Unit 3

AOS 1 – Business Foundations

Sole Trader: is an individual business owner who is entitled to keep all profits earned after
tax. They have unlimited liability which means they are legally responsible for financial
losses incurred by the business.
Advantages: simple and inexpensive to establish, owner has total control of the business,
simple to wind up, minimal government regulation.
Disadvantage: unlimited liability for owner, harder for owner to get finance for the business,
reliant on owner’s own knowledge and skills.
Examples: hairdressers, trade business – design plumbing.
Incorporated: business owner and business is two separate entities, Unincorporated is
owner and business is the same entity.

Partnership: is a business where two or more people work together to form the ownership
structure. The owners have unlimited liability which means they have ultimate responsibility
for financial loss, in the same manner as a sole trader. Partnerships can have between 2 and
20 people listed as owner.
Advantages: inexpensive and simple to set up, risk is shared between partners, minimal
government regulation, workload may be shared, offers broader access to capital,
knowledge, skills, and experience.
Disadvantages: unlimited liability, liability for debts incurred by other partners, business
could be threatened by one partner leaving, potential for disputes and personality clashes.

Private limited company (Pty Ltd): may have up to 50 owners and operated under a more
complex management structure compared to sole traders, and partnerships. In the case of
such companies’ owners have limited liability, reducing their personal expose to business
debts.
Advantages: limited liability, extra capital can be obtained by issuing more shares, separate
legal entity, existence is not threatened by death or removal of one of the directors or
shareholders (perpetuity)
Disadvantages: higher degree of complexity in establishing, higher establishment costs,
higher degree of government control and reporting requirements, additional compliance
costs.

Public listed company (Pty): are listed on the stock exchange (ASX) and provide an
opportunity for members of the public to invest and purchase a “share” of the business.
Shareholders hold limited liability. Investors expect a return on their investment via annual
dividends and increases in share price.
Advantages: limited liability, able to gain extra capital through selling extra shares, separate
legal entity, exitance is not threatened by death or removal of one of the directors or
shareholders.
Disadvantages: highly complex structure, high establishment costs, needs more
accountability and compliance paperwork, additional compliance costs.
Social Enterprise: distribute profit earned to individuals, groups, and communities in need.
Often their support takes the form of funding or undertaking of specific projects. Such
businesses are increasing as members of the community become more socially and
environmentally aware of domestic and global issues.
Advantages: open up new markets – meet the need commercial businesses choose not to,
positive effect on profit and market share.
Disadvantage: difficulty obtaining capital/finance to start, operating costs, difficult to focus
on both social and financial objectives.

Government Business Enterprise: are owned and operated by the government. They seek
to earn a profit with funds returning to the state or commonwealth for reinvestment into
budgets. In most cases GBE’s are also providing a service to the community such as mail
delivery through Australia Post of fast internet utilising the NBN. VicRoads are a state-based
example.
Advantages: support communities where private companies might be hesitant to invest,
operate with some independence from the government
Disadvantages: political interference, increased regulation.

Clothing the Gap Questions:

1. To represent and promote aboriginal voice, educate Australia on issues affecting
aboriginals, motivate people to take action and make change, advocate for social
change. It is reflected by their products by having Ally friendly clothes to purchase
and wear and clothes specifically for aboriginal people to wear. Promote and
celebrate indigenous culture, with a vision of achieving equality.
2. They have several campaigns such as “ for our elders”, where they capture elder’s
stories in their homes and communities for future generations to be able watch and
learn from. They collaborate with indigenous artists, proving them with a platform to
showcase their design.
3. They are certified by ethical clothing Australia, meaning the workforce
manufacturing their clothes on Wurundjeri Country are being paid
appropriately, receiving all their legal entitlements, and working in safe
conditions. Highlights their dedication to environmentally friendly sourcing,
with initiatives like the use of organic cotton.
4. They adopt a variety of marketing techniques such as the use of social media, the
upload educational videos to YouTube for the wider Australian population to view
and learn from. They also have a podcast to promote first nation voices and
opportunities for people to understand more about their culture.
5. They involve various stakeholders of both ally’s and aboriginal Australians by having
Mob only and ally friendly products. They have partnered with Frank Green, they
partnered with them to help achieve the social objectives as they have similar values
for caring for country now and long term, it helps achieve business objectives of
making a profit by having new products for customers to buy which will help
increasing the profit of the business.
Business Objectives:
- are specific goals the business is aiming to achieve in a specified period of time.
- Provide managers and employees with a sense of direction and purpose.
- Should be measurable so it can be determined if they have been successful.
- Businesses will implement strategies that work towards the achievement of the set
objectives.
- Objectives help identify and prioritise resources required to achieve the goals

Objective
Make a profit Profit is what is left after business expenses
have been deducted from money earned
from sales. Profit = revenue – expenses.
Profit is important for business for them to
be able to grow and survive. Profits can be
improved by increasing revenue or
decrease expenses.
Increase market share Market share is a business’s proportion of
total sales in a market or an industry. It is a
measure of competitiveness, if increasing
then customers are choosing them over
others.
Fulfill a market need Meet customers’ expectations or provide a
good or service that is not otherwise
available to a market. Identifying market
needs can help a business determine what
goods or services they will offer and how to
position them to meet the needs of
potential customers. Market research helps
a business to determine where the gaps in
the market are.
Fulfill a social need Production and/or selling of goods and
services for the purpose of making the
world a better place. It is a common
objective for social enterprises, and is
aimed at supporting the cause to improve
the situation.
Shareholder expectations Shareholders expect to make a ROI. They
expect the business that they have invested
in to make a profit, as they receive a
proportion of the profits (dividends).
Shareholders are the owners of the
companies, managers will look to
implement strategies that will increase this
return for shareholders.
Improve efficiency Improving the operations of the business by
 looking at the inputs and outputs. Efficiency
is a measure of how well a business is using
its resources. Using fewer resources means
the business is being more efficient.
Improving efficiency could:
- Allow the business to get products
to the market quicker
- Reduce cost in the business
- Reduce the amount of waste,
minimise impact on the
environment.
- Allow the business to lower prices
for customers.
Improve effectiveness How well the business does in meeting the
business objectives. Being effective may
allow the business to produce higher
quality products, improving customer
satisfaction and customer loyalty.
Managers will implement stratergies for the
business to achieve their objectives, leading
to greater effectiveness.

Stakeholders:
- A stakeholder is a person or group with a vested interest in the business.
- Have different interest in the business.
- Managers need to consider the interest of different stakeholders and impact any
decision may have on them.
- They can come from the external environment or from the internal environment.

Owners:
- Owners are those that owns part of the business.
- Depending on the type of business and the type of ownership, the owner may or
may not be part of the daily operations.
- Many owners will be heavily involved of the key decision making of the business.
Those that own a small portion may not be a part of the process.
- Their interest is to see growth and a return on their investment.
Managers:
- Managers are those that make decisions and lead others to achieve business
objectives.
- Managers are responsible for the day-to-day operations of the business.
- Managers need to consider the impact their decisions have on other stakeholders.
- Their interest is to be involved in decision making and work towards the business
objectives and targets, as well as receive fair remuneration.

Employees:
 - Employees are those that perform tasks in the business in exchange for a wage.
- Employees perform the tasks required to achieve the business objectives.
- Employees are involved in training to improve their skills and abilities and may be
consulted or involved in decision making.
- Their interest is to receive fair pay and good conditions of work. They also want job
security and career advancement opportunities.
Customers:
- Customers are those that purchase goods/services from the business.
- Customers have needs and wants which can change over time.
- Businesses need to understand what their customers want so they can attract more
customers.
- Their interest is to receive good quality products at fair prices and to receive
effective customer service.
Suppliers:
- Suppliers provide resources to a business to help them produce their goods and
services.
- Resources may include things such as materials, machinery, equipment and finance.
- Due to globalisation, suppliers can come from all over the world.
- Their interest is to be paid promptly and fairly and to maintain a positive
professional relationship with the business.
General Community:
- Members of the community are those that live in the area in which the business
operates and sells its product.
- Businesses can contribute positively to a thriving community by:
- offering employment
- behaving ethically
- supporting local events
- considering the community and environment in key decisions.
- Their interest is to for the business to support the local community by offering
employment opportunities and by being environmentally friendly and ethically responsible

Stakeholder Conflicts:
- There can be conflicts between the interests of the various stakeholders.
- Managers need to consider the interest of each stakeholder when making decisions.
- A decision may impact one stakeholder positively, while it may impact another
negatively.

Management Styles:
- Management style refers to the behaviours and attitude of the manager when
making decisions and communicating with employees.
- It is how the manager leads the employees towards the business objectives.
- Some managers prefer to have full control over decisions while others prefer to
empower their employees.

Autocratic:
 - Autocratic management style is where the manager makes decisions themselves and
tells the employees of the decision.
- Characteristics Include:
o Manager making decisions without employee input.
o One way communication
o Clear, direct communication to employees
o Manager may constantly monitor employee progress.
o May motivate employees through discipline and threats.
When autocratic is best?
- Often best when there are simple tasks or when there is a crisis and task need to be
acted upon.
- Best when the task is urgent, and time is limited. Manager can make quick decisions.
- Can be used when employees don’t have the necessary skills or knowledge to make
decisions on their own.
- Some managers prefer to maintain control and act upon their ideas quickly.
- Advantages:
o Decisions are made quickly.
o Communication is made clear, ensuring employees understand their tasks.
o Can be effective when employees lack motivation.
- Disadvantages:
o Smaller pool of ideas due to no employee input.
o Employees may feel undervalued, resulting in poor morale.
o Can reduce creativity in the business.
o Difficult to get buy in from employees on decisions.
Persuasive:
- Persuasive management style is where the manager makes decisions themselves and
aims to convince the employees the decision is best.
- Characteristics Include:
o Manager making decisions without employee input.
o One way communication.
o More communication provided to employees. Reasons for the decisions and
the benefits are explained.
o A task orientated style where the focus is on employees completing tasks.
When persuasive is best?
- Can be used for both simple tasks as well as more challenging or complex.
- Best when the task is urgent, and time is limited. Manager is still able to make quick
decisions.
- Can be used when employees have the skills to complete the task but possibly lack
confidence. Or can be used when employees don’t have the knowledge to make
decisions.
- Some managers prefer to maintain control but aim to get employees on board with
decisions.
- Advantages:
o Decisions are made relatively quickly.
o Communication is made clear, ensuring employees understand their tasks.
o Can get the employees to buy in to a decision if convinced it is best.
o Can help develop the knowledge of employees as they understand why
decisions are made.
- Disadvantages:
o Smaller pool of ideas due to no employee input.
o Communication remains one way which can harm morale for some
employees.
o Can reduce creativity in the business.
o Employees can begin to feel manipulated over time if continue to be sold
ideas.
Consultive:
- Consultive management style is where the manager seeks feedback from employees
before they make the final decision.
- Characteristics Include:
o Manager makes the final decision.
o Two-way communication.
o Manager values employee input.
o Manager uses information gathered from employees to make an informed
decision.
When is consultive best?
- Can be effective when the task is more complex and requires multiple perspectives
or more in-depth information to make informed decision.
- Best when there is more time available to allow the consultation process to occur.
- When the employees have knowledge of the situation or experience in the area.
- Some managers value employee input and feel they can get buy in from employees
by including them in the process, yet maintain control over final decisions.
- Advantages:
o Helps manager make more informed decisions.
o Larger pool of ideas, using employee knowledge and experience.
o More likely to get buy in from employees.
o Employees feel more valued, Improving morale and employee retention.
- Disadvantages:
o More time consuming to make decisions.
o Some ideas may be overlooked, causing resentment or conflict.
 o Some employees may not have the knowledge or experience to effectively
contribute.
Participative:
- Participative management style is where the manager collaboratively makes
decisions with the employees.
- Characteristics Include:
o Manager and employees make decisions together.
o Two-way communication.
o Employees are encouraged to put forward ideas and discuss.
o Employees are valued and part of the decision-making process.
When participative is best?
- Often best when tasks are complex, and discussion needs to occur before decisions
are made.
- Best when more time is available so solutions can be discussed.
- Is best when the employees are experienced and have in depth knowledge of the
issue.
- Some managers have a preference to empower employees and utilise their skills and
knowledge.
- Advantages:
o Can result in effective problem solving due to the collaboration of decision
making.
o Employees have a sense of ownership over decision, improving buy in.
o Often result in improved morale as employees are involved in decisions.
o Greater pool of ideas as different perspectives is brought into conversation.
- Disadvantages:
o Can be time consuming due to discussions.
o May be disagreements about the final decision, causing conflict.
o It may weaken the authority of the manager.
Laissez-fair:
- Laissez-fair management style is where the manager gives autonomy and trust to
employees to carry out tasks and make decisions.
- Characteristics Include:
o Employees are provided autonomy to carry out their work.
o Employees can make their own decisions on how to achieve their objectives.
o Employees work independently with minimal management involvement.
o Manager may provide necessary support where required but does not
interfere with daily operations.
When Laissez-fair is best?
- Can be used for relatively simple tasks where manager is not required. However, can
be beneficial for specialised tasks where the employee is the expert.
- Can be used when time is critical so multiple employees can be responsible for their
own tasks, sharing the load. Or when the employee has time to complete large
projects.
- Best used when employees are highly skilled and experienced and can work
independently.
 - The manager that uses this style has a preference to trust employees with tasks and
provide them freedom and autonomy to get the job done.
- Advantages:
o Can lead to improved creativity within the business.
o Increased employee motivation due to the autonomy provided.
o Can be effective when employees lack motivation.
- Disadvantages:
o Can lead to a lack of direction within the business.
o There could be a misuse of resources due to loss of management control.
o Can lead to poor performance if the employees do not have the skills or
experience required.
Appropriateness of management styles:
- In responding to questions regarding management styles, you will need to be
able to identify when the most appropriate application of each style would occur.
- Variables that would impact your choice include:

- Nature of the task – how might this influence a managers management style?
- Time – does time really affect choice of style? Discuss.
- Experience of Employees – what effect might this variable have on style?
- Manager Preference – can all managers react and adapt their style depending on
the situation?

Management Skills:
- Management skills are the competencies that managers use to help them achieve
required objectives.
- Managers will often need to use a range of skills to achieve the business objectives.
- The skills they are required to use will depend on their management style as well as
the situation they are in.
Communication:
- Communication is the transfer of information from one person to another.
- Managers need to communicate to key stakeholders both internally and externally.
- Communication can come in many forms such as verbally, emails, reports, letters
etc.
- Managers can use communication to ensure that all team members understand the
tasks and goals they are working towards, as well as to provide feedback and
guidance.
- Managers may decide to use one-way communication or listen to feedback from
employees by using two-way communication.
Delegation:
- Delegation is where a manager passes on authority and responsibility to an
employee to carry out tasks.
- This can have benefits for both the manager and the employee.
o Manager: it frees up time for the manager so they can focus on other tasks as
the workload is shared.
o Employees: the employees may feel valued but also get to develop their skills
by taking on other responsibilities.
- Overall, delegation can improve the efficiency of the business as more work can be
completed.

Planning:
- Planning is the formalised process to set objectives and outline the strategies that
will help achieve them.
- Planning helps provide direction for those in the business and help ensure objectives
are achieved on time and in budget.
- Effective planning helps a manager stay organised, prioritise tasks and be efficient
with resources.
- Managers may be involved in different types of planning:
o Strategic: long term planning (3-5 years). Setting overall direction of the
business.
o Tactical: medium term planning (1-2 years). More specific steps that can be
achieved, helping achieve the strategic plan.
o Operational: short term planning (daily, weekly, or monthly plans). These are
very tangible goals that break down the tactical goal.

Planning Process:
- When making decisions, a manager will typically go through a set of steps to come to
a final decision.
1. Set the objective: outline what is to be achieved.
2. Analyse the environment: gathering information to make an informed decision. This
could involve a SWOT analysis.
3. Develop alternatives: developing a range of strategies that can help the business
achieve the set objective.
 4. Implement the plan: after analysing the alternatives, the manager will put the most
appropriate into place.
5. Monitor: the manager monitors the results and seeks feedback to determine the
success of the decision and the extent to which it has achieved the set objective.
Leadership:
- Leadership involves the process of coordinating projects, tasks, teams, and
individuals by influencing individual and team performance.
- Effective leadership helps build trust between management and the employees.
- Effective leaders will lead by example as well as support others when they find times
challenging.
- Leadership helps build a positive environment where everyone is working towards
common goals by communicating, listening, supporting others, and challenging
those that are not on board.
- Successful leaders have:
o Have a vision, a clear picture of an objective/goal
o Self-disciplined, patient with people and focussed on goals.
o Ability to set standards (role-model).
o Communicate effectively with employees, suppliers, customers etc.
using a variety of mediums.
o Ability to motivate and provide constructive feedback

Decision-Making:
- Decision-making is choosing the best course of action from a range of alternatives.
- Effective decision making will ensure the best strategies are implemented so the
business can achieve their objectives and drive the business forward within a
particular time frame.
 - Managers that make poor decisions can harm the business and its people.

Interpersonal:
- Interpersonal skills are the ability of a manager to interact with others and build
positive relationships.
- Effective interpersonal skills allow the manager to communicate accurately and
honestly yet maintain strong relationships.
- Helps build a harmonious and collaborative work environment.
- Interpersonal can assist in getting employees to buy-in to the business objectives and
can even help resolve disputes quickly.
- Managers displaying high levels of intrapersonal skills are:
o Strong communicators
o Team players
o Empathetic
o Motivational
o Ethical, honest & respectful
Additional Skills:
- Additional skills you may be aware of include:
- Negotiation
- Stress Management
- Problem Solving
- Time Management
- Emotional Intelligence
- Technical, Analytical & Visionary Skills
Relationship between styles and skills:
- The management styles are often a reflection of the skills that are being used.
o Eg. An autocratic manager relies heavily on one way communication and
centralised decision making.
o Whereas a participative manager relies more heavily on interpersonal skills,
two-way communication and decentralised decision making.
- Each style relies more heavily on different management skills.

Corporate Culture:
- Corporate culture is the shared values, ideas, and beliefs of the people within the
business.
- A business where the employees share the same values can create a positive work
environment where people are working towards the same thing.
- Some elements that make up a business culture:
o Values
o Rituals and celebrations
o Heroes
o Norms
o Physical spaces
o Overriding management style
- Developing culture by:
o Training and development
o Promotion
o Appraisals
o Employ externally.
o Change management style.
o Alter priorities such as budgets.
o Change style of dress and language.

Official corporate culture:

- Official corporate culture is the shared values and beliefs that the business wants its
people to display, revealed through policies, slogans and mission statements.
- The official corporate culture can be seen in official documents such as the mission
statement, slogans and policies, trainings, uniform, symbols.
- It is often used as a tool to attract and retain employees, as well as to create a
positive image and reputation the company.
- It sets the expectations for those in the business on how the behaviours and values
they should display.
Real corporate culture:
- Real corporate culture is actual values and beliefs that are displayed by the people in
the business.
- The real corporate culture can be seen in:
o How employees treat each other and customers.
o The relationship between managers and employees
 o How employees behave
o Employees following correct policies (or not).
o How problems are solved
- Ideally the real corporate culture would align with the official corporate culture,
however this is not always the case.

official
codes of conduct real
mission statement management styles
business logos celebrations
policies hiring criteria
vision statement staff diversity
business slogans office layout
unifrom regulations