Qualifi syllabus

1. Qualify Level 3 Diploma in
Introduction to Business Environment
Unit BM301:An introduction to the Business
Environment

2. Unit BM301: An introductionto the Business
Environment
Unit code: A/615/5045
Learning Outcome 01: Know different types of
Businessesand their ownershipand the different types
of stakeholders
1.1: Describe two different types of business, and their ownership
 Sole Trading
 Private Limited Company
Sole Trading
A sole trader is also called a sole proprietorship. It is a business that is owned and run by a single
individual. This individual may or may not hire employees for the business, but he/she generally
makes the business decisions of the company. This means that the owner’s name will be the one
used for contracts. It also means that any loss, debt, or legal issues will be shouldered by the
owner. A sole trader business is easier to establish than any other business structure, which
makes it a good choice for people who are interested in trying out a small business.
Advantages of being a sole trader
 Simple to set up and operate.
 You retain complete control of your assets and business decisions.
 Fewer reporting requirements.

3.  Any losses incurred by your business activities may be offset against other income,
such as your investment income or wages (subject to certain conditions).
 Allows you to use your individual tax file number (TFN) to lodge tax returns.
 You are not considered an employee of your own business and therefore don’t pay
payroll tax, superannuation or workers’ compensation on income you draw from the
business.
 Relatively easy to change business structure if your business grows or if you wish to
wind things up
Disadvantages of being a sole trader
 Unlimited liability which means all your personal assets are at risk if things go
wrong.
 Little opportunity for tax planning – you can’t split business profits or losses with
family members and you are personally liable to pay tax on all the income from the
business.
Private Limited Company
A private limited company is a form of privately held business structure. It is a form of
corporation that protects its shareholders by restricting ownership and functioning as a separate
entity. A private limited company is a separate legal entity that can incur debt, make contracts, or
face lawsuits in itself, separate from its shareholders. Shareholder liability is limited - they will
only serve to lose only up to the amount they have invested or guaranteed. Different private
limited companies have different restrictions in their bylaws and policies which are often made
to prevent corporate takeovers.
Advantages of a company
 Limited liability for shareholders.
 Well understood and accepted structure.
 Able to raise significant capital.
 Can carry forward losses indefinitely to offset against future profits.

4.  Easy to sell and pass on ownership.
 Profits can be reinvested in the company or paid to the shareholders as dividends.
Disadvantages of a company
 Significant set-up and maintenance costs.
 Do not retain complete control.
 Complex reporting requirements.
 Can’t distribute losses to its shareholders.
Main Differences Between Sole Trading and Private Limited Company
Table Format
Sole trader Private limited Company
Definition A business structure
owned and run by a
single individual
A privatelyowned
business structure that
protects its
shareholders with
limited liability
Members Owner, employees Shareholders, directors,
officers, employees
Owners Sole trader
(individual)
Shareholders
Minimum amount
of members
1 1-2, dependingon
location

5. 1.2: Describe different types of stakeholders whose presence affect the
purpose of two organizations
Stakeholders
A stakeholder is a party that has an interest in a company and can either affect or be affected by
the business.
Owners’ means of
income
Profits of the
company,
withdrawals
Dividends
Liability Unlimited Limited
Taxation Based on owner’s
income tax
Corporation tax
Separate entity? No YES

6. Internal Stake holders
Internal stakeholders are people whose interest in a company comes through a direct
relationship.
 Employees
Employees are primary internal stakeholders. Employees have significant financial and
time investments in the organization, and play a defining role in the strategy, tactics, and
operations the organization carries out. Well run organizations take into account
employee opinions, concerns, and values in shaping the strategy, vision, and mission of
the firm.
Importance of Employees
Employees are important to businesses, because they directly affect productivity and
profitability. A company that sacrifices employee morale to cater to shareholders may find
themselves with an unmotivated workforce. Employees who lack motivation do not benefit an
organization. Employers must take an interest in the satisfaction of their employees. When

7. employees are happy, organizations experience an increase in productivity and employee morale.
A company’s management and leadership skills play an important role in employee satisfaction.
Responsibilities of employees in organization
 to personally do the work they were hired to do
 to do their work carefully and seriously (In some cases, they could be fired or disciplined
if they’re often late for work, or if they’re absent too often or for no good reason.)
 to avoid putting themselves or others in danger
 to follow their employer’s instructions (There are some exceptions. For example, if an
employer asks an employee to do something dangerous or illegal, the employee doesn’t
have to follow these instructions.
 to be loyal
 Owners
individuals (or groups of individuals) who invested to the organization the capital, and has the
sovereign right over the organization and its property.
Importance of Shareholders
Companies depend on shareholders to buy their stocks to raise money for growth, research,
development and marketing. The importance of shareholders to a business causes some
managers to cater to the desires of shareholders without considering how they affect employees.
In some cases, shareholders can pressure firm directors by refusing to reelect them, effectively
excluding employee interests. Shareholders who exercise their power are usually institutional
shareholders with a large financial interest in the company. If an institutional investor buys a
large amount of a company’s shares to gain control of the company, the institutional investor is
engaging in a hostile takeover.
Responsibilities of owners in organization
 responsible for the growth, stability, direction and daily operation of the business
 Meeting with service vendors or product suppliers to facilitate delivery
 Make buying trips to purchase inventory
 Creating sales displays
 Stocking the shelves
Interest and influences of Employees and owners
Interest Influences
job security increasing or decreasing
productivity

8. Employees
higher pay providing good or bad
customer service
improved working
conditions
in extreme cases,
withdrawing their labour
and going on strike
Owners
make a profit investing or withdrawing
equity into the business
receive high dividends hanging management (at
AGM)
External Stakeholders
External Stakeholders are individuals or groups outside a business or project, but who can affect
or be affected by the business or project. Arguably external stakeholders wield the most
influence on the long term success of a business or project, because external stakeholders will
often be the end users/customers.
Customer
Customers are the individuals and businesses that purchase goods and services from another
business.
Customers want the business to produce quality products at reasonable prices. Shareholders have
an interest in business operations since they are counting on the business to remain profitable and
provide a return on their investment in the business.
Suppliers
A supplier is an entity that supplies goods and services to another organization. This entity is part
of the supply chain of a business, which may provide the bulk of the value contained within its
products.
Learning Outcome 02:Understandhow businessesare
organized
1.1 Identify how two different businesses are organized

9. Organization of sole trading
A sole trader is a person who sets up the business with his mm resources, manages the business
himself by employing persons for his help and alone bears all the gains and risks of the business.
Characteristics of Sole Proprietorship:
Individual Initiative:
This business is started by the initiative of a single person. He prepares the blue prints of the
venture and arranges various factors of production. He may employ other person for assistance
but ultimate authority and responsibility lies with him. All the profits and losses are taken by the
single individual.
Management and Control:
The proprietor manages the whole business himself. He prepares various plans and executes
them under his own supervision. There may be some persons to help him but ultimate control
lies with the owner.
Owners and business exist together:
In sole-trade business there is no separate existence of the business with the owner. The business
and owner exist together. The business is dissolved if the owner dies, becomes insolvent or is
removed from the scene.
Limited area of operations:
A sole-trade business has generally a limited area of operations, the reason being the limited
resources and managerial abilities of the sole trader. He can arrange limited funds only and will
be able to supervise a small business. Since all decisions are to be taken by the proprietors, so the
area of business will be limited with his management abilities.
Organization of Private Limited company
Organization chart of private limited company

10. The Managing Director
The directors represent the top level management of the company. These are the people who are
having the responsibility and authority to act in the interest of the company.
A managing director will be selected from the list of directors with the responsibility to manage
the affairs of the company.
This person, with assistance from other directors, will select other managers or officers. The MD
will further designate these officers with their respective duties and roles.
Chief Executing Officer (CEO)
The Chief Operating Officer is the topmost executive of a Private Limited Company. He
enjoys the apex position and carries ultimate responsibility to take the managerial decision for
day to day working of the company.
Chief Operating Officer (COO)
The Chief Operating Officer is considered as the second top executive authority in
the Designation Hierarchy. He is responsible for the core business activities of the company.
The function of COO includes heading the business operations for the company at all levels
along with framing operations policies, development of operations strategies. He is also
responsible for leading Various Operations Managers under his department.
o Operations Manager

11. Operations Managers work under the Chief Operating Officer and assist in obtaining operational
efficiency and effectiveness in operational activities.
Chief Financial Officer (CFO)
Chief Financial Officer is the topmost executive for managing the financial affairs of the
company. He is responsible for managing cash flow, budgeting, financial strategy, internal
financial control, fundraising, etc.
o Finance Manager
The Finance Managers of the company are responsible for handling the financial operations of
the company and report to the CFO. These are responsible for Bookkeeping, Accounting, and
other financial functions.
Chief Legal Officer (CLO)
The Legal Officer of the company is responsible for handling legal matters of the company along
with acting as the first channel of correspondence with the statutory authorities.
There can be one or more than one managers working under the legal departments[1] head by
CLO.
o Legal Managers
Legal Managers work under the Chief Legal Officer and assist in managing legal matters of the
organization.
Chief Marketing Officer (CMO)

12. The Chief Marketing Officer heads marketing activities for the organization. His work
responsibility includes running marketing campaigns, making marketing strategies, operating
various channels of marketing, improving brand image, etc.
o Marketing Managers
The CMO get assistance from Marketing Managers who are responsible for heading various
functions of the marketing department. They assist in implementing marketing strategies with the
help of subordinates.
Chief Technology Officer (CTO)
The Chief Technological Officer is the person who heads the development of technology
services and products. He also supervises the technological process; technological policies,
maintenance of technological assets of the organization.
o Technology Manager
Technology managers work with direction from the CTO and assist in the technological
development and management of the organizations.
Learning Outcome 03:Understandhow businesses
achievetheir target purpose
3.1: Describe different types of business targets
Objectives of Businesses
Your business objectives are the results you hope to achieve as you run and grow your business.
As an entrepreneur, you are concerned with every aspect of your business and need to have clear
goals in mind for your company if you are to stay on track. Having a comprehensive list of
business objectives creates the guidelines that become the foundation for your business planning.
Types of business objectives

13. 1. Getting and Staying Profitable
Maintaining profitability means making sure that revenue stays ahead of the costs of doing
business. Focus on controlling costs in both production and operations while maintaining the
profit margin on products sold.
2. Productivity of People and Resources
Employee training, equipment maintenance and new equipment purchases all go into company
productivity. Your objective should be to provide all of the resources your employees need to
remain as productive as possible.
3. Excellent Customer Service
Good customer service helps you retain clients and generate repeat revenue. Keeping your
customers happy should be a primary objective of your organization.
4. Employee Attraction and Retention
Employee turnover costs you money in lost productivity and the costs associated with recruiting,
which include employment advertising and paying placement agencies. Maintaining a productive
and positive employee environment improves retention.
5. Mission-driven Core Values
Your company mission statement is a description of the core values of your company. It is a
summary of the beliefs your company holds in regard to customer interaction, responsibility to
the community and employee satisfaction. The company's core values become the objectives
necessary to create a positive corporate culture.
6. Sustainable Growth
Growth is planned based on historical data and future projections. Growth requires the careful
use of company resources such as finances and personnel.
7. Maintaining a Healthy Cash Flow
Even a company with good cash flow needs financing contacts in the event that capital is needed
to expand the organization. Maintaining your ability to finance operations means that you can
prepare for long-term projects and address short-term needs such as payroll and accounts
payable.

14. 8. Dealing with Change
Change management is the process of preparing your organization for growth and creating
processes that effectively deal with a developing marketplace. The objective of change
management is to create a dynamic organization that is prepared to meet the challenges of your
industry.
9. Reaching the Right Customers
Marketing is more than creating advertising and getting customer input on product changes. It is
understanding consumer buying trends, being able to anticipate product distribution needs and
developing business partnerships that help your organization to improve market share.
10. Staying Ahead of the Competition
A comprehensive analysis of the activities of the competition should be an ongoing business
objective for your organization. Understanding where your products rank in the marketplace
helps you to better determine how to improve your standing among consumers and improve your
revenue.
3.2: Identify how a business can achieve a target
Way to achieve the business Goals and objectives
Break Down Your Company's objective
he first step is to break down your goal . Business goals are often long-term and require quite a
bit of work, time, and effort. By breaking down your goals in manageable action steps, it is
easier to focus on what you need to do right now and not get overwhelmed by the process.
A good way to break down your business goals is by creating an action plan made up of
individual tasks that each includes one clearly defined action. By thinking in terms of baby steps,
it's easy to make progress and have small accomplishments every day.
Track Your Goals' Progress
Part of successfully setting goals is tracking how far you've come. Find out what motivates you,
and it can also help you plan future goals and action steps.
You can track your progress by conducting weekly and/or monthly goal check-ins that help you
evaluate what you have accomplished and where you need to focus more of your attention. It

15. may also be helpful for you to create milestones based on time and progress so you can easily tell
if you're on track for reaching your goal.
Commit to the Company's Goals
Effective goal setting requires clarity about what the goal involves, knowledge on what type of
effort will be required, and specific reasons why it is important to you. It also includes a plan for
how you will accomplish each step, and perhaps most importantly, a commitment to seeing the
goal through to completion.
If you are unable to commit to the goal by taking the time to develop a plan and scheduling the
time to focus on the action steps that will bring you closer to your goal, you will face an
unnecessarily difficult challenge.
Build Your Company's Support System
A support system can help you reach your goals in a number of ways:
 Be motivated by the knowledge that you have a solid team behind you.
 Learn from the experiences and backgrounds of your team.
 Your team can cheer you on when you face challenges.
 You can be held accountable by your team for doing what you say you want to do.
 Your team can provide a perspective that's different from your own.
 Your team can help you celebrate your successes.
Your support system can be comprised of family, friends, mentors, colleagues, or anyone who
supports you and wants to see you succeed. For colleagues, be proactive by hiring the right
employees.
Stay Flexible With Your Company's Goals
Very few things happen exactly as we anticipate, both in business and life. It's vital to be able to
adjust to changes and modify your plan as necessary to be able to take your business to the next
level.
While it's important to have a clearly defined plan for accomplishing your goals, you should
avoid rigidity and narrow-minded thinking. The more agile you are and the quicker you can
change directions when you need to, the easier it will be for you to keep progress steady in the
face of the unexpected.

16. Keep Your Eye on Your Company's End Goal
When you're working toward a long-term or ambitious goal, it's important to break it down into
small and manageable steps you can tackle every day. But while you're focusing on taking it one
step at a time, you should make sure you are clear on what you are working toward.
Big picture thinking is an effective way to stay motivated and focused. Take some time to
envision what it will look like and feel like when you've reached your goal. Then, return to that
vision during the process to remind yourself why this goal is so important to you.
Accept Your Company's Imperfections
A challenge for many is our desire to do everything correctly, each step of the way. Sometimes,
the idea of perfection and fear of failure holds us back and prevents us from making progress.
When it comes to goals, forward-moving progress often trumps mistakes, so it can be more
important to keep the process moving than to wait until the situation is perfect in order to
proceed. It's also important to consider mistakes provide a powerful learning experience. A
misstep can open your eyes up to new ideas and approaches you may not otherwise see.
Don't Stop Adjusting Your Company's Goals
We've outlined the importance of being able to change directions and accept imperfection. In
these situations, it's important to keep moving forward, even when the situation is not what you
expect it to be.
Although your path may change and your progress may seem minimal, the only way to reach
your goal is to keep taking it step-by-step and piece-by-piece. Every time you complete a baby
step, you are getting closer to achieving your goal, and as long as you continue to move forward,
you are on the path to success.
Think Positively About Your Company's Goals
Being confident in your ability to achieve goals can play a significant role in your success. You
have to believe in yourself if you are going to achieve your goals.
Thinking positively, encouraging yourself, and being encouraged by your support team is vital.
Positive thoughts can often carry you through tough challenges, unexpected changes and other
tests of your will.
Celebrate Every Goals' Success
It's important to celebrate your successes throughout your goal setting and achievement process,
even the small wins. By celebrating, you are taking time to recognize the effort that went into

17. your achievement while motivating yourself to keep pushing through to the next step of your
goal.
Celebrating success is also a good way to get closure on each stage of the process, and to come
back refreshed and refocused on your continued progress.
By following these powerful goal setting steps, you will be able to break down your long-term
goals and take baby steps each day to get closer and closer to your success.
Learning Outcome 04: Identify legal, political, and
social factors that can affect businesses
4.1: Describe how political, legal, and social factors affect business
Political Factor
he political factors affecting business are often given a lot of importance. Several aspects of
government policy can affect business. All firms must follow the law. Managers must find how
upcoming legislations can affect their activities.
Below, is a list of political factors affecting business:
 Bureaucracy
 Corruption level
 Freedom of the press
 Tariffs
 Trade control
 Education Law
 Anti-trust law
 Employment law
 Discrimination law
 Data protection law
 Environmental Law
 Health and safety law
 Competition regulation
 Regulation and deregulation
 Tax policy (tax rates and incentives)
 Government stability and related changes
 Government involvement in trade unions and agreements
 Import restrictions on quality and quantity of product
 Intellectual property law (Copyright, patents)
 Consumer protection and e-commerce
 Laws that regulate environment pollution

18. There are 4 main effects of these political factors on business organizations. They are:
 Impact on economy
 Changes in regulation
 Political stability
 Mitigation of risk
Impact on economy
The political situation of a country affects its economic setting. The economic environment affects
the business performance.
For example, there are major differences in Democratic and Republican policies in the US. This
influences factors like taxes and government spending, which ultimately affect the economy. A
greater level of government spending often stimulates the economy.
Changes in regulation
Governments could alter their rules and regulations. This could in turn have an effect on a business.
After the accounting scandals of the early 21st century, the US SEC became more attentive on
corporate compliance. The government introduced the Sarbanes-Oxley compliance regulations of
2002. This was a reaction to the social environment. The social environment urged a change to
make public companies more liable.
Political Stability
Lack of political stability in a country effects business operations. This is especially true for the
companies which operate internationally.
For example, an aggressive takeover could overthrow a government. This could lead to riots,
looting and general disorder in the environment. These disrupt business operations. Sri Lanka was
in a similar state during a civil war. Egypt and Syria faced disturbances too.
Mitigation of Risk
Buying political risk insurance is a way to manage political risk. Companies that have international
operations use such insurance to reduce their risk exposure.
There are some indices that give an idea of the risk exposure in certain countries. The index of
economic freedom is a good example. It ranks countries based on how politics impacts business
decisions there.

19. Legal Factors
There are various legal factors that affect businesses, including laws and regulations on taxation,
employment, contract, securities, immigration and more. The law affects the way businesses
operate and customers behave. That is why any business should have a clear understanding of the
legal environment in which it has to function because these factors may determine its success or
failure.
Here are the most important laws that affect businesses.
Organizational Law
Perhaps one of the most fundamental legal factors affecting businesses is the organizational law.
The type of entity the business has chosen before registration will determine the whole scope of
its activities. For example, a business may decide to register as a corporation, limited partnership,
limited liability partnership or a limited liability company. Its legal status will determine not only
the types of activities but taxation, customs, and employee relations.
Employment Law
Let’s take employment law. This law operates differently in different countries, for example,
when it comes to the minimum wage. A business in the USA needs much more financial
resources to pay its employees than a business in South Africa. Moreover, rules in the USA are
stricter when it comes to discrimination or dismissal.
Consumer laws
Consumer laws are another good example. These laws are designed to regulate legal relationships
between consumers and businesses, and protect consumers from fraudulent behavior. As part of
this right, companies are required to provide detailed information on the products they produce.
Some of the laws affecting businesses are the Weight and Measure Act, Trade Description
Act, Consumer Credit Act, and the Sale of Goods Act.
Securities Law
Securities law is a group of laws that regulate the issuance of securities. Security is a financial
instrument designed to raise money for business from investors. In other words, securities law
regulates investments in a business. Securities law manages what a company should do in order to
offer their investment to the public. As you can see, this law also can affect your business. For
instance, if you decide to offer promissory notes, this will be subject to state and federal regulations
and security laws.

20. Health and Safety at the Workplace
Laws regarding health and safety in the workplace are very controversial. When something like
noise pollution may pose tremendous fines on business in one country, it may not be so critical in
another country. Similarly, states differ in safety regulations in the workplace. For instance, in the
workplace, employees should receive clothing and equipment that meet the highest safety
standards. For a business, this means financial resources and administrative costs.
Taxation
Whether a business will flourish, or putting it another way, whether a business will exist or not,
depends on the tax regulations in a state. For instance, some states are more tax-friendly than
others. Wyoming, for example, has no corporate or individual income tax. Montana has no sales
tax. Florida has no individual income tax. In a nutshell, what profits a business will make, how
consumers will behave are largely determined by the legal factors. Since these factors are external
to businesses, they are several times more important than internal business regulations that may be
adjusted at the will of the business owner.
Social Factors
There is no doubt that society is continually changing. The tastes and fashions are a great
example of this change. One of the most significant differences is the growing popularity of
social media. Social networking sites like Facebook have become very popular among younger
people. The young consumers have grown used to mobile phones and computers.
The younger generation prefers to use digital technology to shop online. Older people will
perhaps stick to their traditional methods. The effect of changing society is often discussed. You
must also understand that these changing factors have a toll on businesses too. Changes in social
factors can impact a firm in many different ways.
Below is a list of social factors which impact customer needs and the size of markets:
 Lifestyles
 Buying habits
 Education level
 Emphasis on safety
 Religion and beliefs
 Health consciousness
 Sex distribution
 Average disposable income level
 Social classes
 Family size and structure
 Minorities
 Attitudes toward saving and investing
 Attitudes toward green or ecological products

21.  Attitudes toward renewable energy
 Population growth rate
 Immigration and emigration rates
 Age distribution and life expectancy rates
 Attitudes toward imported products and services
 Attitudes toward work, career, leisure, and retirement
 Attitudes toward customer service and product quality