WACE Business Management Enterprise ATAR cheat sheet

The external environment has three layers: the general/macro environment (PESTLE), the industry environment (Porter's Five Forces) and the internal environment (resources and capabilities).

PESTLE factors: Political, Economic, Social, Technological, Legal, Environmental. Each factor is classified as an opportunity or a threat for the specific business.

Economic indicators used in analysis: interest rates (raise cost of borrowing), inflation (raises input costs and can reduce real demand), unemployment (affects labour supply and wage pressure), exchange rates (affect import costs and export competitiveness).

Porter's Five Forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, competitive rivalry. High combined force strength implies low industry profitability.

Barriers to entry include economies of scale, capital requirements, brand loyalty, government licensing and access to distribution channels.

A stakeholder is any party affected by or affecting business decisions; stakeholders are ranked by power (ability to influence) and interest (concern with outcomes).

SWOT classifies internal Strengths and Weaknesses and external Opportunities and Threats; SWOT is descriptive, so pair it with TOWS to generate strategies.

A business's environmental uncertainty rises with the rate of change and the number of factors it must monitor; higher uncertainty favours flexible structures.

Sole trader: unlimited liability, owner keeps all profit, simplest and cheapest to establish, business ends with the owner.

Partnership: 2-20 partners under general law, unlimited liability unless a limited partnership structure is used; a written partnership agreement governs profit sharing and exit.

Private company (Pty Ltd): separate legal entity, limited liability, at least one shareholder, no public share offer; proprietary companies are classified as large or small by revenue, assets and employees thresholds.

Public company (Ltd): may raise capital from the public, must comply with disclosure and reporting obligations, and is subject to takeover rules.

A company is a separate legal person: it owns assets, contracts in its own name, pays company tax and continues beyond the death of shareholders (perpetual succession).

Trust: a trustee holds assets for beneficiaries; a discretionary trust allows income to be distributed among beneficiaries for tax planning.

Franchise: franchisor licenses brand, systems and IP to a franchisee for fees and royalties; franchisee gains proven systems but loses independence.

Organisational structures: functional (grouped by specialisation), divisional (grouped by product, region or customer), matrix (dual reporting; efficiency plus focus but creates conflicting authority), flat (wide span of control, few management layers).

Span of control is the number of subordinates reporting to one manager; chain of command is the line of authority from top to bottom.

A business plan states the mission, objectives, market analysis, marketing plan, operations plan, management structure and financial forecasts.

SMART objectives: Specific, Measurable, Achievable, Relevant, Time-bound. Objectives translate the mission into measurable targets.

Strategic (long-term, whole business), tactical (medium-term, functional) and operational (short-term, day-to-day) plans differ in time horizon and level of detail.

Break-even quantity = Fixed costs / (Selling price per unit - Variable cost per unit). Contribution per unit = Price - Variable cost per unit.

Margin of safety = (Actual or expected sales - Break-even sales) / Actual or expected sales x 100.

Cash flow forecast records expected cash inflows and outflows by period; a business can be profitable yet fail if it is illiquid.

Net cash flow = Total inflows - Total outflows for the period; closing balance = opening balance + net cash flow.

Contingency planning identifies risks and prepares responses; a risk is assessed by likelihood x impact.

A feasibility study tests whether the market, technical capacity and finances support the proposed venture before commitment.

Entrepreneur characteristics commonly assessed: risk tolerance, initiative, self-confidence, need for achievement, resilience and networking ability.

Sources of a business opportunity: identifying an unmet need, technological change, regulatory change, demographic shifts and gaps left by competitors.

Incremental innovation improves existing products or processes; radical innovation creates new markets or displaces existing products.

Product innovation changes what is sold; process innovation changes how it is produced, often lowering unit costs.

The product life cycle stages are introduction, growth, maturity and decline; extension strategies include new markets, new uses and product updates.

Diffusion of innovation: innovators and early adopters adopt first; the majority follows; laggards adopt last. Adoption speed rises with relative advantage, compatibility, simplicity and trialability.

Intrapreneurship is entrepreneurial behaviour inside an existing organisation, supported by autonomy, reward systems and tolerance of failure.

A patent protects a new invention for a limited term; a trademark protects brand identifiers; copyright protects original creative works.

The marketing mix is the 4Ps (Product, Price, Place, Promotion); services extend it to 7Ps by adding People, Process and Physical evidence.

Market segmentation divides a market by demographic, geographic, psychographic and behavioural variables; a target market is the segment(s) chosen.

Positioning is the perception the brand holds in the customer's mind relative to competitors; a perceptual map plots brands on two attributes.

Pricing strategies: cost-plus (cost plus mark-up), penetration (low launch price to gain share), skimming (high launch price), competitive, and price discrimination.

Price elasticity of demand = % change in quantity demanded / % change in price. Demand is elastic when the absolute value exceeds 1 and inelastic when below 1.

Market share = (Business sales / Total market sales) x 100. Market growth = ((Current market size - Previous market size) / Previous market size) x 100.

The product life cycle guides promotion: informative promotion at introduction, persuasive at growth and maturity, reminder at decline.

A brand provides differentiation and customer loyalty; brand equity is the added value a recognised brand name gives a product.

Customer relationship management builds repeat purchase through service quality, complaint resolution and loyalty programs; retention is usually cheaper than acquisition.

Operations: job production (one-off, customised), batch production (groups of identical items), mass/flow production (high volume, standardised), and lean production (minimise waste).

Productivity = Output / Input (units per labour hour). Capacity utilisation = (Actual output / Maximum possible output) x 100.

Quality management: quality control inspects output after production; quality assurance builds quality into the process; TQM involves all staff in continuous improvement.

Human resource cycle: acquisition, development, maintenance and separation. Recruitment may be internal (cheaper, motivating) or external (wider pool, new ideas).

Separation rates and staff turnover = (Number of staff leaving / Average number of staff) x 100; high turnover raises training and recruitment costs.

Gross profit = Revenue - Cost of goods sold. Net profit = Gross profit - Operating expenses. Gross profit margin = (Gross profit / Revenue) x 100.

Net profit margin = (Net profit / Revenue) x 100. Return on equity = (Net profit / Owner's equity) x 100.

Current ratio = Current assets / Current liabilities (a value near 2:1 is conventionally regarded as sound). Liquid/quick ratio excludes inventory from current assets.

Gearing = (Total liabilities / Total assets) x 100; higher gearing means greater financial risk because interest must be paid regardless of profit.

Growth methods: organic (internal expansion), horizontal integration (same industry, same stage), vertical integration (backward toward suppliers, forward toward customers), diversification (unrelated markets) and mergers/acquisitions.

Economies of scale: technical, purchasing, financial, managerial and marketing. Diseconomies arise from coordination and communication problems as scale rises.

Ansoff's matrix: market penetration (existing product, existing market), product development, market development, diversification (highest risk).

Globalisation drivers: trade liberalisation, lower transport and communication costs, and the search for cheaper inputs or new markets.

Multinational strategies: ethnocentric (home-country practices), polycentric (local adaptation), geocentric (global integration with local responsiveness).

Entry modes into foreign markets, in rising commitment: exporting, licensing/franchising, joint venture, wholly owned subsidiary.

Sustainability triple bottom line: economic, social and environmental performance. Triple bottom line reporting measures all three.

Stakeholder versus shareholder view: the shareholder view maximises profit for owners; the stakeholder view balances outcomes for employees, customers, community and environment.

Corporate social responsibility refers to voluntary obligations beyond legal minimums; sustainability reporting commonly covers emissions, waste, water and labour practices.

Decision-making process: identify the problem, gather information, generate alternatives, evaluate against criteria, select, implement, then review outcomes.

Ratio analysis compares performance over time (trend), against competitors (benchmark) or against budget (variance).

A favourable variance increases profit (revenue above budget or cost below budget); an unfavourable variance reduces profit.

Limitations of ratio analysis: historical data, differing accounting policies, no single correct ratio value, and ratios ignore qualitative factors.

Cost-benefit analysis compares total expected benefits with total expected costs; the option with the highest net benefit is preferred when funds are limited.

Qualitative decision criteria include stakeholder impact, brand reputation, legal compliance, risk exposure and strategic fit.

Opportunity cost is the value of the next-best alternative forgone; it is included in decision analysis even though it is not an accounting cost.

Sensitivity analysis tests how much a key variable (price, volume, cost) can change before the decision outcome reverses.

A decision is judged sound if it is based on relevant, reliable data, considers both quantitative and qualitative factors, and includes a risk assessment.