types of goals: Activity 2.1 Yes No

mission, vision, values Review activity 2.1: Part 1 &
statements and objectives Part 2 (Q2–4)
Extension

2.2 The importance 2.2.1 Describe the process of Review activity 2.2: Part 1 & Yes No
of business concept business concept development Part 2
development

2.2.2 Explain the importance of Review activity 2.2: Part 1 & Yes No
business concept development Part 2
in a business Extension

2.3 The relationship 2.3.1 Describe the relationship Review activity 2.3: Part 1 & Yes No
between business between business opportunities Part 2
opportunities and and business concept
business concept development
development

2.4 Market research 2.4.1 Describe the role of Activity 2.2 Yes No
and feasibility studies market research and feasibility Case study 2.3
studies in business concept Review activity 2.4: Part 1 &
development Part 2

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 3
Business contributions to
society: innovation and
entrepreneurship

‘It’s not about ideas. It’s about making ideas happen.’

Scott Belsky (1980–)

About the author:

Scott Belsky is an American entrepreneur, author and
early-stage investor best known for co-creating the online
portfolio platform, Behance, Inc.

KICKSTARTER ACTIVITY
1 Why is it important for a person to have ideas if they want to start a business?
2 The quote states that it is ‘about making ideas happen’. Explain why this is
important when starting a business.

CHAPTER OVERVIEW

This chapter will examine the contributions that businesses can

make to the economic and social wellbeing of a nation. It will also
examine the methods used to foster a culture of business innovation
and entrepreneurship in a nation, such as government investment in
research and development, council grants for new businesses, school-
based educational programs and the creation of regional start-up hubs.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will
be able to:

Examine the contributions 3.1 Business contribution to the economic and social
that businesses make to the wellbeing of a nation
economic and social wellbeing 3.1.1 Examine, describe and discuss the contribution
of a nation that businesses make to economic and social
wellbeing including:
• employment
• economic growth
• international trade
• taxation revenue
• infrastructure
• research and development
• social contribution

Describe the methods by which 3.2 Building a culture of innovation and entrepreneurship
a culture of business innovation 3.2.1 Describe the methods by which a culture of
and entrepreneurship may business innovation and entrepreneurship may
be fostered in a nation, such be fostered
as government investment in 3.2.2 Describe government investment in research and
research and development, development
council grants for new 3.2.3 Examine council grants for new businesses
businesses, school-based 3.2.4 Describe school-based educational programs in
educational programs in entrepreneurship
entrepreneurship, and the 3.2.5 Investigate the creation of regional business
creation of regional business start-up hubs
start-up hubs

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead
CHAPTER 3
Business contribution to
society: innovation and
entrepreneurship

3.1 Business 3.2 Building a culture

contribution to the of innovation and
economic and social entrepreneurship
wellbeing of a nation

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46 Unit 1 | Planning a business

3.1 Business contribution to the economic

and social wellbeing of a nation
Learning intentions – 3.1.1 Examine, describe and discuss the contribution
wellbeing
businesses
at the end of this that businesses make to economic and social wellbeing
contribute to the chapter section I will including:
economic and be able to:
social wellbeing • employment
of a nation. While
• economic growth
GDP can be
used to measure • international trade
economic • taxation revenue
growth, there
• infrastructure
are also other
measures that • research and development
can be used. • social contribution

Businesses, regardless of their size, contribute to

the economic and social wellbeing of a nation
Employment in many ways, as shown in Figure 3.1. Australia’s
mixed market economy includes both public
(government) sector and privately-owned
Social Economic
contribution growth businesses.

Employment
Economic
and social Businesses employ workers and provide them
Research wellbeing with an income to purchase goods and services.
International
and People employed by businesses also produce or
trade
development deliver goods and services for others. Paid work
is important, and employment levels are closely
linked to economic growth and living standards.
Taxation All new businesses, regardless of their size, can
Infrastructure make a significant contribution to employment
revenue
in Australia.

Figure 3.1 Businesses contribute to economic and social wellbeing in

many ways.

ACTIVITY 3.1

1 Using your favourite search engine, find the latest Australian Labour Force statistics online
at the Australian Bureau of Statistics website. Identify trends in the employment rate
between May 2021 and May 2022 and the current rate.
2 Using the same link that you used in Question 1, answer the following questions:
a What proportion of people are employed in full- and part-time work?
b Has the rate of unemployment increased or decreased in the past six months? Give one
reason why this may have happened.
3 Describe the types of businesses that are being started.
4 What industries or sectors are they located in?

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 47

Economic growth Gross Domestic

Product (GDP)
Economic growth can be defined as the increase in value of production of goods and services the total value
in an economy in a given period of time (usually one year). Gross domestic product (GDP) of production
of goods and
is the main measurement of the size of the economy of a nation, while economic growth is
services in the
the percentage increase in GDP year on year. Economic growth is important as it provides an economy in a
opportunity to improve the living standards of Australians. If the value of production increases given period of
time. Increase
each year, then the standard of living of people in Australia will also increase.
in GDP is used
to measure
If businesses provide a wide variety of goods and services, people in the community will benefit economic
growth.
from this. The standard of living will not be as high if there is limited choice and availability of
goods and services.

CASE STUDY
3.1

Australia and
its GDP

In the quarter (3 months) ending June 2021: household saving

• The Australian economy rose 0.7% in seasonally adjusted chain volume measures. ratio is calculated
by dividing
• GDP rose 1.4%. household
• Household saving ratio decreased to 9.7% from 11.6%. savings by
household
disposable
Source: Extracted from ABS.gov.au website. income. A higher
household
savings ratio
CASE STUDY ANALYSIS indicates
households are
Visit the Australian Bureau of Statistics website, examine the data and answer the following questions:
spending less
and saving more.
1 Outline the trends in economic growth and GDP since 2020. Lower spending
typically reduces
2 Describe the domestic factors that may have influenced economic growth in Australia.
demand for
3 Analyse the link between GDP, international trade, private investment and government credit, negatively
expenditure. affecting industry
operators.

International trade
International trade is important to a country as it gives businesses and individuals access international trade
the exchange of
to goods they may not otherwise be able to purchase, and provides them with revenue for goods and services
exporting their goods and services. Businesses can also use imported parts and materials in the between countries.
production of goods in Australia. The level of trade between one country and another can be It can be measured
through the balance
measured using the balance of payments, which measures the net movement of money and of payments.
capital in and out of a country.
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48 Unit 1 | Planning a business

It includes total imports and exports. Over the past few years, the federal government has
imports goods
and services that signed free trade agreements with a number of countries, which mean not taxing or limiting
are brought in each others goods and services. Such agreements have been signed with countries including
from another
China, Japan, Thailand, Malaysia, New Zealand, South Korea and the United Kingdom.
country to
Australia to use Agreements still in negotiation include those with the European Union and India.
exports goods
and services that
are traded to
another country
from Australia

Figure 3.2 Importing provides access to more goods and services.

ACTIVITY 3.2
1 Find the DFAT webpage ‘Australia’s trade statistics at a glance’. Examine the trade with
different countries and list the statistics for each country in order of importance.
2 Using the same page as Question 1, click the ‘Top 10 Exports/Imports’ tab at the top of the
page and answer the following questions:
a Identify Australia’s top three imports and exports.
b Explain how these goods contribute to the wellbeing of Australia.
c List the reasons why countries trade with other countries.

CASE STUDY
3.2

Australia’s
international trade

Video 3.1 This case study is available in the Interactive Textbook.

  
Free trade
agreements

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 49

Taxation revenue
Businesses are a source of taxation revenue for the federal and state governments. If businesses
make a profit, then they pay company tax and other business-related taxes. This money can
then be used by governments to provide infrastructure and services to the population. Many
businesses also collect tax, such as the goods and services tax (GST), and pass this on to the
federal government. Businesses in Victoria that have a wages bill of more than $700 000 a
year pay payroll tax. The rate for metropolitan businesses is 4.85 per cent, with a lower rate for
regional businesses.

Infrastructure
infrastructure
Businesses all contribute to the provision of infrastructure in Australia. Various levels of roads, transport,
electricity, gas,
government provide roads, transport, electricity, gas, internet and other essential services. internet and
While governments fund many of these projects, they often need businesses to build them, so other essential
governments sign contracts and establish partnerships with the private sector. Many of the new services provided
by various levels
freeways in Victoria, for example, have tolls that go back to the businesses that built them to of government
recoup some of their costs.

CASE STUDY
3.3

Transurban’s
partnerships with
governments

Transurban manages and develops urban toll road networks in Australia and North America and
is listed as a top 20 company in Australia. It partners with governments to provide transport
solutions and infrastructure through the management of new and existing road networks and
involvement in transport policy debate.

In 2018, it started work on the West Gate Tunnel, a 17km road and an alternative to the West Gate
Bridge due to open in 2025.

CASE STUDY ANALYSIS

1 Identify and explain why it is important for businesses such as Transurban to work with
governments on infrastructure projects.
2 Discuss the benefits for communities, governments and Transurban in these types of
partnerships.

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50 Unit 1 | Planning a business

research and Research and development

development
new and Businesses are able to support the standard of living of Australians by continually looking at
improved ways new and improved ways to provide goods and services. Both governments and the private
to conduct
sector are involved in research and development in Australia. Inventions and improvements
business and
develop goods in areas such as science, technology and medicine benefit society and contribute to improved
and services wellbeing (see Chapter 1 for more information on research and development).
to support the
standard of living
of Australians

Social contribution
While many of the benefits already discussed have an
economic or financial focus, businesses also contribute
to the social wellbeing of a nation. When businesses
function, they contribute to both the economic and
social wellbeing of the country.

Australia is considered to be ‘the lucky country’ and in

many ways it is; this is in part due to the natural and
human resources available to all businesses. While
increase in GDP can be used to measure economic
growth, there are also other measures that can be used
to provide a more holistic measure of social wellbeing.

The Organisation for Economic Co-operation and

Figure 3.3 Businesses often invent and innovate to benefit society. Development (OECD) publishes a survey every year
looking at a range of measures of how people in a
nation live. Australia ranks highly in this index and the contribution of businesses is part of the
Better Life Index
(BLI) a measure reason. One of the measures used is the Better Life Index (BLI).
established by
the OECD that
Australia’s overall wellbeing as measured by the BLI is very strong, relative to most other
measures the
quality of life countries. Australia’s civic engagement is top-ranking, and it also enjoys an above-average
of countries rating in health status, environmental quality, personal security, jobs and earnings, education
in a range of
and skills, subjective wellbeing (general happiness) and social connections. In general,
economic, social
and health areas Australians are more satisfied with their lives than the OECD average. Australia does, however,
have a below-average rating in work–life balance, as Australians work long hours when
compared to many other countries.

Businesses also contribute to social wellbeing by trying to reduce their impact on the
environment. Some businesses look at ways to reduce waste, recycle components and minimise
their impact on the environment by reducing carbon emissions and pollution. Large businesses,
in particular, can have a significant impact on the environment.

ACTIVITY 3.3
Go to the OECD Better Life Index website. Look at the most recent statistics for Australia and
answer the following questions:

1 Analyse how Australia rates on five of the indicators you have examined.
2 Identify and explain any areas that may adversely impact on the quality of life of
Australians.
3 Evaluate how businesses have contributed to these results.

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 51

ACTIVITY 3.4
Copy and complete the table below. Some answers have been provided.

Contributions of businesses to the economy

Contribution Positive Negative

Economic growth Businesses produce goods

and provide services to the
economy.

Employment When businesses reduce

their workforce, this can lead
to greater unemployment.

International trade

Taxation revenue

Research and development Businesses can encourage

(innovation) employees to discover new
ways of doing things, which
benefits society.

Infrastructure

Social contribution

REVIEW ACTIVITY 3.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Why are businesses important to the social wellbeing of Australia?

2 Explain how businesses contribute to research and development and taxation revenue.
3 ‘Businesses, regardless of their size, contribute to the economic wellbeing of a nation.’
Discuss this quote.

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52 Unit 1 | Planning a business

3.2 Building a culture of innovation and

entrepreneurship
Learning intentions – at 3.2.1 Describe the methods by which a culture of
the end of this chapter business innovation and entrepreneurship may
section I will be able to: be fostered

3.2.2 Describe government investment in research and

development

3.2.3 Examine council grants for new businesses

3.2.4 Describe school-based educational programs in

entrepreneurship

3.2.5 Investigate the creation of regional business

start-up hubs

There are a several ways that a culture of

innovation and entrepreneurship can be
Investment built and developed.
in R&D
All businesses need to ensure they develop
innovative practices so that they can
continue to grow and prosper. A sense of
entrepreneurship may also instil a positive
corporate culture (the values, beliefs and
Regional attitudes of people involved in a business),
business Innovation and Council which encourages employees to take the
start-up entrepreneurship grants risk of trying something new and look at
hubs
ways to continually improve products and
processes (see Chapter 2).

Innovation can be defined as an

improvement or invention that enhances
School-based or extends a business and provides another
educational product or service. Australian businesses
programs and individuals have an excellent record
for new ideas and inventions. For example,
Australia has invented many important and
Figure 3.4 There are a number of ways a culture of innovation and
significant products including the lifesaving
entrepreneurship can be fostered.
reel, the car-like utility vehicle (or ‘ute’), the
Hills Hoist rotary clothesline, the Victa lawn
mower, the black box flight recorder the
bionic ear (cochlear implant), the baby
capsule for motor vehicles.

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 53

CASE STUDY
3.4

Innovation: AI

The pace of innovation is moving at a rate are emerging, bolstered by advances in AI,
rarely seen in history. The invention of the which allow smaller design teams and budgets
printing press and the ascension of the internet to develop their own products.
come to mind as similar inflection (turning)
points. Current innovation trends are being Sassine Ghazi, President and Chief Operating
driven aggressively by machine learning Officer (COO) of Synopsys, stated that ‘Today’s
and artificial intelligence (AI). AI is enabling technology inflection point is demanding us
rapid technology advances in many areas, to rethink design approaches, and … to drive
from personal devices to the data centre and innovation … ’.
the design of computer chips. At the same
time, the demand for intelligent machines Ghazi also notes that her company is working
and automation is increasing. Examples on harnessing AI to accelerate and automate
of AI include driver assist technologies, the design verification and validation
speech recognition input and smart home process of chips before they are sent to mass
technologies. production and deployment. ‘Validation and
verification are great opportunities for machine
Many market leaders have demonstrated that learning, where the AI can help not only time to
innovation can be achieved by combining this market, but also expand the test coverage area,
with software development and hardware chip- which can be especially critical for general
level design. purpose silicon that needs broader confidence
in a wider range of applications.’
Companies such as Apple and Tesla have huge
resources and big budgets to allow them to Source: Extracted from Forbes.com website, ‘Future
develop their own in-house software, such as chip innovation will be driven by AI powered co-
AI programs, and chips. However, new tools optimization of hardware and software’.

CASE STUDY ANALYSIS

1 Describe why innovation is important for businesses.

2 Explain how AI can assist a business in developing new products and services.

Entrepreneurship
Entrepreneurship involves planning, designing, launching and running a business to make a
profit. This requires initiative and often involves considerable risk (see Chapter 2).
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54 Unit 1 | Planning a business

Individuals, businesses and countries need the right skills to succeed in the global economy.
As the economy has changed, knowledge has become increasingly important – successfully
acquiring, managing and applying knowledge to business practices is the key to growth.
Australia generally performs well in the creation of knowledge when compared to developed
countries around the world.

While Australian businesses and individuals come up with many new ideas and innovations, not
all of them are carried through to production, so there is capacity for greater innovative activity.
One way to help Australian businesses to become more innovative and entrepreneurial is for
programs and support mechanisms to be established by governmental and financial investors.

CASE STUDY
3.5

Entrepreneurship:
Black Soldier flies

In a production facility in a Melbourne suburb, secured money from a venture company. It has
Ms Gardner and her partner and Bardee co- continued to grow and aims to grow and move
founder Alex Arnold are the custodians of into the global market.
about 1 billion Black Soldier Flies.
Beyond fertilisers and pet foods, the flies could
These fly larvae work in a vertical farming also become human food in the near future,
system to transform food waste into nutrient- with the Bardee team anticipating that the Black
rich fertiliser and pet products. Soldier Fly will be the next insect approved by
food standards regulators in Australia and New
Ms Gardner, a trained architect, and Mr Arnold, Zealand to be sold as a protein product.
an entomologist, have been toying with business
ideas to tackle the climate crisis and global food Ms Gardner has observed there are 10,000
waste. The technology they have developed can cities across the world all in need of a more
transform waste from supermarkets and food efficient and carbon-neutral way to break down
manufacturers into new products. food waste.

Bardee, which has been quietly operating Source: Extracted from Emma Koehn, ‘It’s a bugs
for the past two years, has swiftly captured life – Aussie startup enlists insect army to tackle food
the attention of some of the nation’s best- waste’, The Age, 18 November 2021.
known start-up investors. The company has

CASE STUDY ANALYSIS

1 Why is entrepreneurship important to an economy?

2 Describe how this business idea developed.
3 Explain how this business idea could support cities and people across the world.

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 55

CASE STUDY
3.6

Australia’s
top 10 young
entrepreneurs

Imagine a business operating normally until a large customer puts a major contract on hold and
the owners are unsure as to how they will pay their workforce.

Many of Australia’s leading young entrepreneurs in the table below faced these very challenges,
but were able to survive and often capitalised on new opportunities. The pandemic enabled
entrepreneurs to thrive and start new ventures or increase the size of their businesses.

Table 3.1 The top 10 young entrepreneurs

Name Age Company

Nick Molnar 30 Afterpay

This is a ‘buy-now-pay-later’ company which has grown rapidly
since 2020. It has impacted on the way customers buy goods
and services.

Cliff Obrecht 34 Canva

Melanie Perkins 34 The move to teams and employees working remotely and
Cameron Adams 40 looking at new ways to collaborate has seen Canva’s platform
increase in popularity. The business extended to Canva for
Education, which gives classrooms free design tools.

Ruslan Kogan 38 Kogan.com

With the increased demand and use of online shopping Kogan
has been in a position to take advantage of the trend.

Fung Lam 39 New Aim

This is one of Australia’s fastest growing companies and it is
revolutionising the way people shop. The company started
trading on eBay and has grown into one of Australia’s largest
dropshipping businesses, interacting with major retailers both
on and offline. (A ‘dropshipping’ company acts as a stock-
holding intermediary between the supplier and the customer.)

Larry Diamond 38 Zip Co

This is another business operating in the buy-now-pay-later
sector. It has tapped into the demands and needs of customers
who are using this method rather than a credit card. Zip is
expanding into the US market.

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56 Unit 1 | Planning a business

Izhar Basha 37 EHP Holdings, EHPlabs, Blessed Plant Protein, Lust Natural
Protein Bars
Izhar was diagnosed with a life-threatening auto-immune
disease. He vowed if he survived, he would try to improve the
health and wellbeing of others.
He set up a small supplements store but became frustrated and
started producing products.
He has expanded into the US market through The Vitamin
Shoppe and has retail stores in Australia and New Zealand.

Anson Zhang 38 One Stop Warehouse, Discover Energy

Jeff Yu 38 This company is a leading wholesale solar panel distributor. It
also has customers who sign up for their electricity accounts.

Rael Ross 38 Butn, Australian Factoring Company

This company can quickly process and give funds to businesses
and can be used almost anywhere. It is similar to Afterpay but
for businesses.

Dr Sean Parsons 40 Ellume

The business is able to use nanoparticle technology to detect
viruses. The business developed at-home tests which could be
purchased over the counter. The technology was developed to
detect influenza, respiratory viruses and moved into producing
rapid COVID-19 tests.

Carlos Ferri 39 Zapala Corp, Zapala Go, Zapala People, Zapala Fleet, Shipeezi,
Educafy, LIDE Australia, Studio7, Bhold Creative, Referencia
Business
These companies operate in the logistics area and Ferri
describes them as offering ‘brains’ for freight forwarding and
transport companies.

Source: Extracted from article on Business News Australia website, ‘Australia’s top 100 young entrepreneurs’.

CASE STUDY ANALYSIS

Examine the examples in the table. To answer the following questions search for information on
them from the Internet.

1 Why do you believe these entrepreneurs were successful? What characteristics does an
entrepreneur need to have?
2 Find out three pieces of information about one of the successful entrepreneurs (for
example, how long the business has been running and whether the business has expanded
into other areas).
3 Is there anything the entrepreneurs have in common? If so, what is it?

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 57

There are a number of different methods by which a culture of innovation and entrepreneurship
council grants
can be encouraged. These include: funds provided
by local councils

• government investment in research and development to businesses

and individuals
• council grants for new businesses to encourage
• school-based education programs focusing on entrepreneurship new businesses

• creation of regional business start-up hubs. to establish

and provide
employment
in the local
Government investment in research and development government area

High-growth firms can be stimulated and supported via the adoption of economic policies by
governments at all levels.

Government procedures and programs that support entrepreneurial systems result in countries
with elevated levels of technological entrepreneurship. For example, the United States, United
Kingdom, Israel and South Korea share a number of features, including:
• delivering entrepreneurship in schools and engaging university students in a variety of
entrepreneurship offerings
• ensuring that on a national scale, technology entrepreneurship is of significance
• ensuring that entrepreneurs think globally, through including policies that educate and
introduce youth to the finest international business ecosystems and cultures.

Singapore invests about $5 billion a year to expand creation and entrepreneurship over time
and to change the country’s economy from labour-driven to productivity-driven industries by
supporting entrepreneurship research and innovation.

The Australian federal government has a National Innovation and Science Agenda, which
encourages entrepreneurs and innovation in Australia and offers a number of key programs.

The Agenda focuses on four key pillars:

• Taking the leap: backing Australian entrepreneurs by opening up new sources of finance,
embracing risk, taking on innovative ideas, and making more of public research.
• Working together: increasing collaboration between industry and researchers to find
solutions to real world problems and to create jobs and growth.
• Best and brightest: developing and attracting world-class talent for the jobs of the future.
• Leading by example: the Australian Government will lead by example, embracing innovation
and agility in the way we do business.

There are a wide range of different programs, such as advancing quantum computing, data
sharing for innovation, cyber security growth centre, and a global innovation strategy.
Source: ‘Boosting innovation and science’, Department of Industry, Science, Energy and Resources.

The National Innovation and Science Agenda assists innovators with access to funding and provides
grants to businesses to develop ideas. It also provides access to networks to support businesses and
provides tax breaks to businesses to allow them to invest in research and development.

The Victorian Government also supports businesses to innovate. There are grants and programs
available for businesses that establish operations in Melbourne. The 2020–21 state budget
supported innovation with initiatives such as Research and Development Cash Flow Loans and
the Venture Growth Fund.

Source: ‘Incentives, grants and programs’, Invest Victoria.

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58 Unit 1 | Planning a business

ACTIVITY 3.5
Go to the National Innovation and Science Agenda website and use the information on science,
innovation and support to develop a pamphlet, brochure, or blog post on some of the main
programs on offer to support new businesses to innovate.

CASE STUDY
3.7

Investment in
research and
development

Each dollar invested in research and development spending and economic growth,
development (R&D) would earn an average of or compare this to performance on other
A$3.50 in economy-wide benefits for Australia, typical investment returns.
according to evidence compiled in a new report
from CSIRO. Quantum technology and hydrogen industries
are examples of future industries that could
Many Australians know research and be unlocked by research and development in
development drives economic growth and Australia. Emerging technologies that could
improves our wellbeing and prosperity. change the way Australians work and live
However, few could describe the size of the include artificial intelligence and robotics. This
relationship between Australia’s research and is significant, given recent figures from the

Quantifying Australia´s returns on innovation

CSIRO has quantified the relationship between The most conservative estimates state that

domestic gross expenditure on research and $1 of R&D investment in Australia

development (GERD) and

creates an average of $3.50 in economy-wide

GDP per capita growth benefits in today´s dollars

to estimate the return on investment (ROI) in and a 10% average annual return
innovation for Australia

Figure 3.5 Australia’s returns on innovation

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 59

Australian Bureau of Statistics show business payoffs, and for the capital costs of integrating
spending on research and development as research and development into the economy.
a proportion of GDP is just half the OECD For example, an innovation of new computer
average, and the lowest it has been since 2003. software must be built into existing computer
systems and might therefore take a decade
We hope our analysis will raise awareness before its use becomes widespread.
of the value of this kind of spending, and
its importance for Australia’s economic Overall, we calculate that $1 of research and
recovery and long-term resilience. Investing in development investment creates an average
innovation now is crucial for the future. of $3.50 in economy-wide benefits in today’s
dollars, and a 10% average annual return for
In consultation with government and academic Australia.
stakeholders, our team at CSIRO Futures,
the strategic and economic advisory arm of By removing the considerations of delays
Australia’s national science agency, used a new and capital costs, we can also calculate an
yet simple economic approach to quantify the upper boundary on our estimate – that is, the
return on investment in overall research and maximum theoretical return on investment
development spending for Australia. barring any hurdles along the way.

By adapting a method originally developed in This unadjusted result, which does not account
the US, we calculated return on investment by for the additional time and costs associated
defining the relationship between domestic with integrating research and development into
gross spending on research and development, the economy, is estimated as creating $20.80
and the growth in per capita gross domestic in economy-wide benefits, and a 104% average
product (GDP) that follows as a result. This annual return for every dollar spent on research
method encompasses both successful and and development in Australia.
unsuccessful research and development
investments and quantifies only monetary Even with our conservative estimate of $3.50
benefits (excluding non-monetary social and return on the dollar, the expected benefits of
environmental benefits). investing in innovation are high compared with
many other types of investments. For example,
Our approach also accounts for delays between Australia’s 10-year government bond returns
research and development investments and have historically averaged around 7% per year.

Average economy-wide Average economy-wide

Australia´s returns to innovation estimates
benefit-cost ratio rate of return

Baseline results
Unadjusted for delays and capital costs of 20.8 104%
integrating R&D.
Delay in R&D benefits realisation
Incorporates a 15-year lag between R&D 12.7 15%
investments and payoffs.
Embodied capital deepening
Assumes R&D must be built into new capital 4.9 24%
inputs.
Combined adjustment
Delay in R&D benefits realisation (10-year lag) 3.5 10%
and embodied capital deepening.

Figure 3.6 Estimates of Australia’s returns due to innovation

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60 Unit 1 | Planning a business

Private investments in the ASX200 stock index results only fall to $3.30 return on investment,
have typically yielded around 10% annually. with annual yields of 9.5% (at lowest). These
are still strong returns.
Perhaps even more significantly, even our
conservative estimate of $3.50 return on Our findings imply that so far, Australian
investment suggests research and development innovation investments – whether they be in
has a cost/benefit ratio well in excess of new products and services or in creating new
$1 to $1. This means there is a strong economic industries – have been well worthwhile, and
case for this kind of spending. that increasing future investment could capture
substantial economy-wide returns.
But research and development investment
is risky, right? This may be much less of a As our estimates only capture the economic
problem at a national level. While cost or benefits of innovation, actual returns are likely
time overruns are never favourable for any to be much higher when also considering the
investment, building this uncertainty into our broader social and environmental benefits of
findings shows research and development Australian research and development.
investment remains economically viable even if
this happens. Source: Katherine Wynn, Jasmine Cohen &
Mingji Kiu, ‘Every dollar invested in research and
Results from sensitivity analysis demonstrate development creates $3.50 in benefits for Australia,
that if the costs of research and development says new CSIRO analysis’, The Conversation,
spending or delays of payoffs increase by 20%, 22 November 2021. Read the full article on The
the most conservative (combined adjustment) Conversation: https://cambridge.edu.au/redirect/9895.

CASE STUDY ANALYSIS

1 Explain what research and development is.

2 Give three reasons why research and development is important for the economy.
3 Describe some of the future areas or industries where research and development is likely to
have the greatest returns for businesses and the economy.

Council grants for new businesses

Many local councils provide support and grants for businesses in their local area. The City of
Melbourne, for example, offers a range of programs including seminars, business consultation
programs, business networks, business breakfasts and the Melbourne Licensees Forum. The council
also provides grants to businesses to support cutting waste, reducing emissions and encouraging
more efficient waste solutions to reduce costs and increase sustainability. These council grants are
available for start-ups, business growth, and relocation and expansion.

Other opportunities include ‘grants and assistance finders’ – online tools that help a business
owner locate grants. An example of a program for businesses is Grants Victoria, where a
business owner can search for government grants and assistance.

The Shire of Nillumbik in Melbourne’s north developed an economic strategy to support

sustainable economic development. The focus is on creating vibrant activity centres and
improve economic development practices.

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 61

ACTIVITY 3.6
Go to the website of your local government (city or shire) and identify and describe one
innovation or entrepreneur program offered to businesses in the council area.

School-based educational programs

Different levels of government and associations also run educational programs and
competitions for students at secondary and, sometimes, primary school level. Many
competitions are also run at universities for business and commerce students.

STEM (Science, Technology, Engineering and Mathematics) jobs are growing almost twice as
fast as other jobs. Therefore, it is important that students are able to access programs to support
their future careers and business pathways.

By May 2024, the Australian Department of Education, Skills and Employment predicts that
STEM occupations will grow by 11.6 per cent (303 200 people), whereas all other jobs are
projected to grow at 7.5 per cent (771 800 people) over the same period (DESE, ‘Stem jobs
growing almost twice as fast as other jobs’, 16 January 2020).

To meet the needs of these industries, the federal government has allocated money to support
several programs, including:
• Supporting Artificial Intelligence in Schools
• Curious Minds (Summer school for STEM students)
• Australian Digital Technologies Challenges and
Dive into Code
• STEM professional partners in schools
• Digital Technologies Massive Open Online Courses
• Digital Technologies in Focus
• Digital Literacy School Grants
• digIT (ICT Summer Schools)
• Science by Doing
• Primary Connections: Linking Science with
Literacy
• reSolve: Maths by Inquiry
• Digital Technologies Hub
• resources for teachers, such as access to real data Figure 3.7 A large number of future jobs will require STEM skills.
to support student learning through real-life
examples
• VET (Vocational Education and Training) – students can be involved in industry-based
training as part of their studies.

Australian schools are also increasingly moving to introduce specialised entrepreneurship

programs. In Australia, there are programs such as the Plan Your Own Enterprise (PYOE)
competition where students work, either individually or in groups, to develop a business idea;
and the $20 Boss Program (Foundation of Young Australians) where students are provided with
$20 of start-up money to plan, budget and market their business idea over a month.

Students from every state and territory in Australia can be involved in this in-school challenge.

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62 Unit 1 | Planning a business

business hub Creation of regional business start-up hubs

physical space
such as an office A business hub can be described as a place where businesses and individuals are able to go
where businesses for work and networking in shared office space. These spaces can be used for meeting clients,
and individuals
meeting other business people, or accessing technology that might not be possible from home;
can meet for
work some hubs also provide child-care services. Sometimes it is as simple as someone wanting
a different place to work to get out of the home office space. In many cities in Australia and
start-up hubs
set up to allow around the world there are hubs for small businesses to use.
people to use a
workspace and As the economy is changing, the faces of agriculture and regional industries are also changing.
network with
others when Regional start-up hubs offer individuals the same opportunities as their city counterparts,
starting up their such as networking and communication opportunities, particularly when distance can be a
own business limiting factor.

CASE STUDY
3.8

Hub for
entrepreneurs:
Warrnambool

Budding entrepreneurs now have a place to The Hive features a meeting room, hot desks,
develop their business idea with the opening communal space, a podcast studio, a smart
of The Hive at South West TAFE. board and a green screen. Desks and spaces
are available for hire and the space will host
The new co-working innovation hub allows events, workshops, and masterclasses on a
people to interact, share and build their ideas. range of topics and industries, and can provide
support in their fields.
‘People who work from home can find
it isolating, but in The Hive you have a Source: Adapted from Kimberley Price,
community and network behind you,’ ‘Warrnambool hub for entrepreneurs
coordinator Mairead Whelan said. ‘The Hive’ opens in South West TAFE’,
The Standard, Standard.net.au website,
The idea behind the hub is for like-minded 12 March 2020.
people to come together and is open to
everyone in the community.

CASE STUDY ANALYSIS

1 Describe the concept of a ‘business hub’.

2 Outline the benefits for entrepreneurs of sharing a space.
3 Explain why business hubs are being implemented in rural and regional areas in Victoria.

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 Chapter 3 Business contributions to society: innovation and entrepreneurship 63

REVIEW ACTIVITY 3.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe why it is important for businesses and governments to promote and support
innovation and entrepreneurship.
2 Explain why local councils offer programs to support new businesses in their area.
3 Describe why STEM is important for the future of the Australian economy.
4 Read the article below and answer the questions that follow.

Elain Younn became an entrepreneur by accident, and it’s something that she’s since made a
habit of doing.

Before setting up her therapy and wellness platform, SoulAdvisor, in 2020, Ms Younn had
started four other businesses. Each one was brought into existence as a result of a problem
that she had to solve. She started a school, was a property developer and created a not-for-
profit organisation to support children and local communities to enable them to sing. She
also led the BraveHearts Program, a centre for children with special needs.

‘It’s important to do something that is from your heart, that you’re passionate about. I think,
then, everything works out well. It becomes effortless,’ she said. ‘That’s always been my
philosophy … you don’t have to try so hard and struggle. If it was meant to be, it should be
effortless.’

The idea for SoulAdvisor came to her fully formed after she signed up to a two-week sound
healing practitioners’ retreat in Bali in 2014, having mistaken it as a two-week retreat for
consumers.

‘I felt compelled to try and create a way to bring this community of practitioners to the world.’

SoulAdvisor was her first foray into creating a purely digital platform. She made multiple
attempts to engage various web design agencies, but none of them were building quite
what she had in mind. In the end, she decided to hire a team of web designers to build the
platform from scratch.

The start-up is now a multimillion-dollar business with a team of 12. It allows people to find
practitioners from dozens and dozens of different therapy types according to a person’s
location, or symptoms.

When the pandemic hit and everyone’s mental health plummeted, SoulAdvisor was up for
the challenge; three-quarters of the practitioners of the platform offer online services. Ms
Younn has set her sights on expanding into the USA and the UK.

Source: Adapted from Jessica Yun, ‘Straight from the heart:

Mantra of the accidental entrepreneur’, The Age, 6 December 2021.

a Explain why Ms Younn set up each of her businesses.

b Describe how the SoulAdvisor business was established.
c Identify and explain three skills she would have needed to establish her businesses.

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64 Unit 1 | Planning a business

Chapter 3 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 1, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Key concepts
Wellbeing Economic growth Gross Domestic Product
(GDP)

International trade Exports Imports

Infrastructure Research and development Better Life Index (BLI)

Start-up hubs Innovation Council grants

Extension questions
1 You have been employed as a reporter for Excellence Media and have been asked to
present on the contribution of businesses to Australia. You are to argue that businesses do
contribute in a positive way to the economy. You may use a PowerPoint presentation, Prezi,
blog, podcast, or video to make your presentation.
2 Read the quotes below regarding innovation and entrepreneurship. Pick one quote and
explain how they relate to the idea of building a culture of innovation and entrepreneurship.
a ‘If you are not embarrassed by the first version of your product, you’ve launched too late.’
– Reid Hoffman, LinkedIn co-founder
b ‘If you’re competitor-focused, you have to wait until there is a competitor doing
something. Being customer-focused allows you to be more pioneering.’ – Jeff Bezos,
Amazon
c ‘Failure is an option here. If things are not failing, you are not innovating enough.’ – Elon
Musk, Tesla

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 Chapter review 65

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

3.1 Business 3.1.1 Examine, describe and Activity 3.1 Yes No

contribution to discuss the contribution that Activity 3.2: Q2
the economic and businesses make to economic Activity 3.3
social wellbeing of and social wellbeing including: Case study 3.1
a nation • employment Case study 3.2
• economic growth Case study 3.3: Q1–2
• international trade Review activity 3.1: Part 1 &
• taxation revenue Part 2
• infrastructure Extension: Q1
• research and development
• social contribution

3.2 Building 3.2.1 Describe the methods Case study 3.4 Yes No
a culture of by which a culture of Case study 3.5
innovation and business innovation and Case study 3.6
entrepreneurship entrepreneurship may be Case study 3.8
fostered Review activity 3.2: Part 1 &
Part 2 (Q1–3)
Extension: Q2

3.2.2 Describe government Activity 3.5 Yes No

investment in research and Case study 3.7
development

3.2.3 Examine council grants Activity 3.6 Yes No

for new businesses Review activity 3.2: Part 1 &
Part 2 (Q2)

3.2.4 Describe school-based Review activity 3.2: Part 1 & Yes No

educational programs in Part 2
entrepreneurship

3.2.5 Investigate the creation Case study 3.8 Yes No

of regional business start-up
hubs

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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66 Unit 1 | Planning a business

Unit 1 Area of Study 1 review Conceptual summary

Entrepreneur
– someone who
invests energy, $
resources and
time to build Financial
a business from independence
To fulfil a
scratch.
market need
PERSONAL
MOTIVATION TO
Personal START A BUSINESS
independence

$
Thinking
outside
the box To fulfil a
social need
CHARACTERISTICS
OF ENTREPRENEURSHIP

Qualifications
Resilience Confidence
Risk taking

Changing
customer
needs

SOURCES OF Communication
Innovation BUSINESS
Negotiation
OPPORTUNITY
CHARACTERISTICS
OF MANAGERS
Global
Markets
Technological
development
Gap in
the market Planning
Research and
development Leadership

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 Area of Study review 67

$
+ +
Entrepreneur
Gap in Idea investor
the market innovation

Business Market
THE IMPORTANCE OF BUSINESS concept research
CONCEPT DEVELOPMENT product
market
competitive
advantage
Business
plan

SWOT Initial
Establish Core value feasibility
goals study
Mission statement
Vision statement THE IMPORTANCE OF
GOAL SETTING
Strategic goals Long term
Tactical goals Medium term
SMART
Operational goals Short term Objective
SMART
2
Individual objectives Employees Objective
1
Goal

CONTRIBUTION OF
BUSINESSES Council
grants
$ School-based
educational programs
$

Social wellbeing Economic

wellbeing METHODS
$ TO FOSTER
INNOVATION
Government investment

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68 Unit 1 | Planning a business

Key knowledge summary: Unit 1 Area of Study 1

Key knowledge Summary

• The concept of • Entrepreneurship and entrepreneurs are important for the economy and
entrepreneurship society as they allow new ideas and can improve the standard of living
of many people.

• The personal motivation • Some reasons why people decide to start a business are:
behind starting a business, –– success and wealth
such as the desire for –– flexible hours
financial and personal –– independence
independence, to make a –– to be their own boss.
profit and to fulfil a market
and/or social need

• The characteristics of • There are a number of characteristics of successful business managers

successful business and entrepreneurs including:
managers and business –– risk taking
entrepreneurs and how –– ability to think ‘outside the square’
these characteristics –– innovative
contribute to business –– resilient
success –– visionary
–– confident
–– ability to work independently
–– able to set goals
–– flexibility
–– capacity and drive
–– ambitious
–– ethical.
• Entrepreneurs have a range of skills:
–– technical
–– communication and negotiation
–– leadership
–– planning
–– financial management
–– marketing
–– technology.

• Sources of business • Sources of business opportunity include:

opportunity such as –– innovation
innovation, recognising –– market opportunities
and taking advantage –– research and development
of market opportunities, –– global markets
changing customer needs, –– technological development
research and development, –– customer needs.
technological development
and global markets

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 Area of Study review 69

Key knowledge Summary

• The importance of goal • Decision-making is an essential skill for successful managers that
setting and decision-making requires analysing alternatives and making a decision that requires
in business future action. Considering the goals of a business in decision-making
assists in the alignment in actions.
• All businesses must establish goals to set the direction for the business.
There are several types of goals for businesses to establish:
–– mission statement a written statement that defines a business’s
core purpose and focus
–– values statement outlines what the business sees as its values and
centres around integrity, honesty and ethical behaviour
–– vision statement a statement that outlines the aspirations and
values of the business
–– business objectives the steps a business must take to reach its
goals.

• The importance of business • Business concept development is the next step after the business
concept development idea is generated and is a process that includes market research and a
feasibility study.
• Business concept development aims to establish the viability of a
business idea.

• The relationship between • Developing the business concept is a process that turns the potential
business opportunities business idea or opportunity into an actual business.
and business concept
development

• Market research and initial • Initial market research is essential to gaining an understanding of the
feasibility studies industry and potential market.
• The next step is to conduct a business feasibility study in order to
determine if the concept is viable.
• A feasibility study will assess a description of the business, profiles of
personnel and a market analysis. The competition must be identified
and a competitive advantage specified. From this an assessment of
overall feasibility is generated.
• Original ideas and designs must be protected as intellectual property.

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70 Unit 1 | Planning a business

Key knowledge Summary

• The contribution that • Businesses contribute to the economic and social wellbeing of a nation
businesses make to the or country.
economic and social • Businesses contribute to the economy through:
wellbeing of a nation –– employment
–– economic growth
–– international trade
–– taxation revenue
–– infrastructure
–– research and development.
• Businesses also contribute to the general wellbeing of society.

• The methods by which • Innovation and entrepreneurial cultures are important.

a culture of business • Entrepreneurship is the process of designing, launching and running a
innovation and new business.
entrepreneurship may be • Innovation and entrepreneurship can be encouraged by:
fostered in a nation, such as –– government investment in research and development
government investment in –– council grants for new businesses
research and development, –– school-based educational programs in entrepreneurship
council grants for new –– regional business start-up hubs.
businesses, school-based
educational programs in
entrepreneurship, and
the creation of regional
business start-up hubs

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

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 Area of Study review 71

Sample assessment questions and advice

Unit 1 Area of Study 1: The business idea

In this section we will look at some sample assessment-style questions. Although there is no external
examination for Units 1&2, the following questions are written in a VCAA-examination style to prepare
you for these types of questions, and your school may use exam-style questions in SACs.

There are a number of key skills covered in Area of Study 1. Here we will focus on those covered in
Chapter 3, Business contributions to society: innovation and entrepreneurship.

Namely:
• identify business opportunities
• define, describe and apply relevant business management concepts and terms.
Concepts related to innovation and entrepreneurship include:

Council
grants

Research and
development Mentorship

Innovation and
entrepreneurship

School-based
Contribution
educational
of businesses
programs

Regional
business
start-ups

Let’s explore how this content might be assessed through the following two example questions.

Question 1
T here are several methods by which a culture of business innovation and entrepreneurship can be
fostered in a nation. Identify and explain two methods that support business innovation. (4 marks)

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72 Unit 1 | Planning a business

Extended response question – let’s unpack it

Study Design requirements

Key knowledge:
business innovation and
entrepreneurship Marks allocated

There are several methods by which a culture of business innovation and entrepreneurship can be
fostered in a nation. Identify and explain two methods that support business innovation. (4 marks)

Task word Limiting word

Identify: Determine or establish as Determines the number of
being a particular thing. To determine examples you must use
the key characteristics or features

Hints:
• Firstly, you need to define the concept of innovation and entrepreneurship.
• Identify and explain ONE method of innovation or entrepreneurship.
• Identify and explain a second method of innovation or entrepreneurship that can foster this
culture.

A possible answer to the question might be:

Sample response
Innovation and entrepreneurship are important for an economy, and also for businesses,
if a country is to remain competitive and achieve economic growth. There are a number of
ways entrepreneurship and innovation can be fostered and developed. Two methods include
government investment in research and development and school-based educational programs.
Government procedures and programs that support entrepreneurial systems ensure that
universities provide programs and technology is developed to support innovation. The federal
government has developed a National Innovation and Science Agenda to assist businesses.
Another method to foster innovation and entrepreneurship is through school-based educational
programs. These programs run in schools and universities. Programs include competitions for
students to enter (and there is also money allocated to STEM and artificial intelligence programs
in schools), resources to assist teachers, and Science and Maths programs and competitions.

Marking guide:
Note: there are other methods that could be explained, including council grants, business
mentorships and regional business start-ups.
• 1 mark for identification of business innovation and entrepreneurship
• 2 marks for identification and explanation of one method
• 3 marks for identification and explanation of two methods
• 4 marks for identification and explanation of two methods and a link to both innovation and
entrepreneurship
Total 4 marks
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 Area of Study review 73

Question 2
Explain the contribution of businesses to the economic and social wellbeing of a country. Identify
and describe one specific contribution. (4 marks)

Extended response question – let’s unpack it

Study Design requirements

Limiting word Key knowledge: contribution of
Determines the number of businesses to the economic and
examples you must use social wellbeing of a nation

Explain the contribution of businesses to the economic and social wellbeing of a country. Identify
and describe one specific contribution. (4 marks)

Task words Marks allocated

Explain: To make the meaning of something clear,
detailed and understandable
Identify: Determine or establish as being a
particular thing. To determine the key characteristics
or features
Describe: Provide a detailed account of something

Hints:
• This question asks you to outline the general contribution of businesses to the economy.
• Make sure that you identify and describe just one contribution.
• With your answer, remember to describe the contribution of businesses to the economy. It does
not matter which factor or contribution you include.

A possible answer to the question might be:

Sample response
Businesses contribute significantly to the wellbeing of the population. Businesses enhance
economic and social wellbeing in a number of ways, such as employment, economic growth,
trade and infrastructure.
Businesses also contribute to social wellbeing. This can include a wider provision of products
and services and the contribution of new technologies that support wellbeing. People are able
to benefit from the goods and services and new ideas and innovations that contribute to their
general standard of living and wellbeing.

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74 Unit 1 | Planning a business

Businesses contribute to the economy by employing people, and this also provides individuals
with the income to purchase goods and services. People employed by businesses also produce
or deliver goods and services for others. Paid work is important for people, and employment
levels are closely linked to economic growth and living standards.
Small and medium businesses employ approximately 70 per cent of the total workforce, and it is
important for the government to develop policies to ensure that these businesses are supported
and encouraged to employ as many people as possible.

Marking guide:
Note: Other contributions that could be described include economic growth/GDP, international trade,
taxation revenue, infrastructure, and research and development.
• 1 to 2 marks for explanation of business contribution to economic and social wellbeing
• 3 marks as above and identification of one contribution
• 4 marks as above and explanation of one contribution.
Total 4 marks

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 AREA OF STUDY 2
INTERNAL BUSINESS
ENVIRONMENT AND PLANNING

AREA OF STUDY DESCRIPTION OUTCOME 2

The internal environment affects the approach On completion of this unit the student should
a business takes to planning and the extent be able to describe the internal business
to which planning is successful. A business environment and analyse how factors from
owner will generally have more control over within it may affect business planning.
the activities, functions and pressures that
To achieve this outcome the student will draw
occur within the business. These factors, such as
on key knowledge and key skills outlined in
business models, legal business structures and
Area of Study 2. [These are listed at the start
staffing, will also be influenced to some extent by
of each chapter.]
the external environment. Students explore the
factors within the internal business environment Source: © VCAA, VCE Business Management Study Design,
and consider how planning decisions involving 2023–2027, p. 10; reproduced by permission

these factors may affect the ultimate success

of a business, with success being measured by
the extent to which business objectives are met
within a specific timeframe.
Source: © VCAA, VCE Business Management Study Design,
2023–2027, p. 10; reproduced by permission

CHAPTERS 4 The internal business environment: planning business structures

IN THIS and models
AREA OF
5 Resourcing, locating, financing and support services for a business
STUDY
6 Business planning and corporate social responsibility (CSR)

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 CHAPTER 4
The internal business
environment: planning business
structures and models
‘You don’t need to have a 100-person company to develop that idea.’
Larry Page (1973– )

About the author:

Larry Page is an American computer scientists and
entrepreneur, best known as one of the co-founders
of Google.

KICKSTARTER ACTIVITY
1 What does this quote suggest about the development of the business
idea for a business?
2 Brainstorm a list of skills and personal attributes that people such as Larry
Page are likely to draw upon in the early stages of business development.

CHAPTER OVERVIEW

The internal business environment requires businesses to be focused

on balancing the expectations of key players such as employees
and shareholders with the strategic direction set by management.
Businesses also have to consider a range of factors from the external
environment (macro and operating) when planning a business. These
factors are important and can be outside the control or influence of a
business, and therefore require a proactive or reactive response.

The prospective business owner is required to make numerous crucial

decisions before a business actually opens its doors. Owners will
need to decide which type of legal ownership structure will best suit.
Decisions regarding an appropriate business model must be researched
with the final decision being influenced by which model is most likely
to generate profit. An additional decision facing many new business
owners is to weigh the costs and benefits in choosing whether to start
a new business from scratch or purchase an established business.
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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this
chapter I will be able to:

The relationship between the internal 4.1 Internal and external environment
environment and the external environment 4.1.1 Define internal and external
of a business business environments
4.1.2 Describe the relationship between
internal and external business
environments

The types of businesses such as sole trader, 4.2 Choosing the legal business structure
partnership, private limited company, 4.2.1 Describe the key characteristics
public listed company, social enterprises of different types of business
and government business enterprises, and structures
the factors affecting the choice of business 4.2.2 Analyse the factors associated
structure in deciding the suitability of a
business structure

Types of business models such as online 4.3 Types of business models

business, direct-to-consumer business, 4.3.1 Describe and compare types of
bricks-and-mortar business, franchise, business models available to
importer and exporter Australian business

Costs and benefits of purchasing an existing 4.4 Purchase an existing business or

business compared with establishing a new establish your own?
business 4.4.1 Analyse the costs and benefits in
purchasing an existing business
compared to a new business

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 4
The internal business
environment: planning business
structures and models

4.1 Internal and 4.2 Choosing the legal 4.3 Types of business 4.4 Purchase an existing
external environment business structure models business or establish
your own?

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78 Unit 1 | Planning a business

4.1 Internal and external environment

Learning intentions – 4.1.1 Define internal and external business environments
at the end of this
chapter section I will 4.1.2 Describe the relationship between internal and
be able to: external business environments

An overview of the
Corporate social
external and internal
responsibility
environments

Macro factors that

Economic conditions Global issues
affect business planning

Social attitudes
Technological issues
and behaviours

Figure 4.1 Macro factors that affect business planning

All businesses are impacted by a wide range of issues and conditions that they must consider
in all areas of decision-making, including strategic planning. It is important to understand
the range of conditions and factors that may impact on the development of the business. In
understanding these influences, the business can plan appropriate strategies and solutions to
meet demands. Businesses that operate in a vacuum by avoiding or ignoring aspects of their
internal and external surroundings will inevitably fail, as they need to be responsive to the
pressures to understand and successfully work in their context and remain competitive.

The internal environment comprises all of the elements within the business. The legal business
internal
environment structure, the selected business model and corporate culture that establishes employee
comprises all behaviour are part of the internal environment. Stakeholders who have a vested interest in the
of the elements
business are also part of the internal environment – these include shareholders, management
within a business
and employees:
stakeholders
people who have
a vested interest • Shareholders – exert pressure to maximise the dividend benefit and increased share value of
in a business their invested shareholding
• Management – are instrumental in determining the strategic direction of a business with a
focus on meeting business objectives
• Employees – receive financial benefits as a result of working for a business. They aim to
negotiate improved pay and conditions in exchange for their productive and skilled efforts
in supporting a business to meet its objectives.

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 Chapter 4 The internal business environment: planning business structures and models 79

Internal environment: Operating environment: Macro environment:

legal structure, business model, suppliers, customers, laws and regulations,
corporate culture, competitors, societal attitudes,
stakeholders (e.g. managers, interest groups, technology, global issues,
employees, shareholders) trade unions economic conditions

Figure 4.2 Part of good management is possessing high-level knowledge and skills about the business and a solid
understanding of the operational and macro environments in which the business must compete.

The external environment consists of both the operating and macro environments. The
external
operating environment has a great deal of interaction with the internal environment. Both environment
environments may exert pressure that impact each other to react and introduce change in consists of two
environments,
response to meeting expectations. The operating environment includes the following:
the operating
and the macro
• Customers – expect quality goods and service, and for a business to be operating in a environment
socially responsible manner. operating
• Suppliers – businesses that supply the required materials and components to a business. environment
They must be reliable or jeopardise their own business as well as those to whom they supply. the environment

•
immediately
Competitors – add pressure in terms of innovation, differentiation, quality and price to external to a
businesses within their market. business
• Interest groups – groups of people with a special focus that aim to influence businesses and macro
governments to adopt the measures they are seeking. environment
consists of
factors directly
The macro environment consists of elements external to the business which impact the affecting
internal environment and those in direct relation to the business. Factors such as changes businesses that
to the law, shifts in societal attitudes, changes in technology and the economy are examples are outside their
control
that impact a business. Unlike the operating environment and the internal environment, the
business has no control over the macro environment and needs to determine if the business will
take action that is reactive or proactive. The pressing factors of the external environment should
not be overlooked in business planning. The macro environment includes the following:

• Laws and regulations – federal and state laws that require businesses to follow and enforce,
establishing consistent requirements to protect employees and consumers.
• Economic conditions – positive economic conditions impact on consumer behaviour and, as
a result, impact the potential to make profit for a business.
• Societal attitudes – businesses need to respond to changing views in order to keep
competitive and meet the demands of customers as well as creating the opportunity to
increase sales that will raise profits.
• Technological issues – challenges relate to meeting rapid changes and balancing the
potentially high costs of implementing new technologies impacting on profit.
• Global issues – as businesses move to source new opportunities globally, they are
confronted with a new range of issues that must be navigated.

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80 Unit 1 | Planning a business

CASE STUDY
4.1
How much longer
do we need to wait
for Australia to
implement a sugary
drinks tax?

Given the strong evidence linking sugary drink Some would argue that the failure of the
consumption with tooth decay, weight gain, Australian federal government to introduce a
increased risk of developing obesity and type 2 sugary health tax is placing corporate interests
diabetes, the Australian Medical Association (AMA) ahead of public health. However, the AMA
supports the introduction of a sugary drinks tax. claims that the impact on Australia’s sugar
industry would be minimal as 80% of Australia’s
The AMA proposed tax is in line with international domestic sugar production is exported.
evidence that sugary drink taxes are most effective
when the tax rate is based on sugar content. Source: Abridged from Gary Sacks, ‘How much
Consumers are more likely to change their longer do we need to wait for Australia to implement
purchasing habits to healthier, lower sugar drinks a sugary drinks tax?’, The Conversation, 10 June 2021.
at the same time that manufacturers reformulate Read the full article on The Conversation:
their products to avoid a higher tax rate. https://cambridge.edu.au/redirect/9896.

CASE STUDY ANALYSIS

1 Identify which external environment the AMA is a part of. Explain why the AMA is regarded
as influential.
2 Identify which external environment the Australian government works in. Propose why the
AMA is seeking action from the federal government.
3 Identify the groups that will be impacted should a sugary drink tax be introduced.
4 Discuss the advantages and disadvantages for the introduction of a sugary drinks tax on
the internal and operating environment.

REVIEW ACTIVITY 4.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the relationship between the internal and external business environments.
2 Distinguish between the operating and macro environments.
3 For the following scenarios, identify two stakeholders from each of the three business
environments and outline the potential impact on the business:
a Young and Co Real Estate in Shepparton
b The Provincial Hotel in Ballarat
c Robert Gordon Pottery in Pakenham
d Bega Cheese located in Bega.

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 Chapter 4 The internal business environment: planning business structures and models 81

4.2 Choosing the legal business structure

Learning 4.2.1 Describe the key characteristics of different types of
intentions – at business structures
the end of this
chapter section I 4.2.2 Analyse the factors associated in deciding the suitability
will be able to: of a business structure

The decision to determine the most suitable business structure will affect day-to-day
operations, taxes and personal liability. Legal structure will impact business goals and affect the
ability to raise funds. Different structures are suited to different businesses. A business owner
must decide which structure best suits them. Factors that need to be considered are: sole trader an
individual who
• size of the business exclusively

•
owns and runs
people involved a business and
• type of business retains all profits,
• taxation and other financial issues but who is

•
responsible for all
finance losses and legal
• start-up costs aspects of the
• degree of risk business

• personal preference. unlimited liability

full liability of
owner (if their
Choosing wisely may avoid difficult situations and decisions in the future. Some businesses may business fails) to
change their legal structure depending on the growth of the business and change business the extent that
goals to accommodate continued growth. their personal
assets could be
seized to pay

Sole trader debts

This is the simplest form of business

ownership and involves a single
owner operating the business either
under their own name or a Registered
Business Name. The owner makes all
decisions and operates the business
autonomously. It is usually the most
affordable form of business structure
to establish. A sole trader (also called
a sole proprietor) has exclusive rights
to all profit and capital. Sole trader
operations are run by one person,
often based from home. Sole traders
are personally and totally legally
responsible for all actions and debts of
the business. They are liable to meet all
business financial obligations from their
personal assets, placing these at risk.
This is known as unlimited liability. For
tax purposes, a sole trader must declare
all the business income as their own. Figure 4.3 A sole trader has more independence but carries more risk.

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82 Unit 1 | Planning a business

Partnerships
A business partnership combines the expertise and resources of between two and 20 people.
partnership
a legal form Each partner is jointly liable for all debts incurred by the business, meaning they have unlimited
of business liability.
ownership where
two or more
people (partners) There are two forms of partnerships:
work together

general • general partnership: all partners are deemed to hold equal responsibility regarding
partnership business management, and all hold unlimited liability for obligations and debts
where all partners
are deemed
• limited partnership: liability of one or more of the partners is limited. These limited partners
to be equally are often referred to as a ‘silent partner’, as they provide financial input into the business but
responsible for do not actively participate in the business operations.
the management
of the business.
Each has The Partnership Act 1963 regulates partnership dealings. Most partnerships are based on a
unlimited liability formal legal agreement known as a partnership agreement. If a partnership agreement is not
for debts and signed, all partners are deemed equally liable for debts incurred. Common details included in a
obligations.
partnership agreement are:
limited
partnership
where liability of • partner details
one or more of • commencement date and duration of the partnership
the partners is
limited
• description of the business and the nature of the partnership, including individual roles and
what each partner brings to the partnership
partnership • division of profits and remuneration
agreement a
formal document • contribution of capital from each partner
that outlines • responsibilities of each partner within the business and who has authority to do things such
the duties and as access bank accounts
responsibilities
of the parties to a • how disagreements will be resolved
partnership • provision for admitting new partners
• termination clauses, including procedures for distributing assets when the business is
wound up.

A partnership does not have an ongoing life: if one partner leaves, a new partnership must be
formed. It is generally accepted that a person should only enter into a business partnership with
people whom they completely trust, since a business partner may be liable for their partner’s debts.

Figure 4.4 A business partnership is usually set out in a partnership agreement.

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 Chapter 4 The internal business environment: planning business structures and models 83

ACTIVITY 4.1
Rithvik, Jason and Omar are intending to enter into a business partnership. They are going to
establish a driving school.

Rithvik intends to work in the business full time as a driving instructor. He will contribute 50 per
cent of the start-up capital and expects to earn a weekly wage. Jason will contribute 20 per cent of
the capital. He will work part time in the business as the financial officer. Omar is not intending to
work in the business, but will contribute 30 per cent of the working capital.

company
Suggest what should be included in the agreement in each of the following categories, and justify
a separate
your answers: legal entity
(incorporated
1 the amount of capital each person brings body) that is
subject to the
2 how profits will be distributed
requirements of
3 the roles and responsibilities of each partner the Corporations
Act 2001, owned
4 how disputes will be handled
by shareholders
5 salaries and remuneration. who have limited
liability

incorporation the
process in which
Company a business or
corporate entity
Another legal business structure to consider forming is a company, otherwise known as is legally declared
incorporation. Companies have their own independent legal entity, separate from their separate from its
owners
owners. They are formed according to legislation and are registered with the Australian
Securities and Investments Commission (ASIC). The owners of a company are referred to as shareholder
shareholders and appoint company directors to manage the company. owner of a
company

A company structure offers the protection of limited liability, whereby liability of the limited liability
where
shareholders is limited to the value of their shareholding. Unlike a sole proprietorship or shareholders are
partnership, a company has perpetuity. In other words, the company will continue to exist only personally
despite directors who may leave or possibly die while working in their position. liable to the level
of their original
investment in the
There are two forms of company: private and public. Each is discussed on the following page. company

ACTIVITY 4.2
Data from the Australian Bureau of Statistics, which counts the number of Australian businesses,
found that in 2020–21 there was a 3.8 per cent increase in the number of businesses. This included
a 15.8 per cent entry rate and 12 per cent exit rate.

The number of new businesses started in 2020–21 was 356 480, higher than it has been in the
past three years, and up from a low of 336 499 new businesses in 2019–20. At the same time,
there were 277 674 business exits in 2020–21, the lowest it has been in three years, since 2017–18
recorded 273 237 exits.

Source: Australian Bureau of Statistics website.

1 ABS data finds that the number of registered Australian businesses grew during the
COVID-19 epidemic. Suggest two possible reasons for this to occur.
2 Propose one reason as to why the number of business exits declined during the same time.
3 Propose two benefits to the Australian economy as a result of less businesses shutting their
doors while more businesses are starting.

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84 Unit 1 | Planning a business

Private company
The main feature of a private company is that it is restricted to a maximum of 50 shareholders
private company
a company where and these shares can only be traded with the permission of the other shareholders, which must
the shareholding be given before the transaction takes place. Private companies have the letters ‘Pty Ltd’ after
is limited with
their name, which means ‘Proprietary Limited’. Private companies are often, but not always,
shares being sold
privately family companies.
public (listed)
company a larger
company with Public (listed) company
unlimited
shareholders; Larger companies are usually public (listed) companies. These have an unlimited number of
shares are freely shareholders. Other features are that a company initially issues a prospectus inviting the public
traded on the
stock exchange to purchase shares. The shares are freely traded on the stock exchange. In contrast with a private
company, public companies can be recognised by only the word ‘Limited’ (Ltd) after their name,
showing that they offer limited liability to their shareholders. Public companies are also legally
obliged to publicly report on their activities.

Figure 4.5 Public listed companies, such as those shown above, are identifiable by the letters ‘Ltd’.

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 Chapter 4 The internal business environment: planning business structures and models 85

Table 4.1 Features, advantages and disadvantages of ownership structures

Business Features Advantages Disadvantages

structure

Sole trader • One owner who • Inexpensive and • Unlimited liability

operates the simple to set up places personal
business under • Easy to maintain assets at risk
their own name or a • Sole trader has • Owner is tied to the
Registered Business complete control business; difficult to Registered
Name (RBN) and over all aspects of have holidays or sick Business Name
Australian Business the business days (RBN) a trading
name under
Number (ABN) • Sole trader owns all • Profits are taxed at
which a person
assets and receives the marginal tax (sole trader)
all profit rate, which is higher or partnership
• Less paperwork than the company conducts its
• Easy to disband tax rate business or trade
• No legal requirement • Fewer tax
Australian
to disclose profits/ concessions Business Number
losses (as with • Harder to get finance (ABN) an 11-digit
companies), privacy • Reliant on own identifier of a
• Minimal government knowledge and skills company
regulation

Partnership • Business owned by • Inexpensive and • Unlimited liability

two to 20 partners simple to set up • Liability for debts
• Partnership • Risk is shared incurred by others
agreement to • Minimal government • Business could be
establish conditions regulation threatened by one
• Partners jointly liable • Workload may be partner leaving
for business debts shared • Potential for disputes
• Has an ABN • Offers broader and personality
• Operates under an access to capital, clashes
RBN knowledge, skills • Taxation at personal
and experience tax rates, which are
higher than company
tax rates

Private • Shareholders • Limited liability • High degree of

company (Pty (owners) are legally • Extra capital can be complexity in
Ltd) separate from the obtained by issuing establishment
business more shares • Higher establishment
• Between one and 50 • Separate legal costs
shareholders who existence • Higher degree of
appoint directors to • Existence is not government control
run the company threatened with and reporting
• Has an ABN death or removal of requirements Australian
Company
• Operates under one of the directors • Additional
Number (ACN)
registered company • Can trade anywhere compliance costs
a nine-digit
name and Australian in Australia • Potential for disputes number to
Company Number and personality be used on
(ACN) clashes a company’s
• Registered with common seal
and all public
ASIC, which issues
documents
Certificate of
involving the
Incorporation company

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86 Unit 1 | Planning a business

Public • Unlimited number of • Limited liability • High complexity and

accountability the
company shareholders • Extra access to establishment costs
extent to which
a business takes (Limited or • Shares can be capital through • More government
responsibility for Ltd) bought and sold on selling extra shares scrutiny, control
its actions and is stock exchange • Separate legal and compliance
willing to reveal • Has an ABN and ACN existence requirements
its actions and • Regulated by ASIC • Existence is not • Need for more
processes in a
threatened with accountability and
clear, transparent
manner death or removal of paperwork
one of the directors • Legal obligation
• Shares easily to report financial
transferable situation publicly
(less privacy)

CASE STUDY
4.2

Alcohol-free start
up: ‘too good to be
wasted’

The origin story of alcohol-free start-up Heaps the consumption of alcohol altogether by
Normal begins, ironically, over a round of beers. suggesting an alternative. ‘Beer doesn’t have
to mean alcohol. Beer doesn’t have to mean
It was November 2019. Heaps Normal chief getting wasted,’ Miller says. ‘Beer can also taste
executive Andy Miller, then working as a great without having those side effects.’
marketing consultant, was catching up with friend
and graphic designer Peter Brennan, lamenting The name Heaps Normal points to this mission
lack of availability of quality non-alcoholic beer. of normalising drinking without getting drunk
Miller says, ‘People associated non-alcoholic in the very social contexts where having a good
beer with this kind of watery, malty, very sweet time entails having a cold one in hand. ‘All
beverage that didn’t resemble beer at all.’ those activities you’d normally associate with
alcohol … music, going to the pub, watching
So, the pair decided to have a crack at making a sports game… we saw the opportunity to
their own. They called on brewing expert Ben create a brand that we were proud to take to a
Holdstock, who was excited by the challenge. barbeque or a standard gig.’
Next came Jordy Smith, a professional surfer
who wanted non-alcoholic options when he Rewriting the recipe
was off the booze during training season.
Heaps Normal brews beer with none of the
Miller and his fellow founders weren’t just trying alcohol using the same four ingredients as
to launch a new product in a crowded market of traditional beer (water, malt, yeast and hops).
beloved brands: they were gently challenging But all the details in the 15-step process had

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 Chapter 4 The internal business environment: planning business structures and models 87

to be changed to ensure the end product Two and a half years later, the quartet has
tasted like beer but without any alcohol. It took grown to a team of 20 that Miller oversees
Holdstock and the team six months to brew from his new base in Bangkok, Thailand. Heaps
and perfect a winning formula that would Normal has catapulted into a $57.5 million
pass the pub test – literally. When food writers, business with over 2000 wholesale customers.
brewers, bartenders and friends from the
industry sampled Heaps Normal, only one in ten Source: Adapted from Jessica Yun, ‘How Heaps
guessed that the brew was non-alcoholic. Normal CEO Andy Miller is brewing change in beer
culture’, The Age, 25 April 2022.

CASE STUDY ANALYSIS

1 Outline the gap in the market identified by the founders of Heaps Normal and explain why
this has become a profitable opportunity.
2 Propose and justify the likely legal business structure of this business.
3 a Identify one potential issue of this business structure that may impact Heaps Normal.
b 
Propose one strategy that the owners could implement to assist in overcoming this issue.
4 Identify three elements in the operating and macro environments that impact Heaps Normal.
5 Select your preferred search engine and research how the business has continued to develop.

ACTIVITY 4.3
Construct the following table in your notebook and complete it:

Private company (Pty Ltd) Public listed company (Ltd)

Features

Differences

Similarities

REVIEW ACTIVITY 4.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Distinguish between limited and unlimited liability and provide two examples of business
structures for each type of liability.
2 Compare the features of a sole trader business to a partnership.
3 Suggest and justify the most appropriate method of entering into business for each of the
following:
a Zaynab has a limited budget but plans to run a small cafe in her local area despite
several other cafes that are already established.
b Jordan has developed an innovative new product that he intends to market.
4 Identify the ownership structure of each of the following businesses and justify your response.
a Lim’s Kitchen Pty Ltd c Rosie’s Cupcakes
b Iman and Thomas Kitchens d Northeast Ltd.

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88 Unit 1 | Planning a business

4.3 Types of business models

Learning intentions – at 4.3.1 Describe and compare types of business models
the end of this chapter available to Australian business
section I will be able to:

Businesses must select the most appropriate business model that meets their needs and
business
model the plan maximises their chances of business success. A business model is the plan implemented by
implemented a business to generate revenue and make a profit. The model includes how revenue will be
by a business to
generated and expenses incurred, as well as the components and functions of the business. An
generate revenue
and make a profit original or unique business model, or a variation on an existing one, can become a competitive
advantage.

Online business models

Business enterprises with no physical presence that
conduct business via the internet have become
commonplace. Businesses in virtually every sector of
the economy now rely on the internet in some form in
order to reach customers, promote products and widen
their customer base.

There are seven main online business models.

1 D irect to consumer or merchant model: This

model involves a business making direct sales to
consumers via the internet in lieu of a bricks-and-
Figure 4.6 e-commerce is on its way to replacing traditional mortar store. Amazon and most retail operations
bricks-and-mortar businesses. use this model.
2 Advertising model: The advertising online model involves a website providing content, either
online business
a business free or for a fee. Advertisers then pay the website to advertise/promote their products on the
that conducts website. Payment may be based on the number of advertisements placed (per impression),
activities via the
per click or simply via a fixed cost. Facebook is one of many utilising this business model.
internet
Services such as Google AdSense and BuySellAds act as agents helping businesses add
brokerage advertising to their websites.
the activity of
buying and 3 Affiliates model: This model rewards the owner of a website every time a user clicks on a
selling foreign promotion and purchases a product.
money, shares in 4 Brokerage model: Businesses that use this model act as agents bringing buyers and sellers
companies, etc.
together. They may act as a transaction broker or a marketplace; eBay, for example, uses this
model. Money is earned by charging a fee/commission on each transaction.
5 Subscription model: This model involves a business charging a payment or subscription to log
onto its website. Media outlets such as News Limited (Herald Sun) and Nine Publishing
(The Age) use this model.
6 Information model: This model involves a website charging for information. Some digital
academic journal libraries charge per article, for example.
7 Community model: These websites build a community of users interacting with each other.
Blogs and chat sites are examples. Money is made via charging a subscription fee or calling
for donations. Wikipedia is an example of this model.

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 Chapter 4 The internal business environment: planning business structures and models 89

ACTIVITY 4.4
Go to the website of each of the following companies. Classify each according to the online
business model/s used.

Kogan Gumtree YouTube

Twitter Facebook LinkedIn

My Careers eBay The Age

Wikipedia Catch Airbnb

Uber Candy Crush Netflix

CASE STUDY
4.3
Australian online
shopping statistics
that you should
know

Few of us would have thought twenty years ago • More than 30% of Australian shoppers
that the idea of logging onto a computer, finding have tried new brands, and more than 20%
a product to purchase, submitting your credit have tried new retailers, stores and online
card details and to have the product delivered shopping websites since the start of 2020.
to your doorstep in just a few days would be • Nearly half of small businesses in Australia
possible. And yet here we are, with over 85 per have pivoted their approach to business in
cent of Australians on the internet and over response to the pandemic, with a distinct
12 million Australians using social media. shift towards online to maintain market
share.
Here is what has been happening:
• Global e-commerce sales reached $4.5 The COVID-19 pandemic significantly boosted
trillion in 2021. revenue growth, market share and sales
• The online shopping industry has grown for online retailers. The transition to online
dramatically over the past five years due shopping has underpinned many of these
to changing consumer attitudes, where developments – be it the change to remote
advertisers have benefited from consumers work or the purchasing of online grocery and
seeking variety and value in their purchases. consumer goods. Even with retail sales rising

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90 Unit 1 | Planning a business

by 9% year-on-year from July to December Source: Adapted from Commission Factory website,
2020, more time spent at home due to the ‘The Top E-commerce Australia Statistics for 2021 and
pandemic has accelerated the decline of Beyond’, 3 May 2021.
bricks-and-mortar stores and the growth of
e-commerce stores.

CASE STUDY ANALYSIS

1 Describe the impact of the COVID-19 epidemic on consumer behaviour.
2 Do you think that bricks-and-mortar businesses will recover from the negative impact of the
epidemic? Justify your response.

Table 4.2 Advantages and disadvantages in selecting an online business model

Advantages Disadvantages

Offers an easy and instantaneous A personal relationship is usually not developed

connection with customers, suppliers and between buyers and sellers. As a result, repeat
other stakeholders. In effect, the business customers are more difficult to maintain.
can operate 24 hours a day worldwide.

Promotion and marketing are usually Costs of planning, designing, securing and
cheaper and accessible to a wider global maintaining a professional e-commerce website
market. are considerable.

Costs/overheads are significantly less. Customers may be reluctant to purchase online

There is no need to pay for premises, as they are unable to physically handle or try the
and overhead costs, such as bills and products before purchase.
insurance, are less.

It is easy to keep track of competitors and The sense of trust and authority associated with
change prices to match them. a physical bricks-and-mortar location is lost. It is
difficult to establish a trusted brand name without
a physical business with a track record and a
history of face-to-face customer interaction.

Bricks-and-mortar business
model
A business that has a traditional physical
bricks-and-
mortar business presence involving stores, offices, or
a business with a production facilities that customers/
physical presence
clients actually attend, rather than relying
such as a shopfront
or an office, and on an online presence, is referred to as
involves face-to- having a bricks-and-mortar business
face interaction
model. A bricks-and-mortar business
with customers
model usually offers face-to-face customer
interaction.
Figure 4.7 Online businesses are increasingly creative in their attempts to
personalise their business to establish their customer base.
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 Chapter 4 The internal business environment: planning business structures and models 91

Table 4.3 Advantages and disadvantages in selecting a bricks-and-mortar business model

Advantages Disadvantages

Face-to-face customer interaction is possible. Shopping is less convenient for customers

This builds up a relationship with customers/ with busy lifestyles or those who live in
clients and may contribute to increased remote locations.
sales through building a base of loyal return
customers.

Customers can see, touch and try products There can be limitations in relation to the
before purchase. customers that are likely to go in store; i.e. a
limited reach.
clicks-and-
mortar business
A physical presence with identifiable buildings A wider range of stock can be provided online a business that
and location makes it easier to build a trusted due to lower storage costs. has previously
brand. traded using a
bricks-and-mortar
business model
Customers get instant gratification, which also The potential market is smaller with higher and that has
encourages impulse buying. overheads. adopted online
services and
sales in addition
to their traditional
Combining models model

e-commerce
Many businesses that have been trading using a traditional bricks-and-mortar business model
business a
before the development of the internet have since developed and adopted online services business that
and sales in addition to their traditional model. Most major retailers such as Woolworths, Coles, has never owned
a physical
Myer and David Jones have done this in order to maintain competitiveness. These businesses
shopfront, and
are referred to as being clicks-and-mortar businesses. Businesses that have never owned a has always
physical shopfront and have always solely operated using an online model are often referred to operated only
online
as e-commerce businesses.

Social enterprise model

A social enterprise often uses a traditional business
model of buying and selling goods and services
with a view to creating a profit. Unlike a traditional
business, however, the social enterprise business’s
prime motivation is not to create profit for owners/
shareholders. Instead, it aims to use profits to
fund or support social causes. Such causes might
include reduction of poverty or social disadvantage,
provision of employment to disadvantaged groups,
or addressing environmental issues. Many social
enterprises do make a profit, but this is not usually
their main reason for existing. Profits go back into
the business or to a charity. Social enterprises differ Figure 4.8 Mildura Chocolate Company uses a social enterprise
employment model aiming to increase community awareness and
from charities in that they derive income from understanding of employees’ abilities in place of focusing on their
business activities and not donations. disabilities.

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92 Unit 1 | Planning a business

There are approximately 4000 social enterprises in Victoria contributing over $5.2 billion each
year and employing thousands of people. Over 70 per cent of social enterprises operate as small
businesses in service industries.

There are four main social enterprise models:

1 Employment model: These social enterprises provide employment for marginalised people
in society, such as those with a disability, those with cultural or language barriers or any
disadvantaged group.
2 Goods and services model: These social enterprises aim to offer alternative products to those
seen to be socially or environmentally harmful. Fairtrade is an example. Other enterprises
provide organic food or products.
3 Social investment model: These businesses usually operate a traditional business model. All
profits are given to a charitable cause.
4 Hybrid model: A hybrid combines more than one of the above models; for example, a
restaurant selling organic foods sourced on a fair-trade basis, employing long-term
unemployed people, that directs its profits to charity.

ACTIVITY 4.5
1 Classify each of the following social enterprises as one of the categories of social enterprise
(employment, goods and services, investment or hybrid):
a CERES
b PonyUp for Good
c STREAT
d MADCOW Community Enterprises
e Mildura Chocolate Company
f Thankyou Group
g Etiko
h Cargo Crew.
2 Select one of the above social enterprises and undertake some online research to find out
how the social enterprise first began and how it has developed in recent times.

CASE STUDY
4.4
Aussie toilet paper
subscription
start-up Who Gives a
Crap donates $5.85
million to charity

This case study is available in the Interactive Textbook.

  

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 Chapter 4 The internal business environment: planning business structures and models 93

Franchise model
Australia is second in the world in franchising outlets per capita, with almost 90 per cent of
franchise where
these franchises being Australian developed. Australia has over 1000 franchises and close a business owner
to 70 000 franchise units that contribute $128 billion dollars to the Australian economy. (franchisor) grants
another (franchisee)
the right to use their
A franchise involves a franchisee paying another business (franchisor) for the right to trademark or trade
use that business’s trade name, products and operating systems. The franchisor will then name, business
systems and processes
exercise a degree of control over the running of the business, but in return will provide
assistance, advice, suppliers and their reputation. The franchisee is basically paying for franchisee an individual
the right to replicate another business in its entirety. Usually, a one-time franchise fee is who opens what
might be viewed as a
paid by the franchisee as well as a royalty – a percentage of sales revenue. In return, the branch of a company,
franchisee then receives immediate name recognition, familiarity through décor and purchasing the right
design, reliable and tested products, marketing, employee training, and ongoing support to use trademarks,
associated brands and
promoting and upgrading products. access to proprietary
information and
A franchisor retains a significant level of control over franchisees’ operations in order to strategy

safeguard their trademark, and to ensure the quality of their product remains consistent franchisor the company
from location to location. For example, any time you order a Big Mac from a McDonald’s or individual owning/
controlling the rights
store you know exactly the form and quality of what you are buying, even though to grant franchises to
it is likely that each McDonald’s will have a different franchisee owner. A franchisee potential franchisees
signs a legal document known as a franchise agreement that specifies the rights and
franchise agreement
responsibilities of both franchisor and franchisee. A franchisee will be given an exclusive a legal document that
right to operate the franchise in a specified trading area and agrees to pay set fees that outlines the rights
and responsibilities
may include:
of the franchisor and
franchisee
• an initial, upfront fee
• a percentage of sales income each month
• a regular advertising and marketing fee.

Figure 4.9 Some well-known franchises

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94 Unit 1 | Planning a business

Table 4.4 Advantages and disadvantages of owning a franchise

Advantages Disadvantages

Significantly reduced risk of business failure Far less independence – in effect, a franchisee performs
the role of manager rather than owner

Avoidance of the franchisor’s initial mistakes A franchise owner is not able to utilise their own ideas

Opportunity to access franchisor-provided training The franchise is judged by the performance of other
franchisees. Poor service provided by someone else
affects all.

A business system that has been tested and has usually Risk of excessive costs and fees: as well as an initial
succeeded with established policies and procedures and purchase fee, the franchise owner will also be expected
the expert assistance and advice from the franchisor to pay a monthly service fee and a percentage of takings

Less responsibility for decision-making, as many key

decisions are made by the franchisor

Established suppliers and the advantages of bulk buying

(i.e. economies of scale)

Franchising: some history

The development of franchising as a business model has an interesting history. Isaac Singer
(1811–75) is credited as being the modern father of franchising. During the 1850s, Singer was
selling his sewing machines. He wanted increased sales and a wider distribution, but could
not afford to manufacture more. Customers also wanted training to use the machines, which
retailers were not able to provide. Singer therefore decided to charge licensing fees to people
to sell his machines in a specific area. Each licensee was also expected to provide training to
customers. This provided capital for ongoing manufacturing of new machines.

The modern franchising model blossomed in the USA during the 1950s and 1960s. McDonald’s,
Kentucky Fried Chicken, as well as several laundry and dry-cleaning franchises, hotels and rental
cars were all significant players. Within a 10-year period, McDonald’s opened 1000 stores, Midas
Mufflers had 400 locations, Holiday Inn 1000 motels and Budget Car Rental 500 outlets.

Ray Kroc (1902–84) is credited as the founder of the McDonald’s franchise. A milkshake mixer
salesman, Kroc came across the McDonald’s hamburger store in California in 1954 and was
impressed by the business model. He became its licensing agent and recruited franchisees.
In 1961, Kroc bought the McDonald brothers out. By 1988 there were more than 10 000
McDonald’s franchisees across the USA. Now there are more than 37 000 worldwide.

In Australia, there was a similar pattern. After World War II, car manufacturers such as Ford and
Holden established a franchise model for retail sales. Petrol companies such as Shell, Mobil
and Caltex established franchise models for petrol stations. In 1968, Kentucky Fried Chicken
(now KFC) opened its first Australian store. Over the next few years, Pizza Hut, McDonald’s and
Hungry Jack’s opened their first franchise outlets in Australia.

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 Chapter 4 The internal business environment: planning business structures and models 95

ACTIVITY 4.6
Investigate the history and development of one of the following franchised businesses operating
in Australia:
• Boost Juice
• IGA supermarkets
• Chemist Warehouse
• OPSM
• Jim’s Mowing (or another Jim’s Group franchise).
Construct a brief report and outline:
1 who founded the franchise and when
2 where it was founded
3 a brief description of the products sold
4 what competitive advantage a franchisee owner would enjoy
5 approximate costs of being a franchisee (visit the Franchise Business website for more
information).

Importer and exporter business models

Businesses that buy and sell products across
international borders have an importer or exporter
business model. According to the Department of Foreign
Affairs and Trade (DFAT), Australia’s two-way trade in
goods and services was worth $873 billion in 2019–20,
with China, the United States, Japan, South Korea and
the United Kingdom as our top five trading partners.

Reasons for adopting an importer or

exporter business model
There are a number of strong reasons for adopting an
Figure 4.10 The Port of Melbourne is one of the largest ports
importer or exporter business model.
in Australia.

• Price differentials between countries – some products are cheaper to manufacture and
importer one who
assemble in one country than another. Raw materials and labour are cheaper in some parts purchases
of the world, making it attractive to source some products from those countries. Importers overseas
products for
and exporters take advantage of economies of scale to source goods from countries with
resale in their
lower cost structures and then sell the goods in countries where a higher price can be home country
obtained. For example, clothing and footwear produced in South-East Asia is often cheaper
exporter
than similar items produced in Australia. one who sells
• Differences in quality, reputation and image – French perfume has a high reputation and home-country
Egyptian cotton is highly regarded in Australia. Australian wine is highly regarded in many products
overseas
parts of the world. Australia is a source of high-quality agricultural produce and dairy products.
• Ready availability of goods in quantities – some things are not grown in Australia, and some
goods cannot be manufactured here for a competitive price. Electronic goods are currently
being sourced from Asian countries, where they are produced in large quantities and are
available at competitive prices.
• Seasonality – agricultural products are mostly seasonal. At different times of the year some
produce will grow in one part of the world, with many countries obtaining their supplies
from that country. As the seasons change, the parts of the world where the products are
sourced will change.

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96 Unit 1 | Planning a business

• Business opportunities become available for niche markets in Australia and overseas.
Entrepreneurs will take advantage of these. Some established businesses see Australia as an
expanding market and establish operations to take advantage of this; for example, fashion
retailers H&M, Zara and Uniqlo have all created a presence in Australia. Similarly, some
Australian businesses have expanded overseas; for example, Australian surf-wear producers.

Import or export businesses need to be aware of legal requirements and restrictions in moving
products between countries. Labelling requirements and quarantine requirements, as well as
import licences, need to be investigated.

ACTIVITY 4.7
Select two of the following companies. Locate the website of each using a search engine.

JTC Import Export Aussie Imports Leo’s Imports & Distributors

DK Choices Durmaz Tamarr Imports

Complete the following:

1 Outline the history of each company.
2 Describe the types of products imported and sold by each company.
3 List the brands imported by the company.

REVIEW ACTIVITY 4.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Compare the key features of an online business model to a bricks-and-mortar business

model.
2 Identify and briefly describe the seven types of online business model. Name at least one
online business that uses each model.
3 Discuss the advantages and disadvantages of a business adopting an online business
model.
4 In aiming to predict the future of bricks-and-mortar businesses, evaluate if the advantages
of bricks-and-mortar businesses will outweigh the disadvantages.
5 Identify two social enterprises that exist in your area. How does the community
benefit from these enterprises?
6 Boost Juice founder Janine Allis claims that franchises are more successful than other
small businesses. Outline two benefits and two issues for the:
a franchisor
b franchisee.
7 Brainstorm the names of businesses that you have purchased from in the last week.
Identify which business model they are utilising.
8 Describe two reasons for adopting the exporter–importer model.

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 Chapter 4 The internal business environment: planning business structures and models 97

4.4 Purchase an existing business or establish

your own?
Learning intentions – at 4.4.1 Analyse the costs and benefits in purchasing an
the end of this chapter existing business compared to a new business
section I will be able to:
goodwill the
difference in
Once a decision has been made to enter into business, the next consideration is whether to value between
the price that
start a completely new business or purchase an existing business. Each option has distinct a business is
advantages and disadvantages. The potential small business operator must decide which best sold for and its
suits their circumstances, talents, skills, abilities, goals and personal requirements. net asset value;
reflects the value
of the business
reputation and
Purchasing an existing business trading contacts

If the new business operator decides they would rather purchase an existing business as a intangible assets
going concern, the following costs will be part of the overall purchase: assets that
lack physical
substance and
• premises, plant, equipment and inventories of unsold stock can be difficult
• customer accounts to value, such

• contractual and legal rights, such as patents

as patents,
trademarks,
• employees copyrights,
• goodwill franchises, trade

• intangible assets such as the value of the business brand, any intellectual property such as
names and
goodwill
patents the business holds, and specialised knowledge and expertise held.

Table 4.5 Advantages and disadvantages of purchasing an existing business

Advantages Disadvantages

Involves a simpler process as registration of business The intangible assets of a business, such as goodwill, are
name and staffing have already been done. difficult to value precisely and may be overvalued; the
value of the business is therefore often difficult to gauge.

Total cost is agreed upon initially and less likely to blow out. Be prepared to get what you paid for: a bargain may turn
out to be a lemon (someone else’s failure).

Ready access to business financial records will make it Goodwill can, in fact, be ‘bad will’ if a business has a
easier to secure finance. Immediate cash flow. poor reputation, and as result it will take time to develop
reliable relationships with suppliers and a new customer
base.

Start-up time will be significantly reduced with some It can be difficult to make the new business owner’s
inventory available, there are pre-existing relationships ‘mark’ on the business with employees, and potentially
with suppliers, employees are trained, and customer customers, resisting change.
base is established.

Business operating procedures and practices are already Buying an existing business does not change the
in place and employees are familiar with the operations business owner who lacks industry experience and
of the business. expertise in running a business. The learning curve is
enormous and business owners must be involved and
proactive as they learn all areas of the business.

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98 Unit 1 | Planning a business

Checklist for buying an established business

• Ascertain exactly why the business is for sale. Is it in fact a failing business? Is the vendor
selling for financial reasons or not?
• Have an expert do an assessment of the business to ascertain if business goodwill is fairly
priced.
• Investigate future industry trends and existing market share of the business.
• Are suppliers reliable? Are inputs likely to be freely available at an affordable price in the
future?
• Physically check that the business has all the required fixtures and fittings, equipment and
stock in working order. Have these items valued.
• Have an accountant check all financial records, including taxation, receipts and wages.
• Check all the leases and legal contracts the business is subject to.
• Have an independent assessment of the business’s financial viability done by a consultant
and/or bank.
• Have a lawyer investigate the legal status of the business. Are there any pending court cases?
Zoning changes? Does the business have outstanding debts?

Figure 4.11 Purchasing an established business may suit new business owners with limited experience.

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 Chapter 4 The internal business environment: planning business structures and models 99

Establishing a new business

This is usually the best option if the business involves developing a completely new concept
currently unavailable on the market.

Table 4.6 Advantages and disadvantages of establishing a new business

Advantages Disadvantages

Complete autonomy/control over the concept A far greater degree of uncertainty and risk
and form of the business – the owner is able with no previous sales history or figures to
to put their personal stamp on the business. refer to.

The business price will not include the added It will take longer to establish a client/
cost of goodwill. customer base and, therefore, cash flow.

The freedom to implement personal ideas More work initially as establishment of

and have complete autonomy in operating the business systems, procedures and hiring
business and in establishment decisions. and training of staff will be required from the
ground up.

Original ideas and concepts belong to and will More difficult to obtain finance with an
be associated with the business. unproven venture.

Avoiding buying into the mistakes of others. More scope for error with the new business
owner being required to make more decisions.

Initial costs may be lower as intangible assets

do not need to be purchased.

Extra considerations when establishing a business from scratch include:

• registration of the new business name, plus relevant licensing and codes of practice
requirements
• locating and obtaining suitable premises
• establishment of relations with reliable suppliers
• employment of staff
• registration of intellectual property.

REVIEW ACTIVITY 4.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Discuss the potential issues in determining the value of goodwill in an established business.
2 Eleni has just completed a course in silversmithing and her tutor advises that her jewellery
designs are unique and her craftsmanship is of an excellent standard. Eleni is thinking
about opening her own business. Advise Eleni about the advantages and pitfalls that she
should consider.
3 Describe three costs and three benefits in purchasing an existing business.

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100 Unit 1 | Planning a business

Chapter 4 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 2, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Internal environment External environment Operating environment

Sole trader Partnership Unlimited liability

Social enterprise Franchise Importer and exporter

Direct to consumer model Bricks and mortar Limited liability

Stakeholder Private company Public company

Extension questions
The media has reported significant issues with franchises. Investigate and source two
newspaper articles:

• one that reports a positive, profitable franchise

• a second article that presents a negative franchise experience.

1 Compare the two articles, clearly establishing similarities and differences.

2 For the first article, evaluate whether the franchisee or the franchisor has been more
influential in creating the success of the franchise.
3 For the second article, evaluate whether the franchisee or the franchisor was responsible for
the negative issue. Propose two actions that may prevent this occurring in the future.
4 Discuss whether the Australian Government should create further laws to protect
franchisees.
5 Go to the Franchise Business website and answer the following questions:
a Outline the services that are available via this website.
b Identify and research two categories of franchise. For each category, select one franchise
currently for sale.
c For each franchise opportunity, name and describe:
– the franchise and types of goods/services sold
– the areas available for purchase.
d If you were in a position to purchase one of the two franchises, which would you choose?
Justify your response.

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 Chapter review 101

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

4.1 Internal and 4.1.1 Define internal and Case study 4.1: Q1–2 Yes No
external environment external business
environments

4.1.2 Describe the relationship Review activity 4.1: Part 1 & Yes No
between internal and external Part 2 (Q1)
business environments

4.2 Choosing the legal 4.2.1 Describe the key Activity 4.1 Yes No
business structure characteristics of different Activity 4.2
types of business structures

4.2.2 Analyse the factors Case study 4.2: Q1–6 Yes No

associated in deciding the Review activity 4.2: Part 1 &
suitability of a business Part 2 (Q1–4)
structure

4.3 Types of business 4.3.1 Describe and compare Activity 4.3 Yes No
models types of business models Activity 4.4
available to Australian Activity 4.5
business Case study 4.3: Q2
Case study 4.4: Q1
Review activity 4.3: Part 1 &
Part 2
Extension

4.4 Purchase an 4.4.1 Analyse the costs and Review activity 4.4: Part 1 & Yes No
existing business or benefits in purchasing an Part 2
establish your own? existing business compared
to a new business

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 5
Resourcing, locating, financing
and support services
for a business
‘Spend time upfront to invest in systems and processes to make long-term
growth sustainable.’
Jeff Platt (1986– )

About the author:

Jeff Platt is CEO of Sky Zone, a highly successful chain of
American indoor trampoline parks.

KICKSTARTER ACTIVITY
1 Discuss how this statement by Jeff Platt can be applied to all businesses.
2 Suggest how setting up systems and processes can be used in the
long-term growth of a business.

CHAPTER OVERVIEW

Business owners must make crucial decisions regarding the business’s

resource requirements in terms of natural resources, labour and
capital resources, and how these requirements can be met in the most
efficient and effective manner. A decision about the most suitable
location for a business requires several factors to be considered
including the type and potential scope of the business.

Different sources of business finance and capital must also be assessed

and a decision made about which is best for the particular business.
There are many decisions for businesses to make and few business
owners have the knowledge or experience required to make the right
decision for all areas of their business. Potential and existing business
operators in Australia have at their disposal a wide range of support
services providing expert advice and assistance.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter
I will be able to:

Business resource needs (natural, 5.1 Business resource needs and the factors
labour and capital) and the factors affecting their choice
affecting the use of business resources 5.1.1 Describe the three types of business
resources and the factors affecting
their use

Business locations and the factors 5.2 Business location and factors affecting choice
affecting choice of location of location
5.2.1 Describe and analyse the choices
available in determining the location of a
business

Sources of finance available to 5.3 Sources of business finance

establish a business and the factors 5.3.1 Examine the sources of finance available
affecting the source of finance chosen and examine the factors affecting their
choice

Business support services such as legal, 5.4 Government and community-based support
financial, technological, community- and assistance
based, formal and informal networks 5.4.1 Describe the role of business support
and business mentors services in their offerings to business

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission)

What’s ahead

CHAPTER 5
Resourcing, locating,
financing and support
services for a business

5.1 Business 5.2 Business 5.3 Sources of 5.4 Government

resource needs and location and factors business finance and community-
the factors affecting affecting choice of based support and
their choice location assistance

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104 Unit 1 | Planning a business

5.1 Business resource needs and the factors

affecting their choice
Learning intentions – at 5.1.1 Describe the three types of business resources and
the end of this chapter the factors affecting their use
section I will be able to:

A business must plan on an ongoing basis to ensure future human and physical resource
requirements are met. Correct provision of physical input resources is essential if the business is
to create and sell quality products in the quantities demanded by the market. Businesses have
differing resource requirements according to the nature of their operations. These will also change
throughout the life of the business as it expands into new markets or diversifies the product range.

Physical resources: quality,

reliability, procurement,
maintenance, replacement

Human resources:
Finance workforce planning,
Business recruitment, training
resourcing:
natural resources,
component parts,
capital, labour,
finance

Business layout Business location

Informal support and Formal sources of support and

assistance to business assistance to business

– Legal: lawyer
– Previous owners – Financial: accountant/banker
– Networks
– Consultant: marketing, insurance,
– Complementary businesses
information technology, business services
– Competitors
– Federal government: Entrepreneurs’
programme
– Victorian state government:
Small Business Centre Victoria (SBCV),
Small Business Mentoring Service (SBMS)
– Local government
– Community organisations:
business incubators,
networks and mentoring services

Figure 5.1 Business resourcing

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 Chapter 5 Resourcing, locating, financing and support services for a business 105

Types of resources
Resources required by businesses can be divided into three main categories.

Natural resources are resources that have been extracted from the natural environment and
natural resources
are unprocessed. Examples of natural resources include water, oil, sunlight and timber. raw, natural
A potential list could continue with many more examples, but what is required is dependent on materials such as
timber, mineral
how a business aims to use these resources in the process of creating or manufacturing goods.
deposits, or fresh
A restaurant, for example, will need a supplier of fruit and vegetables. water that have
economic value
A shift in community expectations, partnered with changes in laws established by governments, labour a
requires businesses these days to use resources that are sustainable and environmentally primary factor
friendly. A procurement policy that reflects the values, vision and mission of the business will of production
that involves the
guide business decision-making regarding the selection of suppliers, to ensure supply of natural human physical
and sustainable items has been gained according to the standards of the procurement policy. and mental effort
required to create
products or
Labour refers to the human physical and mental effort (skills and knowledge) required to services
create products or offer services. For example, a restaurant might use an employment agency to
workforce
employ waiting or kitchen staff. planning a
continual process
The management of its human resources (labour force) is a key contributing factor to the of assessing
and forecasting
success of a business and involves managing employees through all stages of the employment the number
cycle. To manage human resources, businesses carry out workforce planning, which involves of employees
forecasting the likely future demand for employees and ensuring steps will be taken for this required for a
business to meet
demand to be met. Businesses will aim to attract and maintain a sufficient and sustainable demand
supply of labour with the skills required to keep the business operating at the required level.
capital resources
human-made
Policies and procedures must also be developed regarding: items used in
the process

• employing staff with appropriate skills and qualifications while meeting legal requirements of production.
Machinery and
regarding equal opportunity, fair pay and safe working conditions equipment are
• training staff to ensure continued skill development to meet the needs of the business examples.

• monitoring staff turnover and assessing reasons for staff departures.

Capital resources are human-made items used in the process of production. Machinery
and equipment are examples. A restaurant would require capital resources such as kitchen
equipment, point-of-sale technology, a coffee machine,
tables and chairs.

Meeting the physical requirements of a business is

an ongoing cycle requiring constant attention. The
following actions will be required:

• negotiation of leasing and/or purchasing

arrangements for buildings, equipment and other
inputs
• servicing and maintenance of equipment and other
capital items. This may involve contracts with service
providers and the establishment of maintenance
procedures.
• replacement of capital resources when they reach
the end of their life cycle; for example, vehicles,
Figure 5.2 All businesses must plan to purchase equipment and
information technology (IT) equipment and software. maintain it on an ongoing basis.
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106 Unit 1 | Planning a business

Factors affecting choice of resources

Planning to meet natural, human and capital
requirements is an ongoing process. Generally, a
business needs to consider the following when
resourcing:

1 Quality: selecting suppliers who provide

quality resources will ensure that high-quality
production standards are maintained, which
will make for a more competitive business.
Figure 5.3 It is
imperative to
2 Reliability: suppliers who are reliable and deliver what is required on time enable a business
select good-quality to maintain production and remain competitive.
suppliers, who 3 Corporate social responsibility: in order to gain and maintain a reputation for being
will provide high-
quality goods.
ethically and socially responsible, a business must select suppliers who have similarly high
standards.

CASE STUDY
5.1
Thomas Foods to
create 2000 jobs at
new plant in South
Australia

This case study is available in the Interactive Textbook.

  

REVIEW ACTIVITY 5.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the three types of resources. Select a local business in your area and identify two
examples of each type of resource that would be required by that business.
2 Identify three examples for each of the three types resources that might be required by a
large hotel.
3 Describe what workforce planning is and outline its purpose.
4 Explain the three factors that a business needs to consider when selecting resources.

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 Chapter 5 Resourcing, locating, financing and support services for a business 107

5.2 Business location and factors affecting

choice of location
Learning intentions – at 5.2.1 Describe and analyse the choices available in
the end of this chapter determining the location of a business.
section I will be able to:

A business location provides a link between the business

and its customers/clients, as well as suppliers who
provide the essential raw materials, products and labour.
A good location will establish a balance between these
factors. Different business types have different location
requirements. Determining business location requires
planning and research.

Different businesses have different location

needs
T he best location for a business is dependent on the type of
business. A business needing a physical presence to draw
customers may choose retail shopping strips, both suburban Figure 5.4 Choosing the right location is crucial to business
and CBD; shopping centres/malls (large and small); or success.

industrial parks of various types.

business location
Table 5.1 Location needs for different types of businesses the geographical
site of a business

Require a position that maximises visibility and therefore sales.

Some retailers rely on impulse buying; others rely on customers
Retailers
planning their visits. Usually, the higher the pedestrian and vehicular
traffic flow, the higher the costs associated with a location.

Local councils typically zone for manufacturing. A factory will not

be given any permits to operate in a residential area. Manufacturers
Manufacturers require large amounts of floor space. Customers usually do not
come directly to them; consequently, visibility and traffic flow are
not important. Easy access to transport routes is important.

Require less visibility but more space, with easy access to transport
Wholesalers routes for deliveries and dispatch of large quantities. Warehouse or
storage facility will be most suitable.

Require mainly office or commercial business space. Do not rely on

Service businesses foot traffic; however, easy access and client parking are required. foot traffic
Some businesses may operate from a home. the number of
people walking
past a business
Not restricted in their location but must ensure access to fast
and reliable internet access. If selling goods, an online business
Online businesses
will require warehouse space, as well as an area for packing and
dispatch.

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108 Unit 1 | Planning a business

Factors to consider when selecting a location

Selecting a business location will generally depend on two types of factors: quantitative and
qualitative. Quantitative factors are those that can be numerically calculated, such as the cost
of purchasing or renting premises. Qualitative factors are those that deal with the psychological
and emotional aspects of location, such as proximity to public transport or consideration for the
welfare of workers. Some points to consider are:
complementary
business a
business that
• Personal factors – the business operator’s personal situation is important. For instance, a
offers products
desire to live and work in a certain locality or to stay close to family nearby often determines
that are related to location. Other factors may include the distance people are prepared to commute.
or could enhance
those of another
• Area profile – the area under consideration must be analysed for its ability to provide access
business
to a sufficient number of paying customers (proximity to customer base). The business
owner must evaluate the site with their target market in mind. Factors to consider include:
– area demographics: assessment of the population
in regard to its age patterns, incomes, interests,
ethnicity, education levels and so on, which will
Age indicate whether there are sufficient potential
customers in the area to maintain a viable business.
– economic and social trends: assessment of changes
Ethnicity occurring, such as demographic shifts in the area;
Sex
for example, younger people moving into the area,
or changes in the birth rate. How will the business fit
Demographic with these trends?
segmentation • Complementary businesses – are there established
businesses that complement the new business, and have
potential to enhance sales in the area? For example, a
Occupation Income
pharmacy would be well positioned next to a doctor’s
surgery.
• Proximity to competitors – sometimes when comparative
Marital status shopping is involved it is good to have competitors
nearby as people come to an area in order to make
planned purchases (such as furniture, cars and
Figure 5.5 The demographics of an area are a major appliances). This is how specific locations gain
consideration when selecting a business location. reputations, such as precincts for restaurants or car
sales. Proximity to other large businesses with ‘pulling
power’ could be significant when considering location as
certain businesses will attract customers into an area. For
example, people will travel to a certain shopping centre
in order to visit a supermarket or a variety store such as
Target.
• Proximity to customers and suppliers – aim for a location
where there is potential for demand such as shopping
strips and shopping centres for retailers and cafes.
Reasonable proximity to suppliers provides greater
opportunity for quick and reliable deliveries.
• Local government by-laws – especially zoning regulations:
what developments, if any, are allowed in the area? Will
permits be required to build, extend, or put up signage?
Figure 5.6 Few businesses are successful if located in isolated
areas, so careful selection of a suitable location is essential to
support the viability of a business.

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 Chapter 5 Resourcing, locating, financing and support services for a business 109

• Site accessibility and visibility – are the required number of customers, staff and suppliers able
to locate and access the business? Proximity to public transport could be a consideration, or
checking that there is sufficient parking available. Consider the importance of being visible
along a main street or the preference to be tucked away in a laneway.
• Suitability of the buildings – the actual buildings must meet the physical requirements of the
business, such as building design, floor space, storage space and facilities.
• Cost – the budget of a start-up business is usually limited. Therefore, the operator may need
start-up
to compromise on site location to accommodate this. Generally, the cost of premises will commencement
increase in relation to the size and quality of the premises, level of accessibility to services, of business
visibility and amount of passing trade. operations

• Accessibility to labour – attracting enough of the best type of employees is another major
consideration. Can potential employees afford to live in the area? Will they want to move to
the area if necessary?

ACTIVITY 5.1
Match each of the following businesses with the location that best suits it. Justify your choices by
considering the needs of each business.

Business Location options

Supermarket Among several office towers

Bread shop Large space with major road frontage

Florist Shopping strip in affluent area

Fast-food outlet Next to hotel

Used car yard Country town in dairy area

Pharmacy Industrial area

Animal boarding kennel Airport

Wholesale fish seller Home based

Retail jewellery store Suburban shopping centre

E-commerce business Large shopping centre with high foot traffic

Factory Busy fresh food market

High-end boutique Outside supermarket

Italian restaurant Beachside town

Milk processing plant Foyer of maternity hospital

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Table 5.2 Checklist for choosing a business location

Choosing a business location Yes No

1 Have you outlined your specific requirements (size, street frontage, services, etc.) before
looking?

2 Have you researched whether to lease or purchase premises?

3 Have you researched previous tenants or owners regarding the history of the site? Why
did they leave the site?

4 Is the site suitably zoned? Research local government planning requirements.

Customers

1 Who is your target market? Is the site suitably located for them?

2 Is your location adequately visible and accessible to foot and vehicle traffic as well as car
parks?

3 Does the site project the right image for your business? Do neighbouring businesses
project the desired image?

Transport

1 Have you ascertained how customers will travel to the business? Is public transport
available?

2 Is the cost of shipping goods to and from the site a major factor?

Neighbourhood

1 Are neighbouring businesses appropriate and do they appear healthy?

2 Are complementary businesses close by?

3 Are there any vacant premises nearby? Why? For how long? Have similar businesses
failed/succeeded in this location?

Financial

1 Are the premises affordable? What are the alternatives?

2 Are the terms of the lease suitable?

Long term

1 Does the site have scope/room to expand?

2 Will zoning restrictions conflict with future needs or plans?

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 Chapter 5 Resourcing, locating, financing and support services for a business 111

Figure 5.7 The level of foot traffic is important for businesses that rely on unplanned or impulsive purchases.

ACTIVITY 5.2
Using the checklist in Table 5.2 for choosing a business location, interview a business owner and
find out if each of the criteria was considered when they chose their business location. Present
and analyse your findings in a report.

REVIEW ACTIVITY 5.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Propose and describe four factors that should be taken into consideration when selecting a
business location.
2 Suggest and justify an appropriate location for each of the following businesses.
a an auto service centre
b a child-care centre
c a manufacturer
d a marketing consultancy
e a dentist
3 Identify suitable complementary businesses for each of the following businesses. Justify
your choice.
a a medical centre
b a jeweller
c a gymnasium
d a cafe

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112 Unit 1 | Planning a business

5.3 Sources of business finance

Learning intentions – at 5.3.1 Examine the sources of finance available and
the end of this chapter examine the factors affecting their choice.
section I will be able to:

Finance is a crucial resource and may be a major factor in a business’s success. Finance is
finance the
management required in all areas of business activity, including establishment costs when setting up a
of money, or business, such as legal expenses and a feasibility study. Providing resources for business
the money
activities (operating costs) involves renting or purchasing premises, setting up the facility,
belonging to a
person, group, or paying and training staff, as well as the provision of capital resources essential for the running of
organisation the business. Finance can be sought for such things as purchasing a building or factory, motor
vehicles, machinery, equipment and tools, and inventory.

Factors to consider when choosing a source of finance

There are a wide range of funding options available to a business and determining the most
suitable can be a complex, time-consuming task. There are four factors that a business should
consider when choosing a source of finance.

1 Risk
Businesses should consider the potential consequences if they are unable to meet their financial
commitments associated with a particular source of finance. Businesses need to minimise
financing-related risk when choosing the sources of finance.

2 Cost
Each source of finance offers some benefits as well as pitfalls. The overall aim is to minimise the
cost of finance and to maximise the opportunity to create profit for the business. The financing
decision must consider projections of future business growth, cash flows, and the business’s
ability to maintain repayment of any funds borrowed. A cost/benefit analysis would assist in
decision-making.

3 Control
Some sources of finance may lead to diluting the ownership and control of the business. If the
finance arrangement is for repayment over an agreed period, business control is not affected.
If the funds are to be raised from an investor or through stock market activity, the business
control and decision-making may be impacted.

4 Long-term versus short-term borrowing

Businesses need to decide whether long- or short-term borrowing will better suit their needs.

A finance agreement to be repaid over a longer period, such as bank loans and hire purchase,
will suit if the funds are required for a piece of equipment that will be a permanent part of

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 Chapter 5 Resourcing, locating, financing and support services for a business 113

operations. Short-term finance is used when a business needs to cover unexpected expenses,
manage fluctuations in cash flow, or optimise a potential opportunity. Given that the finance is
to be repaid in a short period of time, there is less risk involved for the business and the lender.

There are a range of finance options available to businesses. The business owner/manager
should seek financial advice about the best option. Some options are outlined below.

Bootstrapping
For a small business, raising the cash needed to start up, operate and then grow is always a
bootstrapping
problem. Lenders require security (assets as loan guarantees) and interest, and investors take a method of
their share of profits out. Bootstrapping, from the metaphor ‘pulling yourself up by your own financing a new
business with
bootstraps’, involves ways of financing operations without having to borrow a lot of cash or
personal savings
take on investors. Bootstrapping allows entrepreneurs to retain full ownership of their business. or invested funds
Bootstrapping methods can include the following: from family or
friends; can be
supported by
• Keeping costs down: working to keep
– keeping overheads low: for example, operating from a garage or spare room where costs down and
using revenue to
permissible, rather than renting more space
grow rather than
– taking on multiple roles (multiskilling): the owner is also the cleaner, answers the phones borrowing
and does their own paperwork.
• Having a good cash flow:
– avoiding the need to make large payments before revenue comes in.
• Growing by using revenue (cash already paid
by customers):
– taking advantage of the interest-free period
on a credit card used to buy supplies
– restricting credit given to customers
and selling direct to cash-on-delivery
customers rather than to distributors that
require credit
– requiring cash advances/deposits from
customers
– leasing equipment, or obtaining it through
hire purchase, rather than buying it with Figure 5.8 Bootstrapping methods reduce dependence on loans and investors.
cash.

Owners’ equity
Many business owners draw from their personal savings to invest in their new business venture.
Business owners who do this can retain full ownership and hence control of the business. It is
often the easiest and most cost-effective way to begin; however, the initial costs of establishing
and operating a business are high and few owners have enough personal equity, so they need
to pursue other options.

Family or friends
A business owner must be careful should they feel the need to seek finance from family or
friends. Often these arrangements are flexible, money may be lent interest free and a longer
repayment period may be negotiated. However, any misunderstandings about the financial
arrangement can damage personal relationships. This may be avoided through a debt finance
arrangement undertaken formally through a solicitor, which will establish clear expectations.
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114 Unit 1 | Planning a business

Private investors/business angels

Investors can contribute funds to a business in return for a share of profits and equity. A
business angel
an individual business angel invests in a new or expanding business. Business angels are usually involved
who provides a in the business directly or as a mentor. They provide development capital, and also contribute
small business
their business skills and contacts to benefit a new business.
start-up with
capital, generally
in return for Business angels can be individuals or businesses keen to operate in the area of risk capital (so
ownership equity
called because when they invest, they take on part of the risk of growing a new business). The
or convertible
debt advantage of securing the help of a business angel is that they can make investment decisions
fairly quickly. The Angel Investment Network (AIN) has an investor register so that businesses
venture capital
money that is can be matched with suitable private investors.
given to start-
ups and small
businesses with Venture capitalists
perceived growth
potential by Venture capital is generally supplied by large corporations that invest large sums in start-
investors up businesses with the potential for high growth and large profits. Venture capitalists often
crowdfunding take an active role in a company’s performance by providing guidance and valuable industry
donations from connections. As the venture capitalist actively influences strategic direction, this may result in a
the public to
raise funds for a
loss of autonomy and control for the owner.
one-off project;
typically used
by artists and
entrepreneurs Crowdfunding
Crowdfunding is a method of gathering finance for a business through donations from the public
for a one-off project. It is typically used by artists and entrepreneurs and involves setting a goal,
providing details of the project and its budget, and then encouraging people to contribute.

Usually, the ‘campaign idea’ or business idea is posted onto a crowdfunding website with further
details about the project. On some websites, a business owner might need to set a monetary
goal and a time frame. Then, individuals who are interested in supporting the campaign, often
called ‘backers’, can donate money to the business to help it achieve its campaign goal. Money
is usually raised through fund raising websites
such as Pozible, where contributors pay
the amount they have pledged only if the
campaign reaches its target.

There are a number of advantages with

crowdfunding as a source of finance. These
include gaining a customer base committed
to the product, an opportunity to interact
directly with customers and gain feedback,
plus free word-of-mouth marketing. There are
also several disadvantages, including the need
to campaign and present a product, the need
to provide incentives and rewards, having to
compete with other businesses also seeking
crowdfunding for their ideas, and that that
there is no guarantee the funding goal will be
reached.
Figure 5.9 Crowdfunding involves sourcing public donations for a business
start-up through the internet.

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CASE STUDY
5.2
Crowdfunding
campaign success
with film and video

Maya Newell knew she had a big project on After screenings and film promotion of
her hands, but at the beginning the audience the short film she was empowered with
didn’t match the project size. Maya needed a information on what worked, the buzz behind
substantial amount of money to make a full- the project was building and she could begin
length feature documentary film highlighting planning for another campaign. Maya’s second
same-sex parenting. With a goal of $100k in campaign was for the exact same project, just
mind, she had to have a great strategy. In a bigger and better version: a full-length film.
all-or-nothing crowdfunding it’s nearly Everything from the beginning was building up
impossible to start with no audience and reach to this final campaign.
a target so high.
Maya ended up reaching that $100k mark
How did she overcome this? She took things with her second campaign. She took things
in two stages. First she launched a short in two steps, which resulted in a comfortable
film (of the same project) with a $10k target. fundraising experience. Had she aimed for
She hit this target without too much struggle, that $100k mark with her first campaign, she
then produced the short film. This initial probably would have failed.
campaign helped her to understand the
audience of the film, what types of marketing Source: Adapted from Pozible website ‘Game
worked for her crowdfunding and, most of all, changing tips for crowdfunding your next film’,
helped her make a start on a smaller yet very Pozible.com, 9 April 2018.
engaged audience, who would be a massive
asset for any future campaigns.

CASE STUDY ANALYSIS

1 Explain how the first crowdfunding campaign prepared Maya for the second campaign.
2 Outline Maya’s success in the second campaign and describe the strategies that were
successful.
3 Research Maya Newell Film Maker to find out if the film was successful and if she has
entered into any further crowdfunding campaigns.

Crowd-sourced funding
Crowd-sourced funding (CSF) was introduced in 2017 and is regulated by the Australian Securities
and Investments Commission (ASIC). It is effectively a financial service where eligible start-ups,
small and medium-sized businesses are able to raise funds from the public to start or grow their
business or pay off debts. Eligible businesses can raise up to $5 million per year using CSF on the
proviso that they are a private company with less than $25 million in assets and annual revenue.
Investors are able to contribute up to $10 000 per annum in exchange for business shares.
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116 Unit 1 | Planning a business

In 2021, Australian investors poured $71 million into crowd-sourced funding and the growth
of this sector is predicted to continue. Over 150 companies have used CSF, attracting 68 000
investors. The most popular sector for investors has been financial services followed by food
and beverage.

CASE STUDY
5.3
Zero Co record
breaking $5 million
crowd-sourced
funding campaign

Eco-start-up Zero Co raised $5 million in just

6 hours and 27 minutes, rewriting the history
of Australian crowd-sourced funding. Founder
and CEO Mike Smith put a $10 000 cap on
investments, but after investors put $1 million
dollars into the campaign in just five minutes,
he reduced the figure to $5000, then $2000 and
finally $1000.

At the time, the start-up located in Byron Bay

had been trading for just 11 months (since
November 2020). The business reduces plastic
waste in Australian households by offering
single-use plastic free body-care and cleaning
products that are generated from common Figure 5.10 CEO Mike Smith plans to expand the product
household products and produces durable range and scale of operations, and launch globally.
dispensers that look good and are made from
ocean, beach and landfill bound plastic. The Source: Adapted from Simon Thomsen, ‘Startup
intention behind this is for customers to refill Daily TV: Zero Co founder Mike Smith on his eco-
and use them indefinitely and avoid creating startup’s record-breaking $5 million crowd-funding
further waste. campaign’, Startup Daily website, 20 October 2021.

CASE STUDY ANALYSIS

1 Outline the outcome of this crowd-sourcing campaign and describe how Zero Co plans to
use the funds.
2 Propose two reasons why crowd-sourced funding has been so successful for Zero Co.
3 Suggest another source of finance that Zero Co could have considered and discuss the
opportunities and limitations of your selected choice of finance.
4 Go to Zero Co’s website and research evidence of the business’s recent product line offering
and growth.

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 Chapter 5 Resourcing, locating, financing and support services for a business 117

Suppliers
For many businesses, trade credit is essential in financing growth. It is the credit extended by
initial public
the supplier that allows businesses to delay payment for goods. Suppliers will offer trade credit offering (IPO)
to businesses they have established a reliable relationship with, and may offer interest free floating on the
stock market
credit for up to 90 days.
offering shares in
the business to
raise capital
Stock market
overdraft an
Also known as initial public offering (IPO), floating on the stock market involves publicly extension of
offering shares to raise capital. This strategy may be followed by a business needing funds to credit that
permits an
support expansion or a privately owned business that wishes its shares traded on the stock account holder to
market. The move to list on the Stock Exchange is an expensive and complex option that carries withdraw more
the risk of not being able to raise the funds needed. money than they
have in their
account

Sources of finance from financial institutions

Financial institutions such as banks, building societies and credit unions
provide financial solutions for both short- and long-term purposes. Businesses
take out various loan types to fit their situations. Loans vary in amount,
repayment period, interest rate, interest rate type
(whether fixed or variable), security and fees.
Some products include business loans, lines of
credit, overdraft facilities, invoice financing,
equipment leases and asset financing.
Loans tend to be sought for long-term
Financial institutions
borrowing.

An overdraft is a bank’s
authorisation that a customer may withdraw
Commercial banks Investment banks
cash over the amount that is in their account,
so that they have a negative balance, up to a Insurance companies Brokerages
certain overdraft limit. The customer has to
provide security (such as stock or buildings) Investment companies
Mortgage companies
and a favourable credit assessment showing
that the business is viable. An overdraft Non-bank financial
facility works like a loan but it should institutions
Savings and loans
only be used to help cash flow; that is, to
provide working capital before the business Shadow banks
Credit unions
receives payment from its customers. As the
business has to pay a higher rate of interest
compared to other forms of finance, it Figure 5.11 ‘Financial institutions’ is an umbrella term that includes banks.
should only be used for short-term borrowing.

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ACTIVITY 5.3
Select one of the following big four banks and visit
its website:
• ANZ
• Commonwealth Bank of Australia
• National Bank of Australia
• Westpac.

Go to the business banking section of the bank you

have selected. Identify the services offered for:
• business loans and finance
• cash flow solutions
• equipment and car finance
• business accounts and cards.

Finance companies
Like banks, finance companies are direct lenders. Loan applications are reviewed by credit
managers or analysts who will then decide whether to approve or not. Finance companies tend
to accept a higher level of risk and, as a result, a higher rate of interest is likely to be charged.
Most finance companies offer finance products via a retailer. Examples include Zurich Financial
Services, Capital Finance and Latitude Financial Services.

Commercial hire purchase

Under a hire-purchase contract, a business pays
an initial deposit for goods such as machinery
or vehicles, which it can then use while it pays
off the remainder of the purchase price in
instalments plus interest. If an instalment is
not paid, the goods may be repossessed by the
vendor or its agents. The regular instalments
may be reduced if the last instalment is agreed
to be much larger; this is called a ‘balloon
payment’. Using hire purchase, the business
may receive revenue from using the goods
before having to fully pay for them, which can
help cash flow. After the last instalment, the
purchaser owns the goods.
Figure 5.12 Support services can help a business to succeed.

Informal support services

Studies have shown that successful businesses tend to utilise available support services more
than those that fail. It is therefore vital that business operators, if they wish to optimise their
chances of long-term success, are aware of, and know how and where to access the numerous
support services available to them.

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 Chapter 5 Resourcing, locating, financing and support services for a business 119

Previous owners
When purchasing an existing business, it is wise for a new business owner to negotiate a period
transition
during which they operate the business alongside the previous owners before takeover occurs period a period
(known as a transition period). The previous owners of a business are potentially valuable where the new
owners operate
sources of information and assistance as they may be able to demonstrate established systems,
a business
as well as provide important information about clients, such as tastes and buying habits. alongside the
Previous owners often help identify appropriate suppliers and advise on potential sources of former owners
before final
support.
handover

network an
interconnected
Networks system of people
or businesses
A network can be an informal friendship group or a more formalised grouping such as a service
club like Rotary. Networks may form among business operators with something in common,
such as operating in the same geographic area or within the same industry.

Networks facilitate the exchange of ideas, advice and support between like-minded individuals
and between groups of people. Members find personal satisfaction in meeting with like-minded
people who are looking for ways to improve their business, while establishing connections with
local businesses and the local community.

Networks also offer an opportunity to establish contact with owners of complementary

businesses who may further enhance their chances of success. Members can confidently refer
businesses or offer invaluable advice and support while establishing local connections.

Through networking, competitors will find that there will be some commonality with shared
concerns that can be addressed together, potentially with greater influence. Competitors
are another valuable source of information for a business; hence the term ‘keeping an eye
on the competition’. Observing the opposition allows a business operator to identify gaps in
the market.

Figure 5.13 A transition period where outgoing owners train the new owners is common practice.

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120 Unit 1 | Planning a business

Business support services

All business operators can expect to pay for professional advice from specialist support
specialist
support services services to assist them in their decision-making; for example, legal or financial advice or advice
professional on daily operational activities.
advisors; for
example,
lawyers, financial
advisors and Legal support services
operational
advisors Many businesses will require the services of a lawyer to negotiate on their behalf, give advice
contract and provide representation on legal issues. In general, ignorance is not accepted as an excuse
legally binding for breaking any law, meaning business owners must ensure that they follow specialist legal
agreement that advice. The services of a lawyer are crucial for the following:
incorporates
the following
elements: offer, • advice on purchase or establishment of the business, and acting on behalf of the business
acceptance and owners during the process of purchasing
the intention to
enter into legal • selection and establishment of the best legal ownership structure including franchise
relations agreements
• preparing legal documents such as contracts required for the sale and purchase of business
• securing intellectual property such as trademarks and patents
• interpretation of legislation and how it will affect the business; for example, local
government by-laws, WorkCover, employment, consumer protection and company law
• preparation of partnership agreements
• dealing with takeovers and acquisitions or selling the business.

Financial support services

A successful business needs an accountant to provide initial financial assistance during the
establishment phase, as well as regular and ongoing services throughout the life of the
business. An accountant’s expertise will be required:

• t o give an accurate valuation of a business intended for purchase, including goodwill

• to establish a financial recording system
• to prepare quarterly financial statements, monthly cash flow summaries and budgets for
auditing
• for taxation
• to recommend appropriate computer software
• for liaison with government departments, especially the Australian Taxation Office (ATO).

Figure 5.14 A business will require qualified legal advice and assistance.

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 Chapter 5 Resourcing, locating, financing and support services for a business 121

It is important to check that an accountant has appropriate qualifications to perform the

work you will be requiring of them. For example, they will need to be a qualified tax agent to
deal with taxation matters; similarly, to give financial advice, an Australian Financial Services
Licence will be required.

Bank managers are another valuable source of financial advice

and assistance. They are responsible for processing loans and
supervising business bank accounts. They also:

• give advice on the feasibility of a business expansion

• give investment advice
•
Figure 5.15 Recommendations can be sought from
act as a source of finance professional bodies such as CPA Australia or Chartered
• provide EFTPOS facilities. Accountants Australia and New Zealand.

ACTIVITY 5.4
Accessing regular financial services can be
costly for a business; however, good record-
keeping processes will reduce the work
required by an accountant or registered
tax agent.

Go to the Australian Taxation Office website,

search for ‘Record-keeping help for small
business’ and answer the following:

1 Outline the five rules for record

keeping.
2 Describe the benefits of accurate Figure 5.16 Australian Taxation Office
record keeping.

Technology support services

Given the complexity and expertise required of information technology (IT), businesses often seek
external IT support services. This frees up time for owners and employees to focus on other areas
of the business. IT support services are able to install and maintain systems to deliver smooth,
continuous business operations. IT support services can protect computer infrastructure from
cyber threats with up-to-date security programs. Many businesses are concerned about security
threats that could compromise sensitive data and erode confidence with all stakeholders.

IT services are well worth investing in as the efficiency of a business is not compromised and
largely continues without interruption. IT services offer support in the following areas:

• business internet
• cloud service
• network security
• business email
• software development
• customer relationship management software
• location-based tools.

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CASE STUDY
5.4
Bunnings
customers’ personal
data compromised
following
cyber-attack

The names and email addresses of thousands The matter has been referred to the Office of
of Bunnings customers using the contactless Australian Information Commission for further
pickup services in December 2021 were investigation.
compromised in a data breach. It is estimated
that approximately 3.7 million who used Customers were advised by Bunnings to be
the drive and collect service may have been cautious with their email accounts and protect
impacted. their accounts by regularly changing their
passwords.
Third-party booking provider Flexbooker,
which provided Bunnings’ customers with Source: Based on information from
scheduled appointment times for contactless bunnings.com.au, ‘Flexbooker data security issue’,
pickup, reported the cyber security attack. 15 January 2022.

CASE STUDY ANALYSIS

1 Describe the issue outlined in this case study.
2 Suggest how the data breach may impact future customer behaviour and sales at Bunnings.
3 Outline the potential role of IT support services to protect future data being stolen.

REVIEW ACTIVITY 5.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Distinguish between the following terms:

a bootstrapping and business angels
b crowdfunding and crowd-sourced funding
c overdraft and hire purchase.
2 Explain what the four factors are that a business should consider when deciding on a
source of finance.
3 Analyse why it is important for a business to investigate different sources of finance.
4 Propose and justify two forms of finance that would suit a start-up business.

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 Chapter 5 Resourcing, locating, financing and support services for a business 123

5.4 Government and community-based

support and assistance
Learning intentions – at 5.4.1 Describe the role of business support services in
the end of this chapter their offerings to business.
section I will be able to:

With almost 2.5 million small businesses employing almost 5 million people, it is in the interest
of government to optimise the chances of small business success, as this will translate into a
healthy economy. The three levels of Australian governments offer a wide range of services and
assistance at little or no cost.

Federal and state government assistance

Both federal and state governments offer grants to
successful applicants of new and innovative businesses.
Although the application process is often tedious and
time-consuming, a successful submission can be valuable
in stepping up the potential success and development
of a business. Since 2014, the Australian Government
has allocated over $400 million to the Entrepreneurs’
Programme to help form almost 500 innovative businesses.
The program supports businesses through four elements:

1 Accelerating commercialisation – assists with

commercialisation of products, services and processes.
2 Business management – businesses can access the Figure 5.17 There are multiple organisations dedicated to
providing support to small businesses throughout Victoria.
expertise of private sector advisers for reviewing
business operations, strategy, direction, growth and supply chain.
3 Incubator support – incubators, both new and existing, are assisted to improve the
prospects of Australian start-ups in achieving international commercial success.
4 Innovation connections – experienced facilitators work with the business to develop a
report identifying knowledge gaps that may prevent business growth.

Small Business Victoria was established by the Victorian state government to provide
information and expert business advice. Support services include:

• the Small Business Bus – effectively a ‘travelling office on wheels’, visiting Melbourne and
mentor person
regional Victoria and offering 45-minute appointments with an experienced business who offers their
mentor knowledge,

• workshops and events that cover topics such as business planning essentials and developing wisdom and
advice to
digital strategies someone with
• the Annual Small Business Festival held each August, comprising over 500 events across less experience
Melbourne and regional Victoria.

Online resources
Both federal and state governments provide online information for businesses. Table 5.3
summarises some of these sites.
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124 Unit 1 | Planning a business

Table 5.3 Information available through government-provided websites

Government organisation Website content

or area of interest

business.vic.gov.au Provides information on topics relating to small business,

(Victorian based) including setting up, marketing, hiring and managing staff. Any
new government initiatives appear on this site.

business.gov.au Provides tools, tips and information to plan and establish a

(Commonwealth small business. Access to all government information, services
Government) and transactions, such as acquiring an Australian Business
Number (ABN) and government forms required by small
business. Provides information on business assistance, business
questions, business start-up, employing people, taxation,
importing and exporting, superannuation, and occupational
health and safety.

www.vsbc.vic.gov.au Victorian Government website dedicated to creating a

Victorian Small Business competitive and fair operating environment for small business.
Commission The Commission has four main functions: advocacy, dispute
resolution, monitoring and engagement. First port of call for
independent guidance on business disputes, it provides access
to quick, effective, neutral and low-cost mediation services.

www.austrade.gov.au Provides export and investment services to Australian

Austrade companies and supports Australian capability in a changing
global environment.

ipaustralia.gov.au Patents are essential in protecting intellectual property (IP) for

IP Australia – Patents any device, substance, method, or process that is new. Provides
information and processes applications.

www.abs.gov.au Good source of business data, statistics and advice on use of

Australian Bureau of this type of information.
Statistics

https://ablis.business.gov.au A one-stop tool that assists in finding the specific local, state
Australian Business License and federal permits, licences and registrations required by
and Information Service businesses.
(ABLIS)

www.auda.org.au Policy and industry self-regulated authority for the internet.au

.au Domain Name domain space.
Administrator

www.ato.gov.au Government website giving taxation information for individuals

Australian Taxation Office and businesses of all sizes.

www.scamwatch.gov.au Advice on and awareness of frauds targeting small businesses.

Scamwatch

www.accc.gov.au Main responsibility is to ensure businesses comply with fair

ACCC – Australian trading and consumer protection laws.
Competition and Consumer
Commission

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 Chapter 5 Resourcing, locating, financing and support services for a business 125

Local government assistance

Local government is an important source of information because it has responsibility for
regulating many of the actions of businesses in its area. As part of their strategic planning
process, councils create an economic development plan, which strategically sets the economic
plan for the immediate area over a five-year period. Local governments oversee programs
designed to assist and support businesses. This usually includes facilitation of business
networks for their operators. Some councils operate local economic development units that aim
to improve basic business opportunities in a local government area.

Major
employers
and business
leaders
Visitor
accommodation:
Employment Macedon Ranges Tourism:
Agribusiness
and Training Accommodation Daylesford
Forum
Network Association Macedon
(MRAA) Ranges (DMR)
Tourism

Viticulture:
Macedon Ranges Tourism:
Macedon Ranges
Vigneron's Tourism Macedon
Shire Council
Association Ranges (TMR)
(MRVA)

Macedon
Ranges Business Macedon Ranges Equine Business
Networking Ranges Business Industry and Tourism
Group Connect (MRBC) Network (REIN) Associations
(MRBNG) (BATAs)

Real estate
agent network

Figure 5.18 Macedon Ranges Shire Council business and industry liaisons. Local governments offer a range of support
services for industry groups and networks.

Economic development units

As mentioned above, local governments run economic development units that aim to improve
basic business opportunities in a local government area. They also run projects and initiatives
aimed at local businesses, such as seminars and workshops. Most publish a newsletter, which
can be accessed via the local government website. Local business awards and access to
information about government grants are other common features.

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ACTIVITY 5.5
1 Go to the website of your local government. Locate the services and support offered to
local business. Copy and complete the following table in your notebook, noting which
options they provide:

Local Government Area

Business service and advice Provided Not provided Details

Business mentoring services

Business incubator

Economic Development Unit

Seminars and workshops

Trader groups

Business grants

Newsletter

Hosts annual business awards

2 Find a copy of your council’s current economic development strategy on its website.
Investigate three strategies the council plans to implement to support business growth in
the area.

Community-based support services

Business Enterprise Centres
Business Enterprise Centres are a nationwide network with over 30 member centres across all
Business
Enterprise states and territories, and most can be identified with the distinctive BEC logo. Some centres are
Centres a partially funded by the federal government, and these centres are a useful first point of contact
national network
for business owners at a local level who are seeking business information, advice and guidance
of centres that
serve as a first across all industry sectors.
point of contact
for business
BECs initially undertake a viability assessment and
owners seeking
business will alert potential business owners to issues that may
information, influence the business proposition and hence avoid
advice and
negative financial damage. Services offered include
guidance
mentoring support, business information and training
programs. BEC network members provide a wide
range of workshops including: Figure 5.19 Business Enterprise Centres can be found
Australia-wide.

• changes to state and federal legislation

• changes to local zoning, development and traffic regulations
• using social media for the benefit of the business
• human resource management.
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 Chapter 5 Resourcing, locating, financing and support services for a business 127

Business incubators business

incubator an
A business incubator is a selective program supporting a start-up business throughout the organisation that
course of its early years. Many incubator programs provide access to a coworking space, where supports new
businesses by
start-up founders can access office space, business equipment and technology.
making available
business
Office/secretarial services, advice, consultancy and training are available at a minimal cost, premises, office/
secretarial
until the business is established. The incubator manager also acts as a mentor or provides an
services, advice,
introduction to other mentors. consultancy
and training
at minimal
Incubators have proven to be very successful at creating employment, commercialising new
cost, until that
technologies and assisting to develop local economies. Business incubators can significantly business is
lessen the likelihood of business collapse. established

CASE STUDY
5.5
Melbourne
Innovation Centre
and mentorship

The Melbourne Innovation Centre (MIC), added to the suite of offering in response to the coworking
established in 1998, aims to provide an changed post epidemic conditions. space a shared
space that is
environment and mentorship that contributes to designed for
the growth of business and create employment Since it was established in 1998 MIC has diverse groups
in Melbourne’s north. Located in Alphington incubated over 400 start-up and scale-up of professionals,
sole traders and
with offices in Northcote and Greensborough, businesses, creating over 1500 jobs within small businesses
the MIC provides start-ups and small business Melbourne’s north, and contributes over to work
owners with low-cost, high-quality advisory $66 million annually to the Victorian economy. independently
in a communal
services in a coworking space. Advisers and setting
mentors with a range of business skills and An impressive range of businesses have
experience across a variety of industries that been incubated by MIC including Farmwall
understand the challenges small businesses Urban Farming, a community oriented social
face support these fledgling businesses. enterprise that is adding a new dimension
to the concept of ‘home grown’ to cafes
MIC has demonstrated the ability to deliver and restaurants. The ground-breaking
high-impact programs such as Digital Solutions concept provides custom design, installation
and the Kitchen and Food Incubator, training and and maintenance of vertical gardens.
mentoring to over 3500 businesses (including Environmentally, Farmwall reduces food miles,
home-based businesses). In addition, MIC has food waste, pesticide and herbicide usage,
supported the establishment and growth of water and energy costs, and deforestation.
over 100 Indigenous-owned enterprises through
its Indigenous Business Incubator program. Farmwall cofounder, Geert Hendrix, explains
The Business Recovery Advisory Service and the motivation behind the start-up: ‘It is
Partners in Wellbeing Helpline have been possible to combine food production, design
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128 Unit 1 | Planning a business

and nature through innovative science and

technologies. If we grow our food in coherence
with natural ecosystems and implement this
mindset in designing our living spaces we
create a beautiful, healthier environment for
ourselves, as well as solving major issues that
cause climate change and pollution.’

Not long after joining the coworking community

at MIC, Farmwall began the Two Feet Program,
an acceleration program that enabled the
business to design a solid business model,
and deepen their value proposition, intent and
customer desirability. The program aims to help
entrepreneurs understand the critical elements
needed to build a sustainable business.

Source: Adapted from the Melbourne Innovation

Figure 5.20 Farmwall Urban Farming start-up uses
Centre website, ‘Farmwall – Urban farming startup’,
aquaponics to grow microgreens for cafes.
October 2017.

CASE STUDY ANALYSIS

1 Outline the success of MIC since it opened in 1998.
2 Describe the advantages offered by a business incubator in terms of:
a cost
b mentoring
c support
d networking.
e coworking.
3 Examine the progress of Farmwall as a business since its involvement with MIC. Research
Farmwall and describe its current progress. Has the business continued to develop as
expected? Propose one challenge that Farmwall may encounter and determine whether
MIC would continue to play a role.

Community-based networks
Small Business Centres Victoria (SBCV) is a network of community-based, not-for-profit
Small Business
Centres Victoria business centres providing a range of business services in both metropolitan and regional
(SBCV) a network locations throughout Victoria. Each SBCV is incorporated and run locally under a public/
of community-
private partnership. Staffed by business development managers who are specialists in
based, not-for-
profit business business and industry, these centres offer advice, mentoring and business incubations
centres providing to business owners. Through their successful partnerships with governments, private
a range of
enterprise and local communities, SBCVs are able to facilitate practical and confidential
business services
throughout business advice. As SBCVs are locally based, staff have an understanding of the issues facing
Victoria particular areas and hence are positioned to tailor their advice to the specific needs of a
new business.

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 Chapter 5 Resourcing, locating, financing and support services for a business 129

Business mentors
State and local governments also facilitate numerous local business groups and make
mentoring arrangements. These assist business through the opportunity to share the
experiences of others. There are a range of programs provided by government to promote and
support business networks and provide mentoring services.

The Small Business Mentoring Service (SBMS) is a non-government, not-for-profit organisation

supported by the Victorian Government and Small Business Victoria. This is a low-cost program
offering the services of approximately 130 business people with deep experience, and
qualifications and skills across a broad range of disciplines and industries. An SBMS mentor will
assist with:

• starting a new business

• writing business plans
• developing marketing strategies
• increasing sales and profits
• understanding finances
• improving management skills
• identifying new opportunities.

CASE STUDY
5.6
Small Business
Mentoring Service
and Altegra:
sheltering from a
business storm

From adversity comes opportunity. That’s how ticking away just nicely,’ Simon says. ‘It literally
small business owner Simon Braunthal has ground to a halt.’
seen the COVID-19 crisis, which is changing the
way he and other businesses work. The situation could have been disastrous. But
Simon set about finding new ways to market
Simon runs Altegra, which has sold premium his portable marquees and gazebos, which are
custom-made and -branded marquees and known for their strength and durability.
gazebos since 2004. When the pandemic hit
and Australians were told to stay at home and
avoid large gatherings, sales plummeted by 75
per cent.

Outdoor crowds were Simon’s livelihood, but

most markets closed, sport was postponed,
schools went online, and outdoor events were
cancelled. ‘Prior to this our business was
Figure 5.21 Some of Altegra’s products in action

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130 Unit 1 | Planning a business

Thinking outside the square online. With the guidance of the mentors from
The challenge for Simon was finding new SBMS, exploring the digital opportunities that
product ideas and markets as COVID-19 best aligned to his business was extremely
restrictions gradually eased. When schools valuable. ‘It’s almost like starting again,’ Simon
returned, for example, he developed hand says. ‘We’re having to change our thinking.
sanitiser stations that used a gazebo with a We’re having to invest more on our website
school logo to provide a recognisable location and YouTube.
to find and use it.
‘It’s exciting in some ways. It’s a bit of a reset
With some help from the Small Business not just for Australia but for the whole world.’
Mentoring Service (SBMS) CEO David Gregory,
Simon brainstormed more clever ways to Adapting to a new normal
attract new sales and to expand Altegra’s digital SBMS has also adapted to the new normal
footprint. by moving mentoring online via Zoom and
establishing a COVID-19 support page on its
They included: website (www.sbms.org.au). It deals with
issues such as accessing support and how to
• Outdoor kitchen/serving stations. With survive in these challenging times.
numbers restricted at wineries and
restaurants, branded gazebos could become With David, Simon looked at his current market
outdoor stations for items such as crepes to see what avenues remained unexplored,
and cheese platters. what would enhance or differentiate his offer,
• Fairs and markets. As markets, fairs and how he could target bulk sales and what
outdoor events return, event organisers and he could offer others looking to meet new
councils might like gazebo packages with challenges.
creative customised messages and photos.
• Festivals. Gazebos can be matched to a ‘The road ahead is not the same road,’ David
festival theme or stallholder, such as Ferrari explains. ‘While so many businesses have been
red marquees at the Italian Festival in impacted, the response should be how can
Carlton’s Lygon St around Grand Prix time. they redefine their business, their direction,
• Tourism. A group of businesses could their products/services and align them to the
use gazebos or marquees for consistent new road.’
branding across joint ventures, such as farm
gate or tourism trails. The Small Business Mentoring Service (SBMS)
is a non-government, non-profit organisation of
Making a fresh start volunteer expert mentors who give their time
Simon is also rethinking how he operates. and experience to help small business. It is
He had preferred selling face to face and supported by Small Business Victoria.
customers liked to visit his Knoxfield
showroom. ‘People like to feel them and touch Source: Adapted from www.sbms.org.au, ‘Altegra –
them,’ he says of his products. Post-COVID-19, Sheltering from a business storm’.
however, more customers may prefer to shop

CASE STUDY ANALYSIS

1 Outline the issues experienced by this business as a result of the COVID-19 pandemic.
2 Describe how the Small Business Mentoring Service assisted Altegra.
3 Based on your knowledge of business support services, propose two additional business
support services that Simon Braunthal could pursue further.

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 Chapter 5 Resourcing, locating, financing and support services for a business 131

ACTIVITY 5.6
Select one of the following business support organisations: Business Incubator Centre, Business
Enterprise Centre or Small Business Mentoring Service. Working in small groups of three,
construct a booklet or pamphlet promoting your chosen organisation and the services it offers to
a start-up business.

Headings that may be used in the booklet or

pamphlet include:

a getting started
b coming up with a business idea
c legal advice
d financial advice
e government assistance and advice
f business structure and registration
g case study of a business benefiting
from the organisation’s services.

You may wish to conduct your research online

or arrange to visit the organisation.

Figure 5.22 A small business owner needs to consult advisers and

professionals in areas that require specific expertise.

REVIEW ACTIVITY 5.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Distinguish between formal and informal sources of business support.

2 Describe the advantages that are available through business networking.
3 List the sources of formal assistance available to businesses. Categorise these as
government or non-government providers.
4 Using the Business Victoria website and related links on the website, construct a checklist of
10 items that a business start-up should consider in their initial planning and suggest where
relevant advice can be reliably found.
5 Rank in order of importance the organisations that operate to support innovative business
from local to federal government support. Describe the services offered and justify your
ranking by explaining why you have selected the organisation to be ranked as you have
determined.

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132 Unit 1 | Planning a business

Chapter 5 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 2, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Capital resources Natural resources Labour

Business location Bootstrapping Owners’ equity

Business angels Venture capitalist Crowdfunding

Crowd-sourced funding Overdraft Commercial hire

purchase

Mentoring Business support services Business incubator

Extension questions
1 Investigate three different sources of finance a business might access. Present your findings
to potential business owners, outlining the advantages and disadvantages of each source.
2 ‘There is a wealth of assistance offered to an aspiring business operator; however, to
navigate the range of possibilities is confusing.’ Consider this statement, and then construct
Construct an information pamphlet titled ‘The Start Up Guide to Business Support Services’.
Make sure your pamphlet:
• describes the types of assistance and support a potential business operator might
require while setting up and establishing a small business.
• discusses the advantages and potential disadvantages of the services that are offered.

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 Chapter review 133

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

5.1 Business resource 5.1.1 Describe the three types Case study 5.1 Yes No
needs and the factors of business resources and Review activity 5.1: Part 1 &   
affecting their choice the factors affecting their use Part 2

5.2 Business location 5.2.1 Describe and analyse Activity 5.1 Yes No
and factors affecting the choices available in Activity 5.2   
choice of location determining the location of a Review activity 5.2: Part 1 &
business Part 2

5.3 Sources of 5.3.1 Examine the sources Activity 5.3 Yes No

business finance of finance available and Activity 5.4   
examine the factors affecting Case study 5.2: Q1
their choice Case study 5.3: Q1–3
Review activity 5.3: Part 1 &
Part 2
Extension: Q1

5.4 Government 5.4.1 Describe the role of Activity 5.5 Yes No

and community- business support services in Activity 5.6   
based support and their offerings to business Case study 5.5
assistance Case study 5.6: Q2–3
Review activity 5.4: Part 1 &
Part 2
Extension: Q2

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 6
Business planning and corporate
social responsibility (CSR)

‘I admire companies that give back to communities. It is an absolute

essential for organisations to watch, mitigate, and improve their impact on
the environment, people, communities, their health and overall well-being.’

Shiv Nadar (1945– )

About the author:
Shiv Nadar is an industrialist and philanthropist. He is founder
of HCL Technologies Limited and is the third richest person
in India, with an estimated net worth of over $28 billion.

KICKSTARTER ACTIVITY
1 Why does Shiv Nadar believes it is essential for organisations to improve
their impact on the environment and communities?
2 This chapter is titled ‘Business planning and corporate social responsibility
(CSR).’  Discuss the relationship between these two concepts.

CHAPTER OVERVIEW

Planning involves working out how to do something, get somewhere, or achieve a desired
objective. As individuals, we all need to plan our lives in order to achieve objectives. Businesses
are no different! A business must plan to achieve business objectives right from inception. Failure
to plan will see the chances of success in business lessen considerably. There is an old saying:
Businesses do not plan to fail; they simply fail to plan’. In other words, it is those business operators
who rush headlong into a business venture without taking the time to plan who do not succeed.
A business should be built up with a specific strategy and direction in mind. Think of a plan as being
like a global positioning system (GPS). Attempting to navigate through an unfamiliar area without
using a GPS is hardly effective. Referring to a GPS, it is possible to assess all of the route options
and select the best one. Like these direction-finding devices, a business plan should maximise the
chances of arriving at a desired destination without wasting time and other valuable resources.
Planning should occur before establishing the business and continue for the life of the business.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will be able to:

Planning analysis tools to 6.1 Planning

assist in determining the 6.1.1 Describe planning analysis tools such as a SWOT
strengths and weaknesses analysis to assist a business
of decisions regarding
changing internal factors,
such as SWOT analysis

Overview of business plans, 6.2 The business plan

including the benefits of 6.2.1 Outline the key features of business plans and
using them and an outline of discuss their usefulness in business planning
their key features

Corporate social 6.3 Corporate social responsibility considerations

responsibility considerations 6.3.1 Examine the need for corporate social responsibility
and business planning considerations in business planning

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 6
Business planning and
corporate social
responsibility (CSR)

6.1 Planning 6.2 The business plan 6.3 Corporate social

responsibility
considerations

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136 Unit 1 | Planning a business

6.1 Planning
Learning intentions – 6.1.1 Describe planning analysis tools such as a SWOT
at the end of this analysis to assist a business
chapter section I will
be able to:

Planning is a formalised process

planning a
formalised involving a series of decisions that
SWOT
decision-making are aimed at assisting a business to analysis
process that is
achieve its objectives. A systematic
future oriented
approach to planning, which is based
strategic planning
on five stages, can be undertaken
long-term
(two to five by different levels of management,
years) planning with the decisions made varying in CSR
undertaken management Business Levels of
time from short term to long term.
by senior issues related planning planning
management to Planning involves working out what to planning
achieve business the business wants to achieve (i.e.
objectives
targets and objectives), how it will
business achieve these (strategies/tactics) and
strategy the who will manage the process.
plan or process
that a business Business plan
implements to
achieve its long- Levels of business planning
term goals and
objectives Businesses must make plans for the Figure 6.1 Business planning
long, medium and short term if they
tactical planning
the planning
are to be successful.
undertaken by
middle-level
management
to assist in
Strategic planning
implementing
strategic
Strategic planning is long-term planning over a period of two to five years and is concerned
decisions; its time with the whole business and its long-term direction. A strategic plan looks at how that business
frame is medium intends to compete and survive in the marketplace for the long term. It involves setting
term (one to two
years)
long-term, whole-of-business goals. For example, if a business sets an objective of increasing
its market share, the business strategy could be to provide a superior product and quality
tactics activities
customer service.
or courses of
action taken by
a business to
achieve business
objectives
Tactical planning
Tactical planning covers the short to medium term (one to two years) and usually involves
planning tactics or steps within the overall business strategy. For example, if a business strategy
is to provide quality customer service, the tactical planning would involve identifying what
the business believes quality customer service to be and then planning the training program
required to implement this strategy. Put simply, tactical planning sets out the tactics that make
a strategy happen.

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 Chapter 6 Business planning and corporate social responsibility (CSR) 137

Establishing an objective – (for example: what do we want?)

Identification of present situation and forecasting the future situation

(SWOT analysis for strategic planning)

Developing and evaluating planning alternatives

Selecting and implementing the plan

Monitoring and reviewing the results

Figure 6.2 Five stages of planning

Operational planning
Operational planning covers the short-term Strategic planning operational
(day-to-day, weekly, monthly, up to one year) planning planning the
detailed, short-
undertaken by a business. This level of planning is term planning
detailed and is designed to implement strategies that Tactical planning undertaken by a
will ultimately achieve specific objectives that have business

been determined by a higher level of management.

Operational planning

SWOT analysis: a planning tool

Figure 6.3 Three levels of business planning
An important analytical tool for a business to use when
undertaking strategic (long-term) planning is a SWOT analysis. This analytical exercise helps a
business to focus on its internal environment by recognising its strengths (what it is good at)
and minimising its weaknesses (what it has performed poorly at). The business also needs to
focus on its external environment so that it may take advantage of opportunities (what it can
use to its advantage) and reduce any threats (things that could adversely affect it).

A SWOT analysis can be broken down into the following areas:

• A strength can be defined as an internal characteristic that contributes to the realisation of

the mission of the business. This could include a positive reputation, strong branding, type
of product, how the product is made, or the quality of the service provided.
• A weakness is an internal characteristic that negatively influences the functioning of the
business; for example, poor reputation, weak market, or the current structure of the business
may not be suitable.
• An opportunity is an external fact or development that, if taken advantage of, could
contribute to the realisation of the mission or purpose of the business. This could include
globalisation and decreased interest rates.
• A threat can be defined as an external fact or development that can have a substantial
negative effect on the performance of the business. Examples of threats could include
globalisation, increasing costs, environmental issues, or a decline in the industry.

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138 Unit 1 | Planning a business

Table 6.1 Examples of strengths, weaknesses, opportunities and threats as part of a SWOT analysis

Internal environment

Strengths Weaknesses

Well-trained and skilled workforce Unskilled and poorly trained workforce

Strong reputation/brand recognition Poor reputation/brand recognition

Quality customer service Poor customer relations

Excellent product/service Outdated product/service

Highly skilled/experienced management Unskilled/inexperienced management team

team

Strong financial position Under-capitalisation/constantly needing

funds

Up-to-date and efficient facilities Outdated and inefficient facilities

Dynamic and responsive organisational Bureaucratic management structure

structure

Positive corporate culture Poor/toxic corporate culture

Stable workforce High level of staff turnover

External environment

Opportunities Threats

New and changing customer needs Changes in customer preferences and

buying behaviour

Development of new products/services Actions taken by competitors, including

pricing, special offers and promotions

Expansion to different locations Changes in lease conditions, such as

increased rent or eviction

Government policies – favourable Government policies – restrictive

Improving economic conditions Economic factors

New technologies Developments in technology

Strategic alliances Competitors entering into strategic alliances

Excess of resources Shortages of resources, such as materials

and skilled staff

Legal issues – protection/removal of Legal issues – restrictive legislation or legal

restrictions action

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 Chapter 6 Business planning and corporate social responsibility (CSR) 139

CASE STUDY
6.1

IKEA’S strategies
determined through
a SWOT analysis

IKEA is an internationally known home Strengths

furnishing retailer that is recognised for its • Specialist marketing expertise
Scandinavian style. Founded in 1943, it is • Store location
now the world’s largest furniture retailer. • A strong global brand
The majority of IKEA’s furniture is sold as a • Its vision ‘to create a better everyday life for
flat-pack, which is then assembled by the the many people’
consumer. This allows for reduced costs of • A strong business concept which is based
assembling the furniture, storage and packing. on offering a wide range of well-designed,
It is estimated that IKEA stocks approximately functional products at low prices
12 000 products and sells these via its 455 • Reaches all demographic groups in its
stores operating in 60 countries and its online design. It balances the product function,
stores. IKEA stores also have a restaurant and quality, design and price
cafe which serve typical Swedish food. At the • Increased use of renewable materials
exit to the stores there is a small food shop • Smarter use of raw materials
which sells Swedish grocery items. • Creation of long-term partnerships with
suppliers
Low prices are the cornerstones of the IKEA • Using economies of scale, i.e. bulk buy at
concept and help to make customers want cheaper unit costs
to buy from IKEA. In addition, its products • Sourcing materials close to supply chain to
are well designed, functional and appeal reduce transport costs
to a wide range of age groups and types of • Delivering products directly from the
households. IKEA has a social conscience, in supplier to IKEA store, so cutting handling
particular for people and the environment. Its costs, reducing road miles and lowering the
vision ‘to create a better everyday life for the carbon footprint
many people’ demonstrates that this concern
underpins its business. Its commitment to Weaknesses
sustainability is shown in its choice of product • The size and scale of its global business
range, suppliers, stores and communication. This makes it difficult to control standards
Its concern for people and the environment and quality
is seen in the better use it is making of raw • Difficult to control working conditions in
materials and energy. These actions, while some of the countries where IKEA products
helping to keep costs down, also help the are made
company to reach its green targets and have an • The need for low-cost products has to
overall positive impact on the environment. be balanced against producing good-quality
items
IKEA uses SWOT analysis to help it reach its • Need to keep good communication with all
objectives. Following is a summary of a SWOT global stakeholders about its environmental
analysis on the operations of IKEA. activities

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140 Unit 1 | Planning a business

Opportunities as World Wildlife Fund, UNICEF and Save

• Ensure in the price-sensitive marketplace the Children
IKEA gets its story out to consumers and • Being open with all stakeholders – by
that it conducts itself in an ‘environmentally building trust through good communication
sensitive manner’ with consumers, coworkers, suppliers and
• A growing demand for greener products the media
• A growing demand for low-priced products
• Demand for reduced water usage and lower Threats
carbon footprints • Slowdown in first-time buyers entering the
• Giving customers tips and ideas on how to housing market
create a sustainable life at home • More competitors entering the low-price
• Sustainable use of resources. IKEA aims for household and furnishings markets
zero waste to landfill, wastewater treatment • A recession which will act to slow down
and programs to reduce use of water consumer spending as disposable income
• Reducing carbon footprint. IKEA aims to reduces
reduce its energy use, use more renewable
energy and reduce packaging Source: Extracted from the Business Case Studies UK
• Develop its social responsibility by website, ‘An IKEA case study, SWOT analysis and
providing greater support for charities such sustainable business planning’, 28 November 2019.

CASE STUDY ANALYSIS

1 Explain the difference between the two internal and two external factors that may affect
IKEA, and that need to be considered when undertaking a SWOT analysis.
2 Suggest ways you believe IKEA has responded to opportunities to grow the business and
how it has managed to minimise threats to its business.
3 Evaluate the contribution undertaking a SWOT analysis has made to IKEA’s success and
business growth.

REVIEW ACTIVITY 6.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe what is meant by a SWOT analysis.

2 Describe the relationship between the internal and external business environments.
3 Describe the benefits for a business of conducting a SWOT analysis as part of its strategic
planning process. Suggest one disadvantage of a SWOT analysis.
4 Outline the three levels of planning for a business. Consider a business that you are
familiar with, perhaps your part-time job or the involvement in a business of a family
member. Identify three decisions for each level of planning (strategic, tactical and
operational) that would need to be made by the business.

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 Chapter 6 Business planning and corporate social responsibility (CSR) 141

6.2 The business plan

Learning intentions – 6.2.1 Outline the key features of business plans and discuss
at the end of this their usefulness in business planning
chapter section I will
be able to:

To optimise the chances of business success, it is important to spend time preparing and
business plan
developing a good business plan. This document sets out the details of a business, indicates the formalised
the direction it intends to take, defines its goals and maps out strategies to achieve these. planning a
business
Initially, a business plan should establish the objectives of a business and assess the feasibility
undertakes on a
of a business proposal. It should then demonstrate how stated business objectives are to be periodic basis
achieved, as well as provide formal direction for business ideas.

A business plan should be a living document that is constantly evolving. A regular review
and update of a business plan is required. As the business’s environment changes, its plans,
actions and strategies should also evolve and adapt in response. This should be reflected in
the business plan. The plan should be reviewed and refined annually to keep the business
on track, reinforce its key goals and objectives, and assess whether the chosen strategies
are working. This annual review will then allow the business to adapt to any changes
occurring in its business environment and take advantage of any new opportunities that
may have arisen, such as new technologies or changes in consumer tastes, since the
previous plan was written.

A business plan performs numerous

roles. It:
Timeline
• defines and clarifies the objectives and Financial Executive
direction of the business, setting out planning summary
where the business is headed and how it
intends to get there
• assists in obtaining financial backing –
Operations
Mission
financial institutions and investors statement
will seldom grant finance or invest in
a business venture before viewing a Business plan
detailed business plan
• keeps the business on track and focused
SWOT Company
on achieving its objectives – a detailed analysis background
business plan helps to keep a business,
regardless of its size, focused on the
primary business objectives and avoids
Competitor Product
making decisions on the run
analysis description
• enables realistic estimations regarding Marketing
business costs, thereby reducing plan
chances of cost blow-outs.

Figure 6.4 A good business plan will increase the chances of business success.

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142 Unit 1 | Planning a business

CASE STUDY
6.2

Businesses forced
to review business
plans

Farmhouse Seeds is based in regional Victoria in person. Farmhouse Seeds is now

and produces sustainable and freshly packed predominantly an online retail business that
seeds. Its vision is to have every community specialises in heirloom vegetable, herb and
growing and sharing sustainable home-grown flower seeds, as well as garden supplies.
produce, and its mission is to provide their
customers with nutrient-rich produce as an After meeting with the Business Resilience
alternative to compromised store-bought program, they realised the importance of
options. formulating a solid plan that could take them
into the long term. COVID-19 pushed their
Jay Hill and David Ryan launched their new online business to a level above and beyond
business Farmhouse Seeds at the start of what they had originally hoped. It prompted
2020. Initially, their business plan was based them to change their business model to
around face-to-face interaction of markets and an online portal that combined sales with
festivals, combined with an online presence, information that would support customers on a
but they were forced to change abruptly in the daily basis.
face of COVID-19.
Source: Adapted from Maddy Williams, ‘Farmhouse
Unfortunately, the timing of the pandemic Seeds – Digital Solutions Business Feature’,
removed the opportunity to attend events Melbourne Innovation Centre website, 4 August 2021.
and present their new products to customers

CASE STUDY ANALYSIS

1 Explain why it is important for a business to review the business plan.

2 Identify two key areas of the business plan that will need to be reviewed in light of the change
for Farmhouse Seeds’ business model. Explain why these two areas will require review.

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 Chapter 6 Business planning and corporate social responsibility (CSR) 143

Components of a business plan

Businesses are able to access many templates or suggested formats when writing their business
plans. Regardless of which format is used, the following 11 sections should be included in the plan:

1 Title or cover page

2 Executive summary
3 Business profile and details
4 Legal details and considerations
5 Insurance and risk management
6 Sustainability plan
7 Products/services
8 Operations plan
9 Marketing plan
10 Financial plan
11 Appendices.

Section 1: Title or cover page

The first page of a business plan should contain the following details:

• business name (both registered and trading names)

• owner/s names and titles
• main business address
• Australian Business Number (ABN) (registered with Australian Taxation Office (ATO))
• Australian Company Number (ACN) (registered with the Australian Securities and
Investments Commission (ASIC))
• date the plan was prepared and by whom
• table of contents.

Figure 6.5 A business plan sets out how business objectives will be achieved.

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144 Unit 1 | Planning a business

Section 2: Executive summary

The executive summary immediately follows the cover page and is generally the first thing
executive
summary an read by interested parties. It is often referred to as the ‘front end’, and it is usually the section
overview or that is written last. It contains a summary, or overview, of what is included in each section
summary of
to follow. An executive summary should highlight strategies proposed by the business to
the key points
contained in the achieve objectives.
business plan
The purpose of the executive summary is to enable a quick appraisal of the proposal by
someone reading the document. For instance, by reading the executive summary a bank
manager or a person wishing to provide
venture capital can quickly gauge if it
is worth reading further. This section is
vital in ‘selling’ the business to others
and should indicate that what follows
in the body of the plan is worthwhile. If
an executive summary fails to impress,
it is unlikely people will bother reading
further. It should be no more than one
page in length. Clear presentation and
structure are vital.

Key aspects of the executive summary

are:

• Registered Business Name

• business legal structure (e.g.
Figure 6.6 Your executive summary should be clear, concise and engaging.
company, sole trader, or partnership)
• ABN and ACN (if applicable)
• location
• date established
• owner names and their relevant experience and qualifications
• products and/or services
• business goals and objectives
• target market and an outline of marketing strategy
• outline of financial plan including sales and profits forecast; start-up capital required
• mission statement/vision statement.

Mission statement
The mission statement and/or vision statement demonstrates what the business has to offer the
market and its overall aspirations. It usually contains some of the following:

• a statement about the intended target market (types of customers the business intends to
cater for)
• reference to the types of products to be sold or services to be provided
• clarification of things the business views as important, including values and aspirations.

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 Chapter 6 Business planning and corporate social responsibility (CSR) 145

Table 6.2 Examples of mission/vision statements

Business Mission/vision statements

Blackmores Vision statement:

Combine our knowledge of nature and science to deliver quality
solutions to bring wellness to people and their pets everywhere,
every day.
(Source: Blackmores, 2021 Annual Report )

Kmart Vision statement:

Kmart’s vision is to provide families with everyday products at the
lowest prices. We strive for this vision through high-volume sales,
efficient operations, adaptable stores and a great culture.
(Source: Kmart website, ‘About us’ )

Commonwealth Bank Mission statement:

The objective of our business strategy is to deliver balanced and
sustainable outcomes for our customers, community, people,
and shareholders. Our focus areas are financial education,
contributing to the community, and good business practices.
Vision statement:
Our vision is to excel at securing and enhancing the financial
wellbeing of people, businesses and communities and a key
requirement to achieve this is that we maintain the highest
professional standards and act with integrity during the course of
our business activities
(Source: Commonwealth Bank website, ‘Our vision’ )

ACTIVITY 6.1
1 Using the websites of the three businesses from Table 6.2, investigate and then describe the
products and/or service they offer to their customers.
2 Evaluate whether you believe the mission and/or vision statement of these businesses
reflects accurately the purpose of those businesses.

Section 3: Business profile and details

This section contains:

• a statement of the business objectives and purpose of the business

• a brief rationale explaining why the business is being established and how it will succeed
• a list of the management and other key personnel, together with an organisational chart
showing responsibilities of each
• staff required and an outline of the experience and qualifications of key personnel and staff
• an outline of the business structure
• business location plus details about premises
• a brief description of main activities to be undertaken and products and services offered
• anticipated competitive advantage
• any domain names registered
• relevant licences/permits held or applied for (a tradesperson requiring a certificate, permits
required for footpath trading, etc.).

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146 Unit 1 | Planning a business

Section 4: Legal details and considerations (regulatory strategy)

The regulatory strategy section specifies exactly how the business intends to comply with laws
and regulations affecting it and its activities, including:

• business registration – ABN, goods and services tax (GST), employees’ tax file numbers (TFNs)
and Pay As You Go (PAYG) withholding tax
• location and local government zoning restrictions
• workplace health and safety and anti-bullying laws
• employee relations and unfair dismissal laws
• environmental laws
• storage and handling of dangerous goods
• consumer protection laws
• labelling requirements
• licensing and registration permits
• privacy – the handling, processing and use of personal information.

Section 5: Insurance and risk management

This section outlines details of insurance policies to be taken out by the business. Examples
include:

• WorkCover
• public liability
• professional indemnity
• product liability
• protection of business assets in the event of fire, burglary or damage
• business revenue protection.

The risk management section lists all potential risks to the business and their potential impact
on the business, and evaluates the likelihood of occurrence of each of them. Strategies to lessen
potential risks, known as mitigation, are then detailed.

Figure 6.7 Analysis of levels of risk and plans to manage potential risks feature in a business plan.

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 Chapter 6 Business planning and corporate social responsibility (CSR) 147

Section 6: Sustainability plan

This section first outlines potential environmental impacts of the business, followed by strategies
to minimise any negative environmental and community impacts. Plans for environmental
audits, an environmental management system and/or environmental goals are included.

Section 7: Products/services
This section contains a description of products/services to be offered by the business, including:

• diagrams and plans explaining new products in detail

• a description of the market position of the products/services – are they high end,
competitive or low cost?
• the pricing strategy to be adopted
• a description of the competitive advantage of the business. This might be lower costs, a
better location, reputation, or superior customer service
• details of any intellectual property held, such as patents
• anticipated level of customer demand
• a brief description of possible future opportunities and developments, and an analysis
of barriers to entry into the market, potential threats to the business and how these will
be countered.

Section 8: Operations plan

This section provides detailed information about the people and processes the business will use
to achieve its objectives. It includes a number of subsections.

Production process
The production process that is undertaken by the business to produce its products and dispose
of waste is described. The steps of the production process may be outlined using a flow chart,
such as that shown in Figure 6.8 for a dentist.

Receptionist greets patient Patient is greeted by dentist

Patient waits in waiting
on arrival for their or dental nurse and shown
room for dentist
appointment to surgery

Dentist checks patient’s

Patient pays and makes
mouth to determine what
new appointment
work is required on the
(if required)
patient’s mouth

Dentist performs procedure;

Dentist answers queries Dentist discusses with the
e.g. X-rays, tooth filled or
and checks patient is patient if further
extracted, teeth cleaned
happy with the work done procedures are required
and polished

Figure 6.8 Production process for a dentist

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148 Unit 1 | Planning a business

The following details should also be included:

• suppliers providing inputs into the business

• plant and equipment required including costs; for example, vehicles, computer equipment
and phones
• current items of inventory (stock)
• technology and software required plus cost
• trading hours including details of peak trading periods
• payment methods accepted; for example, cash, credit and PayPal
• credit policy
• warranties and refunds
• membership and affiliations; for example, industry associations.

ACTIVITY 6.2
Design a flow chart demonstrating the production process for one of the following tasks:

• serving a customer in a cafe

• grooming a dog

Quality management system

These are the processes and procedures in place to ensure standards of product and service
quality remain consistently high. Quality management ensures the product or service a client
will receive tomorrow is of the same quality that someone else received yesterday.

There are three basic quality management systems used:

quality control 1 Quality control: Goods and services are physically checked against a set of predetermined
process of standards. Examples of this are inspections or random checks, such as those used by many
checking the
quality standards
clothing manufacturers.
of work done or 2 Quality assurance: This is a system used by a business to ensure that predetermined quality
quality of raw standards are achieved during production of the products or providing the service. It is
materials or
component parts
a proactive approach to managing quality. A business that adopts the quality assurance
approach can bring in an outside agency or organisation (known as a ‘certification body’)
quality assurance
to check the way they conduct their business, with a view to gaining quality assurance
a system
established certification. In short, the business must show that it meets set standards in how it does
to ensure that things; it must also show that it follows certain procedures and processes.
predetermined
3 Total quality management (TQM): A system requiring every person in a business to take
quality standards
are achieved responsibility for quality in both product and service. Employees are put into teams, often
called ‘quality circles’. Each of these groups is expected to look on a continual basis for
total quality
management possible improvements that can be made in their own area. With everyone making small
(TQM) a concept incremental improvements, the total quality standards of the business and what it does will
whereby result in an overall improvement in the business.
all staff in a
business have
responsibility for
its process and Analysis of key personnel and staff of the business
output
A detailed audit of the skill base of the key people and staff within the business provides a
record of what skills people already possess. The business needs to determine what future skills
its staff will need to grow the business. If these skills are not currently held by staff, the business
may train the existing staff or recruit people with a specific skill or qualification.
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 Chapter 6 Business planning and corporate social responsibility (CSR) 149

Section 9: Marketing plan

The marketing plan is usually one of the larger sections
marketing plan
in a business plan, containing an analysis of the market, the plan that sets
the particular industry in which the business will be out the marketing
objectives and
operating, and how the business will operate within that
strategy to be
market. It may include: undertaken by a
business

• a description of the market in which the business will

be operating, including customer demographics, size
of the market, changing tastes and trends
• an industry analysis or evaluation of the characteristics Figure 6.9 This is a
of the particular industry category the business is certification mark
owned by SAI
entering into. This is done to gauge the minimum Global Limited.
standards of entry and to ascertain what the business’s Only businesses
competitive edge might be. A typical industry analysis certified by SAI
Global to ISO
would include the: 9001 on SAI
–– size of the industry and its parts/segments Global’s terms
–– number of businesses in the market and and conditions
have the right to
average size display this mark
–– number of people employed in the industry in the context
• a statement and analysis of current market trends, of the good or
services subject of
including what changes are occurring in the market. certification.
Do people want something different or new? How do
we know this?
• a profile of the business’s customers, including age, income level, lifestyle, tastes and values
• an analysis of the internal strengths and weaknesses of the business and how these can be
exploited and overcome. External to the business, the future opportunities and threats and
how these might be overcome should also be included (i.e. a SWOT analysis)
• a description of how the business intends to promote itself and its products, including
marketing and public relations strategies
• methods of sales and distribution to be employed. This details how the business intends to
sell and deliver its product to customers/clients; for example, home delivery, internet sales,
mail order and after-sales back-up.

Section 10: Financial plan

This section provides an assessment of the financial viability of the business. A financial plan will
include:

• a balance sheet that details the net assets and liabilities of the business. Included will be
other financial statements, which detail the working capital requirements and level of
business liquidity. These statements indicate the current financial position of the business,
including funds available, value of assets and sources of finance.
• expected volume of sales, income and expense projections for the first five years of the
business; these are estimates based on market research
• estimated profits and losses based on income and expenditure projections
• a forecast of expected cash flow for five years – this tracks money flowing in and out of the
business
• a break-even analysis – this calculates at which point the business should start making a profit.

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150 Unit 1 | Planning a business

Figure 6.10 Creating a financial plan assists in checking that all essential requirements and expectations have been
accounted for.

Section 11: Appendices

Any extra material that might strengthen the case for a potential business should be included as
an appendix to the business plan. For example:

• brochures prepared for the business

• any patents or trademarks taken out or acquired on behalf of the business
• the resumés of the key personnel
• any market research relevant to the business
• any articles, press releases, or publicity material featuring the business or key personnel.

REVIEW ACTIVITY 6.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe what a business plan is and outline three advantages for a business that develops
their business plan.
2 Outline the purpose of each of the following key elements to a business plan:
a executive summary
b sustainability plan
c operations plan
d marketing plan
e financial plan.
3 Explain why business owners should not expect to make a profit in the first year of
operation.
4 ‘An executive summary is like an elevator pitch.’ Explain the meaning of this statement.

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 Chapter 6 Business planning and corporate social responsibility (CSR) 151

6.3 Corporate social responsibility

considerations
Learning intentions – 6.3.1 Examine the need for corporate social responsibility
at the end of this considerations in business planning
chapter section I will
be able to:

The corporate social responsibility (CSR) expectation is for a business to be socially accountable
towards itself, to stakeholders and to society. Businesses are expected to conduct themselves in
ways that will enhance society, instead of making any negative contribution to economic, social,
or environmental factors. Regardless of their size, all businesses need to consider corporate
social responsibility when developing and planning a business.

The concept of CSR requires businesses to work above minimum legal requirements. Businesses
have discovered that adopting CSR practices has assisted in achieving business success. A
business operating in a fair and ethical manner is displaying CSR by its fair treatment of all
stakeholders including employees, customers, investors and suppliers. Volunteering in the
community, establishing grant programs, collaborating with other businesses, developing
sustainable business practices, and supporting local and global causes are examples of ways in
which businesses can contribute socially.

CSR and the environment

It is advised by Business Victoria that when preparing a business plan, information on how
the business will approach sustainability and corporate social responsibility (CSR) should be
included. Suggested areas related to this would be covered in the business plan:

• Environment and resource impacts – outlines the impact

the business will have on the environment
• Community impact and engagement – identifies the
possible positive impact the business will have on
the community and the ways it will engage with the
community
• Risks/constraints – identifies potential risks or constraints the
business may experience related to environmental matters
• Strategies – identifies any strategies or a course of action
that will be taken by the business to minimise the impact
on the environment of its activities
• Action plan – lists the key sustainability and environmental
targets and includes sustainability milestones, such as
reduced water consumption and the dates the business
expects to reach the targets.

Figure 6.11 The recycling symbol often appears on goods

being marketed as ‘environmentally friendly’.

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152 Unit 1 | Planning a business

Sustainability Victoria recommends that businesses should complete an environmental audit as

this allows businesses to also set benchmarks for improvement. Conducting an environmental
audit is important for a business, as it reveals the specific areas where the environment is most
impacted by the business’s operations. It also functions as a risk management tool to measure
how well a business operates in accordance with environmental regulations. Adopting these
sustainability practices will then often act as a way of attracting customers to the business.

The Competition and Consumer Act 2010 sets out requirements when marketing a product
or good as environmentally friendly. A business must be able to back up its environmental
or ‘green’ claims with scientific evidence. A consumer should be able to trust and rely on
environmental claims. When businesses ensure that their claims are substantiated, they not only
demonstrate good business practice but also comply with the law. The Australian Competition
and Consumer Commission (ACCC) advises businesses to avoid using terms such as ‘safe’ and
‘friendly’, as these terms are unhelpful and may be misleading. It is also important for a business
to check and investigate the processes used in areas such as manufacturing, transportation and
packaging. It is essential to test and confirm any claims such as ‘environmentally friendly’ and ‘no
testing on animals’.

A business plan should also take into account sourcing of materials and products from
sustainable and ethical suppliers. This is important because the reputation of the business
may be negatively affected if it emerges that there are unethical or illegal practices related
to its suppliers. Maintaining CSR practices across the supply chain assists in ensuring that
expectations are managed from the sourcing of materials through to the delivery of the final
product or service.

CASE STUDY
6.3

A look behind
Canva’s crazy big
sustainability goals

Canva is an Australian online design platform, worth over US$15 billion. Research the article ‘A
look behind Canva’s crazy big sustainability goals’ written by Kimi Cosepe, on the Canva website,
and read the information closely. Then answer the analysis questions that follow.

CASE STUDY ANALYSIS

1 Canva has adopted a socially responsible approach to its products and business operations.
Provide two reasons why this is a sound approach.
2 Outline the main strategies implemented by Canva to reach carbon neutral in 2020. (Hint:
access the article on the following URL for an outline of steps taken by Canva:
https://cambridge.edu.au/redirect/9758.)

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 Chapter 6 Business planning and corporate social responsibility (CSR) 153

3 Sustainability requires careful management of resources to ensure their availability in

the future. Describe the strategies Canva introduced in aiming to establish a sustainable
printing industry.
4 According to Jared Ingersoll, ‘One of Canva’s core values is to “be a force for good” and
it’s a statement that steers all of the decisions we make, the goals we set, and the culture
we create as a company.’ Given that a business plan includes the opportunity to align all
business practices with the mission, vision and values statements, identify the areas of the
business plan that should align with these overarching goals.
5 Identify and describe strategies that enhance corporate culture at Canva.
6 Explain whether you believe the approach adopted by Canva may make it more difficult to
create a financially successful business.

Figure 6.12 Ensure that environmental concerns and how you will address them are a part of your business plan.

REVIEW ACTIVITY 6.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe why a business should include references in its business plan to its approach to
corporate social responsibility and the environment.
2 Describe the types of information that should be included in a business plan relating to
corporate social responsibility.
3 Explain why a business should try to ethically source materials and inputs.
4 Discuss the costs and benefits of corporate social responsibility practices.
5 Describe the consequences for a business if it fails to act in an ethical and socially
responsible manner.

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154 Unit 1 | Planning a business

Chapter 6 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 2, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

SWOT analysis Strategic planning Tactical planning

Operational planning Business plan Executive summary

Corporate social Marketing plan Operations plan

responsibility

Extension questions
A friend who has recently retired is thinking of starting up a business to cater for the domestic
needs of busy professionals. The business would offer the following services: grocery shopping,
arranging occasional child care or a nanny, dog walking, employing a cleaner, ordering gourmet
meals, sending out laundry and ironing, and simple gardening duties.

1 Suggest an appropriate name for the business. Undertake an online search to ensure that
your proposed name has not already been registered. Identify five reasons why you would
advise your friend to write a business plan.
2 List and explain the contents of the essential sections of a business plan.
3 Identify some other important areas or considerations that you believe they should look
into before embarking on this business venture.

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 Chapter review 155

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

6.1 Planning 6.1.1 Describe planning analysis Case study 6.1 Yes No
tools such as a SWOT analysis to Review activity 6.1: Part 1 &
assist a business Part 2

6.2 The business 6.2.1 Outline the key features of Activity 6.1 Yes No
plan business plans and discuss their Activity 6.2
usefulness in business planning Case study 6.2
Review activity 6.2: Part 1 &
Part 2
Extension

6.3 Corporate 6.3.1 Examine the need for Case study 6.3 Yes No
social corporate social responsibility Review activity 6.3: Part 1 &
responsibility considerations in business Part 2
considerations planning

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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156 Unit 1 | Planning a business

Unit 1 Area of Study 2 review Conceptual summary

Private Company
Pty Ltd

Partnership
2–20 owners
1–50 owners
Sole trader
1 owner Public company
TYPES OF BUSINESS T
– STRUCTURES L D
AUSTRALIA

Unlimited
Government Social shareholders
business enterprise enterprise

BUSINESS MODELS

www
Online
Bricks-and-mortar Franchise
$
Importer/
exporter
Direct to consumer
COST/BENEFIT
OF ENTRY
Layout
Accessibility
$
Establishing a new business $
Cost

$ Complementary
businesses Rent or
buy

Buying a business
Customer
LOCATION
visibility
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 Area of Study review 157

$ $ $
$ $
Venture capital
$
Bootstrapping
Financial
SOURCES OF institutions
FINANCE

ASX stockmarket
$ $
investment $ Family
$
$ $ and friends
$
Crowdfunding
Consultants
Legal

$
Financial
BUSINESS
SUPPORT SERVICES Coporate social
responsibility
Community related to
organisations planning
State Local

Government

S STRENGTHS
INTERNAL

W WEAKNESSES

BUSINESS
0 OPPORTUNITIES
EXTERNAL

PLANNING

T THREATS

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158 Unit 1 | Planning a business

Key knowledge summary: Unit 1 Area of Study 2

Key knowledge Summary

• The relationship • Businesses are impacted by a number of conditions that require

between the internal understanding and action in planning and decision making.
environment and the • The internal environment comprises all of the elements within a business.
external environment of • External environment consists of two environments:
a business –– operating environment is the environment immediately external to a
business
–– macro environment consists of factors directly affecting businesses that
are outside their control.

• Types of businesses • Sole trader: a single owner operates a business under their own name or a
such as sole trader, Registered Business Name. This is simple and easy to establish but has the
partnership, private drawback of unlimited liability.
limited company, • Partnership: between two and 20 partners operate a business based on a
public listed company, partnership agreement. This also carries the risk of unlimited liability.
social enterprises and • Company: establishment of a separate legal entity through a process of
government business incorporation. Offers the advantage of limited liability.
enterprises, and the • There are two types of companies:
factors affecting the –– private company: two to 50 shareholders; not listed on the stock
choice of business exchange; identified by ‘Propriety Limited’ (‘Pty Ltd’) in its business name
structure –– public listed company: unlimited shareholders; shares are listed for sale
on the stock exchange; business name ends with ‘Limited’ or ‘Ltd’.

• Types of business • A legal business structure must be selected.

models such as online • Each business structure has its own advantages and disadvantages.
business, direct-to- • A business model must be selected and developed showing how the
consumer business, business will operate and generate profit. Types of business model include:
bricks-and-mortar –– online
business, franchise, –– bricks-and-mortar
importer and exporter –– social enterprise
–– franchise
–– importer or exporter.

• Costs and benefits of • The potential business operator may opt to enter into business in one of the
purchasing an existing following ways:
business compared –– Establish a new business from scratch. This offers the advantages of
with establishing a new greater autonomy and control over the business and its development,
business as well as freedom to implement original ideas. The owner also avoids
buying the mistakes of others. Disadvantages include extra costs and
time in purchase of all capital stock, staffing and establishment of
business systems, procedures and relationships with suppliers. It also
takes longer to generate a profit.
–– Purchase existing business. Advantages include processes in place,
access to financial records, and established staff, clients and suppliers.
Cash flow commences sooner and profits should come more quickly.
Disadvantages involve intangible assets such as goodwill are included in
a sale price. These are difficult to value. A purchaser may be buying the
mistakes of others.

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 Area of Study review 159

Key knowledge Summary

• Business resource • A business must plan to meet its resourcing requirements in terms of
needs (natural, labour natural resources, labour and capital items.
and capital) and the • In managing human resources (labour), workforce planning is required to
factors affecting the use ensure skilled labour is developed and available to satisfy the business’s
of business resources requirements.
• Arrangements must be made for the servicing of capital equipment.

• Business locations and • Business location is a crucial decision as location provides a link between
the factors affecting the business and its customers.
choice of location • Factors to consider when deciding on a business location include:
–– personal factors
–– area profile
–– level of competition in an area
–– proximity to complementary businesses
–– proximity to competitors
–– proximity to customers and suppliers
–– suitability of buildings and facilities.

• Sources of finance • Finance is a crucial aspect of business planning and the success of the business.
available to establish • There are a range of different sources of finance available to business.
a business and the • Bootstrapping is a method of financing a new business with personal
factors affecting the savings or funds loaned by family or friends that aims to reduce set-up costs.
type and source of • Owners’ equity is where owners draw from their personal savings to invest
finance chosen in their business.
• Business angels invest in a new business and usually act as a mentor.
• Venture capitalists are large corporations that invest heavily in start-ups with
potential for high growth and profits.
• Crowdfunding is a method of gaining finance from the public for a one-off project.
• Crowd-sourced funding is used by start-ups and small business; it’s
regulated by ASIC and allows business to raise up to $5 million each year.
• Sources of finance from financial institutions:
–– banks provide financial services for short-term and long-term requirements
–– overdraft is an extension of credit that permits an account holder to
withdraw more than they have in their account
–– finance companies are direct lenders and accept a higher level of risk
then a bank but charge higher interest rates
–– commercial hire purchase can be used for machinery or vehicles.

• Business support • There is a wide range of support services available. Businesses that utilise
services such as legal, available support services stand a greater chance of survival and prosperity.
financial, technological, –– Informal sources of support include:
community-based, –– networking with groups of business owners
formal and informal –– previous owners of a business, to demonstrate established systems and
networks, and business provide information about clients
mentors –– competitors, to recognise standards expected in the industry, identify
gaps in the market, pricing etc.
–– Formal sources of support include professional advisers: lawyers,
accountants and IT support services.
• Government assistance:
–– the federal government offers the Entrepreneurs’ Programme for new
businesses
–– the Victorian state government has established online services, and
funds Small Business Centres Victoria (SBCV), Small Business Mentoring
Service (SBMS) and Business Victoria
–– local governments provide networking opportunities.
• Business centres, business incubators, network and mentoring services are
funded by the federal and state governments, but run independently and are
not-for-profit organisations.
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160 Unit 1 | Planning a business

Key knowledge Summary

• Planning analysis tools • Businesses need to plan to assist them to achieve their business objectives.
to assist in determining • There are three levels of business planning: strategic, tactical and
the strengths and operational.
weaknesses of • Conducting a SWOT analysis, where a business looks at its internal strengths
decisions regarding and weaknesses and its external opportunities and threats, assists in the
changing internal strategic planning process for a business.
factors, such as SWOT • Planning is essential for all businesses in order to establish:
analysis –– what it wants to achieve (business objectives)
–– how objectives will be achieved (strategy)
–– who will be responsible for which aspects of the plan
–– the time frame for achievement of objectives.

• Overview of business • The business plan outlines the strategic details of the business, shows
plans, including the direction and long-term objectives, and shows strategies to be used to
benefits of using them achieve objectives.
and an outline of their • The purpose of the business plan is to help establish the business and keep
key features it on track, to help obtain finance and backing for the business venture, and
to set a direction for business ideas.
• Sections commonly found in a business plan include:
–– title or cover page
–– executive summary
–– business profile and details
–– legal details and considerations
–– insurance and risk management
–– sustainability plan
–– products/services
–– operations plan
–– marketing plan
–– financial plan
–– appendices.

• Corporate social • Corporate social responsibility should be considered when developing a

responsibility business plan.
considerations and • A business plan should include sections on the approach the business will
business planning take in relation to being sustainable and its impact on the environment. It
should also examine possible resource issues and impact on the community.
• CSR measures extends to employees, customers and the community.

Source: VCE Business Management Design extracts © VCAA; reproduced by permission

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 Area of Study review 161

Sample assessment questions and advice

Unit 1 Area of Study 2: Internal business environment and planning

In this section, we will look at some sample assessment-style questions. Although there is no external
examination for Units 1&2, the following questions are written in a VCAA-examination style to prepare
you for these types of questions.

Unit 1, Area of Study 2 examines the internal business environment and analyses how factors from
within it may affect business planning.

When planning a business, owners must ensure that they consider and work with the following factors
under their control:

• resources they need, such as natural, labour and capital

• location – choices
• finance – sources and types
• new or existing business
• business structures – types
• support services available
• planning tools, such as a SWOT analysis
• business plans
• CSR.

Let’s explore how this content might be assessed through the following two example questions.

Question 1
Propose and describe one important consideration for each of the following three factors when
planning a new business venture:
a resources
b location
c finance. (6 marks)

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162 Unit 1 | Planning a business

Extended response question – let’s unpack it

Task words
Propose: To put forward (a plan or
suggestion) for consideration by
others Limiting word
Describe: Provide a detailed Determines the number of examples
account of something you must use

Propose and describe one important consideration for each of the following three factors when
planning a new business venture:

a resources
b location
Study Design requirements
c finance. (6 marks)
Key knowledge: setting up a business

Marks allocated

Hints:
• The key knowledge areas have been identified in the question; now we need to ensure that the
two key skills are correctly applied when answering the question.
• The first task is ‘propose’, which requires you to put forward a plan or suggestion for consideration
by others.
• The second task word is ‘describe’, which requires you to provide a detailed account of the factor
you have identified.

A possible answer to the question might be:

Sample response
a An important consideration when planning a new business venture is the availability
of human resources (labour) to work in the business. It is essential that the business
can access employees with the requisite qualifications, skills and experience. While
the business might commence as a sole-trader operation, as it expands it will require
additional employees and ensuring the business can access these will be an important
factor for its ongoing success.
b Where to locate a business is another important consideration when planning a business.
Different types of businesses require different locations. For instance, a retail shop needs
to be in an area where visibility and foot traffic is high. A high-street shopping centre or
shopping mall is ideal. If the business does not require passing foot traffic, but needs a larger
operating footprint, an industrial estate may be a better location. Service businesses such as
lawyers or doctors may be better to locate near complementary business such as the courts
or a pharmacy or hospital.
c Where to source finances for establishing and operating a business is vital when planning
a business venture. New business owners who have no proven financial history or much
capital behind them will find obtaining finance from established financial institutions,
such as banks, very difficult. Initially, they will need to rely on their own savings, securing a

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 Area of Study review 163

loan over one of their existing assets (home), or borrowing from family and friends. For the
day-to-day running of the business they will need to ensure they have sufficient working
capital. It may be possible to arrange this by securing the overdraft facility from a bank. As
the interest charged on this facility is high, the business must ensure it keeps a close check
on this type of account.

Marking guide:
• 2 marks for proposing and describing an important consideration in relation to resources
• 2 marks for proposing and describing an important consideration in relation to location
• 2 marks for proposing and describing an important consideration in relation to finances.
Total 6 marks

Question 2
Distinguish between the following legal business structures:
a sole trader and partnership
b private limited company and public listed company. (4 marks)

Extended response question – let’s unpack it

Task words
Distinguish: To recognise or show
points of difference between two
or more concepts of items. Note the Study Design requirements
distinctive characteristics or response Key knowledge: management
involved in the stimulus material styles and management skills

Distinguish between the following legal business structures:

a sole trader and partnership

b private limited company and public listed company. (4 marks)

Marks allocated

Hints:
• This question requires you to distinguish between two key terms.
• The task word ‘distinguish’ requires you to recognise or show points of difference between the two
items, concepts or terms.

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164 Unit 1 | Planning a business

A possible answer to the question might be:

Sample response
a There are several distinguishing features between operating a business as a sole trader or a
partnership. Firstly, a sole trader is an individual owner of a business, whereas a partnership
involves two or more owners working together. While both partners contribute capital to the
business in a partnership, it does not have to be in equal amounts. A sole trader is entitled to
keep all profits, not having to split these with any business partners. If the business makes a
loss, however, they have to carry the losses personally as they cannot split these among the
partners, who have the ability to spread the risk to their personal assets.
b Both these legal structures (private limited company and public listed company) are separate
legal entities but differ in that the public listed company has greater legal requirements
attaching to its reporting to shareholders and ASIC. It is also able to raise greater amounts
of funds through the issue of shares because the number of shareholders it may have is far
greater than a private limited company. Another distinguishing feature is how shareholders
acquire or sell their shares. In a private company, share transactions occur with the consent
of the other shareholders and are traded privately. The ASX is the trading place for shares in
public listed companies, with the market determining the buying/selling price for the shares.

Marking guide:
• 2 marks for distinguishing between sole trader and partnership
• 2 marks for distinguishing between private limited company and public listed company.
Total 4 marks

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 AREA OF STUDY 3
EXTERNAL BUSINESS
ENVIRONMENT AND PLANNING

AREA OF STUDY DESCRIPTION OUTCOME 3

The external environment consists of all On completion of this unit the student should
elements outside a business that may act as be able to describe the external environment
pressures or forces on business operations. of a business and explain how the macro and
Students consider factors from the external operating factors within it may affect business
environment such as legal, political, social, planning.
economic, technological, global and
To achieve this outcome the student will draw
corporate social responsibility factors and the
on key knowledge and key skills outlined in
effects these may have on the decisions made
Area of Study 3. [These are listed at the start
when planning a business.
of each chapter.]
Source: © VCAA, VCE Business Management Study Design,
Source: © VCAA, VCE Business Management Study Design,
2023–2027, p. 11; reproduced by permission
2023–2027, p. 11; reproduced by permission

CHAPTERS IN 7 External business environment and planning:

THIS AREA OF macro factors
STUDY
8 External business environment and planning:
operating factors

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 CHAPTER 7
External business environment
and planning: macro factors

‘Every single social and global issue of our day is a business opportunity
in disguise.’

Peter Drucker (1909–2005)

About the author:
Peter Drucker was an Austrian-American management
consultant, educator and author, whose writings
contributed to the philosophical and practical
foundations of the modern business corporation.

KICKSTARTER ACTIVITY
1 Explain the meaning of the quote.
2 How can planning assist a business in finding opportunities when
considering factors outside the control of the business?

CHAPTER OVERVIEW

Businesses have to consider a range of factors from the external

(macro and operating) environment that affect business planning.
Macro factors that affect business planning include legal and
government regulations, societal attitudes and behaviour, economic
conditions, technological considerations, global considerations
and corporate social responsibility considerations. These factors are
important and are outside the control or influence of a business, and
businesses need to be able to anticipate and respond to them.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter
I will be able to:

An overview of the factors within 7.1 An overview of the external environment: part 1
the external (macro and operating) 7.1.1 Provide an overview and explain factors
environment that affect business within the external environment
planning: 7.1.2 Provide an overview of key legal and
• An overview of key legal and government regulations affecting
government regulations affecting businesses in the planning stage
businesses in the planning stage 7.1.3 Describe the impact of societal attitudes and
• Societal attitudes and behaviour behaviour such as values, beliefs and trends
such as values, beliefs and trends 7.1.4 Explain the effect of economic conditions
• Economic conditions such as interest such as interest rates, employment levels,
rates, employment levels, tax rates tax rates and levels of consumer confidence
and levels of consumer confidence

An overview of the factors within 7.2 An overview of the external environment: part 2
the external (macro and operating) 7.2.1 Explain the effect of technological
environment that affect business considerations, such as how the market may
planning: change in the future and how businesses
• Technological considerations such as adapt to developments in technology
how the market may change in the 7.2.2 Describe the impact on planning of
future and how businesses adapt to global considerations, such as overseas
developments in technology competitors, overseas markets, offshoring
• Global considerations such as of labour, exchange rates, patenting,
overseas competitors, overseas copyrights, trademarks and online sales
markets, offshoring of labour, 7.2.3 Describe the impact on planning of corporate
exchange rates, patenting, copyrights, social responsibility considerations related
trademarks and online sales to business planning, such as environmental
• Corporate social responsibility considerations and planning for socially
considerations related to business responsible production of goods and
planning, such as environmental services
considerations and planning for
socially responsible production of
goods and services

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead
CHAPTER 7
External business
environment and planning:
macro factors

7.1 An overview of 7.2 An overview of

the external the external
environment: part 1 environment: part 2

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168 Unit 1 | Planning a business

7.1 An overview of the external

environment: part 1
Learning intentions – 7.1.1 Provide an overview and explain factors within the
at the end of this external environment
chapter section I will
be able to: 7.1.2 Provide an overview of key legal and government
regulations affecting businesses in the planning stage

7.1.3 Describe the impact of societal attitudes and

behaviour such as values, beliefs and trends

7.1.4 Explain the effect of economic conditions such as

interest rates, employment levels, tax rates and levels of
consumer confidence

Businesses must take into consideration a range of issues and conditions when developing
and planning their business. This is a complex undertaking. The external environment (macro
and operating) is outside the control of any one business. Businesses need to respond to these
factors when considering business planning issues.

It is always more difficult to anticipate changes in the external environment. An event may
occur in the macro (often at a state or national) level, yet a business needs to be able to respond
to this and take it into consideration when planning for the future.

Economic Technological
conditions considerations

Societal Global
attitudes considerations

Legal and External CSR

government environment considerations
regulations

Figure 7.1 External factors that affect business planning

Key legal and government regulations affecting businesses

when planning
When planning a business there is a range of legal and government regulations that need to
be considered. At the macro environment level, a business owner must consider factors such
as taxation arrangements, licences or permits required, occupational health and safety laws,
trading laws, environmental protection laws and privacy laws. These are described in Table 7.1.
There are a number of activities and case studies following Table 7.1.
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 Chapter 7 External business environment and planning: macro factors 169

Table 7.1 Legal and government regulations businesses need to consider when planning

Licences and Licences and permits are often required to operate a business, and must be
permits applied for, and approved, before a business can start.
Examples include licences to manufacture, prepare and serve food; signage;
regulations around permits to operate a business in an area or from home;
and planning overlays. Permits and requirements can vary between states and
across local government areas.
Business owners can check the licences, permits, approvals, registrations,
codes of practice, standards and guidelines that are required for their
respective industries by referring to the Australian Business Licence and
Information Service (ABLIS).

Taxation Before starting any trading activities, business owners should register
arrangements the business name and ensure they meet all requirements and taxation
obligations. These can include acquiring an Australian Business Number
(ABN), registering for goods and services tax (GST), and applying for a tax file taxes are levied
number (TFN) and Pay As You Go (PAYG) income tax. by federal
and state
governments on
Occupational Occupational health and safety (OH&S) in Victoria is governed by a set of individuals and
health and laws, regulations and compliance codes that outline the responsibilities of businesses. They
provide a source
safety laws employers and employees to ensure that the workplace is safe. Business
of revenue for a
owners need to consider a range of variables, such as the types of equipment
government.
and training required, and the conditions of a workplace or building, to ensure
that the business is compliant.

Trading laws Anyone considering starting a new business also needs to check the main
and other federal law, the Competition and Consumer Act 2010 (Cth) (CCA), for the
requirements requirements they must fulfil to make their business compliant. The CCA
is administered by the Australian Competition and Consumer Commission
(ACCC) to bring about a fair and efficient marketplace through the promotion
of good business practices.
The CCA ensures fair trading for both a business and its customers, and
covers a wide range of marketplace aspects, ranging from product labelling to
the regulation of industries such as telecommunications, gas, electricity and
airports. It governs dealings with suppliers, wholesalers, retailers, competitors
and customers; identifies unfair market practices; sets industry codes of
practice; and regulates mergers and acquisitions of companies, product safety
and price monitoring.
A person starting a new business, regardless of its size, also has to check the
fair-trading laws of their own state or territory. Consumer Affairs Victoria, for
example, has codes and regulations covering:

• licensed businesses such as real estate agents, debt collectors, motor car
traders and travel agents
• registered businesses such as builders and tradespeople, caravan and
residential park operators, retirement village operators and second-hand
dealers and pawn brokers.
There are also other considerations, laws and regulations that businesses have to
consider when planning a business. These include:
• privacy legislation – the use and storage of personal information by a business
• employment and related laws – if planning to recruit staff, then it is
important to understand laws surrounding equal opportunity, wages and
employment standards, and anti-bullying laws.

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170 Unit 1 | Planning a business

Environmental Any new business must investigate whether there are any environmental
legislation laws that relate to the business’s activities. In Australia, environmental laws
are administered and enforced by all levels of government: federal, state and
local. According to the Business Victoria website, environmental concerns
include importation considerations, heritage issues, hazardous waste disposal
and the quality of fuel. Other areas covered include:
• licensing and works approvals
• land and groundwater
• landfills
• noise
• waste
• water
• National Pollutant Inventory.

ACTIVITY 7.1
1 Think of a business you would like to establish (e.g. a mobile food van). Go to the ABLIS
website and, using your suburb or postcode, work through the questions.
2 Identify the types of legal and other considerations that would need to be addressed as part
of the initial planning for your business.

ACTIVITY 7.2
Go to the WorkSafe website and find the page on compliance codes and codes of practice.
1 Select one area or code and outline three main requirements a business needs to address.
2 Explain how this code can affect a business in the planning stage.

Figure 7.2 Businesses must be compliant with the CCA, which includes ensuring that unfair market practices, such as
estate agents underquoting on real estate prices, do not occur.

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 Chapter 7 External business environment and planning: macro factors 171

CASE STUDY
7.1

The ACCC as a
regulatory body:
privacy code

In 2021, the federal government has announced The OP Code would set out details about how
proposed legislation to develop an online these organisations must meet obligations
privacy code (or ‘OP Code’) setting tougher under the Privacy Act. This would include
privacy standards for Facebook, Google, higher standards for what constitutes users’
Amazon and many other online platforms. ‘consent’ for how their data are used.

These companies collect and use vast The government’s explanatory paper says
amounts of consumers’ personal data, much the OP Code would require consent to be
of it without their knowledge or real consent, ‘voluntary, informed, unambiguous, specific
and the code is intended to guard against and current’.
privacy harms from these practices. The higher
standards would be backed by increased In the European Union, for example,
penalties for interference with privacy under ‘unambiguous’ consent means a person must
the Privacy Act. Serious or repeated breaches take clear, affirmative action – for instance by
carry penalties of up to $10 million or 10% of ticking a box or clicking a button – to consent to
turnover for companies. a use of their information.

The current definition of ‘personal information’ Consent must also be ‘specific’, so companies
under the Privacy Act does not clearly include cannot, for example, require consumers to
technical data such as IP addresses and device consent to unrelated uses (such as market
identifiers. Updating this will be important to research) when their data is only needed to
ensure the OP Code is effective. process a specific purchase.

The OP Code would target online platforms that The OP Code would include an obligation for
‘collect a high volume of personal information organisations to comply with a consumer’s
or trade in personal information’, including: reasonable request to stop using and
disclosing their personal data. Companies
• social media networks such as Facebook, would be allowed to charge a ‘non-excessive’
dating apps, Reddit, gaming platforms and fee for fulfilling these requests.
services such as WhatsApp and Zoom
• data brokers that trade in personal For example, Amazon currently states in
information such as Quantium its privacy policy that it uses customers’
• large online platforms that collect personal personal data in its advertising business and
information such as Amazon, Google discloses the data to its vast Amazon.com
and Apple. corporate group. The proposed OP Code would
mean Amazon would have to stop this, at a
The OP Code would impose higher standards customer’s request, unless it had reasonable
for these companies than otherwise apply grounds for refusing.
under the Privacy Act.
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172 Unit 1 | Planning a business

The draft bill also includes a provision to add Once legislation is passed, it will take around
protections for kids and other vulnerable 12 months for the code to be developed and
people who are not capable of making their registered.
own privacy decisions.
Source: Abridged from Katharine Kemp & Graham
The government has pledged to give tougher Greenleef, ‘A new proposed privacy code promises
powers to the privacy commissioner, and to hit tough rules and $10 million penalties for tech giants’,
companies with tougher penalties for breaching The Conversation, 27 October 2021. Read the full
their obligations once the code comes into effect. article on The Conversation:
https://cambridge.edu.au/redirect/9897.

CASE STUDY ANALYSIS

1 Explain why there are regulatory bodies such as the ACCC to check on the activities of
businesses.
2 Explain why the federal government is examining ways to protect the privacy of individuals.

CASE STUDY
7.2

‘No refund’ signs

and consumer
rights: Mazda

This case study is available in the Interactive Textbook.

  

ACTIVITY 7.3
1 Go to the Victorian Department of Environment, Land, Water and Planning website and
outline how you can apply for a planning permit.
2 Look at the local government area or council you live in (there are links on the website).
Identify what you need to do to gain a permit.

Societal attitudes and behaviour such as values, beliefs and trends

Many societal and economic changes have taken place in Australia and other countries over the
past few decades. Factors such as shifting demographics, increased levels of education, different
ideas and expectations, beliefs, trends and values have all affected the ways that society and
the economy operate. It is important for a business to understand and take these factors into
account while in the planning stage.
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 Chapter 7 External business environment and planning: macro factors 173

CASE STUDY
7.3

Changes in societal
attitudes: towards
work

COVID-19 has fundamentally changed our managers to bring people together with
relationship with the office. After the enforced employees’ desire for greater flexibility?
experiment of lockdowns pushing about 40% of
the labour force into working from home, few Some organisations are adamant that going
want to return to the pre-pandemic status quo. back to the office all or most of the time is
essential. Take, for example, Google.
Surveys show at least three-quarters of
workers want the option to spend a few days The Silicon Valley giant has won awards for
working at home and a few days in the office. its corporate culture and its products have
facilitated as much as any company in the
The experience of working from home has teleworking revolution. But in September,
helped break down many of the prejudices Google said it would reduce the wages of its
that limited work flexibility prior to 2020. But US employees choosing to work from home
there remain differences in attitudes between permanently.
workers and managers on this question.
A company spokesperson justified this by
There are actual or perceived costs to working stating that Google had always paid employees
from home, such as reduced opportunities according to ‘the local market based on
for collaboration and networking, reduced where an employee works from’. Choosing to
face-to-face interaction with managers, and work from home could reportedly cost some
consequences for long-term career prospects. employees up to 25% of their salary.

That last point is of particular concern. A pre- If this is the attitude at Google, just imagine
pandemic study found fully remote workers, what prevails in more conservative businesses.
despite being 13% more productive, were only Indeed, it is largely managerial fears that
half as likely to be promoted as their colleagues have stymied the potential for greater work
who spent their time in the office. flexibility since technology made ‘teleworking’
a possibility in the 1970s.
The reasons for this are likely complex – a
combination of explicit attitudes and For decades, concerns about innovation
subconscious biases. Their persistence spells and productivity have been cited as reasons
danger for post-COVID organisations. In workers must be in the office most of the time,
particular, they could disadvantage those with despite research indicating there is no reason
carer responsibilities, who are more likely to employees need to be in the office every day to
want greater flexibility. maximise the benefits of collaboration.

So how many days a week in the office is There are still often unwritten expectations
enough? How do we balance the desire of about such things as not leaving before the

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174 Unit 1 | Planning a business

boss, and putting in unpaid overtime, being encompasses not just whether we work from
prerequisites to pay rises and promotions. home or the office a certain number of days,
but also when we work, who we work with and
So the big question isn’t really about what’s the what we are working on.
optimal mix of days in the office and at home.
Our organisations are not made up of one type
Experts agree there is no one-size-fits-all model of person and one type of job, something our
for hybrid work. It should really depend on the management structures and organisational
context and individuals. Maybe it’s four days a initiatives often ignore. Success in the post-
week in the office, maybe it’s one. COVID world will depend on thinking differently
and creating a culture that embraces the
The question is why managerial attitudes are opportunities this new model of work brings.
taking so long to catch up to reality.
Source: Abridged from Libby Sander, ‘How many
There is now extensive research showing that days a week in the office are enough? You shouldn’t
employees are more effective and satisfied need to ask’, The Conversation, 15 October 2021.
in their jobs when they have the flexibility Read the full article on The Conversation:
to customise their work. This flexibility https://cambridge.edu.au/redirect/9898.

CASE STUDY ANALYSIS

Read the case study and watch the video to answer the following questions:

1 Outline one change in societal attitudes mentioned in the article.

2 Explain why many businesses may find it difficult to allow employees to work from home
rather than in the office.
Video 7.1 3 Referring to the video, describe how the pandemic has affected office usage at both the
Working Australian business EY as well as global companies mentioned in the video.
from home

There have been many waves of immigration since World War II and this has influenced food,
traditions, social attitudes and business practices in Australia. Many new immigrants to Australia
have run their own businesses and this trend is likely to continue. When planning a business,
the needs of the population may change and this can influence the types of businesses that
might operate in the future.

In 1966, more than 25 per cent of the workforce was in manufacturing, but this is now around 6.5
per cent. In 1940, 6 per cent of all factory workers were under the age of 16, but people are now
staying in education and training a lot longer. The majority of the
workforce is now employed in service industries because the nature
of work is also changing. People with tertiary education (those with
a university or TAFE qualification) are more likely to have a job than
those who have not done a post-school qualification.

According to the Australian Bureau of Statistics, in 2021 15.9

per cent of the population, or 3.9 million people in Australia,
were aged 65 and over. Most older Australians were living in
households and most participated in social activities. This trend
may provide opportunities for businesses to go into industries
and sectors of the economy that previously did not offer
Figure 7.3 The Australian population is both changing and prospects. (Statistics from ABS government website.)
ageing.
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 Chapter 7 External business environment and planning: macro factors 175

ACTIVITY 7.4
Go to the ABS website and conduct some research to answer the following questions:

1 Determine how many people there are in Australia.

2 Identify trends around age and population patterns.
3 Explain how these trends might impact on business planning for the future.

The effect of economic conditions

There are many economic factors that can Employment
influence the development and operation of levels
a business. If an individual or large business
is looking at expanding or starting up a new
venture, it is important to consider the economic
conditions at the national, state and local levels.
These factors are outlined in Figure 7.4.

Interest Economic
Tax rates
rates conditions

Levels of
consumer
confidence

Figure 7.4 Economic conditions impact on business planning.

Figure 7.5 Business owners might need to borrow money to set up their business.

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176 Unit 1 | Planning a business

Each factor is described in Table 7.2 below.

Table 7.2 The effect of economic conditions on business planning

Economic condition Explanation

Interest rates If the rate of interest (the cost of borrowing money) is low, then it is
more likely that business owners will borrow to set up the business (or
may borrow more) because the repayments are easier to manage
and maintain.
interest rates Interest rates in Australia have been low during the past few years but
the cost involved have risen rapidly in recent times. Businesses need to have the capacity
in borrowing to manage a loan if interest rates rise.
money. Interest
can also be
earned when Employment levels The level of employment can have an effect on a business when it is
money is planning. If there are low levels of employment, this may mean it is
invested in
easier to find someone to work as there are not many job opportunities.
the bank or
other financial However, it could also mean that people do not have money to spend
institution. and therefore the business may not be able to sell its products.
If there is a shortage of people to work and employment levels are high,
employment
this may mean the business cannot attract or retain employees and
levels the rate
therefore cannot operate; or it may have to spend more on wages to
or number of
people who are attract staff, which will increase costs to the business.
in the workforce
and working
either part time Tax rates All individuals and businesses pay income and other taxes. As part of
or full time. When the planning process, tax obligations should be considered. Although
employment tax is not the only important factor, it may have a significant effect
levels are high, on the financial performance of the business. If an individual runs a
the economy is business as a sole trader or partnership, then the individual will pay
usually growing.
income tax. Australia has a progressive income taxation system, which
consumer means that the more a person earns the higher the rate of tax they pay.
confidence how Individuals usually pay tax as they earn; this is known as Pay As You
consumers or Go (PAYG).
customers are
feeling about the If a business is set up as a company, then the tax rate is different – 30%
future. If they are for most companies and 25% for small businesses. Businesses also pay
confident, they other taxes to state governments, such as payroll tax.
are more likely to
spend. Managing tax obligations needs to be factored in to business planning.
A business needs to ensure it has the cash to meet its obligations.
Taxation may also have some bearing on the type of business structure
chosen (see Chapter 9 for further information).

Levels of consumer Levels of consumer confidence are related to economic growth and the
confidence level of economic activity, and therefore important to all businesses. If
consumer confidence is high, then businesses are more likely to look at
expanding or increasing production, and consumers are more likely to
spend because they feel comfortable about their financial situation. If
economic conditions are uncertain or weak and unemployment is high,
then consumer confidence is likely to suffer. Often consumer confidence
is linked to people’s perceptions as much as reality.

Consumer demand is an important factor that can influence and provide

new business opportunities. If demand for particular types of goods and
services is high, then this might mean that businesses will move into
this sector. Some businesses might take advantage of trends
and expand.

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 Chapter 7 External business environment and planning: macro factors 177

ACTIVITY 7.5
1 Using information from the website of one of the banks or financial institutions, describe
the types of loans available to businesses.
2 Outline why a new business may need to have access to a loan or extra finance.

CASE STUDY
7.4

Employment levels,
hospitality and staff
shortages

Dishwashers are earning up to $90 an hour themselves in the foot; if they don’t make their
in one of Sydney’s top restaurants, as labour work environment a good place to work, you’re
shortages in the hospitality industry force not going to get the staff,’ he said.
some businesses to cut opening hours.
Long and unsocial hours was regarded as an
Rockpool Bar & Grill is paying dishwashers $90 impediment to attracting local staff by 55 per
an hour on Friday and Saturday nights ‘and we cent of women surveyed, but only 38 per cent
still can’t get them’, said executive chef Corey of male hospitality owners and managers, the
Costelloe. survey found.

Yet apprentice chefs earn as little as $13 an Rockpool founder Neil Perry, whose latest
hour and are expected to work long hours, project is Margaret restaurant in Double Bay,
which participants at a meeting of leaders in said he did not believe young Australians were
the hospitality sector said contributed to turned off careers in the kitchen by low pay and
labour shortages. long work hours.

Mr Costelloe also said some employers Source: Abridged from Andrew Taylor, ‘Dishwashers
needed to ‘pick up their game’ to attract on $90 an hour as staff shortages smash hospitality
more apprentices and staff: ‘They’re shooting sector’, Sydney Morning Herald, 21 November 2021.

CASE STUDY ANALYSIS

1 Explain how employment levels can have an impact on business planning.
2 Describe why some dishwashers are being paid so much per hour.
3 Explain how lack of access to employees may impact on the performance of a business.

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178 Unit 1 | Planning a business

ACTIVITY 7.6
Franca and Ali want to set up an interior design and styling business that they will run from home.
They are not sure how much tax they might need to pay. They obtained financial advice and have
decided to set up a company. They anticipate that the revenue or sales will be around $140 000 in
the first year.

1 Go to the Australian Taxation Office (ATO) website. Using the information found there,
explain the taxation rate and types of taxation Franca and Ali are likely to have to pay,
based on their predicted revenue.
2 Discuss why taxation would be a consideration in planning the type of business structure
they choose.

ACTIVITY 7.7
The following task looks at consumer confidence and its impact on business. Go to the Australian
Bureau of Statistics website and examine the latest Australian National Accounts: Finance
and Wealth.

1 Describe what has happened to household wealth during the past year.
2 Explain how this impact on a business.

REVIEW ACTIVITY 7.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain how the macro environment can affect business planning.

2 How can legal and government regulations affect business planning?
3 Explain why a business needs to consider licences and permits when planning.
4 How can taxation impact on a business?
5 Why should a business consider Occupational Health and Safety requirements when planning?
6 Describe the impact on a business of a change in societal attitudes and behaviour.
7 Examine the effect of the following economic conditions on business planning:
a employment levels
b taxation rates
c interest rates
d consumer confidence.
8 Describe how the ageing population might influence the types of businesses created.

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 Chapter 7 External business environment and planning: macro factors 179

7.2 An overview of the external

environment: part 2
Learning intentions – 7.2.1 Explain the effect of technological considerations,
at the end of this such as how the market may change in the future and how
chapter section I will businesses adapt to developments in technology
be able to:
7.2.2 Describe the impact on planning of global
considerations, such as overseas competitors, overseas
markets, offshoring of labour, exchange rates, patenting,
copyrights, trademarks and online sales

7.2.3 Describe the impact on planning of corporate social

responsibility considerations related to business planning,
such as environmental considerations and planning for
socially responsible production of goods and services

Technology is continually changing and the rate of change will continue to accelerate. It is important
for a business to ensure it is up to date with technology to run the business and also to take advantage
of any business opportunities that result from new innovations. Technology has not only changed
the way businesses operate, but has also offered new opportunities for businesses (particularly small
businesses) to compete for customers and markets. Whether it is delivering a product or a service, it
is important in the planning stage for a business to consider the use of technology in areas such as
record keeping and financial management, marketing and sales, and operations.

Technological developments will lead to changes in how a business has to manage and adapt.
technological
New ways of marketing – for example, different social media platforms – will influence the marketing development the
plans of a business and how it will try to reach its target market and potential customers. innovations and
improvements
in technology
As advances in technology continue, it will also mean that a business may change the products that can assist
or services it has planned to deliver. It is difficult for a business to forecast the future; however, it is a business in
carrying out work
essential that those involved in planning look at possible future services so they take advantage of
these or find a market niche or a gap in the market. Keeping up with technological advances will also
allow a business, regardless of its size, to be competitive and provides the basis for future expansion.

Table 7.3 The impact of technology on business planning and activity

Possible impact Explanation

Operating costs Software usually allows a business to automate most processes, such as accounting,
payroll and record keeping.

Managing sensitive Technology will assist a business in developing secure environments for sensitive
information customer and business information.

Communication Businesses should be able to plan for, and develop, communication processes. This will
processes assist in marketing, and sending and receiving information about the business and its
products and services. It also allows a business to establish a portal to access and update
internal documents.

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180 Unit 1 | Planning a business

Increased employee Using computer programs and software will usually mean processes are completed more
productivity accurately and efficiently.

Establishing and Technology allows a new business to reach markets beyond their local area or region.
maintaining a customer Any business, including a small business, can reach national and global markets through
base technology. This should be considered when the business is being planned.

Outsourcing A business may be able to plan to outsource some business functions (either in Australia
or overseas) to assist in lowering costs and focusing on its core business.

CASE STUDY
7.5
Technology and
business planning:
managing cyber
security

As part of its planning, a business needs to properly protected. Free software can collect
consider the possible impact of a cyber-attack. and share information without a person’s
knowledge or permission.
According to the Australian Cyber Security
Centre, the average cost to business of a Basic preventative measures to improve
cybercrime is almost $300 000, and Victoria cybersecurity in a business include:
has 25% of the country’s victims of cybercrime.
When planning for a business, some of the • use up-to-date virus scanners on all
key cyber security problems that need to be computers
considered include: • ensure wireless internet networks are
secure and password protected
• viruses or malware (malicious software) • do not open email attachments from
• hackers capturing personal data unknown sources
• free software that has been downloaded. • be very careful about using free applications
downloaded from the internet
Viruses or malware may affect the way a • keep software and the operating system
computer runs, or may corrupt data. They can (OS) up to date. Many hackers exploit
be spread by opening email attachments from vulnerabilities in older versions of software.
unknown people or through online scams. Turning on automatic updates can ensure
Hackers are a threat if information is shared the current version is installed.
over a wireless internet network that isn’t

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 Chapter 7 External business environment and planning: macro factors 181

It is important that a business has planned

and prepared for a possible cyber-attack and
how it will reduce the impact of one occurring.
Measures include:

• regularly backing up files to an external hard

drive or to the cloud
• storing any back-up devices in a secure place,
and regularly testing back-ups.

When personal information is accessed,

disclosed without authorisation, or is lost, this
is known as a data breach. Under the Notifiable
Data Breaches scheme, any organisation covered
Figure 7.6 Businesses need to take steps to reduce the risk of a cyber-attack.
by the Privacy Act 1998 must inform the Office of
the Australian Information Commissioner (OAIC),
as well as any individuals affected by a breach.

CASE STUDY ANALYSIS

1 Explain why it is important for a business to plan for technological developments.
2 Describe how cyber-security is becoming increasingly important for a business to plan for.
3 Go to the website scamwatch.gov.au and describe two different scams that have been
reported.
4 How can a business take steps to minimise the impact of the scams you have described?

CASE STUDY
7.6
Technology and
business planning:
experts’ predictions
about innovations
by 2030

This case study is available in the Interactive Textbook.

  

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182 Unit 1 | Planning a business

The impact on planning of global

considerations Overseas
competitors
Australia’s future prosperity relies on businesses adapting
to changing global conditions, and implementing and
retaining competitive business practices. Living standards
will continue to increase only if productivity growth
and trading relationships are maintained. It is important
for businesses to contemplate the impact of global Overseas
considerations on their planning. Issues such as overseas markets
competitors, overseas markets, offshoring of labour,
exchange rates, patenting, copyrights, trademarks and
online sales will all impact on a business’s operations.

Offshoring
of labour

Exchange
rates

Global
considerations
Figure 7.7 Australian businesses must adapt and change to changing
global conditions.

Patenting

Because businesses now have the ability to globally

streamline supply, manufacturing and retail chains,
companies are placing increasing emphasis on factors such
as transferring business activities and services to countries
where there are the greatest efficiencies available.
Copyrights

Overseas competitors
Businesses have to be able to compete with businesses
within Australia and overseas, whether this is importing
(bringing in) or exporting (sending overseas) goods.
overseas Trying to compete with overseas competitors can be Trademarks
competitors daunting as many countries have different laws, practices
businesses
not based in
and regulations that may give other businesses a
Australia that competitive advantage over Australian businesses. Labour
compete with costs, for example, are often cheaper in neighbouring
the Australian
business
countries and this can provide an advantage, keeping the
costs of goods and services much lower.
Online sales

Figure 7.8 There are a number of global considerations

when planning a business.
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 Chapter 7 External business environment and planning: macro factors 183

Overseas markets
Businesses need to be able to move into overseas markets in order to expand. A business trying
to conduct business overseas needs to ensure it understands the different requirements and
regulations that cover that particular business sector. Understanding social and other aspects of
different societies is also important.

A recent Australian International Business Survey found that Australia’s exports have grown. The
main products exported include natural gas, crude oil and also services.

There have been a number of challenges for businesses in the global economy including overseas markets
trade tensions between the USA and China, the impact of Brexit, conflict in Europe, the global markets or
pandemic, and weaker demand for some Australian exports. customers
in another
country that
Businesses are also finding access to finance more challenging, especially if they are a small buy a business’s
business. The impact of COVID on the supply chain and a shortage of containers has also products and
services
impacted on businesses that export to overseas markets.

ACTIVITY 7.8
Go to the Department of Foreign Affairs and Trade website and find the Trade and Economic Fact
Sheets. Select one country and examine the types and amount of trade Australian businesses
have with that country. Explain how this information could be useful for a business setting up to
export products.

CASE STUDY
7.7

Australia’s
expansion into new
markets: McCormick

This case study is available in the Interactive Textbook.

  

offshoring
Offshoring of labour when work is
done in another
Offshoring refers to work that is done in another country; for example, aircraft maintenance country; for
example, aircraft
conducted in Hong Kong or app development carried out in India. This is a growing trend maintenance
among businesses operating in the global economy. It is not the same as outsourcing where conducted in
work is conducted by a third party and outsourced to a local company. Hong Kong or
app development
carried out in India

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184 Unit 1 | Planning a business

Having work completed offshore allows businesses a certain amount of flexibility, particularly in
the legal, information technology (IT) and accounting industries. As trade barriers are removed,
free trade agreements are signed and more businesses enter the global economy, offshoring
work will become increasingly popular for businesses searching for ways to remain competitive.

The recent growth in offshoring labour can be linked to four key factors:
a Changes in technology, particularly the development of cloud computing, rapid
advances in mobility, work flexibility and the influences of big data have made it easier
for businesses to go offshore.
b The relaxation of legislation and regulations has removed many of the legal barriers to
companies taking work offshore. New trade agreements and the removal of tariffs (taxes)
have also reduced the cost of offshore work.
c The growth of particular locations as offshore hubs, including India, Poland, the
Philippines, China, Romania, Mexico and parts of South America.
d The pressures of globalisation, which have forced businesses to reduce costs and
become more competitive. Globalisation has also created access to skilled workers from
developing markets.

exchange rates Exchange rates

the value of a
currency against Australia has a floating exchange rate (its value is determined by demand and supply for the
another one. currency). The value of the Australian dollar is an important determinant of business revenue
The Australian
dollar is usually and might vary depending on whether a business is importing or exporting goods or products.
compared to the
US dollar. The In an economic climate where the Australian dollar fluctuates, businesses have to be able to
exchange rate
can influence the anticipate possible changes and adapt their business plans accordingly. If a business wishes
overseas sales of to be involved in the global economy, then as part of its business planning it must be able to
a business. foresee and develop strategies to manage changing currency value.

ACTIVITY 7.9
Go to a website such as the Reserve Bank of Australia that provides exchange rates.

1 What is the current exchange rate for the Australian dollar?

2 Describe how the exchange rate will affect a business that is importing goods and one that
patent a right is exporting goods.
that is granted
for any device,
substance,
method, or
process that is
Patenting
new, inventive
and useful. A
A patent is a right that is granted for any device, substance, method, or process that is new,
patent is legally inventive and useful. A patent is legally enforceable and gives the owner exclusive rights to
enforceable and commercially exploit the invention for the life of the patent.
gives the owner
exclusive rights
to commercially There are two types of patents granted in Australia: standard and innovation. When planning to
exploit the apply for a patent, a business owner needs to research both types before deciding which one
invention for the
life of the patent.
suits the needs of the business. There are differences in the cost of the patents, the length of
protection they offer, the time taken to process them and the type of invention covered.

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 Chapter 7 External business environment and planning: macro factors 185

CASE STUDY
7.8

Patenting: artificial
intelligence system

A recently granted South African patent known as machine learning. Once the machine
relating to a system of interlocking food learning phase has occurred, the machine is
containers sounds mundane. However, the able to ‘autonomously’ create without human
inventor is not a person but rather is an intervention.
artificial intelligence (AI) system named
DABUS. When it came to the food container invention
by DABUS, Thaler, assisted by Ryan Abbott
DABUS (which stands for ‘device for the of the University of Surrey, decided instead
autonomous bootstrapping of unified to list DABUS as the rightful inventor, as the
sentience’) is an AI system created by Stephen invention was entirely devised by the AI.
Thaler, a pioneer in the field of AI and This was the start of their push for AI to be
programming. The system simulates human recognised as inventors the world over.
brainstorming and creates new inventions.
DABUS is a particular type of AI, often referred South Africa’s government wants to increase
to as ‘creativity machines’ because they innovation to solve the country’s socio-economic
are capable of independent and complex issues. There is clear worry about issues such as
functioning. poor innovation levels, lack of funding and lack
of suitable infrastructure, which are necessary
The patent application listing DABUS as the to really capitalise on the fourth industrial
inventor was filed in patent offices around the revolution. Given the policy environment and
world, including the USA, Europe, Australia the vast potential of AI, the granting of the patent
and South Africa. South Africa and Australia makes sense. Perhaps this will turn out to be a
granted the patent. strategic masterclass by the South African office,
which will lead to a much more innovative nation.
South Africa’s decision has received
widespread backlash from intellectual property Source: Abridged from Meshandren Naidoo, ‘In a
experts labelling it as a mistake. world first, South Africa grants patent to an artificial
intelligence system’, The Conversation, 5 August 2021.
Creativity machines can process and critically Read the full article on The Conversation:
analyse data, and learn from it – a process https://cambridge.edu.au/redirect/9899.

CASE STUDY ANALYSIS

1 Explain the concept of a patent.
2 Describe why a business would apply for a patent.
3 If countries across the world recognise AI as an inventor, discuss the impact this might
have on innovation and product development.

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186 Unit 1 | Planning a business

copyright exists Copyright

to protect
the original A business in the planning stage should consider any copyright restrictions and requirements.
expression Copyright exists to protect the original expression of ideas (not the ideas themselves).
of ideas (not Copyright in Australia is free and automatic and there is no official registry or application
the ideas
themselves). process. It generally covers works such as books, films, music, newspapers, magazines and
Copyright in artworks. Copyright also protects originally created databases, computer programs and media
Australia is free broadcasts. Copyright protection is provided under the Copyright Act 1968 in Australia, although
and automatic
and there is no copyright laws vary between countries. It usually lasts for 70 years from the year of the author’s
official registry death or from the year of first publication after the author’s death. Copyright does not protect
or application names, titles, or slogans, although there may be issues around trademarks.
process.

trademarks are
important as they Trademarks
protect a business
from others using Trademarks are important as they protect a business from others using its reputation or
their reputation products. Business planning needs to consider any potential trademark requirements.
or products. A
trademark is a
protection that A trademark is a protection that can be granted for any aspect of marketing, including letters,
can be granted numbers, words, phrases, sounds, smells, shapes, logos and pictures, as well as a combination of
for any aspect
of marketing.
these things. Trademarks give businesses exclusive rights to use them for commercial purposes,
Registered as well as to license or sell them to others. Registered trademarks are protected legally, and
trademarks are misuse of trademarks can be pursued under law.
protected legally,
and misuse of
trademarks can A trademark can also be a powerful marketing tool. A trademark is a means of identifying a
be pursued business’s unique identity, and is often called a brand.
under law.

Trademarks are different from business,

company and domain names. Well-known
examples include Qantas’s flying kangaroo
and Lonely Planet’s logo.

Most businesses should register a

trademark, although it can be used even if
it is not registered and can have significant
business value.

A business can also take out an

international trademark in a number of
different countries at the same time. There
are two ways to register a trademark
overseas: a single international application
can be filed through IP Australia, where
the business selects the countries in which
protection is required as designated in the
Madrid Protocol (international registration
of a trademark), or the business can file an
Figure 7.9 The Lonely Planet logo is the registered trademark for its travel guides.
application in each individual country.

A business also needs to ensure that it has registered any designs as well as trademarks. A
new design must be unique and distinctive in terms of its configuration, shape, pattern, or
ornamentation.

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 Chapter 7 External business environment and planning: macro factors 187

CASE STUDY
7.9

Trademark: Manuka
Honey
Australian honey producers have won a The association argued the term ‘manuka
four-year trademark battle in Britain amid a honey’ was a customary term used to describe
long-running dispute with New Zealand over honey made from the manuka tree, found in
who can claim the term ‘manuka honey’. both New Zealand and Australia.

The Manuka Honey Appellation Society, In reaching its decision, the court
representing a group of New Zealand acknowledged that the term was mostly
producers, was trying to stop Australian descriptive of a type of honey and used widely
beekeepers from selling products using beyond New Zealand.
the word ‘manuka’ in Britain. They claimed
they had the rights to the term, arguing Mr Callander said the court’s decision would
that mãnuka was a Mãori word and was a be felt across many Australian industries, with
distinctive product of New Zealand. the manuka honey market forecast to be worth
$1.27 billion globally by 2027.
Britain’s Intellectual Property Office this week
there was no evidence the public believed the Demand for manuka honey, made from the
product was exclusively from New Zealand. Leptospermum scoparium plant, has boomed
across the globe thanks to its reported health
Australian Manuka Honey Association, which and wellness benefits. Products can sell for
fought the application in court, said it would between $300 and $500 per kilogram.
have been deeply unfair and financially
devastating to deny producers the right to use The same group of New Zealand producers
the term. has also sought to trademark the term in
the United States, Europe, New Zealand and
‘This decision is the right decision and a fair China. So far, no region has agreed to register
decision. The term manuka has been used in the trademark.
Australia since the 1800s and the Australian
industry has invested significantly for decades Source: Abridged from Daniella White, ‘Australian
in manuka honey science, research and beekeepers win Manuka honey trademark battle
marketing,’ chairman Paul Callander said. against NZ producers’, The Age, 16 December 2021.

CASE STUDY ANALYSIS

1 Describe what a trademark is.
2 Explain why a business would wish to register a logo, symbol, letter, or number when
establishing and running a business.
3 Explain why the Australian Manuka Honey Association was successful in this case.
4 Describe the possible benefits to the Australian honey industry of this decision.

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188 Unit 1 | Planning a business

Online sales
Online sales provide an opportunity for businesses to expand and take advantage of many
online sales
when a business potential customers. Businesses of any size can sell products and services anywhere in the
does not sell world. It is important that any potential business examines ways it can sell via the internet.
goods to a
Being able to sell online also means that a business can save on the physical space and rent
customer face to
face; customers required; an office can be set up at home and goods can be stored in a garage. Operations can
purchase their be focused on goods and storage rather than on a ‘bricks-and-mortar’ store.
goods online,
usually through a
website The complexity of website creation, the amount of time and administrative work involved, and a
lack of computer literacy have been some of the reasons put forward by various business owners
for not taking up online retailing. However, to avoid being taken over or overtaken by competitors,
small businesses must consider incorporating online sales as part of their sales strategy.

Small and medium businesses tend to start their online retailer journey on marketplaces, with
eBay, Etsy and Shopify examples of some commonly used platforms. Low barriers to entry and
low set-up costs make these a logical choice.

If selling online proves successful, businesses should look to push their products out in more
places, to reach as many potential customers as possible.

One of the impacts of the COVID pandemic is the growth in Australia of virtual and online
shopping. Customers becoming more comfortable purchasing online provides the scope and
potential to expand or create new businesses. According to data from the ABS at the end of
2021, total online retailing had grown, in part due to consumers being unable to visit shops in
NSW and Victoria.

Figure 7.10 Online selling can expand the size of your customer base and allow you to reach new markets.

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 Chapter 7 External business environment and planning: macro factors 189

CASE STUDY
7.10

Online shopping: the

internet

If YouTube has its way, we may soon watch which is owned by Google, detailed its
makeup tutorials and buy face powder and plans to introduce live shopping webcasts
eyeliner directly from its site. Facebook is also and ‘shoppable videos’. Amazon, Snapchat,
airing infomercial shows that will encourage Pinterest, Facebook and Instagram are going
people to shop from small businesses. bigger with shopping webcasts and features to
buy items directly. So is TikTok, whose Chinese
Lots of internet personalities and businesses parent company is big in live shopping.
already pitch their products on social media.
But now, internet companies seem to be The question of why this is happening may be
making a concerted effort to make shopping a answered by a number of trends including the
seamless part of the online spaces where we increasing ability to make an income and living
come to be entertained and informed but not out of social media. E-commerce sales are one
necessarily to buy stuff. carrot that the internet giants can offer online
creators to help them earn more money. Google
Many people and businesses on Instagram, doesn’t love that most people turn to Amazon
YouTube and TikTok sell merchandise, but they when they’re hunting for products, rather
often direct you to buy on Amazon, Sephora or than to its web search box. Diversifying into
another website. An app that was developed and e-commerce also allows Facebook and Snapchat
used in China allows users to buy something the to advertise and allow access to products.
millisecond that they think, ‘Oooh, I want it!’
Source: Abridged from Shira Ovide, ‘Why the Internet
While it started in China, this style of online is turning into a home shopping channel’, The Age, 17
shopping could spread in the USA. YouTube, November 2021.
corporate social
responsibility
CASE STUDY ANALYSIS (CSR) a
management
1 Explain why businesses may move to expand into online shopping. concept whereby
2 Describe the benefits of online shopping for retail businesses and also customers. the business
conducts itself
3 Australia has had low rates of online shopping compared to other countries. This has
in an ethical
changed since COVID-19. As a class, discuss the trends within your peers and families in manner, takes
regards to online shopping. responsibility for
the economic,
social and
environmental
consequences of
its activities, and
Corporate social responsibility considerations is accountable
to a wide range
It is important for businesses to have a sense of corporate social responsibility (CSR) towards of stakeholders,
including
the community and the environment in which they operate. This can take the form of educational
employees,
and social programs, as well as practices that reduce the business’s impact on the environment. customers and
Businesses that are seen to meet these responsibilities are known as ‘good corporate citizens’, and suppliers
the community expect businesses to recognise their social responsibilities.
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190 Unit 1 | Planning a business

Businesses of all sizes should strive to become good corporate citizens, and it is important that this
is considered when the business is being planned. Volunteering in the community, establishing
grant programs, collaborating with other businesses, developing sustainable business practices,
and supporting local and global causes are examples of ways in which businesses can contribute
socially. As a business grows, the scope of its social involvement should grow with it.

CSR can affect business planning. All businesses, regardless of size, have an impact on the
environment during the course of their operations. An awareness of any environmental impact
of a business can benefit both the company itself and society as a whole. For example, being
environmentally friendly can save a business money and attract customers who are more willing
to support businesses they believe are contributing to society in a positive way. Businesses can be
socially responsible in the planning stage by investing in products, such as rainwater tanks and solar
energy, that reduce reliance on natural resources, use products that are made of recyclable materials,
reuse paper, and recycle and minimise waste. Focusing on developing ethical sourcing of supplies
and products can assist a business in being socially responsible.

Planning should also include taking steps to reduce environmental risks, putting in place
control measures and then developing an action plan if environmental issues arise.

Businesses also need to consider how their potential goods and services can affect society at
large. For example, when setting up a manufacturing business it would be important to take
into account the laws and regulations that cover that particular industry, and to ensure that staff
are safe and products will not injure customers.

Often in the planning stage there is a focus on ideas that can contribute to the business and also
to society in general. Many new businesses are now looking at ways to both earn a profit and be
socially responsible. In the hospitality sector, for example, cafes have become a driving force in the
social enterprise sector in recent years. Charities and businesses are increasingly using cafes as a way
to train and employ disadvantaged people and those with a disability who would otherwise struggle
to find work. Other businesses are looking at where they source their products and are developing
relationships with suppliers who are sustainable and ethical in their dealing with employees.

CASE STUDY
7.11

Sustainability:
designing
sustainable fashion

There are several considerations for a fashion include dyes, solvents, yarns, paper patterns
business wanting to reduce its environmental and machinery. Environmental impacts
impact: arise from material selection and use,
manufacturing processes, the dyes used to
• The production, manufacturing, print fabrics, and the ethical issues around
transportation and use of textiles for fashion the human labour used to create garments.
and interior furnishing applications can
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 Chapter 7 External business environment and planning: macro factors 191

• The impact of materials on the environment • Minimising unethical labour practices by

can be minimised by choosing fabrics that making sure that garments and materials
are made of natural or organic fibres and are sourced from ‘fair trade’ or ‘sweatshop
require less detergents when washing. free’ brands and ensuring that overseas
• Questions relating to wastewater – is it businesses that supply materials have been
contaminated and how will it be disposed of? checked by an independent third party
• Minimising waste when setting out patterns to confirm that they are operating under
to cut, sourcing materials from businesses ethical conditions.
that have environmental certification and • Minimising packaging or using recycled
avoiding inks and dyes that may become materials to make the product more
potentially hazardous waste products. sustainable.
• Care instructions and labelling – minimising
the environmental impact over the life of Source: Abridged from information on the
the product by letting customers know they Business.vic.gov.au website.
can wash in cold rather than hot water.

CASE STUDY ANALYSIS

1 Explain why corporate social responsibility is an important consideration for a business.
2 Outline the benefits associated with a business planning to follow the guidelines when
producing clothing.
3 Evaluate the effectiveness of socially responsible measures implemented by
businesses. Using a company or business website, outline the types of CSR programs the
business is involved in.
4 Cassie and Oliver are establishing an online clothing business. Both are qualified designers
and have had experience in retail. They will design, make and sell a line of clothing targeted
at the 16- to 30-year-old demographic.
a Provide Cassie and Oliver with three strategies they could use to ensure that their
business is ethical and minimises its impact on the environment.
b How could Cassie and Oliver communicate their ethical practices with potential customers?

REVIEW ACTIVITY 7.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain why technological considerations are important for a business when planning.
2 Technology is an important and continually developing concern. Suggest how a business
could try to plan for the constantly changing technology available.
3 Ask six people you know about their online shopping experiences. Compare the results
with your class. Identify the use of online sales and how common it is.
4 Describe the global considerations of overseas competitors, offshoring of labour
and copyright.
5 Explain why it is important for a business to have a sense of corporate social responsibility.

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192 Unit 1 | Planning a business

Chapter 7 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 3, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Macro environment Taxation Operating environment

Consumer confidence Interest rates Employment levels

Technological development Overseas competitors Overseas markets

Offshoring of labour Exchange rates Patenting

Copyright Trademarks Online sales

Corporate social
responsibility (CSR)

Extension question
Serge and Shana are investigating starting a business. They would like to set up a bed and breakfast
in Daylesford and have looked at a property they believe would be ideal. In addition to the bed and
breakfast, they would like to operate a cafe and sell gourmet picnic hampers for tourists.

Using the following points, construct a report to advise Serge and Shana about the factors they
would need to consider when planning for their business:
• economic conditions, such as consumer confidence and the number of tourists in Daylesford
• technology, such as online bookings and a website
• legal requirements, such as zoning laws, permits and licences
• social factors, such as trends and tastes
• corporate social responsibility considerations.

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.
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 Chapter review 193

Success criteria – I am now able to: Linked questions Completed

(Y/N)

7.1 Overview 7.1.1 Provide an overview and explain factors within the Review activity 7.1: Yes No
of the external environment Part 1 & Part 2 (Q1)
external
environment:
part 1 7.1.2 Provide an overview of key legal and government Activity 7.1 Yes No
regulations affecting businesses in the planning stage Activity 7.2
Case study 7.1
Case study 7.2: Q2
Activity 7.3
Review activity 7.1:
Part 1 & Part 2 (Q2–5)

7.1.3 Describe the impact of societal attitudes and behaviour, Activity 7.4 Yes No
such as values, beliefs and trends Case study 7.3
Review activity 7.1:
Part 1 & Part 2 (Q6)
Extension

7.1.4 Explain the effect of economic conditions, such as interest Activity 7.5 Yes No
rates, employment levels, tax rates and levels of consumer Activity 7.6
confidence Activity 7.7
Case study 7.4
Review activity 7.1:
Part 1 & Part 2 (Q4, 7)

7.2 Overview 7.2.1 Explain the effect of technological considerations, such as Case study 7.5: Q1–2 Yes No
of the how the market may change in the future and how businesses Case study 7.6
external adapt to developments in technology Case study 7.10
environment: Review activity 7.2:
part 2 Part 1 & Part 2 (Q1–3)
Extension

7.2.2 Describe the impact on planning of global considerations: Activity 7.8 Yes No
• overseas competitors Activity 7.9
• overseas markets Case study 7.7
• offshoring of labour Case study 7.8
• exchange rates Case study 7.9
• patenting Review activity 7.2:
• copyrights Part 1 & Part 2 (Q4)
• trademarks Extension
• online sales

7.2.3 Describe the impact on planning of corporate social Case study 7.11 Yes No
responsibility considerations related to business planning, Review activity 7.2:
such as environmental considerations and planning for socially Part 1 & Part 2 (Q5)
responsible production of goods and services Extension

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style assessment questions with
model responses.
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 CHAPTER 8
External business environment
and planning: operating factors

‘Companies that solely focus on competition will die. Those that focus on
value creation will thrive.’

Edward de Bono (1933–2021)

About the author:

Dr Edward de Bono was a Maltese physician, psychologist,
author, inventor, philosopher and consultant. He originated
the term ‘lateral thinking’.

KICKSTARTER ACTIVITY
1 Identify what you believe to be the message contained in this quote.
2 Discuss with a partner whether you believe this message is a valuable
one for business owners to understand.

OVERVIEW

The operating environment of a business has a range of factors –

including customers, competitors, suppliers and special interest
groups such as environmental lobby groups, business associations and
unions – that may affect the planning it undertakes. Understanding
these factors will provide the business with improved information on
which to base its planning decisions.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will be able to:

Operating factors 8.1 Customer needs and expectations

that affect business 8.1.1 Identify, define and describe the needs and expectations of
planning customers
Customer needs and 8.1.2 Discuss and analyse case studies of businesses
expectations

Competitors’ 8.2 Competitors’ behaviour

behaviour 8.2.1 Identify, define and describe the behaviour of competitors
8.2.2 Explain and analyse case studies of businesses

Suppliers of 8.3 Suppliers of business resources and the supply chain

business resources 8.3.1 Identify, define and describe suppliers of business
and considerations resources and supply chain
regarding the supply 8.3.2 Explain and analyse case studies of businesses
chain, such as from
where resources
are sourced and
how they reach the
business

Special interest 8.4 Special interest groups

groups such as 8.4.1 Identify, define and describe a variety of special interest and
environmental lobby lobby groups
groups, business 8.4.2 Analyse case studies of businesses
associations and
unions

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 8
External business
environment and planning:
operating factors

8.1 Customer needs 8.2 Competitors’ 8.3 Suppliers of 8.4 Special interest
and expectations behaviour business resources groups
and the supply chain

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196 Unit 1 | Planning a business

8.1 Customer needs and expectations

Learning intentions – at 8.1.1 Identify, define and describe the needs and
the end of this chapter expectations of customers
section I will be able to:

8.1.2 Discuss and analyse case studies of businesses

Customers form an important part of the operating environment of a business. Most businesses
customer
someone who believe they focus on customer and consumer needs and customer expectations, devoting
buys goods or production and marketing resources to satisfy them. This requires market research and market
services
analysis to establish the current consumer and customer needs. While unmet customer needs
consumer a can provide opportunities for a business, they can also pose potential uncertainty for the
person or group profitability and ongoing success of the business. It is important that businesses adopt the
who uses a
product or following philosophies: ‘the customer comes first’ and ‘the customer is always right’. Both these
service. Note: a philosophies are widely accepted in retailing. In marketing, they are referred to as ‘developing
customer may be the customer relationship’ or ‘customer relationship marketing’.
a consumer, but
not all consumers
are customers; Businesses must ensure in their planning that they take into account important needs and
that is, the person expectations of customers, such as:
consuming
a product or
service is not • providing value in the level of quality of the goods and services at an attractive price
necessarily
• delivering high levels of customer service (pre- and post-sale)
•
the one who
purchased it. being ethical and socially responsible in the way they operate

customer
• being environmentally aware and sourcing clean, green and
expectations
safe products
the value that • being able to establish long-term positive relationships with
customers the customers
believe they
will gain from • ensuring that the products are Australian made or grown
purchasing a • providing an opportunity for customers to support an
particular good or Australian-owned business
service
• meeting the demands of customers for ‘ultra-convenience’
customer needs when purchasing products and services.
something
customers
• recognising that consumers are increasingly become health
require because oriented.
it is essential or
very important
Customers are now more discerning and educated in their
rather than just
desirable consumer choices. They have become more health conscious.
Regarding food, they are looking for products that are low in fat,
salt and sugar and that contain no additives or preservatives.
Customers often make a product selection based on whether the
product was grown, produced or made in Australia. Legislation Figure 8.1 Registered
effective from 1 July 2018 provides for product labelling that certification of Australian
specifies the country of origin as well as the proportion of products, including the bar
showing the percentage of
Australian ingredients. If the product has been grown, produced product grown, produced, or
or made in Australia, the kangaroo logo may also be included. made in Australia.

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 Chapter 8 External business environment and planning: operating factors 197

This tells you how

many serves there
are in the whole
NUTRITION INFORMATION
Servings per package: 8
packet.
Serving size: 33g

Per serving Per 100g This tells you the

Energy 550kj 1680kj
size of one serving
of this food.
Protein 2.4g 7.2g

Fat
Total 3.6g 11.0g This tells you the
Saturated 1.3g 4.1g nutrients in 100g of
this food. This is the
Carbohydrate best way to compare
Total 21.5g 55.1g similar products.
Sugars 10.1g 30.7g

Dietary Fibre 1.7g 5.1g

This tells you the
Sodium 20mg 70mg nutrients in a single
serve of this food. In
this case, it’s per 33g.

Figure 8.2 To appeal to discerning customers, Australian products display nutritional information and certifications
on products.

CASE STUDY
8.1

Subway product
range responds to
changing consumer
preferences

This case study is available in the Interactive Textbook.

  

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198 Unit 1 | Planning a business

Another customer expectation is

that businesses operate in an ethical
and socially responsible manner.
This expectation then flows on to
the customer’s purchasing decisions.
Customers of the major banks, incensed
by branch closures in many suburban
shopping centres and country towns,
showed their anger by closing their
accounts. This action by customers
provided an opportunity for community
banks to establish and prosper. Bendigo
Bank anticipated this customer need
and based its approach to banking on
putting time and effort into innovation
in the communities within which it
operates. It has been rewarded and is
Figure 8.3 Bendigo Bank: operating a very successful community bank model.
now ranked the fifth-largest bank in
Australia. Bendigo Bank currently has
a branch, agency or ATM in over 500
locations around Australia.

ACTIVITY 8.1
Visit the Bendigo Bank website and answer the following questions.

1 Identify two examples of activities being undertaken by the bank that link to the needs of
your local community.
2 Discuss whether you believe this commitment to the community would make customers
change whom they bank with.

REVIEW ACTIVITY 8.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain the difference between a customer and a consumer.

2 Compare these two terms: ‘customer needs’ and ‘customer expectations’.
3 Identify and describe three expectations customers have when purchasing food.
4 Increasingly, consumers consider the environmental impact that would be a factor in their
choice of product. For example, when buying laundry detergent a person might look for
products that are ‘clean, green and safe for the environment’. Propose an environmental
consideration when it comes to purchasing:
a paper products
b soft drinks
c takeaway food in containers.
5 ‘Unmet customer needs can provide opportunities for businesses; however, they can also
pose potential uncertainty for the profitability and ongoing success of a business.’ Analyse
the meaning of this comment.

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 Chapter 8 External business environment and planning: operating factors 199

8.2 Competitors’ behaviour

Learning intentions – at the 8.2.1 Identify, define and describe the behaviour of
end of this chapter section I competitors
will be able to:

8.2.2 Explain and analyse case studies of businesses

It is important that businesses constantly monitor the products or services being offered by
competitor a
their competitors. This ongoing checking should be aimed at detecting whether a competitor business rival in
has introduced a new product, updated or extended a current product line, or changed its the same market
for products or
pricing strategies. All such changes will impact on competing businesses, which must be
services offered
prepared to respond. A possible opportunity could be created or a counteraction taken to by the business
overcome a potential threat.

Successful competitors watch daily what their

business rivals are doing. For instance, in your
local shopping centre, large supermarkets
keep a watchful eye on the products
offered and prices being charged by other
supermarkets in the suburb, as well as the
local fruit shop, butcher and bakery. While
many customers are happy to purchase
all their food items at a supermarket, a fair
number of people still want to purchase
their meat, bread, fruit and vegetables
from specialist stores or the ever-increasing
number of farmers’ markets. Major food
retailers, Coles and Woolworths, along with
their suppliers, constantly watch each other’s
pricing. One supermarket chain will have a
product on special one week, the other the Figure 8.4 Incentive to purchase strategy
following week. ALDI provides an additional
challenge for these two chains with their lower pricing business model. In addition to competitive
pricing, offering inducements, incentives, memberships and loyalty schemes is another strategy
used by businesses in their quest to gain a competitive advantage.

ACTIVITY 8.2
1 Identify an example of an inducement or incentive program being offered by a business
that operates throughout Victoria.
2 Explain why these businesses see the need to offer these inducements or incentives.

Another aspect of business planning for food retailers is the increasing demand by their
customers for ‘ready-made and convenience food’. Competitors have entered this marketspace
by preparing and delivering already-cooked family meals, while others deliver fresh meal kits
with recipes for the home cook to follow to prepare these meals. The major food retailers,
understanding the importance of responding to both customer needs and the importance
of holding their market share, have responded by increasing their range of ready-made and
convenience food and are providing click-and-collect facilities at their outlets.
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200 Unit 1 | Planning a business

ACTIVITY 8.3
In your class undertake a survey of your class members to find out the following:
1 How many of their families buy or use:
• ready-prepared meals bought at a supermarket
• fresh meal kits delivered to home
• a food delivery service.
2 How often do they buy or use these services?
3 Compile the results of the survey and then analyse and discuss the results.

The entertainment industry is going through a period of unprecedented transformation.

Industry disrupters (competitors) are forcing free-to-air (FTA) networks and pay TV operators
to evaluate their business models. FTA networks are being troubled by the arrival of new and
efficient streaming content providers such as Netflix, Apple TV+ and Stan that give viewers
what they want to watch at a reasonable price point with no lock-in agreements. This assists
customers who want to cancel the service, as they may do this at any time without incurring
fees, unlike Foxtel subscriptions. An additional disrupter is the wide use of smartphones
to watch movies, live sport and newsfeeds. Pay TV operators and FTA networks still hold a
competitive advantage over streaming services with their ability to provide access to live TV,
particularly newscasts, sporting and other major events.

ACTIVITY 8.4
1 Conduct a survey of class members to find out how many of their families:
• watch free-to-air TV in real time
• watch free-to-air TV recorded and advertisements skipped
• subscribe to a pay TV provider
• subscribe to a streaming service
• use their smartphone to watch shows or movies.
2 Analyse the results and conduct a class discussion on the findings.

REVIEW ACTIVITY 8.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the impact on a business when a competitor introduces a new product or service.
2 Outline four strategies that a business can adopt in its quest to gain a competitive
advantage.
3 Explain why it is important for business to closely monitor the pricing strategies being
adopted by a competitor.

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 Chapter 8 External business environment and planning: operating factors 201

8.3 Suppliers of business resources

and the supply chain
Learning intentions ­­– at 8.3.1 Identify, define and describe suppliers of
the end of this chapter business resources and supply chain
section I will be able to:
8.3.2 Explain and analyse case studies of businesses supplier supplies
the inputs
(resources)
A supplier is any provider of inputs into a business’s operations. Inputs can take the form of raw required for
the production
materials, services, energy, equipment, labour and capital. Businesses must ensure a steady and process
reliable flow of needed resources (inputs) at the lowest possible cost. It is therefore essential to
supply chain
establish a guaranteed stable, long-term relationship with selected suppliers. a system or
process in which
It is important for a business to plan, establish and then manage its supply chain. This is a resources,
information,
system that incorporates planning and organising the resources, people, information and organisations
activities (such as sourcing and procurement, manufacturing and/or conversion, and logistics) and people
that are required to process raw materials and components into finished products ready to be collaborate to
move a product
purchased by the end customer. In addition, the supply chain links the major business functions or service from
and processes, such as sales, marketing, design, information technology and finance, within suppliers to
one business with those of another business. Essentially, the aim of a supply chain is to balance manufacturers
and then on to
demand and supply for a product or service with the minimal level of inventory (stock). consumers

Businesses can plan to optimise their supply chain

using a variety of different strategies, including:

• liaising directly with suppliers to eliminate

bottlenecks
• entering into long-term contracts with suppliers to
tie them into specific prices and quantities
• sourcing resources and products locally
• outsourcing their transportation and distribution
to a third-party logistics provider
• implementing just-in-time techniques to optimise
Figure 8.5 Businesses rely on long-term suppliers for their supply chain.

manufacturing flow
• creating a mix of locations of factories and warehouses to best serve customer markets
• using technology, such as global positioning systems (GPS), to analyse transportation routes
• optimising their logistics to maximise distribution efficiency.

Businesses, particularly those that are involved in sourcing their products from overseas
manufacturers, are being put under increased scrutiny from consumers to provide information
about the supply chain of the goods they are purchasing. While it is often difficult for a business
to know precisely all the steps involved in the supply chain of a particular product, many
businesses that source their products from overseas are now integrating codes of conduct and
guidelines into the management of their supply chain. They are also demanding their suppliers
undertake social audits to ensure they are complying with the required standards outlined
in the business’s codes of conduct. This demonstrates that ethical and socially responsible
practices are becoming increasingly important to both consumers and businesses.

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Following horrific incidents such as the Savar building collapse in 2013 (Bangladesh), which
killed more than 1100 people, Australian businesses such as Rivers, Coles, Kmart and Target
have been subjected to increased pressure to review their global supply chains. The suggestion
is that businesses should not only audit their first-tier (direct) suppliers for compliance, but also
request that those suppliers provide evidence of compliance in their own supply chains.

In 2020, the COVID-19 pandemic highlighted for many businesses their over-reliance on
importing component parts or finished goods as part of their supply chain. Supply chain
problems associated with overseas suppliers meant that Australia had an undersupply of masks,
sanitiser, respirators and pharmaceuticals. An opportunity arose for Australian manufacturing
businesses wanting to survive the pandemic to pivot towards making these essential supplies,
such as surgical masks and hand sanitiser. A South Australian company, Detmold Group, which
normally provides packaging for both KFC and McDonald’s, changed to making surgical masks.
Fella Hamilton, a ladies’ wear manufacturer, also started making surgical masks and scrub suits
for medical staff.

CASE STUDY
8.2
COVID pandemic
has a silver lining for
local manufacturer
as customers turn to
Australian made

Local manufacturers willing to pivot their Bosch Australia Manufacturing Solutions

production capabilities to areas such as (BAMS), using its global automation and
medical technology, space, robotics and food manufacturing know-how, is one such company
and beverages are helping other Australian to take up the opportunity. Bosch collaborated
businesses to overcome supply chain with Brisbane-based Ellume to create state-
interruptions and long waits from overseas of-the-art automated production lines to scale
suppliers. up manufacturing volumes of rapid at-home
COVID-19 diagnostic test kits that are approved
for use in the United States.

CASE STUDY ANALYSIS

Read the case study and watch the video to answer the following questions:

1 Identify and describe the benefits to both Bosch Australia Manufacturing Solutions and
Ellume in being able to manufacture the rapid at-home COVID-19 testing kits in Australia.
2 Referring to the video, what percentage of Australia’s GDP was made up by the
manufacturing sector in the 1960s, and what percentage does it account for today?
3 Referring to the video, describe one example of a business that thrived due to the
Video 8.1 pandemic, and one that struggled, and explain why this was.
Australian 4 Identify an opportunity mentioned in the video to revive manufacturing in Australia.
manufacturing

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 Chapter 8 External business environment and planning: operating factors 203

ACTIVITY 8.5
On the McDonald’s website, read the page ‘Introducing the suppliers who brought you your
Macca’s’ (https://cambridge.edu.au/redirect/9759) and answer the following questions.

1 Describe what it means when McDonald’s states that

its supply chain is unique and is based on a culture of
partnership and collaboration.
2 Explain some of the ways that McDonald’s ensures that
suppliers in its supply chain act ethically.
3 Outline the standards McDonald’s expects of its suppliers
of animal products.

The sourcing of products locally has also become a factor that businesses need to consider.
food miles
Particularly with food products, consumers often ask about ‘food miles’; that is, how far has a system of
the food travelled from the paddock to the plate? It is generally thought that if two products, measurement
that calculates
such as two pieces of fruit, or two vegetables, are compared, the lower the food miles mean the
the distance a
less distance that product has travelled and the better the choice is for the environment and food product
the health of the consumer. This question is particularly relevant when a consumer is making a travels from
production to
choice between something locally grown, and produce that has travelled many kilometres in a
consumption
refrigerated truck or plane.

Farmers’ markets are gaining in popularity as a marketplace for small producers to sell their locally
produced products directly to the public. If a producer decides to sell their products at a farmers’
market, as in any other marketplace, it needs to undertake research prior to entering that market.
The areas of research need to cover the potential customer (i.e. target market), the type of product
they will sell and how it will be marketed, the market guidelines for stallholders, and the legal
requirements (e.g. labelling of food and food safety) specific to the product they wish to sell.

REVIEW ACTIVITY 8.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify and describe which major functions of one business are directly linked to the
supply chain of another business.
2 Describe two strategies that a business can implement to optimise its supply chain.
3 Identify why it is important that a business is aware of where its supplies are sourced and
how the supplies reach the business.
4 Describe the concept of ‘food miles’ as it relates to fresh produce.
5 Businesses need suppliers either to provide the resources for the products or services they
sell, or to supply resources needed to run the business. Identify what you consider to be
the key advantage of a strong, healthy supplier relationship.

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204 Unit 1 | Planning a business

8.4 Special interest groups

Learning intentions – at the 8.4.1 Identify, define and describe a variety of special
end of this chapter section I interest and lobby groups
will be able to:

8.4.2 Analyse case studies of businesses

Special interest groups and lobby groups attempt to influence the actions of businesses. One
special interest
group a group such area of interest relates to the environment; in particular, how business operations impact
or organisation on the environment and what measures businesses are taking to proactively manage their
seeking or
environmental impact.
receiving special
advantages or
privileges

lobby group a
group that aims
Environmental lobby groups
to influence Environmental lobby groups actively promote environmental issues to businesses, the
organisations or
governments in community and all levels of government (local, state and federal). Environmental sustainability
their decision- is an important issue for these groups. They want businesses to use renewable resources,
making processes reduce the levels of waste or pollution generated in manufacturing their products and, in the
event that non-renewable resources are needed for production purposes, for businesses to
develop renewable substitutes for the resource used. One business taking up the challenge
from environmental lobby groups is Woolworths.

CASE STUDY
8.3
Woolworths
responds to pressure
to become more
sustainable and
greener in its
operations

Woolworths states that it is committed to growing greener every day, by cutting emissions,
eliminating food waste, reducing plastic and sourcing responsibly. It not only wants to limit
negative impact but also find ways to create positive benefits.

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 Chapter 8 External business environment and planning: operating factors 205

Initiatives they have planned and are putting into action are:

Initiative Explanation and results to date

Commitment to zero food • Since 2015 customers have bought 156 000 tonnes of The Odd
waste to landfill by 2025 Bunch fruit and vegetables, helping farmers to sell more of the
crop and divert fresh product from landfill.
• Overripe bananas are made into Woolworths’ banana bread,
with 50 cents from every loaf sold being donated to OzHarvest.
• Donation of 10 tonnes of surplus fresh food to food
rescue partners and the Animal and Stock Feed program,
which supports livestock, zoo animals and rescued native
Australian wildlife.

Making 100% Own Brand • Introduced cardboard meat trays to Woolworths Specially
packaging reusable, Selected and Grass Fed Beef ranges, which use 75% less plastic
recyclable or compostable than previous packaging, and can be recycled via its REDCycle
by 2023 Program.
• Since 2017, collected over 900 million pieces of soft plastic
(i.e. 3700 tonnes) through in-store REDCycle recycling program.
Upcycled into customer benches and car park bollards.
• Reduced single-use plastics by removing plastic-stemmed
cotton buds in favour of paper and sugarcane alternatives to
save almost 500 million pieces of plastic yearly.

Partnered with Macro • Launched range of environmentally friendly cleaning products

to launch a range of independently certified by GECA (Good Environmental Choice
environmentally friendly Australia) that are ethically made, environmentally friendly and
cleaning products have a lower impact on human health.

Responsible sourcing and • Tissues, toilet paper and kitchen towels are responsibly sourced
independently certified and independently certified by the Forest Stewardship Council.
Own Brand tissues

100% Green electricity • Expanded its solar network to 100 000 panels made up of 200
by 2025 sites including 132 stores.

Net positive carbon • Cut 97 000 tonnes of CO2 emissions. Reduced 27% since 2015.
emission by 2050

Source: Woolworths website, commitments were current at time of writing

CASE STUDY ANALYSIS

1 Identify the main areas where Woolworths is demonstrating its pledge to:
• ‘go greener’
• be more sustainable in its operations.
2 Identify any products you have purposefully bought from Woolworths because of its pledge
to be more sustainable and greener in the way it operates.

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206 Unit 1 | Planning a business

It has become a big issue for businesses when planning their operations to demonstrate that
they are responding appropriately to the growing pressure to control and reduce their level of
waste. Proper waste management helps to protect the environment through reducing, reusing
and recycling waste, as it decreases the amount of waste for disposal, saves space in landfill and
conserves natural resources. It also assists with the health and safety of the population. Beyond
environmental benefits, a business can be positively impacted by its reputation being enhanced
and costs being reduced.

Sustainability Victoria calculated that, in 2020, Victoria wasted 2.4 million tonnes of food.
The goal has been set to reduce food waste to 1.2 million tonnes by 2030. This is not only an
environment issue but also a financial issue. Each year it costs Victoria $6 billion in lost product
value and disposal fees, creating 3 million tonnes of carbon dioxide emission and wasting 29
billion litres of water.

The Wilderness Society is a national, community-based,

environmental advocacy organisation that seeks to protect,
promote and restore wilderness and natural processes across
the nation for a greater purpose of protecting life on Earth.
In 2018, VicForests was found by the Federal Court to be
logging native and old-growth forests in breach of state and
federal laws and was contributing to forest wildlife extinction.
Bunnings, as an industry leader, decided that it would only
stock wood sourced from uncontroversial sources by 2020.
This decision was welcomed by The Wilderness Society.

The use of energy resources is another area where

environmental lobby groups can affect the plans businesses
Figure 8.6 Members of the Australian Wilderness Society
protesting the sale of Reflex paper sourced from the logging are formulating. In 2020–21, solar energy generated
of native forests. approximately 10 per cent of Australia’s electricity and is the
fastest growing generation type in Australia. More than 30
per cent of Australian households now have solar panels on their rooftops. (Source:
https://cambridge.edu.au/redirect/9760.) Many commercial properties have panels fitted to
their roofs to generate solar energy for their own use while also having the potential to sell
it back to the electricity grid. Businesses wishing to participate in renewable energy projects
cite that cost, especially the upfront capital cost (in particular the cost of batteries to store the
generated energy), is a major barrier to adopting these technologies. The cost and efficiency of
the batteries is improving and over time they will become more popular.

Other special interest groups

Other groups may lobby for safe working conditions for employees. For instance, the Cancer
Council has been instrumental in ensuring that workplaces implement non-smoking and
SunSmart policies to protect the health of employees.

Community groups can also have an effect on a business’s ‘licence to operate’. If the community
does not like the way a business is operating, it can cause it to lose brand value overnight. For
example, in 2006 US sporting goods company Nike suffered a massive drop in sales when it was
accused of using child labour in its factories in Pakistan. Closer examination of the claim found
that Nike did not operate its own factories, with its production contracted out under licence to
other manufacturers. Following this adverse reaction from consumers, Nike established stringent
operating conditions for the contracting factories that produce its goods.
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 Chapter 8 External business environment and planning: operating factors 207

The instant brand recognition of the Nike ‘Swoosh’, while very successful in marketing terms,
has also made it an easy target for any adverse publicity relating to the use of child labour and
poor working conditions. Actions taken by Nike to ensure that no child labour is used in the
manufacture of its products has resulted it being ranked top in the industry for the seventh time
in a row (2015–21).

Another powerful lobby group established over 60 years ago is Choice, recognised as the leading
consumer advocacy group in Australia. Its monthly magazine (published both in print and online)
is a common reference point for consumers wishing to purchase better, safer and fairer products
and services. A favourable or damning report by Choice certainly has an impact on consumers’
purchasing patterns and ultimately the sales revenue of businesses mentioned in the report.

Another group growing in prominence to protect and improve the livelihoods and wellbeing of
fair trade a
disadvantaged producers is Fairtrade International. It promotes members who trade fair trade system of trade
goods, including household goods, giftware, furniture, jewellery, garments and food and beverages. in which buyers
from developed
countries
Business associations purchase
products from
producers in
There are a number of business associations in Australia that aim to meet the varied needs of
developing
businesses. As businesses vary in size, legal structure and nature of operations, there really is no countries for a
‘one size fits all’ business association. Businesses need to research which association will best fair and ethical
price
suit their needs. Membership of the right business association will help a business to plan and
meet its training needs, and provide support and advisory services, as well as general industry business
news and information. In addition, membership also allows the business to be part of a network. association
membership
organisation
The federal government recognises the importance of business associations and has created a engaged in
directory of government and business associations that may be able to provide guidance and promoting the
business interests
assistance both in the planning and ongoing running of a business. For ease of consultation, the of its members
list has been divided into types of industries.
industry
association
There are general industry associations (or bodies) whose membership base is broad, being representative
drawn from different industries. These groups provide general information and assistance. body for a
particular
An example of this is the Australian Industry Group (Ai Group), a top industry association industry
that represents more than 60 000 Australian businesses. These businesses come from a range
of sectors that is growing every day – from manufacturing and construction to food and
telecommunications – and cumulatively employ over 1 million workers.

Each state of Australia has a Chamber of Commerce; for example, the Victorian Chamber
of Commerce and Industry. There are also business associations to cover specific types of
industries, trades, or professions. For example, Master Builders Australia is the nation’s main
building and construction industry association, representing and assisting workers who are
part of the Master Builders Associations, with a combined membership of over 33 000. Similarly,
solicitors can join the Law Institute of Victoria.

Figure 8.7 General industry bodies

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208 Unit 1 | Planning a business

When commencing in business, many sole traders, partnerships and private companies are
formed as a family business. Family Business Australia (FBA) has conducted research into what
consumers think about family-owned businesses. The results show that consumers prefer
products or services purchased from family-owned businesses and also believe they can trust
these products. When registered, a family-owned Australian business is allowed to display the
FBA emblem – this is a visual sign to customers, employees, the community and government of
its status. FBA also assists businesses by providing accredited advisers to assist in planning and
growing the business.

Founded in 1979 and incorporated in 1985, the Council of Small Business Organisations
Australia (COSBOA) has become Australia’s premier organisation representing small business.
COSBOA has three main goals:

• promote and support the development of small businesses in Australia

• advocate advancing the interests of small business in Australia, including through policy
change and regulatory reform
• foster an increased awareness and understanding of the role of small business in Australia
among public servants and elected government officials, larger businesses, the media and
the general community.
(Source: Council of Small Business Australia website, ‘COSBOA history and goals’.)

Unions
Unions represent workers who are their members, and act on their behalf to negotiate with
union a group
of workers and business owners and/or management on issues such as wages, working conditions, working
employees who hours and other aspects of work. Unions also provide a range of welfare and social benefits
have banded
for members. In recent times, unions have adopted a more cooperative role with employers
together to
achieve common and management. This role is based on partnership building and working towards mutual
goals, such business objectives. This new approach has provided employers (business owners) with a forum
as higher pay,
for discussing issues of common interest, such as business competitiveness and productivity,
better working
conditions and and making new workplace agreements. This cooperative approach is intended to result in
job security increased productivity and profits for businesses and job security for employees.

According to the Australian Bureau of Statistics

(ABS), in 2020 the number of employees in our
national workforce was 10.4 million, of which
14.3 per cent were members of a union. The
highest industry sectors with union members
are education and training (31 per cent), public
administration and safety (28 per cent) and
health care and social assistance (24 per cent).
In the private sector, union membership is low,
with only one in nine employees choosing to
belong to a union.

Unions have played an important role in

improving the working conditions of workers.
Some of their achievements have been to
negotiate working hours, leave entitlements
(annual, sick, long service, maternity),
Figure 8.8 Unions act on behalf of workers to support them in improving
working conditions
allowances (shift, uniform), breaks (meals

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 Chapter 8 External business environment and planning: operating factors 209

and rest periods), wages (awards, penalty rates, collective bargaining, redundancy pay),
superannuation, health and safety and workers’ compensation, and unfair dismissal protection.

The Australian Council of Trade Unions (ACTU) is the largest peak body representing workers
in Australia. It is the national trade union centre with 46 affiliated unions and eight trades and
labour councils.

When planning a business, it is important to look into the prominence of the union movement in
that particular industry. If the industry has a high level of union membership it is wise to consult
with the relevant union to ensure that planning decisions being made by the business align with
the union’s expectations. In the building and construction industry sector, many work sites have
imposed a restriction on non-union members working on that site. However, the ‘no-ticket, no-
start’ culture on Melbourne’s building sites is starting to weaken. Non-union labour is increasingly
being employed by building companies constructing either mid-size commercial properties or
larger residential properties. Unions such as the Construction, Forestry, Maritime, Mining and
Energy Union (CFMEU) are now more concerned with ensuring that building companies provide
adequate public liability insurance, WorkCover and superannuation than whether the workers on
sites are contributing union members. In 2021, the CFMEU played an important role in supporting
the Victorian government to protect the health of workers by ensuring that construction workers
were vaccinated against COVID before being able to work on a construction site.

Business owners must also understand that workers have the right to belong or not belong to
a union and also to take part or not take part in industrial activity. This legal right is covered by
the Fair Work Act 2009. This Act also allows workers to legally undertake industrial action when
bargaining for a new registered agreement (related to collective pay and working conditions) at
the workplace is unsuccessful. This is known as protected industrial action.

ACTIVITY 8.6
1 Union membership for blue-collar workers (those engaged in trade work, labouring,
machinery operators and drivers) has been declining. Identify reasons why this decline in
membership may be occurring.
2 Union membership for managers and professionals (media, information technology,
health, finance and education) employed in the public sector has seen an increase. Identify
reasons why this increase in membership may be occurring.
3 Workers employed in the category of unskilled and semi-skilled workers (sales, clerical
work, community and personal service) have traditionally had low union membership
figures. Identify reasons why you believe this category of union membership could be low.

REVIEW ACTIVITY 8.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify and describe examples of activities taken by lobby groups that would impact on
the ‘licence to operate’ of a business.
2 Outline the benefits to a business of becoming a member of a business association.

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210 Unit 1 | Planning a business

Chapter 8 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 1 Area of Study 3, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Operating environment Customer Consumer

Competitor Supplier Supply chain

Lobby group Business association Union

Extension questions
1 ‘The customer is always right’ is a figurative motto rather than a golden rule adopted by
businesses. Identify and describe ways that a business needs to plan and operate if it wants
to respond to this motto.
2 Discuss whether you believe unions are a thing of the past and not relevant in the current
workplace or are important to the efficient functioning of Australian businesses and
protection of workers’ rights.
3 Analyse the importance for a business of establishing a reliable supply chain for the inputs/
resources they require to manufacture a product.

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 Chapter review 211

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

8.1 Customer 8.1.1 Identify, define and describe the Activity 8.1 Yes No
needs and needs and expectations of customers Case study 8.1
expectations Review activity 8.1:
Part 1 & Part 2
Extension: Q1

8.1.2 Discuss and analyse case studies of Case study 8.1 Yes No
businesses

8.2 Competitors’ 8.2.1 Identify, define and describe the Activity 8.2 Yes No
behaviour behaviour of competitors Activity 8.3
Activity 8.4
Review activity 8.2:
Part 1 & Part 2

8.2.2 Explain and analyse case studies of Activity 8.2 Yes No

businesses Activity 8.3
Activity 8.4

8.3 Suppliers 8.3.1 Identify, define and describe Activity 8.5 Yes No
of business suppliers of business resources and Case study 8.2
resources and supply chain Review activity 8.2:
the supply chain Part 1 & Part 2
Extension: Q3

8.3.2 Explain and analyse case studies of Case study 8.2 Yes No
businesses

8.4 Special 8.4.1 Identify, define and describe a Activity 8.6 Yes No
interest groups variety of special interest and lobby Review activity 8.4:
groups Part 1 & Part 2
Extension: Q2

8.4.2 Analyse case studies of businesses Case study 8.3 Yes No

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.
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212 Unit 1 | Planning a business

Unit 1 Area of Study 3 review Conceptual summary

Legal & government + –

regulations
Values (what is important
Societal to you)
attitudes &
behaviour Economic
conditions
Beliefs

LAW
ACT
(Ideas you hold
Tax to be true)
. Interest rates

.
Regulation
Employment rates
. Tax rates
OHS
MACRO FACTORS
. Level of consumer
confidence
AFFECTING BUSINESS
PLANNING
Technological
considerations

How to adapt
to future technological
changes?

Corporate social
responsibility

Overseas Ethical conduct

markets & beyond legal
competitors compliance

Global considerations

Trademarks

Online Reducing
Patents emissions
sales

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 Area of Study review 213

Customer needs
& expectations

? Quality
service

Competitors'
AUSTRALIAN MADE behaviour
Sugar free
Healthy
lifestyles $
Price drop

OPERATING FACTORS
THAT AFFECT
$ BUSINESS PLANNING

Increased
costs Innovation

Special interest
groups
Delivery times

Bottlenecks

Lobby groups

Suppliers Business
& supply-chain associations
considerations
Unions

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214 Unit 1 | Planning a business

Key knowledge summary: Unit 1 Area of Study 3

Key knowledge Summary

• An overview of the • Businesses have to consider a range of factors when planning.

factors within the • Some factors in the environment are outside the control of the business.
external (macro • The operating environment is the business environment immediately
and operating) external to the business with which it has a close interaction when
environment that affect conducting its activities.
business planning • There are a range of operating factors that need to be considered and
responded to when undertaking business planning.

Macro factors affecting business planning

• An overview of key • There is a range of taxation and legal factors, such as employment laws,
legal and government building and other permits, and zoning that businesses must take into
regulations affecting consideration.
businesses in the
planning stage

• Societal attitudes • Societal attitudes, changing values and trends all have to be considered
and behaviour such when planning a business.
as values, beliefs
and trends

• Economic conditions • Economic conditions can have a substantial impact on business planning.
such as interest rates, • Economic factors include interest rates, taxation rates, and business and
employment levels, consumer confidence.
tax rates and levels of
consumer confidence

• Technological • Technological issues and continual changes in technology can influence

considerations such as business activity.
how the market may
change in the future
and how businesses
adapt to developments
in technology

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 Area of Study review 215

Key knowledge Summary

• Global considerations • Australia is part of a global economy and businesses need to be able to
such as overseas compete with businesses from a range of countries.
competitors, overseas • Global considerations include:
markets, offshoring of ––overseas markets
labour, exchange rates, ––overseas competition
patenting, copyrights, ––offshoring of labour
trademarks and ––exchange rates
online sales ––patenting
––copyright
––trademarks
––online sales.

• Corporate social • Corporate social responsibility is an important issue when planning a

responsibility business.
considerations related • A new business needs to look at CSR considerations such as managing the
to business planning, impact on the environment and contributing to the wider community either
such as environmental directly or indirectly.
considerations and
planning for socially
responsible production
of goods and services

Operating factors that affect business planning

• Customer needs and • Customer needs and associated expectations change over time and
expectations businesses need to be responsive to the changes.

• Competitors’ behaviour • Competitor behaviour must be closely monitored, and planning undertaken
to ensure the business is positioning itself to be competitive against its rivals.

• Suppliers of • Suppliers and the supply chain, together with how resources are sourced
business resources and how they reach the business, must be considered.
and considerations
regarding the supply
chain, such as from
where resources are
sourced and how they
reach the business

• Special interest groups • Special interest groups, such as environmental lobby groups, business
such as environmental associations and unions, attempt to influence the actions of businesses.
lobby groups, business
associations and unions

Source: VCE Business Management Design extracts © VCAA; reproduced by permission

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216 Unit 1 | Planning a business

Sample assessment questions and advice

Unit 1 Area of Study 3: External business environment and planning

In this section we will look at some sample assessment-style questions. Although there is no external
examination for Units 1&2, the following questions are written in a VCAA-examination style to prepare
you for these types of questions.

Business Unit 1 Area of Study 3 examines the

external environment (macro and
operating) that may act as pressures or
Operating forces when planning a business.
environment
When planning a business, owners must
Macro ensure that they consider and respond
environment to the following factors from the
macro environment: legal, government
regulations, societal attitudes, economy,
technological, global and corporate
social responsibility issues.

Legal
requirements
Government
regulations
CSR issues

MACRO ENVIRONMENT
Societal
Global issues
attitudes

Technological Economic
issues conditions

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 Area of Study review 217

In addition to businesses taking account of factors from the macro environment, they also need to be
aware of and respond to factors from their operating environment.

The factors that can affect business planning are customer needs and expectations, competitors’
behavior, suppliers and the supply chain, and special interest groups.

Customer-
needs and
expectations

Special Competitors'
interest groups behaviour

Suppliers and
supply chain

Using the following case study, we can explore how the following key skills (identify and describe) can
be used in assessment questions.

Case study practice

Sebastian wants to pursue his passion for baking French croissants. He adds a variety of interesting
flavours such as strawberry, almond and chocolate to his delectable and mouth-watering creations.
He wants to make (manufacture) the croissants in his kitchen at his home, transport the freshly baked
croissants using his car and sell them at various farmers’ markets around Melbourne.

Your responses to the following two questions are to be based on this case study.

It is important that you read the case study carefully as the questions following will be directly related
to the case study, requiring you to apply your understanding of the relevant key knowledge.

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218 Unit 1 | Planning a business

Question 1
I dentify and describe one factor from the macro environment that will affect Sebastian when
planning his business venture. (3 marks)

Extended response question – let’s unpack it

Task words
Identify: Determine or establish as being a particular Study Design requirements
thing. To determine the key characteristics or features Key knowledge: macro
Describe: Provide a detailed account of something business environment

Identify and describe one factor from the macro environment that will affect Sebastian when
planning his business venture. (3 marks)

Limiting word Marks allocated Case study

Determines the number of examples you
must use.

Hints:
• The first task word is ‘identify’, which requires you to determine or establish the key factor from the
macro environment.
• The second task word is ‘describe’, which requires you to provide a detailed account of the factor
you have identified.

A possible answer to the question might be:

Sample response
Sebastian is planning to run a food-based business and therefore must ensure that he researches
all the legal factors associated with registering his business, and also the health requirements
for operating from his kitchen at home and not a commercial kitchen. He must make sure he is
compliant with all legal regulations, as failure to do so will see his business being closed down
and could ultimately result in him being prosecuted.

Marking guide:
• 1 mark for identifying a relevant macro environment factor
• 2 marks for providing a detailed account of the factor identified and related to the case study.
Total 3 marks

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 Area of Study review 219

Question 2
I dentify and describe two important factors from the operating environment that Sebastian must
take into account when planning his business. (8 marks)

Extended response question – let’s unpack it

Task words
Identify: Determine or establish as being a particular Study Design requirements
thing. To determine the key characteristics or features Key knowledge: operating
Describe: Provide a detailed account of something environment

Identify and describe two important factors from the operating environment that Sebastian must take
into account when planning his business. (8marks)

Limiting word Marks allocated Case study

Determines the number of examples you
must use

Hints:
• This question is similar to the previous question, but it requires you to identify and describe two
factors that are not only important when undertaking planning to commence a business, but will
also contribute to making it a success.

A possible answer to the question might be:

Sample response
An important factor within the operating environment is customers. Sebastian must ensure that
he understands his customers, as they are the ones that choose whether to buy his croissants. He
must ensure that he is responding to what the customers want in terms of variety and quality of
the croissants, the price(s) he is charging for his freshly baked product and the customer service
he is providing.
Another important factor is his competitors. Sebastian needs to check out who his potential
competitors are at the various farmers’ markets he wants to sell at and the strength of position
they hold within the marketplace. He also needs to ensure that his products (flavoured home-
baked croissants) are sufficiently different from what his competitors are selling if he wants his
business to be successful.

Marking guide:
• 2 marks for identifying two relevant operating environment factors
• 2 marks x 2 (4 marks) for describing the two relevant operating environment factors
• 2 marks for relating each relevant operating environment factor to Sebastian’s planning of his
business (i.e. case study).
Total 8 marks

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 UNIT 2
ESTABLISHING
A BUSINESS

UNIT DESCRIPTION
This unit focuses on the establishment
phase of a business. Establishing a
business involves compliance with
legal requirements as well as decisions
about how best to establish a system
of financial record keeping, staff the
business and establish a customer
base. In this unit, students examine the
legal requirements that must be met to
establish a business. They investigate
the essential features of effective
marketing and consider the best way to
meet the needs of the business in terms
of staffing and financial record keeping.
Students analyse management
practices by applying key knowledge
to contemporary business case studies
from the past four years.

Source: © VCAA, VCE Business Management Study

Design 2023–2027, p. 13; reproduced by permission

AREAS OF STUDY IN THIS UNIT

1 Legal requirements and financial considerations

2 Marketing a business

3 Staffing a business
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 AREA OF STUDY 1
LEGAL REQUIREMENTS
AND FINANCIAL
CONSIDERATIONS

AREA OF STUDY DESCRIPTION OUTCOME 3

It is essential to deal with legal and financial On completion of this unit the student should
matters when establishing a business. In be able to outline the key legal requirements
this Area of Study students are introduced and financial record-keeping considerations
to the legal requirements and financial when establishing a business, and explain the
considerations that are vital in establishing a importance of establishing effective policies
business. They also consider the implications and procedures to achieve compliance with
for the business if legal and financial these requirements.
requirements are not met.
To achieve this outcome the student will draw
Source: © VCAA, VCE Business Management Study Design on key knowledge and key skills outlined in
2023–2027, p. 13; reproduced by permission Area of Study 1. [These are listed at the start
of each chapter.]
Source: © VCAA, VCE Business Management Study Design
2023–2027, p. 13; reproduced by permission

CHAPTERS IN 9 Establishing a business: legal requirements and external

THIS AREA OF professionals
STUDY
10 Establishing a business: policies and procedures

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 CHAPTER 9
Establishing a business: legal
requirements and external
professionals
‘Play by the rules, but be ferocious.’
Phil Knight (1938– )

About the author:

American billionaire Phil Knight is the co-founder of
Nike and currently ranked as the 24th richest person in
the world.

KICKSTARTER ACTIVITY
1 Discuss the meaning of the above quote. Consider the types of rules that
Phil Knight may be referring to and why he suggests to ‘be ferocious’.
2 Identify the range of professional services available to offer advice so that
businesses do ‘play by the rules’.

CHAPTER OVERVIEW

There are numerous legal considerations and requirements to be

aware of during the process of establishing and operating a business.
A business owner must ensure the business is following all laws and
regulations, or otherwise risk exposure to legal sanction. Seeking
advice from professionals is a valuable safeguard to ensure that the
business is working within expected legal parameters.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will
be able to:

An overview of key legal 9.1 Key legal and government regulations

requirements for establishing 9.1.1 Provide an overview of the key legal
a business, such as registering requirements for establishing a business,
the business name, registering including registering the business name,
a website domain, trade registering a website domain, trade practices
practices legislation, business legislation, business tax compliance and
tax compliance and Worksafe Worksafe insurance
insurance

Overview of the role of 9.2 The role of external professionals when establishing a
external professionals when business
establishing a business 9.2.1 Describe the role of external professionals when
establishing a business

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 9
Establishing a business:
legal requirements
and external professionals

9.1 Key legal and 9.2 The role of

government external professionals
regulations when establishing a
business

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224 Unit 2 | Establishing a business

9.1 Key legal and government regulations

Learning intentions 9.1.1 Provide an overview of the key legal requirements for
– at the end of this establishing a business, including registering the business
chapter section I will name, registering a website domain, trade practices
be able to: legislation, business tax compliance and Worksafe insurance

Business
registration
Local
Insurance
government
by-laws

Licences,
Privacy laws Business legal permits and
requirements approvals
upon
commencement

Australian
Occupational
Consumer
health and
Law
safety

Equal Employment
opportunity laws

Figure 9.1 Legal requirements for businesses to comply with before commencing

Legal compliance must be considered both prior to business commencement and throughout
legal compliance
the process by the life of the business. Like individual citizens, businesses are subject to a plethora of laws
which a business and other government-imposed regulations that both restrict and impact on business activity.
ensures that it
As citizens, individuals are subject to laws imposed by governments. Similarly, the business
observes and
complies with sector is also subject to laws and standards of expected behaviour. This concept of corporate
the external citizenship and its consequent social obligations has increasingly become the focus of media
statutory laws
attention in recent years.
and regulations

corporate
A business is subject to numerous and changing legal, ethical and social responsibility
citizenship
acceptance by requirements. Failure to take account of these may mean legal prosecution, professional
a corporate deregistration and/or forcible closure of the business. It is vital that a business operator
entity of its
complies with the relevant laws, regulations, licensing requirements and codes of behaviour.
responsibility
to stakeholders
for actions and
decisions National Business Names Register
The Australian Securities and Investments Commission (ASIC) took over the administration of
business names from states and territories to establish Australia’s Business Names Register.
Under the national business names legislation, businesses need to register just once and this
provides national recognition. New businesses are expected to have an Australian Business
Number (ABN) to register the business name.
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 Chapter 9 Establishing a business: legal requirements and external professionals 225

If a business operator chooses to trade under their own name, there is no need to
register; however, business structures such as a sole trader conducting business
under another name, partnerships, family trusts, or joint ventures require the
business name to be registered. Selecting a business name identifies a business to
its customers, and allows it to differentiate itself from the competition.

Registering a company
A company is a separate legal entity and is taxed at a different rate. Businesses
wanting to register a company must have an Australian Company Number (ACN)
as well as an ABN. This is a unique, nine-digit number issued by ASIC that offers
identification while transacting business. It is a legal requirement for the ACN
to be displayed on a range of documents, including invoices, official company
notices, cheques and business letterheads.
Figure 9.2 A registered business
name helps customers to identify
Registering a website domain and connect with a business.

Although not compulsory when starting a new business, it is highly recommended to register
a domain name, a website address or URL that effectively provides an online identity. It’s an
domain name
important marketing tool to help customers find and identify with a business. When selecting a a unique name
website domain, a business should select a name that represents the business in a unique way identifying the
website in a web
that is easy to remember, pronounce and spell.
address

Registration for a .com.au domain must be done through a domain register accredited by the
Australian Domain Name Authority (auDA). Businesses are required to have an ABN or ACN to
register as .com.au. Australian technology companies or business websites prefer to register as
.net.au while non-commercial Australian organisations register as .org.au.

If a business plans on using social media for marketing

purposes, it is wise to check that the business name
is indeed available on the certain channels that the
business plans to use. A quick way to find out if a
domain name is available is to use the free service
provided by Afilias Australia, which can easily be
found online using your favourite search engine.
Figure 9.3 It is recommended to register a domain name for your business.

Table 9.1 Register and protect your business

Initial business What it does for a business

registration steps

Business name A business name, or trading name, is a name or title under which a
person, or other legal entity, trades (issued by ASIC).

Register website An ABN will allow a business to obtain an Australian domain name,
name which is a website address or URL on the internet and enables a
business to have an online identity (issued by auDA).

Australian Business An ABN is a unique 11-digit number that partnerships and trusts must
Number (ABN) have. ABNs are managed by ASIC.

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226 Unit 2 | Establishing a business

Australian Company An ACN is a unique nine-digit number that every company in Australia
Number (ACN) must have. ACNs are managed by ASIC.

Business Tax File A TFN is issued by the Australian Taxation Office (ATO) to individuals
Number (TFN) and organisations to help manage tax and other services. Partnerships,
companies and trusts require their own TFN.

Pay As You Go PAYG withholding is a legal requirement when a business makes payments
(PAYG) to employees and some contractors. The business must withhold a
designated amount of money and send it to the ATO at regular intervals.

Intellectual property Businesses register patents, copyrights and trademarks to protect their
(IP) registration IP so that their rivals cannot simply copy their ideas (see IP Australia).

ACTIVITY 9.1
The Australian Business Licence and Information Service (ABLIS) website is a useful resource for
businesses to determine the range of expected legal compliance that the business must meet in
relation to government licences, permits, registrations, codes of practice and standards.

Using the ABLIS website, list the licensing requirements for each of the following businesses:

1 restaurant
2 real estate agency
3 electrician
4 hair salon.

Business taxation compliance

There is an old saying that there are only two things that we can be certain of in this life: death
superannuation a
pension or lump and taxes. A business must pay tax. The Australian Taxation Office (ATO) administers Australia’s
sum payment taxation and superannuation systems. Business taxation obligations include the following:
made to workers
on retirement;
the money comes
• A business carrying out an enterprise in Australia must obtain an ABN. Businesses without
from employers’ an ABN are effectively penalised as their business clients withhold 46.5 per cent of any
contributions payments they make to the business.
made during the
working life of
• Business partnerships and companies require their own tax file number (TFN).
the employee
All businesses must pay tax on income, and collect income tax from the wages of employees:
• If earning over $75 000, businesses are required to collect goods and services tax (GST) from
their sales.
• A Business Activity Statement (BAS) must be submitted periodically to advise the ATO and remit
tax due on income earned during that period, plus any GST and employee income tax owed.
• Fringe benefits tax (FBT) and capital gains tax (CGT) may also apply.
A business with employees may also be subject to state government payroll tax.

Trade practices legislation and rights of the consumer

The Trade Practices Act 1974 was replaced by the Competition and Consumer Act 2010 with
Schedule 2 of the Act known as the Australian Consumer Law 2011 (ACL). All Australian
businesses must comply with the national law designed to protect Australian consumers.
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 Chapter 9 Establishing a business: legal requirements and external professionals 227

The Competition and Consumer Act established the Australian Competition and Consumer
Commission (ACCC) to protect consumer rights, business rights and obligations, perform
industry regulation and price monitoring, and prevent illegal anti-competitive behaviour.

The ACCC also works to ensure that both business owners and consumers are aware of their
responsibilities and rights so that all parties are well informed and are able to stimulate effective
competition. Australian consumers now have the same rights no matter where they live, where
they purchase goods and services, or where a supplier is located.

Consumer guarantees
Businesses need to be aware of consumer rights as they are protected by ACL, which covers
goods and services purchased up to the value of $40 000 for domestic, household, or personal
use. All goods and services are expected to be fit for the purpose they were purchased for, be
free of defects and be safe to use.

There are legal obligations businesses must meet when

devising warranties and guarantees. The business must
ensure that its products and services are suitable, not
faulty and will perform satisfactorily; and the product
or service must be fit for the purpose for which it is sold
and must be of a quality that means it can be used. While
the focus of warranties and guarantees is on retailers of
goods and services, manufacturers also need to ensure
the products they supply and design are suitable for use.

Consumers are automatically covered by warranty

protection under the Act. Should a product fail to meet
these criteria, a consumer has the right to a remedy
through repair, replacement, refund, or compensation. Figure 9.4 Australian Consumer Law is designed to protect
There are penalties imposed on businesses that fail to consumers from exploitation and is administered by the ACCC.
follow the provisions relating to guarantees, warranties
and advertising.

Misleading and deceptive conduct

warranty a written
A seller may not make false and misleading representations to a consumer. This means they guarantee, issued
must not lie or exaggerate about the quality, benefits, warranty, possible uses, or prices of the to the purchaser
of an article by
products they are selling. its manufacturer,
promising to
A business must ensure that it does not make false and misleading representations about repair or replace
it, if necessary,
products sold. Illegal practices include: within a specified
period of time
• a ‘half-truth’ in advertising false and
• suggesting that a product has an attribute that it does not have misleading
• stating that a product is made in one country when it is made in another representation to

• using a logo, business name or packaging that is similar to a well-known brand

lie or exaggerate
about the features
• overly optimistic claims about a product or benefits
• false or misleading labels or misleading statements about the characteristics of a product offered by a

• offering gifts and prizes with no intention of supplying them

product being
sold
• bait advertising, which is advertising an item when there are only a few available.

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228 Unit 2 | Establishing a business

CASE STUDY
9.1
Booktopia in court
for alleged false or
misleading claims
on refund rights

Booktopia is an Australian online seller of other remedy under the consumer guarantee
books, audiobooks, DVDs and eBooks, and one rights in the Australian Consumer Law (ACL).
of the largest book retailers in Australia. Its
parent company is ASX-listed Booktopia Group The ACL gives consumers a right to remedies if
Ltd. Booktopia Group is the largest Australian- the goods do not meet the consumer guarantees,
owned online book retailer by market share. including if they are of unacceptable quality.
Consumer guarantee rights extend to digital
The ACCC has instituted Federal Court goods, and do not have a two-day expiration date.
proceedings against online retailer Booktopia Pty
Ltd for making false or misleading representations ‘Consumers who buy digital products or buy
to consumers about their rights to refunds and products online have the same rights as those
other remedies for faulty or damaged goods. who shop in physical stores,’ ACCC Chair Rod
Sims said.
On its website between 10 January 2020
and 2 November 2021, Booktopia allegedly ‘Australian consumers have a right to refund,
represented that consumers had to notify it of a repair or replacement for goods that do not
faulty, damaged, or incorrect product within two meet their consumer guarantee rights which
days of delivery to have a right to a refund or apply for a reasonable period, and no business
other remedy, and that consumers had no right can exclude, limit or modify those rights.
to refunds on certain products, including digital
content and eBooks, in any circumstances. ‘Booktopia’s conduct may have caused
consumers not to seek a refund, replacement or
In addition, in dealings with 19 consumers, repair for faulty digital products, books and other
Booktopia allegedly represented that it was not goods in circumstances where the Australian
obliged to provide a refund or remedy because Consumer Law gave them a right to do so.’
the consumer had failed to notify Booktopia of
a fault within two days of delivery. The ACCC is seeking penalties, declarations,
costs and other orders.
The ACCC alleges that the representations
on Booktopia’s website and made directly by Source: Adapted from ACCC, ‘Booktopia in court for
customer service staff to the 19 consumers alleged false or misleading claims on refund rights’,
were false or misleading because they did not ACCC website, 10 December 2021.
reflect consumers’ rights to obtain a refund or

CASE STUDY ANALYSIS

1 Outline the facts of this case including how Booktopia breached ACL.
2 Describe the role of the Federal Court in this case.

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 Chapter 9 Establishing a business: legal requirements and external professionals 229

3 Propose a possible penalty. Do you think that this will also deter other businesses from
making misleading representations?
4 This case reinforces the importance of businesses being ethical. Suggest the possible
impact this outcome may have on the actions of other online businesses.

ACTIVITY 9.2
1 Search for the website of Consumer Affairs Victoria. Go to ‘Products and services’ and
answer the following questions relating to returns and refunds:
a Describe the circumstances under which a trader is legally obliged to provide a refund at
a customer’s request.
licence a
b Does a refund have to be a cash refund or will a credit note suffice?
document or
c Describe the circumstances where a customer is not legally entitled to a refund. permit that
2 Are the following signs legal in Victoria? Explain your answer. gives official
a ‘No refund on sale items’ permission to
do, use, or own
b ‘No refunds’
something

Business licences, permits and approvals

Many businesses require some type of licence, permit, or approval
from a government authority or professional association to
operate. Licences grant the right to perform a specified activity
or role. For example, skilled tradespeople or professionals such as
accountants need to be licensed with the appropriate authority.
Often a particular qualification is required to practise. A licence
is issued for a specified period of time and must be reapplied for
once this period has elapsed. For example, a medical practitioner
must be registered with the Health Insurance Commission to treat
patients under the Australian system of Medicare.

Figure 9.5 Consumer guarantees require goods to be of an

Local government by-laws acceptable quality.

Local government by-laws affect the operation of businesses in a given local area. These vary
by-laws local
according to the local government. government
laws/regulations
relating to
Building and planning controls activities within a
municipality
Each local government has a planning scheme administered by its planning department.
Different areas are designated for different types of use. For instance, large parts of any local
government area will be zoned for ‘residential use’ only. This designates the area for residential
dwellings with very few exceptions; for example, home offices and a few mixed businesses.

Other areas are zoned ‘light industrial’, ‘heavy industrial’, ‘retail’ and ‘commercial’. The purpose of
this system is to ensure that like businesses are restricted to similar areas. No one, for instance,
would like to discover that the vacant block of land next to their house has been sold to a

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230 Unit 2 | Establishing a business

developer building a four-storey office block, or even a supermarket. The system of zoning
largely prevents this from occurring.

Council planning approval must also be obtained for all plumbing and building work. The
operation of a home office may also require council planning permission.

Other by-laws impacting on business

Businesses must also be aware of other local by-laws, including:

• parking restrictions
• hours of operation
• health regulations covering hygiene and food handling
• restrictions on activities such as outdoor dining.

Permits and approvals are required from the

local government planning department to
set up or make fit-out changes to business
premises.

Some businesses require a variety of

licences. For example, a restaurant might
require the following:

• food premises registration for preparing

and selling meals
• liquor licensing for selling alcohol
• Australian Prudential Regulation
Authority (APRA) copyright licensing for
Figure 9.6 Food vans feature at a range of Melbourne venues providing casual and playing music
usually well-priced food.
• local council permits for footpath seating.

ACTIVITY 9.3
Using your favourite search engine, locate the ‘Permits and approvals’ page in the Business
section of the City of Melbourne website and answer the questions:

1 In relation to street trading:

a Describe three types of street trading activities offered by the City of Melbourne.
b Outline the application process.
c Suggest two reasons why the City of Melbourne regulates this type of activity.
2 Outline two by-laws that apply to mobile food vans and their operation in the City of
Melbourne.
3 Outline two requirements applying to hospitality businesses in the City of Melbourne.
4 List the steps that would be required to be followed for a music venue in the City of
Melbourne. Discuss why these guidelines have been established.
5 Describe the waste and recycling programs to which businesses in the City of Melbourne
are expected to adhere.

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 Chapter 9 Establishing a business: legal requirements and external professionals 231

Employment laws
The Australian federal and Victorian state governments are responsible for the creation and
Fair Work
implementation of workplace laws. Employers’ obligations and responsibilities are set out to Commission
ensure that employees’ rights are protected. Key areas of legislation relate to workplace safety, (FWC) Australia’s
national
awards and agreements, equal opportunity and anti-discrimination laws.
workplace
relations tribunal.
Its role is to
Workplace relations laws assist employees
and employers
The Fair Work Commission (FWC) is the independent, national body established under the Fair to maintain fair
Work Act 2009 to regulate workplace relations between employees and employers including: and productive
workplaces.

• setting minimum wages and conditions. workplace

• resolving disputes in the workplace. relations the
relationship
between
In establishing the National Employment Standards (NES), the FWC protects the minimum employer and
workplace entitlements for all Australian employees. In addition, the FWC determines the employee
with regards
minimum standards for wages and to contractual,
conditions specific to an industry, known as emotional,
awards. The FWC acts like an industrial court physical and
practical
to resolve disputes and establish minimum concerns
wages and conditions. The FWC oversees
Fair Work
and enforces regulations regarding: Ombudsman
(FWO) an
• t he safety net of minimum wages and independent
statutory agency
employment conditions (NES) of the Australian
• enterprise bargaining Government that
• industrial action acts as a central

• dispute resolution
point of contact
for free advice
• termination of employment and information
• other workplace matters. on the Australian
national
workplace
Figure 9.7 City of Melbourne Town Hall
relations system

The Fair Work Ombudsman (FWO) is an independent statutory agency of the federal
government that acts as a hub of information and advice regarding the workplace relations
system. Investigations into workplace complaints are carried out by the Office of the Fair Work
Ombudsman, which also enforces compliance with Australia’s workplace laws.

ACTIVITY 9.4
Go to the Fair Work Ombudsman website. This is a website provided by the government for both
employers and employees to check their entitlements and obligations.

1 Using the website, go to ‘Employee conditions’ then ‘National Employment Standards’ and
answer the following questions:
a Explain how the National Employment Standards (NES) are designed to protect
employees.
b List the 11 NES that apply to all employees covered by the national workplace relations
system.
c Outline the potential penalties that an employer faces for providing an enterprise
agreement to their employees with entitlements less than the NES.
2 Explain why the federal government would establish this type of website.

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232 Unit 2 | Establishing a business

Occupational health and safety laws

All businesses need to ensure they comply with the
relevant occupational health and safety laws for their
state. In Victoria, businesses are to observe occupational
health and safety laws that set out the responsibilities of
employers and employees to ensure a workplace is safe.
Workplaces are to be proactive in reducing all physical,
chemical and behavioural hazards as far as is practicable.
These obligations and responsibilities are set out in the
Occupational Health and Safety Act 2004.

Occupational health and safety (OH&S) laws aim to

prevent accidents in the workplace by involving all within
Figure 9.8 Occupational health and safety is an important obligation the business in actively working to identify and remove
of a business. hazards.

An employer’s obligations under OH&S include:

occupational
health and safety
(OH&S) laws
• a commitment to a safe workplace covering all workplace activities
concerned with • to involve all workers, management and owners in the development of an OH&S policy
the safety and • to communicate the OH&S policy and its relevant processes and procedures
welfare of people
engaged in work
• to provide training in all relevant OH&S procedures and processes
or employment • to regularly monitor compliance and review the policy.

In addition to the Act, there are compliance codes that provide practical advice to those who
have duties or obligations under the Act.

Ongoing
worksite
inspection
Hazard Accident
control incident
investigation

Health
and
Hazard
Worker safety system
identification
training and
assessment

Program Emergency
administration response
and review and planning

Figure 9.9 Elements of a health and safety management system operating in accordance
with Victorian OH&S laws

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 Chapter 9 Establishing a business: legal requirements and external professionals 233

WorkSafe Victoria
WorkSafe is the Victorian Government’s regulator in the enforcement of health and safety
in all workplaces in the state. Inspectors from WorkSafe may assess risks and hazards and,
if necessary, may close down the business until these are removed. The business operator,
therefore, must be aware of OH&S legislation and the standards and codes relevant to their
particular industry. Failure to do so could result in legal prosecution.

WorkCover a
WorkSafe Victoria established compulsory workplace injury insurance where employers compulsory
contribute to WorkCover insurance. This provides employers with insurance cover for the cost insurance
of benefits their workers will receive if they are injured or become ill because of their work. An scheme that
provides
income and compensation for employees and/or their families is provided in the event of injury, employers
disability, or even death in the workplace. Premiums vary according to the level of risk in the with insurance
workplace. The insurance may cover: cover for the
cost of benefits
if workers
• replacement of lost income are injured
• medical and rehabilitation treatment costs or become ill

• legal costs
because of their
work
• lump sum compensation in the event of a serious injury.

CASE STUDY
9.2
O’Brien stable
to face trial
over Worksafe
charges following
Thirteenth Beach
death

The stable of Melbourne Cup-winning trainer 9 March 2020, when a car collided with horse
Danny O’Brien has been committed to stand trial and stablehand, killing the 31-year-old man.
on charges of failing to provide a safe workplace
after a track rider, crossing a road on horseback, The unraced horse escaped with just minor
was struck by a car and killed in March 2020. injuries, as did the driver of the car.

O’Brien Thoroughbreds pleaded not guilty to WorkSafe said O’Brien Thoroughbreds received
the charges at the Geelong Magistrates Court, a document outlining safe work practices
but the judge determined on Wednesday that and known risks within the racing industry in
there was enough evidence to proceed with December 2018 from Racing Victoria, focusing
the case. on the topic of handling and transporting horses.

WorkSafe argues that stable staff should have WorkSafe said the document noted various
been wearing high-vis protective wear when risks relating to the topic, one of which was
they were crossing Thirteenth Beach Road, ‘horse and rider being struck by vehicles due to
Connewarre, on horseback on the morning of poor visibility’.
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234 Unit 2 | Establishing a business

One of the recommended safe practices in

the document is that every horse that is led
or ridden on a public road or thoroughfare
before sunrise should wear a rug or gear with
reflective strips, and the riders should wear
a reflective high-visibility vest, according
to WorkSafe.

But stable staff who gave evidence in the

committal hearing on Monday said they felt
safe to cross the road.

Source: Adapted from Damien Ractliffe,

‘O’Brien stable to face trial over WorkSafe
charges following Thirteenth Beach death’,

Figure 9.10 Danny O’Brien trained with master trainer Bart The Sydney Morning Herald,
Cummings and over the last 20 years has proven to be 16 February 2022.
one of Australia’s finest horse trainers.

CASE STUDY ANALYSIS

1 Outline the circumstances leading to Danny O’Brien being committed to stand trial.
2 Describe the role of WorkSafe and include details of its published guidelines outlining safe
work practices and known risks within the racing industry.
3 Do you think the Danny O’Brien was responsible for the breach of these conditions? Justify
your answer.
4 Predict the possible outcome for this case.
5 Conduct research about the outcome of the case at the County Court. Suggest how the
decision is likely to affect the racing industry in the long term.

Equal opportunity, anti-discrimination and

sexual harassment laws
The Victorian Equal Opportunity and Human Rights
Commission defines discrimination as ‘treating, or
proposing to treat, someone unfavourably because of a
personal characteristic protected by law’. Victoria’s Equal
Opportunity Act 2010 protects people from discrimination
and harassment in all areas of public life, including the
workplace.

Anti-discrimination laws aim to protect employees from

discrimination on the grounds of age, gender, sexual
Figure 9.11 Discrimination is treating, or proposing to orientation, gender identity, religion, pregnancy, race, ethnic
treat, someone unfavourably because of a personal
characteristic protected by law.
background, disability, or any other personal characteristic.

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 Chapter 9 Establishing a business: legal requirements and external professionals 235

The Victorian Equal Opportunity and Human

Rights Commission may fine employers if they
perpetrate or allow discrimination based on an
employee’s personal characteristics to occur in
their workplace. Discrimination can be direct or
indirect and includes:

• the recruitment process; for example,

job advertisements or interviews being
inaccessible because of a disability
• being offered unfair terms of employment; for
example, because of your race or religion
• being denied access to training; for example,
because of your age
• being refused or having limited access to
opportunities for promotion, transfer, or other
Figure 9.12 Some businesses have higher levels of risk than others.
employment benefits; for example, because of
parental status
• being unfairly dismissed, retrenched or demoted; for example, because you become
pregnant.

Sexual harassment is against the law according to the Equal Opportunity Act 2010. It is unwanted
or uninvited sexual behaviour that is offensive, embarrassing, or humiliating in the workplace
either by employers to workers or between workers. Despite being outlawed for over 25 years, insurance
sexual discrimination continues to be an issue. There are clearly specified procedures for a contract,
represented by a
investigating a sexual harassment claim that must be followed by employers. policy, in which
an individual or
entity receives
Further obligations with insurance financial
protection or
Many businesses require some form of insurance to provide financial compensation in case reimbursement
of accidents, fire, theft and other mishaps and disasters. An insurance policy is a legal contract against
losses from
where the insured (client) pays a sum of money (premium) to an insurer (usually an insurance an insurance
company). In return, the insurer guarantees to financially compensate the client for accidental company
losses incurred, or for the client being liable to compensate staff, customers, or members of premium periodic
the public, for accidental damage and loss suffered due to the business’s operations. Premiums payment made
increase according to the amount of risk and the cost of replacement or amount of financial to an insurance
company
protection offered. For example, it costs more to insure against fire in a bushfire-prone area, and
more to insure against theft in an area with high rates of burglary. risk assessment
an assessment
of the level of
The small business operator should carry out risk management by investigating potential safety risk for which
risks and hazards, taking action to reduce them, and taking out insurance accordingly. Risk insurance
cover is sought,
management should be repeated regularly as the business develops. The insurance company
conducted by
will also conduct risk assessment of the business to gauge premiums. Business owners can an insurance
obtain reduced premiums if they take action to reduce their level of risk. For example, installing company
fireproof doors, smoke alarms and extinguishers reduces fire risk. public liability
insurance the
Some types of insurance are compulsory and must be purchased by all businesses: protection of
businesses
against damages
• Businesses are required to pay workers’ compensation insurance if their employees are paid or injuries to
over $7500 per annum. another person or
property
• Public liability insurance is required by many types of businesses.

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236 Unit 2 | Establishing a business

REVIEW ACTIVITY 9.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 List the main areas of legal compliance with which business operators must be acquainted.
2 Identify to which organisation an employer would go for advice on the following:
a resolution of an employee’s sexual harassment claim
b obtaining a licence to discharge waste into the environment
c obtaining an ABN
d finding out their legal obligations in regard to consumer rights
e registration of a website domain name
f breakdown in employer and employee relations.
3 Outline the obligation an employer has to the Australian Taxation Office.
4 Outline the obligations of a Victorian employer with regards to occupational health and
safety. What is the purpose of these laws?
5 Compare the role of the Fair Work Commission with that of the Fair Work Ombudsman in
the Australian system of workplace relations, noting the differences and similarities.
6 Identify and describe four guarantees that are protected for Australian consumers and
explain the role of the ACCC in working towards solutions should a guarantee be breached.

Figure 9.13 Employers are required to make their workplaces safe for their employees.

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 Chapter 9 Establishing a business: legal requirements and external professionals 237

9.2 The role of external professionals when

establishing a business
Learning intentions – at 9.2.1 Describe the role of external professionals when
the end of this chapter establishing a business
section I will be able to:

Business today is very complex and the range of advice that can be sought from external
professionals can be overwhelming. However, a well-prepared business plan will highlight
the strengths of the business and reveal where there are gaps in knowledge and expertise.
In Chapter 5, business support services offering legal, financial and technological advice to
businesses were examined. This section will explore the role of additional professional services
that provide advice in areas where high-level expertise is required that will provide fresh
perspectives and up-to-date knowledge.

Legal advice from the Law Institute

The Victorian Law Institute offers a Legal Referral Service, where a business’s specific needs are
matched with a lawyer with expertise in the area. All major law firms offer a no-cost 30-minute
interview, which can be used to discuss the options in managing a given legal issue and will
advise on the likely costs to pursue the action further.

ACTIVITY 9.5
Federal and Victorian state government websites

The federal government’s website business.gov.au offers

a great deal of advice for new businesses and provides
legal and business resources for many industries
including:
• accommodation and food service industry
• agriculture industry
• forestry industry
• professional, scientific and technical services industry
• tourism industry.
1 Go to business.gov.au > planning > industry-information. Select one of the 15 identified
industries and complete the following:
a Identify the types of business associated with this industry.
b List the legislation, standards and initiatives that apply to the industry.
c Outline the taxation obligations and additional tax measures that may apply to the industry.
d Outline the key workplace health and safety regulations.
e Identify the relevant IP required to protect intellectual property associated with this industry.
f List the industry-specific insurances related to this industry.
2 The Victorian state government has established the business.vic.gov.au website to provide
Victorian businesses guidance and services for a successful business start through to advice
about transforming your business. Go to business.vic.gov.au and click on the tools and
templates tab.
Select two templates and suggest why these resources would be useful to a Victorian
business.

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238 Unit 2 | Establishing a business

Finance professionals
One of the most challenging areas for new businesses is to manage finance and establish
financial systems. Finance professionals can assist in monitoring cash flow, maintain records of
transactions, and provide advice on business expansion. Professional services can be sought
from the following:

• Accountant – to prepare financial statements, monitor banking,

follow up on overdue payments and provide advice
• Book keeper – is responsible for maintaining the day-to-day
activities of a business
• Business activity statement (BAS) agent – many businesses find
meeting ATO requirements difficult. A BAS agent will prepare
and lodge the statement with the ATO.
• Bank managers – another valuable source of financial advice
and assistance. They can assist with loan applications and
managing business bank accounts. They can also give advice on
the feasibility of a business expansion.
• The ATO – an excellent source of information regarding
Figure 9.14 Continued practice in planning will assist in taxation matters, with their website providing free accessible
maximising the services of an external professional.
information.

CASE STUDY
9.3
Are you getting
the most from your
external advice and
service providers?

This case study is available in the Interactive Textbook.

  

Other professional advisers and consultants

Additional support required will depend on the business type:

• Insurance agents and brokers are experts who will give advice on risk management
and appropriate insurance. They also sell insurance. An agent works for one insurance
company and will try to sell only that company’s products. Brokers, on the other hand,
work for themselves and act as agents to the person or business seeking insurance. They
will negotiate insurance policies with different insurers on behalf of a client.
• Advertising consultants work on developing product advertising campaigns that attempt
to engage new customers and are most successful when there is a good understanding of
trends and target markets. The recommended media streams for a suitable campaign will be
based on their understanding of the target market. Media options include radio, newspapers,
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 Chapter 9 Establishing a business: legal requirements and external professionals 239

publications, television and social media. The work of

advertising consultants is more short term in impact when
compared to a marketing consultant.
• Marketing consultants develop campaigns to build a
business brand by advising on the best ways to reach,
engage and retain customers. It involves careful planning
and research to understand who the target market is, their
wants and behaviours. Their services include:
– evaluating current marketing campaigns and advise
future improvements
– devising, planning and implementing marketing
campaigns across a range of platforms including the
growing digital spaces.
• Graphic designers and printers may be employed to design Figure 9.15 A small business owner needs to consult advisers
and professionals in areas that require specific expertise.
and produce logos, letterheads, pamphlets, business cards
and advertisements.
• Information management and technology consultants are experts who will help select
technology, software and hardware, set up systems, train staff, and provide ongoing back-up
and assistance with all technology-related areas of the business.

ACTIVITY 9.6
Go to the Kexino website at the following link https://cambridge.edu.au/redirect/9757 and
complete the following questions.

1 Identify the company that owns this website.

2 In your own words, describe the services offered by this company to small business
start-ups under each of the following headings and explain how the service will benefit a
business start-up.
a search engine optimisation
b content marketing
c branding
d design
e public relations.
3 Explain how a marketing plan
for a start-up would differ to an
established business.

REVIEW ACTIVITY 9.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain the benefits for a business in seeking advice from professionals external to the
business.
2 Outline how a business should prepare prior to meeting an expert external to the business.
3 Locate where a small business would go to find information on the following issues:
a legal advice
b feasibility of a business venture
c preparation of a tax return
d assistance with a marketing campaign
e up-to-date industry news.

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240 Unit 2 | Establishing a business

Chapter 9 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 1, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Website domain Australian Business By-laws

Number

Fair Work Commission Occupational health and Workplace relations

safety (OHS)

Equal opportunity Worksafe insurance Trade practices legislation

External professionals Marketing consultant Advertising consultant

Extension questions
1 Working in small groups, develop a ‘Meet your legal obligations in business’ brochure
designed for new business owners in Victoria.
2 Create an information pamphlet titled ‘Guide to professional advice for Victorian businesses’
and include an overview of what the following professionals can offer businesses:
a legal advisors
b financial advisors
c insurance agents
d advertising consultants
e marketing consultants
f graphic designers.

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 Chapter review 241

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

9.1 Key legal 9.1.1 Provide an overview of the key legal Activity 9.1 Yes No
and government requirements for establishing a business Activity 9.2   
regulations including registering the business Activity 9.3
name, registering a website domain, Activity 9.4
trade practices legislation, business tax Case study 9.1
compliance and Worksafe insurance Case study 9.2
Review activity 9.1:
Part 1 & Part 2
Extension: Q1

9.2 The role 9.2.1 Describe the role of external Activity 9.5 Yes No
of external professionals when establishing a business Activity 9.6   
professionals Case study 9.3
when Review activity 9.2:
establishing a Part 1 & Part 2
business Extension: Q2

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 10
Establishing a business:
policies and procedures

‘Being good is good business.’

Anita Roddick (1942–2007)

About the author:

Anita Roddick was a British entrepreneur, human rights
activist and environmental campaigner. She was best
known as the founder of The Body Shop, producing and
retailing beauty products that shaped ethical consumerism.
In 2006, she sold the Body Shop to L’Oreal for £652 million.

KICKSTARTER ACTIVITY
1 The Body Shop is known for its ethically created products and social
conscience. Is demonstrating ‘being good’ enough for employees and
customers? Discuss.
2 Brainstorm internal policies and procedures that would support ‘being
good’ across all levels of an organisation.

CHAPTER OVERVIEW

policy a deliberate All businesses need to plan for and develop policies and procedures
system of
guidelines and
to ensure consistency and stability in their day-to-day operations.
statement of Having policies also means a business is more likely to be compliant
intent
with legal and other requirements. Particularly in the planning and
procedures the establishment phase of a business, it is important that bank accounts,
steps used to
implement a financial control systems and record-keeping strategies are all in place.
policy Suppliers are a vital component of a competitive business venture
and there are important factors to be considered in establishing
socially responsible supply chain management. It is also essential that
a business takes into consideration its technological needs, and to
ensure that data obtained from customers is protected.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will
be able to:

The importance of establishing 10.1 The importance of establishing bank accounts,

bank accounts, financial control financial control systems and record-keeping
systems and record-keeping strategies
strategies 10.1.1 Explain the importance of establishing bank
accounts, financial control systems and
record-keeping strategies

The importance of choosing 10.2 The importance of choosing appropriate suppliers

appropriate suppliers, including 10.2.1 Describe the importance of choosing
the benefits and limitations of appropriate suppliers and discuss the
suppliers that meet the corporate benefits and limitations of suppliers that
social responsibility objectives of meet the corporate social responsibility
the business objectives of the business

The need for policies and 10.3 Policies and procedures relating to legal
procedures to achieve compliance requirements
with legal requirements and 10.3.1 Describe the need for policies and
establish business routines procedures to achieve compliance with legal
requirements and establish business routines

Technological and global issues 10.4 Technological and global issues

that may affect decision-making 10.4.1 Describe technological and global issues that
when establishing a business, may affect decision-making when establishing a
such as generating customer business, such as generating customer databases
databases and contacts with and contacts with overseas suppliers and retailers
overseas suppliers and retailers

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 10
Establishing a business: policies
and procedures

10.1 The importance of 10.2 The importance of 10.3 Policies and 10.4 Technological and
establishing bank choosing appropriate procedures relating to global issues
accounts, financial suppliers legal requirements
control systems and
record-keeping strategies

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244 Unit 2 | Establishing a business

10.1 The importance of establishing bank

accounts, financial control systems and
record-keeping strategies
Learning intentions – at 10.1.1 Explain the importance of establishing bank
the end of this chapter accounts, financial control systems and record-keeping
section I will be able to: strategies

Among the most vital aspects of business operations are financial management, record
financial
management keeping and the ability to evaluate financial performance. It is essential that a manager/owner
managing of a business has the necessary skills to perform these tasks and enable the business to remain
financial activities
financially viable. Financial planning, management and evaluation necessitate the development
relating to the
operation of a and maintenance of financial record keeping, control and evaluation systems and processes.
business

record keeping
maintaining
Establishing a bank account for a business
accurate When establishing a business, it is important to set up a bank account that is separate from the
records of all
matters related owner/s of the business. Applying the separate entity concept keeps personal and business
to business income and expenditure separate. Accurate monitoring of the financial progress of a business
activities can be achieved and preparation for Australian Taxation Office requirements will become
separate simpler and more accurate to prepare.
entity involves
the separate
recording of
transactions of a
business from its
owners

Figure 10.1 When establishing a business, it is important to set up a separate business bank account that is used only
for business transactions.

ACTIVITY 10.1
Josh and Rahim have started a business selling comic books. Presently the business is selling
online and the comics are stored in their bedroom. Josh believes they should open up a separate
bank account because the revenue from sales and business expenses are coming out of Rahim’s
personal bank account.

Explain why it is advisable that the business has its own separate bank account.

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 Chapter 10 Establishing a business: policies and procedures 245

Financial control systems and record-keeping strategies

It is essential that all businesses establish a financial management system, although this is
cash flow
sometimes more difficult for a small business. However, this does not mean it should not be tracking the
done. A business needs to have control over its cash and cash flow. cash or money
coming into and
going out of the
There are a range of factors to be considered when establishing financial control systems. business
If a business is to be successful and viable over a long period of time, controls and systems
are required.

Financial control and business documents required

Small and new businesses are often the most vulnerable to fraud because they often do
not have effective internal controls. By removing the opportunity and motivation for fraud
and theft, and ensuring systems are in place to discourage errors and identify mistakes and
anomalies quickly, it is easier to avoid fraud and easier to take corrective action to
minimise losses.

Internal controls are adopted by businesses in order to:

1 safeguard its assets

2 ensure financial information is accurate and reliable
3 ensure compliance with all financial and operational requirements.

If the owner/manager does not establish controls then it is unlikely that staff will, and this can
lead to issues around financial control and resource management. Having a code of ethics, plus
clear processes and policies that are known and followed, will set the culture and tone of the
business. It is also important for the business to have formal systems and written procedures
and policies in place to identify any issues or oversights. Proper and accurate record keeping
and clear procedures will minimise exposure to risk and possible fraud because these can then
be detected early and quickly.

Each internal control procedure should address at least one of the following criteria:

• completeness – all reports of business contain records and transactions

transactions
• accuracy – the appropriate amounts are recorded in the appropriate accounts contractual
• authorisation – the correct levels of authorisation are in place to cover such things as arrangements
undertaken
approval, payments, data entry and computer access
by a business;
• validity – the invoice is for work performed or products received and the business has for example,
incurred the liability properly payment of

• existence – of assets and liabilities; that these have been recorded accurately and in a timely manner wages or rent

• error handling – errors in the system are identified and processed

• segregation of duties – to ensure certain functions are kept separate; for example, the
person taking cash receipts should not also do the banking
• presentation and disclosure – timely preparation of standard financial reports.
(Source: Based on CPA Australia website, ‘Internal controls for small business:
2008 update’. Copyright © CPA Australia Ltd. Used by permission.)

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246 Unit 2 | Establishing a business

There are a range of financial records that should

evidence
information that be kept by business. These can be used to compile
identifies type of reports accessible by owners and other interested
transaction, its
stakeholders. A simple book-keeping system for a
date, parties and
financial value (if small business should include records of financial
any) transactions such as cash and credit sales and
source payment of expenses. These transactions should be
documents recorded. There needs to be evidence of all financial
documents that
transactions. A document should include the date,
provide evidence
of transactions the type of transaction, the monetary value and the
name/s of those involved where relevant.
cash book one
of the simplest
forms of financial If these source documents are not kept it is almost Figure 10.2 A spreadsheet is one of the simplest forms
record keeping; impossible for a business to track the financial data or of financial record keeping.
sets out all the
cash transactions prove expenditure; for example, phone expenses.
of a business
including receipts A cash book is one of the simplest forms of financial record keeping. A cash book sets out all the
and payments
cash transactions of a business including receipts and payments. Once a business starts operation it
cash payments enters into transactions, which must be correctly recorded. Examples of transactions include revenue
when items are
purchased and
from the sale of a good or service and cash payments such as employee wages and payment of
paid for in cash rent. A business needs to ensure that it keeps evidence of all transactions. The cash book can be kept
manually as a multi-column cash book, on a spreadsheet program such as Microsoft Excel, or on a
computerised accounting package such as MYOB (Mind Your Own Business), Xero or QuickBooks.

A cash receipt is a source document and also provides evidence for the business. Cash source
documents are set out in Table 10.1.

ACTIVITY 10.2
1 Determine whether the following events are transactions. Justify your answers with
reasons.
a A customer places their name on a mailing list.
b A manufacturer purchases raw materials.
c A supplier distributes a catalogue of plumbing parts to a hardware store.
d A customer returns a faulty toaster.
e A phone bill is paid by an advertising agency on a Visa card.

Figure 10.3 Businesses must be systematic in developing financial control systems.

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 Chapter 10 Establishing a business: policies and procedures 247

Table 10.1 Cash source documents

Type Explanation

Receipts A receipt is a record of cash transactions and money received by a

business.

Cash register roll or Most retail stores use electronic cash registers. A cash transaction is
summary recorded by the business, often on a cash register roll, or a summary
that can be accessed.

Pay-in book or slip When cash is deposited into the bank, a pay-in book or slip is
completed and provides evidence. It is a sound practice to bank cash
daily to ensure that the records balance with the cash received or paid
out by the business.

EFTPOS records EFTPOS (Electronic Funds Transfer at Point of Sale) transactions are
widely used. While it is still recognised as a cash transaction, the
money is transferred into the bank account of the business by the
customer’s financial institution.

EFT Electronic funds transfer is the electronic transfer of money from one
bank account to another, either within a single financial institution or
across multiple institutions, via computer-based systems, without the
direct intervention of bank staff.

Credit card Many businesses offer credit card facilities. The financial institution
transactions or credit card provider reimburses the business for the sale, with the
business also paying a fee for the use of these facilities.

Periodic payments Businesses may also have periodic payments (direct debits or
payments) made by the bank or other financial institutions on behalf
petty cash a
of the business. The business has authorised the financial institution
small amount of
to withdraw the amount from its bank account. Lease payments, cash held to pay
insurance instalments, electricity bills and many other regular for items such as
payments can be made in this way. stamps, tea and
coffee

Petty cash Businesses usually need to make small payments including for stamps, cheque an
tea, coffee and transport fares. The petty cash system allows small instruction to
the bank to pay
amounts of cash to be kept on hand for these expenses. A petty cash
money from an
voucher should be completed when petty cash is required; this voucher account to the
provides evidence of the expenditure and is recorded in the petty cash person named
book. on the cheque
(drawee)

Cheques Cheques are used less now and most businesses use direct debit cheque butt form
and EFTPOS for payments of business expenses. A cheque is simply of evidence to
support writing
an ‘IOU’ to the person or business. The bank involved transfers this
of the cheque and
amount into the account of the person owed the money. A cheque butt
payment of an
provides the business with a record. account

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 Figure 10.4 An example of a cash book for Bob’s Pet Grooming Service
248

Bob’s Pet Grooming Service

Cash Book for the month ended September 2021

Motor
Grooming Sale of pet Vehicle
Date Details Rec. no. fees products Sundries Bank Date Details Ch. No. Products Exp. Wages Sundries Bank

3-Sep Fees 112 350 350 4-Sep Wages 150 150

ISBN 978-1-009-20257-2
9-Sep Pet 113 56 56 11-Sep Petrol 50 50

13-Sep Fees 114 123 123 14-Sep Cleaning 123 34 34

products
Unit 2 | Establishing a business

16-Sep Fees 115 68 68 17-Sep Wages 72 72

21-Sep Pet 116 86 86 20-Sep Petrol 24 24

minding
service

© Julie Cain et al 2023

25-Sep Fees 117 193 193 24-Sep Cleaning 124 18 18
products

27-Sep Fees 118 67 67 26-Sep Electricity 75 75

Photocopying is restricted under law and this material must not be transferred to another party.
29-Sep Fees 119 48 48

30-Sep Total 849 56 86 991 30-Sep Total 52 74 222 75 423

Cambridge University Press

 Chapter 10 Establishing a business: policies and procedures 249

ACTIVITY 10.3
Katie Walker has been successfully running her business A-Plus Dog Walking for the past six
months. She has been trying to keep her records manually in a cash book. This seemed to be
working; however, she cannot account for $150 of petty cash expenses, although she may have
used some of it to buy coffees, movie tickets and dinner during the last month. Katie has not
recently accessed her bank statements online and has not had time to check them properly. She bank statement
paid three suppliers and has received a phone call from one of them telling her that the direct a periodical
statement where
deposit did not go through.
the bank itemises
the transactions
Advise Katie as to what she could do to ensure that she can gain control over her business relating to
finances. an account;
for example,
debits, credits,
government and
Cash control bank charges

For a business to be financially successful, it must maintain control of its cash and cash flow.
Cash flow is tracking the cash or money coming into and going out of the business. As part of
the control over the cash and financial system, a business should also put in place the following
processes:

• Cash registers should be used and cash stored securely.

• Cash should be banked regularly, preferably daily.
• If possible, the tasks of handling cash, banking and writing
cheques should be completed by different people.
• Bank statements and cash books should be checked
regularly and reconciled (balanced).
• Correct procedures should be in place for petty cash. Cash
should not be reimbursed without a receipt and a petty
cash voucher. The petty cash tin should be kept locked and
in a secure place.
Figure 10.5 For a business to be financially successful, it must
Many businesses also have credit transactions as well as cash, keep control over cash and cash flow.
and these are just as important to control. Again, this means it
is important to have accurate records and ensure that any outstanding money from customers
is followed up. Many businesses will put in place strategies, such as limiting the amount of Profit and Loss
credit given to customers and monitoring the terms and time given to customers to pay. At the Statement an
accounting report
same time, a business should try to extend the time given by suppliers to pay bills at a later date that outlines the
to keep cash in the business. revenue less the
expenses for
an accounting
There are two important financial statements a business will use; these are the Profit and Loss period. It provides
Statement and the balance sheet. The Profit and Loss Statement will provide an outline of the a business with
revenue and expenses of the business and any profit (if one has been made). A balance sheet an overview of
whether it has
will set out the assets, liabilities and owners’ equity (investment) in the business. Both provide made a profit for
information that can be useful for business owners and allow them to monitor and evaluate the accounting
business performance. period.

balance sheet
A business should have financial statements audited and checked by an independent auditor an accounting
report that sets
or accountant. Audits are generally prepared by an appropriately qualified accountant (e.g. a
out the assets,
CPA or CA) who will ensure that the financial statements are compliant and meet standards. liabilities and
Large businesses must have an independent financial audit and there are codes of corporate proprietorship
(owners’ equity)
governance.
of a business as
at a given date

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250 Unit 2 | Establishing a business

Table 10.2 Top 10 dos & don’ts for a business

The top ten dos for a business The top ten don’ts for a business

1 Adjust and readjust cash flow projections. 1 Run out of cash … ever.
2 Establish maximum limits of purchasing 2 Discount the importance of hiring an
authority. accountant.
3  Require all payments be supported by 3 Overlook suppliers as sources of financing.
invoices. 4 Disregard contingency planning.
4 Use an inventory control system. 5 Have the same person handling payables
5  Work with a CPA to upgrade financial and receivables.
controls. 6 Place an order without a written price and
6  Require quotes on all purchases over a terms.
stated limit. 7 Delegate signing of cheques.
7 Be loyal to good suppliers. 8 Assume that shipments are complete and
8 Pay on time, but only after verification. in perfect condition.
9 Consider higher audit levels. 9 Neglect to ask for and use term discounts.
10 Implement an ‘edit log’ for website 10 
Think that hand-shake agreements are
changes and updates. best when buying.

(Source: Adapted from ‘Session 1: Getting financial controls in place’,

My Own Business Institute, www.scu.edu.)

Figure 10.6 Businesses of all sizes need to keep financial records.

All internal controls, whether administrative or accounting, are linked to a financial consequence.
Many decisions are based on the information in financial reports, hence accurate and up-to-date
information is crucial. Businesses have many compliance obligations and need to ensure these
are met. Without accurate financial information, decision-making becomes very difficult and the
business will suffer. Internal controls also help to ensure financial information is accurate and timely,
so that managers and owners can take the correct action to meet the business’s objectives and goals.

The types of controls needed will vary with the different flows of goods and funds within a business.
Some areas of the business are at greater risk of loss or fraud and require more stringent controls.
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 Chapter 10 Establishing a business: policies and procedures 251

CASE STUDY
10.1
Strategies for
small businesses:
financial control
and record keeping

It is important for a small business to keep Financial controls for large businesses
record keeping simple while still ensuring
records are accurate. A number of strategies Large businesses have several obligations
should be introduced, including: regarding financial record keeping and financial
control. These financial reporting and auditing
• keeping financial records and transactions requirements are set out in the Corporations
separate from the owner/s Act 2001. The Australian Securities and
• keeping documents of all transactions in Investments Commission (ASIC) regulates
one place and filed in a logical way compliance. Companies listed on the Australian
• at least once a week checking that all Securities Exchange are actively monitored to
transactions have been accurately recorded ensure that financial reports and audit opinions
• at the end of each month ‘closing off’ the are relevant and reliable to assist users of this
records. Any adjustments can be made in information to make informed decisions.
the next month.

CASE STUDY ANALYSIS

Explain why it would be important for a business owner to record and monitor this type of
information for both small and large businesses.

REVIEW ACTIVITY 10.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe why business owners should open a separate bank account.

2 Explain the importance of setting up financial control systems and record keeping
strategies.
3 Describe why it is important for a business to establish and use internal financial controls.
4 Outline three internal financial controls a business might use.
5 Explain the reasons why a business should complete and use financial statements.

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252 Unit 2 | Establishing a business

10.2 The importance of choosing appropriate

suppliers
Learning intentions 10.2.1 Describe the importance of choosing appropriate
– at the end of this suppliers and discuss the benefits and limitations of suppliers
chapter section I that meet the corporate social responsibility objectives of
will be able to: the business

The relationship a business has with its suppliers is crucial to competitiveness. Contracts must be
established with reliable suppliers of high-quality inputs in order to maximise competitiveness. A
reliable supplier of high-quality inputs will bring the following competitive advantages:

• Quality: the quality of inputs a business is able to access will directly impact on the quality
of the products it is able to provide for sale in the market. Higher-quality products will in
turn create higher levels of customer satisfaction, reduce defects and returns, and generally
improve the level of sales and efficiency. For example, if a bakery is able to access high-
quality eggs, flour and butter, the quality of the cakes it produces will be high. This will make
the business more competitive, and increase sales and business performance.
• Timeliness: suppliers that deliver reliably and on time enable a business to create products both
reliably and in a timely manner. Unreliable suppliers may mean a business is forced to halt or
slow production. This in turn will affect its reputation for reliability and reduce productivity
levels. Reliable deliveries from suppliers mean that a business is able to maintain minimal
inventory levels, thereby reducing storage costs and
minimising waste, theft and loss of items in inventory. This
in turn increases efficiency and business competitiveness.
• Competitiveness: businesses with reliable suppliers of
high-quality inputs at competitive prices can offer high-
quality products at competitive rates.
• Innovation: suppliers are often major contributors to
new product development and innovative ideas. Having
established relationships with them will mean that a
business is able to take advantage of these as they arise. For
example, if a florist already has an established relationship
with a flower grower who has developed a new type of rose,
the florist will likely be the first to gain access to and sell the
new flower, gaining a competitive advantage.
Figure 10.7 A business may establish and maintain a mutually
beneficial relationship with a reliable supplier.
• Finance: a good relationship with a supplier may allow
a business to postpone debt.

Maintaining positive supplier relationships

A business may establish and maintain a mutually beneficial relationship with a reliable supplier
of quality inputs using the following strategies:

1 Settle bills on time: a business that pays accounts reliably and promptly becomes a valued
customer. This will often extend into preferential treatment over other clients.

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 Chapter 10 Establishing a business: policies and procedures 253

2 Allow adequate lead times for orders: a supplier given ample warning of an order is more
likely to deliver on time and provide high-quality products.
3 Maintain transparent, open and frequent communication: regular contact with suppliers and
maintenance of positive relationships often leads to preferential treatment. News of new
products and promotions may consequently reach the business before it reaches competitors.

Choosing suppliers and corporate social responsibility

The following criteria should be applied when selecting suppliers:

1 Price: lower input costs enable a business to produce at a lower cost, thereby increasing
competitiveness.
2 Quality: quality inputs enable high quality in a finished product, also enhancing
environmental
competitiveness. sustainability
3 Reliability: suppliers who are reliable reduce the risk of production delays. This means the ability of an
ecosystem to
increased productivity and business reputation.
maintain itself
4 Social responsibility: environmental sustainability and other social responsibility into the future;
considerations are also important criteria in selection of suppliers. Many businesses adopt involves using
the Earth’s
a procurement policy that stipulates environmental sustainability and social responsibility
resources at a
criteria to be applied when selecting suppliers of inputs. This means the environmental and rate they can be
social performance of potential suppliers is considered as part of the tender process. Factors replenished
to be taken into consideration when evaluating the environmental and social responsibility procurement
credentials of a supplier include: policy the specific
a the environmental management practices in use; for example, many businesses will not regulations
that a business
trade with sellers of genetically modified foods uses to guide
b supplier environmental and social responsibility policies: suppliers are increasingly the process of
chosen according to their levels of commitment to environmental practices and policies procuring goods
and services that
such as recycling or fair-trade principles. The Body Shop, for example, will only trade with are necessary for
cosmetics suppliers who do not test their products on animals. Traders who sign up to business
fair-trade agreements agree to only purchase from ethical suppliers who pay a fair price
to producers in less-developed countries.
c local suppliers may also be given first consideration as they have a reduced impact on
CO2 emissions owing to the shorter distances required for deliveries. Similarly, local
suppliers may also be favoured in an effort to
protect Australian jobs and industries.
d social responsibility considerations may
include treatment of employees by the
supplier; for example, the payment of fair
wages and not using child or forced labour.
They may also include aspects of how the
supplier supports its local community and the
employment policies of the supplier.
e socially responsible inputs: every product
has an effect on the environment. The
purchase of more sustainable inputs will
minimise the environmental impact of
a business. Therefore, suppliers of more
environmentally friendly inputs are often
favoured because these produce less waste,
can offer greater efficiencies and improve
the reputation of a business in terms of Figure 10.8 Suppliers are increasingly chosen according to their levels of
environmental performance. commitment to environmental practices.
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254 Unit 2 | Establishing a business

Social responsibility and supply

chain management
The community increasingly expects that
a business considers social responsibility
factors when selecting suppliers. Many
businesses adopt a procurement policy
stipulating environmental sustainability and
social responsibility criteria to be applied. An
environmental management system (EMS) sets
out a sustainable procurement process.

The lowest price is no longer the only criteria

for the selection of a supplier. Evaluation
of a supplier’s environmental and social
performance must be made before awarding
Figure 10.9 When selecting a supplier, ensure their products are
a contract. Factors to be considered
produced ethically. may include:

• Does the supplier use environmental management practices? Does the supplier have
an EMS? Does the supplier meet ISO 14001 environmental management standards and
practices?
• Is there legal compliance with environmental legislation?
• Does the supplier have appropriate environmental and social responsibility policies in place?
• Does the supplier treat employees properly and pay them a fair wage?

An audit of suppliers and their social responsibility practices and policies may be done to assess
which suppliers satisfy the criteria. Social responsibility considerations may include treatment
of employees. Do they pay fair wages and provide adequate working conditions? Suppliers who
are found to use child labour or exploit workers would be excluded on these grounds.

Examples of environmentally sustainable input strategies include:

• purchase and use of green energy options: this will reduce carbon emissions and minimise
energy use
• purchase of sustainable technology and equipment options: energy efficient equipment will
save on energy use. Fully electric vehicles, for example, will save on fuel costs, reduce CO2
emissions and improve the business’s image.
• purchase of the most sustainable input options; for example, recyclable materials
• choosing local suppliers to reduce carbon footprint and transport costs
• choosing suppliers based on principles of corporate social responsibility.

Advantages of ethical procurement are:

1 Suppliers of environmentally sustainable products may offer reduced costs due to energy
efficiencies such as:
a reduced waste and waste disposal costs
b newer, more efficient technologies
c recycling.

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 Chapter 10 Establishing a business: policies and procedures 255

2 An improved business reputation in terms of social responsibility may result, including:

a a better reputation among investors who look for ‘green’ or socially responsible
investment opportunities
b improved customer relations: consumers are often drawn to purchase from businesses
with a positive reputation in terms of corporate social responsibility
c a positive message is sent to investment analysts, the media, shareholders and the local
community about the commitment of the business to social responsibility.

3 The positive publicity associated with an ethical procurement policy will often result in
improved business competitiveness levels.

Potential disadvantages of ethical procurement are:

1 increased costs involved in sourcing ethical and socially responsible suppliers

2 potential for reductions in quality of products.

CASE STUDY
10.2
Ethical sourcing
protecting worker’s
rights

When we say we take a zero-tolerance approach around the world and we couldn’t be more
to unethical behaviour, we mean it. Serious proud. As a global business, we know we have
matters like forced labour and child labour are a responsibility to make sure our supply chain
not tolerated. And we’re also committed to our is equally ethical and sustainable.
journey of paying a living wage. Introducing our
direct sourcing model in 1997, we were given Partnering with our suppliers
more visibility and control over our supply
chain. This solidified strong, lasting partnerships We believe that all members of the Cotton On
with our suppliers that still stand today. Group family, including everyone in our supply
chain, has the right to have their voice heard.
Since the ’90s, we’ve kept building on our They also have the right to work in a space that
Ethical Sourcing Program, and in 2009, we has safety and wellbeing front of mind – always.
formalised our 14 Rules to Trade. This is our
supplier code of conduct, and it essentially Regular factory audits (covering more than 160
governs the sourcing, manufacturing and topics) and worker interviews are part of the
supply of our products. It is also in place to everyday support we offer our supplier partners.
protect human rights, and the environment, Not only does this support them, but it also
while continuing to strengthen our helps us gain the best possible insights. Our
supplier partnerships. audits are benchmarked against international
standards, covering areas such as fire and
Over the years, our supplier base has grown safety, management practices, workers’ rights,
from a small handful, to over 200 suppliers factory conditions, waste, and environment.
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256 Unit 2 | Establishing a business

We offer training and education programs for Transparency and traceability

owners, managers and their team members
too, covering our 14 Rules to Trade and our We know it’s our responsibility to understand
supplier agreement. We work to empower everything from who makes our product
absolutely everyone in our supply chain, and how it’s made, right through to the raw
supporting them to develop their life and materials being used to make it. That’s why
leadership skills. How? Through providing we’ve set a goal to implement end-to-end
opportunities at every level. A great example supply chain mapping. Our commitment?
of this is our previous partnership with CARE Transparency at all levels of our supply chain,
Australia, where we implemented a Women’s plus sharing this information with the world.
Empowerment program across Bangladesh
Suppliers. Source: Adapted from Cotton On website, ‘Ethical
sourcing’, ‘Partnering with Our Suppliers’ and
‘Transparency and Traceability’. Valid as of June 2022.

CASE STUDY ANALYSIS

1 Summarise the key principles of ethical sourcing for Cotton On.
2 Explain the expectations required from overseas suppliers to ensure that Cotton On’s Rules
to Trade agreement is implemented.
3 Describe the benefits received by overseas workers and the impact these conditions may
have on their lives.
4 Suggest how ethical sourcing may provide Cotton On with a competitive edge.
5 Investigate the ethical sourcing policy of one of the following:
a David Jones
b Target
c Coles.

REVIEW ACTIVITY 10.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify and describe four factors that should be considered when choosing a supplier.
2 Define the term ‘supplier’ and provide an example of two suppliers for each of the
following:
a a school
b a builder
c a supermarket.
3 Outline the advantages of maintaining a good relationship with a group of reliable
suppliers of high-quality inputs for a business.
4 Distinguish between corporate social responsibility and procurement policy.
5 Explain why each of the following factors is important when selecting suppliers:
a social responsibility levels of suppliers
b environmental impacts of transport
c quality of inputs supplied
d reliability of delivery.
6 Discuss the implications of adopting corporate social responsibility principles as key criteria
in selection of suppliers.
7 Analyse the potential advantages and disadvantages of using a local Australian supplier
rather than one from overseas.

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 Chapter 10 Establishing a business: policies and procedures 257

10.3 Policies and procedures relating to legal

requirements
Learning intentions – at 10.3.1 Describe the need for policies and procedures to achieve
the end of this chapter compliance with legal requirements and establish business
section I will be able to: routines

A policy is a written statement detailing the processes,

procedures, rules and regulations that are expected to be
followed in certain situations. It is important that a business
develops policies and accompanying procedures to ensure
it complies with legal and other regulatory requirements.
Clear policies and procedures are an important aspect
of managing risk in an organisation. Policies ensure that
the values of an organisation are clearly communicated.
Business routines or procedures involving tasks or
processes that are completed regularly are often embedded
in a workplace policy to ensure continued, consistent
application. With consistent and uniform standards, policies
foster stability and confidence in the workplace.
Figure 10.10 A workplace policy clearly establishes the
A workplace policy clearly establishes the expectations expectations regarding employee behaviour and performance.
regarding employee behaviour and performance. A
workplace procedure informs employees about how to implement the policies. When
combined and communicated effectively, policies and procedures provide safe, fair and positive
workplaces. Policies are developed in a range of different areas including a:

• Code of conduct, which establishes the rules that employees are expected to follow and
business routines
frequently includes: processes that
– attendance and absence are regularly
practised in a
– employee behaviour
business
– company values
code of conduct
– dress code
guidelines
– confidentiality to regulate
– reporting misconduct. standards of

• Recruitment policy, which outlines the process of hiring new employees with the aim to behaviour
and conduct
promote fair and consistent approaches and may cover: either within
– equal opportunity and anti-discrimination an organisation
or within an
– selection processes
industry
– internal and external hiring preferences
– how to check references.
• Health and Safety policy to cover a business’s legal obligations to protect employees and
may include:
– employee safety training
– first aid information
– safe handling of materials and substances
– maintenance of equipment
– mental health information
– accident training
– emergency procedures.
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258 Unit 2 | Establishing a business

• Procurement policy, which supports good planning to ensure value for money, quality
goods and reliable customer service from suppliers. Without planning, businesses may
find operating expenses much higher than expected, which will impact on the final price
and customers may find the higher prices unacceptable. Typical features include:
– determining who has purchasing authority
– budget limits
– processes for the ordering system.
• Financial management policy, including bank accounts, which should reflect a business’s
values and include:
– when and how new accounts are opened
– insurance and risk management
– new suppliers and how to choose them.
• Customer service policy to guide employees in a consistent approach to customer service.
• Emergency management procedures policy, which is a legal requirement that all businesses
have a policy to deal with emergency management and evacuations. By developing a policy,
a business will need to consider how it might cope with events and unforeseen emergencies.

ACTIVITY 10.4
Policy in action
Read the following Workplace Bullying Policy template created by Safe Work Australia for
organisations to potentially implement.

Figure 10.11 Example of a workplace bullying policy

(Source: Safe Work Australia, ‘Guide for Preventing and Responding

to Workplace Bullying’, pp. 26–7.)

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 Chapter 10 Establishing a business: policies and procedures 259

1 Suggest why a workplace bullying policy template would be developed.

2 Outline the behaviours employees are expected to demonstrate in the workplace.
3 Definitions are often provided in a policy. Provide one reason why definitions are a feature.
4 Describe management’s response should bullying or unreasonable behaviour of an
employee be reported.
5 Outline the consequences for an employee who is found to be in breach of this policy.
6 Suggest two features of this policy that could be used in other policies.

Table 10.3 Policy development is essential in ensuring legal compliance requirements are being met by business.

Area of Legal requirements impacting Areas of policy development

management policy development

Human Equal opportunity, anti- Recruitment and selection

resources discrimination and sexual Bullying and harassment policy
harassment laws, workplace Code of conduct
relations laws Internet and email policy
Staff induction and procedures policy

Operations Occupational health and safety Hazards control policy

laws Workplace health and safety policy
Emergency evacuation policy
Procurement policy

Technology Privacy Act Data management policy

support Australian Privacy Principles Privacy policy

Sales and Competition and Consumer Customer service policies

marketing Act Returns and refunds policy
Marketing policy
Social media policy

Finance Corporations Act Financial policy and procedures

Australian Accounting Bank account policy
Standards Board (AASB) Use of business credit card policy
New supplier policy
Purchasing policy
Customer debt collection policy

REVIEW ACTIVITY 10.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Explain why a business should develop policies.

2 Outline three policies required by businesses to comply with legal requirements.
3 How do policies establish business routines? Describe one policy that may assist in
establishing a business routine.

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260 Unit 2 | Establishing a business

10.4 Technological and global issues

Learning intentions 10.4.1 Describe technological and global issues that may
– at the end of this affect decision-making when establishing a business,
chapter section I will such as generating customer databases and contacts with
be able to: overseas suppliers and retailers

Planning considerations
In order for a business to succeed and flourish, information technology is a key resource that
should be utilised to its full potential. Planning and decision-making should ensure:

• the system (internal and external) is user friendly and easy to navigate
• maintenance scheduling is proactive rather than reactive with respect to technological issues
• technology is a key component in strategic planning
• cyber-security procedures and remedies are put in place to ensure data protection
• trends and data are tracked to inform the business
• information and records are stored in a digital environment that is able to be accessed when
required
• hardware and software requirements of the business are thoroughly audited in a timely manner.

Databases are collections of organised information that are set up by information technology
workers and save businesses time and money. When the information collected is analysed
and actioned, databases help to strengthen a business, increase profits and help plan for
future business growth. Ranging from automating routine tasks to identifying new customers,
databases empower business owners to be more efficient and productive:

• Centralised systems enable managers to

access data centrally, safely and securely.
• Improved management of human resources
is made possible by streamlining the
processing of data such as staff hours, leave,
payroll, etc.
• Customer relationship management
databases make it possible to manage
customer data and relationships through the
use of stored contact details and purchase
history. Information can also be used to
target marketing.
• Improved inventory management helps to
Figure 10.12 Customer relationship management (CRM) databases allow
maximise sales and to avoid the risk of stock
businesses to gather data on what customers are purchasing and to stay
connected with their customers. wastage.

customer Customer databases

database the
collection of Amendments to the Commonwealth Privacy Amendment Act 2012 became effective in 2014 with
information a set of 13 Australian Privacy Principles. These principles are in place to protect people’s privacy
gathered from and, among other things, set out to ensure that data collected on customer databases cannot
each customer
be used without a customer’s consent. This data protection and maintenance is also often
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 Chapter 10 Establishing a business: policies and procedures 261

handled and managed by use of technology. Many existing businesses have had to incorporate
retraining of staff for the management and storage of customer data, and new businesses need
to consider data maintenance as a key element of their planning. Data management also assists
businesses with product placement and is a key consideration in attracting new customers.

CASE STUDY
10.3
Keep them coming
back: innovative
customer loyalty
programs

More than 90% of businesses have some type effectively referring new customers. Customers
of customer loyalty program. Loyalty programs who find value in a program are more likely
have proven themselves as one of the most to remain. Almost 50% of consumers indicate
effective tactics for increasing revenue and that they spend more after joining. A successful
inspiring customer loyalty. As many as 84% of loyalty program can turn regular customers
consumers say they’re more apt to stick with into brand advocates. This group helps your
a brand that offers a loyalty program. And 66% company get in front of new customers
of customers say the ability to earn rewards through word of mouth, which is a low-cost
actually changes their spending behaviour. marketing strategy versus paid ads.

While they can be effective, customer loyalty

programs are nothing new. Most fall into
one of four categories: points, tiers, social
media and paid programs. That’s why some
retailers are looking to shake things up and
find innovative new ways to build rewards
programs and inspire customer loyalty.

How customer loyalty programs work

Figure 10.13 Customer rewards programs can turn casual

Customer loyalty programs reward customers customers into repeat customers.
who repeatedly interact with a brand. It’s
a customer retention strategy that encourages Types of programs
customers to continue buying from your brand
rather than competitors. The more a customer Points-based loyalty programs are the most
buys or engages with the brand, the more common type where customers accumulate
rewards they earn. points to redeem for free items, cashback etc.;
for example, Flybuys.
Running a customer loyalty program means
you’ll need to give away something, be it Tiered loyalty programs are a type of
discounts, sales, early access, etc. But the membership where customers get different
payoffs for having rewards programs are huge benefits depending on their ranks. These
with customers telling family and friends, programs give customers a goal, as higher the
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262 Unit 2 | Establishing a business

tier, the more exclusive and better rewards they Value loyalty programs connect with customers on
receive; for example, American Express. a deeper level. It involves donating a percentage of
purchases to charity or welfare programs.
Paid loyalty programs are fee based and give
customers immediate and ongoing benefits; for Source: Adapted from Lindsay Peacock, ‘7 Innovative
example, Amazon Prime. Customer Loyalty Programs Keep Them Coming
Back’, Shopify blog, 29 April 2021.

CASE STUDY ANALYSIS

1 Discuss the benefits and issues in implementing a customer loyalty program from a
business owners’ perspective and that of customers.
2 Discuss with your family about the rewards programs that they are involved with.
a Which program seemed to be most beneficial and why? What type of program is it?
b Other than purchasing, what strategies have businesses attempted to encourage
continued purchases?
c Which loyalty program was deemed as ‘not worth it’? Establish why this is the case and
determine how the program could have been improved.

CASE STUDY
10.4
Plant-based proteins
start-up Fënn Foods
raises $3 million for
global push

Queensland plant-based food start-up Fënn Fënn Foods Executive Chairman Nicholas
Foods has raised $3 million as it looks to expand Simms said modelling suggests the sector has
into offshore markets. The Sunshine Coast– the potential to generate $3 billion in retail
based business was founded by Michelin-star sales in Australia from more than $1 billion
trained chef Alejandro Cancino, from the highly in manufacturing, and to employ over 6000
lauded Brisbane restaurant Urbane. Australians.

Fënn produces premium plant-based foods and ‘This injection of capital enables us to increase
last year became the first company in the world our investment in innovation, marketing and
to launch a certified carbon neutral plant-based production, allowing us to meet the increasing
mince under its vEEF brand. The product range demand for vEEF products, enter new
includes ‘beef’ and ‘chicken’ burgers, mince, a categories and explore distribution into select
schnitzel, ‘meatballs’, ‘bacon’ bits and pulled international markets,’ he said.
‘beef’.

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 Chapter 10 Establishing a business: policies and procedures 263

‘Plant-based foods are one of the most rapidly see Fënn Foods as having a unique point of
growing segments of the global food market and, difference in this burgeoning market.’
according to Food Frontier, in Australia alone,
the plant-based market is estimated to generate Source: Adapted from Simon Thomsen,
approximately $3 billion in retail sales by 2030. ‘Plant-based proteins startup Fenn Foods
raises $3 million for global push’,
‘The plant-based food market is growing StartupDaily, 11 February 2022.
rapidly both in Australia and globally and we

CASE STUDY ANALYSIS

1 Suggest why Fënn Foods has decided to expand into global markets in place of further
establishing the business in Australia.
2 Explain why the plant-based food market is rapidly expanding locally and internationally.
3 Propose two issues that the business may encounter in the near future.

Establishing contacts with overseas suppliers and retailers

As Australia has a relatively small population, Australian businesses may find it necessary to
explore opportunities to trade overseas if they want to expand. A business can look to grow by
investigating opportunities to develop supply chains in other countries and sell its products
and services in foreign markets, either through offshore retail outlets or online stores.

Austrade is a federal government body that provides support for businesses exploring offshore
trading opportunities. Registering is free, and support includes promotion of the business to
overseas buyers through the Australian Suppliers Directory.
Figure 10.14 Importing from foreign suppliers, or exporting goods to foreign markets, may be a necessary step in expanding a business.

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264 Unit 2 | Establishing a business

Free trade agreements are another way that the Australian Government tries to support
Australian businesses looking to trade overseas. A free trade agreement is a legally binding
agreement between two or more countries that establishes an area of trading that removes
tariffs and other trading restrictions. Free trade agreements aim to increase the competitiveness
of Australian businesses, provide better access to lucrative offshore markets, reduce trading
costs for Australian businesses and promote two-way investment opportunities (allowing
offshore businesses to explore trading opportunities in Australia). Currently, Australia has
free trade agreements with a large number of countries, including New Zealand, Singapore,
Thailand, Malaysia, Korea, Peru and Chile. For an up-to-date list refer to www.dfat.gov.au/trade/
agreements/in-force/free-trade-agreements-in-force.

In general, a business that is looking to import goods from overseas or sell in foreign
markets needs to keep in mind that income tax is calculated on worldwide income, that
local tax obligations may vary from country to country, and that there are legal and ethical
considerations involved in setting up factories, workshops, or retail outlets in other countries.

Businesses that attempt to achieve financial gain through practices that involve mistreatment of
overseas workers and unsafe working conditions face enormous fines. As such, it is imperative
for a business operating overseas to have a comprehensive compliance policy in place, to
adhere to it, and ensure that suppliers and third-party manufacturers are frequently audited.

CASE STUDY
10.5

The global supply

chain in crisis

In pre-pandemic times, consumers across the The end of 2021 saw the perfect storm of events
globe could ‘add to basket’ and anticipate that led to global supply chains being unable to
delivery at the forecast time. In simple meet consumer demand with predictions that
economic terms, our demand was supplied. In supply disruptions will continue for a further two
the background was a series of complex and years. Shortages in gaming consoles, computers
interconnected activities to ensure that the and even cars are due to the alarming poor
supply chain was functioning efficiently with supply of semiconductor chips that led to a full-
retailer contacting distributor, who in turn blown global supply chain crisis.
placed an order with the manufacturer that
ordered the required inputs to produce the As a result of the COVID-19 pandemic, supply is
product. Transport was smoothly coordinated playing catch-up with demand. Issues include
using shipping, airlines, trucking and parcel a shortage of empty shipping containers used
delivery that facilitated their business at sea for transporting products such as electronics,
ports, airports, warehouses and distribution white goods and clothing. Additional factors
centres. exacerbating supply include:

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 Chapter 10 Establishing a business: policies and procedures 265

• continued global lockdowns impacting

workplaces along the supply chain. Shipping
lines have reduced the number of ships in
services, and there are fewer port workers and
vessel crews, resulting in many ports being
overwhelmed and unable to send containers
back to Asia where they are needed.
• closure of some ports due to high numbers
of COVID-19, including Singapore, and
Shanghai and Ningbo in China.
• higher levels of demand being placed on
some products, with many people working
from home and not travelling, choosing
instead to spend their money on home
appliances and entertainment.
Australia is dependent on imported, overseas-
made consumer goods; however, we import
Figure 10.15 Australian businesses will need to consider more efficient and reliable
more than we export, which creates a container methods in managing the supply chain as a consequence of the global pandemic.
trade imbalance. Australia is also reliant on
truck delivery which does not operate 24
hours a day, unlike shipping. In addition, local Adapted from ‘The global supply chain crisis

manufacturers cannot produce as much as they that stole Christmas’, RMIT website (‘News’), 17

want due to their own supply shortages. November 2021.

CASE STUDY ANALYSIS

1 Identify the key elements of the global supply chain and describe how interruptions along
the global supply chain can impact supply of goods and component parts in Australia.
2 Propose and justify one strategy suggesting how Australian business could best manage
the current shortages and meet consumer demand.
3 Research the current state of the global supply chain. Has the global supply chain recovered
from the pandemic? Have there been any changes in the way Australian businesses utilise
the global supply chain as a result of the severe interruptions during the pandemic?

REVIEW ACTIVITY 10.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe why a business should consider technology when in the planning phase.
2 Explain the benefits for a business in developing and maintaining a customer database.
3 Describe two benefits for Australian businesses looking to expand into global markets.
4 Discuss the costs and benefits associated with working with overseas suppliers and
retailers.
5 Identify one global issue that affects business planning and describe how the identified
issue may impact on business planning.

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266 Unit 2 | Establishing a business

Chapter 10 review
Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 1, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Financial management Record keeping Cash flow

Separate entity Customer database Procurement

Supply chain Environmental Policy

sustainability

Extension questions
Muscle Nation originated in the kitchen of Chris Anastasi’s home, using what is now a signature
custard powder that was added to a protein bar. After signing a huge financial deal with
one of Australia’s largest supermarket chains, the owners of Muscle Nation understood the
urgent need to change their current level of business planning to accommodate substantial
business growth.

1 Explain why it is important for Muscle Nation to establish financial control systems and
record-keeping strategies.
2 Part of the marketing message for Muscle Nation involves maintaining corporate social
responsibility through their supply chain. Discuss the benefits and limitations of seeking
CSR in the supply chain.
3 Distinguish between a policy and a procedure. Identify one area of business activity in
which a policy would ensure certainty and consistency for Muscle Nation, and propose a
plan for Muscle Nation to follow in developing the policy.
4 Discuss the potential benefits in developing a customer database for Muscle Nation.
Propose and justify a loyalty-based program that would suit this business.

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 Chapter review 267

Checklist
The success criteria are linked to the learning intentions from each section of this chapter and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

10.1 The importance 10.1.1 Explain the Activity 10.1 Yes No

of establishing bank importance of Activity 10.2
accounts, financial establishing bank Activity 10.3
control systems accounts, financial Case study: 10.1
and record-keeping control systems and Review activity 10.1:
strategies record-keeping strategies Part 1 & Part 2
Extension: Q1

10.2 The importance 10.2.1 Describe the Case study 10.2 Yes No
of choosing importance of choosing Review activity 10.2:
appropriate appropriate suppliers and Part 1 & Part 2
suppliers discuss the benefits and Extension: Q2
limitations of suppliers
that meet the corporate
social responsibility
objectives of the business

10.3 Policies 10.3.1 Describe the Activity 10.4 Yes No

and procedures need for policies and Review activity 10.3:
relating to legal procedures to achieve Part 1 & Part 2
requirements compliance with legal Extension: Q3
requirements and
establish business
routines

10.4 Technological 10.4.1 Describe Case study 10.3 Yes No

and global issues technological and global Case study 10.4
issues that may affect Review activity 10.4:
decision-making when Part 1 & Part 2
establishing a business, Extension: Q4
such as generating
customer databases and
contacts with overseas
suppliers and retailers

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.
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268 Unit 2 | Establishing a business

Unit 2 Area of Study 1 review Conceptual summary

LEGAL REQUIREMENTS FOR

ESTABLISHING A BUSINESS
OHS

Compliance
Trade practices
Register a
business name WWW.

Register a
domain name
Laws Tax compliance

THE NEED FOR POLICIES

Business AND PROCEDURES TO
policy COMPLY WITH LEGAL
Code of
REQUIREMENTS
conduct

Procedure A

Guidelines to
regulate standards
Procedure B of behaviour and
A written statement conduct
that communicates
an organisation's
values
Procedure C

1.
Procedures
2. − a step-by-step guide to
3. help employees to comply
with policies or complete a task

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 Area of Study review 269

THE ROLE OF
System
EXTERNAL process
PROFESSIONALS advice
coaching

ESTABLISHING FINANCIAL Bank

CONTROL SYSTEMS accounts

$
Record keeping
and control

JUNE Overseas
suppliers

Reliability

Overseas
Corporate retailers
THE IMPORTANCE social
OF CHOOSING APPROPRIATE responsibility
SUPPLIERS

Quality
$ Hardware
and software
Price

TECHNOLOGICAL
Customer ISSUES
databases

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270 Unit 2 | Establishing a business

Key knowledge summary: Unit 2 Area of Study 1

Key knowledge Summary

• An overview of key legal • A business must be aware of its legal, ethical and social responsibility
requirements for establishing obligations; otherwise it runs the risk of prosecution, which may also
a business, such as registering involve hefty fines.
the business name, registering • ASIC requires the registration of business names, including names of
a website domain, trade companies.
practices legislation, business • The ATO issues businesses with an ABN, which is a unique 11-digit
tax compliance and Worksafe number that confirms a business identity.
insurance • An ABN will allow a business to obtain an Australian domain name.
• Local councils are empowered to create rules, by-laws and
regulations that are most suited to the needs and resources of the
local area. Businesses are expected to operate within the established
guidelines in relation to areas such as parking, footpath trading and
health regulations. Required licences, permits and approvals are
applied for at local council level.
• Requirements to maintain occupational health and safety at
workplaces is a legal obligation for all employers. In Victoria, OH&S
laws are implemented by WorkSafe.
• Employment laws exist to protect employees and to ensure that there
are equal rights and responsibilities in workplaces. Employers are
expected to provide equal opportunity throughout all of the stages of
employment, including the application process.
• Employers are expected to provide employees the 11 National
Employment Standards (NES).
• There are mechanisms for resolving disputes in the workplace
outlined in industry awards and enterprise bargaining agreements.
• Australian trade practices law exists to support fair competition to
Australian businesses and includes Australian Consumer Law, which
outlines the rights of consumers. Business owners are expected to be
responsible in assuring that the rights of consumers are maintained.
• Some insurances are compulsory for business owners. Trades, such
as electrical contractors, are expected to show evidence of their
public liability insurance when completing registration renewal every
three years.

• An overview of the role of • Seeking the advice from professionals external to the business works
external professionals when well to support gaps in knowledge and skills.
establishing a business • Businesses frequently seek specialist services in the legal, financial
and information technology areas.
• Both federal and state governments have developed websites to
support businesses and to provide advice.
• Advertising and marketing consultants are frequently sought to
prepare and implement campaigns designed to increase sales and
brand loyalty.

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 Area of Study review 271

Key knowledge Summary

• The importance of establishing • All businesses, regardless of size, should have a separate bank
bank accounts, financial account.
control systems and record- • It is important to establish financial controls over all aspects of the
keeping strategies business.
• Businesses need a range of documents as evidence of transactions.
• Small businesses often find it difficult to keep records and monitor
financial information.
• There are a range of financial records that should be kept by a
business.
• A cash book is one the simplest forms of financial record keeping.

• The importance of choosing • In order to become and remain competitive, it is important for
appropriate suppliers, businesses to establish and maintain good relationships with
including the benefits and suppliers who are reliable and provide high-quality inputs.
limitations of suppliers that • A procurement or purchasing policy states the principles and
meet the corporate social guidelines for selection of and dealing with suppliers.
responsibility objectives of the • The criteria that should be applied in a procurement policy for a
business selection of suppliers are price, reliability, quality and the levels of
social responsibility exhibited by the supplier.
• A good supplier brings advantages to a business in terms of quality,
timeliness, competitiveness, innovation and possibly credit.
• Selection of suppliers based on social and environmental credentials
will often increase the competitiveness and reputation of a business.
There may be disadvantages in terms of costs and quality at times.

• The need for policies and • All businesses need to plan and develop policies and procedures to
procedures to achieve ensure compliance and consistency.
compliance with legal • Businesses have to comply with federal, state and local government
requirements and establish laws.
business routines • Anti-discrimination and equal opportunity legislation has to be
followed.
• Customer service policies allow a business to comply with legal
practices.

• Technological and global • It is important for businesses to take into account technological needs
issues that may affect decision- as part of their business planning.
making when establishing a • Customers expect businesses to integrate technology into their
business, such as generating operations.
customer databases and • Businesses need to develop and maintain databases.
contacts with overseas • Businesses in Australia are working at establishing contacts and
suppliers and retailers relationships with overseas suppliers and retailers.

Source: VCE Business Management Design extracts © VCAA; reproduced by permission

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272 Unit 2 | Establishing a business

Sample assessment questions and advice

Unit 2 Area of Study 1: Legal requirements and financial considerations

In this section we will look at some sample assessment-style questions. Although there is no external
examination for Units 1&2, the following questions are written in a VCAA-examination style to prepare
you for these types of questions.

Unit 2 Area of Study 1, Legal requirements and financial considerations is covered in Chapters 9 and 10
of the text. When establishing a business, business owners must ensure that legal requirements have
been met.

Establishing a business involves complying with a wide range of legal requirements and financial
expectations.

The establishment phase of a business requires processes and systems to be put into place in areas
such as establishing a system of financial record keeping, and establishing effective policies and
procedures.

Area of Study 1 requires students to explain the importance of complying with legal requirements
and financial record keeping, and establishing effective policies and procedures when establishing a
business.

The key knowledge is:

1 an overview of legal requirements

2 the importance of establishing financial systems
3 what procurement and CSR are
4 the need for policies and procedures to achieve compliance
5 and the impact of technological and global issues that affect decision-making.

Today, we are focusing on the following skills:

• applying business management knowledge to practical and/or simulated business situations

• evaluating the costs and benefits of decisions when establishing a business, and justifying the
strategy chosen.

Let’s explore how these skills might be assessed through the following example questions based upon
a case study.

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 Area of Study review 273

Case study practice

Arepaland is a new food truck venture that offers traditional Venezuelan food. Arepas are the South
American equivalent of Mexican tortillas. The owner, Fernando Rey, has left his lucrative IT career to
focus on developing his business venture. However, Fernando is concerned that his business may not
be meeting all expected legal requirements and financial obligations.

Your responses to the following two questions are to be based on this case study.

It is important for students to read the case study carefully, as the questions following will be directly
related to the case study, requiring you to apply your understanding of the relevant key knowledge.

Question 1
Explain why it is important for businesses to establish financial control systems. Propose and justify
one financial control system that would suit Arepaland. (4 marks)

Extended response question – let’s unpack it

Task words Study Design requirements

Explain: To make the meaning of something Key knowledge: financial controls
clear, detailed and understandable
Propose: To put forward (a plan or suggestion)
for consideration by others
Justify: Give valid reasons or evidence to support
an argument or conclusion

Explain why it is important for businesses to establish financial control systems. Propose and justify
one financial control system that would suit Arepaland. (4 marks)

Limiting word Marks allocated

Determines the number of Case study
examples you must use

Hints:
• The first task word is ‘explain’, which requires making the meaning of something clear with the use
of detail.
• The second task word is ‘propose’, which requires a suggestion to be put forward.
• The third task word is ‘justify’, which requires a reason to be given to what has been proposed.

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274 Unit 2 | Establishing a business

A possible answer to the question might be:

Sample response
Financial control systems enable a business to safeguard its assets from potential fraud, ensuring
that financial information is both accurate and reliable. Financial control systems also assist in
achieving legal compliance.
As a small business handling mainly cash sales, Arepaland should develop a cash accounting
system, which will be quite simple to learn, implement and maintain in the future. It is also more
cost-efficient for a small business. This system should track all financial transactions, such as cash
and credit sales, and the payment of expenses including employee wages.

Marking guide:
• 2 marks for identifying the importance of financial control systems to a business
• 2 marks proposing a suitable financial control system and describing its relevant application to the
case study.
Total 4 marks

Question 2
Arepaland aims to produce authentic Venezuelan arepas and must make a decision regarding whether
to source the ingredients from South America or locally. Evaluate the potential benefits and costs for
Arepaland in using local suppliers instead of overseas suppliers. (5 marks)

Extended response question – let’s unpack it

Task words
Evaluate: Apply a weighted criteria to the relative strengths and
Case study weaknesses of the arguments raised in the stimulus material, as
well as being able to provide your opinion

Arepaland aims to produce authentic Venezuelan arepas and must make a decision regarding
whether to source the ingredients from South America or locally. Evaluate the potential benefits
and costs for Arepaland in using local suppliers instead of overseas suppliers. (5 marks)

Study Design requirements Marks allocated

Key knowledge: benefits and
cost analysis

Hints:
• The task word is ‘evaluate’.
• ‘Evaluate’ requires an analysis of the benefits and costs (or advantages and disadvantages).
• An ‘evaluate’ question also requires a student to conclude with an opinion.
• The case study is explicit in the question and requires the student to tailor their response to suit the
case study.

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 Area of Study review 275

A possible answer to the question might be:

Sample response
There are several benefits for Arepaland in using local suppliers, especially proximity, offering
faster delivery and service. In addition, the goods can be physically inspected. A second benefit
could be reliability, with close proximity and good communication meaning the supply of goods
should be more reliable.
A potential cost to Arepaland of using local suppliers is that the goods may be more expensive
than using overseas suppliers, due to different labour costs and conditions. There also could be
limitations to the ingredients that can be sourced locally (especially for South American dishes).
In conclusion, Arepaland should source its ingredients from overseas, as this will maintain the
integrity of the product. With reduced labour costs, it may also be cheaper for Arepaland to
import key ingredients from South America.

Given that Arepaland’s marketing is based on the idea of ‘authenticity’, they are best to continue
importing key ingredients to meet their customers’ expectations. As the business grows, there may be
an opportunity to review their sourcing.

Marking guide
• 2 marks for describing potential benefits sourcing ingredients from local suppliers
• 2 marks for describing costs in sourcing ingredients from local suppliers
• 1 mark for overall opinion related to the case study.
Total 5 marks

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 AREA OF STUDY 2
MARKETING A BUSINESS

AREA OF STUDY DESCRIPTION OUTCOME 2

Establishing a strong customer base for On completion of this unit the student
a business is an important component should be able to explain how establishing
of success. In this Area of Study students a customer base and a marketing presence
develop an understanding that marketing supports the achievement of business
encompasses a wide range of management objectives, analyse effective marketing and
practices, from identifying the needs of the public relations strategies and apply these
target market and creating a brand presence strategies to business-related case studies.
through to consideration of the 7Ps of
To achieve this outcome the student will draw
marketing and the impact of rapidly changing
on key knowledge and key skills outlined in
technology on marketing practices. They also
Area of Study 2. [These are listed at the start
consider effective public relations strategies
of each chapter.]
and the benefits these can bring to a business.
Source: © VCAA, VCE Business Management Study Design
Source: © VCAA, VCE Business Management Study
2023–2027, p. 14; reproduced by permission
Design 2023–2027, p. 14; reproduced by permission

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CHAPTERS 11 Marketing the business
IN THIS
AREA OF 12 Marketing mix, product life cycle and marketing strategies,
STUDY features and value of customer relations and technological
developments in marketing

13 Public relations and corporate social responsibility management

considerations

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 CHAPTER 11
Marketing the business

‘Within five years, if your business is the same as it is now, you are going to
be out of business.’
Philip Kotler (1931–)

About the author:

Philip Kotler is an American consultant and professor
and author of Marketing Management, a widely used
marketing textbook.

KICKSTARTER ACTIVITY
Explain what you consider to be the meaning of the above quote by Philip
Kotler.

CHAPTER OVERVIEW

In this chapter, the relationship between marketing and establishing a

customer base and business objectives will be explained. In addition,
internal and external (macro and operating) factors affecting the
establishment of a customer base and the creation of brand identity
will be addressed. For any business, undertaking market research is a
vital ingredient of successful marketing, as well as gaining knowledge
of the attributes of target markets.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will be able to:

The relationship between 11.1 R

 elationship between marketing, establishing a customer base
marketing, establishing a and business objectives
customer base and business 11.1.1 Define business management terms
objectives 11.1.2 Identify and describe the relationship between marketing,
establishing a customer base and business objectives

Internal and external (macro 11.2 F

 actors affecting the establishment of a customer base and the
and operating) environment creation of a brand identity
factors affecting the 11.2.1 Define business management terms
establishment of a customer 11.2.2 Identify and describe internal factors affecting the
base and the creation of a establishment of a customer base
brand identity 11.2.3 Identify and describe internal factors affecting the creation
of brand identity
11.2.4 Identify and describe external factors affecting the
establishment of a customer base
11.2.5 Identify and describe external factors affecting the
establishment of brand identity
11.2.6 Analyse and evaluate impact of macro factors on businesses
11.2.7 Analyse case studies
11.2.8 Discuss business information and ideas

Market research practices 11.3 Market research practices

such as data collection 11.3.1 Identify and define market research practices
techniques, analysis and 11.3.2 Discuss concepts
interpretation 11.3.3 Compare and evaluate business information

Target market attributes 11.4 Target market attributes

such as market dimensions, 11.4.1 Define business management concepts and terms
segments, consumer trends 11.4.2 Construct a customer profile
and behaviour 11.4.3 Identify and describe consumer trends and behaviour
11.4.4 Identify and describe the concept of ‘target market’
11.4.5 Discuss business strategies and ideas
11.4.6 Analyse case studies and contemporary examples

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 11
Marketing the business

11.1 Relationship 11.2 Factors affecting 11.3 Market research 11.4 Target market
between marketing, the establishment of a practices attributes
establishing a customer customer base and
base and business the creation of a brand
objectives identity

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280 Unit 2 | Establishing a business

11.1 Relationship between marketing,

establishing a customer base and
business objectives
Learning intentions – 11.1.1 Define business management terms
at the end of this
chapter section I will 11.1.2 Identify and describe the relationship between
be able to: marketing, establishing a customer base and
business objectives

Marketing: what is it?

Marketing is the process that provides the link between the producers, or providers of goods
marketing the
process that and services, and the consumers. It involves the relationship whereby producers/providers
provides the and consumers create, offer and freely exchange products and services of value to each other.
link between
Marketing extends to:
producers or
providers of
goods and • goods – the tangible items that businesses wish to sell such as food, commodities, clothing
services and the
and housing
consumers of
these • services – such as those provided by hotels, car rental businesses, dentists, hairdressers,
accountants, doctors, solicitors, engineers, management consultants, airlines, real estate agents
brand a powerful
business asset • experiences – such as a visit to a museum or an art gallery events, the AFL for its games,
that is essentially Victoria Racing for the Spring Racing Carnival, rock concerts
a maker’s mark;
it creates and
• personalities – Nigella Lawson, Jamie Oliver and Curtis Stone, for example, all have their own
brings with marketing teams who work to create their image and brand.
it awareness,
desirability and
power

Customer
base

Target
Business
market
objectives
attributes

Marketing

Internal and
Market external factors
research affecting
practices customer base
and brand
identity

Figure 11.1 Marketing

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 Chapter 11 Marketing the business 281

Most businesses would like to think they focus on the needs and wants of their customers
marketing
(actual purchasers of the goods and services) and consumers, and therefore devote production concept where
and marketing resources to satisfy them. The marketing concept was developed when the the business
focuses on
focus of businesses changed from just selling a product or service to actually satisfying the
satisfying the
needs of customers and consumers. The concept is based on the belief that the best results needs of the
are achieved through using an integrated approach to marketing. The marketing concept sits customer/
consumer rather
within the market-oriented approach, which means the business’s efforts are aimed in a
than just selling
coordinated and integrated manner towards simultaneously achieving its business objectives a product or
and satisfying its customers. Using this approach lowers the risk of a newly developed product service
or service failing in the market, because effective market research will have been undertaken market-oriented
prior to the manufacture of the product or provision of the service. The four essential elements approach a
to the marketing concept are outlined in Figure 11.2. business strategy
that focuses
on the needs
and wants of
1 Customer satisfaction consumers and
develops products
to meet them

2 Totally integrated effort by business

3 Business objectives established

4 Key performance indicators (KPIs) to measure achievement

Figure 11.2 Four essential elements of the marketing concept

If a business is to be fully committed to the

marketing concept approach, it must focus on
the customer and adopt the philosophy ‘the
customer comes first’. To be successful, the business
must understand its customers and align the
performance of the business, its evaluation and
rewards systems so that the business objectives
are met. For the small business owner, good
customer relationships developed through good
customer service and customer satisfaction
become very powerful marketing tools, and lead
to customer loyalty and repeat business. Good
customer relationships are also cost-effective to the
business, because they do not require an expensive
marketing campaign to attract customers.
Businesses that are larger and more complex
in their organisational structures, policies and
procedures can redesign their organisational charts
to represent the importance of the customer to Figure 11.3 Repeat customers are important to establishing the customer
their business. base of a business.

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282 Unit 2 | Establishing a business

It is very important that businesses recognise that approximately 80 per cent of their business
customer base
the people is generated by approximately 20 per cent of their customer base. This is referred to as the
or entities Pareto Principle (i.e. the 80/20 rule). Marketing strategies may get the customer through the
that regularly
door initially, but it is essential for the business to ‘do the right thing’ to convert those customers
purchase
products or into repeat customers, thereby establishing a reliable and consistent customer base.
services from a
business

Pareto Principle
referred to as
the 80/20 rule –
approximately 80
per cent of the
business revenue
is generated by
approximately 20
Figure 11.4 Pareto Principle: 80 per cent of the revenue comes from 20 per cent of your customer base
per cent of the
customer base

By reversing the traditional organisation chart, customers are now at the top of the ‘chain
of command’. In this model, it is the purpose of management (senior and middle) to help
employees take care of the customers, as they are the ones providing the main source of
revenue to the business.

CUSTOMERS

E M P L O Y E E S

MANAGERS

CEO

Figure 11.5 Customer-oriented organisation chart

REVIEW ACTIVITY 11.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Define the term marketing and use the term in a sentence to demonstrate your
understanding.
2 Describe how marketing relates to establishing a customer base.
3 Describe how marketing relates to business objectives.
4 Describe the Pareto Principle and explain its relevance to marketing.
5 Explain the market concept and how it fits within the market-oriented approach to
marketing.

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 Chapter 11 Marketing the business 283

11.2 Factors affecting the establishment of a

customer base and the creation of a brand
identity
Learning intentions 11.2.1 Define business management terms
– at the end of this
chapter section I 11.2.2 Identify and describe internal factors affecting the
will be able to: establishment of a customer base

11.2.3 Identify and describe internal factors affecting the

creation of brand identity

11.2.4 Identify and describe external factors affecting the

establishment of a customer base

11.2.5 Identify and describe external factors affecting the

establishment of brand identity

11.2.6 Analyse and evaluate impact of macro factors on

businesses

11.2.7 Analyse case studies

11.2.8 Discuss business information and ideas

Factors drawn from all levels of the business environment, namely internal and external (macro
and operating), can affect how a business establishes its customer base and brand identity. As
previously mentioned, a well-established customer base provides an important revenue stream
for a business.

Establishing a brand identity is one of the key elements to building a relationship with
customers.

A brand for a business is far more than simply

designing an easily recognisable symbol or choosing
a good name. It also involves determining:

• the attributes of the product or service to be sold

or offered to the customer
• the positioning of the brand
• a desirable benefit and strong belief in its value.

To protect the brand and name for the future, a

business should register the symbol as a trademark.
Following creating the brand identity, decisions will
need to be made as to whether the products will be
launched as a manufacturer’s brand, a private brand
(store brand or distributor brand) or a licensed brand. Figure 11.6 Building a brand identity

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284 Unit 2 | Establishing a business

Internal environmental factors

Culture of business
The internal culture of a business is at the heart of how the business and its staff behave. Successful
businesses seek and value customer feedback, putting customers at the heart of the business. If the
corporate culture of a business fails to live up to community and customer expectations, it potentially
can become a large threat to both the customer base and brand of that business. A business that
conducts itself well can reap the rewards and get its message to the community very quickly via
social media and the 24-hour news cycle. On the other hand, these same communication tools can
be used by the public to criticise a business, if the actions of the business are harmful or unethical.

Owners and managers

Business owners and managers need to understand and possess the skills required to establish
their customer base and create their brand identity. Larger businesses will seek to employ a
marketing manager and team who already possess this required knowledge and the skills to
write and implement a marketing plan for the business. Smaller businesses may seek assistance
from external consultants, or simply rely on their own abilities.

Employees
Employees act as the ‘front line’ in their daily contact with
customers. It is therefore important that their relationship with
customers is positive. They need to provide polite, friendly
and efficient service, which in turn will lead to the customer
returning to that business and also being happy to identify
with the brand.

External environmental factors: macro

The customer base and brand identity of a business
Figure 11.7 Providing support and excellent service to customers
is one way that employees can help a company cement a can be affected by a range of external environmental
positive brand identity for their employer. factors. In the macro environment, economic and
technological developments and legislative requirements
are important factors to which businesses need to respond.

Economic factors
It is important that businesses consider the current economic conditions under which they are
operating, as these can affect their customer base and their brand’s identity. If the economic
conditions are strong, the business may take the opportunity to expand its customer base,
as employment and consumer confidence levels will be high. In more difficult or challenging
economic times, the business needs to change its strategy to place more emphasis on the
brand providing value for money to their customer base.

Technological developments
Technological developments have had a large impact on how businesses develop their
customer base and brand identity. They have allowed for the customised manufacturing of
products, to meet the growing appetite of customers for personalised products. Once such
business is Canva, which provides an online visual communications platform to its customers.
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 Chapter 11 Marketing the business 285

CASE STUDY
11.1

Canva: online visual

communications
platform

The Australian-owned graphic design platform

Canva, co-founded by CEO Melanie Perkins,
was launched in 2013 with its mission to
empower everyone in the world to design and
publish anything and everywhere.

It offers a free, simple user interface and a

range of templates for presentations, social
media graphics, posters, apparel and videos,
plus a huge library of fonts, stock photography,
illustrations, video footage and audio clips;
with the goal that anyone can take an idea and
create something beautiful. Canva is offered on
desktop, web, iOS and Android.

In 2021, Canva was ranked 3rd in the Forbes

2021 Cloud 100 top private cloud companies
in the world. It moved up from 7th place in
2020, placing it as the only Australian-based
company to appear in the Top 50. It was also
recognised as the winner of the ‘Overall
Design Collaboration Company of the Year’
for 2021 by Remote Tech Breakthrough, a
leading independent market intelligence
organisation. Figure 11.8 Melanie Perkins, co-founder and CEO of Canva

CASE STUDY ANALYSIS

1 Identify and describe the customer base that Canva is aiming to establish and expand.
2 Identify and describe the brand identity of Canva.
3 Analyse and evaluate whether Canva winning many awards will assist it to further its brand
identity.

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286 Unit 2 | Establishing a business

CASE STUDY
11.2
Kogan: the most
recognisable face of
online retailing in
Australia

This case study is available in the Interactive Textbook.

  

Social media can affect customer base and brand identity in a variety of ways. A positive
aspect is that it successfully provides customers unprecedented access to information about
businesses, their products and services, and what customers/consumers think of them.
However, with social media at ‘our fingertips’, a business can be negatively impacted within a
very short time by ‘customer dissatisfaction’ from a bad review.

Legislation and regulators

Legislation at both federal and state levels has been enacted to protect customers and
consumers in the event of a business misleading them. Regulatory bodies have been
established to administer these laws.

• The Competition and Consumer Act 2010 regulates fair trading in Australia and governs how
all businesses operating in Australia deal with their customers, competitors and suppliers.
This Act is administered by the Australian Competition and Consumer Commission (ACCC).
In 2021, the ACCC began legal proceedings against Telstra, Optus and TPG over allegedly
misleading claims about some of their NBN plans.
• The Australian Consumer Law and Fair Trading Act 2012 is administered in Victoria by
Consumer Affairs Victoria.
• The Australian Securities and Investments Commission (ASIC) and the Australian Prudential
Regulation Authority (APRA) act as corporate watchdogs to protect consumers from
misleading statements made by businesses when advertising their products and financial
matters affecting customers.

An adverse finding of a business or a complaint lodged with the above regulators will have a negative
impact on how a business is able to establish its customer base and create a positive brand identity.

External environmental factors: operating

Customers
Businesses should be aware that there are four generations of people in the workforce who
have earned money to spend on goods and services: baby boomers, generation X, generation
Y (millennials) and generation Z (iGeneration). It is therefore important that a business does not
adopt a ‘one size fits all’ approach to marketing, as it will then not be reaching all of its potential
customer base and may even be alienating an important customer demographic.
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 Chapter 11 Marketing the business 287

As mentioned previously, customers’ appetite

for customised products continues to be a huge
trend in retail. Many consumers now have more
disposable income than in previous decades, and
they want to have a personal connection with
the products they buy. For a business, product
customisation can lead to increased sales revenue
as a higher price can be charged. It also gives
the customers a platform to express themselves,
increases their customer loyalty and provides
the business with a unique way of getting ahead
of its competitors. For example, upmarket car
manufacturer Tesla allows customers to design
their own cars by selecting from a range of
available options. Another way businesses are
Figure 11.9 Tesla customers can add customised design features to
customising their offerings to customers or users
their car.
is to ask them to identify their preferences. For
example, streaming service Netflix asks users
to select a few shows they like and then displays a list of options based on their original
choices, creating a feeling of engagement for the user.

Mistreating customers can have a detrimental effect on businesses. In 2021, it was reported
that Origin Energy had allegedly breached its own hardship policies by making a ‘unilateral’
change to customers hardship plans, cancelling some plans and failing to consider customers’
actual ability to repay the plans. The Australian Energy Regulator (AER) instituted proceedings
in the Federal Court against Origin Energy. The media attention brought to this case may lead to
customers choosing another energy company in the future.

Competitors
Establishing and increasing both their customer base and market share are key objectives for
our major supermarket chains. It is, however, proving to be a constant battle. Since the arrival
of ALDI in 2001, Woolworths, Coles and IGA (Independent Grocers of Australia) have been
cutting shelf prices and increasing the depth and frequency of their promotions. The strategy
of reducing everyday shelf prices on the products which draw customers into the store is
aimed at building confidence in their customer base in the prices charged by those stores.

The arrival of ALDI into the Australian marketplace and its successful marketing strategies
used to establish its customer base and brand identity has certainly impacted the other major
supermarket chains. ALDI now has 570 stores operating in all eight Australian states and
territories. According to Roy Morgan Research, ALDI has captured 12.4 per cent of the Australian
supermarket market (see Figure 11.10). While this share of the market is still not anywhere
close to those of its two main competitors (Woolworths 32.9 per cent with 1000 stores and
Coles 26.5 per cent with 800 stores), it is increasing on an annual basis. In 2021, ALDI was rated
by customers undertaking the CANSTAR Survey as their favourite supermarket for the fourth
consecutive year and rated it best with five stars for its product freshness, quality of private label
items, deals available, store layout and presentation, value for money and overall satisfaction.

Establishing and increasing both their customer base and market share are key objectives for
the major retailers.

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288 Unit 2 | Establishing a business

Supermarket chains’ split of the grocery market

Supermarket chains’ proportion of total grocery market dollars spent in Australia.

IGA (7.3%)

Other (9.1%) Woolworths (32.9%)

Fresh food stores

(11.8%)

ALDI (12.4%)

Coles (26.5%)

Figure 11.10 Shares of the $110 billion spent at supermarkets over the 12 months to
December 2019 according to Roy Morgan data.

ACTIVITY 11.1
1 Identify the strategies that major retailers Woolworths and Coles are using in their quest to
narrow the price gap with ALDI.
2 Identify which retail store Woolworths regards as its major competitor.
3 Analyse whether you believe ALDI’s strategies of broadening and increasing their product
range, and revamping their store layout will be successful in increasing ALDI’s appeal to
middle-income customers.

A change in external operating conditions can present some great opportunities for the growth
of the customer base for some businesses. Unfortunately, the COVID-19 pandemic caused many
businesses to shut down, while others were able to continue trading with modified operations.
Businesses which were able to operate with an online presence increased their customer base,
by servicing customers who normally would visit a bricks-and-mortar shop. Once normal
trading conditions return, the long-term impact of these changes in operating conditions will
be tested for businesses which increased their customer base during those challenging times.

REVIEW ACTIVITY 11.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Define the terms ‘internal environment factors’ and ‘external (macro and operating)
environment factors’ and then use these terms in sentences to demonstrate your
understanding of them.
2 Identify and describe three factors from the macro and operating environments that can
affect the customer base of a business.
3 Identify and describe three factors from the macro and operating environments that can
affect the brand identity of a business.
4 Identify and describe two internal factors that can either positively or negatively affect the
brand identity of a business.
5 Analyse and evaluate the impact of the COVID-19 pandemic on how businesses market
themselves and their brand identity.

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 Chapter 11 Marketing the business 289

11.3 Market research practices

Learning intentions 11.3.1 Identify and define market research practices
– at the end of this
chapter section I will 11.3.2 Discuss concepts
be able to:
11.3.3 Compare and evaluate business information

Market research is a systematic procedure used to

develop and analyse new and existing information.
This analysis helps businesses to make decisions
relating to the marketplace and to satisfy the
needs of both potential and existing customers.

Market research assists a business to:

• reduce the level of risk or uncertainty attached

to introducing a new product or service
• assess current products, advertisements and
forms of packaging, and determine whether
changes need to be made
• predict future changes or trends in a product Figure 11.11 Market research assists a business to know their customers.
or service.

If there is an inadequate amount of information available for a good decision to be made, it may be
necessary to arrange for additional market research to be undertaken. In small businesses, funds
for market research are normally limited. It is therefore important to determine whether the benefit
gained from research will outweigh the cost involved in conducting the research. It is possible to find marketing
consultant a
informal, low-cost alternatives of information gathering, such as customer feedback surveys, keeping professional
an eye on the competition and industry trends, and making sure internal record keeping is accurate. (specialist) who
Larger businesses can allocate more funds to undertake market research and will often adopt a provides advice
on marketing-
more formal approach, possibly engaging a marketing consultant to gather the data, carry out an related issues
analysis and interpret the results.

Any business that does undertake market research must ensure the information gained is used
in an ethical manner and does not infringe on the privacy of the person giving the information.
It is unethical for a business to contact consumers under the pretence of undertaking research
when the real purpose is to actually sell something. A Code of Marketing Research Standards
has been adopted by the Marketing Research Association (MRA) to protect research credibility
in the eyes of the public.

Market research can be used to find answers to questions about:

• market size
• consumer likes and dislikes
• product positives and negatives
• promotion effectiveness
• packaging effectiveness
• degree of threat from competitors
• distribution: how customers want to get the product.
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290 Unit 2 | Establishing a business

An objective and systematic approach must be adopted to undertake effective market research.
‘Objective’ means that the research must be conducted in an impartial and unbiased manner,
often by a professional marketing consultant. ‘Systematic’ means the adoption of a formal
method or approach.

Define the problem and establish the research A systematic approach to market
1 objectives research
The following six steps constitute a systematic
Determine the research design
2 approach to market research (see Figure 11.12).

Identify and assess information types and sources

3 Step 1: Define the problem and establish
Design data collection approaches, forms and the research objectives
sample size
4 Problem definition is possibly the most important
step of the process. By accurately defining
Collect and analyse data
5 the problem and establishing the objectives,
a business is then able to gather the relevant
Prepare and present final report information to assist with decision-making. The
6 information needed is dependent on the type
of business being operated. Generally, market
Figure 11.12 Steps when using a systematic approach to market research research objectives relate to the potential
demand for a product or service, the marketing
environment, or a business’s competition.

exploratory
research Step 2: Determine the research design
collecting
information in an There are three basic types of research design:
unstructured and
informal manner
1 Exploratory research involves collecting information in an unstructured and informal
descriptive manner, such as reading a magazine or article, using a particular product or service and
research research gaining an impression and feeling about the product or service.
that incorporates
consumers’ 2 Descriptive research incorporates such things as consumers’ attitudes, intentions and
attitudes, behaviour. It can be related to the ‘image’ of the product or service being researched.
intentions and Information can be gathered through observation of consumers’ behaviour.
behaviour
3 Causal research aims to find the cause and effect of certain actions. One variable, such as
causal research the price of a product, could be changed to study what impact this has on the volume of
research that
involves finding
product sales.
the cause and
effect of certain
actions
Step 3: Identify and assess information types and sources
primary data
information that a There are two basic types of information available: primary data and secondary data.
business collects
directly from first-
1 Primary data refers to information gathered by the business owners or market researchers
hand experience
and sources themselves, specifically to service the current research objectives.
2 Secondary data refers to information previously collected. This information can come from
secondary data
information internal records of the business or sources external to the business.
that has been
gathered
previously by
external sources

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 Chapter 11 Marketing the business 291

Table 11.1 Primary and secondary data sources

Primary data sources Secondary data sources

• Surveys/questionnaires – both telephone and • Company records

direct mail • Financial statements
• Interviews – door-to-door or shopping centre • Annual reports
• Direct observation – personal or electronic • Periodicals and trade/professional magazines
• Small group discussions; e.g. focus groups • Internet searches
• Experiments – laboratory tests, field tests • Computerised databases
• Online bulletin boards • Index services
• Email blasts – mass emails to family, friends, business • Libraries
associates • Advertising agencies
• Newspapers
• Magazines
• Yellow Pages and White Pages
• Trade associations
• Government agencies. Both the federal and state
governments publish data on many subjects; e.g. the
Australian Bureau of Statistics (ABS) provides periodic
statistics relating to Australia’s population.
• Private market research firms; e.g. AC Nielsen, Roy
Morgan Research Centre
• Radio and television stations

ACTIVITY 11.2
1 Explain the basic difference between primary and secondary classification of data.
2 Classify the following forms of data as being either primary or secondary:

• survey • direct mail-out sample a

proportion or
• focus group • product tests
subset of the total
• internet search • shopping centre interviews population being
• electoral roll • computerised databases studied
• magazine • email blasts
population the
• exit poll • company annual report. entire group
under study
as defined by
the research
Step 4: Design data collection approaches, forms and sample size objectives

target market
It would be an impossible task for a market researcher to collect information first-hand from the the market at
entire population. It is therefore necessary to study a sample, which will be a small proportion which a product
or service is
of the population of interest or target market. The group may be randomly selected to provide primarily aimed
a broad range of opinions or interests.
questionnaire
a form of survey
There are several methods of conducting where questions
primary research, including questionnaires, are asked of
respondents
observation, focus groups and experiments.
quantitative
research market
• A questionnaire is a standard form of research based
survey used to gather data. A structured on structured,
closed questions
questionnaire lists questions and provides
that aim to
pre-described answers (similar to a multiple- gather responses
choice format). It is regarded as a form of Figure 11.13 A questionnaire is a standard form of
that can be
summarised in
quantitative research. survey used to gather data.
figures
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292 Unit 2 | Establishing a business

Answers are given by ticking or placing an ‘X’ in a box. Some questions will require rating the
answer by indicating a number in a predetermined range; for example, ‘1 to 10’. Unstructured
questionnaires have open-ended questions. While a questionnaire looks simple to create,
care must be taken in its design to gain objective information from the respondent. It is
important not to provide any ambiguous
or leading questions. It is also important
to trial the use of a questionnaire to
make sure that it actually gathers the
information required to meet the
previously determined objectives.
• Observation is a process that recognises
and takes note of people’s actions and
behaviour, rather than directly asking
them for information. The introduction of
electronic scanning of product codes at
supermarkets or using other codes, such
as postcodes, has assisted enormously in
determining consumer demographics and
shopping habits. Businesses also use video
cameras to record shopper numbers, time
Figure 11.14 Customer being observed while checking product spent in the store, the areas of the store
range: primary research method that attracted foot traffic and interaction
between customers and salespeople.
• Focus groups are a popular way of collecting qualitative research and consumer-related
focus group
information. The group size is usually between six and 12 participants and is conducted in an
between six and
12 participants informal setting. A facilitator, often an experienced market researcher or even a psychologist,
gathered together aims to generate group interaction in order to stimulate immediate thinking on a topic. A
in an informal
session may last between one and two hours, with the participants usually being paid a
setting to give
their opinion small fee. It is often videotaped for later review or observed through a glass partition by
on a product or interested parties.
service
• Experiments can be conducted in the field or in a laboratory. This method involves removing
qualitative all variables except for the one being tested. For example, blind taste tests remove variables
research research such as brand, packaging and price, and leave only the taste to be tested.
based on in-
depth, open-
ended responses
that focus on Step 5: Collect and analyse data
emotional or
motivational Often the data is collected by trained interviewers who work for a market research company
aspects of
consumer and ask a series of questions or leave a questionnaire for a person to complete in their own
behaviour time. Many interviews are conducted over the telephone, with the interviewer reading scripted
questions from the computer screen and entering responses directly into the computer.

Once collected, the raw data needs to be tabulated, tested and analysed to form meaningful
information. Computer software, such as Statistical Package for Social Sciences (SPSS), is used
by marketing professionals to tabulate and perform statistical tests, which include means,
frequencies, correlations and trend analysis. There are many other software packages, such
as SurveyMonkey, SurveyGizmo and QuestionPro, that businesses may use to collect and
analyse data.

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 Chapter 11 Marketing the business 293

Step 6: Prepare and present final report

The last step in the market research process
is to prepare and present the findings. These
findings must be communicated to the business
owner in the form of a report, which includes
comments on how the data was collected. To
enhance the information visually, computer
graphics are usually added. Graphs and charts,
such as bar or line graphs and pie charts, are
invaluable communication tools to show
patterns or trends at a glance. Market research
companies will often make an oral and visual
presentation, generally using a computer
software presentation package. Figure 11.15 Example of part of a market research analysis report

REVIEW ACTIVITY 11.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify three ways a fruit and vegetable shop could use market research to decide whether
to add an organics section.
2 ‘Why undertake market research? It is a waste of time and money’. Discuss whether you
agree or disagree with this comment.
3 Explain why a business will use a ‘sample’ of a population when undertaking market
research.
4 Compare the terms ‘qualitative research’ and ‘quantitative research’. Provide examples of
each form of research to support your explanation of how these two forms of research differ.
5 In the following table, link the name of the research with its correct description.

Type of research Description

Exploratory Intended to find the cause and effect of certain actions. For instance, price
could be changed to see the impact it would have on sales volume

Descriptive Involves collecting information in an unstructured and informal manner;

e.g. reading a magazine or article, using a particular product or service

Causal Incorporates consumers’ attitudes, intentions and behaviour, and may be

gathered through observation of consumers’ behaviour. Can be related to
the image of the product or service

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11.4 Target market attributes

Learning intentions 11.4.1 Define business management concepts and terms
– at the end of this
chapter section I will 11.4.2 Construct a customer profile
be able to:
11.4.3 Identify and describe consumer trends and behaviour

11.4.4 Identify and describe the concept of ‘target market’

11.4.5 Discuss business strategies and ideas

11.4.6 Analyse case studies and contemporary examples

A market comprises customers and potential customers with similar needs and desires who
market a group of
customers with may purchase a product or service through the exchange of money or other things of value.
similar needs
and desires who
There are four basic types of markets, as shown in Table 11.2.
may purchase
products or
services from Table 11.2 The four types of markets
sellers through
the exchange of
money or other Types of market Explanation
things of value

Consumer Involves businesses selling mass consumer goods, such as

soft drinks, food and household products, to customers and
consumers

Business Where the purchasers are other business personnel who are
often well-trained and well-informed professional buyers

Global Businesses that decide to export their product or service

Not-for-profit and government Organisations that are formed to provide assistance to or

infrastructure for society

Market dimensions
mass marketing When a business is working out its marketing strategies, one of the first questions that needs to
a marketing
strategy that
be addressed is the anticipated size of the market for their product or service. This will directly
seeks to attract impact on the approach they should adopt. If a business markets its product or service to an
the attention entire market, this is referred to as mass marketing. Adopting this strategy can be costly and
of all market
segments
does not usually work well, since it is unlikely that every individual customer or consumer will
through the have the same needs. For instance, subscription TV providers such as Netflix, Stan, Amazon
use of mass Prime and Foxtel Now have been mass marketing their services. By using this strategy, they
distribution and
mass media
are incurring high costs for mass media exposure without necessarily getting ‘buy in’ from
consumers. Optus also uses mass marketing with the inclusion of separate pieces of marketing

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 Chapter 11 Marketing the business 295

material into daily newspapers. It raises

the question – is this the most effective
way for them to market their product
and service?

For marketing to be effective, the mass

market needs to be broken into segments,
using the four forms of segmentation and
their variables (see Table 11.3).
niche market
Once the segments have been is a subset of a
larger market
determined, a business can review them with its own
and select its target market. Within the particular needs
target market it is possible to identify or preferences

Figure 11.16 STP: acronym for segmentation, targeting whether there is a niche market whose market segment
and positioning needs can be more precisely met. The final relatively similar
(homogeneous)
step in this process is to differentiate the product or service of the business from its competitors group of
within that market segment. This strategy is referred to as market positioning. customers
who are likely
to respond in
Market segmentation similar ways

market
It is rare for a business to be able to satisfy the needs and wants of everyone; therefore, market
positioning
segmentation is carried out to improve a business’s precision marketing. Not everyone likes where a product
the same drinks, food, clothes, hotels and movies. Marketers try to identify certain groups of is placed within
a market with
potential customers who have a preference towards a diverse range of products and services,
regards to its
and they make use of the seven variables of the marketing mix. A market segment should image, price and
ultimately be a relatively similar (homogeneous) group of customers who are likely to respond age of the target
market
in similar ways. Segmentation then allows management to concentrate its efforts on allocating
its scarce resources more effectively, so it can achieve its business objectives. Segmentation market
segmentation an
is an approach that is midway between mass marketing and individual marketing. Consumer
approach that is
markets are typically segmented by the four bases or dimensions shown in Table 11.3. midway between
mass marketing
Table 11.3 Forms of segmentation and their variables and individual
marketing; it
defines and
Geographic Demographic Psychographic Behavioural subdivides a
large generic
market into
Where the Where the market is Where the market is Where the market is distinct
customers live or divided according divided according divided according to: subsections
work: to: to: • needs – economic, of potential
• region – world or • age • social class – functional, customers who
have similar
country • gender upper, middle, physiological,
specific needs
• size of city; • income level lower middle psychological, and wants
i.e. number of • education level • personality – social
residents • family size compulsive, • benefits sought marketing
mix the seven
• suburban or rural • family life cycle gregarious, – quality, service,
variables that
• climate – hot, cold, • occupation ambitious, economy, speed
are used when
or temperate • nationality/ethnicity aggressive, • loyalty status undertaking
extroverted, • kind of shopping marketing
introverted – convenience, strategies:
• lifestyle – achiever, comparison, product, price,
place, promotion,
socially aware, speciality
people, physical
conservative, • purchasing
evidence and
optimist frequency process

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296 Unit 2 | Establishing a business

The greater the number of variables that can be identified when defining a market, the closer
a business comes to developing the profile of its customers. For example, Dulux (paint and
coating manufacturing company) sees its customers as people who:

• are building a new home, renovating or redecorating

• place importance on using a reputable and trusted brand
• are willing to pay a premium price for a quality product
• are looking for innovative paint ideas in both colour range and finishes (textures)
• are comfortable accessing its website for information and assistance
• purchase products through major hardware chains.

Figure 11.17 A market

segment should ultimately
be a relatively similar
(homogeneous) group of
customers who are likely
to respond in similar ways,
such as mothers with young
children.

ACTIVITY 11.3
Using the market segmentation dimensions in Table 11.3, construct a likely customer profile for
two of the following businesses:

generic market • Cotton On

a market • Subway
where broadly • Smiggle
similar needs of
customers are
• Uniqlo
met by sellers • Tesla
offering a variety • Metro Trains Melbourne.
and often diverse
range of products

Target market
Once they have reviewed the forms of segmentation
and their variables, businesses need to select which
market segment they wish to pursue. This requires the
identification of their actual target market.

Identifying a specific target market requires a ‘narrowing-

down’ process from a broad or generic market to focus
on the specific type of customer. For example, the entire
Figure 11.18 The target market is the group of customers to whom drinks market is seen as satisfying people’s thirst; it is
the business actually wants to sell its products and services. therefore seen as being part of the generic marketplace.
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 Chapter 11 Marketing the business 297

When the consumer is specifically looking for a particular type of drink (such as a sports drink)
product market
that target market changes to the product market. Similarly, the entire car market is seen as when a consumer
satisfying a potential customer’s need for private transport. It is when that potential customer is looking for a
narrows down their choice to an prestige car that Mercedes, BMW or Audi may enter as players particular item;
for example, a
in this specific product market (i.e. prestige cars). The current desire of consumers for smaller particular type of
and more fuel-efficient cars or SUVs has produced other specific product markets. In the future, drink or car
consumers may desire an electric or driverless car, creating another product market.

Creating or identifying a niche market within the target market of a business is a good
marketing strategy because it allows the business to position its marketing efforts on a clearly
defined and less competitive market. This more narrowly defined group often does not have its
current needs met. The ideal niche market has the following attributes:

• the customers have a distinct set of needs

• the customer will often pay a premium to the business that satisfies their need
• the business usually has no, or few, competitors
• it permits a degree of specialisation in the product or service required
• it is generally one that will allow for profit and market growth.

Operating in a niche market can be attractive to

businesses due to their reduced competition and
positioning. Melbourne rates as one of the best cities
in the world in which to drink coffee. Its roasters and
baristas are very accomplished, inventive and technically
capable. Its cafes often set the standard for new brewing
techniques or gadgets. Selling a cup of filtered coffee can
change from being a product, to a niche product regarded
as a speciality, when the coffee beans have been grown
organically and dry roasted. This creates an expectation
of better quality and promise of being better for the
environment. A cafe serving this niche speciality coffee
would expect to charge a higher price for the product.

Figure 11.19 A niche product: organic and dry-roasted coffee

Consumer trends
Keeping up with current consumer trends is important to the financial success of a business.
It is important that the marketing function supports the business by understanding current
and changing consumer trends. The bushfire crisis in 2019–20 and then the COVID-19
pandemic deeply impacted retail and other business sectors in Australia. These events created
for many consumers a feeling of looking inward and seeking out brands with which they feel
an emotional connection. The enforced lockdowns, store closures and physical distancing
measures associated with the pandemic acted to elevate ‘digital’ to new levels for consumers.

Some examples of these trends and behaviours resulting from the bushfire crisis and COVID-19
pandemic include:

• increased e-commerce transactions and general usage of technology. Restrictions to

movement imposed by the COVID lockdowns accelerated online sales, with consumers
spending more time browsing, researching and purchasing online. Inside Australian Online
Shopping: eCommerce Industry Report 2021, issued by Australia Post, stated that the online
share of retail spend was 16.3 per cent in 2020, reflecting a 57 per cent growth year-on-year.

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• a shift to the suburbs and support of local businesses. Multiple lockdowns and work-from-
home orders negatively impacted on CBD retailers, especially department stores. With more
people working from home during the pandemic, there has been an increase in people
shopping locally and supporting local producers, cafes and restaurants. Consumers are
showing greater interest in supporting Australian products; that is, where they are made,
where they are designed and where they are manufactured. For example, iconic Australian
brands Driza-bone garments (designed in Melbourne) and Rossi Boots (designed and made
in South Australia) are experiencing an increased demand for their products.
• a change in purchases mix. Consumers spending more time at home resulted in a change
of purchase needs. Initial purchases focused on furniture, electrical products and home
furnishings. Home cooking resulted in increased grocery sales, and garden products
increased as people were restricted to their own garden and not allowed into local parks for
recreation. There was an increase in leisurewear sales and a decrease in work wear.

Apart from the recent consumer trends

due to the pandemic, there are many other
consumer trends that businesses need to
be aware of and respond to:

•
Buying consumables (meat, fruit
and vegetables): when purchasing
consumables, in-store shopping is still
favoured over online grocery shopping,
as customers are providing feedback
that they still want to be able to inspect
the products to determine their quality
and value. This trend is supported
by the increasing number of farmers’
markets across both metropolitan
and regional areas. Customers are
willing to pay a ‘price premium’ for the
Figure 11.20 Farmers’ market: a popular venue to purchase fresh produce
satisfaction of purchasing their fruit
and vegetables directly from the producer, being able to develop a personal relationship
with the grower and get additional information about how the product was grown. The
consumer trend of wanting to buy ‘greener food’ and reduce ‘food miles’ is also satisfied by
shopping at farmers’ markets.
• One-stop shopping: this trend has encouraged retailers to add related and unrelated items
of merchandise to their core products. For example, many retail businesses now include a
coffee shop within their store, capitalising on the trend of being part of a ‘cafe society’.
• Purchasing ready-to-eat meals: consumers have been able to buy ready-to-heat and
ready-to-eat food for many years. One more recent trend is that consumers are now
looking to buy ‘gourmet’ meals, not just the normal offerings of spaghetti bolognaise
or pizza. Businesses such as HelloFresh and Marley Spoon are meeting the customers’
desire to cook by supplying specific gourmet ingredients to use when preparing entrees,
main courses and desserts. The important factors for businesses wanting to respond to
this trend are that they meet the customers’ need to feel confident that they are buying
good-quality, tasty food. Many restaurants now also offer gourmet meals delivered to the
customer, using other businesses such as UberEats, Deliveroo and DoorDash. Fast-food
chains, such as KFC and McDonald’s have responded to efficiently serve their customers by
setting up double-lane drive-throughs.

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 Chapter 11 Marketing the business 299

Figure 11.21 Businesses that offer the convenience of either cooking at home or delivering meals

• E-commerce: electronic transactions have increased, with more consumers now expecting
the convenience of paying digitally. Electronic payment systems allow customers to pay for
goods or services electronically and include tap-and-go (contactless) payments, credit and
debit cards, EFTPOS, online payments, and smartphone or tablet card processing.
• Consumers have now become 24/7 purchasers. They look for retailers who can provide
fast and convenient service at any time on any day, particularly of goods and services that
will ultimately save them time in their busy lives. This has also led to an increase in internet
purchasing, where the consumer orders online with the goods being delivered to their
designated address. Coles and Woolworths have experienced a significant increase in
demand for home-delivered groceries. To service this increased demand both retailers have
established centralised fulfilment centres where they are able to dispatch home delivery
orders directly to the consumer rather than using individual local stores. Consumers are also
using online services to book airline tickets, holidays and entertainment.
• Many consumers want to be treated as individuals in their
purchasing decisions, as they are tired of the mass
marketing approach and want to be listened to and treated
as special. Cotton On provides a personalised service where
a customer’s initials or names can be put on a variety of
items such as diaries, dressing gowns, slippers, handbags,
towels, pyjamas, footless tights and children’s clothing.
• Consumers are more conscious of their health and better
informed about nutrition. They are also more aware and
concerned about environmental and social issues. They
engage in consumption behaviour that will support their
diet, fitness and ideal lifestyle. Businesses have responded
to this trend by providing information on their packaging
relating to nutrition, fair trade, etc.
• A growing number of consumers are questioning and
wanting to be able to trust the motives of businesses from
Figure 11.22 An example of a
whom they are purchasing products or being provided with
personalised item from Cotton On
services. It has led to them questioning marketing campaigns,
brand images and business practices. These sceptical consumers are demanding evidence of
ethical labour, product and supply-chain practices to justify their purchasing decisions.
• The emergence of a consumer group known as ‘tweens’ – no longer little kids, but not quite
teenagers – has formed a new market. This consumer group has become more empowered
and seeks products and experiences that previously appealed to teenagers. Businesses
operating in the streetwear, cosmetics (beauty) and entertainment industries are beneficiaries
of this new consumer group. They are, however, posing issues for traditional toy manufacturers.

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300 Unit 2 | Establishing a business

ACTIVITY 11.4
Refer to the list on the previous page as a guide.

1 Identify and describe consumer trends that you believe directly relate to your age group.
2 Identify and describe consumer trends that you believe directly relate to adults.
consumer
behaviour the
study of the
behaviours and
Consumer behaviour
strategies of
customers when
Businesses need to know about consumer behaviour when trying to anticipate how
choosing, using their customers will respond to their marketing strategies. It is therefore important for
and disposing businesses to understand influences on customer purchasing decisions. If customers are
of products or
services
individuals or household members, it is recognised that the following five factors will
influence their behaviour.

Table 11.4 Factors influencing consumer behaviour

Cultural Social Personal Psychological Situational

Inherent values Actions and Consumer’s What is When – is there a particular

and beliefs beliefs of age, stage of motivating time of day, week or
developed those with life (i.e. single, the consumer season?
through whom they newly married, to purchase a Where – where is actual
parental and associate, married with particular product buying decision made and
environmental such as family, dependents, single or service where actual purchase
influences, such peers, sport, parent, divorced occurs; i.e. planned or
as nationality, religious with dependent impulsive
religion or ethnic or other children, widowed), How – relates to
background or community occupation, behavioural issues such
social groupings groups economic as whether the consumer
situation, lifestyle makes single or multiple
and personality pack purchase of items

Figure 11.23 Factors that can influence consumer behaviour

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 Chapter 11 Marketing the business 301

While marketers understand what factors can influence the purchasing decisions of consumers,
it is not always easy to predict what the actual deciding factor was for buying a particular item.
It could have been based on satisfying a practical need, an emotional or impulsive action,
a logical (rational) or irrational (foolish) reason, or as a result of recommendations made in
research reports.

CASE STUDY
11.3

Smiggle: behind
the smiles and
giggles

Smiggle opened in Melbourne in 2003 with

the grand plan of becoming the world’s most
exciting and fabulous stationery brand. Its
colourful, fun, fashion-forward stationery is
aimed at being the go-to brand for school,
lifestyle and stationery product categories for
bags, lunchboxes, drink bottles, pencil cases, Figure 11.24 The Smiggle logo
books, writing tools, headphones, collectibles
and accessories. The products sold by Smiggle are well
designed and innovative, using bold colours
The growth of Smiggle has been exceptional, and quirky graphics. Smiggle’s ultimate goal
from the original 20 stores, it has expanded to is ‘to inspire and develop the creative spirits of
over 300 wholly-owned Smiggle stores across its customers, by delivering original, fun and
10 countries. In addition, it is represented in affordable stationery’. Visit a Smiggle store and
more than 10 concession shops in prestigious you can’t help but notice its extremely colourful
department store retailers (including Harrods and bright fit-out.
and Selfridges) in four countries.
Source: Smiggle website, ‘About Smiggle’.

CASE STUDY ANALYSIS

1 Identify the target markets for this fun and rapidly expanding business.
2 Have you visited any Smiggle stores? Explain whether or not the store’s colourful fit-out
and friendly staff made you want to purchase one or more of Smiggle’s products.
3 Identify which of the five factors that influence a consumer’s behaviour are being
addressed and satisfied by this business.

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302 Unit 2 | Establishing a business

ACTIVITY 11.5
Twice a week, ALDI adopts a ‘special buys’ promotional strategy, which offers customers heavily
discounted general merchandise in its stores. On each visit to the store, the customer is asked
whether they would like an ALDI brochure setting out the specials for the week ahead.

At the end of October 2021, Coles introduced a ‘Best Buys’ promotional strategy. This online
platform for its Best Buys range aims to give shoppers massive savings on big-ticket lifestyle
products and popular tech. It is intended that new products will be added to this online exclusive
collection from existing and emerging brands.

1 Do you or any of your family shop at ALDI? If so, identify the reasons why you or your
family shop there.
2 Have you purchased any items that are listed as ‘special buys’? If so, describe the factors or
influences that caused you to make the purchase.
3 Discuss whether or not you believe this strategy is working to attract customers to ALDI
stores.
4 Identify the characteristic of consumer behaviour that ALDI is using in this marketing
strategy.
5 Identify and describe the target market you believe Coles is aiming its ‘Best Buys’
promotional strategy.

REVIEW ACTIVITY 11.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the factors that influence consumer behaviour.

2 Describe the difference in approach needed when marketing a product to a mass market or
a niche market.
3 Discuss whether you think that the ‘digital marketplace’ has changed the traditional
approach to how a product is promoted.
4 Define the term ‘market segmentation’ and explain why it is a useful activity to undertake
when determining how to market a particular product or service.
5 Markets can be described as ‘generic’, ‘product’, or ‘niche’. Describe each of these types of
market and explain their relationship to the marketing of a product to a customer.

Figure 11.25 Every consumer is different and has a distinct set of needs. It is the role of the marketer to understand
them and how to approach them.

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 Chapter review 303

Chapter 11 review
Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 2, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Marketing Brand Market-oriented approach

Customer base Internal environment External environment

Pareto principle Market research Primary data

Secondary data Quantitative research Qualitative research

Market Niche market Market segment

Marketing mix Target market Consumer trends

Consumer behaviour

Extension question
Farouk owns and operates a very popular and profitable bakery in one of Melbourne’s eastern
suburbs. During the COVID-19 pandemic, the bakery’s sales of bread products increased
dramatically, as locals supported their neighbourhood business. The range of bread products
offered by the bakery is large; however, some of his existing customers have asked him whether
he would be interested in extending his range of bread to include making and selling gluten-
free products. Farouk has investigated this idea in the past and found out that to be able to
make and certify the products as gluten-free, he would need to make major changes to his
current bakery, as it is important that the same machinery is not used for gluten and gluten-free
products. Making the necessary changes would be a costly exercise and he believes this would
not result in a sufficient increase in revenue to the business.

Farouk has asked you to provide him with advice on how to:

• identify what other issues, apart from cost, he needs to consider that will assist him to make
a decision on whether to respond to his customers’ requests to bake gluten-free products
• identify ways that he could undertake market research to determine whether there is a
strong demand by his existing customer base for gluten-free products.

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304 Unit 2 | Establishing a business

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

11.1 Relationship 11.1.1 Define business Review activity 11.1: Yes No

between marketing, management terms Part 1 & Part 2 (Q1)
establishing a
customer base and
business objectives 11.1.2 Identify and describe Review activity 11.1: Yes No
the relationship between Part 1 & Part 2 (Q2–5)
marketing, establishing a
customer base and business
objectives

11.2 Factors affecting 11.2.1 Define business Review activity 11.2: Yes No
the establishment management terms Part 1 & Part 2 (Q1)
of a customer base
and the creation of a
brand identity 11.2.2 Identify and describe Case study 11.1: Q1 Yes No
internal factors affecting the Case study 11.2: Q2–3
establishment of a customer Review activity 11.2:
base Part 1 & Part 2 (Q2)

11.2.3 Identify and describe Case study 11.1: Q2–3 Yes No

internal factors affecting the Case study 11.2: Q4
creation of brand identity Review activity 11.2:
Part 1 & Part 2 (Q3–5)

11.2.4 Identify and describe Activity 11.1 Yes No

external factors affecting the Case study 11.1: Q1
establishment of a customer Case study 11.2: Q2–3
base Review activity 11.2:
Part 1 & Part 2 (Q1–2)

11.2.5 Identify and describe Case study 11.1: Q2–3 Yes No

external factors affecting the Case study 11.2: Q4
creation of brand identity Review activity 11.2:
Part 1 & Part 2 (Q3, 5)

11.2.6 Analyse and evaluate Activity 11.1 Yes No

impact of macro factors on Review activity 11.2:
businesses Part 1 & Part 2 (Q1)

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 Chapter review 305

Success criteria – I am now able to: Linked questions Completed

(Y/N)

11.2.7 Analyse case studies Case study 11.1 Yes No

Case study 11.2

11.2.8 Discuss business Extension Yes No

information and ideas

11.3 Market research 11.3.1 Identify and define Activity 11.2 Yes No
practices market research practices Review activity 11.3:
Part 1 & Part 2

Yes No
11.3.2 Discuss concepts Extension

11.3.3 Compare and evaluate Extension Yes No

business information

11.4 Target market 11.4.1 Define business Activity 11.4 Yes No

attributes management concept and Review activity 11.4:
terms Part 1 & Part 2 (Q4)

11.4.2 Construct a customer Activity 11.3 Yes No

profile

11.4.3 Identify and describe Activity 11.4 Yes No

consumer trends and Case study 11.3: Q3
behaviour

11.4.4 Identify and describe Activity 11.5: Q5 Yes No

the concept of ‘target Review activity 11.4:
market’ Part 1 & Part 2 (Q4–5)

11.4.5 Discuss business Activity 11.5 Yes No

strategies and ideas Extension

11.4.6 Analyse case studies Case study 11.3 Yes No

and contemporary examples Extension

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 12
Marketing mix, product life
cycle and marketing strategies,
features and value of customer
relations and technological
developments in marketing

‘A good company offers excellent products and services. A great company

also offers excellent products and services but also strives to make the world
a better place.’
Philip Kotler (1931–)

About the author:

Philip Kotler is an American consultant and professor and
author of Marketing Management, a widely used marketing
textbook.

KICKSTARTER ACTIVITY
Discuss whether this statement made by Philip Kotler is good advice for
businesses or if it’s too idealistic.

CHAPTER OVERVIEW

In this chapter students will continue to develop their understanding

of how marketing, using the extended marketing mix (the 7Ps), extend
to considerations on product, price, place, promotion, people, physical
evidence and process. Students will gain an understanding of the
life cycle of a product and the marketing strategies appropriate to
each stage of this cycle. The features and value of customer relations
strategies, such as providing quality customer service and loyalty
programs, will be examined. A variety of technological developments
in marketing will also be considered.
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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will be able to:

The 7Ps model of marketing: 12.1 The 7Ps of marketing

product, price, place, 12.1.1 Identify, define and describe the 7Ps of marketing
promotion, people, physical 12.1.2 Discuss and apply business management
evidence and process knowledge to practical or simulated situations
12.1.3 Analyse case studies and contemporary examples

The product life cycle: 12.2 Product life cycle

introduction, growth, 12.2.1 Identify stages of product life cycle
maturity, and decline/ 12.2.2 Describe marketing strategies relevant to product
extension, and the life cycle
relationship between each
of these stages and the
choice of marketing strategy

The features and value 12.3 Features and value of customer relations strategies
of customer relations 12.3.1 Define and describe terms and concepts
strategies such as providing 12.3.2 Propose marketing strategies
quality customer service 12.3.3 Apply business management knowledge to
and establishing customer practical or simulated business
loyalty programs 12.3.4 Interpret business information
12.3.5 Explain and apply business management concepts

Technological developments 12.4 Technological developments in marketing

in marketing such as social 12.4.1 Define, identify, describe, explain and apply
media, email marketing, business management concepts and terms
search engine optimisation, 12.4.2 Discuss business management information
artificial intelligence, data 12.4.3 Describe and analyse contemporary examples of
analytics and management of business management
data.

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 12
Marketing mix, product life cycle and
marketing strategies, features and value of
customer relations and technological
developments in marketing

12.1 The 7Ps of 12.2 Product 12.3 Features and value of 12.4 Technological
marketing life cycle customer relations strategies developments in marketing

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308 Unit 2 | Establishing a business

12.1 The 7Ps of marketing

Learning intentions – at 12.1.1 Identify, define and describe the 7Ps of marketing
the end of this chapter
section I will be able to: 12.1.2 Discuss and apply business management
knowledge to practical or simulated situations

12.1.3 Analyse case studies and contemporary examples

P1 – product
Product is the first component of the 7Ps of the marketing model. A product is anything that
product a good
or service in its can be offered to a market to satisfy a need or want. It can include physical goods, services,
final state after experiences, events, persons, places, properties, organisations, information and ideas.
having gone
Consumer and business goods and services can be classified based on their characteristics
through all stages
of the production relating to purchasing habits. The consumer profile will then impact the form of marketing
process best suited to that category of product.
consumer profile
a statistical
picture of the
typical consumer
of a product 1 Product
based on
demographic
data; for
example, income, 7 Process 2 Price
age, gender and
occupation

Marketing
mix – 7Ps
6 Physical
evidence 3 Place

5 People 4 Promotion

Figure 12.1 The 7Ps of the marketing model

Business goods
Business goods and services can also be classified according to their characteristics, ensuring
that the appropriate marketing strategies can be applied. These may include:

• raw materials (e.g. minerals and agricultural products) and manufactured materials and parts
(e.g component parts)
• capital items, such as buildings, equipment, computers and office equipment
• supplies, such as paint, petroleum products, paper and cleaning materials
• services, such as engineering, surveying, maintenance, accounting and legal.
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 Chapter 12 Marketing mix, product life cycle and marketing strategies 309

Consumer goods

Unique characteristics Purchased

or brand frequently
identification and with
and quality little effort
Speciality Convenience
goods products

Shopping Unsought
products products
Comparisons
made based Goods not
on suitability, purchased
quality, price, style regularly
and research
Figure 12.2 Consumer products classification system

Table 12.1 Types of consumer goods, their classification and impact on marketing strategies

Product classification Groups Marketing strategies

Convenience goods • Staples – items bought on a regular basis; e.g. • Strategies that allow for wide
newspapers, bread, milk, toothpaste, shampoo, exposure of the product; e.g.
food items television advertisements
• Impulse – items bought with no planning; e.g. • Prominent display such as
chocolate bar, chewing gum, magazines colourful displays on checkout
• Emergency – items purchased when the need is counters
urgent and price is not important; e.g. umbrella • Prominent display positioning;
during a rainstorm, shopping bags e.g. displaying product near
checkout counters

Shopping goods Examples: clothes, shoes, furniture, household Broad range of strategies
appliances, new and used cars required to cater for varying
purchasing styles; salespeople
need to have good product
knowledge and selling
techniques

Speciality goods Examples: new cars (luxury), photographic Limited production coupled with
equipment, computers exclusive distribution rights
means that marketing strategies
can be directed at specific targets

Unsought goods Examples: smoke detectors, life insurance, Marketing needs to be specific
encyclopaedias, prepaid funerals, financial planning and advise of benefits of
products/services; personal
selling and direct marketing are
important for product promotion

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310 Unit 2 | Establishing a business

ACTIVITY 12.1
Classify each of the following consumer products according to its classification and group.
Explain why you have chosen this category:

• takeaway meal/snack
• fiction novel
• fashion clothing
• drone
• umbrella
• beach towel
• bed
• shampoo
• electric car
• iPad (tablet).

Developing the product

Businesses should aim to keep their product range appealing to the marketplace. There are
a number of important factors that contribute to the success of a product. Commitment on
the manufacturer’s part to continuously develop a unique and superior product is one key to
success. Manufacturers also need to consider changes in consumer tastes, new competitors
product
development and technological advances. Failure can occur due to the market segment being too small, poor
the design and choice of marketing strategies, changes in consumer tastes or forecasting errors.
development of
new or existing
products There are five stages involved in product development; that is, in getting a new product
developed and out to the market.

Table 12.2 Stages in the new product development process

Stage Title Description

1 Idea development Ideas can be generated from input from both staff and customers or as a
result of market research. A current product could be modified, enhanced
(innovated) or extended.
Product ideas could come from current consumer trends or analysis of a
competitor’s product.

2 Idea screening How well does the idea fit with the objectives and profile of the business?
Does the new idea sit within the current product range or become an
extension of the current range?

3 Idea evaluation Test the concept with market analysis to determine demand and gain reaction
of customers, identifying target markets, working out cost of producing the
product and forecasting sales and profits.

4 Developing the The actual product needs to be produced and market-tested, and marketing
product strategies need to be determined. Alterations may still be made to the final
product, depending on feedback from market testing.

5 Commercialisation Product enters the marketplace through a product launch and accompanying
of the product marketing campaign. The product’s success is judged against the forecasts
made during the idea evaluation stage.

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 311

Product mix
Many businesses offer more than one product for sale. The product mix is the full set of all
product mix a full
products being sold by a business. The mix has two main elements or dimensions: set of all products
• breadth – measured by the number of product lines carried being sold by a

• depth – determined by the variety of sizes, colours and models offered within each business

product line. product line a

broad group of
products that
A product line is a broad group of products intended for basically similar uses and have are intended
reasonably similar physical characteristics. For instance, in an electrical retail store the product for similar uses
mix would include items such as refrigerators, freezers, washing machines, dryers, microwaves and have similar
physical features
and dishwashers, referred to as ‘white goods’. An example of one product line would be
refrigerators. Within that product category, its breadth can be determined by the number of
different brands a store is selling and the depth by the number of different models of that
particular product that are available.

The role of branding

A brand is the distinguishing name, term, symbol, or design that is used to identify one
product
manufacturer’s product and differentiate it from another manufacturer’s product. Branding is differentiation
very influential in marketing, creating either a positive or negative image in the mind of the where products
are developed
consumer. Products are developed and advertised to make them appear different to others on
and advertised
the market (product differentiation). to make them
appear different
from others on
The business with the largest share of the market is known as the market leader (or brand
the market
leader). It has been estimated that a successful brand is a powerful asset to a business and may
account for between 50 per cent and 70 per cent of the total value of a business. brand leader
the brand in
the market with
What is it that makes a brand connect with the consumer? Is it emotion, market leadership, high the highest
quality, or being judged as value for money? Over the past 22 years, the Reader’s Digest Trusted market share

Brands survey has researched which Australian brands have the best customer reputation.

ACTIVITY 12.2
Visit the Trusted Brands Australia website and answer the following questions.

1 Select five of the most trusted

brands and describe the
features that you believe each
of these brands possesses
to make it ‘most trusted’. For
example, in 2021 Bunnings
Warehouse was voted
Australian Iconic Brand, and
Bendigo Bank as Bank of the
Year.
2 Describe what you believe
makes a brand connect with Figure 12.3 A brand is a powerful business asset that is essentially a
the consumer. maker’s mark.

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312 Unit 2 | Establishing a business

Importance of brand
A brand can convey a range of meanings: attributes, benefits, values, culture, personality and
type of user. Taking the example of luxury cars such as Mercedes-Benz, BMW and Tesla, it is
possible to analyse these brand meanings:

• attributes of the product – all three cars suggest an expensive, well-built, well-engineered,
long-lasting, high-prestige automobiles
• benefits – both functional and social status. They will last for a long time and can make some
people feel important and admired for owning and driving one of these products. All three
leverage using brands have zero emission models.
(something) • values – these cars say something about the manufacturer’s values relating to high
to maximum performance, safety and prestige
advantage
• culture – these brands may represent a certain culture of the business such as efficiency,
brand stretching precision and high quality
using an
established brand • personality – all three brands project a certain and different personality. Mercedes-Benz: safe
name in order and conservative motoring, BMW: high status and interested in on-road performance, Tesla:
to introduce quiet and makes a statement
unrelated
products • type of user – who would we expect to see behind the wheel of a Mercedes-Benz, BMW,
or Tesla?

Figure 12.4 Luxury brands – Mercedes-Benz, BMW and Tesla

The importance of branding is recognised by all luxury car

manufacturers. These manufacturers know the value of
cashing in on their highly regarded brand. They leverage
this to market and sell branded clothing, key chains, or other
trinkets. These branded goods provide a profitable product
line for such premium, low-volume car producers. Their
growing non-car product lines underscore the power of their
brands, but also the harsh realities of the car business: selling
baseball caps and luggage can be more profitable than selling
cars. This practice is known as brand stretching and occurs
where a central logo is used as an umbrella for a range of
products.

Chemist Warehouse, established in 2000, is a privately owned

Figure 12.5 Chemist Warehouse, ‘Australia’s cheapest chemist’

Australian company operating a chain of retail pharmacies.

This business is heavily reliant on the marketing strategy of brand recognition as ‘Australia’s
cheapest chemist’ to ensure its success. This dependence on its brand recognition and loyalty
to ensure that it gets a very large number of customers through the door or purchasing online
follows on from the company spending more than $100 million annually on marketing, while
working on a lower profit margin than other community chemists.
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 Chapter 12 Marketing mix, product life cycle and marketing strategies 313

Another example of brand distinguishing a product is in the very

large and competitive paint industry. The brand Dulux, with its
motto (created in the 1970s) ‘Worth doing, worth Dulux’, conveys the
image of quality attached to any paint product from its range. Not
only is Dulux the winner of the most trusted paint brand (Reader’s
Digest Trusted Brands) in 2021, but the company also features an
English sheepdog (named Digby) as part of its brand recognition.
Digby is seen as a powerful trademarked symbol of the Dulux brand
for consumers. Research confirms that the inclusion of Digby in any
promotional material increases the memorability and branding for
the consumer.
Figure 12.6 ‘Digby’ the Dulux Dog – the powerful
trademarked symbol of Dulux paints

ACTIVITY 12.3
1 Identify two luxury brands (other than cars) where the business is ‘cashing in’ on the brand
name to gain an additional revenue stream; for example, Liberty and Harrods department
stores in London.
2 List at least five products where the brand name has become accepted as the ‘common
name’ for the product; for example, Speedo (bathers).
3 Select two different products and describe the range of meanings attached to those
products in terms of attributes, benefits, values, culture, personality and types of user.

Businesses that adopt a brand ownership strategy must ensure the strategy adequately
promotes the brand, while also maintaining its quality. It is possible to register a brand name to
protect its use. Over time, some brand names have become accepted in our common language
as the generic name for a type of product. For example, plastic cling wrap is commonly referred
to as ‘gladwrap’, a felt-tip pen as a ‘texta’, a portable cooler as an ‘esky’, and reusable adhesives as
‘blu tack’. This kind of product recognition is a marketing advantage.

Figure 12.7 Blu tack and Esky – two products where the brand name has become the common name for the product

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314 Unit 2 | Establishing a business

Businesses also now want to monopolise the colour they use in their brands. Over the years
there have been a number of cases brought contesting the use of certain colours in the brands
of businesses.

Table 12.3 Contested colours

Colour contested Businesses Outcome

Red, blue and silver Red Bull and another Red Bull won this case in 2002 stopping
soft drink distributor other businesses using these colours

Blue and red on a Clark Rubber and Clark Rubber won an injunction in 2006
yellow background Oasis Foam and to stop the use of this colour scheme by
Rubber competitors

Green BP and Woolworths BP wanted to register ‘green’ under the

Trade Marks Act 1995 (Cth) to protect
its brand. Woolworths opposed this
application.

Purple Cadbury and Darrell Fought a five-year battle in Australia’s

Lea Federal Court over the right to use ‘purple’
in their packaging and advertising. Federal
Court told Cadbury it did not own sole right
to use this colour and rejected its attempt
to sue Darrell Lea.

A success story in the power of debranding resulted from the Australian Government’s
requirement that from January 2012 all cigarettes be sold in plain packaging, which is to not
be coloured, or contain any imagery, corporate logos, or trademarks. The packaging must have
a standard colour and font, with a large, graphic health warning. While Australia was the first
country to introduce this debranding, there are now more than 23 countries around the world
at various stages of implementing, progressing, or investigating plain packaging laws.

ACTIVITY 12.4
1 Identify the colour/s you associate with the following brands:

• Coles
• Bakers Delight
• Bunnings
• David Jones
• John West
• Toyota
• National Australia Bank
• Woolworths
• Metro Trains
• Australia Post.

2 Are there any similarities in the colours used by the brands. How many of these are based
on the primary colours of red, yellow and blue?

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 315

CASE STUDY
12.1

Ampol

Ampol Limited was established over 80 years In 2021, the Ampol brand returned with a
ago; however, the Ampol brand was phased out new logo designed to reflect the growth and
in the mid-1990s when the company adopted evolution of the company into new markets for
the branding of one of its other companies, this nation-wide fuel network. The fresh symbol
Caltex Australia. is aimed at connecting a new generation of
customers and underpins its commitment to
once again make it Australia’s most loved and
admired fuel brand. The design of the new
Ampol logo draws on key elements from the
heritage Ampol brand, by including the original
red and blue bands, which capture its proud
history as a company built for Australians.
The new, simple and modern symbol with the
distinctive leaning ‘A’ was designed to draw
attention to the company’s forward momentum.
The company is intending to leverage its
position as the only major Australian fuel brand
to win new customers.

Figure 12.8 The Ampol brand is one that strongly

resonates with Australians. Source: Ampol website, ‘Who we are/our history’.

CASE STUDY ANALYSIS

Discuss whether you believe that the return of Ampol and highlighting it as ‘the only major
Australian fuel brand’ will assist in it gaining a competitive advantage over the other multi-
national fuel companies operating in Australia.

An advertiser wants its product to be in front of people’s eyes, wherever those eyes might be.
product
Product placement has become very popular in television programs and movies. When you placement
are next watching television or at the movies, take some time to count how many products are a method
used to gain
strategically placed in the show to subconsciously catch your eye. You may also want to count
prominence of
how many times an individual product appears or is mentioned during a television show that a product in the
the business has sponsored. consumer’s mind;
for example,
in television,
The internet has become part of the branding strategy of many businesses. The website movies, or the
for a business becomes a brand portal offering site visitors more than just straight product internet
information. It offers opportunities to participate in activities such as games, puzzles, message
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316 Unit 2 | Establishing a business

boards, live chat, email, surveys and e-commerce. It aims to gain commitment from visitors to
the website by building a virtual community around that brand of product.

For small business operators, deciding to stock branded products is a sound strategy as these
products carry their own consumer recognition and brand loyalty. This will cut down on the
amount of marketing a business will need to undertake.

Some large supermarkets offer products that have generic brands or private label brands
generic brand
a brand that that attach specifically to that supermarket chain, rather than the various manufacturers of
attributes its the product. These brands are produced by a variety of unacknowledged manufacturers, and
identity to
are packaged plainly and therefore more cheaply. They do not receive a lot of promotion.
the retailer
rather than the These savings are then passed on to the consumer by way of lower prices for the product. In
manufacturer comparison, ALDI has its own ‘brands’, though not what consumers traditionally refer to as
‘home brands’. A close look at the ALDI range of products will reveal that its brands use the
same colour palette as the well-known brands stocked by its competitors.

The choice of the right packaging

The packaging of a product is very important and should not be overlooked. It has a multitude
of purposes, including:
• acting as an advertisement, attracting attention and new customers
• building image and brand recognition, and positioning the product in the marketplace
• differentiating the product from that of its competitors
• protecting the product – primary wrapper, secondary and transportation packaging
• tamper-proofing the product
• providing consumer information – ingredients, manufacturer and country of origin.
One of the most important considerations when designing packaging is colour. For example,
consumers associate certain colours with certain feelings and products: white (purity) with
milk; red (warmth, passion and sensuality) with Coca-Cola; blue (professionalism) with IBM
computers; and purple (luxury) with Cadbury chocolates.

Labels can be used to provide information about the product, the manufacturer and its
label placed on a
product to inform trademark or the retailer. When a business is designing labels for its products, it is imperative
the customer/ it ensures that it complies with the Competition and Consumer Act 2010, which specifies that
consumer with
businesses cannot provide customers with false, misleading, or deceptive information. Labels
information such
as manufacturer, can be attached directly to the product or form part of the packaging.
ingredients and
use-by date
Packaging, while very important from a marketing sense, has also come under greater
consumer scrutiny and criticism, mainly due to environmental issues. The use of reusable
packaging such as glass or recycled cardboard has helped overcome some of this criticism.
Customers also choose products based on the convenience of the packaging. Producers should
also think about portion sizes when designing their packaging. Not all households are large and
therefore individual pre-packaged portions of items may lead to more sales.

ACTIVITY 12.5
1 Select three products and analyse their packaging based on the following criteria:
a design – use of colour, placement of logo or business name
b consumer information; for example, ingredients, name of manufacturer, country
of origin

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 317

c level of packaging – primary or secondary

d brand recognition
e environmental friendliness.
2 Identify and describe a product where you consider the packaging to be a reason why you
would choose not to buy that particular product.
3 A well-known food retailer designs some of its products’ packaging in similar ways to other
more expensive brands. Discuss whether you think that this practice is legal and whether it
gives that retailer a competitive advantage.

P2 – price
Price is the second component of the 7Ps of the marketing mix. The price is the amount
of money paid by customers for a product or service. It is the customer who will ultimately
determine whether the business-set price is correct. Pricing levels greatly influence the revenue
and profit made by a business, helping to determine its financial success or failure.

Correct pricing decisions are therefore some of the most important issues facing marketing
managers. Businesses often apply different pricing methods to their portfolio of products,
depending on costs of production, stage in product life cycle and competitive conditions within price the amount
the market. for which
something is sold

Pricing a product for the market is dependent upon a range of factors. When a business mark-up pricing
determines its pricing strategy, it must ensure that it covers the base price for the product, determined by
adding gross
then takes into account the range of price adjustment strategies available. Outlined below are profit to the direct
various factors that must be considered when determining the price of a product or service. cost per unit;
usually expressed
as a percentage
There are three main ways that the pricing of a product or service is determined.
going rate
Table 12.4 The methods of determining price setting a price
for a product or
service using the
Method of Explanation prevailing market
determining price price as a basis

loyalty program
Cost-based or This method enables the business to recover the total costs (both fixed a rewards
program offered
cost-plus and variable) associated with actually getting the product to the point of
by a business to
being ready for the marketplace. customers who
The business calculates its break-even point. frequently make
Costs are normally calculated on a ‘cost-per-unit’ basis. A standard purchases. It may
percentage mark-up (representing the desired profit margin) is then added give a customer
to the unit cost to arrive at the sale price. advanced access
to new products,
special sales
Competition-based Customers compare prices and quality between items being offered coupons, or free
merchandise.
by a business and that of its competition. To be competitive in the
marketplace, it is very important to price products in a similar price range price leadership
to competitors. This is referred to as establishing the going rate. While a business that
price is important, businesses need also to focus on other aspects of through its
the business, such as customer service and loyalty programs to entice dominant market
position is able
customers. If a business wants to be the market leader, it will have
to set prices that
to adopt a price leadership strategy, thus setting the prices for other other businesses
competitors in that industry. adopt

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318 Unit 2 | Establishing a business

penetration
Marketing strategy The pricing strategy differs based on whether a business is introducing
pricing a strategy
where the price a new product, or its product or service is already established in the
is set lower marketplace. When introducing a new product, a business may adopt one
than that of of the following strategies:
competitors • Penetration pricing is where the price is set lower than that of
or the normal competitors or the normal price for such a product. Its purpose is to get
price for such
customers to try the product and then to create a long-term relationship
a product. Its
purpose is to get with those customers. It is hoped that these customers will still remain
customers to try when prices increase to the level of normal competitive pricing for
the product and that product. Other forms of penetration pricing are introductory price
then to create discounts (‘two for the price of one’) and sampling.
a long-term • Skimming pricing is used for products that are of high quality and have
relationship with
an ‘image’ attached to them. The market is usually small and not seen
those customers.
as having potential to grow in size. The price charged is high relative to
skimming pricing competitors and is skimming off the ‘cream’ of the market.
a strategy where
high prices are
set to ensure If the product or service is established in the market, there are a range of pricing strategies that
high profits may be used; namely:
before marketing
advantage is lost

loss leader where

• identifying one product as a loss leader where the price set on this product is set low in order
the price on a
to attract customers to buy other products in the range that have a higher profit margin
product is set low • adopting psychological pricing – used by manufacturers and retailers to make a price seem to
in order to attract be lower than it actually is. The price of $1999 appears lower than $2001; similarly, $0.99 instead
customers to buy
other products
of $1.01. If you visit a Chemist Warehouse store, you will observe that this pricing strategy is
in the range that used throughout the store with the intention of leading the customer to believe the price is
have a higher lower than it actually is. In reality, the price will be rounded up at the checkout. Consumers also
profit margin
assume that some products, because of their image and quality, are going to be expensive.
psychological While the cost of producing perfume and cosmetics is not all that high, a large proportion of the
pricing a strategy
cost is actually associated with the packaging to make the product look exclusive.
whereby the
price is set in • using complementary pricing – where the price is set low on one item and high on another
accordance item that would normally go together; for example, suit, shirt and tie, or coat and scarf.
with the value
consumers place
on the product

complementary
Costs
pricing where the
price is set low Business
on one item and
objectives Marketing
high on another strategies
item that would
(profit)
normally go
together

Legal Price Competition

constraints

Life cycle Customer’s

position perception
of product of value
Supply and
demand

Figure 12.9 Factors that determine price of a product or service

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 319

There are other factors that can affect the pricing of a product or service. Some products,
price inelastic
such as fresh fruit and vegetables, are highly dependent on the level of supply, either directly where a fall or
from the growers or the wholesale market due to seasonal factors. When the marketplace is rise in price of a
product does not
oversupplied with a product, the price will usually fall in the hope of attracting consumers to
impact on the
buy additional quantities. Just think of the price comparison between strawberries, mangoes demand for that
and watermelons in summer and winter. product

price elastic the

Demand is slightly more complicated in its relationship to price. Some products may have degree to which
a price increase with little or no impact on the demand for the product. These products are demand for a
good or service
referred to as being price inelastic, and generally tend to be essential items such as milk, bread varies with its
and eggs. Products that have a large drop-off in demand due to a price increase are referred price
to as being price elastic, and generally tend to be non-essential items, such as movie tickets,
leisure travel and restaurant prices.

The government may periodically regulate or control

the maximum prices for certain products. It is often
those items considered to be staples, such as milk,
bread, eggs and petrol. The government also regulates
prices through the provisions of the Competition and
Consumer Act 2010, and in some instances prohibits
certain pricing practices, such as:

• price fixing, when suppliers formally arrange with

competitor suppliers to fix the same price for a
product
• resale price maintenance, which prohibits product
suppliers specifying a minimum price below which
retailers must not resell or advertise their goods Figure 12.10 Bread, milk and eggs can all be considered price inelastic.
or services
• misuse of market power, when a supplier, having
a substantial degree of market power, tries to eliminate or damage a competitor, prevent a
person entering the market, or deter a competitor from undertaking competitive practices.

ACTIVITY 12.6
1 Suggest a pricing policy that you would recommend the following businesses adopt:
a a school cafeteria
b a women’s clothing (fashion) boutique at the start of the winter season
c a women’s clothing (fashion) boutique at the end of the winter season
d an organic food store in a local shopping strip
e a local hardware store located near a store of a very large hardware chain.

P3 – place
Place is the third component of the 7Ps of the marketing mix. It is very important that
place
businesses place their product correctly so that it is accessible to the end user (consumer) when encompasses
and where they want it. Place therefore involves making decisions to ensure that the right the distribution
channels used to
quantity of a product is in the right location, at the right time. It also means ways of displaying
market products
products to consumer groups. This could be in a shop window or online. to customers; one
of the 7Ps of the
marketing mix
Distribution channels are used to provide the link between the manufacturer and the customer.
There are two main types of distribution channels: direct and indirect.
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320 Unit 2 | Establishing a business

Producer Producer Producer

Wholesaler

Retailer Retailer

Consumer Consumer Consumer

Channel 1 Channel 2 Channel 3

Direct distribution channel Indirect distribution channels

Figure 12.11 Direct and indirect distribution channels

Direct distribution channel

A direct distribution channel enables the manufacturer or producer to sell their product directly
direct distribution
sales channel to the customer. This method usually requires the business to invest in facilities and staff to sell its
where product; however, it allows it complete control of the marketing function. The internet has added to
a manufacturer
the popularity of this distribution channel, especially for services such as insurance and banking.
sells the product
directly to the
customer

indirect Indirect distribution channel

distribution
channel where Traditionally, an indirect distribution channel involves the use of a retail outlet, where
a manufacturer products are stored and displayed. It is a popular distribution channel for occasions when
sells their product consumers want to purchase an assortment of items, the value of purchasing transactions is low
to a wholesaler
and/or retailer and the market is fragmented and dispersed. The online department store is now an established
(intermediary) business model. One very successful example is Kogan.com, recognised as Australia’s premier
who then sells it online shopping destination, running a 24-hour, seven-days-a-week operation offering TVs,
to the customer
phones, tablets, computers, audio, homewares, appliances, travel and pantry items. Another is
multi-channel Temple & Webster, which is Australia’s No. 1 online-only furniture and homeware retailer. Other
where a retailer
sells products
types of distribution channels occur where a retailer adopts a ‘multi-channel’ approach by
both online and selling its products both online and in ‘bricks-and-mortar’ stores or uses the ‘click-and-collect’
in bricks-and- model to assist its time-poor customers. Adopting these distribution models can give the
mortar stores
retailer the opportunity to adopt different pricing strategies.

Often businesses will have a combination of both direct and indirect channels, as they have
their own retail outlet where they employ their own sales staff as well as placing the product
for sale through distributors. Industrial products are more likely to be sold directly with fewer
intermediaries than consumer goods.

The process of planning and organising transportation, warehousing and storage of goods is
known as logistics. Having an efficient logistics operation can provide a business with a strong
competitive advantage.
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Table 12.5 Advantages and disadvantages of direct distribution to the customer

Advantages Disadvantages

Cuts out the profit margins of the retail intermediary Manufacturer/producer needs to warehouse the stock,
adding to storage costs

Pricing and marketing of the product/service are under the Product is not on display in a retail outlet for the consumer
full control of the manufacturer/producer to browse and make comparisons with other products

Takes advantage of increased popularity of online If selling online, need to ensure web presence is appealing
purchasing. Can be regularly updated and up to date

Able to provide 24/7 access May need to provide after-hours support for online
purchasers

Table 12.6 Advantages and disadvantages of indirect distribution to the customer

Advantages Disadvantages

Manufacturer/producer has passed on the cost of holding Profit margin is shared with the retailer or intermediary
and storing stock to a retailer

Manufacturer/producer is given more freedom to focus on Customers can view a wider range of items from different
producing a product ordered by a retailer sources and make price comparisons

Retailer can create an online presence to complement Marketing decisions relating to price are now out of the
physical store control of the manufacturer/producer and are made by the
retailer

Online retailer can provide 24/7 access not available with If selling through an online store, retailer needs to ensure
physical store web presence is appealing and up to date

ACTIVITY 12.7
1 Visit the online department store websites of Kogan and Temple & Webster and describe
how they undertake the distribution of the products they sell.
2 Use the internet to investigate which major retail stores have established an online store.
Explain why you believe these businesses may have adopted this strategy.

P4 – promotion
Promotion is the fourth component of the 7Ps of the marketing mix and the most public aspect
promotion
of marketing. Promotion involves the business communicating with its actual or potential the use of
customers by informing them about the business’s products or services while also convincing advertising,
them of that product’s ability to satisfy their individual needs or wants. branding, sales
promotion and
public relations
For promotion to be effective, either short-term or long-term objectives must be established. to inform and
A short-term objective may be to promote an end-of-season sale, while a long-term objective persuade
consumers; one
may be to change the whole image of the business. Other examples of some promotional of the 7Ps of the
objectives include: marketing mix

• raising consumer awareness of a new or existing product

• reminding consumers of the existence of a product or service
• promoting distinctive features or superior quality of a product or service over those of its
competitors
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322 Unit 2 | Establishing a business

• creating and reinforcing brand image or personality

• correcting misleading reports about a product or service or reassuring the public after a
crisis or accident relating to the product.

Once the promotional objectives have been set, it is time to decide what will be the appropriate
promotional mix. This refers to the combination of promotional techniques that will be used to
sell the particular product or service, or range of products or services.

Promotional techniques
advertising
informing
Advertising
potential buyers
about a product
Advertising is a powerful medium of mass communication that is designed to inform, compare
and persuade, and remind and reinforce. Refer to Table 12.7 for more details.

Table 12.7 The roles of advertising

Purpose Explanation

Inform Giving information to potential customers about technical details, product use, key
features, price and where the product may be purchased and if it is doing any social
good. It is important to use this form of advertising when introducing new products.

Compare and persuade Creating a distinct image or brand identity for the product. The advertisement is used
to persuade consumers to buy a product and not that of a competitor when there is
really little difference between the products. It is the role of the marketer to build up
the image of quality and difference between the products in the mind of the consumer.
Larger, established brands use this strategy to try to get consumers to switch brands.

Remind and reinforce When products are entrenched in the market, advertising is undertaken to remind
consumers of the product’s presence and reinforce what the product has to offer to
consumers, so that a switch in preference is not made to the competitor’s product.

Examples of business that have used advertising as a form of mass

communication:

1 Three social entrepreneurs learnt in 2012 that more than

2 billion people across the world (i.e. approximately 40 per cent
of the global population) didn’t have access to a toilet or the
availability of using toilet paper, to us a common household
product. They also learnt that around 289 000 children under five
died every year from diarrhoeal diseases caused by poor water
and sanitation. This knowledge provided the impetus for them
creating their social enterprise ‘Who Gives a Crap’. Part of their
advertising message is to inform customers that 50 per cent of
their profits is donated to build toilets in areas of need.
2 ALDI often runs comparative advertisements on its products to
highlight the price difference between well-known brands stocked
Figure 12.12 ‘Who Gives a Crap’ informs and appeals
to customers’ social conscience. by its competitors and its ‘product of Australia’ homebrand. One
such advertisement was based around its Confidence-branded
toilet rolls where ALDI was attempting to gain a slice of the market
worth $2 billion, currently dominated by three brands (Sorbent,
Kleenex and Quilton). Market research had shown that an
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 Chapter 12 Marketing mix, product life cycle and marketing strategies 323

important criterion for choosing this essential product is ‘softness’.

ALDI not only made a price comparison in its advertisement but
ensured that on the packaging on its Confidence toilet paper the
word ‘soft’ was included.

Types of advertising media

After choosing the style of advertisement to be used, it is then the
role of the marketer to select the most appropriate media for the
advertisement that will best target the particular market segment they
want to attract. For example, it would be a waste of money to advertise
leather jackets in a magazine about vegan lifestyles. Set out below are
the most common forms of media used by marketers to advertise their
product or service.
Figure 12.13 Aldi’s Confidence toilet paper competes
Table 12.8 Types of advertising media with Sorbent, Kleenex and Quilton.

Form of media Explanation

Newspapers – national, Provides for large amounts of detailed information.

state and local Advertisements can vary in size – full-page to very small.
Print copy and online Can be costly – full-page colour advertisements in the Herald-Sun (Monday to Friday)
would cost in excess of $70 000. Higher price for Saturday.
Newspapers:
• run special-interest sections, so it is possible to aim at particular target market; e.g.
travel
• in addition to print version, newspapers also operate multi-media platforms that extend
to desktop, mobile and table coverage.

Television Very expensive medium that can provide high impact as it relies on visual, movement,
sound and special effects to communicate the message.
Suits simple messages delivered in 30-second time frames.
Products can be demonstrated.
Potential audiences can easily skip or miss and advertisement when:
• channel surfing using remote controls
• time shifting using a digital video recorder
• streaming television shows.

Radio Can provide a wide reach and ability to target market segments, particularly those based
on age, music style and areas of interest.
Often on in background when people are working, studying or driving, meaning that
attention can in fact be at a low level.

Magazines Appealing due to high quality of their print and colour.

Ideal for fashion items, food and anything associated with glamour.
Usually read in a leisurely manner and passed on to multiple readers so extending the
longevity of the advertisement’s time frame.

Internet Fastest-developing advertising medium and has the advantage of providing businesses
with the opportunity to advertise their products to both local and global markets.
Provides customers with easy access to details of products and prices and the ability to
make comparisons.
Pop-up and pop-under advertising is able to interrupt user’s session to display message
or product.

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Social media platforms An extremely popular medium with more than 17 social networks worldwide with active
users.
Important that businesses create a social media marketing strategy to reach these
audiences.

Direct mail The most personal and selective form of advertising media.
Lists of names and addresses can be purchased, which have already undergone sorting
based on various demographic or target segmenting characteristics.
Cost are incurred due to printing and postage fees, but there’s less waste circulation.

Outdoor advertising Wide range of techniques, such as billboards, neon signs, bus and tram shelter, railway
stations, back of taxis and sides of buses.
Can reach a large percentage of the population.
Only appropriate for very simple or reminder messages.

Yellow Pages Available in print and electronic format.

Low-cost medium used by smaller businesses.
Print format has greater penetration in regional areas.

ACTIVITY 12.8
Construct a chart and provide an example of an advertisement based on each of the nine
advertising styles listed in Table 12.8.

Table 12.9 Advantages and disadvantages of advertising used as a form of promotion

Advantages Disadvantages

Able to reach a broad or mass market May be expensive and difficult to gauge effect

Acts to persuade if creative techniques are used Impersonal

Able to target market segments through directed media Inflexible or not as compelling as a salesperson

Able to create powerful brand image and product Consumer is able to tune out
recognition

Direct marketing/selling
If a business wishes to develop a closer relationship with its customer (target market), direct
marketing is a way to do this. The marketing tools used are direct mail, directed catalogues,
mail-outs, phone calls, personal visits, or emails. Technology has seen the expansion of direct
selling into the area of telemarketing, where sales staff are employed to sell products over
the telephone, instead of face to face. Telemarketing saves a business money and time by not
requiring salespeople to travel or sell on a door-to-door basis with no guarantee of a sale.
Using the telephone, sales personnel work through a far larger portion of the target market in a
smaller time, arranging both payment and delivery details at the same time. It can also be cost-
efficient, as all sales staff are located at one central call centre and do not need to be provided
with transport. As many sales staff earn commission on the value of sales received, this form of
promotional payment acts as a motivator to increase their sales performance.
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Table 12.10 Advantages and disadvantages of direct marketing/selling

Advantages Disadvantages

Allows for one-to-one personalised communication with Possible invasion of privacy, as customer questions
targeted market where/how you gained their personal details

Increases opportunity for generating customer loyalty Negative image created with unwanted phone calls
and higher frequency (particularly at meal times)

Flexible Relatively expensive due to high costs of making direct

contact rather than the broad approach of advertising

Sales promotion
The sales promotion technique is used to entice a customer into purchasing a product in the
sales promotion
belief that they are gaining some economic advantage. The incentives to purchase may be use of incentives
immediate; for example, a product being offered as a bonus pack or free samples attached to to encourage
increased sales;
the regular product. Alternatively, the incentive may be delayed, where a customer needs to
for example,
send in a coupon or save up points to gain a reward. The promotional objective must be clearly free gifts,
defined by the business as to whether it wants a short-term increase in sales or a long-term competitions,
‘buy one, get
relationship with the customer.
one free’

For instance, a marketing campaign can offer discounted accommodation packages to entice
travellers to stay at a new resort opening in a highly competitive marketplace or to increase
occupancy rates in off-peak periods. While using this marketing strategy will result in a higher
occupancy rate (i.e. more guests), in overall financial terms it may not be judged as successful. The
financial impact is due to the costs the hotel bears to ensure all its facilities are fully operational
while only gaining a smaller revenue increase from the heavily discounted marketing offer.

Table 12.11 Advantages and disadvantages of sales promotion

Advantages Disadvantages

Provides additional support (reinforcement) to an A technique that can be easily copied and improved
advertising campaign upon by competitors

Offers short-term incentives to increase sales, without Short-term solution to product promotion, but does not
long-term pricing implications generally lead to long-term improvement in product sales

Provides opportunity for immediate feedback on

effectiveness of the technique

Sales promotion techniques are used on both consumers and those in the trade (retailers).
The economic advantage for the retail outlet may come in the form of buying allowances,
cooperative advertising and point-of-sale material, trade shows and training to motivate staff to
improve sales performance.

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326 Unit 2 | Establishing a business

HOLIDAY WORLD

HOTELS & RESORTS

SAMUI RESORT
CHAWENG BEACH, KANDABURI
KOH SAMUI, THAILAND

FROM $900
(VALUED UP TO $3000)

Figure 12.14 This advertisement uses the sales promotion technique to promote a quality accommodation package at a bargain price.

Personal selling
Personal selling can be the largest single operating expense of a business. To make this expense
personal selling
where a product cost-effective, it is therefore important that sales personnel are adequately trained in their product
is sold by a knowledge and interpersonal skills. The days of the stereotypical ‘loud-mouth salesman’ are hopefully
salesperson,
gone, replaced with a professionally trained problem-solver who has something to contribute to
preferably trained
the business and its customers. A salesperson should be someone customers can trust for accurate
product advice and ethical behaviour. This helps form the basis of relationship marketing.

Table 12.12 Advantages and disadvantages of personal selling

Advantages Disadvantages

Customer is actually dealing with a salesperson who has Requires sales staff to be trained and adequate staffing
product knowledge levels to be maintained to satisfy needs of customers

Customer is able to ask questions and get immediate Largest single operating expense of a business and
answers costly on a per-customer basis

Customer gets immediate feedback – not left to wonder Unless a large sales force is used, it may only be
what the answer will be; can gain a response even by possible to reach a limited number of customers
body language or facial expression

Internet marketing (website)

The website of a business is often the customer’s first experience of the business, so it is
important to make a good impression. This promotion technique involves all online marketing
activities used to promote and sell the goods and services of one business to another business
(B2B) or a business selling to the consumer market (B2C). It is important that the web address
of the business is included in other forms of promotional activities and communication such as
advertisements, sales brochures, product specification sheets, letterheads, business cards and
even delivery and service vehicles.

When adopting this form of promotion, there are some considerations that need to be analysed
by the business.
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Table 12.13 Considerations of internet marketing

Considerations Explanation

Do the goods or services have online Goods or services that require a first-hand
promotional potential, and how can that experience or demonstration to appreciate their
potential be used? benefits would be more difficult to sell online

Type of website Does it need to be simple and easy for

customers to use?
Does it adequately reflect the brand and image
of the business?

Form of advertising on website Banner (headline advertisements) on top

of popular website drawing customers to
your website

Registration and referrals Using a search engine or links to direct

customer product or service enquiries

Figure 12.15 The website

of a business is often
the customer’s first
experience of the
business.

ACTIVITY 12.9
Visit four of the following websites and answer the questions below.

• Bunnings
• Nike
• Qantas
• AFL or sporting club of your choice
• Visit Victoria
• Metro Trains
• Harvey Norman

1 Identify the aim of the website.

2 Deduce the gender and age of the product or service’s target market.
3 Identify and describe strategies used on the site to gain further commitment and
brand loyalty.
4 Estimate how long you spent browsing the site. Would you visit it again?

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Mobile marketing
As there are now more mobile phones than people in Australia, it is hardly surprising that the mobile
phone is becoming a means to market products and services. With the advent of smartphones and
other sophisticated handsets, some businesses are now making use of the location-based services
(GPS function) on phones for target marketing to people in a geographic area.
publicity a ‘free’
form of mass
communication
with the aim Publicity and public relations
of attracting
favourable Publicity is a ‘free’ form of mass communication that is different from advertising, which attracts
attention to a cost. The role of a publicist is to attract favourable attention to the business and what it offers
a business.
Methods include
without having to pay media costs. The common tools used by publicists are press releases,
media releases, product launches, special events, lobbying and sponsorships. Public relations activities involve
open days, communication aimed at developing a favourable corporate and product or service image. The
sponsorship and
brochures.
communication can take the forms of advertising and/or publicity and acts to support other
marketing strategies.

Table 12.14 Advantages and disadvantages of publicity and public relations

Advantages Disadvantages

Low cost, as the business generates the Difficult to be in total control of the publicity a
communication business receives

High credibility Can be negative as well as positive

Allows the business to build a positive

brand image

ACTIVITY 12.10
Listed below are 10 different products and services.

Identify which form(s) of promotional technique you would recommend be best to market that
particular product or service. Justify your choice.

• Victorian coastal holiday resort • community bank

• pharmacy • plumber
• university or TAFE • gymnasium/fitness centre
• babysitting service • financial planner
• solar heating installer • VCE tutoring service

P5 – people
Every person in a business who has contact with a customer makes an impression. Often
customers find it difficult to separate the product or service being offered from the staff
member who provides it. Staff therefore can have a profound effect – positive or negative – on
the level of customer satisfaction.

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 329

Staff must be appropriately trained and

motivated, have the right attitude and
be suited to their role. If a customer is
happy with how they are treated they
can become a powerful advocate for
the business and its brand. In addition
to pre-sales support and advice, if a
business can provide the same manner
of service post-sale, this can often
become more important to a customer
than the price paid for the product.
Figure 12.16 Bunnings prides itself on employing qualified tradespeople as
its sales staff.

CASE STUDY
12.2

Apple’s Five Steps

of Service

This case study is available in the Interactive Textbook.

  

An Australian business that recognises

the importance of well-trained staff
marketing and selling its products is
paint manufacturer, the Dulux Group. To
support is customers (hardware stores)
it has established a training academy
providing on-site courses, run by qualified
and experienced trainers knowledgeable
in the Dulux Group range of products, to
the retailers of its products. Recognising
the importance of not taking staff away
from the retail outlet, the Dulux Training
Academy comes to the shop premises
delivering the courses from their mobile
training trailer. Figure 12.17 Dulux is a business that believes in the ‘people’ approach to
marketing.

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P6 – physical evidence
Physical evidence can take a variety of forms:
• Evidence showing a service was performed. This acts to remind or reassure the consumer
that the service took place, regardless of whether it was a positive or negative experience.
There are physical elements to almost all services, even if the service that a customer pays for
is not a physical thing. For example, a visit to your doctor will result in your medical records
being updated and a claim being made to Medicare. A trip to the hairdresser will entail the
salon keeping your contact details, recording what treatment you received – for example,
foils and colour of dye – and booking a future appointment. An insurance company would
provide its customers with some form of printed advertising material and then follow up
with more formal printed material, such as a quote; or alternatively providing an online
quote followed up with an email.
• The physical environment in which the
consumer experiences the service; for
example, when flying this would be the
type of aircraft, its ambient conditions,
seating layout and any directional
signs. Ambient conditions relate to
temperature, smell, sound, colour, music
and noise, and these can impact both
positively and negatively on consumers
as they experience the service.
Marketers need to match the ambience
to the service being delivered; for
example, bakery smells wafting through
a supermarket, relaxing and calming
music in a health spa, or loud music and
bright lights at a pop concert.
• The signs and symbols of the business
Figure 12.18 The MCG – an iconic stadium that supports its image and identity; for
example, the building, office, or shop
where the business is located and how it is furnished. Is it prestigious, purely functional,
or minimalistic? Other areas where the physical evidence is apparent is in the brochures,
packaging, web pages, signage, business cards and paperwork (e.g. invoices, tickets). When
you go to an AFL match you will observe numerous examples of physical evidence; for
example, your tickets with the team’s logo printed on them, and players wearing their team
colours and clothing. The MCG and Marvel Stadium have their own physical presence and
atmosphere.

ACTIVITY 12.11
Each year your school undertakes a marketing campaign to attract Year 7 student enrolments for
the following or subsequent years.

1 Identify the ways that your school markets itself to prospective students, parents and the
broader community.
2 Walk around your school and note down the physical evidence that relates to the marketing
of the school. Compare your observations with other class members.
3 Propose some improvements that could be made to improve the marketing of your school
to the community.

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 331

P7 – process
Customer satisfaction is becoming increasingly important to marketing success. The process
through which a customer finds out about a business, researches its products, chooses and
purchases the product, the actual delivery of the product or service, and the behaviour of those
involved in the delivery process are all factors crucial to customer satisfaction.

First impressions are always important to consumers – was it gained offline by coming into a shop or
office, or online via the website? Either way, a business must strive to make the impression ‘good’. The
processes within the business should be designed for the customer’s benefit; this means:

• keeping customers fully informed either personally or via electronic media

• keeping wait times to a minimum, either face-to-face or via the business’s website
• staff being knowledgeable, courteous and helpful
• providing efficient customer service.

REVIEW ACTIVITY 12.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify and explain which promotional techniques would be the most appropriate for
the following products and services. Provide more than one technique for each product
or service:
a organically produced soft drink
b hair-care products
c vinyl records
d weight-loss meals
e cars – new and pre-used
f house paint and timber finish products
g gardening products
h sporting equipment
i legal services
j a restaurant.
2 Identify the kind of physical evidence of marketing you would expect to receive when
attending a pop concert.
3 Direct-to-customer and factory outlets have become a very popular shopping alternative
for many customers. From the point of view of both the manufacturer and the customer,
explain why they are successful.
4 The technology company Apple uses price skimming (i.e. high prices) as a marketing
strategy when it releases new products. Identify what characteristics or attributes Apple
believes its products possess to allow it to adopt this pricing strategy.
5 Water is the ultimate commodity readily available to us to use straight from the tap at
a minimal cost. It is, however, a $600 million industry. Analyse why people are willing
to spend a high price for a bottle of water in a decorative bottle or from a particular
named brand.

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332 Unit 2 | Establishing a business

12.2 Product life cycle

Learning intentions – at 12.2.1 Identify stages of product life cycle
the end of this chapter
section I will be able to: 12.2.2 Describe marketing strategies relevant to product
life cycle

Business success would be guaranteed if it were possible to determine the exact time to launch
product life
cycle the stages a new product or update an existing product. What is known, however, is that all products go
through which through a life cycle. An awareness of this can help businesses gain an advantage over their
all products
competitors. The product life cycle is divided into four stages, as described here.
pass: launch
(introduction),
growth, maturity,
Stage 1: Introduction
and decline or
extension
Commences with the launch of the product into the marketplace, after its product development
and testing stages. Sales at this stage are low (increasing at a slow pace), profits are non-existent
maturity the
or very small, and competition is scarce.
stage of the
product life cycle
where sales peak
Stage 2: Growth
(saturation point);
mature products
Due to effective promotion of the product and acceptance by consumers, sales will be growing
either decline or fast, with profits rising, then flattening out and starting to fall over a period of time. At this
are extended to point, competitors may have entered the market.
lengthen their life
cycle
Stage 3: Maturity or saturation
The level of sales has stabilised and competition for the product is strong; however, profits may
start to decline. The initial consumer demand for the product has been satisfied and the product
does not yet need to be replaced. Prior to launching a brand-new product, extension strategies
may be introduced to extend the old product’s maturity stage; for example, a re-launch that
involves new packaging and advertising of the product.
Saturation or
maturity

Decline
Growth
Introduction of a
new product

Disappearance
Introduction

Product life cycle

Figure 12.19 The product life cycle

Stage 4: Decline or extension

This stage involves a steady decline in sales as newer competitors’ products are more popular.
When the product becomes unprofitable or a new product is ready, the original product will be
withdrawn from the market. An extension strategy, such as exporting, may be adopted in the
maturity stage as a way to boost sales.

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 333

The marketing strategies of a product need to change during the various stages of that
product’s life cycle as customers’ attitudes to the product will change. In addition, the target
market may need to change, and there may be an increase in competition for the product. Table
12.15 sets out the relationship between the first four elements of the marketing mix and the
four phases of the life cycle of a product.

Table 12.15 Product life cycle relationship to the first 4Ps of the marketing mix

Product life Product Price Place Promotion

cycle phases

Introduction New model or Market Limited • Informative market

penetration a
product penetration number of advertising to
pricing strategy
pricing (low) outlets, with make consumers
that aims to
or skimming possibility of aware of product, set low prices
policy (high) expansion its price and initially to gain
features high market
• Free samples, share quickly
trial periods informative
• Trade incentive/s advertising
to stock the advertising that
product gives consumers
factual
information about
Growth Product If penetration Increased • Reinforcement a product rather
improvements pricing policy number of and persuasive than creating a
need to be is a success, outlets advertising product image

planned to prices may to encourage persuasive

maintain now be consumers to advertising
appeal to increased repeat purchase attempts to create
customers • Sales promotions an emotionally
positive
to encourage
feeling about a
repeat purchases product’s image
and establish and to encourage
maintain brand consumers to
loyalty buy it

brand loyalty
Maturity Extension Competitive Large • Importance of when consumers
continue to
or market strategies pricing number of brand image,
purchase the
saturation needed; e.g. outlets, with with advertising
same product,
new models, possibility emphasising even though rival
colour range, of new and the difference products may
packaging different between your exist
types of product and
market saturation
outlets that of your occurs when
competitor most consumers
already own the
product and the
Decline Sell off Discount or Reduce • No active market is not
existing stock lowering of number of promotion or growing; any
ready for pricing outlets to advertising sales that occur
withdrawal those that are • Possibly price are replacement
from product profitable reduction sales
range and information
market

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334 Unit 2 | Establishing a business

REVIEW ACTIVITY 12.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify two reasons why an understanding of the product life cycle is so important to the
success and profitability of a business.
2 Identify what stage in the product life cycle the following products or services have
currently reached:
• streaming services
• vinyl records
• automated (driverless) cars
• hybrid cars
• drones
• carbonated drinks
• bottled water
• digital cameras
• smartphones
• solar panels.
3 Describe the marketing strategies related to price and place you would suggest for a
product that is in the ‘decline’ stage of its product life cycle.
4 Describe the marketing strategies related to price and promotion you would suggest for a
product that is in the ‘introduction’ stage of its product life cycle.
5 Describe the marketing strategies related to place and promotion you would suggest for a
product that is in the ‘growth’ stage of its product life cycle.

Figure 12.20 How might you withdraw a product if it was in the decline stage of the product life cycle?
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 Chapter 12 Marketing mix, product life cycle and marketing strategies 335

12.3 Features and value of customer

relations strategies
Learning intentions – at 12.3.1 Define and describe terms and concepts
the end of this chapter
section I will be able to: 12.3.2 Propose marketing strategies

12.3.3 Apply business management knowledge to

practical or simulated business

12.3.4 Interpret business information

customer
12.3.5 Explain and apply business management concepts relationship
marketing (CRM)
a business
process that
Every business needs to ‘acquire, retain and grow’ relationships with its target customers and
uses marketing
market. For a business to achieve this, it must adopt strategies and activities that work on strategies
developing relationships with its clients, gaining customer loyalty and bringing value to its and activities
to develop
brand. This is referred to as customer relationship marketing (CRM).
relationships
with clients, gain
When selling any product, being able to identify your buyer (i.e. your target market) is customer loyalty
and bring value
imperative if you intend to be successful. For example, if you have a meat business you would
to the brand
probably not target a marketing campaign to vegetarian or vegan groups.

Figure 12.21 Know who your target market is. Figure 12.22 Uniqlo: an international fast-fashion brand making its presence
felt in the Australian retail market

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336 Unit 2 | Establishing a business

CASE STUDY
12.3

Online shopping
and the COVID-19
pandemic

has provided customers with a greater ability

to comparison shop. Many customers are
now using their mobile phones to check online
offerings while standing in a bricks-and-mortar
store.

Established retailers Myer, which is regarded

as a middle-class retail outlet, and David Jones,
with its brand image of being a prestigious
department store, have both had to adapt their
mode of operations to include online retailing.
Cotton On, Australia’s own brand leader in
the fast-fashion industry, has also adapted its
business model to meet the demand for both
instore and online retailing.

Figure 12.23 How have your shopping habits changed as

Greater demand from consumers who have
a result of the COVID-19 pandemic?
been exposed to global brands through social
The changing face of clothing and homewares media is anticipated to provide international
retail has led to retailers needing to labels with the confidence to pursue
concentrate more closely on their customer expansion in Australia. One such international
relations strategies. retailer that has gained a valuable market
share in the latest fashion-forward market
The retail industry in Australia has been affected segment is Uniqlo. In the homewares market,
by the growth of online retailing, particularly online store Temple & Webster is making its
during the COVID-19 pandemic. This change present felt.

CASE STUDY ANALYSIS

1 Describe the concept of customer relationship marketing.
2 Propose a range of marketing strategies that established retail brands such as Myer and
David Jones could adopt to reposition themselves in the ever-changing retail market.
3 Choose a business where you are currently a customer and describe the marketing
strategies and activities that business uses to gain your customer loyalty and makes you
value that brand.

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 337

Providing quality customer service

Providing excellent customer service gives value to a business while also acting as a way of
differentiating that business from its competitors. We all have our favourite shops and places
to eat – but why do we keep going back to them? Is it because of quality customer service or
something else? The quality of customer service of the business can be judged by:

• the actions of the employees;

for example, how they deal with
customers, and whether they have
good product knowledge
• providing prompt service to
customers both pre- and post-sale
• being responsive, accessible, available
and willing to help customers
whenever they have a problem
• establishing a policy for dealing
with customer complaints or return
of goods.

Providing good-quality customer

service can bring many benefits to a
business; namely:

• reducing marketing and in

particular paid advertising costs Figure 12.24 Quality customer service is important to gain repeat customers.

due to favourable ‘word-of-mouth’

advertising
• stronger customer loyalty
• gaining a competitive advantage
• staff gaining pride in and satisfaction with their work.

Establishing customer loyalty programs

The use of loyalty programs is extensive and can take the form of earning points or getting
special offers, freebies and discounts. Using loyalty programs, particularly in retail, gives
customers an incentive to keep coming back to that store.

In recent years, there has been ongoing discussion as to the relative worth of these programs,
as they can be very expensive to operate. Businesses can gain a lot of information about
consumers using loyalty cards. Every time the card is used, the transaction is recorded against
the consumer’s account. Over time the business can create a profile of the consumer’s habits:
what and when they buy, how they spend and how they pay. Retailers and marketers use this
information as a way of getting to know the ‘real you’ as a consumer so they may promote
their goods and services in a way of most interest to that consumer. This strategy is referred to
as target marketing. Major food retailer Woolworths has a loyalty program called Woolworths
Everyday Rewards. The Coles Flybuys loyalty card network not only credits customers when they
purchase items from Coles, but has now been expanded to allow cardholders to collect points
from Bunnings and Officeworks and transfer points to Virgin Australia. Loyalty reward schemes
are big business for the airlines, such as Virgin and Qantas. Both Virgin’s Velocity and Qantas
Frequent Flyer programs each have in excess of 10 million members.
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338 Unit 2 | Establishing a business

While large businesses gain the benefit

of accessing ‘big data’ from loyalty reward
schemes, many small businesses use customer
loyalty programs as a method of boosting
their revenue through the support of repeat
customers. Research has shown that retaining
customers is less costly than acquiring new
ones. The program provides the business with
a way of saying thank you to its customers
who then often work as unpaid advertisers
for the business due to their ‘word-of-mouth’
comments. A small coffee shop can use its
loyalty program and quality customer service
as a way of competing with the big-brand
coffee chains.

Figure 12.25 Qantas Frequent Flyer loyalty card

ACTIVITY 12.12
Conduct research with your class members and family to determine the following:

1 How many students in your class have customer loyalty cards?

2 How many members of your family have customer loyalty cards?
3 Which shops/business are they for?
4 Describe the benefits/rewards gained from having these cards.

REVIEW ACTIVITY 12.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify the various criteria that can be used to judge the quality of customer service being
provided by a business.
2 Businesses need to ‘acquire, retain and grow’ relationships with its target customers
and market. Identify strategies that a business could put in place to develop this ongoing
relationship with their customers.
3 Explain how establishing and retaining customer loyalty can provide value to a business.
4 Explain the concept of customer relationship marketing.
5 Explain the importance and value to a business of ‘word of mouth’ recommendations by
customers.

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 Chapter 12 Marketing mix, product life cycle and marketing strategies 339

12.4 Technological developments in marketing

Learning intentions – at 12.4.1 Define, identify, describe, explain and apply
the end of this chapter business management concepts and terms
section I will be able to:
12.4.2 Discuss business management information

12.4.3 Describe and analyse contemporary examples of

business management

Developments in technology have had a massive impact on marketing and it is important that
businesses, regardless of their size, look to see how these developments can aid their business
success. Technology has transformed marketing by helping businesses to create more targeted
and personalised marketing strategies and campaigns.

Social media
Social media are forms of electronic communication through which users create online
social media
communities to share information, ideas, personal messages and other content, such as videos. forms of
Social media, when used for marketing purposes, means using content that is tailored to a electronic
communication
specific social platform to get a message across to its users. Marketers may want to use social
through
media to increase sales, raise awareness of a brand or product, improve a brand’s image, or which users
improve customer engagement. create online
communities
to share
While there are many social media platforms, the most popular ones currently are outlined in information,
Table 12.16. ideas, personal
messages and
other content
Table 12.16 Most popular social media platforms

Platform Description

Facebook Offers a multitude of advertising and marketing options as it allows for

creation of groups, business pages, placing advertisements, or case studies.
Able to create a business page containing business name, business
category and accurate contact information.
Provides good selection of content mix; e.g. videos, images, text posts.
Can provide comprehensive analytical data allowing a business to easily
evaluate the performance of their marketing strategies.

Instagram Relies on visual content. A picture can be uploaded and enhanced using a
selection of built-in filters. Allows for short video clippings to go live.
Allows collaboration or co-promotion with influencers having the same
target market.

YouTube Google-owned video-only platform that can be used for demonstrations,

tutorials, promotions and video blogs.
Able to be cross-promoted from website of business, emails and newsletters.

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340 Unit 2 | Establishing a business

social capital LinkedIn A social network for professionals.

refers to the
Can be used to drive traffic to website of business, its blog posts and
resources
available to advertising campaigns.
people and
entities because Twitter Perceived as a news channel; however, it allows a business to contact its
of their networks.
customers.
The assets we
possess due Social listening tools, such as Sprout Social, can be used to track brand
to the social mentions.
relations we Able to build social capital of the business by retweeting popular and
develop and relevant tweets.
maintain, and the Locate relevant hashtags to improve content visibility for the business.
shared values
Able to create Twitter-exclusive deals for followers.
which arise from
those networks,
make up social Snapchat Targets teenage demographic who share videos and pictures.
capital.

TikTok Tends to appeal to younger users; 41% of its users are between the ages of
16 and 24.

Social media marketing has now become a must-have marketing technique for businesses.
It provides brand visibility, voice and engagement, and is cheaper than traditional marketing
methods. Businesses need to decide which social platforms best suit their businesses and
target audience.

CASE STUDY
12.4
LEGO: using social
media as one of
its key marketing
strategies

This case study is available in the Interactive Textbook.

  

Email marketing
Email marketing is both a form of direct marketing and digital marketing as it uses email to
promote the products and services of a business. It can be an important marketing channel as a
business can use it to build relationships or keep customers engaged by making them aware of its
latest products or offers. Email marketing can also act to direct customers to social media or a blog.

It is important that when a business is developing their email marketing list they are aware of a
few guidelines, such as:
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 Chapter 12 Marketing mix, product life cycle and marketing strategies 341

• Creating your own email lists. This can

be done by asking customers when
they purchase a product if they would
like to sign up to your email list. It is
important to confirm for customers that
the personal information contained on
the list will be confidential and subject
to security measures. Being on the
emailing list could entitle the customer
to discount offers.
• Ensuring you are aware of and
compliant with any legal requirements
such as privacy.
• Not flooding your customers’ inbox
with superfluous emails. Send emails
that are relevant and engaging, which
will help to establish their loyalty to
Figure 12.26 Email marketing can reach customers directly.
your business

ACTIVITY 12.13
1 How many times have you been asked, ‘Would you like to be included in our email list?’
What is your answer? If no, why not? If yes, describe what benefits you believe you will
receive by being on that list.
2 Discuss with your classmates and family if they have ever asked to be removed from an search engine
email list. If so, why? a program that
searches for and
identifies items
in a database
that corresponds
Search engine optimisation to key words
or characters
Search engine optimisation (SEO) is a set of practices designed to improve both the specified by the
user, specifically
appearance and positioning of webpages resulting from organic searches (that is, unpaid search for finding
results). The search engine results page (SERP) shows unpaid listings determined as being most particular sites on
relevant to the enquiry made by the user. the World Wide
Web (www)

Search engines such as Google and Bing use crawlers, also called bots or spiders, to gather search engine
optimisation
information about all the content they can find on the internet. The crawler starts from a known (SEO) the process
web page, following internal links to pages within that website. It also follows external links of maximising
to pages from other websites. The content on those pages, plus the context of the links it has the number
of visitors to a
followed, helps the crawler to understand what each page is about and how it relates to other particular website
pages within the search engine’s database, called an index. by ensuring that
the site appears
high on the list of
Following a user typing or speaking a query into a search box, the search engine then uses results returned
complex algorithms to find and pull out from the index the most accurate and useful results for by a search engine
the initial query. What is found could be: web pages, news articles, images, videos, or business
crawler an
names. A lot of factors go into the search engines’ algorithms, and those factors are evolving internet bot that
all the time to keep up with changing user behaviour and advances in machine learning. systemically
browses the
If a business wants to earn and maintain high SERP rankings leading to lots of high-quality
World Wide Web
user traffic, it needs to employ marketing strategies that recognise consumers’ priorities and operated by
changing consumer trends and behaviour. search engines
for the purpose
of indexing

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342 Unit 2 | Establishing a business

Artificial intelligence
Artificial intelligence (AI) enables problem-solving through combining computer science
artificial
intelligence using expert systems with access to robust databases. The role of artificial intelligence in digital
(AI) combines marketing means that it is easier to forecast consumer behaviour and decisions.
computer
science using an
expert system Marketers using these AI platforms can acquire a more sophisticated and comprehensive
with access to knowledge of their target market, which assists them to determine which strategies they need
robust databases
to implement to enhance the level of customer satisfaction and ultimately sales revenue.
to assist with
problem solving Artificial intelligence can help in tailoring emails and sales communications to the correct target
market based on their behaviour and preferences. It is also a useful tool to analyse customer
data analytics a
process where data, determine best contact times and creating the best content and subject lines that get the
raw unstructured most clicks on the website. Potential customers can be helped to find what they are looking for
data is examined with their web search with the inclusion of chatbots to help convert the query into a purchasing
to make
predictions, find decision. Social media platforms use AI extensively to promote material based on the users’
trends, answer searches and viewing habits.
questions and
draw conclusions
Data analytics
Data analytics is the process where raw unstructured data is examined to make predictions,
find trends, answer questions and draw conclusions. Specialised software, such as a Customer
Relationship Management (CRM) system, is often used to gain insight into a customer’s
purchasing history. Using this historical marketing data (big data) provides useful insights
and information on which marketers can plan their strategies to personalise and engage their
customers in their message and the different offers they will
make to them. Customers are one of the most valuable assets
for a company as they are the ones that turn a company into
a brand. If the company fails to meet the expectations of its
customers, it could well lead to a decline in that business.

Data analytics also extends to examining how customers interact

with all facets of a business, including its brands, website,
products and services. Common sources for data collection
are websites, CRM systems, call centres, marketing automation
systems and billing systems referred to as touch points. The data
is collected with the goal of obtaining a full picture of a customer
and insight into what would be the best way to attract that
customer. The ability to target the right market at the right time is
Figure 12.27 Data analytics are a powerful marketing tool.
one of the most valuable marketing skills.

Using predictive analytics tools, it is possible to identify which marketing channels (e.g. social
media, email marketing and advertising) will provide the best results for customer engagement
and response rates.

Big data can assist with email marketing as it provides information to help judge which email
subject lines can attract customers, the correct timing of a campaign, and content that should
be personalised to gain more clicks and conversations.

Information about influencers and the community in which they operate can be gained using
big data. Discovering and managing influencers and being able to develop relationships with
the group can become a strong marketing tool, especially how their recommendations link to
the brand of the business.
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 Chapter 12 Marketing mix, product life cycle and marketing strategies 343

CASE STUDY
12.5
How Amazon
uses big data for
monitoring its
customers

Amazon is regarded as being one of the • One-Click Ordering is a patented feature

leading e-commerce platforms. It offers online of Amazon. Once the order is placed, a
shopping as well as services such as Amazon shipping address is provided, and payment
Pay, Amazon Pantry and Amazon Web Services made, the customer has 30 minutes to
(AWS). Therefore, the amount of data it collects decide on whether to change their purchase;
on a regular basis is enormous. Amazon uses otherwise, it is automatically charged and
predictive analytics for targeted marketing, processed.
which helps them increase customer
satisfaction and gain increased loyalty to their Following collection of this information about
brand. They use a variety of approaches to gain consumers, Amazon uses those insights as
this data. follows:

• Alexa voice recognition offers virtual • To provide increased efficiency in their

assistants such as Echo and Echo Show, supply chain to ensure orders are quickly
which include a camera and speakers. The despatched and tracked. Amazon has a
audio recordings are uploaded to Amazon’s spread of warehouses worldwide and they
servers and stored in the cloud. If privacy is choose the closest one to the customer to
a concern to customers, they can arrange reduce shipping costs.
for the recordings to be deleted. • Managing the pricing of their products to
• Personalised Recommendation System – attract more customers. Prices are set based
this system uses a comprehensive, on activity on the website, competitors’
collaborative filtering engine (CFE) that pricing, product availability and desired
uses purchasing patterns of customers profit margins. Analysis of big data will
from previous purchases, items in the allow for prices to be altered frequently and
shopping cart or on their wish list, or discounts to be offered.
products reviewed and rated by them. • To screen purchases and returns to see if
The information gained is then used to there are any fraudulent patterns emerging.
recommend additional products that other • To encourage customers to place larger
customers purchased when buying the orders through product recommendations
same items. This approach is working on the and related items.
power of suggestion to encourage impulse Source: Adapted from Ritesh Pathak, ‘How
purchases and has proven to be successful Amazon uses Big Data?’, analyticSteps.com blogs,
generating 35% of its annual sales. 4 November 2020.

CASE STUDY ANALYSIS

1 Describe the approaches adopted by Amazon using predictive analysis for target marketing.
2 Describe how Amazon then uses the information to manage its supply chain and pricing of
products.

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344 Unit 2 | Establishing a business

Management of data
Data is obtained from a vast array of sources and can be defined
as either structured or unstructured. Structured data is highly
organised information that has already been indexed, uploaded
into databases and used by search operations or algorithms.
This data can be gathered from point-of-sale transactions,
e-commerce or online purchases, and behavioural transactions
such as clickstream data. Unstructured data is generally people-
generated, often language-based and reveals more about
people’s opinions, emotions and relationships between the
customer and the product. This data is often sourced from
information contained in emails, audio and video files, blogs
Figure 12.28 Data needs to be managed correctly in order
and postings on Twitter, Facebook, Instagram and other social
for it to be beneficial to the organisation.
media platforms.

The data, both structured and unstructured, then needs to be transformed and managed to
become actionable knowledge for marketers to use. There are two common techniques used:
data mining and text mining.

• Data mining reviews large amounts of data searching for consistent patterns or relationships.
One technique is to try to establish a pattern through the process of association. For
example, people will often purchase bread and milk together as they are staple pantry items.
Another is by classifying or defining attributes of a customer based on age, income and
where they live. How often have you been asked your postcode when making a purchase?
• Text mining is often limited to numerical data and uses technology to analyse numerous
documents, locating key concepts, phrases, or word usages. It is used to identify and classify
key elements using predefined categories, such as people’s names, locations or companies.
It can also be used to identify and categorise opinions contained in a text to determine the
writer’s reaction to a topic.

The ongoing management of data by a company is important if it is to be used by marketers in

their quest to increase the market share of a business. To become useful information on which
to base marketing decisions, data must be timely and accurate.

REVIEW ACTIVITY 12.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Data can be classified as ‘unstructured’ or ‘structured’. Define each of these terms.

2 a Provide examples of how unstructured data is sourced.
b Provide examples of how structured data is sourced.
3 Identify how technology has assisted business to transform their approaches to marketing.
4 Explain how the website of a business can appear high on the list of websites when
undertaking a web search for a product or search.
5 Explain why email marketing is regarded as an important marketing channel for a business.

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 Chapter review 345

Chapter 12 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 2, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

7Ps of marketing Product Product mix

Brand leader Price Skimming pricing

Penetration pricing Psychological pricing Place

Direct distribution channel Indirect distribution Promotion

channel

Advertising Sales promotion Publicity

Product life cycle Brand loyalty Market saturation

Consumer profile Customer relationship Product development

marketing

Product placement Generic brand Social media

Data analytics Search engine optimisation Artificial intelligence

Extension questions
1 Select one product that would be classified as a staple convenience good (i.e. purchased
frequently and without much effort), such as toothpaste, a bottle of water, or a snack bar.
2 Select one product you have purchased recently that would be classified as a shopping good
(i.e. a comparison is made between goods based on certain criteria), such as furniture for
your bedroom, household appliances, or sporting or musical equipment.
3 Analyse the purchase of both the above products, based on which of the following factors
were important to you when making the purchasing decision.
• Product – where did it fit in the product life cycle?
• Packaging – was it attractive and appealing to the eye? How much information did it
contain about the product?
• Price – what pricing policy do you believe was adopted for this product? Was it on a
mark-down table? How did it compare to the price of a competitor’s product?
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346 Unit 2 | Establishing a business

• Promotion – what techniques were used to attract you to the product?

• People – were the salespeople good at their job and did they convince you to buy the
product?
• Physical evidence – will you receive a keepsake from buying this product?
• Process – was the purchasing and after-sales service good?
4 Explain whether, after analysing the above factors in Question 3, you considered any green
(environmental) factors that impacted on your purchasing decision.
5 When marketing a start-up business, it is recommended that you ‘focus on the point of
differentiation of that new business and its products from those of its competitor and its
products’. Analyse whether you believe that this recommendation of focusing on a clear and
simple message will catch the attention of the target market for the new business.

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

12.1 The 7Ps of 12.1.1 Identify, define and Activity 12.1 Yes No
marketing describe the 7Ps of marketing Activity 12.4
Activity 12.10
Review activity 12.1: Part 1 & Part 2
Extension: Q3

12.1.2 Discuss and apply Activity 12.5 Yes No

business management Activity 12.6
knowledge to practical or Activity 12.11
simulated situations Review activity 12.1: Part 1 &
Part 2 (Q4)

12.1.3 Analyse case studies Activity 12.3 Yes No

and contemporary examples Activity 12.7
Activity 12.8
Activity 12.9
Case study 12.1
Case study 12.2

12.2 Product life 12.2.1 Identify stages of Review activity 12.2: Part 1 & Yes No
cycle product life cycle Part 2 (Q1–2)

12.2.2 Describe marketing Review activity 12.2: Part 1 & Yes No

strategies relevant to product Part 2 (Q3–5)
life cycle

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 Chapter review 347

Success criteria – I am now able to: Linked questions Completed

(Y/N)

12.3 Features 12.3.1 Define and describe Case study 12.3: Q1 Yes No
and value terms and concepts
of customer
relations
strategies 12.3.2 Propose marketing Case study 12.3: Q2–3 Yes No
strategies

12.3.3 Apply business Activity 12.12 Yes No

management knowledge to Case study 12.3: Q3
practical or simulated business Extension: Q1–3

12.3.4 Interpret business Review activity 12.3: Part 1 & Part 2 Yes No
information

12.3.5 Explain and apply Review activity 12.3: Part 1 & Part 2 Yes No
business management
concepts

12.4 12.4.1 Define, identify, Review activity 12.4: Part 1 & Yes No
Technological describe, explain and apply Part 2 (Q1)
developments in business management
marketing concepts and terms

12.4.2 Discuss business Case study 12.4 Yes No

management information Case study 12.5
Review activity 12.4: Part 1 & Part 2

12.4.3 Describe and analyse Case study 12.4 Yes No

contemporary examples of Case study 12.5
business management Extension

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 13
Public relations and
corporate social responsibility
management considerations

‘If I only had two dollars left, I would spend one dollar on PR.’

(Bill Gates (1955–)

About the author:

Bill Gates is an American business magnate, software
developer, investor, author and philanthropist. He is a co-
founder of Microsoft.

KICKSTARTER ACTIVITY
Explain what the quote implies about public relations.

OVERVIEW

In a business environment where legal action against businesses

is increasing, many businesses are turning their attention to how
they can protect one of their most valuable assets: their business
reputation. While unfavourable judgments can be challenged in a
court of law, public opinion is more difficult to change – the reputation
of a business can be permanently tarnished by negative perceptions.
It is important that a business has public relations strategies to
create and maintain a positive image and that this is managed at the
strategic level. Furthermore, businesses need to ensure that planned
crisis management strategies are in place to protect the business’s
reputation. There are significant implications if a business fails to do
so. Businesses must consider how they manage their corporate social
responsibility when establishing their customer base, specifically in
areas such as green marketing and protection of customer privacy.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this
chapter I will be able to:

An overview of public relations and its 13.1 An overview of public relations and its
relationship to business objectives relationship to business objectives
13.1.1 Provide an overview of public
relations and its relationship to
business objectives

Public relations strategies such as 13.2 Public relations strategies: planned and
planned and crisis public relations, the crisis public relations
importance of maintaining a positive 13.2.1 Explain public relations strategies
relationship with the customer base and such as planned and crisis public
the implications if this relationship is not relations
maintained 13.2.2 Describe the importance of
maintaining a positive relationship
with the customer base
13.2.3 Examine the implications if the PR
relationship is not maintained

Corporate social responsibility 13.3 Corporate social responsibility

management considerations regarding management considerations regarding
establishment of a customer base, such establishment of a customer base
as green marketing and the protection of 13.3.1 Identify CSR management
customer privacy considerations regarding
establishment of a customer base

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 13
Public relations and corporate
social responsibility
management considerations

13.1 An overview of 13.2 Public relations 13.3 Corporate social

public relations and its strategies: planned and responsibility management
relationship to business crisis public relations considerations regarding
objectives establishment of a
customer base

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350 Unit 2 | Establishing a business

13.1 An overview of public relations and its

relationship to business objectives
Learning intentions – at 13.1.1 Provide an overview of public relations and its
the end of this chapter relationship to business objectives
section I will be able to:

The role of public relations is vital – businesses that develop effective networks and public
public relations
the practice relations strategies will often find their exposure to the public increased, usually at little cost to
of promoting the business itself. Businesses can build a reputation by pursuing free media publicity through
goodwill among events, community involvement and various media avenues. Some businesses also engage in
the public
to present a charitable activities to convey a positive image. A large proportion of media stories develop
favourable image, from public relations leads, so businesses need to tap into this resource to enhance their profile,
PR is primarily which can flow into increased sales and market share.
concerned with
the image which
the business
portrays to the
public

Public relations • Relationship to business objectives

• Planned public relations

Public relations
• Crisis public relations
strategies
• Maintaining a positive relationship and implications

Corporate social responsibility • Identify CSR management considerations

considerations regarding establishment of customer base

Figure 13.1 Public relations and its role in business

There are several definitions of public relations including the following:

public the ‘public’
is the group/s
that the business
wants to attract
• Public relations is the practice of promoting goodwill among the public to present a
favourable image.
and connect
with. The public • Public relations is primarily concerned with the image of the business portrayed to the
may include public.
employees,
customers of the
• The British-based Chartered Institute of Public Relations has defined public relations as ‘a
business and deliberate, planned and sustained effort to establish a relationship between a business and
suppliers. its public’.

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 Chapter 13 Public relations and corporate social responsibility management considerations 351

While public relations is parallel to

the marketing function and shares its
communication techniques, it has a
different role for the business. Both
functions aim to increase the reputation
and recognition of the business in the
public arena. Public relations, however,
is usually not product specific. Public
relations is generally a long-term
investment in building a company’s
reputation and goodwill, but it may also
occur as a result of strategies developed
by the business to be implemented in the
event of a crisis.

The goals of public relations usually

include: Figure 13.2 It is important for businesses to understand the purpose of
public relations.

• developing relationships with the community

• providing information to the public
• managing issues and crises
• gaining free publicity
• promoting the business.

It is important for any business, regardless of its size, to have a business plan and some
planned public
strategic or long-term objectives. The long-term objectives of the business are likely to include relations
increased market share, growth, and perhaps diversification of products and the customer strategies which
base. A planned public relations strategy should be used to increase public recognition of the are established
ahead of time,
business and prepare public opinion to accept the business brand and its product range, and to setting out a
develop a positive image of the business in general. series of steps
to be undertaken
and the methods
Well-planned public relations campaigns can contribute to the achievement of business that will be used
objectives through:

• increasing the customer base

• increasing demand for products or services
• gaining a competitive edge
• enhancing credibility
• creating goodwill within the community.

A business needs to ensure it is clear about who its ‘public’ and customers are, if it is to be
successful. It can be said that ‘image is everything’ and it is important that this image is carefully
created and maintained. Successful businesses and their owners or managers will usually have a
strong public relations strategy.

Public relations aims to present positive information and to reduce negative perceptions
by using a range of strategies. These strategies ensure that the messages and images which
the business wishes to present to the public are implemented in line with its wide-ranging
business goals.

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352 Unit 2 | Establishing a business

When a business sets its public relations objectives,

they should ensure that they are developed as shown
Clear in Figure 13.3.

It is also crucial that businesses, regardless of size, have

Agreed Realistic policies and strategies in place to maintain positive
relationships with their customers. The ‘public’ of
one business is different from that of another. It is
important that the business is clear about who its
PR public is, to ensure that it has the correct strategies
objectives
in place and continues to develop relationships with
Forward existing and potential customers. When the federal or
Communicated
looking state governments bring in new laws or regulations,
these will impact on all people, and therefore ‘the
public’ of the business may also be affected.

Actionable
The public can be internal or external stakeholders:

• t he internal public may include employees,

shareholders and management
Figure 13.3 There are a range of requirements for developing practical
public relations objectives in order to achieve business objectives. • the external public might include the local
community, suppliers, competitors, customers
and all tiers of government.

Cost The public of a large retail store will be different

effectivess from that of a small cabinet-making business.
Public relations strategies must be targeted at the
correct groups and in the most appropriate form,
considering the business objectives and goals.

Businesses must ensure that they have developed

Benefits
Credibility Longevity and implemented public relations strategies to
of PR
support them through a planned or unplanned
crisis situation. Ideally, a business should never have
to deal with a crisis that is unexpected, because it
should have policies and action plans in place to
avoid such a situation.
Greater
audience
For numerous reasons, publicity is more effective
than advertising. Some of the benefits of public
Figure 13.4 There are benefits associated with public relations.
relations are set out in Figure 13.4.

ACTIVITY 13.1
1 List the ‘public’ for each of the following businesses:
a a coffee shop
b Melbourne Storm
c a local secondary school
d a hospital.

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 Chapter 13 Public relations and corporate social responsibility management considerations 353

CASE STUDY
13.1
Public relations and
business objectives:
types of public
relations

Public relations complements an organisation’s requirements by governments than general

marketing efforts and is an effective way to public relations.
build on marketing strategies to create a
stronger brand reputation. Having an effective Government relations
public relations strategy is critical for all
businesses. A branch of public relations that specifically
focuses on how a business communicates with
There are several types of public relations the various branches of government. It deals
every business needs to maintain: with communications regarding regulatory
and legislative issues and engaging with
Media relations policymakers for lobbying efforts.

This refers to the relationships that a business Community relations

builds with journalists and other media
professionals in order to spread important For any business, building positive local
information regarding their policies, plans and community relationships is important.
practices to the target audience. It includes Community relations is the part of public
giving media conferences and writing press/ relations that deals with establishing and press/media
media releases to generate positive coverage maintaining mutually beneficial relationships release a
statement used
of the business’s products and services. An between a business and the communities in by a business
effective media relations strategy can help the which it operates. When businesses take an to inform the
company reach its desired target audience. active interest in their communities and are media of a new
product release,
eager to accept their civic responsibilities, they or a major
Investor relations appear more socially conscious and credible. announcement
or change. Public
relations officers
Investor relations is all about the Customer relations will release
communication between a company’s corporate a statement
management and its investors, including Customer relations refers to how a business to encourage
the media to
government authorities, shareholders and the manages its interactions with its existing write about
financial community. The main focus of investor customer base and also its past and potential the business
relations is on ensuring that a company’s customers. The focus of customer relations is or its product
favourably.
investors get an accurate account of financial on improving the customer experience, and
affairs through proper disclosure of key facts. it includes providing answers to short-term
issues and creating long-term solutions for
Investor relations practices are also required major roadblocks. As part of a wider public
to be integrated with a company’s legal and relations strategy, a great customer relations
accounting departments and are subjected strategy can help boost customer acquisition,
to more regulatory, financial and legal satisfaction and loyalty.

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354 Unit 2 | Establishing a business

Marketing communications online promotions, and more. Marketing

communications focuses on positioning and
Marketing communications is a set of building a brand to create and sustain demand
methods and tools deployed by a company for the company’s products.
to communicate either directly or indirectly
to the customers. It includes public relations Source: Adapted from ‘The 7 types of public
activities, advertising, branding, packaging, relations’, OnePitch.co website, 25 February 2021.
direct marketing, sales presentations,

CASE STUDY ANALYSIS

1 Explain why it is important for businesses to develop public relations processes that cover
a number of different areas of the business.
2 Explain why it is important for a business to monitor and maintain its reputation across all
areas and groups.
3 Describe how public relations links to the objectives of a business.

REVIEW ACTIVITY 13.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Define the concept of public relations.

2 Explain the relationship between public relations and business objectives.
3 Describe why a business has to determine who its ‘public’ is.
4 There are a number of different types of public relations. Distinguish between two of these.

Figure 13.5 It is crucial that all businesses have policies in place to maintain positive customer relationships.

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 Chapter 13 Public relations and corporate social responsibility management considerations 355

13.2 Public relations strategies: planned

and crisis public relations
Learning 13.2.1 Explain public relations strategies such as planned and
intentions – at crisis public relations
the end of this
chapter section 13.2.2 Describe the importance of maintaining a positive
I will be able to: relationship with the customer base

13.2.3 Examine the implications if the PR relationship is not

maintained

Planned public relations

Taking advantage of planned public relations situations means that a business can make the
most of opportunities over which it has control. In this way, it can ensure that publicity is
positive and increases its exposure with the public. There are many ways that a business can
communicate with its public. These involve the use of a range of media including television,
radio, newspapers, company publications and the internet and social media.

Public relations communications sometimes attempt to persuade others or change public

opinion. For public relations to be effective, it is necessary to match the strategies and
techniques to the situation and choose the most appropriate channels. Many businesses and
associations employ a public relations consultant, and larger businesses may have a public
relations manager or a whole department to oversee these strategies.

Public relations can also be integrated into marketing activities in a number of ways and it is
important to ensure that the business considers the following:

• public relations has to lead a product launch of a new product or service

• the message is important
• public relations-led activities need to encompass a
range of audiences or stakeholders
• public relations is not always aimed at the customer
or buyer
• it may be necessary to include some extra
information or research beyond product
information
• the brand manager and senior managers may need
to attend media events and launches
• public relations needs to be ongoing and the
business must work on continually building
relationships with the media.

There are a number of methods or strategies that a

business can use for planned public relations activities. Figure 13.6 Publicity is often more effective than advertising. Richard
Some of these are outlined on the following page. Branson successfully uses publicity in all of his businesses.

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356 Unit 2 | Establishing a business

Free publicity
This could include issuing communications to inform the general
public about a specific event or function. If the media runs a story, it
allows the business to receive free publicity and lifts its profile. The
opening of a new real estate agency in the local area may include a paid
advertisement together with a story in the local community paper or
magazine highlighting the new business and an employee profile.

Develop relationships with the community

To develop positive relationships with the wider community, a business
Figure 13.7 There are a number of methods or
strategies a business can use for planned public may hold a public information session so that people can see what is
relations, and presenting the desired image to happening within the business. For example, a local gym may open to
the world is very important.
allow people to tour the facilities. Many retirement villages open their
village so that prospective residents can see what the village offers. A factory may open its site
to allay any fears about its impact on the environment.

Public information
Public information includes data and activities designed to benefit the public. The major
freeways around Melbourne have information about the time it will take to get to the city or
major arterial roads and what the traffic conditions are like. This provides both a service to
motorists and also some positive publicity for the business.

Media releases
A media release is used by a business to inform the media of a new product release, or a major
announcement or change. Public relations officers will release a statement to try to influence
the media to write about the business or its product favourably, which in turn provides free
publicity about the business, in addition to getting its specific message out. Social media is
becoming increasingly important for all businesses as a quick and effective way to contact
customers and the public in general.

Brochures, pamphlets and newsletters

Although there is some cost involved, a newsletter or brochure provides a relatively inexpensive
means of communicating with the public and other stakeholders. A newsletter may profile a
staff member, or discuss changes in the business and upcoming events. A brochure distributed
to the public may highlight a new product or service being offered.

Social media platforms

Most businesses are now using social media as a means to communicate about the business.
There are a number of benefits, including instant and timely release of information and that
it’s relatively inexpensive to send information. If a business has expertise in this area it can,
regardless of its size, reach many people quickly and ensure that there is favourable information
being released about the business and its brand.

Open days and tours

If a business opens its doors to the public, it presents an opportunity to improve or reinforce its
image. An open day allows the public to see the business in action. In some circumstances, it may
provide or strengthen an understanding of what the business does. Schools, TAFEs and universities
have tours and open days to allow prospective students and their families to see them in operation.
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 Chapter 13 Public relations and corporate social responsibility management considerations 357

Seminars and conferences Senior

management controls
Conferences may be used to train staff or to inform customers the messages
and potential customers about the business. In this approach,
information can be presented visually, participants have the
chance to ask questions and usually only interested parties will
Social media
attend. In communication and marketing terms, conferences and
increasing in
seminars allow businesses to disseminate information quickly to importance
a wide audience.

Sponsorship
Online reputation
A common strategy in creating positive public relations is important
sponsorship. The act of sponsoring creates an awareness and
positive image of the business. The business may provide Trends
financial support in return for naming rights and merchandising. in PR
Common forms of sponsorship include:
Policies and processes
in place
• sporting events, such as the Australian Tennis Open or the
AFL Grand Final, or a local sporting club
• the arts, such as Opera Australia or the Australian Ballet
Looking at
• charities, such as The Smith Family for their partnership with
different ways to
Officeworks’ Back to School Appeal. promote products

New technologies open up new communication channels – this

means that businesses are in a changing environment when
it comes to public relations. Some of the key trends in public Targeting individuals
relations are set out in Figure 13.8. with influence

Figure 13.8 There are a number of trends in public relations.

ACTIVITY 13.2
1 List five sporting events, charities or campaigns supported by a business.
2 For each one, describe a possible benefit of the sponsorship.
3 Analyse why businesses use social media as a form of public relations.

CASE STUDY
13.2

Examples of
planned PR
campaigns

This case study is available in the Interactive Textbook.

  

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358 Unit 2 | Establishing a business

Crisis management in public relations

While public relations techniques form an integral part of the strategies of a business, there
are times when it may have to move quickly to manage a crisis. A crisis is an unfavourable
set of circumstances or a difficult situation that places immediate public attention on a
business. Crises are often caused by issues such as accidents, equipment failure, or product
recalls. Crises are particularly prone to media scrutiny as they generally have a strong human
element to them. It is important for a business to act swiftly and to make careful plans
regarding what information is revealed to the public and how, in a process that is often called
crisis management.

If a business is not able to manage a crisis in a quick, well-coordinated and honest way, then
it is likely that the reputation of the business will be tarnished and it could have long-lasting
implications for the business and its relationships with customers.

Importance of a crisis management plan

A crisis is often considered to be a threat to the operations of a business. An explosion could
cripple production, a defective product can lead to a product recall, and poor service or quality
(which can spread quickly via social media) can all have a serious negative impact on a business.

A crisis is never good for a business. The risks to public safety, financial losses and reputational
damage can see businesses completely destroyed, and in some cases have legal proceedings
brought against them. Effective crisis management is essential to minimise the impacts of a
crisis on a business, its customers and the wider public. When dealing with a crisis, the business
has the options to:

• prevent the crisis from happening in the first place

• resolve the crisis and address any issues before it escalates
• see the crisis as an ultimately positive experience and seek new opportunities.

An effective crisis management plan considers these three options and has steps to guide the
business through each. Preventing a crisis is the best way of dealing with potential problems.
Businesses should analyse their operations and products regularly in order to identify any
potential risks. Once identified, strategies should be developed that will minimise these risks, or
avoid them altogether.

If crisis public relations fail it is important that the business does everything in its power
crisis public
relations when to minimise the impact of the crisis. Keeping employees informed is also essential – this will
a crisis or major reduce stress and allow them to better handle any extra pressure.
issue has arisen
that the business
has to respond to The highest priority of a business affected by a crisis is public safety. Once this has been
and manage their addressed, focus can be placed on minimising financial and reputational damage. A business
brand
that raises an issue before the media does will likely control the situation better. The business
has an opportunity to learn and develop. Assessing how and why the crisis occurred will help
the business develop better plans and procedures. It might also be an opportunity to address
deeper structural issues and improve the business more generally.

The crisis management plan should contain the elements set out in Table 13.1.

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 Chapter 13 Public relations and corporate social responsibility management considerations 359

Table 13.1 Crisis plan elements

Elements Explanation

Key contacts Outline individuals’ responsibilities, include relevant forms and

identify a team representing different sections of the business; for
example, finance and human resources

‘Face’ of the business This should be in place for the duration of the crisis to ensure
consistency in the public messaging

Detailed plan This should be detailed enough to act as a reference or a guide and
enable the business to respond in a timely manner

Strategies determined There should be a list of strategies that can be implemented for
example, an apology, compensation to victims if relevant, reminder
of previous good works and praise to those who assisted during the
crisis

Not all businesses deal effectively with public relations crises. The way in which Volkswagen
handled its issue of engine emission manipulations in 2015 not only evoked fears that the crisis
might have an impact on the German economy (i.e. a huge financial impact), but also caused
long-term brand damage as the company lost the trust of its customers. Volkswagen had
promoted its cars in the United States on the basis of low emissions, but the US Environmental
Protection Agency discovered that many of the cars had software allowing them to detect
testing and adjust the recordings to get better readings. This breach of consumer trust through
false advertising damaged Volkswagen’s reputation worldwide.

CASE STUDY
13.3

Crisis in public
relations: examples

Sharetea Australia The Fair Work Ombudsman, which is the

national underpayment watchdog, stated it
A national bubble tea chain, 22 of its was investigating Sharetea Australia and urged
franchisees and the Taiwanese company anyone with pay issues to come forward.
that owns it are in the sights of two federal
watchdogs, with the most serious complaints Small Business and Family Enterprise
alleging that it sourced supplies contaminated Ombudsman Bruce Billson confirmed that
with flies and small insects. his office had received complaints from 22
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360 Unit 2 | Establishing a business

He said reforms to the franchising code of

conduct had been made this year that helped
protect relationships between franchisees and
franchisors.

Supply problems have been a focus of

franchisees’ complaints about the Australian
head office.

The founder said the business was forced

Figure 13.9 A Sharetea franchise shop
to change suppliers for two reasons: Lian Fa
‘refused to supply stock’ and Sharetea Australia
franchisees about ingredient costs, supplies,
encountered ‘significant issues’ with the quality
leasing arrangements and marketing funds.
and shelf life of Lian Fa’s ingredients.

One local franchisee, who asked to remain

A local franchisee said the first sign that
anonymous for fear of reprisal from Sharetea
something was wrong was when Sharetea
Australia headquarters, said she felt abandoned
Australia ‘suddenly’ switched ingredients
after opening her store four years ago, and that
in May this year, and contaminants began
problems had become worse since a change in
appearing in some supplies.
suppliers.

An internal, unofficial survey completed by 25

‘I’m looking for justice. I feel so hopeless,’ the
franchisees unhappy with Sharetea Australia
franchisee said.
found 96 per cent had concerns about the
change of supplier from Lian Fa to another
‘We worry to death what the new ingredients
firm, with particular concerns about the syrups
are. We don’t know what we’re selling. It’s so
Sharetea had secured.
bad I don’t even want to drink. How can I give it
to customers?’
‘We can assure you it is business as usual for
all our stores across the country, and nothing
On top of its problems with staff and
will change day-to-day operations of our
franchisees, Sharetea Australia is also in a
franchise partners,’ Mr Mu said in his letter.
legal dispute with the Taiwanese company that
‘Sharetea Australia will continue to act in the
holds the international rights to the brand,
best interest of our franchisees and protect
Lian Fa International Dining Business Co. It
their privacy.’
claims Sharetea Australia has been unlawfully
using its trademarks and recipes after Lian Fa
Separately, the chain told franchisees not to
terminated an agreement between the two
give any information to journalists calling to
companies. In contrast to Sharetea’s claims
seek comment and instead direct all inquiries
that only a ‘minute’ number of franchisees had
to head office.
problems, Mr Billson said 22 local franchisees
had raised concerns about several issues
Source: Adapted from Jessica Yun & Nick Bonyhady,
with the company, which the independent
‘“Topping comes with a fly as a bonus”: bubble tea
government agency was examining.
chain under fire over wages, ingredients’, The Age,
30 November 2021.
‘These franchisees have cited a range of
concerns including in respect of ingredient
costs and supply, lease arrangements and the
marketing fund,’ Mr Billson said

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 Chapter 13 Public relations and corporate social responsibility management considerations 361

Other examples of poor public relations in easyJet versus unsatisfied client

crisis include the following.
In the UK, easyJet’s online response to criticism
Pepsi and Kendall Jenner ad was seen as a poor public relations move. A
passenger flying with easyJet from England
Pepsi launched a campaign starring Kendall to Switzerland posted a picture of an older
Jenner, an American media personality and woman on the plane sitting on a backless seat.
model. It portrayed young people walking
down the street and protesting peacefully while The passenger tagged easyJet in his tweet so
Jenner is filming a photo shoot nearby. the company could see what was happening in
one of their planes. As journalists immediately
Jenner was then shown as having sort of an started replying to the tweet asking for further
‘enlightenment’ moment. Then, she stopped the information on the story, easyJet noticed the
photoshoot and joined the protestors. Smiling, tweet and had one of the worst responses
she walks through the crowd directly towards possible. They asked the passenger to take the
police officers. She grabs a can of Pepsi, and tweet down and discuss the situation privately.
hands it to one of the officers as the protestors easyJet’s response, understandably, resulted in
cheer happily. even more online backlash.

The ad came shortly after some of the biggest The lesson to take from easyJet’s response:
protests against racial inequality and police your brand is nothing without your customers.
brutality in the USA. The protests were an
important event in American history. Tesla unveiling’ bulletproof’ Cybertruck

Pepsi thought it would be good to give some Tesla, an American electric vehicle
recognition to the protests and the new manufacturer, unveiled its new truck, which
movement. But their intention didn’t go so well they described and praised as bulletproof prior
with the public. Many people saw the ad as an to the official launch.
insensitive and rather cheap way of product
promotion at the expense of much bigger To prove the truck’s strength and resistance,
social issues. Afterward, Pepsi apologised and Elon Musk and colleagues used metal balls
withdrew the campaign. to attempt to shatter the truck’s glass during
its live reveal. Unfortunately, things did not
go as they expected. The glass on the vehicle
shattered twice.

While the brand was not damaged, it is a

reminder that a business should thoroughly
test its product before unveiling it.

Figure 13.10 Kendall Jenner’s ad for Pepsi misfired.

CASE STUDY ANALYSIS

Using the information from the case studies, answer the following questions:

1 Explain why it is important for a business to make sure it is managing its public relations.
2 Outline the concerns around Sharetea and how this has impacted on the reputation of the
business.
3 Why was the Pepsi ad seen as a public relations failure?
4 Describe the possible consequences of their actions on easyJet and Tesla.

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362 Unit 2 | Establishing a business

The importance of maintaining a positive relationship with the

customer base
As outlined previously, a business needs to
ensure that it considers public relations when
looking at the success and objectives of the
business. Public relations strategies should
be planned, and it is important for a business
to know how to deal with a crisis. If this is not
done properly, the business may find it difficult
to maintain a positive relationship with its
customer base and the public, and consequently
that its reputation can be irreparably damaged.
Surprisingly, a number of large businesses still
have issues that impact on their business. Virgin
Australia, following practices in the United
States, announced it would publicly honour all
military personnel on their flights. One day later
this was overturned. It is believed that Virgin
misread the culture in Australia and chose the
wrong cause to support. Essentially it attempted
to import an American practice from Virgin
Atlantic but did not understand that Australians
Figure 13.11 Good customer service is crucial for businesses to maintain their would find it excessive and embarrassing.
customer base.

CASE STUDY
13.4

Maintaining
customer service

Businesses that can enhance and personalise customer service that is slow and lacking in
the customer service experience stand to personalisation.
profit, according to Australian marketing
company Freshworks. Proving that customer service failures send
customers to competitors, Freshworks found
Ever-growing competition in products and that more than half of people surveyed stopped
services means that brands must constantly buying from a company as a result of its
find new ways to appeal to customers on every communications during the pandemic. Twenty
level. Precise and appropriate personalisation per cent stopped dealing with a company when
can sway customers, but many brands get call wait times became too long, and a similar
this very wrong, according to research by number went elsewhere when they could not
Freshworks, with a recent report showing that get a response. ‘Insensitive communications’
many brands are pushing customers away with also prompted 14 per cent to go elsewhere for
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 Chapter 13 Public relations and corporate social responsibility management considerations 363

goods and services. According to the report, Overall, the Freshworks survey found more
around three quarters of 18- to 34-year-olds than half of Australians are disappointed with
are more likely to make a purchase after a their customer service experiences. Most (56
personalised experience. The influence of per cent) even said they don’t believe customer
personalisation drops to half for 55- to 64-year- service matches brand reputation. The main
olds, and it’s even less for people over 65. complaints (35–38 per cent) were about how
However, Freshworks found only 14 per cent of long it took to speak to someone, that customer
Australians expect any personalisation and less queries got passed around in a loop, that
than 10 per cent did not expect to be impressed responses were scripted and automated, and
by communications at all. Yet more than half that responses lacked resolution. In a separate
(55 per cent) do expect brands to know about study, Qualtrics XM Institute found that top-
their values and for brand communications to rate customer service boosts customer loyalty,
take this knowledge into account. More than as nearly 80 per cent of its respondents said
half (52 per cent) want companies to know customer service influenced their relationship
more about us as individuals. with a brand.

CASE STUDY ANALYSIS

1 Describe the main findings of the surveys.
2 Why should a business focus on excellent customer service?
3 Propose and justify two strategies a business could put into place to support positive
customer experiences.

The implications if the PR relationship is not maintained

It is important for a business to consider the impact of poor public relations on the business,
and steps should be taken to ensure that the business can control the messages as much as
possible. A good public relations strategy, coupled with a crisis management plan, will assist
a business if there is an issue. If no thought is given to how the business may be portrayed
in the media after an issue, or if the business is on the defensive and reacts poorly, this will
have serious consequences for the business. If the business reputation is lost, this may not be
recovered.

If a business neglects public relations, it will have to manage a situation that it may not be able
to control. Poor public relations strategies include poor timing and having no plan in place to
ensure that publicity coincides with the release of a product or service. If a business publishes
poorly worded press releases, this may make it less reputable to media outlets. It is important
for a business to follow up on a media release in order to ensure that it will be published in a
timely manner. If a business does not expend the necessary time and resources to complete
research about its target markets and who it wants to receive its message, this may also lead to
problems for the business.

A business needs to ensure that:

• it has a good strategy in place for managing public relations and media
• there is open communication with customers and other stakeholders
• it is proactive and responsive to any crisis or issue
• it maintains the relationships that it has developed.
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CASE STUDY
13.5

Poor public
relations: billionaire
space race

A handful of billionaires spent 2021 blasting Similar statements were voiced during the COP26
into space. But a growing public backlash summit in 2021. British astronaut Tim Peak said
against their extravagance could curb the he was disappointed to see space travel was now
future of space tourism. being treated as a luxury experience.

More than three-quarters of people in the UK For space companies, such as Virgin Galactic,
think wealthy individuals, such as Jeff Bezos Blue Origin and a host of other start-ups that
(pictured above), Elon Musk and Richard have launched, this could harm the future of
Branson, ‘should focus their resources on their business.
problems facing Earth, like climate change,
before space travel’, according to a new study. Some space start-ups are looking to capitalise
on the negative publicity attracted by these
An 11-minute space flight can create as rocket companies. Space Perspective offers
much as 75 tonnes of emissions, according ‘zero-emissions’ trips that are ‘flown gently by
to a report by the Institute for Sustainable a space balloon instead of rockets.’
Development and International Relations. That’s
more than the average person creates during But the rocket companies are fighting back,

their entire lifetime. trying to show the world that they are more
‘professional,’ says Greenaway. ‘There needs to
Spending such vast sums of money, and be a purpose to it over and above just wanting
burning so much carbon and other harmful to fly up high and look at the world.’
emissions all in the name of tourism is callous,
many argue. ‘The billionaire class are out of Virgin Galactic says its rockets are reusable and
touch with the problems facing the planet,’ says the company aims to ‘transform the current cost,
Jordan Greenaway, partner at Transmission safety and environmental impact of space-launch.’
Private, a reputation management firm that
conducted the study. ‘For some people this might be because they
believe that investment in blue-skies high-end
Popular opinion started turning against space tech will unlock innovation in other areas
space tourism soon after both Virgin Galactic that could help us in new and different ways,’
and Blue Origin launched their maiden Greenaway said.
manned flights in July. ‘We’ve now reached
stratospheric inequality. Billionaires burning For others, such as the Japanese billionaire
into space, away from a world of pandemic, Yusaku Maezawa, it’s about advancing society
climate change and starvation … This is human rather than technology. He spent 12 days on the
folly, not human achievement,’ said Deepak International Space Station.
Xavier, Oxfam International’s global head of
Inequality Campaign, at the time. Source: Adapted from Ollie A. Williams, ‘Billionaire
space race turns into a publicity disaster’,
Forbes, 21 December 2021.

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 Chapter 13 Public relations and corporate social responsibility management considerations 365

CASE STUDY ANALYSIS

1 Summarise the main findings from the research about space travel.
2 Do you think the businessmen involved would have expected this type of reaction to their
journeys?

REVIEW ACTIVITY 13.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 What is planned public relations?

2 Explain how public relations can be integrated into marketing activities.
3 How can developing a relationship with the community and using social media support a
business in projecting a positive public image?
4 Explain the purpose of a crisis management plan.
5 What can happen to a business if it does not manage a public relations crisis?
6 Explain why it is important for a business to maintain a positive relationship with its
customer base.
7 Read the case study below and answer the questions that follow.

A teenage girl walked into a clothing shop to buy a new jacket. The girl stated that when she
walked in, she was followed around the shop by the saleswoman. She alleged that the woman
had called her a shoplifter as she walked out the door. The girl went home and told her sister
who posted the incident on her social media. Many people saw and commented on the post.

The owner of the clothing store issued an apology. However, later the store posted a further
message stating that they found no evidence of the incident or comment occurring. After
this, the store was bombarded with critical comments.

The store also found that its sales declined, since many potential customers had concerns
about the behaviour of the staff and owner.

a Outline how this case study demonstrates poor customer service.

b What should the store have done instead (both at the time and after the alleged incident)?
c Explain why it is important for a business to maintain a positive relationship with its
customers.
8 Discuss the importance of public relations and its link to customer relationships.
9 Explain why a crisis management plan is important for all businesses.
10 Explain the implications if public relations is not maintained.

Figure 13.12 It
is important to
plan for public
relations.

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366 Unit 2 | Establishing a business

13.3 Corporate social responsibility

management considerations regarding
establishment of a customer base
Learning intentions – at 13.3.1 Identify CSR management considerations regarding
the end of this chapter establishment of a customer base
section I will be able to:

The management of corporate social responsibility (CSR) is an important way for a business
to increase its competitive advantage. For its customers, CSR can raise brand awareness and
build trust, which are two very important factors when wanting to establish a customer base. A
positive approach to social responsibility improves the public image of a business as well as its
relationship with its customers.

Green marketing
Differentiating a product or service from that of its competitor is a common strategy used
green marketing
the marketing of by businesses when seeking to establish their customer base. The strategy of sourcing raw
products that are materials from sustainable sources demonstrates to the customer that the business is being
presumed to be
socially responsible in its business practices. While sourcing sustainable resources often comes
environmentally
preferable to at a higher price, many customers are willing to pay a premium price for the product, knowing
others its source. This approach (known as green marketing) can encompass a range of businesses
activities, including changes to the production process, changes to the product, using
sustainable packaging and modifying the advertising and marketing of products.

Businesses can gain green marketing opportunities for their products by:

• using recycled products in the product production process

• using green energy such as wind or geo-thermal
• decreasing the level of waste their business generates in energy usage and materials
• adopting eco-friendly methods such as sustainable and organic agriculture
• reducing transportation by buying and selling locally
• reducing packaging on products
• making products that are reusable and recyclable.

Businesses realise that making environmental claims for their products can be a very powerful
marketing and public relations tool, while also acting to differentiate themselves from their
competitors. The following are examples of such claims:

• this product is environmentally sustainable • no animal testing used

• made from recycled materials • does not affect the natural environment
• energy- and water-efficient product • carbon neutral.

ACTIVITY 13.3
1 Identify products where you consider ‘energy efficiency’ to be an important consideration
for customers.
2 Identify products where you consider ‘environmental claims’ to be an important
consideration for customers.

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 Chapter 13 Public relations and corporate social responsibility management considerations 367

When making environmental claims on products, or when advertising products, it is imperative

that businesses do not contravene Australian Consumer Law (ACL). Any business found guilty
of misleading or deceiving consumers in any way can attract serious penalties, such as fines in
excess of $1 million for companies and up to $220 000 for individuals; and injunctions, corrective
advertising and publicity orders. The reputation of the business would be severely damaged.

Protection of customer privacy

Many businesses in Australia are required by law (Privacy Act 1988) to protect personal
information related to their customers, such as name, contact details, signature, medical
records, bank details, photos and videos, IP address and opinions that can be used to identify
them. The protection covers the information for the following circumstances: theft, misuse,
interference, loss, unauthorised access, modification and disclosure. When the information is no
longer required, the business must destroy or de-identify it.

Businesses should refer to the Australian Privacy Principles (APP), which were established to ensure
that the privacy policies they create will enable them to manage personal information in an open
and transparent way. For customers to feel assured that their personal information is being managed
appropriately, they should be able to freely access the privacy policy of the business with whom
they are dealing. The policy could be on the website of the business, displayed in the entrance to the
business premises or a copy of the policy provided to the customer when requested.

Making available an accessible summary version of the policy document focusing on what
customers would like to know has proven to be particularly effective for those seeking
information in the online environment. The summary can provide information about:

• what the policy applies to (scope)

• how information is collected and why
• sharing of information and disclosures
• rights and choices relating to requesting access and correcting any personal details
• how to make a complaint
• contact details.

ACTIVITY 13.4
Access the McDonalds.com > privacy-policy website and answer the questions below.

1 Identify what information McDonald’s collects and holds about its customers.
2 For what purposes does McDonald’s state they collect this information?
3 Does McDonald’s provide customers with the opportunity to review the personal
information they hold about them?

REVIEW ACTIVITY 13.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify and explain three ‘green marketing’ opportunities a business can follow.
2 Describe how ‘green marketing’ can be used as a public relations and marketing tool.
3 Explain why a business should develop privacy policies and practices in their business.

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368 Unit 2 | Establishing a business

Chapter 13 review
Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 2, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Public relations Planned public relations Crisis public relations

The ‘public’ Publicity Press/media release

Green marketing

Extension question
Richard Branson, founder of the Virgin business empire, once stated that: ‘Publicity is absolutely
critical. A good public relations story is infinitely more effective than a front-page ad.’
Evaluate and discuss this statement.

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 Chapter review 369

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

13.1 An overview of 13.1.1 Provide an overview Activity 13.1 Yes No

public relations and of public relations and its Case study 13.1
its relationship to relationship to business Review activity 13.1: Part 1 &
business objectives objectives Part 2
Extension

13.2 Public relations 13.2.1 Explain public Activity 13.2 Yes No

strategies: planned relations strategies such Case study 13.2
and crisis public as planned and crisis Case study 13.3
relations public relations Review activity 13.2: Part 1 &
Part 2

13.2.2 Describe the Case study 13.4 Yes No

importance of maintaining Review activity 13.2: Part 1 &
a positive relationship Part 2 (Q3, 6)
with the customer base

13.2.3 Examine the Case study 13.5 Yes No

implications if the PR Review activity 13.2: Part 1 &
relationship is not Part 2 (Q8–10)
maintained

13.3 Corporate 13.3.1 Identify Activity 13.3 Yes No

social responsibility CSR management Activity 13.4
management considerations regarding Review activity 13.3: Part 1 &
considerations establishment of a Part 2
regarding customer base
establishment of a
customer base

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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370 Unit 2 | Establishing a business

Unit 2 Area of Study 2 review Conceptual summary

Customer
satisfaction
Key
THE RELATIONSHIP
performance
BETWEEN MARKETING,
indicators
CUSTOMER BASE AND
BUSINESS OBJECTIVES

( (
(
Marketing
(KPIs) concept

(
Commitment
Business
objectives
Legislation set
Technological and regulations Business
developments culture

MACRO FACTORS INTERNAL

AFFECTING CUSTOMER BASE FACTORS
AND BRAND IDENTITY
$
Customers

Managers Owners

TARGET
Competitors MARKET
Employees
Data
analysis

Market dimension
(Size of market)
MARKET Data collection
RESEARCH Market segmentation

Information geographic psychographic

demographic behavioural
Customer Target
trends market

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 Area of Study review 371

Social
PLANNED PUBLIC media
RELATIONS
Media
release
NEWS
Data
$ management
and analytics
Sponsorship

Seminars AI
and conferences TECHNOLOGICAL
DEVELOPMENTS

CRISIS
MANAGEMENT
IN PUBLIC
RELATIONS
Search
engine
Customer
loyalty
CSR considerations
when establishing a
CUSTOMER
customer base
RELATIONS
PRODUCT LIFE
Maturity CYCLE
Sales
growth Decline
Quality Disappearence Reintroduction
service (relaunch)
Customer
relationship Introduction
marketing (CRM)

7 Ps model of marketing

$$

Physical
Price Promotion Place Product People Process evidence

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372 Unit 2 | Establishing a business

Key knowledge summary: Unit 2 Area of Study 2

Key knowledge Summary

• The relationship between • Marketing is more than just selling a product; marketing influences
marketing, establishing the majority of activities undertaken in people’s lives. It aims to help
a customer base and consumers make informed and accurate decisions relating to the
business objectives purchase of a product or use of a service.
• Marketing extends to the following entities: goods, services, experiences,
events and personalities.
• Marketing is an important consideration when establishing a customer
base and business objectives.
• The marketing concept has developed to support the change in focus
from selling a product or service to actually satisfying the needs and
recognising the importance of customers.

• Internal and external • There are a range of internal and external (macro and operating) factors
(macro and operating) that can affect the establishment of a customer base and the creation of a
environment factors brand identity of a business, such as the internal culture of the business, its
affecting the establishment owners, and managers and employees. Externally, macro factors are the
of a customer base and the economic conditions, technological developments, legislation and regulators.
creation of a brand identity Operating factors are the customers and competitors of the business.

• Market research practices • Market research is undertaken to help businesses make informed decisions.
such as data collection • Market research needs to be undertaken in a systematic manner, with
techniques, analysis and consideration given to minimising any form of bias in the data-gathering
interpretation process.
• Marketing data can be obtained from two main sources: primary and
secondary.
• Common methods of obtaining primary data are telephone surveys, mail
surveys, door-to-door personal interviews, shopping centre interviews,
direct observation and small group discussions and experiments.
• Common methods of obtaining secondary data are company records,
periodicals, computerised databases, libraries, newspapers, magazines,
Yellow Pages and White Pages, government agencies and trade associations.
• Market research aids the success of businesses, but it does not guarantee it.
• The research process involves a number of steps, with problem definition
being one of the most difficult steps. Systematic approach steps include
the following:
–– define the problem and establish research objectives
–– determine the research design
–– identify and assess information types and sources
–– design data-collection approaches, forms and sample size
–– collect and analyse data
–– prepare and present the final report.
• Market researchers should strive to provide unbiased and honest results.
The presentation of research findings using graphical representation aids
both interpretation and analysis.
• Secondary data is useful in establishing market size and trends, but is not
as useful for providing specific data about individual business products.

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 Area of Study review 373

Key knowledge Summary

• Target market attributes • Determining the attributes of the target market is important for effective
such as market marketing.
dimensions, segments, • Segmentation requires identifying market segments based on
consumer trends and behavioural, geographic, demographic and psychographic variables.
behaviour Once the segment is determined, a decision can be made as to which
segment is more favourable for a particular business to target.
• The importance of the Pareto Principle (80/20 rule) needs to be
recognised, whereby 80 per cent of sales are said to be attributed to only
20 per cent of customers.
• An important consideration of marketing is whether to market to a mass
or niche market.
• It is important to understand the influences on a consumer’s purchasing
behaviour and to develop a customer profile.
• For businesses to prosper, they must be aware of the current consumer
trends and behaviour and make sure they take these into account when
marketing their products. Trends include buying online, purchasing
products direct from the producer or grower, one-stop shopping and 24/7
availability, demand for ready-to-eat gourmet meals, being treated as
an individual provided personalised (not mass-produced) products, and
new market of tweens. There is also a trend where consumers wish to be
more informed about products, including their nutritional value, impact
on environment and society, and whether the businesses producing the
goods are ethical and socially responsible.

• The 7Ps model of • The marketing mix recognises 7Ps – product, price, place, promotion,
marketing: product, price, people, physical evidence and process.
place, promotion, people, • Products can be classified as business or consumer items (convenience,
physical evidence and shopping, speciality or unsought).
process • Products go through a five-stage development process.
• A brand acts to identify and differentiate one manufacturer’s product
from another manufacturer’s product.
• Packaging of a product has a multitude of purposes, with labels providing
important information.
• Price and its level greatly influence the revenue and profit made by a
business.
• There are a variety of methods used to set prices: cost-based,
competition-based, mark-up and marketing strategies such as penetration
and skimming.
• Place involves decisions that relate to having the right quantity of product
in the right location at the right time. Distribution channels can be direct
or indirect.
• Promotion is how the business communicates or connects with its
customers.

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374 Unit 2 | Establishing a business

Key knowledge Summary

• There are a variety of promotional techniques, including:

–– advertising using media such as newspapers (print and online),
television, radio, magazines, internet, social media, direct mail and
outdoor advertising
–– direct marketing/selling
–– sales promotion
–– personal selling
–– internet (websites)
–– mobile marketing
–– publicity and public relations.
• People are often the first point of contact to make an impression. Staff
must be trained, motivated and suited to their role.
• Physical evidence can demonstrate that a service was provided or create
an environment where the consumer experiences a service. It also covers
signs and symbols that support image and identity.
• Process covers how a customer finds out about a product, researches that
product, chooses and then makes the purchase. It is also how the product
is delivered and the behaviour of those involved in the delivery process.

• The product life cycle: • Products experience a product life cycle (introduction, growth, maturity
introduction, growth, and decline/extension) and marketing strategies differ throughout the life
maturity, and decline/ cycle of the product.
extension, and the
relationship between
each of these stages and
the choice of marketing
strategy

• The features and value • Customer service is fundamental to acquiring, retaining and growing
of customer relations the target market of the business. Providing quality service and loyalty
strategies such as programs form an important part of this.
providing quality customer
service and establishing
customer loyalty programs

• Technological • Technological developments in marketing are increasingly gaining in

developments in importance. The developments cover the use of social media, email
marketing such as marketing, search engine optimisation, artificial intelligence, data
social media, email analytics and the management of data.
marketing, search engine
optimisation, artificial
intelligence, data analytics
and management of data

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 Area of Study review 375

Key knowledge Summary

• An overview of public • Public relations is aimed at presenting a favourable image for a business.
relations and its • Public relations is vital for all businesses, regardless of size.
relationship to business • Many news stories arise from public relations leads.
objectives • Public relations and its relationship to business objectives is important
and should be integrated at the strategic level.
• Well-planned public relations campaigns contribute to:
–– increased customer base
–– increased demand for products and services
–– gaining a competitive edge
–– enhanced credibility
–– creating goodwill.
• Public relations objectives should be forward-looking, realistic, attainable,
clear, agreed and communicated.
• Managing the reputation of the business is important.
• Different businesses have different ‘publics’.
• Businesses generally develop strategies for planned public relations situations.
• There are a number of strategies for planned public relations, including:
–– free publicity
–– developing relationships with community
–– public information
–– sponsorship
–– media releases
–– brochures, newsletters and pamphlets
–– open days and tours
–– seminars and conferences.
–– social media.
• Public relations is becoming more important and businesses need to
manage online messages and reputations.

• Public relations strategies • Businesses need to determine how to manage a public relations crisis.
such as planned and • There are three ways to approach a crisis situation: prevent it, quickly
crisis public relations, the address the issue and/or seek ways to turn the event into an opportunity
importance of maintaining for the business.
a positive relationship • A crisis can impact on all aspects of a business, including:
with the customer base –– public safety
and the implications if –– financial loss
this relationship is not –– loss of reputation.
maintained • The role of management is significant in a public relations crisis.
• If a business cannot manage the PR function in a positive way the
business will suffer.

• Corporate social • Corporate social responsibility management considerations are necessary

responsibility management when establishing the customer base for a business.
considerations regarding • One CSR management consideration is the correct use of green
establishment of a marketing, where customers are being influenced by the environmental
customer base, such as attributes of a product.
green marketing and the • Customer privacy needs to be protected; and businesses, while legally
protection of customer required to undertake this, can take additional actions to ensure that
privacy customers feel protected.

Source: VCE Business Management Design extracts © VCAA; reproduced by permission

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376 Unit 2 | Establishing a business

Sample assessment questions and advice

Unit 2 Area of Study 2: Marketing a business

In this section we will look at some sample assessment-style questions. Although there is no external
examination for Units 1&2, the following questions are written in a VCAA-examination style to prepare
you for these types of questions.

Today we are looking back at Area of Study 2. There are a number of key skills covered in Chapter 13:

• Public relations strategies such as planned and crisis public relations.

• The importance of maintaining a positive relationship with the customer base and the implications
if this relationship is not maintained.

Examples of things you need to consider in terms of public relations include:

• planned PR
• crisis PR
• positive relationships with customers.

PR strategies
Let’s explore how these skills might be assessed through the following multi-part example question.

Question 1
Define the concept of public relations. Outline and explain why it is important for a business to
develop public relations strategies for planned and crisis public relations. In your response, include
examples of strategies a business can use. (8 marks)

Extended response question – let’s unpack it

Task words
Define: Accurately state or explain the precise meaning of a word, phrase or term
Outline: Provide a brief description of the terms or topic
Explain: To make the meaning of something clear, detailed and understandable

Define the concept of public relations. Outline and explain why it is important for a
business to develop public relations strategies for planned and crisis public relations. In your
response, include examples of strategies a business can use. (8 marks)

Study Design requirements Marks allocated

Key knowledge: public relations strategies

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 Area of Study review 377

Hints:
• Firstly, you need to define the concept of public relations.
• You then need to outline and explain the importance of public relations strategies for both
planned and crisis PR.

A possible answer to the question might be:

Sample response
Public relations (PR) can be defined as the practice of promoting goodwill among the public to
present a favourable image. It is also a deliberate, planned and sustained effort to establish a
relationship between a business and its public. PR is usually not product- or service-specific and is
seen as a long-term approach to improve a business’s reputation and goodwill.
The public relations strategies of a business should include maintaining positive relationships with
customers because losing a customer is an issue for any business.
Businesses should have PR strategies to deal with both planned and crisis situations. Ideally, a
business should never have to deal with a crisis that is unexpected because it should have policies
and action plans in place to avoid such a situation.
There are a range of strategies a business can implement to deal with planned business situations.
These strategies include communicating with the public through a range of media outlets and
social media. Other strategies include using a media release, developing relationships with the
wider community, brochures, pamphlets and newsletters, open days and tours, seminar and
conferences, and sponsorship.
It is important for a business to have a public relations crisis management plan to deal with a
situation that may have an immediate and often negative impact on a business. These crises
typically have a strong human aspect to them, which means they become the focus of media
scrutiny. Effective crisis management is essential to minimise the impacts of a crisis on a business,
its customers and the wider public.
Any plan should include a number of processes, including the names of key contacts, outline of
individuals’ responsibilities, a team representing different sections of the business (such as finance
and human resources) and a spokesperson who becomes the face of the business.

Marking guide:
• 1–2 marks for definition of public relations.
• 3 marks as above and an outline of why it is important to develop strategies.
• 4 marks as above and an explanation of why it is important to develop strategies.
• 5–6 marks as above and an explanation of both planned and crisis public relations.
• 7–8 marks as above and specific examples of strategies that can be used by a business.
Total 8 marks

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378 Unit 2 | Establishing a business

Question 2
 uring the 2018 Boxing Day sales a number of retailers, including Myer and Coles, were not able to
D
process gift cards. Customers took to social media to criticise the retailers. Propose and justify one
public relations strategy either business could implement to reduce the harm to their reputation.
(3 marks)

Extended response question – let’s unpack it

Task words
Propose: To put forward (a plan or suggestion) for
Limiting word
consideration by others
Determines the number of
Justify: Give valid reasons or evidence to support examples you must use
an argument or conclusion

Propose and justify one public relations strategy either business could implement to reduce the
harm to their reputation. (3 marks)

Marks allocated Study Design requirements Case study

Key knowledge: public relations
strategies

Hints:
• For this question, you need to ‘propose’ and ‘justify’ one specific public relations strategy for retail
businesses.
• Remember that you need to come up with a strategy and then justify the strategy and link it to a
case study or scenario.

A possible answer to the question might be:

Sample response
All businesses such as Coles and Myer need to ensure that they have a public relations strategy
in place to deal with a crisis. Coles and Myer rectified the situation as soon as they could – it was
a technical issue with their provider. One strategy Coles and Myer could propose is to offer some
kind of incentive or discount for all customers with a gift card. This would allow customers to get
something extra or a discount to make up for the inconvenience of the cards not working during
the sale. This may assist in restoring some of their reputation and customer goodwill.

Marking guide:
• 1 mark for proposal of one public relations strategy that could be used.
• 2 marks for proposal and justification (reasons why) the proposal could assist in reducing the harm
to Coles and Myer’s reputation.
Total 3 marks

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 AREA OF STUDY 3
STAFFING A BUSINESS

AREA OF STUDY DESCRIPTION OUTCOME 3

Staff, as one of the greatest assets of a business, are On completion of this unit the student should be
an important consideration during the establishment able to discuss the importance of staff to a business,
phase. The quantity and quality of staff has a direct discuss the staffing needs for a business, and evaluate
link to business productivity and the achievement staff-management strategies from both an employer
of business objectives. In this Area of Study students and staff perspective.
consider staffing requirements that will meet the
needs of a business and contribute to productivity To achieve this outcome the student will draw on key
and achievement of business objectives. They knowledge and key skills outlined in Area of Study 3.
research the processes undertaken by the business in [These are listed at the start of each chapter.]
relation to the recruitment, selection and induction Source: © VCAA, VCE Business Management Study Design
of staff. Students consider the opportunities that the 2023–2027, p. 15; reproduced by permission
skills and capabilities of staff can offer a business, the
legal obligations that must be addressed in relation
to staff, and the relationship between employers and
employees within a business.
Source: © VCAA, VCE Business Management Study Design
2023–2027, p. 15; reproduced by permission

CHAPTERS IN THIS 14 Staffing a business

AREA OF STUDY
15 Recruitment and selection of staff

16 National Employment Standards, employer and employee

expectations, legal obligations for staffing, employee induction and
CSR considerations relating to staff

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 CHAPTER 14
Staffing a business

‘There are only three measurements that tell you nearly everything you
need to know about your organisation’s overall performance: employee
engagement, customer satisfaction, and cash flow … It goes without
saying that no company, small or large, can win over the long run without
energised employees who believe in the mission and understand how to
achieve it.’

Jack Welch (1935–2020)

About the author:

Jack Welch was an American business executive, chemical
engineer and writer. He was Chairman and CEO of General
Electric (GE) between 1981 and 2001.

KICKSTARTER ACTIVITY
1 Identify the three measurements that Jack Welch states can tell you
about an organisation’s overall performance.
2 Analyse why employees are so important to the ongoing success of an
organisation.

CHAPTER OVERVIEW

Staff are one of the business’s greatest assets and they must
be considered when establishing a business. It is important for
businesses to undertake workforce planning so they can determine
the number and quality of the staff they require to assist in the
achievement of business objectives. Technology is playing an
increasingly important role for businesses. While providing an
opportunity for increases in productivity, it has also had the effect of
changing the nature of many jobs.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will
be able to:

The relationship between 14.1 R

 elationship between the performance of staff and
the performance of staff achieving business objectives
and achieving business 14.1.1 Identify, define, describe and apply business
objectives management terms and concepts
14.1.2 Analyse the importance of employees to a business

Identification of the staffing 14.2 Identification of staffing needs of the business

needs of the business such 14.2.1 Identify, describe and explain staffing needs of
as the knowledge, skills and businesses
ideas staff can contribute to 14.2.2 Describe and analyse a case study
the business

The effects that 14.3 Effects of developments in technology on staffing needs

developments in technology 14.3.1 Identify, describe and discuss technology, and
may have on staffing needs contemporary examples and a case study
14.3.2 Explain the impact of technology

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 14
Staffing a business

14.1 Relationship 14.2 Identification 14.3 Effects of

between the of staffing needs developments in
performance of staff of the business technology on
and achieving staffing needs
business objectives

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382 Unit 2 | Establishing a business

14.1 Relationship between the performance of

staff and achieving business objectives
Learning intentions – at 14.1.1 Identify, define, describe and apply business
the end of this chapter management terms and concepts
section I will be able to:
staff a group
14.1.2 Analyse the importance of employees to a business
of persons, as
employees,
charged with No matter their size, most businesses recognise that their success can be attributed to having
carrying out properly managed their staff, also referred to as employees. This involves balancing the
the work of a
business objectives of the business with the goals and aspirations of its employees. A business will
usually set goals and objectives that relate to its survival, gaining and growing market share,
employee a
person working
and being profitable. The staff of any business is one of its most important assets and plays
for another a vital role in ensuring the business prospers; they are an essential input in the production
person or a process for either manufacturing a product or providing a service. Staff also provide the day-to-
business for
wages or a salary
day management of the business’s operations. If a business has a positive relationship with its
employees, they will assist in the growth and success of that business.

Business objectives are the outcomes that

a business sets out that it wants to achieve.
Business Business plans are then created, strategies
objectives
determined and actions undertaken to
achieve these objectives. The business
objectives and plans must take into
account the requirements of various
stakeholders of the business. Stakeholders
are those individuals or groups that are
affected by and have a vested interest
Staffing needs: Staffing
Performance in how the business is run and what it
knowledge, a
of staff achieves. While every business has a
skills and ideas business
range of stakeholders, one stakeholder
vital to the success of the business is its
employees. It is therefore important that
effective relationships are created between
management and employees.

Effects of Employees are the biggest line-item

developments
expense (cost) for any business as well
in technology
as being its most valuable asset. For a
business to achieve its objectives of being
Figure 14.1 Main considerations for staffing a business productive and profitable, it is imperative
that its staff are performing to their full
potential. Numerous studies have shown that when a business sets and closely ties the goals
or objectives of an individual employee to the objectives of the business and the strategies it
needs to undertake, the performance of both the staff member and the business improve.

When establishing the individual objectives or goals for a staff member, it is important to ensure
that these are established using the SMART principle and that the manager and staff member
meet periodically to ensure outcomes are on track. Regular feedback provides opportunities for
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 Chapter 14 Staffing a business 383

clarification of expectations, adjusting the level of difficulty of the goal and gaining recognition.
When the objectives are being set, the following criteria must be addressed:
management
by objectives
• the objectives being set are specific (S) to the tasks being carried out by the job holder (MBO) a process
• the objectives and their outcomes are measurable (M) of setting goals,

• the objectives, while challenging, are achievable/attainable (A) by the job holder
using the SMART
principle, which
• the objectives are understood and accepted by the job holder as relevant (R) relate to an
• the objectives are time-bound (T); that is, they have a time frame in which they are to employee’s
key areas of
be achieved. responsibility. It
creates a sense
The individual staff member’s objectives should then link to those of their team, department of direction
and provides
and the business as a whole. This approach, when adopted business-wide, is referred to as a measure
management by objectives (MBO) and was developed by Peter Drucker in 1954. Adopting this for assessing
management system requires managers and their subordinates at every level within the business the work
performance of
to set objectives relevant to their area of responsibility, and their performance (outcomes) to be the employee.
measured against these. MBO provides a way to focus the efforts of all be measured of the business
to achieving both their personal objectives
as well as those of the business. It creates
a very close relationship between the
way staff are being managed and the
achievement of business objectives.

Staff members who have a clear

understanding of their individual
objectives and how they relate to the
business become more engaged with
their work as they feel they are making
a direct contribution to its success. As
staff members feel a greater sense of
ownership in what the business is trying
to achieve, they will then often make
suggestions or share ideas with their
manager on ways to improve processes Figure 14.2 Setting goals using the SMART principle
that will result in productivity gains.

REVIEW ACTIVITY 14.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Define the term ‘business objectives’ and use it in a sentence to demonstrate your
understanding of the term.
2 Describe the concept of setting objectives using the SMART principle.
3 Outline the relationship between an individual employee setting their objectives and the
objectives of the business.
4 Explain the importance of giving feedback to employees as they work to achieve their
individual objectives.
5 Describe why staff are considered a ‘vital asset’ to the success of a business.

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384 Unit 2 | Establishing a business

14.2 Identification of staffing needs

of the business
Learning intentions – at 14.2.1 Identify, describe and explain the staffing needs of
the end of this chapter businesses
section I will be able to:
14.2.2 Describe and analyse a case study

‘Getting the right people in the right place at the right time with the right skills.’
human resource
management
(HRM) the This quote links directly to the concept of workplace planning. A business, regardless of its size,
methods of
needs to undertake the planning process to ensure it has the right people, with the right skills,
managing the
human element at the right time. This methodical process documents the directions in which the business is
of a business going and helps the business owner or management to make human resource (people) decisions
(employees),
to meet the current and future needs of the business. Any business, to operate effectively and
encompassing
a wide range of efficiently, needs to have an adequate supply of competent and motivated people who are
responsibilities, available to perform the duties and tasks required to meet the objectives of that business.
which are
implemented
to ensure a In a small business, the owner will be responsible for ensuring that the business is properly
good working staffed. As the size of the business grows, more formal human resource management (HRM)
relationship
policies, procedures and practices will be adopted. These will include recruitment and selection
between
employees and procedures, written occupational health and safety (OH&S) guidelines, and performance
the business management and evaluation practices.
and therefore
increase
efficiency The replacement cost associated with hiring the wrong person can be huge. These costs relate
to advertising, interviews, reference checking and induction of the new employee. Added to
this is the time taken to perform these tasks – it all adds up to
being an expensive and time-consuming exercise.

For micro or small businesses, the decision to employ staff

is a major one. Many are very cautious about hiring staff
as they believe these employees may not have the same
commitment to the business and its objectives as the
owner does. For many small to medium businesses, as they
continue to grow, employing more staff is a necessity and it
is therefore vital that the ‘right’ person is employed. Larger
businesses, however, are better placed as they usually have a
human resource management department. This department
is staffed by personnel who are responsible for ensuring the
business is properly staffed.
Figure 14.3 An HRM manager at larger businesses uses formal
processes when hiring the right person for a job.
Identifying the staffing needs of a business requires
management to undertake planning. They need to
determine the knowledge and skills required by a person to fulfil the role they wish to fill. When
undertaking this planning, they need to be aware of:

• the growing demand or emphasis by employees of having flexibility in their working

arrangements; for example, flexible working hours, part-time or job-share arrangements and
work–life balance
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 Chapter 14 Staffing a business 385

• changes in skills and education expectations – with more people seeking tertiary
diversity the
qualifications, obtaining workers skilled in trades may be more difficult inclusion of
• generational change – awareness of the differences between the four generations; namely people from
different
baby boomers, generation X, generation Y (millennials) and generation Z (iGeneration) and
backgrounds,
their approach to work including race,
• diversity in the workplace – having employees from a wide range of ethnic backgrounds, ethnicity, religion,
sex, gender,
physical abilities, gender, sexual orientation and religious beliefs.
socioeconomic
status and age
Businesses should also recognise that new and existing staff can contribute ideas and bring a
fresh outlook to the way a business is operating. Employees, either through their experience
at another business or through their training, may be able to provide insight into a better or
more effective way of performing a task. When a long-term employee leaves, either because
they have retired or resigned, their vacancy can be beneficial as it allows a new employee to
introduce their own fresh ideas and insights. The contributions of long-term employees to
a business are very valuable, but their leaving also provides an opportunity to bring in new
perspectives.

Another benefit of bringing in new talent is that it can help to stimulate new thinking and
creativity, which may act to challenge the way processes are currently undertaken at a business.
Once the employee has been inducted and trained, and is fully integrated into their new
position, they should be encouraged to make suggestions on ways to improve processes. For
instance, if the business was reliant on print media for its advertising, a younger tech-savvy
employee may be able to suggest ways to introduce social media and social networking as
a form of advertising and communication. Internet-based businesses, such as Google and
Facebook, have acknowledged that the success of many of their projects can be attributed to
the creativity and innovation of their employees.

CASE STUDY
14.1
Bunnings:
employees are
considered to be
the heart of their
business

Bunnings states that ‘we want all of our team a real difference to our future success. To
members to have an opportunity to achieve us, diversity means many things including
their potential by providing a great place to different ideas and ways of thinking,
work. Our culture is one where people come demographics, culture and gender. Together
first, where care for others is the norm – and we’re able to deliver far more than we ever
where you’ll have the opportunity to make could have alone.’

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386 Unit 2 | Establishing a business

Bunnings states that its team members are the perspectives, backgrounds and education,
heart of their business. From its stores through which supports them in representing the local
to its support office, they offer real benefits communities they serve and so their team can
and genuine opportunities for career and bring their whole self to work.
personal growth. Bunnings also states that it is
as diverse as the customers who walk through Bunnings believe that a diverse and inclusive
their doors. Together, it’s one big family and team makes everyone feel valued, respected
when you start a role with them, you’ll soon and connected at work. They are committed
find there’s a lot more in store for you than you to creating a safe and supportive work
first imagined. environment for all team members regardless
of age, ability, gender identity, sexual
At Bunnings, they believe a diverse team orientation, race, ethnicity, or background.
creates the best mix of perspectives which
helps them innovate and make better decisions. Source: Adapted from Bunnings website.
They want their team to have diverse thinking,

CASE STUDY ANALYSIS

1 Describe how diversity has become an important consideration for Bunnings when
undertaking its workplace planning.
2 Discuss the advantages and disadvantages that Bunnings would face by actively seeking to
employ an increased number of older workers.

REVIEW ACTIVITY 14.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the factors that a business needs to consider when determining its staffing needs.
2 The current workforce is composed of four generations of workers. Identify the four
generations and describe what qualities of each of these generations can bring to a
business.
3 ‘Businesses should embrace diversity in their workplace’. Explain what is meant by this
statement and provide examples of ways a business can incorporate diversity into its
workplace.
4 Identify and describe two benefits of bringing new staff into a business.
5 Why do you believe many small business owners are reluctant to employ staff?

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 Chapter 14 Staffing a business 387

14.3 Effects of developments in technology

on staffing needs
Learning intentions – at 14.3.1 Identify, describe and discuss technology, and
the end of this chapter contemporary examples and a case study
section I will be able to:
14.3.2 Explain the impact of technology

Many businesses have felt the effect of developments in technology on their staffing needs. robotics the
The wide acceptance of automation, robotics, artificial intelligence, cloud computing and other study, design,
forms of technology has meant that some jobs need to be created while others have been construction
and operation
transformed. of technology
relating to robots
Using technology in a business can lead to an increase in productivity, while also reducing the cost and automated
technology
of labour. Technology has allowed many small businesses to compete more effectively with their
larger competitors as they are able to respond to change faster than a larger business. Machines or automation the
use of automated
automation, however, are not good at creative work, problem solving or the interpersonal skills
technology to
needed by advisers, people holding leadership roles, or people working in teams or in sales. High fulfil functions or
emotional intelligence (EQ) quotients are also becoming more in demand in these areas of business. processes rather
than humans

In the past if a business wanted to create brochures,

flyers, or other promotional material it would engage
another business, usually a graphic design and printing
business, to undertake this work. Technology and
software advances have now been developed to allow
a business to design their own material and publish it
anywhere. Canva, an Australian business established
in 2013, saw the potential of this business idea and
established an online design and publishing tool. The
flow-on effect has been that this business now employs
more than 1000 people worldwide. While this business
provides the technology and software, employees with
a creative flair are still required to have their input into
the product produced.

Technology has also provided opportunities for jobs to

be created building software to help other businesses Figure 14.4 The changing role of customer service as customers pay
using technology
make sense of customer feedback and store customer
data. Dovetail, a Sydney-based start-up, uses cloud-
based software to help businesses make sense of customers’ conversations and provides a place to
store customer data and collaborate on it. The customer base of Dovetail includes Porsche, Canva,
Harvard University and IBM. Dovetail is growing rapidly, expecting that it will need to more than
double its number of employees in 2022.

ACTIVITY 14.1
1 Access the websites of Canva and Dovetail. Describe the nature of their businesses.
2 Identify and describe the skills and abilities these businesses would be looking for when
assessing their staffing needs.

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388 Unit 2 | Establishing a business

Advances in technology have made communication a lot easier and faster. Previously, if a
business wanted to communicate in writing with another business or a person, the manager
would need to dictate a letter to a typist or secretary, who would then type it and send it
through the post to that other person. Today, information technology makes communication
a far easier and quicker process. Communication via email does not require the writer to
have secretarial skills. It also means that the response to the email can be very quick. The role
of secretary in many businesses has been made redundant and replaced with an employee
performing a broader role as a personal assistant to a manager.

Technology has also provided businesses with the opportunity to create flexible workplaces. An
employee with a laptop computer, tablet, or mobile phone with internet connection does not
need to be at their workplace to transact business. This saves the business the cost of providing a
separate office space for that employee because they can use any desk available at the workplace
or work from home, which has been the preferred option during the COVID-19 pandemic. In the
retail environment, the use of barcodes that are scanned to record sale of stock has resulted in
many cashiers losing their job or being freed up to perform other duties. Businesses now have
the ability to automate certain functions previously undertaken by an employee. For instance,
bookkeeping tasks were once done manually, but these tasks can now be handled using
applications such as Xero and MYOB. These computer packages also generate financial reports,
which previously would have required an employee with more knowledge to prepare.

CASE STUDY
14.2

People at the heart

of Woolies’ service

Brad Banducci, CEO of Woolworths, states

that ‘technological advances in automation,
predictive analytic, AI and digital are
transforming the core retail processes driving
our industry forward and helping us to do a
better job of meeting our customers’ changing
needs. But they also change the fundamental
nature of the day-to-day work many of our
teams do.

‘Over time our team members will do fewer

manual and repetitive tasks and more work that
Figure 14.5 Automated checkouts at Woolworths
requires judgment, creativity and interpersonal
skills.’ The fastest-growing role in Woolworths is Source: Adapted from Brad Banducci, ‘No team
that of the online personal shopper, who hand- member left behind: My vision for the retail jobs of
picks orders for customers. the future’, The Age, 7 February 2021.

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 Chapter 14 Staffing a business 389

CASE STUDY ANALYSIS

1 Identify the technological advances that Brad Banducci states are impacting on the way
Woolworths operates.
2 Identify the tasks that you believe will be replaced by these technological advances.
3 Describe the role of the employee who is an ‘online personal shopper’.

ACTIVITY 14.2
Select five occupations/jobs in the list below. Identify which forms of technology have replaced or
altered tasks forming part of those jobs:

• shop assistants • builders • TV reporters

• newspaper reporters • musicians • authors
• travel agents • automotive mechanics • taxi drivers
• medical personnel (e.g. • pilots • farmers.
doctors and nurses) • teachers

REVIEW ACTIVITY 14.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 The COVID-19 pandemic forced many workplaces to change the way they operated. Identify
the various technologies that assisted employees to work from home.
2 Using technology in a business can result in an increase in productivity, while also reducing
the cost of labour. Explain how this can occur.
3 In your class, conduct a quick survey to find out how many students have part-time jobs.
a Identify what technology they use as part of performing that job.
b Do they believe that using this technology makes them more productive? If so, why?

4 Identify which jobs have been replaced with these four examples of technology.

a Automated teller machine b Self-check-in at airport

c Myki system d Driverless vehicles at mining sites

5 Discuss whether you believe the technological developments referred to in question 4 have
had a positive or negative effect on the job and the tasks of the job holder.

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390 Unit 2 | Establishing a business

Chapter 14 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 3, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Staff Employee SMART principle

Management by objectives Human resource Diversity

management

Technology Robotics Automation

Extension question
‘If a business does not adopt technology, it will find it very difficult to be competitive.’

Separate the class into two groups to discuss this statement. One group is to take the negative
side of the discussion, the other the positive side. Following the group work, each group is to
nominate a spokesperson to present their discussion points to the entire class.

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 Chapter review 391

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

14.1 Relationship 14.1.1 Identify, define, Review activity 14.1: Part 1 & Yes No
between the describe and apply business Part 2 (Q1)
performance of staff management terms and
and achieving business concepts
objectives

14.1.2 Analyse the Review activity 14.1: Part 1 & Yes No

importance of employees to Part 2 (Q2–5)
a business

14.2 Identification of 14.2.1 Identify, describe and Case study 14.1 Yes No
staffing needs of the explain the staffing needs of Review activity 14.2: Part 1 &
business businesses Part 2

14.2.2 Describe and analyse a Case study 14.1 Yes No

case study

14.3 Effects of 14.3.1 Identify, describe and Activity 14.1 Yes No

developments in discuss technology, and Activity 14.2
technology on staffing contemporary examples and Case study 14.2
needs a case study Review activity 14.3: Part 1 &
Part 2
Extension

14.3.2 Explain the impact of Activity 14.2 Yes No

technology Case study 14.2
Review activity 14.3: Part 1 &
Part 2
Extension

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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 CHAPTER 15
Recruitment and selection
of staff
‘The key for us, number one, has always been hiring very
smart people.’
Bill Gates (1955– )

‘I’ve learned over the years that, when you have really good
people, you don’t have to baby them. By expecting them to
do great things, you can get them to do great things.’
Steve Jobs (1955–2011)
About the authors:
Bill Gates is an American business magnate, software developer, investor, author
and philanthropist. He is a co-founder of Microsoft.
Steve Jobs was an American business magnate, industrial designer, investor and
media proprietor. He was a co-founder of Apple Inc.

KICKSTARTER ACTIVITY
Bill Gates and Steve Jobs appear to have a similar philosophy relating to
hiring their staff. Explain what you believe to be their philosophy and the
impact it has on the success of their respective businesses.

CHAPTER OVERVIEW

In this chapter students will gain an understanding of the processes

undertaken by a business in relation to the recruitment and selection
of staff. These activities form part of the establishment phase of
the employment relationship between a business and one of its
employees (staff member).
For the prospective employee, the ad or notice placed in the media or
employment agency is the commencement of the relationship. For the
business, the phase commenced prior to that, when it undertook its
workforce planning (outlined in the previous chapter). It is important
that the business takes great care in ensuring the right person is
ultimately selected, because to make the wrong choice could be
extremely costly.

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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will
be able to:

Job analysis and its 15.1 J

 ob analysis and its relationship to job design, job
relationship to job design, description and job specification
job description and job 15.1.1 Identify and explain job analysis, job design, job
specification description and job specification

Recruitment methods 15.2 Recruitment methods

and the advantages and 15.2.1 Outline and describe internal recruitment methods
disadvantages of each 15.2.2 Outline and describe advantages and disadvantages
method: of internal and external recruitment methods
• internal such as intranet 15.2.3 Investigate, outline, describe, explain and justify
and word of mouth external recruitment methods
• external such as 15.2.4 Analyse case studies and contemporary examples
websites, online of business management
recruitment agencies and 15.2.5 Apply business management knowledge to
social media practical and/or simulated business situations

Selection methods such as 15.3 Selection methods

interview, psychological 15.3.1 Identify selection methods
testing, work testing, 15.3.2 Outline online selection
online selection and 15.3.3 List and explain testing
the advantages and 15.3.4 Describe and analyse selection processes
disadvantages of each 15.3.5 Explain advantages and disadvantages of each
selection method
15.3.6 Analyse case studies and contemporary examples
of business management
15.3.7 Apply business management knowledge to
practical and/or simulated business situations

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead

CHAPTER 15
Chapter 15 Recruitment
and selection of staff

15.1 Job analysis and its 15.2 Recruitment 15.3 Selection methods
relationship to job methods
design, job description
and job specification

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394 Unit 2 | Establishing a business

15.1 Job analysis and its relationship to

job design, job description and job
specification
Learning intentions – 15.1.1 Identify and explain job analysis, job design, job
at the end of this description and job specification
chapter section I will
be able to:

job analysis
Job analysis is the systematic process of looking at a particular job to find out exactly what it
a detailed entails, and what kind of skills and experience people should have to do the job effectively. Job
examination of analysis generates the source material for preparing the job description and job specification.
a certain job,
including an
analysis of the Methods used to conduct job analysis
specific duties
and requirements
of the job and Table 15.1 Job analysis methods
their relative
importance
Method Explanation
job a collection of
tasks and duties
that an employee 1 Interview the current job Possibly the most widely used method; however, can be
performs holder time-consuming.

2 Questionnaires The current job holder describes their job by completing a

detailed/structured questionnaire that uses both closed and
open questions, which allow for additional input from the job
holder.
This method allows for information on a large number of
jobs to be collected within a short period of time.

3 Observation The current job holder is observed, or a video made of them

performing their job.

4 Log books and daily This method is particularly useful for analysing professional
work diaries of activities or senior management positions where observation and
completed by the job questioning would not give a true indication of the job.
holder

5 Supervisory reports Details are provided by the job holder’s supervisor to give
their perception of what the job entails. Reports can act to
verify information gained from the job holder and provide
additional information as to the expectations of the task.

When undertaking a job analysis, it is recommended that the steps set out in Figure 15.1 are
followed, as job analysis generates the source material for preparing the job description and job
specification.

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 Chapter 15 Recruitment and selection of staff 395

Job design
The purpose of job analysis is to look
job design
at and analyse the current jobs being 1 Collect and record information
the grouping
performed at a workplace. It can be used together of tasks
for a particular
as input into designing a job. Job design 2 Check the job information for accuracy job, which should
involves ensuring that the job meets incorporate
the objectives of the employer and the variety and
employee. For the employee this may 3 Write a job description challenge for the
job holder
mean the job contains an appropriate
degree of variety and challenge for the 4 Determine the skills, abilities and job enlargement
knowledge required to perform the job increasing the
job holder, while also building in an size or level
opportunity for personal development of difficulty of
5 Update the information periodically a particular
in the role. Additional motivation and
position by
job satisfaction can be provided to the merging various
Figure 15.1 Flowchart of steps involved in conducting a job
job holder by widening the job scope, analysis. tasks and
referred to as job enlargement. This responsibilities at
a similar level
involves making the job bigger or more
challenging by combining various operations at a similar level (horizontal). Another way to increase job enrichment
making a job
the challenge of the job is to vertically expand the job by increasing its depth of content as well as more challenging,
the degree of control the job holder has over their work. This is referred to as job enrichment. which requires
workers to
use their full
Job rotation is a method that can be used to reduce boredom for a job holder while exposing capabilities and
them to more than one task. This acts to increase the skills of that employee and create a more gain personal
flexible workforce. While not necessarily motivating the employee, it does make them a more growth

valuable team member. job rotation

workers are
moved between
Designing jobs to be part of a team is a growing practice in business. It provides the
different jobs
opportunity for the job holder to be part of a network of jobs and feel part of a collaborative to increase the
approach to achieving the business objectives, while also providing social interaction between variety of work
and to create a
team members. Creating quality circles/teams provides an excellent method for encouraging
more flexible
participation of all employees to accept challenging tasks and responsibilities. These teams of workforce
workers meet regularly to discuss quality and production issues and propose changes that can
team a group of
then be put forward to management. employees with
different tasks
Figure 15.2 Jobs are often designed for employees to be part of a team.
and skills working
together on a
common project,
service, or goal

quality circle
a group of
workers who
meet regularly to
discuss quality
and production.
Any proposed
changes to
production
methods are then
put forward to
management.

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396 Unit 2 | Establishing a business

Job descriptions and job specifications

job description a written A job description is a written statement of tasks performed, how they are done and why
overview of a particular they are done. Typically, it describes the job title, job summary, responsibilities, duties
position, including
details such as the and activities, relationships, where the position fits into the business, accountability and
position title, duties and special circumstances, and also states key performance indicators.
responsibilities, and its
position in the overall
organisation After writing the job description, a job specification is created that identifies the
experience, qualifications, skills, abilities, knowledge and personal qualities or
job specification
a detailed listing of
requirements needed for the job. These could include requirements such as a current
the personal skills and driver’s licence, forklift licence, or ability to speak a foreign language. Regular updating of
characteristics required both job descriptions and job specifications is essential, as jobs constantly change due to
to perform a particular
job
the introduction of technology or new procedures, or the creation of a new job.

CASE STUDY
15.1

Job description
and job/person
specification

Read the example job description and job/ ‘Bootwear’ is its global brand with 60 stores,
person specification below and answer the with the business overseeing a global supply
questions that follow. chain across three continents, selling its
products in Australia and New Zealand.
Bootwear Pty Ltd is a family-owned business
based in Melbourne, Victoria. The company Position: Store Manager
has 250 employees based across Australia Location: Richmond store, Melbourne
and New Zealand, holding positions ranging Reports to: Manager, Retail Stores
from executive management to administration,
sales, warehouse and manufacturing. Key responsibilities

• Ensure high levels of customer satisfaction

through excellent sales service
• Maintain outstanding store condition and
visual merchandising standards
• Maintain a fully stocked store
• Ascertain customers’ needs and wants
• Recommend and display items that match
customer needs
• Welcome and greet customers
• Manage point-of-sale processes
• Be actively involved in the receiving of new
Figure 15.3 Store Manager required for Richmond store shipments of stock
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 Chapter 15 Recruitment and selection of staff 397

• Keep up to date with product information • Understanding of sales principles and

• Accurately describe product features and customer service practices
benefits • Track record of over-achieving sales quota
• Recruit, select and manage sales assistants • Solid communication and interpersonal
• Follow all Bootwear Pty Ltd policies and skills
procedures • Customer service focus
• Friendly, helpful, confident and engaging
Job/person specifications personality
• Proficiency in English
• Proven working experience in retail sales • Good administration skills
and store management • VCE or higher qualification

CASE STUDY ANALYSIS

1 Identify at what level in the management hierarchy of Bootwear this position sits. Justify
your decision.
2 Where is this position located and would the job holder be expected to travel to other
stores of Bootwear to undertake their role?
3 Explain why it would be important for the job holder to have specific knowledge, skills and
experience to undertake this position. Link your comments to the major responsibilities
outlined in the job description.
4 Having created this job description and job/person specification, Bootwear Pty Ltd would now
like to recruit for this position. Construct a job advertisement for Store Manager, Richmond.

Both the job description and specification are used for recruitment purposes, particularly when
designing job advertisements. They can also form background material for designing interview
questions, assigning work, appraising employees and for general planning.

REVIEW ACTIVITY 15.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify and explain the five common methods used to undertake a job analysis.
2 Explain the importance of good job design to a business wanting to achieve its objectives.
3 Explain how job enrichment and job rotation can help a business to become more productive.
4 Explain the difference between a job description and a job specification.
5 Identify how the information contained in the job description and job specification can be
used as background material and for what.

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398 Unit 2 | Establishing a business

15.2 Recruitment methods

Learning intentions – 15.2.1 Outline and describe internal recruitment methods
at the end of this
chapter section I will 15.2.2 Outline and describe advantages and disadvantages
be able to: of internal and external recruitment methods

15.2.3 Investigate, outline, describe, explain and justify

external recruitment methods

15.2.4 Analyse case studies and contemporary examples of

business management

15.2.5 Apply business management knowledge to

practical and/or simulated business situations

Recruitment involves identifying, locating and attracting a pool of qualified applicants,

recruitment
the process and, in its wider sense, it includes selecting the right person for the job. (Sometimes though
of locating ‘recruitment’ is used for the process of getting applicants in, and ‘selection’ is used for the
and hiring the
process of deciding the successful candidate.). More importantly, it needs to attract the ‘right’
most suitable
applicants for a potential candidates to the ‘right’ openings within a business. From this pool, those who most
position closely match the job specification should be selected for an interview.

Recruitment is a two-way process; it involves information being given by the business and
received from the applicant. Effective communication is therefore very important.

The recruitment process begins with:

• identifying human resource requirements
• determining where the qualified pool of applicants can be found (recruitment sources)
• choosing a specific means of attracting potential employees to the business
(recruitment methods).

Job analysis

Job design,
Recruitment job
Selection
and description
methods
selection and job
specification

Recruitment
methods,
advantages
and
disadvantages

Figure 15.4 Staff recruitment and selection considerations

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 Chapter 15 Recruitment and selection of staff 399

Identifying human resource requirements equal employment

opportunity (EEO)
It is the role of the person in the business responsible for human resources to ensure that the practice of
the people recruited and ultimately selected have the right skills and attributes required by making sure that
all applicants have
the business to assist in achieving its business objectives. The strategies and culture of the
an equal and fair
business also determine whether the focus is on technical skills and formal qualifications, or chance to secure a
personality, the ability to ‘fit in’ and the potential for personal and career development. position regardless
of their age, race,
sex, ethnicity, or
For example, Macpac, an Australian and New Zealander chain of retail stores selling camping, hiking physical or mental
and kayaking equipment and outdoor clothing and footwear, would be looking for applicants disability
who are passionate about adventurous, outdoor-related activities and lifestyles and possibly have internal recruitment
retail experience. In contrast, the major banks and finance companies would place more emphasis the process of
on an applicant having strong banking and finance skills and formal qualifications in business or assessing and
selecting from
economics. existing staff at
a business who
While smaller-sized businesses often do not have a formal recruitment policy, they should would be qualified
and appropriate to
still try to approach recruiting of staff in a consistent manner. Larger-sized businesses usually perform a vacant
have a formal recruitment policy that provides the framework for a consistent approach to role
recruitment throughout the business. It will cover items such as: external recruitment
the process
• formalised recruitment and selection procedures; for example, use of job descriptions of assessing
and selecting
and job specifications to generate advertisements, where to advertise, creating a short list candidates, other
against established selection criteria, composition of interview panel and question types, than existing staff
testing procedures, reference checks, advising successful and unsuccessful applicants, at a business who
would be qualified
negotiating terms and conditions of employment and appropriate to
• ensuring legal compliance relating to equal employment opportunity (EEO) and anti- perform a vacant
discrimination in advertising jobs and interviewing applicants role

• a positive approach to recruitment of people with disabilities, minority groups, women, career advancement
older workers and First Nations Australians moving from a

• recruitment methods – whether there is a preference to search first for applicants internally junior-level position
to a more senior-
and then use external methods. level position in a
business

Recruitment methods transfer a sideways

movement of
Businesses, human resources managers and other staffing professionals can use a variety employees within
the same level, from
of recruitment methods (internal or external) to assess and select personnel who would be one job to another
qualified to fill and perform a job vacancy within a business.
promotion the
advancement in
rank or position of
Internal recruitment an employee within
a business related
As part of their recruitment policy, many businesses require that an open invitation is given to to their previous
position or job tasks
all current employees to apply for job vacancies (internal recruitment) before entering into
the external recruitment process. This allows individuals within the business the opportunity intranet the internal
or private network
for career advancement by either transferring or being promoted. One internal method is
of a business
using the intranet of the business to publish and accept applications for the vacant position. based on internet
A direct approach (word-of-mouth) or recommendation can also be made to an employee technology
by a member of the human resources department or the employee’s manager or supervisor. word-of-mouth
This will often occur when an employee has been recognised as having career advancement an oral or written
recommendation by
potential. A job description and job specification should be made available to potential
someone
applicants for them to judge whether they possess the necessary knowledge, skills and
abilities, formal qualifications and personal requirements.

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400 Unit 2 | Establishing a business

application
Internal applicants are then usually requested to submit a formal letter of application. The
the processes submission of a resumé (curriculum vitae) is not always requested because the business is
involved in already familiar with the accomplishments of the employee.
applying for
an advertised
position, usually Table 15.2 outlines some of the advantages and disadvantages of recruiting internally.
completed
through a letter
or form Table 15.2 Advantages and disadvantages of internal recruitment

Advantages Disadvantages

Quicker adjustment to the position; no Employees may be promoted beyond

induction needed competency level

Incentive for employees to gain career No new ideas introduced; could stifle
progression creativity and innovation

Acts as a motivator and morale booster for Rivalry, infighting and negative impact on
employees of the business morale for unsuccessful applicants

Business knows the applicant; applicant Any poor work habits will remain and
knows the business and its objectives, encourages bureaucracy
corporate culture, policies and procedures

Cheaper, as no external recruitment agencies If the successful internal applicant’s position

need to be paid needs to be filled, it may create the need to
select from an external candidate

External recruitment
A variety of methods can be used to locate and attract external candidates. Most businesses
would choose a couple of methods to reach the largest pool of potential applicants. Table 15.3
illustrates the various advantages and disadvantages associated with recruiting externally.

Table 15.3 Advantages and disadvantages of external recruitment

Advantages Disadvantages

Larger pool of applicants to choose from Attracting/selecting new employee is time-

consuming and more difficult

New insights, skills and abilities brought into Induction process takes longer
the business

Costs can be lower, as business does not have Limits possible career advancement of
to fill two positions existing employees.

New approach to work, issues and problems Greater element of risk, as new employee is
an ‘unknown’ person

When qualified staff are in good supply, it may Costly form of recruitment
be possible to pay an external recruit less

Current employees may feel resentful if they

were overlooked

When qualified staff are in short supply, the

employer may have to pay more than previously
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 Chapter 15 Recruitment and selection of staff 401

The use of technology has brought big changes to the way that businesses now recruit new
employees. In the past, a business that had job openings would place an advertisement in a
local, state, or national newspaper. For instance, the Saturday Age (Careers section) contained
the most employment advertisements for jobs located in Melbourne and Victoria. The
Australian was the choice of newspaper for jobs in other parts of Australia. If a business still
wants to use this form of written media, then more senior positions will be advertised, using
block advertisements, in the front section of the papers. Other positions will be found in the
employment section, which is categorised by job type; for example, education, health or sales.

For an advertisement to be effective, it should contain an attention-grabbing headline and details

that inform the potential applicant about the position (i.e. job title, salary, location, key roles and
duties) and any relevant personal attributes, such as qualifications, knowledge, skills and abilities,
required to perform the job. Finally, contact details and the application closing date need to be
included. A small business may also choose to advertise by sticking a ‘help wanted’ sign on the
door of their business. Some employers still use these methods; however, more are turning to a
multifaceted approach to recruiting applicants such as online job boards, social networking sites
and websites.

Websites
Many businesses have created a careers section on their own website where applicants can go
to search online for current job vacancies. Using their corporate website gives the applicant an
opportunity to carry out research into that business to see what the business actually does, the
products it makes and/or sells or services it provides, and its mission, vision and the values it holds.

Using a website to publish a job advertisement is considerably cheaper since online recruiting
is not bound by traditional print advertising’s line or word costs. Also, the advertisements
tend to be more detailed and comprehensive. After reading the advertisement, applicants are
requested to submit their letter of application and resumé online. This allows for immediate
acknowledgement of receipt of the application.

ACTIVITY 15.1
Go to the careers pages of these business websites:
• Smiggle (part of the Just Group)
• ALDI
• Canva.
1 Investigate the careers section and identify any current job vacancies.
2 Outline the procedure that applicants need to follow to apply for these positions.
3 How would you rate the career pages websites of these businesses? Explain what you like
or dislike about these pages and whether the information provided is useful.

Online recruitment agencies

There are many online recruitment agencies operating in Australia, both in capital cities and
regional areas, and specialising in certain employment sectors. Traditionally, a recruitment agency
worked on behalf of an employer to find job applicants. In more recent times, these agencies have
developed their own databases of people seeking employment so they may match these to job
vacancies as they arise. The agency will ask the prospective job seeker to create a profile on its
website, attend an interview, or to come into its office to undertake an aptitude test.

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ACTIVITY 15.2
Go to the website of each of the well-known online recruitment agencies below:
• LinkedIn
• SEEK
• Adecco
• Programmed/Persolkelly.
1 Identify the types of jobs being advertised on the four websites – are they covering jobs in
a range of industries or are they specialising in one industry?
2 Select two of the websites and summarise the details of one job vacancy on each site.
3 Describe how the website Programmed/Persolkelly differs from the other websites in the
jobs it lists.

Social media
The use of social media as a recruitment method has been rapidly
expanding over the past decade. Businesses are increasingly using
social networking sites such as:

• LinkedIn – the majority of companies use this site for social media
recruiting via LinkedIn Talent Solutions, having members from more
than 170 different industries in over 200 countries. Businesses can
advertise jobs on LinkedIn as well as create career pages to attract and
engage talented candidates. The network also enables businesses to
Figure 15.5 The use of social media as a recruitment
easily gain access to candidates, checking out their personal life, views
method has become more common. and interests while also finding out about their career history, skills
and qualifications. An employer can ask for an employee referral for
a particular position vacancy. LinkedIn provides a way of staying in
touch with former, valued and trusted employees whom a business
may want to attract back in future times or rely upon for a referral.
Using the key word search facility allows a business to search for
people with the required qualifications and experience who they can
then contact directly to see if they are interested in a vacant position
with their business.
• Facebook – having 400 million users, it ranks as the second most
popular social networking site and is a cost-effective way to hire
employees. Businesses can join employment groups such as Digital
marketing group to post job vacancies and wait for candidates to
Figure 15.6 For business purposes, popular social
comment and enquire about the position the business is interested in
media sites include LinkedIn, Facebook and Twitter. filling. The primary role of Facebook is for talking and communicating
with family and friends. For this reason, some candidates do not want
to divulge their professional activities and information, nor want their current employer to find
out they are searching for another job if they need to apply via Facebook.
job board
websites where
• Twitter – Businesses post job openings on their own account. This social media channel ranks
businesses pay
third in popularity for social media recruiting. The limit of 280 characters in a post restricts
a fee to the job the business effectively displaying all the important job details in the post.
board to list
their job on the
site and will
A job board is another form of social media being used by businesses to post vacant positions.
often accept These are websites where businesses pay a fee to the job board to list their job on the site
job applications and will often accept job applications directly from the job board. Seek is one of the largest
directly from the
job board
job board providers in Australia. Other more specialised or niche-oriented boards focus on a
particular industry, such as information technology, education, or healthcare jobs.
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 Chapter 15 Recruitment and selection of staff 403

Social media has many benefits, such as being able to gain an immediate response, being lower
in cost and being able to reach a larger target market in its search for fresh talent. It can pose
problems, however, for economically disadvantaged candidates who do not have access to
social media channels.

There are also a number of other methods that can be used when attracting applicants for a
job, such as:

• referrals of candidates from one of the current employees at the business

• walk-in applications (unsolicited) where the prospective candidate approaches the business
on the off-chance there may be a job vacancy
• government recruitment agencies, where unemployed people needing assistance are
directed to employers generally looking for administrative or manual positions
• career fairs held by universities or TAFEs assisting graduates to gain positions.

CASE STUDY
15.2

Seasonal workers
job advertisement

This case study is available in the Interactive Textbook.

  

REVIEW ACTIVITY 15.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Outline the benefits for the business from using internal recruitment as a way to fill a job
vacancy.
2 Outline the benefits for the current employees if a business uses internal recruitment as a
way to fill a job vacancy.
3 Identify and describe the benefits to a business of using external recruitment methods as
its way of finding suitable qualified applicants for vacant positions within the business.
4 Outline the benefits to an employee within a business if, through the internal recruitment
process, the position they are applying for results in career advancement in the form of a
promotion.
5 Following an unsuccessful internal search within the business for a suitable candidate, it is
decided to now advertise externally for candidates to fill the position. Identify and describe
the impact of recruiting an external candidate to join the business.

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404 Unit 2 | Establishing a business

15.3 Selection methods

Learning intentions – 15.3.1 Identify selection methods
at the end of this
chapter section I will 15.3.2 Outline online selection
be able to:
15.3.3 List and explain testing

15.3.4 Describe and analyse selection processes

15.3.5 Explain advantages and disadvantages of each

selection method

15.3.6 Analyse case studies and contemporary examples of

business management

15.3.7 Apply business management knowledge to

practical and/or simulated business situations

selection
Within the selection process, a range of methods are used to ensure the best applicant is
a process found. The actual order of using these selection devices may differ depending on the particular
undertaken by business. All steps in the selection process perform an important role when trying to select the
a business to
decide whether to
right person for the job position that a business wants to fill.
make a job offer
to a candidate
Receipt of application
It is not only polite but good business practice to acknowledge any application made by a job
candidate via a telephone call or a simple letter, email or text of acknowledgement. It should
be noted that this practice is not as common as it used to be due to increased reliance by
businesses on online applications.

Some businesses require an application form to be completed. It acts as a screening tool,

application form
a document that seeking information the business sees as important. Care needs to be taken when preparing
covers basic application forms to ensure they do not breach equal employment opportunity provisions.
information
Questions relating to marital status, ethnic origin, or age (unless a minimum requirement is
about a potential
employee, such necessary for the position, such as bar work) should not be included.
as qualifications,
experience and
job-related data Initial screening
This step eliminates applicants who do not possess the skills and expertise required for the
position. By reading through the cover letters, resumés and application forms (if required), a
short list of applicants to be interviewed is created. When reviewing applications, there are
common areas often considered: hobbies and interests, accomplishments/results, any gaps in
employment history, stability in employment, related experience to job advertised, appearance
and overall structure of resumé, career progression, education and qualifications.

For larger businesses that attract many applicants, online testing is sometimes used to
determine whether or not an applicant meets the basic requirements of the role. They could be
assessed on problem-solving abilities or technical expertise in the area they are applying for.
Timed tests could be simple multiple-choice questions or games that require critical thinking.
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 Chapter 15 Recruitment and selection of staff 405

Often a rating system is used: ‘Yes’ (will get an interview), ‘No’ (definitely no interview) and
‘Maybe’ (consider again later). If the applicant is to be interviewed, they are normally contacted
by telephone and a mutually convenient time is arranged.

Offer job
Receipt of Screening Reference
Interviews Testing to the best
applications and shortlist checking
applicant

Figure 15.7 The selection process

CASE STUDY
15.3

Bright futures at
Maccas

Our jobs work for you, and that’s our people Our people are our greatest asset and since
promise. we opened our first restaurant, we’ve had the
privilege of providing a job full of opportunities
Maccas® is looking for motivated, passionate to more than 1.3 million Australians at our 990
people who prioritize health and safety as restaurants. We believe in equipping those who
much as we do, so apply now to join the work with us, with technical and soft skills that
Macca’s family. give them the foundations to forge a career
within McDonald’s and beyond.
At Maccas, we attract people who love to
create and serve seriously great food, possess We create opportunities for all employees to
an infectious attitude, provide world-class work flexibly in a way that is meaningful and
customer service, and most importantly, like fulfilling for them, whilst recognising and
to have fun while they’re working! Whether it valuing our people in an enjoyable, energising
is building skills for life or giving you flexibility environment.
to fit in with your lifestyle, we create jobs that
work for you. Source: McDonald’s Australia website, ‘Join our crew’.

CASE STUDY ANALYSIS

Use your favourite search engine to find the McDonald’s careers website to assist you to answer
the following questions.

1 Choose one of the positions posted in the Job Search section of the website for Restaurant
staff. Identify the position chosen.
2 Outline the information McDonald’s requires to be provided in an applicant’s online application.
3 In addition to the online application, do they require applicants to submit a resumé? If so, why?

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4 Identify if McDonald’s asks applicants to nominate the social media they use. Which ones
do they ask about?
5 Explain why the hiring manager wants to know the applicant’s interest in working at the
store where the position is being offered.

Interviews
The employment interview is the most commonly used selection technique. It is the
interview
a meeting that opportunity for an employer and the candidate to learn more about each other. Some
is held between businesses use video communication such as Zoom or FaceTime to conduct initial interviews
an employer, or
(virtual interviews) with the aim of screening candidates and narrowing down the pool of
a representative
of an employer, applicants to be invited for a face-to-face interview. This is also a way to reduce the expense
and an applicant involved in interviewing candidates who are not local.
in order to
determine
whether or not an It is quite common that an applicant will attend several rounds of interview. The first in-person
applicant should interview generally seeks to find out about the applicant’s experience, skills, work history and
be shortlisted
whether they have the personal qualities and qualifications the business is seeking from its
or hired
workers. The number of interviews often reflects the level of seniority of the position in the
business. For example, a shop assistant may only have one face-to-face interview with the
owner of a small business, whereas a senior manager in a larger business will go through a far
more rigorous and time-consuming interview process.

The most common interview style is structured,

where a series of questions are asked based on
the job description and specification. The same
questions would be asked of all applicants
for the job making comparisons fairer.
Alternatively, an unstructured interview can
be used where the applicant is encouraged to
do most of the talking with not much direction
from the interviewer.

There are certain elements that must be

addressed if a selection interview is to be
successful and produce the desired outcome.

1 Plan for the interview

Figure 15.8 Larger businesses usually have a formal recruitment policy, which
requires then to conduct a panel interview. The location must be arranged, and the
candidate advised of the time and location.
The location should be private (such as a conference room) and free of interruptions. Seating
arrangements need to be made to ensure no confronting or intimidating situations are created.
The interview panel must be formed and given all relevant information on the candidate and
the job; that is, personal attributes, experience, skills and qualifications required for the job and
any other relevant business details. They should be directed to look for any gaps in employment
history, vague wording, inflated job titles and frequent job changes. In addition, the panel
meets to formulate a series of questions to put to each candidate during the interview.

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 Chapter 15 Recruitment and selection of staff 407

2 Opening the interview

The candidate should be greeted with a handshake
(when it is safe to do so) by all parties and a little ‘small
talk’ entered into to gain rapport and put the candidate
more at ease. It is important to set the scene by
outlining how the interview will be conducted.

3 The main parts of the interview

a Questioning – there are two main types of
questions that can be asked during the interview:
• Open questions usually require more than a
few words in response, giving the applicant
opportunity to answer the question. Open
questions help to reveal thoughts, needs,
feelings and opinions. They also require the Figure 15.9 Smaller companies may have a more informal
applicant to think before answering. interview process.

• Closed questions only require a short ‘yes’ or

‘no’ answer, or require the candidate to pick ‘X’ or ‘Y’. They require very little thinking and
talking. Closed questions are used to elicit specific facts or details (e.g. ‘Do you have a
current work visa?’).
– It is important to remember that employers believe that past behaviour is the best
predictor of future behaviour. Questions that require the interviewee to explain past
experiences and behaviours should be asked; for example, ‘Tell me about a time
you encountered a difficult customer and how you dealt with the situation’. Often
the interviewer will need to gain further details by using follow-up questions. The
candidate should be allowed to talk for approximately 70 per cent of the time, with
the interviewing panel being active listeners. Watch the body language of both the
candidate and the panel. Non-verbal signs, such as facial expressions, fidgeting, arm
movements and the like give important clues as to what people are really thinking.
b Understanding the legal requirements – it is important to be aware of areas of discrimination
(race/nationality, marital status, age, pregnancy, physical features, impairment/disability,
religious belief or activity, lawful sexual activity, parental status) when questioning and
forming opinions of suitable applicants. This will help to protect the panel from any
accusations of discriminatory or unfair interviewing practices.
c Selling the job and the business – explain the key aspects of the job and where it fits within
the business. Ask the applicant if they have any questions or need any more information.

4 Close the interview

Give a firm handshake (if safe) and thank the applicant for coming. Advise them of the next
stage in the process.

5 Evaluate the applicants

All panel members need to finalise their notes immediately after the interview. Assessment
capability
should be made only on the candidate’s skills, knowledge and capabilities relative to the job competence to
requirements and you may be asked to explain your decision and justify your choice. (Hint: do perform a task
not dismiss your gut feelings about a person.)

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408 Unit 2 | Establishing a business

Table 15.4 Advantages and disadvantages of using interviews as a selection method

Advantages Disadvantages

Allows the parties (interviewer and applicant) the To be effective it generally requires more than one
opportunity to start developing their relationship interview to make the selection

Permits the interviewer to gain a lot of information Time-consuming as time needs to be found for:
about the applicant • preparing for the interview by the interviewer or
panel of interviewers
• conducting interviews
• interpreting the responses
• making recommendations on which candidates
should progress to the next round of interviews

Provides an opportunity for the applicant to find out Potential for interviewer bias
information about the business and what the job involves

Provides the interviewer with the opportunity to pose Costly due to personnel costs associated with
problem or behavioural scenarios to the applicant and interview and panel members
then to make a judgement of their problem-solving skills

Allows the applicant to make clear any Inefficient if the interviewer and panel members are
misunderstanding or mistake they may have made not trained or experienced in how to conduct an
during the interview interview

May not select the best person for the job if the latter
does not require strong verbal and interpersonal
skills for a job that does not require such

Online selection
Some businesses now use a combination of selection methods to assist them to find the best
candidate for the job. For example, when recruiting, the Department of Defence requires
applicants to complete certain components online and, if successful, they will be called in to
an assessment centre for a face-to-face interview. This practice is also common with many
state and federal government departments and large businesses. Applicants access the
online application form on the website and need to provide the required information for each
selection criterion set out for the position. The information provided must be clear and concise
as it is used as the basis for short-listing applicants as well as for their selection.

For employers, using an online application and selection process can have some advantages. It
is cost-effective and reduces the cost associated with hiring. Receiving job applications in digital
format makes them easy to store, sort and screen for key words, which saves time when wanting to
create a short list of people to be interviewed. Using the online application also allows the business
to cast a wider net for finding the right candidate, as job openings can easily be advertised and
spread on the internet through job-posting sites, company websites, blogs and social media.

The ease of applying online means that a business may receive applications from unqualified
applicants or people who are not seriously interested in the position. This places more
importance on having an effective screening strategy in place to reduce the number of
applicants to a manageable number to process for selection.
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 Chapter 15 Recruitment and selection of staff 409

Another issue with using standardised online

forms as the basis of sorting and selecting
applicants is that it often constrains the
applicant from uploading some of the data
that would be contained in their traditional
resumé. If the employer wants someone
with creative skills, an online application and
selection format may exclude them from
including samples of their work.

Psychological testing
Psychological testing (also known as
psychometric testing) provides a scientific
component to selection. It must be
carried out by a qualified organisational
psychologist, who has completed training
in occupational testing. It aims to assess the
potential of an individual to perform in a
particular job role and covers:

• an aptitude test or an ability or Figure 15.10 Some businesses now use a combination of recruitment methods to

intelligence test – designed to measure assist them to find the best candidate for the job.

an applicant’s intelligence or IQ based on

their ability to reason with numbers, words and abstract items. This test indicates a person’s
aptitude test
ability to think conceptually and solve problems. a test of
• personality or temperament traits, which look at the behaviour of a person in the workplace. special abilities
One popular test is the Myers-Briggs Type Indicator (MBTI), which classifies people as (e.g. clerical,
language, artistic)
being an extrovert or introvert; sensing or intuitive; thinking or feeling; and judgemental that are required
or perceptive. Although it is a common test, it is worth noting that the MBTI has recently for a specific job
lost favour as a job recruitment tool. While it might still be useful for predicting a person’s
behaviour in a group situation, it has been deemed to be less useful for determining a
person’s suitability to a particular role.
• motivation – looks at a person’s drive and initiative.

Table 15.5 Advantages and disadvantages of psychological testing

Advantages Disadvantages

Acts to prevent a business hiring an applicant Too great a reliance on applicants telling the
not really suited to the tasks of the job truth when answering questions

Tests are standardised so every candidate gets Not always a good way of assessing an
the same questions and is given the same applicant’s personality
opportunities

Provides candidates with weaker interview If an unqualified person is administering the

skills or who are shy a chance to prove test, the finding may not be correct or able to
themselves in another way be relied upon

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Work testing
Businesses use work testing as a method to assess how candidates perform in work situations.
This form of testing can provide additional objective information that relates to skills that
may be difficult to assess using other methods, such as an interview. Work tests can take a
variety of forms, such as computer
tests, presentations, role plays and
written work. They can also include
exercises that test the applicant’s
ability to analyse statistical or budget
information or other exercises that test
an applicant’s speed, skill, accuracy
and dexterity at manual tasks. For
instance, a cashier for a supermarket
may be tested in product knowledge
and their speed and accuracy of
processing customers through a
checkout.

Candidates are usually advised in

advance that they will be asked
to take a work test and often it is
arranged to be taken either before or
Figure 15.11 Applicant being given a work test of preparing a document based on
after their interview.
information supplied.

Examples of common work tests are:

• drafting and typing a letter to a client of a business

• creating an Excel spreadsheet, based on information that has been supplied
• drafting a press release to announce an important decision made by the business
• reading and summarising a document that could be placed on the intranet of the business.

Asking a job applicant to undertake a work test can provide the following advantages when
undertaking the selection process:

• It demonstrates the work capability of the candidate as the test should be based on tasks
likely to form part of the job.
• The tasks should be directly related to the job, and their ability to perform the task usually
ranks higher than the results of the personality test.
• It is difficult for an applicant to fake job proficiency.
• The applicant is using equipment that is the same or very similar to the actual equipment
they will be using for that job.
• An applicant will often feel that the test allows them to display skills that would not be
shown during an interview.
The major disadvantage in conducting a work test relates to the type of job. If the tasks
associated with the job are complex and take a longer period (days or weeks) to perform, it may
not be possible to perform a realistic test, and a shorter test may not be a good indicator of an
applicant’s ability for the job if the test can be completed in a short period of time.

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 Chapter 15 Recruitment and selection of staff 411

Background investigation: reference checking

Comprehensive reference checking provides important opportunities to learn more about
candidates and should be undertaken before offering the position. Besides an online search,
human resource supervisors can conduct these checks personally by contacting former
supervisors and work colleagues of the applicant or using their professional network to talk
with other individuals who can provide additional insight into the applicant.

It may also be wise to check academic qualifications, as there are instances of qualifications
having been misstated in resumés. A police check may also need to be undertaken if the area
of employment relates to providing services to children, such as teaching or child care. Social
media, such as Facebook, are now being extensively used by businesses as part of background
checking of applicants.

Advising applicants of outcome

Once all the background checks and testing have been undertaken and the selection panel has
decided on the most suitable applicant, the following needs to occur:

• the position needs to be officially offered to the successful job applicant. This may be done
initially by telephone and followed up by a formal letter of offer. This letter will contain all the
conditions of work, such as salary, leave entitlements, job title, starting date, location of job
and to whom the person will report.
• the remaining unsuccessful short-listed applicants need to be thanked for their interest and
advised of their non-success
• an announcement needs to be made to the employees of the business regarding the new
appointment.

ACTIVITY 15.3
Complete the following questions.

1 Identify the costs that could result from a business undertaking a poor recruitment and
selection process.
2 Identify which areas of cost would be changed if a business were to recruit internally.

REVIEW ACTIVITY 15.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the selection process a business needs to undertake to ensure it is choosing the
right applicant for a vacancy within its business.
2 Discuss the advantages and disadvantages of a panel interview as one of the selection
tools used by a business.
3 A variety of tests can be undertaken by applicants. List them and explain why they are used.
4 Analyse which method of selection would be cheaper for a business – an interview or a
combination of online selection and interview.
5 Explain why it is important for a business to check an applicant’s references and
qualifications prior to offering the position to a candidate.

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412 Unit 2 | Establishing a business

Chapter 15 review
Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 3, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

Job Job analysis Job design

Job enlargement Job enrichment Job rotation

Job description Job specification Recruitment

Team Quality circle Equal employment opportunity (EEO)

Internal recruitment External recruitment Promotion

Career advancement Selection Interview

Psychological testing Work testing Online selection

Aptitude test

Extension questions
Whitehorse Real Estate and Property Development Company was created in late 2022 from the
merger of two local businesses, Select Real Estate and Hann Property Developments. The aim of the
new business is to provide opportunities for overseas clients from China, Hong Kong and Malaysia
to purchase properties in Australia either for residential or development purposes. The owners of the
business believe that to best suit the needs of their business they should employ a diverse workforce
based on age and ethnic background. Fluency in English would put them in a better position when
negotiating with property owners in Australia to sell their properties, whereas fluency in Asian
languages would assist when negotiating with overseas buyers and property investors.

Whitehorse Real Estate and Property Development Company has taken out a lease on business
premises in Box Hill, referred to as Melbourne’s second CBD, and now needs to recruit and select
real estate agents and office staff.

1 Advise the owners of Whitehorse Real Estate and Property Development Company on the
process they should undertake to create the job description and job specification for the real
estate agent’s position.
2 Outline the important personal specifications that would be needed for the position of a
real estate agent in this business.
3 Advise the owners of Whitehorse Real Estate and Property Development Company where it
would be appropriate to advertise or to go to attract applicants for the real estate agent and
office staff positions.
4 Outline the selection process that you would recommend be followed to ensure the best
applicant(s) are chosen to fill the vacant positions.
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 Chapter review 413

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked quetions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

15.1 Job analysis and 15.1.1 Identify and explain job analysis and its Case study 15.1 Yes No
its relationship to job relationship to job design, job description and Review activity 15.1: Part 1 &   
design, job description job specification Part 2
and job specification Extension: Q1–2

15.2 Recruitment 15.2.1 Outline and describe internal Review activity 15.2: Part 1 & Yes No
methods recruitment methods Part 2 (Q1–2, 4)   

15.2.2 Outline and describe advantages Review activity 15.2: Part 1 & Yes No
and disadvantages of internal and external Part 2   
recruitment methods

15.2.3 Investigate, outline, describe, explain Activity 15.1 Yes No

and justify external recruitment methods Activity 15.2   
Review activity 15.2: Part 1 &
Part 2 (Q3, 5)

15.2.4 Analyse case studies and contemporary Case study 15.2 Yes No
examples of business management   

15.2.5 Apply business management Review activity 15.2: Part 1 & Yes No
knowledge to practical and/or simulated Part 2 (Q4–5)   
business situations Extension

15.3 Selection methods 15.3.1 Identify selection methods Case study 15.3 Yes No
15.3.2 Outline online selection Review activity 15.3: Part 1 &   
15.3.3 List and explain testing Part 2
15.3.4 Describe and analyse selection Extension: Q4
processes
15.3.5 Explain advantages and disadvantages
of each selection method

15.3.6 Analyse case studies and contemporary Case study 15.3 Yes No
examples of business management Extension: Q4   

15.3.7 Apply business management Review activity 15.3: Part 1 & Yes No
knowledge to practical and/or simulated Part 2   
business situations Extension

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.
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 CHAPTER 16
National Employment Standards,
employer and employee expectations,
legal obligations for staffing, employee
induction and CSR considerations relating
to staff

‘When management and labour (employer and employee) both understand

they are all on the same side, then each will prosper more.’

Zig Ziglar (1926–2012)

About the author:
Zig Ziglar was an American author, salesman and
motivational speaker.

KICKSTARTER ACTIVITY
Describe what you believe Zig Ziglar’s message is from the above
statement.

CHAPTER OVERVIEW

The National Employment Standards (NES) outline the 11 minimum entitlements that must
be provided to all Australian employees. Employers expect their employees to be loyal to their
business and, in the event of them wanting to leave the business, they will provide the necessary
terms of notice. Each individual employee working for a business will have different expectations
from their job. Some will place great value on the conditions under which they will be employed
and their remuneration, while others are looking to create a balance between their work and
personal lives. Securing a job with a guaranteed future, while an achievable goal in the past, is
now becoming a more difficult expectation to fulfil. When an employee commences work at a
business it is important that they are properly inducted, as this will result in them being able to
contribute to the business objectives and be productive at a faster rate.

The federal and state governments have passed legislation and established statutory authorities
that set out legal obligations that employers must observe relating to occupational health and
safety regulations, and equal employment opportunities they must provide. Businesses should
also ensure they consider their corporate social responsibility obligations when establishing the
staffing for the business and recruiting employees from overseas.
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Key knowledge and learning intentions
Key knowledge Learning intentions – at the end of this chapter I will be able to:

Overview of the National 16.1 Overview of the National Employment Standards (NES)
Employment Standards (NES) 16.1.1 Identify, define and describe the NES
16.1.2 Apply knowledge to practical/simulated situations

Employer expectations such as 16.2 Employer expectations

contracts of employment, loyalty 16.2.1 Outline, identify and describe employer expectations
and terms of notice 16.2.2 Explain and discuss employer expectations

Employee expectations such 16.3 Employee expectations

as conditions of employment, 16.3.1 Identify, define and describe employee expectations
remuneration, job security and 16.3.2 Discuss remuneration options
work–life balance 16.3.3 Apply and explain knowledge related to case studies

Overview of legal obligations 16.4 Legal obligations for staff

for staffing such as occupational 16.4.1 Identify and describe legal obligations for staffing
health and safety (OH&S) 16.4.2 Apply business management knowledge to practical
regulations and equal employment and/or simulated business situations
opportunity (EEO) legislation

The purpose and common 16.5 Purpose and common methods of employee induction
methods of employee induction 16.5.1 Identify and describe methods of employee induction
16.5.2 Propose and apply business management concepts
and terms

Corporate social responsibility 16.6 C

 orporate social responsibility management considerations
management considerations when establishing staffing for a business and overseas
regarding establishing of staffing recruitment
for a business and overseas 16.6.1 Interpret business information and ideas related to
recruitment CSR and contemporary examples
16.6.2 Discuss the concept of CSR
16.6.3 Identify, describe and explain diversity in the workplace

Source: Adapted from VCE Business Management Study Design © VCAA; reproduced by permission

What’s ahead
CHAPTER 16
National Employment Standards, employer and employee
expectations, legal obligations for staffing, employee induction and CSR
considerations relating to staff

16.1 Overview 16.2 Employer 16.3 Employee 16.4 Legal 16.5 Purpose 16.6 Corporate
of the National expectations expectations obligations and common social responsibility
Employment for staff methods management
Standards of employee considerations
(NES) induction when establishing
staffing for a
business and
overseas recruitment

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416 Unit 2 | Establishing a business

16.1 Overview of the National Employment

Standards (NES)
Learning intentions – at 16.1.1 Identify, define and describe the NES
the end of this chapter
section I will be able to: 16.1.2 Apply knowledge to practical/simulated
situations

The National Employment Standards (NES) are the 11 minimum employment entitlements
National
Employment that must be provided to all Australian employees; however, only certain entitlements apply
Standards (NES) to casual employees. Providing less than the minimum wage or conditions found in the
11 minimum
NES cannot be excused by an enterprise agreement, employment contract, award, or other
employment
entitlements registered agreement. The 11 minimum entitlements are set out in Table 16.1. Employers must
that have to give every new employee a copy of the Fair Work Information Statement (FWIS) when they
be provided to
start their new job. Employers must give every new casual employee a copy of the Casual
all employees
in Australia; Employment Information Statement (CEIS) at the same time. The NES came into operation on 1
however, January 2010 and their purpose is to ensure that all employees’ key entitlements are protected
only certain
in law by a strong safety net of fair minimum conditions. Amendments have been made to
entitlements
apply to casual the initial legislation and regulations to reflect changes in workplace practices. The NES apply
employees to employees under the federal system, regardless of the industry to which they belong, their
occupation, or their income levels.

Table 16.1 The National Employment Standards

Minimum standard Explanation

Maximum weekly Full-time employee: 38 hours. May be required to work a reasonable

hours of work number of additional hours.

Requests for flexible Employees who have worked with the same employer for at least 12
working arrangements months can request flexible working arrangements because they:
• are the parent or have responsibility for the care of a child who is of
school age or younger
• are a carer (within the meaning of the Carer Recognition Act 2010)
• have a disability
• are 55 or older
• are experiencing violence from a member of their family
• provide care or support to a member of their immediate family or
household, requiring care or support due to experiencing violence
from their family.

Offers and requests Casual employees who have worked for their employer for 12
to convert from months need to be offered the option to convert to full-time or
casual to permanent part-time (permanent) employment by their employer. An eligible
employment casual employee can also make a request to convert to permanent
employment after their 12-month anniversary. Certain eligibility
requirements need to be met for this conversion to occur.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 417

Parental leave and Parental leave entitlements include: maternity leave, paternity and
related entitlements partner leave, adoption leave, special maternity leave and a safe job
and no safe job leave. Employee parents have the right to return to
their old job. Employees can take parental leave if they have worked
for their employer for at least 12 months. Parents have a right to
separate periods of 12 months of unpaid leave, up to a total of 24
months. An employer must consult an employee if they make a
decision that will have significant effect on the status, pay or location
of the employee’s pre-parental leave position.

Annual leave All full-time, non-casual employees will be guaranteed four weeks of
paid annual leave each year (part-time employees paid pro rata). Certain
shift workers may be entitled to an additional paid week of annual leave.

Personal/carer’s leave, Employees will be entitled to 10 days of paid personal and carer’s
compassionate leave leave each year (part-timers pro rata). Employees are also entitled to
and unpaid family and two days of paid compassionate leave on the death or serious illness
domestic violence of a family member or a person the employee lives with, plus two days
leave of unpaid personal leave where required for genuine caring purposes
and family emergencies. Employees are also entitled to five days of
unpaid family and domestic violence leave each year. Employees are
entitled to the full five days from the day they start work. They don’t
have to build it up over time. The five days renews each 12 months but
doesn’t accumulate from year to year if it isn’t used.

Community service Employees, including casual employees, can take leave for activities
leave such as voluntary emergency management activities or jury duty.
Except for jury duty, community service leave is unpaid. There is no
limit on the amount of community service leave an employee can take.

Long service leave Entitlements are set out for each state. In Victoria, portable long service long service leave
scheme (Long Service Benefits Portability Regulations, October 2020) a period of paid
allows workers in community services, contract cleaning and security to leave granted
to an employee
accrue long service leave entitlements and transfer them from job to job.
who has served a
specified period
Public holidays Guarantees eight national public holidays, plus prescribed state of continuous
employment
and local holidays. Where an employee works on a public holiday,
they will be entitled to an appropriate penalty rate of pay or other
compensation (set out in an appropriate award).

Notice of termination Employees will be entitled to fair notice of termination, provided in

and redundancy pay writing, and those who are made redundant and who are employed in
workplaces with 15 or more employees will be entitled to redundancy
pay (maximum of 16 weeks’ pay).

Fair Work Information An employer must give each new employee the Statement before the
Statement or employee starts their employment. The Statement contains prescribed
Casual Employment information about the employee’s rights and entitlements at work
Information Statement under the NES and the respective roles of the Fair Work Commission
(FWC) and the Fair Work Ombudsman.

Source: Adapted from the Fair Work Act 2009 (Cth), from Fair Work website.

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418 Unit 2 | Establishing a business

CASE STUDY
16.1
Victoria’s wages
watchdog takes
legal action for
breaches of long
service leave
entitlements

Victoria’s Long Service Leave Act 2018 states failure to ensure employees received their
all employees, who have worked continuously full entitlements.
with one employer for at least seven years, are
entitled to long service leave entitlements. This In October 2021 the watchdog filed criminal
law applies to work that is full-time, part-time, charges against National Australia Bank in
casual, seasonal and fixed term. the Magistrates’ Court alleging the bank
systematically broke the law by failing to pay
The Victorian government’s employment former staff members on casual contracts
watchdog, the Wage Inspectorate, in July 2021 their long service leave entitlements valued at
fined Coles $50 000 following an investigation $30 000.
that found that 4000 Victorian employees
were collectively underpaid $700 000 in long Source: Adapted from ‘Coles fined for
service leave entitlements. Coles was also underpaying LSL entitlements’, Australian
ordered to pay $15 000 in costs for its systemic Payroll Association website, 18 July 2021; ‘Long
service leave’, Victorian government website.

CASE STUDY ANALYSIS

1 Define the term ‘long service leave’.
2 Under the National Employment Standards, identify who is responsible for setting out the
entitlements for employees relating to their long service leave.
3 Under Victoria’s Long Service Leave Act 2018, identify which employees are entitled to
receive long service leave and what conditions of employment must be met.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 419

ACTIVITY 16.1
Read the following scenarios and determine whether the employee would be entitled to their
request under the NES.

1 Amanda is 65 years old and wants to finish work early on Thursdays so she can volunteer at
her local nursing home helping feed residents their evening meal. Advise her as to whether
she would be successful in her request from her employer for flexible working arrangements.
2 Roger wants to start work at 10 am instead of the usual start of 9 am so he can take
his daughter to pre-school. Advise him as to whether his request for flexible working
arrangements would be successful.
3 Bernard works casually as a produce assistant at a large local greengrocer (30 employees).
He has worked a regular pattern of work (8 am to 12 noon each day Monday to Friday)
for the past 12 months and is now considering requesting that his employer change has
employment status from casual to part-time permanent. Advise Bernard as to whether his
request to his employer would be accepted.

REVIEW ACTIVITY 16.1

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify which classifications of employees are provided with entitlements under the
National Employment Standards.
2 Describe the conditions that must occur before an employee is entitled to make a request
for flexible working arrangements from their employer.
3 Casual employees may now be entitled to request from their employer to change to
permanent employee status. Outline the conditions that need to exist for this change to
be considered.
4 Identify which employees are entitled to parental leave and which circumstances this
leave covers.

Figure 16.1 The National Employment Standards apply to all employees under the federal system.

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420 Unit 2 | Establishing a business

16.2 Employer expectations

Learning intentions – at 16.2.1 Outline, identify and describe employer
the end of this chapter expectations
section I will be able to:
16.2.2 Explain and discuss employer expectations

Employers hire staff to help the business achieve its objectives and contribute to its overall
success. Regardless of the job title of the employee, there are a few characteristics that
employers value in their employees. A positive attitude is a requirement as this will impact upon
the relationships the employee develops with their coworkers, supervisors and managers. This
will also affect the way the employee feels about the tasks related to their job. Being punctual,
dependable and cooperative are also key characteristics. It is important that the employer feels
they can rely on the employee to do what they say they will do, while also getting along with
their fellow workers. Employees are also valued if they are willing to learn new skills and happily
receive feedback to assist them to improve how they perform their job.
contract of
employment
a written
agreement made
Contracts of employment
between an Employers expect that they will enter into a contract of employment with an employee, laying
employee and
an employer that down terms and conditions of their involvement with a business. There is a range of ways these
outlines the legal contractual arrangements can commence. One common method is the signing of the duplicate
requirements and letter of offer by the successful candidate and returning it to the person making the offer.
responsibilities
of both
The employment contract may engage the employee in the ways outlined in Table 16.2.
permanent
full-time
where the Table 16.2 Types of employment
employee signs
a continuing Basis of Description
contract of engagement
employment
of employee
permanent
part-time the
employee signs
Permanent The employee signs a continuing contract of employment. The number of hours
a continuing full-time worked (e.g. full time is 38 hours per nominal week as stated in the NES) will
contract, with basis depend on the conditions of either the award or collective agreement applicable
the same to the business. The employee will be entitled to receive a salary or wages,
employment leave entitlements (sick and carer’s leave, parental leave, compassionate and
conditions, but
bereavement leave) and superannuation guarantee rate of 10% (1 July 2021). In
will work fewer
hours than a full-
addition, for each year of employment at a business, the employee accrues long
time employee service leave entitlements.

fixed-term
contract Permanent The employee signs a continuing contract; however, while entitled to all the
employees part-time above employment conditions, they will work fewer hours than a full-time
engaged in either basis employee. All calculations for pay and entitlements are made on a pro rata basis.
a full-time or
part-time capacity
for project work Fixed-term Employees can be engaged in either a full-time or part-time capacity for project
or to replace contract work or to replace employees who have gone on long service or parental leave.
employees
Annual and sick leave is generally accrued on a pro rata basis. As the length
absent on
of their employment is finite and contractually stipulated (e.g. one year or five
long service or
parental leave years), it is not covered by the termination of employment legislation.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 421

Casual basis An employee is often appointed by oral contract (not written) for short-term,
casual where
non-regular, or seasonal work. They are usually engaged and paid on a daily or
an employee is
hourly basis and do not have access to permanent employment benefits such often appointed
as sick leave and annual leave, so their wages usually include compensatory by oral contract
loadings of between 20% and 25%, depending upon their applicable award. (not written)
Casual employees who are employed regularly may be entitled to benefits such for short-term,
as superannuation and long service leave under federal and state legislation. non-regular, or
seasonal work
Casual workers employed in a regular pattern of work for 12 months can now
request to become permanent employees of that business.

Businesses increasingly have been employing independent contractors to complete specific

tasks or projects, without affecting their ongoing staffing plans. These contractors negotiate
their hours of work and rates of pay and are responsible for paying their own taxation and
goods and services tax (GST) to the Australian Taxation Office. They need to have an Australian
Business Number (ABN) and submit regular invoices for payment to the business. Contractors
are responsible for making their own superannuation contributions and are not entitled to
receive leave entitlements from the business.

The contract of employment can be either written or verbal but cannot provide less than the
legal minimum as found in the National Employment Standards (NES) and any enterprise
agreement, award, or any other applicable registered agreement. All employees are covered by
the NES regardless of whether they have signed an employment contract.

The contract of employment will also stipulate the arrangements for determining the pay and
working conditions under which staff are employed. There are two choices available to employers:

• Modern awards are legally binding documents determined and verified by the Fair Work modern award
Commission (FWC), setting out the pay and employment conditions for a whole industry an agreement
or occupation. Building on the NES, modern awards cover areas including minimum that sets out
minimum terms
wages, hours of work, rosters, breaks, allowances, penalty rates and overtime rates, leave, and conditions
superannuation, employee representation and dispute resolution procedures. They are also of employment
used as the benchmark for assessing enterprise agreements before approval. relating to an

• Enterprise agreements are made at an enterprise level (workplace) between an employer

industry or
occupation
and their employees covering their terms and conditions of employment. Enterprise
enterprise
agreements can be tailored to meet the needs of particular enterprises and differ from
agreement a
awards, which relate to an entire industry or occupation. The enterprise agreement should written collective
state a nominal expiry date for the agreement, which is no more than four years from the agreement made
between an
date of its approval by the FWC. It should also include a dispute settlement procedure
employer and
authorising either the FWC or an independent body to settle disputes relating to matters the employees
covered by the modern award or the NES. at a workplace,
setting out
the terms and
The FWC can assist with the process of making such agreements, deal with disputes that may conditions of
arise under the terms of the agreement, and assess and approve agreements. The agreement employment
covers a broad range of matters such as rates of pay and employment conditions; for example,
hours of work, meal breaks, overtime, consultative mechanisms, dispute resolution procedures
and any authorised deductions to be made from the wages of an individual employee.

Prior to approval of any enterprise agreement, it must undergo checking against the Better
Off Overall Test (BOOT) created by the Fair Work Act 2009. The test compares the terms of the
proposed enterprise agreement against the relevant modern award to make sure employees
will be better off overall.
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422 Unit 2 | Establishing a business

Business loyalty
In our current business environment, where loyalty to a business is not rewarded by job
security, employers can’t just expect employees to be loyal – they need to earn loyalty. There is
a lesser sense nowadays that a business is going to look after its employees, which would lead
one to expect a reduction in the loyalty shown by employees.

Businesses that conduct themselves in an ethical manner and take responsibility for both their
wins and losses are far more likely to have loyal employees. A loyal employee will treat their
boss as a ‘person’ not as a ‘position of power’, and often will feel sufficiently confident to provide
honest feedback that perhaps the boss did not want to hear, such as that their idea may not
work or a mistake has been made. Loyalty may also be shown in the way that the employee will
not criticise or disagree with their manager or the business in public; however, they will expect
to receive respect back from the manager. They will also expect to be involved in an honest
exchange of ideas in private. Finally, once a decision has been made, they will support the
decision whether they agree or not. When they decide to leave the business, a loyal employee
will try to make the termination as painless as possible both for the business and themselves.

Employees are often more loyal to those around them – their manager, their colleagues
and perhaps their clients – than they are to the business. If a manager looks out for their
subordinate’s best interests, provides opportunities for them to improve themselves and pays
attention to their career path, then they are more likely to earn the loyalty of that employee.

Figure 16.2 Employees are valued if they are willing to work together and demonstrate loyalty to their employer.

Currently, Australian workplaces are made up of employees from four generational classifications:
baby boomers (born between 1944 and 1964), generation X (born between 1965 and 1979),
generation Y (born between 1980 and 1994; often referred to as ‘millennials’) and generation
Z (born between 1995 and 2015). This provides an additional challenge to employers as the
expectations of each of these groups are diverse. While baby boomers may be less driven by
financial rewards and more by the stimulation they gain from their jobs, they are more likely to be
loyal to their employer if they are provided with jobs that reflect their wishes, such as part-time
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 Chapter 16 NES, employer and employee expectations, obligations and CSR 423

employment. To gain the loyalty of generation X, businesses need to provide these employees
with better pay and working conditions, time off for study and training, and development
opportunities. Providing a flexible work–life plan for both these generational groups should assist
in gaining their loyalty.

Gaining the loyalty of generation Y or millennial employees poses a different challenge to a

business. Surveys of this group indicate that Australian millennials believe culture and a positive
work environment are the most important considerations when choosing a new employer. It
has also been found that generation Z is proving to be less loyal to employers than millennials,
with the majority indicating that they would expect to stay with the current employer for less
than two years.

Terms of notice
When an employee decides to resign from a business, they need to give notice to their employer.
The period of notice commences when the employee advises the employer that they want
to end the employment relationship and finishes on the last day of employment. The period
of notice required to be given will be set out in the legal document under which they are
employed; namely the award, enterprise agreement, or employment contract. It is possible for an
employee to give more notice than is formally required; however, an employer does not have to
accept this and can choose to ask the employee to leave when the minimum notice period ends.

It would be an expectation that as the employee has decided to leave the business, they would
work during their period of notice. The employee may, however, take annual leave during
the notice period if they have the agreement of their employer. Accrued sick leave may also
be taken during the notice period; however, the employer may ask for evidence (e.g. medical
certificate) verifying that the employee is actually sick.

An employer would expect, and has the legal right, to retain the intellectual property in an invention
or any work developed as part of an employee’s job. The employer may also require the departing
employee to enter into a non-disclosure agreement about the work they were performing. After the
period of notice is served by the employee, the employer would expect that all property provided by
the business to that employee (e.g. car, computer or mobile phone) be returned and their access to
the intranet will cease. It is also a reasonable expectation that if the job position has been filled during
the term of the employee’s notice, they will carry out a formal handover of work to their successor.

REVIEW ACTIVITY 16.2

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Outline what information is contained in a contract of employment.

2 Congratulations, you have just started your first job. Identify the expectations that your
employer (the business) would have of you. Describe why they may differ from your
expectations.
3 ‘Loyalty by an employee to a business is a thing of the past.’ Discuss whether you believe
this statement is true or not.
4 Identify when an employee’s period of notice to their employer starts and ends.
5 Explain the effect that having four generations of employees in the workforce is placing
on employers.

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424 Unit 2 | Establishing a business

16.3 Employee expectations

Learning intentions – at 16.3.1 Identify, define and describe employee
the end of this chapter expectations
section I will be able to:
16.3.2 Discuss remuneration options

16.3.3 Apply and explain knowledge related to case

studies

Each individual employee working for a business will

have different expectations from their job and different
factors will motivate them. As every person has different
values, it must be realised that what one employee may
expect, and will be motivated by to perform well, will not
necessarily motivate another. People all have different
cultural backgrounds, abilities, experiences, attitudes
and learning patterns and will therefore be motivated by
different rewards. For a reward to be effective, it must be
both attainable and worth attaining.

It is important for employers to gain an understanding of

what employees want from their workplace. Employees
Figure 16.3 Every individual employee will have different
seem to greatly value working for a respected and
expectations of their employer and their job. successful business that provides them with the
opportunity for personal development and advancement.
They want to feel that their work not only contributes to the corporate bottom line (profit) but
can also have a positive impact on the broader community.

The workplace is now seen as a place that must have a ‘real’ meaning, where employees can
gain respect, recognition and fulfilment, not just an environment where they go to perform a
set of tasks.
conditions of
employment
the specific Conditions of employment
remuneration or
benefits that an Employees can expect that the conditions under which they will be employed are contained
employee will in either the industry award or enterprise agreement negotiated for their workplace. Both
receive from
the award and enterprise agreement will need to be checked and verified by the Fair
an employer
in exchange Work Commission. The NES acts as a safety mechanism and ensures that the minimum
for work standards have been put in place. An employer cannot negotiate an employee’s conditions
remuneration of employment to a standard lower than those set in the NES. The employment contract
the amount a entered into by the employee with their employer will outline the nature of their employment
person is paid for relationship – permanent (full-time or part-time) or casual.
performing work
tasks (i.e. job); it
can take the form
of cash and/or Remuneration
fringe benefits; it
can be referred It is an expectation of employees that they will receive remuneration (pay) in return for the
to as a wage or
salary work they perform for their employer. The remuneration for their labour can take the forms
outlined in Table 16.3.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 425

Table 16.3 Forms of remuneration

wages monetary
reward for labour,
Forms of remuneration Description paid on a weekly
basis, calculated
by multiplying
Wages Calculated on an hourly basis and structured around a working week
the hourly rate
(e.g. the nominal 38 hours per week). An employee would expect to by the number of
receive overtime if their hours at work exceed the nominal hours, at hours worked for
a rate of one-and-one-half times the normal rate. Additional penalty the period
rates may be paid for Sundays or public holidays. Employees under
salary an agreed
this system would expect to be paid on a weekly basis.
amount of money
paid to employees
Salary An annual figure usually paid on a monthly or fortnightly basis. for their labour
Employees receiving a salary would not expect to receive payment during a year,
expressed as
for overtime, as additional hours worked are often taken off in lieu.
an amount per
annum
Salary package Used for more senior positions in a business. The employee
would expect to receive a salary component, performance-based salary package
the total value of
pay (bonus), additional superannuation entitlements, company
an employee’s
car, share options and other fringe benefits. remuneration,
comprised of
Benefits Employees, while not necessarily expecting them, do value both cash and
additional benefits provided by their employers. These benefits fringe benefits
can be care assistance programs (e.g. family care, paid parental benefits financial
leave), or alternative work arrangements. rewards that are
not paid directly
in cash to an
Employees have the expectation that they will receive a fair wage and work under the employee; for
example, parental
conditions outlined in the award or enterprise agreement. The Fair Work Ombudsman provides leave and sick
protection for workers who feel that this expectation has not been met. leave

CASE STUDY
16.2
Fair Work
Ombudsman
accuses Coles of
underpaying staff

This case study is available in the Interactive Textbook.

  

Job security
Employees like to feel assured that they have gainful employment for as long as they desire. Job
insecurity has become a growing concern for many employees. Job security, or lack thereof, has
a huge impact on the level of motivation demonstrated by employees as well as their feelings of
loyalty and commitment to a business.
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426 Unit 2 | Establishing a business

In the past, employees believed that if they were able to get a job with a large business – such
as a bank, insurance company, large manufacturer, or government department – they would
have job security for their entire working lives. They were happy to start with an entry-level
position and work their way up the hierarchy over time. In recent times, with the change in
economic circumstances of both Australia and businesses, this expectation is no longer able
to be met. For example, the closure of the main automotive companies operating in Australia
and the scaling back of the mining industry have meant that a vast number of employees
have lost their jobs, with many finding it difficult to get another job in the same industry.

Statistics provided by the Australian Bureau of Statistics (ABS) indicate that many of these
workers have, however, been able to find other forms of work, either through changing
industries, updating their skills, or using their redundancy payouts to establish their own
businesses. The mode of employment has also changed, with some workers changing from
being permanent employees of a business to providing their services as contractors.

The COVID-19 pandemic that hit Australia in 2020 caused major job security issues for
employees, as businesses had to either close or suspend their operations due to restrictions
placed on their businesses during this period of great uncertainty. The ultimate fallout from the
pandemic for employee job security is still unknown.

CASE STUDY
16.3

Job insecurity
and the casual
workforce

The Australia Talks National Survey, conducted It is estimated that 2.3 million workers in
in March 2021, asked tens of thousands of Australia are classified as ‘casuals’. These
Australians about job security in Australia workers are supposed to receive a ‘casual
and how secure they felt in their own job. loading’ usually 20 to 25 per cent paid on top
Eighty-eight per cent of respondent’s answered of their hourly wage rate for the job as a form
‘that job security was a problem for Australia’, of compensation for not getting paid leave
with 27 per cent being concerned they might entitlements such as holiday and sick leave.
lose their job within the next 12 months. They also have no job security and can lose
their job at the end of a shift.
Anxiety associated with job insecurity is
affecting different age groups in different ways. Source: Adapted from Gareth Hutchens,
People aged over 50 are less confident of ‘Job security is a problem according to most
finding another job than people under 50. Australians, and casual work is a big reason
why’, ABC news website, 2 June 2021.
One large group of employees who do not
have job security is the casual workforce.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 427

CASE STUDY ANALYSIS

Read the case study and watch the video to answer the following questions:
1 Define the term ‘job security’.
2 Explain why employees over 50 years of age are less confident of finding another job.
3 Explain whether you believe it is fair that a casual employee receives a ‘casual pay loading’
in lieu of not getting paid leave entitlements. Video 16.1
4 Referring to the video, describe the experience of casual worker Jordi. Job insecurity

Work–life balance
Employees are now placing increasing demands on employers to provide more flexibility in
their work practices to allow time for their family or other responsibilities. The FWC recognises
this change in expectation for working parents responsible for the care of a child, and
encourages employers to enter into arrangements to change the employee’s hours of work,
pattern of work, or even the location of that work to allow time for family responsibilities.
Businesses that are working towards creating work–life balance for their employees are
work–life balance
offering the following family-friendly work practices: family and parental leave (either paid or the relationship
unpaid); child care, which may be subsidised and provided either on-site or off-site; and school between
holiday programs. In addition, flexible work practices should be available to workers of all a person’s
work and the
ages and may take the forms of offering flexible working hours, part-time work or job share, and commitments in
home-based work where employees work some or all of their hours at home and telecommute. the rest of their
life
When a business introduces flexible work practices, it is important that the employees are
consulted and any proposed changes discussed, particularly with those staff directly affected. flexible work
practices
These new arrangements should be checked to ensure they comply with any workplace conditions that
agreements operating at the workplace. allow employees
to balance work
Introducing flexible work practices brings benefits to a business, such as reducing or avoiding and family
unnecessary recruitment costs as staff turnover will reduce; retaining valued employees who responsibilities
more effectively
might otherwise leave the business; promoting diversity and fairness throughout the business;
creating positive effects on employee wellbeing; improving staff morale; and increasing the
productivity of employees, as they are more focused when at work. To accommodate the
continuing demand for flexibility it has become increasingly important for businesses to ensure
they have a digitally connected mobile workforce. The advent of cloud-based computer systems
is enabling this. This borderless connectivity needs to be managed carefully, however, as it can
actually negatively impact employees’ work–life balance.

REVIEW ACTIVITY 16.3

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Identify the documentation an employee should refer to when checking their conditions of
employment.
2 Congratulations – you have just been offered your first permanent full-time job. Describe
what your expectations would be from that job and the business for whom you will work.
3 Discuss the similarities and differences between the following three methods of
remuneration: wages, salary and salary package.
4 Work–life balance is an expectation that employees are increasingly placing on businesses.
Describe the concept of work–life balance and provide examples of practices that a
business could adopt to achieve it.

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428 Unit 2 | Establishing a business

16.4 Legal obligations for staff

Learning intentions – at 16.4.1 Identify and describe legal obligations for
the end of this chapter staffing
section I will be able to:
16.4.2 Apply business management knowledge to
practical and/or simulated business situations

The legal obligations of a business to its staff can come from any one of the following sources:

• federal, state and territory laws

• industrial awards and agreements
• tribunal decisions
• contracts of employment (written or verbal).

An employer is obliged to pay their employees their correct pay and provide supporting
documentation (pay slips), and reimburse any work-related expenses. They must also deduct
Pay As You Go (PAYG) tax instalments from the pay of their workers and forward them to the
Australian Taxation Office (ATO). An employer is also legally obliged to make appropriate
payments, such as the 10 per cent superannuation guarantee (rate as at 1 July 2021) under
the Superannuation Guarantee legislation. As outlined by the Australian Government on its
business.gov.au website, employers are obliged to ensure that they are providing a safe work
environment, are not acting in a way that may seriously damage an employee’s reputation, or
cause them mental distress or humiliation, or are acting in a way that damages the trust and
confidence necessary for an employment relationship.

Occupational health and safety (OH&S)

regulations
A business must provide a safe and healthy workplace
for its employees. The Occupational Health and Safety
Act 2004 (the Act) is the cornerstone of legislative and
administrative measures to improve occupational
health and safety (OH&S) in Victoria. It outlines the
rights and responsibilities of employers, penalties for
non-compliance, workplace insurance and how to
make a claim, and return to work expectations and
procedures. It is the responsibility of the Victorian
government authority, WorkSafe Victoria, or the
Victorian WorkCover Authority to regulate and enforce
this legislation.

It is the expectation that employers will provide and

maintain a safe workplace, which includes machinery,
equipment and systems of work. Also covered is the
safe use, handling, storage and transport of chemicals.
Employers must ensure that safety procedures are in
place, such as fire exits not being blocked, emergency
Figure 16.4 A workplace injury could result in a compensation claim
equipment being serviceable and the worksite being
by an employee against their employer. generally tidy.
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 Chapter 16 NES, employer and employee expectations, obligations and CSR 429

Employees should also be provided with adequate facilities, such as clean toilets, cool and clean
drinking water and hygienic eating areas. Employees must receive information, instruction,
training and supervision to work in a safe and healthy manner.

Workplaces should have a poster prominently displayed that outlines the procedure for an
employee in the event of them being injured. In the event of a workplace injury, employees
have the right to return to work to take up alternative duties once they have received a
WorkSafe Medical Certificate of Capacity. Employers have legal obligations under the Workplace
Injury, Rehabilitation and Compensation Act 2013, which states that the injured worker does not
need to be 100 per cent recovered to return to work. The worker may undertake reduced hours
in their regular job or alternative duties.

Penalties for breaches of the Occupational Health & Safety Act 2004 are imposed on both
corporate bodies (companies) and individuals.

ACTIVITY 16.2
1 Study the following scenarios and determine whether the business is at fault in terms of
OH&S regulations. Justify your answer with reasons.
a Dong Pham worked at a steel manufacturing plant. He injured his back lifting heavy
steel beams off a conveyor belt. Over a period of 18 months, he had complained to his
employer about his sore back. His complaints were ignored and he was directed to keep
working. Dong had been given no training in lifting the beams, a task clearly beyond the
ability of one man.
b George lifts by himself a large and very heavy couch from a small removal truck and
hurts his back. The truck has an electric operating tail gate that can be used to lower
heavy goods. All workers at the furniture removal business have been trained in how to
use this device.
c Akeela works as a data entry operator in an office. In the past, she has suffered lower
back and neck problems. Her computer keyboard and screen are located on her desk
and she sits on a non-adjustable chair.
discrimination
unfair treatment
Equal employment opportunity (EEO) legislation of an individual
based on a range
of factors such
In Australia, national and state laws cover equal employment opportunity and anti-
as race, age,
discrimination in the workplace. Businesses are legally obliged to create a workplace free from sex, ethnicity, or
discrimination, sexual harassment, harassment and bullying, and victimisation. Putting religion
effective anti-discrimination and anti-harassment procedures in place while protecting harassment
employees has the added benefit to a business of improving productivity and efficiency. behaviour
designed to make
a person feel
To assist and educate a business to develop their policies, and put in place best practice uncomfortable,
procedures on how to prevent discrimination and harassment in the workplace, the Australian offended,
humiliated, or
Human Rights Commission and the Fair Work Ombudsman provide written directions via facts
intimidated
sheets. The Fair Work Act 2009 was updated in September 2019 with new provisions to address
sexual harassment at work. The changes are aimed at making sure that workers are protected bullying someone
in the workplace
and empowered to address sexual harassment at the workplace. who repeatedly
behaves
In Victoria, the Equal Opportunity Act 2010 (the Act) provides protection for people from unreasonably
towards another
discrimination and harassment in areas of public life, such as workplaces, schools, clubs, shops person or group
or places that provide services. The Act makes it illegal for someone to discriminate against an of people and
employee based on their personal characteristics such as race, colour, sex, sexual orientation, causes a risk to
health and safety
age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, in the workplace
religion, political opinion, national extraction, or social origin.
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430 Unit 2 | Establishing a business

It is also against the law to sexually harass, victimise, or vilify someone based on their race or
religion. The Act encompasses the entire process of employment, from recruitment, deciding on
workplace terms and conditions, negotiations about flexible work, the process of returning to
work, making adjustments to employment terms and dismissal.

It is easy to detect direct discrimination, such as treating someone unfavourably due to their
personal characteristics. This often occurs because people make wrong or unfair assumptions
about what people with particular characteristics are capable or not capable of doing; for
example, where a worker does not get a job because the employer says ‘we have employed
people with your religious beliefs before and they want to take off too many religious holidays’.

Detecting indirect discrimination is a little harder and often becomes part of the culture or
practices of a business. It could mean that the business is placing unreasonable requirements,
conditions, or practices that act to disadvantage an individual or group of employees due to
their personal characteristics or circumstances; for example, if a business changes the start of its
workday to 6 a.m. from the prior time of 8.30 a.m. and requires all employees to be at work at that
time. While it may be a reasonable requirement for the business to commence its operations at
this earlier time, it could also be judged as not treating all its workers equally, as the change could
disadvantage those who need to provide care for their children in the morning.

The Act also makes it illegal to victimise an employee due to them asserting their rights under
equal opportunity law, having made a complaint, or refusing to do something because it would
be judged as being a discriminatory act, sexual harassment, or victimisation.

Employers must also ensure that bullying is not occurring at their business. Bullying happens
when someone in a workplace repeatedly behaves in an unreasonable manner towards
another employee or group of employees, which leads to placing the bullied person’s health
and safety at risk. Bullying can take many forms, such as publicly humiliating someone, verbally
abusing them, or spreading malicious rumours or gossip. It can be undertaken by managers
towards their workers, among co-workers or even by workers towards their managers. It is
important that businesses respond to instances of workplace bullying in a way that is judged as
being appropriate to the seriousness of what has occurred.

REVIEW ACTIVITY 16.4

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Outline why it is important for a business to adhere to legislative requirements relating to

the management of staff.
2 Identify what an employer is obliged to pay their employees.
3 Identify what an employer is required to ensure they provide for their employees.
4 In Australia, national and state laws cover equal employment opportunity and anti-
discrimination in the workplace. Identify situations where this legislation provides
protection for workers.
5 Describe the benefits that a business can gain as a result of enacting these policies and
procedures.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 431

16.5 Purpose and common methods

of employee induction
Learning intentions – at 16.5.1 Identify and describe methods of employee
the end of this chapter induction
section I will be able to:
16.5.2 Propose and apply business management
concepts and terms

Induction involves all the activities undertaken by a business when introducing a new induction the
process of
employee to the business and the department or area in which they will work. The length of introducing new
the induction period, which often incorporates some form of training, can last from a couple of workers to their
hours to several days. The main purposes of induction are to: place of work,
their job role,
their colleagues,
• commence the socialisation process; that is, sense of feeling of belonging and create a supervisors,
feeling of being supported management and

• communicate the workplace culture – the values, beliefs and expectations of the business
corporate culture

• provide information about job tasks and performance expectations

• create a favourable impression (public relations) about the business
• educate employees about the policies of the business
relating to safety, bullying, sexual harassment and other
critical policies
• assist employees to become productive in a shorter time frame.

Creating an induction pack (employee handbook), which can

be given to the employee on the day they commence at the
business, or made available via the intranet of the business,
would be a good start to their induction process. The employee
may then refer to this induction pack when they have queries in
the early days of their new job.

The pack would consist of:

Figure 16.5 Employee training is another part of the
induction process.
• an organisation chart outlining the current positions and
employees’ names
• a copy of the human resources manual for the business
(relevant to medium or larger businesses)
• a copy of the job description of the employee
• contact list of employees – email addresses and telephone
numbers
• instructions on how to access and use the intranet of the
business
• a safety induction including evacuation procedures
• security access details.

Using a simple induction checklist (see Table 16.4) can ensure

that all necessary documentation and arrangements are in place
for the new employee. Figure 16.6 Introducing new staff members to co-workers
forms an important part of the induction process.

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432 Unit 2 | Establishing a business

Table 16.4 Simple induction checklist

Item Yes/No

Prepared work area/work station; e.g. computer, telephone, desk, chair

Arranged for supervisor/manager to welcome new employee and introduce to

fellow employees in their work area and department

Explanation of job procedures, duties and responsibilities completed

Initial training requirements organised

Information sourced on the business’s expectations as to attendance, personal

conduct and appearance

Orientation tour of facilities arranged

Staff handbook and other induction material ready to be given to new employee

All administrative/pay documentation compiled and ready for employee to complete

Access to intranet organised, and protocols and procedures of internet

use explained

Sourced details of organisational chart, organisational communication

and responsibility channels, safety rules, security requirements and other
relevant policies

Arranged for a mentor to assist new employee to settle into job

A good induction program is important. It reduces staff turnover and means the new employee
will become effective and reach expected performance levels more quickly. After the initial formal
induction program, many businesses use a mentoring or ‘buddy’ system to further assist the new
employee to settle into the job. The mentor or buddy will often be assigned to assist the new
employee in that first important year as they gradually settle into their new work environment.

REVIEW ACTIVITY 16.5

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the purpose of induction.

2 Describe three benefits from a business undertaking a good induction program.
3 Identify the components of an induction pack suggested to be provided to a new employee.
4 Once an employee has undertaken their induction program, propose a procedure that a
business can then undertake to support the new employee.

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 Chapter 16 NES, employer and employee expectations, obligations and CSR 433

16.6 Corporate social responsibility

management considerations when
establishing staffing for a business and
overseas recruitment
Learning intentions – at 16.6.1 Interpret business information and ideas
the end of this chapter related to CSR and contemporary examples
section I will be able to:
16.6.2 Discuss the concept of CSR

16.6.3 Identify, describe and explain diversity in the

workplace

There are a range of corporate social responsibility (CSR) management considerations that
could arise when a business is establishing its workforce (i.e. staff ) from either local or overseas.
If a business is unable to locate suitable local employees with the necessary qualifications,
skills and experience to meet the demands of the job to be filled, then employing people from
overseas can sometimes be the best option. Overseas staff may also bring fresh ideas and new
approaches to the business, as well as foreign languages and international business experiences,
which could assist the business in expanding their operations globally.

Creating a positive, supportive and diverse work environment, where employees feel valued
while contributing to the overall success of the business, should be among key objectives of
any business. This approach can contribute to the business being recognised as an Employer of Employer of
Choice based on the internal policies and practices that a business uses to manage its CSR. If a Choice a business
that is regarded
business is judged as being an Employer of Choice, it can also be regarded as demonstrating CSR. as an excellent
place to work
Strategies that businesses may implement to ensure they are judged as being socially
responsible include the following.

1 Creating a diverse workforce

Creating a diverse workforce is a proactive approach
that can be taken by a business to ensure it has a
discrimination-free workplace. It is against the law
to place an employee or potential employee at a
disadvantage due to factors such as their ethnicity,
race, gender, sexual preference, age, or physical or
mental disability. For a business, having a diverse
workforce means it can benefit from the different
talents, experiences and perspectives of its employees.

Providing diversity training to all employees in

the workplace (both local and overseas) will assist
employees to gain a better understanding of and
respect for the different cultures in that workplace. Figure 16.7 Hiring a diverse workforce enriches the workplace.

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434 Unit 2 | Establishing a business

There are a variety of ways that a business can create diversity in its workforce. Governments
(all levels) and businesses consider it as ‘good business’ to create Global Diversity and Inclusion
Strategies, which generally focus on ‘people, customers and communities’.

Australian workplaces often employ at least three generations of employees (baby boomers,
generation X and generation Y/millennials). Hiring a mature-age worker can be a good
investment for a business as they bring with them many years of knowledge and experience.
They can assist the business to improve their processes and provide mentoring and training
to less experienced employees. Mature employees also save the business money as their
rate of absenteeism is usually lower than the other two generational groups. A business that
welcomes mature-age workers will certainly be judged as a better employer as well as a good
corporate citizen.

People who have a disability make up approximately 10 per cent of the total Australian
disability
an ongoing workforce. When looking for employees, businesses should keep in mind that people with
physical or a disability can bring a range of skills to the workplace. People with a disability work in all
mental condition
industries and in varied roles, having many qualifications, talents and experience
experienced
by a person, that they can bring to a business. Many businesses have developed programs and initiatives
which reduces to support the employment of people with a disability. Woolworths is an example of such
their ability to
a business.
complete certain
activities
It is not only socially responsible to employ people with disabilities, but it also boosts workplace
morale and enhances teamwork. In addition, employees with disabilities tend to have fewer
days off, take less sick leave and stay longer at the workplace than other workers.

ACTIVITY 16.3
Visit the Australian Government’s Job Access website and scroll down to the ‘Stories’ page.

1 Select and read two different case studies of employees with disabilities.
2 Identify the approach taken by the business to employing this worker.
3 Describe what the employee has gained by having this job.

A business could gain different perspectives,

experience and knowledge by having Aboriginal
and Torres Strait Islander employees. It is worth
noting that the Aboriginal and Torres Strait
Islander population in Australia is growing faster
than the non-Indigenous population, with 56
per cent of Aboriginal and Torres Strait Islander
Australians being under 25 years of age. Employing
these young workers would give a business
the opportunity to develop their cross-cultural
awareness and would greatly assist when dealing
with suppliers and customers from Aboriginal and
Torres Strait Islander communities. It is the view of
Reconciliation Australia that a business adopting
this strategy should be regarded as an Employer
of Choice. From their perspective, a key factor in
Figure 16.8 All businesses should create and provide for reaching financial independence for Aboriginal
equal opportunities and support for Aboriginal and Torres
Strait Islander peoples.
and Torres Strait Islander job seekers is improved
employment opportunities.
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 Chapter 16 NES, employer and employee expectations, obligations and CSR 435

In time, this will assist in addressing the long-term disadvantage that some Aboriginal and
Torres Strait Islander peoples experience. The employer is a crucial player in supporting this
effort, as they have the ability to employ local people in local jobs, and support training and
education outcomes by employing Aboriginal and Torres Strait Islander peoples through
accredited apprenticeships and traineeships. Visit the ‘Indigenous Apprenticeships Program’
page on the Services Australia website for more information.

ACTIVITY 16.4
1 Explore the Indigenous Business Australia website. Explain why this agency would be set
up to support Indigenous businesses.
2 Other businesses also support different groups. Visit the Coles Indigenous Employment
website and the Woolworths Diversity website. Summarise the approach being taken by
both these companies to employing workers from Aboriginal and Torres Strait Islander
communities.

2 Establishing policies to support employees

Policies to support employees demonstrate the commitment of a business to its staff. Provision
of these policies assist when attracting staff to the business and ultimately retaining them as
long-term employees. Such policies and programs create a workplace that is:

• flexible and family friendly – offering

flexible working arrangements to employees
recognising the personal and family
commitment of its employees makes the
workplace extremely attractive to workers of
any age. These arrangements are appreciated
by younger workers (both male and female)
who may be contemplating starting a family
or are caring for older children, or older
workers who are providing care to elderly or
unwell parents or an unwell partner/spouse.
The business may offer flexible working
hours, remote-working opportunities,
telecommuting, time off and wellbeing
programs. In addition, creating a policy on
parental leave that exceeds the minimum
Figure 16.9 Offering flexible working arrangements will attract more potential
legislated requirements, and also includes
employees to your company.
programs related to maintaining connection
with the employee while on parental leave, is an example of good business practice and CSR.
• supportive of employees by funding an Employee Assistance Program. This employer-funded
counselling is provided to employees and often close family members. Confidential assistance
is available for employees experiencing personal, family and work-related problems that could
negatively impact on their work performance and/or health. The scope of these programs often
relates to issues concerning alcohol, drugs, gambling, domestic and family violence.
• able to undertake a comprehensive induction process that should explain how things work
at the business and provide clear information about what is expected of both employees
and the employer. Providing a buddy or mentor would act as an additional support for the
new employee.

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436 Unit 2 | Establishing a business

3 Establishing policies that link employees to

their community
Encouraging community volunteering and engagement
recognises that businesses do not operate in isolation and
that they form part of a wider community. The culture of the
business should therefore include giving back to its community.
It is important when establishing the relationship with staff
during the recruitment and selection process that the applicant
understands this important element of social responsibility
embraced by the business. Younger workers often actively look
to be employed by businesses that are involved in volunteering
and community projects.
Figure 16.10 To attract the best possible staff, employers
need to make their workplaces inclusive, welcoming, safe
and supportive.
To help newly arrived overseas workers to settle into their new
communities, the business could create specific programs to
assist them with accommodation and welcome events, and provide information about local
services and attractions in their local community.

ACTIVITY 16.5
Being recognised as an Employer of Choice gives a business a desirable workplace reputation.
Set out below are a few characteristics attributed to being an Employer of Choice that should be
considered by a business wishing to establish effective staffing practices:

• providing remuneration to employees that is equal to or above market rates

• providing job security to employees
• encouraging employees to feel empowered to make decisions and take responsibility for
their jobs
• ensuring that employees are respected by their managers and coworkers
• providing opportunities for employees to grow both their skill base and their careers
• making sure the business is committed to and involved with its employees, customers
and the community
• providing work–life balance through flexible working arrangements.

Discuss whether you believe it would be sufficient for a business that incorporates the above
seven characteristics into its staffing approach to be regarded as a good corporate citizen, and
therefore to have effectively managed its corporate social responsibility considerations.

REVIEW ACTIVITY 16.6

Part 1: Digital quiz
Please see the Interactive Textbook
   to access a digital activity.

Part 2: Short-answer questions

Answer these questions on paper or in the Interactive Textbook.
  

1 Describe the benefits that employing people from diverse backgrounds can bring to a
workplace.
2 Identify and explain the advantages that a business would gain by providing diversity
training to all employees.
3 Identify and explain the advantages that overseas workers can provide to a business.
4 Explain how programs where staff members volunteer in the community or provide pro
bona work to assist community groups lead to greater employee engagement with the
business for which they work.

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 Chapter review 437

Chapter 16 review

Summary
Create your own summary notes for this chapter on paper or in a digital document. A model
summary is provided in the Area of Study review chapter for Unit 2 Area of Study 3, which can
be used to compare with yours.

Developing clear definitions

By writing a brief explanation of each of the following terms, you will gradually build up a
glossary of comprehensive terms for revision. Define these terms in your exercise book.

National Employment Fair Work Information Fair Work Commission

Standards (NES) Statement (FWIS)

Fair Work Ombudsman Parental leave Long service leave

Contract of employment Permanent full-time Permanent part-time

Casual Modern award Enterprise agreement

Better Off Overall Test Remuneration Wages

(BOOT)

Salary Salary package Benefits

Job security Work–life balance Flexible work practices

Discrimination Harassment Bullying

Induction Disability Employer of Choice

Extension question
Mining companies on notice to tackle workplace issues
Australia’s second-largest miner Rio Tinto has been found to suffer from systematic bullying,
sexism and racism in a report by former Sex Discrimination Commissioner, Elizabeth Broderick.

Rio Tinto’s Chief Executive Jakob Stausholm stated that ‘I feel shame and enormous regret to have
learned the extent to which bullying, sexual harassment and racism are happening at Rio Tinto’.

The report claimed that:

• At the fly-in fly-out mining sites, 40 per cent of women reported experiencing sexual harassment.
To avoid these incidences they were choosing to eat alone in their rooms rather than go to the
communal dining rooms, and avoided exercising in the gyms and being out after dark.

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438 Unit 2 | Establishing a business

• At the city offices of its WA iron ore business, 14 per cent of respondents reported sexual
harassment occurring in the office-based strategy, sustainability and development teams.
• 40 per cent of Rio Tinto’s Aboriginal and Torres Strait Islander employees reported they had
experienced racism in the past five years. Almost 50 per cent reported having been bullied,
resulting in loss of confidence, declining performance, anxiety and depression.

Following this report Rio Tinto has sanctioned 142 supervisors and dismissed 38 supervisors for
disrespectful behaviour.

All major resource companies are tackling similar workplace behaviour issues; for instance:
• Fortescue – in mid-2021 Chief Executive Elizabeth Gaines stated it launched a review to
gather workers’ experiences and suggestions in line with its zero-tolerance approach to
harassment, bullying and intimidation.
• Chevron Australia – Human Resources Manager Chris Watts stated it was engaging an
external consultant to advise on how best to tackle unacceptable behaviour.
• BHP stated that having an inclusive and diverse workplace has been the policy of the
company for a number of years.
• Woodside stated that it had strengthened its harassment policies to include clear definitions
of unacceptable behaviours.

Source: Adapted from Peter Milne & Nick Toscano, ‘Rio Tinto “shamed” by alarming sexual
harassment, bullying and racism’, The Age, 1 February 2022; ‘Rio Tinto releases external review of
workplace culture’, Rio Tinto, 1 February 2022.

Identify and describe actions and activities that you would recommend these mining
companies adopt to assist them to change the culture that has led to these workplace
behaviour issues.

Checklist
The success criteria are linked to the learning intentions from each section of this chapter, and
have been written based on the key knowledge and skills of the VCE Business Management
Study Design. Completing the linked questions per success criteria will thoroughly prepare you
for success in this subject. Fill in, print, or photocopy this checklist and tick the boxes when you
have answered the corresponding questions correctly.

Success criteria – I am now able to: Linked questions Completed

(Y/N)

16.1 Overview 16.1.1 Identify, define and describe Activity 16.1 Yes No
of the National the NES Case study 16.1: Q2
Employment Review activity 16.1: Part 1 & Part 2
Standards (NES)

16.1.2 Apply knowledge to practical/ Activity 16.1 Yes No

simulated situations

16.2 Employer 16.2.1 Outline, identify and describe Review activity 16.2: Part 1 & Part 2 Yes No
expectations employer expectations

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 Chapter review 439

Success criteria – I am now able to: Linked questions Completed

(Y/N)

16.2.2 Explain and discuss employer Review activity 16.2: Part 1 & Part 2 Yes No
expectations

16.3 Employee 16.3.1 Identify, define and describe Review activity 16.3: Part 1 & Part 2 Yes No
expectations employee expectations

16.3.2 Apply and explain knowledge Case study 16.2 Yes No

related to case studies Case study 16.3

16.3.3 Discuss remuneration options Review activity 16.3: Part 1 & Part 2 Yes No
(Q3)

16.4 Legal 16.4.1 Outline, identify and describe Activity 16.2 Yes No
obligations for legal obligations for staffing Review activity 16.4: Part 1 & Part 2
staff

16.4.2 Apply business management Activity 16.2 Yes No

knowledge to practical and/or
simulated business situations

16.5 Purpose 16.5.1 Identify and describe methods Review activity 16.5: Part 1 & Part 2 Yes No
and common of employee induction
methods of
employee
induction 16.5.2 Propose and apply business Review activity 16.5: Part 1 & Part 2 Yes No
management concepts and terms

16.6 Corporate 16.6.1 Interpret business information Activity 16.3 Yes No

social and ideas related to CSR and Activity 16.4
responsibility contemporary examples Review activity 16.6: Part 1 & Part 2
management Extension
considerations
when
establishing
16.6.2 Discuss the concept of CSR Activity 16.3 Yes No
Activity 16.4
staffing for
Review activity 16.6: Part 1 & Part 2
a business
and overseas
recruitment 16.6.3 Identify, describe and explain Activity 16.3 Yes No
diversity in the workplace Activity 16.4
Review activity 16.6: Part 1 & Part 2

Digital activities
• Access the Interactive   Textbook via Cambridge GO to complete a Scorcher timed
competitive quiz for this chapter.
• From their Cambridge GO account, your teacher can also assign practice VCAA-style
assessment questions with model responses.

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440 Unit 2 | Establishing a business

Unit 2 Area of Study 3 review Conceptual summary

IDENTIFICATION OF
STAFFING NEEDS

Knowledge

Qualifications
and knowledge Ideas
p Skills

Uber

Reduces staff Increase in

numbers technology
jobs

IMPACT OF TECHNOLOGY
Changes the tasks ON STAFFING
required

Job
Candidate
Job
Job design description
Job analysis Job
Promoted
specification
employee
INTERNAL may not have
RECRUITMENT skills needed
Less
innovation
Lower (new ideas)
$ cost Less
Rivalry and infighting
risk
for unsuccessful
applicants

Motivates May create a gap

others that needs to be
Career advancement filled externally

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 Area of Study review 441

Job
access EMPLOYEE
INDUCTION
Anti-
LEGAL OBLIGATIONS Tasks
bullying
Expectations
Socialisation
OH&S + EEO Gender
in staffing equality
Job
Good Security
Training about
conditions
policies
Safety
EMPLOYEE Online
Overseas recruiting CONDITIONS

CORPORATE SOCIAL $
RESPONSIBILITY Pay
SELECTION
Interview
Business METHODS
Loyalty National
Employment
contract Employment
Standards
Pay EMPLOYER Work
hours EXPECTATIONS testing
location 11
I quit Terms Psychological
!! of notice testing
Bring in
New ideas
new
talent
and skills

Resentment
Larger pool from current
of candidates employees

EXTERNAL
RECRUITMENT ? Costly

Risk $

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442 Unit 2 | Establishing a business

Key knowledge summary: Unit 2 Area of Study 3

Key knowledge Summary

• The relationship • Staff are one of the most important assets of a business.
between the • Business success comes from balancing the objectives of the business with
performance of staff the goals and aspirations of its staff (employees).
and achieving business • Staff are stakeholders in the business.
objectives • The SMART principle is used to establish objectives for staff that align with
the objectives of the business.
• Workforce planning is a process that aims to get the right people with the
right skills, in the right place, at the right time.
• Human resource management is the management of a wide range of
responsibilities that relate to the functioning of employees within a business.

• Identification of the • Businesses need to factor in the following considerations when making
staffing needs of staffing decisions:
the business such – growing demand for flexibility in working arrangements
as the knowledge, – changes in skills and education expectations
skills and ideas staff – generational change: there are four generations with different
can contribute to the expectations currently in the workplace
business – diversity in the workplace.
• Employees can contribute fresh ideas and insights to improve the business.

• The effects that • Technology has directly impacted on the staffing needs of businesses.
developments in • Automation, robotics, artificial intelligence, cloud computing and other
technology may have forms of technology are having wide-ranging effects on the staffing needs of
on staffing needs businesses.
• Technology has caused some jobs to be removed while leading to the job
content of others being enhanced.
• Technology has also led to the creation of some new jobs.

• Job analysis and its • Job analysis is the systematic process of looking at a particular job to
relationship to job determine the tasks and duties required for that job. It also determines the
design, job description skills and level of experience needed by the job holder of that position.
and job specification • Job analysis results in the creation of two documents: job description and
job specification.
• A job description sets out the tasks or duties specific to the job while the job
specification sets out the personal qualities, qualifications and experiences
of the actual job holder.
• Job design involves grouping together tasks for a particular job. The design
of a job can be changed by job enlargement (increasing the number of
tasks), job enrichment (increasing the complexity of the tasks), or job rotation
(moving between several jobs).
• Creating teams and quality circles are also popular tools used by businesses
to create greater flexibility, increased motivation and a greater feeling of
ownership and contribution to the achievements of the business.

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 Area of Study review 443

Key knowledge Summary

• Recruitment methods • Recruitment involves locating and attracting a pool of qualified applicants to
and the advantages and fill a vacant position in the business.
disadvantages of each • Recruitment can be through internal or external sources, both of which have
method: their associated methods and their related advantages and disadvantages.
– internal such as
intranet and word
of mouth
– external such as
websites, online
recruitment
agencies and social
media.

• Selection methods • Selection is the process undertaken by a business to ultimately decide to

such as interview, which applicant it will make a job offer.
psychological testing, • The selection process can involve screening the applicants, creating a short
work testing, online list, conducting interviews, online selection, different forms of testing and
selection, and the undertaking background checks.
advantages and
disadvantages of each

• Overview of the • The National Employment Standards (NES) set out 11 minimum standards
National Employment that must be reflected in all agreements that relate to pay and working
Standards conditions for employees.

• Employer expectations • Employers expect their employees to enter into contracts of employment, to
such as contracts of be loyal to their business and to provide appropriate terms of notice in the
employment, loyalty event that they resign or retire from the business.
and terms of notice

• Employee expectations • Employees also have expectations that relate to their employment. They want
such as conditions their conditions of employment to provide for fair remuneration for their labour.
of employment, • Remunerations can take the form of wages, salary, a salary package and
remuneration, job benefits.
security and work–life • Employees like to feel assured that they have job security; however, this
balance expectation is often now not being met.
• Employees’ expectation of having work–life balance is placing increasing
demands on employers.
• This expectation has led to a variety of family-friendly work practices being
offered by businesses, such as family and parental leave, child-care facilities
or subsidies, and school holiday programs.
• It is also an expectation of employees of any age that they should be able
to have flexible work practices made available to them. These can take the
form of flexible working hours, part-time or job-share, home-based work and
telecommuting.

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444 Unit 2 | Establishing a business

Key knowledge Summary

• Overview of legal • Legal obligations require employers to provide a safe and healthy workplace
obligations for staffing (OH&S) for staff.
such as occupational • Equal employment opportunity legislation regulates workplaces to
health and safety ensure that businesses are working towards creating equal employment
(OH&S) regulations opportunities and eradicating discrimination, harassment and bullying in
and equal employment workplaces.
opportunity (EEO)
legislation

• The purpose and • Induction is the process of introducing new workers to the place of work,
common methods of their job role, colleagues, supervisors, management and corporate culture.
employee induction • A well-run induction program means that the new employee will become
more effective and reach their expected performance levels more quickly. It
also has the effect of reducing staff turnover.

• Corporate social • Managing a business’s commitment to corporate social responsibility when

responsibility establishing staffing (both local and overseas) can be achieved through a
management range of policies and strategies, such as:
considerations – creating a diverse workforce
regarding – establishing policies to support employees
establishment of – establishing policies that link employees to their communities.
staffing for a business • Policies that create a flexible and family-friendly workplace and establish
and overseas Employee Assistance Programs treat staff with respect and provide the help
recruitment need to overcome or balance their work and personal life.
• Community engagement and volunteering policies and programs link
workers with their community. They also lead to improved worker
engagement at their workplace, which will result in additional benefits for the
business.

Source: VCE Business Management Design extracts © VCAA; reproduced by permission

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 Area of Study review 445

Sample assessment questions and advice

Unit 2 Area of Study 3: Staffing a business

In this section we will look at some sample assessment-style questions. Although there is no external
examination for Units 1&2, the following questions are written in a VCAA-examination style to prepare
you for these types of questions.

Today we are looking at Area of Study 3.

There are a range of key skills covered in Chapter 16:

• define, describe and apply relevant business management concepts and terms
• research and analyse case studies and contemporary examples of business management
applicable to establishing staff in a business
• apply business management knowledge.

Another part of this Area of Study is corporate social responsibility considerations when staffing a
business.

These considerations can include:

• diversity in the workforce

• policies to support employees
• policies to support links to the community.

Diverse
workforce

CSR:
staffing

Policies: Policies:
community employees

Let’s explore how these skills might be assessed through the following example question.

Question 1
Define the concept of corporate social responsibility (CSR). Identify one CSR consideration when
staffing a business. (4 marks)

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446 Unit 2 | Establishing a business

Extended response question – let’s unpack it

Task words
Define: Accurately state or explain the precise meaning
of a word, phrase, or term Limiting word
Identify: Determine or establish as being a particular Determines the number of
thing. To determine the key characteristics or features examples you must use

Define the concept of corporate social responsibility (CSR). Identify one CSR consideration when
staffing a business. (4 marks)

Marks allocated Study Design requirements

Key knowledge: Corporate social
responsibility (CSR) considerations

Hints:
• Firstly, you need to ‘define’ the concept of Corporate Social Responsibility (CSR).
• You need to ‘identify’ one CSR consideration that relates to staffing a business.
• Remember that CSR impacts on all areas of a business and is an important consideration across
many aspects of the business. This chapter and its key skills and knowledge relate to staffing a
business and employees.
A possible answer to the question might be:

Sample response
Corporate social responsibility (CSR) can be defined as a business’s sense of responsibility
towards the community and the environment. A business can express their CSR through a range
of activities such as waste and pollution reduction, contributing to community programs and
ensuring employees feel that they are contributing to the local community.
There are a number of CSR considerations that a business needs to take into account when
managing employees and staffing their business. One consideration is ensuring that the
workforce is diverse. Creating a diverse workforce is a proactive approach. A business should
ensure that the workplace is discrimination-free and that all employees are treated equally.
Diversity of the workforce may include employing mature-age workers who bring many years
of knowledge and experience with them. Employing people who have a disability can also
bring a range of skills, experiences and qualifications to a business. In addition, a business can
employ people from different cultural backgrounds such as Indigenous peoples and people born
overseas.

Marking guide:
Note: other considerations can be policies relating to employees and policies developed to make links
to the community.
• 2 marks for defining the concept of CSR.
• 2 marks for identifying one CSR consideration related to staffing a business.
Total 4 marks

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 447

Glossary

accountability the extent to which a business takes bricks-and-mortar business a business with a physical
responsibility for its actions and is willing to reveal its presence such as a shopfront or an office, and
actions and processes in a clear, transparent manner involves face-to-face interaction with customers

advertising informing potential buyers about a product brokerage the activity of buying and selling foreign
money, shares in companies, etc.
application the processes involved in applying for
an advertised position, usually completed through a bullying someone in the workplace who repeatedly
letter or form behaves unreasonably towards another person or
group of people and causes a risk to health and
application form a document that covers basic safety in the workplace
information about a potential employee, such as
qualifications, experience and job-related data business angel an individual who provides a small
business start-up with capital, generally in return for
aptitude test a test of special abilities (e.g. clerical, ownership equity or convertible debt
language, artistic) that are required for a specific job
business association membership organisation
artificial intelligence (AI) combines computer science engaged in promoting the business interests of its
using an expert system with access to robust members
databases to assist with problem solving
business concept an idea for a business including the
Australian Business Number (ABN) an 11-digit identifier actual product, the target market plus the proposed
of a company competitive advantage

Australian Company Number (ACN) a nine-digit number Business Enterprise Centres a national network of
to be used on a company’s common seal and all centres that serve as a first point of contact for
public documents involving the company business owners seeking business information,
advice and guidance
automation the use of automated technology to fulfil
functions or processes rather than humans business goals represent the aspirations of the business
and describe what a business aims to accomplish
balance sheet an accounting report that sets out the
assets, liabilities and proprietorship (owners’ equity) business hub physical space such as an office where
of a business as at a given date businesses and individuals can meet for work

bank statement a periodical statement where the bank business incubator an organisation that supports new
itemises the transactions relating to an account; for businesses by making available business premises,
example, debits, credits, government and bank charges office/secretarial services, advice, consultancy
and training at minimal cost, until that business is
benefits financial rewards that are not paid directly in
established
cash to an employee; for example, parental leave and
sick leave business location the geographical site of a business

Better Life Index (BLI) a measure established by the business model the plan implemented by a business
OECD that measures the quality of life of countries in to generate revenue and make a profit
a range of economic, social and health areas
business objectives the stated, measurable targets to
bootstrapping a method of financing a new business determine how a business will achieve its goals
with personal savings or invested funds from family
or friends; can be supported by working to keep business plan the formalised planning a business
costs down and using revenue to grow rather than undertakes on a periodic basis
borrowing
business routines processes that are regularly
brand a powerful business asset that is essentially a practised in a business
maker’s mark; it creates and brings with it awareness,
desirability and power business strategy the plan or process that a business
implements to achieve its long-term goals and
brand leader the brand in the market with the highest objectives
market share
by-laws local government laws/regulations relating to
brand loyalty when consumers continue to purchase activities within a municipality
the same product, even though rival products
may exist capability competence to perform a task

brand stretching using an established brand name in capital resources human-made items used in the process
order to introduce unrelated products of production. Machinery and equipment are examples.

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448

career advancement moving from a junior-level contract legally binding agreement that incorporates
position to a more senior-level position in a business the following elements: offer, acceptance and the
intention to enter into legal relations
cash book one of the simplest forms of financial
record keeping; sets out all the cash transactions of a contract of employment a written agreement made
business including receipts and payments between an employee and an employer that outlines
the legal requirements and responsibilities of both
cash flow tracking the cash or money coming into and
going out of the business copyright exists to protect the original expression
of ideas (not the ideas themselves). Copyright in
cash payments when items are purchased and paid for Australia is free and automatic and there is no official
in cash registry or application process.

casual where an employee is often appointed by oral corporate citizenship acceptance by a corporate entity
contract (not written) for short-term, non-regular, or of its responsibility to stakeholders for actions and
seasonal work decisions

causal research research that involves finding the corporate social responsibility (CSR) a management
cause and effect of certain actions concept whereby the business conducts itself in
an ethical manner, takes responsibility for the
cheque an instruction to the bank to pay money
economic, social and environmental consequences
from an account to the person named on the cheque
of its activities, and is accountable to a wide range of
(drawee)
stakeholders, including employees, customers and
cheque butt form of evidence to support writing of suppliers
the cheque and payment of an account
council grants funds provided by local councils
clicks-and-mortar business a business that has to businesses and individuals to encourage new
previously traded using a bricks-and-mortar business businesses to establish and provide employment in
model and that has adopted online services and sales the local government area
in addition to their traditional model
coworking space a shared space that is designed
code of conduct guidelines to regulate standards of for diverse groups of professionals, sole traders
behaviour and conduct either within an organisation and small businesses to work independently in a
or within an industry communal setting

company a separate legal entity (incorporated crawler an internet bot that systemically browses the
body) that is subject to the requirements of the World Wide Web operated by search engines for the
Corporations Act 2001, owned by shareholders who purpose of indexing
have limited liability
crisis public relations when a crisis or major issue
competitor a business rival in the same market for has arisen that the business has to respond to and
products or services offered by the business manage their brand

complementary business a business that offers crowdfunding donations from the public to raise
products that are related to or could enhance those funds for a one-off project; typically used by artists
of another business and entrepreneurs

complementary pricing where the price is set low customer someone who buys goods or services
on one item and high on another item that would
customer base the people or entities that regularly
normally go together
purchase products or services from a business
conditions of employment the specific remuneration
customer database the collection of information
or benefits that an employee will receive from an
gathered from each customer
employer in exchange for work
customer expectations the value that customers
consumer a person or group who uses a product or
believe they will gain from purchasing a particular
service. Note: a customer may be a consumer, but
good or service
not all consumers are customers; that is, the person
consuming a product or service is not necessarily the customer needs something customers require
one who purchased it. because it is essential or very important rather than
just desirable
consumer behaviour the study of the behaviours and
strategies of customers when choosing, using and customer relationship marketing (CRM) a business
disposing of products or services process that uses marketing strategies and activities
to develop relationships with clients, gain customer
consumer confidence how consumers or customers
loyalty and bring value to the brand
are feeling about the future. If they are confident,
they are more likely to spend. data analytics a process where raw unstructured data
is examined to make predictions, find trends, answer
consumer profile a statistical picture of the typical
questions and draw conclusions
consumer of a product based on demographic data;
for example, income, age, gender and occupation

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 449

decision-making the process of making a choice exchange rates the value of a currency against another
between two or more alternatives one. The Australian dollar is usually compared to
the US dollar. The exchange rate can influence the
demographic the population in a particular age group, overseas sales of a business.
type, or target market to which a business will try to
attract and target their product or service executive summary an overview or summary of the
key points contained in the business plan
descriptive research research that incorporates
consumers’ attitudes, intentions and behaviour exploratory research collecting information in an
unstructured and informal manner
direct distribution sales channel where
a manufacturer sells the product directly to the exporter one who sells home-country products
customer overseas

disability an ongoing physical or mental condition exports goods and services that are traded to another
experienced by a person, which reduces their ability country from Australia
to complete certain activities
external environment consists of two environments,
discrimination unfair treatment of an individual based the operating and the macro environment
on a range of factors such as race, age, sex, ethnicity,
or religion external recruitment the process of assessing and
selecting candidates, other than existing staff at a
diversity the inclusion of people from different business who would be qualified and appropriate to
backgrounds, including race, ethnicity, religion, sex, perform a vacant role
gender, socioeconomic status and age
fair trade a system of trade in which buyers from
domain name a unique name identifying the website developed countries purchase products from
in a web address producers in developing countries for a fair and
ethical price
e-commerce business a business that has never owned
a physical shopfront, and has always operated only Fair Work Commission (FWC) Australia’s national
online workplace relations tribunal. Its role is to assist
employees and employers to maintain fair and
employee a person working for another person or a productive workplaces.
business for wages or a salary
Fair Work Ombudsman (FWO) an independent statutory
Employer of Choice a business that is regarded as an agency of the Australian Government that acts
excellent place to work as a central point of contact for free advice and
information on the Australian national workplace
employment levels the rate or number of people who
relations system
are in the workforce and working either part time
or full time. When employment levels are high, the false and misleading representation to lie or
economy is usually growing. exaggerate about the features or benefits offered by
a product being sold
enterprise agreement a written collective agreement
made between an employer and the employees at a feasibility study initial research that is required
workplace, setting out the terms and conditions of to determine whether the business concept is
employment potentially viable

entrepreneur an individual who creates a new finance the management of money, or the money
business, bears most of the risks and enjoys the belonging to a person, group, or organisation
rewards. An entrepreneur is usually an innovator and
a source of new ideas, products and services. financial management managing financial activities
relating to the operation of a business
entrepreneurship the ability to ‘think outside the
box’ and come up with new and different ways of fixed-term contract employees engaged in either a
seeing things. This ability and skill set often see new full-time or part-time capacity for project work or to
products developed. replace employees absent on long service or parental
leave
environmental sustainability the ability of an
ecosystem to maintain itself into the future; involves flexible work practices conditions that allow
using the Earth’s resources at a rate they can be employees to balance work and family
replenished responsibilities more effectively

equal employment opportunity (EEO) the practice of focus group between six and 12 participants gathered
making sure that all applicants have an equal and fair together in an informal setting to give their opinion
chance to secure a position regardless of their age, on a product or service
race, sex, ethnicity, or physical or mental disability
food miles a system of measurement that calculates
evidence information that identifies type of the distance a food product travels from production
transaction, its date, parties and financial value to consumption
(if any)

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450

foot traffic the number of people walking past a incorporation the process in which a business or
business corporate entity is legally declared separate from its
owners
franchise where a business owner (franchisor) grants
another (franchisee) the right to use their trademark indirect distribution channel where a manufacturer
or trade name, business systems and processes sells their product to a wholesaler and/or retailer
(intermediary) who then sells it to the customer
franchise agreement a legal document that outlines
the rights and responsibilities of the franchisor and induction the process of introducing new workers to
franchisee their place of work, their job role, their colleagues,
supervisors, management and corporate culture
franchisee an individual who opens what might be
viewed as a branch of a company, purchasing the industry association representative body for a
right to use trademarks, associated brands and particular industry
access to proprietary information and strategy
informative advertising advertising that gives
franchisor the company or individual owning/ consumers factual information about a product
controlling the rights to grant franchises to potential rather than creating a product image
franchisees
infrastructure roads, transport, electricity, gas,
general partnership where all partners are deemed to internet and other essential services provided by
be equally responsible for the management of the various levels of government
business. Each has unlimited liability for debts and
obligations. initial public offering (IPO) floating on the stock market
involving publicly offering shares in the business to
generic brand a brand that attributes its identity to the raise capital
retailer rather than the manufacturer
innovation a new or improved product/s or method/s
generic market a market where broadly similar needs of doing things and is often the impetus for a new
of customers are met by sellers offering a variety and business venture
often diverse range of products
insurance a contract, represented by a policy, in which
goal setting the process of identifying desired aims an individual or entity receives financial protection
and the steps to achieve them or reimbursement against losses from an insurance
company
going rate setting a price for a product or service
using the prevailing market price as a basis intangible assets assets that lack physical substance and
can be difficult to value, such as patents, trademarks,
goodwill the difference in value between the price copyrights, franchises, trade names and goodwill
that a business is sold for and its net asset value;
reflects the value of the business reputation and intellectual property (IP) the property rights over the
trading contacts creations of mind or intellect and can include an
invention, trademark, or original design
green marketing the marketing of products that are
presumed to be environmentally preferable to others interest rates the cost involved in borrowing money.
Interest can also be earned when money is invested
Gross Domestic Product (GDP) the total value of in the bank or other financial institution.
production of goods and services in the economy
in a given period of time. Increase in GDP is used to internal environment comprises all of the elements
measure economic growth. within a business

harassment behaviour designed to make a person feel internal recruitment the process of assessing and
uncomfortable, offended, humiliated, or intimidated selecting from existing staff at a business who would
be qualified and appropriate to perform a vacant role
household saving ratio is calculated by dividing
household savings by household disposable international trade record of the exchange of goods
income. A higher household savings ratio indicates and services between Australia and other countries. It
households are spending less and saving more. can be measured through the balance of payments.
Lower spending typically reduces demand for credit,
negatively affecting industry operators. interview a meeting that is held between an
employer, or a representative of an employer, and
human resource management (HRM) the methods an applicant in order to determine whether or not an
of managing the human element of a business applicant should be shortlisted or hired
(employees), encompassing a wide range of
responsibilities, which are implemented to ensure a intranet the internal or private network of a business
good working relationship between employees and based on internet technology
the business and therefore increase efficiency
job a collection of tasks and duties that an employee
importer one who purchases overseas products for performs
resale in their home country
job analysis a detailed examination of a certain job,
imports goods and services that are brought in from including an analysis of the specific duties and
another country to Australia to use requirements of the job and their relative importance

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job board websites where businesses pay a fee to the management by objectives (MBO) a process of setting
job board to list their job on the site and will often goals, using the SMART principle, which relate to
accept job applications directly from the job board an employee’s key areas of responsibility. It creates
a sense of direction and provides a measure for
job description a written overview of a particular assessing the work performance of the employee.
position, including details such as the position title,
duties and responsibilities, and its position in the mark-up pricing determined by adding gross profit
overall organisation to the direct cost per unit; usually expressed as a
percentage
job design the grouping together of tasks for a
particular job, which should incorporate variety and market a group of customers with like needs and
challenge for the job holder desires who may purchase products or services from
sellers through the exchange of money or other
job enlargement increasing the size or level of things of value
difficulty of a particular position by merging various
tasks and responsibilities at a similar level market niche where a business can find a gap or
space in an industry or market. It usually means that
job enrichment making a job more challenging, which there is something unique about their product or
requires workers to use their full capabilities and gain service so customers will buy from the business.
personal growth
market penetration a pricing strategy that aims to set
job rotation where workers are moved between low prices initially to gain high market share quickly
different jobs to increase the variety of work and to
create a more flexible workforce market positioning where a product is placed within a
market with regards to its image, price and age of the
job specification a detailed listing of the personal skills target market
and characteristics required to perform a particular
job market research a systematic approach that assists a
business to make decisions about consumers and the
label placed on a product to inform the customer/ marketplace
consumer with information such as manufacturer,
ingredients and use-by date market saturation occurs when most consumers
already own the product and the market is not
labour a primary factor of production that involves growing; any sales that occur are replacement sales
the human physical and mental effort required to
create products or services market segment relatively similar (homogeneous)
group of customers who are likely to respond in
legal compliance the process by which a business similar ways
ensures that it observes and complies with the
external statutory laws and regulations market segmentation an approach that is midway
between mass marketing and individual marketing;
leverage using (something) to maximum advantage it defines and subdivides a large generic market into
distinct subsections of potential customers who have
licence a document or permit that gives official
similar specific needs and wants
permission to do, use, or own something
market-oriented approach a business strategy that
limited liability where shareholders are only
focuses on the needs and wants of consumers and
personally liable to the level of their original
develops products to meet them
investment in the company
marketing the process that provides the link between
limited partnership where liability of one or more of
producers or providers of goods and services and the
the partners is limited
consumers of these
lobby group a group that aims to influence
marketing concept where the business focuses on
organisations or governments in their decision-
satisfying the needs of the customer/consumer rather
making processes
than just selling a product or service
long service leave a period of paid leave granted to
marketing consultant a professional (specialist) who
an employee who has served a specified period of
provides advice on marketing-related issues
continuous employment
marketing mix the seven variables that are used when
loss leader where the price on a product is set low in
undertaking marketing strategies: product, price,
order to attract customers to buy other products in
place, promotion, people, physical evidence and
the range that have a higher profit margin
process
loyalty program a rewards program offered by
marketing plan the plan that sets out the marketing
a business to customers who frequently make
objectives and strategy to be undertaken by a
purchases. It may give a customer advanced access
business
to new products, special sales coupons, or free
merchandise. mass marketing a marketing strategy that seeks to
attract the attention of all market segments through
macro environment consists of factors directly
the use of mass distribution and mass media
affecting businesses that are outside their control

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452

maturity the stage of the product life cycle where patent a right that is granted for any device,
sales peak (saturation point); mature products either substance, method, or process that is new, inventive
decline or are extended to lengthen their life cycle and useful. A patent is legally enforceable and gives
the owner exclusive rights to commercially exploit
mentor person who offers their knowledge, wisdom the invention for the life of the patent.
and advice to someone with less experience
penetration pricing a strategy where the price is set
mission statement a statement that defines a lower than that of competitors or the normal price
business’s core purpose and focus for such a product. Its purpose is to get customers
to try the product and then to create a long-term
modern award an agreement that sets out minimum
relationship with those customers.
terms and conditions of employment relating to an
industry or occupation permanent full-time where the employee signs a
continuing contract of employment
multi-channel where a retailer sells products both
online and in ‘bricks-and-mortar’ stores permanent part-time the employee signs a continuing
contract, with the same employment conditions, but
National Employment Standards (NES) 11 minimum
will work fewer hours than a full-time employee
employment entitlements that have to be provided
to all employees in Australia; however, only certain personal selling where a product is sold by a
entitlements apply to casual employees salesperson, preferably trained

natural resources raw, natural materials such as persuasive advertising attempts to create an
timber, mineral deposits, or fresh water that have emotionally positive feeling about a product’s image
economic value to encourage consumers to buy it

network an interconnected system of people or petty cash a small amount of cash held to pay for
businesses items such as stamps, tea and coffee

niche market is a subset of a larger market with its place encompasses the distribution channels used to
own particular needs or preferences market products to customers; one of the 7Ps of the
marketing mix
occupational health and safety (OH&S) laws concerned
with the safety and welfare of people engaged in planned public relations strategies which are
work or employment established ahead of time, setting out a series of steps
to be undertaken and the methods that will be used
offshoring when work is done in another country; for
example, aircraft maintenance conducted in Hong planning a formalised decision-making process that is
Kong or app development carried out in India future oriented

online business a business that conducts activities via policy a deliberate system of guidelines and
the internet statement of intent

online sales when a business does not sell goods to population the entire group under study as defined
a customer face to face; customers purchase their by the research objectives
goods online, usually through a website
premium periodic payment made to an insurance
operating environment the environment immediately company
external to a business
press/media release a statement used by a business
operational planning the detailed, short-term planning to inform the media of a new product release, or a
undertaken by a business major announcement or change. Public relations
officers will release a statement to encourage the
overdraft an extension of credit that permits an
media to write about the business or its product
account holder to withdraw more money than they
favourably.
have in their account
price the amount for which something is sold
overseas competitors businesses not based in
Australia that compete with the Australian business price elastic the degree to which demand for a good
or service varies with its price
overseas markets markets or customers in another
country that buy a business’s products and services price inelastic where a fall or rise in price of a product
does not impact on the demand for that product
Pareto Principle referred to as the 80/20 rule –
approximately 80 per cent of the business revenue price leadership a business that through its dominant
is generated by approximately 20 per cent of the market position is able to set prices that other
customer base businesses adopt

partnership a legal form of business ownership where primary data information that a business collects
two or more people (partners) work together directly from first-hand experience and sources

partnership agreement a formal document that private company a company where the shareholding
outlines the duties and responsibilities of the parties is limited with shares being sold privately
to a partnership
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 453

procedures the steps used to implement a policy publicity a ‘free’ form of mass communication
with the aim of attracting favourable attention to a
procurement policy the specific regulations that a business. Methods include media releases, open
business uses to guide the process of procuring days, sponsorship and brochures.
goods and services that are necessary for business
qualitative research research based on in-depth,
product a good or service in its final state after having open-ended responses that focus on emotional or
gone through all stages of the production process motivational aspects of consumer behaviour

product development the design and development of quality assurance a system established to ensure that
new or existing products predetermined quality standards are achieved

product differentiation where products are developed quality circle a group of workers who meet regularly
and advertised to make them appear different from to discuss quality and production. Any proposed
others on the market changes to production methods are then put forward
to management.
product life cycle the stages through which all
products pass: launch (introduction), growth, quality control process of checking the quality
maturity, and decline or extension standards of work done or quality of raw materials or
component parts
product line a broad group of products that are
intended for similar uses and have similar physical quantitative research market research based on
features structured, closed questions that aim to gather
responses that can be summarised in figures
product market when a consumer is looking for a
particular item; for example, a particular type of drink questionnaire a form of survey where questions are
or car asked of respondents

product mix a full set of all products being sold by a record keeping maintaining accurate records of all
business matters related to business activities

product placement a method used to gain prominence recruitment the process of locating and hiring the
of a product in the consumer’s mind; for example, in most suitable applicants for a position
television, movies, or the internet
Registered Business Name (RBN) a trading name under
Profit and Loss Statement an accounting report which a person (sole trader) or partnership conducts
that outlines the revenue less the expenses for an its business or trade
accounting period. It provides a business with an
overview of whether it has made a profit for the remuneration the amount a person is paid for
accounting period. performing work tasks (i.e. job); it can take the form
of cash and/or fringe benefits; it can be referred to as
promotion (1) the advancement in rank or position a wage or salary
of an employee within a business related to their
previous position or job tasks research and development new and improved ways to
conduct business and develop goods and services to
promotion (2) the use of advertising, branding, support the standard of living of Australians
sales promotion and public relations to inform and
persuade consumers; one of the 7Ps of the risk assessment an assessment of the level of risk for
marketing mix which insurance cover is sought, conducted by an
insurance company
psychological pricing a strategy whereby the price is
set in accordance with the value consumers place on robotics the study, design, construction and operation
the product of technology relating to robots and automated
technology
public the ‘public’ is the group/s the business wants
to attract and get their message to. The public may salary an agreed amount of money paid to employees
include employees, customers of the business and for their labour during a year, expressed as an
suppliers. amount per annum

public (listed) company a larger company with salary package the total value of an employee’s
unlimited shareholders; shares are freely traded on remuneration, comprised of both cash and fringe
the stock exchange benefits

public liability insurance the protection of businesses sales promotion use of incentives to encourage
against damages or injuries to another person or increased sales; for example, free gifts, competitions,
property ‘buy one, get one free’

public relations the practice of promoting goodwill sample a proportion or subset of the total population
among the public to present a favourable image and being studied
is primarily concerned with the image of the business
portrayed to the public

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454

search engine a program that searches for and start-up hubs set up to allow people to use a
identifies items in a database that corresponds to key workspace and network with others when starting up
words or characters specified by the user, specifically their own business
for finding particular sites on the World Wide Web
(www) strategic planning long-term (two to five years)
planning undertaken by senior management to
search engine optimisation (SEO) the process of achieve business objectives
maximising the number of visitors to a particular
website by ensuring that the site appears high on the superannuation a pension or lump sum payment
list of results returned by a search engine made to workers on retirement; the money comes
from employers’ contributions made during the
secondary data information that has been gathered working life of the employee
previously by external sources
supplier supplies the inputs (resources) required for
selection a process undertaken by a business to the production process
decide whether to make a job offer to a candidate
supply chain a system or process in which resources,
separate entity involves the separate recording of information, organisations and people collaborate
transactions of a business from its owners to move a product or service from suppliers to
manufacturers and then on to consumers
shareholder owner of a company
tactical planning the planning undertaken by middle-
skimming pricing a strategy where high prices are set level management to assist in implementing strategic
to ensure high profits before marketing advantage decisions; its time frame is medium term (one to two
is lost years)

Small Business Centres Victoria (SBCV) a network of tactics activities or courses of action taken by a
community-based, not-for-profit business centres business to achieve business objectives
providing a range of business services throughout
Victoria target market the market at which a product or service
is primarily aimed
SMART objectives or goals that are specific,
measurable, attainable or achievable, relevant or taxes are levied by federal and state governments on
realistic, and timely or timebound individuals and businesses. They provide a source of
revenue for a government.
social capital refers to the resources available to
people and entities because of their networks. The team a group of employees with different tasks and
assets we possess due to the social relations we skills working together on a common project, service,
develop and maintain, and the shared values which or goal
arise from those networks, make up social capital
technological development the innovations and
social enterprise private-sector business that improvements in technology that can assist a
distributes profit to benefit the community rather business in carrying out work
than individual shareholders
total quality management (TQM) a concept whereby all
social media forms of electronic communication staff in a business have responsibility for its process
through which users create online communities to and output
share information, ideas, personal messages and
other content trademarks are important as they protect a business
from others using their reputation or products. A
sole trader an individual who exclusively owns and trademark is a protection that can be granted for
runs a business and retains all profits, but who is any aspect of marketing. Registered trademarks are
responsible for all losses and legal aspects of the protected legally, and misuse of trademarks can be
business pursued under law.

source documents documents that provide evidence of transactions contractual arrangements undertaken by
transactions a business; for example, payment of wages or rent

special interest group a group or organisation seeking transfer a sideways movement of employees within
or receiving special advantages or privileges the same level, from one job to another

specialist support services professional advisors; for transition period a period where the new owners
example, lawyers, financial advisors and operational operate a business alongside the former owners
advisors before final handover

staff a group of persons, as employees, charged with union a group of workers and employees who have
carrying out the work of a business banded together to achieve common goals, such
as higher pay, better working conditions and job
stakeholders people who have a vested interest in a security
business
unlimited liability full liability of owner (if their
start-up commencement of business operations business fails) to the extent that their personal assets
could be seized to pay debts
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values statement a statement that outlines what the word-of-mouth an oral or written recommendation by
business sees as its values and centres on integrity, someone
honesty and ethical behaviour
work–life balance the relationship between a person’s
venture capital money that is given to start-ups and work and the commitments in the rest of their life
small businesses with perceived growth potential by
investors WorkCover a compulsory insurance scheme that
provides employers with insurance cover for the
viability whether the business is capable of cost of benefits if workers are injured or become ill
developing and growing because of their work

vision statement a statement that outlines the workforce planning a continual process of assessing
aspirations and values of the business and forecasting the number of employees required
for a business to meet demand
wages monetary reward for labour, paid on a weekly
basis, calculated by multiplying the hourly rate by the workplace relations the relationship between
number of hours worked for the period employer and employee with regards to contractual,
emotional, physical and practical concerns
warranty a written guarantee, issued to the purchaser
of an article by its manufacturer, promising to repair
or replace it, if necessary, within a specified period
of time

wellbeing businesses contribute to the economic and

social wellbeing of a nation. While GDP can be used
to measure economic growth, there are also other
measures that can be used.

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Index

ABC (Australian Broadcasting Corporation) 33 Australian Consumer Law (ACL) 286, 367
abilities 399, 424 Australian Consumer Law 2011 (ACL) 226, 228
Aboriginal and Torres Strait Islander peoples 399, Australian Council of Trade Unions (ACTU) 209
434–5 Australian Prudential Regulation Authority
Accelerating Commercialisation service 6, 17 (APRA) 230, 286
accounting/accountants 121, 238, 249 Australian Securities and Investments
accuracy 245, 250, 344, 410 Commission (ASIC) 83, 86, 224, 286
adaptability 11, 182 Australian Taxation Office (ATO) 120, 238, 244
advertising 227, 311, 321–2, 325, 352, 354, 384, automation 6, 179, 202, 387
397, 401 awards 208, 231, 416–17, 421, 423, 425
advertising consultants 238–9
advertising media 323–4 baby boomers 385, 422, 434
advice 128, 237 background investigation 411
advocacy 32, 207 bank accounts 244–51
affiliates model 88 banks/bank managers 117, 121, 238
age 39, 234, 404, 429, 433 bargaining 209, 231
agreement 184, 208, 231, 264, 416, 423, 425 behaviour 11, 199, 300–1, 341
Aldi 199, 287, 316, 322–3 beliefs 33, 52, 172
algorithms 341 benefits 312, 425
allowances 208, 421 Better Life Index (BLI) 50
Altegra 129–30 Better Off Overall Test (BOOT) 421
Amazon 88, 171, 189, 343 big data 338, 342–3
analysis 14, 21, 31, 38, 40, 148, 185, 292 billionaire space race 364
Angel Investment Network (AIN) 114 Black Soldier Flies 54
annual leave 208, 417 Blackmores 145
anti-competitive behaviour 227 bookkeeping/keepers 238, 246, 388
anti-discrimination laws 231, 234–5, 399 Booktopia 228
anxiety 426 bootstrapping 113
appendices 150 Bootwear Pty Ltd 396
application forms/letters 400–1, 404 borrowing 112–13, 117, 175
apprenticeships 435 Bosch Australia Manufacturing Solutions
artificial intelligence (AI) 53, 58, 185, 342, 387–8 (BAMS) 202
assessment 7, 36, 40, 126, 149, 235, 410 bottom line 424
assets 85, 98, 113, 245, 249 brand awareness 12, 339, 366
attitude 52, 172–4, 420, 424 brand identity 8, 283–8, 353–4
attributes 312, 399 see also reputation
audits/auditing 152, 249, 254–5, 264 brand loyalty 333
Austrade 263 brand/branding 137, 186, 206, 262, 280, 312–14,
318, 321, 354, 362–3
Australian Bureau of Statistics (ABS) 59, 174, 188,
208, 426 breaks 208, 421
Australian Business Licence and Information ‘bricks-and-mortar’ stores 90–1, 188, 320, 336
Service (ABLIS) 169 brochures 356
Australian Business Number (ABN) 85–6, 169, brokerage model 88
224–5, 421 buddies 432, 435
Australian Company Number (ACN) 85–6, 225–6 building controls 229–30
Australian Competition and Consumer building societies 117
Commission (ACCC) 152, 169, 171–2,
bullying 429–30
227, 286
Bunnings 122, 206, 385–6
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  457

bush fire crisis 297 Carer Recognition Act (2010) 416

business 6, 17, 60, 294 carers 416, 429
Australian 6 carer’s leave 417, 420
contributions [to society] 46–62 cash books 246, 248
documents see documentation cash control 249–50
do’s and don’ts 250 cash flow 113, 245, 249
environments for see environment casual employees 416, 426
long-term view of 14 Casual Employment Information Statement
managers of see managers (CEIS) 416–17
opportunities for see opportunities Catapult 21
performance of see performance certification 196–7, 205
recognition 351 Chamber of Commerce 207
resourcing/location factors affecting 104–10 change 17, 168, 184, 388, 395
rights of 227 charities 91, 190
starting see start-ups child labour 207, 254–6
structures and models 78–99 China 183, 189
business activities 30, 182, 396 choice 30, 47, 106, 196, 203, 253
Business Activity Statement (BAS)/agents citizenship 224, 434
226, 238 clicks-and-mortar businesses 91, 320
business associations 207–8 closed questions 394, 407
Business Enterprise Centres (BECs) 126 cloud-based software/computing 184,
business establishment 224–39, 244–65, 387–8, 427
280–301, 308–44, 350–67, 382–9, 394–411, codes 169, 232–3, 249
416–36 codes of conduct 201, 257, 360
business idea 6–25, 30–41, 46–62 Coles 91, 199, 202, 287, 299, 337, 418
business incubators 126 collaboration 21, 31–2, 151, 173, 190, 343, 388
business licences/permits/approvals 229 collective bargaining 209
business loyalty 422–3 commercialisation 123, 127
business management 123 Commonwealth Government 6, 17
business mentors 129–30 communication 14, 179, 285, 321–2, 351, 388
business models 88–6 effective 398
business names 224–5 ‘insensitive’ 362–3
business objectives see objectives community 7, 32, 198, 352, 434
business planning/plans 6–25, 36, 46–62, 78–99, employee links to 436
104–30, 136–50, 168–80, 184, 186, 190,
relationships with 356
196–209, 237, 382
community-based support/services 123–8
components 143–50
companies 83, 225
conceptual 30–41
comparison 322–3
roles 141
compensation 209, 227, 233, 235, 417, 428
business practice 17, 416
Competition and Consumer Act 2010 (Cth) (CCA)
‘good’ 152, 190, 433, 435
152, 169–70, 226, 286, 316, 319
sustainable 151
competition-based pricing 317
Business Tax File Numbers (TFNs) 226
competition/competitors 17, 30, 36, 39–40, 79,
business taxation compliance 226 108, 119, 179, 182, 199, 287–8, 310, 332, 352,
business to business (B2B); business to consumer 362–3
(B2C) 326 competitive advantage 88, 149, 182, 199, 320,
by-laws 108, 229, 231 337, 366
competitiveness 10, 208, 252, 264
Caltex Australia 94, 315 complementary pricing 319
campaigns 115, 238, 335, 339, 351 compliance 146, 169, 201, 224, 232, 264, 399
Canva 152, 285, 387 concept development 30–41
capabilities 11, 407 importance of 36
capital 32, 40, 47, 81, 114, 201 process 30, 36
carbon emission 50, 205–6 conditions 207–8, 231, 416, 424–7
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458

conduct 151, 201, 257, 360 relationships with 280–2, 362–4

confidence 10, 12 customer databases 260–1
confidentiality 41, 435 customer expectations 196–8
conflict 110, 183 customer loyalty/programs 261–2, 281, 287, 337–8
Construction, Forestry, Maritime, Mining and customer needs 16, 18–20, 31, 36–7, 196–8,
Energy Union (CFMEU) 209 281, 388
consultation/consultants 30, 238–9 customer relations 281, 318, 336, 353–4, 358
Consumer Affairs Victoria 169 features and value of strategies 335–8
consumer behaviour 300–1 customer relationship management 260,
consumer choice 196 335, 342
consumer confidence 176, 178 customer satisfaction 34, 252, 281, 328,
331, 342
consumer demand 11, 19, 354
customer service 258, 337, 362–3, 388
consumer goods 32, 309
customers 12, 30, 79, 110, 151, 286–7, 352, 434
consumer guarantees 227
‘customers come first’ 281, 284
consumer rights 226–7
existing 39
consumer tastes/preferences 20, 310, 337
potential 14
consumer trends 297–9
proximity to 108
consumers 294, 299
see also consumers
contacts 114, 119, 123, 263–4
cyber security 23, 57, 180–1
continuous improvement 52, 148
cyber-attack 22, 122
contract/contractors 120, 416, 421
contract of employment 416, 420–1, 423
data 57, 171, 260–1, 290–1, 338, 342–3, 344,
control(s) 7, 85, 93, 190, 229–30, 244–51, 355
388, 409
convenience goods 19, 199, 309
data analysis/analytics 38, 185, 292, 342
cooperation 325, 420
data collection 291–2, 342
copyright 30, 41, 182, 186, 226, 230
databases 260, 342
Copyright Act 1968 186
decision-making 7, 10–11, 78, 250, 260, 289, 299,
corporate citizenship 189–90, 224, 434 317, 344
corporate culture 31, 52, 284 goals-aligned 31
corporate social responsibility (CSR) 34, 106, importance of 30–5
151–3, 189–91, 350, 366–7, 433–6
informed decisions 30
cost reduction/saving 387–8
decline 332–3
cost-based/cost-plus pricing 317
demand 11, 19, 105, 201, 264–5, 319, 354
costs 24, 86, 109, 112–13, 137, 176, 179, 182, 264,
see also supply/supply chains
317, 343, 382, 384
demographics 18–19, 39, 108, 172, 295
Cotton On 255–6, 299
design 17, 41, 186, 201, 290, 395
Council of Small Business Organisations Australia
(COSBOA) 208 development 16, 21–2, 30–41, 52–62, 125, 252,
310, 358, 395, 399, 424
COVID-19 pandemic 19, 24, 89, 129–30, 142, 173,
183, 188, 202, 265, 288, 297, 336, 388, 426 see also technological developments
creativity 10, 12, 185, 385, 387–8 differentiation 225, 311, 366
crises 264–5, 351–2, 358, 362 direct distribution channels 320–1
crisis management/plans 358–61 direct marketing 324–5, 354
crisis public relations 355–65 disability 190, 233–4, 416, 429, 434
crowdfunding 114–15 disadvantage 91, 173, 190, 207, 435
crowd-sourced funding (CSF) 115–16 disclosure 181, 245, 353, 367, 423
culture 33, 52, 284, 312, 399, 423, 433–4 discrimination 235, 429, 430
core values component 33–4 dispute/resolution 85, 231, 421
giving back 436 distribution channels 319–21
of innovation and entrepreneurship 52–62 diversification 104, 189
of meeting needs 31 diversity 32, 385, 433–4
customer bases 180, 282, 287–8, 350, 353 documentation 110, 141, 245–7, 428
CSR establishment considerations 366–7 Dulux 296, 313, 329
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e-commerce 91, 189, 297, 299, 344 environmental benefit 7, 32

economic conditions 79, 175–6 environmental claims 366–7
economic development units 125 environmental impact 151, 189–91
economic factors 40, 108, 151, 284 environmental legislation 170
economic growth 21, 46–7 environmental lobby groups 204–6
economic wellbeing 46–51 environmental management system (EMS)
economy 6, 32 253–4
environmental risks 190
education 12, 32, 189, 256, 429, 435
environmental sustainability 253
efficiency 32, 34, 182, 252, 343, 429
environmentally friendly criteria 21, 105, 151
EFT/EFTPOS (Electronic Funds Transfer at Point of
Sale) 247 equal employment opportunity (EEO) 399, 435
electronic communication 339 legislation 429–30
email 324, 340–1, 388 equal opportunity 231, 434
emergency management procedures policy 258 Equal Opportunity Act 2010 234–5, 429
emissions 50, 205, 253, 359, 364 equal opportunity laws 234–5
emotional intelligence (EQ) quotients 387 equipment 105, 201, 358
Employee Assistance Program 435 error 10, 245
employee expectations 423–6 ethical approaches 11, 151, 190–1, 422
employee rights 209, 231, 417 ethical procurement 254–5
employees 30, 78, 151, 284 ethical requirements 198, 224
actions 337 ethical sourcing 190, 255–6
aspirations 382 evaluation 7, 14, 36, 38, 244, 281
entitlements 416–17 evidence 152, 202, 246, 330
facilities 429 exchange rates 182, 184
links to community 436 expansion 34, 36, 110, 179, 188, 263, 433
obligations 428–30 see also development; growth
roles and responsibilities 383, 396 experience 98, 280, 424, 433–4
supporting 435–6 exploratory research 290
working together 33 export 21, 48, 95–6, 182–4
employer expectations 257, 420–3 extension 332–3
Employer of Choice 433–4 external business environment 78–80, 138,
168–81, 196–209
employment 6–7, 46–50, 169, 418, 424–7
external environmental factors 284, 286–7
employment contract 416, 420–1, 423
external professionals 237–9
employment entitlements 416
external recruitment 400–1
employment laws 169, 231
employment levels 176–7
Facebook/FaceTime 171, 189, 339, 402, 406
employment relationship 424, 428
Fair Trading Act 2012 286
energy 32, 201, 205–6
Fair Work Act 2009 209, 421
engagement 50, 151, 383, 436
Fair Work Commission (FWC) 231, 417, 421, 427
enterprise agreement 416, 421, 423, 425
Fair Work Information Statement (FWIS) 416–17
enterprise bargaining 231
Fair Work Ombudsman 231, 417, 425, 429
entrepreneurs 6, 10–14, 18–19, 37, 113, 322
families 113, 417, 429
hubs 62
family-owned business 84, 208
top 10 55–6
policy and programs for 435
entrepreneurship 6, 18, 52–4, 57
Family Business Australia (FBA) 208
building a culture of 52–62
feasibility studies 30, 36–41
environment 50, 423
feedback 114, 289, 298, 388, 420, 422
for business see external business
environment; internal business Fënn Foods 262–3
environment finance/sources 112–22, 252, 259
CSR and 151–3 financial considerations 12, 22, 40, 110, 224–39,
positive, supportive and diverse 433 244–65

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financial control/systems 244–51 Heaps Normal 86–7

financial management 14, 179, 244 Hello Fresh 298
financial management policy 258 home shopping channels 189
financial plans 149–50 home-delivered groceries 299
flexibility 11, 174, 184, 384, 395 human resource management (HRM) 384
flexible working arrangements 184, 416, 427, 435 human resources 259, 384, 399
focus groups 38, 292 hybrid model 92
food 32, 199, 203, 298
forced labour 255–6 ideas 6–25, 30–41, 46–62, 186, 310
Ford 94 identity 33, 283–8, 330
forecasting 40, 105, 179 see also brand identity
franchise 23–4, 93–4, 359–60 image 95, 280, 313, 318, 330, 339, 351
franchisee/franchisor 93 immigration 174
fraud 245, 250, 343 import 48, 95–6, 182, 184, 263–4
free trade agreements 48, 184, 264 incentives 114, 199, 325
Freshworks 362–3 inclusion 386, 434
income 39
gender 39, 234, 433 income tax 176, 226
gender-neutral children’s clothing 20 incorporation 83, 85
generations X, Y, Z 385, 422–3, 434 incubator support 123, 127
generic markets 296–7 independence 7, 10
global considerations 182, 433 indirect discrimination 235, 430
global issues 79, 260–5 indirect distribution channels 320–1
global markets 16, 23–5, 37, 294 individuals 34, 382
global supply chains 32, 201, 264–5 induction 384, 431–2, 435
globalisation 137, 184 industrial action 209, 231
goals/goal-setting 10–11, 14, 30, 152, 250, 351 information 30, 171, 299, 322, 351, 356, 410
importance of 30–5 disclosure 181, 245, 353, 423
objectives–goals balance 382 sensitive 179
realistic 39 storage space for 17
types of 33 types of 290
see also strategic goals information management 239
good business practice 152, 190, 404, 433, 435 information sources 30, 290
good corporate citizens 189–90 information technology (IT) 121, 184, 201, 388
goods 18, 32, 46, 95, 151, 182, 188, 207, 227, 280 informative advertising 333
see also services infrastructure 49, 185
goods and services tax (GST) 49, 169, 226, 421 initial public offering (IPO) 117
Google 171, 173, 189 injury 233, 428
government 48–9, 108, 207 innovation 7, 10, 16–17, 22, 33, 52–62, 123, 173,
business support and assistance 6, 17, 123–30 179, 185, 252, 261–2
diversity and inclusion 434 inputs 104, 201, 253–4, 264, 382
investment 57–60 Instagram 189, 339
key regulations 168–70, 224–35, 352 insurance 146, 233, 238
legislation 352 insurance agents/brokers 238
planning schemes 229–30 insurance obligations 235
grants 6, 17, 57, 60, 123, 151, 190 integration 281, 353, 355
green marketing 366–7 intellectual property (IP) 30, 40–1, 185, 226
groups 7, 79, 204–9, 292, 352, 382, 399 intelligence quotient (IQ) 409
growth 16–17, 21–2, 36, 182, 184, 333 interaction 90–1, 142
interest rates 118, 176
harassment 234–5, 429–30 internal business environment 78–80, 104–30,
136–53, 284
hazards 191, 428
internal controls 245, 250
health 18, 50, 206, 209, 257, 299
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international trade 47–8 licences 94, 169, 186, 228–30

internet 22, 53, 88–9, 188–9, 315–16, 320, 323, life cycles 105, 317, 332–3
326–7, 341, 355, 408 ‘Limited’ (Ltd) 84, 86
interpersonal skills 387 limited liability 83, 85–6
interviews 38, 237, 384, 394, 406–8 LinkedIn 340, 402
intranet 399, 423 lobbying 204–6, 328, 353
introduction 332–3 location (business) factors 40, 104–10, 184
inventory/management 201, 260 location-based services 328
investment 36, 57–60, 113, 190, 249, 351 lockdown 265, 297–8
investors 6, 151, 353 long service leave 417–18
Long Service Leave Act 2018 418
job analysis 394–7 loss/loss leaders 318, 367
job boards 402 loyalty 199, 261–2, 281, 287, 312, 317, 333, 337,
job description 394–7 422–3, 425
job design 394–7
job enlargement 395 macro environment/factors 79, 168–91, 284
job enrichment 395 management 12, 14, 78, 201, 238, 253
job rotation 395 CSR and staffing considerations 433–6
job security 208 employee–management relationship 382
job insecurity 426–7 goals 31, 34
job specification 394–7 women in 32
job transformation 387 management by objectives (MBO) 383
job-posting sites 408 managers 10–14, 284, 317
job-share arrangements 384 manufacturing 25, 94, 107, 152, 182, 190, 264
joint ventures 225 marital status 404, 429
jury duty 417 market conditions 11
market dimensions 294–5
key performance indicators (KPIs) 281 market niches 16
knowledge 14, 54, 407, 434 market penetration 333
market positioning 295
labels/labelling 96, 169, 316 market research 30, 36–41, 281
labour 19, 24 105, 182, 201, 387 practices 289–93
accessibility 109 systematic approach 290–3
landfill 32, 204–5 market saturation 333
law 79, 105, 182, 190, 231–2, 234–5, 352, 399 market segmentation 295–6
legal advice 237 market share 89, 287, 344, 350
see also legislation marketing 14, 22, 179, 186, 201, 259, 280–301,
leadership 14, 30, 317, 387 308–44, 350–67
learning 10, 358, 424 defined 280
leave entitlements 208, 416–17, 420–1, 423 objectives–customer base relationship 280–2
legal business structure 81–7 7Ps 308–31
legal considerations 40, 146, 224 technological developments in 339–44
legal requirements 96, 168–70, 203, 224–39, marketing communications 354
244–65, 341, 407, 435 marketing consultants 239, 289
policies and procedures 257–9 marketing function 351
staff legal obligations 428–30 marketing mix 295–6, 308–44
working above 151 marketing plans 149, 284
see also regulations Marketing Research Association (MRA) 289
legal support services 120 marketing strategy 309, 318
legislation 169–70, 184, 286, 429–30, 435 markets 16, 21, 23–5, 36–7, 40, 179, 183, 188,
also under specific Act 294–301
liability 81, 83, 85–6, 209, 245, 249 behavioural 295
gaps 7, 16, 19, 119, 179
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niche 179, 295, 297 mutual 208

opportunities 16, 18–19, 188 public relations and 350–4
types of 294 O’Brien Thoroughbreds 233–4
also under specific market observation 18, 21, 119, 292, 394
mass markets 19, 294 occupation 39
materials 95, 152, 191, 366 Occupational Health and Safety Act 2004 232,
maternity leave 208, 417 428–9
occupational health and safety (OH&S) laws/
mature-age workers 399, 434–5
regulations 169, 232, 428–9
maturity 332–3
offers 337
McDonald’s 94, 405
Office of the Australian Information
media 18, 179, 189, 238–9, 323–4, 350, 353, Commissioner (OAIC) 181
358, 363
offshoring 183–4, 262–4
mental disability 429, 433
older workers see mature-age workers
mentoring 114, 126–30, 432, 434–5
online business models 88–90, 107
migrants 9, 436
online recruitment agencies 401
Millenials 385, 422–3, 434
online resources 123–4
minimum entitlements 416
online sales 182, 188–9
minimum wage 231, 416, 421
online selection 408–9
minority groups 399
online shopping 89–90, 320, 336, 388
misleading and deceptive conduct 227, 367
OP Code 171
missions/mission statements 30, 33–4, 105, 137,
open days 356
144–5
open questions 394, 407
mistakes 10, 39, 245
operating conditions 206–7, 288
misuse 319, 367
operating costs 179
models/modelling 78–99
operating environment 79, 168
Modern Manufacturing Strategy 24
operating factors 196–209
money 47, 88, 114, 235, 249, 284, 317
operating systems (OS) 180
monitoring 14, 169, 199, 249, 343
operational planning 137
motivation 7–9, 329, 409, 424–5
operations 40, 147, 172, 179, 188, 259, 286–7,
430
National Australia Bank (NAB) 418 opportunities 6, 10, 12, 16–19, 30, 36–7, 96, 125,
National Business Names Register 224–5 137–8, 140, 179
National Employment Standards (NES) 231, see also equal opportunity
416–18, 421, 424 oral contract 421
national extraction 429 Organisation for Economic Cooperation and
National Innovation and Science Agenda 57 Development (OECD) 50
natural capital 32 organisational skills 14
natural resources 105 orientation 30, 33
needs 7, 16, 18–20, 31, 34, 36–7, 196–8, Origin Energy 287
281, 388 Oscillating Positive Expiratory Pressure (OPEP) 25
identifying staffing needs 384–6 outcomes 435
for resources 104–6 outdoor advertising 324
negotiation 14, 78, 105, 113, 208–9, 430 outsourcing 180, 183
networking 18, 62, 119, 173, 207 overseas markets 182–3
overseas recruitment 433–6
objectives 7, 30, 32, 78, 250, 281, 290, 321, 362, overseas suppliers 263–4
382, 420
owners’ equity (investment) 113, 249
achieving objectives–performance
ownership 113, 284, 383
relationship 382–3
structures 85–6
criteria 383
future-oriented 33
P1–7 (product; price; place; promotion; people;
hierarchy 34
evidence; process) 308, 317–22, 328–31
marketing–customer base relationship 280–2
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packaging 152, 191, 205, 299, 314, 316, 318, schemes 229–30
332, 354 plant-based food 262–3
paid loyalty programs 262 plastics reduction 204–5
pamphlets 356 points-based loyalty programs 261
parental leave 417, 420, 435 police check 411
parents 416 policy; procedure; principle 105, 245, 433
Pareto Principle (80/20 rule) 282 business principles 33
partner leave 417 CSR policy 433
partnership 6, 49, 82, 85, 128, 208, 225, 255–6 customer service policy 258
Partnership Act 1963 82 dispute resolution procedures 421
partnership agreement 82 emergency management procedures
patents 30, 41, 182, 184–5, 226 policy 258
paternity leave 417 financial management policy 258
Pay As You Go (PAYG) 169, 176, 226, 428 HRM 384
pay-in book/slip 247 legal and financial considerations 244–65
payroll tax 49 policy development 259
penalties/rates 171–2, 209, 227, 417, 421, 428–9 policy for positive relationships 352
penetration pricing 318 policy linking workers to community 436
penetration testing 23 privacy policy 367
people 434 procurement policy 105, 253–5, 258
people with a disability 190, 399, 434 recruitment policy 257, 399
Pepsi 361 relating to legal requirements 252–6
performance 32, 252, 281, 382–3 SMART principle 33, 382
aspects 34 supportive policy 435–6
impacts on 435 political opinion 429
periodic payments 247 pollution 50, 204
permanent full- or part-time basis 416, 420 population 174, 291, 434
permits 169, 230 position of power 422
personal development 395 positioning 354
personal factors 108, 300 positivity 420
personal information 171 PR strategies 350, 355–65
personal leave 417 practice 182
personal liability 81 best practice 429
personal selling 326 CSR practice 433
personality 312, 399, 409 flexible work practices 427
perspectives 433–4 good business practice 152, 190, 404, 433, 435
persuasive advertising 333 ideas into practice 11
physical disability 429, 433 illegal practices 152
place 319–20 market research practices 289–93
Plan Your Own Enterprise (PYOE) competition 61 prohibited procuring practices 319
planet [Earth] 32, 206 sustainable business practices 151
planned public relations 351, 355–65 unethical practices 152, 191, 284
plans/planning 14, 36, 136–40, 151, 190, unfair practices 169
229–30, 384 work/workplace practices 17, 416
business structures and models 78–99 see also codes
considerations 260 pregnancy 234, 429
crisis management plans 358–9 premium 235, 298
goal achievement focus 31 presentation 245
for interviewing 406 price 34, 169, 199, 253, 317–19, 343
levels and stages 136–7 see also costs
planning a business see business planning/ price differentials 95
plans
price elasticity/inelasticity 319
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price fixing 319 public (listed) companies 84

price leadership strategy 317 public, the 350–2
pricing decisions 317 public companies 86
pricing practices 319 public holidays 417
primary data 290–1 public information 356
privacy 169, 260, 341, 367 public liability 209, 235
Privacy Act 1998 171, 181, 367 public opinion 355, 364
Privacy Amendment Act 2012 260 public relations (PR) 321, 328, 355–65
privacy code 171 benefits 352
private companies 84–5, 208 campaigns 351
problem-solving 7, 12, 290, 326, 337, 342, 387, crisis/crisis management in 358–61
404, 409 implications of poor PR 363–4
procurement policy 105, 253–5, 258 relationship with objectives 350–4
product development 252, 310 types of 353
product differentiation 311 public safety 358
product labelling 196 publicity 207, 328, 350, 352, 355
product life cycles 332–3 punctuality 420
product lines 311 purchases mix 298
product markets 297 purchasing decisions 299
product mix 311 purchasing habits 207, 308, 343
product placement 315–16
product recalls 358 Qantas 337–8
production 6, 17, 22, 47, 147 qualifications 14, 121, 174, 385, 406, 411, 433
productivity 21, 173, 180, 182, 208, 252, 382–3, 429 qualitative data 38
products 6, 32, 137, 147, 152, 280, 308, 353 qualitative factors 108
classification 309 qualitative research 292
environmentally friendly 205 quality 95, 106, 252–3, 313
new 17, 39 quality assurance 148
portfolio 317 quality circles 148, 395
see also commercialisation quality control 148
professionals 237–9 quality management system 148
profiles 40, 308 quantitative data 38
Profit and Loss Statements 249 quantitative factors 108
profit/profitability 16, 34, 40, 81, 85, 112, 190, quantitative research 291
196, 317, 382, 424
Quantum Brilliance 17
profit distribution 7
quantum computing 57
profit margin 317
questioning 299, 394, 399, 406–7
promotion 14, 173, 321–2, 325, 332, 354, 399
questionnaires 291, 394
techniques 322–3
see also marketing
race 234, 429–30, 433
‘Proprietary Limited’ (Pty Ltd) 84–6
radio 323
prospectus 84
rapid at home test kits (RAT) 202
protected industrial action 209
rapport 407
protection 22, 172, 186, 209, 227, 234, 255–6,
rating systems 405
260–1, 283, 367, 425, 429
raw data 292
see also copyright; trademarks
raw materials 95, 191, 201, 366
proximity 108
ready-made food 199, 298
psychographic markets 295
rebranding 18
psychological factors 300
receipts 247
psychological pricing 318
Reconciliation Australia 434
psychological testing 409
records/record-keeping 179, 244–6, 251
psychometric testing 409
recruitment 433–6
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recruitment methods 398–403 respect 33, 422, 433

recruitment policy 257, 399 resumé (curriculum vitae) 400–1, 411
reducing, reusing and recycling 50, 190–1, 206 retailers 12, 107, 263–4, 287–8
redundancy pay 209, 417 return on investment (ROI) 36
reference checks 384, 399, 411 revenue 49, 88–9, 93, 113, 282, 317, 338, 342
referrals 403 reward 6, 36, 114, 281, 325, 406
refund 227–8 rights 81, 93, 186, 209, 226–7, 231, 255–6, 417,
Registered Business Name (RBN) 81, 85 429–30
registration 169, 225 see also patents
regulations 79, 85, 108, 152, 169, 171–2, 190, risk 6, 36–7, 52–3, 85, 112, 151, 180–1, 190, 235,
224–35, 428–9 245, 281, 289
regulators 125, 286 risk assessment 235
regulatory strategy 146 risk management 146, 152, 238
reinforcing 322 risk takers 10, 12
relationship building 12 robotics 58, 387
relationships
factors affecting establishment 283–8 safety 32, 169, 203, 206, 209, 231, 358, 428
job analysis; design; description; specification salary/packages 420, 425
394–7 sales 14, 16, 129–30, 179, 182, 188–9, 201, 207,
mutually beneficial 353 252, 259, 325, 332, 350, 354, 387
objectives–marketing–customer base 280–2 selling (jobs) 407
between opportunity and concept sales promotion 325
development 37 sales strategy 188
positive 252–3, 352, 356 school-based educational programs 61
public relations–objectives 350–4 screening 404, 406, 408
trading 182 search engine optimisation (SEO) 341
reliability 106, 253 secondary data 290–1
religion 234, 429–30 security 21, 23, 50, 180–1
reminding 322 segmentation 295
remote working 435 segregation of duties 245
remuneration 424–5 selection/methods 398–403, 436
renewable resources 32, 204, 206 self-assurance 10
repair 227–8 self-starters 10, 12
repeat business 281–2 seminars 357
replacement 227–8, 384 separate entity concept 244
reports/reporting 38, 84–5, 293, 388, 394 services 6, 18, 46, 107, 125–8, 147, 182, 201, 227,
reputation 95, 106, 137, 152, 186, 252, 255, 311, 280, 353, 388
350–1, 353, 358, 362–3, 367, 428 new 39
resale price maintenance 319 prompt 337
rescued food 32 see also goods
research 17, 38–41, 203, 289–93 7Ps of marketing 308–31
see also market research sexual harassment 235, 430
research and development (R&D) 16, 21, 50, sexual orientation 234, 429, 433
57–60 shareholder needs 34
resilience 10, 12 shareholders 78, 83–6
resources 37, 123–4, 206 shares/prices 34, 84–6, 117
business needs 104–6 Sharetea Australia 359–60
factors affecting choice 106 shift workers 417
replacing 105 Shopify 188
suppliers 201–3 shopping goods 309
types of 105 sick leave 208, 423, 434
see also human resources silent partners 82

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skilled workers 184, 385 Global Diversity and Inclusion Strategies 434
skills 10, 14, 30, 54, 114, 385, 399, 407 marketing strategy 309
skimming pricing 318 matching to situation 355
SMART (Specific, Measurable, Achievable, optimising 201
Relevant and Time bound) 33, 382 for positive relationships 352
Snapchat 189, 340 PR strategies 350, 355–65
social benefit 7, 208 record-keeping 244–9
social enterprises 7, 9, 91–2 see also marketing strategy
social factors 151, 300 strengths 36, 137–9
social interaction 395 superannuation 209, 226, 420–1
social investment model 92 Superannuation Guarantee legislation 428
social media/platforms 89, 179, 189, 225, 284, supervisory reports 394
286, 324, 339–40, 342, 344, 350, 355–6,
suppliers 12, 30, 79, 93, 117, 151–2, 201–3, 253,
402–3, 408
263–4, 352, 434
social origin 429
positive relationships with 252–3
social programs 189
proximity to 108
social responsibility 189–90, 198, 201, 224,
selection importance 252–6
253–5, 433–6
supply/supply chains 19, 32, 37, 152, 182–3,
social wellbeing 46–51
201–3, 254–5, 264, 319
socially conscious businesses 353
support 6–7, 17, 93, 118, 123–30, 151, 190, 263,
societal attitudes 79, 172–4 416, 434–6
societal needs 18 support services 120, 125–8
society 6, 33, 151, 183, 190 survey 38, 50, 173, 183, 289
software 14, 179–80, 388 sustainability 8, 32, 34, 105, 147, 190–1, 204, 253
sole traders 81, 85, 208, 225 milestones 151
source documents 246–7 Sustainability Victoria 152
sourcing 152, 190 SWOT analysis 137–40
see also outsourcing symbols 313, 315
space race 364
special interest groups 204–9 tactics 136
staff performance 382–3 see also strategy
staff satisfaction 34, 337 TAFE 174
staff shortages 177 talents 434–5
staff turnover 34, 427, 432 Target 202
staff/staffing 148, 382–9, 394–411, 416–36 target audiences 340, 353
CSR establishment considerations 433–6 target markets 21, 179, 203, 291, 296–7, 324, 333,
identifying needs 384–6 335, 337, 342, 363
legal obligations 428–30 attributes 294–301
see also employees tariffs 184, 264
stakeholders 78, 151, 352, 382 tasks 31, 260, 420
standards 46, 106, 182, 233, 249 tax file numbers (TFNs) 169, 226
see also National Employment Standards taxation 49, 169, 176, 184, 225, 421
start-ups 7–9, 30, 99, 109, 123, 364 marginal rates 85
estimates 40 teams/teamwork 31, 386–7, 395, 434
hubs 62 technical skills 14
versus purchasing existing 88–96 technological developments 16–17, 21–3, 36,
states/territories 61, 207, 428 179, 284, 310, 388
STP (segmentation, targeting, positioning) 295 effects on staffing needs 387–9
strategic goals 34 in marketing 339–44
strategic planning 36, 136 technology 261, 297, 387–8
strategic thinking 14 factors 40
strategy 146, 151, 188, 251, 313, 355, 399 issues 79, 260–5
Temple & Webster 336
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termination 417, 422 violence 416, 435

territories see states/territories Virgin Australia 337, 362
Tesla 53, 287, 361 vision/vision statements 10, 30, 33–4, 105
tests/testing procedures 23, 202, 399, 409–10, volunteering 151, 190, 436
421 wages 208–9, 231, 416, 420–1, 425
theft 245, 367 waste/waste reduction 32, 50, 54, 190–1, 204–6
‘thinking outside the square’10, 12 watchdogs 286, 359, 418
threat 40, 137–8, 140, 199, 358 weaknesses 36, 137–9
tiered loyalty programs 261–2 websites 88–9, 123–4, 188, 315–16, 326–7, 401, 408
TikTok 189, 340 wellbeing 46–51, 435
timeliness 252, 344 Wilderness Society 206
title (cover) page 143 women 399
Toll Group 23 in management 32
total costs 317 Woolworths 91, 199, 204–5, 287, 299, 337, 388
total quality management (TQM) 148 word-of-mouth 262, 338, 399
trade practices legislation 226–7 WorkCover 209, 233
trade secrets 41 workers 417, 434–6
trade shows 18 see also employees
trademarks 30, 41, 93, 182, 186–7, 226, 283 workers’ compensation 209
trades 385 workforce 33
trade/trading 47–8, 169, 182 diverse 433–4
restrictions 264 national 208
trade relationship 24 planning 105
US–China trade tension 183 see also staff
traineeships 435 working arrangements 184, 416, 435
training 7, 9, 93–4, 190, 256, 261, 329, 433–5 working conditions 207–8, 231, 421, 423
traits 12, 409 unsafe 264
transparency 30, 256 working from home (WFH) 173, 265, 298
transport 32, 49, 110, 152, 264 working hours 208, 384, 416, 420–1, 435
trends 19, 37–9, 108, 172, 174, 176, 183, 189, 287, work–life balance 50, 384, 427
293, 297–9, 341–2
workplace agreements 208
trust 32, 152, 313, 359, 428
Workplace Injury, Rehabilitation and
trusts 225 Compensation Act 2013 429
Twitter 340, 402 workplace safety 231
workplaces 234, 434–5
Uber 22 discrimination-free 433
uncertainty 10, 176, 196, 289, 426 diverse 385
underpayment 359, 418 flexible 388
unemployment 176 positive 32
unethical practices 152, 191, 284 WorkSafe 233–4, 429
unfair dismissal protection 209 work/working 173–4
unions 208–9 changing nature of 174, 388
unlimited liability 81–2, 85 variety and challenges 395
working together 33
validity 245
value 83, 184, 186, 280, 294, 335–8, 433 young workers 434–5
values/values statements 30, 33, 52, 105, 172, YouTube 189, 339
312
core values 33–4
Zero Co 116
viability 36, 39, 108, 126, 149
zero food waste 32, 204–5
Victorian Equal Opportunity and Human Rights
zero-tolerance approach 255–6
Commission 234–5
zoning/regulations 108, 230
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acknowledgements

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Cover: © Getty Images / Westend61

Images: © Getty Images / gorodenkoff, Unit 1 Opener / Thomas Barwick, 1.3 / Spencer Platt, 1.2 /
Marco Geber, Case Study 1.2 / d3sign, Case Study 1.3 / George Pimentel, 1.4 / Kelly Sullivan, 1.5 /
Nora Carol Photography, 1.7 / Andriy Onufriyenko, Case Study 1.4 / Oscar Wong, 1.9 / Mike C, Case
Study 1.5 / Crystal Bolin Photography, Case Study 1.6 / Viaframe, 1.10 / Katleho Seisa, Case Study 1.7
/ Peter Dazeley, Case Study 1.8 / El Pics, Chapter 2 Opener / Heath Korvola, 2.1 / Morsa Images, 2.4 /
Abstract Aerial Art, Case Study 2.1 / Morsa Images, Case Study 2.2 / Cecilie_Arcurs, 2.8 / Skynesher,
Case Study 2.3 / Nora Carol Photography, 2.11 / littleny, 2.12 / Ezra Bailey, Case Study 3.1 / Thatree
Thitivongvaroon, 3.2 / BeyondImages, Case Study 3.2 / John W Banagan, Case Study 3.3 / Hinterhuas
Productions, 3.3 / Paper Boat Creative, Case Study 3.4 / Sergio Yoneda, Case Study 3.5 / Maskot,
Case Study 3.6 / Anna Blazhuk, Case Study 3.7 / Tom Werner, 3.7 / Westend61, Case Study 3.8 / The
Washington Post, Chapter 4 Opener / Jose A. Bernat Bacete, Case Study 4.1 / 10’000 Hours, 4.3 / Luis
Alvarez, 4.4 / Saeed Khan, 4.5 (1) / Michael Dodge, 4.5 (2) / Ryan Pierse, 4.5 (3) / Bloomberg, 4.5 (4-5)
/ Oscar Wong, Case Study 4.3 / Mapodile, 4.7 / Scott Olson, 4.9 (3) / Fairfax Media, 4.9 (4) / NurPhoto,
4.9 (6) / Fairfax Media, 4.10 / Willie B. Thomas, 4.11 / Hinterhuas Productions, 4.12 / CasarsaGuru,
Chapter 5 Opener / Alistair Berg, 5.2 / Alistair Berg, 5.2 / Yellow Dog Productions, 5.3 / Escaflowne,
Case Study 5.1 / Benoit Balanca, 5.4 / RichVintage, 5.6 / Maremagnum, 5.7 / Willie B. Thomas, 5.8 /
Ribkhan, 5.9 / Jose A. Bernat Bacete, Case Study 5.2 / Andriy Onufriyenko, Case Study 5.3 / Howard
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5.16 / Hiroshi Watanabe, 5.17 / Asanka Ratnayake, Case Study 5.5 / Marko Geber, 5.22 / Bloomberg,
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Musketeer, 6.8 / PM Images, 6.10 / We Are, Case Study 6.3 / Colin Anderson Productions pty ltd, 6.12 /
James Leynse, Case Study 7.1 / Kurmyshov, Case Study 7.2 / Mixetto, Case Study 7.3 / Alistair Berg, 7.3
/ DNY59, 7.5 / Thomas Barwick, Case Study 7.4 / Klaus Vedfelt, Case Study 7.5 / Momo Productions,
Case Study 7.6 / Peter Dazeley, 7.6 / John Lamb, Case Study 7.7 / Yuichiro Chino, 7.7 / Glowimages,
Case Study 7.8 / Andriy Onufriyenko, Case Study 7.9 / Anthia Cumming, Case Study 7.10 / Oscar
Wong, Case Study 7.11 / Tim Kitchen, Case Study 7.12 / StarLineArts, 8.2 / NurPhoto, Case Study 8.1
/ Karl Tapales, 8.4 / Karl Hendon, 8.6 / Bloomberg, Case Study 8.2 / Norbert Kamil Kowaczek, Case
Study 8.3 / Torsten Blackwood, 8.7 / Oscar Wong, Unit 2 Opener / Andriy Onufriyenko, AOS 1 Opener
/ Drew Angerer, Chapter 9 Opener / William West, 9.4 / Daniel Grizelj, Case Study 9.1 / Oscar Wong,
9.5 / Piero Damiani, 9.7 / Warodom changyencham, 9.8 / Warodom changyencham, Case Study 9.2
/ Mark Evans, 9.10 / Mark Evans, 9.10 / timsa, 9.11 / Bernd Vogel/, 9.12 / Avalon_Studio, Activity 9.5 /
Malte Mueller, 9.13 / 10’000 Hours, Case Study 9.3 / Vasyl Dolmatov, 9.14 / Gareth Davies, Chapter 10
Opener / Oscar Wong, 10.1 / Nigelcarse, 10.2 / Tetra Images, 10.4 / Firdausiah Mamat, 10.5 /. Maskot
Bildbyrå, 10.6 / Nora Carol Photography, Case Study 10.1 / Marko Geber, 10.7 / Hiroshi Watanabe,
10.8 / Serts, 10.9 / Morsa Images, 10.10 /. SOPA Images, Case Study 10.2 / Laurence Dutton, 20.22 /
Alexsl, Case Study 10.3 / Hispanolistic, 10.13 / MR.Cole_Photographer, 10.14 / xPACIFICA, Case Study
10.5 / Franck-Boston, 10.15 / Klaus Vedfelt, AOS 2 Opener / Arisara_Tongdonnoi, 11.3 / Good_Stock,
11.4 / Jpkirakun, 11.7 / Filo, Case Study 11.1 / Horacio Villalobos, 11.8 / Yuichiro chino, Case Study
11.2 / Future Publishing, 11.9 / Makhbubakhon Ismatova, 11.12 / Choochart Choochaikupt, 11.14
/ JuSun, 11.15 / Kasayizgi, 11.16 / PeopleImages, 11.17 / Ariel Skelley, 11.18 / Dilok Klaisataporn,
11.19 / Powerbeephoto, 11.20 / Richard Ross, 11.21 / Nathan Stirk, 11.22 (4) / Eyjafjallajokull, 11.14 /
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  469

Richard Lewis, Chapter 12 Opener / Bloomberg, 11.22 (1), 11.22 (5), 12.3, 12.4 (3), 12.5, 12.15, 12.16,
Case Study 12.5 / Raymond Boyd, 12.4 (1) / T3 Magazine, 12.4 (2) / Cavan Images, 12.7 (2) / Maskot,
Case Study 12.1 / Larisa Blinova, 12.10 / Laughing Mango, 12.18 / Brandon Bell, Case Study 12.2 /
Mark Dadswell, 12.18 / SOPA Images, 12.20 / Miakievy, Case Study 12.3 / Nitat Termmee, 12.22 /
d3sign, Case Study 12.4 / Kelvin Murray, 13.2 / Tara Moore, 13.5 / Prasit Photo, Case Study 13.1 / Don
Arnold, 13.6 /. MerveKarahan, 13.7 / We Are, Case Study 13.2 / Jasmin Merdan, Case Study 13.3 /
TomSmith585, 13.9 / Sellwell, 13.10 / KTS Design, 13.11 / Yagi Studio, Case Study 13.4 / 10’000 Hours,
13.12, AOS 3 Opener / Joe Raedle, Case Study 13.5 / Marrio31, 14.1 / Jose Luis Pelaez Inc, 14.3 / Tom
Werner, Case Study 14.2 / Jiang Suying, Review Activity 14.3 (1) / D3sign, Review Activity 14.3 (2) /
Education Images, Review Activity 14.3 (3) / John W Banagan, Review Activity 14.3 (4) / FG Trade, 15.2
/ Westend61, Case Study 15.1 / Blend Images - Erik Isakson, 15.3 / Mr.Cole_Photographer, 15.5 / We
Are, 15.6 / Ultramarinfoto, Case Study 15.2 / SOPA Images, Case Study 15.3 / Svetikd, 15.8 / 10’000
Hours, 15.9 / John M Lund Photography Inc, 15.10 / Westend61, 15.11 / Peter Cade, Case Study 16.1,
Case Study 16.2 / Demaerre, 16.1 / Suedhang, 16.2 / Safri Ibrahim, Case Study 16.3 / Luis Alvarez, 16.4
/ Thomas Barwick, 16.5 / Morsa Images, 16.6 / 10’000 Hours, 16.7 / Michael Dodge, 8.9 / sturti, 16.4 /
Jenny Evans, 9.2 / Asanka Ratnayake, 9.6; © Boy Scouts of America/Wikipedia, Chapter 1 Opener; ©
DFAT– www.dfat.gov.au /CC By 4.0 License. 1.11; © Brambles, 2.5; © Rawpixelimages /Dreamstime.
com, 2.10; © The Next Web/Wikipedia, Chapter 3 Opener; Graphic © CSIRO, 3.9, 3.10, Case Study
3.7; © Heaps Normal, Case Study 4.2; © Mildura Chocolate Company, 4.8; © Who Gives A Crap, Case
Study 4.4, 12.12; © Anett Flassi /Alamy, 4.9 (1); Alamy, 4.9 (2,5); © CPA Australia 5.15; © Shaik Mydeen /
Wikipedia, Chapter 6 Opener; © Jeff McNeill/Wikipedia, Chapter 7 Opener; © Impact Hub/Wikimedia
Commons, Chapter 8 Opener; LisaatVicChamber/CC By 4.0 Int’ License, 8.8 (1); © AIG Group, 8.8
(2); “Image courtesy of KEXINO, used with permission” Activity 9.6; © Safe Work Australia / CC BY
4.0 License, 10.11; © Jack11 Poland/Wikimedia Commons, Chapter 11 Opener; © Wirestock, Inc./
Alamy, 11.22 (2); © SMIGGLE, Case Study 11.3; © Kuhlmann/MSC/Wikipedia, Chapter 13 Opener; ©
Kuhlmann/ MSC/Wikipedia, Chapter 15 Opener (1); © Matthew Yohe/Wikipedia, Chapter 15 Opener
(2); © Broken Sphere/ Wikimedia Commons, Chapter 16 Opener.

Text: © Business Case Studies, Case Study 6.1; used with permission from Woolworths, Case
Study 8.3; “The use of the following work (The Age/SMH) has been licensed by Copyright
Agency except as permitted by the Copyright Act, you must not re-use this work without the
permission of the copyright owner or Copyright Agency”: adapted from ‘Charity founder blazes
own trail with tech training’ by Cara Waters Sept 28 2021 The Age Case Study 1.2; ‘Straight from
the heart mantra of the accidental entrepreneur’ by Jessica Yun Dec 7 2021 © The Age Review
Activity 3.2; ‘Dishwashers on $90 an hour as staff shortages smash hospitality sector’ By Andrew
Taylor, © The Age Nov 21, 2021, Case Study 7.4; ‘Australian beekeepers win manuka honey
trademark battle against NZ producers’ By Daniella White Dec 16, 2021, Case Study 7.10 digital
textbook; ‘O’Brien stable to face trial over WorkSafe charges following Thirteenth Beach death’
By Damien Ractliffe Feb 16, 2022, Case Study 9.2; ‘Topping comes with a fly as a bonus’: Bubble
tea chain under fire over wages, ingredients’ By Jessica Yun & Nick Bonyhady Nov 30, 2021, Case
Study 13.3; Used with permission of Cotton On, Case Study 10.2, p.299.

Every effort has been made to trace and acknowledge copyright. The publisher apologises for
any accidental infringement and welcomes information that would redress this situation.

VCAA – Extracts from the VCE Business Management Study Design (2023–2027) reproduced
by permission; © VCAA. VCE is a registered trademark of the VCAA. The VCAA does not endorse
or make any warranties regarding this study resource. Current VCE Study Designs and related
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and the VCAA Notices to Schools.
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 CASE STUDY
2.2

Ramsay Australia

Ramsay Australia is Australia’s largest hospital Ramsay Health Care Values

operator with 72 private hospitals and day The Ramsay Way
surgeries, employing more than 31 000 staff.
People are at the heart of our success. As
Ramsay has focused on maintaining the ‘people caring for people’ there are three key
highest standards of quality and safety, approaches:
being an employer of choice and operating
its business according to The Ramsay Way We value strong relationships
philosophy: ‘People caring for People.’
Healthy relationships lead to positive
Our Purpose: ‘People caring for people’ outcomes. We look out for the people we work
with, and we respect and recognise them.
Our Vision: ‘To be a leading health care Strong healthy relationships are the foundation
provider of the future’ of our stakeholder loyalty.

Our Mission: ‘To change what is possible for We aim to constantly improve
your health’
We do things the right way. We enjoy our work
and take pride in our achievements. We are not
afraid to challenge the status quo to find better
ways.

We seek to grow sustainably

Maintaining sustainable levels of profitability

are only part of our success. We prioritise
long-term success over short-term financial
gains because we care about our people, our
Figure 2.6a Ramsay Health Care is a global company
community and our planet.
operating in 10 countries with over 460 locations, and it
treated over eight million patients in 2021.
Source: Ramsay Health Care 2021 Investor briefing.

CASE STUDY ANALYSIS

1 Outline Ramsay’s vision statement and explain why this statement is significant.
2 Suggest three actions that will support Ramsay’s vision statement.
3 Describe the purpose of the Ramsay Way values.

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 CASE STUDY
3.2

Australia’s
international trade

Total exports for Australia

Figure 3.2a Two-

way trade and
trading partners

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 CASE STUDY ANALYSIS
Read the case study and watch the video.

1 Examine the diagrams outlining trading countries and Australia’s main exports. Explain
what effect these have had on the living standards of Australians.
2 Discuss why it is important for countries to develop trade, markets and agreements with
Video 3.1 other countries.
Free trade 3 Explain the impact that trade can have on the wellbeing of the economy.
agreements 4 Referring to the video, explain what Australia’s Free Trade Agreements (FTA’s) are.

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 CASE STUDY
4.4
Aussie toilet paper
subscription
start-up Who Gives a
Crap donates $5.85
million to charity

Despite the funny name, Who Gives a Crap is organisations such as Water Aid Australia and
a serious Australian-based social enterprise, Sanergy.
manufacturing environmentally friendly toilet
paper from recycled paper or bamboo. Since the panic buying of toilet paper that left
Australian supermarket shelves bare in 2020,
The Melbourne-based company was Who Gives a Crap sales have increased by
established to help solve an issue that 2.3 1000%. The spike in sales related to COVID-19
billion people around the world face – no panic buying meant that the social enterprise
access to a toilet. Closely related is the poor was able to donate $5.85 million, a 750%
sanitation and water supply that leads to increase from the previous year.
disease where 700 children under the age of
five die each day. Source: Adapted from Stephanie Palmer-Derrien,
‘Aussie toilet paper subscription startup Who
Launched in 2014 through a crowd funding Gives a Crap donates $5.85 million to charity,
campaign, Who Gives a Crap has donated following bumper panic-buying profits’,
half of its profits towards building toilets with www.smartcompany.com.au, 10 July 2020.

CASE STUDY ANALYSIS

1 Summarise the evidence in this article that Who Gives a Crap is a social enterprise.
2 Suggest why this social enterprise has been so successful.
3 The panic buying of toilet paper in 2020 provided the opportunity for Who Gives a Crap to
meet consumer demand and increase sales. Discuss the notion that social enterprises need
to make a profit to be successful.

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 CASE STUDY
5.1
Thomas Foods to
create 2000 jobs at
new plant in South
Australia

According to Thomas Foods CEO Darren Thomas, • stockyards

the new abattoir at Murray Bridge in SA will • administration facilities
create around 2000 jobs. ‘We plan to build the • a wastewater treatment plant
best, most advanced multi species processing • fully automated carton chilling, freezing and
facility in Australia, if not the world,’ said Thomas. storage systems.
‘We want our facility to be world class in Construction has been a 24-month process with
adapting the latest advancements in technology, the build expected to be finished in late 2022.
efficiency, environmental sustainability, animal Recruitment of the first management positions
welfare and workplace safety.’ has already begun, with recent advertising
for a Quality Assurance Manager and a Group
The huge packaging building will have the Environmental & Sustainability Manager.
capacity to store 40,000 cartons of frozen and
chilled meat products within the storage and Sources: Extracted from information on Thomas
retrieval system, and will feature the latest in Foods website; articles in Adelaide Independent
automation and robotics technology. Stage One News: Andrew Spence, ‘Thomas Foods Murray
of the development features: Bridge plant takes shape’, 24 September 2021;
Melissa Keogh, ‘Thomas Foods rises from the ashes
• beef processing and animal handling facilities with multi-million dollar abattoir, 2000 jobs for
• a beef boning room with automated Murray Bridge’, 2 September 2019.
packaging technology

CASE STUDY ANALYSIS

1 Identify the natural, human and capital resources required for the Thomas Foods Abattoir.
2 Describe two factors that affected the choice of resources for the plant.
3 Explain why workforce planning is important in preparing for the opening of this facility.

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 CASE STUDY
7.2

‘No refund’ signs

and consumer
rights: Mazda

The Federal Court has found that Mazda guarantee rights even though a consumer’s
Australia Pty Ltd engaged in misleading rights under the Australian Consumer Law also
and deceptive conduct and made false or include a refund or replacement when there is
misleading representations to nine consumers a major failure.
about their consumer guarantee rights.
The Court also found that Mazda misled the
The consumers had each requested a refund consumers about their consumer guarantee
or a replacement vehicle from Mazda, after rights by representing that they were not
experiencing serious and recurring faults with entitled to a refund or replacement vehicle at
their new Mazda vehicles within a year or two no cost, when in fact consumers do not have
of purchase. to make any financial contribution to receive
the remedies that they are entitled to under the
Mazda ignored or rejected the consumers’ Australian Consumer Law.
requests, telling them the only available
remedy was another repair, even though the ‘Mazda engaged in long, drawn-out discussions
consumers’ vehicles had already undergone with the consumers, often multiple times a day
multiple unsuccessful repair attempts, over months, in which it misled the consumers
including complete engine replacements. One about their rights,’ ACCC Chair Mr Sims said.
vehicle had three engine replacements.
‘The message to the new car industry is clear:
After repeated attempted repairs Mazda offered consumer rights are not negotiable and must not
to refund only a portion of the vehicle’s purchase be misrepresented to consumers,’ Mr Sims said.
price, or offered a replacement vehicle only if
the consumer made a significant payment. ‘If a vehicle cannot be repaired within a
reasonable time, or at all, consumers have a
The Court found that Mazda made 49 separate right under the Australian Consumer Law to a
false or misleading representations relating to refund or replacement.’
the nine consumers.
Source: Abridged from ‘Mazda misled consumers
Specifically, the Court found that Mazda about their rights over refund or replacement for
misled these consumers about their consumer faulty cars’, ACCC website, 30 November 2021.

CASE STUDY ANALYSIS

1 Explain why Mazda was found to have engaged in misleading and deceptive conduct by
the Federal Court.
2 Explain why it is important for a business to ensure it meets its legal obligations towards
consumers.

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 CASE STUDY
7.6
Technology and
business planning:
experts’ predictions
about innovations
by 2030

Social media: Experts see a reckoning coming Healthier living: Innovations will address
for social platform companies and leaders that physical and mental health; major change is
will lead to large-scale changes. Some expect coming for the health care sector.
serious efforts to break up such firms, and some
predict the rise of new platforms designed to Artificial intelligence: AI will continue to
make their users’ best interests paramount. improve and be applied to improve human
lives online and offline.
Privacy issues: Actions will be taken to better
protect people’s privacy online. It is suggested Education reform: Education systems will
that these concerns may be addressed through evolve in response to many multilayered
stricter regulations around advertising, a focus societal changes.
on privacy and how to manage this online, and
more laws around digital technology. Labour and jobs: Business practices, individuals’
work lives and the larger economy will
Misinformation: Due to growing concerns about substantially change by 2030. This may include
the accuracy of information encountered online, shorter working weeks, more specialised roles
efforts will be made to identify and address and AI-enhanced adaptive learning.
misinformation and manipulation of information.
Environmental issues: Climate change and
Political and government reform: Democratic other environmental issues will inspire
activity and government policymaking will innovation out of necessity. It is likely that
open to more citizen engagement, and public digital technologies will assist with this and
activism will grow. improve collaboration between people and
countries.
Social connectivity: A number of innovations
will help connect people and bring them Source: Abridged from Emily A. Vogels, Lee Rainie
together for a common purpose. & Janna Anderson, ‘The innovations these experts
predict by 2030’, Pew Research Center, 30 June 2020.

CASE STUDY ANALYSIS

1 How can three of the issues or innovations outlined in the article impact on
business planning?
2 Explain why it is important for a business to try to predict and plan for technological
developments.

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 CASE STUDY
7.7

Australia’s
expansion into new
markets: McCormick

McCormick & Company Inc. opened a new The Technical Innovation Centre focuses on
environmentally friendly, multi-purpose head creating new:
office in Australia. • products for brands such as Aeroplane Jelly
and Keen’s Curry
Based in Melbourne, McCormick’s new • seasonings for snack food manufacturers
complex houses the company’s new Australian • sauces and coatings for restaurants.
head office. The complex also includes a
Technical Innovation Centre, a Logistics Centre Melbourne provides a dedicated Australian and
and new corporate offices. Asia-Pacific customer base, and a transport
network that is among the best in the world.
The facility is McCormick Australia’s innovation
and collaboration hub for staff and customers. Source: Abridged from ‘McCormick builds new HQ
The new office is symbolic of the business’s and food innovation centre in Australia’,
transformation and includes a strategic focus Austrade.gov.au website, 6 December 2021.
on growth within the Asia Pacific region.

CASE STUDY ANALYSIS

1 Explain why it is important for a business to understand the market it wishes to move in to.
2 How has McCormick planned for an expansion?
3 Discuss why Australian businesses try to expand into other markets. What are the benefits
to the business and the Australian economy?

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 CASE STUDY
8.1

Subway product
range responds to
changing consumer
preferences

Franchise sandwich giant Subway has been are struggling to survive, with a significant
battling changing consumer habits and a number of owners trying to sell their stores.
tough retail environment. Over the past 10
years, the tastes and palates of Australians In response to the downturn in the business
have changed. People are now looking for and with the aim of improving performance in a
healthier food for their lunch or dinner. This highly competitive market, Subway decided to
resulted in consumers bypassing Subway as overhaul its current business model by changing
a meal or snack option. This once successful its product offerings and rolling out a new
franchise business is suffering, with many store design. In response to changed trading
local Subway franchisees claiming they conditions due to the COVID-19 pandemic, it has
introduced a pilot 24/7 pick-up service.

CASE STUDY ANALYSIS

1 Describe the level of importance you place on being able to purchase a healthy sandwich as
either a snack or meal.
2 Identify and describe whether you believe that the change in consumer preferences is now
being met with the changes made by Subway.

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 CASE STUDY
9.3
Are you getting
the most from your
external advice and
service providers?

External advice and service providers play a preparations. An external advisor will want to
crucial role for many businesses. understand the current reality of your business
before engaging with it.
But whether you are using yours for financial
planning, marketing, or something else, how 5 Set goals
do you know you’re getting the maximum Define clearly what success will look like and
benefits of outsourcing? who is responsible for any tasks.

The following approach to working with 6 Create business processes

external support will help you get the most Implement the process, plan, or solution that is
from the relationship. intended to produce the desired result. While
seemingly obvious, this is the step most often
1 Identify the current state of your organisation neglected.
Start by identifying the internal and external
systems and resources needed to operate your 7 Assess the results and make adjustments
organisation in its present state. Evaluate the success by comparing the
outcomes to the initial objectives and adjust
2 Prepare for the unexpected when needed.
You must prepare to respond to external
shocks that could cause serious issues for your Further key points and critical considerations
organisation. Anything that could disrupt your You are in charge of the outsourcing
business processes counts, and it’s good to engagement, so you’re primarily responsible
have a plan in place should the worst occur. for the quality of the brief required. What
systems and processes do you have to achieve
3 Find the balance this to a high standard of quality? For example,
You will then need to decide on what internal do you have high-quality data sources about
and external resources strike the best balance the operation of your organisation?
between current performance and the future
sustainability of your organisation. Resources External resources will be most successful
that are necessary to the current and future in delivering appropriate support to your
operations of your business systems should be organisation when your goals have been clearly
maintained as internal resources or insourced defined and the outsourcer has been provided
as needed. Other functions and resources with all the necessary information to support its
are best outsourced by the organisation to a rapid and cost-effective engagement.
provider who can deliver the result required.
Source: Adapted from Michael Perkins, ‘Are you
4 Make preparations getting the most from your external advice and
Before you begin any external provider service providers?’, Businessaustralia.com website,
relationship, you’ll need to make the proper available at https://cambridge.edu.au/redirect/9761.

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 CASE STUDY ANALYSIS
Explain how a business can best prepare for the expert advice that they are seeking.

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 CASE STUDY
11.2
Kogan: the most
recognisable face of
online retailing in
Australia

Kogan was established by Ruslan Kogan in • An unwavering commitment to provide

2006 and operates as a portfolio of retail and Aussies with better value products and
services business that includes Kogan Retail, services.
Kogan Marketplace, Kogan Mobile, Kogan • An obsession with creating the best
Internet, Kogan Insurance, Kogan Energy, possible shopping experience, from easy
Kogan Travel, Kogan Money and Kogan Cars. purchasing to efficient delivery and reliable
after-sales support.
From its headquarters in Melbourne, the • Our online-only business model allows us
business focuses on making in-demand products to bypass the expenses of bricks-and-mortar
and services more affordable and accessible to stores, so we can pass the savings onto our
customers. The Kogan brand has a reputation for customers.
‘price leadership through digital efficiency’. The Source: Adapted from Kogan website, ‘About us’.
business has established three key pillars as the
basis for its operations; namely:

CASE STUDY ANALYSIS

Access the Kogan website to answer the following questions:
1 Identify the types of products and services that are sold by the various Kogan online stores.
2 Outline the strategies used by Kogan to find out about customers, so the business can
expand its customer base.
3 Identify the strategies used by Kogan to convert customers into repeat customers.
4 Analyse whether Kogan has used its strong brand identity to leverage new products and
services.

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 CASE STUDY
12.2

Apple’s five steps of

service

Apple trains their employees to follow five P – Probe (in a polite manner) to gain an
steps of service (APPLE). Starting from the understanding of the customer’s needs.
moment a potential customer walks into the
store, Apple employees are expected to go P – Present a solution for the customer to take
above and beyond. The five steps are designed home today.
not only to help enhance the customer
experience, but also to create an amazing L – Listen closely for any concerns and resolve
environment for everyone. The ‘APPLE’ any issues the customer may have.
acronym stands for:
E – End with a positive goodbye and an
A – Approach all customers with a personalised invitation to return.
and sincere welcome demonstrating that
you are a friendly, passionate and committed Source: Adapted from Tamara, ‘Becoming
employee. donor centric: Apple’s Five Steps of Service’,
finelinesolutions.com academy blogs.

CASE STUDY ANALYSIS

Discuss whether you as a customer would feel comfortable with your customer experience being
so directed.

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 CASE STUDY
12.4
LEGO: using social
media as one of
its key marketing
strategies

Since its founding in 1932 by Ole Kirk

Kristiansen, LEGO, a private family-owned
company based in Denmark, has continued
to make famous its interlocking plastic
bricks. Over time, LEGO has diversified into
movies, video games, television shows,
popular social media channels and even
major amusement parks. Much of its success
is due to its marketing strategy, which
embraces digitalisation and emphasises
knowing its customer base. In the 21st century Figure 12.25a LEGO: an innovative and adaptable
LEGO continues to be a thriving and highly company adopting social media strategies

innovative company adapting its marketing

strategy to new digital communications. content and posts receive numerous likes
and comments, showing excellent user
LEGO’s approach to marketing has six key engagement. YouTube rates LEGO as its most
factors, one of which relates to its social popular brand channel (June 2020) with 10
media/content marketing strategy. LEGO million views. Their channel offers promotional,
uses Facebook, Instagram and YouTube to educational and how-to videos that promote
engage with customers. Its Facebook page the company’s brand.
has more than 13 million followers and is
regularly updated with photos and videos of Source: Adapted from Joyce Qian, ‘LEGO: The

new LEGO releases and innovative creations. Marketing Strategy Behind the Toy Industry Titan’,

The Instagram page offers followers similar ContactPigeon.com blog.

CASE STUDY ANALYSIS

1 Identify the social media platforms used by Lego as part of its digital marketing strategies.
2 For each of the social media platforms identified in Question 1, describe how LEGO uses
these platforms.
3 Visit the website of LEGO. Identify who the company believes are its target market.

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 CASE STUDY
13.2

Examples of
planned PR
campaigns

Businesses have had to quickly adapt to the Zara – Shot-from-home

pandemic and the new rules and ways of living
and working demanded by it. The main goal Zara, the Spanish high-street retailer, proved
was simple for all businesses – to keep the that you can do a lot at home, even fashion
business running. photoshoots. Zara sent its product samples to
the home addresses of its models. The models
To do so, brands had to reach out to their did a self-shoot of the new collection, which
customers; decide whether to offer them resulted in many interesting selfies/self-photo
discounts; encourage their customers to stay shoots.
with them; send out motivating messages;
or simply to thank their customers for their Brave – Spoiling Netflix shows
patience while their services are on hold. Some
good examples of businesses supporting What best way to urge people to stay home
customers and gaining positive reputations at than putting spoilers of their favourite Netflix
the same time include the following: shows all over the streets?

Uber – Thank You For Not Riding That question popped up in the heads of Seine
Kongruangkit and Matithorn Prachuabmoh
At the beginning of worldwide lockdowns, Chaimoungkalo, known as Brave. The two
Uber decided to join many companies urging authors decided to do a fake campaign in which
people to stay home. In their Thank You For Not they filled billboards with spoilers of Netflix’s
Riding campaign, Uber thanked its customers most popular shows. At first, people thought it
for not using its services unnecessarily at the was Netflix’s campaign, but the streaming service
moment with a simple message: ‘Stay home quickly distanced itself from it. Brave’s spoiler
for everyone who can’t.’ campaign not only encouraged people to stay
home, but it also reminded them to watch Netflix.
Along with the campaign, Uber committed
to providing 10 million free rides and food Billie – Video calls
deliveries to healthcare workers, senior
citizens, and all those in need in those Billie, a female-first beauty brand, decided to
challenging times. tackle (especially women’s) shame for the way
we look on webcams during online meetings.
Ikea – Stay Home The brand started a great PR campaign that
celebrated natural beauty and encouraged
Ikea was also among many companies people to stop apologising for looking like
motivating people to stay home. It did this themselves when at home.
by reminding people of how cosy their home
can be to ease the thought of having to spend Source: Adapted from Irma Jakić, ’10 Best PR
several weeks ‘locked’ in it. Campaigns of 2020’, Mediatoolkit website, 16
December 2020.
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 CASE STUDY ANALYSIS
1 Explain why it is important for a business to have a planned public relations strategy in
place.
2 Choose two of the campaigns outlined in the article. Why did the businesses decide to run
these campaigns?
3 What were the benefits of the campaigns for the business and the public?

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 CASE STUDY
15.2

Seasonal workers
job advertisement

Highest alpine village in Australia is seeking team, make friends and enjoy all that the great
seasonal workers. Alpine snowfields have to offer!

Change up your daily routine and join our Explore the huge range of awesome roles
down-to-earth team at the highest alpine available at Hotham:
village in Australia. If you’re passionate about • Administration/Reception
the snow and are looking to work for a season, • Day Care and Indoor attendants
or are interested in a longer-term career, you • Experienced Boot Fitters
can find our latest opportunities from around • Events
the mountain below. • Hotel Receptionists
• Housekeeper and Commercial Cleaners
Mt Hotham Skiing Company (MHSC) is the • Human Resources Assistants
largest operator at Hotham Alpine Resort • Lift Attendants
and seeks exciting, innovative and dynamic • Marketing and Media
individuals each year to join our team working • Porter/Snow Clearer
at the top of the Victorian Alps. Owned by • Cook/Chef
Merlin Entertainments Group, the company • Rental Hire Attendant
is responsible for the ski field operations • Retail Sales Staff
including snow grooming, snowmaking, lifts, • Snow Groomers (must be experienced)
snow sports, school, tickets, guest services, • Snowmaking
retail, equipment hire, day spas, property, • Snowsports Instructor Positions – with or
maintenance, reservations, events, marketing, without experience
Hotham Airport and more. • Ticket Seller/Ticket Checker.

While previous snow experience is desirable, Source: Mount Hotham website, ‘Employment’.
it is not essential for many positions. Join our

CASE STUDY ANALYSIS

1 From the list of ‘awesome roles’ above, select one of the jobs and design an online job
advertisement.
2 Identify which social media site and/or website you think would be the best to use to attract
the greatest number of applicants to the job you have chosen. Justify your choices.

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 CASE STUDY
16.2
Fair Work
Ombudsman
accuses Coles of
underpaying staff

The Fair Work Ombudsman (FWO) has taken relating to weekends, public holiday penalty
legal action in the Federal Court against Coles rates and allowances. The record-keeping
alleging it has underpaid thousands of their breaches occurred in every state and territory.
employees in its liquor and supermarket
business. The amount of underpayment is more FWO Sandra Parker said the action being
than $115 million and has accrued over three taken against Coles should serve as a
years. warning to all employers that they can face
serious consequences if they do not prioritise
The FWO in its legal action is seeking backpay workplace law compliance. In addition to
and penalties for the underpayment of 7812 seeking payment of backpay for the employees,
employees between January 2017 and March the FWO is also seeking penalties of up to
2020. The alleged underpayments appear to be $64 000 for each breach that has occurred.
due to Coles paying award-covered employees’
annual salaries that were insufficient to Source: Adapted from Neelam Dajee, ‘Watchdog
cover their minimum entitlements due to the sues Coles over staff underpayments’, The Market
significant amounts of overtime worked by Herald website, 3 December 2021; Pat McGrath,
those employees during that period. It is also Dan Harrison & Alison McLlymont, ‘Coles accused
alleged that Coles had breached record-keeping of overworking and underpaying supermarket
laws including records related to overtime managers as FWO launches action’, ABC news
hours worked by employees, in particular those website, 10 December 2021.

CASE STUDY ANALYSIS

1 Describe the role of the Fair Work Ombudsman.
2 Describe the basis of the legal action being taken by the Fair Work Ombudsman against
Coles.
3 Undertake research to find any current claims for underpayment of wages that are being
dealt with by the Fair Work Ombudsman. Select one of the claims and outline the problem,
and then describe what action has been taken to rectify the employee’s claim.

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