CAMBRIDGE

VCE BUSINESS

CAMBRIDGE VCE BUSINESS MANAGEMENT 1&2

MANAGEMENT

1&2 CAMBRIDGE
VCE BUSINESS
MANAGEMENT

Cambridge VCE Business Management Units 1 & 2

Cambridge VCE Business Management Units 1 & 2 provides complete coverage of the 2017 VCE Business
Management Study Design. With new content to demonstrate how theory works in contemporary business
1&2
ISBN 9781316621196 - CAIN, JEFFERY & SOMERS - CAMBRIDGE VCE BUSINESS MANAGEMENT UNITS 1 & 2 - CMYK

practice, activities designed to develop knowledge and enhance student confidence, and interactive digital
support to bring the study of Business Management to life, this resource package supports a range of JULIE CAIN
different learning styles and strengths while providing the in-depth content needed for VCE success. MEGAN JEFFERY
• New and topical case studies with accompanying analysis questions provide practical examples of GILLIAN SOMERS
business management theory in practice and help you prepare for assessment.
• The highly visual design uses graphic organisers, diagrams and tables to help you understand
and apply business management concepts, principles and terminology.
• Chapter introductions outline the key knowledge and skills to be covered in the chapter ahead, INTERACTIVE TEXTBOOK INCLUDED
and offer valuable guidance for revision, assessment and examinations.
• Chapter summaries that encourage regular revision, and the consistent use of exam-style questions
and key exam terminology, ensure you are fully prepared for success in your assessment and final
VCE examination.
• The Interactive Textbook brings Business Management to life through rich media, pop-up glossary
definitions, interactive activities and more.

CAIN JEFFERY SOMERS

Cambridge GO for students and teachers
Digital resources including the Interactive Textbook, the PDF Textbook, and additional support resources
are accessed through Cambridge GO using the unique 16-character code found in the front of this book.
Also available: Teacher Resource Package
A Teacher Resource Package is available for purchase separately and includes a host of valuable
time-saving planning, classroom and assessment support resources.
Also in this series:
Cambridge VCE Business Management Units 1 & 2 digital only
Cambridge VCE Business Management Units 1 & 2 Teacher Resource Package
Cambridge VCE Business Management Units 3 & 4 print and digital
Cambridge VCE Business Management Units 3 & 4 digital only
Cambridge VCE Business Management Units 3 & 4 Teacher Resource Package

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 CONTENTS
How to use this resource viii
Key knowledge table x
Key terms xiv
About the authors xvi
Author acknowledgements xvi
Permissions acknowledgements xvii

UNIT 1  PLANNING A BUSINESS 1

PART 1, AREA OF STUDY 1
The business idea 2

01 The business idea – inspiration and planning

1.1 Starting a business
3
4
1.2 Skills and qualities of successful business operators 7
1.3 Sources of business opportunity 13

02 Business concept development – ‘getting off the ground’

2.1 The importance of business concept development
20
21
2.2 Market research – refining the business concept 22
2.3 The importance of goal setting in business 24

03 Business contributions to society – innovation and

entrepreneurship 31
3.1 Contribution to the economic wellbeing of a nation 32
3.2 Building a culture of innovation and entrepreneurship 40

Contents iii
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 PART 2, AREA OF STUDY 2
External environment 52

04 Overview of the macro, operating and internal

environments – influence of the macro environment on
business planning 53
4.1 Macro factors affecting business planning 54
4.2 Key legal and government regulations 54
4.3 Societal attitudes and behaviour considerations 58
4.4 Economic conditions 62
4.5 Technological issues 67
4.6 Global issues 69
4.7 Corporate social responsibility 79

05 Influence of the operating environment on business

planning83
5.1 Customer needs and expectations 84
5.2 Competitors’ behaviour 86
5.3 Suppliers and the supply chain 87
5.4 Special interest groups 91

PART 3, AREA OF STUDY 3

Internal environment 96

06 Resourcing, locating and financing a business

6.1 Business resource needs and the factors affecting their choice
97
98
6.2 Business location and factors affecting choice of location 99
6.3 Sources of business finance  111

07 Business structures and models

7.1 A new business from scratch or an existing business?
119
120
7.2 Choosing the legal business structure  122
7.3 Types of business models 129

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 08 Business support services
8.1 Informal support and assistance provided by networks
139
140
8.2 Business support services 142
8.3 Government and community-based support and assistance 145

09 Business planning
9.1 Planning
158
159
9.2 The business plan 163
9.3 Corporate social responsibility management issues and business
planning172

Contents v
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 UNIT 2 ESTABLISHING A BUSINESS 177
PART 1, AREA OF STUDY 1
Legal requirements and financial considerations 178

10 Establishing a business – legal requirements

10.1 Compliance with key legal and government regulations
179
180
10.2 Employment laws 185
10.3 Rights of the Australian consumer 188

11 Establishing a business – policies and procedures

11.1 Policies and procedures relating to legal requirements
195
196
11.2 Financial control systems 200
11.3 The importance of choosing appropriate suppliers and procurement
policies 207
11.4 Technological and global issues 212

PART 2, AREA OF STUDY 2

Marketing a business 218

12 Marketing the business

12.1 Marketing – what is it?
219
220
12.2 Relationship between marketing, establishing a customer base and
business objectives 220
12.3 Factors affecting the establishment of a customer base and brand
identity 221
12.4 Market research practices 225
12.5 Market attributes 230

13 Extended marketing mix, related marketing strategies and

corporate social responsibility issues 237
13.1 The 7Ps of marketing 238
13.2 Product life cycle 241
13.3 Features and value of customer relations strategies 260

vi CAMBRIDGE VCE BUSINESS MANAGEMENT  | UNITS 1 & 2

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 14 Public relations
14.1 Public relations and its relationship to business objectives
266
267
14.2 Public relations strategies 269
14.3 Maintaining a positive relationship with customers and possible
implications276

PART 3, AREA OF STUDY 3

Staffing a business 280
15 Staffing a business
15.1 Relationship between the performance of staff and achieving business
281

objectives282
15.2 Identification of staffing needs of the business 283
15.3 Developments in technology  285

16 Recruitment and selection of staff 

16.1 Job analysis
290
291
16.2 Recruitment 295
16.3 Selection of applicants 301
16.4 Employment arrangements  308

17 Expectations and legal obligations

17.1 Employer expectations 
311
312
17.2 Employee expectations  315
17.3 Legal obligations for staff  322
17.4 Employee induction  327

18 Global and corporate social responsibility issues

18.1 Global issues
331
332
18.2 Corporate social responsibility management issues when establishing
staffing of a business 340
18.3 Establishing policies to support employees 343

Glossary348
Index359

Contents vii
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 HOW TO USE THIS RESOURCE
Chapter openers feature four sections
introducing the topics being studied:
Overview captures the essence of the
content presented.
Key knowledge links to the Study Design
and lists the outcomes this chapter will help
you achieve.
Key terms gives a summary of the
language you need to discuss the topics.
What’s ahead presents a visual
overview of focus areas.

Section heads link to key knowledge

required by the Study Design.
Case studies extend on information to
add another layer to your knowledge and
understanding.
Each case study is followed by an analysis
– a set of questions challenging you to
apply business management knowledge to
a practical business situation.

Glossary terms are bolded in the text,

defined in the margins and collated at the
end of the textbook for easy reference.
A variety of activities and research tasks
explore key concepts, develop skills, and
encourage you to consolidate and extend
your knowledge and skills on a wide range
of key topics.
All activities are available as downloadable
documents.

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Chapter summaries review the main
ideas of the topic to consolidate what
you have learned.
Chapter summary questions highlight
key areas explored and help reinforce
learning.
Extension questions, using key exam
terminology, test your knowledge through
the reinforcement of key concepts and the
application of skills.

In the Interactive Textbook, video, audio

and additional images enrich the learning
experience.
Interactive activities (e.g. drag-and-
drop questions) assist recall of facts and
understanding of concepts.
Roll-over definitions of glossary terms
enhance understanding.

A downloadable PDF Textbook is available

with note-taking and search functions.
All worksheets and end-of-chapter
content are available as downloadable
documents.

How to use this resource ix

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 KEY KNOWLEDGE TABLE
AREA OF CHAPTER KEY KNOWLEDGE
STUDY
Part 1 AOS1 1 The business • The personal motivation behind starting a
PLANNING A BUSINESS  UNIT 1

The business idea – inspiration business such as the desire for independence
idea and planning both financially and personally, to make a profit
and to fulfil a market and/or social need
• The characteristics of successful business
managers and business entrepreneurs and how
these characteristics contribute to business
success
• Sources of business opportunity, including
innovation and entrepreneurship, recognising
and taking advantage of market opportunities,
changing customer needs, research and
development, technological development and
global markets
2 Business • The importance of goal setting in business
concept • The importance of business concept
development – development
‘getting off the • The relationship between business opportunities
ground’ and business concept development
• Market research and initial feasibility studies
3 Business • The contribution that businesses make to the
contributions economic and social wellbeing of a nation
to society – • The methods by which a culture of business
innovation and innovation and entrepreneurship may be
entrepreneurship fostered in a nation, such as government
investment in research and development,
council grants for new businesses, business
mentorships, school-based educational
programs in entrepreneurship, and the creation
of regional business start-up hubs
Part 2 AOS2 4 Overview of the • Macro factors that affect business planning
External macro, operating • An overview of the key legal and government
environment and internal regulations affecting businesses in the planning
environments – stage
influence of • Societal attitudes and behaviour such as values,
the macro beliefs and trends
environment on • Economic conditions such as how interest rates,
business planning tax rates, business and consumer confidence
levels affect business planning
• Technological issues such as how the market
may change in the future and developments in
technology

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 AREA OF CHAPTER KEY KNOWLEDGE
STUDY
• Global issues such as overseas competitors,
PLANNING A BUSINESS  UNIT 1
overseas markets, offshoring labour, exchange
rates, patenting, copyrights, trademarks and
online sales that affect business planning
• Corporate social responsibility issues such as
environmental considerations and planning the
production of goods and services which are in
society’s best interests
5 Influence of • Customer needs
the operating • Customer expectations
environment on • Competitors’ behaviour
business planning • Suppliers and the supply chain such as the
resources required for the business and the
considerations about where these resources are
sourced and how they reach the business
• Special interest groups such as environmental
lobby groups, business associations and unions
Part 3 AOS3 6 Resourcing, • Business resource needs and factors affecting
Internal locating and their choice: natural, labour and capital resources
environment financing a • Business locations and factors affecting their
business choice
• Sources of finance available to establish a
business and factors affecting their choice
7 Business • Costs and benefits of purchasing an existing
structures and business compared with establishing a new
models business
• Types of legal business structures such as sole
trader, partnership, franchise, private limited
company, public listed company and the factors
affecting choice of business structure
• Types of business models such as online
business, bricks and mortar business, social
enterprise, franchise, importer and exporter
8 Business • Legal services
support services • Financial services
• Technological services
• Community-based services
• Formal and informal networks
• Business mentors
9 Business • Planning tools such as a SWOT analysis
planning • Features and construction of business plans and
benefits of using them
• Corporate social responsibility management
issues regarding business planning

Key knowledge table xi

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 KEY KNOWLEDGE TABLE
AREA OF CHAPTER KEY KNOWLEDGE
STUDY
Part 1 10 Establishing • An overview of key legal and government
ESTABLISHING A BUSINESS  UNIT 2

AOS1 Legal a business – regulations to be considered when establishing a

requirements legal business, including:
and financial requirements – Registration of a business name
considerations – Registration of a website domain
– Trade practices legislation
– Business tax compliance
– WorkSafe insurance
11 Establishing • The need for policies and procedures to achieve
a business – compliance with legal requirements and establish
policies and business routines
procedures • The importance of establishing bank accounts,
financial control systems and record-keeping
strategies
• The importance of choosing appropriate suppliers,
including the benefits and limitations of suppliers
which meet the corporate social responsibility
objectives of the business
• Technological and global issues that may affect
decision making when establishing a business, such
as generating customer data bases and contacts
with overseas suppliers and retailers
Part 2 AOS2 12 Marketing • The relationship between marketing, establishing a
Marketing a the business customer base and business objectives
business • External (macro and operating) and internal
environment factors affecting the establishment of
a customer base and brand identity
• Market research practices such as data collection
techniques, analysis and interpretation
• Target market attributes such as market dimensions,
segments, consumer trends and behaviour
13 Extended • The 7Ps model of marketing: product, price, place,
marketing promotion, people, physical evidence and process
mix, related • Product life cycle: introduction, growth, maturity,
marketing decline, extension and the relationship between
strategies and each of these stages and the choice of marketing
corporate social strategy
responsibility
issues

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 AREA OF CHAPTER KEY KNOWLEDGE
STUDY
• The features and value of customer relations
ESTABLISHING A BUSINESS  UNIT 2
strategies such as providing quality customer
service and establishing customer loyalty programs
• Corporate social responsibility management issues
with regards to establishing a customer base, such
as green marketing
14 Public • An overview of public relations and its relationship
relations to business objectives
• 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
Part 3 AOS3 15 Staffing a • The relationship between the performance of staff
Staffing a business and achieving business objectives
business • Identification of the staffing needs of the business
such as the knowledge, skills and ideas staff can
contribute to the business
• The effects that developments in technology may
have on staffing needs
16 Recruitment • Job analysis and its relationship to job design and
and selection related documentation, job descriptions and job
of staff specifications
• Recruitment methods and the advantages and
disadvantages of each method:
– Internal such as intranet and word-of-mouth
– External such as websites, online recruitment
agencies and social media
• Selection methods such as interview, psychological
testing, work testing, online selection, and the
advantages and disadvantages of each
• Employment arrangements such as full time, part
time, contractual and casual
17 • Employer expectations such as contracts of
Expectations employment, business loyalty and terms of notice
and legal • Employee expectations such as conditions of
obligations employment, remuneration, job security and work–
life balance
• Legal obligations for staffing such as occupational
health and safety (OH&S), equal employment
opportunity legislation and the Workplace Gender
Equality Agency
• The purpose and common methods of employee
induction
18 Global and • Global issues such as overseas recruitment
corporate social • Corporate social responsibility issues regarding
responsibility establishing the staffing of a business
issues

Key knowledge table xiii

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 KEY TERMS
Term Definition
Analyse Break into parts and examine; e.g. essential components in decision-
making or problem-solving process.
Apply Use theory to help in a practical example. Show or make links,
relationships or connections.
Compare Bring together for noting the points of likeness and difference; e.g.
compare management theory and practice, compare the management
style of manager A with manager B.
Define Accurately state or explain the precise meaning of a word, phrase or
term.
Describe Provide a detailed account of something.
Discuss Examine an issue or response and state arguments or opinions
covering both sides of the issue or response involved in the stimulus
material.
Distinguish To recognise or show points of difference between two or more
concepts of items. Note the distinctive characteristics.
Establish criteria Determine criteria or measures to conduct an evaluation.
Evaluate Apply weighted criteria to the relative strengths and weaknesses of
the arguments raised in the stimulus material, as well as being able to
provide your opinion.
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.
Illustrate Provide an example to support your statement/comment.
Interpret Use knowledge and understanding to explain or make clear the
meaning of something.
Label To describe or designate; e.g. specific management style.
List Enter in a list with others.
Outline Provide a brief description of the terms or topic.
Propose To put forward (a plan or suggestion) for consideration by others.
Provide reasons/ Justify your choice or answer. Give valid reasons or evidence to support
justify an answer or conclusion.
Recognise To identify the existence of something or someone; e.g. the
contribution of businesses within the local, national and global
markets.
Recommend To be able to present and state facts, ideas or feelings appropriate to
the issue or response covered in the stimulus material.
Record To write something down or use some other permanent form so that it
can be used or seen again in the future.
Research To investigate, explore or study in order to establish facts and reach
new conclusions.

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Term Definition
Select To choose one in preference to another.
Share To have or use something at the same time as someone else.
Understand To interpret, perceive or view (something) in a particular way.

Key terms xv
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 ABOUT THE AUTHORS
Julie Cain is Senior Campus Principal 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 is an experienced VCE Business Management, Commerce and Humanities teacher. Julie has 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 also presents revision lectures for
students, is a regular contributor to the VCTA COMPAK teachers’ journal and develops assessment materials
for a number of organisations.

Megan Jeffery currently teaches at Northcote High School. She is an experienced Humanities and Commerce
teacher at both senior and junior levels and has taught in Victorian government schools for more than 30
years. Megan has been actively involved in consultation, auditing, reviewing and assessing for the Victorian
Curriculum and Assessment Authority (VCAA). She is a regular speaker at professional development and
student lectures for the VCTA and is a regular contributor to the VCTA journal COMPAK.

Gillian Somers is an education consultant and regularly presents 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 VCAA. She edits the Business Management
section of the VCTA journal COMPAK and is also a regular contributor to the journal and its annual conference
Comview. Previously, she was the Senior Business Management teacher and VET Coordinator at Trinity
Grammar School, Kew.

AUTHOR ACKNOWLEDGEMENTS
Julie Cain
Thank you to my family and particularly my husband John for his support and constant encouragement.
Thanks also to Joe Somers for his patience in proofreading and providing valuable feedback.

Megan Jeffery
Thank you to my family, Ken, James and Claire, for your continued support, advice, encouragement and
patience throughout the writing process. Also, a huge thank you to my VCE students for their support,
feedback and advice over the years. And finally to Joe Somers, the world’s best proofreader, your assistance
and expertise has been invaluable.

Gillian Somers
Thank you to my husband Joe for his support, advice, feedback and proofreading.

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PERMISSIONS ACKNOWLEDGEMENTS
The author and publisher wish to thank the following sources for permission to reproduce material:

Cover: Used under license from Shutterstock.com 2016 / Happy Together, Cover

Images: © Getty Images / Thomas_EyeDesign, Unit 1 Opener / suedhang, Part 1 Opener / Hero Images, 1.2, 1.8,
1.18, 3.12, 3.18, 6.4, 7.13, p.155, 10.15, 12.15, 14.4, 17.2, 17.4, 17.11, p.336 / Kathrin Ziegler, 1.4 / Thomas Barwick,
1.5 / Thomas Barwick, 1.6 / Rawpixel Ltd, 1.7, 4.9, 7.2, 11.4 / vesmil,1.9 / Bloomberg, 1.10, 3.10, 3.21, 3.26,
4.7, 4.13, 4.29, 5.10 (1–4), 7.8(1–3), 7.9, 7.10, 7.15 (t-1), 8.6 (1–4), 8.6 (1–4), 11.20, 13.7, 13.8, 13.19, 14.5, 14.11,
14.13, 14.17, 14.18, 18.15, Case Study 18.6 / gerenme, 1.11 / novintito, 1.13 / Mark Sullivan, 1.14 / Yuri_Arcurs,
1.15 / VCG, 1.16, 1.18 / Zak Kacz marek, 1.17 / John Wildgoose, 1.17 / Nico De Pasquale Photography, Activity
1.7 / KMM Productions, 2.1 / PeopleImages, 2.1 The importance of business concept development / muharrem,
2.5 / robuart, 2.6 / Micha klootwijk, 2.7 / lculig, 2.8 / erhui1979, 2.9 / Jupiterimages, Activity 2.2 / Chris Ryan,
3.2 / Ken Fisher, 3.3 / hh5800, 3.4 / Monty Rakusen, 3.5 / Thierry Dosogne, 3.6 / Andrzej Wojcicki, 3.7 / Craig
Dingle, 3.8 / Craig Dingle, 3.8 / Nigel Killeen, 3.9 / Colin Anderson, 3.13 / emojoez, 3.15 / Leren Lu, 3.14 /
Hinterhaus Productions, 3.17 / Wu Tao, 3.20 / Cultura Exclusive / Sofie Delauw, 3.22 / Peter Cade, 3.23 / Ezra
Bailey, 3.24 / fatihhoca, 3.25 / blueclue, Part 2 Opener / Fry Design Ltd, 4.2 / shape charge, 4.4 / Sam Edwards,
4.5 / Rachel Husband, 4.6 / SM/Aiueo, 4.8 / Nick David, 4.10 / pchoui, 4.11 / Daniel Grill, 4.12 / alfexe, 4.14 /
Howard Kingsnorth, 4.15 / Howard Kingsnorth, 4.16 / rafal_olechowski, 4.17 / Colin Anderson, 4.18 / teekid,
4.19 / Images By Tang Ming Tung, 4.20 / shutterstop, 4.21 / BeyondImages, 4.22 / Lynn Gail, 4.23 / Christian
Rummel, 4.24 / Tbd, 4.25 / Felix Hug, 4.26 / amphotora, 4.27 / valio84sl, 4.28 / John MacDougall AFP, 4.30 /
SelectStock, 4.31 / Colin Anderson, 4.32 / Sydney Roberts, 4.33 / Glow Images, Inc, 4.34 / David Epperson, 4.35 /
Glowimages, 4.36 / Frederic Cirou, 4.37 / altrendo images, 5.2; Moment Mobile, 5.3 / Irina_ Zholudeva, 5.5 / Scott
Barbour, 5.7 / Moncherie, 5.8 / Kohei Hara, 5.9 / Mongkol Nitirojsakul, 5.11 / BIG_TAU, 5.12 / XiXinXing, 5.13
/ Yoshikazu Tsuno, 5.14 / KatarzynaBialasiewicz, 5.24 / Echo, Part 3 Opener / Liam Bailey, 6.3 / David Hannah,
6.5 / Triangle Images, 6.7 / Ken Welsh / Design Pics, 6.8 / Paul Bradbury, 6.9 / adisa, 6.11 / Vostok, 6.16 / Siri
Stafford, 6.19 / monkey business images, 6.21 / endopack, 6.22 / tbd, Activity 6.3 (below) 110 / Thomas Barwick,
6.24 / Tupungato, 6.25 / miriam-doerr, 6.26 / IvanJekic, 6.27 / helovi, 6.29 / Grant Faint, Chapter Summary (end)
/ Christopher Furlong, 7.3 / Szey, 7.5 / William West, 3.11, 7.8 (4) / Gustavo Caballero, 7.11 / Grant Faint, 7.12
/ Jean Francois Monier, 7.5 (t-3) / Justin Sullivan, 7.15 (t-4) (b-1), 8.2 / Oliver Burston, Ch7 Importer & exporter
business models (bottom) / North England, 7.16 / Westend1, 8.2, 10.2, 11.6, 11.18, 13.25 / Tetra Images, 8.3 /
Yuji Kotani, Activity 8.2 / AndreyPopov, 8.4 / Odilon Dimier, Ch8 , Where to find financial advice / courtneyk,
8.7 / mindscanner, 8.10 / Buero Monaco, Activity 8.6 / Jonathan Nackstrand, 9.5 / David Gould, 9.6 / adnresr,
9.7 / Catalin205, 9.9 / atakan, 9.10 / Andersen Ross, 9.11 / Karwai Tang, 9.12 / LuckyBusiness, 9.14 / Oez, 19.5
/ Enciktep,19.6 / jimmyjamesbond, 9.17 / Aquir, 9.19 / Daniel Allan, Unit 2 Opener / Eric Audras, Part 1 Opener
/ merznatalia, 10.4 / Iqoncept, 10.5 / MattZ90, 10.7 / Stephen Smith, 10.8 / Echo, Activity 10.3 / Zerbor, 10.10
/ William West / AFP, 10.11 / paci77, 10.12 / gpointstudio, 10.13 / StudioM1, 10.16, 14.12 / M_a_y_a, 10.18 /
James Hardy, 10.18 / Hinterhaus Productions, Ch11 Overview / Adam Trafford / AFL Media, 11.3 / Adam Gault,
11.5 / TongRo Images Inc., 11.7 / Arisara_Tongdonnoi, 11.8 / filmfoto, 11.9 / Lumina Images, 11.10 / your
personal camera obscura, 11.12 / Image Source, 11.13, Ch18, key knowledge / PeopleImages, 11.14 / querbeet,
11.16 / Peathegee Inc, 11.17 / VisitBritain / Britain on View, 11.18 / Innocenti, 11.12 / Audy_indy, Activity 11.6
/ Robert Daly, Part 2 Opener, 12.12, Ch13 developing the product, Ch14 Key Knowledge / Lane Oatey / Blue
Jean Images, 12.3 / Annatodica, 12.5 / Laurence Dutton, 12.6 / Justin Sullivan, 12.6 / Dougal Waters, 12.7 /
UpperCut Images, 12.8, 14.8 / ONiONAstudio, Table 12.1 / ShotShare, 12.10 / Dan Dalton, 12.11 / utah778, 12.13
/ kgtoh, 12.16 / Emely, Ch13 Key Knowledge / Nicki1982, Activity 13.1 / SirikulT, 13.5 / Pacific Press, 13.6 (t) /
Carlos Chavez, 13.6 (b) / Ryan Pierse, 13.8 / moodboard, 13.9 / nanoqfu, 13.11 / Stephen J Krasemann, 13.11
/ dewollewwi, 13.15 / Robert Cianfione, 13.16 / Greg Pease, 13.17 / Ashit Desai, 13.18 / Michael Willson / AFL
Media, 13.24 / Nick White & Fiona Jackson-Downes, 13.26 / hidesy, 13.29 / NurPhoto, 14.3 / Xavier Arnau, 14.6
/ John Lund / Marc Romanelli, 14.7 / Compassionate Eye Foundation / Chris Ryan, 14.8 / Michael Dodge, 14.10
/ Quinn Rooney, 14.14 / juniorbeep, 14.15 / Stefan Postles, 14.16 / Courtney Keating, 17.3 / Courtney Keating,
17.3 / Vincent Hazat, 17.5 / Betsie Van Der Meer, 17.6 / Monty Rakusen, 17.8 / Klaus Vedfelt, 17.7 / Nick David,
17.9 / Maartje van Caspel, 17.10 / Zing Images, 17.12 / Buero Monaco, 17.13 / Paul Bradbury, 17.15 / Jose
Luis Pelaez, 17.17 / Peopleimages, 17.19 / c-George, 17.20 / kupicoo, p.328 / ndoeljindoel, 18.2 / Matt Lincoln,
18.3 / Martin Barraud, 18.4 / Tracey Lee, 18.5 / Loop Images, 18.6 / Blend Images - ERproductions Ltd, 18.7 /
Hoberman Collection, 18.8 / Robert Cianflone, 18.9 / Chris Mellor, 18.11 / Monty Rakusen, 18.12 / Hoxton /

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‘Fact sheet: The benefits of employing Aboriginal &Torres Strait Islander Australians’ © Reconcilliation.org, p.342;
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 UNIT 1
PLANNING A BUSINESS

1
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 PART 1
AREA OF STUDY 1

The business idea

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CHAPTER 1 Key terms
• brainstorming • gap in the

The business idea – inspiration • competitive

advantage
market
• innovation

and planning
• decision making • qualities
• demographic • skills
• entrepreneurship • SWOT analysis

Overview Key knowledge

In this chapter students will initially examine the Students will learn the following about small business
range of personal motivations behind a business decision making and planning:
start-up. The personal characteristics and qualities • The personal motivation behind starting a
possessed by successful entrepreneurs will follow. business such as the desire for independence both
A self-appraisal of personal suitability to operate financially and personally, to make a profit and to
a small business is also conducted. Students will fulfil a market and/or social need
also become acquainted with different sources of • The characteristics of successful business
business inspiration for innovative business ideas and managers and business entrepreneurs and how
opportunities in the market. these characteristics contribute to business success
• Sources of business opportunity, including
innovation and entrepreneurship, recognising and
taking advantage of market opportunities, changing
customer needs, research and development,
technological development and global markets.

What’s ahead
Entrepreneurship
Market opportunities Innovation

Technology developments Business opportunity Customer needs

Global markets
Research and development

Business idea

Starting a business

Personal motivation

Figure 1.1 Factors to think about when considering a business opportunity

Chapter 1  The business idea – inspiration and planning 3

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 1.1 Starting a business means of recognition as a successful person
• potential for flexible working hours and conditions:
Effective decision making is an integral component a business owner may be able to choose their
of a successful business operation. Managing a hours of work and have flexibility in where they
business involves making work (e.g. from home)
decision making a decisions about all aspects of • to overcome unemployment
multistep approach the business. To succeed, good • to follow family tradition
whereby a selection is decision making is vital from • to fill an identified gap in the market. Many
made between a range of business inception, and this small businesses are founded because someone
different alternatives recognised that people had an unfulfilled market
continues throughout the life
of the business. need, meaning that they simply wanted to buy
Many key decisions are made prior to business something not yet available on the market.
commencement. These include: • to fulfil a social need. Social enterprises are
• personal suitability to start and operate a business businesses that trade for community benefit,
(personality type, skill levels, experience, selling products for the sole purpose of delivering
knowledge and personal traits). This involves social or environmental benefit to communities.
asking: Is this business right for me? For many people the motivation behind starting
• where to look for inspiration for business ideas a business is to give back or provide a service to
• the business concept (type of business). benefit society. Social enterprises operate using a
business model. They aim to create profits. Unlike
Assessment of personal suitability other business models, however, these profits are
distributed to social causes, not shareholders/
to start a business owners. Key motivations behind the establishment
The first step for a person starting a business is to of a social enterprise are usually one or more of
conduct a self-evaluation focusing on the following: the following:
• Personal motivation, or reasons, for going into – to provide employment, training and support
business must be examined. It must then be for disadvantaged groups
ascertained whether or not these reasons are valid. – to meet a community need by providing
• A self-appraisal of personal skills, abilities and products not currently produced, often
personality type should be completed. This will because they are not profitable
demonstrate whether there is a reasonable chance – to generate profits for redistribution to social
of success. programs or charities.
• Personal and business objectives must be
established and clarified.

Personal motivation behind starting a

business
People decide to start a business for a variety of
reasons, including:
• a desire for independence and to be their own
boss. Being a business owner means being in
control and assuming responsibility for decision
making. A self-employed person has freedom to
innovate and problem solve without needing to
ask a ‘boss’ for permission. Many people find it
frustrating to work in environments that do not
have this freedom or allow personal independence.
• potential wealth and financial independence.
Business ownership is often viewed as a path to
wealth.
• self-worth: many see business ownership as a Figure 1.2 Businesses are often established to meet a
community need.

4 CAMBRIDGE VCE BUSINESS MANAGEMENT  | UNITS 1 & 2

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 All of the above reasons are valid; however, a person considering opening a business requiring
person starting a business must assess whether or them to work 80 hours a week, and who also sees
not they are doing so for the right reasons. They must family and lifestyle as personal priorities, will find
clearly identify and evaluate: the business simply will not allow them to achieve
• their personal objectives in starting a business these priorities. A person who values wealth
• the things that are important to them (family, and status, and who is prepared to work long
lifestyle, interests, wealth and status) hours, would be better suited to that particular
• whether the business idea under consideration business.
can realistically satisfy their personal objectives A person starting a business must assess if
• if operating the business will allow them to access personal goals, needs and wants can be realistically
things that are important to them. For example, a met through the business.

ACTIVITY 1.1
Research a social enterprise. 2 Using the internet, research and answer
1 Select one of the following social the following:
enterprises: a When was this enterprise founded and
• Ceres Fair Food by whom?
• Swags for Homeless b What were the original aims of the
• Pollinate Energy founders?
• Asylum Seeker Resource Centre Food c What activities does this enterprise
Justice Truck engage in?
• Melbourne Farmers Markets d Who benefits? How do they benefit?

Motivation for starting a business

The following case studies provide two examples of
motivations leading to the establishment of a business.

CASE STUDY 1.1

Synergy Repairs: to fulfil a social need
Synergy Auto Repairs is a North Melbourne-based smash repair workshop that was established
in 2014 by Mission Australia. This social enterprise was created in partnership with the National
Motor Vehicle Theft Reduction Council (NMVTRC), and offers on-the-job training while building
the careers of its participants by catering to their interest in automobiles.
This initiative was created to provide work
experience for troubled youth, specifically
those who have had previous concerns with
the law.
Participants are mentored by auto industry
professionals during the six-month program,
giving them the skills they need to be fully
accredited in the industry, and leading them
to job opportunities such as panel beating
and spray painting. Synergy continues to aid
and support its participants by giving them
practical experience and skills to join the
Figure 1.3 Synergy Repairs workforce.

Chapter 1  The business idea – inspiration and planning 5

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 CASE STUDY 1.1 continued
Analysis 3 Describe the likely motivations behind the
1 Describe the products sold by Synergy establishment of this business.
Repairs.
2 Identify and describe two factors that
indicate Synergy Repairs is a social
enterprise.

CASE STUDY 1.2

Double Shot Express’o: to fulfil a personal need

These guys are the very definition of a no-

nonsense espresso bar: Hole in the wall, minimal
food & absolutely cranking espresso.
Starting with their first site on the Pacific
Highway at Belmont, NSW, they have expanded
to two more locations also on the highway at
Swansea & Charlestown. The creation of two
brothers Chad & Luke, along with their mum,
Julie…
Chad: I’m a motor mechanic by trade and ended
up building trains – putting the engines in diesel
locomotives. Then I decided to get a coffee van
with my brother, I thought it looked pretty cruisy
and the lifestyle looked good.
Figure 1.4 Double Shot Express’o
Julie: Ha! So he thought…
So, what motivated you to get into the coffee game?
Chad: I was sick of working 6 days a week, 12 hours a day for someone else. I actually didn’t like
coffee to start with, until my brother got his coffee van. He had been running his coffee van for about
4 years, and then we did that for another 2 years, until the shop started to get too busy and we sold
the van.
Julie: I think Luke first saw the market and said: people just want good coffee in a hurry. And this
(the Belmont store) is actually where it all started, the hole in the wall thing.
People talk a lot about ‘lifestyle’ when starting a coffee business, but you seem to be able to
pull it off. What’s your secret?
Chad: The secret is to have a good manager (looks at Julie and laughs).
Julie: There’s the 3 of us. I couldn’t do it on my own.
Chad: We’ve all got our own things that we do. If [it] was just any one of us, it wouldn’t be a lifestyle,
we’d be going home from work and doing all the finances, doing all the maintenance and stock.
The locations you’ve gone for seem to be the ones that other people have overlooked, what
was it that you saw in them?
Chad: They’re all on the Pacific Highway, which has a lot of traffic. A lot of people work north of
here, so we’re getting people from Belmont, Swansea, and the Central Coast. Previously, they could
go to Maccas or a take-away shop, but not a place that specifically focussed on espresso coffee…

6 CAMBRIDGE VCE BUSINESS MANAGEMENT  | UNITS 1 & 2

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 So, you were targeting commuters?
Chad: Basically yes, tradies and people commuting to work.
Julie: When Chad worked as a tradie, he recognised that these guys want coffee really early. It’s not
what you personally want, you’ve got to know your customers. It’s been a conscious decision not to
be like a cafe. …
The locals are loving your coffee. How do you keep up such a high standard with your
team?
Chad: We’re constantly watching them, we try and make it so that one of us is always working with
them until we know that they can do a good job and that they want to do a good job.
What was the biggest challenge you had to overcome to get to this point?
Chad: I would say, finding the right staff that actually have a passion for making coffee. Everyone says
they know how to make coffee, but there’s not that many that know how to do it well.
(Source: Peaberrys website, ‘Café case study: Double Shot’, 26 October 2015.)

Analysis  ow look at the businesses described in

N
1 Describe what Double Shot sells. How Case studies 1.1 and 1.2.
is it different from other coffee 5 Identify two similarities between them and
providers? the motivation behind the establishment of
2 Explain how the owners of Double Shot each.
were able to maintain their lifestyle while 6 Identify two differences in the motivation
still running their business. behind the establishment of these
3 Identify the gap in the market found by businesses.
the owners of this business.
4 Identify the likely motivations behind the
establishment of the business.

1.2 Skills and qualities of skills, knowledge and qualifications, a swimming

school operator requires knowledge about how
successful business people learn to swim, and a hairdresser requires

operators skills and trade qualifications in cutting and

colouring hair.
To be successful in business requires numerous • Planning and organisational skills: required
skills. Some of these will be specific to the type to manage workflow and time effectively. It is
of business; others will be
skills the ability to do generic. They include:
something well, gained • Communication skills:
through training and
essential for dealing
experience
effectively and successfully
with the range of people
with whom the business comes into contact, such
as staff, customers, suppliers, professional advisers
and government agencies.
• Technical skills and appropriate qualifications:
necessary to successfully complete tasks within Figure 1.5 Effective communication skills are essential for
the business. For example, a lawyer requires legal business success.

Chapter 1  The business idea – inspiration and planning 7

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 to promote the business and products to potential
customers. A business operator must be able to
identify who their customers are and devise ways
to get them to purchase the product the business
is selling.
• Administrative skills: required in establishing
effective and efficient procedures within the
business so that processes run smoothly.
• Analytical skills: the ability to analyse or study the
nature of a given situation or set of circumstances.
• Time management skills: the ability to use
time, which is a limited resource, effectively.
There must be an ability to focus on tasks that
directly move the business towards achievement
of its objectives in a time-efficient and effective
way.
• Computer skills: include knowledge of relevant
software packages.
• Negotiation skills: are important when doing deals
Figure 1.6 A business owner will require the ability to
negotiate with a range of people. with clients/customers, suppliers or anyone with
whom the business comes into contact.
• Leadership skills: someone starting a business may
important to keep up to date with paperwork and be required to effectively lead both staff and the
organise workspace effectively. business as a whole. They may need to oversee
• Accounting and financial skills: necessary to teams of people, and inspire and motivate them to
monitor the financial position of the business. work towards achievement of business goals and
Good financial management is essential. objectives. This requires development of trust, plus
• Marketing, sales and promotional skills: required excellent communication skills.

Figure 1.7 A small business owner will require marketing skills.

8 CAMBRIDGE VCE BUSINESS MANAGEMENT  | UNITS 1 & 2

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 ACTIVITY 1.2
SKILLS AUDIT
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.
The first skill is completed for you as an example.
Why is this Strategy for
skill necessary Self-evaluation Self-evaluation developing
Skill
in small – positives – negatives expertise in
business? this area
Communication • To deal • I am good at • I need • TAFE course
skills effectively communicating help when • Read book
with all with my peers communicating on body
aspects of on a one-to- with large language
the business, one basis groups • Ask a
including • I write very • I do not read friend for
selling, staff, clearly the body assistance
government • I speak two language of
agencies, languages other people
suppliers well
Technical skills
Analytical skills
Financial
management
skills
Leadership
skills
Table 1.1 Skills audit table

Characteristics of successful
ACTIVITY 1.3 business managers and business
Identify the skills required to successfully
complete the following business-related
entrepreneurs
tasks: Certain personal qualities are recognised as being
1 Manage staff on a day-to-day basis. advantageous to starting a business. These include:

2 Ensure that all financial obligations are • Preparedness to take risks:

a start-up business requires qualities
met. personal characteristics
an owner to risk personal
3 Select and operate an appropriate of an individual that make
assets. He/she must be able up their personality and
computer program.
to live with the possibility determine how they act in a
4 Successfully make sales. of failure. Calculated situation
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 establishment of a business.

Chapter 1  The business idea – inspiration and planning 9

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 • Ability to think outside the square: people able wants to buy, plus the confidence that they can
to devise original ideas, who can come up provide it.
with different ways of approaching things, and • Ability to work independently without requiring
who recognise opportunities others cannot, are guidance (self-starter): successful entrepreneurs
more suited to starting a business. Successful are often intrinsically motivated to achieve
business operators are often rule breakers who personal goals, enjoy challenges and are naturally
defy conventional wisdom, engaging in smart, competitive.
aggressive risk taking. • Willingness to accept responsibility.
• Innovative thinkers: successful business operators • Ability to set goals and work towards achievement.
are usually able to come up with new ideas, then • Flexibility and ability to change direction when
develop and improve them. This often requires required: important when responding to changing
creativity and inquisitiveness. tastes, consumer demands and alterations in
• Resilience: for success, a business operator must market conditions. A successful business is able
be prepared to persist and persevere over the long to change course quickly when things do not go
term. Patience and determination are required to to plan. To do this, the business owner must be
see things through. Establishment of a successful nimble, adaptable and able to make decisions
business may require years of hard work. Success both quickly and adeptly.
rarely happens overnight. • Ability to learn from mistakes.
• Vision: the ability to spot an opportunity and • Capacity for hard work.
imagine something that others have not. This • Ambition: needed to achieve long-term goals.
requires curiosity, an open mind and listening • Ability to be practical: be a ‘doer’, rather than
skills. someone who theorises.
• Confidence: self-belief and enthusiasm are • Ethical: in the long term, clients and customers
business assets. Successful business development will lose interest in those who lie and cheat. Long-
requires a person to possess the self-assurance term business success therefore requires an ethical
that they have something the market needs or approach.

Figure 1.8 Successful business owners have a number of important characteristics.

10 CAMBRIDGE VCE BUSINESS MANAGEMENT  | UNITS 1 & 2

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 ACTIVITY 1.4
Read the descriptions of the qualities and skills of these potential business owners and
answer the questions that follow.
1 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 loses his cool with customers and fellow staff members alike. His wife
works in marketing. Surjeet’s friends say that he is a very determined person who wants
to be a multi-millionaire within 10 years.
2 Tina is a professional dancer with extensive experience appearing in stage and television
shows. She is very quiet and lacks confidence, but is noted in the industry as an excellent
dancer. Tina is extremely shy about speaking to groups of people, but loves children. She
has a teaching qualification.
3 Mick has just left school at the end of Year 11. He has good computer skills, is confident
and spends his days surfing the internet. He wants to set up his own computer repair
business. He failed English in his last year of school.
4 Lydia is sports mad. For eight years she has worked in a chain of stores that sells sporting
shoes, but has recently become very disillusioned after being passed over for promotion
in favour of the store owner’s daughter. Lydia feels that her selling skills and technical
expertise in fitting sports shoes are better than anyone’s in this industry. Her partner is
currently unemployed.

QUESTIONS
1 Identify the skills Surjeet possesses that could help his new restaurant succeed. What
personal qualities could hinder his chances of success? Explain.
2 Assess if Tina should start her own dance school. Identify the skills she has that would
help her. Discuss her major drawback.
3 Identify the skills Mick should try to acquire before he starts his own computer repair
business. Make a recommendation on where he can acquire these skills.
4 Propose the action you believe Lydia should take. Justify your answer.
5 Suggest and justify an appropriate type of small business for each person.

CASE STUDY 1.3

Successful entrepreneurs
Australia is a nation of successful entrepreneurs. We have seen innovation and initiative, with
start-ups that are leading the way. It appears that starting a new business and seeing it through
to completion has become the Australian dream.
However, there a number of qualities required to achieve success in starting a new business.
These qualities include but are not limited to: curiosity, vision, self-belief, perseverance and
passion.

• It is important to ask lots of questions. This will ensure details are not overlooked and the
potential of every opportunity is explored. Curiosity will help entrepreneurs to discover and
innovate.
• The ability to visualise the future success of a new business is a powerful tool. Entrepreneurs who

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 CASE STUDY 1.3 continued

lack this vision will find it difficult to see

clearly and may allow obstacles to blur their
sight.
• Confidence and self-belief should not be
underestimated in the success of a business.
Entrepreneurs need to believe in the product
or service they are providing as they may
experience hurdles along their journey to
success.
• When the business becomes difficult, the
ability to keep going will help entrepreneurs
to work towards making their vision a reality.
The initial steps in starting a business are
not particularly difficult – an idea and a
registration fee – but working through the
next steps may require perseverance.
• Finally, passion and a love for the product
or service are imperative when getting stuck
in the grind of having to turn over cash and Figure 1.9 Australia is a nation of entrepreneurs.
attain a profit.
(Source: Based on One Shift website, ‘The 5 essential qualities of a successful
entrepreneur’, 17 February 2014.)

Analysis
1 List and summarise the five essential
qualities of a successful entrepreneur as
suggested by the author of the article.
2 Identify at least five other qualities you
believe a successful entrepreneur requires.
Justify your suggestions.
3 Select and research one of the following
successful entrepreneurs:
• Janine Allis
• Lindsay Fox
• John Singleton
• Estée Lauder
• Richard Branson
a Describe how each founded and grew Figure 1.10 Richard Branson, a successful entrepreneur, is the
their business. founder of Virgin Airlines.
b Identify the qualities and skills shown by
the entrepreneur in doing this.

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 ACTIVITY 1.5
Watch the movie Joy (2015) starring Jennifer Lawrence. This is the story of Joy Mangana, a
self-made millionaire who created her own business empire.
1 Identify and discuss the skills and qualities that helped Joy Mangana establish and
develop such a successful business enterprise.
2 List 10 things you learnt about establishing a successful business through watching this
film.

1.3 Sources of business element of risk taking with their own knowledge,
assets and skills in order to make a profit.
opportunity Successful entrepreneurs
are usually able to think innovation generally refers
innovatively and/or identify to changing or creating
Innovation and entrepreneurship innovations that have potential more effective processes,
Innovation, or new, improved products or methods for success. They are able products and ideas, and can
increase the likelihood of a
of doing things, is often the impetus for a new business to exploit innovation for
business succeeding
venture. An innovation can be a whole new product business success. Innovation
entrepreneurship the
or a variation on an existing product that improves it, is the tool of the entrepreneur, process of designing,
such as colour, design or features. It could also be a the means by which they launching and running a
different way of taking a product to the market, such can exploit change. When new business. It is the
as home delivery or perhaps even delivery by drone! looking for innovative ideas an capacity and willingness
Innovation may come from scientific research, entrepreneur might examine to develop, organise and
manage a business venture
changes in work practices and often improvements any of the following:
along with any of its risks in
in technology. Original thinkers are often sources of • New products: these are order to make a profit.
innovation. the most common form of
Entrepreneurship involves designing, launching innovation.
and running a new business. Entrepreneurs are often • New services.
innovators. Some small business operators are referred • New production techniques may offer reduced
to as entrepreneurs. An entrepreneur combines an costs of production by either allowing a product

Figure 1.11 Innovation requires original thinking combined Figure 1.12 Shanaka Fernando founded social enterprise
with vision. Lentil as Anything.

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 diet and exercise has seen demand for personal
training, dieticians and weight loss services rise.
• Many entrepreneurs have converted a hobby into
a money-making opportunity. Celebrity chefs
and fitness experts are examples of people who
have recognised and taken advantage of market
opportunities.
• Brainstorming and SWOT analysis are tools
for creative problem solving, identifying strengths
and weaknesses, and often generating ideas for
new businesses or products. Market opportunities
aligning with the capabilities
of the person or business brainstorming a method
are recognised. for generating new ideas
• Observation and research – and solutions through
Figure 1.13 Successful entrepreneurs possess distinctive spontaneous contributions
an entrepreneur looking
qualities. based on intensive and
for inspiration is well freewheeling group
advised to look around discussion
to be made for a lower cost or creating a more and make observations SWOT analysis an
complex product. regarding how things could assessment of the internal
be done better, or what strengths and weaknesses
• New marketing techniques: allow a product to be
things are not being done and the external
promoted in a different manner. Consumers will opportunities and threats
therefore be more likely to notice the marketing at all. Often the simplest
for a business in a given
campaign. ideas and observations situation
can be the beginning of
Recognising and taking advantage a business. For example,
noting an occasion when someone is unable to
of market opportunities obtain a specific product or service at the exact
A successful business entrepreneur is able to see time required is often a first step.
opportunities others have failed to recognise. The • The media is often a source of ideas for a business
source of most business opportunities is change. As concept. Regular observation of the media can
society’s needs and wants change and evolve, so too provide inspiration and innovative ideas. TV
do the types of goods and services people want to shows specifically on entrepreneurship such as
purchase. Customer needs and wants continually Dragon’s Den or The Apprentice may be useful.
change and evolve. Some examples of this are: Similarly, news and current affairs articles often
• If the type of people (demographic) moving into report changes in consumer needs or fashions. For
an area is changing, so too will the products that example, a study about incidence of childhood
market seeks to buy. If young obesity may be the impetus for a healthy fast-
demographic the food outlet or a gym designed for children. New
families come into an area,
statistical data of a
demand for child care services business concepts such as franchises often appear
population, especially those
showing average age, or children’s clothing will in the media as well.
income or education increase. Similarly, if an area • Trade shows and exhibitions are sources of ideas.
becomes ‘gentrified’, as most These provide opportunities to see new products,
inner Melbourne suburbs have in recent times, obtain ideas and maybe opportunities for the
demand for coffee shops, gymnasiums and pet- rebranding of existing products. They also provide
minding services is likely to increase. opportunities to make important contacts and to
• If government changes a law, often a business network.
opportunity emerges. A change in laws regarding
superannuation might see an increased demand
for financial planning businesses.
• As lifestyles change so does consumer demand.
For example, increased community interest in

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Figure 1.14 Michelle Bridges uses her personal fitness Figure 1.15 A gap in the market represents something that
experience to run her business. people wish to purchase but is not available.

Changing customer needs demand and supply. This is a result of people

An entrepreneur is able to recognise signs indicating changing the types of products
customer needs and wants. A business may spot they wish to buy. Successful gap in the market an
a change creating a favourable condition that the businesses recognise changes opportunity for a business
business can take advantage of, a changing trend or in consumer demand and take to enter into an area of the
an increasing demand for a product by a demographic advantage of these. This is market not currently being
serviced
group that has yet to be recognised by its competitors. known as recognising a gap
Often such a change creates a gap between customer in the market.

ACTIVITY 1.6
1 Identify two potential ideas for a new business that could arise from each of the
following:
a A news report reveals that home burglaries are increasing.
b A government study finds a link between fast foods and increased childhood obesity.
c Melbourne is chosen as the venue for a major sporting event.
d Studies find that many people do not have sufficient time to prepare healthy meals.
e A significant increase occurs in the birth rate.
f Statistics show a significant number of retired people living in an area.

Figure 1.16 Trade shows are often a source of business ideas and inspiration.

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 Figure 1.17 Research is often required in order to identify a Figure 1.18 Research and development is often a source of
viable business concept. innovation.

Global markets Research and development

Looking overseas can reveal innovation and ideas Research and development is often the source of
that have not yet reached Australia. The first person business ideas. Inventors and entrepreneurs are
to import a new idea from overseas can profit always looking for partners in business concept
very handsomely. Often franchises that have been development. It is also possible to identify new
successful overseas are successfully introduced into products and technologies for potential development
the Australian market. through observation of a particular target market and
Moving in the other direction, there have been an analysis of products that they might be interested
several Australian entrepreneurs who have realised in. For example, increasing community concerns
the value of Australian goods and services and taken about personal security could translate into a market
these overseas to build successful businesses; for for security products and services, such as electronic
example, a handful of Australian entrepreneurs are position indicating radio beacons (EPIRBs).
making it big in New York with a surprising export. Another option is to research and develop ways of
Following on from polymer bank notes and Google adding value to an existing product for consumers. An
Maps, the next big Aussie export is our coffee culture. example of this is providing environmentally friendly
A dozen or so Melbourne-style cafés have opened options for a cleaning product or changing packaging
up over the past decade in the Big Apple, attracting to use biodegradable materials.
the recent attention of the New York Times with their
mix of top baristas, good food and quality service. Technological development
The owner of one such café has said the idea to The development and impending availability of new
open up an establishment came from his move to technologies is often a source of ideas for a new
New York six years ago. It was only then, he said, business. For example, the growth and development
that he realised how unique Australia’s urban coffee of the World Wide Web, coupled with the hand-
culture is. A far cry from ‘throw another shrimp on held devices capable of mobile internet access, has
the barbie’, New Yorkers are falling in love with flat enabled the formation and development of many new
whites, piccolo lattés and avocado smash. business ideas. Airbnb and Uber are two examples.
It is also wise to research new technologies The development of drone technology is another
and research and development occurring overseas. example offering numerous possibilities for business
Innovation such as new products or designs can be application.
imported.

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 ACTIVITY 1.7
1 Conduct an internet search for ‘business ideas drones’.
2 Using the results of your search, list the business possibilities that have emerged since
the development of drone technology (e.g. delivery services).
3 Select one of the possibilities that you believe has potential and describe why you think
this.

Characteristics of a good business business idea when determining whether or not it is

worth investing the required time and money. It may
opportunity be difficult to remain impartial about an idea you are
A brilliant piece of technology or an innovative idea passionate about. Therefore, a thorough analysis of
is not the only criteria for a potentially successful the potential feasibility of the business is essential.
business idea. There must also exist a market, or (See Chapter 2 for more on this.)
group of consumers who are prepared to purchase
the product at a price that will provide a profit to the Opportunities for Australian
business. For a business concept to be an attractive business
proposition for development, there must be a strong
There are always opportunities for potential business
possibility of a return on the investments made. In
development. The trick is to identify and locate them.
other words, the potential for income to be made must
Successful entrepreneurs have an ability to do this.
exceed the costs required to develop the business
They are constantly looking for innovative ideas that
idea. The following criteria must exist:
can be translated into ideas for new business.
• Real demand: a new product or business concept
Changes in lifestyles, fashions, trends, laws,
will only be successful if it responds to unsatisfied
economic situations, demographics and world events
needs or requirements of customers who are both
are all indicators of potentially altered consumer
willing and able to purchase it. In other words,
demands and buying habits. A business operator
there must be enough customers willing to
should always keep an ear to the ground.
purchase the product at a price that will generate a
profit for the business. Market research is required
in order to ascertain this.
• Return on investment: there must be potential
for sustainable, timely and acceptable returns
or rewards for the risk and effort required in
developing the business concept. In other words,
it must be a worthwhile investment.
• Market competitiveness: the product or business
must be equal or better than available products on
the market from the customer’s viewpoint. It must
be better than the competition and have some
type of competitive advantage.
• Objectives of the entrepreneur taking the risk must
be feasible/achievable via the business concepts.
• Resources and skills required for the business to be
successful must be freely available. For example,
are raw materials available?
Are there sufficient qualified
competitive advantage
point of difference or and trained staff available? Can
superiority held over one’s spare parts be accessed? Figure 1.19 Australia’s warm climate has led to the
competitors It is important to look establishment of many popular ice cream business, including
critically and impartially at a the Cold Rock Ice-Creamery and Trampoline.

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 Chapter summary • Sources of business opportunity may
include:
• A potential business owner/operator must – innovation and entrepreneurship
initially assess and evaluate: – changing demographics
– their personal motivation and goals for – legal changes
entering into business and the validity of – changes in consumer tastes, lifestyle
these and income
– personal skills and qualities and whether – a hobby/interest
these are applicable in business
– brainstorming/SWOT analysis
– personal and business goals and their
– observation and research
compatibility.
– media
• Reasons for going into business may
include: – trade shows
– desire for independence – a recognisable market gap
– potential to make money – global markets
– self-worth – research and development
– flexible working hours and conditions – technological developments.
– to overcome unemployment • A viable business opportunity involves:
– family tradition – real demand for a good/service
– to cover a market gap – a return on investment
– to fulfil a social need. – market competitiveness.
• Successful business operators often have
several of the following skills: Chapter summary questions
– communication skills 1 Define the following concepts:
– planning and organisation skills a entrepreneur
– financial skills b innovation
– analytical skills c gap in the market
– time management skills d communication skills.
– IT skills 2 List and explain five possible motivations
– negotiation skills for going into business.
– leadership skills. 3 Explain how the motivation for
• The following personal qualities are often commencement of a social enterprise
an advantage to business owners: might be both different and similar to the
motivation for entering into another type of
– ability to think outside the square and
business.
innovatively
4 Outline an example of when an
– resilience
entrepreneur or business operator would
– vision require the following:
– ability to work independently and accept a communication skills
responsibility
b negotiation skills
– flexibility
c financial skills
– ability to learn from mistakes
d marketing skills
– willingness to work hard
e technical skills.
– ambition
– ethics.

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5 Explain the connection between Extension questions
entrepreneurship and innovation.
6 Write a paragraph describing five qualities 1 Research a successful Australian business.
usually found in successful entrepreneurs. Identify:
Explain how each quality would be a when the business was founded and by
advantageous when starting a new whom
business. b the probable motivation for commencing
7 Explain how each of the following changes the business
in an area could create an opening for a c the reasons why this business has been
new type of business: successful.
a A large number of families with young
children move into an area.
b A new hospital is built in an area.
c A large number of retirees move into an
area.

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 CHAPTER 2 Key terms
• B2B • market research

Business concept development – •

•
B2C
business concept
• mission
statement

‘getting off the ground’

• business goals • values
• business statement
objectives • viability
• feasibility study • vision statement
• intellectual
property (IP)

Overview • The relationship between business opportunities

and business concept development
The process of establishing a business can be • Market research and initial feasibility studies.
lengthy. Much time and effort is usually devoted
to the development of the business concept. Once What’s ahead
an idea with potential for further development as a
business is identified, the next stage is to progress
to business concept development. This begins with Business opportunity recognised
market research, followed by a feasibility study.
Following this, business goals need to be set and a
formal business plan written.

Key knowledge Business concept development

In this chapter students will learn the following about
planning a business:
• The importance of goal setting in business
• The importance of business concept development
Conduct initial market research

Conduct feasibility study

Establish business values, goals,

mission, vision and objectives

Figure 2.2 Business concept development

Figure 2.1 Developing a business concept – brainstorming

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 2.1 The importance of The relationship between
business concept business opportunities and
business concept development
development Once an idea for a business has been determined, the
products or services identified, and market research
Initial idea or business concept completed, the next stage should be to conduct
an evaluation of the feasibility and viability of the
business idea. What is considered feasible will vary
Conduct market research depending on the desired return on investment and
the degree of risk an entrepreneur is prepared to take.
Initial market research is conducted in order to
Refine the business concept assess whether there is a potential market for the
business. Likely risks and
rewards in establishing the viability whether the
Conduct feasibility study business and the viability business is capable of
of the business need to be developing and growing
assessed through a feasibility
Write a business plan study. A viable business has the potential to survive
and be profitable. Even the best business ideas are
Figure 2.3 The business concept development process useless if there are not enough customers or clients
willing and able to pay for the goods and services
Business concept development is a multi-stage being offered, if sufficient finance cannot be found, or
process. The initial idea or business concept may the experience and skill levels of personnel involved
have come from a variety of are not adequate.
business concept an idea sources, such as recognising
for a business including changing customer needs, a
basic information such development in technology,
as the product, the target
or expanding globally. Sources
market, plus proposed
competitive advantage. of business opportunities were
A business concept may covered in Chapter 1.
involve a new product or Market research needs to be
simply a new approach to undertaken to gain a general
marketing or delivering an understanding of the industry
existing product.
that the business will be part
of. For instance, a potential
business owner believes that opening a coffee shop
would be a good idea because they are responding
to the increasing needs of customers for good-quality
coffee, either to enjoy at the shop or to take away.
That business owner would need to initially undertake
research into the general hospitality and fast-food
industry. This research could be undertaken online,
by reading books and magazines, or interviewing
business owners already engaged in the industry.
Following this general research, specific research
should be undertaken looking into coffee shops to
understand market trends, competitors and the 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 coffee).

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 2.2 Market research –
refining the business
concept

Interviews Libraries

Focus Government
groups agencies

Market Trade
Surveys
research associations

Figure 2.4 Market research is an important aspect of conducting a feasibility study for a business proposal.

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
market research a indicate whether there are
systematic approach which sufficient customers or clients
assists a business to make
willing and able to pay for
decisions about consumers
and the marketplace the goods and services being
offered.
The initial market research
undertaken when the business concept is being
developed should look at obtaining answers to the
following questions:
Figure 2.5 A feasibility study determines if a business idea is
• Will the product or service being developed be viable.
attractive to customers or clients?
• Who will be the potential customers or clients? research into business trends. Further information on
Will it be other businesses (B2B) or individual market trends or industry movements can be gained
consumers (B2C)? through reading previous research undertaken by
• Is the product or service going to provide value business professionals, market reports and industry
to the customer or client? analysis.
• Who will be the competition?
• In what potential areas or ways would the business Initial feasibility study
be able to gain a competitive The market research already conducted will show
B2B business to business advantage? whether the market can sustain the business. Using
B2C business to consumer Obtaining answers to these the information gathered about the industry and
questions may require talking the potential customer base, the entrepreneur will
to potential customers or clients, creating surveys now need to determine whether the business idea
and analysing the results, interviewing other business is feasible. In other words, they need to determine if
owners, running focus groups and conducting online the business they wish to establish can survive and be

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 profitable. This is known as a
feasibility study initial feasibility study. It provides
research that is required information on whether or not
to determine whether
the idea on which they wish to
the business concept is
potentially viable create their 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
Figure 2.6 A feasibility study is vital for a business plan.
• profiles of the key people involved, including
background, skills, personal qualities and
qualifications • a brief analysis of the proposed operation.
• a description of the market – who and where the A detailed feasibility study shows whether it is
customers are, the size of the market and expected worthwhile to proceed with further development of
sales based on costs of production. This market the business concept. The feasibility study may also
analysis sets out the level and types of demand identify reasons not to proceed.
there is for the products to be sold and its capacity
for growth. Protecting intellectual property
• supply analysis – looking at the life cycle of the Once a business concept and associated original
industry and whether it is a good time to be ideas, known as intellectual property (IP), have
entering into it. For example, if the products of been created and developed,
competitors have been selling well for a long protection must be obtained intellectual property
time it is likely that demand will begin to drop off against others copying or (IP) the property rights
in the near future. (See ‘Product life cycle’ in stealing them. This involves over the creations of mind
Chapter 13.) or intellect; can be an
registering original ideas or a
• whether there is a threat of substitute products invention, trademark or
work idea as one’s property. original design
entering the market in the future Registration of intellectual
• identification of the competition, their strengths property must be made in
and weaknesses and how a competitive advantage every country where the business intends to trade.
might be gained. In order to do this the following
questions must be examined:
– How is the product different to that of
competitors? Why will customers purchase
from you rather than competitors?
– Are there any barriers to entering the market
such as the need to gain a licence or be
registered?
– What makes the competitors successful?
• 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
• personal circumstances of the person driving the
business idea, including current financial position,
skills and knowledge and experience in the area/
industry. Levels of commitment to the idea and
venture are also included. Figure 2.7 Copyright is a form of intellectual property.

Chapter 2  Business concept development – ‘getting off the ground’ 23

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 Types of intellectual property include:
• patent: granted for exclusive exploitation of any
2.3 The importance of goal
device, substance, method or process that is new, setting in business
inventive or useful
When planning the future of a business, a list of
• trademark: a right granted for exclusive
potential and desired achievements should be
exploitation of numbers, letters, words, phrases,
generated. These are the goals and objectives of the
sounds, smells, shape, logo, picture, an aspect of
business. The establishment of business goals and
packaging or combination of these
objectives is vital because they provide direction for
• design: features of shape, configuration, a pattern
actions.
or ornamentation that make a product unique
Business goals are statements that set out where
• copyright: original expression of ideas (not the
the business sees itself in the future. They represent
ideas themselves); for example, in art, songs,
the aspirations of the business and its owners, but do
literature, films, computer programs, articles and
not define how they are to be achieved. A business
photos
goal might be ‘To be the largest seller of electronic
• trade secrets/confidentiality: intended to stop
gadgets in the country’, but that
employees from releasing your ideas to others;
statement does not mention business goals describe
for example, a secret recipe. what a business expects
how this goal is to be attained.
For more information on intellectual property, visit to accomplish over a
Business objectives are
the IP Australia website. specific period of time and
the steps a business must take represent the aspirations of
to reach its goals. They will set the business
out what the business believes business objectives the
it needs to do to achieve stated, measurable targets
its goals. This may require of how to achieve business
multiple objectives, and it may goals
take several years before the
business attains its goal. To achieve the example of
the goal given above, one objective for the business
may be ‘We will open a store in every city and every
major town in the country by the end of year three’.
The importance of establishing goals and objectives
cannot be overstated. Without clear goals, a person or
Figure 2.8 It is important to register all intellectual property. business will have no defined purpose and nothing to

ACTIVITY 2.1
1 Identify the type of intellectual property
involved in each of the following:
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.
Figure 2.9 All businesses must establish goals.

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strive for. Consequently, they will most likely stagnate Goals, however:
and struggle for meaningful accomplishments. The • do not specify how they will be attained
absence of goals is akin to a person setting out on a • should align with the mission statement and
journey with no destination in mind. values statement of the
Goals and objectives are stepping stones to business, which are even mission statement a
an end result. They must exist in every aspect of more general and abstract written statement that
business planning. The first step of planning is the defines a business’s core
statements of the business
establishment of clear goals. purpose and focus
aspirations. (See below for
A business plan sets out the strategy to be values statement outlines
more on this.)
what the business sees
implemented to achieve business goals. The ability
When devising goals for a as its values and centres
of a business to meet its stated goals is referred to as around integrity, honesty
business, the following aspects
business effectiveness. and ethical behaviour
of business performance
The terms ‘goals’ and ‘objectives’ are often used
should be considered for
interchangeably, but as explained above, they are
inclusion in its goals:
different and are used in different stages of the
• profit/profitability: targets for levels and growth in
business planning process.
profits and profitability over the long term
Business goals • efficiency: targets for improvements in the ratio of
costs of production to the value of output
Business goals generally: • expansion goals: for example, to increase the
• are broad statements about the future of a business number of outlets and open up in new markets
which define the intended direction a business • satisfaction levels of both customers and staff: to
will take achieve a staff turnover rate of less than 5 per cent
• are representative of aspirations the owner has for per annum
the business • corporate social responsibility and environmental
• may include emotive and general language sustainability goals, as outlined in Figure 2.10.
• allow for conceptual thought and not prescriptive
steps.

Figure 2.10 Example of environmental sustainability goals and objectives

Digging Deep Global Group – Environmental goals to be met by 2020

Goal 1: Improve energy efficiency by at least 20 per cent

Objectives:
• Replace all coal boilers with high-efficiency natural gas boilers
• Identify and repair malfunctioning operating equipment immediately – regardless of how
small or inconsequential the error might be

Goal 2: Increase renewable energy sources by 10 per cent

Objective:
• All new plants to be fully solar powered

Goal 3: Increase recycling by 50 per cent

Objectives:
• Implement education projects to create and increase staff awareness of best recycling
practices followed by annual award for top recycling suggestion
• All workstations to be within 25 metres of recycling hub relevant to that division

Goal 4: Reducing deforestation

Objectives:
• Audit supply chains to identify entities at risk of breaching the UN Declaration of Forests
• Establish projects to promote responsible practices among partners

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 Business objectives Objectives:
• stipulate the steps the business will take in order
Business objectives should be derived from the goals
to achieve its stated goals
of the business and are used to measure degree of
• are typically measurable and quantifiable
success and progress towards goal achievement.
• are written in a non-emotive, technical manner
• should be realistic and attainable
• have a timeline for completion.
Business Related
goal objectives Establishing business goals
‘We seek to be the To increase sales by A business must initially clarify its overall purpose or
leading producer and 10% annually over a reason for existence before determining goals. To do
seller of children’s four-year period this it must develop its:
wear in the Southern To achieve a 40% 1 Core values: these must be established as they
Hemisphere’ market share within are the priorities and principles important to
five years the business and the people within it. Values
‘Our goal is To reduce the demonstrate what the business stands for, its
100% customer number of customer principles and beliefs.
satisfaction’ complaints by 50% 2 Mission statement: this is a global statement that
within 12 months reflects a business’s reason for being or purpose,
To achieve 95% and the way it will be managed in order to reflect
positive rating on its business values.
customer surveys 3 Vision statement: using the values of the business,
over a six-month the next step is to construct
period a vision statement defining vision statement a
the long-term aspirations statement that outlines the
Figure 2.11 Business goals and related objectives
of the business. Goals may aspirations and values of
be specified within a vision the business
statement.

1 Core values: priorities and principles

important to the business as a whole.
1
2 Mission statement: central purpose or
2 reason for the business.
3 Vision statement: long-term aspirations
of the business.
3 4 Strategic goals: long-term whole goals for the
entire business organisation. Set by
4 executive management (two to five years).
5 Tactical/departmental objectives: medium-term
5 goals set by middle management for one
department/division (one to two years).
6 Operational objectives: short-term goals set
6 by frontline management for one team/shift
(daily, weekly, monthly).
7 7 Individual objectives: personal goals
set by one employee.
Figure 2.12 The hierarchy of objectives

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CASE STUDY 2.1
The Bosch company: mission statement, vision statement and core values

Mission statement:
Our objective – what we want to achieve:
In the spirit of Robert Bosch, we aim to secure
our company’s future by ensuring its strong
and meaningful development and preserving its
financial independence.
Figure 2.13 The Bosch company logo
Our motivation – what drives us: Invented for
life: we want our products to spark enthusiasm,
improve quality of life, and help conserve
natural resources.
Vision statement:
Our strategic focal points – what will help us succeed
Focusing on customers: We understand our customers’ requirements. We tailor our products to
them, and we create innovative business models.
Shaping change: We shape change and seize the opportunities it brings, especially in connectivity,
electrification, energy efficiency, automation, and the emerging markets.
Striving for excellence: We measure ourselves against our strongest competitors. Our work is fast,
agile, and accurate. Efficient processes, lean structures, and high productivity secure and increase the
value of the company.
Our strengths – what we do well
Bosch culture: Worldwide, our distinctive corporate culture is a common bond. We live by our
values and strive for continuous improvement. We are proud to work for Bosch.
Innovation: Our creativity is the basis for new technological solutions that translate into best-selling
products. We are innovation leaders.
Outstanding quality: We deliver products that offer the best quality and reliability. In this way, we
meet our customers’ wishes and expectations.
Global presence: We are an international company. While constantly extending our global presence,
we strengthen local responsibility.
Core values:
Our values – what we build on
Bosch has always been a value-driven company. Many of our values can be traced back to our
founder Robert Bosch, other values have changed or have arisen over the decades. Our values reflect
the manner in which we run our business: Our professional ethics in dealing with our business
partners, investors, employees and society.
Future and result focus: Our actions are result-focused. This allows us to secure our future. It also
creates a sound basis for the social initiatives of the company and the foundation.
Responsibility and sustainability: We act responsibly in the interest of our company, also taking
the social and ecological impact of our actions into consideration.
Initiative and determination: We act on our own initiative, take entrepreneurial responsibility, and
pursue our goals with determination.
Openness and trust: We communicate important company matters in a timely and open fashion.
This is the best foundation for a relationship built on trust.

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 CASE STUDY 2.1 continued

Fairness: We deal fairly with our colleagues and business partners, and view this fairness as a
cornerstone of our corporate success.
Reliability, credibility, legality: We promise only what we can deliver, accept agreements as
binding, and respect and observe the law in all our business transactions.
Diversity: We appreciate and encourage diversity for the enrichment it brings, and see it as essential
for our success.
(Source: The Bosch company website, ‘Values: Bosch Australia & We are Bosch’.)

Analysis 2 Summarise the key aspects of the Bosch

1 List the three key aspects of the Bosch vision.
mission. 3 List and describe the key values of Bosch.

ACTIVITY 2.2
1 Visit the website of two of the following businesses:
a ANZ
b McDonald’s
c Nike
d BHP.
Locate the vision/mission and values statements. Identify the following for each:
• the purpose of the organisation
• its basic philosophies and values
• the goods and services offered
• its target market.
2 Imagine you are in the process of establishing a café. Write an example of each of the
following types of goals which would be relevant:
a a strategic financial goal
b an operational financial goal
c a service goal
d a social goal.

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 a a soft drink producer develops a new
flavour of drink
Chapter summary b a collection of clothing designed by a
designer
• Business concept development is the next
step after the business idea is generated. c a logo
• The first step is to conduct a business d a distinctive type of packaging
feasibility study in order to determine if the e a jingle to be used in an advertisement
concept is viable. for a new car
• A feasibility study will assess a description f a slogan.
of the business, profiles of personnel and 6 Identify and explain the purpose and
a market analysis. The competition must importance of the establishment of
be identified and a competitive advantage business goals and objectives.
specified. From this an assessment of 7 Define:
overall feasibility is generated.
a business goals
• Original ideas and designs must be
b business objectives.
protected as intellectual property.
8 Discuss the differences and similarities
• All businesses must establish goals to set
between business goals and business
the direction for the business.
objectives.
• Businesses set both financial and non-
9 Analyse the relationship/link between
financial goals and objectives.
business goals and objectives.
Chapter summary questions 10 Use the internet to locate the following:
a three business mission/vision
1 Define the following terms. Then, use statements
each in a sentence to demonstrate your
b three business values statements.
understanding:
11 Identify and explain the relationship/
a feasibility study
link between business values, business
b market analysis. mission and business vision statements.
2 Explain what market research is. Discuss 12 Classify each of the following as a business
the purpose of conducting market research goal or a business objective:
as part of the process of developing a
a be the leading seller of hamburgers in
business concept.
the world
3 Explain the purpose of and process
b increase sales by 30 per cent over two
involved in conducting a business feasibility
years
study.
c launch three new product lines by the
4 List and describe the different types
end of the month
of intellectual property that a business
may need to register. Cite an example of d increase profitability
each. Describe the purpose of registering e reduce the use of paper in the office
intellectual property. f distribute electronic notebooks to all
5 Identify the type of intellectual property to staff within three months
be registered for each of the following: g produce and distribute to dealers 10 000
vehicles by year’s end
h open six stores by the end of the year.

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 Extension questions 2 Excellence: To use only the best-quality
natural ingredients.
Sophie and Effie are two friends planning to 3 Environment: To adopt sustainable
open a business that manufactures and sells business practices.
cosmetics to be called Grecian Goddess Pty
4 Social: To strive to improve the quality of
Ltd. They have devised a values statement for
life for employees and their families.
the new business.
Using the values statement of Grecian
The guiding principles for Grecian Goddess
Goddess, propose an appropriate:
are as follows:
a mission statement
1 Integrity: To maintain the highest ethical
standards and honesty in all our dealings b vision statement
and relationships with employees, c business goals (3)
customers, suppliers and the community. d business objectives (6).

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CHAPTER 3 Key terms
• balance of • gross domestic

Business contributions to payments (BOP)

• Better Life Index
product (GDP)
• imports

society – innovation and

(BLI) • infrastructure
• business hub • mixed market
• business economy
entrepreneurship mentorship
• council grants
• OECD
• research and
• exports development
• Global • wellbeing
Innovation
Index (GII)

Overview Key knowledge

This chapter will examine the economic contributions In this chapter students will learn about:
that businesses can make to a society. These include • The contribution that businesses make to the
the standard of living – access to goods and services, economic and social wellbeing of a nation
employment, gross domestic product (GDP), • The methods by which a culture of business
economic growth, innovation, the development innovation and entrepreneurship may be fostered
of new technologies, infrastructure, trade and the in a nation, such as government investment in
development of export markets, and taxation revenue research and development, council grants for new
for the government. businesses, business mentorships, school-based
Businesses also contribute to social wellbeing. educational programs in entrepreneurship, and
This can include a wider provision of products and the creation of regional business start-up hubs.
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
What’s ahead
that contribute to their economic and non-economic
standard of living. • economic
It is important for all businesses and society in Contribution of wellbeing
general to have a culture of innovation and a sense businesses: • social
of entrepreneurship so that they can continue wellbeing
to improve and develop new and better ways to
produce goods and services. While a business
should try to develop this culture itself, there are also • government
a range of other methods and programs that may investment
support and encourage a culture of innovation and • council grants
entrepreneurship across the whole of Australia. Methods to foster • school-based
innovation and educational
entrepreneurship: programs
• regional
business
start-up hubs

Figure 3.1 Business contributions to society

Chapter 3  Business contributions to society – innovation and entrepreneurship 31

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 3.1 Contribution to the
economic wellbeing of
a nation
Businesses, regardless of their size, contribute to
the economic and social wellbeing of a country in
many ways, including through
wellbeing a good or employment, economic growth,
satisfactory condition of international trade, taxation
existence. It usually centres revenue, infrastructure and
on health, happiness and
research and innovation.
prosperity.
Through their activities,
businesses allow people in
Figure 3.2 Employing people provides them with an income.
Australia to have a high level of economic and social
wellbeing.

Economic contribution of ACTIVITY 3.1

businesses in Australia Analyse the following:
1 Identify what happened to the
In a mixed market economy (i.e. includes both
employment rate in the last quarter
the public (government) sector and privately owned
of 2015 and what is the current
businesses) such as Australia
rate. Use the website at Cambridge
mixed market economy has, businesses contribute
weblinks: http://cambridge.edu.au/
an economy that is based to the wellbeing of the
on both privately owned redirect/?id=6965.
population. Businesses add to
and run businesses and the 2 Using the ABS website (see question
economic and social wellbeing
government (public sector), 1), answer the following questions:
which also provides goods in a number of ways, including
and services. through: a What proportion of people are
• employment employed full and part time?
• economic growth/gross b Has the rate of unemployment
domestic product (GDP) increased or decreased in the last six
• international trade months?
• taxation revenue 3 Describe how businesses can
• infrastructure contribute to the employment
• research and development. opportunities of Australians.

Employment
Businesses employ people and this 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.

Figure 3.3 Businesses provide valuable employment

opportunities.

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 Economic growth/gross domestic
product (GDP)
Economic growth can be defined as the value of
production of goods and services in an economy
in a given period of time (usually one year). Gross
domestic product (GDP) is the main way that
economic growth is measured
gross domestic product in Australia. Economic growth
(GDP) total market value of is important for any nation as it
production in a country over provides the chance to ensure
a period of time minus the
improved living standards.
costs of production
If the value of production
increases each year, then the
standard of living of the people in Australia will also
increase.
If businesses provide a wide variety of goods and
services, then people are able to take advantage of
this. If these were not provided, then the standard of
living would not be as high, or there would be limited Figure 3.4 Gross domestic product measures economic
choice and availability of goods and services. growth.

CASE STUDY 3.1

Cheer up: after the mining boom, Australia is still doing OK

The latest official economic figures showed a ‘spending spree’ had helped economic growth
accelerate to stronger-than-expected 3 per cent. And rather than plunging towards US50¢ our dollar
has climbed back over US75¢ for the first time since the middle of 2015. The fortunes of Australia’s
most important export commodity, iron ore, are also looking up.
So what are we to make of the mixed economic messages so far this year?
ANZ’s head of Australian economics, Felicity Emmett, says the gloomy start to the year was driven by
unfounded fears about the economic outlook.
That sentiment was backed by two of Australia’s top economic officials who gave thoughtful speeches
about the state of the economy this week.
Philip Lowe, the deputy governor of the Reserve Bank, was upbeat about Australia’s economic
performance since the end of the mining boom. Dr Lowe said the economy has proved far more
resilient than many expected.
‘Mining investment has also declined by almost 40 per cent, which is the equivalent of nearly 3 per
cent of GDP. Yet over these two years, our economy has continued to expand at a reasonable pace,
with growth over 2015 having been a bit stronger than was earlier expected and not too different
from the long-term average,’ he said.
In a separate speech this week the Deputy Secretary of the Federal Treasury, Nigel Ray, said the
economy should continue to perform well.
‘Slower global growth has been accompanied by a number of trends that are observable across the
global economy: slower growth in trade; weak business investment; slower productivity growth;
slower population growth in advanced economies; low inflation; and lower inflation expectations,’ he
said.

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 CASE STUDY 3.1 continued

While offshore hazards have intensified, Mr

Ray said it was domestic factors that would be
the key to Australia’s economic performance
over the next two years, especially household
spending.
‘We need consumption (customer spending)
growth to continue to grow strongly – we need
the savings ratio to come down to achieve that
– and we need … Australian businesses to
invest,’ he said.
Dr Lowe and Mr Ray also drew attention to the
lingering decline in Australia’s national income.
In past decades economic growth and national
income have been very closely correlated but
since the mining boom the two have diverged.
Figure 3.5 The mining industry is important to the
As a result the key measure of the economy –
Australian economy.
gross domestic product – has continued to grow.
(Source: M Wade, ‘Cheer up: after the mining boom, Australia is still doing OK’, The Age, 11 March 2016.)

Analysis 3 Illustrate the link between economic

1 Interpret what the article states about the growth and national income outlined in the
rate of economic growth in Australia. article.
2 Describe the domestic factors that may
have contributed to economic growth in
Australia.

International trade greater variety of goods and allows businesses to earn

revenue by selling products to other countries. Over
International trade is important to a nation as it allows
the last few years, the federal government has signed
businesses and individuals to gain access to goods they
free trade agreements with a number of countries,
may not otherwise be able to purchase. Businesses
can also use imported parts
balance of payments and materials in the production
(BOP) a record of the total of goods in Australia. The
value of money and capital level of trade between one
and imports and exports country and another can be
between one country and
measured using the balance
another
of payments (BOP), which
imports goods and
materials that come into measures the movement of
Australia from other money and capital in and out
countries of a country. It includes total
exports goods and imports and exports. Many
materials that Australia businesses import and export
sends to other countries as goods and services, which
part of trade allows people to access a Figure 3.6 Exporting provides access to a greater amount of
goods and services.

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including the United States, Japan and South Korea. and materials and will contribute to the economic
This will also allow businesses greater access to goods wellbeing of the country.

ACTIVITY 3.2
1 Examine the trade between different countries and list the statistics for each country in
order of importance. See Cambridge weblinks: http://cambridge.edu.au/redirect/?id=6966.
2 Go to the website at Cambridge weblinks: http://cambridge.edu.au/redirect/?id=6967 and
answer the following questions:
a Identify the top three goods that Australia imports and exports.
b Explain how these goods can contribute to the wellbeing of Australia.
c List the reasons why countries trade with other countries.

CASE STUDY 3.2

International trade to quadruple by 2050
According to a report from the international bank HSBC, which was summarised in Fairfax
newspapers on 24 November 2015, international trade will increase fourfold in value by 2050.
The report is quoted as saying this will result from another wave of globalisation driven by:

• global population growth increasing the number of consumers

• improved standards of living creating 3 billion more middle class consumers, mainly in emerging
markets
• new technologies helping businesses reduce costs
• governments lowering barriers to trade.
(Source: Based on ‘International trade to quadruple by 2050, says HSBC’, The Age, 24 November 2015.)

Analysis 2 Explain how this will benefit people and

1 Analyse what will happen to international businesses in different countries.
trade between 2015 and 2050.

Figure 3.7 As the world population grows, so does consumption.

Chapter 3  Business contributions to society – innovation and entrepreneurship 35

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 Taxation revenue Infrastructure
Businesses are a source of taxation revenue for Businesses all contribute to the provision of
the federal and state governments. If businesses infrastructure in Australia. Various levels of
are successful, then they pay company and other government provide roads,
business-related taxes. This money can then be used transport, electricity, gas, infrastructure the
by governments to provide services to the population. internet and essential services. foundations and investment
Individuals running their own business also pay taxes. While governments fund a lot needed in a country to
Many businesses also collect tax such as the goods of these projects, they often provide the means for
an economy to operate.
and services tax (GST) and pass this on to the federal need businesses to build
It can include transport,
government. them, and governments can communications, education,
sign contracts and establish power and electricity
partnerships with the private services.
sector. Many of the new
freeways in Victoria, for example, charge tolls that
go to the businesses after the roads have been built.

Figure 3.8 Business taxation is a form of revenue for Figure 3.9 Businesses help the government to fund city
governments. infrastructure.

CASE STUDY 3.3

NAB upgrades technology infrastructure for better customer service
In an attempt to reduce the risk of outages in its customer service technology, National Australia
Bank has upgraded to a new data centre. The upgrade comes as part of a broader technological
infrastructure upgrade. The new data centre is like a technological nerve centre through which
its daily $250 billion transactions flow.
Renee Roberts, NAB group executive, said the bank is also preparing to increase spending on
customer-facing technology such as mobile banking applications.
Mobile banking and contactless payments have led to a boom in everyday transactions which
are putting pressure on banks to increase their infrastructure.
Ms Roberts said that the key feature of the infrastructure upgrade was the new data centre’s
ability to provide ‘infrastructure on demand’. Rather than running its servers to overcapacity and
risking them crashing, the bank purchases the capacity it needs dynamically from a third party,
paying for higher capacity during peak times.
For example, internet banking tends to peak during lunchtime hours, but experiences a low

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 in the middle of the night. However, mass
payments between banks are often made
overnight, which leads to high server demand
in the early hours of the morning.
‘The infrastructure-on-demand piece means
that there is just more reliability and less risk
of outages due to running out of capacity,’ said
Ms Roberts.
As banks are increasingly competing for
customers based on their digital services,
reducing the risk of servers crashing is a key
concern.
The benefits of overhauling its core
banking system, known as NextGen, are also
becoming clear. This system, which deals
with customer management, was initially
subject to delays and crashes. However, new
improvements have benefited customers Figure 3.10 The National Australia Bank
by providing, for example, shorter loan
processing times.
Ms Roberts said that NAB’s infrastructure upgrade was about putting more financial
resources into ‘refreshing’ front-end systems used by customers.

Analysis 3 Explain why the bank made these

1 Identify why is it important for businesses changes.
to contribute to infrastructure projects in 4 Describe how the changes can improve
Australia. services to customers.
2 Outline the improvements NAB has made
to the bank’s services.

Research and development

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

Figure 3.11 Businesses invent and innovate to benefit society.

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 ACTIVITY 3.3
1 Discuss how research and development
can contribute to the wellbeing of
people in Australia and around the world.
2 Evaluate why it is important for
individuals and businesses to
continually look for ways to develop
new ideas.

Social contribution
While many of the points already discussed in
this chapter have an economic or financial focus, Figure 3.12 The OECD measures economic quality of life
businesses contribute to the social wellbeing of a worldwide.
nation as well. When businesses provide employment,
goods and services for customers, infrastructure, and Australia performs very well in many measures
research and development, they contribute to both of wellbeing relative to most other countries in the
the economic and social wellbeing of the country. BLI. Australia ranks at the top in civic engagement
Australia is considered to be ‘the lucky country’ and above average in environmental quality, health
and in many ways it is; this is in part due to the status, housing, personal security, jobs and earnings,
contribution of all businesses. While GDP can be used education and skills, subjective wellbeing and social
to measure economic growth, there are also other connections; but it rates below average in work–life
measures that can be used to provide a more holistic balance.
approach. Businesses also contribute to social wellbeing
The OECD (Organisation for Economic through trying to reduce their impact on the
Cooperation and Development) publishes a survey environment. Some businesses
every year looking at a range will look at ways to reduce Better Life Index (BLI)
OECD the Organisation of measures as to how people waste, recycle components developed by the OECD to
for Economic Cooperation and minimise their impact measure standards of living
in a nation live. Australia ranks
and Development; an across a number of different
highly in this index and the on the environment through
association of nations areas; for example, housing,
contribution of businesses is reducing carbon emissions and environment and social
which promotes economic
growth, prosperity and part of the reason. One of the pollution. Large businesses in connections
trade measures used is the Better particular can have a significant
Life Index (BLI). impact on the environment.

General happiness Income per capita

Workforce (employment)
(satifaction with life) (average household)
• Findings show that • Australians work longer • Findings show that
Australians are satisfied hours, where 14% of Australians earn more than
with their lives. employees work above the the OECD average.
• Results show that OECD average. • However, there is a wide
Australians are above the • Australia’s paid employees gap between the poor
OECD average. are above the OECD and the rich, causing
average, where 72% of a difference in wealth
employees between the distribution.
ages of 15 and 62 are still
part of the workforce.
Table 3.1 Results from the Better Life Index – Australia for income, employment and satisfaction with life

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 ACTIVITY 3.4
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 the indicators set out in Table One.
2 Establish whether there has been an improvement or a decline in these indicators.
3 Explain why it is important to look at this type of data.
4 Illustrate how businesses have contributed to the results.

CASE STUDY 3.4

Environmental footprint of world tourism
industry
A report conducted by EarthCheck revealed
that tourism is one of the top five polluters of
the world. EarthCheck, a scientific group for
tourism, conducted a study where electricity,
water and waste production was measured
across the globe – analysing 1047 global
industry properties over a period of seven
years. The study found industries that manage
and measure their resources will benefit from
financial returns on investment. For example,
the Radisson Blu Hotel in Sydney reviewed
its resources and made changes that have
saved water equating to six Olympic-sized
swimming pools, greenhouse gas emissions
equating to removing approximately 600
vehicles off the road, and energy to provide Figure 3.13 Reducing environmental impacts is important for
for 400 average households. businesses.

Analysis 3 Assess how businesses can impact on

1 Explain the analysis carried out by the economic and social wellbeing of a
EarthCheck. country.
2 Provide reasons why it is important for a
business to try to minimise its impact on
the environment.

While businesses contribute in many ways to the cutting back on production of goods and services,
social and economic wellbeing of a country, there can paying less company and other taxes, and importing
also be negative aspects, which can adversely impact more goods than they export, which leads to issues
on society. This may be in the form of businesses with trade deficits (shortfall). The impact of business
reducing the number of staff they employ, or by activity on the environment may also affect the
decreasing their research and development budgets, standard of living of people.

Chapter 3  Business contributions to society – innovation and entrepreneurship 39

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 3.2 Building a culture
of innovation and
entrepreneurship
All businesses need to ensure they develop innovative
practices so that their business can continue to grow.
A sense of entrepreneurship will also instil a positive
corporate culture (values, beliefs and attitudes of
those in a business), which encourages employees
to take risks and look at ways to continually improve
products and processes (see Chapter 2).
There are a number of ways that innovation and
entrepreneurship can be encouraged and supported.
Approaches include specific programs, investment by
governments in research and development, councils
providing grants, businesses mentoring, educational
programs in schools and regional business start-up Figure 3.15 Innovation helps businesses find ways to improve.
hubs.
Innovation allows businesses to build on good the tools that can assist in tailoring policies to promote
practice and find ways to improve further. The types long-term output growth, improved productivity and
of goods and services businesses can offer will lead to job growth. It also provides information on the factors
improved economic and social wellbeing for people and the environment necessary
and society in general. to create innovation and allows Global Innovation Index
Innovation can be defined as an improvement or these to be evaluated. (GII) aims to capture the
invention that enhances or extends a business and Many businesses are able multi-dimensional facets
of innovation and provide
provides another product or service to the economy. to foster innovation in their
the tools that can assist in
Australian businesses and individuals have a tradition own businesses, and have tailoring policies to promote
of coming up with new ideas and inventions. successfully implemented new long-term output growth,
Innovation can be measured using the Global processes and practices, with improved productivity and
Innovation Index (GII). The GII aims to capture the excellent results. job growth
multi-dimensional facets of innovation and provide

Figure 3.14 Entrepreneurship and innovation help businesses Figure 3.16 Australia has developed many useful inventions.
grow.

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 Innovation/Invention
A way to manufacture ice was developed in 1879 so meat could be exported Invention
to Great Britain
Lawrence Hargrave – first powered flight in 1894 with four box kites Innovation
The surf lifesaving reel was designed and built in 1906 Invention
A pedal-powered radio was developed in 1929 for the Royal Flying Doctor Innovation
Service
The utility truck, or ute, was developed in 1934 Innovation
Hills hoist clothes line created in 1946 Invention
In the 1940s, Howard Florey developed a way for penicillin to be Invention
manufactured and processed
In 1952 the Victa lawn mower was invented Invention
In the 1950s the black box flight recorder was developed Invention
In 1976 Australian doctors started using ultrasounds to monitor unborn Innovation
babies
Baby car safety capsules arrived in 1984 Invention
Anti-counterfeiting technology developed for bank notes in 1992 Innovation
Long-wearing contact lenses introduced in 1999 Innovation
Most recently, a nano machine that can be placed inside bodies to detect Innovation
drugs or viruses in the blood was developed by Australian scientists
Table 3.2 Examples of Australian innovations and inventions

CASE STUDY 3.5

Real innovation doesn’t need the IT crowd

If you really want innovation, you need to think.

Health care will be in the front line of that battle
for state and federal governments, so here’s a
little example of real innovation not waiting
for government policy: an aged care provider
changing the basis of its staff structure and
assignment to dramatically improve the lives of
residents, families and staff. It also looks like
saving a pile of money.
Last month Arcare Greenhill, in Epping,
Victoria, won the Australian Aged Care Quality
Agency better practice award for organisational
leadership and staff development.
Basically, the Arcare team led by Daniella
Greenwood undertook a lot of research into
what worked well in aged care, including
dementia care. Ms Greenwood listened to the Figure 3.17 Real innovation can happen in any industry.
clients and families and staff and subsequently
changed the organisation’s staff structure, training and approach.

Chapter 3  Business contributions to society – innovation and entrepreneurship 41

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 CASE STUDY 3.5 continued

It’s more complicated than can be explained in this brief space, but the core of it is focusing on
relationships between staff and residents. Doing that meant staff were assigned to work with the same
small group of residents instead of broadly across the facility and staff committed to do at least three
shifts each week.
The results have been amazing, pressure injuries down 90 per cent, respiratory tract infections down
69 per cent, 25 per cent reduction in skin tears, 13 per cent reduction in falls, 52 per cent reduction
in the use of some medications, 28 per cent reduction in staff sick leave, 50 per cent reduction in staff
turnover (people leaving the business), 100 per cent reduction in agency staff in the dementia care
unit, zero WorkCover claims.
Job satisfaction, resident and family satisfaction all up. Compliments up, complaints down.
‘We believe developing open and respectful relationships between family, staff and residents is the
most important thing we do,’ says Ms Greenwood, Arcare strategy and innovation manager.
(Source: M Pascoe, ‘Real innovation doesn’t need the IT crowd’, The Age, 15 December 2015.)

Analysis 2 Outline the process and ideas

1 The article states that if you want implemented at Arcare.
innovation you have to ‘think’. Define. 3 Summarise the outcomes of the innovations.

Entrepreneurship Individuals, businesses and countries need the

right skills to keep up with the global economy. As
Entrepreneurship is the process of designing, the economy has changed, knowledge has become
launching and running a new business. It is the increasingly important – successfully acquiring,
capacity and willingness to develop, organise and managing and applying knowledge is the key to
manage a business venture along with any of its risks growth. Australia is performing well in the creation
in order to make a profit (see Chapter 2). of knowledge. In the WEF Global Competitiveness
Index 2014–15, Australia’s scientific institutions are
ranked ninth, and a 2014 examination of the world’s
top 1 per cent of cited research papers in science,
technology, engineering and mathematics (STEM)
found that Australia’s share stood up well against
the United States, Canada and 11 Western European
countries. However, we seem to be less successful in
the application of knowledge. The 2015 GII included
a ranking for Innovation Efficiency (innovation output
compared to input), in which Australia was listed at
number 72. 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 even greater innovative activity.
One way to help Australian businesses to become
more innovative and entrepreneurial would be for
programs and support mechanisms to be established
by governmental and other bodies.
Figure 3.18 Running and launching a business involves
entrepreneurship.

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CASE STUDY 3.6
Australian surf fin tackles Balinese beach pollution
The beaches in Bali offer both natural beauty and amazing surf breaks. But they are also known
for the amount of plastic pollution that accumulates. Especially in the rainy season, creeks
and rivers carry large amounts of rubbish to
the beach. It may be cleaned up in the main
tourist areas, but surfers tell of having to
paddle through plastic bags and garbage.
But this may change, due to the innovative
thinking of two German surfing enthusiasts.
Luise Grossman and Felix Wunner used
recycled Balinese beach rubbish to develop a
high-tech surf fin.
Felix is a qualified engineer, while Luise
has a business and technology background.
Surfing in Bali, they found the pollution to
be ‘horrible’ – worse than they had ever
seen – and decided to use their skills to do
something about it.
The partners settled in Brisbane, and
established the Five Oceans surf brand. After
having their design tested at the University
of New South Wales, in August 2015 they Figure 3.19 ecoFins are an example of innovation to solve a
problem.
launched a Kickstarter campaign to fund full-
scale manufacturing. Their $35 000 target was
exceeded by more than $2000.
Rubbish from popular Balinese surfing beaches is collected and sorted by local recycling
centres. Items such as small packaging and bottle tops are packaged and sent to Java, where
they are converted into plastic pellets. A factory in Brisbane uses these pellets as the base
material for making the high-performance ecoFins.
Luise Grossman and Felix Wunner have created a high-performance, fully recycled product,
with a transparent value chain.

Analysis 3 Describe the steps that were involved in

1 Describe the type of innovation Ms developing this product.
Grossman and Mr Wunner developed.
2 Explain why they believe the recycling of
waste is important.

Methods to foster a culture of • business mentorships

• school-based education programs focusing on
innovation and entrepreneurship entrepreneurship
There are a number of different methods by which • creation of regional business start-up hubs.
a culture of innovation and entrepreneurship can be
encouraged. These include:
• government commitment to investment in research
and development
• council grants for new businesses

Chapter 3  Business contributions to society – innovation and entrepreneurship 43

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 Government investment in research and
development
High-growth firms can be stimulated and supported
via the adoption of economic policies by governments
at all levels. The teaching of entrepreneurship and
fashioning entrepreneurs is regarded as an important
role for universities and of economic significance.
Government procedures and programs that
support entrepreneurial systems result in countries
with elevated levels of technology entrepreneurship.
As an example, the United States, United Kingdom,
Israel and South Korea have a number of shared
features, which are:
• delivering entrepreneurship in schools and
engaging university students in a variety of
entrepreneurship offerings Figure 3.20 Supporting entrepreneurs is an economic priority.
• on a national scale, technology entrepreneurship
is of significance
• to ensure that entrepreneurs think globally, The National Innovation and Science Agenda
policies include educating and introducing youth created by the federal government assists innovators
to the finest international ecosystems and cultures with access to funding. Undertakings include:
• through an assortment of regulations, the progress • adjusting bankruptcy regulations to encourage
of technology companies is sustainable. entrepreneurship
Another country that has changed its perspective • providing resources, mentors, funding and access
on research and development is Singapore. It has to business networks to support innovative start-
invested over $1 billion to expand creation and ups to refine concepts
entrepreneurship over time and to change the country’s • granting businesses entry to more diverse funding
economy from labour-driven to productivity-driven options from the public such as generating funds
industries by supporting entrepreneurship research through crowd-sourced equity funding
and innovation. • for small businesses to compete in winning
To increase business effectiveness and efficiency, government contracts and tenders some changes
in Australia the federal government offers the have been made in government processes
Entrepreneurs’ Programme. To enhance Australia’s • tax breaks to encourage investment.
strengths and business opportunities the main In an effort to motivate and induce high-performing
emphasis of the program is on a variety of economic employees the government has enabled strategies
reforms. These include: such as allowing businesses to offer employees shares.
• assisting small and medium businesses to This results in businesses being able to enter and
concentrate on innovation links to gain entry extend global markets through multiple contacts. The
to knowledge, join networks and connect with government assists innovative start-ups in regional
researchers. This may involve co-funded grants and agricultural areas by granting access to public
to commercialise new products, processes and data and scientific research.
services or advice for people. The CSIRO (Commonwealth Scientific and
• programs such as growth services, business growth Industrial Research Organisation), associated
grants, business appraisals and expedient supply businesses and universities receive funding from
chain mechanisms assisted by services and advice the federal government to support research. The
to develop business proficiencies and networks government backs research and development in
• facilitating entrepreneurs, researchers and science and for innovative and up-and-coming
businesses to fast-track commercialisation, and businesses. It provides funding to the workforce
tackle crucial threats to create innovative products, to assist in the development of research skills in
processes and services to the market. areas such as engineering, mathematics, science and
technology. The government also examines applied

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 start-ups, business growth grants and relocation and
expansion grants.
Other opportunities include council grants include
‘grants and assistance finders’ money and incentives
– online tools that help a provided to businesses
and individuals to pursue
business locate grants. Some
business ideas and
programs available include development
Grants Victoria, where a
business owner can search
for government grants and assistance, GrantGuru
Business, Business Victoria and the Victorian
Department of Transport, Planning and Local
Infrastructure.

ACTIVITY 3.6
1 Go to your local council website
Figure 3.21 Investing in innovation and science is crucial.
and research the types of business
grants available for small and start-up
research, which looks at real-world applications of
businesses.
learning to support the private sector.
Privately run businesses also invest and implement 2 Describe the support available and
practices and ideas based on such research. explain why your local council would
offer these programs.

See the Interactive Textbook edition for

a case study on Australia’s top female Business mentorship
entrepreneurs. Mentoring for small business is encouraged and
supported by the Australian government. At a state
level, there are business mentorship programs to
help small business owners. For
ACTIVITY 3.5 example, Victoria has a small business mentorship
Go to the National Innovation and Science business ‘bus’ whose purpose a person or program that
Agenda website and use the information is to travel around and support offers knowledge, advice
businesses in metropolitan and and experience to another
on science, innovation and support to person. Mentoring can be
develop a pamphlet, brochure or blog post regional areas. There is also a
a highly effective way to
on some of the main programs on offer to program aimed at educating provide people with the
support new businesses to innovate. business owners on how to skills needed to develop a
refine business strategies and successful business.
strategic objectives. Another
Victorian program offers initial mentoring sessions
Council grants for new businesses and business clinics free of charge, with a fee paid for
Many local councils provide support and grants for further mentoring. Around 90 people, all experienced
businesses in their local area. The City of Melbourne, and qualified in a wide range of business industries
for example, offers a range of programs including and disciplines, provide the mentoring.
seminars, business consultation programs, business These mentors offer assistance in a wide range
networks, business breakfasts and the Melbourne of areas, including starting new businesses, writing
Licensees Forum. Similarly, the City of Greater business plans and setting objectives, developing
Dandenong has a range of grants for businesses marketing strategies, and identifying new products,
wishing to establish themselves in the local area. services and/or opportunities to increase sales and
These council grants are available in areas such as profits.

Chapter 3  Business contributions to society – innovation and entrepreneurship 45

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 Figure 3.24 Competitions exist for planning an enterprise.
Figure 3.22 Mentoring programs are offered in each state.
experience with start-ups, entrepreneurs, small

School-based educational businesses and research

• more resources for teachers such as access to real
programs data to support student learning through real-
Different levels of government and associations world examples.
also run educational programs and competitions for Other programs include:
students at secondary and, sometimes, primary school • Engineers Without Borders’ School Outreach
level. Many competitions are also run in universities program, which aims to inspire the next generation
for business and commerce students. of STEM students to have a positive social impact in
In the next decade it is estimated that 75 per disadvantaged communities by engaging students
cent of the fastest-growing jobs will rely on STEM with diverse backgrounds across Australia,
skills. To meet the needs of these industries the particularly Indigenous Australians and female
federal government has announced several programs, students, which make up only 11 per cent of the
including: engineering workforce.
• Cracking the Code, and other ICT competitions • CPA (Certified Practising Accountant) Australia
to help improve digital literacy among students in has launched an annual competition which
Years 4 to 12 allows students from all over Australia to propose
• the Cyber Security Growth Centre, which provides creative ideas and business plans to kick-start a
students with the opportunity to gain real-world small business. The competition uses key elements
such as collaboration, innovation, research and
community, and decision making as criteria for a
successful business.
• VET in Schools – VET students can be involved
in the VETiS (Vocational Education and Training
in Schools) program, which is run to promote
industry standard frameworks, created by industry
professionals and practising teachers by creating
work-simulated projects.
Initiatives such as running a small business for the
local community are becoming increasingly popular
for schools that offer commerce-related subjects and
business management as part of their curriculum.

Figure 3.23 A large number of future jobs will require STEM

skills.

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 Figure 3.25 Rural communities benefit from creativity and innovation.

Creation of regional and start-up As the economy is changing,

business hub a place
the face of agriculture and
hubs regional industries is also
where businesses and
individuals go to seek
A business hub can be described as a place where changing. Regional start-up support and have a place
businesses and individuals go to seek support and hubs offer individuals the and space to use without
also have a place and space to use without necessarily same opportunities as their city necessarily setting up their
own office
setting up their own office. In many cities in Australia counterparts.
and around the world there are hubs for people to use.

ACTIVITY 3.7
1 Investigate your local area and find out if there are any business hubs where you live.
2 Outline why governments and local councils support such places.

CASE STUDY 3.7

The missing ingredient for success: hard work
Max Schiller knows about start-up organisations. He co-founded his own start-up, GownTown,
and he is a member of the co-working space Fishburners. In early 2016, he suggested that
possibly start-ups in Australia have it too easy, and as a result the founders may not have the
drive to achieve success.
Mr Schiller pointed out that in many countries, co-working spaces for start-ups are active
around the clock, but in Australia they are almost deserted after 5pm and on weekends. Only
31 per cent of Australian entrepreneurs work over 40 hours per week, as compared to around
50 per cent in the US. While overall shorter working hours may be good for society, he
questioned whether this results in successful entrepreneurs. Aside from Silicon Valley, Israel
and Singapore are often pointed to as sites of successful start-ups – both countries need an
ideas-driven economy, due to their lack of natural resources.

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 CASE STUDY 3.7 continued
In Australia, there is a solid economy and comfortable standard of living, so the drive to
create start-ups is somewhat different. A 2015 survey, Startup Muster, found that 33 per cent
of start-ups came about because the founder was dissatisfied with their former job. Mr Schiller
speculates that a major cause of this dissatisfaction was probably due to working long hours for
corporate employers … and so these people are not likely to want to spend just as many work
hours on their start-up.
Another question in the Startup Muster survey was what start-up founders want from
government. For 34 per cent of respondents, the answer was ‘provide funding/grants’. Schiller
argues that a successful start-up hub has never been created from a government hand-out.

Analysis 3 Explain why Schiller feels that ‘having it

1 Describe the concept of a ‘business hub’. easy’ impacts on the ability of Australians
2 Explain the arguments around working to be entrepreneurial.
hours of entrepreneurs in Australia.

ACTIVITY 3.8
Research at least one person from the table below and answer the following questions:
1 What business do they run/start?
2 What experience do they have?
3 How successful is their business?
Name Business
Gina Rinehart Hancock Prospecting
Vicky Teoh TPG
Naomi Milgrom ARJ Group
Maxine Horne Vita Group
Yenda Lee Bing Lee
Christina Quinn VIP Petfoods
Charlotte Vidor Toga Group

Figure 3.26 Gina Rinehart of Hancock Prospecting

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Chapter summary • Innovation and entrepreneurship can be
encouraged by:
• Businesses contribute to the economic and – government investment in research and
social wellbeing of a nation or country. development
• Approximately 70 per cent of the Australian – council grants for new businesses
workforce are employed by small and – business mentorship
medium businesses.
– school-based educational programs in
• Businesses contribute to the economy entrepreneurship
through:
– regional business start-up hubs.
– employment
– economic growth (GDP) Chapter summary questions
– international trade (BOP)
1 Describe how businesses contribute to the
– taxation and revenue
economic and social wellbeing of a nation.
– infrastructure
2 Explain how economic growth is
– research and development. measured.
• Businesses also contribute to the general 3 Explain why businesses import and export
wellbeing of society. goods and how this contributes to the
• All businesses need to develop innovative wellbeing of Australians.
practices. 4 Providing infrastructure is important. How
• Innovation and entrepreneurship cultures do businesses support this?
are important. 5 Describe how a business can support
• Entrepreneurship is the process of society through research and development.
designing, launching and running a new 6 Complete the following table – some of it
business. has been completed for you.

Contributions of businesses to the economy

Contribution Positive Negative
Gross domestic Businesses produce goods and
product (GDP) provide services to the economy,
which increases GDP.

Employment When businesses reduce their

staff this can lead to more
unemployment.

Balance of payments
and trade

Chapter 3  Business contributions to society – innovation and entrepreneurship 49

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 Contributions of businesses to the economy
Contribution Positive Negative
Research and Businesses can discover new
development ways of doing things, which
(innovation) benefits society.

Infrastructure growth

Pollution/waste Businesses can contribute to

reduction pollution by the scale and size of
their operations.

7 Describe why it is important for businesses Quotes (see Cambridge weblinks: http://
and governments to promote and support cambridge.edu.au/redirect/?id=6968)
innovation and entrepreneurship. a David Rohrsheim, general manager of
8 Define the Global Innovation Index (GII). Australia and New Zealand at Uber:
9 Explain why local councils offer programs In order to become a genius, you must
to support new businesses in their area. first risk being seen as a fool.
10 Describe why STEM (science, technology, b Karen Stocks, managing director at
engineering and mathematics) is important Twitter Australia:
for the future of the Australian economy.
Figure out what it is you stand for, go and
stand up for it.
Extension questions
c Naomi Simson, founder and CEO of
1 You have been employed as a reporter RedBalloon:
for Open Media and have been asked to Goals without routines are wishes;
present on the contribution of businesses routines without goals are aimless.
to Australia. You are to argue that
businesses do contribute in a positive way d Lisa Messenger, founder and CEO of
to the economy. You may use a PowerPoint The Messenger Group:
presentation, Prezi, blog or podcast to Hire fast, fire slowly.
make your presentation. e Fred Schebesta, founder of
2 Read the quotes below regarding Finder.com.au:
innovation and entrepreneurship. Pick two Focus on the one thing that you can be
quotes and explain how they relate to the the best in the world at and just do that
idea of building a culture of innovation and over and over again.
entrepreneurship.

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 f Daniel Flynn, co-founder and managing i Jodie Fox, co-founder of Shoes of Prey:
director of Thankyou: You can be whatever it is that you want
Leadership is learning, just in front of to be.
more people.
j Nicolette Maury, managing director of
g Mitch Harper, co-founder of Intuit Australia:
Bigcommerce: Be the best version of yourself.
Get really good at learning.
k Eugene Trautwein, vice president
h Catherine Brenner, a non-executive of worldwide customer support at
director at Coca-Cola Amatil, Boral and Commvault:
AMP: Put yourself in the other person’s shoes.
You have two eyes, two ears and one
mouth. Use them in that proportion.

Chapter 3  Business contributions to society – innovation and entrepreneurship 51

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 PART 2
AREA OF STUDY 2

External environment
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CHAPTER 4 Key terms
• Australian • macro factors

Overview of the macro, Business Licence

and Information
• offshoring
labour

operating and internal

Service (ABLIS) • online sales
• copyright • patent
• corporate social • permits
environments – influence of responsibility
(CSR)
• rate of interest
• social attitudes

the macro environment on • exchange rates

• floating
• technology
• trademark

business planning exchange rate

Overview • Key legal and government regulations affecting

businesses in the planning stage
Businesses have to consider a range of factors from • Societal attitudes and behaviour such as values,
the external (macro and operating) and internal beliefs and trends
environments when planning a business. Macro factors • Economic conditions such as how interest rates,
and considerations include legal and government tax rates, business and consumer confidence levels
regulations, societal attitudes and behaviour, economic affect business planning
conditions, technological issues, global issues and • Technological issues such as how the market
corporate social responsibility. These factors are may change in the future and developments in
important and are outside the control or influence of technology
a business, and therefore businesses need to be able • Global issues such as overseas competitors,
to respond to them. overseas markets, offshoring labour, exchange
rates, patenting, copyrights, trademarks and online
Key knowledge sales that affect business planning
• Corporate social responsibility issues such as
In this chapter students will learn about: environmental considerations and planning the
• Macro factors that affect business planning production of goods and services which are in
society’s best interests.

What’s ahead
An overview of the external
and internal environments Economic conditions

Social attitudes Macro factors that affect

Technological issues
and behaviours business planning

Global issues Corporate social responsibility

Figure 4.1 Macro factors that affect business planning

Chapter 4  Overview of the macro, operating and internal environments 53

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 4.1 Macro factors Number (ABN), the goods and services tax (GST), a
tax file number (TFN) and Pay as you go (PAYG) –
affecting business income tax.

planning Licences and permits

Businesses have to take into consideration a range of There are different types of licences that need
issues and conditions when developing and planning to be considered by business owners in order to
their business. Planning is a complex task; if it is operate in their industry. Owners can check the
not done properly it may mean that the business is licences, permits, approvals, registrations, codes of
unsuccessful. Before a business is established a range practice, standards and guidelines that are required
of factors must be addressed by referring to the Australian Business Licence
macro factors those in the planning stage. Macro and Information Service (ABLIS). For example,
factors that impact on factors are those that impact business owners selling food
the business and are
on the business and are may require a food business Australian Business
outside the control of any
outside the control of any one licence and these differ across Licence and Information
one business. Examples
business. Businesses need to states and local government Service (ABLIS) a
include economic factors,
government service that
government policy, changes respond to macro factors when areas. Other issues that may
assists people to find the
in the law and global considering business planning need to be considered include government licences,
issues. issues. laws relating to businesses permits, approvals,
that operate from home, registrations, codes of
4.2 Key legal and planning zones and overlays,
and businesses that can only
practice, standards and
guidelines needed to
government be operated in particular areas.
meet their compliance
responsibilities
regulations
When planning a business there are a range of
legal and government regulations that need to be
ACTIVITY 4.1
considered. Some of these are dealt with within the 1 Go to the Australian Business Licence
business (internal environment – see Chapters 6 to and Information Service website and
9) and others are outside the control of the business. imagine a type of business you would
At the macro environment level, a business owner like to establish (e.g. a mobile food
must consider a range of factors, such as taxation van), and use your suburb or postcode
arrangements, any licences or permits required, and work through the questions.
occupational health and safety 2 Identify the types of legal and other
permit a law or regulation (OH&S) laws, trading laws, considerations that would need to be
or some type of official environment protection laws addressed as part of the initial business
approval to perform a task
and privacy laws. planning.
or complete an activity
Licences and permits are
often required to operate
a business and must be applied for and approved Common planning and building permit
before a business can start. If, for example, a business applications include:
is going to be a manufacturing company, there are • setting up a store, food premises or other business
permits, licences and courses that may need to be • changing an existing shop front
completed, and in the planning stage a potential • attaching signage to a building
business owner must investigate these. • updating the internal fit-out of a premises
• putting outdoor seating or heaters on a footpath
Taxation arrangements • running a home business.
It is important that all of these matters are dealt
Before starting any trading activities, Australian
with before a business commences.
business owners should register a business name and
ensure they meet all other requirements and taxation
obligations. These can include an Australian Business

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 ACTIVITY 4.2
1 Go to the WorkSafe website at
Cambridge weblinks (http://cambridge.
edu.au/redirect/?id=6969) and look at
the Compliance Codes.
2 Choose one area or code and outline
three main requirements a business
needs to address.
3 Explain how this code can have an impact
on a business in the planning stage.

Trading laws and other

Figure 4.2 Businesses must have the correct licences and
permits. requirements
Anyone considering starting a new business also
needs to check the main federal law, the Competition
Occupational health and safety and Consumer Act 2010 (CCA), for the requirements
laws they must fulfil and to make sure that the business is
compliant. The CCA is administered by the Australian
Occupational health and safety (OH&S) in Victoria is
Competition and Consumer Commission (ACCC) to
governed by a set of laws, regulations and compliance
bring about a fair and efficient marketplace through
codes that outline the responsibilities employers
the promotion of good business practices.
and workers must adhere to, in order to ensure that
The CCA ensures that trading is fair for a
safety is maintained at work. Business owners need
business and its customers and covers a wide
to consider the types of equipment and training, and
range of marketplace aspects, ranging from product
the conditions of a workplace or building, that would
labelling to the regulation of industries such as
be required before operating a business.
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.

Figure 4.3 Understanding occupational health and safety is

vital. Figure 4.4 Businesses must be compliant with the CCA.

Chapter 4  Overview of the macro, operating and internal environments 55

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 A person starting a new business, regardless of its There are also other considerations, laws and
size, also has to check the fair trading laws of their regulations that businesses have to take into account
own state or territory. Victoria Consumer Affairs, for when planning a business. These include:
example, has codes and regulations covering: • privacy legislation – use of personal information
• licensed businesses such as real estate agents, by a business
debt collectors, motor car traders and travel agents • employment and related laws – if planning to
• registered businesses such as builders and recruit staff then it is important to understand
tradespeople, caravan and residential park laws surrounding equal opportunity, wages and
operators, retirement village operators and employment standards, and anti-bullying laws.
secondhand dealers and pawn brokers.

CASE STUDY 4.1

Health and fitness centres – consumer contracts

Health and fitness centres generally use standard form consumer contracts – that is, contracts
prepared by the business and offered on a ‘take it or leave it’ basis.
Under the Australian Consumer Law, a term in a standard form contract may be declared unfair if it:
• would cause a significant imbalance in the parties’ rights and obligations under the contract
• is not reasonably necessary to protect the business
• would cause detriment (financial or otherwise) to a consumer.
All businesses, including health and fitness centres, should ensure their contracts comply with unfair
contract terms laws.
Victorian Consumer Affairs has worked with health and fitness centres to remove or modify unfair
consumer contract terms, including terms that:
• resulted in the automatic renewal of memberships without the opportunity to cancel at the
conclusion of a minimum term
• allowed the health and fitness centre to vary
its services without notice
• penalised consumers for terminating
memberships
• penalised consumers for breach of contract.
Contracts that include such terms are not
automatically considered unfair, as only a court
or tribunal can determine this.
Consumer Affairs engages with businesses to
ensure their contracts comply with the law. If
a business refuses to modify its contracts, they
may take further action such as applying to
the Victorian Civil and Administrative Tribunal
(VCAT) for orders. 
Consumers may also take their own action at
VCAT or in a court if they believe a term to
Figure 4.5 All businesses must comply with contract laws.
be unfair. If the contract terms are found to
be unfair and void, those terms are treated as
though they never existed. If the contract can operate without the unfair term, it will still be binding.
Recreational businesses, including health and fitness centres, can limit their liability under consumer

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 law for death or personal injury as long as they notify consumers of any limitation before they agree
to buy the services.
(Source: Based on Consumer Affairs Victoria website, ‘Health and fitness
centres – unfair contract terms’, updated 2 June 2016.)

Analysis to take out gym memberships. What

1 Joanna and Heidi are investigating and conditions would they need to follow to
planning to set up a gym in Ballarat. They ensure members were treated fairly?
want to encourage the local community

CASE STUDY 4.2

Chocolate and confectionery manufacturing in Australia: market research report

Just desserts: healthier eating habits have forced the industry to introduce new products
Report snapshot:
Market Share of Companies – the main businesses in this market are Mars, Mondelez Australia and
Nestlé.
Industry Statistics & Market Size:
• Revenue – $6.5b
• Annual Growth (2011–2016) – 3.5%
• Employment – 11 733
• Businesses – 356
Industry Analysis & Industry Trends
The Chocolate and Confectionery Manufacturing
industry has remained resilient despite
challenging operating conditions. Increasing
health consciousness has required manufacturers
to be innovative with their product lines
and adapt to shifting consumer demands. In
particular, consumers have demanded more
ethical and sustainable production methods,
resulting in the significant growth of fair trade
and organic chocolate products. Greater demand Figure 4.6 The chocolate and confectionary industry is
for industry products from supermarkets and resilient.
grocery stores along with rising household
disposable income have underpinned industry growth over the period.
Industry Report – Industry Locations
The majority of chocolate and confectionery manufacturers are located in Australia’s eastern states,
with just under 80% of industry enterprises located in Victoria, New South Wales and Queensland.
Chocolate and confectionery manufacturers tend to operate in metropolitan areas, as population
levels and economic activity are highest in these areas. Historically, the fragile and perishable nature
of industry products, particularly chocolate, has made it necessary for firms to establish operations
close to their major consumer markets.
(Source: IBISWorld website, www.ibisworld.com.au, ‘Chocolate and
Confectionery Manufacturing Market Research Report’, May 2016.)

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 CASE STUDY 4.2 continued
Analysis to build up partnerships with a few local
1 Outline three trends and pieces of restaurants. Identify how they could use
information in the report regarding the the information in the report shown to
chocolate and confectionary industry. assist in their business planning.
2 Stefan and Oliver want to start a small 3 Describe what other considerations they
chocolate manufacturer in the western would need to take into account in their
suburbs of Melbourne. They have started planning.

Environmental legislation
Any potential new business must investigate whether
ACTIVITY 4.3
there are any environmental laws that relate to the 1 Go to the federal Department of the
business’s activities. In Australia, environmental laws Environment website and view the
are administered and enforced by federal, state and Environment Protection and Biodiversity
local governments. According to the Business Victoria Conservation Act 1999 (EPBC Act).
website these include importation considerations, 2 Outline two areas covered by the Act
heritage issues, hazardous waste disposal and the that might need to be considered when
quality of fuel. Other areas covered include: planning a business.
• licensing and works approvals 3 Now go to the Department of Transport,
• land and groundwater Planning and Local Infrastructure
• landfills website and outline how you can apply
• noise for a planning permit. Look at the local
• waste government area or council you live
• water in (there are links on the website).
• National Pollutant Inventory. What do you need to do to gain a
permit?

4.3 Societal attitudes

and behaviour
considerations
Many changes have taken place in Australia and
societies around the world over the past few decades.
Factors such as shifting demographics, increased
levels of education, different ideas and expectations,
beliefs, trends and values have all impacted on 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.

Figure 4.7 Businesses must follow environmental laws.

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CASE STUDY 4.3
15 ways that society is about to change
In today’s world change is rapid, and especially so in terms of technological advancements.
Some of the ways society might change in the near future include:
1. Instant language translation – Google is working on a mobile device that will act as an instant
voice translator.
2. 3D printing will become more and more widespread and change the way the world works.
3. The world’s population is expected to almost double its current number by the end of the
21st century.
4. According to the US Director of National Intelligence, by 2030 brain machine interface
technology could provide superhuman strength, speed, night vision and superior memory
recall.
5. Organ donation will cease, as scientists
are growing body parts in the lab.
6. 75% of the species on earth are
disappearing – further reducing our planet’s
natural assets.
7. As the use of cash is diminishing, bank
robbers will go out of business.
8. Commercial jets will travel at amazing
speeds in orbit, allowing for super-fast air
travel.
9. Landfills will not be required – as a plastic-
eating fungus has been discovered in the
Amazon.
10. There will be as many mobile phone
accounts as there are people in the world.
11. It is estimated that in 2050 the number of
people living in poverty will be decreased
Figure 4.8 Society will continue to change in unexpected
to 1 in 40. It was 1 in 2 in 1950. ways.
12. Car manufacturers plan to introduce ‘crash
proof’ cars by 2020, which will use imaging and computing technology to detect and avoid
dangerous objects on the road.
13. By 2035, cars will drive entirely on their own.
14. Space travel will be revolutionised by a next generation spacesuit that acts as a second skin
for astronauts.
15. The first person who will live to 150 is already born.

Analysis 2 Talk to your relatives, parents or

1 Take three of the trends and ideas grandparents or older friends. Ask them to
mentioned in this extract and describe describe some of the changes that have
how they could possibly impact on future taken place in their work and lives over the
businesses. last few decades.

Chapter 4  Overview of the macro, operating and internal environments 59

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 Australian society is changing; there have been
many waves of immigration since World War II and
this has influenced food, traditions, social attitudes
and businesses in Australia. Many new immigrants
to Australia have run their
social attitudes an own businesses and this trend
acquired tendency to is likely to continue. When
evaluate social things in a planning a business, the needs
specific way. Attitudes can
of the population may change
be characterised by positive
or negative beliefs, feelings and this can influence the
and behaviours towards types of businesses that might
others or a particular entity. run in the future.
The workforce is also
changing in Australia. Fifty years ago the expectation
was that a man went to work and a woman
stayed home. Until 1966 married women were not
employed by the Australian Public Service and single
women were forced to ‘retire’ when they married.
This has changed substantially and the number of
women in the workforce has grown rapidly since
the 1960s. These demographic changes have led to Figure 4.9 People are staying in education and training longer.
changes in people’s attitudes and beliefs regarding
the roles of men and women in society and the The composition of Australia’s population is also
workforce. changing; the population is ageing. In 1970–71, 31 per
In 1966 more than 25 per cent of the workforce cent of the population was aged 15 years or younger,
was in manufacturing, but this is now around while by 2001–02 this had dropped to 22 per cent. It
8 per cent. In 1940, 6 per cent of all factory workers is expected that over the next 40 years the proportion
were under the age of 16. People are now staying in of the population over 65 will continue to grow. At
education and training a lot longer. The majority of the same time population growth will also slow. Life
people are now employed in service industries as the expectancy has also increased. These changes also
nature of work is also changing. People with a tertiary provide many opportunities for businesses to go into
education are more likely to have a job than those who industries and sectors of the economy that previously
have not gone to university (see Cambridge weblinks: did not offer prospects (see Cambridge weblinks:
http://cambridge.edu.au/redirect/?id=6970). http://cambridge.edu.au/redirect/?id=6971).

ACTIVITY 4.4
Go to the Australian Bureau of Statistics (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 How might these trends impact on business planning for the future?

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CASE STUDY 4.4
Australia’s ageing population yields opportunities for business

Scoping demographic mega-trends

What is the single most important mega-trend that underpins the Australian consumer market
and electoral base? I think it is the demographic contortions associated with ageing and with the
combined effects of the inflow and outflow of population. In common language ageing means more
people – generally baby boomers – progressing to and lingering in old age.
The Australian population increased by four million over the decade to 2015. This decade also
witnessed the global financial crisis and a shift in the terms of trade such that, for a few heady years,
the national income surged ahead. Business opportunity isn’t so much understanding the scale of the
available market; it’s more about snaring and servicing an expanding market.
These demographic surges underpinned the consumer market over the last decade. The surging 18–
24 segment was partly due to the tail-end of Generation Y as well as the result of escalated migration
and international students. The older late-50/
early-60 segment comprised baby boomers
transitioning towards retirement.
This is quite irrelevant to the future. And the
reason is that the demography that underpins
the Australian consumer market and electorate is
continually shifting. What business really wants
is a best estimate of how the age-specific market
will change over the coming decade to 2025.
Which age groups will expand and therefore
present servicing opportunities?
It is at the segment level where the underlying
and emerging demographic mega-trends become
apparent. The number of kids under the age of Figure 4.10 An ageing population creates business
five will rise but this market is moderating. And opportunities.
so too is the 18–24-year segment. The kid and
the university-student markets will be tough in the coming decade.
The opportunities lie elsewhere. The school-age 5–17 segment will increase. School-supplies,
children’s sport, teen fashion or teen-music/technology would be good businesses to be in.
Interestingly, the chart shows that there will be a shift in the 25–39 household formation segment,
with the market expanding in the later years. More Generation Ys pushing from 20s to 30s will deliver
a level of sophistication to the housing market: less student accommodation/apartments and more
corporate chic is perhaps how it might be best explained. More elegant and expensive apartments
in the inner city and more McMansions in the outer suburbs, all tailored to a market that is settled,
employed and has the capacity to discern their preferred lifestyle.
Over the coming decade the number of Australians pushing into the pre-retirement 55–64 phase in
the life cycle will moderate. The downsizing market will subside later this decade. Financial planners
might struggle to secure work. Instead the coming decade will surge into the late 70s. This segment
expanded by 329 000 over the decade to 2015 but this will rise to 731 000 over the decade to 2025.
With the likely addition of four million residents over the coming decade, all segments and all
markets will expand.
That is always expected in a young country like Australia. Business builds an expected rate of growth
into expansion and management plans. Supermarket chains and fast food stores expect to expand their

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 CASE STUDY 4.4 continued

network year after year. The opportunity in business is being able to snare or control a market
segment that is rising faster than its historic trajectory. Such segments deliver a better than expected
yield.
By carefully measuring year-by-year net growth over the last decade and comparing that with net
growth over the coming decade it is possible to determine segments that will grow. What business
is really looking for is segments that are moving in an upward trajectory. And in this regard look no
further than the 5–17 segment, the mid- to late-30s segment, and the 75-plus segment.
(Source: B Salt, ‘Australia’s ageing population yields opportunities for business’, The Australian, 14 May 2015.)

Analysis
1 Identify and explain three trends outlined in
the market.
2 List the areas or possible industries that
potential businesses could move into.
3 Marco and Pammy are looking at setting
up a caravan park in a tourist area. They
plan to offer discounts to families and ‘grey
nomads’ (people who have retired and are
travelling). Evaluate the business idea and
provide some advice (based on the article)
for its business prospects.
4 Explain how the current situation offers
opportunities for people planning to start a
business. Figure 4.11 Australia has an ageing population.

4.4 Economic conditions

There are many economic factors that can influence
and impact on a business. If an individual or large
business is looking at expanding or starting up a
new venture, it is important to take into account the
economic conditions at the national, state and local
levels. There are a number of economic factors that
can impact on a proposed business. These include:
• interest rates
• tax rates
• business and consumer confidence levels.

rate of interest the amount Interest rates

charged, expressed as a If the rate of interest (the cost
percentage of principal, by
of borrowing for a business)
a lender to a borrower for
the use of assets. Interest is low then it is more likely
rates are typically noted on that business owners might Figure 4.12 Businesses must take economic conditions into
an annual basis. borrow to set up a business, account.

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because the repayments will also be less and easier interest rates are attractive when borrowing money,
to manage and maintain. they make it more difficult for investors, individuals
Interest rates in Australia have been relatively and businesses when they want to invest money
low when compared to a few years ago. While low because the returns are not high.

CASE STUDY 4.5

Commonwealth Bank joins rivals in raising business interest rates

The Commonwealth Bank has joined rivals in raising interest rates for business customers, hiking
rates on a range of business loans by up to 0.21 of a percentage point.
Some mortgage customers will also feel the sting of higher borrowing costs, as CBA is also increasing
interest rates on lines of credit. CBA, the country’s biggest bank, became the last major lender to
increase its business lending rates independently of the Reserve Bank and blames the increase on
higher funding costs and tougher regulation.
‘We have increased our rates across a number
of business lending products in response to
higher funding costs and increased regulatory
requirements impacting all banks,’ a spokesman
said.
In contrast to the banks’ justification for raising
rates, Reserve Bank governor Glenn Stevens last
month said the recent rise in wholesale funding
costs had not been sufficient to warrant banks
increasing their lending rates independently of
the central bank.
‘I do not see much of a case for independent
increases in lending rates based on funding costs
Figure 4.13 The Commonwealth Bank of Australia
as they have evolved just lately,’ Mr Stevens said.
The moves also come as bank profit margins are
being reduced by fierce competition and borrowers paying back debt quickly.
(Source: C Yeates, ‘Commonwealth joins rivals in raising business interest rates’,
Sydney Morning Herald, 3 March 2016.)

Analysis 2 How could an increase in the rate of

1 Explain why the banks increased the rate interest and the cost of borrowing impact
of interest for businesses. on someone planning to start a business?

ACTIVITY 4.5
1 Go to the website of one of the banks or financial institutions and outline the types of
loans available to businesses.
2 Outline why a new business would need to have access to a loan or extra finance.

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 ACTIVITY 4.6
Franca and Ali want to set up a small
business – a painting and decorating
business that they will run from home.
They are not sure about how much tax
they might need to pay. Both have agreed
to set up a company. They anticipate
that the revenue or sales will be around
$180 000 in the first year.
1 Go to the Australian Taxation Office
(ATO) website and explain the taxation
rate and types of taxation Franca and Ali
are likely to have to pay based on their
predicted revenue.
2 Assess why taxation would be a
Figure 4.14 Banks have lenders dedicated to assisting consideration in planning the type of
businesses. business structure they choose.

Tax rates
All individuals and businesses pay income and other Business and consumer
taxes. As part of the planning process, taxation
consequences should be taken into account.
confidence
Although taxation is not the only important factor, The general level of business and consumer
it may have an impact on the financial performance confidence is related to economic growth and the
of the business. If an individual runs a business as level of economic activity, and therefore is important
a sole trader or partnership, then the individual will to all businesses. If business and consumer confidence
pay income tax. Australia has a progressive income is high then businesses are more likely to look at
taxation system, which means that the more a person expanding or increasing production and consumers
earns the higher the rate of tax they pay. Individuals are more likely to spend because they feel comfortable
usually pay tax as they earn; this is known as Pay as about their financial situation. If the level of economic
you go (PAYG). growth and economic activity is low then consumer
If a business is set up as a company then the tax and business confidence is likely to suffer. For much
rate is different – 30 per cent for most companies. In of the time it is the perception of how the economy is
an effort to support and encourage small businesses performing or will perform that drives the economic
there are some taxation concessions, and a small and spending decisions of people (see Chapter 3).
business which earns less than $2 million is subject Consumer demand is an important factor that can
to a 28.5 per cent tax rate. Businesses also pay other influence and provide new business opportunities.
taxes to state governments, such as payroll tax. If demand for particular types of goods and services
Taxation considerations are important as a is high then this might mean that businesses will be
business needs to ensure it has the cash to meet its more likely to move into this area. Large businesses
taxation obligations. Taxation may also have some might take advantage of any trends and expand into
bearing on the type of business structure chosen (see new areas or sectors.
Chapter 7 for further information).

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CASE STUDY 4.6
Consumer and business confidence – part one

Consumer confidence hit by global turmoil

Global market turmoil has hit Australian
consumer confidence, with a fall in Westpac’s
monthly index confirming a marked drop in
sentiment.
‘The index is at its lowest level since
September 2015, but remains 4.3 per
cent above its level of a year ago,’ said
Westpac chief economist Bill Evans.
Consumers were impacted by ‘the spate of
negative news on the international front and the
spillover effect on financial markets,’ he said.
Figure 4.15 Consumer behaviour is affected by economic
All subcategories except one dropped in January.
conditions.
The largest drop was how family finances
compared to one year ago (down 9.4 per cent), the lowest level since last July.
This was followed by the assessment of current economic conditions (down 5.1 per cent) and how
the economy would be performing one year from now (down 5.0 per cent).
Mr Evans said the spate of negative news from international markets had been flowing through to
consumers.
China’s volatile sharemarket has been down by about 15 per cent since the beginning of 2016, which
had sent the Australian dollar falling to 69 US cents, from 73 US cents, Mr Evans said.
One good piece of news was the sharp 13.9 per cent increase in the ‘time to buy a dwelling’ index to
113.0 in January from 99.2 the month before.
It is the highest reading for this index since May last year, and now only 1.4 per cent below its level
for January 2015.
‘The sharp increase will reflect some seasonality but the move is so large that we can only conclude
that this print may be signalling some improving optimism in the housing market,’ Mr Evans said.
‘For this reason it is best to be cautious but nevertheless encouraged by this result,’ Mr Evans said.
Retail Council chief executive Anna McPhee said concerns over China and the sharemarket had
weighed on the reading. ‘The consumer sentiment reading shows the momentum of rising consumer
sentiment experienced in the final months of 2015 have not continued into January with the likely
impact of this fall attributed to slowing of the Chinese economy and recent share market volatility.’
The Westpac figure confirms the sentiment reported in the ANZ-Roy Morgan weekly consumer
confidence index, released Tuesday. That index declined by 0.8 per cent in the week ending
17 January, following a 1.9 per cent fall in the previous week.
Further losses on the share market amid ongoing concerns around China’s economic growth
prospects are likely to have weighed on confidence, said the bank.
‘Consumer confidence fell a modest 0.8 per cent last week, leaving levels just a tick (0.4 per cent)
above their long run average,’ said ANZ co-head of Australian Economics, Felicity Emmett. ‘This
follows a dip in the previous week which was likely driven by news flow on global financial market
volatility and concerns over China’s economic growth.’
(Source: S Cauchi, ‘Consumer confidence bit by global turmoil’, The Age, 20 January 2016.)

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 CASE STUDY 4.6 continued

Figure 4.16 Consumer confidence is an indicator of economic conditions.

Analysis 2 Examine how consumer confidence

1 Define consumer confidence. How can it can influence decisions about business
be influenced by economic conditions in planning.
Australia and the rest of the world?

Consumer and business confidence – part two

Business confidence unaffected by global turmoil

The National Australia Bank’s business survey, released monthly, showed that the global market
upheaval in January 2016 had very little impact on Australian business confidence. Despite the
pressure on mining and resource-related businesses from drops in commodity prices, other sectors of
the economy remained relatively healthy.
The NAB survey compiles data from more than 400 companies in different sectors and across
Australia. While deterioration in the mining industry had some flow-on effects in Western and South
Australia, the ongoing strength of other industries suggested that their fundamental conditions
remained resilient.
The survey showed that the service based economies of Victoria and New South Wales enjoyed
positive business confidence over the month of January, while the transport industry likely benefited
from low fuel prices.
‘Given all the volatility in equity and financial markets, this is yet another relatively good result from
the Business Survey,’ said NAB’s group economist Alan Oster. ‘It suggests things remain broadly on
track for the non-mining economy.’
(Source: M Mulligan, ‘Business confidence steady despite market turmoil’, The Age, 9 February 2016.)

Analysis 3 Provide reasons why a business in the

1 Explain why surveys about business planning stage would need to be aware of
confidence are conducted. current economic conditions, in particular
2 Describe the impact that business within the business sector in which the
conditions can have on any individuals or business will operate.
groups that might want to start a business.

See the Interactive Textbook edition for a further case study on business and consumer
confidence.

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 4.5 Technological issues
Technology is continually changing and the rate of
change is rapid. In this environment it is important
for a business to ensure it is
technology practical up-to-date with technology
application of science to to run the business and also
achieve commercial or to take advantage of any
industrial objectives
business opportunities that
result from new innovations.
While technology has changed the way businesses
operate, technology also offers new opportunities for
businesses, particularly small businesses, to compete
against larger and established businesses. Whether
it is delivering a product or a service, it is important
in the planning stage for a business to consider the Figure 4.17 Businesses must stay up-to-date with changes in
use of technology in areas such as record keeping technology.
and financial management, marketing and sales, and
operations.

CASE STUDY 4.7

Eight tech trends to watch in 2016

More than once you’ve probably looked at some new digital or technological development and asked
yourself, ‘How did we miss that?’
In order to chart the best way forward, you must understand emerging trends: what they are, what
they aren’t, and how they operate. Such trends are more than shiny objects; they’re manifestations of
sustained changes within an industry sector, society, or human behaviour. Trends are a way of seeing
and interpreting our current reality, providing a useful framework to organise thinking, especially
when dealing with the unknown. Fads pass. Trends help forecast the future.
Trends for 2016 include:
Algorithmic personality detection. Some life insurance underwriters are attempting to assess a
person’s personality – via magazine and website subscriptions, the photos a person posts to social
media, and more – in order to determine risk. Algorithms will harness personal data in order to assess
an employee’s predicted success at work: for example, how likely s/he is to move between jobs.
Bots. Software applications that run automated tasks are called ‘bots’. 2016 will bring a host of
creative bots that will supercharge productivity, keep people company, and help track what others
are doing. Microsoft’s experimental Mandarin-language bot, Xiaolce, can have conversations via a
smartphone.
News organisations will soon use bots to sort and tag articles in real time. The intelligence community
might deploy bots for surveillance and for digital diplomacy. HR managers can use bots to train
employees.
Glitches. Expect to hear more about ‘glitches’ in 2016. While there have always been software bugs,
what we’re seeing now is so much new technology coming online so quickly that we don’t know
what the interactions will be in advance.

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 CASE STUDY 4.7 continued

Glitches are a newer phenomenon, which are difficult to predict in advance. This is not an
argument against technology – it’s a recommendation for increased systems monitoring and regular
conversations with IT managers.
Backdoors. Backdoors are lines of code developers intentionally install in firmware so that
manufacturers can safely upgrade our devices and operating systems.
Some government officials will be advocating for a set of ‘golden keys’, which would allow law
enforcement to use backdoors as they wish. In 2016, any company that stores customer data could
be asked to create a backdoor. This might include banks, advocacy groups, travel agencies, hotel
companies and more. Opponents argue that the simple act of creating a backdoor would leave
ordinary people vulnerable to everyday attacks
by even unskilled hackers.
Blockchain. The blockchain is a sort of
distributed consensus system, where no one
person controls all the data. The blockchain
enables people to participate in ‘trustless’
transactions, eliminating the need for an
intermediary between buyers and sellers.
And it potentially eliminates the need for all
intermediaries in most transactions, even those
outside finance. The cryptography team at
Blockstream recently launched its first prototype
‘sidechain’, which functions as a separate ledger
with its own code. Sidechains allow for easier
authentication. Figure 4.18 Drones will soon need their own sky lane.
Drone lanes. In 2015, two drones inadvertently
prevented firefighters from putting out a rapidly spreading California wildfire, which crossed over
onto a freeway and destroyed a dozen vehicles. It is anticipated that the sky will be divided soon:
hobbyist pilots will have access to operate drones in the 200 feet and below space, while businesses
and commercial pilots will gain exclusive access to 200–400 feet zone overhead.
Quantum computing. In short, quantum computers can solve problems that are computationally too
difficult for a classical computer, which can only process information in 1s and 0s. In the quantum
universe, those 1 and 0 bytes can exist in two states (qubits) at once, allowing computations to be
performed in parallel. The National Security Agency is already predicting that the cryptography in use
will be rendered completely obsolete once quantum computers go into widespread use.
Researchers at IBM’s experimental quantum computing group have begun to unlock difficult
problems in quantum computing, such as detecting errors. Recently, D-Wave Systems announced that
it broke the 1,000 qubit barrier, which (if true) would make it the most powerful computer on the
planet. Now, IBM, Microsoft, Hewlett-Packard and Google, as well as D-Wave, are trying to figure out
how to advance and commercialise the technology.
Augmented knowledge. Scientists at the University of Southern California have been working
on a cognitive neural prosthesis that can restore and enhance memory function. This research has
a practical and altruistic purpose: to help victims of stroke or traumatic brain injury regain their
cognitive abilities and motor function. Rather than having to relearn, they need only reload those
memories. But this implies that someday you might be able to augment your mental ability – much
like robotic suits allow us to enhance our physical strength – with a computer device.
(Source: A Webb, ‘8 tech trends to watch in 2016’, Harvard Business Review, 8 December 2015.)

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Analysis
1 Identify and explain the implications that the technology innovations such as those mentioned
in the article have for existing and potential businesses.

See the Interactive Textbook edition for a further case study on technological issues. 

4.6 Global issues the global business world have led to fundamental
changes in how businesses operate.
Australia’s future prosperity is inextricably linked Because businesses now have the ability to
to productivity growth and to the performance of globally streamline supply, manufacturing and retail
its businesses. The increasingly competitive nature chains, companies are placing increasing emphasis
of global markets makes strong demands on the on:
operation of Australian businesses, which need to • centralising and transferring business activities,
continually adapt and improve. In this environment particularly service functions using digital
sustained productivity growth and trading success platforms
are critical for raising living standards in the long • capitalising, sharing and transferring intangible
term. Much progress has been made in improving the (non-physical) assets to where their development
international competitiveness of Australian industry and protection is most efficient.
following a series of economic reforms since the A number of factors need to be taken into account
1980s. when moving into a global economy, including:
All businesses are now operating in a global • overseas competitors
economy and must contend with regulations, practices • overseas markets
and laws in many different countries. Improvements • offshoring labour
in technology, reduced barriers to international trade, • exchange rates exchange rates the price
and the integration of developing economies into • patenting of a country’s currency in
• copyrights terms of another currency
• trademarks
• online sales.

Overseas competitors
Australian businesses have to be able to compete
with businesses within Australia and overseas,
whether this is importing or exporting goods. Trying
to compete with businesses from different countries
can be daunting. Many countries have different
laws, practices and regulations that may give other
businesses a competitive advantage over Australian
businesses. Labour costs, for example, are often
cheaper in some neighbouring countries and this can
provide an advantage.

Overseas markets
Australian businesses need to be able to move into
overseas markets in order to expand markets and
customer bases. A business wishing to establish
itself needs to ensure it has an understanding of the
different requirements and regulations that cover
that particular business. Understanding social and
Figure 4.19 Australian businesses compete in a global other aspects of different societies is also important.
economy.

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 These three markets, along with the United States and
United Kingdom, were also identified as key target
markets (see Cambridge weblinks: http://cambridge.
edu.au/redirect/?id=6972).

Offshoring labour
Offshoring labour is a growing trend among
businesses operating in the global economy.
Offshoring refers to work that
is done in another country; for offshoring labour refers to
example, aircraft maintenance work that is done in another
conducted in Hong Kong or country
app development carried out
in India. This is not the same as outsourcing (work
conducted by a third party) and the two are not
mutually exclusive. A business can outsource labour
Figure 4.20 Australian businesses must understand overseas to a local company, or offshore labour to another arm
markets.
of the same business.
Having work completed offshore allows businesses
As part of its planning to move into overseas markets,
a certain amount of flexibility, particularly in the
a business must ensure it is clear about regulations
legal, information technology (IT) and accounting
and laws.
industries. As trade barriers are removed, free trade
The Australian International Business Survey
agreements are signed and more businesses enter
in 2015 found that Australia’s internationally active
the global economy, offshoring work will become
businesses use a range of strategies to respond to
increasingly popular for businesses searching for
different global opportunities and challenges. Some
ways to remain competitive.
of the survey findings highlighted that Australian
The recent growth in offshoring labour can be
businesses earning revenue from overseas markets
linked to four key factors:
must engage in a portfolio of complementary activities
• Changes in technology, particularly the
that go beyond traditional exporting. The survey
development of cloud computing, the growth of
also confirmed that local culture, business practices
bring your own device (BYOD) work policies,
and language remain the most significant barriers to
rapid advances in mobility and the influences of
breaking into some overseas markets. Payment issues,
big data have made it easier for businesses to go
business practices, product standards and tariffs were
offshore.
also cited as important considerations for businesses
to plan for.
In the survey India, Indonesia and China were
identified as challenging business environments.

ACTIVITY 4.7
1 Go to the Department of Foreign Affairs
and Trade website and find the ‘Trade
and Economic Fact sheets’.
2 Choose one country and look at the
types and amount of trade Australian
businesses have with that country.
3 Explain how this information could
be useful for a business setting up to
export products. Figure 4.21 Using offshore labour is a business trend in the
global economy.

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• The relaxation of legislation and regulations has Exchange rates
removed many of the legal barriers to companies
taking work offshore. New trade agreements and Australia has a floating exchange rate (its value is
the removal of tariffs have also reduced the cost determined by demand and
of offshore work. supply for the currency). The floating exchange rate
• The growth of particular locations as offshore value of the Australian dollar the value of the currency is
is an important determinant of determined by the demand
hubs, including India, Poland, the Philippines,
business revenue and might and supply for the currency;
China, Romania, Mexico and parts of South it can change on a daily
America. vary depending on whether
basis
• The pressures of globalisation, which have forced a business is importing or
businesses to reduce costs and become more exporting goods or products.
competitive. Globalisation has also created access In an economic climate where the Australian dollar
to skilled workers from developing markets, such fluctuates, businesses have to be able to anticipate
as those in Asia. possible changes and adapt their business plans
accordingly. If a business wishes to be involved in the
global economy, then as part of its business planning
it must be able to foresee and develop strategies to
manage changing currency value.

CASE STUDY 4.8

The resilient Australian dollar
The Australian dollar has a reputation for being resilient to fluctuations in the global economy.
In late February 2016, a huge amount of economic data from China and Australia was released,
allowing the Aussie dollar to strengthen slightly after a drop against the US dollar around the
same time.
The Australian dollar generally sits around US72¢, however senior economists suggest
that this could strengthen on the back of a drop in the US dollar and an increase in the global
appetite for risk. In addition, the Australian Bureau of Statistics (ABS) will soon release
information on 2016’s fourth-quarter GDP performance, which many economists believe will
show growth.
Changes to policy in China are also expected to further stimulate the Australian economy.
The People’s Bank of China has reduced the reserve requirement ratio for banks by 0.5 per cent
to 17 per cent. The reserve requirement ratio refers to the amount of physical capital that needs
to be held by banks: reducing the ratio allows banks to lend more money without needing to
increase their capital reserves.

Analysis
1 Explain why it is important for a business
to understand the movement in currency
and exchange rates if it is trading overseas.
2 What is the value of the Australian dollar
currently? Has the value increased or
decreased over the past month? What
impact might this have on a business or
someone considering starting a business? Figure 4.22 The resilient Australian dollar is living up to its
reputation.

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 Patenting
A patent is a right that is granted for any device,
substance, method or process that is new, inventive
and useful. A patent is legally
patent a right that is enforceable and gives the
granted for any device, owner exclusive rights to
substance, method or commercially exploit the
process that is new,
invention for the life of the
inventive and useful
patent.
There are two types
of patents granted in Australia – standard and
innovation. When planning to apply for a patent, a
business owner needs to research both types before Figure 4.23 The Sand Wedge is an example of intellectual
deciding which one suits the needs of the business. property, and is a versatile product for beachgoers.
There are differences in the cost of the patents, the
length of protection they offer, the time taken to
pretty bad. I showed my idea to family members and
process them and the type of invention covered.
they thought it was great.’
In order to have a patent granted a person needs
As Katherine developed the concept further, she
to file what is known as a complete application. Prior
began to wonder whether it was patentable.
to filing this, a person can also file a provisional
She researched to see if anyone had invented
application to gain priority.
something that was similar to her concept.
Such a thing as an ‘international patent’ does
Finding there was nothing like the Sand Wedge
not exist, but businesses can apply for a specific
protected in Australia or the US, Katherine decided
patent in different countries in order to protect their
to go ahead with getting intellectual property (IP)
inventions in various export markets. A helpful way
protection.
to simultaneously apply for patents across the globe
She saw a patent lawyer to learn more about
is a Patent Cooperation Treaty (PCT) application. An
patents and what they actually protect. Through the
Australian patent provides protection only within
solicitor she then filed a provisional patent application,
Australia. To obtain similar protection in other
which gave her 12 months to research the product’s
countries a business generally has two choices:
viability on the market.
• It can file separate patent applications in each Within the 12 months Katherine also decided to
country. This can be cost-effective when a patent have her design registered, as a patent protects the
is only filed in a few countries. way something functions but a registered design
• It can file a single international application under protects the way it looks.
the PCT, which is administered by the World Trade marking the Sand Wedge logo was the final
Intellectual Property Organization (WIPO). This step in gaining comprehensive IP protection.
gives an application automatic effect in  148 (Source: IP Australia website, ‘Patents’.)
countries and allows further time to decide whether
a person wants to pursue patent protection and
Copyright
in which countries. While this still necessitates
separate patent applications in each country it is Another factor a business
a way to do all of them simultaneously. must consider in the planning copyright exists to protect
stage is copyright restrictions the original expression
Example of intellectual property – Sand and requirements. Copyright of ideas (not the ideas
Wedge exists to protect the original themselves). Copyright
in Australia is free and
The Sand Wedge is a beach chair with a difference. It’s expression of ideas (not the
automatic and tends to cover
a back pack, beach bag, beach seat and sun lounge ideas themselves). Copyright works such as books, films,
all in one. in Australia is free and music and newspapers.
Katherine Drayton says: ‘When I made my first automatic and tends to cover
Sand Wedge it was really just for me, as I have a spinal works such as books, films, music, newspapers,
condition that made the whole beach experience magazines and artworks. Copyright also protects

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originally created data bases, computer programs
and media broadcasts. Copyrights are overseen by
the federal Attorney-General’s Department. Because
copyright is automatic there is no official registry or
application process. Copyright protection is provided
under the Copyright Act 1968 in Australia, although
copyright laws vary between countries. It does not
protect a business from the independent creation
of similar work. Copyright usually lasts for 70 years
from the year of the author’s death or from the
year of first publication after the author’s death.
Copyright for films and music is generally 70 years.
Copyright does not protect names, titles or slogans,
although there may be issues around trademarks (see
below).
Figure 4.24 The copyright symbol

CASE STUDY 4.9

Happy birthday to you and everyone else: US judge rules song belongs to the world
In 2015, a US judge ruled that Warner/Chappell’s (a subsidiary of Warner Music) copyright claims
to ‘Happy Birthday to You’ – the famous tune sung at almost every birthday celebration – were
invalid. Licensing fees for the public use of the song have been paid since 1949, and Warner/
Chappell has agreed to pay nearly $20 million of these royalties back.
The song can be traced back to ‘Good Morning to All’, a tune written by Mildred and Patty
Hill in 1893. The Hill sisters’ song had the same melody but different lyrics; however, variations
emerged in the early 20th century that eventually evolved to the song we know today. Warner/
Chappell has controlled the rights since 1988 after acquiring the song’s previous publisher.
Since the 2015 ruling Warner/Chappell has been in negotiations with other parties in the
case. A settlement was reached in February 2016 that will see Warner/Chappell pay $US14
million ($19.8 million AUD). The case was followed closely by copyright specialists and the music
industry, in part due to the song’s popularity, but also because of the amounts involved – it is
estimated that the song earned around $US2 million per year from licensing fees.

Figure 4.25 ‘Happy Birthday to You’ is now copyright free

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 CASE STUDY 4.9 continued
Analysis and takeaway business and really like
1 Discuss why it is important for a business the idea of using the McDonald’s ‘M’
to try to ensure it takes action against letter and colour as part of their business
copyright infringements. name. Advise Greta and Harley about
2 Why was the ‘Happy Birthday to You’ case the possibility of using this and what the
such an important one? possible consequences might be.
3 Greta and Harley McCarthy are
investigating establishing a new hamburger

Trademarks through IP Australia and nominating the Madrid

Protocol countries in which the protection is required.
A trademark is a protection that can be granted
for any aspect of marketing, including letters,
numbers, words, phrases,
trademark a right that is sounds, smells, shapes, logos
granted for a letter, number, and pictures, as well as a
word, phrase, sound, smell, combination of these things.
shape, logo, picture and/or
Trademarks give businesses
aspect of marketing
exclusive rights to use them
for commercial purposes, as
well as to license or sell them to others. Registered
trademarks are protected legally, and misuse of
trademarks can be pursued under law.
A trademark is a way of identifying a unique
product or service and it can be a valuable marketing
tool. Sometimes called a brand, a trademark is often
the business identity – the way a business shows who
they are. Trademarks are different from business,
company and domain names. One well-known
example of a trade mark is Qantas and the flying Figure 4.26 Businesses can have their trademarks registered.
kangaroo.
A trademark is used to distinguish a business’s
goods and services from another and is enforceable
under IP law. For example, the Lonely Planet® logo is
a registered trademark for travel guides. This protects
the owner from other businesses using the Lonely
Planet trademark.
Most businesses should register a trademark,
although it can be used even if it is not registered.
A trademark can have an infinite life representing
significant business value. It is initially registered for
10 years and can be continually renewed (there is
a cost and the trademark must be actively used). 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 –
an application can be filed directly in each country Figure 4.27 Lonely Planet® logo is the registered trademark
or through a single international application filed for its travel guides.

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 The Madrid Protocol is a treaty that provides A business also needs to ensure that it has
international registration of a trademark. It is registered any designs as well as trademarks. A
administered by the International Bureau of WIPO. design refers to the features of shape, configuration,
It facilitates the filing of trademark applications in a pattern or ornamentation that give a product a unique
number of countries at the same time. All requests for appearance, and must be new and distinctive. Design
protection in Madrid member countries are examined registration is intended to protect designs that have
according to the trademark legislation and laws an industrial or commercial use.
existing in the designated countries.

CASE STUDY 4.10

EU court rules plastic toys are a protected trademark
A European Union (EU) court ruled in mid-2015 that Lego’s famous figurines are a protected
trademark. The ruling blocked moves by a competitor that wanted to copy the shape of the
Danish company’s figurines.
Lego has grown to be the world’s second-
largest toymaker, thanks in part to blockbuster
movies, video games and successful crossovers
with superhero and Star Wars franchises. The
shape of the Lego figurines, including their iconic
smiley faces, was registered in 2000 and has
become synonymous with Lego’s building-block
system.
Best Block, the company being challenged
in the suit, developed similar characters for its
system and challenged the trademark on the
Figure 4.28 Lego’s famous figurines are protected by
grounds that the shape of the figurines was
trademarks.
determined by how they connected to other
interlocking blocks. The judgment found that
the key elements of the figurines did not involve their connecting parts, and were therefore
protected from being copied under Lego’s trademark.

Analysis 3 Explain why Lego would have taken the

1 Describe what is a trademark is. other toy company, Best Block, to court.
2 Explain why a business would wish to What was the outcome of the case?
register a logo, symbol, letter or number
when establishing and running a business.

Online sales online also means that a business can save on the
physical space required; an office can be set up at
Online sales provide an opportunity for businesses home and goods can be stored in a garage. Larger
to expand and take advantage of many potential businesses can also take advantage of online sales
customers. Businesses of any because they also would not need as much space
online sales when a size can sell products and and staff to sell products. Operations can be focused
person purchases a product services to anywhere in the
or service via the internet. on goods and storage rather than on a ‘bricks and
world. It is important that any mortar’ store.
Online shopping has become
popular because it is potential business examines
convenient and can be done ways it can sell via the World
from anywhere. Wide Web. Being able to sell

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 Figure 4.29 Amazon is an example of a successful online Figure 4.30 Amazon has invested heavily in infrastructure and
business. logistics.

Example of an online business – Amazon AWS is also growing in size, with major services such
Amazon is an online cloud computing and retail giant. as Netflix using the company for its hosting.
Based in Seattle, it is the largest electronic online While Amazon is best known as a book retailer
retailer in the United States with inventory that with a hand in other digital and electronic products,
includes books, CDs, DVDs, digital video, software, the company aims to expand into other market
video games and electronics. To facilitate sales, segments. An online craft market aims to challenge
Amazon has built more than 100 warehouses across Etsy, while there are plans to expand into groceries.
the US, with plans to build even more. Amazon may not be able to compete on luxury
Analysts have estimated that in 2015, for every US$1 items and branded goods, like those sold through
Americans spent on online retail, around 51 cents the Disney store, but it seems that no segment is safe
went to Amazon. This dominance is also reflected in from Amazon’s growth.
Amazon’s market share, with the company accounting While Australia lacks a local giant like Amazon,
for 26 per cent of all online e-commerce sales in the online spending is still on the rise. The National
US in 2015, up from 22 per cent the previous year. Australia Bank (NAB) estimates that Australians spent
Amazon’s growth has been reflected positively in its $19.2 billion online in 2015, although this is only
share price, with the company’s market capitalisation – around 6.6 per cent of the amount spent in bricks-
the value of the shares held by shareholders – around and-mortar stores.
US$325 billion. Another American retail giant, Wal- Online businesses have the potential to become
Mart, has a market capitalisation of just US$200 huge. Removing the issue of distance between the
billion, which is falling. customer and the store means that a business’s
Known for its bricks-and-mortar stores, Wal- market can be anywhere, but it also means that its
Mart has tried to capitalise on the growing online competitors are everywhere too. When planning to
market. Since 2011, its e-commerce team has grown set up an online business there are some important
from 500 to 2500 staff, and it has opened four new things to remember:
distribution centres just for online orders. Even so, • Know your product or service, and understand
Wal-Mart’s online sales amounted to less than one- what staff and physical space will be required. If
sixth of Amazon’s in 2015, and the gap is getting rent and wages are expensive, the business might
wider every year. not be viable.
Despite its size, Amazon generates very little profit. • Understand your customers – who they are, what
Heavy ongoing discounting, as well as a sales holiday they’ll buy, and when and how often they’ll buy it.
called Prime Day, means that the company moves a • Have a business and marketing plan that can be
lot of goods at a very low profit margin. To counter changed as the business grows.
this, Amazon relies on its cloud computing business, • Determine what IT will be required – both software
Amazon Web Services (AWS), for most of its profits. and hardware.

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• Build a website that users will understand, and
figure out the best way to target your customers.
It is recommended that graphic and web design be
done professionally, as this might save you money
down the track.

Grow your online business

E-commerce is becoming an increasingly important
part of the Australian retailing landscape, and presents
a great opportunity for small and medium businesses
(SMBs) to build and grow online presence.
However, the latest findings of the Summary of
IT Use and Innovation in Australian Business survey
from the ABS show that SMBs are still slow in their
take up of online retailing – less than half of SMBs are
engaging online, despite the fact that 91.9 per cent of
Australian businesses have internet access.
The complexity of website creation, the amount of
Figure 4.31 E-commerce is becoming increasingly important
time and administrative work involved, and a lack of to businesses.
computer literacy have been some of the reasons put
forward by various business owners for not taking up
online retailing. However, small businesses must start being the primary platform. Low barriers to entry, and
considering how they can use online sales to enhance low set-up costs (all you really need are products to
and complement their existing sales models, or face sell and the ability to fulfil them), make it a logical
being overtaken, or taken over, by more efficient choice.
competitors. If selling on eBay proves successful, businesses
Small and medium businesses tend to start their should look to push their products out in more places,
online retailer journey on marketplaces, with eBay to reach as many potential customers as possible.

CASE STUDY 4.11

RetailSplash
One example of the multichannel approach
is RetailSplash. In only a few years, co-
owners Neville Samuels and Dov Herdan
have transformed their business from
selling video games on eBay (via their brand
Dungeon Crawl) to now running three
online multichannel retail brands under the
RetailSplash umbrella.
Each RetailSplash brand sells across
multiple channels – revenue is generated
through each brand’s own dedicated website,
as well as third-party platforms like eBay.
RetailSplash is an example of how smaller
businesses can ‘look bigger’ by using digital
technology to do a whole lot more for less.

Figure 4.32 RetailSplash brings together several online shops.

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 CASE STUDY 4.11 continued
To learn from RetailSplash, small and medium businesses should consider the following:
• Information is the key – a business should spend the time and effort to publish as much
information about products or services as possible. The more information put forward,
the easier it is for shoppers to find the product on Google, comparison shopping sites
and eBay.
• Manage inventory – a business needs to maintain careful management of orders
and inventory levels so that products are distributed via each channel effectively.
• Invest in a website – for experienced eBay sellers, it’s worth considering investing in a
business webstore, which lets the business ‘take back control’ of the customer experience
and control branding.
• Seek out advice – there are several options that retailers can take up to kick-start or grow
their online business. For example, web agencies or independent developers can help
retailers get up and running online; some also specialise in particular industries.

Analysis in the article and how a business could use

1 Why do some small and medium these when implementing a new business.
businesses not take up online retailing? 3 Recommend why a potential business
2 Explain two of the pieces of advice given should try to access customers online.

Another method a business can use to develop specific products online, helping users to compare
an online presence is Google Shopping. Google price and stock availability instantly. The increased
Shopping ads have reportedly been growing in use of mobile devices has been attributed to the rise
popularity in recent years for consumers and retailers of such online tools.
alike. Google Shopping allows businesses to promote

CASE STUDY 4.12

Five tips for starting an online business

Setting up an online business is an exciting time. But it’s important to pay attention to detail, watch
your pennies and start small before building up the business. Here are some ideas to help your
fledgling enterprise survive and thrive.
1 Get started and ‘fail fast’
When it comes to starting a business, it can be easy to get caught up in spending thousands of dollars
on things such as perfecting a website and developing detailed marketing plans.
If you are waiting for everything to be perfect before you start, you will be waiting forever. We
launched using an extremely lean mindset and spent very little on web development and detailed
plans with the aim to test the waters to see what customers wanted, measure certain aspects of the
business to see what works and what doesn’t and then adapt quickly.
2 Learn from others
In all industries, chances are there are other successful companies out there doing exactly what you
want to do. For example, pet supplies delivered to your door isn’t new. These companies have done
all the hard work gathering data and understanding what customers want. As a start-up with limited

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 capital, implementing aspects from successful
companies into your own will save you endless
time and money that you would have had to
spend doing your own research.
3 Network
The more people you bring into your
network, the higher the chance one of
these people will have the ability or know
someone with the ability to help you. A
strong social media presence will increase
the likelihood of being linked with someone
who can add value to your company or with
whom you can form a strategic partnership.
4 Never stop looking for ways to
improve Figure 4.33 Businesses need to learn from each other.
All industries are rapidly changing, so the need
to stay with trends is important if you want to be successful. The best way to continually grow and
improve is to never stop reading. The internet provides information on almost anything you can think
of, so searching out articles, books and trends from other industries is the best way we can learn and
implement new ideas.
5 Be prepared to hustle
Nothing good comes easy, so be prepared to put in the hard work and go the extra mile to launch
and grow your new start-up. Although BarkingOrders.com.au is an online service, our team still gets
up at 5am to get in three hours of letter box drops each morning before the work day starts. Getting
out in public and chatting to potential customers and being visible is extremely important for our
business as developing strong relationships with the early adopters is crucial for the growth of the
business in the early days. Without the drive to put in the hours and do what others won’t, your
business will struggle to get the kick start it needs to compete in the competitive online business world.
(Source: Based on R Boyd, ‘Five tips for starting an online business’, The Age, 13 March 2016.)

Analysis 2 Why is it important for a business to have

1 Outline the type of advice that is given in thought about using the internet to access
the article. extra sales?

Businesses of all sizes corporate social

4.7 Corporate social should strive to become good responsibility the

responsibility corporate citizens, and it’s

important that this is considered
commitment by
organisations to conduct
their business in an
It is important for businesses to have a sense of when the business is being ethical manner, to take
corporate social responsibility (CSR) towards the planned. Volunteering in the responsibility for the
community and environment in which they operate. community, establishing grant economic, social and
This can take the form of educational and social programs, collaborating with environmental consequences
programs, as well as practices that reduce the business’s other businesses, developing of their activities, and to
being accountable to a
impact on the environment. Businesses that are seen sustainable business practices,
wide range of stakeholders,
to meet these responsibilities are known as ‘good and supporting local and including employees,
corporate citizens’, and most communities expect global causes are examples of customers and suppliers –
businesses to recognise their social responsibilities. ways in which businesses can now and in the future

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 Figure 4.34 Businesses can model social responsibility. Figure 4.35 A small contribution to charity goes a long way.

contribute socially. As a business grows, the scope of minimised. Planning should include taking steps to
its social involvement should grow with it. reduce the impact of environmental risks, putting
in place practices to control the risks, and then
Environmental concerns and developing an action plan for use if environmental
planning the production of goods issues arise.

and services Businesses also need to consider how their

potential goods and services can impact on society at
Corporate social responsibility can affect business large. For instance, when setting up a manufacturing
planning in areas such as environmental impact. All business it would be important to take into account
businesses, regardless of size, have an impact on all of the laws and regulations that cover the particular
the environment in the course of their operations. industry, and also to ensure that staff are safe and
Awareness of the environmental impact of a business products will not injure customers.
can benefit both the company itself and society as a Often in the planning stage there is a focus on
whole. For example, being environmentally friendly ideas that can contribute to the business and also
can save a business money and can attract customers to society in general. Many new businesses are
who are more willing to support businesses they now looking at ways to both earn a profit and be
believe are contributing to society in a positive way. socially responsible. In the hospitality sector, for
Some ways businesses can improve in this area is in example, cafés have become a driving force in the
the planning stage to look at investing in products, social enterprise sector in recent years. Charities and
such as rainwater tanks and solar energy, that reduce businesses are increasingly using cafés as a way to
reliance on natural resources; to use products that are train and employ disadvantaged people who would
made of recyclable materials; and to reuse paper and otherwise struggle to find work. Some of these cafés
recycle and minimise waste. (See Chapter 9 for more are not-for-profit businesses, which donate money
details regarding CSR and business planning.) to charities each year, while others are for-profit
It is important for businesses in the planning businesses that support people who might otherwise
stage to ensure that their environmental impact is not access employment and training.

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CASE STUDY 4.13
Opportunity renewal for unemployed youth
In March 2016 unemployment rates were at around 13 per cent for youth in the age bracket of
15–24. In Sydney five hotels began a training program for unemployed youth to enable them to
have access to new opportunities.
The Industry Employment Initiative was developed by MAX Employment, Social Ventures
Australia and the Jesuit Social Services group. This innovative hospitality training program will
enable graduates to work and learn skills that
they can utilise to benefit themselves and
the hotels that are offering the course. An
intensive two-week training course enables a
fresh start for many of these young people.
It includes training on how to perform in
an interview, workplace behaviour, barista
training and responsible service of alcohol.
The five hotels involved in this initiative are:
Swissotel Sydney, Holiday Inn Darling Harbour,
Radisson Blu Plaza Hotel Sydney, Amora Hotel
Jamison Sydney and Courtyard Sydney-North
Ryde by Marriott. The program had been
trialled in Melbourne and then replicated in
Sydney.
This program also assuages the corporate Figure 4.36 The Industry Employment Initiative helps
social responsibility (CSR) program that many young people to find work.
businesses must meet. According to the
Australian Human Rights Commission, CSR is generally understood to mean that corporations
have a degree of responsibility not only for the economic consequences of their activities, but
also for the social and environmental implications. This is sometimes referred to as a ‘triple
bottom line’ approach that considers the economic, social and environmental aspects of
corporate activity.

Analysis
1 Explain why corporate social responsibility
is an important consideration for a
business.
2 Outline the benefits associated with the
program described in the article.
3 Evaluate how this type of project can
benefit society beyond the hotels involved
in it.

Figure 4.37 The Industry Employment Initiative has helped

many unemployed youth.

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 Chapter summary obligations that may be required when
planning a business.
• Businesses have to consider a range of 3 Explain how some of the recent changes
factors from the internal and external in Australian trends and attitudes could
environments. impact on planning.
• The macro environment is outside the 4 Describe how the ageing population might
control of the business. influence the types of businesses created.
• There is a range of taxation and legal 5 Illustrate how the interest rate in Australia
factors to take into consideration such can impact on business planning.
as employment laws, building and other 6 Discuss how the level of business and
permits, and zoning. consumer confidence in Australia can
• Societal attitudes, changing values and influence business planning.
trends all have to be taken into account 7 Technology is an important and continually
when planning a business. developing concern. How can a business
• Economic conditions can have a substantial try to plan for the constantly changing
impact on business planning. technology available?
• Economic factors include interest rates, 8 Why do businesses need to investigate
taxation rates, and business and consumer patents, trademarks and copyrights for
confidence. their products?
• Technological issues and continual changes 9 Explain why businesses are increasingly
in technology can have an influence on moving into selling products online.
business activity. 10 Ask six people you know about their online
• Australia is part of a global economy and shopping experiences. Compare the results
businesses need to be able to compete with your class. Identify the use of online
with businesses from a range of countries. sales and how common it is.
• Global considerations include: 11 Explain why CSR is an important
– overseas markets consideration for all businesses when
– overseas competition planning.
– offshoring labour
Extension question
– exchange rates
– patenting Sally and Shana are investigating starting a
– copyright business. They would like to set up a bed
and breakfast in Daylesford and have looked
– trademarks
at a property they believe would be ideal. In
– online sales. addition to the bed and breakfast they would
• Corporate social responsibility (CSR) is an like to operate a café and sell gourmet picnic
important issue when planning a business. hampers for tourists.
• A new business needs to look at CSR Using the following points, complete a
considerations such as managing report to advise Sally and Shana about the
the impact on the environment and factors they would need to consider when
contributing to the wider community either planning for their business:
directly or indirectly. • economic conditions such as consumer
confidence and the number of tourists in
Chapter summary questions Daylesford
1 Distinguish between the macro, operating • technology – online bookings and a website
and internal environments. • legal requirements such as zoning laws,
2 Describe why it is important for a business permits and licences
to investigate taxation and other legal • social factors such as trends and tastes.

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CHAPTER 5 Key terms
• business • industry

Influence of the operating association

• competitor
association
• lobby group

environment on business
• consumer • operating
• customer environment
• customer • special interest
planning expectations
• customer needs
group
• supplier
• fair trade • supply chain
• food miles • union

Overview Key knowledge

The operating environment of a business has a range In this chapter students will learn about how operating
of factors, including customers, competitors, suppliers, factors affect business planning in the areas of:
and special interest groups such as environmental • Customer needs
lobby groups, business associations and unions, that • Customer expectations
may affect the planning it undertakes. Understanding • Competitors’ behaviour
these factors will provide the business with improved • Suppliers and the supply chain such as the
information on which to base its planning decisions. resources required for the business and the
considerations about where these resources are
sourced and how they reach the business
• Special interest groups such as environmental
lobby groups, business associations and unions.

What’s ahead
Customer
needs and
expectations

Special
Operating Competitors’
interest
environment behaviour
groups

Suppliers
and supply
chain

Figure 5.1 The operating environment of a business

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 5.1 Customer needs and • providing high-quality goods and services at an
attractive price
expectations • delivering high levels of customer service (pre-
and post-sale)
Customers form an important part of the operating • being ethical and socially responsible in the way
environment of a business. Most businesses would like they operate
to think they focus on customer and consumer needs • being able to establish long-term positive
and customer expectations, relationships with the customers
operating environment devoting production and • ensuring that the products are Australian made or
the environment marketing resources to satisfy
immediately external to grown
them. This requires market • providing an opportunity for customers to support
a business with which it
has close interaction when research and market analysis to an Australian-owned business.
conducting its business establish the current customer
Customers are now more discerning and educated
activities needs and consumer needs.
in their consumer choices. They have become
consumer a person or While unmet customer needs
more health conscious, and in food are looking for
group who uses a product. can provide opportunities
Note: a customer may be products that are low in fat and salt, and that contain
for a business, they can also
a consumer, but not all no additives or preservatives. Customers often make
pose potential uncertainty for
consumers are customers; a product selection based on whether it has the Heart
that is, the person the profitability and ongoing
Foundation’s ‘tick of approval’. Many consumers
consuming a product is not success of the business. It is
demonstrate their need for locally grown food
necessarily the one who important that businesses adopt
products. For example, by purchasing products from
purchased it. the following philosophies:
SPC, a company that uses 100 per cent Australian-
customer someone who ‘the customer comes first’ and
buys goods or services grown products, customers are also supporting local
‘the customer is always right’.
businesses, farmers and the resultant supply chain.
customer expectations Both these philosophies are
the value that customers Whether a product is Australian made or Australian
widely accepted in retailing.
believe they will gain from grown is now a common need or expectation of
In marketing, they are referred
purchasing a particular consumers. Displaying the government-approved
good or service to as ‘developing the customer
registered certification trademarks shown in
relationship’ or ‘customer
customer needs Figure 5.4 provides consumers with the confidence
something customers relationship marketing’.
that a product is genuinely Australian.
require because it is Businesses must ensure in
essential or very important their planning that they are
rather than just desirable taking into account important
needs and expectations of
customers, such as:

Figure 5.3 Logo of SPC Ardmona on products

Figure 5.4 Registered certification trademarks of Australian

Figure 5.2 Understanding the needs of customers is vital. products

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CASE STUDY 5.1
Australian Weaving Pty Ltd
Established in 1927 in Yarraville, Victoria,
Australian Weaving Pty Ltd is one of
Australia’s oldest and largest textile groups
and brand managers.
Australian Weaving’s brands include Dri Glo
(established in 1930), Dickies Clothing and the
homewares for kids brand Freckles. Australian
Weaving also manufactures products under
licence agreements for other well-known
brands, including RM Williams, Christy and
Esprit Home. It recently teamed up with M&C
Saatchi to create the 2 Litre Towel, a product
that demonstrates an emphasis on competing
on quality rather than lowest prices (the 2
Litre Towel is able to soak up two litres of
Figure 5.5 Dri Glo is a trusted Australian brand.
liquid).
Although some of the cotton used in
Australian Weaving products is sourced from overseas, most of the cotton used in its towels
comes from New South Wales and Queensland.

Analysis customers buying towels (e.g. quality,

1 Describe the level of importance you place colour, etc.).
on being able to purchase Australian made 3 Would the fact that Australian Weaving has
products. been in existence nearly 90 years make it
2 Identify and describe what you consider more appealing to customers? Justify your
would be the consumer needs of opinion.

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, have shown
their anger by closing their accounts. This positive
action by customers caused some banks to rethink
their strategy, while providing an opportunity for
community banks to establish and prosper. The
Bendigo Bank anticipated this customer need and Figure 5.6 Bendigo Bank – a community bank

ACTIVITY 5.1
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
the community.
2 Discuss whether you believe this commitment to the community would make customers
change who they bank with.

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 based its approach to banking on putting time and
effort into innovation in the communities within
which it operates.

5.2 Competitors’ behaviour

Businesses should constantly monitor products or
services of their competitors. It is important to
notice whether a competitor
competitor a business has introduced a new product,
rival in the same market for extended a current product
products or services offered
line or changed its pricing
by the business
strategies. All such changes
will impact on competing
businesses and they must be prepared to respond. A
possible opportunity could be created or a counter Figure 5.8 If you love fresh bread, you’ll love Delightful
action taken to overcome a potential threat. Rewards.
Successful competitors watch what their business
rivals are doing on a daily basis. For instance, in your businesses in their quest to gain a competitive
local shopping centre the large supermarket will advantage. A visit to the Bakers Delight website will
be keeping a watchful eye on the products offered result in you being asked if you would like to become
and prices being charged by the fruit shop, butcher a Delightful Rewards member. This will entitle
and bakery. While many customers are happy to you to the latest product offers, advance notice of
purchase all their needs at a supermarket, many competitions, new product previews and delicious
people still want to purchase their meat, bread, fruit recipes. It also has a loyalty card where, with every
and vegetables from specialist stores. $6 spent in the store, the card is stamped. After five
Offering inducements, incentives, memberships stamps you are entitled to redeem one free product.
and loyalty schemes is another strategy used by In 2016, the Wesfarmers-owned Bunnings chain,
which is currently ranked as No. 1 in the home
improvement, home timber and hardware industries,
has proven to be too strong a competitor for the
Masters Hardware chain. So what went wrong
for Masters? Canstar Blue, a customer satisfaction
research and ratings business, gained the following
comments from customers about what they didn’t
like about Masters: the staff, the product range and
store layout (too hard to find what you were looking

ACTIVITY 5.2
1 Identify an example of an inducement
or incentive program being offered by a
local business in your area.
2 Identify an example of an inducement
or incentive program being offered by
a business that operates throughout
Victoria.
3 Explain why these businesses see the
need to offer these inducements or
Figure 5.7 Fresh fruit and vegetables – a highly competitive incentives.
marketplace

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Figure 5.9 Bunnings is No. 1 in the home improvement, home Figure 5.11 Coca-Cola Life competes with still water and
timber and hardware industries. mineral water.

for). The bottom line, however, was: ‘Not as good as change and how quickly will the others follow? Will
Bunnings’. Does this mean that in future it would have one of these banks break rank and either increase or
to be a very brave business to try and challenge the decrease an interest rate independent of the Reserve
popularity of Bunnings or are consumers just feeling Bank’s announcements?
too comfortable with having Bunnings as a presence It is not only competition from another business
in their suburbs and towns? that can cause a business to change its product. The
In the area of banking, Australia’s four major necessity to change can come from factors that are
banks – National Australia Bank, ANZ Limited, affecting the industry in which that business operates.
Commonwealth Bank and Westpac – are fiercely Coca-Cola Amatil launched the mid-calorie Coca-Cola
competitive. These financial institutions earn a large Life in 2015 in an effort to boost consumption after
percentage of their revenue from the interest they a 5 per cent drop in industry-wide cola sales during
charge other businesses and individuals for the use that year. The new product was aimed at enticing
of their money. The Reserve Bank, as part of its role lapsed Coke drinkers back to the carbonated soft
in implementing the federal government’s monetary drinks category and away from increasingly popular
policy, is responsible for monitoring and setting the still water and mineral water drinks.
official target interest rate in Australia. It is interesting
to watch how these banks react if the official interest 5.3 Suppliers and the
rate goes up or down. Which one will be the first to
supply chain
A supplier is any provider of inputs into a business’s
operations. Inputs can take the form of raw materials,
services, energy, equipment,
labour and capital. Businesses supplier supplies the
must ensure a steady and inputs (resources) required
reliable flow of needed inputs for the production process
at the lowest possible cost. It
is therefore essential to establish a guaranteed stable,
long-term relationship with selected suppliers.
It is important for a business to plan, establish and
then manage its supply chain. This is a system that
incorporates planning and organising the resources,
people, information and activities (such as sourcing
and procurement, manufacturing and/or conversion
Figure 5.10 The four major banks and logistics) which are required to transform natural

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 resources, raw materials and
supply chain a system
of organisations, people, components into a finished
activities, information product that is delivered to
and resources involved the end customer. In addition,
in moving a product or the supply chain links the
service from suppliers to major business functions and
manufacturers and then on
processes, such as marketing,
to consumers
sales, product design, finance
and information technology,
within one business with those of another business.
Essentially, a supply chain seeks to match demand
and supply for a product or service with the minimal
level of inventory (stock).
Businesses can plan to optimise their supply chain
using a variety of different strategies, including:
Figure 5.12 Businesses rely on long-term suppliers for their
• liaising directly with suppliers to eliminate supply chain.
bottlenecks
• entering into long-term contracts with suppliers to in the supply chain of a particular product, many
tie them into specific prices and quantities businesses that source their products from overseas
• sourcing resources and products locally are now integrating codes of conduct and guidelines
• outsourcing their transportation and distribution into the management of their supply chain. They
to a third-party logistics provider are also demanding their suppliers undertake social
• implementing just-in-time techniques to optimise audits to ensure they are complying with the required
manufacturing flow standards outlined in the business’s codes of conduct.
• creating a mix of locations of factories and This demonstrates that ethical and socially responsible
warehouses to best serve customer markets practices are becoming increasingly important to both
• using technology, such as global positioning consumers and businesses.
systems (GPS), to analyse transportation routes Following horrific incidents like the Savar building
• optimising their logistics to maximise distribution collapse in 2013 (Bangladesh), which killed more
efficiency. than 1100 people, businesses have been subjected
Businesses, particularly those that are involved in to increased pressure to review their global supply
sourcing their products from overseas manufacturers, chains. The suggestion is that businesses should
are being put under increased scrutiny from consumers not only audit their first-tier (direct) suppliers for
to provide information about the supply chain of the compliance, but also request that those suppliers
goods they are purchasing. While it is often difficult provide evidence of compliance in their own supply
for a business to know precisely all the steps involved chains.

CASE STUDY 5.2

Coles – ethics in practice and responsible sourcing

Ethics in practice: At Coles, we live our values and ways of working. This includes treating
everyone with care, respect and fairness.
We also require our suppliers and business partners to share our ways of working and seek their
commitment to our Ethical Sourcing Policy. Ethical sourcing is a commitment to the purchase of
goods and services that are manufactured and provided in a way that does not involve exploitation,
or represent a danger to health, safety or the environment. Our policy provides clear guidance to our
team members and our suppliers about the employment practices and social standards we expect to
be upheld in the process of supplying Coles branded products.

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 Ethical sourcing in Coles supply chain
We regularly audit suppliers operating outside Australia to ensure compliance with our policy and
where a supplier does not meet our standards, we work with them on a corrective action plan.
Should a supplier be unable to demonstrate a commitment to our ethical sourcing policy, Coles
reserves the right to terminate its trading agreement. Our policy is based primarily on the Ethical
Trade Initiative (ETI) and International Labour Organisation (ILO) Conventions, and requires that:
• Local laws are respected
• Employment is freely chosen
• Child labour shall not be used
• Illegal labour shall not be used
• Appropriate wages are paid
• Working hours are not excessive
• Freedom of association and the right to collective bargaining are respected
• Working conditions are safe and hygienic
• No discrimination is practised
• Regular employment is provided
• No harsh or inhumane treatment is allowed
• Businesses operate ethically
• No unauthorised sub-contracting is allowed
• Due regard is given to environmental impacts
Responsible sourcing: As one of Australia’s leading food retailers, we have a huge
responsibility to our customers, the community and the environment.
Our focus is simple – to continue to work towards a sustainable future while supporting Aussie
farmers, food producers and the local community.
Pork: Sow stall free – Following extensive work with our pork suppliers, Coles is proud to say
that all our Coles Brand fresh pork is sow stall free. This major animal welfare initiative is a response
to demand from our customers for more responsibly-sourced products and will see approximately
34,000 mother pigs no longer kept in small, single-pig stalls for long periods of their lives. All pigs
raised by suppliers of Coles Brand pork are now free to move about in pens and socialise with other
mother pigs. In addition our local and imported Coles Brand ham and bacon is now sow stall free.
Beef: No added hormones – All the fresh beef in our meat departments is 100% Australian, with no
added hormones. Since 2011, all the fresh beef in our meat departments at every Coles store across
Australia, is 100% Australian and has no added hormones. At Coles, our farmers don’t use added
hormones, allowing the cattle to grow more naturally.
RSPCA Approved – Coles is committed to providing Aussie families with a range of RSPCA
Approved fresh meat options to make delicious meals. The RSPCA Approved Farming Scheme
provides higher animal welfare standards for the care of pigs, chickens and turkeys. Animals in these
farming systems are housed in an environment that meets their physical and behavioural needs.
RSPCA Approved products are marked with an RSPCA Approved Farming Scheme logo.
Cage free eggs – We’re proud that all Coles brand eggs are cage free; they are now either barn laid
or free range. Barn laid and free range hens are free to do the things nature intended hens to do, like
roam around, perch, dust bathe and lay their eggs in a nest. As a result of this initiative, about 350,000
hens will never be caged.
Responsibly-sourced seafood – Coles has made the commitment to only sell responsibly sourced
Coles Brand seafood, so you can be confident you’re making a better choice. This is really important
as well-managed and responsible fishing is essential for the future sustainability of our marine
ecosystems.
What it means – Responsibly sourced means Coles Brand seafood comes from well-managed
fisheries and aquaculture farms that have been independently assessed. This means Coles has looked

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 CASE STUDY 5.2 continued

at the impact on the environment, along with how and where the seafood is caught, to help maintain
healthy fish populations and habitats.
Sea change – Since 2011, Coles has been working with organisations such as the Marine Stewardship
Council (MSC), Aquaculture Stewardship Council (ASC) and WWF Australia to strive for a more
sustainable seafood offering.
Across the aisles – The responsibly sourced Coles Brand seafood ranges from the fresh salmon you
buy at the deli to the canned tuna in the grocery aisle. It even includes the frozen fish fingers you
serve your kids.
Simpler for you – All the work Coles has done behind the scenes has made it simple for you to
feel comfortable with your seafood choices. All you have to do is look for one of the MSC or ASC
ecolabels or the Coles Responsibly Sourced Seafood logo in store.
(Source: Coles website, ‘Ethics in practice’ and ‘Responsible sourcing’ © Copyright
Coles Supermarkets Pty Ltd, reproduced with the permission of Coles.)

Analysis 3 Explain some of the ways that Coles

Read the article above and answer the ensures that suppliers in its supply chain
following questions. act ethically.
1 Define what Coles means by the term 4 Outline the standards Coles expects of its
‘ethical sourcing’. suppliers of animal products.
2 Discuss whether you believe Coles is 5 Explain why it is important that Australia’s
upholding its values statement: ‘we live our seafood industry is sustainable.
values and ways of working. This includes
treating everyone with care, respect and
fairness.’

how far has the food travelled from the paddock to

the plate? It is generally thought that if two products,
such as fruit and vegetables, are compared, the lower
the food miles means the less distance that product
has travelled and the better the choice is for the
environment and the health of the consumer. This
question is particularly relevant when a consumer is
making a choice between something locally grown
and produce that has travelled many miles in a
refrigerated truck or plane.
Farmers’ markets are increasing in popularity as
an ideal way for small producers to sell their locally
Figure 5.13 Farmers’ markets offer locally grown and
produced products. produced and value-added products directly to the
public. If a producer decides to sell their products at a
The sourcing of products farmers’ market, as in any other marketplace, it needs
food miles used to locally has also become a to undertake research prior to entering that market.
measure the transport factor that businesses need to The areas of research need to cover the potential
distance travelled by
consider. Particularly with food customer (i.e. target market), the type of product they
food products between
production and consumption products, consumers often ask will sell and how it will be marketed, the market
about ‘food miles’; that is, guidelines for stallholders, and the legal requirements

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 (e.g. labelling of food and food safety) specific to the consumers’ rights. Choice, the association’s monthly
product they wish to sell. magazine (published both in print and online), is
a common reference point for consumers wishing
5.4 Special interest to purchase products. A favourable or damning

groups report in this magazine certainly has an impact on

consumers’ purchasing patterns. Another group
Special interest groups and lobby groups can growing in prominence to protect and improve the
attempt to influence the actions of businesses. While livelihoods and wellbeing of
many of these groups focus on disadvantaged producers is fair trade trade between
the Fairtrade International. companies in developed
special interest group environmental issues, others
countries and producers
a group of people or an may lobby for safer working It promotes members who
in developing countries in
organisation seeking conditions for employees. For trade in a wide variety of fair
which fair prices are paid to
or receiving special trade goods, such as giftware,
instance, the Cancer Council the producers
advantages or privileges
has been instrumental in household goods, furniture,
lobby group a group garments, jewellery, food and
ensuring that workplaces
that aims to influence
implement non-smoking and beverages.
organisations or
governments in their SunSmart policies to protect
decision-making processes the health of employees. Environmental lobby groups
Community groups can Environmental lobby groups actively promote
also have an effect on a business’s ‘licence to operate’. environmental issues to business, the community
If the community does not like the way a business is and all levels of government (local, state and federal).
operating, it can cause it to lose brand value overnight. Environmental sustainability is an important issue for
For example, Nike sales were adversely affected when these groups. They want businesses to use renewable
it was accused of using child labour in its factories resources, reduce the levels of waste or pollution
in Pakistan. Nike does not, however, operate its own generated in manufacturing their products and, in
factories as its production is contracted out under the event that non-renewable resources are needed
licence to other manufacturers. As a consequence for production purposes, for businesses to develop
of this adverse reaction by consumers, Nike has renewable substitutes for the resource used.
established stringent operating conditions for the The Wilderness Society is a national, community-
contracting factories that produce its goods. The based, environmental advocacy organisation whose
instant brand recognition of the Nike ‘Swoosh’, while purpose is protecting, promoting and restoring
very successful in marketing terms, has also made it wilderness and natural processes across Australia for
an easy target for any adverse publicity relating to the survival and ongoing evolution of life on Earth.
the use of child labour and poor working conditions. The society in recent times has actively sought to
Another powerful lobby group is the Australian protect the iconic River Red Gum national parks
Consumers Association (ACA), which represents along the Murray River and old-growth forests in east
Gippsland. It has lobbied individuals and businesses

Figure 5.15 The Australian Koala Foundation (AKF) is

an example of an environmental lobby group. The AKF is
committed to the protection of the wild koala and its habitat;
visit its website for more information.

Figure 5.14 The Nike ‘Swoosh’ was incorporated into

campaigns to boycott its goods. Figure 5.16 Planet Ark lobbies for recycling.

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 upfront capital costs, is a major barrier to adopting
these technologies.

Figure 5.17 Some lobby groups are focused on environmental

Business associations
issues There are a number of business associations
operating in Australia which aim to meet the
varied needs of businesses.
As businesses vary in size, business association
legal structure and nature of membership organisation
operations, it can be said that engaged in promoting the
business interests of its
there really is no ‘one size
members
fits all’ business association.
Businesses need to research
Figure 5.18 The Ethical Paper campaign which association will best suit their needs. Membership
of the right business association will help a business
to think twice about their choice of paper through its to plan and meet its training needs, provide support
Ethical Paper campaign. and advisory services, as well as general industry
The use of energy resources is another area where news and information. In addition, membership also
environmental lobby groups can affect the plans allows the business to be part of a network.
businesses are formulating. A fact worth considering The federal government recognises the importance
by businesses is: Australia has the highest average of business associations and has created a directory
solar radiation per square metre, yet solar energy of government and business associations that may be
accounts for less than 2 per cent of renewable energy able to provide guidance and assistance both in the
production (see Figure 5.19). Is there a business planning and ongoing running of a business. For ease
opportunity here relating to solar energy, or even a of consultation, the list has been divided into types
way for businesses to cut costs by generating solar of industries.
energy and selling it back to the electricity grid? There are general industry industry association
Many businesses wishing to participate in associations (or bodies) representative body for a
renewable energy projects cite that cost, especially particular industry group
whose membership base is

Solar – solar electricity

0.14% Wind 4.9%
Solar – solar hot water
2.24%

Hydroelectricity
14.97%
Bioenergy – bagasse
38.59%

Bioenergy – wood and

wood waste
33.10%
Bioenergy – biogas
and biofuels 6%
(Source: Parliament of Australia, Parliamentary Library Briefing Book, ‘Powering Australia’;
see Cambridge weblinks: http://cambridge.edu.au/redirect/?id=6973.)
Figure 5.19 Australian production of renewable energy (petajoules)

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broad, being drawn from different industries. These by providing accredited advisers to assist in planning
groups provide general information and assistance. and growing the business.
An example of this is the Australian Industry The Council of Small Business Australia (COSBOA)
Group (Ai Group), a top industry association that has become the country’s peak body representing
represents more than 60 000 Australian businesses. small businesses. The organisation was founded in
These businesses come from a range of sectors that 1979 and was incorporated in 1985. COSBOA has
is growing every day – from manufacturing and three main goals:
construction to food and telecommunications – and 1 To promote and support the development of small
cumulatively employ over 1 million workers. business in Australia.
Each state of Australia has a Chamber of Commerce; 2 To advocate to advance the interests of small
for example, the Victorian Chamber of Commerce and business in Australia through policy change and
Industry. There are also business associations to cover regulatory reform.
specific types of industries, trades or professions. For 3 To foster an increased awareness and understanding
example, Master Builders Australia is the nation’s of the role of small business in Australia among
main building and construction industry association, public servants and elected government officials,
representing and assisting workers who are part of larger businesses, the media and the general
the Master Builder Associations, with a combined community.
membership of over 33 000. Similarly, solicitors can
As small business owners generally are time poor,
join the Law Institute of Victoria.
and often lack expertise in legislative, regulatory and
When commencing in business many sole traders,
taxation matters, COSBOA see its role as providing
partnerships and private companies are formed as
accurate and timely information to assist small
a family business. Family Business Australia (FBA)
businesses with planning and decision making in
has conducted research into what consumers think
these and other areas.
about family-owned businesses. The results show that
(Source: Based on Council of Small Business
consumers prefer products or services purchased from
Australia website, ‘About COSBOA’.)
family-owned businesses and also believe they can
trust these products. When registered as the owner
of a family-owned Australian business, the business is
Unions
allowed to display the FBA emblem – this is a visual Unions represent workers who are their members,
sign to customers, employees, the community and and act on their behalf to negotiate with business
government of its status. FBA also assists businesses owners and/or management on
issues such as wages, working union an organisation
conditions, working hours of workers or employees
and other aspects of work. who have joined together
to achieve common goals
Unions also provide a range
such as higher pay, better
of welfare and social benefits working conditions and job
for members. In recent times, security
unions have adopted a more
cooperative role with employers and management.
This role is based on partnership building and
working towards mutual business objectives. This
new approach has provided employers (business
Figure 5.20 General industry bodies owners) with a forum for discussing issues of common
interest, such as business competitiveness and
productivity, and making new workplace agreements.
This cooperative approach is intended to result in
increased productivity and profits for businesses and
job security for employees.
According to the Australian Bureau of Statistics
(ABS), the industries with the most union members
Figure 5.21 Master Builders Australia is an industry include health, education, public safety, retail,
association that represents builders. construction, manufacturing, transport and

Chapter 5  Influence of the operating environment on business planning 93

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 employed by building companies constructing either
mid-size commercial properties or larger residential
properties. Unions such as the Construction, Forestry,
Mining and Energy Union (CFMEU) are now more
concerned with ensuring that building companies
have adequate public liability, WorkCover and
superannuation than whether the workers on sites
are contributing union members.
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 5.3
Figure 5.22 Unions focus on improving conditions for workers.
UNION MEMBERSHIP STATISTICS
The ABS provides the following statistics
warehousing. In the private sector, union membership
on union membership in 2014:
is low, with only one in nine employees choosing • 94 per cent of 15 to 19 year olds have
to belong to a union. Data from the ABS in 2015 never been a union member
also revealed that union membership has plummeted • 23 per cent of workers aged 55 to 59
in the past two decades from 40 per cent of the years are current union members and
workforce to about 15 per cent of the workforce. 85 per cent of this group has been a
Current union membership sits at 1.6 million people. member for over five years
Unions have played an important role in improving • an estimated 1.5 million workers who
the working conditions of workers. Some of their were members in the past are no
achievements have been: working hours, leave longer members
entitlements (annual, sick, long service, maternity),
• approximately 8.4 million employed
allowances (shift, uniform), breaks (meals and rest
persons have never belonged to a union.
periods), wages (awards, penalty rates, collective
bargaining, redundancy pay), superannuation, health (Source: see Cambridge weblinks: http://
and safety and workers’ compensation, and unfair cambridge.edu.au/redirect/?id=6974.)

dismissal protection. 1 Union membership among young

When planning a business, it is important to look workers is very low. Outline why you
into the prominence of the union movement in that think union membership is so low in
particular industry. If the industry has a high level this age group.
of union membership it is wise to consult with the 2 Membership of workers aged between
relevant union to ensure that planning decisions 55 and 59 is 23 per cent. In which
being made by the business align with the union’s industries do you think these members
expectations. In the building industry many work sites belong?
have imposed a restriction on non-union members 3 Describe what you believe are the
working on that site. However, the ‘no-ticket, no- reasons 8.4 million workers have never
start’ culture on Melbourne’s building sites is starting belonged to a union.
to weaken. Non-union labour is increasingly being

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Chapter summary 2 Identify and describe three expectations
customers have when purchasing food.
• Business planning is directly impacted on 3 Describe the impact on a business of a
by factors from the operating environment competitor introducing a new product.
of the business. 4 Outline four strategies that a business can
• The operating environment is the business adopt in its quest to gain a competitive
environment immediately external to advantage.
the business with which it has a close 5 Identify two product types for which
interaction when conducting its activities. environmental impact would be a factor in
• There are a range of operating factors that your choice of product; for example, when
need to be considered and responded buying laundry detergent would you look
to when undertaking business planning, for products that are ‘clean, green and safe
including: for the environment’?
– customer needs and associated 6 Identify and describe which major functions
expectations of one business are linked through the
– competitors’ behaviour supply chain of another business.
– suppliers and the supply chain, together 7 Describe two strategies that a business
with how resources are sourced and can implement to optimise its supply chain.
how they reach the business
– special interest groups such as Extension questions
environmental lobby groups, business
1 Discuss whether you believe unions are a
associations and unions.
‘thing of the past and not relevant in our
current workplace’.
Chapter summary questions 2 ‘The customer is always right’ is a common
1 Define the following terms and use idea used by businesses. Identify and
them in a sentence to demonstrate your describe ways that a business needs to
understanding: plan and operate if it wants to respond to
a food miles this idea.
b environmental sustainability
c supply chain
d union
e customer.

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 PART 3
AREA OF STUDY 3

Internal environment
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CHAPTER 6 Key terms
• bootstrapping • labour

Resourcing, locating and • business angel

• business layout
• merchandise
• natural resources

financing a business
• business location • overdraft facility
• capital resources • venture capital
• complementary • wholesalers
business • work
Overview • crowdfunding environment
• ergonomics • workforce
When developing a business concept, the business • foot traffic planning
operator needs to make crucial decisions regarding • initial public
the business’s resource requirements in terms of offering (IPO)
natural resources, labour and capital resources, and
how these requirements can be met in the most
efficient and effective manner. Choices must also be
made about the best location for the business. When
making these decisions, the type and potential scope
Key knowledge
of the business must be considered. In this chapter students will learn about:
Different sources of business finance and capital • Business resource needs and factors affecting their
must also be assessed and a decision made as to choice: natural, labour and capital resources
which is best for the particular business. • Business locations and factors affecting their
choice
• Sources of finance available to establish a business
and factors affecting their choice.

What’s ahead
Physical resources:
quality, reliability, procurement,
maintenance, replacement

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

Business layout Business location

Figure 6.1 Business resourcing

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 6.1 Business resource
needs and the factors
affecting their choice
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.
As shown in the previous chapter, the establishment Figure 6.2 Business plans include allocation of a range of
and maintenance of a reliable and cost-efficient resources.
supply chain is vital to business competitiveness.
requiring constant attention. The following actions
Types of resources will be required:
Resources required by businesses can be divided into • Development of a procurement policy with
three main categories: guidelines regarding selection of suppliers.
• Natural resources: these are unprocessed These guidelines should reflect the values, vision
items used in the operations and mission of the business. For example, if a
process when finished goods business espouses values such as wishing to
natural resources a
be environmentally friendly, the procurement
material source of wealth, and services are created. A
such as timber, fresh water restaurant, for example, will policy should stipulate that suppliers must meet
or a mineral deposit, that need a supplier of fruit and designated standards regarding sustainability.
occurs in a natural state • Negotiation of leasing and/or purchasing
vegetables.
and has economic value arrangements for buildings, equipment and other
• Component parts: these are
input products that have inputs.
been already processed. For example, a restaurant • Maintaining a positive relationship with suppliers.
might purchase cakes and bread from a bakery • Making arrangements for servicing and
supplier. maintenance of equipment and other capital
• Labour: these are workers or human labour. For items. This may involve contracts with service
example, a restaurant might use an employment providers and the establishment of maintenance
agency to employ waiting or procedures.
labour human physical kitchen staff. • Replacement of capital resources when they reach
and mental effort used • Capital resources: these the end of their life cycle; for example, vehicles,
in creation of goods are human-made items information technology (IT) equipment and
and services. Labour software.
used in the process of
is a primary factor of
production. Machinery and
production.
equipment are examples.
Factors affecting choice of
capital resources
human-made items used in The restaurant would resources
the process of production. require capital items such Planning to meet human and physical requirements is
Machinery and equipment as kitchen equipment, an ongoing process. The ongoing costs of maintaining
are examples. point of sale technology, a existing resources and sourcing new ones when
coffee machine, tables and required must be taken into account when budgeting.
chairs. A delivery van, for example, will involve more than
Meeting the physical and human resource the initial purchase costs. Ongoing operating costs
requirements of a business is an ongoing cycle such as servicing, petrol and replacement parts must

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 Figure 6.3 All businesses must plan to purchase equipment Figure 6.4 Businesses must anticipate changes to workforce
and maintain it on an ongoing basis. requirements.

also be budgeted for. At some stage in the future, the Policies and procedures must also be developed
van will also need to be replaced. regarding:
Generally, a business needs to consider the • employing staff with appropriate skills and
following when resourcing: qualifications while meeting legal requirements
1 Quality: selecting suppliers who provide quality in regard to equal opportunity laws
resources will ensure that high-quality production • training staff
standards are maintained. This will, in turn, make • motivating staff
for a more competitive business. • dealing with seasonal variations in employment
2 Reliability: suppliers who are reliable and deliver requirements; for example, employing more staff
what is required on time enable a business to as casual workers during busy periods such as
maintain production and remain competitive. Christmas
3 Social responsibility: in order to gain and maintain • monitoring staff turnover and assessing reasons for
a reputation for being ethically and socially staff departures.
responsible a business must select suppliers who
have similarly high standards. 6.2 Business location
As a business expands, resource requirements also
grow. This in turn increases the operating costs of the
and factors affecting
business. choice of location
Workforce planning is carried out in order to
attract and maintain a constant supply of workers/
employees/labour with the
Selecting the best location
workforce planning a skills and capacity required to One of the most critical initial decisions the business
continual planning process keep the business operating at owner must make is location. It is both difficult and
used to align the needs and the required level. costly to physically move a business once it has
priorities of the business
Workforce planning involves been positioned. Poor location choices are therefore
with those of its employees
to ensure it can meet its forecasting the likely future usually difficult to repair.
production and service demand for employees and A business location provides a link
requirements and business taking steps to ensure that between the business and its customers/clients,
objectives this demand is met. This may as well as suppliers who provide the essential
involve establishment and raw materials, products and
maintenance of relationships with an employment labour. A good location will business location
agency or a labour hire firm that supplies temporary establish a balance between geographical site of a
business
workers. Agreements with contractors may also need these factors.
to be negotiated.

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 Age

Ethnicity Sex

Demographic
segmentation

Occupation Income

Marital
status
Figure 6.5 Choosing the right location is crucial to business
success.
Figure 6.6 The demographics of an area are a major
Different business types have different location consideration when selecting a business location.
requirements.
evaluate the site with their target market in mind.
Factors to consider when selecting a Points to consider include:
location – area demographics – assessment of the
Selecting a business location will generally depend population in regard to its age patterns,
on two types of factors: quantitative and qualitative. incomes, interests, ethnicity, education levels
Quantitative factors are those that can be numerically and so on. This will give an indication if there
calculated, such as the cost of purchasing or renting are sufficient potential customers in the area.
premises. Qualitative factors are those that deal with It must be ascertained whether a sufficient
the psychological and emotional aspects of location, percentage of the population in an area
such as proximity to public transport or consideration matches the customer profile of the business
for the welfare of workers. Some points to consider in order to ascertain whether the market will
are: be viable. The products being offered for sale
• personal factors – the business operator’s personal must also match the demographics of the
situation is important. For instance, a desire to location. For example, a store selling high-end
live and work in a certain locality or to stay close designer handbags would not be suited to a
to family nearby often determines location. Other less-affluent area.
factors may include the distance people are – economic and social trends – assessment of
prepared to commute. changes occurring such as demographic shifts
• style of operation – a business owner needs to in the area; for example, younger people
ascertain the style or image the business is to moving into the area, changes in the birth rate.
have, and then determine if a specific location is How will the business fit with these trends?
in keeping with that image. For example, is the – proximity to other businesses
business formal, casual, urban chic, traditional? – complementary businesses – are there
A hipster-style coffee shop would fit best in an businesses that complement the new business,
inner suburban area, for example, whereas a high- and have potential to
end designer clothing store is best suited to an enhance sales in the complementary business
exclusive shopping centre rather than an outer area? For example, a offers for sale products
suburban shopping strip. pharmacy would be that are related to one’s
business and may be of
• area profile – the area under consideration must well positioned next to
use to that business’s
be analysed for its ability to provide access to a a doctor’s surgery, or customers; for example,
sufficient number of paying customers (proximity a newsagent next to a a bridal wear store and a
to customer base). The business owner must large office complex. florist

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Figure 6.7 Locating near complementary businesses is wise. Figure 6.8 The level of foot traffic is important for businesses
that rely on unplanned or impulsive purchases.

– suppliers – are suppliers nearby? Can they † the amount of foot

easily deliver and access the business? Often traffic passing the foot traffic pedestrian
manufacturing businesses set up near relevant location should be visitors to a business or
commercial site
primary producers. For example, fruit canneries measured, especially
are usually near orchards, and Rip Curl if a business relies
manufactures its wet suits in South America as heavily on unplanned purchases.
this is the source of many of the world’s rubber • Local government by-laws, especially zoning
trees. regulations, must be examined. What developments,
– are there cafés for staff to lunch at? Is the level if any, are allowed in the area? Will permits be
of services and amenities in the area, such as required to build, extend, put up signage, etc.?
banking and child care, adequate? • Pending planning proposals must be checked at
– will neighbouring businesses work for or the local council. Any future development could
against you? Issues include: have significant effects (positive or negative).
† the amount of competition. Sometimes • Site accessibility and visibility – are the required
when comparative shopping is involved number of customers, staff and suppliers able to
it is good to have competitors nearby as locate and access the business? Will the parking
people come to an area in order to make be sufficient? Is there access for people with
planned purchases. This applies to large disabilities?
planned purchases such as furniture, car • Suitability of the buildings – the actual buildings
and appliance sales. It is for this reason that must meet the physical requirements of the
specific locations gain reputations such as business. Consider required storage space,
restaurant precincts or for car sales. On the building design and floor space.
other hand, when a business depends on • Costs – the budget of a start-up business is usually
impulse buying it is best to be away from limited. Therefore, the operator may need to
competitors. compromise on site location to accommodate this.
† the reputation of the area – is it an area well Generally, the cost of premises will increase in
known for a type of business? Will it attract relation to the size and quality of the premises, level
people? of accessibility to services, visibility and amount of
† history of the site. It is wise to look up passing trade. Costs such as rent, deposits, utilities
which businesses were located in a and service costs such as cleaning and marketing
particular location and assess the reasons fees in shopping centres must be factored in.
they either relocated or failed. • Accessibility to transport – consideration must
† levels of support offered in the area by be given to how suppliers and customers will be
traders’ associations travelling to the business. If they drive, parking

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 facilities will be required. Public transport users Different businesses have different location
will be attracted by proximity to a train station or needs
bus stop.
The best location for a business is dependent on the
• Proximity to other large businesses with ‘pulling
type of business. Possible choices are:
power’ – certain businesses will attract customers
into an area. For example, people will travel • retail shopping strips, both suburban and CBD
to a certain shopping centre in order to visit a (sometimes referred to as ‘High Street’ locations)
supermarket or a variety store such as Target or • shopping centres/malls (large and small)
Big W. Having one or more ‘customer magnets’ • industrial parks of varying types
nearby is a huge asset to a business. • isolated sites
• Accessibility to labour and attracting enough • online presence
of the best type of employees is another major • home-based.
consideration. Can potential employees afford to Generally:
live in the area? Will they want to move to the area • retailers require a position that maximises visibility
if necessary? and therefore sales. They usually look for areas
Key factors to consider in a location are: with high traffic. Different types of retailers have
• nature and type of business (including desired different needs. Some businesses rely on impulse
business image) buying; others rely on customers planning
• available budget their visits. Usually, the higher the pedestrian
• amount of space required and vehicular traffic flow, the higher the costs
• special facilities required associated with a location.
• access for employees, suppliers and customers. • wholesalers require large wholesalers businesses
that purchase in bulk from
amounts of floor space
producers and sell smaller
for storage. Easy vehicular quantities to retailers

Figure 6.9 Wholesalers require warehouse space.

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 access will also be required for deliveries and will usually require warehouse space, as well as
dispatch of large quantities. Wholesalers require an area for packing and dispatch.
less visibility but more space, with easy access to
transport routes.
Factors to consider when selecting a
• service businesses require mainly office space. building
Many can be run from home. If clients call in, • Is the space sufficient?
easy access and client parking are required. • Is there potential for growth or expansion if
• manufacturers require large amounts of floor required?
space. Customers usually do not come directly • Are the entrances inviting?
to them. They do not rely on impulse buying, • Does it meet legal requirements (e.g. disabled
therefore visibility and traffic flow are not usually access)?
considerations. Easy access to transport routes is • Is the interior appropriate? If not, how much will
important. it cost to redecorate it?
• online businesses, while not restricted in their • Is the lighting appropriate/sufficient?
location, must ensure they have access to fast and
reliable electronic communication; that is, internet
access. If it is selling goods, an online business

ACTIVITY 6.1
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
Bookstore Farm near airport
Used car yard Country town in dairying area
Pharmacy Industrial area
Animal boarding kennel Airport
Wholesale fish seller Home based
Retail jewellery store Area with high percentage of Muslim
residents
E-commerce Suburban shopping centre
Factory Large shopping centre with high foot traffic
Bottle shop Victoria Market
Coffee shop Mobile van
Juice bar Main road close to a secondary school
High-end boutique Lygon Street, Carlton
Halal butcher Outside supermarket
Dog groomers Next to doctor’s surgery
Italian restaurant Beachside town
Milk processing plant Foyer of maternity hospital
Surf shop Food court in large shopping centre

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 A checklist for choosing a business location Yes  No
1. Have you outlined your specific requirements (size, street frontage,
services) 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.
5. Have you assessed the sales potential of the area? Have you taken into
account economic and demographic factors as well as competition?
Customers
1. Who is your target market? Is the site suitably located for them?
2. How visible and accessible is your location to both foot and vehicle traffic
and car parking facilities?
3. How many people and vehicles pass the location daily? How important is
foot traffic to your business anyway?
4. Are the proposed premises on the best side of the street?
5. 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?
4. Are there any major changes contemplated in the area? Investigate
planning proposals.
5. Are there any restrictions on signage in the area?
Financial
1. Are the premises affordable? What are the alternatives?
2. Are the terms of the lease suitable?
3. Have you identified and costed all outgoings?
4. Is a security deposit or bank guarantee required? How much is it?
5. Have you determined what insurance you require?
Long term
1. Does the site have scope/room to expand?
2. Will zoning restrictions conflict with future needs or plans?

Figure 6.10 Checklist for choosing a business location

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 Layout of premises • Customers will either come into the store with a
definite purchase in mind (destination traffic), or
The business layout of the they will intend to browse (shopping traffic).
business layout the
physical set-up or business, or its physical set-up, • Shopping traffic tends to move to the right after
arrangement of a business. is another important planning entering a store and circulate anticlockwise.
Includes placement decision. The best layout is Therefore, specials, items with low profit margins
and type of plant and dependent on business type. and impulse items should be placed to the right.
equipment, fixtures and The first step is to prepare a
fittings. • Destination traffic tends to move to the left of a
floor plan. store, and circulate clockwise, so goods with a
Factors to consider in layout design high profit margin should be placed to the left.
• Customer exposure to stock (merchandise)
• Fixtures and fittings – taking into account the
should be the aim.
image of the business and the environment
• Sale items should be placed merchandise the stock of
required to make the right impression. goods in a store or business
at the storefront on what
• Placement of fixtures and fittings should attempt
is known as an ‘obstacle
to maximise traffic flow and optimise their use.
rack’.
• Placement of stock/merchandise should ensure
• A good place for potential impulse purchase items
that clients/customers see what the business wants
is next to the cash register.
them to see.
• Impulse and convenience items should be placed
• Efficient traffic flow.
in the highest traffic areas.
• Knowledge of your customers’ buying habits
• Basics are best placed at the back of the store so
should assist in planning layout accordingly.
people have to walk past other merchandise to get
• Opportunity to display merchandise attractively.
to them. Supermarkets generally put milk in the
• Ability to display complementary items together
back right-hand corner for this reason.
(e.g. supermarkets always place pet care items
• Items likely to appeal to children should be placed
near the pet food).
at lower shelf levels.
Retail layout • Music appropriate to customer demographics will
make them feel at ease, more inclined to linger
A well-planned layout will optimise sales and customer and therefore to spend.
satisfaction. The goal is to influence customer buying
behaviour, to minimise costs and to provide flexibility Types of retail layout
so changes can be made when required. An effective
layout provides maximum customer exposure to Grid layout
the merchandise and creates an attractive image for The grid layout places all fixtures and fittings at right
customers. angles and creates parallel aisles.
Hints for layout of retail operations A variation on the grid is a diagonal layout where
aisles are set at an angle to the front entrance. This
• Allowing plenty of space for circulation is the
maximises store space, and is good for self-service
key to an effective retail operation. It is important
outlets as it offers good visibility and traffic flow.
customers feel they can move through a store both
freely and fluidly.

Grid layout advantages Grid layout disadvantages

• Makes efficient use of floor and wall space • Customers may easily miss items
(less wasted space) • Not visually exciting for customers (boring)
• Cost-effective (can use cheaper standard • Limited browsing occurs
fittings)
• Good for stores carrying large volumes of
stock
• Easy for customers to locate items
Table 6.1 Advantages and disadvantages of the grid layout

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 Receiving and storage
Fruits

Books, magazines, Cart area

Vegetables
seasonal display

Entrance
Figure 6.11 A grid layout is commonly used in supermarkets. Office and
customer Checkouts
services
Exit

Figure 6.12 Example of a grid layout.

Figure 6.13 Diagonal grid layout

Loop/racetrack/mousetrap layout
In this layout, one main aisle loops around the store
like a racetrack. It gives customers only one direction
to go in, as they must walk around the perimeter of
the store until returning to the entry point. Furniture
stores often use this layout.

Spine layout Figure 6.14 A racetrack/loop layout loops through a store and
In a spine layout, a central customer aisle runs from returns customers to the entrance.
the front to the back of a store with merchandise (Source: SlideShare.)
departments branching off to the back walls.

Loop layout advantages Loop layout disadvantages

• Exposes customers to multiple • Difficult to locate specific items
departments and encourages cross • Wastes customer’s time
shopping
• Encourages browsing and impulse buying
Table 6.2 Advantages and disadvantages of the loop layout

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 Back room

Figure 6.16 Example of a free form layout

Figure 6.15 A spine layout is often used in fashion stores.

Suit jackets Accessories

Free form layout Fitting room Cashier Clearance
Dress shirts

Free form layout uses curves and creates visual

Pants
diversity through asymmetric patterns. Fixtures and
Pants

merchandise are grouped in free-flowing patterns,

resulting in no defined traffic pattern. It is often used

Popular item
in high-end stores that carry minimal stock.
New arrival/ Clearance
Mixed layout seasonal

Large retail stores often use a combination of layouts. Sale item

Sweaters

Setting up departments within the same store with

Sale item
Seasonal
Shirts

different layouts is more interesting and creates a

different vibe in different sections. A department store
may use a grid layout in its homewares section, a
racetrack layout in the clothing sections, and a free
form layout in giftware, for example. Figure 6.17 Plan for a free form layout

Free form layout advantages Free form layout disadvantages

• Soft angles encourage traffic flow • Less actual room for products to be
• Visual diversity (interesting to look at) displayed
• Good for use in speciality stores or for • Sacrifices storage space
departments of large department stores • Lack of defined traffic pattern
• Creates relaxing environment that • Possible confusion
encourages shopping
• Products displayed get extra emphasis
• Encourages impulse buying
Table 6.3 Advantages and disadvantages of free form layout

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 ACTIVITY 6.2
1 Classify the layout used by each of the following retail stores:
• Bunnings Warehouse • a milk bar
• a local supermarket • 7 Eleven
• a local fruit and vegetable store • Sussan
• Target • a jeans store.
• Big W
2 Draw up a table showing the advantages and disadvantages of each layout.

Office layouts lighting that must be adhered to. The aim is to create
efficient workflow, allow for effective communication
The layout of an office has considerable impact on patterns and encourage collaboration where required.
levels of productivity and quality. The modern office
requires staff to work together in departments/teams. Cellular office design
There are also legal requirements regarding minimum A cellular office has people located in separate offices,
space allocations, ventilation, temperature control and meaning they are apart from each other.

Cellular office layout advantages Cellular office disadvantages

• Promotes autonomous work • Difficult for teamwork
• Employees feel secure in their own space • Necessitates more formal meetings
• Employees can personalise the space • Staff may feel isolated and less involved
• Maintains confidentiality when required • May have negative effect on morale and
• Less distractions workplace culture as socialising is not
• Rooms can be locked for greater security encouraged
• Less spread of infectious diseases
Table 6.4 Advantages and disadvantages of cellular office layout

Filing Filing Filing Filing

cabinet cabinet cabinet cabinet

Waiting area

Reception
ry
ta
re
c
Se

Figure 6.18 Plan for a cellular office layout

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 Open plan office layout
Involves multiple employees being placed in a large
room with multiple work stations. Workspace is
shared and non-territorial.

Hot desking
Personal technology such as portable laptops and
tablet devices have allowed some workplaces to
move to hot desking. Hot desking involves multiple
workers using a single workspace during different
time periods. Upon arrival at the office, employees
store personal items in a locker and, not being bound
to any one workspace, take work areas on a first
come, first served basis. They set up wherever there
is free space.
Hot desking is usually found in workplaces
with flexible schedules for employees, when not
Figure 6.19 Cellular office layouts offer confidentiality and a all employees are actually working in an office at
quiet environment. the same time. Employees in such workplaces use

Computer work station Computer work station

Door
cabinet
Filing

Filing
cabinet
Computer work station

Computer work station

Computer work station

Supervisor’s
desk

Computer work station

Door

Figure 6.20 Plan for an open plan office

Open plan layout advantages Open plan disadvantages

• Promotes teamwork and interaction • May have negative effect on staff morale
(project teams) because employees no longer have
• Good for exchange and flow of ideas personal space
• Less requirement for formal meetings as • Studies show employees susceptible to
informal communication is encouraged high blood pressure and stress. Spread of
• Efficient use of workspace. Can air-borne diseases such as influenza.
accommodate more workspaces in a • Noise may impact on productivity and
smaller area. concentration levels
• Cost-effective • Lack of confidentiality
Table 6.5 Advantages and disadvantages of an open plan layout

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 Figure 6.21 Open plan offices are common. Figure 6.22 An ergonomically designed workplace can
increase productivity.

existing offices only occasionally or for short periods in creating workplace designs that optimise the work
of time, which leaves offices vacant. By sharing environment.
such offices, employees make more efficient use of
company space and resources.

Combination office layout

ACTIVITY 6.3
Explain the critical factors that must be
Many workplaces combine elements of both cellular
considered when deciding on layout for
and open plan layouts. Often several individual
the following businesses:
enclosed offices exist surrounding common
workspaces. A combination office layout allows for 1 childcare centre
privacy through access to areas conducive to solo 2 private hospital
work when required but also enables easy access 3 computer store
to group/team collaboration. This layout is good for
4 fast-food outlet
employees who move between
work environment 5 designer jewellery store
individual and teamwork.
the surrounding 6 motor mechanic workshop
conditions in which Other layout 7 café
an employee operates. considerations 8 swim school
Can be composed of
physical conditions, such Layout must take into
9 tattoo parlour
as office temperature, account employees’ work
or equipment, such as environment. Workplace 10 ice-cream parlour.
personal computers. It can ergonomics directly affect
also be related to factors employee productivity levels.
such as work processes or
Factors such as appropriate
procedures.
furniture and equipment, height
ergonomics the study of
the relationship between of workbenches, provision of
people and their working appropriate protective clothing
environment and even sufficient lighting
and temperature should all be
considered. The ergonomics professional specialises

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 ACTIVITY 6.4
Read the scenario, view the shop layout and Men’s shoes

Children’s shoes
answer the questions that follow. Register

Women’s shoes
Imelda’s Shoe Emporium is a shoe shop
Specials
located in a strip shopping centre in the bin

Seats

Seats
suburb of Snorbins. Lately the business has
noted the following trends and events:

Storeroom
Handbags
Staff and
• The specials are not selling. toilets and accessories
• The sales of men’s shoes are down. lunch area

• Several handbags and accessories on

display have been damaged. Figure 6.23 Layout of Imelda’s Shoe Emporium

• Customers complain about the smell

when trying on shoes.
• The registers are regularly crowded and there have been numerous complaints about
poor customer service.
• Several accidents have occurred with people colliding into each other.
• Shop stealing has increased.
1 Identify two potential occupational health and safety risks that are created by the use of
this layout.
2 Identify and explain three problems with the positioning of the register.
3 Give possible reasons for each of the above trends and events.
4 Using the ‘Hints for layout of retail operations’ above as a guide, suggest and justify more
appropriate positions for:
a the register
b the specials bin
c the storeroom
d children’s shoes.
5 Design a more appropriate layout for Imelda’s Shoe Emporium.

6.3 Sources of business Some products include business loans, lines of credit,
overdraft facilities, invoice financing, equipment
finance leases and asset financing.

Finance is crucial, especially when setting up a Retailers

business, and may be a major factor in the business’s
Many stores offer finance to purchase goods such
success. Finance can be sought for such things as
as furniture, technology or equipment, and many
purchasing a building or factory, motor vehicles,
also offer store credit through a finance company.
machinery, equipment and tools, and inventory.
Generally, this is a higher interest option and is suited
There are a range of finance options available to
to businesses that can pay the loan off quickly within
businesses. The business owner/manager should seek
the interest-free period.
financial advice about the best option. Some options
are outlined below.
Suppliers
Financial institutions Most suppliers offer trade credit that allow businesses
to delay payment for goods. The terms often vary and
Financial institutions such as banks, building societies
trade credit may only be offered to businesses that
and credit unions offer a range of finance products
have an established relationship with the supplier.
for both short- and long-term finance solutions.

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 Figure 6.24 There are a range of financial options available Figure 6.25 There are many types of business finance
for businesses. available.

Finance companies Venture capitalists

Most finance companies offer finance products via a Venture capitalists are generally large corporations
retailer. Examples include GO, Capital Finance and that invest large sums in start-up businesses with the
Motor Finance Wizard. potential for high growth and large profits.

Family or friends Stock market

Sometimes friends and family may offer money for a Also known as an initial public offering (IPO),
business, particularly if it is a small business starting floating on the stock market involves publicly offering
up. This is called a debt finance arrangement. It may shares to raise capital. This
impact on a relationship with family members if not can be a more expensive and initial public offering
done formally. complex option and carries (IPO) floating on the stock
the risk of not raising the funds market involves publicly
Private investors/business angels needed due to poor market
offering shares to raise
capital
Investors can contribute funds to a business in return conditions.
for a share of profits and equity. A business angel
invests in a new or expanding
Crowdfunding
business angel an business. Business angels Some social media websites offer entrepreneurs a
affluent individual who are usually involved in the crowdfunding platform for product prototypes or
provides capital for business, either directly or as innovative projects. This involves setting a funding
a business start-up, usually a mentor. They can provide goal, providing project and
in exchange for convertible
development capital, and budget details and inviting crowdfunding a way
debt or ownership equity
they can also contribute their people to contribute to a start- of financing a business
business skills and contacts to up capital pool. Crowdfunding through donations of money
from the public
benefit a new business. is a way of financing a business
Business angels can be individuals or businesses through donations of money
keen to operate in the area of risk capital (so called from the public. This is commonly done through
because when they invest, they take on part of the crowdfunding websites.
risk of growing a new business). The advantage of Generally, a business idea as a ‘campaign idea’
securing the help of a business angel is that they can is posted onto the website, with a description of the
make investment decisions fairly quickly. project. If people want to support the campaign, they
can donate money to help the business achieve its

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 ACTIVITY 6.5
Go to the website of two or more of the
main banks or finance companies (e.g.
National Australia Bank) and compare the
interest rates and types of loans available
to businesses.

repaid), interest rate, interest rate type (i.e. fixed or

variable), fees and security.

Overdraft facility
An overdraft facility is a bank’s authorisation that a
customer may withdraw cash over the amount that is in
their account, so that they have
a negative balance, to a certain overdraft facility an
Figure 6.26 Crowdfunding involves sourcing public donations overdraft limit. The customer extension of credit from a
for a business start-up through the internet. has to provide security (such lending institution when
an account reaches zero
as stock or buildings) and a
which allows the ability
goal. These supporters are often called backers. On favourable credit assessment to continue withdrawing
some websites, a business owner might need to set a showing that the business is money even if the account
monetary goal, and a timeframe. viable. An overdraft facility has no funds in it or not
therefore works like a loan but enough to cover the
To encourage people to support a campaign,
it should only be used to help withdrawal
some businesses can offer incentives and rewards
based on the amount donated. These incentives cash flow; that is, to provide
and rewards can be anything, such as merchandise, working capital before the business receives payment
acknowledgement or discounts on a future purchase. from its customers. Because the business has to pay
There are a number of advantages with a higher rate of interest on an overdraft compared to
crowdfunding as a source of finance. These include other forms of finance, it should not be used for major
gaining a customer base committed to the product, purchases or in the long term.
an opportunity to interact directly with customers and
gain feedback, plus free word-of-mouth marketing.
Commercial hire purchase
There are also a number of disadvantages, including Under a hire-purchase contract a business pays an
that there is no guarantee the funding goal will be initial deposit for goods such as machinery or vehicles,
reached, a need to campaign and present a product, which it can then use while it pays off the remainder
the need to provide incentives and rewards, and of the purchase price in instalments plus interest, like
having to compete with other businesses also seeking a lease. If an instalment is not paid the goods may be
crowdfunding for their ideas. 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
See the Interactive Textbook edition for a payment’. Using hire purchase, the business may
case study on crowdfunding. 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.

Loans Bootstrapping
There are a variety of loans available to businesses For a small business, raising the cash needed to start
that suit various situations. They vary in the amount, up, operate and then grow is always a problem.
loan term (the period in which the loan needs to be Lenders require security (assets as loan guarantees)

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 and interest, and investors take their share of profits • Having a good cash flow – avoiding the need to
out. make large payments before revenue comes in.
Bootstrapping, from the metaphor of pulling • Growing by using revenue – cash already paid by
yourself up by your own bootstraps, covers a range of customers:
ways of financing operations – taking advantage of the interest-free period on
bootstrapping a way in without having to borrow a lot a credit card used to buy supplies
which a small business of cash or take on investors. – restricting credit given to customers and selling
can finance its operations
Bootstrapping helps direct to cash-on-delivery customers rather
without having to borrow
substantial amounts of cash businesses to start up quickly than to distributors that require credit
(to take advantage of new – requiring cash advances/deposits from
venture capital money
provided by investors to markets and opportunities, customers against their orders
start-up firms and small for instance) and to avoid the – leasing equipment, or obtaining it through
businesses with perceived need to find venture capital hire purchase, rather than buying it with cash.
long-term growth potential. (start-up loans and investments • Networking with other businesses (these measures
An important source of from banks and financial may overlap categories of reducing overheads and
funding for start-ups
institutions). promoting good cash flow):
that do not have access
to capital markets. Bootstrapping methods fall – negotiating credit from suppliers
into these main categories: – bartering goods and services with other
• Keeping costs down: businesses to avoid using cash
– keeping overheads low; for example, operating – setting up beneficial deals with other business
from a garage or spare room where permissible, owners who often support the business
rather than renting more space – becoming acquainted with new business
– taking on multiple roles (multiskilling) – the owners who aren’t in direct competition.
owner is also the cleaner, answers the phones A web search for ‘bootstrapping business’ will find
and does their own paperwork. other examples and opportunities.

Figure 6.27 Bootstrapping methods reduce dependence on loans and investors.

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CASE STUDY 6.1
Thankyou takes on nappy giants

Thank​you won its way into the hearts of Australian consumers with its bottled water and now it is
taking on Australia’s nappy and baby product market.
The social enterprise has made its name by donating 100% of its profits from retail sales to fund
charitable projects in developing countries.
It all started with water and now Thankyou produces baby and body care and food products such as
muesli using the same model and has expanded its range to include 50 products, which are sold in
Woolworths and Coles.
Thankyou’s profits to date are $4.6 million, including a profit of $1.5 million last year, all of which is
distributed to the social enterprise’s impact partners.
Thankyou’s latest product is ‘Thankyou baby’ tackling child and maternal health and [co-founder
Daniel] Flynn says taking on the competitive nappy market will be the biggest challenge yet for the
social enterprise.
Nappies grew by 1 per cent in value terms to reach sales of $525 million in 2014 according to
Euromonitor, with one corporate giant dominating the market.
Kimberly-Clark Australia is the leading player in the category with a 69 per cent value share, largely
thanks to its main brand Huggies.
‘This is a massive market,’ Flynn says. ‘Our body care products have worked really well and there’s a
natural progression into baby body care but nappies are a really new thing for us. There’s one major
player, Huggies, and a bunch of people trying to catch up.’
Flynn says ‘100 per cent’ of the profits will go to funding child and maternal health projects, which
will help address a crisis where every 10.3 seconds a mother dies in childbirth and 2.7 million babies
die within a month of being born.
Child and maternal health is personal for the Flynns after having their first child last year.
‘I feel as a young parent there is such a deep connection,’ Flynn says. ‘Every time you change a
nappy you could be helping save another baby’s life, it’s a pretty powerful thought.’
On a practical level Flynn says his nappy-changing
experiences have made him realise there’s room for
improvement.
‘We’ve developed something that is more
absorbent and better functioning than what is on
the market and then we’ve innovated and lined
it with vitamin E and aloe vera,’ he says. ‘We
will produce both disposable and modern cloth
nappies.’
The Thankyou team is under no illusions about
the competition it faces.
‘Huggies is owned by a billion-dollar company
and listed on Wall Street,’ Flynn says. ‘It invests
$10 million a year in marketing.’
Flynn says he has been advised rival nappy
companies will set up teams to challenge the Figure 6.28 Taking on the nappy market is a challenge for
launch of Thankyou baby. the Thankyou brand.

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 CASE STUDY 6.1 continued

‘They will do bigger promotions than they have ever done before so mums and dads will stock up
their cupboards with nappies so when we launch we won’t be able to get the sales data to even stay
on the shelf,’ he says.
Flynn has calculated Thankyou needs $600 000 to launch Thankyou baby and will crowdfund the
product launch.
‘Hopefully tens of thousands of us will have been funding the launch so will buy the nappies and
baby body care,’ he says.
Flynn says the last seven years of Thankyou have been about proving the concept.
‘It works,’ he says. ‘Thankyou works in multiple categories and against multiple competitors and now
it’s time to scale the idea.’
Most crowdfunding operates by supporters buying the product they are helping fund but Thankyou’s
campaign centres around the launch of a book written by Flynn about Thankyou’s journey called
Chapter One.
The book will launch in Australia with a ‘pay what you want price’ and no recommended retail price.
It will be sold at airports and online.
Chapter One is formatted to be read vertically rather than horizontally.
Funding Thankyou baby is the first crowdfunding target and the second is to launch Thankyou in
New Zealand, which the social enterprise wants to raise $600 000 for.
(Source: C Waters, ‘Thankyou takes on nappy giants’, The Age, 27 February 2016.)

Analysis 2 Explain how the launch of the new book

1 Explain why Thankyou baby is turning to and chapters might assist the business.
crowdfunding to access more capital.

Figure 6.29 The Thankyou brand uses crowdfunding as part of its strategy.

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Chapter summary 2 Discuss the factors that a business needs
to consider when selecting suppliers and
• A business must plan to meet its resources.
resourcing requirements in terms of natural 3 Explain what workforce planning is. What is
resources, labour and capital items. the purpose of workforce planning?
• A procurement policy is required to provide 4 Suggest and explain four factors a business
guidelines regarding the selection of must take into consideration when
suppliers. selecting a location.
• Arrangements must be made for the 5 Suggest and justify an appropriate location
servicing of capital equipment. for each of the following businesses:
• Workforce planning is required to ensure a a a florist
supply of skilled labour. b a childcare centre
• Business location is a crucial decision that c an online store
is not easily changed.
d an advertising agency.
• Factors to consider when deciding on a
6 Identify suitable complementary
business location include:
businesses for each of the following
– business type businesses. Justify each:
– area demographics, profile, reputation a a swim school
and economic and social trends
b a jeweller
– level of competition in an area
c a gymnasium
– proximity to complementary businesses
d an ice-cream shop.
and suppliers
7 Define ‘ergonomics’. Discuss the
– site history
importance of ergonomics to workplace
– amount of foot traffic productivity.
– suitability of buildings and facilities. 8 Visit your local shopping centre and identify
• Once a location has been selected, the stores using each of the following types of
optimal layout must be identified and layout:
implemented. a grid
• Finance is a crucial aspect of business b loop
planning and the success of the business.
c spine
• There are a range of different sources of
d free form.
finance, including: financial institutions,
suppliers, retailers, finance companies, 9 Explain why it is important for a business
family or friends, business angels/private to investigate different sources of finance.
investors, venture capitalists, stock 10 Crowdfunding has become more popular.
market, crowdfunding, loans, overdraft Outline how it can assist a business in
facility, commercial hire purchase and expanding.
bootstrapping.
Extension question
Chapter summary questions Investigate three different sources of finance
1 Identify and outline examples of each of a business might access. Present this
the following categories of resources that information to potential business owners,
might be required by a large hotel: outlining the advantages and disadvantages of
a natural resources each source.
b labour
c component parts
d capital resources.

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CHAPTER 7 Key terms
• accountability • importer

Business structures and • Australian

Business
•
•
incorporation
intangible assets

models
Number (ABN) • limited liability
• Australian • limited
Company partnership
Number (ACN) • online business
Overview • bricks and • partnership
mortar business • partnership
The prospective business owner is required to • business model agreement
make numerous crucial decisions before a business • clicks and • passive investors
actually opens its doors. The method of entering into mortar business • private company
business is one of these decisions. A choice must be • company • proprietorship
made about whether to start a new business from • dotcom business • public listed
scratch or purchase an established business. Another • exporter company
option is to enter into a franchise arrangement with a • franchise • Registered
franchisor. All three options have advantages as well • franchise Business Name
as disadvantages. agreement (RBN)
The next decision to be made is which type of legal • franchisee • shareholder
ownership structure to adopt. The business owner • franchisor • social enterprise
must decide if they will trade under their own name • general • sole trader
as a sole trader, form a legal business partnership, or partnership • unlimited liability
incorporate the business and form a company. • goodwill
Finally, an appropriate business model must be
developed. This involves setting out a plan showing
how the business will operate and create a profit.
What’s ahead
Key knowledge
In this chapter students will learn about: Mode of entry
• Costs and benefits of purchasing an existing Purchase existing business
business compared with establishing a new Establish new business
business Enter into franchise agreement
Business structures and models

• Types of legal business structures such as sole

trader, partnership, franchise, private limited
company, public listed company and the factors
Business structures
affecting choice of business structure
Sole trader
• Types of business models such as online business,
Partnership
bricks and mortar business, social enterprise,
franchise, importer and exporter
Private company
Public listed company

Business model
Online/bricks and mortar
Franchise
Importer/exporter

Figure 7.1 Business structures and models

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 7.1 A new business from
scratch or an existing
business?
Once a decision has been made to enter into business
the next consideration is whether to:
• start a completely new business from scratch or
• purchase an existing business.
Each option has distinct advantages and
disadvantages. The potential small business operator
must decide which best suits their circumstances,
talents, skills, abilities, goals and personal
requirements.

Establishing a new business

This is usually the best option if the business involves
a completely new concept currently not available
on the market that the business operator intends to
develop.
The advantages of starting from scratch include:
• complete autonomy/control over the concept and
Figure 7.2 Starting a new business from scratch is riskier than
form of the business – the owner is able to put
buying a new business.
their personal stamp on the business
• the business price will not
goodwill the difference in include the added cost of • greater time and energy is required to establish a
value between the price that goodwill good name and reputation
a business is sold for and its • 
freedom to implement • more difficulty in obtaining finance with an
net asset value; reflects the
personal ideas unproven venture
value of the firm’s reputation
and trading contacts • 
i t avoids buying into the • a suitable location will need to be sourced and
mistakes of others the business resourced from scratch – this involves
intangible assets assets
that lack physical substance • 
complete autonomy in time and potentially greater expense
and are usually very difficult operating the business and • potential for unexpected competition
to value. Include patents, in establishment decisions • more scope for error with the new business owner
copyrights, franchises, • 
original ideas and being required to make more decisions
goodwill, trademarks and • a significant period of time before profits may be
concepts belong to and
trade names.
will be associated with the generated because a customer base and business
business goodwill need to be established.
• initial costs may be lower as intangible assets do Extra considerations when establishing a business
not need to be purchased. from scratch include:
Potential disadvantages of starting from scratch • locating and obtaining suitable premises
include: • registration of the new business name, plus the
• far greater degree of uncertainty and risk with no need to ascertain relevant licensing and codes of
previous sales history or figures to refer to practice requirements
• more work initially as establishment of business • establishment of relations with reliable suppliers
systems, procedures and hiring and training of • employment of staff
staff will be required from the ground up • registration of intellectual property.
• it will take longer to establish a client/customer
base and, therefore, cash flow

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Purchasing an existing business
If the new business operator decides they would
rather purchase an existing business as a going
concern, the following costs will be incurred:
• premises, plant and equipment
• inventories of unsold stock purchased at valuation
price (SAV)
• customer accounts
• contractual and legal rights such as patents
• employees
• goodwill
• intangible assets such as the value of the business
brand, any intellectual property such as patents
the business holds, and specialised knowledge
and expertise held. Figure 7.3 Purchasing an established business is an option.
Potential advantages of buying an existing business
include: Disadvantages of buying an existing business
• it involves a much simpler process, because things include:
like registration of business name and staffing • the intangible assets of a business, such as
have already been done goodwill, are difficult to value precisely and
• ready access to business financial records makes may be overvalued; the value of the business is
it easier to obtain finance therefore often difficult to gauge
• total cost is agreed upon initially and less likely to • danger that the purchaser may be ‘buying a lemon’
blow out (someone else’s failure)
• the business will become operational and generate • goodwill can, in fact, be bad will if a business has
cash flow more quickly a poor reputation.
• business operating procedures and practices are
Checklist for buying an established
already in place and do not require development
from scratch
business
• the business has existing suppliers, staff and client Ascertain exactly why the business is for sale. Is it
base in fact a failing business? Is the vendor selling for
• established policies and systems. financial reasons or not?
Have an expert do an assessment of the business
to ascertain if business goodwill is fairly priced.

Brands Goodwill

Intangible
assets
Knowledge Patents

Trademarks

Figure 7.4 Calculating the true value of a business for sale is often imprecise.

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 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 the premises.
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 Figure 7.5 A sole trader has more independence but carries
outstanding debts? more risk.
Check on the seller’s right to open a competing
business. business financial obligations from their personal
Take care: many businesses that change hands in assets, placing these at risk.
this way fail. This is known as unlimited unlimited liability full
BUYER BEWARE! liability. For tax purposes a liability of owner (if their
sole trader must declare all business fails) to the extent
7.2 Choosing the legal the business income as their
of their personal assets

business structure own.

Once the decision to start a new business or to buy an Partnerships

existing one has been made the next decision is which A business partnership
form of proprietorship combines the expertise and partnership a legal form
proprietorship the to adopt. There are four resources of between two of business ownership
ownership of a business main structures. Each one where two or more people
and 20 people. Each partner
has distinct advantages and is jointly liable for all debts (partners) work together
disadvantages.

Sole trader
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 the cheapest form
of business structure to establish. A sole trader
has exclusive rights to all profit and capital. Sole
trader operations are run
sole trader an individual by one person, often based
owner of a business, entitled from home. Sole traders are
to keep all profits after tax personally and totally legally
has been paid but liable for
responsible for all actions
all losses
and debts of the business.
They are liable to meet all Figure 7.6 Business partnership is usually set out in a
partnership agreement.

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 incurred by the business, The Partnership Act 1963 regulates partnership
general partnership all meaning they have unlimited dealings. Most partnerships
partners are deemed to liability. are based on a formal legal partnership agreement
be equally responsible for a formal document which
There are two forms of agreement known as a
the management of the outlines the duties and
business. Each has unlimited partnerships: partnership agreement. responsibilities of the
liability for debts and • General partnership when If a partnership agreement parties to a partnership
obligations. all partners are deemed to be is not signed, all partners
limited partnership where equally responsible for the are deemed equally liable
liability of one or more of the management of the business. for debts incurred.
partners is limited Common details included in a partnership
Each has unlimited liability
passive investor often agreement are:
for debts and obligations.
referred to as a ‘silent
partner’, provides financial • Limited partnership, • partner details
input into the business but where liability of one • commencement date and duration of the
does not actively participate or more of the partners is partnership
in the business operations limited. These limited • description of the business and the nature of the
partners are usually passive partnership, including individual roles and what
investors and not involved each partner brings to the partnership
in the day-to-day running of the business. Their • division of profits and remuneration
liability is limited in proportion to the amount • contribution of capital from each partner
contributed. • responsibilities of each partner within the business

ACTIVITY 7.1
’000 June 2013
800 June 2014
700
600
500
400
300
200
100
0
Companies Sole proprietors Partnerships Trusts Public sector (a)
(a) There were 572 actively trading public sector businesses in June 2013 and 516 in June 2014.
(Source: Australian Bureau of Statistics, ‘Counts of Australian businesses,
including entries and exits’, March 2015.)

Figure 7.7 Actively trading public sector businesses 2013–14

1 Rank the categories of business legal structure shown in Figure 7.7 from most to least
common.
2 List the categories of business which increased during period 2013 to 2014. By how much
did they increase? What do you think were the reasons for this?
3 Identify which category fell during this period. By how much? Provide possible reasons.

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 and who has authority to do things such as access Company
bank accounts
• how disagreements will be resolved Another legal business structure to consider forming
• provision for admitting new partners is a company, otherwise known as incorporation.
• termination clauses, including procedures for Features of companies are:
distributing assets when the business is wound up. • Companies have their company a separate
legal entity (incorporated
A partnership does not have an ongoing life: own independent legal
body) that is subject to
if one partner leaves, a new partnership must be entity, separate from their the requirements of the
formed. In other words, there is no perpetuity. It is owners. They are formed Corporations Act 2001,
generally accepted that a person should only enter according to legislation owned by shareholders who
and are registered with have limited liability, run by
into a business partnership with people whom they
the Australian Security and directors and has perpetual
completely trust, since a business partner may be succession
liable for their partner’s debts. Investments Commission
(ASIC). Setting up a incorporation the process
of legally declaring a
company can be both
ACTIVITY 7.2 expensive and complex.
corporate entity as separate
from its owners
Bill, Barry and Bob are intending to enter • The owners of a company shareholder owner of a
into a business partnership. They are going are referred to as company
to establish a driving school. Bill intends to shareholders. limited liability
work in the business full time as a driving • A company pays tax on shareholders are only
its earnings as a separate personally liable to the level
instructor. He will contribute 50 per cent of
entity. of their original investment
the start-up capital and expects to earn a in the company
weekly wage. • Company directors are
appointed by shareholders
Barry will contribute 20 per cent of
to manage and control the company.
the capital. He will work part time in the
• A company structure offers the protection
business as the financial officer.
of limited liability, whereby liability of the
Bob is not intending to work in the shareholders is limited to the value of their
business, but will contribute 30 per cent of shareholding.
the working capital.
There are two forms of company: private and
Questions public. Each is discussed below.
Suggest what should be included in
the agreement in each of the following Private company
categories: The main features of a private company are:
1 The amount of capital each person • A private company is
restricted to a maximum private company a
brings.
company where the
of 50 shareholders.
2 How profits will be distributed. shareholding is limited
• Shares can only be traded (small), with shares being
3 The roles and responsibilities of each
with the permission of the sold privately; often run as
partner.
other shareholders, which a family business; has the
4 How disputes will be handled. must be given before the words ‘Proprietary Limited’
5 Salaries and remuneration. transaction takes place. (Pty Ltd) at the end of the
company name
Justify your answers. • Private companies have
the letters ‘Pty Ltd’ after
their name, which means ‘Proprietary Limited’.
• Private companies are often family companies.

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 Figure 7.8 Public listed companies, such as those shown above, are identifiable by the letters Ltd.

Public (listed) company Which structure is the best?

Larger companies are usually public listed Different structures are suited to different businesses.
companies. These have an unlimited number of A business owner must decide which structure best
shareholders. Other features suits them. Factors that need to be considered are:
public listed company are: • size of the business
larger company with • A  company initially issues • people involved
unlimited number of a prospectus inviting the • type of business
shareholders; shares can be public to purchase shares. • taxation and other financial issues
freely traded on the stock • Shares are freely traded on
exchange; has the word • finance
the stock exchange. • start-up costs
‘Limited’ (Ltd) after its name
• Public companies can • degree of risk
be recognised by the word • personal preference.
‘Limited’ (Ltd) after their name, showing that they
offer limited liability to their shareholders.
• Public companies are legally obliged to publicly
report on their activities.

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 Business
Features Advantages Disadvantages
structure
Sole trader • One owner who • Inexpensive and • Unlimited liability
operates the simple to set up places personal assets
business under • Easy to maintain at risk
their own name or a • Sole trader has • Owner is tied to the
Registered Business complete control over business; difficult to
Name (RBN) and all aspects of the have holidays or sick
Australian Business business days
Number (ABN) • Sole trader owns all • Profits are taxed at
assets and receives the marginal tax rate,
Registered Business all profit which is higher than
Name (RBN) a trading • Less paperwork the company tax rate
name under which a person • Easy to disband • Fewer tax concessions
(sole trader) or partnership • Simple to wind up • Harder to get finance
conducts its business or
• No legal requirement • Reliant on own
trade
to disclose profits/ knowledge and skills
Australian Business
Number (ABN) nine-digit losses (as with
identifier of a company companies), privacy
• Minimal government
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
• Offers broader access and personality clashes
to capital, knowledge, • Taxation at personal tax
skills and experience rates, which are higher
than company tax rates
Private • Shareholders • Limited liability • High degree of
company (owners) are legally • Extra capital can be complexity in
(Pty 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 and
run the company threatened with reporting requirements
• Has an ABN death or removal of • Additional compliance
• Operates under one of the directors costs
registered company • Can trade anywhere • Legal obligation to
name and Australian in Australia report financial situation
Company Number publicly (less privacy)
(ACN)
• Registered with Australian Company
ASIC, which issues Number (ACN) nine-digit
Certificate of number to be used on a
company’s common seal
Incorporation
and all public documents
involving the company

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 Business
Features Advantages Disadvantages
structure
Public • Unlimited number of • Limited liability • High complexity and
company shareholders • Extra access to establishment costs
(Limited or • Shares can be bought capital through selling • More government
Ltd) and sold on stock extra shares scrutiny, control
exchange • Separate legal and compliance
• Has an ABN existence requirements
• Has an ACN • Existence is not • Need for more
• Registered with threatened with accountability and
ASIC, which issues death or removal of paperwork
Certificate of one of the directors • Legal obligation to
Incorporation • Shares easily report financial situation
transferable publicly (less privacy)
Table 7.1 Features, advantages and disadvantages of ownership structures
accountability the extent
to which a business has to
account for its activities,
accept responsibility for
CASE STUDY 7.1 them and disclose results in
a transparent manner
Cotton On

‘Cotton On is a true Australian new generation success story,’ retail expert and former David Jones
chief executive Paul Zahra says. Here’s how they did it.
Nigel Austin was studying business at university when, in need of cash, he started selling acid-wash
denim jackets from the boot of his car at the markets in Geelong almost 24 years ago.
In the first week he sold just one jacket for $30, barely enough to pay for lunch and petrol.
Undeterred, he went back to his supplier, who just happened to be his father, the late clothing
wholesaler Grant Austin, and negotiated a better deal.
‘The next week I sold all 20 and made $200 – I thought that was pretty addictive,’ Austin says.
Now 44, Austin is still selling denim jackets – as
well as t-shirts, jeans, checked shirts, dresses,
sweaters, bras, undies and homewares – but his
Cotton On Group retail empire has grown from
just two stores in 1991 to more than 1300 stores
across eight brands in 19 countries including the
US and South Africa.
Sales have risen more than 20 per cent a year
for at least five years and are forecast to reach
$1.51 billion this year, seemingly unaffected by
the invasion of international fast-fashion chains
such as Sweden’s H&M, Inditex’s Zara, Arcadia
Group’s TopShop and Japan’s Uniqlo.
With almost 760 stores in Australia alone, the
home-grown casual fashion factory arguably has
more influence on what we and our kids wear
on the weekend than any other fashion chain.

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 CASE STUDY 7.1 continued

‘Success story’
Cotton On Group is now bigger than Solomon Lew’s Premier Investments, which owns Just Jeans,
Dotti, Portmans and Jay Jays, the Country Road/Witchery/Mimco group and even surf and skate wear
retailer Billabong International. It’s one of only a handful of domestic retailers that have successfully
ventured overseas.
…
But Austin, his cousins Ashley and Michael Hardwick and their trusted lieutenant, chief executive
Peter Johnson, have finally decided to lift the lid, disclosing for the first time the size of the company,
its growth strategy and its ambition to become the world’s dominant value fashion retailer.
…
No plans to sell
In exclusive interviews with AFR Weekend, Austin and the Hardwicks ruled out an initial public offer
and say they have no plans to raise external capital or sell out, despite keen interest in the past from
private equity investors and domestic competitors.
‘They wouldn’t even get to me today because it’s not even on the agenda,’ Austin says.
‘It’s just not something we spend time thinking about,’ says Michael Hardwick, 46, who joined Cotton
On as chief financial officer in 2009 after a long career with PwC and working in venture capital in
the US. ‘We don’t need to do it [raise external capital] to continue to deliver on our aspirations for the
business.’
On a chilly Tuesday last week, the 1000-odd staff at Cotton On’s headquarters in an industrial estate
in Geelong’s north gathered for the group’s monthly BBQ for an update on February sales and to
learn more about plans for the coming year.
‘It was another cracking month, the fifth in a row where we’ve beaten the market,’ says Johnson, who
worked for Country Road and Sussan Group before joining the COG team in 2004.
Comparable store sales across the group rose 9.2 per cent in February, led by 22 per cent growth at
Cotton On Kids, 14.8 per cent at Supre, which was acquired in 2013, 12.5 per cent at stationery and
homewares chain Typo and 8.6 per cent at the original Cotton On brand. In a subdued consumer
spending environment, where annual retail sales growth is tracking at a below-trend 3.6 per cent
and clothing sales are growing around 2.8 per cent year-on-year, it was an impressive performance,
fuelled largely by overseas demand. Australian comps rose an enviable 8.8 per cent, Malaysian comps
jumped 42 per cent, Singapore 15 per cent, Hong Kong by 14 per cent and Thailand 11 per cent.
New jobs
As staff bobbed for plastic fish in an inflatable pool or tucked into hamburgers with quinoa salad,
Johnson unveiled plans to add 227 head office jobs this coming year – 171 in Geelong and 56 in
Cotton On’s four global hubs. Another 2000-odd retail jobs will be created as Cotton On opens more
than 100 stores over the next 12 months.
Over the next three years the group plans to open 570 stores around the globe, taking the total to
almost 1900, while lifting online sales to $250 million. 
…
Products are designed by a team of more than 60 designers and trend forecasters, with a turnaround
time between design and manufacture of two to eight weeks, depending on the category. Range
reviews are conducted for each brand every quarter. New products are dropped in stores daily and
new ranges arrive each week.

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 Products are manufactured by 170 suppliers at 330 factories, mainly in China and Bangladesh, and
are sent by sea freight to seven distribution centres in Melbourne, Brisbane, South Africa, China,
Singapore, California and New Zealand.
…
Austin and the Hardwicks have no plans to retire soon, but like any family company COG will
eventually have to grapple with the issue of succession planning.
Austin says his father taught him almost everything he knows about retail, but is reluctant to hand his
share of the business to his own children, saying the burden would be too great.
In last year’s BRW Rich List, Austin was estimated to be worth $295 million. But industry sources say
COG would be worth more than $1 billion, based on sales of $1.5 billion and estimated earnings of
$150 million, although it is impossible to verify these numbers.
‘At this age they’re still saying they’d like to take it over but the responsibility of such a big business
[would be unfair], and it’s going to be so much bigger by then, I don’t think it’s realistic,’ he says. ‘It’s
been a really great role to grow into as opposed to stepping into it.’
Ashley agrees. ‘It’s going to be a pretty big business, but with new people coming into the business
all the time and the new brands and countries it keeps the enthusiasm levels high – we don’t really
need an exit plan.’
(Source: S Mitchell, ‘Cotton On: the inside story of the retailer’s rise
to $1.5b in revenue’, The Age.com.au, 2 April 2015.)

Analysis 6 Cotton On is still a private company. Explain

1 Name the founder of Cotton On. Describe what this means and how it differs from a
how, when and where this business was public listed company.
founded. 7 Outline the reasons given in the article
2 Describe how the Cotton On business for Cotton On deciding to stay with the
expanded between 1991 and the present. private company business structure for the
3 List six facts from the article that moment.
demonstrate the extent of the success of 8 Analyse the advantages and disadvantages
this business. for Cotton On of remaining a private
4 Name five other stores or brands owned by company.
Cotton On Group.
5 Describe the plans Cotton On has for
expansion.

7.3 Types of business the components and functions of the business, as

well as how revenue will be generated and expenses
models incurred. An original, unique or variation on an
existing business model can become a competitive
Businesses must select the
advantage.
business model the most appropriate business
plan implemented by
a business to generate
model that meets their Online vs bricks and mortar
needs and maximises their
revenue and make a profit.
chances of business success.
business models
The model includes the
components and functions of A business model is the plan Business enterprises with no physical presence that
the business, as well as how implemented by a business to conduct business via the World Wide Web have
revenue will be generated generate revenue and make become commonplace. Businesses in virtually every
and expenses incurred. a profit. The model includes sector of the economy now rely on the internet in

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 some form in order to reach customers, promote
products and widen their customer base.

Online (internet-based) business

models
There are seven main online business models:
1 Advertising model: The advertising online model
involves a website providing content, either free
or for a fee. Advertisers then
online business business pay the website to advertise/
that conducts activities via promote their products on
the World Wide Web the website. Payment may
be based on the number of
advertisements placed (per impression), per click
or simply via a fixed cost. Facebook is one of
many utilising this business model. Services Figure 7.9 Facebook uses an online advertising business
model. eBay uses a brokerage model.
such as Google AdSense and BuySellAds act as
agents helping businesses add advertising to their
websites.
2 Affiliates model: This model rewards the owner of
a website every time a user clicks on a promotion
and purchases a product.
3 Brokerage model: Businesses that use this
model act as agents bringing buyers and sellers
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.
4 Merchant model: This model involves a business
making direct sales to consumers via the internet Figure 7.10 Merchant online business model
in lieu of a bricks and mortar store. Amazon.com
and most retail operations use this model.
5 Subscription model: This model involves a business 7 Community model: These websites build a
charging a payment or subscription to log onto community of users interacting with each other.
its website. Media outlets such as News Limited Blogs and chat sites are examples. Money is
(Herald Sun) and Fairfax (The Age) use this model. made via charging a subscription fee or calling for
6 Information model: This model involves a website donations. Wikipedia is an example of this model.
charging for information. The sale of eBooks is an
example.

ACTIVITY 7.3
Go to each of the following websites. Classify each according to the online business model/s
used.
ASOS Gumtree YouTube
Twitter Facebook LinkedIn
Mycareer.com eBay Age.com
Guardian.com Slideshare Airbnb
Uber Candycrush Any Blog

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 • Customers may be reluctant to purchase online
as they are unable to physically handle or try the
products before purchase.
• The sense of trust and authority associated with
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.
• Online fraud has the potential to negatively impact
on the business’s reputation.

Bricks and mortar business model

A business that has a traditional physical presence
involving stores, offices or production facilities that
customers/clients actually
Figure 7.11 An online business model allows for greater
attend, rather than relying on bricks and mortar
flexibility.
an online presence, is referred business business with a
to as having a bricks and physical presence such as a
mortar business model. A shop front or office. Involves
Advantages of adopting an online face-to-face interaction with
bricks and mortar business
business model model usually offers face-to-
customers.
• It offers an easy and instantaneous connection face customer interaction.
with customers, suppliers and other stakeholders.
In effect, the business can operate 24 hours a day Advantages of a bricks and mortar
worldwide. business model
• Promotion and marketing are usually cheaper and • Face-to-face customer interaction is possible. This
accessible to a wider world market. builds up a relationship with customers/clients
• Costs/overheads are significantly less. There is and may contribute to increased sales through
no need to pay for premises, and overhead costs, building a base of loyal, return customers.
such as bills and insurance, are less. Staffing • Customers can see, touch and try products before
requirements and costs are also less. purchase.
• Customers are easily able to access and purchase • A physical presence with identifiable buildings
online from anywhere they can connect via an and location makes it easier to build a trusted
electronic device. Similarly, the business can be brand.
operated from remote sites.
• It is easy to keep track of competitors and change
prices to match them.
• The potential for rapid growth is greater as costs
of doing so, such as staffing and bigger premises,
are reduced.
• The potential for customer impulse buying is
significantly higher.

Disadvantages of an online business

model
• Online commerce is often impersonal and a
personal relationship is usually not developed
between buyers and sellers. As a result, repeat
customers are more difficult to maintain.
• The costs of planning, designing, hosting, securing
and maintaining a professional e-commerce
website are considerable. Figure 7.12 A bricks and mortar business model

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 Disadvantages of a bricks and mortar
business model
• Overheads and costs are higher.
• Shopping is less convenient for customers with
busy lifestyles or who live in remote locations.
• A wider range of stock can be provided online.
• The potential market is smaller.
• Customers may face queues and crowding in a
physical store.

Combining models
Many businesses that have been trading using a
traditional bricks and mortar business model before
the development of the World Wide Web have since
developed and adopted online services and sales in
addition to their traditional model. Most major retailers
such as Woolworths, Coles, Myer and David Jones Figure 7.13 Cafés are a business type that is compatible with
the social enterprise model.
have done this in order to maintain competitiveness.
These businesses are referred
buying and selling goods and services with a view to
clicks and mortar to as being clicks and mortar
business a business that creating a profit. Unlike a traditional business, however,
businesses. Businesses that
utilises a hybrid online/ the social enterprise business’s prime motivation is
have never owned a physical
bricks and mortar business not to create profit for owners/shareholders. Instead,
shop front and have always
model it aims to use profits to fund or support social causes.
solely operated using an online
dotcom business a Such causes might include reduction of poverty or
business that has always model are often referred to as
social disadvantage, provision of employment to
exclusively used an online dotcom businesses.
disadvantaged groups or addressing environmental
business model
social enterprise private Social enterprise issues. Many social enterprises do make a profit,
but this is not usually their main reason for being.
sector business that models Profits go back into the business or to a charity. Social
distributes profit to benefit
the community rather than A social enterprise uses a enterprises differ from charities in that they derive
individual shareholders traditional business model of income from business activities and not donations.

ACTIVITY 7.4
Go to the Social Traders website and answer the following questions.
1 Explain what a social enterprise is.
2 List and explain two ways a social enterprise differs from a charity.
3 How many social enterprises exist in Australia?
4 By what percentage has this increased over the past few years?
5 Identify the contribution made to Australia’s gross domestic product by social enterprises.
6 Classify each of the following social enterprises as one of the categories of social
enterprise (employment, goods and services, investment, hybrid):
a CERES
b Fair Trade Coffee Company
c Bawrunga Aboriginal Medical Service
d Cleanable
e Australian Disability Enterprises.

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 There are four main social enterprise models: return will provide assistance, advice, suppliers and
1 Employment model: These social enterprises reputation. The franchisee is, in effect, paying for
provide employment for marginalised people in the right to replicate another
business in its entirety. The franchisee the person in a
society such as those with a disability, those with
franchisee usually pays a franchising agreement who
cultural or language barriers or any disadvantaged purchases the right to use
group. one-time franchise fee plus
a business’s trademarks,
2 Goods and services model: These social enterprises a percentage of sales revenue associated brands and other
aim to offer alternative products to those seen to as royalty. In return, the proprietary knowledge in
be socially or environmentally harmful. Fair trade franchisee gains immediate order to open a branch.
name recognition, tried and In addition to paying an
is an example. Other enterprises provide organic
tested products, recognisable annual franchising fee,
food or products. the franchisee also pays a
3 Social investment model: These businesses usually building design and décor,
portion of turnover to the
operate a traditional business model. All profits marketing, employee training, franchisor.
are given to a charitable cause. and ongoing help promoting franchisor the company
4 Hybrid model: A hybrid combines more than one and upgrading products. or individual owning/
of the above models. For example, a restaurant A franchisor retains a controlling the rights to
selling organic foods sourced on a fair trade basis, significant level of control grant franchises to potential
over franchisees’ operations franchisees
employing long-term unemployed people, that
in order to safeguard their franchise where a business
directs its profits to charity.
trademark, and to ensure owner (franchisor) grants
another (franchisee) the
Franchise models the quality of their product
right to use their trademark
remains consistent from or trade name, business
Franchising involves a franchisee paying another location to location. For systems and processes,
business (franchisor) for the right to use that example, any time you order to produce and market a
business’s trade name, products and operating a Big Mac from a McDonald’s good or service according to
systems. The franchisor will then exercise a degree store you know exactly the certain specifications
of control over the running of the business, but in form and quality of what

Figure 7.14 A franchise operation offers less autonomy but is less likely to fail.

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 Figure 7.15 Some well-known franchises

you are buying, even though it is likely that each Disadvantages of a franchise business model
McDonald’s will have a different franchisee owner. include:
A franchisee signs a legal document known as a • far less independence – in effect, a franchise
franchise agreement that owner performs the role of manager rather than
franchise agreement specifies the rights and owner
a legal document that responsibilities of both • a franchise owner is not able to utilise their own
outlines the rights and franchisor and franchisee. A
responsibilities of the ideas
franchisee will be given an • excessive costs and fees. As well as an initial
franchisor and franchisee
exclusive right to operate the purchase fee, the franchise owner will also be
franchise in a specified trading expected to pay a monthly service fee and a
area and agrees to pay set fees that may include: percentage of takings.
• an initial, upfront fee • the franchise is judged by the performance of other
• a percentage of sales income each month franchisees. Poor service provided by someone
• a regular advertising and marketing fee. else affects all.
Advantages and disadvantages of a Franchising: some history
franchise Here are some interesting facts about the development
Advantages of a franchise business model include: of franchising as a business model.
• significantly reduced risk of business failure • The modern franchising model blossomed in the
• avoidance of the franchisor’s initial mistakes USA during the 1950s and 1960s. McDonald’s,
• franchisor-provided training Kentucky Fried Chicken, as well as several laundry
• a business system that has been tested and has and dry-cleaning franchises, hotels and rental cars
usually succeeded were all significant players.
• expert assistance and advice from the franchisor • Within a 10-year period, McDonald’s opened 100
• less responsibility for decision making, as many stores, Midas Mufflers had 400 locations, Holiday
key decisions are made by the franchisor Inn 1000 motels and Budget Car Rental 500 outlets.
• established suppliers and the advantages of bulk • Isaac Singer (1811–75) is credited as being the
buying (i.e. economies of scale) modern father of franchising. During the 1850s,
• established procedures, policies and processes Singer was selling his sewing machines. He wanted
• established buyer awareness of the brand name increased sales and a wider distribution, but could
• easier access to finance not afford to manufacture more. Customers also
• guarantee of an exclusive territory, which limits wanted training in how to use the machines, which
competition retailers were not able to provide. Singer therefore
• the franchise business should become immediately decided to charge licensing fees to people to sell
competitive as it is a recognisable and known his machines in a specific area. Each licensee was
brand. also expected to provide training to customers.

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 This provided the money for manufacture of new
Number of franchise
machines. Year
outlets (Australia)
• Ray Kroc (1902–84) is credited as the founder
of the McDonald’s franchise. A milkshake mixer
1990 9 570
salesman, Kroc, came across the McDonald’s 1998 43 800
hamburger store in California in 1954 and was 2002 51 100
impressed by the business model. He became 2008 71 400
its licensing agent and recruited franchisees. In 2012 73 000
1961 Kroc bought the McDonald brothers out. By
1988 there were more than 10 000 McDonald’s Table 7.2 Franchising facts
franchisees across the USA. Now there are more
than 30 000 worldwide.

In Australia Importer and exporter business

• Post World War II: Car manufacturers such as Ford models
and Holden established a franchise model for Businesses that buy and sell products across
retail sales. Petrol companies such as Shell, Mobil international borders have an importer or exporter
and Caltex established franchise models for petrol business model. According to
stations. the Department of Foreign importer purchases
• 1968: Kentucky Fried Chicken (now KFC) Affairs and Trade Australia’s overseas products for resale
established its first Australian store. two-way trade in goods and in their home country
• 1970–71: Pizza Hut, McDonald’s and Hungry Jack’s services was worth $660 billion exporter sells home-
opened their first franchise outlets in Australia. country products overseas
in 2014–15 (see Cambridge
weblinks: http://cambridge.

ACTIVITY 7.5 edu.au/redirect/?id=6975).

Research the history and development of

one of the following franchised businesses
operating in Australia:
• McDonald’s
• KFC
• Boost Juice
• Bakers Delight
• Jim’s Mowing (or another Jim’s Group
franchise).
Write a brief report outlining:
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).

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 Reasons for adopting an importer or
exporter business model
There are a number of strong reasons for adopting an
importer or exporter business model.
• Price differentials between countries – some
products are cheaper to manufacture and assemble
in one country than another. Raw materials and
labour are cheaper in some parts of the world,
making it attractive to source some products from
those countries. Importers and exporters take
advantage of economies of scale to source goods
from countries with lower cost structures and
then sell the goods in countries where a higher
price can be obtained. For example, clothing and
footwear produced in South East Asia is often
cheaper than similar items produced in Australia.
• Differences in quality, reputation and image –
French perfume has a high reputation and
Egyptian cotton is highly regarded in Australia.
Australian wine is highly regarded in many parts
of the world. Australia is a source of high-quality
agricultural produce and dairy products. Figure 7.16 Businesses across international borders adopt
• Ready availability of goods in quantities – some importer or exporter business models.
things are not grown in Australia, and some goods
cannot be manufactured here for a competitive will take advantage of these. Some established
price. Electronic goods are currently being sourced businesses see Australia as an expanding market
from Asian countries where they are produced in and establish operations to take advantage of
large quantities and are available at competitive this; for example, fashion retailers H&M, Zara and
prices. Uniqlo have all created a presence in Australia.
• Seasonality – agricultural products are mostly Similarly, some Australian businesses have
seasonal. At different times of the year some expanded overseas; for example, Australian surf-
produce will grow in one part of the world, with wear producers.
many countries obtaining their supplies from that Import or export businesses need to be aware
country. As the seasons change, the parts of the of legal requirements and restrictions in moving
world where the products are sourced will change. products between countries. Labelling requirements
• Business opportunities become available for niche and quarantine requirements, as well as import
markets in Australia and overseas. Entrepreneurs licences, need to be investigated.

ACTIVITY 7.6
Select two of the following companies. Locate the website of each using a search engine.
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.
JTC Import Export Cut Price Imports Leo’s Imports & Distributors
DK Choices Durmaz North South Importers &
Wholesalers

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Chapter summary • There are two types of company:
– Private company: two to 50
• The potential business operator may opt to shareholders; not listed on the stock
enter into business in one of the following exchange; identified by ‘Propriety
ways: Limited’ (‘Pty Ltd’) in its business name.
– Establishment of a new business from – Public listed company: unlimited
scratch. This offers the advantages shareholders; shares are listed for sale
of greater autonomy and control over on the stock exchange; business name
the business and its development, ends with ‘Limited’ or ‘Ltd’.
as well as freedom to implement • Each business structure has its own
original ideas. The owner also avoids advantages and disadvantages.
buying the mistakes of others.
• A business model must be selected and
Disadvantages include extra costs and
developed showing how the business
time in purchase of all capital stock,
will operate and generate profit. Types of
staffing and establishment of business
business model include:
systems, procedures and relationships
with suppliers. It also takes longer to – online
generate a profit. – bricks and mortar
– Purchase of an existing business. – social enterprise
Advantages are: a simpler process, – franchise
access to financial records, established – importer or exporter.
clients and suppliers, staff, etc.
Cash flow commences sooner and
profits should come more quickly.
Chapter summary questions
Disadvantages are: intangible assets 1 Define each of the following terms. Then,
such as goodwill are included in a sale using each term accurately, construct a
price. These are difficult to value. A paragraph that includes each of them.
purchaser may be buying the mistakes a Franchise
of others.
b Goodwill
• A legal business structure must then be
c Sole trader
selected:
d Established business
– Sole trader: a single owner operates
a business under their own name or e Partnership
a registered business name. This is f Pty Ltd
simple and easy to establish but has the 2 Identify and summarise the advantages
drawback of unlimited liability. and disadvantages of each of the following
– Partnership: between two and 20 options for entering into business:
partners operate a business based on a a starting a business from scratch
partnership agreement. This also carries b purchasing an existing business.
the risk of unlimited liability.
3 Suggest and justify the most appropriate
– Company: establishment of a separate method of entering into business for each
legal entity through a process of of the following:
incorporation. Offers the advantage of
a X has a limited budget. She wishes to
limited liability.
run a small café in her local area. The
area already has several cafés.
b Y has a new invention she wishes to
market.

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 4 Draw up the following table and fill in:
Private company (Pty Ltd) Public listed company (Ltd)
Features

Differences

Similarities

5 Identify the ownership structure of each of Extension questions

the following businesses:
a Sophie’s Kitchen Pty Ltd Go to the Franchise Business website and
answer the following questions.
b Voula and Son Plumbers
1 Outline the services that are available via
c Effie’s Corner Store
this website.
d Norfkut Ltd
2 Identify and research two categories of
6 Explain why it is vital for business partners franchise. For each, select two franchises
to have complete trust in each other. currently for sale.
7 Identify the key features of, and differences 3 For each franchise opportunity, name and
and similarities between: describe:
a an online business model a the franchise and types of goods/
b a bricks and mortar business model. services sold
8 Define each of the following terms and give b the areas available for purchase
two examples of each: c the market demographic this franchise is
a a clicks and mortar business appealing to (i.e. customer type)
b an online business. d the costs, fees and charges involved in
9 Discuss the advantages and disadvantages the purchase of each.
of a business adopting an online business 4 Evaluate which of the four franchise
model. opportunities you have researched offers
10 Identify and briefly describe the seven the best chance of business success. Give
types of online business model. Name at reasons for your answers.
least one online business that uses each
model.
11 Identify the online business model used by
each of the following:
a Melbourne Girl
b Quick Sales
c Horoscope.com

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CHAPTER 8 Key terms
• Business • network

Business support services Enterprise

Centres
• professional
association
• business • Small Business
incubator Centres Victoria
Overview • contracts (SBCV)
• industrial • start-up
Potential and existing business operators in Australia
espionage • support services
have at their disposal a wide range of support services
• mentor • transition period
providing expert advice and assistance. Effective
utilisation of these support services gives a business
greater chance of success. In recent years, the range operators, if they wish to optimise their chances
and availability of these services has expanded. of long-term success, are aware of, and know how
Australian governments, in particular, offer a wide and where to access the numerous support services
range of services and assistance at little or no cost. available to them.
A healthy economy is built on the success of There are several places a business operator can
business. In particular, small businesses employing access advice and assistance both on a formal and
fewer than 20 people make a significant contribution. informal basis.
Australia-wide there are more than 2.2 million small
businesses employing more than 5 million people
(or half of private sector employment), with a total
Key knowledge
capitalised worth of more than 4.3 trillion dollars (see In this chapter students will learn about business
the Australian Government’s Treasury website for support services such as:
more information). Obviously, it is in the interest of • Legal services
government to optimise the chances of small business • Financial services
success, as this will translate into a healthy economy. • Technological services
Studies have shown that successful businesses • Community-based services
tend to utilise the available support services more • Formal and informal networks
than those that fail. It is therefore vital that business • Business mentors.

What’s ahead
Informal Formal sources
support and of support and
assistance to assistance to
business business
Legal: lawyer
Financial: accountant/banker
Competitors Consultants: marketing, insurance,
Previous owners business services
Complementary businesses Government: online, mentoring,
Networks incubators, networks, SBCV, BEC
Media: websites, publications,
personal research

Figure 8.1 Informal and formal business support sources

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 8.1 Informal support and
assistance provided by
networks
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,
network an interconnected such as operating in the same
system of people or geographic area or being from
businesses
the same industry.
Networks facilitate the
exchange of ideas and advice and support between Figure 8.2 It is common to have a transition period where
like-minded individuals and between groups of outgoing owners train the new owners.
people. ‘Old Boy’ and ‘Old Girl’ networks from
particular schools, for instance, are extremely access to staff. A network can offer invaluable advice,
important in the business world. Connections with support and assistance for minimal cost.
a particular school can open doors in business that The previous owners of a business are potentially
may otherwise remain closed. Business breakfast valuable sources of information and assistance
clubs, where business operators gather at breakfast as they may be able to demonstrate established
meetings, are another important and growing network. systems operating in the business, as well as provide
The Victorian Government Network Program offers important information about clients, such as tastes and
grants of up to $15 000 to assist small business in buying habits. Previous owners often help identify
establishing networks in order to provide mutual appropriate suppliers and advise on potential sources
advice, assistance and support in general (see the of support. It is wise for a new
Business Victoria website for more information). business owner to negotiate transition period a period
Networks also offer an opportunity to establish a period during which they of time when the previous
contact with owners of complementary businesses operate the business alongside business owner works with
who may assist the business and further enhance their the previous owners before the new owner to introduce
chances of success. A contact with a supplier of raw takeover occurs (known as them to the business
operations, clients/
materials or component parts, for example, may result a transition period). This
customers, suppliers and
in a better deal, or an employment agency may offer allows for introductions to other business contacts

ACTIVITY 8.1
Match each of the following businesses with an appropriate complementary business that
would be desirable to have within the immediate vicinity.
Business Appropriate complementary business
a Chemist i Limousine hire
b Architect ii General practitioner
c Florist iii Beautician
d Bridal shop iv Gymnasium
e Nightclub v Car dealership
f Health food shop vi Hospital
g Insurance agent vii Coffee shop
h Hairdresser viii Builder

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regular clientele, and other important contacts,
such as suppliers. More importantly, it provides an
opportunity to learn about the business’s operations.

ACTIVITY 8.2
Access the website of at least one of
these prominent schools or your own
school. Find the past students’ association
link. Write a response to each of the
questions that follow.
• Fintona Girls’ School
• Geelong Grammar School
• Kew High School
• MacRobertson Girls’ High School
• Melbourne High School
• Trinity Grammar School
1 List some of the activities organised
by this group for past students of the
particular school.
2 What advantages would membership
of this group offer both socially and
professionally?
3 How could the contacts offered by Figure 8.3 Industrial espionage
membership of this group help you in
business?
Competitors are another valuable source of
4 List all of the networks of which you are information for a business; hence the term ‘keeping
currently a member. What advantages an eye on the competition’. Large organisations have
does membership of these groups been known to employ spies to gain information
offer you? (Include sporting, friendship, about what their competitors are doing. This illegal
school, church, interest groups, as well act is known as industrial
as any others.) espionage. Acting within industrial espionage
legal limits, a lot can be gaining valuable
learnt by simply watching the information on a
competitor’s activities
competition and taking note of
(i.e. spying)
important details such as their
pricing strategies, special offers, types of customer
service and even the layout of premises. Keeping
a close eye on the opposition allows a business
operator to identify those areas of the market that
are currently inadequately catered for (market gaps).
It also indicates the standards of customer service
the consumer is accustomed to and likely to expect.

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 8.2 Business support • representing the business in court
• selling the business.
services Because ignorance is not accepted as an excuse
for breaking any law, appropriate legal advice is
All business operators can
essential.
support services services expect to pay for professional
(paid or unpaid) used by advice from specialist support Where to find a lawyer
businesses to assist them services. A good accountant The cost of hiring a lawyer is significant; therefore, a
in their decision making; for
and solicitor are essential, business operator should select a legal professional
example, legal or financial
advice or daily operational as are the services of an carefully. Possible sources include:
activities insurance broker, a banker,
• word of mouth
and others such as marketing
• internet
and computer experts.
• Yellow Pages

Legal support services • professional and business association lists of

recommended lawyers for their members to deal
Every business will require the services of a lawyer with
to negotiate on its behalf, give advice and provide • Law Institute of Victoria – the peak professional
representation on legal issues. body for the legal profession. To find a lawyer or
contracts legally A lawyer will be required get a referral, or for more information on law and
binding agreements to prepare legal documents the services offered, go to the Law Institute of
that incorporate the such as contracts, and give Victoria website.
following elements: offer,
specialist legal advice. A lawyer Upon initial contact it is wise to ask a lawyer
acceptance, the intention
to enter into legal relations, will also be required for: about:
consideration, the capacity • advice on purchase or • their qualifications and experience
to contract, legality of establishment of the business, • the type of clients they specialise in. Look for
purpose, consent and and will act on behalf of the
certainty of terms someone who specialises in and has other clients
business owners during the in the same industry. If you are entering into a
process franchise, look for a lawyer who specialises in
• selection and establishment of the best legal franchise agreements.
ownership structure • the likely costs involved in using their services.
• establishment of a debt recovery system and debt
collection
• negotiation and advice regarding a franchising
agreement
• negotiation and drawing up of leases for premises
and/or equipment
• negotiation, establishment and implementation
of contracts like employment agreements,
conveyancing when purchasing property, and
business transactions
• 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
• establishment and compliance with industry
licensing requirements, permits, registrations and
approvals
• preparation of partnership agreements
• dealing with creditors Figure 8.4 A business will require qualified legal advice and
• dealing with takeovers and acquisitions assistance.

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Financial support services
A successful business will require 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:
• to give an accurate valuation of a business Figure 8.5 CPA Australia (Certified Practising Accountants)
intended for purchase, including goodwill is a large professional organisation for accountants in
• to evaluate the financial feasibility of a business Australia.
idea
• Yellow Pages
• when undertaking negotiations regarding leases
• professional and business associations
and contracts
• business referral centres
• to establish a financial recording system
• CPA (Certified Practising Accountants) Australia or
• to prepare loan applications
Chartered Accountants Australia and New Zealand
• to prepare quarterly financial statements, monthly
(see their websites for more information).
cash flow summaries and budgets for auditing
• for taxation It is important to check that an accountant has
• for financial planning appropriate qualifications to perform the work you
• to recommend appropriate computer software will be requiring of them. For example, they will
• for advice on superannuation need to be a qualified tax agent to deal with taxation
• to identify and understand the cause of changes matters; similarly, to give financial advice an Australian
in business performance Financial Services Licence will be required.
• during liaison with government departments, Bank managers are another valuable source of
especially the Australian Taxation Office (ATO). financial advice and assistance. They are responsible
for processing loans and supervising business bank
Before using an accountant, a business operator
accounts. They also:
should check that they have:
• give advice on the feasibility of a business
• appropriate qualifications
expansion
• good communication skills
• give investment advice
• experience with clients in the relevant industry
• act as a source of finance
sector
• provide EFTPOS facilities.
• experience with business issues, especially
taxation All businesses require banking services and
• professional registration (e.g. Certified Practising facilities. The ATO is an excellent source of information
Accountant) regarding taxation matters (visit the ATO website for
• reasonable fees and charges and what these cover. more information).

At a minimum, an accountant should be contacted:

• before starting, buying or selling a business
• before acquiring or replacing property, plant or
other assets
• sometime between January and 30 June each year
to plan for the end of the financial year so there
are no tax surprises
• when planning future expansion
• when experiencing problems with creditors,
debtors, finance, expenses or stock.

Where to find financial advice

Sources for locating a good accountant include:
• internet
• word of mouth

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 ACTIVITY 8.3
1 Select two of the following banks and visit their websites:
– ANZ
– National Australia Bank
– Westpac
– Bendigo Bank
– Commonwealth Bank of Australia.
For each:
a go to the business banking section
b identify the nature of services offered by each bank for:
i insurance iv local business bankers
ii franchising v banking services.
iii establishment of a business
In your opinion, which bank offers the best service to a business operator? Justify your
view.
2 Go to the Commonwealth Bank glossary on their website and find the definitions of each
of the following business and banking terms:
a ABN h mortgage
b EFTPOS i foreign exchange
c credit card j GST
d bank fees k guarantor
e creditor l investor
f debtor m direct debit.
g credit limit

Figure 8.6 The four major Australian banks

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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.
• Marketing and advertising consultants give
Figure 8.7 A small business owner needs to consult advisers
specialised marketing and advertising advice for and professionals.
a fee.
• Graphic designers and printers may be employed
to design and produce logos, letterheads,
pamphlets, business cards and advertisements.
8.3 Government and
• Information management and technology community-based
consultants are experts who will help select
technology, software and hardware, set up
support and assistance
systems, train staff, and provide ongoing backup Australian federal, state and local governments
and assistance with all technology-related areas of each provide resources and assistance to business
the business. operators. Governments are usually judged by the
voter on their economic performance; it is in their
interests to try to promote a healthy business sector
ACTIVITY 8.4 in order to optimise economic performance.

MARKETING SERVICES Local government assistance

Go to the Kexino website and complete Local government is an important source of information
the following: because it has responsibility for regulating many of the
1 Name the company that owns this actions of businesses. Most local governments oversee
website. programs designed to assist and support businesses.
2 In your own words, describe the This usually includes facilitation of business networks
services offered by this company to for their operators. Prior to entering business, a
small business start-ups under each of
the following headings:
a Content creation
b Marketing
c Translation
d Video.
3 Outline how each service could benefit
a business start-up.
4 List 10 facts that you have learnt from
looking through this website.
5 Search for and locate three other
marketing businesses that offer similar
services to small businesses. Figure 8.8 Local governments offer a range of support
services for business.

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 business operator should ascertain the types and exceptions will be rare. Planning laws will also
extent of government assistance available. Local affect any building, extensions or renovations.
government should be contacted for information • health, hygiene and food handling regulations – a
regarding: business can expect health inspectors employed
• planning and zoning regulations – local by local government to regularly check that they
government controls planning and zoning laws are meeting the required standards in this regard
which limit where certain businesses can be • by-laws covering matters such as parking
located. A business must locate in the appropriate restrictions, outdoor dining and footpath trading –
zone. For example, an area zoned ‘Residential’ these must be clarified before entering into
can only have residential buildings within it; any business.

ACTIVITY 8.5
1 Go to the website of your local government. Look for and locate the services and support
offered to local business. Fill in the following table:
LOCAL GOVERNMENT AREA: 
Business service
Yes No Details
and advice
Business mentoring
services

Business incubator

Training seminars

2 Identify and outline five permits that a business may need to apply for to operate in your
local government area (e.g. footpath trading).
3 Name a development project the council is undertaking that would benefit business
development in the area (e.g. retail developments or a business park).

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State and federal government Online resources
assistance Both federal and state governments have an extensive
array of services for business operators, and provide
Federal and state governments also provide a great
online information for business. Table 8.1 summarises
deal of assistance to business owners, as it is to their
some of these sites.
benefit for businesses to succeed.

Government
organisation or Website address Content
area of interest
Business Victoria Cambridge weblink: Provides information on a wide range of topics
http://cambridge.edu. in relation to small business, including start-up
au/redirect/?id=6976 and operation. Has access to
a small business counselling start-up commencement of
service and the Business business operations
Referral Service, and links to
Victorian Government Business. Any new
government initiatives will appear on this site.
Make this the first site that you visit.
business.gov.au Cambridge weblink: Provides information on all aspects of
(Commonwealth http://cambridge.edu. establishing and running a small business.
Government) au/redirect/?id=6977 Access to all government information,
services and transactions, such as acquiring
an ABN, and government forms required
by small business. Information on business
assistance, business questions, business
start-up, employing people, taxation, importing
and exporting, superannuation, occupational
health and safety, customs, and so on.
Comprehensive information and numerous
links to other relevant sites.
Victorian Small Cambridge weblink: Victorian Government website dedicated to
Business http://cambridge.edu. providing a competitive and fair operating
Commissioner au/redirect/?id=6978 environment for small business. Covers
promotion of small business, informed
decision making, dispute mediation, dealing
with complaints, and encouragement of
awareness of small business needs.
First port of call for independent guidance on
business disputes. Quick, effective, neutral
and low-cost mediation services.
Austrade Cambridge weblink: Provides export and investment services to
http://cambridge.edu. Australian companies.
au/redirect/?id=6979
Small business Cambridge weblink: A quick way to locate relevant government
grants http://cambridge.edu. grants and assistance programs for business.
au/redirect/?id=6980
IP Australia – Patents Cambridge weblink: How to apply for a patent online.
http://cambridge.edu.
au/redirect/?id=6981
Table 8.1 Information available through government-provided websites

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 Government
organisation or Website address Content
area of interest
Australian Bureau of Cambridge weblink: Good source of business data, statistics and
Statistics http://cambridge.edu. advice on use of this type of information.
au/redirect/?id=6982
Australian Business Cambridge weblink: Provides information on licences and codes of
Licence and http://cambridge.edu. practice affecting particular types of business.
Information Service au/redirect/?id=6983
Australian domain Cambridge weblink: Policy authority for the internet.au domain
name administrator http://cambridge.edu. space.
au/redirect/?id=6984
Australian Taxation Cambridge weblink: Government website giving taxation
Office http://cambridge.edu. information for individuals and businesses of
au/redirect/?id=6985 all sizes.
e-business Cambridge weblink: Specific resources for e-business.
http://cambridge.edu.
au/redirect/?id=6986
Scamwatch Cambridge weblink: Advice on and awareness of frauds targeting
http://cambridge.edu. small businesses.
au/redirect/?id=6987
Table 8.1 Information available through government-provided websites

Small Business Centres Victoria (SBCV)

offices are located both in metropolitan and rural
areas. Staffed by business development managers
who are specialists in business and industry, these
centres offer help and support
Small Business Centres to business owners. Help with
Victoria (SBCV) a network the navigation of government
of community based,
services, programs and
not-for-profit business
centres providing a range regulations is provided.
of business services in both Business Enterprise
metropolitan and regional Centres are a national network
locations throughout of more than 100 centres.
Victoria Partially funded by the federal Figure 8.9 Business Enterprise Centres can be found
Business Enterprise government these centres Australia-wide.
Centres a national network
serve as a first point of contact
of government-funded
centres that serve as a for business owners seeking
first point of contact for business information, advice Community-based support services
business owners seeking and guidance. Face-to-face
business information, contact is provided as well as Business incubators
advice and guidance a support line. A business incubator is an
business incubator
organisation that supports new
an organisation that
businesses by making available supports new businesses
business premises, office/ by making available
secretarial services, advice, business premises, office/
consultancy and training secretarial services, advice,
at minimal cost, until that consultancy and training
at minimal cost, until that
business is established. The
business is established

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 incubator manager also acts
mentor person who offers as a mentor or provides an
their knowledge, wisdom introduction to other mentors.
and advice to someone with A business incubator allows
less experience a new business operator to
interact with others in similar
circumstances. This encourages networking and
exchange of ideas. Research has shown that business
incubators lessen the likelihood of business collapse.

Figure 8.10 Business incubators support new businesses.

CASE STUDY 8.1

Brunswick Business Incubator is good news for start-ups

The façade of the former Brunswick High school is well known to many Moreland residents. Yet
not many would be aware of the significant contributions its occupants have made to the Victorian
economy. Vacant for some years under the watchful eye of neighbourhood cats, parts of the building
were revitalised in August 2002 through a collaboration of Local, State and Federal Government
funding. This … culminated in the opening of the Brunswick Business Incubator (BBI). …
Since its inception 90 start-up businesses have progressed to commercial sites and there are currently
50 businesses operating at the BBI.
… it offers multi-purpose spaces to existing tenants and prospective business operators, with added
BBI programs and services aimed at fostering growth. …
Research conducted by the National Institute of Economic and Industry Research (NIEIR) in October
2012 … found that BBI start-ups have a 75% success rate compared to the national average of 49%
and added $27.32 million to the Victorian Gross Regional Product in 2012, with potential for further
growth.
Much of this success is attributed to the BBI’s operating model and value adding services; such as
support from full-time staff and management. This includes day-to-day administration and reception
services to advice on marketing, technology, finance, professional development and regular
opportunities for networking and mentoring. The BBI is also a sounding board to prospective
business operators by providing free information
and advice.
Another success factor relates to the diversity
of its occupants. The BBI is a mixed-business
incubator supporting a vibrant business
community of tenants sharing a common
purpose; contrary to the isolation of many
start-ups. The BBI sustains a range of sectors
including professional and administrative to
creative, fashion and health services and fosters
a spirit of collaboration. …

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 CASE STUDY 8.1 continued

Joe Crosara of Estate Financial Services, sums it up well. ‘For 16 months prior I was working from
home, the support from management from day one has been great, the rates are significantly cheaper
than commercial rates, the mentoring and support services have helped me grow my business and
the networking opportunities are some of the reasons I love it here.’
To date BBI businesses have created 948 jobs and a few of the watchful cats have been adopted. The
BBI’s objective is to continue to support future growth for many micro and small businesses within
the Northern Region and wider Victorian community.
(Source: Banyan Agency, ‘The Brunswick Business Incubator is
good news for start-ups’, media release, 4 June 2014.)

Analysis 6 Explain the advantages offered by a

1 Where is the Brunswick Business business incubator in terms of:
Incubator located? a cost
2 Identify how many businesses operate b mentoring
from the BBI. c support
3 Identify how many started there and have d networking.
moved out to other premises. 7 Research one of the following business
incubators. Outline the location and
4 Explain the evidence that commencing
services offered by each:
operations in a business incubator is
advantageous to a business. a Ballarat
b Monash
5 How many jobs are estimated to have been
c Darebin.
created by businesses from the BBI?

ACTIVITY 8.6
Locate and contact your nearest Business
Enterprise Centre office or Small Business
Centre Victoria. Then, working in groups of
three to five, produce a booklet or pamphlet
advertising Victorian Business Centres and
the services they offer to small business.
Before you contact a centre, make sure
you work out exactly what information you
require from the contact. Headings that may
be used in the booklet or pamphlet include:
• Getting started
• Coming up with a business idea
• Legal advice
• Financial advice
• Government assistance and advice
• Business structure and registration.

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Community-based networks Business mentors
As mentioned earlier, SBCV is a network of community- Local and state governments also facilitate numerous
based, not-for-profit business centres providing a local business groups and make mentoring
range of business services in both metropolitan and arrangements. These assist business through the
regional locations throughout Victoria. Each SBCV is opportunity to share experiences of others. There
incorporated and run locally under a public/private are a range of programs provided by government to
partnership. Each is designed to facilitate the creation, promote and support business networks and provide
retention and development of sustainable business mentoring services.
enterprises and foster local economic development. The Victorian government operates the Small
SBCV offices provide a range of services including Business Mentoring Program (SBMP). This is a low-cost
business advice and mentoring, training programs, program offering the services of 90 highly experienced
business incubators as well as general advice to local business people with skills and qualifications in a
business operators. Regular events and workshops are wide range of industries and disciplines. An SBMP
held for business operators. Advice about government mentor will assist in:
programs such as the New Enterprise Initiative • starting a new business
Scheme (NEIS), which offers grants to new business • establishing objectives and direction for a business
operators, is also available. • writing business plans
• developing marketing strategies
• increasing sales and profits
• identifying new products and services
• improving time management
• identifying new opportunities.
Some local governments also offer mentoring
services to local businesses.

ACTIVITY 8.7
SMALL BUSINESS MENTORING SERVICE
Go to the Small Business Mentoring Service website. Select a case study from the link on
the home page and answer the following questions:
1 Name the business and the owners who participated in the SBMS.
2 Name the mentor. What experience did they have?
3 Outline the reasons the business owners decided to participate in the program.
4 What was involved in participating?
5 Describe the benefits participation brought.

ACTIVITY 8.8
JELLY
Access the following link at Cambridge weblinks: http://cambridge.edu.au/redirect/?id=6988
Explore the website and answer the following questions:
1 What is Jelly?
2 When was Jelly established? By whom? For what reason?
3 List 15 cities worldwide where a Jelly network can be found.

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 ACTIVITY 8.8 continued
4 Describe some of the business operators who use Jelly.
5 In your opinion, what advantages does membership and participation in a Jelly network
bring?
6 Go to the webpage of Melbourne Jelly at Cambridge weblinks (http://cambridge.edu.au/
redirect/?id=6989) and:
a Describe three events/meet-ups recently organised by this group.
b Explore the Twitter and Facebook pages.
c How many Melbourne members does Jelly currently have?
d Describe the advantages membership brings to the Melbourne members.

Professional, trade and industry

associations
A business operator should seriously consider joining
a specific industry association or professional
association. These associations cover specific
types of industry, trades or
professional association professions. For example, the
usually a not-for-profit Master Builders Association
organisation seeking
represents and assists builders. Figure 8.12 The Victorian Automobile Chamber of Commerce
to further a particular
profession and the interests Similarly, the Law Institute of provides business support to and advocates on behalf of their
of individuals engaged in Victoria is made up of lawyers. more than 5000 members and promotes skills, training and
that profession Membership of a relevant careers in the automotive industry.
industry association allows
business operators to keep up to date with training, industry news and information. Membership also
support and advisory services, as well as general allows businesses to be part of a network.

General industry bodies

These groups are broad-based bodies of members
from different industries providing general information
and assistance. Examples of these groups include: Ai
Group (Australian Industry Group), which represents
more than 60 000 Australian businesses, and the state
chambers of commerce, such as VACC (Victorian
Automobile Chamber of Commerce). For a complete
list of general industry bodies, go to the Australian
Government Directory website.

Other networks
Other formal and informal networks exist to help the
small business owner.

Local traders associations

Businesses operating in a certain geographical area
often form networks to offer mutual support and
to provide a forum for discussion of local business
Figure 8.11 The Law Institute of Victoria is a professional issues. They also lobby governments on issues in their
association for lawyers. mutual interest.

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CASE STUDY 8.2
Hampton Street Traders Association – everyone benefits
Hampton Street Traders Association is a not-for-profit organisation run by and for traders for the
purpose of promoting and marketing Hampton Street.

Membership has its privileges

The association is the peak collective body for the street. Members have a say in how the street
is run, how money gets spent, how and what events get run and are empowered to positively
contribute to the street environment and local community. Member benefits include:
• A Voice. A voice to Bayside Council for issues like Street Upgrades, Council planning and
budgeting. A voice to local residents and consumers… Hampton Street Traders presents a unified
voice to ensure our needs are heard.
• Marketing and Promotion. Member Promotion and marketing through online presence and
Traders directory listing, Social Media promotion, Individual Trader Profiles, Members only
promotions, advertising and collateral.
• Street Events. Participation in street promotions and events. Local events to engage the
community and bring business to Hampton Street. Feet on the street, directly for trader members
benefit.
• News. Members’ news and updates about what’s going on in the street, distributed via email
newsletter. Member news contains notification of upcoming events and reports on matters such as
council funding, streetworks, and member benefits.
• Member Identification. Identification of members to consumers including bold Directory listing,
Members Window Stickers, Member’s only online Resources, discount Affiliate Memberships such
as Bayside Business Network.
• Street Action. Member input and action for street works and upgrades, council works. Members
are represented at council level by the committee. The committee is able to take member
complaints and issues directly to the council for action.
(Source: Hampton Street Traders Association website, ‘Member benefits’.)

Analysis 5 Go to the website of the Hampton Street

1 In what local government area is Hampton Traders Association. Find answers to the
Street Traders Association located? following:
2 Describe the purpose of the Hampton a What is the cost of joining?
Street Traders Association. b List the marketing activities currently
3 List its members. being undertaken by this group.
4 Describe the benefits of joining a traders
association such as this.

Economic development units publish a newsletter, which can be accessed via the
These are run by local governments and aim to improve local government website. Local business awards and
basic business opportunities in a local government access to information about government grants are
area. They run projects and initiatives aimed at local another common feature.
businesses, such as seminars and workshops. Most

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 ACTIVITY 8.9
Where would a small business operator go to find information on the following issues? In
your responses, consider both formal and informal sources of assistance. (The first one has
been done for you.)
Issue Potential source of information
1 Legal advice Lawyer, Law Institute of Victoria,
government websites
2 Feasibility of a business venture

3 Taking out a business loan

4 Preparation of a tax return and GST

5 Up-to-date industry news

6 Advice on footpath trading

7 Help with a marketing campaign

8 Information regarding the

demographics of the local area
9 Licensing information

10 How to register a business name

11 Advice on industry standards

12 An industry code of ethics

Publications Other useful websites from non-

Individual industries will most likely publish a government providers
journal that will provide business operators with A plethora of information is available online, including:
useful advice. These will be available through trade • Flying Solo; an online community for the solo
associations. Other useful publications could include business operator
magazines such as Business Review Weekly and My • Ninemsn Finance Small Business website
Business and newspapers (business section). • My Business magazine
Individual research • Dynamic Business magazine
• Kochie’s Business Builders
This might include visits to trade shows, conferences
• Australian Small Business and Family Enterprise
and other resource centres, such as libraries.
Ombudsman

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• Advice on employment law and wages (see
the Employment and Workplace section of the
Victorian Government website)
• Australian Businesswomen’s Network (herBusiness)
• Australian Copyright Council
• Australian Institute of Export
• Victorian Employers’ Chamber of Commerce and
Industry.

Figure 8.13 Local traders associations are important sources

of support for small business.

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 Chapter summary • Local trader associations are networks of
small business owners operating in the
• There is a wide range of support services same geographical area.
available to the Australian business • Economic development units aim to
operator. improve business opportunities within their
• Governments provide much of this geographic area.
assistance at minimal cost. A healthy • Industry publications and business
economy is dependent on a healthy magazines are useful for individual
business sector. research.
• Businesses that utilise available support
services stand a greater chance of survival Chapter summary questions
and prosperity.
1 List the sources of informal advice and
• Informal sources of support include:
assistance available to the business
– networking (e.g. service clubs such as operator.
Rotary). These are groups of business
2 Describe the advantages that are available
owners who exchange ideas and
through business networking.
support for mutual benefit.
3 List the sources of formal assistance
– previous owners of a business – to
available to businesses. Categorise
demonstrate established systems and
these as government or non-government
provide information about clients
providers.
– competitors – to recognise standards
4 What is industrial espionage? List and
expected in the industry, identify gaps in
explain three instances you can think
the market, pricing, standards being set,
of where a business might consider
and so on.
employing this tactic.
• Formal sources of support include:
5 Describe two instances where a business
– professional advisers – lawyers, operator would be wise to take out a
accountants, financial advisers, bank patent.
managers, insurance brokers, marketing
6 Explain the steps a business operator
and advertising professionals, graphic
might take in order to register intellectual
designers and printers, information
property.
technology professionals.
7 Explain why it is vital for a business
• Government assistance:
operator to be aware of the range of
– Australian Taxation Office support services and assistance available.
– local government, to provide help with 8 What is a professional or trade association?
by-laws, zoning, health regulations, Explain the benefits of being a member of
parking, planning issues one of these organisations.
– state and federal governments, to 9 Explain the purpose of a local traders
facilitate and provide business centres, association.
business incubators, network and
10 Imagine that you are a business operator
mentoring services
looking to employ the services of an
– professional, trade and industry accountant and a solicitor. Devise a list of
associations offering training, advice, four questions you would ask each of these
support, industry news, networking. professionals before you engage them for
• General industry bodies such as Australian your business. Explain why you believe
Industry Group offer practical information, each of these four questions is important.
advice and assistance to help members run
their businesses more effectively.

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11 Why might a business operator looking to Prepare a summary, including:
buy insurance save time by approaching an a the goals/mission of this organisation
insurance broker rather than an insurance
b a brief history of the organisation
agent?
c membership numbers
Extension questions d services this organisation offers to its
members.
1 You are the owner/operator of one of the 3 ‘The assistance offered by the Victorian
following businesses in your local area Government to the aspiring business
(choose one): operator is insufficient.’ Discuss this
• a hairdressing salon statement. Your response should include
• a plumbing business the following:
• a café. a Explain the types of assistance and
Using the Business Victoria website, locate support a potential business operator
the following information: might require while setting up and
establishing a small business.
a Minimum wages you are required to pay
staff. b Outline the types of assistance currently
available from the state government.
b Licences and qualifications required in
order to run this business. c Evaluate whether, in your opinion, this
level of assistance is sufficient. Justify
c Business registration requirements.
your response.
d Available industry or trade associations
4 Using the website of your local
you could join.
government, complete the following:
e Extent and scope of competition in your
a List the support services available to
industry in your area.
business in your local area.
2 Use the internet to locate the website of
b Identify the name of a contact person
one of the following organisations:
for advice.
• Victorian Chamber of Commerce and
c Describe what is offered to business
Industry
under each of the headings: Networking;
• Australian Industry Group (AIG). Financial grants; Support and advice.

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 CHAPTER 9 Key terms
• best practice • planning

Business planning •
•
business plan
business strategy
•
•
quality assurance
quality control
• customer • strategic
satisfaction planning
Overview • environmental • tactical planning
audit • tactics
Planning involves working out how to do something,
• executive • total quality
get somewhere or achieve a desired objective. As
summary management
individuals, we all need to plan our lives in order
• marketing plan (TQM)
to achieve objectives. Businesses are no different! A
• operational
business must plan to achieve business objectives
planning
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 chances of arriving at a desired destination without
most commonly those business operators who rush wasting time and other valuable resources. Planning
headlong into a business venture without taking the should occur both before establishment and on an
time to plan who do not succeed. ongoing basis for the life of the business.
A business should be built up with a specific
strategy and direction in mind. Think of a plan as being
like a street directory or global positioning system
Key knowledge
(GPS). Attempting to navigate through an unfamiliar In this chapter students will learn about:
area without consulting a street directory or GPS is • Planning tools such as a SWOT analysis
hardly effective. By consulting a street directory or • Features and construction of business plans and
GPS, however, it is possible to assess all of the route benefits of using them
options and select the best one. Like these direction • Corporate social responsibility management issues
finding devices, a business plan should maximise the regarding business planning.

What’s ahead

SWOT analysis

CSR management issues

Business planning Levels of planning
related to planning

Business plan

Figure 9.1 Business planning

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 9.1 Planning Establishing an objective –
Planning is a formalised process involving a series i.e. What do we want?
of decisions that are aimed at assisting a business
to achieve its objectives.
planning a formalised A systematic approach to
decision-making process planning, which is based
that is future oriented Identification of present situation
on five stages, can be
and forecasting the future situation
undertaken by different levels
(SWOT analysis for strategic planning)
of management, with the decisions made varying in
time from long-term to short-term. Planning involves
working out what the business wants to achieve (i.e.
targets and objectives), how it will achieve these
(strategies/tactics) and who will manage the process. Developing and evaluating
planning alternatives
Levels of business planning
Businesses must make plans for the long, medium
and short term if they are to be successful.

Strategic planning Selecting and implementing

Strategic planning is long-term planning over a the plan
period of two to five years and is concerned with the
whole business and its long-term direction. A strategic
plan looks at how that business
strategic planning long- intends to compete and survive Monitoring and reviewing
term (two to five years) in the marketplace for the long
planning undertaken by
the results
term. It involves setting long-
senior management to
term whole-of-business goals.
achieve business objectives Figure 9.2 Five stages of planning
For example, if a business sets
business strategy the
an objective of increasing its
long-term plan of action
adopted by a business market share, the business Operational planning
to achieve its goals and strategy could be to provide Operational planning covers the short-term (day-
objectives a superior product and quality to-day, weekly, monthly, up to one year) planning
customer service. undertaken by a business. This
level of planning is detailed operational planning
Tactical planning the detailed, short-term
and is designed to implement
Tactical planning covers the short to medium term planning undertaken by a
strategies that will ultimately
(one to two years) and usually involves planning business
achieve specific objectives
tactics or steps within the overall business strategy.
For example, if a business strategy is to provide
quality customer service, the
Strategic
tactical planning the tactical planning would involve
planning undertaken by planning
identifying what the business
middle-level management believes quality customer
to assist in implementing
service to be and then planning
strategic decisions; its time Tactical planning
frame is medium term (one the training program required
to two years) to implement this strategy. Put
tactics activities or simply, tactical planning sets
courses of action taken out the tactics that make a Operational planning
by a business to achieve strategy happen.
business objectives

Figure 9.3 Three levels of business planning

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 that have been determined by a higher level of a positive reputation, strong branding, type of
management. product, how the product is made or the quality
of the service provided.
SWOT analysis – a planning tool • A weakness is an internal characteristic that
An important analytical tool for a business to use negatively influences the functioning of the
when undertaking strategic (long-term) planning business. For example, poor reputation, weak
is a SWOT analysis. This analytical exercise helps market or the current structure of the business
a business to focus on its internal environment by may not be suitable.
recognising its strengths (what it is good at) and • An opportunity is an external fact or development
minimising its weaknesses (what it has performed that, if taken advantage of, could contribute to
poorly at). The business also needs to focus on its the realisation of the mission or purpose of the
external environment so that it may take advantage business. This could include globalisation and
of opportunities (what it can use to its advantage) decreased interest rates.
and reduce any threats (things that could adversely • A threat can be defined as an external fact or
affect it). development that can have a substantial negative
A SWOT analysis can be broken down into the effect on the performance of the business.
following areas: Examples of threats could include globalisation,
increasing costs, environmental issues or a decline
• A strength can be defined as an internal
in the industry.
characteristic that contributes to the realisation of
the mission of the business. This could include

Strengths Weaknesses Opportunities Threats

S W O T
Figure 9.4 SWOT analysis – strengths and weaknesses are internal factors, opportunities and threats are external factors.

Internal environment
Strengths Weaknesses
Skilled workforce Unskilled workforce
Strong reputation/brand Poor reputation and 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 facilities Outdated facilities
Dynamic and responsive organisational Bureaucratic management structure
structure
Positive corporate culture Poor/toxic corporate culture
Stable workforce High level of staff turnover

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 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, promotions
Expansion to different locations Changes in lease conditions, e.g. increased
rental 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, e.g. materials, skilled
staff
Legal issues – protection/removal of Legal issues – restrictive legislation or legal
restrictions action
Table 9.1 Examples of strengths, weaknesses, opportunities and threats as part of a SWOT analysis

CASE STUDY 9.1

IKEA’s strategies determined through a SWOT analysis

IKEA is an internationally known home furnishing retailer that is recognised for its Scandinavian
style. Founded in 1943, it is now the world’s largest furniture retailer. The majority of IKEA’s furniture
is sold as a flat-pack, which is then assembled by the consumer. This allows for reduced costs of
assembling the furniture, storage and packing. In late August 2015 it was estimated that IKEA stocks
approximately 12 000 products and sells these via their 373 stores in 47 countries and their online
stores. IKEA stores also have a restaurant and café which serve typical Swedish food. At the exit to
the stores there is a small food shop which sells
Swedish grocery items.
Low prices are the cornerstones of the IKEA
concept and help to make customers want to
buy from IKEA. In addition, their products are
well-designed, functional and appeal to a wide
range of age groups and types of households.
IKEA has a social conscience, in particular for
people and the environment. Its vision ‘to create
a better everyday life for the many people’
demonstrates that this concern underpins their
business. Its commitment to sustainability is
shown in its choice of product range, suppliers,
stores and communication. Their concern for
people and the environment is seen in the better
use it is making of raw materials and energy. Figure 9.5 IKEA is an internationally recognised
These actions, while helping to keep costs Scandinavian homewares and furniture brand.

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 CASE STUDY 9.1 continued

down, also help the company to reach its green targets and have an overall positive impact on the
environment.
IKEA uses SWOT analysis to help it reach its objectives. Set out below is a summary of a SWOT
analysis on the operations of IKEA.
Strengths
• Specialist marketing expertise
• Store location
• A strong global brand
• Its vision ‘to create a better everyday life for the many people’
• A strong business concept which is based on offering a wide range of well-designed, functional
products at low prices
• Reaches all demographic groups in its design. It balances the product function, quality, design and
price
• Increased use of renewable materials
• Smarter use of raw materials
• Creation of long-term partnerships with suppliers
• Using economies of scale, i.e. bulk buy at cheaper unit costs
• Sourcing materials close to supply chain to reduce transport costs
• Delivering products directly from the supplier to IKEA store, so cutting handling costs, reducing
road miles and lowering the carbon footprint
Weaknesses
• The size and scale of its global business. This makes it difficult to control standards and quality.
• Difficult to control working conditions in some of the countries where IKEA products are made
• The need for low cost products has to be balanced against producing good quality items
• Need to keep good communication with all global stakeholders about its environmental activities
Opportunities
• Ensure in the price sensitive marketplace IKEA gets its story out to consumers that it conducts
itself in an ‘environmentally sensitive manner’
• A growing demand for greener products
• A growing demand for low priced products
• Demand for reduced water usage and lower carbon footprints
• Giving customers tips and ideas on how to create a sustainable life at home
• Sustainable use of resources. IKEA aims for zero waste to landfill, wastewater treatment and
programmes to reduce use of water.
• Reducing carbon footprint. IKEA aims to reduce its energy use, use more renewable energy and
reduce packaging.
• Develop their social responsibility by providing greater support for charities such as World Wildlife
Fund, UNICEF and Save the Children
• Being open with all stakeholders – by building trust through good communication with
consumers, co-workers, suppliers and the media
Threats
• Slowdown in first-time buyers entering the housing market
• More competitors entering the low-price household and furnishings markets
• A recession which will act to slow down consumer spending as disposable income reduces
(Source: Based on Business Case Studies website: an IKEA case study,
‘SWOT analysis and sustainable business planning’.)

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 Analysis 3 Suggest ways you believe IKEA has
1 Describe what is meant by a SWOT managed to minimise threats to its
analysis. business.
2 Explain the difference between internal and 4 Discuss the contribution undertaking a
external factors. SWOT analysis has made to IKEA’s success
and business growth.

9.2 The business plan and take advantage of any new opportunities that may
have arisen, such as new technologies or changes in
To optimise the chances of business success, it is consumer tastes, since the previous plan was written.
important to spend time preparing and developing A business plan performs numerous roles. It:
a good business plan. This document sets out • defines the objectives and direction of the business,
the details of a business, the setting out where the business is headed and how
business plan the direction it intends to take, it intends to get there
formalised planning a defines its goals and maps • assists in obtaining financial backing – financial
business undertakes on a out strategies to achieve institutions and investors will seldom grant finance
periodic basis
these. Initially, a business plan or invest in a business venture before viewing a
should establish the objectives detailed business plan
of a business and assess the feasibility of a business • keeps the business on track and focused on
proposal. It should then demonstrate how stated achieving its objectives – a detailed business plan
business objectives are to be achieved, as well as helps to keep a business, regardless of its size,
provide formal direction for business ideas. focused on the primary business objectives and
A business plan should be a living document that avoids decision making on the run
is constantly evolving. A regular review and update • enables realistic estimations regarding business
of a business plan is required. As the business’s costs, thereby reducing chances of cost blow-outs.
environment changes, its plans, actions and strategies
should also evolve and adapt in response. This should Components of a business plan
be reflected in the business plan. The plan should be
Businesses are able to access many templates or
reviewed and refined annually to keep the business
suggested formats when writing their business plans.
on track, reinforce its key goals and objectives and
Regardless of which format is used, the following 11
assess whether the chosen strategies are working. This
sections should be included in the plan:
annual review will then allow the business to adapt
1 Title or cover page
to any changes occurring in its business environment
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 section
11 Appendices.

Section 1: Title (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
Figure 9.6 A good business plan will increase the chances of
• main business address
business success.

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 Figure 9.7 A business plan sets out how business objectives will be achieved.

• Australian Business Number (ABN) (registered one page in length. Clear presentation and structure
with Australian Taxation Office) are vital.
• Australian Company Number (ACN) (registered Key aspects of the executive summary are:
with the Australian Securities and Investments • registered business name
Commission (ASIC)) • business legal structure (e.g. company, sole trader
• date the plan was prepared and by whom or partnership)
• table of contents. • ABN and ACN (if applicable)
Section 2: Executive summary • location
• date established
The executive summary immediately follows the
• owner names and their relevant experience and
cover page and generally is the first thing read by
qualifications
interested parties. It is often
executive summary an • products and/or services
referred to as the ‘front end’,
overview or summary of the • business goals and objectives
and it is usually the section
key points contained in the • target market and an outline of marketing strategy
that is written last. It contains a
business plan • outline of financial plan including sales and profits
summary, or overview, of what
forecast; start-up capital required
is included in each section to follow. An executive
• mission statement/vision statement.
summary should highlight strategies proposed by the
business to achieve objectives. Mission statement
The purpose of the executive summary is to enable The mission statement and/or vision statement
a quick appraisal of the proposal by someone reading demonstrates what the business has to offer the
the document. For instance, a bank manager deciding market and its overall aspirations. It usually contains
whether to finance a business can read the executive some of the following:
summary and quickly gauge if it is worth reading
• a statement about the intended target market
further. This section is vital in ‘selling’ the business
(types of customers the business intends to cater
to others, and should indicate that what follows in
for)
the body of the plan is worthwhile. If an executive
• reference to the types of products to be sold or
summary fails to impress, it is unlikely people will
services to be provided
bother reading further. It should be no more than

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• reference to location of the business market and • clarification of things the business views as
area it intends to serve important, including values and aspirations.

Company Mission/Vision
Gloria Jean’s Coffees Vision: To be the most loved and respected coffee company in the
world.
Mission: Gloria Jean’s Coffees is committed to building a unified
family, consistently serving the highest quality coffee and providing
outstanding personalised service in a vibrant store atmosphere.
Values: At Gloria Jean’s Coffees, our values are simple: We
demonstrate a commitment to excellence and innovation in everything
we do. Our partnerships are based on integrity and trust. We believe
in people, building and changing lives. We foster a culture of joy and
passion throughout our company.
(Source: Gloria Jean’s website, ‘Our story’.)
The Shed Café Mission Statement
To consistently aim at raising the benchmark in serving exceptional
espresso matched with freshly baked breads & pastries over a relaxed
and peaceful environment.
(Source: The Shed Café website.)
McDonald’s McDonald’s Vision Statement: ‘Our overall vision is for McDonald’s
to become a modern, progressive burger company delivering a
contemporary customer experience. Modern is about getting the brand
to where we need to be today and progressive is about doing what
it takes to be the McDonald’s our customers will expect tomorrow.
To realise this commitment, we are focused on delivering great
tasting, high-quality food to our customers and providing a world-class
experience that makes them feel welcome. Our mission is to be our
customers’ favourite place and way to eat & drink. We’re dedicated to
being a great place for our people to work; to being a strong, positive
presence in your community; and to delivering the quality, service,
cleanliness and value our customers have come to expect from the
Golden Arches – a symbol that’s trusted around the world and valued.’
(Source: McDonald’s website, ‘Company profile’.)

Table 9.2 Examples of mission/vision statements

ACTIVITY 9.1
1 Using the internet, obtain the mission and/or vision statements of three different
Australian businesses. For each of these statements, analyse their key elements based
on the four points (customers, location, products, philosophy).
2 Working in pairs, write an appropriate mission statement for two of the following fictitious
businesses:
a a child care centre named Totes Tots Pty Ltd
b a dog training school named Heelers
c a hairdressing salon named French Cutzzz Pty Ltd.

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 Section 3: Business profile • location and local government zoning restrictions
• workplace health and safety and anti-bullying laws
This section contains:
• employee relations and unfair dismissal laws
• a statement of the business objectives and purpose
• environmental laws
of the business
• storage and handling of dangerous goods
• a brief rationale explaining why the business is
• consumer protection laws
being established and how it will succeed
• labelling requirements
• a list of the management and other key personnel
• licensing and registration permits
together with an organisational chart showing
• privacy – the handling, processing and use of
responsibilities of each
personal information.
• staff required and an outline of the experience,
qualifications of key personnel and staff Section 5: Insurance and risk
• business size based on the number of employees management
or estimated annual turnover of the business This section outlines details of insurance policies to
• an outline of the business structure be taken out by the business. Examples include:
• business location plus details about premises; for
• WorkCover
example size, whether the premises are owned or
• public liability
leased
• professional indemnity
• a brief description of main activities to be
• product liability
undertaken and products and services offered
• protection of business assets in the event of fire,
• anticipated competitive advantage
burglary or damage
• date of business establishment plus any operating
• business revenue protection.
history
• any domain names registered The risk management section lists all potential
• relevant licences/permits held or applied for (e.g. risks to the business, their potential impact on the
a tradesperson requiring a certificate, permits business, and evaluates the likelihood of occurrence
required for footpath trading, etc.). of each of them. Strategies to lessen potential risks,
known as mitigation, are then detailed.
Section 4: Legal considerations
(regulatory strategy) Section 6: Sustainability plan
This section first outlines potential environmental
The regulatory strategy section specifies exactly
impacts of the business, followed by strategies
how the business intends to comply with laws and
to minimise any negative environmental and
regulations affecting it and its activities, including:
community impacts. Plans for environmental audits,
• business registration – ABN, goods and services an environmental management system and/or
tax (GST), employees’ tax file numbers (TFNs) and environmental goals are included.
Pay as you go (PAYG) withholding tax

Figure 9.8 Analysis of levels of risk and plans to manage potential risks feature in a business plan.

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Section 7: Products and 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,
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.
Every business must have a competitive advantage
if it is to succeed in the marketplace. Figure 9.9 Where to position the products/service in the
• details of any intellectual property held, such as marketplace
patents
• anticipated level of customer demand to achieve its objectives. It includes a number of
• a brief description of possible future opportunities subsections.
and developments, and an analysis of barriers
to entry into the market, potential threats to the
Production process
business and how these will be countered. The production process that is undertaken by the
business to produce its products and dispose of waste
Section 8: Operations section is described. The steps of the production process may
This section provides detailed information about be outlined using a flow chart such as that shown in
the people and processes the business will use Figure 9.11 for a hairdresser.

Greet client on arrival. Customer seated

Offer tea and coffee within 10 minutes

Client pays and Staff member

makes new appointment appraises client’s hair

Client’s hair is
Final appraisal
washed at basin

Hair is blow dried Hair is styled and

by stylist cut by stylist

Figure 9.10 Production process for a hairdresser

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 The following details should also be included:
• suppliers providing inputs into the business
• plant and equipment required including costs; for
example, vehicles, computer equipment, 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, PayPal
• credit policy
• warranties and refunds
• membership and affiliations; for example, industry
associations.

ACTIVITY 9.2
Design a flow chart demonstrating
the production process for one of the
following tasks: Figure 9.11 Differing approaches to quality management –
quality control is reactive, while quality assurance is
• kicking a football
proactive
• serving a customer
• borrowing a book from the library approach to managing quality. A business that
• writing an essay adopts the quality assurance approach can bring
• loading a dishwasher. in an outside agency or organisation (known as a
‘certification body’) to check the way they conduct
their business, with a view to gaining quality
assurance certification. In short, the business must
Quality management system show that it meets set standards in how it does
These are the processes and procedures in place to things; it must also show that it follows certain
ensure standards of product and service quality remain procedures and processes. When the business can
consistently high. Quality management ensures the show that it meets all of these requirements, it
product or service a client receives tomorrow is of the becomes ‘certified’. The business is then entitled
same quality that someone else received yesterday. to advertise this and it is also entitled to use the
There are three basic quality management systems logo of the certification body in its marketing and
used: advertising materials.
1 Quality control: Goods and
 services are The International Organization for
physically checked against a set of predetermined Standardization (ISO) is responsible for developing
standards. This can occur after the ISO 9000 family of quality management
quality control process they have been produced or standards, the most widely known of the
of checking the quality prior to the product being sold. internationally recognised quality management
standards of work done or It is a reactive process aimed at standards. SAI Global,
quality of raw materials or
managing quality. Examples of which is associated with
component parts best practice a method
this are inspections or random Standards Australia, is a or technique that has
quality assurance a
checks, such as those used by locally based organisation consistently shown results
system established to
ensure that predetermined many clothing manufacturers. that carries out certification superior to those achieved
quality standards are 2  Quality assurance: A and assists businesses in with other means, which is
achieved system used by a business to used as a benchmark
meeting best practice.
ensure that predetermined The process of obtaining
quality standards are achieved during producing the quality assurance certification requires investment in
products or providing the service. It is a proactive time, money and resources, but will generally pay

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 Figure 9.12 This is a certification mark owned by SAI Global
Limited. Only parties certified by by SAI Global to ISO 9001
on SAI Global’s terms and conditions have the right to display
this mark in the context of the good or services subject of Figure 9.13 One of the keys to business success is adopting
certification. total quality management (TQM).

off with increased customer service. Employees are put

customer satisfaction the satisfaction, sales and into teams, often called total quality
degree to which customer opportunities. Furthermore, ‘quality circles’. Each of management (TQM)
expectations have been met gaining a recognised quality these groups is expected to a concept whereby all
staff in a business have
certification such as the ISO look on a continual basis
responsibility for its process
9000 is extremely helpful when trying to do for possible improvements and output
business with government, multinationals, large that can be made in their
corporations and overseas customers. A business own area. With everyone making small incremental
with accreditation has a distinct advantage, as it improvements, the total quality standards of the
is immediately recognisable as having achieved business and what it does will result in an overall
certain standards of quality. improvement in the business. It is worth noting
3 Total quality management (TQM): A system that the strong reputation Japanese-produced
requiring every person in a business to take goods have for high quality has resulted from the
responsibility for quality in both product and use of TQM practices by Japanese businesses.

CASE STUDY 9.2

ISO accreditation

ISO is an independent, non-governmental international organization with a membership of 162

national standards bodies. Through its members, it brings together experts to share knowledge and
develop voluntary, consensus-based, market relevant International Standards that support innovation
and provide solutions to global challenges…
Today we have members from 162 countries and 3 368 technical bodies to take care of standard
development. More than 150 people work full time for ISO’s Central Secretariat in Geneva,
Switzerland.

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 CASE STUDY 9.2 continued

…International Standards make things work. They give world-class specifications for products,
services and systems, to ensure quality, safety and efficiency. They are instrumental in
facilitating international trade.
ISO has published more than 21 000 International Standards and related documents, covering almost
every industry, from technology, to food safety, to agriculture and healthcare. ISO International
Standards impact everyone, everywhere.
(Source: International Organization for Standardization website, ‘About ISO’.)

Analysis 3 Explain how meeting ISO standards might

Go to the website of the International be compulsory for businesses in one
Organization for Standardization and answer country, but not in another.
the following questions: 4 List 10 important facts about the ISO.
1 What is the ISO? When was it
5 Use the internet to find the names of 10
established? Where is its headquarters
Australian businesses that have ISO 9000
located?
accreditation.
2 Explain briefly what the ISO does.

Analysis of key personnel and staff of the what the business’s competitive edge might be. A
business typical industry analysis would include the:
A detailed audit of the skill base of the key people and – size of the industry and its parts/segments
staff within the business provides a record of what – number of businesses in the market
skills people already possess. The business needs to – number of people employed in the industry
determine what future skills its staff will need to grow – average size of businesses in the industry
the business. If these skills are not currently held by – average operating hours
staff, the business may train the existing staff or recruit – average profits and earnings
people with a specific skill or qualification. – relevant legal structures
– industry trends.
Section 9: Marketing plan • a statement and analysis of current market trends,
The marketing plan is usually one of the larger including what changes are occurring in the
sections in a business plan, containing an analysis market. Do people want something different or
of the market, the particular new? How do we know this?
marketing plan the plan industry in which the business • a profile of the business’s customers, including
that sets out the marketing will be operating, and how the age, income level, lifestyle, tastes and values
objectives and strategy
business will operate within • an analysis of the internal strengths and weaknesses
to be undertaken by a
business that market. It may include: of the business and how these can be exploited
• a description of the market and overcome. External to the business, the future
in which the business will be operating, including opportunities and threats and how these might be
customer demographics, size of the market, overcome should also be included (i.e. a SWOT
changing tastes and trends analysis).
• an industry analysis or evaluation of the • the pricing structure and strategies
characteristics of the particular industry category • a description of how the business intends
the business is entering into. This is done to gauge to promote itself and its products, including
the minimum standards of entry and to ascertain marketing and public relations strategies

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Figure 9.14 Key elements of a marketing plan

• 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, Figure 9.15 Businesses need money to grow and flourish.
after-sales back-up.
• an analysis of how the business expects to gain
and maintain a competitive edge. ACTIVITY 9.3
Section 10: Financial plan 1 List all of the capital items (equipment
This section provides an assessment of the financial and buildings) that would be required
viability of the business. A financial plan will include: to establish each of the following
businesses:
• a balance sheet that details the net assets and
liabilities of the business. Included will be other a small clothing retail outlet
financial statements, which detail the working b plumbing business
capital requirements and level of business liquidity. c courier business
These statements indicate the current financial d gardening business.
position of the business, including funds available, 2 Explain why it is not uncommon for a
value of assets and sources of finance. new business operation to expect to
• expected volume of sales, income and expense make a loss for the first year, or at least
projections for the first five years of the business; the first few months, of operation.
these are estimates based on market research
• estimated profits and losses based on income and
expenditure projections
Section 11: Appendices
• a forecast of expected cash flow for five years – Any extra material that might strengthen the case for a
this tracks money flowing in and out of the potential business should be included as an appendix
business to the business plan. For example:
• a break-even analysis – this calculates at which • brochures prepared for the business
point the business should start making a profit. • any patents or trademarks taken out or acquired
on behalf of the business
• the résumés of the key personnel
• any market research relevant to the business
• any articles, press releases or publicity material
featuring the business or key personnel.

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 9.3 Corporate social risk management tool to check how effectively a
business is acting in accordance with environmental
responsibility regulations.

management issues An audit can also assist in:

• assessing how to manage or improve the condition
and business planning of the environment
• prioritise what actions can be taken to reduce the
It is important to consider corporate social impact on the environment
responsibility when developing and planning a • demonstrate accountability to third parties such
business. There is an expectation in the community as government, customers and shareholders or
that businesses, regardless of their size, will have owners.
a plan of action around social responsibility (see
As part of a plan, a business also needs to ensure
Chapter 4 for further information on corporate social
that it adheres to sustainable practices. Adopting these
responsibility).
sustainability practices will then often act as a way of
It is advised by Business Victoria that, when
attracting customers to the business.
preparing a business plan, information on how the
The Competition and Consumer Act 2010 sets
business will approach sustainability and corporate
out requirements when marketing a product or good
social responsibility should be included. Suggested
as environmentally friendly. Businesses that make
areas related to this would be covered in the following
environmental or ‘green’ claims need to ensure these
sections in the business plan:
claims are scientifically sound and substantiated.
• Environment and resource impacts – an outline Consumers are entitled to rely on any environmental
of the impact the business will have on the claims made and to expect these claims to be truthful.
environment. Not only is this good business practice; it is law. The
• Community impact and engagement – identifying Australian Competition and Consumer Commission
the possible positive impact the business will have (ACCC) advises businesses to avoid using terms such
on the community and the ways it will engage as ‘safe’ and ‘friendly’, as these terms are unhelpful and
with the community. may be misleading. It is also important for a business
• Risks/constraints – identification of potential risks
or constraints the business may experience related
to environmental matters.
• Strategies – identification of 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.
Sustainability Victoria recommends that businesses
should complete an environmental audit as this allows
businesses to also set benchmarks for improvement.
An environmental audit will highlight any areas
of the business that might
environmental audit impact on the environment
highlights how the business and can also act as a check
affects the environment to make sure the business
and sets a benchmark for
acts in accordance with
improvement
environmental laws.
Conducting an environmental audit is useful
for finding the areas of the business that impact
the most on the environment. It is also an effective Figure 9.16 A symbol that often appears on goods being
marketed as ‘environmentally friendly’

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to check and investigate the processes used in areas
such as manufacturing, transportation and packaging. ACTIVITY 9.4
It is essential to test and confirm any claims such as
1 Identify why it is important for
‘environmentally friendly’ and ‘no testing on animals’.
a business to consider social
A business plan should also take into account
responsibility issues when developing a
sourcing of materials and products from sustainable
business plan.
and ethical suppliers. This is important because the
reputation of the business may be negatively affected 2 Explain why ethical marketing is
if there are found to be unethical or illegal practices important as part of a business plan.
related to its suppliers. Supply chain management is
important and needs to be considered (see Chapter
10 for further detail).

CASE STUDY 9.3

Fairtrade school uniforms
In 2016, Hazelbrook Public School became
the first school in Australia to incorporate
a Fairtrade certified item into its school
uniforms. The school’s polo shirts are made
out of 50 per cent polyester from recycled
plastic bottles and 50 per cent ethically
sourced cotton. They were acquired from a
Fairtrade certified supplier named Change
Threads in Katoomba, produced in India and
then delivered back to Australia. Fairtrade
certification encompasses standards along
the whole supply chain such as a fair price and
long-term contracts for the producers as well Figure 9.17 Fair trade logo
as environmental sustainability.
Change Threads was founded by Anna
Dohnt, who has been involved in Fairtrade for many years. Ms Dohnt, who has four daughters,
said she didn’t like taking her children to school ‘in something made by a child living in misery’.
‘We need to make our children understand ethical supply chains and what better way to do
that than with a uniform,’ she said. Ms Dohnt has travelled to India to make sure every worker
involved in producing the textiles is treated and paid fairly.
It was in Ms Dohnt’s Fairtrade store, Uplift, that a parent from Hazelbrook Public School first
discovered the Change Threads uniform label. The concept was then communicated to the
school’s uniform shop coordinator, who was eager to expand on the school’s existing ethical
culture of sourcing bags produced from recycled PET bottles and selling Fairtrade reusable lunch
bags. Rather than being unattainably expensive, Change Threads was able to match the pricing,
as well as the style, of the existing school polo shirt.
According to the Change Threads website, it is combating today’s culture of exploitative
economic systems by making Fairtrade Certified Cotton products available and accessible. Its
aim is to provide sustainable livelihoods for marginalised producers in poor communities as well
as educating, equipping and empowering Australians to make ethical choices that help change
the world.
Change Threads is an Australian Clothing Company that partners with Indian cotton farmers
and garment producers to provide a range of uniforms and garments in accordance with the

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 CASE STUDY 9.3 continued
international Fairtrade standards. It has ‘followed the thread’ of the clothing supply chain – to
understand the people and systems who are producing the clothes we wear.

Analysis 2 Describe how Change Threads came up

1 Explain why Hazelbrook Public School with the idea of ethically sourcing the polo
looked at finding a different place to source shirts and contributing to the standard of
its uniforms. living of people in India.

Figure 9.18 Ethically sourced student uniforms at Hazelbrook Public School, created by Change Threads

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Chapter summary • A business plan should include sections
on the approach the business will take in
• Businesses need to plan to assist them to relation to being sustainable and its impact
achieve their business objectives. on the environment. It should also examine
• There are three levels of business planning: possible resource issues and impact on the
strategic, tactical and operational. community.
• Conducting a SWOT analysis, where a • An environmental audit will assist a
business looks at its internal strengths and business and should be included in the
weaknesses and its external opportunities business plan.
and threats, assists in the strategic • Laws relating to marketing and product
planning process for a business. requirements should be taken into account.
• Planning is essential for a small business in
order to establish: Chapter summary questions
– what it wants to achieve (business 1 Define the following terms and then use
objectives) each in a sentence to demonstrate your
– how objectives will be achieved understanding:
(strategy) a objective
– who will be responsible for which b business plan
aspects of the plan
c mission statement
– the timeframe for achievement of
d quality assurance
objectives.
e executive summary.
• The business plan outlines the strategic
details of the business, shows direction 2 Describe the benefits for a business of
and long-term objectives, and shows conducting a SWOT analysis as part of its
strategies to be used to achieve objectives. strategic planning process.

• The purpose of the business plan is to help 3 Identify and outline the components/
establish the business and keep it on track, sections of a good business plan.
to help obtain finance and backing for the 4 Explain why it is vital for the potential
business venture, and to set a direction for small business operator to prepare a
business ideas. detailed business plan before commencing
• Sections commonly found in a business operations.
plan include: 5 Explain why quality control could be
– Title or cover page described as a reactive system of quality
management, whereas quality assurance
– Executive summary
and total quality management are both
– Business profile and details proactive approaches.
– Legal details 6 Classify each of the following quality
– Insurance and risk management management examples as: quality
– Sustainability plan control; quality assurance; or total quality
– Products/services management measures.

– Operations plan a A quality system where items are

checked for faults before leaving the
– Marketing plan
factory.
– Financial section
b A system involving a quality circle to
– Appendices. devise methods to reduce defects in the
• Corporate social responsibility should be items produced.
considered when developing a business
plan.

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 c A system where people posing as Extension questions
customers at a fast-food restaurant
perform spot-checks on customer Imagine that a friend who is thinking of going
service levels. into business has come to you for advice on
d When a business has earned the right whether or not to write a business plan.
to display the logo of a standards 1 Write a list of 10 reasons why it is wise
association. to write a business plan before going into
7 Describe why a business should include business.
reference in its business plan to its 2 List and explain the contents of the
approach to corporate social responsibility essential sections of a business plan.
and the environment. 3 Suggest some useful websites and links
8 Explain why a business should try to that would help educate someone on the
ethically source materials and inputs. benefits of writing a business plan and how
to do it.

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 UNIT 2
ESTABLISHING A BUSINESS

177
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 PART 1
AREA OF STUDY 1

Legal requirements and

financial considerations
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CHAPTER 10 Key terms
• by-laws • false and

Establishing a business – • code of conduct

• codes of practice
misleading
representation

legal requirements
• cooling-off • insurance
period • legal compliance
• corporate • licence
citizenship • occupational
Overview • domain name health and safety
• Environment (OH&S)
There are numerous legal considerations and Protection • premium
requirements to be aware of during the process of Authority (EPA) • product recall
establishing and operating a business. A business • equal • public liability
operator must ensure the business is in compliance opportunity insurance
with all laws and regulations, or otherwise risk legislation • regulation
exposure to legal sanction. • Fair Work • risk assessment
Commission • self-regulation
Key knowledge (FWC) • superannuation
• Fair Work • warranty
In this chapter students will learn the following about Ombudsman • WorkCover
the legal aspects of a business: (FWO) • workplace
• An overview of key legal and government relations
regulations to be considered when establishing a
business, including:
– Registration of a business name
– Registration of a website domain
– Trade practices legislation
– Business tax compliance
– WorkSafe insurance.

What’s ahead
Business
Local
Codes of registration
government
practice
by-laws

Licences,
Insurance permits and
approvals
Business legal
requirements upon Occupational
Privacy laws commencement health and
safety

Australian
Consumer Law Employment
laws
Environmental Equal
laws opportunity
Figure 10.1 Business legal requirements at start-up

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 10.1 Compliance with key
legal and government
regulations
Legal compliance must be considered both prior to
business commencement and throughout the life of
the business. Like individual citizens, businesses are
subject to a plethora of laws and other government-
imposed regulations that both restrict and impact on
business activity. As citizens, individuals are subject to
laws imposed by governments. Similarly, the business
sector is also subject to laws and standards of expected
behaviour. This concept of
legal compliance corporate citizenship and its
the process by which a Figure 10.2 Registration of all business names is required in
consequent social obligations
business ensures that it Victoria.
has increasingly become the
observes and complies with
focus of media attention in
the external statutory laws It is a legal requirement for the ACN to be displayed
and regulations recent years.
on a range of documents, including invoices, official
corporate citizenship A business is subject to
company notices, cheques and business letterheads.
acceptance by a corporate numerous and changing legal,
The following steps describe how a business name
of its responsibility to ethical and social responsibility
is registered.
stakeholders for actions requirements. Failure to take
and decisions Step 1: Select an appropriate name. An effective
account of these may mean
regulation rule or directive business name should be:
legal prosecution, professional
made and maintained by an deregistration and/or forcible • memorable
authority • easy to pronounce and spell
closure of the business. It is
vital that a business operator • original
complies with the relevant laws, regulations, licensing • appropriate, professional and non-offensive
requirements and codes of behaviour included in • descriptive and functional.
Australian business regulation. Once a few names have been shortlisted, the
online Business Name Register must be checked
Business registration to see if any of the names have already been taken
and are currently in use by another business. The
The Business Names Act 1962 requires registration
most appropriate available name is then chosen
of the names of all businesses that conduct business
and reserved for the process of registering it. This is
in Victoria under a business name. Consumer Affairs
known as ‘holding the business name’.
Victoria holds a registry of business names. A business
The Business Name Register can be found on the
operator is obliged to display a sign showing the
ASIC website.
business name. If using a personal name (e.g. Jane
Step 2: Before the chosen business name can be
Smith) as a business name, there is no need to register
registered an Australian Business Number (ABN) needs
it. However, any additions, such as ‘Jane Smith & Co’,
to be obtained through the Australian Business Register.
will require the business name to be registered, as ‘&
Co’ is not part of a personal name.

Registering a business name

Businesses wanting to register a business name
must have an Australian Company Number (ACN). A
business that is a company will have an ACN. This is
a unique, nine-digit number issued by the Australian
Securities and Investments Commission (ASIC) that Figure 10.3 Before a business name can be registered, a
offers identification while transacting business. company must obtain an Australian Business Number.

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 The ABN enables businesses in Australia to deal with
a range of government departments and agencies
using a single identification number.
Step 3: With the ABN, the business applies to the
ASIC website, provides details of persons holding the
business name and addresses for the business. This
can be done by signing up to ASIC Connect on the
ASIC website.

Registering a website domain

It is advisable to buy a website domain name for a
business website. In this context, the domain name is
the part of an internet address
domain name a unique that identifies a website,
name identifying the
such as ‘Cambridge’ in www.
website in a web address
cambridge.edu.au.
In general, the best domain
names: Figure 10.4 A business website domain must be registered.
• reflect the business name
• are three syllables or less (e.g. Yahoo, webwombat)
• are easy to remember, pronounce, spell and type social media channels. A quick way to find out if a
(e.g. Google)  domain name is available is to use the free service
• are alliterative (e.g. Redraven, Bluebug and provided by AusRegistry (see Cambridge weblinks:
Firefox) http://cambridge.edu.au/redirect/?id=6990).
• are also available for registration via social media If a name is available and not in breach of any
channels. law, the next step is to register it. This can be done
If planning to  use social media  to market a through several accredited registration organisations.
business, it’s a good idea to check if the name is also A list of accredited registrars can be found on the
available on Twitter, Facebook, Instagram or other .au Domain Administration website.

Initial business
What it is Go to
registration
ABN Australian Business Cambridge weblink: http://cambridge.edu.
Number au/redirect/?id=6991
ACN Australian Company Cambridge weblink: http://cambridge.edu.
Number au/redirect/?id=6992
PAYG withholding Legal requirement when a Cambridge weblink: http://cambridge.edu.
business has employees au/redirect/?id=6993
Intellectual property Patents, copyright, Cambridge weblink: http://cambridge.edu.
registration trademarks, designs, etc. au/redirect/?id=6994
GST Goods and services tax Cambridge weblink: http://cambridge.edu.
au/redirect/?id=6995
TFN Business tax file number Cambridge weblink: http://cambridge.edu.
au/redirect/?id=6996
Business name Business name Cambridge weblink: http://cambridge.edu.
au/redirect/?id=6997
Fringe benefits tax Fringe benefits tax Cambridge weblink: http://cambridge.edu.
au/redirect/?id=6998
Table 10.1 Business registration sites

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 Local government by-laws
Local government by-laws
by-laws local government affect the operation of
laws/regulations relating businesses in a given local
to activities within a
area. These vary according to
municipality
the local government.

Building and planning controls

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. Figure 10.5 Local government is responsible for much
Other areas are zoned ‘light industrial’, ‘heavy business regulation.
industrial’, ‘retail’ and ‘commercial’. The purpose
of this system is to ensure that like businesses are
with the appropriate authority. Often a particular
restricted to similar areas. No one, for instance, would
qualification is required to practise. A licence is issued
like to discover that the vacant block of land next to
for a specified period of time and must be reapplied for
their house has been sold to a developer building a
once this period has elapsed. For example, a medical
four-storey office block, or even a supermarket. The
practitioner must be registered with the Health Insurance
system of zoning prevents this from occurring.
Commission to treat patients under the Australian system
Council planning approval must also be obtained
of Medicare. Similarly, other types of business may
for all plumbing and building work. The operation
need to have registration or a licence from a specified
of a home office may also require council planning
body or organisation.
permission.
Some businesses require a variety of licences. For
Other by-laws impacting on business example, a restaurant might require the following:
Businesses must also be aware of other local by-laws, • food premises registration for preparing and
including: selling meals
• parking restrictions • liquor licensing for selling alcohol
• hours of operation • APRA copyright licensing for playing music
• health regulations covering hygiene and food • local council permits for footpath seating.
handling
• restrictions on activities such as outdoor dining.
Permits and approvals are required from the local
ACTIVITY 10.1
government planning department to set up or make Using the ABLIS website, compile a list of
fit-out changes to business premises. the licensing requirements for each of the
following businesses:
Business licences, permits and • café
approvals • real estate agency
Most businesses require some type of licence, permit or • child care centre
approval from a government authority or professional • beautician.
association to operate. Licences
licence permit from an grant the right to perform a
authority to own or use specified activity or role. For
something, do a particular
example, skilled tradespeople
thing, or carry on a trade
and/or professionals such as
accountants need to be licensed

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 Occupational health and safety
ACTIVITY 10.2 laws (WorkSafe in Victoria)
All Australian employees have a legal right to a safe
workplace; consequently, laws are designed to ensure
employers provide this. In Victoria the Occupational
Health and Safety Act 2004 obliges all employers to
provide a safe workplace by
proactively working to reduce occupational health
all physical, chemical and and safety (OH&S)
behavioural hazards as far as area concerned with
the safety and welfare of
is practicable.
people engaged in work or
Occupational health employment. In Victoria,
Figure 10.6 City of Port Phillip town hall and safety (OH&S) laws aim workplace health and
to prevent accidents in the safety is governed by a
Use the following link to the website system of laws, regulations
workplace through involving
of the City of Port Phillip at Cambridge and compliance codes that
all within the business in
weblinks (http://cambridge.edu.au/ set out the responsibilities
actively working to identify
redirect/?id=6999) and answer the of employers and workers
and remove hazards. Every to ensure that safety is
questions:
workplace must have an maintained at work.
1 Footpath trading: OH&S policy.
a When is footpath trading allowed? An employer’s OH&S
b When is footpath trading not obligations include:
permitted? • a commitment to a safe workplace covering all
c Are there any costs involved? workplace activities
2 Outline three by-laws that apply to • to involve all workers, management and owners
mobile food vans and their operation in in the development of an OH&S policy
the City of Port Phillip. • to communicate the OH&S policy and its relevant
3 Outline four requirements applying to processes and procedures
businesses that sell food in the City of • to provide training in all relevant OH&S procedures
Port Phillip. and processes
4 Identify three health by-laws that apply • to regularly monitor compliance and review the
to a beauty salon operating in the City policy.
of Port Phillip. In Victoria laws are enforced by WorkSafe.
Inspectors from WorkSafe may be called in to assess

Figure 10.7 Occupational health and safety is an important obligation of a business.

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 risks and hazards and, if necessary, may close employers. This is generally known as workers’
down the business until these are removed. The compensation insurance. WorkCover insurance
business operator therefore must be aware of OH&S is compulsory insurance for
legislation, and standards and codes relevant to their Victorian employers which is WorkCover compulsory
particular industry. Failure to do so could result in funded by their contributions. insurance scheme that
provides employers with
legal prosecution. It provides employers with
insurance cover for the
insurance cover for the cost
WorkSafe insurance (provided through of benefits if their workers are
cost of benefits if workers
are injured or become ill
WorkCover) injured or become ill because because of their work
WorkSafe’s statutory obligations include providing of their work. (See more on
reasonably priced workplace injury insurance for this on the following page, under ‘Employment laws’.)

CASE STUDY 10.1

Cosmetics company wears $75 000 fine after forklift incident

A cosmetics distribution company was convicted and fined $75 000 at the Magistrates Court in
Moorabbin last week following an incident in which a worker inside a cage was dropped by a forklift.
Total Beauty Network Pty Ltd was charged with failing to provide a safe working environment and
failing to maintain safe systems of work over the incident which caused the worker to suffer multiple
vertebrae fractures requiring a spinal fusion and an extensive period of rehabilitation.
The court was told that employees at the company’s Carnegie warehouse were expected to get into a
cage, raised by the tynes of a forklift operated by the warehouse manager, in order to retrieve prod-
ucts from high racking.
This system of work meant the business avoided taking the time to safely retrieve a large box of stock
with the forklift, place it on the ground to select particular items and return it to the high racking.
On 20 October 2014, a worker was lifted in the cage to a top rack to retrieve products. When the
warehouse manager lowered the forklift, the cage snagged on a beam of racking and fell several me-
tres to the ground with the worker inside. 
The court heard that the cage was not designed to carry workers for picking stock, nor was the fork-
lift designed to carry a cage.
The court also heard that the warehouse manager did not hold a licence to operate the forklift. He
was charged with one count of failing to hold a licence in accordance with regulations and was con-
victed and fined $2 500.
Executive Director of Health and Safety, Marnie Williams, said there was no excuse for the total disre-
gard for safety that the business had adopted in its warehouse operations.
‘It is just staggering that in this workplace employees were expected to get into a cage, which was not
designed for carrying people, and be elevated by a forklift controlled by someone not qualified to do
so,’ she said.
‘It is because of this attitude to health and safety that a worker was involved in a traumatic incident
which caused serious spinal injuries and ongoing rehabilitation – it is just inexcusable.’ …
(Source: WorkSafe Victoria, ‘Cosmetics company wears $75,000 fine after forklift incident’, 11 December 2015.
The WorkSafe website (which can be accessed via http://cambridge.edu.au/redirect/?id=7000)
should be accessed for more information and future updates on any references used.)

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 Analysis
1 Name and describe the business that has
been prosecuted.
2 What Act of Parliament was this business
prosecuted under? What penalties have
been imposed as a result?
3 Describe what has occurred and how the
law has been breached.
4 Explain who you believe was at fault in this
case. Was the penalty imposed adequate in
your view? Give reasons for your answer.
5 Describe how this prosecution and the
publicity surrounding it might affect the
business in terms of its reputation and
sales. Figure 10.8 Total Beauty Network Pty Ltd was charged with
failing to provide a safe working environment.

10.2 Employment laws Workplace relations laws

Both state and federal governments enforce workplace
All businesses are subject to laws and regulations
relations laws regulating the relationship between
affecting employment of staff. These include:
employers and employees.
• Since 1992 all Australian employers must pay
These laws stipulate procedures workplace relations
superannuation contributions on behalf of historically referred to
for:
their employees to a regulated as industrial relations,
• resolving disputes in the
superannuation a pension superannuation provider. workplace relations
workplace is concerned with the
or lump sum payment made Currently, this is at a rate of
to workers on retirement; • setting minimum wages contractual, emotional,
9.5 per cent of the employee’s
the money comes from and conditions. physical and practical
income. The purpose of this
employers’ contributions relationship between
is to guarantee all workers Minimum standards for
made during the working employer and employee
superannuation income for wages and conditions are
life of the employee Fair Work Commission
their retirement. known as awards and are
(FWC) Australia’s national
• WorkCover is a compulsory established by an independent workplace relations
insurance scheme employers pay into on behalf tribunal called the Fair Work tribunal. Its role is to assist
of their employees. Its purpose is to provide an Commission (FWC), which employees and employers
acts like an industrial court to maintain fair and
income and compensation for employees and/
to resolve disputes and to productive workplaces. The
or their families in the event of injury, disability FWC is an independent
or even death in the workplace. Premiums vary establish minimum wages and
body that operates under
according to the level of risk in the workplace. conditions. The FWC oversees the Fair Work Act 2009
The insurance may cover: and enforces regulations Fair Work Ombudsman
– replacement of lost income regarding: (FWO) an independent
– medical and rehabilitation treatment costs • the safety net of minimum statutory agency of
– legal costs wages and employment the Australia government
that acts as a central
– lump sum compensation in the event of a conditions
point of contact for free
serious injury. • enterprise bargaining advice and information
• industrial action on the Australian national
• dispute resolution workplace relations system
• termination of employment
• other workplace matters.

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 The Fair Work Ombudsman (FWO) is an national workplace relations system. The Office of the
independent statutory agency of the Government Fair Work Ombudsman also investigates workplace
of Australia  that acts as a central point of contact complaints and enforces compliance with national
for free advice and information on the Australian workplace laws.

ACTIVITY 10.3
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 ‘Employment’ then ‘National Employment Standards’ and
answer the following questions.
a What are the National Employment Standards (NES)? Who is affected by them?
b Explain how the NES are designed to protect employees.
c List the 10 NES that apply to all employees covered by the national workplace relations
system.
d What penalties does an employer face for
providing an enterprise agreement to their
employees with entitlements less than the NES?
2 Go to ‘Resources’ then ‘Pay Rates Calculator’. Use
this to calculate the minimum pay rate for each of the
following employees:
a Andrew, a Grade 2 food and beverage attendant
working in a restaurant
b Eleni, an 18-year-old third-year apprentice chef
c Bruce, a second-year apprentice hairdresser.
3 Go to ‘Complaints’ then ‘Fair Work Inspectors’. Summarise the role and powers of a Fair
Work Inspector.
4 Suggest why the federal government would establish this type of website.

Equal opportunity, anti- Opportunity Commission may fine employers if

discrimination and sexual they perpetrate or allow discrimination based on

an employee’s personal characteristics to occur in
harassment laws their workplace.
There are numerous pieces of federal and state • Affirmative action laws aim to improve the
legislation that regulate the behaviour of employers chances for career advancement for groups that
towards employees, as well have traditionally been disadvantaged, such
equal opportunity as employees towards each as women and people of a non-Anglo ethnic
legislation laws that other. Equal opportunity background. The Equal Opportunity for Women
aim to protect people in the Workplace Act 1999, for example, requires
legislation, in particular, aims
from certain kinds of businesses employing more than 100 people to
discrimination in public life to ensure that employees are
judged by their employers on report on the progress made in appointing women
and from breaches of their
human rights their merits. Legislation relates to non-traditional work areas.
to three main areas: • Federal sexual harassment legislation outlaws
unwanted or uninvited sexual behaviour that
• Anti-discrimination laws aim to protect employees
is offensive, embarrassing or humiliating in the
from discrimination on the grounds of race,
workplace either by employers to workers or
gender, sexual preference, religion, pregnancy,
between workers. There are clearly specified
ethnic background, disability or any other personal
procedures for investigating a sexual harassment
characteristic. Employers are also liable for the
claim that must be followed by employers.
actions of their employees in this regard. The Equal

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Figure 10.9 Environment protection laws are enacted by governments at all levels.

Environment protection laws Protection Authority (EPA)

Environment Protection
is the Victorian body charged
Environment protection laws are enacted by with enforcing environmental Authority (EPA)
governments at all levels. A business will be authority that monitors
laws. Areas that are covered
prosecuted if it fails to meet the environmental the environment and the
include: things that impact on the
standards defined in a particular law. An operator
• noise environment
is required to become acquainted with the relevant
• waste discharge
environmental legislation and ensure that the business
• use of toxic substances
meets expected standards. The Environment
• emissions into the environment.

ACTIVITY 10.4
Visit the website of Environment Protection Authority Victoria and answer the following
questions.
1 Briefly describe the role of the EPA.
2 List 10 facts about EPA Victoria.
3 Explain how a polluter can be reported to the EPA.
4 What is an environmental audit? Name two recent environmental audits conducted by the
EPA.
5 What is a Pollution Abatement Notice? When is one of these issued? What are the
penalties for ignoring a Pollution Abatement Notice?
6 Click on ‘News Centre’ and then ‘EPA Media Releases’. Briefly outline two recent
prosecutions launched by the EPA against small businesses in Victoria. For each one:
a name the business
b describe the damage it inflicted on the environment
c outline the penalties imposed.
d Were these penalties justified in your view? Explain what you would have done if you
were the judge in each case and justify your views.

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 10.3 Rights of the
Australian consumer
Consumer guarantees
Australian Consumer Law covers goods and services
purchased up to the value of $40 000 for domestic,
household or personal use. Consumers are guaranteed
rights to repair, replacements or refunds under ACL; if
the goods or services bought are found to not:
1 be of acceptable quality: the product must be able
to:
– be used for the purpose it was intended
– match the description given before sale
Figure 10.10 Australian consumer law is designed to protect
– have an acceptable finish and appearance
consumers from exploitation and is administered by the ACCC.
– be free from defects. (Except where the
supplier has informed the purchaser about
defects before purchase.)
Trade practices legislation 2 be safe to use
The Trade Practices Act 1974 was replaced by the 3 match sample or demonstration models
Competition and Consumer Act 2010 (CCA). Schedule 4 have available repairs and spare parts
2 of the CCA is known as the Australian Consumer 5 be durable.
Law 2011 (ACL). All Australian businesses must Services must be:
comply with the national law designed to protect 1 performed with due care and skill
Australian consumers. The CCA established the 2 fit for the purpose intended: the service must do
Australian Competition and Consumer Commission what it was supposed to do and achieve promised
(ACCC) to protect consumer rights, business rights results
and obligations, perform industry regulation and 3 completed in reasonable time.
price monitoring, and prevent illegal anti-competitive
When a product fails to meet these criteria, a
behaviour.
consumer has the right to a remedy through repair,
The objectives of the CCA are:
replacement or refund. The consumer guarantee
• to promote competition and fair trading
provided by the ACL is separate from a supplier’s
• to provide protection for Australian consumers
• to prevent anti-competitive conduct by businesses,
thus encouraging competition and efficiency
• to safeguard consumers in their dealings with
businesses, and businesses when they are dealing
with other businesses.
The CCA prohibits restrictive trade practices,
cartels, exclusive dealing, anti-competitive agreements,
misuse of market power and unconscionable conduct.
Under the ACL, Australian consumers now have
the same rights no matter where they live, where they
purchase goods and services or where a supplier is
located.
The ACL is administered by the ACCC, and state
and territory consumer protection agencies.

Figure 10.11 Suppliers’ warranties are separate from the ACL

consumer guarantee.

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 ACTIVITY 10.5
Explain why each of the following customers would be entitled to a remedy under ACL.
1 A customer purchases a drink that claims to be 100 per cent orange juice. The product is
50 per cent apple juice.
2 A plumber repairs a toilet which starts leaking again after three days.
3 A builder takes three years to complete a job.
4 Bob purchases a car the salesperson claims has done 10 000 km. He later finds evidence
that the car has in fact done 45 000 km.
Using the ACCC website, prepare a presentation entitled ‘Guarantees, Warranties and the
Australian Consumer’. Include:
• When can I claim a remedy as a consumer?
• How to claim a refund, replacement or repair.
• How to go about claiming a remedy.

warranty, which is a voluntary misuse, it must be withdrawn from sale. This is a

warranty a written promise of what the supplier product recall; a compulsory
guarantee, issued to the will do if something goes recall notice will be issued and product recall when a
purchaser of an article bywrong. Such a warranty can consumers who have bought defective product is sourced
its manufacturer, promising and either rectified or
be enforced by the ACL, but the products contacted.
to repair or replace it replaced after it has been
if necessary within a the ACL consumer guarantee The faulty product may be sold by the manufacturer
specified period of time trumps suppliers’ warranties. replaced, repaired or its cost
For instance, a supplier’s may be refunded. The reasons
warranty may last for six months, but the consumer for the product recall must be publicly disclosed.
guarantee may support the argument that an item
should be more durable than this. Harassment and coercion
The ACL protects consumers against unethical and
Returning products high-pressure sales practices.
A consumer is entitled to ask for a refund or exchange Consumers are also entitled to a 10-day cooling-
when the product: off period after making a purchase from a direct
1 does not work in the way it is supposed to sale. During this period, they
2 does not look the way it is supposed to are entitled to change their cooling-off period a
mind about the purchase. period of time where a
3 is broken or faulty
purchaser (in some cases)
4 is unsafe. Consumers are entitled to a
is permitted to change their
copy of any agreement made. mind about a purchase
Product recalls
The ACL states that if a product might reasonably
lead to injury to the public through its use, or even

Signs that state ‘No refunds on Signs that state ‘No refunds’
sale items’ are illegal are illegal

Signs that state ‘No refunds will Signs that state ‘Exchange or
be given if you have simply credit note only for return
changed your mind’ are legal of sale items’ are illegal

Figure 10.12 Returning products

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 hair, not a wig. The consumer asks questions about
the treatment and expected results and pays $4000
deposit. When later the ‘restored’ head of hair proves
to be a wig stuck to his head, the consumer is entitled
to a refund because the supplier made a false and
misleading representation. The service offered was
not what he received.

Contracts
Any agreement to buy or sell goods or services,
whether it is written or spoken, is a contract. Both a
purchaser and a seller have rights and responsibilities
under contract law. Each can be sure that the other
individual or business involved in the contract will
perform their side of the bargain. For example, a
Figure 10.13 A business must comply with Australian contract ensures that the products sold will be of
Consumer Law. reasonable quality and fit for the purpose intended.
The consumer is legally bound to pay the agreed
Misleading and deceptive conduct price set out in the contract.
A seller may not make false and misleading
representations to a consumer. This means they
Product labelling
must not lie or exaggerate The ACL ensures that products are labelled accurately.
false and misleading the quality, benefits, warranty, A label on a product must accurately reflect its
representation to lie possible uses or prices of the content. It must state information so that the consumer
or exaggerate about the
products they are selling. knows exactly what they are buying and can make
features or benefits offered
by a product being sold For example, a consumer an informed decision. Labels must not be deceptive
might go to a hair loss clinic or misleading. For example, to be entitled to label
where a salesperson assures a product ‘Made in Australia’ the products must be
him they will restore his head with real natural ‘substantially transformed in Australia’ and 50 per cent

Consideration is
The consumer The customer valid. The seller
The object and
enters a store service officer benefits by gaining
purpose of the
and locates a scans the product, the cash payment. Both the customer
agreement is
pair of shoes processes the The consumer and the seller are
legal. It is legal
they want to sale, the customer benefits from aware of the
to purchase
purchase. She hands over the gaining the new terms of the
shoes in a store.
takes these to cash payment in pair of shoes. Both contract. Certainty
Legal object
the customer exchange for the parties have given of terms.
requirement is
service officer. shoes. The seller consideration/have
met.
An offer is made. accepts the offer. benefited from the
transaction.

Figure 10.14 This figure demonstrates that a purchase transaction is a legal contract.

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Figure 10.15 Labelling laws ensure that products are labelled
accurately
Figure 10.16 Taxation compliance
or more of the production completed in Australia.
A producer may be prosecuted if they claim their
product is ‘Made in Australia’ but are shown not to about an identifiable individual, such as names and
meet these two criteria. addresses, income and marital status. Compliance
with the Act means the businesses concerned must

ACTIVITY 10.6 always inform people that such information is

being collected. The information must only be used
1 Examine the labelling of at least four for the purpose specified, be open to scrutiny by
food items. Describe three factors they the individuals concerned and only be used for a
all have in common in regard to their reasonable purpose.
labelling. Do you think these would be a
legal requirement for food labels? What Business taxation compliance
information do you deduce must be There is an old saying: ‘there are only two things that
displayed on food labels? Give reasons are certain in this life: death and taxation’. A business
for your answers. must pay tax. The Australian Taxation Office (ATO)
2 Examine the labelling on three administers Australia’s taxation and superannuation
household cleaning products. What systems. Business taxation obligations include:
factors do the three labels have in • A business carrying out an enterprise in Australia
common? Why do you think these must obtain an Australian Business Number (ABN).
things have to be on this type of • Business partnerships and companies require their
label? own tax file number (TFN).
3 What information do you look for on • All businesses must pay tax on income, and collect
each of the following items? Give income tax from the wages of employees.
reasons for your answer: • Businesses are required to collect goods and
a a packet of biscuits services tax (GST) from their sales.
b an item of clothing. • 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.
Privacy laws • Fringe benefits tax (FBT) and capital gains tax
The federal Privacy Act 1988 regulates how a business (CGT) may also apply.
may handle and use the personal information of • A business with employees may also be subject to
people. Personal information is any information state government payroll tax.

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 Insurance
Every business requires some form of insurance to
provide financial compensation in case of accidents,
fire, theft and other mishaps and
insurance a contract, disasters. An insurance policy
represented by a policy, in is a legal contract which works
which an individual or entity by the insured (client) paying
receives financial protection
a sum of money (premium)
or reimbursement against
losses from an insurance to an insurer (usually an
company. insurance company). In
premium periodic payment return, the insurer guarantees
made to an insurance to financially compensate the
company client for accidental losses Figure 10.17 Some businesses have higher levels of risk than
incurred, or for the client being others.
liable to compensate staff, customers or members of
the public for accidental damage and loss suffered
due to the business’s operations. Premiums increase
ACTIVITY 10.7
according to the amount of risk and the cost of Devise a poster, booklet or presentation
replacement or amount of financial protection offered. outlining the different types of insurance a
For example, it costs more to insure against fire in a small business might require.
bushfire-prone area, and more to insure against theft
in an area with high rates of burglary.
The small business operator should carry out risk Codes of practice
management by investigating potential safety risks
Codes of practice are sets of guidelines established by
and hazards, taking action to reduce them, and taking
external bodies to regulate the standards of behaviour
out insurance accordingly. Risk management should
and conduct within an industry.
be repeated regularly as the business develops.
They may be known by any codes of practice sets of
The insurance company will also conduct risk guidelines established by
of the following names: code
assessment of the business to gauge premiums. external bodies to regulate
of ethics, code of conduct,
Business owners can obtain the standards of behaviour
good practice, professional
risk assessment reduced premiums if they take and conduct within an
conducted by an insurance conduct, standards, rules or industry
action to reduce their level of
company to assess the level risk. For example, installing specifications. While they are code of conduct
of risk for which insurance not legally enforceable, and guidelines to regulate
fireproof doors, smoke alarms
cover is sought breaches are not subject to law, standards of behaviour and
and extinguishers reduces fire
they are usually enforced by conduct either within an
risk. organisation or within an
the authority also responsible
Some types of insurance are compulsory and must industry
for licensing. A breach of an
be purchased by all businesses: self-regulation a group or
industry code of practice can
• Workers’ compensation insurance (WorkCover – industry regulates its own
result in a business losing its
see section 10.2, ‘Employment laws’). conduct and behaviour
licence to trade.
• Some types of businesses are required to take out Often an industry code of
public liability insurance. practice is used by an industry as a form of self-
• 
If the business owns a regulation. Australian consumers have become much
public liability insurance vehicle it must pay for more aware of the ethical and social responsibility
to protect the business third party personal injury
against damages or injuries issues covered by industry codes of conduct. Breaches
insurance. of these are often reported in the media and can
to another person or
property potentially create a poor business image.

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Chapter summary 2 List the main areas of legal compliance
with which business operators must be
• A business must be aware of its legal acquainted.
obligations, otherwise it runs the risk of 3 Suggest why a business is required to
prosecution. submit a list of possible business names
• The following obligations must be rather than simply one when applying for
considered: business registration.
– registration of both a business name 4 Identify which organisation an employer
and website domain name would go for advice on the following:
– local government by-laws such as a Resolution of an employee’s sexual
planning and health regulations harassment claim
– required licences, permits and approvals b Obtaining a licence to discharge waste
– occupational health and safety laws into the environment
– employment laws, including workers’ c Obtaining an ABN
compensation d Finding out their legal obligations in
– equal opportunity laws regard to consumer rights
– environment protection laws e Registration of a website domain name.
– Australian trade practices law (consumer 5 Explain what occupational health and
protection) safety laws are. What is the purpose of
these laws?
– labelling laws
6 Outline the obligations of a Victorian
– taxation
employer in regards to occupational health
– insurance and safety.
– industry codes of practice. 7 Explain what each of the following are
and outline the obligations of Australian
Chapter summary questions business in regards to them:
1 Define the following terms and explain how a income tax
each relates to the issue of small business b ABN
legal compliance: c TFN
a by-law d GST
b social responsibility e FBT.
c occupational health and safety 8 Compare the role of the Fair Work
d workers’ compensation Commission with that of the Fair Work
e risk assessment Ombudsman in the Australian system of
f code of conduct workplace relations, noting the differences
and similarities.
g licence.

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 Extension questions d Is it legal to hang up a sign saying ‘No
refund’ in Victoria?
1 Go to the website of Consumer Affairs e Are the following signs legal in Victoria?
Victoria. Go to ‘Shopping and trading’ and Explain your answer.
answer the following questions relating to
i ‘Refunds on unworn items only’
returns and refunds.
ii ‘No refund on sale items’.
a Describe the circumstances under
which a trader is legally obliged to 2 Discuss the social obligations you believe
provide a refund at a customer’s Australian businesses have to the general
request. community. Use examples to support your
arguments.
b Does a refund have to be a cash refund
or will a credit note suffice?
c Describe the circumstances where a
customer is not legally entitled to a
refund.

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CHAPTER 11 Key terms
• balance sheet • financial

Establishing a business – •
•
bank statement
cash book
management
• petty cash

policies and procedures

• cash flow • policy
• cash payments • procurement
• cheque policy
• cheque butt • Profit and Loss
Overview • customer data Statement
base • record keeping
All businesses need to plan for and develop policies • environmental • source
and procedures to ensure consistency and stability sustainability documents
in their day-to-day operations. Having policies also • evidence • transactions
means a business is more likely to be compliant with
legal and other requirements. This chapter will initially
focus on policies and procedures revolving around
occupational health and safety, equal opportunity Suppliers are a vital component of a competitive
and anti-bullying, customer rights and licensing business venture. The final section of this chapter will
requirements. focus on the important factors to be considered in the
Financial record keeping and financial management selection of suppliers.
are also examined as these are crucial for the ongoing It is also essential that a business takes into
success of any business, regardless of size. When in consideration technological needs such as the types
the planning and establishment phase of a business, of information technology systems that are required
it is important that bank accounts, financial control and any hardware and software necessary to run the
systems and record-keeping strategies are all in place. business. The need to develop business opportunities
in other countries and establish relationships with
overseas suppliers and retailers are important when
establishing a business. In an increasingly global
economy many businesses, regardless of size, either
import components and goods or sell products
overseas, so this should also be considered and
planned for.

Key knowledge
In this chapter students will learn about:
• The need for policies and procedures to achieve
compliance with legal requirements and establish
business routines
• The importance of establishing bank accounts,
financial control systems and record-keeping
strategies
• The importance of choosing appropriate suppliers,
including the benefits and limitations of suppliers
which meet the corporate social responsibility
objectives of the business
• Technological and global issues that may affect
decision making when establishing a business,
such as generating customer data bases and
contacts with overseas suppliers and retailers.

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 What’s ahead
Bank accounts
and financial
controls

Business
Legal Suppliers and
policies and
compliance procurement
procedures

Technology
and global
issues

Figure 11.1 Policies and procedures for establishing a business

A business would need to consider and develop

11.1 Policies and policies in areas such as:

procedures relating to • occupational health and safety and emergency

management
legal requirements • anti-discrimination, equal opportunity and anti-
bullying
It is important that a business develops policies and
• customer service, such as returns, marketing and
accompanying procedures to ensure it complies with
refunds
legal and other regulatory requirements. A policy is
• licensing requirements, such as food handling.
a written statement detailing
Each of these is discussed further below.
policy a written statement the processes, procedures,
of the processes, rules and regulations that Occupational health and safety
procedures, rules and should be followed in a given
regulations situation. Having clear policies
laws and emergency management
and processes in place allows All businesses need to ensure they comply with the
for consistency and certainty in all aspects of the relevant health and safety laws for their state. In
business. Sometimes a policy is developed in response Victoria, businesses are bound to observe occupational
to laws and other legal requirements, at other times health and safety (OH&S) laws, which set out the
events and needs in the business dictate the types of responsibilities of employers and employees to
policies required. Policies are developed in a range ensure a workplace is safe. These obligations and
of different areas including safety in the workplace, responsibilities are set out in the Occupational Health
anti-discrimination and equal opportunity, licensing and Safety Act 2004. Businesses must comply with
requirements, marketing and customer relations, procedural and administrative matters under the Act.
warranties and guarantees, and environmental In addition to the Act, there are compliance codes
issues. that provide practical advice to those who have duties
or obligations under the Act.

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 Ongoing
work site
inspection

Accident and
Hazard
incident
control
investigation

Health and
safety system Hazard
Worker
identification and
training
assessment

Program Emergency
adminstration response
review planning

Figure 11.2 Elements of a health and safety system

CASE STUDY 11.1

WorkSafe Victoria charge Essendon Football Club

Essendon have been charged by WorkSafe Victoria for breaching two counts of the Occupational
Health and Safety Act after a long investigation which also saw the AFL investigated but cleared of
any breaches.
The charges relate to the supplements scandal which took place at Essendon from the end of 2011
until August 2012 and saw the club fined $2 million by the AFL.
WorkSafe released a statement on Monday morning outlining the charges. ‘Following a comprehensive
investigation, WorkSafe has charged the Essendon Football Club with two breaches of the OHS Act
2004 in relation to its 2011–2012 supplements
program,’ the statement read.
‘The charges are: One breach of section 21(1)
– failing to provide and maintain for employees
a working environment that is, so far as is
reasonably practicable, safe and without risks
to health; one breach of 21(2)(a) – failing to
provide and maintain for employees a system of
work that is, so far as is reasonably practicable,
safe and without risks to health.’
‘We are aware of the charges laid by WorkSafe
Victoria, and have liaised with both WorkSafe
and Essendon Football Club throughout the
investigation,’ Brett Murphy, legal counsel for the Figure 11.3 The Bombers released a statement via their
AFL Players Association, said. website.

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 CASE STUDY 11.1 continued

‘Essendon Football club has been assisting WorkSafe with its investigation and agreed to the charges
laid today,’ the statement said.
‘The charges reflect the governance failings of the club at that time, which the club has accepted
responsibility.
‘As this matter is now before the Court, the club will make no further comment at this time.’ 
(Source: Based on C Wilson, ‘Worksafe Victoria charge Essendon Football Club’, The Age, 9 November 2015.)

Analysis 3 Describe some of the policies a business

1 Summarise why it is important for a might need to develop for staff safety.
business to ensure it has a safe workplace.
2 Explain why Essendon Football Club was
charged under the OHS Act.

A business might also need to ensure it has put into relevant laws. An employer is obliged to ensure
place policies around emergency management and their employees understand the policies and that
evacuations. It is a legal requirement that all businesses there are processes in place to deal with complaints.
have a policy to deal with possible events such as Discrimination can be direct or indirect and may
flood or fire. By developing a policy, a business will include:
need to consider how it might cope with events and • the recruitment process; for example, job
unforeseen emergencies (see Cambridge weblinks: advertisements or interviews being inaccessible
http://cambridge.edu.au/redirect/?id=7001). because of a disability
• being offered unfair terms of employment; for

ACTIVITY 11.1 example, because of your race or religion

• being denied access to training; for example,
Find the emergency management plan for because of your age
your school or institution. • being refused or having limited access to
1 Outline the type of information that is opportunities for promotion, transfer or other
included in the plan.
2 Explain why schools and all businesses
need to develop these types of policies.

Anti-discrimination, equal
opportunity and anti-bullying
policies
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
Figure 11.4 Discrimination is treating, or proposing to treat,
life, including the workplace. A business needs to someone unfavourably because of a personal characteristic
make sure it has clear policies that comply with protected by law.

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 employment benefits; for example, because of and guarantees is on retailers of goods and services,
parental status manufacturers also need to ensure the products they
• being unfairly dismissed, retrenched or demoted; supply and design are suitable for use.
for example, because you become pregnant. Consumers are automatically covered by warranty
A business must also ensure it has policies to protection under the Act. If statutory warranties are
stop cyberbullying in the workplace. This area is also breached or ignored then consumers are entitled to
covered by laws and a business is obliged to develop a refund, compensation, repair or replacement of
and put into place relevant cyberbullying and internet the item they have purchased. There are penalties
usage policies. imposed on businesses that fail to follow the
(Source: Victorian Equal Opportunity and Human
provisions relating to guarantees, warranties and
Rights Commission website, ‘Discrimination’.) advertising (see also Chapter 10).

Customer service policies such as Licensing requirements such as

returns, marketing and refunds food handling
Local government (municipal councils and shires)
Australian Consumer Law 2011, which is part of the
are responsible for a number of laws and regulations
Competition and Consumer Act 2010, is designed to
relating to businesses. These include areas such as:
stop and prohibit exploitative business behaviours.
• food handling regulations
The scope of the Act includes misleading advertising,
• advertising; for example, billboards
consumer protection and contracts.
• planning and building permits
A business needs to have policies that ensure it
• hours of operation
does not make false and misleading representations
• land and business zoning (see Chapter 10 for more
about products sold. Illegal practices include:
on this).
• a ‘half-truth’ in advertising
• suggesting a product has an attribute that it does Food handling regulations
not have According to the Victorian Department of Health and
• stating a product is made in one country when it Human Services, all food business owners are legally
is made in another responsible under the Food Act 1984 to ensure that
• using a logo, business name or packaging that is the food sold to customers is safe to eat. Victorian
similar to a well-known brand food laws also require businesses to comply with
• overly optimistic claims about a product the Food Standards Code. This means the business
• false or misleading labels or misleading statements owner/proprietor is responsible for food safety in
about the characteristics of a product
• offering gifts and prizes with no intention of
supplying them
• bait advertising, which is advertising a good when
there are only a few available.
Businesses must also develop policies regarding
warranties and guarantees for the products and
services they provide.
A guarantee policy may be a powerful marketing
tool. Guarantees can be either written or verbal, and
send a message that the business is confident about
what it sells.
There are legal obligations businesses must
meet when devising warranties and guarantees. The
business must ensure that its products and services are
suitable, are not faulty and will perform satisfactorily,
the product or service must be fit for the purpose
for which it is sold and must be of a quality that Figure 11.5 In Victoria, all food business owners are legally
means it can be used. While the focus of warranties responsible for ensuring their food sold to customers is safe
to eat.

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 the business, and needs to ensure that all staff who personal and business income and expenses. It can
prepare food are fully trained in safe food handling. also become an issue when tax returns need to be
Businesses need to ensure that they have policies in completed. If the business is a company, partnership
place and staff are properly trained. Policies should or trust it is compulsory to have a separate account
be developed around storage and display of food (see Chapter 7 for further information on business
and ensuring food is heated or cooled at correct structures).
temperatures.

11.2 Financial control ACTIVITY 11.2

systems Sunni and Liam have started a business
selling comic books. Presently the
Among the most vital aspects of business operations business is selling online and the comics
are financial management, record keeping and are stored in their front room. Sunni
the ability to evaluate financial believes they should open up a separate
financial management performance. It is essential that bank account because the revenue from
managing financial a manager/owner of a business sales and business expenses are coming
activities relating to the has the necessary skills to out of Liam’s personal bank account.
operation of a business
perform these tasks and Explain why it is advisable that the
record keeping
enable the business to remain business has its own separate bank
maintaining accurate
records of all matters financially viable. Financial account.
related to business planning, management and
activities evaluation necessitate the
development and maintenance
of financial record keeping, control and evaluation Financial control systems and
systems and processes. record-keeping strategies
Establishing a bank account for a It is essential that all businesses establish a financial
management system, although this is sometimes more
business difficult for a small business. However, this does not
When establishing a business, it is important to set mean it should not be done. A business needs to have
up a bank account that is separate from the owner/s control over its cash and cash flow.
of the business. If this does not occur, then it is There are a range of considerations to be taken
impossible for the owner/s to monitor and separate into account when establishing
financial control systems. If a cash flow tracking the
business is to be successful cash or money coming
and viable over a long period into and going out of the
business
of time, a range of controls
and systems are required.

Financial control and business

documents required
Small and new businesses are 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 methods adopted in a
Figure 11.6 When establishing a business, it is important business to:
to set up a bank account that is separate from that of the
owner/s of the business. 1 safeguard its assets

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 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 records
transactions contractual and transactions are
arrangements undertaken included in the reports of
by a business; for
business
example, payment of
wages or rent • accuracy – the right amounts
are recorded in the correct
accounts
Figure 11.7 It is essential that all businesses establish a
• authorisation – the correct levels of authorisation
financial management system.
are in place to cover such things as approval,
payments, data entry and computer access
the type of transaction, the monetary value and the
• validity – the invoice is for work performed or
name/s of those involved where relevant.
products received and the business has incurred
If these source documents are not kept it
the liability properly
is almost impossible for a
• existence – of assets and liabilities; that these have
business to track the financial evidence information
been recorded accurately and in a timely manner which identifies type of
data or prove expenditure; for
• error handling – that errors in the system have transaction, its date, parties
example, phone expenses.
been identified and processed and financial value (if any)
A cash book is one of the
• segregation of duties – to ensure certain functions source documents
simplest forms of financial
are kept separate; for example, the person documents that provide
record keeping. A cash evidence of transactions
taking cash receipts should not also do the banking
book sets out all the cash
• presentation and disclosure – timely preparation
transactions of a business
of standard financial reports.
including receipts and payments. Once a business
(Source: CPA website, ‘Internal controls for starts operation it enters into transactions, which
small business: 2008 update’.) must be correctly recorded. Examples of transactions
There are a range of financial records that should include revenue from the sale
be kept by business. These can be used to compile of a good or service and cash cash book one of the
reports accessible by owners and other interested payments such as employee simplest forms of financial
record keeping; sets out all
stakeholders. A simple book-keeping system for a wages and payment of rent.
the cash transactions of a
small business should include records of financial A business needs to ensure business including receipts
transactions such as cash and credit sales and that it keeps evidence of all and payments
payment of expenses. These transactions should be transactions. The cash book cash payments when
recorded. There needs to be evidence of all financial can be kept manually as a items are purchased and
transactions. A document should include the date, multicolumn cash book, on a paid for in cash

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 Figure 11.8 A spreadsheet is one of the simplest forms of Figure 11.9 A cash receipt is a source document and also
financial record keeping. provides evidence for the business.

spreadsheet program such as Microsoft Excel, or on A cash receipt is a source document and also
a computerised accounting package such as MYOB provides evidence for the business. Cash source
(Mind Your Own Business) or QuickBooks. documents are set out in Table 11.1.

ACTIVITY 11.3
Determine whether the following events are transactions. Give reasons for your answers.
1 A customer places their name on a mailing list.
2 A manufacturer purchases raw materials.
3 A supplier distributes a catalogue of plumbing parts to a hardware store.
4 A customer returns a faulty Blu-Ray player.
5 A phone bill is paid by an advertising agency on a Visa card.

Type Explanation
Receipts A receipt is a record of cash transactions and money received by a
business.
Cash register roll Most retail stores use electronic cash registers. A cash transaction is
or summary recorded by the business, often on a cash register roll, or a summary
which 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 Businesses are increasingly using EFTPOS (Electronic Funds Transfer at
Point of Sale). 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. The growth in the use of EFTPOS and internet
banking means that small businesses need to check that these electronic
transactions are in the business records and bank accounts. Failure to
check may mean that the cash flow is not accurate.

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 Type Explanation
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 also have periodic payments (direct debits or payments) made
by the bank or other financial institution on behalf of the business. The
business has authorised the financial institution to withdraw the amount
from its bank account. Lease payments, insurance instalments, electricity
bills and many other regular payments can be made.
Petty cash Businesses usually need to make small payments including for stamps,
tea, coffee and tram fares. The petty cash system allows small amounts of
cash to be kept on hand for these expenses. A petty
cash voucher should be completed when petty cash petty cash a small amount
is required; this voucher then provides evidence of of cash held to pay for
the expenditure and is then recorded in the petty items such as stamps, tea
cash book. and coffee
cheque an instruction to
Cheques Cheques are used less now and most businesses
the bank to pay money from
use direct debit and EFTPOS for payments of an account to the person
business expenses. A cheque is simply an ‘IOU’ to named on the cheque
the person or business. The bank involved transfers (drawee)
this amount into the account of the person owed cheque butt form of
the money. A cheque butt provides the business evidence to support writing
with a record. of the cheque and payment
of an account
Table 11.1 Cash source documents

Figure 11.10 Businesses are increasingly using EFTPOS.

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 Figure 11.11 An example of a cash book, for Bob’s Pet Grooming Service

ACTIVITY 11.4
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.
Her bank statements are sent every three months, but Katie has not had
time to check them properly. She paid three suppliers and has received a bank statement a
phone call from one of them telling her that the direct deposit did not go periodical statement where
through. the bank itemises the
transactions relating to
Advise Katie as to what she could do to ensure that she can gain an account; for example,
control over her business finances. debits, credits, government
and bank charges

Cash control
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 Figure 11.12 For a business to be financially successful, it
tin should be kept locked and in a secure place. must keep control over cash and cash flow.

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 ACTIVITY 11.5
Go to the website of a large business;
for example, NAB, Wesfarmers or Flight
Centre. Look at the first few pages of
the business’s current annual report (a
summary and overview).
1 Identify the profit or loss of the
business.
2 List other financial information
regarding expenses and revenue that is
outlined.

Figure 11.13 A business should have financial statements ‘The top ten do’s for a business’
audited and checked by an independent auditor or accountant
1 Adjust and readjust cash flow projections.
Many businesses also have credit transactions as 2 Establish maximum limits of purchasing
well as cash, and these are just as important to control. authority.
Again, this means it is important to have accurate 3 Require all payments be supported by
records and ensure that any outstanding money from invoices.
customers is followed up. Many businesses will put 4 Use an inventory control system.
in place strategies, such as limiting the amount of 5 Work with a CPA to upgrade financial
credit given to customers and monitoring the terms controls.
and time given to customers to pay. At the same time, 6 Require bids on all purchases over a
a business should try to extend the time given by stated limit.
suppliers to pay bills at a later date to keep cash in
7 Be loyal to good suppliers.
the business.
8 Pay on time, but only after verification.
There are two important financial statements a
9 Consider higher audit levels.
business will use; these are the Profit and Loss
Statement and the balance 10 Implement an ‘edit log’ for website
Profit and Loss sheet. The Profit and Loss changes and updates.
Statement an accounting Statement will provide an ‘The top ten don’ts for a business’
report that outlines the 1 Run out of cash...ever.
outline of the revenue and
revenue less the expenses
for an accounting period. expenses of the business and 2 Discount the importance of hiring an
It provides a business with any profit (if one has been accountant.
an overview of whether it made). A balance sheet will set 3 Overlook suppliers as sources of
has made a profit for the out the assets, liabilities and financing.
accounting period. owners’ equity (investment) 4 Disregard contingency planning.
balance sheet an in the business. Both provide
accounting report that sets 5 Have the same person handling payables
information that can be useful and receivables.
out the assets, liabilities
and proprietorship (owners’ for business owners and allow
6 Place an order without a written price and
equity) of a business as at a them to monitor and evaluate
terms.
given date business performance.
7 Delegate signing of cheques.
A business should have
8 Assume that shipments are complete and
financial statements audited and checked by an
in perfect condition.
independent auditor or accountant. Audits are
generally prepared by a CPA (Certified Practising 9 Neglect to ask for and use term discounts.
Accountant) who will ensure that the financial 10 Think that hand-shake agreements are
statements are compliant and meet standards. Large best when buying.
businesses must have an independent financial audit
and there are codes of corporate governance.

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 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.
Figure 11.14 A good relationship with suppliers is vital.

CASE STUDY 11.2

Strategies for small businesses – financial control and record keeping
It is important for a small business to keep record keeping simple while still ensuring records
are accurate.
A number of strategies should be introduced including:
• keep financial records and transactions separate from the owner/s
• keep documents of all transactions in one place and filed in a logical way
• at least once a week check that all transactions have been accurately recorded
• at the end of each month ‘close off’ the records. Any adjustments can be made in the next
month.
Financial controls for large businesses
Large businesses have several obligations regarding financial record keeping and financial
control. These financial reporting and auditing requirements are set out in the Corporations
Act 2001. The Australian Securities and Investment Commission (ASIC) regulates compliance.
Companies listed on the Stock Exchange are actively monitored to ensure that financial reports
and audit opinions are relevant and reliable to assist users of this information to make informed
decisions.
Analysis
Discuss why it would be important for a business owner to record and monitor this type of
information.

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11.3 The importance of levels. Reliable deliveries from suppliers mean that
a business is able to maintain minimal inventory
choosing appropriate levels, thereby reducing storage costs and thus

suppliers and minimising waste, theft and loss of items in

inventory. This in turn increases efficiency and
procurement policies business competitiveness.
• Competitiveness: businesses with reliable suppliers
of high-quality inputs at competitive prices can
The importance of suppliers offer high-quality products at competitive rates.
The relationship a business has with its suppliers • Innovation: suppliers are often major contributors
is crucial to competitiveness. Contracts must be to new product development and innovative ideas.
established with reliable suppliers of high-quality Having established relationships with them will
inputs in order to maximise competitiveness. A mean that a business is able to take advantage
reliable supplier of high-quality inputs will bring the of these as they arise. For example, if a florist
following competitive advantages: already has an established relationship with a
• Quality: the quality of inputs a business is able to flower grower who has developed a new type
access will directly impact on the quality of the of rose, the florist will likely be the first to gain
products it is able to provide for sale in the market. access to and sell the new flower, thereby gaining
Higher-quality products will in turn create higher a competitive advantage.
levels of customer satisfaction, reduce defects and • Finance: a good relationship with a supplier may
returns and generally improve the level of sales allow a business to postpone debt.
and efficiency. For example, if a bakery is able Maintaining positive supplier
to access high-quality eggs, flour and butter the relationships
quality of the cakes it produces will be high. This
A business may establish and maintain a mutually
will make the business more competitive, and
beneficial relationship with a reliable supplier of
increase sales and business performance.
quality inputs using the following strategies:
• Timeliness: suppliers that deliver reliably and
on time enable a business to create products 1 Settle bills on time: a business that pays accounts
both reliably and in a timely manner. Unreliable reliably and promptly becomes a valued customer.
suppliers may mean a business is forced to halt This will often extend into preferential treatment
or slow production. This in turn will affect its over other clients.
reputation for reliability and reduce productivity 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 competitiveness.
Figure 11.15 A business may establish and maintain a
mutually beneficial relationship with a reliable supplier. 3 Reliability: suppliers who are reliable reduce the

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 risk of production delays. This means increased
productivity and business reputation.
4 Social responsibility: environmental sustainability
and other social responsibility
environmental considerations are also
sustainability the important criteria in selection
ability of an ecosystem of suppliers. Many businesses
to maintain itself into the
adopt a procurement policy
future; involves using the
earth’s resources at a rate that stipulates environmental
they can be replenished sustainability and social
procurement policy the responsibility criteria to
rules and regulations that be applied when selecting
are set in place to govern suppliers of inputs. This means
the process of acquiring the environmental and social
goods and services needed performance of potential
by a business to function
suppliers is considered as part
efficiently
of the tender process. Factors Figure 11.16 Suppliers are increasingly chosen according to
to be taken into consideration their levels of commitment to environmental practices.
when evaluating the environmental and social
responsibility credentials of a supplier include: of more sustainable inputs will minimise
a the environmental management practices in the environmental impact of a business.
use; for example, many businesses will not Therefore, suppliers of more environmentally
trade with sellers of genetically modified friendly inputs are often favoured because
foods. these produce less waste, can offer greater
b supplier environmental and social efficiencies and improve the reputation
responsibility policies: suppliers are of a business in terms of environmental
increasingly chosen according to their levels performance.
of commitment to environmental practices
and policies such as recycling, or fair trade
Social responsibility and supply chain
principles. The Body Shop, for example, will management
only trade with cosmetics suppliers who do The community increasingly expects that a business
not test their products on animals. Traders considers social responsibility factors when selecting
who sign up to fair trade agreements agree to suppliers. Many businesses adopt a procurement
only purchase from ethical suppliers who pay policy stipulating environmental sustainability
a fair price to producers in less developed and social responsibility criteria to be applied. An
countries. environmental management system (EMS) sets out a
c local suppliers may also be given first sustainable procurement process.
consideration as they have a reduced impact The lowest price is no longer the only criteria for
on CO2 emissions owing to the shorter the selection of a supplier. Evaluation of a supplier’s
distances required for deliveries. Similarly, environmental and social performance must be made
local suppliers may also be favoured in before awarding a contract. Factors to be considered
an effort to protect Australian jobs and may include:
industries. • Does the supplier use environmental management
d social responsibility considerations may practices? Does the supplier have an EMS? Does
include treatment of employees by the the supplier meet ISO 14001 environmental
supplier; for example, the payment of fair management standards and practices?
wages and not using child or forced labour. • Is there legal compliance with environmental
They may also include aspects of how the legislation?
supplier supports its local community and the • Does the supplier have appropriate environmental
employment policies of the supplier. and social responsibility policies in place?
e socially responsible inputs: every product has • Does the supplier treat employees properly and
an effect on the environment. The purchase pay them a fair wage?

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 • 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
usually offer reduced costs due to energy
efficiencies such as:
a lower transport costs
b reduced waste and waste disposal costs
c newer, more efficient technologies
d recycling.
2 Improved business reputation in terms of social
responsibility including:
Figure 11.17 Suppliers of more environmentally friendly
inputs are often favoured. a a better reputation among investors who look
for ‘green’ or socially responsible investment
opportunities
An audit of suppliers and their social responsibility
b improved customer relations: consumers are
practices and policies may be done to assess which
often drawn to purchase from businesses
suppliers satisfy the criteria.
with a positive reputation in terms of
Social responsibility considerations may include
corporate social responsibility
treatment of employees. Do they pay fair wages and
c a positive message is sent to investment
provide adequate working conditions? Suppliers who
analysts, the media, shareholders and the
are found to use child labour or exploit workers may
local community about the commitment of
be excluded on these grounds.
the business to social responsibility.
Examples of environmentally sustainable input
The positive publicity associated with an ethical
strategies include:
procurement policy will often result in improved
• purchase and use of green energy options: this will
business competitiveness levels.
reduce carbon emissions and minimise energy use
Potential disadvantages of ethical procurement
• purchase of sustainable technology and equipment
are:
options: energy efficient equipment will save on
1 increased costs involved in sourcing ethical and
energy use. Green company vehicles, for example,
socially responsible suppliers
with smaller hybrid engines will save on fuel costs,
2 potential for reductions in quality of products.
reduce CO2 emissions and improve the business’s
image.

CASE STUDY 11.3

Green logistics – the competitive advantage of bicycle couriers
In Paris, one of Europe’s most traffic-congested cities, a green delivery company is bringing
the world one step closer to a low carbon future.
With a team of 45 people, 34 customised electric cargo bikes and seven electric small
vans working from two sorting offices, The Green Link makes a range of daily deliveries, from
meals to housebound citizens to goods to large multinationals, servicing a total of 2000
customers.
The Green Link chief executive and co-founder, Michael Darchambeau, is passionate about
ecology and about the role that small businesses can play to ensure clean energy. He not only
wants to grow the company financially (it started in 2010 with just €10 000 in personal savings

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 CASE STUDY 11.3 continued

Figure 11.18 Can pedal power help deliver a green logistics Figure 11.19 Customised electric cargo bikes use cycle lanes
sector? around the congested city in order to outpace their fuel-driven
four-wheel rivals.

and now has an annual turnover of €1.3 million), but he wants his model to be replicated
throughout Europe, and then the world.
‘It’s much more important than business’, he explains. ‘The environment, when it’s destroyed
you cannot restore it.’
The Green Link receives parcels from global courier companies and then delivers them
throughout Paris using bicycle lanes, outpacing its competitors’ four-wheeled delivery vans and,
claims Michael, leaving a zero carbon footprint.
Not everyone is eager to embrace green solutions, however. Alluding to the plunge in oil
prices that encourages consumers to continue using petrol and diesel, Sony Kapoor from
the think tank Re-Define calls for radical action by governments to ensure that clean energy
businesses thrive. He suggests, ‘Increasing tax on oil at the pump would make sure that the
real cost doesn’t fall.’

Analysis 8 When selecting suppliers, ethical and

1 Describe how The Green Link delivery social responsibility considerations as well
company differs from its competitors. as quality and reliability are key factors to
Describe its competitive advantage. consider. Explain why each of the following
2 Identify the capital investment required to factors is important when selecting
establish this business. suppliers:
3 Describe the effect the fall in oil prices has a social responsibility levels of suppliers
had on this business. b environmental impacts of transport
c quality of inputs supplied
4 Name three suppliers this business would
d reliability of delivery.
use.
9 Analyse the potential advantages and
5 Name three types of businesses that might
disadvantages of using a local Australian
utilise the services of this business.
supplier rather than one from an overseas
6 Identify the long-term goals the owner has location.
for this business.
7 Analyse the advantages and disadvantages
of using this business rather than a
conventional courier business.

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CASE STUDY 11.4
David Jones – ethical sourcing

Our commitment
David Jones is committed to working with our suppliers to have a positive impact on environmental,
social and ethical standards along our supply chain. As a business, we recognise that our customers
and employees expect more of us which is why we have started to improve our understanding of our
supply chain and what we can do to better meet our stakeholders’ expectations. We acknowledge
that the first step is to work in partnership with our suppliers, our people and the wider industry to
understand and better manage our ethical sourcing impacts.
Our Supplier Code of Conduct
Our Supplier Code of Conduct outlines the minimum requirements of doing business with David
Jones, in relation to environmental, social and ethical issues along our supply chain. There are four
key elements of our Supplier Code of Conduct, which requires suppliers to:
1 Ensure safe and fair working conditions, in line with the ETI Base Code (Ethical Trading Initiative)
2 Ensure integrity and transparency in dealings between David Jones and its supply chain partners
3 Improve environmental outcomes beyond David Jones’ operational control
4 Protect the welfare of animals.
All of our suppliers are subject to the Code.
(Source: David Jones website, ‘Ethical sourcing’.)

Figure 11.20 David Jones has a strict code of conduct for its suppliers.

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 CASE STUDY 11.4 continued
Analysis 5 Go to the David Jones website and view
1 Summarise the key principles of the David this policy in more detail. Summarise what
Jones policy outlined above. the policy says in regard to:
2 Define the ‘stakeholder’s expectations’ a the ethical sourcing team and what its
referred to in the first paragraph. role is
3 Outline the effect this policy is likely to b the United Nations Global Compact
have on: c packaging
d harmful substances.
a David Jones’s costs
6 Research the ethical sourcing policy of one
b David Jones’s suppliers
of the following:
c the reputation of David Jones
d David Jones’s levels of a Cotton On
competitiveness. b Coles
4 Design a table outlining the potential costs c Woolworths.
and benefits of the adoption of this policy
for David Jones Ltd.

11.4 Technological and to navigate are no longer ‘par for the course’ or
acceptable to consumers. Recently published studies
global issues emphasise a growing divide between the customer
and the retailer. Careful planning and research of
customer needs and wants should be conducted by
Planning considerations businesses to reduce this gap.
In order for a business to succeed and flourish, While customers understand that they are required
information technology is a key resource that should to pay and wait for delivery from overseas outlets,
be utilised to its full potential. Planning and decision many expect that Australian outlets will offer a 24-
making should ensure: hour service and the option to pick up the purchase
• the system (internal and external) is user friendly if they desire. It is important that these systems are set
and easy to navigate in place, whether they be technological or a resource
• maintenance scheduling is proactive rather than requirement.
reactive with respect to technological issues Technology has enhanced information gathering
• technology is a key component in strategic for retailers, who are now able to track consumer
planning preferences and buying habits. Data can be collated
• cyber security procedures and remedies are put in and used to plan for future products and services.
place to ensure data protection Digital marketing is now key to many retailers’
• the ability to track trends and data to inform the success and considerations such as smartphone
business apps and compatibility of websites for phones
• information and records are stored in a digital and computers is a key component of a successful
environment that is able to be accessed when retailer’s considerations.
required Many retailers have invested in apps that eliminate
• hardware and software requirements of the the need for consumers to search online for their store
business are thoroughly audited in a timely or product. Downloading the app gives the consumer
manner. direct access and gives the retailer confidence that
the consumer is not going to stray to a competitor.
Technology has raised customer requirements,
Technology has also had to advance in the area of
and customer experience and expectations are
cyber security, as financial details are transferred from
of a high standard. Websites that do not allow for
the customer to the retailer.
online purchasing or have information that is difficult

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Figure 11.21 Technology allows businesses to track and gather data on what customers are purchasing.

Customer data bases and managed by technology.

Many existing businesses have customer data base the
Amendments to the Commonwealth Privacy had to incorporate retraining collection of information
Amendment Act 2012 came into force on 12 March of staff for the management gathered from each
2014. These amendments replaced the National and storage of customer data, customer. A data base may
Privacy Principles and Information Privacy Principles include contact information,
and new businesses need to
with a new set of 13 Australian Privacy Principles. as well as details about
consider data maintenance as a past purchases and future
These principles are in place to protect people’s key element of their planning. needs.
privacy and, among other things, set out to ensure Data management also assists
that data collected on customer data bases cannot businesses with product
be used without a customer’s consent. This data placement and is a key consideration in attracting
protection and maintenance is also often handled new customers.

CASE STUDY 11.5

Dick Smith customers receive ‘opt-out’ offer before Kogan deal

Dick Smith customers have been given a week to unsubscribe from the retailer’s database and avoid
being bombarded with offers from Kogan, the new owner of Dick Smith’s online stores.
Dick Smith’s receivers and managers at Ferrier Hodgson sent emails to Dick Smith’s customers and
subscribers in Australia and New Zealand, offering them the opportunity to unsubscribe from the
Dick Smith database.
‘Unless you elect otherwise, you will continue to receive commercial messages from the new owners
of the Dick Smith online business,’ the email said.

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 CASE STUDY 11.5 continued

The email to customers was sent following widespread concerns about the privacy implications of
selling the Dick Smith database, which includes the names of about one million loyalty program
customers.
Some consumers who received the email feared it was a ‘phishing’ exercise aimed at obtaining their
personal information. One customer stated he was on the Dick Smith mailing list although he had
never signed up for their mailing list or loyalty program.
Ferrier Hodgson partner James Stewart said the receivers had liaised with the Privacy Commission in
Australia and New Zealand to make sure customer privacy was protected.
Mr Kogan, an online retailer, acquired Dick Smith’s intellectual property, including the Dick Smith
brand and trademarks, online businesses in Australia and New Zealand, customer databases and
domain names.
DickSmith.com.au would continue to sell branded and private-label consumer electronics and
appliances, but prices could be cheaper as Dick Smith and Kogan pooled resources to secure more
favourable trading terms with suppliers, he said.
Kogan, which has sales of about $250 million and is estimated to account for one per cent of the
consumer electronics market, will be able to tap the one million existing members in Dick Smith’s
customer loyalty database to boost sales at both sites.
(Source: S Mitchell, ‘Dick Smith customers receive “opt-out” offer
before Kogan deal’, Sydney Morning Herald, 15 March 2016.)

Analysis 3 Provide reasons why Ferrier Hodgson had

1 Explain why it is important for a business to notify Dick Smith customers of Kogan’s
to develop and keep a data base of purchase of intellectual property.
customers.
2 Describe some of the strategies a business
might develop to maintain and build a data
base.

Establishing contacts with businesses looking to trade overseas. A free trade

agreement is a legally binding agreement between
overseas suppliers and retailers two or more countries which establishes an area
As Australia has a relatively small population, of trading that removes tariffs and other trading
Australian businesses may find it necessary to explore restrictions. Free trade agreements aim to increase
opportunities to trade overseas if they want to the competitiveness of Australian businesses,
expand. A business can look to grow by investigating provide better access to lucrative offshore markets,
opportunities to develop supply chains in other countries reduce trading costs for Australian businesses and
and sell its products and services in foreign markets, promote two-way investment opportunities (allowing
either through offshore retail outlets or online stores. offshore businesses to explore trading opportunities
Austrade is a federal government body that in Australia). Currently, Australia has six free trade
provides support for businesses exploring offshore agreements in place and eight more are under
trading opportunities. Registering is free, and support negotiation.
includes promotion of the business to overseas buyers In general, a business that is looking to import
through the Australian Suppliers Directory. goods from overseas or sell in foreign markets
Free trade agreements are another way that the needs to keep in mind that tax is calculated on
Australian government tries to support Australian worldwide income, that tax obligations may vary

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from country to country, and that there are legal enormous fines. As such, it is imperative for a business
and ethical considerations involved in setting up operating overseas to have in place a comprehensive
factories, workshops or retail outlets in other countries. compliance process and to adhere to it, and ensure
Businesses that attempt to achieve financial that suppliers and third-party manufacturers are
gain through practices that involve mistreatment of frequently audited.
overseas workers and unsafe working conditions face

ACTIVITY 11.6
1 Explain why Australian businesses have been looking at expanding into global markets.
2 Perform some online research about skateboards, surf and streetwear group Globe
International. Outline how Globe has been a successful retailer in the global market.
3 Discuss the costs and benefits associated with working with overseas suppliers and
retailers.

See the Interactive Textbook edition for a further case study on a business that is successfully
operating overseas.

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 Chapter summary • It is important for businesses to take into
account technological needs as part of their
• All businesses need to plan and develop business planning.
policies and procedures to ensure • Customers expect businesses to integrate
compliance and consistency. technology into their operations.
• Businesses have to comply with federal, • Many customers use technology to shop
state and local government laws. online.
• Anti-discrimination and equal opportunity • Businesses need to develop and maintain
legislation has to be followed. data bases.
• Customer service policies allow a business • Businesses in Australia are working at es-
to comply with legal practices. tablishing contacts and relationships with
• Food handling policies are important for overseas suppliers and retailers.
businesses in the hospitality area.
• All businesses, regardless of size, should Chapter summary questions
have a separate bank account.
1 Explain why a business should develop
• It is important to establish financial controls policies.
over all aspects of the business.
2 Outline some of the policies a business
• Businesses need a range of documents as might need.
evidence of transactions.
3 Provide reasons why business owners
• Small businesses often find it difficult should open a separate bank account.
to keep records and monitor financial
4 Describe why it is important for a business
information.
to establish and use internal financial
• There are a range of financial records that controls.
should be kept by a business.
5 Explain three internal financial controls a
• In order to become and remain business might use.
competitive, it is important for businesses
6 Explain the reasons why a business should
to establish and maintain good
complete and use financial statements.
relationships with suppliers who are
reliable and provide high-quality inputs. 7 Define the term ‘business supplier‘. Give
an example of a supplier for each of the
• A procurement or purchasing policy states
following:
the principles and guidelines for selection
of and dealing with suppliers. a a school

• The criteria that should be applied in b a bakery

a procurement policy for selection of c a bank.
suppliers are price, reliability, quality and 8 Outline the advantages of maintaining a
the levels of social responsibility exhibited good relationship with a group of reliable
by the supplier. suppliers of high-quality inputs for a
• A good supplier brings advantage to a business.
business in terms of quality, timeliness, 9 Define:
competitiveness, innovation and possibly a corporate social responsibility
credit.
b procurement policy.
• Selection of suppliers based on social
10 Discuss the implications of adopting
and environmental credentials will
corporate social responsibility principles as
often increase the competitiveness and
key criteria in selection of suppliers.
reputation of a business. There may be
disadvantages in terms of costs and quality
at times.

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11 Analyse the potential effects of basing Six months ago a new administrative clerk,
a procurement policy on principles of Barney, was employed. While Jonah and
corporate social responsibility on: Delores are pleased with his work, there are a
a business costs number of concerns that have arisen.
b business reputation Their accountant has noticed a number of
issues including:
c attracting business investment
• credit sales have not been collected
d business competitiveness.
• some petty cash money is missing
12 Describe why a business should consider
technology when in the planning phase. • some deposits have not been recorded in
the bank account
13 Explain why a business should develop and
maintain a customer data base. • cash register records have been mislaid.
14 Describe the issues a business would need Questions
to consider when establishing contacts 1 Explain why a business needs to keep
with overseas suppliers and retailers. accurate financial records.
2 Identify three possible issues Jonah and
Extension question Delores might have with the business.
Jonah and Delores operate the Harbourside 3 Describe one possible process or idea
Boutique, which specialises in unusual that might assist in overcoming one of the
handcrafted gifts. The business has been in issues you have identified.
operation for five years and both are pleased
with the sales and performance of the
business.

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 PART 2
AREA OF STUDY 2

Marketing a business
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CHAPTER 12 Key terms
• brand • marketing

Marketing the business • causal research

• consumer
consultant
• marketing mix
behaviour • market-oriented
• customer base approach
Overview • descriptive • mass marketing
research • niche market
In this chapter the relationship between marketing
• exploratory • Pareto Principle
and establishing a customer base and business
research • population
objectives will be explained. In addition, factors
• focus group • primary data
from the external (macro and operating) and
• generic market • product market
internal environments that can affect how a business
• market • qualitative
establishes its customer base and brand identity will
positioning research
be addressed. For any business, undertaking market
• market segment • quantitative
research is a vital ingredient of successful marketing,
• market research
as well as gaining knowledge of the attributes of
segmentation • questionnaire
target markets.
• marketing • sample
• marketing • secondary data
Key knowledge concept • target market

In this chapter students will learn about:

• The relationship between marketing, establishing
a customer base and business objectives
• External (macro and operating) and internal
environment factors affecting the establishment
of a customer base and brand identity
• Market research practices such as data collection
techniques, analysis and interpretation
• Target market attributes such as market dimensions,
segments, consumer trends and behaviour.

What’s ahead
Customer base

Target market attributes Business objectives

Marketing

External and internal

Market research
environmental factors affecting
practices
customer base and brand identity

Figure 12.1 Marketing

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 12.1 Marketing – what The concept is based on the belief that the best results
are achieved through using an integrated approach
is it? to marketing. The marketing concept sits within
the market-oriented approach, which means the
Marketing is the process that provides the link business’s efforts are aimed in a coordinated and
between the producers or providers of goods and integrated manner towards simultaneously achieving
services, and the consumers. its business objectives and
marketing the process that It involves the relationship satisfying its customers. Using market-oriented
provides the link between whereby producers/providers approach a business
this approach lowers the risk
producers or providers of and consumers create, offer strategy that focuses on
goods and services, and the of a newly developed product the needs and wants of
and freely exchange products or service failing in the market
consumers of these consumers and develops
and services of value to each because effective market products to meet them
other. Marketing extends to: research will have been
• goods – the tangible items that businesses wish undertaken prior to the manufacture of the product
to sell such as food, commodities, clothing and or provision of the service. There are four essential
housing elements to the marketing concept:
• services – provided by hotels, car rental 1 Customer satisfaction is important.
businesses, hairdressers, accountants, doctors, 2 A totally integrated effort is required by the
solicitors, engineers, management consultants, business.
airlines 3 Business objectives must be set; for example,
• experiences – a visit to the Melbourne Star, a establishing a customer base, increasing market
museum, an art gallery share.
• events – the AFL for its games, Victorian Racing 4 Key performance indicators customer base the
for the Spring Racing Carnival, rock concert (KPIs) show whether the group of customers who
organisers business objectives have repeatedly purchase the
• personalities – Nigella Lawson, Jamie Oliver and goods or services of a
been achieved.
Curtis Stone, for example, business and are the main
brand a powerful business
If a business is to be fully source of revenue for the
all have their own marketing
asset that is essentially a committed to the marketing business
teams who work to create
maker’s mark; it creates and
their image and brand.
brings with it awareness,
desirability and power

12.2 Relationship Customer

satisfaction
between marketing,
establishing a
customer base and Key
business objectives performances Marketing
Total
business
indicators concept
Most businesses would like to think they focus commitment
(KPIs)
on the needs and wants of their customers (actual
purchasers of the goods and services) and consumers,
and therefore devote production and marketing
resources to satisfy them. Business
marketing concept The marketing concept objectives
the business focuses on developed when the focus of set
satisfying the needs of the businesses changed from just
customer/consumer rather
selling a product or service to
than just selling a product
or service actually satisfying the needs Figure 12.2 The marketing concept and its four essential
of customers and consumers. elements

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concept approach, it must focus on the customer It is very important that businesses recognise
and adopt the philosophy ‘the customer comes first’. that approximately 80 per cent of their business is
To be successful, the business must understand its actually generated by approximately 20 per cent of
customers and align the performance of the business, their customer base. This is referred to as the Pareto
its evaluation and rewards systems so that the Principle (i.e. the 80/20 rule).
business objectives are met. For the small business Marketing strategies may get Pareto Principle referred
owner, good customer relationships developed the customer through the door to as the 80/20 rule –
through good customer service and customer initially, but it is essential for the approximately 80 per cent
satisfaction become very powerful marketing tools, business to ‘do the right thing’ of the business revenue is
generated by approximately
and lead to customer loyalty and repeat business. to convert those customers
20 per cent of the customer
Good customer relationships are also cost-effective into repeat customers, thereby base
to the business, because they do not require an establishing a reliable and
expensive marketing campaign to attract customers. consistent customer base.
Businesses that are larger and more complex in their By reversing the traditional organisation
organisational structures, policies and procedures chart, customers are now at the top of the ‘chain
can redesign their organisational charts to represent of command’. In this model, it is the purpose of
the importance of the customer to their business. 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.

12.3 Factors affecting the

establishment of a
customer base and
brand identity
Factors drawn from all levels of the business
environment, namely macro, operating and internal,
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.

Figure 12.3 Repeat customers are important to establishing

the customer base of a business.

CUSTOMERS

E M P L O Y E E S

MAN AG ERS

CEO
Figure 12.4 Customer-oriented organisation chart Figure 12.5 Building a brand identity

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 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.

Technology
Technological developments have had a large impact
on businesses with regard to 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,
previously only available for luxury items. A prime
example of this was noted by major retailer, Myer,
when at Christmas 2015 its top-selling item at the
store was personalised jars of Nutella. For start-up
business Shoes of Prey, modern technology and
logistics have assisted it to become a world leader
in the customised manufacturing of shoes. The
technology used by this business allows customers
to design their own shoes down to the last detail
including colour, materials and heel height. The time
taken from designing a customised shoe to delivery
is four weeks (visit the Shoes of Prey website for
more information). Figure 12.6 Personalised products – tailoring and Nutella

CASE STUDY 12.1

eBay customers’ access to Myer
With shoppers having access to the web and many more products than they previously had
access to, stores are coming up with innovative ways of luring prospective buyers. Digital
marketing strategies are key to retaining customers as well sourcing new customers. One idea
is that an eBay store would grant Myer contact with a wider range of people and enable it to
have access to new shoppers who may not be shopping on its myer.com e-commerce site.
eBay is an extremely popular site and this strategy opens the potential for customers to click
through to the Myer store when hunting for a bargain or conducting general online shopping.

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Analysis 2 Myer is hoping to expand its customer
1 Myer is a long-established department base by establishing an online marketplace.
store generally located in major shopping How effective do you think this strategy
centres. Identify the types of products that will be for Myer? Justify your opinion.
are sold at Myer stores.

Social media can affect customer base and brand in retail. As many consumers now have more
identity in a variety of ways. A positive aspect is that disposable income than in previous decades, they
it successfully provides customers unprecedented want to have a personal connection with the products
access to information about businesses, their products they buy. One entrepreneur who understood this
and services and also what customers/consumers trend was Gary Elphick, founder of Disrupt Sports.
think of them. However, with social media at ‘our He recognised the desire people have for wanting
finger tips’ a business can be negatively impacted to design goods, but who lack the means to do it.
within a very short time by ‘customer regulation’ This Australian business based in Bondi, Sydney has
resulting from a bad review. been so successful in designing and manufacturing
personalised surfboards that it has now expanded
Legislation and regulators its range of products to include skateboards and
Legislation (both federal and state) protects customers yoga mats. The business is now opening an office
and consumers in the event of businesses misleading in the United States in the hope of increasing its
them. Regulatory bodies, such as the Australian customer base.
Securities and Investments Commission (ASIC), act Mistreating customers can have a detrimental
as corporate watchdogs to protect consumers from effect on businesses. In 2015 the Commonwealth
being misled by statements made by businesses when Bank’s reputation and brand identity was tarnished
advertising their products or services. For example, by two scandals. The first related to mistreatment of
in March 2016 ASIC directed iSelect, an insurance clients associated with its financial planning business.
comparison website, to remove some misleading
statements about it being ‘independent’ from its
advertising and promotional material because it was,
in fact, taking commissions from insurance companies
(see Cambridge weblinks: http://cambridge.edu.au/
redirect/?id=7003). The Corporations Act prohibits the
use of words like ‘independent, impartial and unbiased’
being used by businesses receiving commissions,
volume-based payments, gifts or other benefits through
sales or referrals. It would be interesting to note what
impact, if any, this direction by ASIC has had on the
customer base and brand of iSelect.

Customers
Businesses should be aware that there are now four
generations of people in the workforce who have
earned money to spend on goods and services. 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.
As mentioned above, customers’ appetite for
customised products continues to be a huge trend
Figure 12.7 Disrupt Sports: recognising the needs of surfers

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 The second related to the mistreatment of policy
holders (customers) of its life insurance business,
CommInsure. These two actions were widely
reported in the media and caused concern to many
customers who had either used the bank’s financial
planning services or were insured with CommInsure.

Competitors
Establishing a customer base has proven to be a
constant battle for the major supermarket chains.
Recently, retailers Woolworths, Coles and Metcash’s
IGA have been cutting shelf prices and increasing
the depth and frequency of their promotions.
The strategy of reducing everyday shelf prices on
products that draw customers into the store is aimed
at building the confidence in their customer base in
the prices that are charged by those stores. Figure 12.8 Establishing a customer base has proven to be a
The arrival of ALDI into the marketplace and constant battle for the major supermarket chains.
the successful strategies it has used to establish its
customer base and brand identity have also impacted
on the major supermarket chains. According to Roy of the market is still not anywhere close to those
Morgan Research, ALDI has captured 11.8 per cent of of its two main competitors, it is increasing on an
the Australian supermarket market. While this share annual basis.

CASE STUDY 12.2

Woolworths puts Homebrand label out to pasture

After spending 33 years turning its Homebrand range into one of Australia’s biggest-selling generic
brands, Woolworths is renaming almost 1000 Homebrand products ‘Essentials’ to fight perceptions
that customers can get better quality at ALDI.
Launched in 1983, Homebrand is one of the biggest private label brands in Australia, with annual
sales of about $1.4 billion and more than 950 product lines, ranging from pantry staples such as
pasta, sugar and cereal to soft drinks, insect spray and painkillers.
While Homebrand’s prices are generally as cheap or cheaper than similar entry-level private label
goods at ALDI and Coles, consumers perceive the quality of Homebrand products to be inferior to
that at other chains.
‘The issue with Homebrand is not so much price but a perception built around the product branding
and packaging,’ Credit Suisse analyst Grant Saligari said.
‘What they’re trying to address is the weakness in the brand itself, not so much the price points,’ he
said. ‘If [the new strategy] lifts brand quality and maintains price, that should be positive.’
Woolworths’ chief executive Brad Banducci flagged a shake-up of the retailer’s private label grocery
strategy last May, acknowledging that Homebrand, with its no-nonsense red and white logo, had a
‘perception problem’.
‘The issue we’ve got with ALDI is providing the same value experience in our store as you would in
an ALDI, which requires us to rethink and re-engineer some of our entry level products,’ Mr Banducci
said at the time.

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 Over the past 10 months Woolworths has reduced the prices of both Homebrand and the midmarket
Select label, narrowing the price gap with ALDI.
It is now starting to re-engineer and repackage Homebrand products, reintroducing products category
by category, rather than in one fell swoop, under the lesser known red and yellow Essentials label.
‘We have been reviewing the products in all of our own brand ranges to ensure we deliver even
greater quality and value for our customers,’ a Woolworths spokesman told Fairfax Media.
‘Part of this review will see our current value ranges, Homebrand and Essentials, consolidated into
one improved value range called Essentials.’
Essentials is a much smaller brand than Homebrand and is currently used on a range of non-food
products such as paper plates, disposable cutlery and rubbish bags.
‘When customers see each product move to the new Essentials packaging, they can be assured the
product will offer market-leading value for money,’ the Woolworths spokesman said.
Woolworths is investing at least $600 million into reducing grocery prices and improving service in
stores in an attempt to reinvigorate same-store sales growth in supermarkets, which has been falling
for three consecutive quarters, and to regain market share lost to ALDI and Coles.
According to a report by Morgan Stanley last month, Woolworths has reduced private label prices by
about 4.6 per cent since May last year. At the same time, Coles has reduced prices by 4.6 per cent and
ALDI has trimmed prices by 1.2 per cent. ‘So little has changed in relative terms,’ Morgan Stanley retail
analyst Tom Kierath said.
(Source: S Mitchell, ‘Woolworths puts Homebrand label out to pasture’, The Age, 29 March 2016.)

Analysis 4 Outline the future strategies being

1 Describe the major reason behind planned by Woolworths for its Homebrand
Woolworths renaming its Homebrand products.
products. 5 Identify the message that Woolworths
2 Outline how important the private label is hopes will result from the change to
to Woolworths. Essentials packaging.
3 What other strategies has Woolworths
used in its quest to narrow the price gap
with ALDI?

Culture of business 12.4 Market research

The internal culture of a business is at the heart of
how the business and its staff behave. Successful
practices
businesses seek and value customer feedback, Market research is a systematic procedure used to
putting customers at the heart of the business. If the develop and analyse new and existing information.
corporate culture of a business fails to live up to This analysis helps businesses to make decisions
community and customer expectations, it potentially relating to the marketplace and to satisfy the needs
can become a large threat to both the customer base of both potential and existing customers.
and brand of that business. A business that conducts Market research assists a business to:
itself well can reap the rewards and get its message • reduce the level of risk or uncertainty attached to
to the community very quickly via social media and introducing a new product or service
the 24-hour news cycle. On the other hand, these • assess current products, advertisements and forms
same communication tools can turn on a business if of packaging, and determine whether changes
the actions of the business are bad or unethical. need to be made

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 • predict future changes or trends in a product or
service. 1 Define the problem
and establish the
Should it be decided that there is an inadequate
amount of information available for a good decision
research objectives
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 2 Determine the
the benefit gained from research will outweigh research design
the cost involved in conducting the research. It is
possible to find informal, low-cost alternatives of
information gathering, such as customer feedback
surveys, keeping an eye on the competition and
industry trends, and making sure internal record 3 Identify and assess
keeping is accurate. Larger businesses can allocate information types
more funds to undertake market research and will and sources
often adopt a more formal approach, possibly
engaging a marketing consultant to gather the
data, carry out an analysis and
marketing consultant interpret the results. 4 Design data collection
a professional (specialist) Any business that does approaches, forms and
who provides advice on undertake market research sample size
marketing-related issues 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 5 Collect and
business to contact consumers under the pretence
analyse data
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.
6 Prepare and present
Market research can be used to find answers to
final report
questions about:
• market size
Figure 12.9 A systematic approach to market research
• consumer likes and dislikes
• product positives and negatives
• promotion effectiveness
• packaging effectiveness A systematic approach to market
• degree of threat from competitors research
• distribution – how customers like to get the
product. The following six steps constitute a systematic
approach to market research.
An objective and systematic approach must be
adopted to undertake effective market research. Step 1: Define the problem and establish
‘Objective’ means that the research must be conducted the research objectives
in an impartial and unbiased manner, often by Problem definition is possibly the most important
a professional marketing consultant. ‘Systematic’ step of the process. By accurately defining the
means the adoption of a formal method or approach, problem and establishing the objectives, a business
such as using a process similar to the steps shown is then able to gather the relevant information to
in Figure 12.9. assist with decision making. The information needed
is dependent on the type of business being operated.

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 Generally, market research objectives relate to the price of a product, could
potential demand for a product or service, the be changed to study what causal research research
marketing environment or a business’s competition. impact this has on the that involves finding the
volume of product sales. cause and effect of certain
Step 2: Determine the research design actions
There are three basic types of research design. Step 3: Identify and
• Exploratory research involves collecting assess information types and sources
information in an unstructured There are two basic types of information available:
exploratory research and informal manner. This primary data and secondary data.
collecting information in an could mean reading a magazine • Primary data refers
unstructured and informal or article, using a particular to information that has primary data information
manner
product or service, and gaining been gathered by the gathered firsthand by the
descriptive research business
an impression and feeling about business owners or market
research that incorporates
the product or service. researchers themselves, secondary data
consumers’ attitudes,
• Descriptive research information that has been
intentions and behaviour specifically to service the
incorporates such things as previously collected
current research objectives.
consumers’ attitudes, intentions and behaviour. It can • Secondary data refers to information that has
be related to the ‘image’ of the product or service been previously collected. This information can
being researched. Information can be gathered come from internal records of the business or
through observation of consumers’ behaviour. sources external to the business.
• Causal research aims to find the cause and
effect of certain actions. One variable, such as the

Primary data sources Secondary data sources

• Surveys/questionnaires – both telephone • Company records
and direct mail • Financial statements
• Interviews – door-to-door or shopping • Annual reports
centre • Periodicals and trade/professional
• Direct observation – personal or electronic 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, • Libraries
friends, business 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
Table 12.1 Primary and secondary data sources

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 ACTIVITY 12.1
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:
a survey
b focus group
c internet search
d electoral roll
e magazine
f exit poll
g direct mail out Figure 12.10 There are various types of survey questions.
h field tests
i shopping centre interviews care must be taken in its design to gain objective
j computerised data bases. 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
Step 4: Design data collection the information required to meet previously
approaches, forms and sample size determined objectives.
It would be an impossible • Observation is a process that recognises and takes
sample a proportion task for a market researcher to note of people’s actions and behaviour, rather
or subset of the total collect information firsthand than directly asking them for information. The
population being studied from the entire population. It introduction of electronic scanning of product
population entire group is therefore necessary to study codes at supermarkets or using other codes,
under study as defined by such as postcodes, has assisted enormously
a sample, which will be a small
the research objectives
proportion of the population in determining consumer demographics and
target market the market
of interest or target market. shopping habits. Businesses also use video
at which a product or
service is primarily aimed The group may be randomly cameras to record shopper numbers, time spent
selected to provide a broad in the store, the areas of the store that attracted
range of opinions or interests. foot traffic and interaction between customers
There are several methods of conducting primary and salespeople.
research, such as questionnaires, observations and
focus groups.
• A questionnaire is the standard form of survey
used to gather data. A structured questionnaire
lists questions and provides pre-described
answers (similar to a multiple
questionnaire form of choice format). It is regarded
survey where questions are as a form of quantitative
asked of respondents research. Answers are given
quantitative research by ticking or placing an ‘X’
market research based
in a box. Some questions
on structured, closed
questions that aim to will require rating the answer
gather responses that can by indicating a number in
be summarised in figures a predetermined range; for
example, ‘1 to 10’. Unstructured
questionnaires have open-ended questions. Figure 12.11 Customer observation is a primary research
While a questionnaire looks simple to create, method.

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 Figure 12.12 Focus group being observed by interested
stakeholders

• Focus groups are a popular way of collecting

qualitative research and consumer-related
information. The group Figure 12.13 Example of a market research analysis report
focus group between size is usually between six
six and 12 participants and 12 participants and is track not only the programs being watched, but also
gathered together in an conducted in an informal which member or members of the family are viewing
informal setting to give
setting. A facilitator, often an the programs.
their opinion on a product
or service experienced market researcher Once collected, the raw data needs to be tabulated,
or even a psychologist, aims to tested and analysed to form meaningful information.
qualitative research
research based on in-depth, generate group interaction in Computer software, such as Statistical Package
open-ended responses order to stimulate immediate for Social Sciences (SPSS), is used by marketing
that focus on emotional thinking on a topic. A session professionals to tabulate and perform statistical
or motivational aspects of may last between one and two tests, which include means, frequencies, correlations
consumer behaviour hours, with the participants and trend analysis. There are many other software
usually being paid a small fee. packages, such as SurveyMonkey, SurveyGizmo and
It is often videotaped for later review, or observed QuestionPro, that businesses may use to collect and
through a glass partition by interested parties. analyse data.
• Experiments can be conducted in the field or in
a laboratory. This method involves removing all
Step 6: Prepare and present final report
variables except for the one being tested. For The last step in the market research process is to
example, blind taste tests remove variables such prepare and present the findings. These findings
as brand, packaging and price, and leave only the must be communicated to the business owner in the
taste to be tested. form of a report, which includes comments on how
the data was collected. To enhance the information
Step 5: Collect and analyse data visually, computer graphics are usually added. Graphs
Often the data is collected by trained interviewers and charts, such as bar or line graphs and pie charts,
working for a market research company and asking are invaluable communication tools to show patterns
a series of questions, or leaving a questionnaire or trends at a glance. Market research companies will
for a person to complete in their own time. Many often make an oral and visual presentation, generally
interviews are now conducted over the telephone using a computer software presentation package.
with the interviewer reading set questions from the
computer screen and entering responses directly
into the computer. Television viewing habits are
electronically collected through attaching black
monitoring boxes (peoplemeters) to televisions that

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 12.5 Market attributes Once the segments have been determined, a
business can review them
and select its target market. niche marketing
A market is a group of
concentrating all marketing
market the group of potential customers with Within the target market
efforts on a small but
potential customers similar needs who are willing it is possible to identify specific and well-defined
with similar needs who whether there is a niche
to exchange something of segment of the population
are willing to exchange
value with sellers offering market whose needs can market segment relatively
something of value with
sellers offering various various need-satisfying goods be more precisely met. The similar (homogeneous)
need-satisfying goods or or services. final step in this process is group of customers who are
services to differentiate the product likely to respond in similar
Four basic types of markets
ways
are recognised: or service of the business
from its competitors within market positioning a
• Consumers – involves businesses selling mass product is placed within a
that market segment. This
consumer goods; for example, soft drinks, food market with regards to its
and household products to consumers. strategy is referred to as image, price and age of the
• Businesses – where the purchasers are other market positioning. target market
business personnel who are often well-trained
and well-informed professional buyers.
Market segmentation
• Global – businesses that decide to export their It is rare for a business to be able to satisfy the
product. needs and wants of everyone; therefore, market
• Not-for-profit and government markets – segmentation is carried out in an effort to improve
organisations that are formed to provide assistance a business’s precision marketing. Not everyone likes
to, or infrastructure for, society. the same drinks, food,
clothes, hotels and movies. market segmentation an
Market dimensions Marketers try to identify approach that is midway
between mass marketing
One of the first questions that need to be addressed and profile distinct groups
and individual marketing;
when a business is working out its marketing of buyers who might prefer the approach defines
strategies relates to what they anticipate will be the or require varying products and subdivides a large
size of the market for their product or service. This and marketing mix. A homogeneous market
market segment should into clearly identifiable
will impact on the approach they will need to adopt.
ultimately be a relatively segments having similar
If a business markets its product or service to an needs, wants or demand
entire market, this is referred similar (homogeneous)
characteristics
group of customers who
mass marketing an to as mass marketing. marketing mix the
attempt to appeal to an are likely to respond in
Adopting this strategy can be seven variables that are
entire market with one costly and does not usually similar ways. Segmentation used when undertaking
basic marketing strategy then allows management marketing strategies:
work well since it is unlikely
utilising mass distribution to concentrate its efforts product, price, place,
and mass media; also that every individual customer
on allocating its scarce promotion, people, physical
called undifferentiated or consumer will have the evidence and process
resources more effectively
marketing same needs. For instance,
subscription TV providers in order to achieve its
such as Netflix, Presto and Stan have been mass business objectives. Segmentation is an approach
marketing their services. By using this strategy, they that is midway between mass marketing and
are incurring high costs for mass media exposure individual marketing. Consumer markets are typically
without necessarily getting ‘buy in’ from consumers. segmented by the four bases or dimensions shown
Optus also uses mass marketing with the inclusion in Table 12.2.
of separate pieces of marketing material into daily The greater the number of variables that can
newspapers. It raises the question – is this the most be identified when defining a market, the closer
effective way for them to market their product and a business comes to developing the profile of its
service? customers. For example, Dulux sees its customers as
For marketing to be more effective, the mass people who:
market needs to be broken into segments, using • are building a new home, renovating or
the four forms of segmentation and their variables. redecorating

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Behavioural Geographic
Market
Demographic
segmentation
Psychographic

Figure 12.15 A market segment should ultimately be a

relatively similar (homogeneous) group of customers who are
Figure 12.14 Four forms of market segmentation likely to respond in similar ways.

• place importance on using a reputable and trusted

brand
ACTIVITY 12.2
• are willing to pay a premium price for a quality Provide a customer profile for two of the
product following products/businesses:
• are looking for innovative paint ideas in both 1 Cotton On
colour range and finishes (textures)
2 Subway
• are comfortable accessing its website for
information and assistance
3 Boost Juice
• purchase products through major hardware 4 David Jones
chains. 5 electric car made by Tesla Motors
6 Metro Trains.

Geographic Demographic Psychographic Behavioural

Where the customers Where the market is Where the market is Where the market is
live or work: divided according to: divided according to: divided according to:
• Region – world or • Age • Social class – • Needs – economic,
country • Gender upper, middle, functional,
• Size of city; • Income level lower middle physiological,
i.e. number of • Education level • Personality – psychological or
residents • Family size compulsive, social
• Suburban or rural • Family life cycle gregarious, • Benefits sought –
• Climate – hot, cold • Occupation ambitious, quality, service,
or temperate • Nationality/race aggressive, economy, speed
extroverted, • Loyalty status
introverted • Kind of shopping –
• Lifestyle – achiever, convenience,
socially aware, comparison,
conservative, speciality
optimist • Purchasing
frequency
Table 12.2 Forms of segmentation and their variables

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 Target market airline, consistently offering cheap no-frills flights to
a limited number of destinations. Tigerair became
Once they have reviewed the forms of segmentation popular with travellers who have a limited capacity
and their variables, businesses need to select which to pay for travel. Virgin Australia perceived that
market segment they wish to pursue. This requires Tigerair was meeting a previously unmet need, and
the identification of their actual target market. in February 2015 the Virgin Australia Group acquired
Identifying a specific target market requires a this budget airline, rather than establishing its own
‘narrowing-down’ process from a broad or generic budget airline to compete for those customers.
market to focus on the specific type of customer. For
example, the entire drinks market is seen as satisfying Consumer behaviour
people’s thirst; it is therefore
Businesses need to know about consumer behaviour
generic market a market seen as being part of the
where broadly similar when trying to anticipate how their customers will
generic marketplace. When
needs of customers are met respond to their marketing strategies. It is therefore
the consumer is specifically
by sellers offering a variety important for businesses to understand influences on
looking for a particular type
and often diverse range of customer purchasing decisions.
products of drink (e.g. a sports drink)
If customers are individuals consumer behaviour the
product market when a that target market changes
or household members, it is study of individuals and
consumer is looking for a to the product market. groups, and the processes
recognised that the following
particular item; for example, Similarly, the entire car market they use to select,
five factors will influence their
a particular type of drink is seen as satisfying a potential secure, use and dispose
or car behaviour: of products, services,
customer’s need for private
transport. It is when that • Cultural factors – inherent experiences or ideas to
values and beliefs are satisfy their needs
potential customer narrows down their choice to an
expensive car that Mercedes, BMW or Lexus may enter developed through parental
as players in a specific product market (i.e. expensive and environmental influences, such as nationality,
cars). The current desire by consumers for smaller religion or ethnic background or even the social
and more fuel-efficient cars has produced another grouping to which people belong.
specific product market. In the future, consumers • Social factors – people are influenced in their
may desire an electric or driverless car, so creating actions and beliefs by those with whom they
another product market. associate. Associates may come from family, peers,
Creating or identifying a niche market within sporting, church or other community groups.
the target market of a business is a good marketing • Personal factors – these are differences due to
strategy because it allows the business to position age, stage of life (single, newly married, married
its marketing efforts on a clearly defined and less with dependent children, single parent, divorced
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 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. In the airline industry in Australia, there
are airlines ( Jetstar and Virgin) in the domestic air
travel market that advertise cheap airline tickets on
some routes and particular days and times. In 2007,
Tigerair Australia found its niche as a ‘true’ budget Figure 12.16 Influences on consumer behaviour

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 with dependent children, widowed), occupation,
economic situation, lifestyle and personality.
• Psychological factors – this incorporates the notion
of what is motivating a consumer to purchase
this particular product or service. Trying to work
out what is in a consumer’s mind before, during
and after purchasing a product is a very difficult
exercise.
• Situational factors – it is important to know when,
where and how consumers make their purchases.
– When: is there a particular time of day, week
or season? For instance, we are increasingly
seeing seasonal products such as Easter eggs
and Christmas-related products entering
stores earlier and earlier in an attempt to
extend the buying season. No sooner have
supermarkets packed away the Christmas
Figure 12.17 It is not easy to predict what the deciding factor
items or put them in the mark-down bins,
will be for buying an item.
but hot cross buns are being stocked. Studies
have shown that family food purchases
are made towards the end of the week; ACTIVITY 12.3
accordingly, food advertising and specials are
ALDI has adopted a ‘special buys’
often provided earlier in the week to try to
promotional strategy of offering heavily
improve sales in the earlier days of the week.
discounted general merchandise twice a
Many customers are perceived to be ‘time-
week in its stores.
poor’ or have time constraints imposed upon
them. The introduction of telephone and 1 Do you or any of your family shop at
internet banking has extended trading hours ALDI? If so, identify the reasons why
and assisted consumers to save time. you or your family shop there.
– Where: this relates to where the actual 2 Have you purchased any items that are
buying decision is made and where the listed as ‘special buys’?
actual purchase occurs. Has the purchase 3 If you have purchased any ‘special
been planned or is it one that occurred buy’ items, describe the factors or
as a result of an impulsive decision based influences that caused you to make the
on various marketing techniques used to purchase.
influence the decision, such as music, lighting 4 Do you believe this strategy is working
and placement of products? to attract customers to ALDI stores?
– How: this relates to behavioural issues such
5 What characteristic of consumer
as the consumer’s preference to buy the
behaviour is ALDI using in this
product as a single item or in multiple packs;
marketing strategy?
for example, yoghurt, food and snack items,
socks and underwear.
While marketers understand what factors can Consumer trends
influence the purchasing decisions of consumers,
it is not always easy to predict what the actual Keeping up with current consumer trends is important
deciding factor was for buying a particular item. to the financial success of a business. It is important
It could have been based on satisfying a practical that the marketing function supports the business
need, an emotional or impulsive action, a logical by understanding current and changing consumer
(rational) or irrational (foolish) reason, or as a result trends. Some examples of these trends are:
of recommendations made in research reports. • Buying online: Australian shoppers are increasingly
using digital devices to review products online at
home and then using their smartphones to make

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 the purchase. Market research company Nielsen and have been replaced by online payment or
estimates that 96 per cent of Australians who have payment by apps on the consumer’s smartphone.
an online presence have made an online purchase. Credit cards and use of EFTPOS have become
The most prevalent categories are fashion, books, acceptable as a replacement for cash. Advances in
music and travel. To keep up with this trend, technology have allowed banks to respond to this
retailers are now using a combination of online trend with contactless payment technology, so
and offline strategies to help customers make making it easier and quicker to make an in-store
more informed decisions while also providing purchase; for example, Visa introduced payWave
customers with a ‘value-add’ to their shopping and MasterCard has PayPass.
experience. • Consumers have now become 24/7 in their
• Buying consumables (meat, fruit and vegetables): purchasing. They look for retailers who can
when purchasing consumables, in-store shopping provide fast and convenient service at any time
is favoured over online grocery shopping, as on any day, particularly of goods and services
customers are providing feedback that they that will ultimately save them time in their busy
still want to be able to inspect the products to lives. This has also led to an increase in internet
determine their quality and value. This trend is purchasing where the consumer orders online
supported by the increasing number of farmers’ with the goods being delivered to their designated
markets across both metropolitan and regional address. Consumers are also using online services
areas. Customers are willing to pay a ‘price to book airline tickets or holidays.
premium’ for the satisfaction of purchasing their • Many consumers are now looking to be treated as
fruit and vegetables directly from the producer individuals in their purchasing decisions. They are
and being able to develop a personal relationship tired of the mass marketing approach and want to
with the grower and get additional information be listened to and treated as special. For example,
about how the product was grown. Visiting a handbags or laptop bags produced by The Daily
farmers’ market also seems to be meeting a social Edited are monogrammed with the initials of the
need of consumers, and provides a destination/ customer.
event experience. The consumer trend of wanting • Consumers are more health conscious,
to buy ‘greener food’ and reduce ‘food miles’ is nutritionally informed, environmentally aware and
also satisfied by shopping at farmers’ markets. socially concerned. They engage in consumption
• One-stop shopping: this trend has encouraged behaviour that will support their diet, fitness and
retailers to add related and unrelated items of ideal lifestyle. Businesses have responded to this
merchandise to their core products. For example, trend by providing information on their packaging
banks now offer insurance and many retail relating to nutrition, fair trade, etc.
businesses now include a coffee shop within their • The nostalgia factor is evident in consumers
store, capitalising on the trend of being part of a of different age groups. Older consumers are
‘café society’. reaching back towards long-gone simpler days to
• Ready-to-eat (gourmet) meals: consumers have replace their growing anxiety about ageing and
been able to buy ready-to-heat and eat food our stressful society, while young consumers are
for the past 20 years. The current trend is that adopting and updating or reinventing products
consumers – often busy professionals – are from the past; for example, retro look radios (on
now looking to buy ‘gourmet’ meals, not just the outside they have old styling, inside the latest
the normal offerings of spaghetti bolognaise. technology).
Businesses such as dish’d are responding to • The emergence of a consumer group known
this trend by offering a wide variety of gourmet as ‘tweens’ – no longer little kids, but not quite
entrees, main courses and desserts at relatively teenagers – has formed a new market. This
affordable prices. The important factors for consumer group has become more empowered
businesses wanting to respond to this trend are and seeks products and experiences that
that they meet the customers’ need of being able previously appealed to teenagers. Businesses
to buy good-quality, tasty food. operating in the streetwear, cosmetics (beauty)
• E-commerce: many consumers have changed and entertainment industries are beneficiaries of
their preferred method of payment for goods this new consumer group. They are, however,
and services. Cheques are virtually nonexistent posing issues for traditional toy manufacturers.

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Chapter summary one of the most difficult steps. Systematic
approach steps include the following:
• Marketing is more than just selling a – Define the problem and establish
product; marketing influences the majority research objectives.
of activities undertaken in people’s lives. – Determine the research design.
It aims to help consumers make informed
– Identify and assess information types
and accurate decisions relating to the
and sources.
purchase of a product or use of a service.
– Design data-collection approaches,
• Marketing extends to the following entities:
forms and sample size.
goods, services, experiences, events and
personalities. – Collect and analyse data.
• Marketing is an important consideration – Prepare and present the final report.
when establishing a customer base and • Market researchers should strive to
business objectives. provide unbiased and honest results.
• The marketing concept has developed to The presentation of research findings
support the change in focus from selling a using graphical representation aids both
product or service to actually satisfying the interpretation and analysis.
needs and recognising the importance of • Secondary data is useful in establishing
customers. market size and trends, but is not as useful
• There are a range of external and internal for providing specific data about individual
factors that can affect the establishment business products.
of a customer base and brand identity of a • Determining the attributes of the target
business, such as technology, social media, market is important for effective marketing.
customers, competitors and corporate • Segmentation requires identifying
culture. market segments based on behavioural,
• Market research is undertaken to help geographic, demographic and
businesses make informed decisions. psychographic variables. Once the segment
• Market research needs to be undertaken is determined, a decision can be made as
in a systematic manner, with consideration to which segment is more favourable for a
given to minimising any form of bias in the particular business to target.
data-gathering process. • The importance of the Pareto Principle
• Marketing data can be obtained from two (80/20 rule) needs to be recognised,
main sources: primary and secondary. whereby 80 per cent of sales are said to be
attributed to only 20 per cent of customers.
• Common methods of obtaining primary
data are telephone surveys, mail surveys, • An important consideration of marketing
door-to-door personal interviews, shopping is whether to market to a mass or niche
centre interviews, direct observation and market.
small group discussions and experiments. • It is important to understand the influences
• Common methods of obtaining secondary on a consumer’s purchasing behaviour and
data are company records, periodicals, to develop a customer profile.
computerised data bases, libraries, • For businesses to prosper, they must be
newspapers, magazines, Yellow Pages and aware of the current consumer trends and
White Pages, government agencies and make sure they take these into account
trade associations. when marketing their products.
• 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

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 Chapter summary questions 3 Describe the factors that influence
consumer behaviour.
1 Define the following terms and then use 4 Identify three ways a fruit and vegetable
each in a sentence to demonstrate your shop could use market research.
understanding:
5 ‘Why undertake market research, it is
a customer profile a waste of time and money.’ Discuss
b niche market whether you agree or disagree with this
c market segment comment.
d qualitative research 6 Identify and describe three factors that can
e product market affect the customer base of a business.
f population 7 Identify and describe three factors that can
affect the brand identity of a business.
g focus group
h primary data
Extension question
i brand
j market research. Evaluate the costs and benefits to a business
of establishing a customer base.
2 Describe the Pareto Principle and explain
its relevance to marketing.

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CHAPTER 13 Key terms
• advertising • penetration

Extended marketing mix, related •

•
brand leader
brand loyalty
pricing
• personal selling

marketing strategies and

• brand stretching • persuasive
• complementary advertising
pricing • place
corporate social responsibility •
•
consumer profile
customer
• price
• price elastic

issues relationship
marketing (CRM)
• price inelastic
• price leadership
• direct • product

Overview
distribution • product
channel development
• generic brand • product
In this chapter students will continue to develop
• going rate differentiation
their understanding of how marketing, using the
• green marketing • product life
extended marketing mix, covers both the marketing
• indirect cycle
of products that are services and not just physical
distribution • product line
things. The 7Ps extend to considerations on price,
channel • product mix
product features and packaging, promotion, place,
• informative • product
people, physical evidence and processes. Students
advertising placement
will also gain an understanding of the life cycle of a
• label • promotion
product and the marketing strategies appropriate to
• leverage • psychological
each stage of this cycle. Customer relations strategies
• loyalty program pricing
such as quality customer service and loyalty programs
• market • publicity
will also be examined. When establishing a customer
saturation • sales promotion
base, it is also important to consider corporate social
• mark-up • skimming
responsibility issues such as green marketing.
• maturity pricing

Key knowledge
In this chapter students will learn about:
• The 7Ps model of marketing: product, price, place,
promotion, people, physical evidence and process
• Product life cycle: introduction, growth, maturity,
decline, extension and the relationship between
each of these stages and the choice of marketing
strategy
• The features and value of customer relations
strategies such as providing quality customer
service and establishing customer loyalty programs
• Corporate social responsibility management issues
with regards to establishing a customer base, such
as green marketing.

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 What’s ahead
Product

Process Price

Marketing
mix – 7Ps
Physical evidence Place

People Promotion

Figure 13.1 The 7Ps of the marketing mix

13.1 The 7Ps of marketing • capital items, such as buildings, equipment,

computers and office equipment
• supplies, such as paint, petroleum products, paper
P1 – Product and cleaning materials
• services, such as engineering, surveying,
Product is the first component of the 7Ps of the
maintenance, accounting and legal.
marketing mix. A product is anything that can
be offered to a market to Consumer goods
product the end result of satisfy a need or want. It
the production process; can include physical goods,
can be either a good or a Consumer products
services, experiences, events,
service; one of the 7Ps of classification system
the marketing mix persons, places, properties,
organisations, information
consumer profile a
statistical picture
of and ideas. Consumer and
the typical consumer business goods and services
of a product based on can be classified on the basis Convenience Speciality
demographic data;
for of their characteristics relating products products
example, income, age, to purchasing habits. The
gender, occupation
consumer profile will then
have an effect on the form of marketing best suited Shopping Unsought
to that category of product. products products
Business goods
Business goods and services can also be classified
according to their characteristics, ensuring that the Figure 13.2 Consumer products classification system
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)

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 Product classification Groups Marketing strategies
Convenience goods Staples are items bought on a Strategies that allow for wide
(purchased frequently and regular basis; e.g. newspapers, exposure of the product; e.g.
without much effort) bread, milk, toothpaste, television advertisements
shampoo, food items Prominent display such as
Impulse are items bought with checkout counters; e.g. colourful
no planning; e.g. chocolate bar, displays
chewing gum, magazines Prominent display near checkout
Emergency items are counters; e.g. product display
purchased when the need positioning
is urgent and price is not
important; e.g. umbrella during
a rainstorm, shopping bags
Shopping goods (a Examples are clothes, Broad range of strategies
comparison is made based shoes, furniture, household required to cater for varying
on suitability, quality, appliances, new and used cars purchasing styles; salespeople
price, style; research need to have good product
is undertaken prior to knowledge and selling
purchasing the item) techniques
Speciality goods (have Examples are new cars Exclusive distribution rights
unique characteristics or (luxury), photographic and limited production allow
brand identification; brand equipment, computers for marketing to be specifically
and product quality are the targeted
main considerations rather
than price)
Unsought goods (those Examples are smoke Marketing needs to be specific
goods not regularly detectors, life insurance, and advise of benefits of
purchased) encyclopaedias, prepaid products/services; personal
funerals, financial planning selling and direct marketing are
important for product promotion
Table 13.1 Types of consumer goods, their classification and impact on marketing strategies

ACTIVITY 13.1
Classify each of the following consumer products
according to its classification and group.
Explain why you have chosen this category.
1 Jewellery
2 Sunglasses
3 Fashion clothing
4 Smartphone
5 Sports shoes
6 Lounge suite
7 Car insurance
8 Shampoo
9 Mars bar
10 Lawnmower

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 a unique and superior product is one key to success.
Stage 1 Manufacturers also need to consider changes in
Idea development consumer tastes, new competitors and technological
advances. Failure can occur due to the market segment
being too small, poor choice of marketing strategies,
changes in consumer tastes or forecasting errors.
There are five stages involved in product
Stage 2 development – that is, in getting a new product
developed and out to the
Idea screening
market. product development the
design and development of
Stage 1: Idea new or existing products
development
Ideas can be generated from input from both staff
Stage 3
and customers or by carrying out market research.
Idea evaluation
A business will then be able to find out what needs
are not currently being met, or how the current
product could be modified, enhanced (innovated) or
extended. A competitor’s product could be analysed
to see how to improve on the concept. Product ideas
Stage 4 may also come from perceptions of current consumer
Developing the product trends, as outlined in Chapter 12.

Stage 2: Idea screening

Business owners need to consider how attractive these
ideas are to their business and how well they fit with
Stage 5
the business objectives and profile. Consideration
Commercialisation of
should also be given to the current product range as
the product
to whether the new idea will totally change the range,
or become an extension of a current range.
Figure 13.3 Stages in the new product development process
Stage 3: Idea evaluation
Developing the product Idea evaluation involves the testing of the concept
with market analysis to determine demand and gain
It is very important for businesses to keep their
the reactions of customers, identifying target markets,
product range appealing to the marketplace. It would
working out the cost of producing the product and
appear there are a number of important factors that
forecasting sales and profits.
contribute to the success of a product. Commitment
on the manufacturer’s part to continuously develop Stage 4: Developing the product
The actual product now needs to be produced and
market-tested, and marketing strategies need to be
determined. Alterations may still be made to the final
product, depending on feedback from market testing.

Stage 5: Commercialisation of the

product
Once developed, the product enters the marketplace
through a product launch and its accompanying
marketing campaign. The success of the product is
judged against the forecasts made during the idea
evaluation stage.

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 13.2 Product life cycle
Business success would be guaranteed if it were
possible to determine the exact time to launch a new
product or update an existing product. What is known,
however, is that all products
product life cycle the go through a life cycle. An
stages through which all awareness of this can help
products pass: launch businesses gain an advantage
(introduction), growth,
over their competitors. The
maturity, decline or
extension product life cycle is divided
into four stages, as described Figure 13.4 The product life cycle
here.
old product’s maturity stage;
Stage 1: Introduction for example, a re-launch that maturity the stage of the
This stage commences with the launch of the product involves new packaging and product life cycle where
into the marketplace, after its product development advertising of the product. sales peak (saturation
point); mature products
and testing stages. Sales at this stage are low
either decline or are
(increasing at a slow pace), profits are nonexistent or Stage 4: Decline or extended to lengthen their
very small, and competition is scarce. extension life cycle

Stage 2: Growth This stage involves a steady

decline in sales as newer competitors’ products
Due to effective promotion of the product and are more popular. When the product becomes
acceptance by consumers, sales will be growing fast, unprofitable or a new product is ready, the original
with profits rising, then flattening out and starting to product will be withdrawn from the market. An
fall over a period of time. At this point, competitors extension strategy, such as exporting, may be adopted
may have now entered the market. in the maturity stage as a way to boost sales.
The marketing strategies of a product need to
Stage 3: Maturity or saturation change during the various stages of a product’s life
The level of sales has stabilised and competition for cycle as customers’ attitudes to the product will
the product is strong. Profit can start to decline. The change. In addition, the target market may need to
initial consumer demand for the product has been change and there may be an increase in competition
satisfied and the product as yet does not need to be for the product. Table 13.2 sets out the relationship
replaced. Prior to launching a brand-new product, between the marketing mix and the four phases of
extension strategies may be introduced to extend the the product life cycle.

ACTIVITY 13.2
1 Provide three reasons why an understanding of the product life cycle is so important to
business success.
2 Identify what stage in the product life cycle the following products have reached at
the current time. For example, vinyl records declined in the original product cycle.
Interestingly, they are now becoming trendy due to quality of sound compared to digital
recording methods.
a Robocalls e Skateboards
b Electric cars f Energy drinks
c Hybrid cars g Digital cameras
d Drones h Smartphones

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 Product life
Product Price Place Promotion
cycle phases
Introduction New model or Market Limited number Informative
product penetration of outlets, with advertising to
pricing (low) or possibility of make consumers
skimming policy expansion aware of product,
(high) its price and
features
Free samples,
trial periods
Trade incentive/s
to stock the
product
Growth Product If penetration Increased Reinforcement
improvements pricing policy is number of and persuasive
need to be a success, prices outlets advertising
planned to may now be to encourage
maintain appeal increased consumers to
to customers repeat purchase
Sales promotions
to encourage
repeat purchases
and establish and
maintain brand
loyalty
Maturity Extension Competitive Large number Importance of
or market strategies pricing of outlets, with brand image,
saturation needed; e.g. new possibility of new with advertising
models, colour and different emphasising
range, packaging types of outlets the difference
between your
product
and that of your
competitor
Decline Sell off existing Discount or Reduce number No active
stock ready for lowering of of outlets to promotion or
withdrawal from pricing those that are advertising
product range profitable Possibly, price
and market reduction
information
Table 13.2 Product life cycle relationship to the first 4Ps of the marketing mix

market penetration a pricing strategy that aims to set low persuasive advertising attempts to create an emotionally
prices initially to gain high market share quickly positive feeling about a product’s image to encourage
informative advertising advertising that gives consumers consumers to buy it
factual information about a product rather than creating a brand loyalty when consumers continue to purchase the same
product image product, even though rival products may exist
penetration pricing a pricing strategy where the product’s market saturation occurs when most consumers already own
price is set lower than a competitor’s price; also used when the product and the market is not growing; any sales that occur
introducing a new product to the market are replacement sales

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 What is the product mix? The role of branding
Many businesses offer more than one product for A brand is the distinguishing name, term, symbol or
sale. The product mix is the full set of all products design that is used to identify one manufacturer’s
being sold by a company. The mix has two main product and differentiate it from another manufacturer’s
elements or dimensions: product. Branding is very influential in marketing,
• breadth – measured by the number of product creating either a positive or negative image in the
lines carried mind of the consumer. Products are developed and
• depth – determined by the variety of sizes, colours advertised to make them appear different to others
and models offered within each product line. on the market (product differentiation).
The business with the largest share of the market
A product line is a broad
is known as the market
product mix a full set of group of products intended
leader (or brand leader). It product differentiation
all products being sold by a for basically similar uses, and
business is estimated that a successful products are developed
having reasonably similar
brand is a powerful asset to a and advertised to make
product line a broad physical characteristics. For them appear different from
group of products that are business and may account for
instance, in an electrical others on the market
intended for similar uses between 50 and 70 per cent of
retail store the product mix brand leader the brand in
and have similar physical the total value of a business.
features would include items such as the market with the highest
What is it that makes a brand market share
refrigerators, freezers, washing
connect with the consumer? Is
machines, dryers, microwaves
it emotion, market leadership,
and dishwashers, referred to as ‘white goods’. An
high quality or being judged as value for money? For
example of one product line would be refrigerators.
the past 14 years, the Reader’s Digest Trusted Brands
Within that product category, its breadth can be
survey has investigated which brands in Australia
determined by the number of different brands a store
have the best reputation among consumers.
is selling and the depth by the number of different
models of that particular product that are available.

ACTIVITY 13.3
MOST TRUSTED BRANDS
Visit the Reader’s Digest Trusted Brands
website and answer the following questions.
1 Which brands are identified as ‘iconic’?
Why are they identified as such?
2 Choose five of the other most trusted
brands and describe the features that you
believe each of these brands possesses
to make it ‘most trusted’. For example:
Barbecues – a Weber barbecue is
described as ‘the cornerstone of outdoor
cooking since late 1970s’, producing
outstanding meals, a quality and durable
product, variety of designs, and good
customer service ranging from technical Figure 13.5 A brand is a powerful business asset that is
help to recipe planning. essentially a maker’s mark.

3 What do you believe makes a brand

connect with the consumer?

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 Importance of brand The importance of branding is recognised by
luxury car manufacturers, such as Ferrari, Porsche and
A brand can convey a range of meanings: attributes, Aston Martin. These manufacturers know the value
benefits, values, culture, personality and type of user. of cashing in on their highly regarded brand. They
Taking the example of a luxury car such as a BMW, it leverage this to market and sell branded clothing,
is possible to analyse these brand meanings: key chains or other trinkets. These branded goods
• Attributes of the product – a BMW suggests an provide a profitable product
expensive, well-built, well-engineered, long- line for such premium, low- leverage using (something)
lasting, high-prestige automobile. volume car producers. Their to maximum advantage
• Benefits – both functional and social status. A growing non-car product lines brand stretching using an
BMW will last for a long time and can make some underscore the power of their established brand name in
people feel important and admired for having this order to introduce unrelated
brands, but also the harsh
product. products
realities of the car business:
• Values – this car says something about the selling baseball caps and
manufacturer’s values; BMW stands for high luggage can be more profitable than selling cars. This
performance, safety and prestige. practice is known as brand stretching and occurs
• Culture – the brand may represent a certain where a central logo is used as an umbrella for a
culture. BMW represents German cultural traits of range of products.
organisation, efficiency and high quality. Another example of brand distinguishing a
• Personality – a BMW projects a certain personality: product is in the very large and competitive paint
high status and interested in on-road performance. industry. The brand Dulux, with its motto (created
• Type of user – who would we expect to see in the 1970s) ‘Worth doing, worth Dulux’, conveys
behind the wheel of a BMW? the image of quality attached to any paint product
from its range. As part of its brand recognition, the
company features an English sheepdog. The Dulux
dog is seen as a powerful trademarked symbol of the
Dulux brand for consumers. Research confirms that
the inclusion of the Dulux dog in any promotional
material increases the memorability and branding for
the consumer.

ACTIVITY 13.4
1 Identify two luxury brands where
the business is ‘cashing in’ on the
brand name to gain an additional
revenue stream; for example, Harrods
department store in London.
2 Create a list of at least five products
where the brand name has become
accepted as the ‘common name’ for the
product; for example, Karcher (water
pressure cleaner).
3 Outline two different products and
describe the range of meanings
attached to those products in terms of:
attributes, values, culture, personality
and types of user.

Figure 13.6 Luxury brands – BMW and Aston Martin

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Figure 13.7 The importance of branding and brand recognition

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’, and
a portable car fridge as an ‘esky’. This kind of product
recognition is a marketing advantage.
Businesses also now want to monopolise the
colour they use in their brands. This has become an
increasingly contested issue, with Red Bull winning
a court case in 2002 against a soft drink distributor
Figure 13.8 Cadbury and Darrell Lea contested the ownership
whose can used the same red, blue and silver
of the colour purple.
combination with the same ‘diagonal thrust’ as the
Red Bull can. In January 2006, Clark Rubber won
an injunction against Oasis Foam and Rubber, which ACTIVITY 13.5
had painted its stores with blue and red on a yellow
Name the colour you associate with the
background, similar to the Clark Rubber colour
following brands:
scheme. In more recent times, BP wanted to register
the colour ‘green’ under the Trade Marks Act 1995
1 John West
(Commonwealth), which can then protect its brand. 2 Commonwealth Bank
This was opposed by Woolworths, which also uses 3 Toyota
this colour in its branding. Meanwhile, Cadbury and 4 Sara Lee
Darrel Lea fought a five-year legal battle in Australia’s
5 Domino’s Pizza
Federal Court over the right to use the colour purple
in packaging and advertising. Cadbury wanted to gain 6 Westpac
sole rights to this colour. Cadbury was told by the 7 Coles
Federal Court that it does not ‘own’ the colour purple 8 Swisse
for all its products, and its attempt to sue Darrel Lea 9 Australia Post
was rejected.
10 Metro trains.
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 by 3.4 per cent in 2013 from 2012. This legislative
packaging, with the boxes all being the same colour. requirement is now being adopted by other countries,
The Australian Bureau of Statistics (ABS) reported including Ireland, Britain, New Zealand and the Cook
that in the first year of the ban, tobacco sales fell Islands.

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 An advertiser wants its product to be in front of • acting as an advertisement, attracting attention and
people’s eyes, wherever those eyes might be. Product new customers
placement has become very • building image, brand recognition and positioning
product placement popular in television programs the product in the marketplace
a method used to gain and movies. When you are • differentiating the product from that of its
prominence of a product next watching television or at competitors
in the consumer’s mind;
the movies, take some time • protecting the product – primary wrapper,
for example, in television,
movies or the internet to count how many products secondary and transportation packaging
are strategically placed in the • tamper-proofing the product
show to subconsciously catch • providing consumer information – ingredients,
the eye. You may also want to count how many manufacturer and country of origin.
times an individual product appears or is mentioned One of the most important considerations
during a television show that the business has when designing packaging is colour. For instance,
sponsored. consumers associate certain colours with certain
The internet has become part of the branding feelings and products: white (purity) with milk; red
strategy of many businesses. The website for a (warmth, passion and sensuality) with Coca-Cola;
business becomes a brand portal offering site visitors blue (professionalism) with IBM computers; purple
more than just straight product information. It offers (luxury) with Cadbury chocolates.
opportunities to participate in activities such as games, Labels can be used to provide information about
puzzles, message boards, live chat, email, surveys and the product, the manufacturer or retailer. Often the
e-commerce. It aims to gain commitment from visitors trademark of the business is
to the website by building a virtual community around displayed on the label. Labels label placed on a product
that brand of product. can be part of the packaging of to inform the customer/
For small business operators, deciding to stock a product or attached directly consumer with information
branded products is a sound strategy as these such as manufacturer,
to the product. Packaging,
ingredients and use-by date
products carry their own consumer recognition and while very important from a
brand loyalty. This will cut down on the amount of marketing sense, has also come
marketing a business will need to undertake. under greater consumer scrutiny and criticism, mainly
Some large supermarkets offer products that due to environmental issues. The use of reusable
have generic brand names, such as ‘No Frills’, ‘No packaging such as glass or recycled cardboard has
Name’ or ‘Essentials’ brand. helped overcome some of this criticism. Customers
generic brand a brand The brand attaches to the also choose products based on the convenience
that attributes its identity to supermarket chain, rather
of the packaging. For example, Heinz moved from
the retailer rather than the than the various manufacturers
manufacturer selling glass bottles of tomato sauce to also selling
of the product. These brands plastic, squeezable containers. White Wings flour is
are produced by a variety of
unacknowledged manufacturers, packaged plainly
and therefore more cheaply. They do not receive a
lot of promotion. These savings are then passed on to ACTIVITY 13.6
the consumer by way of lower prices for the product. Choose four products and analyse their
In comparison, ALDI has its own ‘brands’, though not packaging based on the following criteria:
what consumers traditionally refer to as ‘home brands’.
1 design – use of colour, placement of
A close look at the ALDI range of products will reveal
logo or business name
that the colours used for its brands use the same
colour palate as the well-known brands stocked by its 2 consumer information; for example,
competitors. ingredients, name of manufacturer,
country of origin
The choice of the right packaging 3 level of packaging – primary or
secondary
The packaging of a product is very important and
should not be overlooked. It has a multitude of 4 brand recognition
purposes, including: 5 environmental friendliness.

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 now available in a screw-top plastic jar as well as the range of price adjustment strategies available.
a paper packet. Producers should also think about Outlined below are various factors that must be
portion sizes when designing their packaging. Not considered when determining the price of a product
all households are large and therefore individual pre- or service.
packaged portions of items may lead to more sales. There are three main ways that the pricing of a
product or service is determined.
P2 – Price
1 Cost-based methods
Price is the second component of the 7Ps of the
A business will want to recover the total costs (both
marketing mix. The price is the amount of money
fixed and variable) associated with actually getting
paid by customers for a product or service. It is the
the product to the point of being ready for the
customer who will ultimately
marketplace. This requires the business to calculate
price the amount for which determine whether the
its break-even point. Costs are normally calculated on
something is sold business-set price is correct.
a ‘cost-per-unit’ basis. A standard percentage mark-
Pricing levels greatly influence
up (representing the desired
the revenue and profit made by a business, helping to
profit margin) is then added mark-up pricing
determine its financial success or failure. determined by adding gross
to the unit cost to arrive at the
Correct pricing decisions are therefore some of profit to the direct cost per
sale price.
the most important issues facing marketing managers. unit; usually expressed as a
Businesses often apply different pricing methods to 2 Competition-based percentage
their portfolio of products, depending on costs of methods
production, stage in product life cycle and competitive It is normal for a customer to compare prices and
conditions within the market. quality between items being offered by a business
Pricing a product for the market is dependent and that of its competition. To be competitive in the
upon a range of factors. When a business determines marketplace, it is therefore very
its pricing strategy, it must ensure that it covers the important to price products
base price for the product, then takes into account going rate setting a price
in a similar price range to for a product or service
competitors. This is referred using the prevailing market
to as establishing the going price as a basis
loyalty program a
rate. While price is important,
rewards program offered
businesses need also to focus by a business to customers
on other aspects of the business, who frequently make
such as customer service and purchases. It may give a
loyalty programs to entice customer advanced access
customers. If a business wants to new products, special
sales coupons or free
to be the market leader, it
merchandise.
will have to adopt a price
price leadership a
leadership strategy, thus
business that through its
setting the prices for other dominant market position is
competitors in that industry. able to set prices that other
businesses adopt
3 Marketing strategy
methods
The pricing strategy will differ based on whether a
business is introducing a new product or its product
or service is already established in the marketplace.
When introducing a new product, a business may
adopt one of the following strategies:
• Penetration pricing is where the price is set lower
than that of competitors or the normal price for
such a product. Its purpose is to get customers
Figure 13.9 Price is the second component of the 7Ps of the
to try the product and then to create a long-term
marketing mix.

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 Business Marketing
Costs
objectives (profit) strategies

Legal constraints Price Competition

Life cycle position Supply and Customer’s perception

of product demand of value

Figure 13.10 Factors that determine price of a product or service

relationship with those customers. It is hoped • using complementary pricing – where the price
that these customers will still remain when prices is set low on one item and high on another item
increase to the level of normal competitive pricing that would normally go together; for example, suit,
for that product. Other forms of penetration shirt and tie, coat and scarf.
complementary pricing
pricing are introductory price discounts (‘two for There are other factors where the price is set low
the price of one’) and sampling. that can affect the pricing of on one item and high on
• Skimming pricing is used for products that are a product or service. Some another item that would
of high quality and have an ‘image’ attached to products, such as fresh fruit normally go together
them. The market is usually small and not seen and vegetables, are highly
as having potential to grow in dependent on the level of supply, either directly
skimming pricing a size. The price charged is high from the growers or the wholesale market due
strategy where high prices
relative to competitors, and is to seasonal factors. When the marketplace is
are set to ensure high
profits before marketing skimming off the ‘cream’ of the oversupplied with a product, the price will usually fall
advantage is lost market. in the hope of attracting consumers to buy additional
If the product or service is quantities. Just think of the price comparison between
established in the market there are a range of pricing strawberries, mangoes and watermelons in summer
strategies that may be used, namely: and winter.
• identifying one product as a loss leader where Demand is slightly more complicated in its
the price set on this product is set low in order relationship to price. Some products may have a price
to attract customers to buy other products in the increase with little or no impact on the demand for
range that have a higher profit margin the product. These products are referred to as being
• adopting psychological pricing – used by price inelastic, and generally tend to be essential
manufacturers and retailers to make the price items such as milk, bread
and eggs. Products that have price inelastic a fall or
appear lower than it actually is. The price
a large drop-off in demand rise in price of a product
of $1999 appears lower does not impact on the
psychological pricing than $2001; similarly, $0.99 due to a price increase are
demand for that product
pricing strategy whereby referred to as being price
instead of $1.01. Consumers price elastic the degree to
the price is set in elastic, and generally tend to
accordance with the value also assume that some which demand for a good or
products, because of their be non-essential items, such service varies with its price
consumers place on the
product image and quality, are going as movie tickets, leisure travel
to be expensive. While the cost and restaurant prices.
of producing perfume and cosmetics is not all The government may periodically regulate or
that high, a large proportion of the cost is actually control the maximum prices for certain products. It
associated with the packaging to make the product is often those items that are considered to be staples,
look exclusive. such as milk, bread, eggs and petrol. The government

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 • resale price maintenance, which prohibits product
suppliers specifying a minimum price below
which retailers must not resell or advertise their
goods or services
• misuse of market power, which is 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.

P3 – Place
Place is the third component of the 7Ps of the
marketing mix. It is very important that businesses
place their product correctly so that it is accessible to
the end user (consumer) when and where they want
it. Place therefore involves
making decisions to ensure place encompasses the
that the right quantity of a distribution channels used
product is in the right location, to market products to
Figure 13.11 Demand is slightly more complicated in its customers; one of the 7Ps
relationship to price. at the right time. It also means
of the marketing mix
ways of displaying products to
consumer groups. This could
also regulates prices through the provisions of the be in a shop window, but it could also be online.
Competition and Consumer Act 2010 (CCA), and in Distribution channels are used to provide the link
some instances prohibits certain pricing practices, between the manufacturer and the customer. There
such as: are two main types of distribution channels: direct
• price fixing, which is when suppliers formally and indirect.
arrange with competitor suppliers to fix the same
price for a product

Producer Producer Producer

Wholesaler
Direct
distribution
channel
Retailer Retailer

Consumer Consumer Consumer

Channel 1 Channel 2 Channel 3

Indirect distribution channels

Figure 13.12 Direct and indirect distribution channels

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 Direct distribution channel Advantages of Disadvantages of
A direct distribution channel enables the direct distribution direct distribution
manufacturer or producer to sell their product directly • Cuts out the profit • Manufacturer/
to the customer. This method margins of the producer needs
direct distribution usually requires the business ‘middleman’ (retail to warehouse the
channel a manufacturer to invest in facilities and staff intermediary) stock, adding to
sells the product directly to to sell their product; however, • Pricing and storage costs
the customer
it allows them complete marketing of the • Product is not
control of the marketing product/service on display in a
function. The internet has added to the popularity of are under the retail outlet for
this distribution channel, especially for services such full control of the the consumer to
as insurance and banking. manufacturer/ browse and make
Indirect distribution channel producer comparisons to
other products
Traditionally, an indirect distribution channel
involves the use of a retail outlet, where products Table 13.3 Direct distribution to the customer
are stored and displayed. It is
indirect distribution a popular distribution channel Advantages Disadvantages
channel a manufacturer for occasions when consumers of indirect of indirect
sells their product to a want to purchase an distribution distribution
wholesaler and/or retailer
assortment of items, the value • Manufacturer/ • Customers can
(intermediary) who then
sells it to the customer of purchasing transactions producer has view a wider
is low and the market is passed on the range of items
fragmented and dispersed. In cost of holding and make price
recent times, the concept of an online department and storing stock comparisons
store has evolved. Kogan.com is Australia’s premier to a retailer • Marketing
online shopping destination, running a 24-hour, • Manufacturer/ decisions relating
seven-days-a-week operation offering TVs, phones, producer is given to price are
tablets, computers, audio, homewares, appliances, more freedom now out of the
travel and pantry items. Another innovation is to focus on control of the
Aussie Farmers Direct, which is a free home delivery producing a manufacturer/
service supplying Australian grown and produced product rather producer and
products, such as milk, cream, cheese, bread, eggs, than also having are made by the
bacon, orange juice and spring water, directly to the to concentrate on retailer
consumer. selling the product
Often businesses will have a combination of
both direct and indirect channels, as they have their Table 13.4 Indirect distribution to the customer
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
ACTIVITY 13.7
sold directly with fewer intermediaries than consumer 1 Visit the Kogan online department store
goods. website and describe how it undertakes
Logistics covers decisions relating to transportation, the distribution of the products it sells.
warehousing and storage of goods. Having an 2 Undertake an internet search to
efficient logistics operation can provide a business find which major retail stores have
with a strong competitive advantage. established an online store. Explain why
you believe these businesses may have
adopted this strategy.

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 P4 – Promotion
Promotion is the fourth component of the 7Ps of the
marketing mix. Promotion involves the business
communicating with its
promotion the use of actual or potential customers.
advertising, branding, Promotion is the element of
sales promotion and public the marketing mix that informs
relations to inform and
customers of the business’s
persuade consumers; one
of the 7Ps of the marketing product or service while
mix also convincing them of that
product’s ability to satisfy their
individual needs or wants.
For promotion to be effective, either short-term
or long-term objectives must be established. A short-
term objective may be to promote an end-of-season
sale, while a long-term objective may be to change
the whole image of the business. Other examples of
some promotional objectives include:
• raising consumer awareness of a new or existing
product
• reminding consumers of the existence of a
particular product or service
• promoting distinctive features or superior quality
of a product or service over those of its competitors Figure 13.13 Yates products are advertised at gardening
• creating and reinforcing brand image or personality supply stores.
• correcting misleading reports about a product or
service or reassuring the public after a crisis or and make no mess! Read more at: http://www.
accident relating to the product. yates.com.au/products/fertilising/water-soluble/
Once the promotional objectives have been set, thrive-easy-pods-all-purpose-soluble-fertiliser.
it is time to decide what will be the appropriate • compare and persuade by creating a distinct image
promotional mix. This refers to the combination of or brand identity for the product. An advertisement
promotional techniques that will be used to sell the can be used to persuade consumers to buy a
particular product or service, or range of products product and not a competitor’s, when there is
or services. really little difference between the products. It is
the role of the marketer to build up the image of
Promotional techniques quality and difference between the products in the
mind of the consumer. Larger, established brands
Advertising use this strategy to try to get consumers to switch.
Advertising is a powerful medium of mass For example, ALDI has been running comparative
communication that is designed to: advertisements on its products, which highlight
• inform by giving information to potential customers the price difference between well-known brands
about the technical details, product use, key stocked by its competitors and its ‘product of
features, price and where the Australia’ homebrand. One recent advertisement
advertising informing product may be purchased. It run by ALDI related to toilet rolls in an attempt
potential buyers about a is important to use this form of to gain a slice of the market, currently dominated
product advertising when introducing by three brands (Sorbent, Kleenex and Quilton),
new products. For example: which is estimated to be worth $2 billion. Market
The latest innovation in soluble fertiliser that offers research has shown that the main criteria for
no fuss feeding for your whole garden. Yates choosing this essential product is ‘softness’. Both
Thrive Easy Pods™ are easy-to-use premeasured these criteria are noted on the packaging of ALDI’s
pods of Thrive fertiliser that require no handling toilet paper ‘Confidence’.

Chapter 13  Extended marketing mix, marketing strategies and corporate social responsibility 251
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 Figure 13.14 ALDI has been running comparative advertisements for several of its products, including promoting its toilet paper
over that of more famous competitors.

• remind and reinforce – when products are well in The Age could cost approximately $60 000
established in the market, advertising is undertaken including GST for Monday to Friday, going up
to remind consumers of the product’s presence to $90 000 for Saturday. As newspapers generally
and reinforce what the product has to offer to run special-interest sections, it is possible to aim
consumers, so that a switch in preference is not the marketing at particular market segments;
made to the competition’s product. for example, the ‘Travel’ section in a Saturday
newspaper will have numerous promotions,
Forms of advertising media special offers and advertisements for local and
After choosing the style of advertisement to be used, overseas holidays. Newspaper publishers, while
it is then the role of the marketer to select the most still offering a print version of their newspapers,
appropriate media for the advertisement that will also operate multi-media platforms that extend to
best target the particular market segment they want desktop, mobile and tablet coverage.
to attract. For example, it would be a waste of money • Television is a very expensive medium that can
to advertise ladies fashion, jewellery and perfume in provide high impact, as it relies on a combination
a computer magazine. Set out below are the most of visual, movement, sound and special effects
common forms of media used by marketers. to communicate the message. It lends itself best
• Newspapers allow for large amounts of detailed to simple messages delivered in 30-second time
information to be provided in advertisements, frames. Products can be demonstrated as well.
which can vary greatly in size, from full-page With the popularity of channel surfing using
to very small. Small businesses would be more remote controls, and time shifting using a digital
attracted to placing a small advertisement in a local video recorder, potential audiences can easily miss
newspaper, as a full-page colour advertisement or skip over the advertisement.
• Radio has a wide reach and the ability to target
market segments, particularly those based on age,
music styles and areas of interest. As radios are
often in the background when people are working,

Figure 13.15 Dulux Paints always includes an image of an

Old English Sheepdog to remind or reinforce the market of its
iconic brand image and name. Figure 13.16 The masthead of The Age

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 studying or driving, it means that attention can in
fact be at a low level.
• Magazines are appealing due to the high quality of
their print and colour. They are ideal for marketing
fashion items, food and anything associated with
glamour. Magazines are usually read in a leisurely
manner and passed on to multiple readers, so they
extend the longevity of the advertisement’s time
frame.
• The internet is regarded as the fastest-developing
advertising medium. It allows a business the
opportunity to advertise its products to both a local
and global market. The number of retail outlets in
Australia adopting an online presence increased
by 7 per cent in 2015, with an estimated worth of Figure 13.17 Outdoor advertising opportunity
$22.1 billion. This medium can provide consumers
with easy access to details of products and their and sides of buses. It can reach a large percentage
prices and allow them to make comparisons. The of the population, but is only appropriate for very
consumer can then decide whether to make a simple or reminder messages.
purchase online or go into a bricks and mortar • Yellow Pages is available both in print and
store. The advertisements may appear as part of electronic format. It is still a popular, low-cost
the website of a business or as a ‘pop-up’ window medium used by small- and medium-sized
on another site. Due to their annoyance factor, businesses.
these pop-up advertisements can actually be
counter-productive.
• Social media platform – Instagram. Many Australian ACTIVITY 13.8
businesses have adopted this social media platform.
Create a chart and provide an example of
For example, Tourism Queensland has entered
an advertisement based on each of the
into a marketing campaign to attract overseas
nine advertising styles listed above.
travellers, where holiday and happy snaps are
being used to promote destinations in Queensland
(see Cambridge weblinks: http://cambridge.edu. Advantages of Disadvantages of
au/redirect/?id=7004). Other brands such as advertising advertising
Vegemite, Philadelphia Cream Cheese, Ben &
• Reaches a broad • Expensive and
Jerry’s ice-cream, Flight Centre, Toyota, Audi and
or mass market difficult to gauge
McDonald’s are also advertising on Instagram.
• Acts to persuade effect
SnapChat is another social media tool that has
if creative • Impersonal
the potential to provide advertising opportunities.
techniques are • Inflexible or not as
It is not widely used yet by marketers, but it is
used compelling as a
predicted that once it is adopted by the millennials,
• Able to target salesperson
followed by the baby boomers, it will become a
market segments • Consumer is able
powerful advertising medium.
through directed to tune out
• Direct mail is the most personal and selective of
media (e.g.
all advertising media. Lists of names and addresses
teenage girls
can be purchased, which have already undergone
through Girlfriend
sorting based on various demographic or target
magazine)
segmenting characteristics. Costs can arise due to
• Able to create
printing and postage fees, but there is less waste
powerful brand
circulation.
image and product
• Outdoor advertising occurs using a wide range
recognition
of techniques, such as billboards, neon signs, bus
and tram shelters, railway stations, backs of taxis Table 13.5 Advantages and disadvantages of advertising

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 Direct marketing/selling Sales promotion
If a business wishes to develop a closer relationship The sales promotion technique is used to entice
with its customer (target market), direct marketing a customer into purchasing a product in the belief
is a way to do this. The marketing tools used are: that they are gaining some
direct mail, directed catalogues, mail-outs, phone economic advantage. The sales promotion use of
calls, personal visits or emails. Technology has incentives to purchase may incentives to encourage
increased sales; for
seen the expansion of direct selling into the area of be immediate; for example,
example, free gifts,
telemarketing, where sales staff is employed to sell a product being offered as a competitions, ‘buy one, get
products over the telephone, instead of face to face. bonus pack or free samples one free’
Telemarketing saves a business money and time by attached to the regular product.
not requiring salespeople to travel or sell on a door- Alternatively, the incentive may be delayed, where a
to-door basis with no guarantee of a sale. Using the customer needs to send in a coupon or save up points
telephone, sales personnel are able to work through in order to gain a reward. The promotional objective
a far larger portion of the target market in a smaller must be clearly defined by the business as to whether
time, arranging both payment and delivery details at it wants a short-term increase in sales or a long-term
the same time. It can also be cost-efficient, as all sales relationship with the customer.
staff are located at one central call centre and do not For instance, a marketing campaign can offer
need to be provided with transport. As many sales discounted accommodation packages to entice
staff earn commission on the value of sales received, travellers to stay at a new resort opening in a highly
this form of promotional payment acts as a motivator competitive marketplace or to increase occupancy
to increase their sales performance. rates in off-peak periods. Using this marketing strategy
has two outcomes: namely, a higher occupancy rate
(i.e. more guests) while in overall financial terms it
may not be judged as successful. This is due to the
costs the hotel has to bear to ensure all its facilities are
Advantages of Disadvantages of fully operational while only gaining a smaller revenue
direct marketing/ direct marketing/ increase, due to the heavily discounted marketing
selling selling offer.
• Allows for one-to- • Could be seen
one personalised as invasion
communication of privacy, Advantages of Disadvantages of
with targeted as customer sales promotion sales promotion
market questions where/ • Provides • A technique that
• Increases how you gained additional support can be easily
opportunity for their personal (reinforcement) copied and
customer loyalty details to an advertising improved upon by
and higher • Negative image campaign competitors
frequency of direct mail and • Offers short-term • Short-term
• Flexible unwanted phone incentives to solution
calls (particularly increase sales, to product
at meal times) without long- promotion, but
• Relatively term pricing does not generally
expensive due implications lead to long-term
to high costs of • Provides improvement in
making direct opportunity product sales
contact rather for immediate
than the broad feedback on
approach of effectiveness of
advertising the technique
Table 13.6 Advantages and disadvantages of direct Table 13.7 Advantages and disadvantages of sales promotion
marketing/selling

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 Advantages of Disadvantages of
personal selling personal selling
• In person • Business needs to
(customer make sure sales
is actually staff are trained
dealing with and adequate
a salesperson staffing levels
who has product are maintained to
Figure 13.18 This advertisement uses the sales promotion knowledge) satisfy needs of
technique to promote a quality accommodation package at a • Immediate customers
bargain price. answers to • Largest single
questions posed operating expense
Sales promotion techniques are used on both by customer of a business and
consumers and those in the trade (retailers). The • Ability to ask and costly on a per-
economic advantage for the retail outlet may come in answer questions customer basis
the form of buying allowances, cooperative advertising • Immediate • Unless a large
and point-of-sale material, trade shows and training to feedback – not sales force is
motivate staff to improve sales performance. left to wonder used, it may only
what the answer be possible to
Personal selling
will be; can gain a reach a limited
Personal selling can be the largest single operating
response even by number of
expense of a business. To make this expense cost-
body language or customers
effective, it is therefore
facial expression
personal selling product important that sales personnel
is sold by a salesperson, are adequately trained in Table 13.8 Advantages and disadvantages of personal selling
preferably trained their product knowledge
and interpersonal skills. The
days of the stereotypical ‘loud mouth salesman’ are advice and ethical behaviour. This helps form the
hopefully gone, replaced with a professionally trained basis of relationship marketing.
problem-solver who has something to contribute to
the business and its customers. A salesperson should
Internet marketing (website)
be someone customers can trust for accurate product 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:
• Do the goods or services have online promotional
potential, and how can that potential be used?
For example, goods or services that require a
firsthand experience or demonstration in order to
Figure 13.19 Bunnings prides itself on employing qualified appreciate their benefits would be more difficult
tradespeople as its sales staff. to sell online. Similarly, if the product is currently

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 • Can it be registered through a search engine so
that customer product or service enquiries are
directed to the website?
• Can it get referrals by using links to other websites?

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.

Figure 13.20 The website of a business is often the Publicity and public relations
customer’s first experience of the business.
Publicity is a ‘free’ form of mass communication that
is different from advertising, which attracts a cost.
widely available from a retail outlet, such as The role of a publicist is to
grocery items, there must be some additional attract favourable attention to publicity a ‘free’ form
the business and what it offers of mass communication
incentive to using this promotional strategy as a
with the aim of attracting
purchasing method. without having to pay media
favourable attention to a
• What type of website does it need – one that, while costs. The common tools business
simple and easy for customers to use, adequately used by publicists are press
reflects its corporate brand and image? releases, product launches,
• How does it get customers to visit its website? special events, lobbying and sponsorships. Public
Promotional strategies will only be successful if relations activities involve communication aimed at
sufficient visitors are attracted to the website. developing a favourable corporate and product or
• How should the goods or service be advertised service image. The communication can take the forms
on the internet? Should banner advertising be of advertising and/or publicity and acts to support
used to draw customers to the site? (Banners are other marketing strategies.
the headline advertisements seen on the top of
popular websites.)

ACTIVITY 13.9
Visit four of the following websites and answer the questions below.
• Myer • Cadbury
• Nike • Melbourne Victory Football Club
• Australian Football League • Triple J
• Virgin Australia
1 Identify the aim of the website.
2 What gender and age do you think is the target market for the products or service of the
business?
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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 Advantages of Disadvantages
publicity and of publicity and ACTIVITY 13.10
public relations public relations For the products and services listed below,
• Low cost, as • Difficult to be in identify which form(s) of promotional
the business total control of technique you recommend would be best
generates the the publicity a to market that product or service. Justify
communication business receives your choice.
• High credibility • Can be negative 1 Car
• Allows the as well as positive 2 Local restaurant
business to build
3 Home cleaning service
a positive brand
image 4 Solar heating
5 A school
Table 13.9 Advantages and disadvantages of publicity and
public relations 6 Bank
7 House builder
8 Gymnasium/fitness centre
9 Accountant
10 Tutoring service

CASE STUDY 13.1

Metro Trains – a creative way to market a service

Metro Trains Melbourne (Metro) is owned by a

consortium of rail and construction businesses,
namely Hong Kong’s MTR Corporation (60
per cent shareholding), John Holland (20 per
cent shareholding) and UGL Rail (20 per cent
shareholding). All three businesses have a long
and successful history of working together,
bringing their expertise to both local and
international rail industry projects. In 2009,
Metro took over operating the metropolitan train
network in Melbourne. Metro now employs Figure 13.21 ‘Dumb Ways to Die’
more than 4600 staff in areas such as customer
services, train services, head office, engineering and maintenance and projects. Its operations around
metropolitan Melbourne involve:
• running 210 six carriage trains across 869 kilometres of rail track
• operating and maintaining 15 lines with 218 stations
• transporting 415 000 customers each day, with rail patronage of 227.5 million trips per year
• providing seven days a week service.
Metro states that it is strongly committed to providing the Melbourne community and its visitors
with a comfortable, safe and reliable train network as part of an interconnected public transport
service. In order to achieve this aim it has established a training academy for staff to improve their
skills, improved the performance and reliability of its rolling stock (i.e. trains), developed ‘greenfield’
timetables (i.e. thrown out old timetables and established new ones), systematically tackled any

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 CASE STUDY 13.1 continued

industrial relations issues and established an ‘every minute counts’ philosophy throughout the
organisation.
Brand development is important to Metro, and in recognition of this it has introduced initiatives such
as new uniforms and improved communication using newspaper advertisements to advise changes
in scheduled train services. Additionally, it interacts with customers by making announcements at the
stations accompanied by screen displays.
A marketing campaign about train travel aimed at highlighting the significance of safety to youth
with a message that they could relate to without alarming them was extremely successful. It was
titled ‘Dumb Ways to Die’ and was the highest awarded campaign in the history of Cannes. The real
success of the marketing campaign is that it was reported that 127 million people have affirmed
they would be safer around trains due to it. The ‘Dumb Ways to Die’ song reached the top 10 chart
of iTunes and the associated video accumulated close to 100 million views. Do a search via your
preferred browser for more information on this campaign.
(Source: Based on author interview with Leah Waymark, Chief Corporate Relations and
Business Development Officer/CEO of ‘Dumb Ways to Die’; and Metro Trains website.)

Analysis 4 Outline the ways that Metro went about

1 Briefly describe the operations of Metro developing and improving its brand.
Trains. 5 Describe the novel approach to marketing
2 Identify what Metro Trains believes is adopted by Metro in its quest to improve
important when endeavouring to provide train safety for its passengers.
good customer service. 6 Evaluate the effectiveness of this
3 Describe the strategies Metro Trains used marketing campaign.
to improve its approach to communicating
with its stakeholders.

P5 – People courses on the DuluxGroup range of products. The

courses are provided to retailers of its products.
Every person in a business who has contact with a They are designed with both theory and practical
customer makes an impression. Often customers find components and are held at different levels; for
it difficult to separate the product or service being example, induction, intermediate, advanced and
offered from the staff member who provides it. Staff refresher. The aim is that trainees will progress
therefore can have a profound effect – positive or through these levels and use this knowledge to
negative – on the level of customer satisfaction. provide better customer service and sales support at
Staff must be appropriately trained, motivated, their retail outlet.
have the right attitude and be suited to their role. If a
customer is happy with their treatment they 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.
A company that believes in this approach to
marketing is DuluxGroup. In support of its excellent
brand image, it has established a training academy Figure 13.22 A company that believes in the ‘people’
where its qualified and experienced trainers provide approach to marketing is DuluxGroup.

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Figure 13.23 Cotton On logo

The Cotton On Group is another business that

believes that ‘its people’ are at the heart of everything
it does. Cotton On is an extremely successful
Australian company established in 1991, whose
offerings through its eight branded stores include
womenswear, menswear and accessories. Its aim is
to deliver value fashion and quality basics designed Figure 13.24 The AFL and the MCG
to exceed its customers’ expectations. Cotton On
believes in providing education opportunities to its
people and has created an educational platform called
ACTIVITY 13.11
COG Uni. The courses delivered are regarded as
MARKETING YOUR SCHOOL
world class and cover both personal and professional
development qualifications for employees. Each year your school will undertake
a marketing campaign to attract
P6 – Physical evidence student enrolments for the following or
subsequent years.
Physical evidence can take a variety of forms:
1 Identify the ways that your school
• It can refer to the evidence that shows a service
markets itself to the community.
was performed. This acts to remind or reassure the
consumer that the service took place, regardless of 2 Walk around your school and note down
whether it was a positive or negative experience. the physical evidence that relates to
Almost all services include some physical elements the marketing of the school. Compare
even if the bulk of what the consumer is paying for your observations with other class
is intangible. For example, a hair salon provides members.
its client with a completed hairdo. Not only does 3 Propose some improvements that
the hair salon keep contact details for the client, would better market your school to the
it also records what treatment was provided; for community.
example, foils and colour of dye. In addition, the
salon would be expected to provide a pleasant
waiting area, reading materials, access to coffee • The signs and symbols of the business that supports
and tea for its customers. An insurance company its image and identity; for example, the building,
would provide its customers with some form of office or shop where the business is located
printed advertising material and then follow up and how it is furnished. Is it prestigious, purely
with more formal printed material, such as a quote. functional or minimalistic? Other areas where the
• The physical environment in which the consumer physical evidence is apparent is in the brochures,
experiences the service; for example, when flying packaging, web pages, signage, business cards
this would be the type of aircraft, its ambient and paperwork (e.g. invoices, tickets). When you
conditions, seating layout and any directional go to an AFL match you will observe numerous
signs. Ambient conditions relate to temperature, examples of physical evidence; for example, your
smell, sound, colour, music and noise and tickets with the team’s logo printed on them,
these can impact both positively and negatively players wearing their team colours and clothing.
on consumers as they experience the service. The MCG itself has its own physical presence and
Marketers need to match the ambience to the atmosphere.
service being delivered; for example, bakery
smells wafting through a supermarket, relaxing
P7 – Process
and calming music in a health spa, loud noise Customer satisfaction is becoming increasingly
and bright lights at a pop concert. more important to marketing success. The process

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 through which a customer finds out about a business, When selling any product, knowing who your
researches its products, chooses and purchases the buyer is (i.e. your target market) is imperative if you
product, the actual delivery of the product or service, intend to be successful. For example, if you have
and the behaviour of those involved in the delivery a meat business you would probably not target a
process are all factors crucial to customer satisfaction. marketing campaign to a vegetarian society.
First impressions are always important to In September 2015 the Myer department store
consumers – was it gained offline by coming into chain decided to launch a new marketing strategy
a shop or office or online via the website? Either and changed its product range. The strategy included
way, a business must strive to make the impression an aspiration to improve the customer experience.
‘good’. The processes within the business should be Myer’s strategy was now concentrated on appealing
designed for the customer’s benefit; this means: to and maintaining ‘high value’ customers. Customer
• keeping customers fully informed either personally relations was essential to its success.
or via electronic media After an analysis of market research was completed
• keeping wait times to a minimum, either face-to- the results disclosed that 60 per cent of ‘high value’
face or via the business’s website customers were more inclined to shop at Myer than
• staff being knowledgeable, courteous and helpful others. These customers surveyed currently did 7 per
• providing efficient customer service. cent of their shopping at Myer. The results revealed
that gender or age was not a factor in the responses.
13.3 Features and value What the market research did show, however, was

of customer relations that customers were sincerely interested in brands

and fashion. These customers are ‘high value’ because
strategies their interests were not necessarily catering to specific
needs but more to specific wants.
Every business needs to ‘acquire, retain and grow’
relationships with its target customers and market. Quality service
For a business to achieve
Providing excellent customer service gives value to
customer relationship this, it must adopt strategies
marketing (CRM) a a business and also acts as a way of differentiating
and activities that work on
business process which that business from its competitors. We all have our
developing relationships with
uses marketing strategies favourite shops and places to eat – but why do we
its clients, gaining customer
and activities to develop keep going back to them? Is it because of quality
relationships with clients, loyalty and bringing value to
customer service or something else? The quality of
gain customer loyalty and its brand. This is referred to
customer service of the business can be judged by:
bring value to the brand as customer relationship
marketing (CRM). • the actions of the employees; for example, how
they deal with customers, whether they have good
product knowledge
• providing prompt service to customers both pre-
and post-sale
• being responsive, accessible, available and willing
to help your 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 due to favourable ‘word-of-
mouth’ advertising
• stronger customer loyalty
• gaining a competitive advantage
• staff gaining pride in and satisfaction with their
Figure 13.25 The valued repeat customer work.

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 Figure 13.27 Some customer rewards cards from different
businesses

Figure 13.26 Good customer relations are invaluable. customers who drink lots of milk and eats lots of red
meat are very good insurance risks versus those who
eat lots of rice, fill up their petrol at night and drink
Customer loyalty programs spirits. To assist Woolworths adopt this innovative
The use of loyalty programs is extensive and can practice of using ‘big data’ in May 2013 it bought for
take the form of earning points, getting special offers, $20 million a 50 per cent stake in data analytics firm
freebies and discounts. Using loyalty programs, Quantium. Spending this amount of money confirms
particularly in retail, gives customers an incentive to that using ‘big data’ is certainly an approach that
keep coming back to that store. businesses believe will enhance their results.
A recent market survey published in Choice (Source: B Connolly, ‘Quantium helps
Magazine (March 2016) found ‘that four in five Woolworths get personal with customers,
shoppers tend to buy more from businesses whose CEO says’, CMO website, August 2014.)
cards they hold, and 55% said that when choosing Loyalty reward schemes are big business for the
between two similar companies they’ll usually airlines, such as Virgin and Qantas. Virgin Australia
pick one with a loyalty scheme’. The research also Holdings earned more than half of its domestic
found that these programs did not actually build an profits from its loyalty program, Velocity, in the first
emotional attachment to the brand. half of the 2015 financial year. Velocity currently has
Loyalty schemes for a business can be very 4.8 million members, and has set itself a target of
expensive; however, this doesn’t stop their use. It increasing that figure to 7 million members by 2017.
is estimated that the Woolworths Rewards program Its rival, Qantas, has 10.3 million members in its
costs it approximately $500 million annually to run. frequent flyer program.
Businesses do, however, gain a lot of information Many small businesses also use customer loyalty
about consumers through the use of loyalty cards. programs as a method of boosting their revenue
Every time the card is used, the transaction is recorded through the support of repeat customers. Research
against the consumer’s account. Over time the has shown that retaining customers is less costly
business is able to create a profile of the consumer’s than acquiring new ones. The program provides
habits: what and when they buy, how they spend the business with a way of saying thank you to its
and how they pay. Retailers 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
ACTIVITY 13.12
is referred to as target marketing.
CUSTOMER LOYALTY CARDS
Woolworths also sees great worth in adopting the
innovative practice of using ‘big data’. While it already
In your class conduct research with your
collects and uses data about its customers from its
class members to determine:
loyalty program Woolworths Rewards, it wants to be • How many students have customer
able to better analyse the shopping habits not only of loyalty cards?
its own customers but all shoppers. One interesting • Which shops/business are they for?
result that has already been identified by Woolworths • Have they gained any benefits/rewards
when it combined its accident data from its insurance from these cards?
policies with data from its loyalty scheme is that

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 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.

Corporate social responsibility

issues to consider when
establishing a customer base
Corporate social responsibility (CSR) is an important
way to increase the competitive advantage of a business. Figure 13.28 Water and energy ratings
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 ACTIVITY 13.13
approach to social responsibility improves the public
image of a business as well as its relationship with RATINGS ON APPLIANCES
its customers. Check your appliances at home to see
Differentiating a product or service from a which ones have rating stickers attached to
competitor is one strategy used by businesses when them.
seeking to establish their customer bases. The strategy 1 What is the rating (either energy or
of sourcing raw materials from sustainable sources is water) on the appliance?
one way a business can be judged as having strong
2 Was the rating an important
ethics and being socially responsible in its business
consideration when purchasing this
practices. The unique attributes of sourcing raw
product?
materials from sustainable sources is often valued by
customers who are then willing to pay a premium 3 Would the rating (water and/or energy)
price for the product. The business hopes that the be an important consideration for you
higher price will more than cover the extra costs when buying products in the future?
incurred in offering this unique product.
Green marketing is the marketing of products
(WELS) scheme provides water efficiency information
that are presumed to be environmentally preferable to
based on a one-to-six-star rating – the more stars
others. Thus, green marketing
the more water efficient the product. The following
green marketing the incorporates a broad range of
marketing of products products are covered by the WELS scheme: showers,
activities, including product
that are presumed to be taps, toilets, washing machines and dishwashers.
modification, changes to the
environmentally preferable Claims commonly made by business when
production process, sustainable
to others marketing their products are:
packaging, as well as modifying
advertising. • This product is environmentally sustainable.
Businesses are increasingly using environmental • Made from recycled materials.
claims as they realise these can be a powerful • Energy and water efficient product.
marketing tool while also being a way to differentiate • No animal testing used.
themselves and their products from their competitors. • Does not affect the natural environment.
Environmental claims are now relevant to a larger • Carbon neutral.
product range, from small household items such The Australian Competition and Consumer
as nappies, toilet paper, cleaners and detergents to Commission (ACCC) has published a checklist to
major white goods and appliances. Many consumers help businesses and marketers making environmental
consider environmental claims, such as energy claims on products or advertising these products, so
efficiency, to be a major factor when evaluating they do not contravene Australian Consumer Law
products such as refrigerators, freezers, washing (ACL). Businesses found guilty of misleading or
machines, clothes dryers and dishwashers prior to deceiving consumers in any way can attract serious
purchase. The Water Efficiency Labels and Standards penalties of up to $1 million for companies and up

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to $220 000 for individuals as well as injunctions, authority could be used to justify the claim?
adverse publicity orders, corrective advertising orders, Explain how the product’s characteristic
community service orders and disqualification orders. is beneficial to the environment, e.g.
The ACCC states that when making environmental phosphate-free product is less damaging in
claims on products, businesses should: river systems because phosphate promotes
Avoid using terms like ‘safe’ and ‘friendly’ and algal growth, which can clog up rivers.
unqualified pictures or graphics. Avoid giving the impression that the product
Spell out exactly what is beneficial about a is completely environmentally benign if it is
product in plain language that consumers can not.
understand. Use the claim only in an appropriate context
Link the environmental benefit to a specific or setting, e.g. do not claim a product is not
part of the product or its production tested on animals if it is a product that would
process, such as extraction, transportation, never be tested on animals anyway.
manufacturer, use, packaging or disposal. (Source: ACCC, 2011, Green Marketing and the
Make sure claims made about the product Australian Consumer Law.)
can be substantiated, e.g. What scientific

ACTIVITY 13.14
YOU BE THE JUDGE
Read the statements below and suggest what additional information the marketers should
provide to ensure that these claims are not misleading to the consumer.
1 A can of tuna has a picture of a dolphin as a symbol to mean the tuna has been fished in a
manner that does not harm dolphins.
2 A company has advertised its energy as ‘green’ with no indication of the percentage of
energy it has obtained from renewable sources.
3 A business is claiming its products are ‘carbon neutral’.
4 This product is ‘environmentally safe’.

Figure 13.29 Businesses found guilty of misleading consumers may face serious penalties.

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 Chapter summary • People are often the first point of contact
to make an impression. Staff must be
• The marketing mix recognises 7Ps – trained, motivated and suited to their role.
product, price, place, promotion, people, • Physical evidence can demonstrate
physical evidence and process. that a service was provided or create
• Products can be classified as business or an environment where the consumer
consumer items (convenience, shopping, experiences a service. It also covers signs
speciality or unsought). and symbols that support image and
• Products go through a five-stage identity.
development process. • Process covers how a customer finds out
• Products experience a product life cycle about a product, researches that product,
(introduction, growth, maturity, decline/ chooses and then makes the purchase. It is
extension) and marketing strategies differ also how the product is delivered and the
throughout the life cycle of the product. behaviour of those involved in the delivery
process.
• A brand acts to identify and differentiate
one manufacturer’s product from another • Customer service is fundamental to
manufacturer’s product. acquiring, retaining and growing the target
market of the business. Providing quality
• Packaging of a product has a multitude of
service and loyalty programs form an
purposes with labels providing important
important part of this.
information.
• Corporate social responsibility provides
• Price and its level greatly influence the
a business with a way to increase its
revenue and profit made by a business.
competitive advantage.
• There are a variety of methods used to
• Green marketing involves the marketing of
set prices: cost-based, competition-based,
products presumed to be environmentally
mark-up and marketing strategies such as
preferable to others. If businesses mislead
penetration and skimming.
their customers, they can face serious
• Place involves decisions that relate to penalties.
having the right quantity of product in the
right location at the right time. Distribution
Chapter summary questions
channels can be direct or indirect.
• Promotion is how the business 1 Define the following terms and then use
communicates or connects with its each in a sentence to demonstrate your
customers. understanding:
• There are a variety of promotional a brand
techniques, including: b retail
– advertising using media such as: c distribution
newspapers, television, radio, d promotion
magazines, internet, social media, direct
e psychological pricing
mail, outdoor advertising and Yellow
Pages f product line

– direct marketing/selling g B2C website

– sales promotion h product placement

– personal selling i penetration pricing

– internet (websites) j green marketing.

– mobile marketing
– publicity and public relations.

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2 What pricing policy would you recommend Extension questions
the following businesses adopt:
a a school cafeteria 1 Choose one product that would be
classified as a staple convenience good
b a ladies clothing (fashion) boutique at
(i.e. purchased frequently and without
the start of the summer season
much effort), such as toilet paper or
c a ladies clothing (fashion) boutique at toothpaste.
the end of the summer season
2 Choose one product that would be
d a greengrocer in a local shopping strip classified as a shopping good (i.e. a
e a local hardware store located near a comparison is made between goods based
store of a very large hardware chain. on certain criteria), such as furniture or
3 Direct-to-consumer and factory outlets household appliances.
have become a very popular shopping 3 Analyse the purchase of both the above
alternative. From the point of view of products based on which of the following
both the manufacturer and the consumer, factors were important when making the
explain why they are successful. purchasing decision.
4 List and explain which would be the best a Product – where did it fit in the product
promotional techniques for the following life cycle?
products and services. Provide more than b Packaging – attractive, appealing to the
one technique for each product or service. eye, amount of information it contained
a Deodorant about the product.
b Hair care products c Price – what pricing policy do you
c Books believe was adopted for this product?
d Weight loss programs Was it on a mark-down table, how did it
compare to the price of a competitor’s
e Cars
product, etc.?
f Paint
d Promotion – what techniques were used
g Gardening products to attract you to the product?
h Sporting equipment e People – were the salespeople good at
i Legal services their job and did they convince you to
j Restaurant buy the product?
5 What physical evidence of marketing would f Physical evidence – will you receive a
you expect to receive when attending a keepsake from buying this product?
pop concert? g Process – was the purchasing and after-
sales service good?
h Green – were environmental attributes a
factor in clinching the deal?

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 CHAPTER 14 Key terms
• crisis • public

Public relations • crisis

management
• public relations
• sponsorship
• media release

Overview and crisis management strategies are in place to

protect the business’s reputation. There are significant
In a business environment where legal action against implications if a business fails to do so.
businesses is increasing, many businesses are turning
their attention to how they can protect one of the
most valuable assets they have – their business
Key knowledge
reputation. While unfavourable judgements can be In this chapter students will learn about:
challenged in a court of law, public opinion is more • An overview of public relations and its relationship
difficult to change – the reputation of a business can to business objectives
be permanently tarnished by negative perceptions • Public relations strategies such as planned and crisis
of it. It is important that a business has public public relations, the importance of maintaining
relations strategies to create and maintain a positive a positive relationship with the customer base
image and that this is managed at the strategic level. and the implications if this relationship is not
Furthermore, businesses need to ensure that planned maintained.

What’s ahead
Public relations

Overview and relationship

to business objectives

Strategies Importance of maintaining

a positive relationship
with customers

Planned public relations Crisis public relations

Figure 14.1 Public relations and its role in business

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 14.1 Public relations and Public relations and business
its relationship to objectives
business objectives It is important for any business, regardless of its
size, to have a business plan and some strategic or
The role of public relations (PR) is vital – businesses long-term objectives. The long-term objectives of the
that develop effective networks and PR strategies will business are likely to include increased market share,
often find their exposure to growth, and perhaps diversification of products and
public relations the way the public increased, usually the customer base. A planned public relations strategy
businesses communicate at little cost to the business should be used to increase public recognition of the
with the public and media itself. Businesses can build a business and prepare public opinion to accept the
with an aim to create business brand and its product range.
reputation by pursuing free
and maintain a positive
media publicity through events, Well-planned public relations campaigns will
image and create a strong
relationship with their community involvement and contribute to the achievement of business objectives
audience social and other media. Some such as:
businesses also engage in • increasing the customer base
charitable activities to convey a positive image. A • increasing demand for products or services
large proportion of media stories develop from PR • gaining a competitive edge
leads, so businesses need to tap into this resource to • enhancing credibility
enhance their profile, which can flow into increased • creating goodwill within the community.
sales and market share. A major aspect of the role performed by the public
relations professional is to increase the goodwill of
What is public relations? the business in the community and also contribute
There are a number of definitions of public relations, to maintaining and building customer relationships.
including: A business needs to ensure it is clear about who
its ‘public’ and customers are if it is to be successful.
• Public relations is the practice of promoting
It can be said that ‘image is everything’ and it is
goodwill among the public to present a favourable
important that this image is carefully created and
image.
maintained. Successful businesses and their owners/
• Public relations is primarily concerned with the
managers will usually have a strong public relations
image of the business portrayed to the public.
strategy.
• The British-based Chartered Institute of Public
Public relations aims to present positive information
Relations has defined public relations as ‘a
and to reduce the negative by using an assortment of
deliberate, planned and sustained effort to
strategies. These strategies ensure that the messages
establish a relationship between a business and
and images the business wishes to present to the
its public’.
public are implemented in line with its wide-ranging
While public relations is parallel to the marketing
business goals.
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
organisation 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.

Figure 14.2 Public relations can contribute to business

objectives.

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 The goals of public relations may be defined as: the reality of the present into consideration, the
• developing relationships with the community objectives should be about what is to be achieved
• providing information to the public in the future
• managing issues and crises • actionable – everyone should contribute to the
• gaining free publicity achievement of the objectives; they must be the
• promoting the business. responsibility of the whole team or department
• communicated – objectives need to be shared with
When a business sets its public relations objectives,
everyone in the team and the business
they should ensure that they are:
• agreed – if everyone in the team or business
• clear – employees may not be aware of what they
agrees on the objectives, they are more likely to
have to achieve if the objectives are confusing
be achieved.
• realistic – objectives should be achievable but
(Source: Firefly Communications website,
should also challenge or extend the employees
‘Writing great PR objectives’, August 2015.)
• forward looking – building on the past, and taking

CASE STUDY 14.1

Guidelines for managing the reputation of your business

In any industry, reputation is the key to whether

a business will be successful or not. A good
reputation can not only enhance customer
interaction and sales but can also increase
overall revenue and profit. A bad reputation,
however, can have a cascading effect, and can
damage a business in many ways. It is essential
for a business to manage its reputation and
maintain integrity with customers and potential
clients.
Reputation management isn’t about promotion
or advertising, it’s about the way a business
can influence potential customers on their
perception of the business.
Reputation management statistics
Figure 14.3 In any industry, reputation is the key to
• 85% of potential customers use the internet whether a business will be successful.
to research a business before they decide to
make a purchase.
• 79% of potential customers value personal and online recommendations in their search for a
reputable company.
For small businesses, having a good reputation is important to compete against larger competitors,
especially with the increase in online activity. With the introduction of the Internet, many small
businesses have to compete harder to maintain their position with their customers. For a small
business this means that managing their reputation both online and offline is extremely important.
In order to support an online reputation, a business needs to build a web presence. This allows
customers to compare it against others and provides a few advantages including:
• Building customer trust – Positive online reputation will increase customer trust overall. It helps
develop authority, expertise and credibility in the eyes of customers.

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 • Brand exposure – Building and managing a reputation can also help to promote brand
exposure. The more people know about your business the more likely they will shop there.
When it comes to improving a business’s reputation the following may help achieve this:
Local reputation management
• Sponsoring local fun runs, sporting events or other entertainment avenues to show the local public
the business’s commitment.
• Donating time, money or services to a charity event.
• Handling negative feedback and comments politely and constructively. Always offer a positive
reply in return.
Online reputation management
• Creating a business profile on general search sites.
• Using social media to build and manage the business’s reputation. Using posts to interact and
engage with the customers by answering questions, asking questions, or replying to positive or
negative comments.
• Monitoring what people are saying about the business online and responding where necessary.
• Responding to positive and negative reviews on different review websites. 90% of what people say
will impact on the business and their buying decisions.
Managing a business’s reputation is crucial to whether the business will be successful.
(Source: Based on Public Relations Institute of Australia, ‘A guide
to managing your business reputation’, 21 March 2016.)

Analysis 2 Describe how public relations links to the

1 Explain why it is important for a business objectives of a business.
to monitor and maintain its reputation
online and offline.

14.2 Public relations

strategies
It is crucial that all businesses, regardless of size, have
policies and strategies in place to maintain positive
relationships with their customers. The ‘public’ of one
business will be different from
public the internal or that of another. It is important
external stakeholders that the business is clear about
potentially affected by the
who its public is to ensure
actions of a business
that it has the correct strategies
in place and continues to
develop relationships with existing and potential
customers. When the federal or 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.
Figure 14.4 It is crucial that all businesses have policies in
place to maintain positive customer relationships.

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 a third party feature – be it a newspaper or television
ACTIVITY 14.1 report – means the business must be worthwhile in
some way.
List the ‘public’ for each of the following
businesses: Public relations in planned
1 a coffee shop
business situations
2 Melbourne Storm
Taking advantage of planned public relations
3 a local secondary school
situations means that a business can make the most
4 a hospital. of opportunities that it has control over by being clear
about how publicity can be positive and increase its
exposure with the public. There are many ways a
The public may be internal or external stakeholders: business can communicate with its public. These
• Internal public may include employees, involve the use of a range of media including
shareholders and management. television, radio, newspapers, company publications
• External public might include the local community, and the internet and social media.
suppliers, competitors and all tiers of government. Public relations communications sometimes
attempt to persuade the public or change public
The public of a large retail store will be different
opinion. For public relations to be effective, it is
from that of a small cabinet-making business. Public
necessary to match the strategies and techniques
relations strategies must be targeted at the correct
to the situation and to choose the most appropriate
groups and in the most appropriate form, taking into
channels. Many businesses and associations employ
account the business objectives and goals.
a public relations consultant, and larger businesses
The public relations strategies of a business
may have a public relations manager or a whole
must include maintaining positive relationships
department to oversee these strategies.
with customers because losing a customer is one
Public relations can also be integrated into
of the worst things that could happen to a business
advertising and marketing activities in a number of
and it may reflect on its reputation. It is harder for
ways and it is important to ensure that the following
small businesses to gain the same level of publicity
areas are covered.
as large businesses, so it is important for them to
understand their customers and market. As part of a • Public relations has to lead a product launch of a
public relations strategy it is also vital that a business new product or service.
is honest and realistic about the services or products • The message is still important in public relations.
that it provides. • Public relations–led activities need to encompass
Businesses must ensure that they have developed a range of audiences or stakeholders.
and implemented public relations strategies that can
support them through a planned or unplanned crisis
situation. Ideally, a business should not ever have to
deal with a crisis that is unexpected because it should
have policies and action plans in place to avoid such
a situation.
For numerous reasons, publicity is more effective
than advertising. Cost-effectiveness is a major
example; even if publicity is not free, commonly the
only expenses are mailings and calls to the media.
Second, publicity has more longevity than advertising.
Articles, whether good or bad, are remembered for
far longer than advertisements. Publicity also has a
greater reach in terms of audience. In a global world,
news travels far and wide, whereas advertising is
mainly limited to a local audience. For this reason
also, publicity has far greater credibility with media
and the public than advertising, as readers trust that Figure 14.5 Publicity is often more effective than advertising.

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 • 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 management may
need to attend media events and launches.
• Public relations needs to be ongoing and
continually building relationships with the
media.
There are a number of methods or strategies an
organisation can use for planned public relations.
These include those outlined below.
Figure 14.6 There are a number of methods or strategies
Free publicity an organisation can use for planned public relations, though
This could include issuing a media release, informing presenting the correct image to the world is very important. 
the general public about a specific event or function.
If the media runs a story, about the business in addition to getting its specific
media release an item it allows the business to message out.
of news prepared for and receive free publicity and
distributed to the media lifts its profile. The opening
Brochures, pamphlets and newsletters
of a new real estate agency Although there is some cost involved, a newsletter
in the local area may include a paid advertisement or brochure provides a relatively inexpensive
together with a story in the local community paper means of communicating with the public and other
or magazine highlighting the new business and an stakeholders. A newsletter may profile a staff member,
employee profile. or discuss changes in the business and upcoming
events. A brochure distributed to the public may
Develop relationships with the highlight a new product or service being offered.
community
Open days and tours
To develop positive relationships with the wider
If a business opens its doors to the public, it presents
community, a business may hold a public information
an opportunity to improve or reinforce its image.
session so that people can see what is happening
An open day allows the public to see the business
within the business. For example, the Australian
in action. In some circumstances, it may provide or
Football League (AFL) runs subsidised football clinics
strengthen an understanding of what the business
to develop football skills and increase interest in
Australian Rules football.

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
television, print or radio 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 Figure 14.7 A newsletter or brochure provides a relatively
product favourably, which will provide free publicity inexpensive means of communicating.

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 participants have the chance to ask questions
and usually only interested parties will attend. In
communication and marketing terms, conferences and
seminars allow businesses to disseminate information
quickly to a wide audience.

Sponsorship
A common strategy in creating positive public
relations is sponsorship. The
act of sponsoring creates an sponsorship a business
awareness and positive image provides financial support
of the business. The business to a team, charity or
event in return for naming
may provide financial support
rights, merchandising or
in return for naming rights promoting the image for the
and merchandising. Common organisation
forms of sponsorship include:
• sporting events – sponsorship of the Australian
Tennis Open or the AFL Grand Final
• the arts – sponsorship of Opera Australia or the
Australian Ballet
• charities – Target T-shirts raising money for breast
cancer research.
New technologies open up new communication
Figure 14.8 An open day allows the public to see the business channels – this means that businesses are in a changing
in action.

does. Schools, TAFEs and universities have tours and

open days to allow prospective students and their
families to see them in operation.

Seminars and conferences

Conferences may be used to train staff and also to
inform customers and potential customers about
the business. Information can be presented visually,

Figure 14.9 Conferences may be used to train staff and

also to inform customers and potential customers about the Figure 14.10 A common strategy in creating positive public
organisation. relations is sponsorship.

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 Crisis management in public
relations
While public relations techniques and efforts 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 a situation or set of circumstances
that puts an immediate public
focus on the business. It is crisis a situation or set of
usually caused by an event circumstances that puts
or threat that can be related an immediate focus on the
business
to something such as product
crisis management a
recalls, equipment failure or
technique used to manage
accidents. Crises typically have an unplanned (crisis)
Figure 14.11 Businesses are in a changing environment when a strong human aspect to them, situation
it comes to public relations. which means they become
the focus of media scrutiny.
environment when it comes to public relations. Listed
Having plans in place to manage the information that
below are some key trends in public relations:
is given to the public and the media is called crisis
• Senior management teams regard public relations management.
as a growing priority and focus on controlling If a business is not able to manage a crisis in
their brand and any content that goes out. a quick, well-coordinated and honest way, then it
• Less importance is attached to press or media is likely that the reputation of the business will be
articles. There are other, more-effective methods tarnished and it could have long-lasting implications
to gain publicity, such as social media and superior for the business and its relationships with customers.
images.
• The online reputation of a business is of the Importance of a crisis
utmost importance – a business cannot afford to management plan
have an online presence that is not appropriate or
contains misinformation. A crisis is often considered to be a threat to the
• Policies and processes need to be in place operations of a business. An explosion could cripple
and implemented by well-trained staff to avoid production, a defective product can lead to a product
negative experiences. recall, and sometimes production or a service ceases
• Businesses are constantly looking at different
methods and ways to promote their products and
services in a positive light.
• An essential strategy is to target individuals of
‘noteworthy clout’ (followers). Through these
individuals a business can gain access to and
promote its messages to contacts that they
previously had no access to on social media.

ACTIVITY 14.2
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.
Figure 14.12 Crisis management is essential.

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 because of a natural disaster. All crises have a
reputational element and often a crisis can have a
negative impact on the reputation of a business.
A crisis is never good for a business. The risks to
public safety, financial losses and reputational damage
can see businesses destroyed completely, and in some
cases have legal proceedings brought against them.
Effective crisis management is essential in minimising
the impacts of a crisis on a business, its customers and
the wider public. In dealing with a crisis, the options
a business has are to:
• prevent the crisis from happening in the first place
• resolve the crisis and address any issues before it
escalates
• see the crisis as positive and seek new
opportunities.
An effective crisis management plan considers
Figure 14.13 There are many examples of businesses having
these three options, and has steps to guide the
dealt with a public relations crisis in a positive way, and
business through each of them. examples of others that have not.
Preventing a crisis is easily the best way of dealing
with potential problems. Businesses should analyse
their operations and products regularly in order to • identify the spokesperson who becomes the ‘face’
identify any potential risks. Once identified, strategies of the business for the duration of the crisis to
should be developed that will minimise these risks, ensure consistency in the message being sent to
or avoid them altogether. the public
If crisis prevention fails, it is important the business • be detailed enough to act as a reference or a guide
does everything it can to minimise the impact of the and enable the business to respond in a timely
crisis. The crisis management plan should contain key manner
contacts, procedures, and any relevant documentation • list strategies that can be used; for example, an
and forms. Keeping employees informed is also apology, compensation to victims if relevant,
essential – this will reduce stress and allow them to reminder of previous good works and praise to
handle any extra pressure better. those who assisted during the crisis.
The highest priority of a business affected by a Once the crisis has been addressed, the business
crisis is public safety. Once this has been addressed, has an opportunity to learn and develop. Assessing
focus can be placed on minimising financial and how and why the crisis occurred will help the business
reputational damage. A business that raises an issue develop better plans and procedures. It might also be
before the media does will likely control the situation an opportunity to address deeper structural issues
better. and improve the business more generally.
The crisis management plan of any business Not all businesses deal effectively with public
should: relations crises. The way in which Volkswagen (VW)
• have names of key contacts, outline individuals’ handled the issue of engine emission manipulations
responsibilities and include relevant forms not only evoked fears that the crisis might have an
• identify a team representing different sections of impact on the German economy (i.e. a huge financial
the business; for example, finance and human impact), but also potentially caused long-term brand
resources damage as the company lost the trust of its customers.

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CASE STUDY 14.2
Tag Heuer breaks with Maria Sharapova after she fails drug test

Three of the world’s premier brands – Nike,

Porsche and TAG Heuer – have suspended ties
with Maria Sharapova after she failed a drug test
at the Australian Open. Sharapova said at a news
conference that she had been taking meldonium
for health reasons and had not noticed when it
was banned by the World Anti-Doping Agency
as of January 1 2016.
‘We are saddened and surprised by the news
about Maria Sharapova,’ said Kejuan Wilkins, a
spokesman for Nike, which has worked with the
player for more than a decade.
‘We have decided to suspend our relationship
with Maria while the investigation continues. We
will continue to monitor the situation.’ Figure 14.14 Maria Sharapova extended her sponsorship
Sharapova extended her sponsorship agreement agreement to include a line of dresses designed by herself.
with the Beaverton, Oregon-based company in a
deal that included a line of dresses designed by the player, according to a person with knowledge of
the contract at that time.
Luxury carmaker Porsche, a division of Volkswagen, said it would suspend tennis player Sharapova as
its brand ambassador in light of her admission that she failed a doping test.
‘We regret the current news about Maria Sharapova. Until further details emerge and we are able to
analyse the situation, we have decided to suspend planned activities,’ Porsche said in a statement.
Just 23 per cent of her prize money came from tennis winnings – the other $23 million was earned
from endorsements from companies including Avon Products Inc., Nike Inc., Tag Heuer International
SA, and Evian.
(Source: T Panja, ‘Nike, Porsche, Tag Heuer suspends ties with Maria Sharapova
after she fails drug test’, The Age, 8 March 2016.)

Analysis
1 Why would Maria Sharapova’s sponsors
suspend their relationships with her?
2 Discuss how this situation could be seen
as a crisis management issue.
3 Analyse what the statement ‘A brand name
is worth nothing beyond the quality of the
product it’s printed on’ means to a business
in terms of its public reputation and image.

Figure 14.15 ‘A brand name is worth nothing beyond the

quality of the product it’s printed on’

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 14.3 Maintaining a success and objectives of the business. Public relations
strategies should be planned and it is important for
positive relationship a business to know how to deal with a crisis. If this

with customers and is not done properly then the business may find it
difficult to maintain a positive relationship with
possible implications customers and the public in general. If a business
does not deal with issues, it is likely to find that its
As outlined above, a business needs to ensure that it reputation is tarnished and damaged, and this may
is clear about how important public relations is to the take time to overcome.

CASE STUDY 14.3

Australia’s top five PR disasters of 2015

According to the PR Disasters blog – an unofficial industry watchdog – these are 2015’s top five
public relations mistakes.
PR Disasters analyst and author Gerry McCusker said the firm has analysed the volume of mentions a
company, person or issue gets in traditional and online media platforms to determine if content has a
negative or positive sentiment surrounding it.
To be a disaster, the incident must have attracted ongoing negative media coverage.
While the data cannot differentiate between sarcasm and black humour, the companies and people
on Mr McCusker’s list were the ones who acquired the most media mentions (online and offline) with
the most negative sentiment linked to them.
Topping the list of 2015’s top five PR mistakes was:
1. Volkswagen – the company’s emissions scandal. The Environmental Protection Agency (EPA)
discovered ‘defeat devices’ in VW cars for sale, which was a software that detected testing and
accordingly changed the car’s performance to improve results. VW admitted to having cheated US
emissions tests. The company has also revealed an internal investigation found that 800 000 more
vehicles showed ‘irregularities’ on carbon emissions including petrol engines for the first time. The
scandal has spread worldwide, as far as Australia, with class actions being filed, cars recalled and
an inquiry launched.
2. Joe Hockey – the former Liberal treasurer told first-home buyers they just needed to ‘get a good
job that pays good money’ if they wanted to buy a house in Sydney’s ballooning property market.
It attracted 7262 media mentions.
3. Belle Gibson – the Australian wellness blogger who made fraudulent claims about having a
cancerous brain tumour. She insisted she was telling the truth about ‘my reality’.
‘I’ve not been intentionally untruthful. I’ve been completely open when speaking about what
was my reality and what is my reality now,’ she said. Gibson said she believed she had cancer
until earlier this year.
She also took in over $1 million in profits from her cookbook and wellness app, The Whole
Pantry. She also failed to donate $300 000 from the sales of the app to at least five charities as
promised.
4. Bronwyn Bishop – her use of a taxpayer-funded 80km round-trip from Melbourne to Geelong for
a Liberal party fundraiser. She was eventually forced to step down as Speaker of the House.
5. Australian Border Force – their plan to randomly check people’s visas in Operation Fortitude on
the streets of Melbourne sparked public protests and was abandoned.
But when comparing the worst PR disasters of the last decade in Australia, the data found the top
spot was taken out by: Essendon’s supplements scandal.

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 In analysing media coverage, Mr McCusker
said that sporting teams tended to become ‘soft
targets’ for PR disasters because everyone gets
‘passionate’ about sport and everyone wants to
have their say.
‘A lot of stakeholders were involved in the issue
… and it went on for a long time as well,’ he
said.
Other PR disasters over the past ten years
included:
• Former Prime Minister Tony Abbott’s wink
and ‘shirtfront’ comments. Mr Abbott was
caught on camera winking while talking to
a woman called Gloria, who claimed to be
an angry pensioner. Mr Abbott also said he Figure 14.16 Bronwyn Bishop took a taxpayer-funded
would ‘shirtfront’ Russian president Vladimir 80km helicopter round-trip from Melbourne to Geelong.
Putin before they met at a G20 meeting in
Brisbane.
• Qantas – the airline grounded its fleet in
response to unions’ industrial action in 2011.
It also suffered a social media backlash after
a competition inviting Twitter followers to
win a pair of first class pyjamas by tweeting
their idea of a luxury experience descended
into angry customers sharing their gripes.
Mr McCusker said that while there was more
choice in how people and companies can
respond to a PR crisis, there are lessons that can
be learnt from every incident.
Figure 14.17 Qantas – the airline grounded its fleet in
He also said that many companies operate from
response to unions’ industrial action.
‘older crisis management paradigms’ that need to
be updated.
‘Sometimes saying nothing is better, so not to inflame the issue,’ he said.
‘But if they know they’ve made a mistake they have to put their hand up early.
‘Social media demands authenticity and in some cases, it is much better to fess up to a mistake.
Organisations need to reconfigure their crisis plans to meet the demands of social media and online
media. While some responses can save you in court, they cannot always save you in the court of
public opinion.’
(Source: Based on S Rao, ‘Australia’s PR disasters of 2015’, New Corp Australia Network, 14 December 2015.)

Analysis 3 Explain why it is important for a business

1 Why would businesses and the public be to manage public relations to maintain
interested in the results of an analysis like customer relationships.
this?
2 Choose two of the examples from the
article – how were they seen to be a PR
disaster?

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 Chapter summary • Public relations is becoming more
important and businesses need to manage
• Public relations (PR) is aimed at presenting online messages and reputations.
a favourable image. • Businesses need to determine how to
• Public relations is vital for all businesses, manage a public relations crisis.
regardless of size. • There are three ways to approach a crisis
• Many news stories arise from public situation: avoid, quickly address the issue
relations leads. and seek ways to turn the event into an
• Public relations and its relationship to opportunity for the business.
business objectives is important and • A crisis can impact on all aspects of a
should be integrated at the strategic level. business, including:
• Well-planned public relations campaigns – public safety
contribute to: – financial loss
– increasing the customer base – loss of reputation.
– increased demand for products and • The role of management is significant in a
services public relations crisis.
– gaining a competitive edge
– enhancing credibility Chapter summary questions
– creating goodwill. 1 Define the term ‘public relations’.
• Public relations objectives should be 2 Why is public relations important for a
forward looking, realistic, attainable, clear, business?
agreed and communicated.
3 Explain how public relations links to the
• Managing the reputation of the business is objectives of a business.
important.
4 Describe the role of a public relations
• Different businesses have different professional.
‘publics’.
5 What does the statement ‘public relations
• Businesses generally develop strategies for aims to maximise good news and minimise
planned public relations situations. bad news’ mean?
• There are a number of strategies for 6 Describe the ‘public’ of a plumbing
planned public relations, including: supplies business.
– free publicity 7 Discuss the importance of public relations
– developing relationships with and its link to customer relationships.
community 8 Explain why a crisis management plan is
– public information important for all businesses.
– sponsorship 9 Outline three ways a crisis can impact on a
– media releases business.
– brochures, newsletters and pamphlets 10 Discuss the impact of a significant public
– open days and tours relations issue, such as that of Volkswagen
or the Samsung Note 7 batteries exploding,
– seminars and conferences.
on a business.

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Figure 14.18 Businesses need to determine how to manage a PR crisis. Richard Branson has stressed the importance of good
publicity to a successful business.

Extension question is absolutely critical. A good public relations

story is infinitely more effective than a front
Richard Branson, founder of the Virgin page ad’. Discuss this statement.
business empire, once stated that ‘Publicity

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 PART 3
AREA OF STUDY 3

Staffing a business
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CHAPTER 15 Key terms
• employee • SMART

Staffing a business • human resource

management
• staff
• stakeholder
(HRM)
• management
by objectives
(MBO)

Overview Key knowledge

Staff are one of the business’s greatest assets and they In this chapter students will learn about:
must be considered when establishing a business. It • The relationship between the performance of staff
is important for businesses to undertake workforce and achieving business objectives
planning so they can determine the number and • Identification of the staffing needs of the business
quality of the staff they require to assist in the such as the knowledge, skills and ideas staff can
achievement of business objectives. Technology is contribute to the business
playing an increasingly important role for businesses. • The effects that developments in technology may
While providing an opportunity for increases in have on staffing needs.
productivity, it has also had the effect of changing
the nature of many jobs.

What’s ahead

Performance
of staff

Staffing a Business
Technology
business objectives

Staffing needs

Figure 15.1 Main issues for staffing a business

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 15.1 Relationship between
the performance of
staff and achieving
business objectives
No matter what the size of a business, most will
recognise that their success can be attributed to
having properly managed their staff; this group
is also referred to as employees. This involves
balancing the objectives of the
staff a group of persons, as business with the goals and
employees, charged with aspirations of its employees. A
carrying out the work of a
business will usually set goals
business
and objectives which relate Figure 15.2 Staff – an important asset to any business
employee a person
working for another person to its survival, gaining and
or a business for wages or growing market share, and
strategies it needs to undertake, the performance of
a salary being profitable. The staff of
both the staff member and the business improve.
any business is one of its most
When establishing the individual objectives or goals
important assets and plays a vital role in ensuring
for a staff member, it is important to ensure that these
the business prospers; they are an essential input in
are established using the SMART principle and that
the production process for either manufacturing a
the manager and staff member meet periodically to
product or providing a service. Staff also provide the
ensure outcomes are on track.
day-to-day management of the business’s operations. SMART objectives or
Regular feedback provides
If a business has a positive relationship with its goals which are specific,
opportunities for expectation
employees, they will assist in the growth and success measurable, attainable
clarification, adjusting the level or achievable, relevant or
of that business.
of difficulty of the goal and realistic and timely or time-
Business objectives are the outcomes that a business
gaining recognition. When the bound
sets out it wants to achieve. Business plans are then
objectives are being set, the
created, strategies determined and actions undertaken
following criteria must be addressed:
to achieve these objectives. The business objectives
and plans must take into account the requirements of • The objectives being set are specific (S) to the
various stakeholders of the business. Stakeholders tasks being carried out by the job holder.
are those individuals or groups • The objectives and their outcomes are measurable
stakeholder an individual that are affected by and have (M).
or group that has a direct a vested interest in how the • The objectives, while difficult, are achievable/
or vested interest in the business is run and what it attainable (A) by the job holder.
activities of a business • The objectives are understood and accepted by
achieves. While every business
has a range of stakeholders, the job holder as relevant (R).
one stakeholder vital to the success of the business is • The objectives are time-
its employees. It is therefore important that effective bound (T); that is, they
management by
relationships are created between management and have a time frame in which objectives (MBO)
employees. they are to be achieved. a process of setting
Employees are the biggest line item expense (cost) The individual staff goals, using the SMART
principle, which relate
for any business as well as being its most valuable member’s objectives should
to an employee’s key
asset. For a business to achieve its objectives of being then link to those of their team, areas of responsibility.
productive and profitable, it is imperative that its department and the business It creates a sense of
staff are performing to their full potential. Numerous as a whole. This approach, direction and provides a
studies have shown that, when a business sets and when adopted business-wide, measure for assessing the
closely ties the goals or objectives of an individual is referred to as management work performance of the
employee.
employee to the objectives of the business and the by objectives (MBO), and

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 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 that
will result in productivity gains.

15.2 Identification of
staffing needs of the
business
‘Getting the right people in the right place at
the right time with the right skills’

This quote links directly to the concept of workplace

planning. A business, regardless of its size, needs to
undertake the planning process to ensure it has the
Figure 15.3 Effective relationships between managers and
staff members is one key to business success no matter what right people, with the right skills, at the right time.
the size of the business. This methodical process documents the directions in
which the business is going and helps the business
owner or management to make human resource
was developed by Peter Drucker in 1954. Adopting (people) decisions to meet the current and future
this management system requires managers and their needs of the business. Any business, to operate
subordinates at every level within the business to set effectively and efficiently, needs to have an adequate
objectives relevant to their area of responsibility, and supply of competent and motivated people who are
their performance (outcomes) to measure against available to perform the duties and tasks required to
these. MBO provides a way to focus the efforts of meet the objectives of that business.
all members of the business to achieving both their In a small business, the
personal objectives as well as those of the business. It owner will be responsible for human resource
creates a very close relationship between the way staff ensuring that the business is management (HRM) the
are being managed and the achievement of business properly staffed. As the size management of a wide
range of responsibilities
objectives. of the business grows, more
relating to the human
Staff members who have a clear understanding formal human resource (employees) function within
of their individual objectives and how they relate to management (HRM) policies, a business in order to
the business become more engaged with their work procedures and practices will increase the efficiency of
as they feel they are making a direct contribution to be adopted. These will include both employees and the
its success. As staff members feel a greater sense of recruitment and selection business

Right people Right skills Right place Right time

Figure 15.4 Aim of workforce planning

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 procedures, written occupational health and safety
(OH&S) guidelines, and performance management
and evaluation practices.
The replacement cost associated with hiring the
wrong person can be huge. Costs are associated with
advertising, interviews, reference checking and
induction. 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 Figure 15.5 Creative and innovative ideas from employees
they usually have a human resource management have helped this business to prosper.
department. This department is staffed by personnel
who are responsible for ensuring the business is
outlook to the way a business is operating. Employees,
properly staffed.
either through their experience at another business or
Identifying the staffing needs of a business requires
through their training, may be able to provide insight
management to undertake planning. They need to
into a better or more effective way of performing
determine the knowledge required by a person to
a task. When an employee leaves, either because
fulfil the role they wish to fill and any skills that are
they have retired or resigned, particularly one that
specific to the job holder being able to perform that
has been with the business for a while, they are
job. When undertaking this planning, they need to
actually making way for the fresh ideas and insights
be aware of:
of a new employee. While the contributions of long-
• the growing demand or emphasis by employees term employees are extremely valuable to a business,
of having flexibility in their working arrangements; their leaving provides an opportunity to bring in new
for example, flexible working hours, part-time or perspectives.
job-share arrangements and work–life balance Another benefit of bringing in new talent is that
• changes in skills and education expectations – it can help to stimulate new thinking and creativity,
with more people seeking tertiary qualifications, which may act to challenge the way processes are
obtaining workers skilled in trades may be more currently undertaken at a business. Once the employee
difficult has been inducted, trained and is fully integrated into
• generational change – awareness of the differences their new position, they should be encouraged to
between the three generations, namely baby make suggestions on ways to improve processes. For
boomers, generation X and generation Y and their instance, if the business was reliant on print media for
approach to work its advertising, a younger tech-savvy employee may
• diversity in the workplace – having employees be able to suggest ways to introduce social media
from a wide range of ethnic backgrounds, physical and social networking as a form of advertising and
abilities, gender, sexual orientation and religious communication. Internet-based businesses, such as
beliefs. Google and Facebook, have acknowledged that the
Businesses should also recognise that new and success of many of their projects can be attributed
existing staff can contribute ideas and bring a fresh to the creativity and innovation of their employees.

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CASE STUDY 15.1
Coles supports a diverse workplace

Our team is vital to the ongoing growth and success of our business and we are committed to
providing an environment where our team feel genuinely included and valued, regardless of
background or experience.
[…] We appreciate all the differences that make our team unique, including (but not limited to):
• Age • Gender • Cultural background • Physical ability
• Ethnicity • Religion • Family responsibilities • Sexual orientation
Disability employment
At Coles we are committed to attracting and employing a team which is representative of the community
we serve. As such we actively encourage and support the employment of people with disabilities.
We understand that some adjustments to the recruitment process or the workplace may be required,
to ensure people with disability have the same opportunity to perform at their best.
We partner with Disability Works Australia to support us with the recruitment and employment
of people with disabilities throughout Coles. We are also members of the Australian Network on
Disability, to assist with the inclusion of people with disability in all aspects of our business; team
members, customers and suppliers.
(Source: Coles website; ‘Diversity & inclusion’ and ‘Disability employment’ © Copyright
Coles Supermarkets Australia Pty Ltd, reproduced with the permission of Coles.)

Analysis 2 Discuss whether you believe that

1 Describe how diversity and inclusion would employing an increased number of people
be an important consideration for Coles with disabilities adequately satisfies the
when undertaking its workplace planning. commitment that Coles states it has to
providing diversity and inclusion in its
workplace.

15.3 Developments in planning business would not be at risk of being

automated because of the creativity, communication
technology and multi-tasking required for that job. They would,
however, find it to their advantage to use some
Many businesses have felt the effect of developments information technology applications to assist them
in technology on their staffing needs. With the wide
acceptance of automation, robotics and artificial
intelligence, this has meant that some jobs have
been transformed. On the positive side, ongoing
technological innovation has created job opportunities
and new industries. Using technology in a business
can lead to an increase in productivity, while also
reducing the cost 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.
Not all jobs can be replaced by automation,
particularly those which require the job holder to be Figure 15.6 A wedding planning business is unlikely to be
creative. For instance, staff employed at a wedding automated.

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 to record and store data, keep records of expenses, the opportunity to create flexible workplaces. An
attract clients through their website and communicate employee with a laptop computer, tablet, or a mobile
with them via email. phone with internet connection does not need to be
Advances in technology have made communication at their workplace to transact business. This saves the
a lot easier and faster. Previously, if a business wanted business the cost of providing a separate office space
to communicate in writing with another business or for that employee because they can use any desk
a person the manager would need to dictate a letter available at the workplace. In the retail environment,
to a typist or secretary, who would then type the the use of barcodes that are scanned to record
letter and send it through the post. Today, information sale of stock has resulted in many cashiers losing
technology makes communication a far easier and their job or being freed up to perform other duties.
quicker process. Communication via email does not Businesses now have the ability to automate certain
require the writer to have secretarial skills. It also means functions previously undertaken by an employee.
that the response to the email can be very quick. In For instance, bookkeeping tasks were once done
many businesses the role of a secretary has been made manually, but these tasks can now be handled using
redundant and replaced with an employee performing applications such as Quicken and MYOB. These
a broader role as a personal assistant to a manager. computer packages also generate financial reports,
Technology has also provided businesses with which previously would have required an employee
with more knowledge to prepare.

CASE STUDY 15.2

Technology has created more jobs than it has destroyed, says 140 years of data

In the 1800s it was the Luddites smashing weaving machines. These days, retail staff worry about
automatic checkouts. Sooner or later taxi drivers will be fretting over self-driving cars. The battle
between man and machines goes back centuries. Are they taking our jobs? Or are they merely easing
our workload?
A study by economists at the consultancy Deloitte seeks to shed new light on the relationship
between jobs and the rise of technology by trawling through census data for England and Wales
going back to 1871.
Their conclusion is unremittingly cheerful: rather than destroying jobs, technology has been a ‘great
job-creating machine’. Findings by Deloitte such as a fourfold rise in bar staff since the 1950s or a
surge in the number of hairdressers this century suggest to the authors that technology has increased
spending power, therefore creating new demand and new jobs.
Their study argues that the debate has been skewed towards the job-destroying effects of
technological change, which are more easily observed than its creative aspects. The study found that
‘the dominant trend is of contracting employment in agriculture and manufacturing being more offset
by rapid growth in the caring, creative, technology and business services sector. Machines will take
on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour
than at any time in the last 150 years’.
The study found:
• Hard, dangerous and dull jobs have declined. While in some sectors technology has clearly cost
jobs, the question is whether they are really jobs that we wanted to keep. Technology directly
substitutes human muscle power and, in so doing, raises productivity and shrinks employment.
One job that has drastically been affected is the washing of clothes, no longer is this done by
hand in a commercial laundry. With the advent of indoor plumbing, electricity and technology
advances making washing machines automatic this job is now performed at home.
• Caring jobs have risen. The report cites a ‘profound shift’ with labour switching from its historic
role, as a source of raw power, to the care, education and provision of services to others. In the

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 decades between 1992 and 2014 UK labour
force statistics highlighted changes in the
structure of the workforce:
• A 909% increase in nursing positions
• 580% increase in teaching and educational
support assistants
• 183% increase in welfare, housing, youth and
community workers
• 168% increase in care workers and home
carers
• 79% decrease in weavers and knitters
• 57% drop in typists and secretaries
• Technology has boosted jobs in knowledge-
intensive sectors – including medicine,
education and professional services. Easy Figure 15.7 The battle between humans and machines
access to information and the accelerating goes back centuries.
pace of communication have revolutionised
most knowledge-based industries. The report states that both employment and productivity has
risen in these sectors.
• Technology has shifted consumption to more luxuries. Technological progress has cut the prices
of essentials, such as food and the price of bigger household items such as TVs and kitchen
appliances, and cars. That leaves more money to spend on leisure and creates new demand and
new jobs. One example is the surge in the number of hairdressers and beauty therapists.
(Source: Based on K Allen, ‘Technology has created more jobs than it has
destroyed, says 140 years of data’, The Guardian, 18 August 2015.)

Analysis 5 Our consumption habits have changed

1 This article was written based on from only purchasing basic items to now
employment statistics in England and purchasing more luxury items. Identify
Wales. Do you believe that the same five jobs that have been created or where
observations could be made about the the size of the workforce in that sector
changes in the workplace in Australia or has increased due to these changes in
would they be different? consumption habits.
2 Identify three hard, dangerous and dull
jobs for which technology has removed the
need.
3 Caring jobs have risen. Identify and
describe the various forms of technology
that would assist the three categories of
workers referred to in this section of the
article when undertaking their jobs.
4 Knowledge-intensive sectors now have
easy access to information. Identify and
describe forms of communication and
information-gathering resources available
to doctors, teachers and other professional
service workers due to technological
advances; for example, accountants
now have access to computer packages
(Quicken, MYOB).

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 ACTIVITY 15.1
1 Identify which forms of technology have replaced or altered tasks forming part of the
following jobs:
• Receptionists • Builders
• Clerical staff • Live musicians
• Newspaper reporters • Automotive mechanics
• Telemarketers • Pilots
• Travel agents • Teachers
• Medical (e.g. doctors, nurses) • Composers.
2 Identify which jobs have been replaced with these five examples of technology.

a Automated teller machine b Self-check-in at airport

c Self-serve checkout at supermarket d Myki system

e Call centre operations f automated milking machine

3 Discuss whether the technology developments referred to in questions 1 and 2 have had
a positive or negative effect on the job and the tasks of the job holder.

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Chapter summary Chapter summary questions
• Staff are one of the most important assets 1 Define the following terms and use
of a business. them in a sentence to demonstrate your
understanding of the term:
• Business success comes from balancing
the objectives of the business with – stakeholder
the goals and aspirations of its staff – SMART
(employees). – technology.
• Staff are a stakeholder in the business. 2 Describe the factors that need to
• The SMART principle is used to establish be considered by a business when
objectives for staff that align with the determining its staffing requirements.
objectives of the business. 3 Our current workforce is composed of
• Workforce planning is a process that aims three generations of workers. Identify
to get the right people with the right skills, the three generations and describe what
in the right place, at the right time. qualities each of these generations can
• Human resource management is bring to a business.
the management of a wide range 4 ‘Businesses should embrace diversity in
of responsibilities that relate to the their workplace.’ Explain what is meant by
functioning of employees within a this statement and provide examples of
business. ways a business can incorporate diversity
• Businesses need to factor in the following into its workplace.
considerations when making staffing
decisions: Extension question
– growing demand for flexibility in working ‘If a business does not adopt technology, it
arrangements will find it very difficult to be competitive.’
– changes in skills and education Break the class into two groups to discuss
expectations this statement. One group is to take the
– generational change – there are three negative side of the discussion, the other the
generations with different expectations positive side.
currently in the workplace Following the group work, each group is
– diversity in the workplace. to nominate a spokesperson to present their
• Employees can contribute fresh ideas and discussion points to the entire class.
insights to improve the business.
• Technology has directly impacted on the
staffing needs of 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.

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 CHAPTER 16 Key terms
• application • job

Recruitment and selection of •

•
application form
aptitude test
•
•
job analysis
job board

staff
• capabilities • job description
• career • job design
advancement • job enlargement
• casual • job enrichment
Overview • employment • job rotation
contract • job specification
In this chapter students will gain an understanding of • equal • permanent full-
the processes undertaken by a business with relation employment time
to the recruitment and selection of staff. These opportunity • permanent part-
activities form part of the establishment phase of the (EEO) time
employment relationship between a business and its • external • promotion
employee (staff member). recruitment • quality circles
For the prospective employee, the advertisement • fixed-term • recruitment
placed in the media is the commencement of the contract • selection
relationship. For the business, the phase commenced • internal • social media
prior to that, when it undertook its workforce planning recruitment • team
(outlined in the previous chapter). It is important that • interview • transfer
the business takes great care in ensuring the right • intranet • word-of-mouth
person is ultimately selected, because to make the
wrong choice could be extremely costly.

Key knowledge – Internal such as intranet and word-of-mouth

– External such as websites, online recruitment
In this chapter students will learn about: agencies and social media
• Job analysis and its relationship to job design and • Selection methods such as interview, psychological
related documentation, job descriptions and job testing, work testing, online selection, and the
specifications advantages and disadvantages of each
• Recruitment methods and the advantages and • Employment arrangements such as full time, part
disadvantages of each method: time, contractual and casual.

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 What’s ahead
Job analysis,
job description,
job specification,
job design

Recruitment methods –
Employment Recruitment internal and external,
arrangements and selection advantages and
disadvantages

Selection methods –
advantages and
disadvantages

Figure 16.1 Staff recruitment and selection considerations

16.1 Job analysis

Job analysis is the systematic process of looking at
a particular job to find out exactly what it entails,
and what kind of skills and
job analysis a process experience people should
to identify and determine
have to do the job effectively.
in detail the particular job
duties and requirements and Job analysis generates the
the relative importance of source material for preparing
these duties for a given job the job description and job
job a group of tasks specification.
performed by an employee

Methods used to conduct job

analysis Figure 16.2 Job analysis is the systematic process of looking
at a particular job to find out exactly what it entails.
1 Interview the present job holder – while this
method can be very time-consuming, it is probably
the most widely used information collection and open questions to allow for some additional
method. input from the job holder.
2 Questionnaires – the present job holder completes 3 Observation – the current job holder could be
a detailed/structured questionnaire describing their watched or a video made of them performing their
job. It allows for information on a large number of job.
jobs to be collected within a short period of time. 4 Log books and daily work diaries of activities may
The questionnaire can be written with both closed be completed by the job holder. This method is

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 1 Collect and
record information

2 Check the job

information for accuracy

3 Write job
Figure 16.3 Job analysis is often performed by management. description

particularly useful for analysing professional or

senior management positions where observation
and questioning would not give a true indication 4 Determine the skills,
of the job. abilities and knowledge
5 Supervisory reports – details are provided by required for the job
the supervisor of the job holder 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 5 Update the
expectations of the task. information
When undertaking a job analysis, it is recommended periodically
that the steps set out in Figure 16.4 are followed.
Job analysis generates the source material for Figure 16.4 Flowchart of steps involved in a job analysis
preparing the job description and job specification.
A job description is a written statement of tasks
performed, how they are done and why they are
Job analysis
done. Typically it describes
job description a written job title, job summary,
description of a job’s title, responsibilities, duties and
duties and responsibilities,
activities, relationships,
including its location on the Job description Job specification
organisational chart where the position fits into
the business, accountability,
job specification detailed Figure 16.5 Job analysis provides information for preparation
listing of the personal skills special circumstances and
of a job description and job specification.
and characteristics required states key performance
to perform a particular job indicators.
A job specification
focuses on the person’s experience, qualifications, change due to the introduction of technology,
skills, abilities, knowledge, personal qualities, new procedures or creation of a new job. Both
remuneration and any special requirements of the the job description and specification are used for
person. This could include requirements such as a recruitment purposes, particularly when designing
current driver’s licence, forklift licence or ability to job advertisements. They can also form background
speak a foreign language. material for designing interview questions, assigning
Regular updating of both job descriptions and work, appraising employees, and for general planning
job specifications is essential, as jobs constantly purposes within a work area.

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 ACTIVITY 16.1
Read the example job description and person specification below and answer the questions
that follow.
MITCHELL YOUTH ARTS COUNCIL –
nourishing artistic and cultural lives
Position: Marketing Assistant
Location: Mitchell Youth Arts Centre
Reports to: Marketing Manager
Job level: Level 2 salary range – $45,813 –
$55,500
Position status: Full time
Job statement
Responsible to the Marketing Manager for all
aspects of assisting with the marketing and
promotion of the Mitchell Youth Arts Council
programs, events and activities.
The Marketing Assistant is also encouraged to
establish relationships with key stakeholders
including media partners and other Figure 16.6 A job description shows a job’s title, duties and
media representatives generally, local arts responsibilities.
organisations, corporate partners and sponsors.
Key results areas and responsibilities
Marketing and promotion
• In consultation with the Marketing Manager, assist in the execution and monitoring of all
marketing campaigns for the organisation and its strategic initiatives
• Assist in the liaison with all creative supplies for cost-effective production and delivery of
campaigns
• Assist in the liaison with relevant staff on marketing and publicity matters relating to specific
project campaigns
• Assist in the execution of digital marketing strategies
• Archival of all marketing and promotional documents
• Attend meetings as required
PR and communications
• Assist with the implementation of publicity and public relations strategies
• Assist in the implementation of all communication strategies
• Support the Marketing Manager to maintain relationships with key media representatives
• Assist in the development and writing of content for the organisation’s website, e-news, online
communications and media releases
• Assist in the archiving of photographic documentation of all strategic initiatives into the electronic
library and hard copy archive
• Collate information for media kits

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 ACTIVITY 16.1 continued
Funding and sponsorships
• Support Marketing Manager to maintain relationships with key stakeholders: industry, corporate
sponsors, government departments and media
• Assist Marketing Manager in sponsorship servicing including delivery of all contractual obligations
Event management
• Assist Marketing Manager in the event management and coordination of VIP functions, industry
events, media launches and fundraising events as required
Person specification
Essential requirements
• Knowledge of contemporary and digital marketing, communication and promotion principles
and practices
• Understanding of the Victorian and wider Australian arts industry
• Ability to develop and maintain relationships with key stakeholders
• Experience with Microsoft Office, web-based Customer Relations Management software, website
content management systems, web-based e-communications software
• Well-developed time-management, planning, prioritisation and problem-solving skills
• Excellent literacy, writing, editing and proofing skills with outstanding communication and
interpersonal skills and the ability to build collaborative relationships across a diverse organisation
• Ability to think creatively and strategically
• A collaborative and flexible working style with a willingness to contribute to organisational
culture and team wellbeing
Desirable knowledge/experience
• Completed or working towards completing tertiary qualifications in Marketing and/or
Communication
• Understanding of brand marketing and sponsorship
• Understanding of state and national media networks

QUESTIONS
1 Do you think this is an entry level position
(i.e. for someone who has not worked in
marketing previously) or a position that
would be more suitable to someone with
a couple of years’ experience working in
either a marketing or communications
role? Justify your opinion.
2 Comment on why it is important for the
job holder to have the qualifications,
specific knowledge and skills required
for this position. Link your comments to
the major result areas and responsibilities
outlined in the job description. Figure 16.7 A job statement includes desirable knowledge
and experience.

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 Job design propose changes which can then be put forward to
management.
The purpose of job analysis is to look at and analyse
the current jobs being performed at a workplace. 16.2 Recruitment
It can be used as input into designing a job. Job
design involves ensuring that the job an employee is Recruitment involves identifying, locating and
undertaking contains an appropriate degree of variety attracting a pool of qualified applicants. More
and challenge for the job holder, while also building importantly, it needs to attract
in an opportunity for personal the ‘right’ potential candidates recruitment the process
to the ‘right’ openings within of finding the best qualified
job design grouping development in the role.
pool of applicants
together of tasks for a Additional motivation and job a business. From this pool,
particular job, which should satisfaction can be provided those who most closely
incorporate variety and match the job specification should be selected for
to the job holder by widening
challenge for the job holder
the job scope, referred to an interview.
job enlargement making
as job enlargement. This Recruitment is a two-way process; it involves
a job bigger or more
challenging by combining involves making the job information being given by the business and received
various operations at a bigger or more challenging by from the applicant. Effective communication is
similar level (horizontal) combining various operations therefore very important.
job enrichment making at a similar level (horizontal). The recruitment process begins with:
a job more challenging so Another way to increase • identifying human resource requirements
workers are required to use the challenge of the job is • determining where the qualified pool of applicants
their full capabilities and
to vertically expand the job can be found (recruitment sources)
gain personal growth
by increasing its depth of • choosing a specific means of attracting potential
content as well as the degree employees to the business (recruitment methods).
of control the job holder has over their work. This is
referred to as job enrichment. Identifying human resource
Job rotation is a method that can be used to requirements
reduce boredom for a job holder while exposing them
It is the role of the person in the business responsible
to more than one task. This acts to increase the skills
for human resources to ensure that the people
of that employee and create
job rotation workers are recruited and ultimately selected have the unique
a more flexible workforce.
moved between different skills and attributes required by the business to assist
While not necessarily
jobs to increase variety of motivating the employee,
in achieving its business objectives. The strategies and
work and to create a more culture of the business also determine whether the
it does make them a more
flexible workforce focus is on technical skills and formal qualifications,
valuable team member.
or personality, the ability to ‘fit in’ and the potential
Designing jobs to be
for personal and career development.
part of a team is a growing practice in business. It
provides the opportunity for the job holder to be part
of a network of jobs, and feel part of a collaborative
approach to achieving the
team a group of employees business objectives, while also
with different tasks and providing social interaction
skills working together on between team members.
a common project, service
Creating quality circles/
or goal
teams provides an excellent
quality circle a group of
workers who meet regularly method for encouraging
to discuss quality and participation of all employees
production. Any proposed to accept challenging tasks
changes to production and responsibilities. These
methods are then put teams of workers meet
forward to management.
regularly to discuss quality
and production issues and Figure 16.8 Recruitment is a two-way process.

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 For example, Kathmandu (an outdoor clothing and preference to search first
equipment business) would be looking for applicants for applicants internally equal employment
who are passionate about adventurous, outdoor- and then use external opportunity (EEO)
related activities and lifestyles and possibly have methods. providing people with a fair
and equitable opportunity to
retail experience. In contrast, the major banks would
succeed without any form of
place more emphasis on an applicant having strong Recruitment discrimination based on age,
banking and finance skills and formal qualifications methods sex, race or nationality or
in business or economics. physical or mental disability
While smaller-sized businesses often do not have Internal recruitment
a formal recruitment policy they should still try to As part of their recruitment policy, many businesses
approach recruiting of staff in a consistent manner. require that an open invitation is given to all current
Larger-sized businesses usually have a formal employees to apply for job vacancies (internal
recruitment policy that provides the framework for recruitment) before
a consistent approach to recruitment throughout the entering into the external internal recruitment
business. It will cover items such as: recruitment process. This assessment of current
• formalised recruitment and selection procedures; allows individuals within the available pool of applicants
for example, use of job descriptions and job business the opportunity for from existing staff who have
specifications to generate advertisements, where the skills or qualifications
career advancement by
to fill and perform the job
to advertise, creating a short list against established either transferring or being vacancy
selection criteria, composition of interview panel promoted. One internal
external recruitment
and question types, testing procedures, reference method is using the intranet the assessment of the
checks, advising successful and unsuccessful of the business to publish current available pool of
applicants, negotiating terms and conditions of and accept applications for job candidates, other than
employment the vacant position. A direct existing staff, to ascertain if
• ensuring legal compliance relating to equal approach (word-of-mouth) any are sufficiently skilled or
employment opportunity (EEO) and qualified to fill and perform
or recommendation can also
existing job vacancies
antidiscrimination in advertising jobs and be made to an employee
career advancement
interviewing applicants by a member of the human moving from a junior-level
• a positive approach to recruitment of people resources department or position to a more senior-
with disabilities, minority groups, women, older the employee’s manager or level position in a business
workers, and Aboriginal and Torres Strait Islanders supervisor. This will often transfer a sideways
• recruitment methods – whether there is a occur when an employee has movement of employees
been recognised as having within the same level, from
career advancement potential. one job to another
A job description and job promotion the
advancement in rank or
specification should be made
position of an employee
available to potential applicants within a business related
for them to judge whether to their previous position or
they possess the necessary job tasks
knowledge, skills and abilities, intranet the internal
formal qualifications and or private network of a
personal requirements. business based on internet
technology
Internal applicants are
then requested to submit a word-of-mouth an oral or
written recommendation of
formal letter of application.
someone
The submission of a résumé
application the act of
(curriculum vitae) is not applying for a job or an
always requested because the advertised vacancy; the
business is already familiar letter of communication
with the accomplishments of used in expressing interest
Figure 16.9 Larger businesses usually have a formal the employee. in a job or advertised
recruitment policy. vacancy

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 Table 16.1 outlines some of the advantages and various advantages and disadvantages associated with
disadvantages of recruiting internally. recruiting externally.
The use of technology has brought big changes to
Advantages Disadvantages the way that businesses now recruit new employees.
Quicker adjustment Employees may be In the past, a business that had job openings
to the position; no promoted beyond would place an advertisement in a local, state or
induction needed competency level national newspaper. For instance, the Saturday Age
(Careers section) contained the most employment
Incentive for No new ideas
advertisements for jobs located in Melbourne and
employees to gain introduced, could
Victoria. The Australian was the choice of newspaper
career progression stifle creativity and
for jobs in other parts of Australia. If a business still
innovation
wants to use this form of written media, then more
Acts as a motivator Rivalry, infighting senior positions will be advertised, using block
and morale booster and negative advertisements, in the front section of the papers.
impact on morale Other positions will be found in the employment
for unsuccessful section, which is categorised by job type; for example,
applicants education, health, sales.
Business knows the Any poor work For an advertisement to be effective, it should
applicant, applicant habits will remain contain an attention-grabbing headline and details
knows the business and bureaucracy that inform the potential applicant about the position
encouraged (i.e. job title, salary, location, key roles, duties) and
Table 16.1 Advantages and disadvantages of internal any relevant personal details, such as qualifications,
recruitment knowledge, skills and abilities, required to perform
the job. Finally, contact details and the application
External recruitment closing date need to be included. A small business may
also choose to advertise by sticking a ‘help wanted’
A variety of methods can be used to locate and
sign on the door of their business. Some employers
attract external candidates. Most businesses would
still use these methods; however, more are turning
choose a couple of methods to reach the largest
to a multifaceted approach to recruiting applicants
pool of potential applicants. Table 16.2 illustrates the
such as online job boards, social networking sites
and websites.
Advantages Disadvantages
Websites
Larger pool of Attracting/selection
Many businesses have created a careers section on
applicants of new employee is
their own website where applicants can go to search
time-consuming and
online for current job vacancies. Using their corporate
more difficult
website gives the applicant an opportunity to carry
New insights, skills Induction takes
out research into that business to see what the
and abilities brought longer
business actually does, the products it makes and/or
into the business
sells or services it provides, and what are its mission
Costs can be lower, Limits career and vision and the values it holds.
as business does advancement of Using a website to publish a job advertisement
not have to fill two existing employees is considerably cheaper since online recruiting is
positions not bound by traditional print advertising’s line or
New approach to Greater element word costs. Also, the advertisements tend to be
work, issues and of risk, as new more detailed and comprehensive. After reading the
problems employee is an advertisement applicants are requested to submit their
‘unknown’ person letter of application and résumé online. This allows
Costly form of for immediate acknowledgement of receipt of the
recruitment application.
One Girl is a business that operates as a social
Table 16.2 Advantages and disadvantages of external
enterprise. It is looking for a new CEO to take its
recruitment

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 Figure 16.10 One Girl – looking for a CEO

business into the future. Its vision is to assist with the Australia’s top job websites are:
education of 1 000 000 girls in Africa. To recruit this • Seek
new CEO, it created a video, which outlined the job • MyCareer
description and person specification, and it placed • JobSearch
this on its website. This approach provided a very • APS Jobs
innovative, human and personal touch to what this • careerone
business was about and who it was searching for. It • OneShift.
also required an application form to be completed
explaining why the applicant would want to work for
it (see Cambridge weblinks: http://cambridge.edu.au/ ACTIVITY 16.3
redirect/?id=7005).
Go to the website of each of the above job
websites.
ACTIVITY 16.2 1 Identify the types of jobs being
Go to the careers pages of these business advertised on the websites – are they
websites and answer the following covering jobs in a range of industries or
questions: are they specialising in one industry?
• ALDI 2 Choose one job vacancy listed at each
website and summarise its details.
• Kathmandu
3 Explain how the website OneShift
• Coles.
differs from the other websites.
1 Search their careers section and identify
any current job vacancies.
2 Outline the procedure that applicants Social media
need to follow to apply for these The use of social media as a recruitment method
positions. has been rapidly expanding over the past decade.
3 How would you rate the career pages Businesses are increasingly
websites of these businesses? What do using social networking sites social media websites
you like or dislike about these pages? Is such as LinkedIn, Facebook and applications that enable
the information provided useful? and Twitter to advertise users to create and share
content or to participate in
job openings. Businesses
social networking
of all sizes have Facebook
and Twitter pages where
Online recruitment agencies applicants can find information about the business,
There are many online recruitment agencies operating any current job vacancies (job postings) and stories
in Australia, both in capital cities and regional areas, about what it is like to work for the business.
and specialising in certain employment sectors. The most popular network for recruiting
Traditionally, a recruitment agency worked on behalf professionals is LinkedIn Recruiting Solutions, which
of an employer to find job applicants. In more recent has members from more than 130 different industries.
times, these agencies have developed their own data Businesses can advertise jobs on LinkedIn as well as
bases of people seeking employment so they may create career pages to attract and engage talented
match these to job vacancies as they arise. The agency candidates. The network also enables businesses
will ask the prospective job seeker to create a profile to easily gain access to candidates and find out
on its website, attend an interview or to come into its about their career history, skills and qualifications.
office to undertake an aptitude test. An employer can send a request for a referral of a

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 Figure 16.11 The use of social media as a recruitment method
has been rapidly expanding over the past decade.

recommended candidate for a particular job opening.

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.
Job board is another form of social media
being used by businesses to post vacant positions.
These are websites where
job board websites where businesses pay a fee to the
businesses pay a fee to the job board to list their job on
job board to list their job
the site and will often accept
on the site and will often
accept job applications job applications directly
directly from the job board from the job board. Seek is Figure 16.12 Popular social media sites – LinkedIn, Facebook
one of the largest job board and Twitter
providers in Australia. Other
more specialised or niche-oriented boards focus on prospective candidate makes a direct approach to
a particular industry, such as information technology, a business on the off-chance that there may be a
education or healthcare jobs. position vacant. The applicant has nothing to lose
There are also a number of other methods that can by adopting this method and may actually gain a
be used when attracting applicants for a job: job by asking a quick question or handing in their
• Referrals of candidates from one of the current résumé.
employees at the business. This method often • Government employment agencies – these are
acts to streamline the recruitment process as the often used by people who are unemployed and
employee has inside knowledge of the business need assistance to find a job placement. As part
and knows the type of person needed for the job. of their eligibility requirements for unemployment
It also provides an advantage for the applicant benefits, people are required to be ‘work ready’.
as they have someone inside the business who The jobs offered by these agencies are mostly
can hand their résumé directly to the person clerical, sales, technical and manual positions.
responsible for conducting the recruitment. • Direct recruitment of graduates from universities
• Walk-in applications (unsolicited applications) – a or TAFEs.

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 CASE STUDY 16.1
Ski resort seeking seasonal workers

Each year Mt Hotham Skiing Company (MHSC) seeks exciting, innovative and dynamic individuals to
join its team working at the Mt Hotham ski resort. The company is responsible for ski field operations
including snow grooming, snowmaking, lifts, the snowsports school, ticketing, guest services, retail,
equipment hire, day spas, property maintenance, reservations, events and marketing and the Hotham
Airport.
Previous snow experience is desirable but not essential for many of the positions. Join our team,
make friends and enjoy all that the great Alpine snowfields have to offer!
Vacancies exist for:
• Administration/Reception
• Day Care and Indoor Attendants
• Day Spa Staff (Beauty and Massage Therapist)
• Experienced Boot Fitter
• Events
• Hotel Receptionist
• Housekeeper and Commercial Cleaners
• Human Resources Assistant
• Instructor Positions – experienced Ski and
Snowboard (Australian Residents or current
work visa holders)
• Instructor Positions – Skills Clinic (Australian
Residents or current work visa holders)
• Lift Attendant
• Porter/Snow Clearer
• Qualified Cook/Chef (including Head Chef) Figure 16.13 Each year Mt Hotham Skiing Company
• Rental Hire Attendant (MHSC) seeks exciting, innovative and dynamic individuals
to join its team.
• Reservations Manager (Permanent ongoing
year round position)
• Retail Sales Staff
• Snow Groomers (must be experienced)
• Snowmaking
• Ticket Seller/Ticket Checker.
(Source: Mount Hotham website, Employment ‘Mount Hotham Skiing Company’.)

Analysis 2 Identify which social media site and/or

1 From the list of job vacancies above, website you think would be the best to use
choose one of the jobs and design an to attract the greatest number of applicants
online job advertisement. to the job you have chosen. Justify your
choices.

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 16.3 Selection of applicants Receipt of applications
Within the selection process, a range of methods are
used to ensure the best applicant is found. The actual
order of using these selection
selection process devices may differ depending
undertaken by a business to on the particular business. All
decide whether to make a
Screening and short list
steps in the selection process
job offer to a candidate
perform an important role
when trying to select the right
person for the job position that a business wants to fill.

Receipt of application Interviews

It is not only polite, but good business practice
to acknowledge any application made by a job
candidate. This can take the form of a telephone call
or a simple letter of acknowledgement.
Some businesses require Testing
application form basic an application form to be
source of employment completed. This is a valuable
information covering
screening tool, as it seeks
qualifications, experience
and other job-related data information the business sees
as important. Care needs to
Reference checking
be taken when preparing
application forms to ensure they do not breach equal
employment opportunity provisions. Questions
relating to marital status, ethnic origin, age (unless
minimum requirement necessary for position; e.g. bar
work) should not be included. Offer job to best applicant

Initial screening Figure 16.14 The selection process

This step eliminates applicants who do not possess
the skills and expertise required for the position. By
reading through the letters of application, résumés or not an applicant meets the basic requirements of
and application forms (if required), a short list of the role. They could be assessed on problem-solving
applicants to be interviewed is created. When abilities or technical expertise in the area they are
reviewing applications there are common areas often applying for. Timed tests could be simple multiple
considered: hobbies and interests, accomplishments/ choice questions or games that require critical
results, any gaps in employment history, stability in thinking.
employment, related experience to job advertised, Often a rating system is used: ‘Yes’ (will get an
appearance and overall structure of résumé, career interview), ‘No’ (definitely no interview) and ‘Maybe’
progression, education and qualifications. (consider again later). If the applicant is to be
For larger corporations that attract many applicants, interviewed, they are normally contacted by telephone
online testing is sometimes used to determine whether and a mutually convenient time is arranged.

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 CASE STUDY 16.2
Message from Virgin Australia CEO John Borghetti

The Virgin Australia group of airlines prides itself on recruiting the right people into the right roles
and we’re always looking for team members in all specialities to join our award winning team.
We know what sets Virgin Australia apart is our people and the drive that we all have to make a real
difference for our guests.  Our culture encourages innovation whilst ensuring that our guests remain
the focus of our business.  We deliver a highly professional and polished service, whilst ensuring that
we are safe in everything that we do. We want dedicated people who are passionate about customer
service and ready for the challenge of working in a challenging environment.
The reality is that being a team member of the Virgin Australia group of airlines involves hard work
but is very rewarding. Our people are at the cornerstone of the business and their award winning
service to every guest every day is putting the magic back into flying.
So if you are interested in being a part of our passionate and innovative team then we would love to
hear from you.
Kind regards,
John Borghetti
CEO – Virgin Australia group of airlines
(Source: Virgin Australia website, ‘Welcome’.)

Figure 16.15 The Virgin Australia group of airlines prides itself on recruiting the right people into the right roles.

Analysis 3 Describe what being a ‘team member’ of

1 Identify what John Borghetti believes sets Virgin Australia involves.
Virgin Australia apart from other airlines. 4 Identify the personal qualities that Virgin
2 Describe what the culture of Virgin Australia would be looking for in its
encourages and values. employees.

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 Interviews
The employment interview is the most commonly
used selection technique. It is the opportunity for an
employer and the candidate
interview a one-on-one to learn more about each
conversation between other. Some businesses use
a job applicant and a telephone Skype as a way
representative(s) of an to conduct initial interviews
employer that is conducted
(virtual interviews) with the
to assess whether the
applicant should be hired aim of screening candidates
and narrowing down the
pool of applicants who will
be invited for a face-to-face interview. This is also a
way to reduce the expense involved in interviewing
candidates who are not local. Figure 16.16 First impressions count
It is quite common that an applicant will attend
several rounds of interview. The first in-person of questions to put to each candidate during the
interview generally seeks to find out about the interview.
applicant’s experience, skills, work history and whether
they have the personal qualities and qualifications the 2 Opening the interview
business is seeking from its workers. The number The candidate should be greeted with a handshake
of interviews often reflects the level of seniority of by all parties and a little ‘small talk’ entered into to
the position in the business. For example, a shop gain rapport and put the candidate more at ease. It
assistant may only have one face-to-face interview is important to set the scene by outlining how the
with the owner of a small business, whereas a senior interview will be conducted.
manager in a larger business will go through a far
more rigorous and time-consuming interview process.
3 The main parts of the interview
The most common interview style is structured, a Questioning – there are two main types of questions
where a series of questions are asked based on that can be asked during the interview:
the job description and specification. Alternatively, • Open questions usually require more than a few
an unstructured interview can be used where the words in response, giving the applicant opportunity
applicant is encouraged to do most of the talking to answer the question. Open questions help to
with not much direction from the interviewer. reveal thoughts, needs, feelings and opinions.
There are certain elements that must be addressed They also require the applicant to think before
if a selection interview is to be successful and produce answering.
the desired outcome. • Closed questions only require a short ‘yes’ or ‘no’
answer, or require the candidate to pick ‘X’ or
1 Plan for the interview ‘Y’. They require very little thinking and talking.
The location must be arranged and the candidate Closed questions are used to elicit specific facts or
advised of the time and location. The location details (e.g. ‘Do you have a current work visa?’).
should be private (e.g. conference room), free of
It is important to remember that employers believe
interruptions. Seating arrangements need to be made
that past behaviour is the best predictor of future
to ensure no confronting or intimidating situations
behaviour. Questions that require the interviewee
are created. The interview panel must be formed,
to explain past experiences and behaviours should
given all relevant information on the candidate and
be asked; for example, ‘Tell me about a time you
the job; that is, personal attributes, experience, skills
encountered a difficult customer and how you dealt
and qualifications required for the job and any other
with the situation.’ Often the interviewer will need to
relevant business details. They should be directed
gain further details by using follow-up questions. The
to look for any gaps in employment history, vague
candidate should be allowed to talk for approximately
wording, inflated job title and frequent job changes.
70 per cent of the time, with the interviewing panel
In addition, the panel meets to formulate a series
being active listeners. Watch the body language of

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 both the candidate and the panel. Non-verbal signs, Using interviews as a selection method allows for:
such as facial expressions, fidgeting, arm movements • the parties (interviewer and interviewee) to start
and the like give important clues as to what people developing their relationship
are really thinking. • the interviewer to gain a lot of information about
b Understanding the legal requirements – it is the interviewee. It also allows the applicant to find
important to be aware of areas of discrimination out information about the business and what the
(race/nationality, marital status, age, pregnancy, job involves.
physical features, impairment/disability, religious • the interviewer to pose problem or behavioural
belief or activity, lawful sexual activity, parental scenarios to the applicant to then make a
status, industrial activity) when questioning and judgement of their problem-solving skills
forming opinions of suitable applicants. This will • the interviewee to make clear any misunderstanding
help to protect the panel from any accusations of or mistake they may have made during the course
discriminatory or unfair interviewing practices. of the interview.
c Selling the job and the business – explain the key
There are, however, some downsides to using
aspects of the job and where it fits within the business.
interviews as a selection method, namely:
Ask the applicant if they have any questions or need
• to be effective they generally require more than
any more information.
one interview to make the selection.
4 Close the interview • they are time-consuming as time needs to be found
Give a firm handshake and thank the applicant for for: preparing for the interview by the interviewer
coming. Advise them of the next stage in the process. or the panel of interviewers, conducting
interviews, interpreting the responses and making
5 Evaluate the applicants recommendations on which candidates should
All panel members need to finalise their notes progress to the next round of interviews
immediately after the interview. Assessment should • potential for interviewer bias
be made only on the candidate’s skills, knowledge • costly due to personnel costs associated with
and capabilities relative to the job requirements and interview and panel members
you may be asked to explain • inefficient if the interviewer and panel members
capabilities competence to your decision and justify your are not trained or experienced in how to conduct
perform a task choice. (Hint: do not dismiss an interview.
your gut feelings about a
person.) Online selection
Some businesses now use a combination of recruitment
methods to assist them to find the best candidate
for the job. For example, when recruiting graduates
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 criteria
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
Figure 16.17 Active listening by all parties to the interview words, which saves time when wanting to create

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 Figure 16.18 Some businesses now use a combination of
recruitment methods to assist them to find the best candidate
for the job.

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 advised 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.
Another issue with using standardised online forms Figure 16.19 Psychological testing provides a scientific
component to selection.
as the bases 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 2 Personality or temperament traits, which looks at
résumé. If the employer wants someone with creative the behaviour of a person in the workplace. One
skills, an online application and selection format may popular test is the Myer Briggs Type Indicator,
exclude them from including samples of their work. which classifies people as being: an extrovert or
introvert; sensing or intuitive; thinking or feeling;
Psychological testing judgemental or perceptive.
Psychological testing (also known as psychometric 3 Motivational – looks at a person’s drive and
testing) provides a scientific component to selection. initiative.
It must be carried out by a qualified organisational The advantages of conducting psychometric
psychologist, who has completed training in testing include:
occupational testing. It aims to assess the potential
• Conducting these tests could save the business
of an individual to perform in a particular job role
money in the long run as it prevents hiring a
and covers:
candidate who performs well in an interview but
1 Aptitude test or an ability or intelligence test – is not really suited to the tasks of the job.
designed to measure an applicant’s intelligence • Every candidate gets the same questions and
or IQ based on their ability to is given the same opportunities as the tests are
aptitude test a test of reason with numbers, words standardised.
special abilities (e.g. clerical, and abstract items. This test
• It provides applicants with weaker interview skills
language, artistic) that are indicates a person’s ability to
required for a specific job or who are shy a chance to prove themselves in
think conceptually and solve another way.
problems.

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 The disadvantages of conducting psychometric • An applicant will often feel that the test allows
testing include: them to display skills that would not be shown
• too much reliance on applicants telling the truth during an interview.
when answering questions The major disadvantage in conducting a work test
• not always a good way of assessing an applicant’s relates to the type of job. If the tasks associated with
personality the job are complex and take a longer period (days or
• if a qualified person is not administering the test, weeks) to perform, they are not as good an indicator
how do you know that its findings are correct or of an applicant’s ability for jobs where tasks can be
can be relied upon? completed in a short period of time.

Work testing Background investigation –

Businesses use work testing as a method to assess reference checking
how candidates perform in work situations. This form Comprehensive reference checking provides important
of testing can provide additional objective information opportunities to learn more about candidates and
which relates to skills that may be difficult to assess should be undertaken before offering the position.
using other methods, such as an interview. Work tests Human resource supervisors can conduct these
can take a variety of forms, such as: computer tests, checks personally by contacting former supervisors
presentations, role plays and written work. They can and work colleagues of the applicant or using their
also include exercises that test the applicant’s ability professional network to talk with other individuals
to analyse statistical or budget information or other who can provide additional insight into the applicant.
exercises that test an applicant’s speed, skill, accuracy It may also be wise to check academic qualifications,
and dexterity at manual tasks. For instance, a cashier as there are instances of qualifications having been
for a supermarket may be tested in product knowledge misstated in résumés. A police check may also need
and their speed and accuracy of processing customers to be undertaken if the area of employment relates
through a checkout. to providing services to children, such as teaching
Candidates are usually advised in advance that or child care. Social media, such as Facebook, are
they will be asked to take a work test and often it now being extensively used by businesses as part of
is arranged to be taken either before or after their background checking of applicants.
interview.
Examples of common work tests are: Advising applicants of outcome
• drafting and typing a letter to a client of a business
Once all the background checks and testing have
• creating an Excel spreadsheet, based on
been undertaken and the selection panel has decided
information that has been supplied
on the most suitable applicant, the following needs
• drafting a press release to announce an important
to occur:
decision made by the business
• The position needs to be officially offered to the
• reading and summarising a document that could
successful job applicant. This may be done initially
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 can be relied upon to test the work capability of
the candidate as the test should be based on tasks
likely to form part of the job.
• Because the work being tested has a direct
relationship to the job, 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. Figure 16.20 Academic qualification – authentic or false?

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 by telephone and followed up by a formal letter recruitment performance and determining whether
of offer. This letter will contain all the conditions strategic business objectives are being achieved. This
of work, such as salary, leave entitlements, job can be done by looking at the measures outlined in
title, starting date, location of job and to whom Table 16.3.
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.

Evaluation of recruiting methods

The evaluation of recruitment methods provides
valuable feedback for controlling costs, improving

ACTIVITY 16.4
Complete the following questions.
1 List the costs that can result from a poor
recruitment and selection process being
undertaken by a business.
2 Identify which areas of cost would be
reduced if a business were to recruit
internally.
3 Discuss the advantages and
disadvantages of recruiting from internal
and external sources.
4 Analyse which method of selection would
be cheaper for a business – an interview
or a combination of online selection and
interview. Figure 16.21 In today’s business environment, hiring the
wrong candidate can cost a business.

Measure Evaluation
Quality of process How many applicants applied for the vacant position?
and outcome How many of the applicants were qualified and suitable for short-
listing?
Cost of process What was the total cost, including advertising, agency fees and travel
expenses?
Time How long did it take between recognising the need for the new
position, receiving the application and selecting and offering the job?
Soft data Was there any additional qualitative feedback from the applicant and
management on how well the method worked?
Table 16.3 Evaluating recruitment methods

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 16.4 Employment such as superannuation and long service leave
under federal and state legislation. Protection
arrangements is now provided for casual employees who are
terminated after having been employed for longer
An employer and employee will enter into a legally than 12 months.
binding employment contract. There is a range • Fixed-term contract – employees can be
of ways these contractual engaged in either a full-time or part-time capacity
employment contract a arrangements can commence. for project work or to replace employees absent
formal written agreement One common method is the
between an employer and on long service or parental
signing of the duplicate letter leave. They generally
an employee setting out the fixed-term contract
legal obligations of each of offer by the successful accrue entitlements such employees engaged in either
party; an informal or oral candidate and returning it to as annual and sick leave a full-time or part-time
agreement may also be the person making the offer. on a pro rata basis. As the capacity for project work or
entered into The employment contract to replace employees absent
length of their employment
may engage the employee in on long service or parental
is finite and contractually leave
the following ways: stipulated (e.g. one year or
• Permanent full-time basis – the employee enters five years), it is not covered
into a continuing contract of employment. The by the termination of employment legislation.
number of hours worked Businesses increasingly have been employing
permanent full-time (e.g. full time is 38 hours independent contractors to complete specific tasks
the employee enters into per nominal week as stated or projects, without affecting their ongoing staffing
a continuing contract of in the National Employment
employment plans. These contractors negotiate their hours of work
Standards (NES)) will depend and rates of pay and are responsible for paying their
on the conditions of either the own taxation and GST to the Australian Taxation
award or collective agreement applicable to the Office. They need to have an Australian Business
business. The employee will be entitled to receive Number (ABN) and submit regular invoices for
a salary or wages, leave entitlements (sick and payment to the business. Contractors are responsible
carer’s leave, parental leave, compassionate and for making their own superannuation contributions
bereavement leave) and superannuation guarantee and are not entitled to receive leave entitlements from
rate of 9.5 per cent. In addition, for each year of the business.
employment at a business, the employee accrues
long service leave entitlements.
• Permanent part-time basis – the employee enters
into a continuing contract; however, while entitled
to all the above employment
permanent part-time conditions, they will work
the employee enters into fewer hours than a full-time
a continuing contract,
employee. All calculations
with same employment
conditions, but will work for pay and entitlements are
fewer hours than a full-time made on a pro rata basis.
employee • Casual basis – an employee
casual where an employee is often appointed by
is appointed by oral contract oral contract (not written)
(not written) for short-term, for short-term, irregular
irregular or seasonal work
or seasonal work. They are
usually engaged and paid
on a daily or hourly basis and do not have access
to permanent employment benefits such as sick
leave and annual leave, so their wages usually
include compensatory loadings of between 15
and 20 per cent. Casual employees who are
Figure 16.22 Businesses increasingly have been employing
employed regularly may be entitled to benefits independent contractors.

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Chapter summary Chapter summary questions
• Job analysis is the systematic process of 1 Define the following terms and use
looking at a particular job to determine them in a sentence to demonstrate your
the tasks and duties required for that job. understanding of the term:
It also determines the skills and level of a promotion
experience needed by the job holder of b job description
that position.
c application form
• Job analysis results in the creation of
d fixed-term contract
two documents: job description and job
e internal recruitment.
specification.
2 Outline the benefits that can come to both
• A job description sets out the tasks
the business and its employees from using
or duties specific to the job while the
internal recruitment as a way to fill a job
job specification sets out the personal
vacancy at a business.
qualities, qualifications and experiences of
the actual job holder. 3 Outline the benefits to a business of using
external recruitment methods as its way
• Job design involves grouping together
of finding suitably qualified applicants for
tasks for a particular job. The design of a
vacant positions within the business.
job can be changed by job enlargement
(increasing the number of tasks), job 4 Explain the importance of good job
enrichment (increasing the complexity of design to a business wanting to achieve
the tasks) or job rotation (moving between its business objectives. Include in your
several jobs). explanation how job enrichment and job
rotation can help a business to become
• Creating teams and quality circles are also
more productive.
popular tools used by businesses to create
greater flexibility, increased motivation 5 Describe the process a business needs to
and a greater feeling of ownership and undertake to prepare a job description and
contribution to the achievements of the job specification.
business. 6 A variety of tests can be undertaken by
• Recruitment involves locating and attracting applicants. What are they? Why are they
a pool of qualified applicants to fill a vacant used?
position in the business. 7 Distinguish between the employment
• Recruitment can be through internal or arrangements for a permanent full-time and
external sources, both of which have their permanent part-time employee.
associated methods and their related
advantages and disadvantages. Extension questions
• Selection is the process undertaken by Premium Real Estate was created in July
a business to ultimately decide to which 2015 from the merger of two local real estate
applicant it will make a job offer. companies, Select Real Estate and James
• The selection process can involve: Alexander Real Estate. Both companies had
screening the applicants, creating a short in recent years been increasing their overseas
list, conducting interviews, different forms client base in China and Malaysia. The owners
of testing and undertaking background of the two real estate businesses believed
checks. that the merger would result in them being
• A business can use a variety of able to attract more clients from overseas
employment arrangements with its staff. and this would put them into a better position
They may be employed as permanent when negotiating with owners in Australia to
staff members either on a full- or part- list with them to sell their properties.
time basis, as casuals or on a fixed-term
contract basis.

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 Premium Real Estate determined it would 3 Advise Premium Real Estate where it
need to hire additional real estate agents and would be appropriate to advertise or to
office staff to support its expansion strategy. go to attract applicants for these vacant
1 Advise the owners of Premium Real Estate positions.
on the process they should undertake 4 Outline the selection process that you
to create the job description and job would recommend be followed to ensure
specification for the real estate agent’s the best applicant(s) are chosen to fill the
position. vacant positions.
2 Outline the important personal
specifications that would be needed for
the position of real estate agent in this
business.

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CHAPTER 17 Key terms
• award • induction

Expectations and legal •

•
benefits
bullying
• National
Employment

obligations
• conditions of Standards (NES)
employment • remuneration
• discrimination • salary
• enterprise • salary package
Overview agreement • wages
• flexible work • work–life
Each individual employee working for a business practices balance
will have different expectations from their job. Some • harassment
will place great value on the conditions under which
they will be employed, while others are looking for
being able to create a balance between their work
and personal lives. Securing a job with a guaranteed Key knowledge
future, while an achievable goal in the past, is now
becoming a more difficult expectation to fulfil. In this chapter students will learn about:
Employers expect their employees to be loyal to their • Employer expectations such as contracts of
business and in the event of them wanting to leave employment, business loyalty and terms of notice
the business they will provide the necessary terms • Employee expectations such as conditions of
of notice. When an employee commences work at a employment, remuneration, job security and
business it is important that they are properly inducted work–life balance
as this will result in them being able to contribute to • Legal obligations for staffing such as occupational
the business objectives and be productive at a faster health and safety (OH&S), equal employment
rate. opportunity legislation and the Workplace Gender
The federal and state governments have passed Equality Agency
legislation and established statutory authorities that set • The purpose and common methods of employee
out legal obligations employers must observe, which induction.
relate to providing equal employment opportunities
and workplace gender equity.

What’s ahead

Employer expectations

Employee induction –
Staffing a business Employee expectations
purpose and method

Legal obligations

Figure 17.1 Expectations and legal obligations regarding employees

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 17.1 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. They would like them to have a positive
attitude as this will impact upon the relationships the
employee develops with their co-workers, supervisors
and managers. This will also affect the way the
employee feels about the tasks related to their job.
Being dependable and cooperative are also important
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 Figure 17.2 Employees are valued if they are willing to learn
new skills.
to learn new skills and happily receive feedback to
assist them to improve how they perform their job.
assessing enterprise agreements before approval.
Contracts of employment Modern awards build on the NES and cover a
further 10 subject areas, including minimum
Employers expect that they will enter into a contract
wages, arrangements for when work is performed,
of employment with an employee, laying down terms
overtime and penalty rates, allowances, leave and
and conditions of their involvement with a business.
leave loadings, superannuation and procedures
This contract can be either written or verbal and
for consultation, dispute resolution and the
cannot provide for less than the legal minimum as
representation of employees.
found in the National Employment Standards
• Enterprise agreements are made at an enterprise
(NES) and any enterprise
level (workplace) between an employer and their
National Employment agreement, award or any
employees covering their
Standards (NES) 10 other applicable registered
terms and conditions of enterprise agreement a
minimum employment agreement. All employees are
employment. Enterprise written collective agreement
entitlements that have to be covered by the NES whether
agreements can be tailored made between an employer
provided to all employees in
or not they have signed an and the employees at a
Australia to meet the needs of
employment contract. workplace, setting out the
particular enterprises and terms and conditions of
The NES are the 10
differ from awards, which employment
minimum employment entitlements that must be
relate to an entire industry
given to all Australian employees. Providing less
or occupation.
than the minimum wage or conditions found in the
The Fair Work Commission can assist in
NES cannot be excused by an enterprise agreement,
the process of making such agreements and
employment contract, award or other registered
can deal with disputes that may arise under
agreement. The 10 minimum entitlements are set out
the terms of the agreement and assess and
in Table 17.1
approve agreements. The agreement covers a
Businesses may choose from one of the following
broad range of matters such as rates of pay and
arrangements relating to the pay and working
employment conditions; for example, hours
conditions under which they employ their staff.
of work, meal breaks, overtime, consultative
• Modern awards are a legally binding document mechanisms, dispute resolution procedures and
determined and varied by the any authorised deductions to be made from the
award an agreement that Fair Work Commission, which wages of an individual employee.
sets out minimum terms and sets the pay and employment Prior to approval of any enterprise
conditions of employment
conditions for a whole agreement, it must undergo checking against
relating to an industry or
occupation industry or occupation. They the Better Off Overall Test (BOOT) created by
are used as the benchmark for the Fair Work Act 2009. The test compares the

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 Minimum standard Explanation
Maximum weekly hours Full-time employee – 38 hours. May be only required to work a
of work reasonable number of additional hours.
Request for flexible Right to request flexible hours until children reach school age, with
working arrangements employers only able to refuse on reasonable business grounds.
Parental leave and related Parents to have a right to separate periods of 12 months of unpaid
entitlements 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 will be entitled to an additional paid week of
annual leave.
Personal/carer’s leave and All full-time, non-casual employees will be entitled to 10 days of
compassionate leave paid personal and carer’s leave each year (part-timers pro rata).
Employees also entitled to two days of paid compassionate leave
on the death or serious illness of a family member or a person the
employee lives with, plus two days of unpaid personal leave where
required for genuine caring purposes and family emergencies.
Community service leave Entitlement to leave for prescribed community service activities
(e.g. paid leave for jury service and reasonable unpaid leave for
emergency service duties).
Long service leave Employee’s existing entitlements preserved.
Public holidays Guarantees eight national public holidays, plus prescribed state
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).
Termination of Employees will be entitled to fair notice of termination, provided
employment and in writing, and those who are made redundant and who are
redundancy employed in workplaces with 15 or more employees will be
entitled to redundancy pay (maximum of 16 weeks’ pay).
Fair Work Information Employers must provide all new employees with a Fair Work
Statement Information Statement that contains prescribed information about
the employee’s rights and entitlements at work.
(Source: Adapted from the Fair Work Act 2009 (Cth).)

Table 17.1 The National Employment Standards

terms of the proposed enterprise agreement Business loyalty

against the relevant modern award to make sure
employees will be better off overall. The NES In our current business environment where loyalty to
came into operation on 1 January 2010 and their a business is not rewarded by job security, employers
purpose is to ensure that all employees’ key can’t just expect employees to be loyal – they need
entitlements are protected in law by a strong to earn loyalty. There is lesser sense nowadays that
safety net of fair minimum conditions. The NES a business is going to look after its employees in the
apply to all employees under the federal system, way that it used to, which would lead one to expect
regardless of the industry to which they belong, a reduction in the loyalty shown by employees.
their occupation or income levels. Businesses that conduct themselves in an ethical
manner and take responsibility for both their wins and

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 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
except 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 Figure 17.3 Most young professionals choose to work for
their clients – than they are to the business. If a businesses that share their values.
manager looks out for their subordinate’s best
interests, provides opportunities for them to improve
employing a large number of millennials, who it is
themselves and pays attention to their career path,
estimated will comprise 75 per cent of the workforce
then they are more likely to earn the loyalty of that
by 2025. However, because most young professionals
employee.
choose to work for businesses that share their
Currently, Australian workplaces are made up of
personal values, such as wanting to make the world
employees from three generational classifications.
more compassionate, innovative and sustainable, it is
Baby boomers (born between 1946 and 1964),
not too late for employers to overcome this ‘loyalty
generation X (born between 1965 and 1979) and
challenge’.
generation Y (born between 1980 and 1994), often
referred to as the ‘millennials’. This provides an
additional challenge to employers as the expectations
Terms of notice
of each of these groups are diverse. While baby When an employee decides to resign from a business
boomers are less driven by financial rewards and they need to give notice to their employer. The
more by the stimulation they gain from their jobs, period of notice commences when the employee
they are more likely to be loyal to their employer if advises the employer that they want to end the
they are provided with jobs that reflect their wishes, employment relationship and finishes on the last
such as part-time employment. To gain the loyalty day of employment. The period of notice required
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
ACTIVITY 17.1
for both these generational groups should assist in ‘Businesses can no longer expect their
gaining their loyalty. employees to be loyal enough to stay for
Gaining the loyalty of generation Y or millennial 10 or 20 years, and maybe that’s a good
employees poses a different challenge to a business. thing.’
Each year, a survey is undertaken by Deloitte, a 1 Discuss this quote by presenting
multinational professional services firm. The results arguments that agree and disagree with
of the 2016 Deloitte Millennial Survey state that its content.
millennial employees express little loyalty to their 2 Outline what actions a business needs
current employers and many are planning near-term to undertake to gain loyalty from its
exits. This remarkable absence of allegiance (loyalty) employees.
represents a serious challenge to any business

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to be given will be set out in the legal document
under which they are employed, namely the award,
employment contract or enterprise agreement. 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, Figure 17.4 It is important for employers to gain an
to retain the intellectual property in an invention or understanding of what employees want from their workplace.
any work developed as part of an employee’s job. The
employer may also require the departing employee to
not only contributes to the corporate bottom line
enter into a non-disclosure agreement about the work
(profit), but can also have a positive impact on the
they were performing. After the period of notice is
broader community.
served by the employee, the employer would expect
The workplace is now seen as a place that
that all property provided by the business to that
must have a ‘real’ meaning, where employees can
employee (e.g. car, computer, mobile phone) be
gain respect, recognition and fulfilment, not just
returned and their access to the intranet will cease. It
an environment where they go to perform a set of
is also a reasonable expectation that if the job position
tasks.
has been filled during the term of the employee’s
notice, they will carry out a formal handover of work Conditions of employment
to their successor.
Conditions of employment refer to what an
17.2 Employee employer has agreed to give the employee in return
for the employee’s work. It is an expectation of
expectations employees that they will receive remuneration
(pay) in return for the
Each individual employee working for a business
work they perform for their conditions of employment
will have different expectations from their job and what an employer has
employer. The remuneration
different factors will motivate them. As every person agreed to give the employee
for their labour may be as
has different values, it must be realised that what one in return for the employee’s
straightforward as receiving work
employee may expect, and will be motivated by to
a wage or salary, but may remuneration the amount a
perform well, will not necessarily motivate another.
also encompass less tangible person is paid for performing
People all have different cultural backgrounds,
benefits. work tasks (i.e. job); it can
abilities, experiences, attitudes and learning patterns
• Wages – worked out on an take the form of cash and/
and will therefore be motivated by different rewards. or fringe benefits; it can be
For a reward to be effective, it must be both attainable hourly basis for a working
referred to as a wage or
and worth attaining. week (e.g. nominal 38 salary
It is important for employers to gain an hours per week). An wages monetary reward
understanding of what employees want from their employee would expect for labour, paid on a
workplace. Employees seem to greatly value working to receive overtime if their weekly basis, calculated
hours at work exceed the by multiplying the hourly
for a respected and successful business that provides
nominal hours, at a rate rate by the number of hours
them with the opportunity for personal development worked for the period
and advancement. They want to feel that their work of one-and-one-half times

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 the normal rate. Additional penalty rates may be additional superannuation entitlements, company
paid for Sundays or public car, share options and other fringe benefits.
salary an agreed amount holidays. Employees under • Benefits – employees, while not necessarily
of money paid to employees this system would expect to expecting them, do value additional benefits
for their labour during a year,
be paid on a weekly basis. provided by their
expressed as an amount per
• Salary – an annual figure employers. These benefits benefits financial rewards
annum
usually paid on a monthly or can be care assistance that are not paid directly in
salary package the total cash to an employee; for
value of an employee’s fortnightly basis. Employees programs (e.g. family
example, parental leave and
remuneration and is receiving a salary would not care, paid parental leave),
sick leave
comprised of both cash and expect to receive payment or alternative work
fringe benefits for overtime, as additional arrangements.
hours worked are often Employees have the expectation that they will
taken off in lieu. receive a fair wage and work under the conditions
• Salary package – used for more senior positions in outlined in the award relevant to their job. The Fair
a business. The employee would expect to receive a Work Ombudsman provides protection for workers
salary component, performance-based pay (bonus), who feel that this expectation has not been met.

CASE STUDY 17.1

Restaurant, café and catering services workers share more than $1.2 million back-pay

25 June 2015
Food services workers in restaurants, cafés and
catering companies throughout Australia have
been underpaid over $1.2 million, spot checks
by the Fair Work Ombudsman have revealed.
A total of 456 businesses were found to have
short-changed 2752 employees more than $1.215
million. One worker was owed more than
$40 000. More than $386 000 was recouped for
698 employees in Victoria alone.
The underpayments were identified as part of
the second wave of the Fair Work Ombudsman’s
National Hospitality Industry Campaign. Fair
Work Ombudsman Natalie James says 1066
employers were asked to supply their 2012–13
time and wages records for assessment. Only 42 Figure 17.5 ‘Conditions of employment’ refer to what an
per cent (451) were fully compliant with their employer has agreed to give the employee in return for the
employee’s work.
workplace obligations. A total of 879 individual
errors were identified at 615 businesses. Almost
20 per cent of mistakes related to weekend penalty rates.
‘The majority of errors related to wage entitlements,’ Ms James said today when releasing a report on
the campaign findings. ‘Employers were paying flat rates for all hours worked, which was often not
enough to cover penalties, loadings and overtime.’
Fair Work inspectors issued two formal Letters of Caution and two on-the-spot fines. Ms James says a
58 per cent contravention rate shows an ongoing need for intervention by the Fair Work Ombudsman
in the food services sector. ‘According to recent data, this is an industry with a vulnerable workforce
comprised largely of young employees and low-skilled employees,’ she said.

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 The Fair Work Ombudsman found low rates
of employer group membership, which it is
now encouraging as a means of improving
compliance rates.
State-based recoveries were:
• $386 389 for 698 employees in Victoria,
• $355 980 for 846 employees in Queensland,
• $282 996 for 788 employees in NSW,
• $63 967 for 193 employees in SA,
• $51 650 for 62 employees in WA,
• $29 795 for 77 employees in Tasmania,
• $25 767 for 45 employees in the NT, and
• $18 759 for 43 employees in the ACT.
More than 52 000 employers were contacted by
the Fair Work Ombudsman in advance of the Figure 17.6 Food services workers in restaurants, cafés
campaign. Major stakeholders were also notified, and catering companies throughout Australia have been
including Restaurant and Catering Australia, underpaid over $1.2 million.
United Voice, the Franchise Council of Australia,
the Shop Distributive and Allied Employees Association, Australian Culinary Association, the Service
Industry Legal Service and the Japanese/Australian Catering and Restaurant Information Service.
The National Hospitality Industry Campaign was split into three sub-sectors – accommodation, pubs,
bars and taverns; restaurants, cafes and catering services; and take-away foods. Results of the first
wave of the National Hospitality Industry Campaign for pubs, bars, taverns and accommodation
houses were released in December, 2013.
Of 750 businesses audited, 515 (69 per cent) were found to be compliant. Just over 100 employers
were required to back-pay $367 000 to 629 workers found to have been short-changed their minimum
entitlements.
Ms James says the hospitality sector was targeted for attention over three years from 2012–15 in
response to more than 4500 requests for assistance from employees in 2010–11, a high volume of
calls to the Fair Work Infoline and a number of litigations against hospitality businesses for breaches
of workplace laws.
In 2008, a national hospitality campaign involving 664 employers saw more than $1.6 million in
underpaid wages and entitlements returned to a total of 4679 workers across the country.
Nine regional compliance programs involving the hospitality sector were also undertaken between
2010 and 2012 which returned $680 421 to 2271 workers who had been short-changed.
Ms James said the Fair Work Ombudsman was committed to helping employers to understand and
comply with workplace laws, but operators also needed to make an effort to get the basics right in
the first place. She urged hospitality businesses to use the online tools and resources available to
them free of charge at www.fairwork.gov.au.
These include pay calculators to determine the correct award and minimum wages for employees,
templates for pay-slips and time-and-wages records and a range of fact sheets on workplace
entitlements.
Employers and employees seeking advice can also call the Fair Work Infoline on 13 13 94. A free
interpreter service is also available on 13 14 50.
(Source: Fair Work Ombudsman, ‘Restaurant, café and catering services workers
share more than $1.2 million back-pay’, media release, 25 June 2015.)

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 CASE STUDY 17.1 continued
Analysis 5 Explain why the hospitality industry is
1 How many employees in Victoria were viewed by the Fair Work Ombudsman as a
found by the Fair Work Ombudsman to be problem industry.
underpaid? 6 Which state was identified as having the
2 What was the total value of underpayment largest non-compliance recoveries?
discovered by the Fair Work Ombudsman’s 7 Outline the commitment made by the Fair
spot checks? Work Ombudsman to employers in the
3 Outline the type of mistakes being made hospitality industry.
by employers. 8 Undertake research to find any current
4 Identify the items that paying ‘flat rates’ claims for underpayment of wages that are
fails to cover. being exposed by the media. Outline the
problem and then describe what action is
being taken to rectify the employee’s claim.

change in economic circumstances of both Australia

Job security and businesses, this expectation is no longer able
Employees like to feel assured that they have gainful to be met. For example, the closure of the main
employment for as long as they determine. Job automotive companies operating in Australia and the
insecurity has become a growing concern for many scaling back of the mining industry have meant that
employees. Job security, or lack thereof, has a huge a vast number of employees have lost their jobs, with
impact on the level of motivation demonstrated by many finding it difficult to get another job in the same
employees as well as their feelings of loyalty and industry. Statistics provided by the Australian Bureau
commitment to a business. of Statistics (ABS) indicate that many of these workers
In the past, employees believed that if they were have, however, been able to find other forms of work,
able to get a job with a large business, such as a either through changing industries, updating their
bank, insurance company, large manufacturer or skills or using their redundancy payouts to establish
government department, they would have job security their own businesses. The mode of employment has
for their entire working lives. They were happy to also changed, with some workers changing from being
start with an entry level position and work their way permanent employees of a business to providing their
up the hierarchy over time. In recent times, with the services as contractors.

Figure 17.7 The Fair Work Ombudsman is committed to helping employers to understand and comply with workplace laws.

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CASE STUDY 17.2
A mobile workforce
Until recently people were concerned about
stable jobs and the opportunity to climb the
corporate ladder. This has all changed as a
mobile workforce searches for an improved
balance between work and life and higher
levels of job satisfaction. However, while
millennials have become far more mobile
than their grandparents, they still yearn for job
security and will change employer in order to
have a more secure position.
Surveys show that one in five people have
been in their present position for less than
a year and an astonishing 60 per cent of the
Australian workforce has been at their current
job less than five years. What is the profile of
the typical job changer? She is likely to be a
woman, in a sales position and not a manager. Figure 17.8 The employment landscape is changing rapidly in
Australia.
People do not necessarily make the change
for promotion or a higher income. Most of the
200 000 Australians who changed jobs in the 2011–12 financial year stayed in similar occupations
and at the same level. Thirteen per cent of employees are looking to improve their work–life
balance – they may want to work closer to home or work shorter hours to spend more time with
their children. Some are bored – they want to study part time or take on a position with more
challenges. A lucky few manage to find work that allows them to stay at home or travel the
world!

Analysis
1 What percentage of the Australian
workforce has been in their current job for
less than five years?
2 What percentage of workers have held
their job for less than one year?
3 Which gender is most likely to swap jobs?
Which group of workers is most likely to
swap jobs?
4 What is the approach that millennials take
to job security?
5 What percentage of Australians change
jobs in better working conditions? Identify
what it is they are looking for in their new
jobs. Figure 17.9 The traditional working roles of previous
generations have, for the most part, been thrown out the
window.

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 CASE STUDY 17.2 continued
6 Conduct a mini survey of people you know c If yes, for what reason are you wanting
(both genders and a variety of age groups) to change your job?
who are currently in the workforce to find d What do you value more in your job –
answers to the following questions: flexible working conditions or job
a How long have you been at your current security?
job? 7 Based on the results of your mini survey,
b Do you intend to change jobs in the next discuss whether job security is an outdated
year? job expectation of workers in today’s work
environment.

Work–life balance and logistics employees felt they had a flexible work
environment.
Employees are now placing increasing demands on When a business introduces flexible work practices,
employers to provide more flexibility in their work it is important that the employees are consulted and
practices to allow time for their family or other any proposed changes discussed, particularly with
responsibilities. The Fair Work Commission 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 offering
the following family-friendly work practices: family
and parental leave (either
work–life balance the paid or unpaid); child care,
relationship between a which may be subsidised and
person’s work and the provided either on-site or
commitments in the rest of off-site; and school holiday
their life programs. In addition, flexible Figure 17.10 Some businesses are working towards creating
flexible work practices work practices should be ‘work–life balance’ for their employees.
conditions that allow
available to workers of all
employees to balance work
and family responsibilities ages and may take the forms
more effectively of: offering flexible working
hours, part-time work or job
share, and home-based work
where employees work some or all of their hours at
home and telecommute.
While many employees would like to be able to
have flexibility in their working conditions, not all
industries find it easy to arrange. An article on the
CareerOne website (see Cambridge weblinks: http://
cambridge.edu.au/redirect/?id=7006) reported that
health and community care employees had the most
flexible working conditions (68 per cent), followed by
accounting, banking and finance employees (55 per Figure 17.11 Men and women of all ages use flexible work
cent). Only 37 per cent of manufacturing, transport arrangements to meet family commitments.

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those staff directly affected. These new arrangements reduce; retaining valued employees who might
should be checked to ensure they comply with any otherwise leave the business; promoting diversity
workplace agreements operating at the workplace. and fairness throughout the business; positive effects
Introducing flexible work practices brings on employee wellbeing; higher staff morale and
benefits to a business, such as: reducing or avoiding increased productivity of employees, as they are more
unnecessary recruitment costs as staff turnover will focused when at work.

CASE STUDY 17.3

Flexible working hours found to boost productivity
Cambridge Dictionaries Online defines flexible working as ‘a situation in which an employer
allows people to choose the times that they work so that they can do other things, for example
spend time with their children’. According to news reports, less than 50 per cent of Australian
companies have a policy on flexibility, and often those that do, do not take their policies
seriously.
In recent years, some Australian organisations have discovered that encouraging work
flexibility is a key to employee participation and productivity. They have tried to modify or
change their business cultures accordingly – which as one could imagine is not an easy or quick
transition.
Major Australian bank Westpac is one
example of an organisation that is taking work
flexibility very seriously, and both the bank
and its 40 000 employees are reaping the
benefits.
In June 2015, the bank instigated a serious
push to ensure that all staffing roles located
both in Australia and globally offer flexibility.
The push included the ability to change
working hours, compress work weeks, work
away from the office regularly or occasionally,
and share roles. Staff were also offered up to
12 weeks’ paid and unpaid leave a year.
Before the drive towards work flexibility,
Westpac claimed that over 60 per cent of its
Figure 17.12 Telecommuting is a way to provide flexibility to
employees (male and female) already worked
employees.
flexibly (that number is comprised of 58 per
cent of male workers with flexible hours and
68 per cent of female staff). When it asked if staff would need some form of flexibility in the
next three years, 90 per cent said yes.
Westpac chief executive Brian Hartzer explained that ‘if people have the flexibility to manage
their personal commitments, they are more likely to bring their whole selves to work every day.
And that means they’re more likely to do their best work and exceed customer expectations’.
Westpac’s business case for a more diverse workplace makes a lot of sense. Companies
with a diverse workplace culture have been linked with improved job performance and higher
productivity rates, as well as higher levels of innovation and profit.
Another area Westpac is succeeding in is gender inclusivity. For example, the bank has a
target of 50 per cent women in leadership by 2017, and work flexibility is seen as a crucial tool in
building gender equity.
Ainslie van Onselen, the head of Women’s Markets, Diversity and Inclusion at Westpac, says
it has been critical to get senior managers committed to role modelling flexibility. She claims

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 CASE STUDY 17.3 continued
that flexibility ‘puts the onus on the manager to judge performance based on productivity and
output, rather than just sheer presence in the office’. Van Onselen explained that the program
is supported with seminars and coaching on topics such as returning to work after leave, and
managing your career while also being a carer of dependents (children, parents or a spouse).
Westpac appears as a model case study in the fifth annual research report on achieving
gender parity in Australian organisations from Bain & Co and Chief Executive Women.
In its survey of over 1000 people in business, government and non-profit organisations, the
researchers found that men are increasingly demanding the ability to work flexibly, often to
take a more active part in parenting. That means flexible models are becoming more and more
relevant for men, without the traditional stigma or repercussions for their careers.
‘If Australian society really aspires to equal workforce participation by men and women at
every level of leadership, then there is a clear imperative to ensure that both genders are equally
enabled to share the caregiving role,’ the study found.

Analysis
1 How many people are employed by
Westpac?
2 In the next three years, what percentage of
workers at Westpac want flexibility in the
way they work?
3 What is the current percentage of workers
at Westpac using flexible work practices?
What is the breakdown of male/female
staff working flexible hours?
4 Identify the various options Westpac
makes available to employees to create
flexibility.
5 Outline the benefits to Westpac of
providing this flexibility to its staff.
6 What is the target Westpac wants to
achieve for women holding leadership
positions?
7 Identify programs being run by Westpac Figure 17.13 The business case for a more diverse workplace
has been apparent for years.
to improve its performance and support
employees who are seeking work–life
balance.

17.3 Legal obligations for • contracts of employment (written or verbal).

An employer is obliged to pay their employees their
staff correct pay and provide supporting documentation
(pay slips) and reimburse any work-related expenses.
The legal obligations of a business to its staff can
They must also deduct Pay as you go (PAYG) tax
come from any one of the following sources:
instalments from the pay of their workers and forward
• federal, state and territory laws it to the Australian Taxation Office (ATO). An employer
• industrial awards and agreements is also legally obliged to make appropriate payments
• tribunal decisions (currently 9.5 per cent) under the Superannuation

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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 act in a way
that damages the trust and confidence necessary for
an employment relationship.

Occupational health and safety

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 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.
Figure 17.14 ‘If you are injured at work’ poster. The WorkSafe
Employers must ensure that safety procedures are in
website (which can be accessed via http://cambridge.edu.au/
place, such as fire exits not being blocked, emergency redirect/?id=7000) should be accessed for more information
equipment being serviceable and the worksite being and future updates on any references used.
generally tidy.
Employees should also be provided with adequate
facilities, such as clean toilets, cool and clean ACTIVITY 17.2
drinking water and hygienic eating areas. Employees
Study the following scenarios and
must receive information, instruction, training and
determine whether the business is at
supervision to work in a safe and healthy manner.
fault in terms of OH&S regulations. Give
Workplaces should have a poster prominently
reasons for your answer.
displayed that outlines the procedure for an employee
1 Jeremy lifts by himself a large and very
in the event of them being injured.
heavy package from a small removal
In the event of a workplace injury, employees have
truck and hurts his back. The truck had
the right to return to work to take up alternative duties
an electric operating tail gate which
once they have received a WorkSafe Medical Certificate
can be used to lower heavy goods.
of Capacity. Employers have legal obligations under the
All workers at the furniture removal
Workplace Injury, Rehabilitation and Compensation
business have been trained in how to
Act 2013, which state that the injured worker does
use this device.
not need to be 100 per cent recovered to return to
work. The worker may undertake reduced hours in 2 Sally works as a data entry operator in
their regular job or alternative duties. an office. She has suffered in the past
Penalties for breaches of the Occupational Health lower back and neck problems. She
& Safety Act 2004 are imposed on both corporate uses a computer which sits on her desk
bodies (companies) and individuals. The maximum and uses a non-adjustable chair.
penalty for a company is $1 075 050 and for an 3 Peter works in a very noisy workshop.
individual it is $215 010. The business provides ear protection,
but Peter does not wear them. He has
suffered hearing loss.

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 Equal employment opportunity
In Australia, national and state laws cover equal
employment opportunity and anti-discrimination
in the workplace. Businesses are legally obliged to
create a workplace free from discrimination and
harassment. Putting effective anti-discrimination and Figure 17.16 Victorian Equal Opportunity & Human Rights
anti-harassment procedures Commission
discrimination the unjust in place while protecting
or prejudicial treatment employees has the added It is easy to detect direct discrimination, such as
of different categories of benefit to a business of
people, especially on the treating someone unfavourably due to their personal
improving productivity and characteristics, and this often occurs because people
grounds of race, age or sex
efficiency. make wrong or unfair assumptions about what
harassment behaviour
designed to make a To assist a business to people with particular characteristics are capable or
person feel uncomfortable, develop their policies and not capable of doing; for example, where a worker
offended, humiliated or put in place best practice does not get a job because the employer says ‘we
intimidated procedures, the Australian have employed people with your religious beliefs
Human Rights Commission before and they want to take off too many religious
provides written directions via its fact sheets. The holidays’.
Fair Work Ombudsman also works with employers Detecting indirect discrimination is a little harder
and employees to assist and educate them on how to and often becomes part of the culture or practices of
prevent discrimination in the workplace. a business. It could mean that the business is placing
In Victoria, the Equal Opportunity Act 2010 unreasonable requirements, conditions or practices
(the Act) provides protection for people from that act to disadvantage an individual or group of
discrimination and harassment in areas of public life, employees due to their personal characteristics or
such as workplaces, schools, clubs, shops or places circumstances; for example, if a business changes the
that provide services. The Act makes it illegal for start of its work day to 6 a.m. from the prior time of
someone to discriminate against an employee based 8.30 a.m. and requires all employees to be at work at
on their personal characteristics such as age, race, that time. While it may be a reasonable requirement
disability, physical features and political beliefs. It also for the business to commence its operations at this
is against the law to sexually harass, victimise or vilify earlier time, it could also be judged as not treating all
someone based on their race or religion. 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 their 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 bullying someone in the
an unreasonable manner workplace repeatedly
behaves unreasonably
towards another employee or
towards another person or
group of employees, which group of people and causes
leads to placing the bullied a risk to health and safety in
person’s health and safety at the workplace
risk. Bullying can take many
Figure 17.15 Flexible models are equally relevant for men, forms, such as publicly humiliating someone, verbally
without stigma or repercussions for their career. abusing them or spreading malicious rumours or

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gossip. It can be undertaken by managers towards respond to instances of workplace bullying in a way
their workers, among co-workers or even by workers that is judged as being appropriate to the seriousness
towards their managers. It is important that businesses of what has occurred.

ACTIVITY 17.3
YOU BE THE JUDGE

CASE 1
Lance applied for work in a bank and
was offered a position as security liaison
manager. He later claimed that, as a result
of a previous criminal record, the bank
withdrew its employment offer. Lance
argued that his criminal record was over 10
years old, and that the bank’s information
was not supplied by a standard police check
but was instead obtained from another
employee at the bank.
The bank confirmed that it had offered
Lance the job and had rescinded the offer
after it learned of his criminal record. The
bank claimed that as the role required liaison
with police services, Lance’s criminal past
made him ineligible for the position.
Questions
1 What do you think should be the
outcome of this claim?
2 Should Lance be allowed to work at Figure 17.17 You be the judge
the bank or should the bank pay him
compensation for lost wages?

CASE 2
Six years ago, Horace was made redundant in his role as a pattern maker for an industrial
company after 14 years of service. He claims that during his employment, he was an active
member of his trade union as well as a union delegate. In the years since his redundancy,
Horace has applied three separate times for employment with the company, but was
unsuccessful in his bid for a position. He alleges that he has been refused employment due
to his involvement in his trade union and claims that he was told he would not be offered a
position because he ‘had a history’ and had cost the company a large sum of money. The
company has denied the comments and claims that the three positions Horace applied for in
the last six years were either filled by a more qualified applicant or deemed unnecessary and
left unfulfilled.
Questions
1 Do you think that Horace has been discriminated against by the business?
2 Is there any action that needs to be taken by the company in this case?

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 ACTIVITY 17.3 continued
CASE 3
Stephanie had been working with her employer for more than 11 years when she became
pregnant. Unfortunately, she suffered from morning sickness and needed to come in to work
later in the morning. To compensate for this, she offered to leave work later than normal
so she could finish her daily tasks. Her employer told her that this arrangement was not
acceptable and started to deduct money from her wages for the hours not worked in the
morning.
Questions
1 Would you advise Stephanie that she should make a formal complaint about the actions
of her employer?
2 On what basis should the complaint be lodged?

Workplace Gender Equality contract and casual positions and a decrease

in jobs in the mining and construction
Agency industries
The Workplace Gender Equality Agency (WGEA) is – women – an increase in permanent part-time
an Australian government statutory authority whose jobs in healthcare, social assistance and retail
role is to promote and improve gender equality in – casual – male and female positions have
the Australian workforce. The agency was established increased in administration, support services,
by the Workplace Gender Equality Act 2012 (the Act) healthcare, social assistance, education and
with the purpose of overseeing that women and men training.
are equally represented, valued and rewarded in the • Senior management roles are heavily male
workforce. dominated with females making up 36.5 per cent
Businesses who have 100 or more staff are of management positions; however, they represent
required to submit to the agency each year a report only 15 per cent at CEO level. Twenty-five per cent
outlining the operations of their business based on of businesses have no women in key management
the following criteria: positions.
• the gender composition (i.e. male and female) and • The gender pay gap currently ranges between 19.1
their levels within the management hierarchy of and 24 per cent. Gender pay gap is the difference
the business between the average male full-time earnings and
• remuneration levels of their male and female average female full-time earnings as expressed as
employees a percentage of male earnings.
• employment conditions and practices relating Small businesses and their owners employ the
to flexible working arrangements, and working largest proportion of employees in the workforce.
arrangements and support provided to employees There appears to be limited awareness of gender
with family or caring responsibilities equality and pay equity issues by many of these
• consultations they have undertaken with businesses as they are not compelled by law to report
employees on issues of gender balance on these. It is essential that if equality and equity are
• any sex-based harassment or discrimination issues to be achieved, small businesses must ensure that
that have occurred. they manage and improve gender equality and pay
The WGEA, which commenced operations in equity at their workplaces.
2013, has now reported its findings for two years.
Some of the findings are:
• Workforce characteristics:
– men – a decrease in the number of men in
permanent full-time positions, an increase in

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 ACTIVITY 17.4
Go to the Workplace Gender Equality Agency website, and answer the following questions.
1 Identify the workforce characteristics for the current year as stated in the WGEA’s annual
report.
2 Compare these characteristics with those previously outlined and describe the major
differences (increases or decreases).
3 Has there been an improvement in the percentage of women in senior management
positions?
4 Within the Australian workforce, which industries are reported as being male dominated
and which are reported as female dominated?

17.4 Employee induction • create a favourable impression (public relations)

about the business.
Induction involves all the activities undertaken Creating an induction pack (employee handbook),
by a business when introducing a new employee which can be given to the new employee on the day
to the business and the they commence at the business, would be a good start
induction the process of department or area in which to their induction process. The pack would consist of:
introducing new workers they will work. The length of
to their place of work, their • an organisation chart listing the current roles and
the induction period, which employees’ names
job role, their colleagues,
supervisors, management often incorporates some form • a copy of the company human resources manual
and corporate culture of training, can last from a (relevant to medium or larger businesses)
couple of hours to several • a copy of their job description
days. The main purposes of induction are to: • the staff telephone list
• commence the socialisation process; that is, sense • a list of email addresses and how to use the
of feeling of belonging intranet of the business
• communicate the values, beliefs and expectations • a safety induction including evacuation procedures
of the business • security access.
• provide information about job tasks and
performance expectations

Figure 17.18 An induction program can make a new employee Figure 17.19 Employee handbook
feel welcome.

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 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
Organised for explanation of job procedures, duties and responsibilities
Organised any initial training requirements
Information sourced on the business’s expectations as to attendance,
personal conduct and appearance
Arranged orientation tour of facilities
Staff handbook and other induction material ready to be given to new
employee
All administrative/pay documentation compiled and ready for employee to
complete
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
Table 17.2 Simple induction checklist

The employee may then refer to this induction will become effective and reach expected performance
pack when they have queries in the early days of levels more quickly. After the initial formal induction
their new job. program, many businesses use a mentoring or
Using a simple induction checklist (see Table ‘buddy’ system to further assist the new employee to
17.2) can ensure that all necessary documentation settle into the job. The mentor or buddy will often
and arrangements are in place for the new employee. be assigned to assist the new employee in that first
A good induction program is important, as it important year as they gradually settle into their new
reduces staff turnover and means the new employee work environment.

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Chapter summary businesses are working towards creating
equal employment opportunity and
• Employers value their staff having a eradicating discrimination, harassment and
positive attitude, being dependable and bullying in workplaces.
cooperative. • Workplace gender equality is an important
• Employers expect their employees to enter issue. The Workplace Gender Equality
into a contract of employment, which sets Agency oversees the practices occurring
out their job role and working conditions. in businesses to ensure that women and
• Employers will rely on an award to set out men are equally represented, valued and
the pay and working conditions for their rewarded.
employees or negotiate an enterprise • Induction is the process of introducing new
agreement for a particular workplace. workers to the place of work, their job role,
• The National Employment Standards (NES) colleagues, supervisors, management and
set out 10 minimum standards that must corporate culture.
be reflected in all agreements that relate to • A well-run induction program means
pay and working conditions. that the new employee will become
• Employers expect their employees to more effective and reach their expected
be loyal to their business and to provide performance levels more quickly. It also has
appropriate terms of notice in the event the effect of reducing staff turnover.
that they resign or retire from the business.
• Employees also have expectations that Chapter summary questions
relate to their employment. 1 Define the following terms. Use each
• Employees want their conditions term in a sentence to demonstrate your
of employment to provide for fair understanding:
remuneration for their labour. a remuneration
• Remuneration can take the form of wages, b harassment
salary, salary package and benefits.
c salary package.
• Employees like to feel assured that
2 Imagine you are an employee who has just
they have job security; however, this
landed their first permanent full-time job.
expectation is often now not being met.
Identify what your expectations would be
• The expectation of having work–life from that job and the business.
balance is placing increasing demands on
3 Identify the expectations that your
employers.
employer would have of you. Describe why
• This has led to a variety of family they may differ.
friendly work practices being offered by
4 ‘Loyalty by an employee to a business is
businesses, such as family and parental
a thing of the past.’ Discuss whether you
leave, child care facilities or subsidies and
believe this statement is true or not.
school holiday programs.
5 Explain the difference between the
• It is also an expectation of employees of
following methods of remuneration: salary
any age that they should be able to have
and wages.
flexible work practices made available to
them. These can take the form of flexible 6 Work–life balance is an expectation that
working hours, part-time or job share, employees are increasingly placing on
home-based work and telecommuting. businesses. Describe the concept of
work–life balance and provide examples of
• Legal obligations for staff require
practices that a business would need to
employers to provide a safe and healthy
adopt to achieve it.
workplace (OH&S).
• Equal employment opportunity legislation
regulates workplaces to ensure that

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 7 Explain the effect that having three Extension questions
generations of employees in the workforce
is placing on employers. ‘Many businesses underestimate the
8 Outline why it is important for businesses importance of induction – taking an ad hoc
to adhere to legislative requirements approach, and relying on their employees to
relating to the management of staff. work it out as they go.’
1 Define the term ‘induction’, and describe
its purpose.
2 Explain the methods that should be used
to induct a new employee.
3 Describe the benefits that a well-run
induction program can bring to a business.

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CHAPTER 18 Key terms
• disability • Employer of

Global and corporate social • diversity

• Employee
Choice
• visa

responsibility issues
Assistance • volunteering
Program (EAP)

Overview What’s ahead

Businesses when they are being established need to
focus upon developing a workforce of the correct
size while also ensuring that employees have the Corporate
skills and personal qualities to be able to assist the social
Global issues
business to be productive and achieve its business responsibility
objectives. Many businesses find it difficult to source issues
their workforce entirely from local people. Seeking
workers from overseas is an option that many Staffing a
businesses take up. The approach a business decides
business
to take to manage its commitment to being socially
responsible when establishing its workforce will
impact on the policies created, its corporate culture
and the approach it takes to its staffing requirements.
Figure 18.1 Global issues and CSR both overlap with staffing.

Key knowledge
In this chapter students will learn about:
• Global issues such as overseas recruitment
• Corporate social responsibility issues regarding
establishing the staffing of a business.

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 18.1 Global issues Department of Immigration and Border Protection
advised the top three occupation groups sourced from
Employing people from overseas can sometimes be overseas were professionals (63.1 per cent), technical
the best option for a business if it is unable to find and trades workers (22 per cent), and managers (8.6
local employees with the necessary qualifications, per cent).
skills and experience required to meet the demands The Australian Government has put in place
of the job it wants filled. Employing people from methods for businesses to recruit skilled workers who
overseas may also bring to the business fresh ideas are currently living overseas; these include:
and new approaches on how to successfully operate • sponsoring a worker on a permanent basis. This
a business. means the worker will apply for permanent
migration through the Employer Nomination
Recruiting from overseas Scheme or, if the business is located in regional
The most popular countries that Australian businesses Australia, the Regional Sponsorship Migration
source their overseas workers from are India, China Scheme.
and the United Kingdom. In the year 2013–14 the

Figure 18.2 Employing people from overseas can sometimes Figure 18.4 Skilled overseas workers fill labour gaps in
be the best option for a business. Australia.

Figure 18.3 Employing people from overseas may bring to the Figure 18.5 Temporary skilled workers and workers under
business fresh ideas and new approaches. labour agreements often perform agricultural work.

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 • sponsoring a worker on a
visa an endorsement on a temporary basis by gaining
passport indicating that the a Temporary Work (Skilled)
holder is allowed to enter, Subclass 457 visa. This visa
leave or stay for a specified will allow the worker to
period of time in a country
come to Australia to work
for up to four years.
• entering into a labour agreement. The worker can
be employed either on a permanent or temporary
basis by the business entering into a formal labour
agreement with the Australian Government.
Should a business be interested in employing skilled
overseas workers, it can access the online service
SkillSelect, which is managed by the Department of
Immigration and Border Protection. This facility holds
details of skilled workers and business people living
overseas who are interested in migrating to Australia. Figure 18.6 Overseas workers arriving to fill short-term jobs
It allows a business to conduct a search based on
occupation, qualifications and English-language • providing diversity training to all employees at
ability. The Victorian Government also has a state the workplace; that is, current and new overseas
nomination program to assist in sourcing overseas employees. This will assist in gaining understanding
workers. It is the responsibility of the business to of and respect for the different cultures in that
ensure that these skilled employees wishing to work workplace.
in Australia will be allowed to do so. • providing a mentor or buddy to give the new
It is important that a business that has recruited employees ongoing support following their initial
skilled employees from overseas provides support induction.
mechanisms in the workplace. These could involve Some businesses have programs in place to
activities such as: assist newly arrived overseas workers to settle into
• undertaking a comprehensive induction process. their new communities, often assisting them with
This should explain how things work at the accommodation and welcome events, and providing
business and provide clear information about information about local services and attractions in
what is expected of them. their local community.

CASE STUDY 18.1

Recruiting health workers
Claire McKenzie manages the Clinical Care Division at Great Lakes Health and Community
Service approximately four hours southeast of Melbourne. Great Lakes Health provides a
diverse range of health and community services requiring a variety of professional skills and
resources, as Claire explains: ‘We have inpatient services; we have community nursing; we
have all forms of aged care and we provide childcare. There are two doctors associated with the
centre and the Ambulance Service is just next door. It’s a fantastically diverse organisation which
really provides a whole of lifespan service. So there’s demand for a wide variety of skills. And
that’s where our problems began.’
Overseas health professionals play an important role in filling long-term nursing vacancies
and continuing the provision of high quality health care services in the region. Claire’s team of
almost fifty staff in the clinical and catering divisions now includes a number of overseas trained
nurses who have migrated from the Philippines, India, China, the United Kingdom and Mauritius.
Despite the beautiful surrounds and friendly community, Great Lakes Health and Community
Service experiences ongoing challenges in attracting nursing staff. Claire became increasingly

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 CASE STUDY 18.1 continued
frustrated with the difficulties she faced recruiting staff for the variety of roles needed to sustain
such a diverse, community-based service, using standard recruiting tools.
This changed when Claire received a letter from a nurse who had come to Australia via China.
While there was ample room for him to join the team, Claire quickly realised that employing a
skilled migrant was more complex than the local recruitment process.
Claire initially used the 457 visa to employ her skilled migrants because she found that the
process was quicker and enabled a skilled migrant to work for up to four years. But employment
continuity was also an important consideration, and Claire now accesses the Regional
Sponsored Migration Scheme (RSMS), a permanent residency visa subclass which requires
migrants to commit to their sponsoring employer for two years.
Since adding skilled migration into the workforce planning strategy of Great Lakes Health and
Community Services and for the first time since commencing her current role, Claire now has
a full staff for the facility. ‘Our experience with skilled migrants has been an extremely positive
one. And our existing staff find our new arrivals to be so bright and happy and skilled and friendly
and hardworking. They are like a breath of fresh air. I now have six full time nurses, which
means that other people can take holidays. Our sick leave has also been reduced dramatically
and we don’t work as short-staffed as we did. It’s just been a revelation. It’s transformed our
organisation. Without skilled migrants, we would not be able to deliver such high quality Primary
Care in Great Lakes. Our entire division one nursing staff on some days can be skilled migrants
and that makes me very proud. What on earth would I have done if we didn’t have them?’ Claire
said. ‘Now that we’ve got our recruitment strategy working really well we are starting to think
of ways of retaining our staff. We know that some of them, when they get their permanent

Figure 18.7 Overseas health professionals play an important role in filling long-term nursing vacancies.

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residency, will want to move on and see a bit of Australia. But what I really hope is that at least
some will stay with us for a lot longer.
‘We’ve learnt along the way some really useful things we can do to help our newly arrived
staff settle into their roles, their new lives, and into the local community. As a matter of process,
we help out new staff with the basics, such as accommodation arrangements and an orientation
and education program that includes rotations in community nursing and advanced life support
education. But my staff go above and beyond to make new staff feel welcome and respected.
For example, they open their own homes for temporary accommodation, create social
engagement opportunities and avenues for finding cheap or gifted furniture and supplies. Our
new staff tell us that this makes all the difference.
‘In the future, we’d like to trial some new settlement support initiatives such as recreational
days with other skilled migrants in the region.’

Analysis 5 What scheme does Claire McKenzie

1 Identify the services provided by Great now use? How long must a sponsored
Lakes Health and Community Service. employee stay at the sponsored
2 List the job vacancies being filled by workplace?
overseas workers. 6 Identify the benefits Great Lakes Health
3 List the countries from which these enjoys as a result of recruiting and
overseas workers have come. employing overseas workers.
4 What process did Claire McKenzie initially 7 Describe the actions taken by Great Lakes
use to employ the overseas workers? Health to settle the overseas workers
into both their local community and life in
Australia.

Skilled workers from overseas holders usually look for short-term or casual work
in specific industries in regional Australia.
who are currently in Australia • refugees who have a protection or refugee or
Another group of skilled workers that could be humanitarian visa
recruited to fill a job vacancy are those who, while • skilled migrants who have come to Australia on a
born overseas, currently live and have the right to skilled visa because they have skills currently in
work in Australia. These workers may be: short supply in Australia.
• international students who hold a student visa It is the responsibility of the business, as an
• visitors on working holiday visas. These visa employer, to make sure the applicant they intend

Figure 18.8 Working holiday visa holders are encouraged to work in specific industries.

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 to recruit is allowed to work in Australia. Under the employment. Everyone that works in Australia has
Migration Act 1968, it is a criminal offence for a the right to basic workplace protections provided
person to knowingly or recklessly employ an illegal under workplace laws and award conditions and the
worker. The business must check the type of visa National Employment Standards (NES), which outline
and its associated work conditions prior to offering the 10 minimum entitlements of all employees.

CASE STUDY 18.2

Overseas student workers exploited by convenience store
Court documents reveal that the Fair Work Ombudsman (FWO) has launched legal action against
a 7-Eleven store owner who allegedly underpaid staff on a large scale, paying as little as $13 an
hour and falsifying payment records. At the time, the minimum wage for an adult retail worker
was between $17.98 and $18.52.
Eight employees working in the store were assessed as having been underpaid, with
one staff member allegedly being underpaid a total of $13 962.14 over a 13-month period
ending in August 2014. The staff were on student work visas, which permit students to work
a maximum of 40 hours per fortnight during their studies. FWO also alleged that none of the
workers received shift worker allowances despite working overnight on a 24-hour roster, and the
business owner also allegedly failed to pay penalty rates for Saturday and Sunday shifts worked
by his staff.
FWO is seeking confirmation that the business breached employment legislation and heavy
fines for the business owner.

Analysis 3 Describe why employees working on

1 What type of business is a 7-Eleven store? student visas are not keen to report their
2 Identify the allegations being made against employers to the Fair Work Ombudsman
the owner of this 7-Eleven store by the Fair for underpayment of wages and unfair
Work Ombudsman. working conditions.

The Australian Government recently made changes 457 visa. This change, while supported by employer
to allow highly skilled workers to stay in Australia for groups, has been criticised by unions.
a short period of time without the previously required

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CASE STUDY 18.3
Government relaxes entry requirements for short-term foreign workers

The Department of Immigration and Border

Protection has reviewed skilled migration, and in
December 2014 it released its recommendations
to relax entry requirements for short-term
foreign workers. Its proposals include extending
the six-month short term mobility visa to 12
months, meaning that overseas workers would
not have to apply for a 457 working visa.
Under a 457, stricter entry requirements include
English-language tests, and employers are also
required to demonstrate they have looked for
local workers before giving jobs to employees
from overseas.
Opposition spokesman for Immigration and
Border Protection Richard Marles said the Labor
Party was ‘deeply concerned’ about any proposal
Figure 18.9 Workers protested against 457 visas
to remove English-language requirements for
temporary skilled migrants as well as labour
market testing.
A spokesman for the Assistant Minister for Immigration and Border Protection said the Coalition
government fully supported the principle that Australian workers have priority for domestic job
opportunities. ‘An effectively managed skilled migration program is essential in supporting employers
in industries and regions experiencing skill shortages. It is essential in restoring growth in the
economy. It is essential in lifting our productivity.’
Australian Chamber of Commerce and Industry director of employment Jenny Lambert said all
stakeholders needed to recognise that opportunities for Australians are enhanced by a strong
economy that is globally competitive. She said the Department of Immigration proposal referred
to highly specialised skills. ‘Access to these skills can only benefit the skills development of the
Australian workforce as evidence shows that such arrangements allow for the transfer of skills to
Australians,’ Ms Lambert said.
However, workers’ unions fear these proposed changes to visa requirements will cost local jobs
and lead to the exploitation of overseas workers. Ged Kearney, president of the Australian Council
of Trade Unions (ACTU), said the proposed relaxation of requirements for temporary-entry visas
would undermine Australian wages and conditions, and would lead to further exploitation of foreign
workers. ‘We find it absolutely extraordinary that the government’s panel has made a recommendation
to just have open slather on the labour market,’ she said.
Similarly, Construction, Forestry, Mining and Energy Union (CFMEU) national secretary Michael
O’Connor argued that under the proposed changes employers would not be required to demonstrate
they had first tried to fill job vacancies with Australian workers before giving them to foreign workers.
‘It is absolute madness in the current environment, with unemployment at a 10-year high, to be
removing even more opportunities for people to gain access to the workforce,’ Mr O’Connor said.
‘The impact on young people will be particularly harsh. Youth unemployment is at crisis levels, yet
the majority of 457 visa approvals are for people under 30.’
(Source: Based on A Patty, ‘Overseas workers will be allowed to work for a year
without applying for 457 visas’, Sydney Morning Herald, 7 January 2015.)

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 CASE STUDY 18.3 continued
Analysis
1 Identify the change proposed by the
Australian Government.
2 Describe the unions’ reaction to the
change.
3 Which group in the Australian workforce do
the unions believe will be most adversely
impacted by the change?
4 What does Ged Kearney (ACTU) believe
will be the consequence of the change?
5 What two areas of the change cause
concern for Richard Marles, opposition
spokesman for Immigration and Border
Protection?
6 Which group does the government state
should have priority for domestic jobs?
7 Identify the benefits the government Figure 18.10 Youth unemployment is at crisis levels.
believe will flow from the change.

CASE STUDY 18.4

Federal government allowing more foreign workers to gain seasonal farm employment

The number of foreign seasonal workers on Australian farms will increase from July, 2015. Foreign
Affairs Minister Julie Bishop announced the Seasonal Worker Program would offer an additional 1,000
placements to more than 4,200 people. Workers on the program are from the Pacific and East Timor
(Timor Leste) and can work on farms for up to six months a year.
Andrew Macdonald, a spokesman for lobby
group AUSVEG, said his organisation supported
the changes. ‘Labour issues are an ongoing
issue within the Australian horticulture sector on
many vegetable and potato growing operations,’
he said. ‘So we do support any initiatives that
provide a greater pool of workers, a larger
workforce that is available for growers to get on
and get the job done.’
Ms Bishop, in a statement, said the program
allowed participants to send much-needed
money back home. ‘Due to high demand
for employees in the agriculture sector and
difficulties filling positions with Australian
workers, we have increased access for overseas
workers by removing the arbitrary caps on
other sectors put in place by the previous Figure 18.11 Seasonal agricultural workers employed on
government,’ she said. ‘These changes will allow a rural property

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 Australian businesses to better meet the demand for seasonal workers, while also providing valuable
economic opportunities for more workers from the Pacific and Timor Leste.’
Australian Council of Trade Unions (ACTU) president Ged Kearney said she wanted strict guidelines
to prevent the exploitation of foreign workers. ‘By and large, unions are supportive of the Seasonal
Worker Program and we were very happy with the safeguards that were put in place around it,’ she
said. ‘Increasing it by a small amount may well reflect the needs of our farmers using the program.
However, unions have a concern very broadly about the welfare of migrant workers generally. We
have been hearing terrible examples lately about how migrant workers have been exploited.’ Ms
Kearney said she heard reports of migrant workers that received 60 cents an hour and paid ‘exorbitant
rent’ despite living in crowded accommodation.
Mr Macdonald said AUSVEG wanted the Federal Government to expand the program to allow
workers from Thailand and Vietnam. He said AUSVEG also wanted an expansion of the work holiday
visa program to allow people from the Czech Republic, Israel and Indonesia to apply. ‘The fact is that
these jobs are there, they are regularly there, they are available, but despite this Australian farms are
often still grappling with labour shortages,’ Mr Macdonald said. ‘That’s why we do welcome programs
like the Seasonal Worker Program, the ongoing source of backpackers coming to Australia and taking
up work on properties. We really do feel that these assist farmers in filling labour shortages and
getting the job done during peak seasons.’
(Source: B Worthington, ‘Federal Government allowing more foreign workers to gain
seasonal farm employment’, ABC Rural, 24 February 2015.)

Analysis 3 Identify the benefits gained by both

1 How many foreign seasonal agricultural the employer and the workers in this
workers are now being allowed to work employment scheme.
in Australia under the Seasonal Worker 4 Describe some problems that have been
Program? identified with employing seasonal workers
2 Name the countries from where these from overseas.
workers are currently being sourced. To
which countries would AUSVEG like the
program extended?

Figure 18.12 Australian farms are often still grappling with labour shortages.

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 18.2 Corporate social
responsibility
management issues
when establishing
staffing of a business
There are a range of corporate social responsibility
(CSR) management issues or questions that could arise
when a business is establishing its workforce (i.e.
staff). Strategies that businesses may implement to
ensure they are judged as being socially responsible
include:
1 creating a diverse workforce Figure 18.13 Hiring a mature-age worker can be a good
2 establishing policies to support their employees investment for a business.
3 establishing policies that link employees to their
community.
Employing mature-age workers
Creating a positive, supportive and diverse work
The current Australian workplace has three
environment where employees feel valued while
generations of employees (baby boomers, generation
contributing to the overall success of the business
X and generation Y). Hiring a mature-age worker can
should be key objectives of any business. This
be a good investment for a business as they bring with
approach can contribute to the business being
them many years of knowledge and experience. They
recognised as an Employer of
Employer of Choice a could assist the business to improve their business
Choice based on the internal
business that is regarded as policies and practices that a processes and provide mentoring and training to less
a great place to work business uses to manage its
experienced employees. These mature employees also
save the business money as their rate of absenteeism is
CSR. If a business is judged as
usually lower than the other two generational groups.
being an Employer of Choice, it can also be regarded
A business that welcomes mature-age workers will
as demonstrating CSR.
certainly be judged as a better employer as well as a
Diversity in the workforce good corporate citizen.

Creating a diverse workforce is a proactive approach Employing people with a disability

that can be taken by a business to ensure it has a People who have a disability can bring a range
discrimination-free workplace. It is unlawful to of skills, qualifications, talents and experience to a
disadvantage employees and job seekers because business. For example, Telstra
of their race, colour, gender, sexual preference, age, is a business committed to disability a physical or
physical or mental disability, marital status, family or employing workers with mental condition that limits
carer’s responsibilities, pregnancy, religion, political disabilities. It has a formal a person’s movements,
senses or activities
opinion, national extraction or social origin. For a comprehensive Disability
business, having a diverse workforce means it can Action Plan (2013–2016)
benefit from the different talents, experiences and where one of its objectives is: ‘To improve attraction,
perspectives of its employees. recruitment, engagement and retention of people
diversity human There are a variety of ways with disability and their carers at Telstra’.
characteristics that make
that a business can create Case study 18.5 is about Kellie Pearson, a former
people different from one
another diversity in its workforce. Telstra employee who is profoundly deaf.

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CASE STUDY 18.5
Employing people with a disability: Kellie’s aspirations supported by employers

When Kellie Pearson graduated from university with a double major in accounting and marketing, she
sought an employer with a positive attitude to employing people with disability.
This determined young woman, who wears powerful hearing aids and relies heavily on lip reading,
chose Telstra’s graduate program as the offer of employment that best suited her needs.
After successfully completing three different placements in her graduate year, Kellie was appointed
as Senior Pricing Specialist in the Pricing Development team, where she had wide range of
responsibilities.
Kellie identified the following strategies as the most useful to her in overcoming communication
difficulties:
• When people phoned her, if she did not know exactly what they were saying, she asked them to
email or SMS her.
• For ‘talk’ with her colleagues, she regularly used Telstra’s Microsoft Office Communicator, which
allows instant talking to colleagues.
• Kellie was based in the same building as most people with whom she interacted, which allowed
her to rely on her lip reading skills.
Ten years after her stint with Telstra, Kellie is now based in Singapore, where she is a Management
Consultant at EY specialising in the Healthcare and Life Sciences sector. She continues to find new
ways to improve communications with colleagues on a global level through advances in technology,
including video conferencing.
To this day Kellie is appreciative of the high quality of support and encouragement she received from
Telstra.
(Source: Based on Australian Government, Job Access website,
‘Profoundly deaf – Kellie’s aspirations supported by employer’.)

Analysis 2 Outline the strategies Kellie takes to

1 Identify the approach taken by Telstra to overcome any communication difficulties
employing people with a disability. she may have.

Evidence has shown that not only is it socially teamwork. In addition, they have fewer days off, take
responsible to employ people with disabilities, less sick leave and stay longer at the workplace than
they actually boost workplace morale and enhance other workers.

ACTIVITY 18.1
Visit the Job Access website at Cambridge weblinks (http://cambridge.edu.au/
redirect/?id=7007).
1 Choose 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 through having this job.

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 Indigenous population, with 56 per cent of Aboriginal
and Torres Strait Islander Australians under 25 years
of age. Employing these young workers would
allow a business the opportunity of developing 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 Employers of Choice. They also believe that
improving employment opportunities for Aboriginal
and Torres Strait Islander job seekers is a key element
in providing their economic independence, which
will address the long term disadvantage experienced
by First Australians.  Employers have a critical role
Figure 18.14 Evidence has shown that employing people with to play in supporting this process for example by
disabilities boosts workplace morale and enhances teamwork.
employing local people in local jobs. Employers can
also support better education and training outcomes
Employing Aboriginal and Torres Strait for Aboriginal and Torres Strait Islander peoples by
Islander peoples making links with local communities and involving
A business could gain different perspectives, them in accredited employment based training such as
experience and knowledge by employing Aboriginal traineeships and apprenticeships (see Reconciliation
and Torres Strait Islander employees. It is worth Australia, at Cambridge weblinks: http://cambridge.
noting that the Aboriginal and Torres Strait Islander edu.au/redirect/?id=7008).
population in Australia is growing faster than the non-

CASE STUDY 18.6

Major supermarkets supporting Aboriginal
and Torres Strait Islander communities
Both Coles and Woolworths supermarket
chains have proactively committed to
providing employment to Aboriginal and Torres
Strait Islander peoples. Coles has stated
that it is committed to ensuring ‘their team
represents the communities they serve’. The
business has announced its ‘Aboriginal and
Torres Strait Islander Plan’, which articulates
Coles’ commitment to provide more jobs for
Indigenous team members. Coles claims that
it provides a range of opportunities for people
from Aboriginal and Torres Strait Islander
communities to actively develop their careers
within the company, across many areas of the
business.
Similarly, Woolworths demonstrated its
commitment to closing the gap between
Indigenous and non-Indigenous Australians Figure 18.15 Two major Australian supermarkets – Coles and
when it launched its Reconciliation Action Plan Woolworths
in June 2011.

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Analysis providing opportunities of working with
1 Visit the Coles Indigenous Employment small businesses owned by Aboriginal and
webpage and the Woolworths Diversity Torres Strait Islander peoples. Identify what
webpage. Summarise the approach type of businesses and products these
being taken by both these companies to communities might create.
employing workers from the Aboriginal and 3 Evaluate whether you believe Coles and
Torres Strait Islander communities. Woolworths are meeting their commitment
2 The third pillar of the Woolworths to being socially responsible employers
Reconciliation Action Plan relates to with the strategies they have undertaken.

18.3 Establishing policies

to support employees
Creating flexible and family-
friendly workplace policies
A business that offers flexible working arrangements
to all employees is recognising the personal and family
commitments of its employees. A flexible workplace
is 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 young children,
or older workers who are providing care to elderly
parents or an unwell partner/spouse. The employer
may offer flexible working hours, remote-working
opportunities, telecommuting, time-off policies and
wellbeing programs, which then provide employees Figure 18.16 Recognising personal, family and work
with tools for coping with the demands of the commitments is important.

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 modern workplace. Adopting these flexible working Community volunteering and
arrangements is seen as a way of attracting people
to the business and a good way to encourage skilled
engagement
workers to stay with the business. Businesses do not operate in isolation, as they are
Creating a policy on parental leave that exceeds part of and rely upon their broader community. The
the minimum legislated requirements and also culture of a business should therefore include giving
includes programs related to retaining connection back to its community. Many businesses now provide
with the employee while on leave are also examples financial, pro-bono and in-kind support for a range
of good business practice. of community organisations. It is important when
establishing the relationship with staff during the
Employee Assistance Programs recruitment and selection process that the applicant
An Employee Assistance Program (EAP) is an understands this important element of social
employer-funded (i.e. free to employee) counselling responsibility that is embraced by the business.
or other personal service that is provided to It would appear that younger generation workers
employees and often their close family members. (generation Y) do actually look to be employed by
This confidential assistance is businesses that are involved in volunteering and
Employee Assistance available for employees who community projects. They are looking for businesses
Program (EAP) a are experiencing personal, that have a positive culture of
confidential, short-term family and work-related which they can be proud. If volunteering freely
counselling service for they had to make the choice offering to do something;
problems that could impact on
employees with personal between two businesses with that is, receiving no
the performance and/or health payment
problems that affect their
of the employee. Initially, identical jobs, they would
work performance
businesses introduced these choose the one that has
programs to assist workers programs that engage with the community through
with issues related to alcohol, drugs and gambling. volunteering. From the viewpoint of the employer,
In more recent times, the scope of these programs a study by Volunteering Australia found that many
has been extended to assist with domestic and family employers look favourably upon applicants who are
violence issues. or have been involved in volunteering as they believe
they would have a better fit with the culture within
their business.

Figure 18.17 EAPs provide help to workers to overcome work-related or personal problems.

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CASE STUDY 18.7
Businesses pitching in to help

FareShare offers businesses a unique opportunity to escape the workplace and team build in a
different environment – the FareShare kitchen! Corporate groups learn from real chefs and cook
hundreds of meals for people in need on a single shift.
Every day one or more groups of employees
from over 70 businesses and other organisations
provide employees to help in the kitchen to
prepare the 25 000 meals per week that are
distributed to people in need. The volunteers
work half-day shifts in the morning and
afternoon with some three-hour shifts being
available in the evening.
In recent years, staff volunteering has become
a popular part of many corporate social
responsibility (CSR) programs. As well as
giving businesses a fun team-building activity,
FareShare sensitively provides employees
with some insight into hunger in Melbourne,
and environmental issues around food and
community service.
The feedback from people involved in its
corporate volunteering program has been
glowing. They value learning about food
insecurity and food waste, as well as picking up
some cooking skills and the bonding experience
with their colleagues. Many corporate volunteers Figure 18.18 It would appear that younger generation
have gone on to become regular volunteers with workers (generation Y) look to be employed by businesses
FareShare. that are involved in volunteering and community projects.
(Source: Based on the FareShare website.)

Analysis
Visit the FareShare Corporate Volunteering
webpage and answer the following questions:
1 List the names of the businesses that
volunteer at FareShare.
2 Describe the benefits for employees and
their business from being involved in this
worthwhile program.
3 What other programs are being developed
by FareShare as part of its commitment
to being socially responsible and
environmentally friendly in its operations?

Figure 18.19 In recent years, staff volunteering has become a

popular part of many CSR programs.

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 Chapter summary • Policies that create flexible and family-
friendly workplaces and establish
• Businesses often need to source Employee Assistance Programs act to treat
employees from overseas to satisfy their staff with respect and provide the help
staffing requirements. needed to overcome or balance their work
• The most popular countries from which and personal life.
workers are sourced are India, China and • Community volunteering and engagement
the United Kingdom. policies and programs link workers
• Skilled workers currently living overseas with their community. They also lead to
can be employed by being sponsored on a improved worker engagement at their
permanent basis, a temporary basis or by workplace, which will result in additional
entering into a labour agreement. benefits for the business.
• Other sources of overseas workers are
available for businesses to employ. While Chapter summary questions
these workers were born overseas, they 1 Define the following terms and use
are currently in Australia as international them in a sentence to demonstrate your
students, on a working holiday, as refugees understanding:
or have migrated to Australia as skilled
a visa
workers.
b induction
• The Australian Government issues a range
of visas to overseas workers wanting to c volunteering
work in Australia. d mentor
• Businesses employing overseas workers e diversity.
need to undertake a comprehensive 2 Describe the benefits that employing
induction program and provide them with a mature-age workers can bring to a
mentor for ongoing support. All employees workplace.
(local and overseas) at the workplace 3 Identify and explain the advantages that a
should receive diversity training. business would gain by providing diversity
• Managing the business’s commitment training to all employees.
to corporate social responsibility when 4 Identify which groups of employees or
establishing staffing can be achieved particular skill shortages are being filled by
through a range of policies and strategies: overseas workers.
– creating a diverse workforce 5 Identify and explain the advantages that
– establishing policies to support employing overseas workers can provide to
employees a business.
– establishing policies that link employees 6 Explain how programs where staff
to their community. members volunteer in the community or
• Businesses that adopt these proactive provide pro bono work to assist community
strategies are often regarded as Employers groups leads to greater employee
of Choice. engagement with the business for which
• Diversity in the workplace can be achieved they work.
through employing mature-age workers,
those with a disability, and Aboriginal and
Torres Strait Islander peoples.

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Extension questions 4 ensuring that employees are respected by
their managers and co-workers
Being recognised as an Employer of Choice 5 providing opportunities for employees to
provides a business with the reputation of grow both their skill base and their careers
being a desirable place to work. Set out below
6 making sure the business is committed
are a few characteristics attributed to being an
to and involved with its employees,
employer of choice that should be considered
customers and the community
by a business when trying to effectively
establish its staffing: 7 providing work–life balance through flexible
working arrangements.
1 providing remuneration to employees that
is equal to or above market rates Discuss whether you believe that a
business which incorporates the above
2 providing job security to employees
seven characteristics into its approach to
3 encouraging employees to feel empowered establishing staffing would be sufficient for
to make decisions and take responsibility it to be regarded as a good corporate citizen,
for their jobs and therefore have effectively managed its
corporate social responsibility issues.

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 GLOSSARY
accountability the extent to which a business has benefits financial rewards that are not paid directly
to account for its activities, accept responsibility in cash to an employee; for example, parental
for them and disclose results in a transparent leave and sick leave
manner best practice a method or technique that has
advertising informing potential buyers about a consistently shown results superior to those
product achieved with other means, which is used as a
application the act of applying for a job or benchmark
advertised vacancy; the letter or communication Better Life Index (BLI) developed by the OECD to
used in expressing interest in a job or advertised measure standards of living across a number
vacancy of different areas; for example, housing,
application form basic source of employment environment and social connections
information covering qualifications, experience bootstrapping a way in which a small business can
and other job-related data finance its operations without having to borrow
aptitude test a test of special abilities (e.g. clerical, substantial amounts of cash
language, artistic) that are required for a specific brainstorming a method for generating new ideas
job and solutions through spontaneous contributions
Australian Business Licence and Information Service based on intensive and freewheeling group
(ABLIS) a government service that assists people discussion
to find the government licences, permits, brand a powerful business asset that is essentially
approvals, registrations, codes of practice, a maker’s mark; it creates and brings with it
standards and guidelines needed to meet their awareness, desirability and power
compliance responsibilities brand leader the brand in the market with the
Australian Business Number (ABN) nine-digit highest market share
identifier of a company brand loyalty when consumers continue to purchase
Australian Company Number (ACN) nine-digit number the same product, even though rival products
to be used on a company’s common seal and all may exist
public documents involving the company brand stretching using an established brand name in
award an agreement that sets out minimum terms order to introduce unrelated products
and conditions of employment relating to an bricks and mortar business business with a physical
industry or occupation presence such as a shop front or office. Involves
B2B business to business face-to-face interaction with customers.
B2C business to consumer bullying someone in the workplace repeatedly
balance of payments (BOP) a record of the total value behaves unreasonably towards another person
of money and capital and imports and exports or group of people and causes a risk to health
between one country and another and safety in the workplace

balance sheet an accounting report that sets out the business angel an affluent individual who provides
assets, liabilities and proprietorship (owners’ capital for a business start-up, usually in
equity) of a business as at a given date exchange for convertible debt or ownership
equity
bank statement a periodical statement where the
bank itemises the transactions relating to an business association membership organisation
account; for example, debits, credits, government engaged in promoting the business interests of
and bank charges its members
business concept an idea for a business including
basic information such as the product, the target

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 market, plus proposed competitive advantage. career advancement moving from a junior-level
A business concept may involve a new product position to a more senior-level position in a
or simply a new approach to marketing or business
delivering an existing product. cash book one of the simplest forms of financial
Business Enterprise Centres a national network of record keeping; sets out all the cash transactions
government-funded centres that serve as a first of a business including receipts and payments
point of contact for business owners seeking cash flow tracking the cash or money coming into
business information, advice and guidance and going out of the business
business goals describe what a business expects to cash payments when items are purchased and paid
accomplish over a specific period of time and for in cash
represent the aspirations of the business
casual where an employee is appointed by oral
business hub a place where businesses and contract (not written) for short-term, irregular or
individuals go to seek support and have a place seasonal work
and space to use without necessarily setting up
causal research research that involves finding the
their own office
cause and effect of certain actions
business incubator an organisation that supports
cheque an instruction to the bank to pay money
new businesses by making available business
from an account to the person named on the
premises, office/secretarial services, advice,
cheque (drawee)
consultancy and training at minimal cost, until
cheque butt form of evidence to support writing of
that business is established
the cheque and payment of an account
business layout the physical set-up or arrangement
clicks and mortar business a business that utilises a
of a business. Includes placement and type of
hybrid online/bricks and mortar business model
plant and equipment, fixtures and fittings.
code of conduct guidelines to regulate standards
business location geographical site of a business
of behaviour and conduct either within an
business mentorship a person or program that offers
organisation or within an industry
knowledge, advice and experience to another
codes of practice sets of guidelines established by
person. Mentoring can be a highly effective
external bodies to regulate the standards of
way to provide people with the skills needed to
behaviour and conduct within an industry
develop a successful business.
company a separate legal entity (incorporated
business model the plan implemented by
body) that is subject to the requirements of the
a business to generate revenue and make a
Corporations Act 2001, owned by shareholders
profit. The model includes the components
who have limited liability, run by directors and
and functions of the business, as well as how
has perpetual succession
revenue will be generated and expenses
incurred. competitive advantage point of difference or
superiority over one’s competitors
business objectives the stated, measurable targets of
how to achieve business goals competitor a business rival in the same market for
products or services offered by a business
business plan the formalised planning a business
undertakes on a periodic basis complementary business offers for sale products
that are related to one’s business and may be of
business strategy the long-term plan of action
use to that business’s customers; for example, a
adopted by a business to achieve its goals and
bridal wear store and a florist
objectives
complementary pricing where the price is set low on
by-laws local government laws/regulations relating
one item and high on another item that would
to activities within a municipality
normally go together
capabilities competence to perform a task
conditions of employment what an employer has
capital resources human-made items used in
agreed to give the employee in return for the
the process of production. Machinery and
employee’s work
equipment are examples.

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 consumer a person or group who uses a product. customer base the group of customers who
Note a customer may be a consumer, but not repeatedly purchase the goods or services of a
all consumers are customers; that is, the person business and are the main source of revenue for
consuming a product is not necessarily the one the business
who purchased it. customer data base the collection of information
consumer behaviour the study of individuals and gathered from each customer. A data base may
groups, and the processes they use to select, include contact information, as well as details
secure, use and dispose of products, services, about past purchases and future needs.
experiences or ideas to satisfy their needs customer expectations the value that customers
consumer profile a statistical picture
of the typical believe they will gain from purchasing a
consumer of a product based on demographic particular good or service
data; for example, income, age, gender, customer needs something customers require
occupation because it is essential or very important rather
contracts legally binding agreements that than just desirable
incorporate the following elements: offer, customer relationship marketing (CRM) a business
acceptance, the intention to enter into legal process which uses marketing strategies and
relations, consideration, the capacity to contract, activities to develop relationships with clients,
legality of purpose, consent and certainty of gain customer loyalty and bring value to the
terms brand
cooling-off period a period of time where a customer satisfaction the degree to which customer
purchaser (in some cases) is permitted
to change expectations have been met
their mind about a purchase
decision making a multistep approach whereby a
copyright exists to protect the original expression selection is made between a range of different
of ideas (not the ideas themselves). Copyright alternatives
in Australia is free and automatic and tends to
demographic the statistical data of a population,
cover works such as books, films, music and
especially those showing average age, income or
newspapers.
education
corporate citizenship acceptance by a corporate of
descriptive research research that incorporates
its responsibility to stakeholders for actions and
consumers’ attitudes, intentions and behaviour
decisions
direct distribution channel a manufacturer sells the
corporate social responsibility (CSR) the commitment
product directly to the customer
by organisations to conduct their business
disability a physical or mental condition that limits a
in an ethical manner, to take responsibility
person’s movements, senses or activities
for the economic, social and environmental
consequences of their activities, and to being discrimination the unjust or prejudicial treatment of
accountable to a wide range of stakeholders, different categories of people, especially on the
including employees, customers and suppliers – grounds of race, age or sex
now and in the future. diversity human characteristics that make people
council grants include money and incentives different from one another
provided to businesses and individuals to pursue domain name a unique name identifying the website
business ideas and development in a web address
crisis a situation or set of circumstances that puts an dotcom business a business that has always
immediate focus on the business exclusively used an online business model
crisis management a technique used to manage an employee a person working for another person or a
unplanned (crisis) situation business for wages or a salary
crowdfunding a way of financing a business through Employee Assistance Program (EAP) a confidential,
donations of money from the public short-term counselling service for employees
customer someone who buys goods or services with personal problems that affect their work
performance

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Employer of Choice a business that is regarded as a external recruitment the assessment of the current
great place to work available pool of job candidates, other than
employment contract a formal written agreement existing staff, to ascertain if any are sufficiently
between an employer and an employee setting skilled or qualified to fill and perform existing
out the legal obligations of each party; an job vacancies
informal or oral agreement may also be entered fair trade trade between companies in developed
into countries and producers in developing countries
enterprise agreement a written collective agreement in which fair prices are paid to the producers
made between an employer and the employees Fair Work Commission (FWC) Australia’s national
at a workplace, setting out the terms and workplace relations tribunal. Its role is to assist
conditions of employment employees and employers to maintain fair
entrepreneurship the process of designing, launching and productive workplaces. The FWC is an
and running a new business. It is the capacity independent body that operates under the Fair
and willingness to develop, organise and Work Act 2009.
manage a business venture along with any of its Fair Work Ombudsman (FWO) an independent
risks in order to make a profit. statutory agency of the government of
Environment Protection Authority (EPA) authority that Australia that acts as a central point of contact
monitors the environment and the things that for free advice and information on the Australian
impact on the environment national workplace relations system
environmental audit highlights how the business false and misleading representation to lie or
affects the environment and sets a benchmark exaggerate about the features or benefits offered
for improvement by a product being sold
environmental sustainability the ability of an feasibility study initial research that is required to
ecosystem to maintain itself into the future; determine whether the business concept is
involves using the earth’s resources at a rate they potentially viable
can be replenished financial management managing financial activities
equal employment opportunity (EEO) providing people relating to the operation of a business
with a fair and equitable opportunity to succeed fixed-term contract employees engaged in either a
without any form of discrimination based on full-time or part-time capacity for project work
age, sex, race or nationality or physical or or to replace employees absent on long service
mental disability or parental leave
equal opportunity legislation laws which aim flexible work practices conditions that allow
to protect people from certain kinds of employees to balance work and family
discrimination in public life and from breaches responsibilities more effectively
of their human rights floating exchange rate the value of the currency is
ergonomics the study of the relationship between determined by the demand and supply for the
people and their working environment currency; it can change on a daily basis
evidence information which identifies type of focus group between six and 12 participants
transaction, its date, parties and financial value gathered together in an informal setting to give
(if any) their opinion on a product or service
exchange rates the price of a country’s currency in food miles used to measure the transport distance
terms of another currency travelled by food products between production
executive summary an overview or summary of the and consumption
key points contained in the business plan foot traffic pedestrian visitors to a business or
exploratory research collecting information in an commercial site
unstructured and informal manner franchise where a business owner (franchisor)
exporter sells home-country products overseas grants another (franchisee) the right to use their
trademark or trade name, business systems and
exports goods and materials that Australia sends to
other countries as part of trade

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 processes, to produce and market a good or human (employees) function within a business
service according to certain specifications in order to increase the efficiency of both
franchise agreement a legal document that outlines employees and the business
the rights and responsibilities of the franchisor importer purchases overseas products for resale in
and franchisee their home country
franchisee the person in a franchising imports goods and materials that come into Australia
agreement who purchases the right to use a from other countries
business’s trademarks, associated brands and incorporation the process of legally declaring a
other proprietary knowledge in order to open corporate entity as separate from its owners
a branch. In addition to paying an annual
indirect distribution channel a manufacturer sells
franchising fee, the franchisee also pays a
their product to a wholesaler and/or retailer
portion of turnover to the franchisor.
(intermediary) who then sells it to the customer
franchisor the company or individual owning/
induction the process of introducing new workers
controlling the rights to grant franchises to
to their place of work, their job role, their
potential franchisees
colleagues, supervisors, management and
gap in the market an opportunity for a business to corporate culture
enter into an area of the market not currently
industrial espionage gaining valuable information on
being serviced
a competitor’s activities (i.e. spying)
general partnership all partners are deemed to be
industry association representative body for a
equally responsible for the management of the
particular industry group
business. Each has unlimited liability for debts
informative advertising advertising that gives
and obligations.
consumers factual information about a product
generic brand a brand that attributes its identity to
rather than creating a product image
the retailer rather than the manufacturer
infrastructure the foundations and investment
generic market a market where broadly similar
needed in a country to provide the means for
needs of customers are met by sellers offering a
an economy to operate. It can include transport,
variety and often diverse range of products
communications, education, power and
Global Innovation Index (GII) aims to capture the electricity services.
multi-dimensional facets of innovation and
initial public offering (IPO) floating on the stock
provide the tools that can assist in tailoring
market involves publicly offering shares to raise
policies to promote long-term output growth,
capital
improved productivity and job growth
innovation generally refers to changing or creating
going rate setting a price for a product or service
more effective processes, products and ideas,
using prevailing market price as a basis
and can increase the likelihood of a business
goodwill the difference in value between the price succeeding
that a business is sold for and its net asset value;
insurance a contract, represented by a policy, in
reflects the value of the firm’s reputation and
which an individual or entity receives financial
trading contacts
protection or reimbursement against losses from
green marketing the marketing of products that are an insurance company.
presumed to be environmentally preferable to
intangible assets assets that lack physical substance
others
and are usually very difficult to value. Include
gross domestic product (GDP) total market value of patents, copyrights, franchises, goodwill,
production in a country over a period of time trademarks and trade names.
minus the costs of production
intellectual property (IP) the property rights over
harassment behaviour designed to make a person the creations of mind or intellect; can be an
feel uncomfortable, offended, humiliated or invention, trademark or original design
intimidated
internal recruitment assessment of current available
human resource management (HRM) the management pool of applicants from existing staff who have
of a wide range of responsibilities relating to the

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 the skills or qualifications to fill and perform the limited liability shareholders are only personally
job vacancy liable to the level of their original investment in
interview a one-on-one conversation between a job the company
applicant and a representative(s) of an employer limited partnership where liability of one or more of
that is conducted to assess whether the applicant the partners is limited
should be hired lobby group a group that aims to influence
intranet the internal or private network of a business organisations or governments in their decision-
based on internet technology making processes
job a group of tasks performed by an employee loyalty program a rewards program offered by a
job analysis a process to identify and determine in business to customers who frequently make
detail the particular job duties and requirements purchases. It may give a customer advanced
and the relative importance of these duties for a access to new products, special sales coupons or
given job free merchandise.
job board websites where businesses pay a fee to macro factors those factors that impact on the
the job board to list their job on the site and will business and are outside the control of any one
often accept job applications directly from the business. Examples include economic factors,
job board government policy, changes in the law and
global issues.
job description a written description
of a job’s title,
duties and responsibilities, including its location management by objectives (MBO) a process of setting
on the organisational chart goals, using the SMART principle, which relate
to an employee’s key areas of responsibility.
job design grouping together of tasks for a particular
It creates a sense of direction and provides a
job, which should incorporate variety and
measure for assessing the work performance of
challenge for the job holder
the employee.
job enlargement making a job bigger or more
market the group of potential customers with similar
challenging by combining various operations at
needs who are willing to exchange something of
a similar level (horizontal)
value with sellers offering various need-satisfying
job enrichment making a job more challenging so
goods or services
workers are required to use their full capabilities
market penetration a pricing strategy that aims to
and gain personal growth
set low prices initially to gain high market share
job rotation workers are moved between different
quickly
jobs to increase variety of work and create a
market positioning a product is placed within a
more flexible workforce
market with regards to its image, price and age
job specification detailed listing of the personal
of target market
skills and characteristics required to perform a
market research a systematic approach which assists
particular job
a business to make decisions about consumers
label placed on a product to inform the
and the marketplace
customer/consumer with information such as
market saturation occurs when most consumers
manufacturer, ingredients and use-by date
already own the product and the market is not
labour human physical and mental effort used in
growing; any sales that occur are replacement
creation of goods and services. Labour is a
sales
primary factor of production.
market segment relatively similar (homogeneous)
legal compliance the process by which a business
group of customers who are likely to respond in
ensures that it observes and complies with the
similar ways
external statutory laws and regulations
market segmentation an approach that is midway
leverage using (something) to maximum advantage
between mass marketing and individual
licence permit from an authority to own or use marketing; the approach defines and subdivides
something, do a particular thing, or carry on a a large homogeneous market into clearly
trade

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 identifiable segments having similar needs, natural resources a material source of wealth, such
wants or demand characteristics as timber, fresh water or a mineral deposit, that
marketing the process that provides the link occurs in a natural state and has economic value
between producers or providers of goods and network an interconnected system of people or
services, and the consumers of these businesses
marketing concept the business focuses on satisfying niche marketing concentrating all marketing efforts
the needs of the customer/consumer rather than on a small but specific and well-defined segment
just selling a product or service of the population
marketing consultant a professional (specialist) who occupational health and safety (OH&S) area
provides advice on marketing-related issues concerned with the safety and welfare of people
marketing mix the seven variables that are used engaged in work or employment. In Victoria,
when undertaking marketing strategies: product, workplace health and safety is governed by
price, place, promotion, people, physical a system of laws, regulations and compliance
evidence and process codes that set out the responsibilities of
employers and workers to ensure that safety is
marketing plan the plan that sets out the marketing
maintained at work.
objectives and strategy to be undertaken by a
business OECD the Organisation for Economic Cooperation
and Development; an association of nations
market-oriented approach a business strategy that
which promotes economic growth, prosperity
focuses on the needs and wants of consumers
and trade
and develops products to meet them
offshoring labour refers to work that is done in
mark-up pricing determined by adding gross profit
another country
to the direct cost per unit; usually expressed as a
percentage online business business that conducts activities via
the World Wide Web
mass marketing an attempt to appeal to an entire
market with one basic marketing strategy online sales when a person purchases a product or
utilising mass distribution and mass media; also service via the internet. Online shopping has
called undifferentiated marketing become popular because it is convenient and
can be done from anywhere.
maturity the stage of the product life cycle where
sales peak (saturation point); mature products operating environment the environment immediately
either decline or are extended to lengthen their external to a business with which it has close
life cycle interaction when conducting its business
activities
media release an item of news prepared for and
distributed to the media operational planning the detailed, short-term
planning undertaken by a business
mentor person who offers their knowledge, wisdom
and advice to someone with less experience overdraft facility an extension of credit from a
lending institution when an account reaches zero
merchandise the stock of goods in a store or
which allows the ability to continue withdrawing
business
money even if the account has no funds in it or
mission statement a written statement that defines a
not enough to cover the withdrawal
business’s core purpose and focus
Pareto Principle referred to as the 80/20 rule –
mixed market economy an economy that is based
approximately 80 per cent of the business
on both privately owned and run businesses
revenue is generated by approximately 20 per
and the government (public sector), which also
cent of the customer base
provides goods and services
partnership a legal form of business ownership
National Employment Standards (NES) 10 minimum
where two or more people (partners) work
employment entitlements that have to be
together
provided to all employees in Australia
partnership agreement a formal document which
outlines the duties and responsibilities of the
parties to a partnership

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passive investor often referred to as a ‘silent partner’, primary data information gathered firsthand by the
provides financial input into the business but business
does not actively participate in the business private company a company where the shareholding
operations is limited (small), with shares being sold
patent a right that is granted for any device, privately; often run as a family business; has the
substance, method or process that is new, words ‘Proprietary Limited’ (Pty Ltd) at the end
inventive and useful of the company name
penetration pricing a pricing strategy where the procurement policy the rules and regulations that are
product’s price is set lower than a competitor’s set in place to govern the process of acquiring
price; also used when introducing a new goods and services needed by a business to
product to the market function efficiently
permanent full-time the employee enters into a product the end result of the production process;
continuing contract of employment can be either a good or a service; one of the 7Ps
permanent part-time the employee enters into a of the marketing mix
continuing contract, with same employment product development the design and development of
conditions, but will work fewer hours than a new or existing products
full-time employee product differentiation products are developed and
permit a law or regulation or some type of official advertised to make them appear different from
approval to perform a task or complete an others on the market
activity product life cycle the stages through which all
personal selling product is sold by a salesperson, products pass: launch (introduction), growth,
preferably trained maturity, decline or extension
persuasive advertising attempts to create an product line a broad group of products that are
emotionally positive feeling about a product’s intended for similar uses and have similar
image to encourage consumers to buy it physical features
petty cash a small amount of cash held to pay for product market when a consumer is looking for a
items such as stamps, tea and coffee particular item; for example, a particular type of
place encompasses the distribution channels used to drink or car
market products to customers; one of the 7Ps of product mix a full set of all products being sold by a
the marketing mix business
planning a formalised decision-making process that product placement a method used to gain
is future oriented prominence of a product in the consumer’s
policy a written statement of the processes, mind; for example, in television, movies or the
procedures, rules and regulations internet
population entire group under study as defined by product recall when a defective product is sourced
the research objectives and either rectified or replaced after it has been
sold by the manufacturer
premium periodic payment made to an insurance
company professional association usually a not-for-profit
organisation seeking to further a particular
price the amount for which something is sold
profession and the interests of individuals
price elastic the degree to which demand for a
engaged in that profession
good or service varies with its price
Profit and Loss Statement an accounting report that
price inelastic a fall or rise in price of a product
outlines the revenue less the expenses for an
does not impact on the demand for that product
accounting period. It provides a business with
price leadership a business that through its dominant an overview of whether it has made a profit for
market position is able to set prices that other the accounting period.
businesses adopt
promotion (1) the advancement in rank or position
of an employee within a business related to
their previous position or job tasks; (2) the

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 use of advertising, branding, sales promotion record keeping maintaining accurate records of all
and public relations to inform and persuade matters related to business activities
consumers; one of the 7Ps of the marketing mix recruitment the process of finding the best qualified
proprietorship the ownership of a business pool of applicants
psychological pricing pricing strategy whereby Registered Business Name (RBN) a trading name
the price is set in accordance with the value under which a person (sole trader) or
consumers place on the product partnership conducts its business or trade
public the internal or external stakeholders regulation rule or directive made and maintained by
potentially affected by the actions of a business an authority
public liability insurance to protect the business remuneration the amount a person is paid for
against damages or injuries to another person or performing work tasks (i.e. job); it can take the
property form of cash and/or fringe benefits; it can be
public listed company larger company with unlimited referred to as a wage or salary
number of shareholders; shares can be freely research and development an activity undertaken
traded on the stock exchange; has the word by businesses to develop new methods and
‘Limited’ (Ltd) after its name innovations for products and services
public relations the way businesses communicate risk assessment conducted by an insurance
with the public and media with an aim to create company to assess the level of risk for which
and maintain a positive image and create a insurance cover is sought
strong relationship with their audience salary an agreed amount of money paid to
publicity a ‘free’ form of mass communication with employees for their labour during a year,
the aim of attracting favourable attention to a expressed as an amount per annum
business salary package the total value of an employee’s
qualitative research research based on in-depth, remuneration and is comprised of both cash and
open-ended responses that focus on emotional fringe benefits
or motivational aspects of consumer behaviour sales promotion use of incentives to encourage
qualities personal characteristics of an individual increased sales; for example, free gifts,
that make up their personality and determine competitions, ‘buy one, get one free’
how they act in a situation sample a proportion or subset of the total
quality assurance a system established to ensure that population being studied
predetermined quality standards are achieved secondary data information that has been previously
quality circle a group of workers who meet regularly collected
to discuss quality and production. Any proposed selection process undertaken by a business to
changes to production methods are then put decide whether to make a job offer to a
forward to management. candidate
quality control process of checking the quality self-regulation a group or industry regulates its own
standards of work done or quality of raw conduct and behaviour
materials or component parts
shareholder owner of a company
quantitative research market research based on
skills the ability to do something well, gained
structured, closed questions that aim to gather
through training and experience
responses that can be summarised in figures
skimming pricing a strategy where high prices are
questionnaire form of survey where questions are
set to ensure high profits before marketing
asked of respondents
advantage is lost
rate of interest the amount charged, expressed
Small Business Centres Victoria (SBCV) a network of
as a percentage of principal, by a lender to a
community based, not-for-profit business centres
borrower for the use of assets. Interest rates are
providing a range of business services in both
typically noted on an annual basis.
metropolitan and regional locations throughout
Victoria

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SMART objectives or goals which are specific, SWOT analysis an assessment of the internal
measureable, attainable or achievable, relevant strengths and weaknesses and the external
or realistic and timely or time-bound opportunities and threats for a business in a
social attitudes an acquired tendency to given situation
evaluate social things in a specific way. Attitudes tactical planning the planning undertaken by middle-
can be characterised by positive or negative level management to assist in implementing
beliefs, feelings and behaviours towards others strategic decisions; its time frame is medium
or a particular entity. term (one to two years)
social enterprise private sector business that tactics activities or courses of action taken by a
distributes profit to benefit the community rather business to achieve business objectives
than individual shareholders target market the market at which a product or
social media websites and applications that service is primarily aimed
enable users to create and share content or to team a group of employees with different tasks and
participate in social networking skills working together on a common project,
sole trader an individual owner of a business, service or goal
entitled to keep all profits after tax has been technology practical application of science to
paid but liable for all losses achieve commercial or industrial objectives
source documents documents that provide evidence total quality management (TQM) a concept whereby
of transactions all staff in a business have responsibility for its
special interest group a group of people or an process and output
organisation seeking or receiving special trademark a right that is granted for a letter, number,
advantages or privileges word, phrase, sound, smell, shape, logo, picture
sponsorship a business provides financial support and/or aspect of marketing
to a team, charity or event in return for transactions contractual arrangements undertaken
naming rights, merchandising or image for the by a business; for example, payment of wages
organisation or rent
staff a group of persons, as employees, charged transfer a sideways movement of employees within
with carrying out the work of a business the same level, from one job to another
stakeholder an individual or group that has a direct transition period a period of time when the previous
or vested interest in the activities of a business business owner works with the new owner
start-up commencement of business operations to introduce them to the business operations,
strategic planning long-term (two to five years) clients/customers, suppliers and other business
planning undertaken by senior management to contacts
achieve business objectives union an organisation of workers or employees who
superannuation a pension or lump sum payment have joined together to achieve common goals
made to workers on retirement; the money such as higher pay, better working conditions
comes from employers’ contributions made and job security
during the working life of the employee unlimited liability full liability of owner (if their
supplier supplies the inputs (resources) required for business fails) to the extent of their personal
the production process assets
supply chain a system of organisations, people, values statement outlines what the business sees as
activities, information and resources involved in its values and centres around integrity, honesty
moving a product or service from suppliers to and ethical behaviour
manufacturers and then on to consumers venture capital money provided by investors to start-
support services services (paid or unpaid) used up firms and small businesses with perceived
by businesses to assist them in their decision long-term growth potential. An important source
making; for example, legal or financial advice or of funding for start-ups that do not have access
daily operational activities to capital markets.

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 viability whether the business is capable of work environment the surrounding conditions
developing and growing in which an employee operates. Can be
visa an endorsement on a passport indicating that composed of physical conditions, such as office
the holder is allowed to enter, leave or stay for a temperature, or equipment, such as personal
specified period of time in a country computers. It can also be related to factors such
as work processes or procedures.
vision statement a statement that outlines the
aspirations and values of the business WorkCover compulsory insurance scheme that
provides employers with insurance cover for the
volunteering freely offering to do something; that is,
cost of benefits if workers are injured or become
receiving no payment
ill because of their work
wages monetary reward for labour, paid on a
work–life balance the relationship between a
weekly basis, calculated by multiplying the
person’s work and the commitments in the rest
hourly rate by the number of hours worked for
of their life
the period
workforce planning a continual planning process
warranty a written guarantee, issued to the
used to align the needs and priorities of
purchaser of an article by its manufacturer,
the business with those of its employees to
promising to repair or replace it if necessary
ensure it can meet its production and service
within a specified period of time
requirements and business objectives
wellbeing a good or satisfactory condition of
workplace relations historically referred to as
existence. It usually centres on health, happiness
industrial relations, workplace relations is
and prosperity.
concerned with the contractual, emotional,
wholesalers businesses that purchase in bulk from
physical and practical relationship between
producers and sell smaller quantities to retailers
employer and employee
word-of-mouth an oral or written recommendation
of someone

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INDEX
Abbott, Tony 277 Australian Securities and Investment Commission
Aboriginal and Torres Strait Islander peoples, (ASIC) 206, 223
employing 342–3 Australian Suppliers Directors 214
accounting and financial skills 8 Australian Taxation Office (ATO) 143, 148, 191
administrative skills 8 Australian Weaving Pty Ltd 85
advertising awards 312
informative advertising 242
persuasive advertising 242 B2B 22
as promotional technique 251–2 B2C 22
advertising consultants 145 Bakers Delight 86
advertising media, forms 252–3 balance of payments (BOP) 34
advertising online business model 130 balance sheets 205
advertising policies 199 bank accounts 200
affiliates online business model 130 bank statements 204
affirmative action laws 186 banking sector, competition 87
ageing population 60, 61–2 best practice 168
ALDI 224, 251 Better Life Index (BLI) 38
Amazon 76 Better Off Overall Test (BOOT) 312
ambition 10 bicycle couriers 209–10
analytical skills 8 Bishop, Bronwyn 276
anti-bullying policies 199 bootstrapping 113–14
anti-discrimination laws 186 Bosch, mission statement, vision statement and core
anti-discrimination policies 198–9 values 27–8
anti-discrimination procedures 324–5 brainstorming 14
aptitude tests 305 brand identity, establishing 221–5
Arcare 41–2 brand leaders 243
AusRegistry 181 brand loyalty 242
Austrade 147, 214 brand stretching 244
Australian Border Force 276 branding, role of 243
Australian Bureau of Statistics 148 brands, importance 244–6
Australian Business Licence and Information Service Branson, Richard 12
(ABLIS) 54, 148 bricks and mortar business model 131–3
Australian Business Number (ABN) 180–1, 191, 307 brochures 271
Australian Business Register 180 brokerage online business model 130
Australian Company Number (ACN) 126 Brunswick Business Incubator (BBI) 149–50
Australian Competition and Consumer Commission bullying 199, 324–5
(ACCC) 55, 172, 188, 262–3 Bunnings 86–7
Australian Consumer Law (ACL) 2011 188, 199, business activity statements (BAS) 191
262 business angels 112
Australian Consumers Association (ACA) 91 business associations 92–3
Australian dollar 71 business concept development
Australian Financial Services Licence 143 business opportunities and 21
Australian Industry Group (Ai Group) 93, 152 importance of 21–4
Australian Privacy Principles 213 market research and 22–4

Index 359
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 business confidence 64–6 operational planning 159–60
business contributions to society societal attitudes and behaviour considerations
economic contribution 32–7 58–62
social contribution 38–9 stages 159
business culture 225 strategic planning 159
business documents, and financial control 200–4 SWOT analysis 160–2
Business Enterprise Centres 148 tactical planning 159
business finance, sources 111–16 technological issues 67–8
business goals 24, 25, 26 business plans
business goods and services 238 appendices 171
business hubs 47 business profile 166
business incubators 148–50 components 163–71
business layout environmental audit 172
design factors 105 executive summary 164–5
offices 108–10 financial plan 171
retail operations 105–7 legal considerations 166
business licences 182 marketing plan 170–1
business location mission statements 164–5
building selection 103 nature of 163
needs of different businesses 102–3 operations section 167–70
selecting best location 99–104 production process 167–8
business loyalty 313–14 products and services 166–7
business managers, characteristics needed 9–10 quality management system 168–9
business mentorship programs 45, 151 regulatory strategy 166
business models staffing 170
bricks and mortar 131–3 sustainability plan 166
clicks and mortar businesses 132 sustainable practices 172–3
franchises 133–5 title page 163–4
importers/exporters 135–6 business profile 166
online business model 129–31 business regulation 180–1
social enterprise models 132–3 business resources
types 129–36 choosing 98–9
Business Name Register 180 types 98
Business Names Act 1962 180 business start-ups see new businesses
business objectives 24, 26 business structures, types 122–9
marketing and 220–1 business support services
public relations and 267–9 community-based services 148–51
staff performance and 282 financial support services 143–4
business operators, skills and qualities 7–9 formal and informal networks 152–5
business opportunities formal sources 139
and business concept development 21 informal sources 139, 140–1
criteria 17 legal support services 142
factors for consideration 3 local government assistance 145–6
sources 13–17 professional advisers and consultants 145
business planning professional, trade and industry associations
corporate social responsibility 79–81, 172–4 152
economic conditions 62–6 state and federal government assistance 147–8
global issues 69–79 business tax compliance 191
legal and government regulations 54–8 Business Victoria 147
levels 159–60 business.gov.au 147
macro factors affecting 53, 54 by-laws 146, 182
nature of 159

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Cadbury 245 consumer protection 223
Cancer Council 91 consumer rights 188–92
capital resources 98 consumer trends 233–4
career advancement 296 contracts 142, 190
cash books 201 cooling-off period 189
cash control 204–6 copyright 24, 25, 72–3
cash payments 201 Copyright Act 1968 73
cash receipts 202 core values 26
cash source documents 202–3 corporate citizenship 180
casual employment 308 corporate social responsibility (CSR)
casual research 227 and business planning 172–4
cellular office design 108 environmental concerns relating to production
chambers of commerce 93 80
Change Threads 173–4 and establishment of a customer base 262–3
cheque butts 209 importance 79–80
cheques 209 selection of suppliers 207–11
chocolate and confectionary manufacturing 57 social enterprises 81
Choice magazine 91 staffing issues 340–3
cigarette packaging 245 supply chain management 208–9
Clark Rubber 245 cost-based pricing 247
clicks and mortar businesses 132 Cotton On 127–9, 259
Coca-Cola Amatil 87 Council of Small Business Australia (COSBOA) 93
codes of conduct 192 councils see local government
codes of practice 192 CPA Australia 46
Coles 88–90, 224, 285, 342 Cracking the Code competition 46
commercial hire purchase 113 crisis management 273
CommInsure 224 crisis management plans 273–5
Commonwealth Bank 63, 223–4 crowdfunding 112–13
communication skills 7, 8 customer base
community online business model 130 corporate social responsibility issues 262–3
community relationships 271 establishing 221–5
community volunteering 344–5 marketing and 220–1
community-based business support services 148–51 customer data bases 213–14
community-based networks 151 customer expectations, identifying 84–6
company structure 124–5 customer loyalty programs 261–2
Competition and Consumer Act 2010 (CCA) 55, customer needs
172, 188, 199, 249 establishing 84–6
competition-based pricing 247 recognising changes in 15
competitive advantage 17, 207 customer observation 228
competitors, monitoring of 86–7 customer relations strategies, features and value of
complementary businesses 100 260–3
complementary pricing 248 customer relationship management (CRM) 260, 276
computer skills 8 customer satisfaction 169, 259–60
conditions of employment 315–17 customer service policies 19
conferences 272 customer-oriented organisation chart 221
confidence 10, 12 customers, treatment of 223–4
confidentiality 24 customised products 222–3, 223
consumer behaviour 232–3 Cyber Security Growth Centre 46
consumer confidence 64–6 cyberbullying 199
consumer contracts 56–7
consumer goods 238–9 Darrel Lea 245
consumer guarantees 188–9 data collection and analysis 229

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 David Jones 211 employment social enterprise business model 133
debt finance arrangements 112 Engineers Without Borders’ School Outreach
decision making 4 program 46
demand 17 enterprise agreements 312–13
demographic mega-trends 61–2 entrepreneurs, characteristics needed 9–12, 13
demographic segmentation 100 entrepreneurship 13–14, 42, 43
descriptive research 227 Environment Protection Authority (EPA) 187
design, as intellectual property 24 environment protection laws 187
Dick Smith 213–14 environmental audits 172
direct discrimination 324 environmental impact, production of goods and
direct distribution channels 249, 250 services 80
direct mail 253 environmental legislation 58
direct marketing/selling 254 environmental lobby groups 91–2
disability employment 285, 340–1 environmental sustainability 208
Disrupt Sports 223 environmentally sustainable input strategies 209
distribution channels, direct and indirect 249–50 equal employment opportunity (EEO) 296, 324–5
diversity in workforce 284, 340–3 Equal Opportunity Act 2010 (Vic) 198, 324
domain names 148, 181 equal opportunity legislation 186
dotcom businesses 132 equal opportunity policies 198–9
Double Shot Express’o 6–7 Equal Opportunity for Women in the Workplace Act
Drucker, Peter 283 1999 186
DuluxGroup 258 ergonomics 110
Essendon Football Club 197–8, 276–7
e-business 148 ethical approach 10
e-commerce 77–9, 234 ethical procurement 209
EarthCheck 39 ethical sourcing 211
eBay 222 exchange rates 71
ecoFins 43 exploratory research 227
economic conditions, and business planning 62–6 exporter business model 135
economic development units 153 exports 34
economic growth 33 external public 270
emergency management 198 external recruitment 296, 297
Employee Assistance Program (EAP) 344
employee benefits 316 Facebook 130, 298
employee induction 327–8 fair trade 91
employee support policies 343–5 Fair Work Act 2009 94, 185, 312
employees Fair Work Commission (FWC) 185, 312
business loyalty 313–14 Fair Work Ombudsman (FWO) 185, 186, 318
conditions of employment 315–17 Fairtrade certification 173–4
expectations from their job 315 false and misleading representations 190, 199
job security 318 family-owned businesses 93
terms of notice 314 FareShare 345
work–life balance 320–1 feasibility studies 22–3
Employer of Choice 340 federal government, business assistance 147–8
employer expectations 312–15 finance see business finance
Employer Nomination Scheme 332 finance companies 112
employment, business contribution to 32 financial control systems 200–6
employment agencies 299 financial institutions 111
employment arrangements 308 financial management 200
employment conditions 315–17 financial plans 171
employment contracts 308, 312–13 financial support services 143–4
employment laws 56, 185–8 Five Oceans 43

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fixed-term employment contracts 308 Hampton Street Traders Association 153
flexibility (personal) 10 ‘Happy Birthday to You’ 73
flexible work practices 320–2 health workers, overseas recruitment 333–5
floating exchange rates 71 hire purchase contracts 113
focus groups 229 Hockey, Joe 276
food handling regulations 146, 199–200 Homebrand range 224
food miles 90 hot desking 109–10
food services workers, wage entitlements 316–17 human resource management (HRM) 283–4
foot traffic 101 hybrid social enterprise business model 133
franchise agreements 134
franchisees 133 IGA 224
franchises IKEA 161–2
advantages and disadvantages 134 importer business model 135
in Australia 135 imports 34
business model 133–4 income tax 191
history of 134–5 incorporation 124
franchisors 133 independent contractors, employment of 308
free form layouts 107 Indigenous employment 342–3
free publicity 271 indirect discrimination 324
free trade agreements 214 indirect distribution channels 249, 250
fringe benefits tax (FBT) 191 industrial espionage 141
industry associations 92–3, 152
gap in the market 15 industry codes of practice 192
gender equality 326–7 Industry Employment Initiative 81
general partnerships 123 information management and technology
generic brand names 246 consultants 145
generic markets 232 information online business model 130
Gibson, Belle 276 informative advertising 242
Global Innovation Index (GII) 40 infrastructure 36–7
global issues, recruiting from overseas 332–5 initial public offerings (IPOs) 112
global markets 16 innovation 10, 13, 40, 41, 43
Gloria Jean’s 165 Instagram 253
goal setting, importance of 24–6 insurance 192
goods and services social enterprise business model insurance agents/brokers 145
133 intangible assets 120, 121
goods and services tax (GST) 191 intellectual property (IP), protection 23–4, 72–5
goodwill 120 interest rates 62–3, 87
Google Shopping 78 internal public 270
government regulations internal recruitment 296–7
for businesses 54 International Organization for Standardization (ISO)
compliance with 180–4 168, 169–70
governments international trade 34–5
assistance for businesses 145–8 internet advertising 253
investment in research and development 44–5 internet marketing 255–6
graphic designers 143 IP Australia – Patents 147
Green Link 209–10 iSelect 223
green logistics 209–10
green marketing 262 Jesuit Social Services group 81
grid layouts 105–6 job analysis 291–5
gross domestic product (GDP) 33 job applications 296, 301
guarantee policies 199 job board 299
job descriptions 292

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 job design 295 market opportunities, recognising 14
job enlargement 295 market penetration 242
job enrichment 295 market positioning 230
job interviews 303–4 market research
job rotation 295 benefits of 225–6
job security 318 feasibility studies 22–3
job specifications 292 systematic approach 225, 226–9
job vacancies, advertising 297–8 to refine business concept 22–4
uses 226
Kentucky Fried Chicken (KFC) 134, 135 market research reports 229
Kogan 213, 214 market saturation 242
Kroc, Ray 135 market segmentation 230–1
market segments 230
labelling laws 190–1 market-oriented approach 220
labels, and packaging 246 marketing
labour resources 98 7Ps 238–40
Law Institute of Victoria 93, 152 business objectives and 220–1
layout of premises see business layout customer base and 220–1
leadership skills 8 definition 220
legal compliance marketing, sales and promotion skills 8
key regulations 180–4 marketing concept 220
policies and procedures for 196–200 marketing consultants 145, 226
legal obligations to staff 322–7 marketing mix 230
legal regulations 54 marketing plans 170–1
legal support services 142 mass marketing 230
Lego 75 Master Builders Australia 93, 152
leveraging 244 Masters Hardware 86–7
licences 54 mature-age workers 340
licensing requirements 199–200 maturity stage of a product 241
limited liability 124 MAX Employment 81
limited partnerships 123 media releases 271
LinkedIn Recruiting Solutions 298 merchant online business model 130
loans 113 Metro Trains 257–8
lobby groups 91–4 Migration Act 1968 336
local government misleading and deceptive conduct 190, 223,
building and planning controls 146, 182 262–3
business support services 145–6 Mission Australia 5
by-laws 146, 182 mission statements 25, 26, 164–5
grants for new businesses 45 mixed layouts 107
local traders associations 152 mixed market economy 32
location of business see business location mobile marketing 256
loop layouts 106 modern awards 312
motivation, for starting a business 4–7
McDonald’s 134, 135, 165 mousetrap layouts 106
Madrid Protocol 75 Mt Hotham Skiing Company 300
magazine advertising 253 Myer 222, 260
management by objectives, (MBO) 282–3
manufacturers 103 NAB, infrastructure upgrade 36–7
mark-ups 247 National Employment Standards (NES) 308, 312,
market attributes 230 313, 336
market competitiveness 17 natural resources 98
market dimensions 230 negotiation skills 8

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networks 140 outdoor advertising 253
new businesses overdraft facilities 113
council grants for 45 overseas competitors 69
establishing from scratch 120 overseas markets 69–70
hard work required 47–8 overseas recruitment 332–5
legal requirements at start-up 179 overseas retailers 214–15
motivations for starting 4–7 overseas students, exploitation by employers 336
purchasing existing business 121–2 overseas suppliers 214–15
New Enterprise Initiative Scheme (NEIS) 151
newsletters 271 packaging 246–7
newspaper advertisements 252 pamphlets 271
niche markets 230, 232 Pareto Principle 221
Nike 91, 275 Partnership Act 1963 123
nostalgia factor 234 partnership agreements 123
partnerships 122–4, 126
Oasis Foam and Rubber 245 passion 12
occupational health and safety passive investors 123
compliance codes 196 Patent Cooperation Treaty (PCT) applications 72
legal obligations to staff 323 patents 24, 72, 147
legislation 55, 183–4 Pay as you go (PAYG) tax 64
policies and procedures 196–200 payroll tax 191
Occupational Health and Safety Act 2004 (Vic) 183, penetration pricing 242
196, 323 people, as part of marketing mix 258–9
OECD (Organisation for Economic Cooperation and permanent full-time employment 308
Development) 38 permanent part-time employment 308
office layouts permits 54
cellular office design 108 personal motivation, behind starting a business 4
combination layouts 110 personal selling 255
hot desking 109–10 personal skills, self-appraisal 4
open plan 109 persuasive advertising 242
types 108–10 petty cash 209
offshoring labour 70–1 physical evidence, as part of marketing mix 259
one-stop shopping 234 place, as part of marketing mix 249–50
online advertising 253 planning see business planning
online business models planning and organisational skills 7–8
advantages and disadvantages 131 planning regulations 146
types 129–30 policies and procedures
online business support information sources 154–5 emergency management 198
online businesses 77–9, 103 occupational health and safety 196–8
online recruitment agencies 298 relating to legal requirements 196–200
online sales 75–7 Porsche 275
online shopping 233–4 price
online staff selection 304–5 and demand 248–9
open days 271–2 as part of marketing mix 247
open plan office layout 109 price elastic 248
operating environment of a business price inelastic 248
competitors’ behaviour 86–7 pricing strategies
customer needs and expectations 84–6 competition-based methods 247
special interest groups 91–4 complementary pricing 248
suppliers and supply chain 87–91 cost-based methods 247
operational planning 159–60 marketing strategy methods 247–8
operations section of business plans 167–70 penetration pricing 242, 247–8

Index 365
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 psychological pricing 248 Qantas 261, 277
skimming pricing 248 qualitative factors 199
primary data 227 qualitative research 229
printers 143 quality assurance 168
Privacy Act 1988 191 quality circles 295
Privacy Amendment Act 2012 (Cwth) 213 quality control 168
privacy legislation 56, 191 quality management systems 168–9
private companies 124, 126 quality service 260
private investors 112 quantitative factors 100
process, as part of marketing mix 259–60 quantitative research 228
procurement policy 208 questionnaires 228
product development 240
product differentiation 243 racetrack layouts (retail) 106
product labelling 190–1 radio advertisements 252
product life cycle, stages 240–1 ready-to-eat meals 234
product lines 243 record keeping 200–4
product markets 232 recruitment see staff recruitment
product mix 243 Red Bull 245
product placement 246 reference checking 306
product recalls 189 Registered Business Name (RBN) 126
production process 167–8 registration of business names 180
products regulatory strategy 166
classification 238–9 remuneration 315
as part of marketing mix 238 reputation management 268–9
professional associations 152 research and development 16, 37, 44–5
Profit and Loss Statements 205 resilience 10
promotion resources see business resources
definition 251 retail layouts
as part of marketing mix 251–8 free form layout 107
promotion of staff 296 grid layout 105–6
promotional techniques, advertising 251–3 hints for 105
proprietorship 122 loop/racetrack/mousetrap layout 106
psychological pricing 248 mixed layout 107
psychometric testing 305–6 spine layout 106–7
public information 271 types 105–7
public liability insurance 192 retailers
public listed companies 125, 127 business locations 102
public relations as source of finance 111
business objectives and 267–9 RetailSplash 77
definition 267 return on investment 17
and publicity 256–7 returns of products 189, 199
reputation management 268–9 risk assessment 192
role 266, 267 risks 9
public relations disasters 276–7
public relations strategies salary 316
crisis management 273–5 salary packages 316
identification of ‘public’ 269–70 sales promotion 254–5
in planned business situations 270–3 sample (population) 228
trends 273 Sand Wedge 72
publications, business support 154 Scamwatch 148
purchase transactions, as legal contracts 190 school-based educational programs 46
Seasonal Worker Program 338–9

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secondary data 227 advising applicants of outcomes 306–7
self-belief 12 initial screening 301
self-regulation 192 interviews 303–4
seminars 272 online selection 304–5
service businesses 103 process 301
sexual harassment legislation 186 processing job applications 301
Sharapova, Maria 275 psychological testing 305–6
shareholders 124 reference checking 306
The Shed Café 165 work testing 306
Shoes of Prey 222 staffing needs
Singer, Isaac 134–5 identification 283–5
skills technology and 285–8
personal skills self-appraisal 4 stakeholders 282
successful business operators 7–9 state governments, business assistance 147–8
skills audit 9 Stock Exchange 206
skimming pricing 248 stock market 112
Small Business Centres Victoria (SBCV) 148, 151 strategic planning 159
small business grants 147 subscription online business model 130
Small Business Mentoring Program (SMBP) 151 superannuation 185
SMART objectives 282 supermarket market 224–5
social enterprise business models 132–3 supplier relationships 207
social enterprises 4, 5 suppliers 87
social investment business model 133 choosing 207–11
social media 223, 253, 298–9 importance 207
Social Ventures 81 trade credit 111
social wellbeing, business contribution to 38–9 supply chain 87–91
societal attitudes and behaviours 58–62 supply chain management 208–9
society, changes in the future 59 support services see business support services
sole traders 122, 126 sustainability plans 166
source documents 201 sustainability practices, adhering to 172–3
special interest groups 91–4 SWOT analysis 14, 160–2
spine layouts 106–7 Synergy Auto Repairs 5
sponsorship 272
spreadsheets 202 tactical planning 159
staff TAG Heuer 275
main issues 281 target markets 228, 232
as part of marketing mix 258–9 tax file numbers (TFN) 191
staff performance, business objectives and 282–3 taxation arrangements 54
staff recruitment taxation compliance 191
advertising vacancies 297 taxation rates 64
evaluation of methods 307 taxation revenue 36
external recruitment 296, 297 teamwork 295
indentifying human resource requirements 295–6 technical skills 7
internal recruitment 296–7 technological development 16
online recruitment agencies 298 technological issues
overseas recruitment 332–5 business planning 67–8
process 295 planning considerations 212
recruitment methods 296–300 staffing needs and 285–8
skilled foreign workers resident in Australia television advertisements 252
335–9 Telstra 340, 341
using social media 298–9 Temporary Work (Skilled) Subclass 457 visas 332–3,
staff selection 336, 337

Index 367
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 terms of notice (employment) 314 vision 10, 12
Thankyou baby 115–16 vision statements 26, 164–5
time management skills 8 Volkswagen 276
Total Beauty Network Pty Ltd 184–5 volunteering 344–5
total quality management (TQM) 169
tourism industry, environmental footprint 39 wages 315–16
tours 272 warranties 189, 199
trade association publications 154 Water Efficiency Labels and Standards (WELS)
trade credit 111 scheme 262
Trade Marks Act 1995 245 websites, business support information 154–5
Trade Practices Act 1974 188 WEF Global Competitiveness Index 42
trade practices legislation 188 wholesalers 102–3
trade secrets 24 Wilderness Society 91–2
trade unions 93–4 Woolworths 224–5, 261, 342
trademarks 24, 74–5 word-of-mouth recommendations 296
trading laws 55–6 work environment 110
transaction records 201 work tests 306
transition period 140 work–life balance 320–1
‘tweens’, as a consumer group 234 WorkCover 184, 185
Twitter 298 workforce
changes to 60
unions 93–4 diversity in 284, 340–3
unlimited liability 122 mobility 319
workforce planning 99
values statements 25 workplace bullying 199, 324–5
venture capitalists 112 Workplace Gender Equality Act 2012 326
VET in Schools 46 Workplace Gender Equality Agency (WGEA) 326–7
viability of business 21 Workplace Injury, Rehabilitation and Compensation
victimisation of employees 324 Act 2013 323
Victorian Automobile Chamber of Commerce workplace planning 283
(VACC) 152 workplace relations laws 185–6
Victorian Chamber of Commerce and Industry 93 WorkSafe insurance 184
Victorian Civil and Administrative Tribunal (VCAT) WorkSafe Victoria 197–8
56 World Intellectual Property Organization (WIPO) 72
Victorian Consumer Affairs 56
Victorian Equal Opportunity & Human Rights Yates 251
Commission 324 Yellow Pages 253
Victorian Small Business Commissioner 147
Virgin Australia 261, 302 zoning regulations 146, 182, 183

368 CAMBRIDGE VCE BUSINESS MANAGEMENT  | UNITS 1 & 2

ISBN 978-1-316-62119-6 © Cain et al. 2017 Cambridge University Press
Photocopying is restricted under law and this material must not be transferred to another party.