Structural factors and considerations

Unincorporated structures

1. Sole trader: One owner; assets owned by proprietor; unlimited liability. Like other structures, as a sole trader you can employ people to help you run your business.

2. Partnership: Two to twenty owners; pooled assets owned by proprietors; unlimited liability.

3. Trust: A relationship recognised by the courts, not a separate legal entity; a trustee (the legal owner) holds and manages assets (trust fund) for a beneficiary; since a trustee has liability, structure is often set up as a limited liability company.

Incorporated structures

1. Private (proprietary) companies: Up to 50 private shareholders (shares not traded on the stock exchange; liability limited to the face value (nominal, scrip or par value) of the shares (company limited by shares).

2. Public companies: Shares offered to the general public, often through the stock exchange.

3. Cooperatives: Democratic organisations owned and controlled jointly by their members for their common benefit; provide goods or services to members of the general public

Sole Trader

A sole trader is a business that is owned and operated by one person. The owner may employ other people to work in the business, but the owner or sole trader is the person who provides all the finance, makes all the decisions and takes all the responsibility for the operation of the business.

This type of business is easy to establish in terms of legal requirements. The only legal requirement specific to a sole trader is that the name of the business be registered if the name is different from that of the owner. For example, if Paul Jones operates a lawn-mowing service under the name of P. Jones or Paul Jones, then the name of his business does not need to be registered. If, however, he calls his business 'Paul's Lawn and Garden Service' he would have to register the name. The name must be registered with the Australian Securities and Investment Commission (ASIC).

A sole trader is not regarded as a separate legal entity, that is, the owner and the business are regarded as the same. This means that if the business is sued then the owner is sued, or if the business enters into a legal contract then the owner enters into the contract. If the business runs into financial difficulties, it is the owner or sole trader who has the financial problem and is solely responsible for the finances of the business. This responsibility may include selling personal assets, such a property or motor vehicles, to pay for the liabilities of the business. This is referred to as unlimited liability

Partnerships

A partnership is a legal business structure that is owned and operated by between two and 20 people. There are exceptions to this number, including medical practitioners and stockbrokers (allowed up to 50 partners); veterinarians, architects and chemists (allowed up to 100 partners); and solicitors and accountants (allowed up to 400 partners). A partnership is similar to a sole trader in that the owner and the business are regarded as the same; that is, there is no legal entity Consequently, the partners in a business are also subject to unlimited liability and so may be personally responsible for the debts of the business.

A partnership can be made verbally or in writing or by implication, that is, if two people set up a business together without a legally binding partnership agreement. A written partnership agreement is not compulsory, but it is certainly worthwhile in case disputes arise.

A partnership agreement usually has a standard set of contents. The size and operations of the partnership are subject to specific requirements under the Partnership Act 1982 (NSW).

Limited partnerships were introduced to allow one or more partners to contribute financially to the business but take no part in the running of the partnership. In this case, the partner is referred to as a silent or sleeping partner. The main reason for their investment is to add more capital or finance to an existing partnership.

Key aspects of a sole trader structure

• Is simple to set up and operate.

• Gives you full control of your assets and business decisions.

• Requires fewer reporting requirements and is generally a low-cost structure.

• Allows you to use your individual Tax File Number (TFN) to lodge tax returns.

• Has unlimited liability - all your personal assets are at risk if things go wrong. Your assets can be seized to recover a debt.

• Any losses incurred by your business activities may be offset against other income earned (such as your investment income or wages), subject to certain conditions.

• Doesn't require a separate business bank account, unlike a company structure. You can use your personal bank account but must keep financial records for at least 5 years.

• As the business owner, you're not considered an 'employee' of the business. You should pay yourself, which is usually a distribution of your profit, but this is not considered 'wages' for tax purposes.

• If you're a business owner without employees, there's no obligation to pay payroll tax, superannuation contributions or workers' compensation insurance on income you draw from the business. You can choose to make voluntary superannuation contributions to yourself though, to help you build up your superannuation.

• You can employ people to help you run your business. There are compulsory obligations that you must comply with, such as workers' compensation insurance and superannuation contributions.

• It's relatively easy to change your business structure if the business grows, or if you wish to wind things up and close your business.

• You can't split business profits or losses made with family members and you're personally liable to pay tax on all the income derived.

Key aspects of a company structure

• Is a separate legal entity.

• Has limited liability compared to other structures.

• Is a more complex business structure to start and run.

• Involves higher set up and running costs than other structures.

• Requires you to understand and comply with all obligations under the Corporations Act 2001.

• Means that business operations are controlled by directors and owned by the shareholders.

• Must be registered for goods and services tax (GST) if the annual GST turnover is $75,000 or more. The registration threshold for non-profit organisations is $150,000.

• Means the money the business earns belongs to the company.

• Requires an annual company tax return to be lodged with the ATO.

Marketing and Advertising

Definition: Marketing is the promotion of a product or service by an industry. Marketing refers to a far greater range of activities that are undertaken by a business in telling customers about their product and making that product attractive to customers. Marketing can be described as an attempt to get the right goods or services in the right quantity to the right place at the right time- and to make a profit while doing so.

The role of marketing the products involves creating a demand for the product in the hope of encouraging purchases by customers. Marketing increases sales and market share, so the business is helped to operate profitably and financial goals can be achieved.

Marketing concentrates primarily on the buyers/consumers, determining what their needs and wants are, educating them with the regard to the availability of products and to important product features, developing strategies to persuade them to buy, and, finally, enhancing their satisfaction with a purchase.

It is known that without effective marketing strategies a business/company will not survive. There are many different marketing strategies to embark on when choosing a strategy. For example most companies use the internet and create a website on their company promoting what good or service they sell. Although the site must be effective otherwise it will just be costing the company more money up keeping it then it is making money.

Marketing and sales differ greatly, but generally have the same goal. Selling is the final stage in marketing, which also includes pricing, promotion, place and product (the 4 P's). A marketing department in an organisation has the goals of increasing the desirability and value to the customer and increasing the number and engagement of interactions between potential customers and the organisation. Achieving this goal may involve the sales team using promotional techniques such as advertising, sales promotion, publicity, and public relations, creating new sales channels, or creating new products (new product development), among other things. It can also include bringing the potential customer to visit the organisation's website(s) for more information, or to contact the organisation for more information, or to interact with the organisation via social media such as Twitter, Facebook and blogs. Social values also play a major role in consumer decision processes. E-Marketing

"E-Marketing" is an extremely useful tool and it can easily be done from company computers. E-marketing is a type of e-commerce (refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks) that can be defined as achieving marketing objectives through the use of electronic communications technology such as the Internet, e-mail, EBook's, database, and mobile phone. It is a more general term than online marketing which is limited to the use of internet technology to attain marketing objectives.

E- Marketing Tools include:

• Pay per click- Companies pay by the amount of times the advertisement is clicked and directed to their website

• Search engine optimisation- is the improvement of being much more visible in a search engine for example Google.

Production and Efficiency

Efficiency

Improving efficiency ensures costs are kept to a minimum. Improvements in efficiency are measured by comparing costs of production with profits.

Increased production with lower costs and greater profit mean increased efficiency

Ways that companies can improve efficiency are:

• Replace human labour with automatic machines

• Computerising some aspects of the business such as administration

• Organising manufacture into an assembly line

• Ensuring workers are properly trained

• Specialise in one product so that 'economics of scale' can be achieved

• Multi-skill workers so that they can perform more than one operation and fill in for absent workers

• Bulk buy raw materials (cost savings)

• Locate near resources or market (lower costs of transport. time savings etc).

Restructuring

Introduction

As the business environment changes, so must individual organisations. Businesses and organisations need to constantly examine their business practices and structures to ensure they continually improve if they are to survive in a rapidly changing world.

Restructuring is the corporate management term for the act of reorganising the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organised for its present needs. Other reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or major change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring and financial restructuring.

Any restructure must be based on the analysis of accurate data such as production statistics and financial records and fully researched prior to commencement.

The need for restructuring

Businesses need to restructure for many reasons. Over recent years the need for changes in business structures have included:

• the emergence of new technologies

• the emergence of new materials

• the introduction of new production techniques and processes

• the development of new products and services

• the necessity to reduce costs and improve profits

• the need to attract investment

• ensuring the business operations run smoothly

• streamlining operations

• empowering employees to make their own decisions

• developing a teams approach

• changes in workplace culture

• the need for improved environmental protection

• Work Health & Safety legislation

• The need to reduce waste in time and materials

• Environmental considerations

• Restructuring can involve personnel, systems, processes, physical environment

• Effects can be positive and negative

• Restructuring can cause stress/anxiety on workers, causing a lowering of the quality of the product/services

• Workers moved during a restructure may initially lack the skills to perform new tasks, retraining must be undertaken to provide knowledge to overcome lack of experience. This can lead to a short drop in quality of the product/services

• New workers can provide a fresh attitude and show less complacency, possibly improving the quality of product/services

• The introduction of new machinery can improve the quality of products through increased accuracy, precision and output

• Restructuring personnel into specific teams with designated roles can help to improve product quality through skill specialisation

Managing the restructure

Research and careful management of the change process are essential for success in any restructure. Managers need to have a clear understanding of what they wish to achieve and how they are going to achieve it prior to them starting any restructure. This vision should be shared with all stakeholders to gain a sense of common purpose and understanding.

The most successful restructuring process will occur when those involved in the restructure are involved in developing the new structure and given ownership of as much of the process as possible.

The specific processes used by managers in any restructure will vary depending upon the aim and extent of the restructure. They may implement processes such as the principles of Total Quality Management, the Australian Quality Council’s PDSA 9 Step Improvement Process or “Paradigm Zero” change.

“Paradigm Zero”

This change management process is often used in situations where major restructuring is needed or when dealing with the introduction of new technologies and materials. Such situations often require a completely new structure rather than simply a change to an existing one. This process will become more common as the rate of change and development in our society increases. The process is outlined in the following steps:

1. Disregard all existing structures and solutions (“paradigm zero”)

2. Select a team

3. State the team’s desired outcomes

4. Decide appropriate structures and processes to deliver the outcomes

5. Only then overlay current and appropriate organisation, techniques and structures.

Options when restructuring

Many options are available to managers when restructuring. Over recent years the main changes in business structures have included:

• Strategic Alliances - amalgamations/joint ventures

• Outsourcing – production or services

• Flatter organisational structures – reducing middle management

• Network Structures – coordination of subcontracted production or marketing.

Quality control

Quality control, or QC for short, is a process by which entities review the quality of all factors involved in production. ISO 9000 defines quality control as "A part of quality management focused on fulfilling quality requirements".

This approach places an emphasis on three aspects (enshrined in standards such as ISO 9001):

1. Elements such as controls, job management, defined and well managed processes, performance and integrity criteria, and identification of records

2. Competence, such as knowledge, skills, experience, and qualifications

3. Soft elements, such as personnel, integrity, confidence, organisational culture, motivation, team spirit, and quality relationships.

Inspection is a major component of quality control, where physical product is examined visually (or the end results of a service are analysed). Product inspectors will be provided with lists and descriptions of unacceptable product defects such as cracks or surface blemishes for example.

Historical background

Modern humans are distinguished from other species by their extensive use of tools to control and adapt to their surroundings. Early stone tools such as anvils had no holes and were not designed as interchangeable parts. Mass production established processes for the creation of parts and system with identical dimensions and design, but these processes are not uniform and hence some customers were unsatisfied with the result. Quality control separates the act of testing products to uncover defects from the decision to allow or deny product release, which may be determined by fiscal constraints. For contract work, particularly work awarded by government agencies, quality control issues are among the top reasons for not renewing a contract.

The simplest form of quality control was a sketch of the desired item. If the sketch did not match the item, it was rejected, in a simple Go/no go procedure. However, manufacturers soon found it was difficult and costly to make parts be exactly like their depiction; hence around 1840 tolerance limits were introduced, wherein a design would function if its parts were measured to be within the limits. Quality was thus precisely defined using devices such as plug gauges and ring gauges. However, this did not address the problem of defective items; recycling or disposing of the waste adds to the cost of production, as does trying to reduce the defect rate. Various methods have been proposed to prioritise quality control issues and determine whether to leave them unaddressed or use quality assurance techniques to improve and stabilise production.

Quality Assurance v's Quality Control

Quality assurance (QA) is a way of preventing mistakes and defects in manufactured products and avoiding problems when delivering solutions or services to customers; which ISO 9000 defines as "part of quality management focused on providing confidence that quality requirements will be fulfilled". This defect prevention in quality assurance differs subtly from defect detection and rejection in quality control, and has been referred to as a shift left as it focuses on quality earlier in the process i.e. to the left of a linear process diagram reading left to right.

The terms "quality assurance" and "quality control" are often used interchangeably to refer to ways of ensuring the quality of a service or product. For instance, the term "assurance" is often used as follows: Implementation of inspection and structured testing as a measure of quality assurance in a television set software project at Philips Semiconductors is described. The term "control", however, is used to describe the fifth phase of the Define, Measure, Analyse, Improve, Control (DMAIC) model. DMAIC is a data-driven quality strategy used to improve processes.

Quality assurance comprises administrative and procedural activities implemented in a quality system so that requirements and goals for a product, service or activity will be fulfilled. It is the systematic measurement, comparison with a standard, monitoring of processes and an associated feedback loop that confers error prevention. This can be contrasted with quality control, which is focused on process output.

Quality assurance includes two principles: "Fit for purpose" (the product should be suitable for the intended purpose); and "right first time" (mistakes should be eliminated). QA includes management of the quality of raw materials, assemblies, products and components, services related to production, and management, production and inspection processes. The two principles also manifest before the background of developing (engineering) a novel technical product: The task of engineering is to make it work once, while the task of quality assurance is to make it work all the time.

Historically, defining what suitable product or service quality means has been a more difficult process, determined in many ways, from the subjective user-based approach that contains "the different weights that individuals normally attach to quality characteristics," to the value-based approach which finds consumers linking quality to price and making overall conclusions of quality based on such a relationship.