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Preliminary Course 5th Edition S.

Chapman
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JACARANDA
BUSINESS STUDIES
IN ACTION
PRELIMINARY COURSE | 5TH EDITION
STEPHEN CHAPMAN
ROSALINDA GALLINA
NATALIE DEVENISH
jacaranda
A Wiley Brand
Fifth edition published 2019 by
John Wiley & Sons Australia, Ltd
42 McDougall Street, Milton, Qld 4064
Fourth edition published 2014 © S. Chapman, R. Gallina, N. Devenish
Third edition published 2011 © S. Chapman
Second edition published 2006 © S. Chapman, N. Devenish, M. Dhall
First edition published 2000 © S. Chapman, N. Devenish, M. Dhall
Typeset in 10.5/12.5 pt ITC Berkeley Oldstyle Std
© S. Chapman, R. Gallina, N. Devenish 2019
The moral rights of the authors have been asserted.
ISBN: 978-0-7303-5639-4
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10 9 8 7 6 5 4 3 2 1
CONTENTS
How to use this book �� vi

About eBookPLUS �� viii
About the authors �� ix
Acknowledgements �� x
TOPIC 1 NATURE OF BUSINESS 2

1 Role of business 4
1.1 Introduction ��4
1.2 The nature of a business ��6
1.3 Other functions of business��9
2 Types of businesses 20
2.2 Classification by size ��21
2.3 Classification by geographical spread ��23
2.4 Classification by industry sector ��28
2.5 Classification by legal structure��33
2.6 Types of companies��37
2.7 Factors influencing choice of legal structure ��44
3 Influences in the business environment 48

3.2 Business environment ��48
3.3 External influences ��49
3.4 Internal influences on business ��70
3.5 Stakeholders��81
4 Business growth and decline 86

4.2 Business life cycle — stages and responding to challenges ��89
4.3 Factors that can contribute to business decline ��103
4.4 Voluntary and involuntary cessation ��105
TOPIC 1 Suggested assessment tasks��111
TOPIC 2 BUSINESS MANAGEMENT 116

5 Nature of management 118
5.2 The features of effective management ��122
5.3 Skills of management ��123
6 Achieving business goals 144

6.1 Introduction: What are goals? ��144
6.2 Business goals��147
6.3 Achieving a mix of business goals ��157
6.4 Staff involvement ��160
7 Management approaches 168
7.1 Introduction��168
7.2 Classical approach to management��169
7.3 Behavioural approach to management��182
7.4 Contingency approach to management��193
7.5 Compare and contrast approaches to management��195
8 Management process 198

8.2 Different ways of coordinating key business functions for a SME��200
8.3 Operations��202
8.4 Marketing��217
8.5 Finance��234
8.6 Human resources��254
8.7 Ethical business behaviour��282
9 Management and change 290

9.2 What is organisational change?��291
9.3 Responding to internal and external influences��294
9.4 Managing change effectively��299
TOPIC 2 Suggested assessment tasks............................................................................312
TOPIC 3 BUSINESS PLANNING 316

10 Small to medium enterprises (SMEs) 318
10.2 Definition of SMEs��319
10.3 The role of SMEs��322
10.4 Economic contribution of SMEs��323
10.5 Success and/or failure of SMEs��329
11 Influences in establishing a small to medium

enterprise336
11.2 Personal qualities��336
11.3 Sources of information��348
11.4 The business idea��352
11.5 Establishment options��356
11.6 Market considerations��364
11.7 Finance��371
11.8 Legal considerations and influence of government on SMEs��377
11.9 Human resources��382
11.10 Taxation��387
iv CONTENTS
12 The business planning process 394
12.2 Business planning process��398
12.3 Sources of planning ideas��401
12.4 Vision, goals and/or objectives��403
12.5 Organising resources��410
12.6 Forecasting��414
12.7 Monitoring and evaluating��417
12.8 Taking corrective action — modification��424
13 Critical issues in business success and failure 430

13.2 Importance of a business plan��430
13.3 Management — staffing and teams��432
13.4 Trend analysis��437
13.5 Identifying and sustaining competitive advantage��439
13.6 Avoiding overextension of financing and other resources��444
13.7 Using technology��445
13.8 Economic conditions��448
TOPIC 3 Suggested assessment tasks............................................................................451
Appendix �� 457

Glossary �� 462
Index �� 470
CONTENTS v
HOW TO USE THIS BOOK
The following examples highlight the structure and main features of Business Studies
in Action Preliminary Course 5th Edition. An electronic version of the textbook and a
complementary set of targeted digital resources — the eBookPLUS — are available
online at the JacarandaPLUS website (www.jacplus.com.au).
TOPIC 2
BUSINESS MANAGEMENT Case study: Andrew Thorburn — a successful business manager

Andrew Thorburn (pictured), the CEO of the National Australia Bank, was ranked as
one of Australia’s Top 10 CEOs of 2015. After 30 years’ experience in banking, as
Each of the three topics FOCUS AREA
well as experience in senior positions at a number of Australian banks, Thorburn was
appointed Group CEO of NAB in 2014, where he has implemented significant change
has an opening double

The focus of this topic is the nature and responsibilities of management in the business that has turned the company around.
environment. When reflecting on the age-old debate about whether leaders are made or
born, Thorburn believes that anyone can be a leader: ‘what it takes is character
page that presents the OUTCOMES
Students should be able to:
development, ambition, courage and a driving desire to challenge the status quo.’
Thorburn has admitted that he once lacked some of these qualities, but through
focus area of the topic • explain the internal and external influences on businesses
• assess the processes and interdependence of key business functions
observing mentors and other leaders he was able to develop and learn these skills.
Thorburn spends a lot of his time mingling and talking to customers and frontline
and lists the syllabus • examine the application of management theories and strategies
• analyse the responsibilities of business to internal and external stakeholders
staff when he should be talking strategy in the boardroom. He encourages them
to say what they think because he recognises that he doesn’t always have all the
• plan and conduct investigations into contemporary business issues answers. Thorburn believes one of the most effective ways of problem-solving is to
outcomes� A concept • evaluate information for actual and hypothetical business situations
• communicate business information and issues in appropriate formats
listen to different perspectives. One of his favourite parts of the job is to visit different
cities, including regional areas, and talk to staff in order to obtain a view from the
map allows students • apply mathematical concepts appropriately in business situations. ground. He encourages two-way communication as he feels he can learn so much
from his employees about what needs to be done to support them.
❛ … he embraces
change and views it as
to visualise the key
Thorburn believes leadership is all about people; the ability to engage with,
Achieving business
and lead, people. He always wears a name badge (the same type worn by staff an opportunity … ❜
in the bank’s branches) so that when he meets people he can introduce himself
concepts in the topic�
goals
and encourage them to talk to him. While he is often described as ambitious and
someone who can make tough calls, staff have found Thorburn to be caring and
An engaging case Nature of Management

encouraging. He has been described as a people person due to his ability to relate to
staff and customers.
One of Thorburn’s most effective leadership skills is his ability to adapt to and
study with photographs management approaches
implement change. From the moment he began at NAB, he has been constantly
challenging the status quo. Thorburn recognises that he’s operating in an
shows business in BUSINESS MANAGEMENT
environment that is experiencing an unprecedented level of change; however, rather
than viewing change as a threat, he embraces it and views it as an opportunity for
action� the business to shape the industry.

Thorburn possesses a drive for change. He wants to usher it in from the
ground up. He also has high expectations of his employees’ abilities to implement
change. Thorburn continually talks to his staff and focuses on their needs, which
Management Management
and change process demonstrates he is concerned about their welfare. This has reduced the resistance to
change in the organisation and led to a culture where employees embrace change.
In order to create a culture of change, Thorburn believes that management
needs to have a clear intent about what they want to achieve. They need to create
a big strategic goal that inspires people. For NAB, the overarching goal is to make
the customer experience better. Once the strategic aim has been communicated,
Thorburn relies on change agents to help drive the change. He has created a group
of leaders who are passionate but who are also given the freedom to fail, to inspire
others in the organisation to adopt change. In order to sustain the change, Thorburn
is a firm believer in offering encouragement and recognition to staff.
Thorburn believes leaders should be role models and lead by example. This is why
he always acts the way that he expects others to behave. He has come to realise
that the biggest driver of culture is the behaviour of leaders and that it’s not what they
say, it’s their actions and what they do that will inspire others. And inspire he has!
116 TOPIC 2 • Business management TOPIC 2 • Business management 117
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All Preliminary syllabus

BizWORD
Problem solving is a broad set of
Problem solving means finding and then implementing a course of action to cor-
rect an unworkable situation. Although managers have to deal with many problems
Managers today are often confronted with complex, challenging and stressful
decision-making demands. Accelerating change often makes it difficult to accu-
BizFACT
According to Mark Graban, an
outcomes are covered
in the course of a day, not all problems require such a systematic, formal process. rately predict the full effect of any decision. Therefore, managers need to develop
in depth to provide
activities involved in searching for, internationally recognised consultant,
identifying and then implementing One of the most important skills a manager can develop is the ability to decide an effective decision-making environment within the business. This can be accom- author and keynote speaker, “Bad
a course of action to correct an managers tell employees what to
which problem they should give their full attention. plished by tapping into the creative potential of employees.
unworkable situation.
There are six steps in a typical problem-solving process (see figure 5.10). The
do, good managers explain why they
need to do it, but great managers a sound basis of
first step is to clearly identify what the problem is and what has caused it. The 5.3.7 Flexibility and adaptability to change skills involve people in decision making and
Identify the problem and causes
problem might be an industrial dispute or a need to develop a more socially
responsible organisation. All of the facts and information that are relevant to the
Not since the Industrial Revolution over 200 years ago has business experienced so
improvement.” knowledge to prepare
problem must be gathered. Some methods to use might be simply talking to people
or completing questionnaires or surveys.
much change. Over the next 10 to 20 years, the Australian business environment
will dramatically change. How managers perceive and react to these changes will students for the
have dramatic consequences for their businesses.
Gather relevant information
Regardless of their level of management, successful managers are those who BizWORD HSC course�
anticipate and adjust to changing circumstances. They must be flexible, adaptable Flexible refers to being responsive to
and proactive rather than reactive. Those who are unprepared or passive in the
face of change will not succeed.
change and able to adjust to changing
circumstances.
BizWords, highlighted
in the margin for easy
Develop alternative solutions
Businesses today are recruiting and selecting managers who can cope with Proactive refers to a management
style that incorporates dynamic action
unfamiliar and unexpected circumstances. For example, Arthur Hancock, former
and forward planning to achieve
Analyse the alternatives

Senior Human Resources Manager for Global Equities Limited, said:
We are seeking managers who have learned how to learn and can adapt to
particular objectives. reference, provide
changing situations. We do not want managers who are dogmatic and inflex-
ible. Such a style of management may have been appropriate 50 years ago, but
definitions of the bolded
Choose one alternative
and implement it
not for today’s markets which are highly competitive, technologically driven
and rapidly changing. We want to hire people who like surprises!
words in the text to
The topic of management and change will be examined in more detail in chapter 9. build a comprehensive
Evaluate the solution
Case study: Jeff Bezos — flexibility and adaptability to change SNAPSHOT glossary� BizFacts
FIGURE 5.10 A problem-solving
process
Amazon CEO Jeff Bezos has been recognised by various organisations as being one
of the greatest living CEOs. He is a transformational leader whose main strength has
present interesting
FIGURE 5.11 A common problem managers have to deal with is workplace conflict. Research
been his flexibility and ability to adapt to change.
Bezos transformed Amazon from an online bookstore to the largest internet-based and topical snippets
retailer in the world. Due to his leadership, the company has not stopped expanding
shows that up to 30 per cent of a typical manager’s time is spent dealing with disputes. While
conflict in the workplace is unavoidable, it can be minimised with the right strategy, problem-
solving skills and direction.
and changing since its inception. Even though Amazon has been trading for over 20
years, Jeff Bezos wants the $430 billion company to behave with the same urgency
of supplementary
BizWORD Management will need to develop alternative solutions so that the problem
as the start-up it once was.
To ensure he responds to problems and changes quickly, Bezos believes information to engage
and extend students�
high-velocity decision-making is essential to a dynamic, successful business.
Decision making is the process of can be solved with an open mind. A list of possible solutions should be made,
identifying the options available and including the seemingly ridiculous ones. After analysing each of the alternatives for
He feels as though it’s better to ‘fail forward’ — i.e. make a decision quickly, learn
from mistakes and move ahead — than it is to come to a standstill and be frozen by
❛ Bezos is more afraid of
becoming stagnant. ❜
‘Snapshot’ case
then choosing a specific course of their advantages and disadvantages, the best option should be chosen. The solution
action to solve a specific problem. indecision. He urges his employees to follow the same advice, and not to wait for all
to the problem will then be implemented and subsequently evaluated. If the solu- the information before acting. Bezos believes most decisions should be made with
tion does not work, the process would have to start again. only about 70 per cent of the information needed, because if you wait for 90 per cent
or more, then you’re moving too slowly. studies present profiles
5.3.6 Decision-making skills A phrase Bezos uses when it comes to acting quickly and implementing change
BizFACT
In 1986, NASA management had to The task of solving problems will obviously require making some decisions.
is ‘disagree and commit’. He follows this advice when a situation arises where
consensus isn’t possible. This means that even if Bezos disagrees with a decision, he
of a wide range of
businesses and
decide whether to launch the space Decision making is the process of identifying the options available and then trusts the judgement of the other decision-makers and is committed to a successful
shuttle Challenger even though
temperatures at the launch site
choosing a specific course of action to solve a specific problem. outcome. He believes this is a much faster alternative than the team having to
had fallen below the levels normally
required for a safe launch. Lower-level
Effective decision making involves being able to make decisions within a par-
ticular time frame. It also requires a manager to adequately assess the risk involved
convince him to change his mind.
According to Bezos, good entrepreneurs must be stubborn and flexible. In individuals, and the
engineers expressed their concerns. if the decision is implemented. reference to Amazon, the company is ‘stubborn on vision, but flexible on details’.
However, top-level NASA managers
decided to go ahead with the launch,
Decision making can sometimes be dangerous. Not all management deci- While this seems like a paradox, Bezos considers them both valuable traits and, just
like most things in life, the key is finding the middle road between the two. Bezos
contemporary business
sions are effective, as NASA discovered tragically in 1986, providing a case study
a decision that resulted in the deaths
of all the astronauts on board. of management decision making that shows dramatically the importance of the
decision-making process (see the BizFact at left).
feels that if you’re not flexible, you won’t be able to see different solutions to
problems you are trying to solve. There are many entrepreneurs that are inherently issues they face�
134 TOPIC 2 • Business management Nature of management • CHAPTER 5 135
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vi HOW TO USE THIS BOOK

HSC ‘key process
verbs’ are used 18 Identify which external influence is affecting the small business in each of the
following cases:
(a) Julie runs a small busy restaurant. She recently introduced technology that allows
Internal influences on business
consistently in all waiting staff to electronically send orders to the kitchen. This means better service
for the customer because the order is taken more efficiently and more time can be
questions to prepare
devoted to other tasks such as the prompt delivery of food and drinks.
Business
(b) John is the manager of a function centre that hosts large weddings and Products Location Management Resources
culture
conferences. He makes sure to include an acknowledgement of the traditional
students for HSC study. owners of the land, the Wurundjeri people and their elders, in his opening remarks.
(c) Mia has to design and print new labels for the foods sold in her deli. This is
FIGURE 3.19 Internal influences on business
because changes to the food labelling laws require that all foods list the ingredients
Questions are graded by particular portion size. This allows customers to more easily compare different
food items. She thinks that this may affect which foods customers choose.
3.4.1 Product influences
Product influences affect a range of internal structures and operations within the
according to low-, (d) Michael, the owner of a local bottle shop, is no longer allowed to sell imported
premixed alcoholic drinks because of a government ban on food and beverage
imports from particular countries.
business. The main product influences on a business are as follows.
1. The type of goods and services produced will affect the internal operations of a
middle- or high-order business. If the goods are physically large or require many raw material inputs,
there will need to be structures in place to organise and monitor the processes
EXERCISE 3.1 EXTENSION involved in production. In contrast, a service may be delivered by a home-based
thinking skills. The ‘key 1 Explain the impact each of the external influences has on a business and how the
business or a franchise business, such as Jim’s Mowing, and will influence the
internal structures or processes differently.
business’s management responds. The first factor has been completed for you.
process verbs’ are The range of goods and services refers to the number produced by the business.
The larger the number, the more internal impact it will have on the business as
listed and defined in Factor influencing the Brief explanation Management response it will need to expand operations and internal structures to accommodate the
internal environment changes. Companies such as Coca-Cola have continually expanded their product
range over the last 20 years, and this has meant that internal changes to operations
an appendix for ready
Political influences Elected governments at all Must comply with the
levels in Australia regulate laws and regulations and management have been necessary to allow this expansion to occur.
markets and have the power introduced by 2. Product influence will be reflected in the type of business (service, manufacturer
reference.
to make or change laws. governments or retailer). Internally, a service provider will be structured differently to a
manufacturer or retailer, and the influences will vary. Some goods or services
require extensive preparation, while others are merely deliverers. Consider the
difference between the product influences of a clothing manufacturer and that
of a clothing retailer.
3. The size of the business, as previously mentioned, will be based on the range and
type of goods and services produced, the level of technology utilised, and the
volume of goods and services produced. The larger the business the more goods
and services being produced, which will in turn influence the internal structures
and operations of the business. A café will operate at a different scale to a club
2 Using an example, determine how the development of global consumers bistro and therefore the influence on business functions will be relative.
encouraged the process of globalisation.
3 (a) Demonstrate how technology has affected the way consumers can purchase
goods and services.
(b) Predict what will happen if an Australian business does not provide the
opportunity for consumers to purchase online.
4 In small groups, examine and report on a social issue confronting businesses in
your local area. You may wish to either prepare a PowerPoint presentation or use a
word-processing package for your report.
(a) Outline the issue.
(b) State how the local businesses have reacted to the situation.
(c) Determine what indicators you would use to decide the success or failure of a
business’s response to the situation. FIGURE 3.20 Manufacturing
businesses must have a physical
3.4 Internal influences on business location for their production and

stock holding operations, whereas
service firms do not require a physical
Internal influences relate to the specific factors within the business that will affect production site. The people creating
its operations. These factors can be identified and adjusted via feedback and and delivering the service can be
evaluation processes that provide the business with information for change. located anywhere.
70 TOPIC 1 • Nature of business Influences in the business environment • CHAPTER 3 71
their own input into the firm. This style of leadership is most effective when a busi-
performance. Through his leadership skills he has been able to successfully align
ness is operating in an environment undergoing rapid change. Individual employees
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employees with each company’s purpose.
accept responsibility and can implement changes themselves, making the business
more responsive to change. Through activities such as brainstorming, a diverse range SNAPSHOT QUESTIONS
of opinions and ideas can be generated resulting in improved decision making. 1. Demonstrate how Jack Stahl adopts a democratic leadership style.
The main advantages of the participative or democratic management style 2. Explain the impact his leadership style would have on his employees.
include the following:
• Communication is a two-way process.
• Employer/employee relations are positive and there is reduced likelihood of
industrial disputes because employees are more likely to accept management
SUMMARY Straightforward
• A manager who adopts a behavioural approach will tend to use a participative or
decisions.
• Motivation and job satisfaction are optimal as employees feel they have played
democratic leadership style.
• Participative or democratic leaders share their decision-making authority with
explanations of
complex concepts
an active role in allocating tasks and implementing actions to meet objectives.
their subordinates.
• Employees have a greater opportunity to acquire more skills.
• This style of leadership is most effective when a business is operating in an
• Power sharing encourages the development of work teams, and employees
are reinforced by
environment undergoing rapid change.
display high levels of commitment.
• There is a high level of trust, often resulting in improved employee performance.
7.4 Contingency approach to
The main disadvantages include the following:
• Reaching decisions and introducing tasks can be time consuming with differing
management numerous up-to-
views having to be considered. The quality of decisions may also suffer because
compromises are made rather than decisive, clear directions given.
• The role of management, and the control of the manager, may be weakened and
While the classical and behavioural management approaches continue to provide
important lessons for managers, other ideas have also emerged during the last
date statistics and
BizWORD
undermined, with employees given too much power in some cases.
• Internal conflict can arise with so many views and opinions being shared. More
couple of decades (see figure 7.22). These contemporary management approaches
represent major innovations in ways of thinking about management and appropriate Contingency approach stresses the
need for flexibility and adaptation of
easy-to-read graphic
management practices. One of the most important contemporary viewpoints is the
organisers. Summaries
involvement may actually bring about disagreement. management practices and ideas to
• The importance of the organisational structure may be minimised, leading to an contingency approach to management. It stresses the need for flexibility and the suit changing circumstances.
informal system that could result in a complete collapse in management. adaptation of management practices and ideas to suit changing circumstances.
• Not all employees want to contribute.
There is no simple answer to the question: ‘What leadership style does a good
throughout each
manager possess?’ Management is an art, not a science. This means that no simple
management formula can be applied to deal effectively with all workplace situations.
Political
chapter encourage a
SNAPSHOT Case study: Jack Stahl — democratic leadership style Contingency progressive revision
Jack Stahl is a former Chief Operating Officer and President of Coca-Cola, as well
as a former CEO of Revlon. Through his democratic leadership style and knowledge, Systems
of concepts. Weblinks
are provided to key
he brought these two companies to higher profitability. During his tenure at Coca-
Cola, the net worth of the company grew from $3 billion to over $130 billion.
Jack Stahl believes that working with others is the best way to work. He knows Behavioural
how to delegate work to employees and can take a step back when necessary.
Stahl achieves this through investing in training and development of staff. Training business bodies and
his employees to concentrate on the details reduces the need for micromanagement
and allows him to pull back and worry about things from a more strategic
perspective.
Classical–scientific/bureaucratic
further resources.
As a democratic leader, he encourages his employees to be involved in decision
making. He keeps staff informed about matters relating to their work and shares 1780 1900 1920 1940 1970 1980 2000
problem-solving and decision-making responsibilities. While Stahl ultimately has the BizFACT
final say, he consults with staff before making a final decision. The teams he has led FIGURE 7.22 Timeline of management thought Managers are increasingly finding that
felt trusted and responded favourably to his style. Employees under his management creating a sustainable competitive
demonstrated higher morale, team spirit and cooperation. advantage is not just about being
Stahl is a charismatic and visionary leader who is able to effectively communicate 7.4.1 Adapting to changing circumstances the best at doing a particular thing.
his vision to all relevant stakeholders, as well as inspire his employees to turn that Contingency theorists point out to managers that no two situations are absolutely Instead, businesses must be really
vision into a reality. Stahl’s inspirational qualities have enabled him to foster both identical. Each situation, therefore, requires its own unique solution. For example, good at learning to do new things.
❛ … working with individual and team effectiveness. He possesses an ability to produce results through Those businesses that thrive are the
you may have used a particular strategy to complete a task for assessment. Although
others is the best way the use of intrinsic rewards such as recognition, as well as rewarding successful this strategy may have been quite successful for that particular task, another
ones that are quick to read and act on
signals of change.
to work. ❜ assessable task may well require a completely different approach.
192 TOPIC 2 • Business management Management approaches • CHAPTER 7 193
TOPIC 2 SUGGESTED ASSESSMENT TASKS 6. Fletcher & Sons Construction has developed a plan to guide the business over the
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next five years. What type of planning is this an example of?
(a) Operational
(b) Tactical
Business management (c) Technical

(d) Strategic
MULTIPLE CHOICE QUESTIONS 7. What does the contingency approach to management emphasise?
(a) Management as planning, organising and controlling
1. Which of the following would be classified as a social goal? (b) Management as leading, motivating and communicating
(a) To increase market share by 10 per cent (c) The need for managers to be reactive and respond to change after it occurs
(b) To sponsor the local school football team (d) The need for flexibility and adaptation of management practices to suit changing
(c) To provide shareholders with increased returns circumstances
(d) To improve the training opportunities for employees
8. A new furniture store has decided to stock their products through a few selective
2. Refer to the following information for Question 2. retailers. Which marketing strategy is this an example of?
(a) Place
DJ
$
(b) Price
Sales 150 000 (c) Product
(d) Promotion
Cost of Goods Sold 65 000
9. Calculate the value of owner’s equity given the following information: Liabilities =
Expenses 42 000 $75 000 and Assets = $145 000.
(a) $70 000
What would the Net Profit be for this business? (b) $75 000
(a) $43 000 (c) $220 000
(b) $127 000 (d) $240 000
(c) $173 000 10. Shimmering Jewellery relies heavily on their sales assistants to promote their goods
(d) $257 000 by outlining the benefits and features of their products to consumers. This has been
3. Which of the following are both examples of current liabilities? successful in persuading customers to purchase their products. Which promotion
(a) Debtors and creditors technique is this an example of?
(b) Overdraft and debtors (a) Publicity
(c) Creditors and overdraft (b) Advertising
Sample HSC-style (d) Creditors and mortgage

4. What is a collective agreement made at a workplace level about terms and
(c) Personal selling
(d) Sales promotion
conditions of employment referred to as?
assessment tasks
11. Which of the following are both examples of involuntary separation?
(a) Award (a) Resignation and dismissal
(b) Enterprise agreement (b) Retirement and resignation
are provided for each (c) Individual common law contract

(d) National Employment Standards
(c) Dismissal and retrenchment
(d) Retrenchment and retirement
5. Refer to the following Balance Sheet to answer Question 5.
topic, comprising
12. A manager of a real estate agency always consults with employees when setting
targets and making decisions. What type of leadership style would this be an
ASSETS $ LIABILITIES $ example of?
multiple choice, short Current Assets

Cash in bank 5000
Current Liabilities
Overdraft 3000
(a) Autocratic
(b) Democratic
(c) Diplomatic
response and extended
Stock (?) Creditors 4000
(d) Hierarchical
Non-current Liabilities 13. Beautiful Skin Pty Ltd has decided to produce a razor for women. It has calculated
response questions Non-current Assets

Building 350 000
Bank loan 310 000 the total production costs for each razor and added a 15 per cent margin to set the
final price. What pricing method is this an example of?
(a) Cost-based pricing
Equipment 17 000 OWNER’S EQUITY
with appropriate marks Furniture 13 000 Capital 84 000 (b) Break-even pricing
(c) Market-based pricing
allocated.
(d) Competition-based pricing
What would be the value of the stock?
(a) 2000 14. Michael is able to manage change in his business by always scanning the
(b) 4000 environment and attempting to understand the factors that will have an impact on
(c) 16 000 the business. Which of the following best describes the method of managing change
(d) 68 000 effectively used by Michael?
(a) Setting achievable goals
(b) Reducing resistance to change
(c) Identifying the need for change
(d) Utilising management consultants
312 TOPIC 2 • Business management Business management • TOPIC 2 313
c09ManagementAndChange.indd Page 312 03/07/18 1:50 PM c09ManagementAndChange.indd Page 313 03/07/18 1:50 PM
HOW TO USE THIS BOOK vii

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ABOUT THE AUTHORS
Stephen Chapman is an active teacher, author, HSC marker and consultant, with
28 years’ experience as a classroom teacher and head teacher. He has authored/
co-authored 24 textbooks in the areas of Commerce, Business Studies and
Economics. He has won awards for teaching excellence and pedagogical writings,
as well as a Commonwealth Parliamentary Teaching Fellowship. As a consultant,
he works with schools to develop teaching programs and educational resources.
Rosalinda Gallina is a teacher of Business Studies, Legal Studies, Commerce
and Business Services, with over 14 years’ teaching experience. She is a Business
Studies HSC marker and has been the co-convenor of the Business Studies Trial
HSC Examination paper for the Catholic Secondary Schools Association NSW for
three years. She also lectures and presents at student workshops on HSC Business
Studies.
Natalie Devenish is a teacher of Business Studies, Economics, Legal Studies and
Commerce, with over 15 years’ teaching experience. She has been an HSC marker
for seven years and has completed a Masters in Education. She has co-authored
three textbooks in the areas of Business Studies and Commerce. Natalie has a
specific interest in the development and implementation of literacy strategies to
support student learning.
ABOUT THE AUTHORS ix

ACKNOWLEDGEMENTS
The authors would like to thank those people who have played a key role in
the production of this text. Their families and friends were always patient and
supportive, especially when deadlines were imminent. Stephen Chapman wishes
to acknowledge his father, Jack, late mother, Lorna, mother-in-law, Thelo, and late
father-in-law, Rae, who have encouraged him as a student, educator and writer for
many years — and special thanks to Wendy and Max. Rosalinda Gallina would
like to express her appreciation to her husband, Michael, and precious daughter,
Alessia, who supported and encouraged her in spite of all the time it took away
from them. She would also like to sincerely thank her parents, her sister, Isabella,
and her brother-in-law, John, for their never-ending help. Finally, she would like to
acknowledge Lucy and the team at Jacaranda for all their assistance. Natalie Devenish
would like to acknowledge the support of her husband, Mark, and children James,
Georgia and William. Natalie would like to dedicate her contribution to previous
editions to her late father, Graham Kennedy.
The authors and publisher would like to thank the following copyright holders,
organisations and individuals for their assistance and for permission to reproduce
copyright material in this book.
Images
• 2Stepdance: 345/Rosalinda Gallina • ABC: 342 • Alamy Stock Photo: 133/©Kristoffer
Tripplaar; 298/Chronicle; 298/© Alex Segre • Ali Kitinas: 5 • Australian Bureau of Statistics: 28,
352 • Bella Tipping: 17 • brokernews: 149 • Creative Commons: 87, 88; 150/Market share 4
big banks The Conversation Harry Scheule; 351, 400/© Commonwealth of Australia 2017.; 363/
Based on information taken from Australian and New Zealand Standard Industrial Classification;
380/ACCC • Deposit Photos: 125 • Fairtrade Australia: 284 • Getty Images: 83/© 97; 225/
Brand X Pictures / Shutterstock; 420/Blend Images • Getty Images Australia: 39/Eric Taylor/
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x ACKNOWLEDGEMENTS
xieyuliang; 214 (bottom right)/Wright Studio; 215/JuliusKielaitis; 216, 236/SpeedKingz; 218/
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141, 183, 264, 297, 425/TK Kurikawa ; 433/Art_Photo; 440/dotshock; 440/Ragne Kabanova;
440/Kekyalyaynen; 440/Zurijeta; 445/weedezign; 445/Alexander Kirch; 445/Chesky; 447/Ammit
Jack • Stephen Chapman: 339/© Practice Manager 24/7; 358/© Sunrise Mobile Cafe; 360
• The Conversation website: Deborah Ralston & Martin Jenkinson: Derived from RBA: 371 • Tip
Top Australia: 228/Tip Top - a division of George Western Foods • Typefi Systems : 325/Susan
Hudson • WA Govt - Small business development Corporation: 344 • Wesfarmers: 152 • WNA
LOGO: 347 • Yo-Get-It: 330
Text
Key process verbs, Focus areas and Outcomes for each topic from Business Studies Stage 6
Syllabus © NSW Education Standards Authority for and on behalf of the Crown in right of the
State of New South Wales, 2018 • ABC: 63-64/Article ‘Almost 40 per cent of Australian jobs
could be replaced by technology by 2025, report finds’ Loretta Florance and Lily Partland
from http://www.abc.net.au/news/2015-06-16/technology-could-make-almost-40pc-of-jobs-
redundant-report/6548560; 104/Article ‘Topshop Australia goes into voluntary a dministration’
by Lucia Stein taken from http://mobile.abc.net.au/news/2017-05-25/topshop-goes-into-
voluntary-administration/8557044?pfmredir=sm&sf81713921=1&smid=Page:%20ABC%20
News-Facebook_Organic&WT.tsrc=Facebook_Organic; 342, 447-448 • ABS: 10, 22 • BHP
Billiton Ltd: 153-154 • Copyright Agency Limited: 76-77/More companies are adopting a flat
working structure, David Halliday, news.com.au; 255/PWC named Australias Top Company to
work for by LinkedIn, Dana McCauley, news.com.au; 330/Yo! Boosting the hopes of b aby-faced
bosses, Larissa Ham, The Age • Creative Commons: 52/The Conversation website: Jerad A. Ford,
John Steen & Martie-Louise Verreynne; 56/The Conversation Small business gets flexible to
retain quality workers; 79-80/The Conversation Here’s why ‘cool’ offices don’t always make for a
happier workforce; 125/Why Australian workplaces need much better leaders, The Conversation
website: Peter Gahan; 138/Why some companies are becoming environmental activists , The
Conversation website: Steffen Bohm & Annika Skogland; 149-150/Lack of competition is why
government is moving so hard against the banks The Conversation, Harry Scheule; 281/©
Commonwealth of Australia Fair Work Commission 2018 • Ethical Jobs: 292 • Kevin Fouche
pixelfish blog: 367 • Small Medium Enterprises Today: 420-421/Office of the NSW Small
Business Commissioner • The Conversation website: Deborah Ralston & Martin Jenkinson: 371
• Typefi Systems : 325 • WA Government Small business development Corporation: 344
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ACKNOWLEDGEMENTS xi
TOPICS
TOPIC 1 | Nature of business 2
TOPIC 2 | Business management 116
TOPIC 3 | Business planning 316

TOPIC 1
NATURE OF BUSINESS
FOCUS AREA
The focus of this topic is the role and nature of business in a changing business
environment.
OUTCOMES
Students should be able to:
• discuss the nature of business, its role in society and the types of business structures
• explain the internal and external influences on businesses
• analyse the responsibilities of business to internal and external stakeholders
• plan and conduct investigations into contemporary business issues
• evaluate information for actual and hypothetical business situations.
Role of
business
Business growth Types of

NATURE OF BUSINESS businesses
and decline
Influences in the
business environment
2 TOPIC 1 • Nature of business

The role of business
Thousands of Australian businesspeople are involved every day in making decisions ❛ The world of business
about how best to plan and manage their businesses. Businesses play a crucial role
in our lives and actively contribute to progress in society. The examples from a variety is most definitely an
of organisations given below show the various roles that businesses play. exciting and interesting
• Employment and income — QANTAS has more than 29 000 employees.
In 2017, QANTAS was named as Australia’s most attractive company for
one. ❜
job seekers by employment firm Randstad. These awards cover the nation’s
150 largest employers by workforce size and are based on a survey of
approximately 8000 job seekers. QANTAS was picked for its innovation with
technology, financial health and strong reputation.
• Entrepreneurship and risk — Amanda Young and Matt Braithwaite drew on
their previous experience working for companies in the beverage industry to
start Springleaf Iced Tea. With three small children, they wanted a better work–
life balance. The learning curve has been steep, but they have succeeded in
creating a profitable business, as well as having more time for their children.
• Quality of life — Nick Savaidis, the founder of Etiko, believes that businesses
should make a positive contribution to society. Consequently, from sales of its
products, Etiko is able to help fund community development, micro-credit and
health care programs around the world.
• Innovation — Stuart Crumpler drew inspiration after he couldn’t find a bag
that let him cycle home with a slab of beer on his back. With the need to solve
this basic ‘everyday carrying problem’, the innovative mind of Stuart Crumpler
created the first ever Crumpler bag. He now sells one million bags every year,
both online and through around 60 stores in Australia. ‘Make things better’ is
an all-encompassing Crumpler ethos that challenges the company to do their
best every day to make their products better and to find solutions to everyday
carrying problems through functional product design.
• Wealth — Wilson Asset Management (WAM Capital), Australia’s largest
listed investment company, has generated wealth for its many shareholders.
Their share price has grown by 53 per cent over the last five years. They
have also grown their dividend every year since the GFC and currently have
a dividend yield of 8.68 per cent. The company also helps their own investors
(clients) generate wealth with exposure to an actively managed diversified
portfolio of companies. WAM Capital’s key objectives are to deliver investors
a stream of dividends and provide capital growth.
These are just a few examples of the many roles played by businesses in our
society. The world of business is most definitely an exciting and interesting one.
TOPIC 1 • Nature of business 3

CHAPTER 1
Role of business
OVERVIEW
1.1 Introduction
1.2 The nature of a business
1.3 Other functions of business
1.1 Introduction
Think of all the different businesses that operate in your local neighbourhood.
Now imagine what the world would be like if they did not exist. Ultimately we
would have to become self-sufficient: providing for our own needs and wants.
Fortunately, in our society, businesses of all sizes play a crucial role in providing
us with a vast array of goods and services. Businesses are at the very core of our
economy and our future wealth depends upon them.
Most people associate the word ‘business’ with large, multinational corpora-
tions, such as BHP Billiton, McDonalds, Apple and Westfield, operating in many
countries, employing thousands of people and earning millions of dollars in profit.
Although these types of businesses are well known, they are few in number. Small
to medium enterprises (SMEs) make up about 98 per cent of all businesses in
Australia. Take a look around your local area and you will see plenty of examples
of businesses that are considered small or medium based on the number of people
they employ.
FIGURE 1.1 As consumers, we rely

on a large number of businesses to
satisfy our needs and wants.

The one common feature shared by both the largest and the smallest business
is that they produce a product — goods or service — which is sold in a market
where buyers and sellers meet. There are approximately 2.1 million actively trading
business entities in Australia, which respond to the needs and wants of around
24 million Australian customers and millions of overseas customers.
1.1.1 Why learn about business?

Business Studies is a very important subject. It is concerned with activities that
affect us on a day-to-day basis. You only have to listen to the news or read the
newspaper to find stories about business activity. Some of these stories will
make you feel optimistic — for example, the developments of new products that
have helped improve our standard of living. At other times, business activity may
make us feel dejected and cynical — for example, when businesses have misled the
public about safety standards or when companies have exploited weaker members
of society. Therefore, when studying business, it is essential that you carefully
examine business issues in order to make a balanced judgement.
Learning about business is both interesting and useful. It is also challenging and
requires imagination.
In learning about business you will need to be creative and have a questioning
mind. Business decisions are often open ended; there may be more than one way of
going about things. Therefore, you will need to ask lots of questions and weigh up
alternative ideas and proposals.
FIGURE 1.2 You’re never too

young to start a business. More
and more young people are seeing
the value of entrepreneurship as
a rewarding career path. Take, for
example, Ali Kitinas, Australia’s
youngest CEO, who started her first
business when she was 11. Now the
16-year-old runs her own company
producing an ethical body scrub
made from recycled coffee grounds,
with a portion of proceeds going to
impoverished children.
Source: Ali Kitinas
Business Studies is not a totally new subject to you. In one sense you have been
‘studying’ business ever since you made your first purchase many years ago —
perhaps an ice-cream or lollies. That simple transaction launched you on life’s
journey as a customer — and as an integral part of the business world. As a high
school student, perhaps you have even operated your own ‘business’, mowing
neighbours’ lawns, washing windows or setting up a stall at a local community
market. You may be employed on a part-time basis and work in a local store or
fast-food outlet — both examples of business enterprises.
1.1.2 Importance of business to you

Undertaking this Business Studies course will give you a better understanding of
how businesses are established, organised and operated. As well, it will give you an
insight into the different roles you will play throughout your life — as consumer,
employee, business owner and/or investor. Each of these roles centres around a
business as shown in figure 1.3 on the following page.
Role of business • CHAPTER 1 5

Successful business owner Informed consumer
The technical skills and knowledge You will be able to make better informed
required to own and operate a successful decisions and use your money wisely.
business can be gained through learning During your life you will make thousands of
about business. commercial transactions with hundreds of
businesses.
Business studies
It helps you throughout your
life to perform these important
roles better.
Productive employee
Employers today require people to have a Informed investor
number of skills. These include technical You may want to invest some money and
skills, and the ability to cooperate with become a shareholder in a company. To do
people and to have a working knowledge this wisely requires an understanding of
of business operations. business operations and terminology.
FIGURE 1.3 Developing an understanding of the world of business will help you in so many ways.
Businesses, through the many products (goods and services) they make and sell,
have an enormous impact on our lives every day. They influence how we live, work
and play.
SUMMARY
• Businesses play a crucial role in our society, largely determining our standard of
living.
• Small to medium enterprises (SMEs) make up about 98 per cent of all businesses
in Australia.
• The one common feature shared by both the largest and the smallest business
is that they produce a product — goods or service — which is sold in a market
where buyers and sellers meet.
• Businesses have an enormous impact on our lives every day.
1.2 The nature of a business

There is one thing people have in common — they all have needs and wants.
They need food to eat, clothes to wear and houses to live in. Most of us also want
handbags, video games, tablets, smart phones and cars — if only for the pleasure
FIGURE 1.4 Do you have oniomania?

That means you are what might
be referred to as a shopaholic or
compulsive shopper. Market research
company TNS found that Australian
teenagers are spending an average
of $5000 of their parents hard-earned
money per year. Young consumers
spend an average of $96 a week,
with the most money being spent on
clothes, transport, mobile phones,
electronics and fast food.

they give to us. To satisfy these never-ending wants is the role of business. BizWORD
A business can be defined as the organised effort of individuals to produce and A business can be defined as the
sell, for a profit, the products (goods and services) that satisfy individuals’ needs organised effort of individuals to
and wants. produce and sell, for a profit, the
products that satisfy individuals’
To satisfy the needs and wants of its customers, the business has to produce
needs and wants.
the products the customers demand. By producing these products for sale on the
A product is a good or service that
market, the business hopes to achieve a number of goals. Making a profit is per- can be bought or sold.
haps the most basic of these.
Goods are items that can be seen or
touched.
1.2.1 Producing goods and services Services are things done for you by
When we go shopping we are choosing from a range of finished products — others.
products that are ready for customers to buy and use. Rarely do we stop to think
about all the operations that have occurred to transform raw materials into finished
products ready for consumption. Business enterprises undertake many activities to BizWORD
provide the products demanded by customers, as shown in figure 1.5. However, by A finished product is one that is
ready for customers to buy and use.
far the most important of all these activities is production. Production refers to
Production refers to those activities
those activities undertaken by the business that combine the resources to create
undertaken by the business that
products that satisfy customers’ needs and wants. combine the resources to create
products that satisfy customers’
needs and wants.
Management — coordinating
the business’s limited
resources to achieve specific
goals (e.g. the owner buys a
new machine that makes
coffee faster and saves on
labour)
Organising natural,
Production — capital and human
creating products resources (e.g. separate
(e.g. new reproduction rosters are drawn up for
furniture line is created the employees who work
featuring chairs with a in the ‘Eats’ café and the
‘well worn’ look) antiques section)
BizFACT
It is possible to calculate the value
of production within an economy.
Marketing products Distributing goods and The money value of all the finished
(e.g. online services (products) (e.g.
the owner employs a
products produced in Australia during
store established one year is called the gross domestic
to show full range of delivery business to
antiques available) transport antiques to product (GDP). This measurement
various customers is used as an indicator of Australia’s
at a cost) economic growth. In 2016, Australia’s
annual GDP was $1.67 trillion.
Controlling production Planning finances,

— quantity and quality production and business
(e.g. café manager needs (e.g. permission
seeks feedback from sought from local council
customers) to have tables on footpath)
Forecasting sales,
expenses and profit
(e.g. café changes to
a supplier providing
cheaper coffee)
FIGURE 1.5 The main activities undertaken by this business, an antiques dealer with an
on-site café, include more than selling furniture and serving coffee.

SUMMARY
• The main role of a business is to produce and sell, for a profit, the products that
satisfy individuals’ needs and wants.
• Business enterprises undertake many activities to provide the products demanded
by customers, with production being one of the most important.
• Production refers to those activities undertaken by the business that combine
resources to create products that satisfy customers’ needs and wants.
EXERCISE 1.1 REVISION

1 Identify the one common feature shared by all businesses.
2 Summarise how Business Studies can help you better perform the roles of
consumer, employee, business owner and investor.
3 Outline the role of business.
4 Define the term ‘business’.
5 Identify two goods and two services you recently purchased to satisfy a need or
a want. Next to each one write the name of the business from which you bought
the product.
6 Define the term ‘finished products’.
7 Why is production regarded as the most important business activity?
8 Gordon Su is the owner of a jewellery store specialising in handmade necklaces
and bracelets. Read about his daily business activities (in the first column of the
table below) then complete the table to demonstrate each business activity
Gordon undertakes to operate his business successfully. The first example has
been completed for you.
Activity undertaken by business Example
Production — creating products Making necklaces and bracelets

Organising natural, capital and human resources
Marketing products
Controlling production — quantity and quality
Forecasting sales, expenses and profit
Distributing goods
9 Reflect on what you have learned so far. State how this information would influence
you if you were intending to start a business.
EXERCISE 1.1 EXTENSION

1 As a class, discuss the statement: ‘The one thing I’ve learnt about surviving in
business is that it’s important to learn from past mistakes — and the more mistakes
you make the more you learn.’ (Richard Branson, British entrepreneur, founder and
CEO of Virgin Group)
2 Construct a clippings file of magazine and newspaper articles dealing with various
aspects of business and its importance to the Australian economy. Select five
articles and paste them onto a sheet of paper. Underneath each article prepare a
12–15 line summary.
3 Construct a series of flowcharts to show the interrelationship between producers
and consumers.

1.3 Other functions of business
Businesses play an important role in our society. Some of the important functions
of business are outlined in figure 1.6.
Profit
This is the return, or
reward, that business
Quality of life owners receive for
Businesses offer a vast producing products Employment
array of products that that consumers need Businesses provide
improve our standard and want. employment to people in
of living. their local community.
/'
Incomes
Wealth
Businesses provide
Business activity results
income to business
in higher levels of
owners/shareholders
economic growth
and employees.
and wealth.
Entrepreneurship
and risk
Businesses provide Innovation Choice
individuals with the Through research and Consumers have
opportunity to turn development, existing freedom of choice
their ideas and products are improved and the opportunity
passions into a and new products to purchase products
livelihood. are created. at competitive prices.
FIGURE 1.6 The economic and social importance of business
1.3.1 Profit
The main activity of a business is to sell products to its customers. A business BizWORD
receives money (sales revenue) from its customers in exchange for products. It must Revenue is the money a business
also pay out money to cover the numerous expenses involved in operating the receives as payment for its products.
business. If the business’s sales revenue is greater than its operating expenses, it Operating expenses are all the costs
has earned a profit. More specifically, profit is what remains after all business of running the business except the
expenses have been deducted from the business’s sales revenue (see figure 1.7). cost of goods sold.
Profit is what remains after all
business expenses have been
deducted from sales revenue.
FIGURE 1.7 A business must earn a

profit to survive. Profit is the reward to
business owners who have taken the
risks involved in starting and operating
a business.

BizFACT The business’s profit becomes the property of its owners. For this reason, profit
A negative profit, which results when a can be regarded as the return, or reward, that business owners receive for pro-
business’s expenses are greater than ducing products that consumers want.
its sales revenue, is called a loss.
1.3.2 Employment
BizFACT Employment keeps the economy healthy. To be able to purchase products, consumers
Around 61 per cent of businesses in need money. Employed Australians will use the money they have earned from working
Australia do not employ staff. at jobs provided by businesses to buy goods and services to meet their needs and
wants, supporting business and opening up further opportunities for job creation.
People are employed in many different businesses, as can be seen in table 1.1.
TABLE 1.1 Employment in Australia by industry sector (2017)
Industry sector Number %
Health care and social assistance 1 562 600 12.9

Retail trade 1 228 400 10.1
Construction 1 108 300 9.1
Professional, scientific and technical services 1 018 500 8.4
Education and training 971 800 8.0
Manufacturing 906 500 7.5
Accommodation and food services 872 100 7.2
Public administration and safety 812 000 6.7
Transport, postal and warehousing 614 000 5.1
Financial and insurance services 436 100 3.6
Administrative and support services 411 000 3.4
Wholesale trade 391 000 3.2
Agriculture, forestry and fishing 296 700 2.4
Mining 235 800 1.9
Arts and recreation services 215 700 1.8
Rental, hiring and real estate services 212 800 1.8
Information media and telecommunications 211 400 1.0
Electricity, gas, water and waste services 125 500 1.0
Total labour force 12 133 300 95.1*
Source: Australian Bureau of Statistics, Labour Force, Australia, May 2017.
*Excludes 4.9% Other services
The number of employees hired by a business at any time will largely depend on
the nature of the products and the number of customers who wish to purchase the
products. Generally, the more that is sold the more employees a business will hire.
Large businesses employ thousands of people within their organisations.
Businesses employ large numbers of people. However, the SME sector has
driven employment growth in Australia, hiring more staff than large businesses
do. The SME sector currently accounts for about 66 per cent of all private (non-
government) sector employment — approximately 7 million people. During the
last 20 years, the SME sector has been the major generator of new jobs in the
Australian economy.
Large businesses also make an important contribution. ANZ, for example,
employs 21 000 people in Australia. Businesses, therefore, have an impor-
tant role to play in supporting employment growth in Australia and in reducing
unemployment.

FIGURE 1.8 Jobs in the health sector have doubled over the past decade, making the sector
the biggest employer in Australia. Two factors that have contributed to this are population
growth and ageing demographics.
1.3.3 Incomes BizWORD

Another important function of business is to provide income. For an individual, Income is money received by a
income is the amount of money received for providing his or her labour. A business’s person for providing his or her labour,
income is the amount it earns after covering all of its expenses: a return on its or a business from a return on its
investments.
investments.
There are many different types of income that employees can receive. For
example:
• wage: money received by workers, usually on an hourly or daily basis, for BizWORD
services they provide to an employer A wage is money received by
• salary: a fixed regular payment, usually paid on a fortnightly or monthly basis but workers, usually on an hourly or daily
often expressed as an annual sum, made to a permanent employee of a business basis, for services they provide to an
employer.
• bonuses: a sum of money added to a person’s wages as a reward for good
performance A salary is a fixed regular payment,
usually paid on a fortnightly or monthly
• overtime: time during which work is done outside regular working hours. Such basis but often expressed as an
time is usually paid at higher rates. annual sum, made to a permanent
• commission: the percentage of a sales price received by a salesperson for her or employee of a business.
his services
• fringe benefits: an extra benefit supplementing an employee’s money wage or
salary; for example, a company car, private health care, etc.
A business receives money from the sale of its products. As previously outlined, BizWORD
this is called sales revenue. From this revenue, all the expenses incurred in o perating Shareholders are people who are
part owners of a company because
the business must be deducted. The amount that remains is the business’s profit.
they own a number of shares.
This becomes the business owner’s property and consequently their income.
A dividend is part of a business’s
If the business is a private or public company, it will have many owners referred profit that is divided among
to as shareholders. Usually, some or all of a company’s profit is divided among shareholders.
shareholders. This type of income is called a dividend (see figure 1.9).

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FIGURE 1.9 Since shareholders are part owners of a company, they are entitled to a share
in the company’s profits. Paying a dividend is one way to reward shareholders. A dividend is
a distribution of a portion of the company’s profit to its shareholders. Let’s say Company X
generates a profit of $1 million and has a total of 1 million shares on issue. If they wanted to
distribute all their profit to shareholders, they could declare a dividend of $1 per share. Most
companies, however, prefer to retain at least some of their profits to reinvest in the business.
The amount of income a business can generate to pay wages and salaries, profits
or dividends, depends largely on how successful it is in selling its products. A busi-
ness that is aware of what consumers desire and attempts to satisfy this demand
will experience increasing sales. This provides the business with the opportunity
to offer higher income payments to employees, business owners and shareholders.
BizWORD 1.3.4 Choice

Choice is the act of selecting among Choice is the act of selecting among alternatives. For instance, you decide to purchase
alternatives. a new toothbrush. At the local supermarket you find a bewildering array of brands,
designs, colours, shapes, textures, packaging, bristle arrangements, sizes and prices.
A vast assortment of options — and all for the simple task of brushing your teeth.
In our society, consumers have freedom of choice and the opportunity to purchase
BizFACT
a variety of products at competitive prices. An average supermarket will have on
Most businesses usually offer a range
of products as this will increase profits
display approximately 20 000 product lines, with some hypermarkets carrying in
in the long term. excess of 40 000 lines. Freedom of choice exists when consumers can ‘shop around’
and select from a range of competitors’ products. The more competition there is, the
greater the choice available to consumers. Businesses competing with one another
are responsible for the wide range of products in the shops. Every day thousands of
businesses are producing products for specific sections of the overall market.

SUMMARY
• Profit is what remains after all business expenses have been deducted from sales
revenue.
• Profit is the reward that business owners receive for assuming the considerable
risks of ownership.
• SMEs provide employment for about 66 per cent of Australia’s private sector.
• Businesses generate income for:
–– employees — from wages, salaries, bonuses, overtime, commissions and/or
fringe benefits
–– business owners — from profits
–– shareholders — from dividends.
• The amount of income a business can generate as wages, salaries, profits or BizWORD
dividends depends largely on how successful it is in selling its products. Innovation is either creating a new
product, service or process, or
• In our society, consumers have freedom of choice and the opportunity to significantly improving an existing one.
purchase a variety of products at competitive prices.
BizFACT
Each year TIME magazine publishes
1.3.5 Innovation a list of what it considers to be the
The definition of innovation may vary, but it generally refers to the process of year’s 25 great inventions. Some
creating a new or significantly improved product, service or process (way inventions that made the list in 2016
include an artificial pancreas, artificial
of doing something). Invention refers to the development of something that is limbs, Wynd (a portable air cleaner
totally new, but innovation and invention both result in something unique being that monitors the air around you and
created. purifies where needed), a levitating
Ideas for new products, or development of and improvements to existing light bulb, a folding bike helmet, shoes
that tie themselves (Nike Hyperadapt)
products, will often provide the opportunity for the establishment of a new busi- and tyres that spin in every direction.
ness. Many small business concepts are an innovation on an existing product.
Blu-ray players and tablet computers, for example, came into existence in the
same way as light bulbs and car tyres — that is, through people making technical BizWORD
advances with established products. Sometimes, a person has an idea for a totally Research and development (R&D)
new product, an invention, which will satisfy a need that is not presently being is a set of activities undertaken to
improve existing products, create new
satisfied. Patents are legal protection for the exclusive right to commercially exploit products and improve production.
an invention.
The way we listen to music has been the subject of innovation over the last cen-
tury or more. Prior to the invention of the first phonograph by Thomas Edison BizFACT
in 1877, the only way people had been able to listen to music was through live Businesses in the manufacturing and
professional, scientific and technical
performance. Edison’s invention involved playing music that had been recorded services industries were the major
on cylinders, but these were eventually superseded by discs in the 1920s. Tape contributors to the R&D spending.
recording was developed in the 1930s and 1940s, with the cassette tape appearing
in 1964. Compact discs came onto the market in 1982. Since the 1990s digital
recording techniques have allowed for music to be downloaded from the internet, BizFACT
stored on computer hard drives and on solid-state devices such as iPods and USB While Ford closed down their
manufacturing facilities in Australia,
flash drives. New technological developments soon lead to new products, new they retained an Engineering Centre
markets and new business opportunities. in Broadmeadows, a R&D centre in
Many businesses undertake research and development (R&D) in order to expand Geelong and a test facility at Lara.
their knowledge of products and processes. According to the ABS, Australian busi- The CEO believes that the Australian
R&D facilities are instrumental as part
nesses spent $18.9 billion on R&D from 2013 to 2014. Of the $18.9 billion spent, of the company’s capability as an
large businesses contributed $11.1 billion, medium-sized businesses contributed innovator and centre of excellence for
$4.6 billion and small businesses contributed $3.2 billion. the Asia–Pacific region. In 2015 alone,
SMEs have produced many new products that we take for granted. This is Ford spent around $300 million on
R&D, bringing to $2 billion the amount
because SMEs generally display a consistently positive attitude towards innovation.
of money spent on R&D over the past
They constantly research, develop and test new ideas and products. Many SMEs six years.
are built on product innovation.

Finding new and better ways of doing things has resulted in improved efficiency
and increased productivity. Studies confirm that the level of innovation among
SMEs employees is much higher than among employees of larger businesses. This
is perhaps because Australians have traditionally been a very innovative people,
constantly recording the most number of new products per head of population (see
the following Snapshot).
SNAPSHOT Great Aussie innovations

How would you describe a country that has invented the Victa lawnmower, Esky, Hills
Hoist, Speedo swimwear, StumpCam (a small camera hidden in a cricket stump to
provide action replays), wine cask, surf life-saving reel and insect repellent? You might
describe it as a sports-loving nation that enjoys an outdoor lifestyle. Of course, the
country is Australia! Some other world-changing inventions that have come out
of Australia include: black box flight recorders, spray-on skin (to help treat burns
victims), the electronic pacemaker, Google Maps, penicillin, polymer bank notes,
IVF freezing technique, cochlear implants (for hearing loss), the electric drill, Wi-Fi
technology and an ultrasound scanner.
What these lists reveal is that Australians are very innovative. According to the
Global Innovation Index, Australia placed 23rd out of 311 countries on the 2017
index on measures of innovation development.
Converting an innovative idea into a business concept often requires the creativity
and risk taking of an entrepreneur. Success is something the following Australian
business owners achieved due to their innovations:
• Andrew Terry and Michael De Nil began Morse Micro in 2016 based on the
development of a new Wi-Fi chip. The pair built a prototype wireless chip called
the ‘Wi-Fi HaLow’ that reaches up to one kilometre, yet only needs one per
cent of the power consumed by traditional Wi-Fi chips. This new technology,
which is expected to hit the shelves in the next 18 months, is set to power a
new generation of smart devices that can talk across neighbourhoods and run
❛ … world-changing for years on a single battery. While the business will initially focus on industrial
inventions that and agricultural applications, it is hoped the technology will also make its way
have come out of into smart cities and smart homes by 2020.
• Scott Millar, a seventeen-year-old from Brisbane, began BOP Industries when
Australia … ❜ he was in year 9. The original concept was developed as part of a Year 9
assignment based on running a business. While researching his assignment,
he discovered a ‘simplistic’ form of hologram technology online. From
then, it took him just seven days to develop the technology and launch his
first product: a holographic entertainment display which is used by event
managers, theatre companies and educational facilities.
• The need to solve a problem often leads to a new innovation, as was the case
with Hayden Cox who was inspired to develop world-leading surf technology
after trying to fix his own broken surfboard. Cox started his business,
Haydenshapes, when he was just 15 to build on his passion for surfing and
his desire to achieve a better ride. His popular Hypto Krypto boards won the
prestigious Surf Industry Manufacturers Association Surfboard of the Year and
the surfboard technology he invented has changed the face of the sport.
SNAPSHOT QUESTIONS
1. Identify some well-known Australian inventions.
2. Outline what is required to convert an innovative idea into a business concept.
3. Select an Australian innovation and explain the benefits of that innovation to
both the creator and society.
1.3.6 Entrepreneurship and risk

Most of us have seen something advertised and thought, ‘That is just what I need’.
Someone, somewhere, had the idea to provide this product. Not all inventors or
innovators will seek to use their idea as the basis for a business. In many cases

they will be happy to sell their idea to an existing business and let someone else BizWORD
manufacture and market that product. To be willing to take the risk of starting up Entrepreneurship is the ability and
and operating a business and then working to build that business requires qualities willingness to start, operate and
of entrepreneurship. assume the risk of a business venture
in the hope of making a profit.
People who transform their ideas into a new business are called entrepreneurs.
They are prepared to take the risk of starting and operating a business venture; An entrepreneur is someone who
starts, operates and assumes the risk
of turning their dreams and passions into a livelihood. Entrepreneurs have to of a business venture in the hope of
take risks because usually they explore untapped markets with no track record making a profit.
of proven consumer demand or guaranteed returns. They cannot be certain that Risk refers to the possibility of loss.
anyone will buy what they plan to sell. But for those whose ideas translate into a
successful business venture, the profits are often huge.
If a business fails, its owner may lose all or part of the money he or she has
put into it. If people are to take this risk, they must be encouraged by the hope of
some reward for success. In our economic system, profit is the return (reward) or
payment that business owners receive for assuming the considerable risks of own-
ership. One of these risks is the risk of not being paid. Everyone else — employees,
suppliers and lenders — must be paid before the owners. And if there is no profit,
there can be no payment to owners. A second risk is that if the business fails, its
owner may lose all or part of the money he or she has put into it.
Bill Gates, co-founder of Microsoft Corporation — the world’s most successful
computer software company — is a classic example of an entrepreneur (see
figure 1.10). While he was a teenager, he decided to take the risk of establishing
his own business to market a computer operating system that he and a friend had
developed. Today he is one of the world’s wealthiest individuals. Entrepreneurs
often display flair and creativity. They will frequently find new and innovative ways
of promoting their products or services. They will regularly upgrade and adapt
their business objectives and recognise new opportunities to expand or diversify
their business operations.
BizFACT
While Bill Gates topped the Forbes
2017 Billionaires List, the next four
entrepreneurs on the list (in order)
were Warren Buffett (CEO of Berkshire
Hathaway, which owns more than
60 companies, including Duracell and
Dairy Queen), Jeff Bezos (CEO of
Amazon), Amancio Ortega (co-founder
of Zara) and Mark Zuckerberg (CEO of
FIGURE 1.10 Bill Gates topped the Forbes list of the Richest People in the World again in Facebook).
2017 with a net worth of $85.2 billion. He has held the top spot for 18 out of the past 23 years.

BizFACT To be a successful entrepreneur you don’t need to be running a multi-million
Every new business starts with an dollar company. Many people have achieved entrepreneurial success by running
idea. Describe a business idea that small to medium enterprises (see the following Snapshot).
you could provide and that is, to your
knowledge, not already available.
SNAPSHOT Case study: Could you be a successful entrepreneur?

Do you have what it takes to be a successful entrepreneur? An entrepreneur is
someone who undertakes a new business venture and assumes the risk of its
success or failure. One important characteristic many entrepreneurs share is the
ability to be highly motivated. Amanda Wong is an example of an entrepreneur with
plenty of motivation.
At age 15, Amanda Wong was already turning a profit. In her spare time, she
designed brochures and posters for local rock bands and concert events. Today,
aged 29, Amanda is the driving force behind Eclipse Publishing & Design, a graphic
design business specialising in advertising, brochures, digital photography, logos and
publication design. Amanda started the business in 2014, and at the time had no
idea it would eventually employ 15 people and have nine overseas clients. Amanda
believes ‘the business is successful because we offer a diverse range of unique
designs not available from many other graphic design businesses’.
In the beginning, cash flow was tight and Amanda had little experience in operating
a business. However, she was highly motivated and keen to learn. ‘Creating an idea
in my head and then seeing it actually appear out there in the world, that’s huge to
me,’ Amanda says. ‘I get enormous satisfaction from creating products that delight
❛ … good entrepreneurs my clients.’
should take only ‘If you want to go into business, then you have to realise there will be good days
calculated risks … ❜ and bad days,’ she says. ‘I understood there would be risks but good entrepreneurs
should take only calculated risks, which is what I did.’ In addition to Amanda’s
self-confidence is her ability to identify business opportunities when they arise.
‘If I become aware of an opportunity that will be profitable and help grow the
business, it is my responsibility to act. That’s the life of an entrepreneur.’
‘I knew that commencing a business would require hard work and long hours,
but I was totally committed to the idea. I was determined to succeed. Ultimately,
it comes down to self-belief. If you want it to work, you’ve got to believe it will.’
Amanda’s venture into the business world has been financially and personally
rewarding. She says ‘successful entrepreneurs are motivated and passionate about
what they do and where they want to go’.
SNAPSHOT QUESTIONS
1. Identify the main entrepreneurial characteristics exhibited by Amanda Wong.
2. Outline whether you agree with Amanda when she says that good
entrepreneurs should take only calculated risks.
3. Account for the success of Eclipse Publishing & Design.
4. Outline the disadvantages of running your own business.
Entrepreneurial qualities, however, are not confined to adults. For example, at a

recent swimming carnival, Yolanda Zurack, a Year 8 student, arranged to take along
an Esky filled with cold drinks. To keep her costs down Yolanda bought the drinks
through a local wholesaler. During the very hot day she sold all the drinks and
BizFACT made a reasonable profit.
An entrepreneur’s drive and motivation Yolanda Zurack, Bill Gates and Amanda Wong are all entrepreneurs. They organ-
to establish and operate a business ised their business, undertook the necessary arrangements for it to operate and
lies at the heart of our private were prepared to take a risk. The size of the profits may differ but they possess
enterprise economic system.
identical entrepreneurial qualities: courage, motivation, determination and energy.
Without such entrepreneurs and their activities, many of the products we purchase
would not exist.

FIGURE 1.11 At just 12 years old,
Bella Tipping started her business
Kidzcationz — a website designed
to run alongside TripAdvisor which
allows kids to get an avatar and rate
and review hotels, theme parks and
attractions. The business idea started
with a brainwave after returning from
a family holiday. She saw her mum
giving a great review on a hotel that
she didn’t really like as it was too
adult-focused.
Source: Bella Tipping
1.3.7 Wealth
The more that is produced the more wealth is generated within the Australian
economy. The thousands of individual businesses operating every day act as the
‘engine room’ of society, helping drive the economy forward to achieve greater
levels of economic growth and wealth.
During normal operations, a business receives money from its customers in
exchange for products. At the same time it must also pay out money to other busi-
nesses to cover operating expenses. Operating expenses are the costs involved in
the day-to-day operation of the business. The difference between the two amounts,
the value added, represents the wealth (profit) created by the business. This wealth
is then redistributed to employees, governments, lenders, owners/shareholders and
the business itself (see figure 1.12).
Governments
Taxes such as income tax,
payroll tax, fringe benefits tax
and goods and services tax
Business owners/
Employees
shareholders
Salaries, wages and
Profits and/or
other employment
dividends
benefits
How the wealth
created by businesses
is redistributed
Lenders The business itself

Loan repayments Depreciation,
retained profits FIGURE 1.12 The distribution of the
wealth created by a business
As previously outlined, businesses need to employ people to assist in the pro-

duction process. These employees receive an income (wage or salary) that can be
spent to satisfy their needs and wants. Both the money received and the prod-
ucts purchased add to the wealth of individuals and households. Imagine if all
the businesses within your local community were to close down overnight. People
would lose their jobs and source of income, fewer products would be available for

purchase, and the flow of money would quickly contract. The end result would be
an increase in the levels of poverty, the opposite of wealth creation.
The total output of the country’s diverse collection of businesses, ranging from
large multinationals to the family-owned local corner store, makes a significant
contribution to the wealth of the national economy.
1.3.8 Quality of life

In our society most people want more than the bare necessities; they want to
achieve the highest standard of living possible. Overall, we have high expectations
about what our economy should provide for us. However, we often want more
BizWORD than simply to have our material wants satisfied. We also desire a high degree of
Quality of life refers to the overall quality in our lives. Quality of life refers to the overall wellbeing of an individual,
wellbeing of an individual, and is a and is a combination of both material and non-material benefits.
combination of both material and
For example, we desire to have leisure time for hobbies and recreation. Our
non-material benefits.
quality of life is improved by having access to a number of non-material prod-
ucts such as fresh air and clean water, unpolluted earth, conservation of wildlife
BizFACT and protection from toxic sources. Consumers have become increasingly con-
cerned about waste disposal, the greenhouse effect and the destruction of unique
Sanofi is an Australian pharmaceutical
company focused on improving habitats.
people’s health and quality of life. Many businesses have responded to quality-of-life issues and are implementing
Through investment in medical environmentally friendly procedures, for example recycled materials, cleaner cars,
research and development, the
less energy-consuming production and ‘green’ food products. Because business
company has developed leading
prescription medicines across a activities play a vital role in our lives, businesses have a responsibility to help
range of therapeutic areas, as well provide what consumers want and to minimise what they do not want.
as a diverse portfolio of vitamin and
mineral supplements. Sanofi are the
world’s largest vaccine manufacturer
and have also produced a range of
SUMMARY
transformative therapies for people • Research and development (R&D) leads to innovation (the creation of new
affected by rare and debilitating products, services or processes, or the improvement of existing ones).
diseases.
• People who transform their ideas into a new business are called entrepreneurs.
They are prepared to take the risk of starting and operating a business venture in
the hope of making a profit.
BizFACT • An entrepreneur’s drive and motivation to establish and operate a business lie at
Australia is still seen as one of the
the heart of our private economic system.
best places to live but is sliding in
global rankings when it comes to • Business is a major creator of wealth within the Australian economy.
the environment and press freedom. • Businesses produce a vast range of products that enable us to satisfy many and
In the 2017 Social Progress Index, varied wants, which results in a higher standard of living.
which measures quality of life and the • Quality of life refers to the wellbeing of an individual, and is a combination of
wellbeing of society independent of
wealth, Australia dropped from 4th to material and non-material benefits.
9th place.

1 Recall the main activity of a business.
2 Describe the relationship between revenue, operating expenses and profit.
3 Calculate which of the following businesses has made a profit.
(a) Sally’s Pet Shop has expenses of $2000 per week and revenue earned is
$3500 per week.
(b) Ben’s Gardening Supplies takes revenue of $6000 each week for a month,
but has weekly expenses of $7000 the first week, $8000 the second and
third week, and $3000 for the fourth week.
4 Evaluate the significance of the SME sector’s contribution to total employment
within the Australian economy.
5 Outline the three ways in which businesses provide income.

6 Recall the correct term and complete the table below.
Term Meaning
A. Income
B. Wage
C. A fixed amount of money paid on a regular basis to a
permanent employee of a business.
D. Shareholder
E. Part of a business’s profit that is divided among shareholders.
7 Define the term ‘choice’. Explain how businesses encourage freedom of choice.
8 Outline the role innovation plays within our economy.
9 Outline the role of the entrepreneur in our economic system.
10 Explain why people take risks.
11 Describe the two main risks associated with operating a business.
12 Identify the entrepreneurial characteristics that Yolanda Zurack, Bill Gates and
Amanda Wong have in common.
13 Assess your own entrepreneurial ability by completing the following questionnaire.
Question Yes No
(a) Are you willing to take moderate risks?
(b) Are you easily motivated?
(c) Do you get on well with people?
(d) Is your health excellent?
(e) Do you set realistic goals?
(f) Are you prepared to accept responsibility?
(g) Can you tolerate failure?
(h) Do you have a positive self-image?
(i) Are you well organised?
(j) Are you a hard worker?
Someone with an entrepreneurial personality would answer ‘Yes’ to most of the

questions. Write a self-evaluation report based on your answers. Compare your
response in class.
14 How do businesses create wealth within the economy?
15 Identify the ways in which the wealth created by a business is redistributed.
16 Justify which is a more important contributor to a person’s quality of life — material
or non-material benefits. Provide reasons for your answer.

1 A profitable business is one that returns to its owners more than they could earn by
working for someone else. According to this definition, many businesses operating
today would not be considered profitable. Determine why their owners continue to
run them. Share your answer with the rest of the class.
2 Construct a three-minute presentation titled ‘How businesses contribute to our
economic and social wellbeing’. Prepare some multimedia materials to supplement
the oral presentation.
3 ‘The mother of invention/innovation is necessity.’ Justify this statement.
4 In small groups, predict the social consequences of an economy that is experiencing
Resources
a large number of business failures. Compare your answer with other groups.
Weblink: ENYA
5 In small groups, identify someone who successfully runs a small business. Digital doc: Chapter summary
Critically analyse the personal qualities this person possesses that contribute to (doc-26093)
the success of the business. Interactivity: Chapter
6 The Entrepreneur Network for Young Australians Ltd (ENYA) is a not-for-profit public crossword (int-7211)
company that ‘promotes the active participation of young people in enterprise, in an Interactivity: Multiple choice
ethical and sustainable manner’. Examine the main functions of this organisation. quiz (int-7212)
The ENYA weblink in the Resources tab may assist.

CHAPTER 2
Types of businesses
OVERVIEW
2.1 Introduction
2.2 Classification by size
2.3 Classification by geographical spread
2.4 Classification by industry sector
2.5 Classification by legal structure
2.6 Types of companies
2.7 Factors influencing choice of legal structure
2.1 Introduction
As explained in chapter 1, any organisation that sells goods and services to
consumers in order to make a profit is a business.
Businesses may be organised in a variety of ways. Although no two businesses
are identical, some common features that allow similar business types to be classi-
fied and grouped together. Figure 2.1 illustrates the four methods commonly used
to classify businesses.
Micro business
Partnership
Sole trader
Small
Private
Legal structure Size
company
Government
Medium
enterprise
Public
Large
company
WAYS IN WHICH A BUSINESS

CAN BE CLASSIFIED
Quinary Local
Geographical
Industry sector
spread
Quaternary Primary National
Tertiary Secondary Global
FIGURE 2.1 The four methods commonly used to classify businesses

2.2 Classification by size
Like soft drinks, businesses come in three different sizes: small, medium and
large. Most people usually associate the term ‘business’ with large companies such
as Woolworths, Commonwealth Bank and Westfield, which employ thousands
of people across hundreds of locations. However, 98 per cent of businesses in
Australia are small to medium enterprises.
Although no universally accepted definition exists for a small, medium or large
business, a number of measurements can be used to determine the size of a busi-
ness, including:
• the number of employees — those who are hired to do work for the business
• the number of owners (of the business) — for example, a sole trader is a type of
business that has one owner BizWORD
• market share — the proportion of total market sales the business has compared Market share refers to the business’s
to competitors share of the total industry sales for a
• the legal structure — for example, the business is set up as a sole trader, particular product.
partnership or company.
Apart from quantitative measures, such as the number of employees, qualitative
descriptions also help us to determine the size of a business. These qualitative
measures are based on personal observation about the business. From a qualitative
viewpoint, a business may be classified as small or medium-sized if:
• the owner makes most management decisions, such as who to hire, what to
produce and how to advertise a product
• the owner provides most of the capital (finance)
• the business has little control within the market. Smaller businesses do not
usually have a large share of the total market sales and therefore have less
control over such things as price.
• it is independently owned and operated (for example, the local hamburger
shop is run by the owner, who does not answer to a larger organisation such as BizWORD
McDonald’s)
A multinational corporation is a
• the business is locally based. (This does not mean that it doesn’t export, because company that has branches in many
many SMEs do export. It just means that many SMEs are based in the one different countries.
location and, unlike a multinational corporation or company, do not have offices
around the world.)
Using quantitative measurements from the Australian Bureau of Statistics (ABS),
BizWORD
businesses can be defined as follows:
A micro business is a business with
• Micro business: a business with fewer than five employees.
fewer than five employees.
• Small business: a business with 5–19 employees.
A small business is a business with
• Medium business: a business with 20–199 employees. 5–19 employees.
• Large business: a business with 200 or more employees.
A medium business is a business
A comprehensive definition of small, medium and large business usually relies with 20–199 employees.
on a combination of both quantitative measurements and qualitative descriptions, A large business is a business with
as shown in table 2.1. This table also outlines the features of, and distinctions 200 or more employees.
between, the different sized businesses.
There is an additional category of business size called small to medium
enterprises (SMEs). SMEs are defined by the Australian Bureau of Statistics as
firms with fewer than 200 full-time equivalent employees and/or less than
$10 million turnover. SMEs play an especially important role within the Australian BizWORD
economy. As consumers, we rely on a large number of SMEs to satisfy our needs Small to medium enterprises are
and wants. These businesses also provide employment for about 7 million people. defined by the Australian Bureau of
Statistics as firms with fewer than
The role and contribution of SMEs will be looked at in greater detail in
200 full-time equivalent employees
Chapter 10. and/or less than $10 million turnover.
Table 2.2 illustrates the number of businesses by size as of June 2016.
Types of businesses • CHAPTER 2 21

TABLE 2.1 Quantitative measurements and qualitative descriptions of small, medium and large businesses
Characteristics Small Medium Large

Business type Corner store Services club Woolworths
Local mechanic Motel/hotel Qantas
Hairdressing salon Engineering factory National Australia Bank
Number of employees Fewer than 20 employees 20−199 employees 200 or more employees
according to the Australian
Bureau of Statistics (ABS)
business register definition
Type of ownership Independently owned and Owned and operated by a Owned usually by thousands
operated by usually one or two few people and/or private of public shareholders
people shareholders
Most common legal structure Sole trader Partnership Public company
Partnership Private company (numerous)
Decision making Owner responsible for majority Owner basically responsible Complex decision making, due
of decisions; simple and quick for majority of decisions; more to division of responsibilities
implementation of decisions complicated decision making among directors, senior and
with slower implementation, middle management; possibly
due to influence of directors slow implementation of
decisions, due to the layers of
management
Sources of finance Owner (usually from own Owners’/partners’ own Many sources, including
savings or a loan); difficulty in savings or a loan and/or cash reserves, retained profit,
accessing loans private shareholders; easier sale of shares, and loans
accessibility to larger loans from domestic and overseas
institutions
Market share Small, usually local area; not Medium, due to dominance Large, especially for
dominant in the industry within a geographic region; multinational corporations that
some market dominance dominate the markets of many
countries
TABLE 2.2 Number of Australian businesses by size in June 2016
Business by size (by employee no.) Number

0 employees 1 318 568
1–4 employees 599 392
5–19 employees 198 655
20–199 employees 50 808
200+ employees 3774
TOTAL (AUSTRALIA) 2 171 197
Source: ABS Catalogue 8165.0 Counts of Australian Businesses, including Entries and Exits, June 2012 to June 2016.
FIGURE 2.2 While the SME sector is the biggest employer

in Australia, is it the better employer? Some of the benefits
of working for a SME are that it is usually a more casual
environment, there is greater access to management and there
is less bureaucracy. The benefits of working for a large business
are that there are usually greater perks, access to more
resources, better training and development, higher pay and
more opportunities for promotion.

2.3 Classification by geographical
spread
Consider the suburb or town in which you live. This area can be classified as your
local community or neighbourhood — that is, a group of people living and working
in the same locality. The consolidation of all these local communities is what forms
the nation of Australia. Now, broaden your scope even further. Australia is just one
of the 195 independent nations that are part of the global network.
Businesses, too, can be classified as local, national or global according to their BizWORD
geographical spread: the presence of a business and the range of its products Geographical spread is the
across a suburb, city, state, country or the globe. presence of a business and the range
of its products across a suburb, city,
state or country or the globe.
2.3.1 Local
A local business, such as a newsagent, corner store, hairdresser, mechanic or
BizWORD
pharmacy, has a very restricted geographical spread. It serves the surrounding area
A local business has a very
and is in no position to offer a range of products to another suburb or town. Local restricted geographical spread; it
businesses such as these will frequently be used by consumers who live nearby. serves the surrounding area.
The majority of local businesses tend to be small to medium in size.
FIGURE 2.3 Mario and Rosa own Hair to Toe, a hairdressing salon in Drummoyne. They
understand the individual needs of all their clients, and the long-standing support they receive
from the local area is testament to this. They provide a range of professional services to
people in Drummoyne and surrounding suburbs and have established a great reputation in
the area.
2.3.2 National
As a business grows, it increases its range of products and the area it serves. As it
does this, it develops into a national business — one that operates within just one
country. Coles, for example, commenced trading in 1914 as G.J. Coles variety store BizWORD
in Collingwood, Victoria. Started by George Coles and his brother Jim, it employed A national business is one that
six people. Today, Coles is a leader in Australian food retailing, with more than operates within just one country.
99 000 employees and over 19 million customer transactions a week.

BizFACT Other well-known Australian businesses that serve the national market include:
David Jones is not only Australia’s • Australian Geographic — stores that specialise in Australiana, children’s games,
oldest department store, but also the gadgets, telescopes, travel and outdoor products. The Australian Geographic
oldest department store in the world magazine was started in 1985 by Australian entrepreneur and adventurer Dick
still trading under its original name. Smith. Today the magazine operates more than 70 stores across Australia.
For the 2016 financial year, its sales
revenue was $2.2 billion, up 8.4 per
• Sportsgirl — the boutique that became a major Australian fashion brand. The
cent from the previous year. company offers a wide range of fashion and accessories, and has over 120 stores
across Australia. Founded in Melbourne in 1948, Sportsgirl today holds a
dominant place in Australia’s retail fashion market.
• David Jones — one of Australia’s oldest department stores. In 1838, just 50 years
after the First Fleet arrived in Sydney Cove, Mr David Jones opened ‘large and
commodious premises’ on the corner of George and Barrack streets, Sydney (see
figure 2.4) and they now have 43 stores in various locations throughout Australia.
• McGrath Estate Agents — one of the most successful residential real estate
groups. John McGrath began the business in 1988 from a small office in
Woollahra. Today, the company has expanded to more than 102 offices across
the east coast of Australia.
FIGURE 2.4 David Jones originally began with one store in Sydney in 1838. They gradually
expanded over the years and now operate 43 stores around Australia.
As a national business expands and increases its sales, it will eventually run out
of new customers to sell to; that is, the domestic market becomes saturated. If the
business wishes to keep expanding, it can decide to export and sell its products in
other countries. This allows the business to tap into new markets.
BizWORD 2.3.3 Global

A multinational corporation is a large
company that has branches in many
A global business, commonly referred to as a multinational corporation, is a large
different countries. company that has branches in many different countries. The multinational corporation
represents the highest level of involvement in global business. For such companies,

national borders do not represent barriers to trade — they are merely lines on a BizFACT
map. Consequently, multinational corporations conduct a large percentage of their Some multinational corporations
business outside their home country. have grown so large that their annual
Multinational corporation come in many different forms and sizes. Coca-Cola, revenues from worldwide sales
exceed the GDP of many nations.
LG, McDonald’s, CSR, News Corporation, BHP, Toyota, Unilever, Westfield and
(GDP, or gross domestic product,
Exxon are just a few of the well-known foreign and Australian multinational corpo- is the total value of all goods and
rations. However, all multinational corporations have a number of features in services produced in an economy in
common. In a fully developed multinational corporation, finance, assets, tech- a given year.)
nology, information, employees and goods and services all flow freely from one
country to another (see the following Snapshot).
The global expansion of one Australian business
Case study: Westfield Group — global expansion SNAPSHOT

When Frank Lowy and John Saunders first came to Australia in the 1950s, there wasn’t
one shopping centre in the entire country. At the time, most shopping was done in
large department stores in major cities. In 1959 the pair became business partners
and opened their first shopping centre in Blacktown. They have both since grown
to become one of the world’s largest shopping centre owners and managers. The
company they began, Westfield, is now a market leader in Australia, New Zealand,
the United States and the United Kingdom. Throughout its history, Westfield has played
a significant role in changing the way the world shops.
Westfield began as a public company listed on the Sydney Stock Exchange in
1960. In that same year, they built their second shopping centre in Hornsby with the
money they raised from the float.
After opening new shopping centres throughout Sydney in the 1960s, Westfield
❛ … Westfield has
expanded interstate in 1967 with the opening of Toombul in Brisbane, followed by played a significant role
Doncaster in Melbourne in 1969. They continued to expand nationally and currently in changing the way the
have centres in all major metropolitan cities as well as some regional centres
throughout Australia. world shops. ❜
Since the 1950s Saunders and Lowy have made regular trips to the United States
to learn more about shopping centres. By the 1970s they had become concerned
that Australia could only accommodate a finite number of centres due to its limited
population. This concern led them to begin thinking about expanding into overseas
markets. In 1980 Westfield expanded globally by acquiring their first shopping centre
overseas in Connecticut in the United States. Within three years, they owned another
three centres in that market. Since entering the United States market, they have
continued to expand. Today, Westfield has a portfolio of 47 centres in the United States.
Westfield entered the New Zealand market in 1998 when they acquired St Luke’s
Group Ltd, which owned 10 centres. Upon taking over this company, they branded
those centres Westfield. Their expansion into New Zealand has mainly been through
buying existing shopping centres. They currently have an interest in nine centres in
New Zealand.
Also in 2000, Westfield entered the United Kingdom with the acquisition of a centre
in Nottingham. This was followed by the establishment of a joint venture interest in
other centres in major cities. Today, Westfield has a portfolio of five shopping centres
in this market.
In 2011, Westfield entered two new markets, Italy and Brazil. Their entrance
into Italy was through a joint venture with Gruppo Stilo. The project involved the
development of a world class iconic regional shopping centre in Milan. While they
also entered into a joint venture project with Brazilian company Almeida Junior,
Westfield sold their 50 per cent share in this venture back to the original partner in
2013. They are, however, still planning a re-entry into Brazil soon.
Westfield Group continues to expand their portfolio by either acquiring sites with
development opportunities in new markets or by redeveloping existing malls.
•

SNAPSHOT QUESTIONS
1. Outline how Westfield enters new markets overseas.
cm] Resources 2. Explain why Westfield decided to expand globally.
3. Construct a timeline of Westfield’s global expansion.
Weblink: Westfield 4. Explain how Westfield has changed the way the world shops.
_e>_ _]
SUMMARY
• Businesses can be classified as small, medium or large.
• Their classification will depend on such things as number of employees, market
share, ownership and who makes the decisions.
• A micro business (usually a SOHO) employs fewer than five people (including
the owner).
• Businesses can also be classified as local, national or global according to their
geographical spread.
• A local business has a very restricted geographical spread; it serves its surrounding
area.
• A national business operates in just one country.
• A global business — a multinational corporation (MNC) — is a large business
with a home base in one country that operates partially owned or wholly owned
businesses in other countries.

1 Deduce whether the following businesses are small, medium or large, and explain
the reason for your decision.
(a) Qantas employs approximately 37 000 people.
(b) National Australia Bank is an international financial services organisation that has
customers in Australia, New Zealand, Asia, the United Kingdom and the United
States.
(c) Brookfarm is owned by Carolyn and Martin Brook. It produces gourmet macadamia
nuts for domestic and export markets, and employs more than 20 staff.
(d) Ripe Maternity Wear was started by two friends in 1996 to manufacture
contemporary maternity clothes. It supplies clothes worldwide, employing no more
than 20 staff.
2 Determine whether the following statements are true or false.
(a) A micro business is a business that sells only miniature products.
(b) SME stands for small to medium enterprise.
(c) Small businesses do not usually have a large share of a particular market.
(d) According to the Australian Bureau of Statistics, large businesses employ fewer
than 200 people.
(e) SMEs do not play an especially important role within the Australian economy.
(f) An enterprise is just another name for a business.
3 Complete the following statements by determining the correct word from the
choices given. Write the sentences in your notebook.
(a) According to the ABS, a business with fewer than 200/300 employees is classified
as a medium-sized business.
(b) A common feature of all small businesses is that they are independently/
interdependently owned and operated.
(c) Small businesses have a complex/simple management structure with few/many
rules and regulations.
(d) The number of employees in a business is a quantitative/qualitative measure.
(e) A small business has a large/small market share and usually serves the Australian/
local market.

(f) An example of a small business is Westfield Limited/Blue Hills Convenience Store.
(g) Most small businesses are sole traders/public companies.
4 Compare a micro business with a small business.
5 Examine table 2.2 and answer the following questions.
(a) Calculate what percentage of businesses would be considered micro businesses.
(b) Calculate what percentage of businesses are SMEs in Australia.
6 Define the term ‘geographical spread’.
7 Distinguish between a local and national business. Provide two examples of each.
8 Recall another name for a global business.
9 Identify three examples of multinational corporations.
10 State what features all multinational corporations have in common.

1 Construct a database of seven businesses that you have dealt with over the last
few months. Copy and then complete the following table. The first one has been
done for you.
Business name Business activity Size: small,

medium, large
1. Redback Café Food and drink Small
2.
3.
4.
5.
6.
7.
8.
(a) Calculate what percentage of the businesses are small.

(b) Outline the criteria you used to classify the size of each business.
(c) Compare the percentage with the figures for Australia.
(d) Account for the similarity/difference between the two figures.
2 Critically analyse the following statement: ‘Multinational corporations play a crucial
role in our society. Without them, consumers would not have such a wide range of
products to select from.’
3 Look for five internet or newspaper articles about SMEs that interest you. Start a file
of news clippings or printouts and write an information page to attach to each article.
On the information page:
(a) summarise what the article is about
(b) examine some background information about the business.
4 Adidas and Levi Strauss are two multinational corporations that place a great deal
of importance on their corporate social responsibilities. Both companies have taken
action against overseas suppliers over human rights issues and environmental codes
Resources
of conduct. Use the Adidas and Levi Strauss weblinks in the Resources tab and
investigate their commitment to their social and environmental obligations. Create Weblink: Adidas
either an oral or written report and present it to the rest of the class.
Weblink: Levi Strauss
5 Arrange to inspect an annual report for one of Australia’s large multinational Weblink: Multinational
corporations. Investigate the company’s operations. To help you, use the corporations
Multinational corporations weblinks in the Resources tab.

2.4 Classification by industry sector
Another useful method used to classify businesses is based on the type of activity
BizWORD they undertake. When businesses are involved in similar types of production, they
An industry consists of businesses are grouped together in what is referred to as an industry. Australian companies like
that are involved in similar types of Woolworths, Wesfarmers, JB Hi-Fi and Officeworks belong to the retail industry.
production.
There are five main types of industry groupings or sectors: primary, secondary,
tertiary, quaternary and quinary (see figure 2.5).
Industry sector
Primary Secondary Tertiary Quaternary Quinary
FIGURE 2.5 The five main industry sectors
The relative size of each industry sector is shown in figure 2.6. This graph shows
both the percentage of private sector firms and the employment in each industry
sector.
25.2% 4.7%
Quinary Primary
Hospitality 7.1% Agriculture 2.8%
Health 12.1% Mining 1.9%
Arts & 1.8%
Recreation
18.0%
Other 4.2%
Secondary
Services Manufacturing 7.7%
Utilities 1.1%
33.2% Construction 9.2%
Quaternary
Info Media & 1.9%
Communications 18.9%
Finance & Tertiary
Insurance 3.4% Wholesaling 3.2%
Rental & 1.9% Retailing 10.6%
Real Estate Transport 5.1%
Prof. & Tech Serv 8.6%
Admin. & Support 3.3%
Services
Public Admin/ 6.3% 11.72 million employed
Safety
Education 7.8%
FIGURE 2.6 Australia’s industry mix as a share of total employment, 2014–15

Source: ABS and Ibisworld.com.au
BizWORD 2.4.1 Primary industry

Primary industry includes those Primary industry includes those businesses involved in the collection of natural
businesses involved in the collection resources. Examples of these businesses include all types of farming, mining,
of natural resources.
fishing, grazing and forestry. Even though this sector employs only 4.7 per cent of
the labour force, its role is essential because it provides all of our food requirements.
As well, approximately 60 per cent of all our exports come from these industries.
BizWORD 2.4.2 Secondary industry

Secondary industry involves taking
Secondary industry includes all those businesses that take the output of firms in
a raw material and making it into a
finished or semi-finished product. the primary sector (raw materials) and process it into a finished or semi-finished
product. For example, iron ore, coal and limestone are turned into steel — a

semi-finished product that is then used to manufacture cars. Steel and car
manufacturers are both examples of secondary industry businesses.
FIGURE 2.7 In June 2016, the construction sector experienced its highest level of growth
in 10 months. This was just after the Reserve Bank cut the official interest rate to 1.75% in
May. Residential construction (in particular the sub-sectors of house and apartment building)
showed the largest growth, recording its fastest rate of expansion in two-and-a-half years.
The government’s pledge to spend more than $20 billion on infrastructure will also aid the
construction and engineering sector.
2.4.3 Tertiary industry BizWORD

The tertiary industry involves people performing a vast range of services for other Tertiary industry involves people
people. Examples include retailers, dentists, solicitors, banks, museums and health performing a vast range of services for
other people.
workers.
Resources
Weblink: Primary, secondary
and tertiary industries
FIGURE 2.8 Retail sales have been declining in 2017 and growth in the retail industry has
slowed to 2.1 per cent, the slowest rate of growth in almost four years. The decline in retail
sales figures can be attributed to low consumer confidence, low wage growth, increasing
competition domestically and from overseas, high household debt and the high cost of
housing.

BizWORD 2.4.4 Quaternary industry
Quaternary industry includes Quaternary industry includes services that involve the transfer and processing
services that involve the transfer of information and knowledge. Examples include telecommunication, property,
and processing of information and
computing, finance and education.
knowledge.
BizFACT
It is estimated that by 2050, the
quaternary and quinary sectors
combined are likely to account for FIGURE 2.9 Some of the factors driving the growth in the quaternary sector include: the
two-thirds of the economy. rapid growth in e-commerce and internet-based business activity, advances in
telecommunications technologies and an increased demand for online education.
BizWORD 2.4.5 Quinary industry

Quinary industry includes all services Quinary industry includes all services that have traditionally been performed in the
that have traditionally been performed home. Examples include hospitality, tourism, craft-based activities and childcare.
in the home.
It includes both paid and unpaid work.
FIGURE 2.10 In recent years,

Australia has experienced a huge
surge in demand for formal childcare.
The main factor that has fuelled this
growth is the expectation that women
will go back to work after giving
birth. In 2010 there were about 5900
long day care centres nationally, but
now there are well over 10 000. Over
660 000 kids are currently enrolled
in long day care and the sector is
projected to continue increasing
dramatically.

2.4.6 How changes in external influences have
contributed to the growth of the tertiary, quaternary
and quinary industries in Australia
Changes in external influences have altered the proportion of employees working in
Australia’s historical industry sectors and contributed to the growth of the tertiary,
quaternary and quinary industries. In 1900, about one in three employees worked
in primary industries, mainly mining and farming. Currently, the proportion of
employees working in the primary industry has decreased significantly because
of improved methods of farming and mining, as well as the increased use of
mechanical equipment. Today, fewer workers are required to produce our food
supply and minerals.
For a while, many workers who left the farms and mines moved to jobs within
the secondary industries. Recently, however, the proportion of the labour force
needed to do factory work has also decreased because many jobs have been elim-
inated by technology, especially automation. In addition, increased overseas com-
petition, increased trade and changes in government policies have also led to a
decline in employment in this industry.
In the past there were only three industry sectors: primary, secondary and ter-
tiary. Since opportunities for employment in the primary and secondary indus-
tries have decreased over the past 50 years, the number of businesses and people
employed in the tertiary industry sector has grown rapidly, to a point where today,
about three out of every four employees and two out of every three businesses are
classified as tertiary. Due to this increase, the tertiary sector has been subdivided
into two other sectors: quaternary and quinary.
The quaternary sector is expected to undergo dramatic change over the
next 20 years due to the rapid advances in telecommunications. Expansion in
e-commerce and internet-based business activity will see an increase in the number
of people employed in information processing and analysis.
Due to social and lifestyle changes, as well as an increase in the number of
two-income households, the demand for quinary-type services is also estimated to
expand rapidly during the next two decades. Many small businesses in particular
have recently begun providing these services, filling a niche in the market.
This growth in employment in the service industries is expected to continue
increasing rapidly due to technological and social changes.
SUMMARY
• An industry consists of businesses that are involved in similar types of
production.
• Primary industry — businesses involved in collection of natural resources.
• Secondary industry — production of finished or semi-finished goods.
• Tertiary industry — performing a service.
• Quaternary industry — services that involve the transfer and processing of
information and knowledge.
• Quinary industry — services that have traditionally been performed in the
home.

1 Distinguish between a business and an industry.
2 Construct a mind map summarising the five industry sectors. Provide examples for
each sector. The concept map has already been started for you on the following page.

Primary Secondary Tertiary
• Providing something
that has been
provided by nature
• Examples – farming,
mining.
Business
classification according
to industry sector
Quinary Quaternary
3 In your notebook construct a table with five columns. At the top of the columns put
the headings Primary, Secondary, Tertiary, Quaternary and Quinary. From the list of
businesses, determine the correct column for its particular industry group and write
in its name. The first one has been done for you.
Primary Secondary Tertiary Quaternary Quinary

Tallong
Orchards
Tallong Orchards Data Transfer Computing

S. & W. Legal Centre National Australia Bank
Bowral Bricks Tiggy Wiggles Child Care Centre
Clancy’s Restaurant Hi Plains Merino Stud
Pollards Removalists Southern Tablelands Towing
Moo Moo Pastures Dairy Centretown Motel
Bald Hill Quarry B. S. Plastics Manufacturers
Crookwell Real Estate Country Furniture Constructions
Finlay’s Fine Furniture Pioneer Water Tanks
Creative Hands Craft School Access TV Productions
4 Outline reasons for the growth in the tertiary sector over the past 50 years.
5 Refer to figure 2.6 and answer the following questions.
(a) Identify which industry sector employs the most people in Australia.
(b) Identify which industry sector employs the fewest people in Australia.
(c) Why do you think the industry you identified in part (b) employs the smallest
number of Australians?

1 (a) Construct a flowchart showing the industry sectors involved in the production
of a car.
(b) Analyse the relationship between the various sectors.
2 (a) Construct a list of tertiary jobs that are essential for the production of a:
(i) television game show
(ii) local newspaper
(iii) hi-fi system, bought at an electronics store.
(b) Place the letters ‘Qt’ next to those jobs that would be classified as quaternary and
the letters ‘Qn’ for those jobs in the quinary sector.
(c) Deduce what your list reveals.
3 Investigate why the quinary sector has included in it unpaid, voluntary jobs.

2.5 Classification by legal structure
There are a number of different legal structures to choose from when deciding
how a business is to be owned and operated. The four main legal structures of
privately owned businesses are shown in figure 2.11 — sole trader, partnership,
private company and public company..
BizFACT
Classification by
ABS data show that the number of
legal structure
partnerships continued to decrease in
2016 by almost 4 per cent. However,
after three years of consecutive
Sole trader Partnership Company negative growth, there was a 2 per
cent increase in sole traders in 2016.
Meanwhile, companies and trusts
Unincorporated increased by 10 per cent each.
Private Public Companies and trusts have always
made up a large portion of Australia’s
business numbers, and in 2016,
Incorporated
they made up over 60 per cent of all
businesses.
FIGURE 2.11 The four main legal structures of privately owned businesses
2.5.1 Incorporated and unincorporated business

structures
As figure 2.11 shows, the four main legal structures of privately owned businesses
can be further divided into:
• unincorporated businesses, in the case of sole traders and partnerships
• incorporated businesses, in the case of privately and publicly owned companies. BizWORD
The term incorporated refers to the process companies go through to become a Incorporated refers to the process
separate legal entity from the owner/s. This means the business exists in its own companies go through to become a
right, its own legal entity. Regardless of what happens to individual owners (share- separate legal entity from the owner/s.
holders) of the company, the business continues to operate. The business has taken
on a life of its own.
An unincorporated business has no separate legal existence from its owner(s)
and will be either a sole trader or partnership. This means the business entity and
the owner(s) are one and the same. When the owner dies then so too does the
business entity.
The most common legal structure for small businesses in Australia is the unincor-
porated business entity, for example sole traders and partnerships (see figure 2.12),
Trusts 25%
Sole traders 37%
Companies 26%
Partnerships 12%
FIGURE 2.12 Business structure for SMEs in Australia

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effectually silenced their remarks. He shortly afterwards went out,
and returned with a bowl, containing six quarts of new milk, with
which a little flour and some honey had been mixed. He told me he
was determined to see me eat the whole of it before he left the
apartment. I partook sparingly of it at first, but in the night tasted it
several times, which refreshed and invigorated me.
3d.—Finding myself considerably better this morning, I ordered a
pillow to be laid across my horse’s saddle, that I might travel for a
short distance on his back. Entered a miserable village named
Zunko, and slept there for the night.
4th.—Arose at sun-rise, and after a fatiguing journey reached
Roma at two in the afternoon. This town is built on an eminence, and
commands a delightful view of the country for miles round.
Proceeded to the house of the chief, and slept there. He made me
the accustomed presents of provisions, &c. and received in return a
pair of scissors, a hundred needles, and a paper of cloves. Several
Fellata girls came to me this evening, of a bright copper colour, and
extremely beautiful, with delicate and graceful forms. With a curiosity
so natural to their sex, they were all eager to catch a glance of the
“little Christian,” having seen the “great Christian,” as they termed my
master, before. In the course of the afternoon and evening they
brought me a little milk and butter, for which I recompensed them
with a few beads. Here, I am happy to say, the dysentery quite left
me, and my health wonderfully improved.
5th.—Left Roma for Bogell early in the morning, and arrived there
at half-past four in the afternoon. Found myself so well to-day that I
was enabled to ride on horseback the whole of the journey. As usual,
went to the residence of the chief, who gave me a little corn for the
horses only. In the night slept profoundly, and next morning was
completely recovered.
6th.—At six in the morning left for Zulamee, where we arrived at
two in the afternoon. The chief was overjoyed to see me, and
ordered four armed men to guard the beasts and property. A band of
robbers having infested the town for some time, and committed
numerous depredations, he was fearful some of my goods or cattle
would be stolen, and desired me to fire a gun morning and evening,
that the brigands might not think I was unprepared to meet them.
They did not, however, molest me; but the king of Kashna was not
quite so fortunate: he had a fine horse stolen from him yesterday,
which he never afterwards recovered. Rested here two days, in
order to recruit the spirits of my followers, and refresh the animals
under their charge.
9th.—At six in the morning, having got every thing in readiness,
left Zulamee. Both men and beasts seemed much invigorated with
the rest they had enjoyed, and at two in the afternoon reached
Gundumowah, a small but neat Fellata village. The chief sent me a
little milk.
10th.—Early in the morning started for Sansanee. The country
traversed was thickly wooded, and the path lay for three hours
through a large bush, which, having recently been visited by a horde
of elephants, the prints of whose feet were very perceptible,
rendered travelling extremely unpleasant, and even dangerous.
Reached Sansanee at one at noon. The site on which the town is
built not being long cleared, none of the houses were quite finished.
On our arrival, the chief had an open shed, occupied by fifteen
calves, cleaned out for our reception. In the evening, putting the
goods in the centre, I ordered the men to lie around them, whilst I
placed myself near the most valuable articles. Not deeming them
sufficiently secure, my sleep was rather disturbed; and awaking
about ten o’clock, I found my camel had strayed from outside the
hut, and being unwilling to arouse my drowsy companions, went
myself in search of him. On my return, to my infinite surprise and
alarm, discovered Pascoe had decamped, taking with him a valuable
gun, two pistols, a cutlass, six sovereigns, nineteen dollars, ten large
and ten small knives, and several other articles, which he had
contrived to take from the boxes in which they had been placed. To
deceive me, the artful old villain had put a pillow into a sack, which
he had laid along on his own mat. On the discovery, I immediately
made an alarm, and sent to the chief for twelve horsemen to go in
pursuit of him.
11th.—About three o’clock in the afternoon, as I was standing in
my shed, I perceived a party of horsemen coming towards me in full
gallop. On coming within a few yards of me, they suddenly checked
their horses, and flourishing their spears over their heads,
exclaimed, “Nasarah, acqui de moogoo!” (Christian, we have the
rogue!) They informed me that a little before day-break in the
morning they heard the report of a gun, and going towards the place
whence the sound seemed to proceed, saw Pascoe perched on the
top of a high tree, and the stolen goods lying at the root of it. They
threatened to shoot him with their poisoned arrows unless he
immediately came down. This had the desired effect. He hastily
descended, and delivered himself into their hands. One of the
soldiers took the trembling scoundrel behind him on his horse, when
the whole party immediately clapped spurs to their horses, and made
all the haste they could to the village. I asked Pascoe what could
have induced him to leave me in so disgraceful a manner. He replied
that his countrymen (the Gooburites) were at war with the Fellatas,
who would cut off his head on arriving at Soccatoo. The chief coming
up at the instant, cried out, “A blessing, a blessing; you have taken
the thief, let me take off his head!” This was Pascoe’s third offence;
and I ordered him to be heavily ironed and pinioned in the town
dungeon.
12th.—Pascoe having expressed a wish to see me, I sent for him.
He begged most piteously to be forgiven, and holding up his naked
arms, which were swollen to thrice their natural size, implored me at
least not to have him pinioned again. This I freely consented to, but
he was not freed from his irons till the morning we left the town.
13th.—This day 500 camels laden with salt, obtained from the
borders of the Great Desert, arrived at the town. They were
preceded by a party of twenty Tuarick salt-merchants, whose
appearance was grand and imposing. They entered at full trot, riding
on handsome camels, some of them red and white, and others black
and white. All the party were dressed exactly alike. They wore black
cotton tobes and trousers, and white caps with black turbans, which
hid every part of the face but the nose and eyes. In their right hand
they held a long and highly-polished spear, whilst the left was
occupied in holding their shields, and retaining the reins of their
camels. The shields were made of white leather, with a piece of
silver in the centre. As they passed me, their spears glittering in the
sun, and their whole bearing bold and warlike, they had a novel and
singular effect, which delighted me. They stopped suddenly before
the residence of the chief, and all of them exclaiming, “Choir!” each
of the camels dropped on its knees, as if by instinct, whilst their
riders dismounted to pay their respects. They came in a body to see
me just after, and notwithstanding their apparent respectability, felt
not the least repugnance to beg money in a most importunate
manner. One of them, in the hope of obtaining some, described
himself as “God’s own slave.” I refused to accede to his request,
observing, that God always loved his servants, and made them
prosperous and happy, and could not believe what he had told me.
Becoming at length very troublesome, I was under the necessity of
turning him out: as he went away, he muttered something I did not
understand, and said, I was the first person that ever refused to give
him money. Like thousands of others, these merchants were very
inquisitive, and amongst other questions asked whether any of my
countrymen had tails like monkeys? I assured them none of them
had that elegant appendage, but they would not believe me. After
remaining an hour, they went to look after their wives and children,
who were on the camels on the road, and not yet arrived.
14th.—The goods being properly secured, I took my gun this
morning and shot enough of pigeons for dinner. The Tuarick men,
women, and children, surrounded me in great numbers on hearing
the report of my gun, and were amazed to see the birds falling dead
at my feet from the tops of the high trees. They examined them with
great attention, declaring I was a beautiful man, too good for a Kafer,
and ought to be a worshipper of the true faith.
16th.—In the afternoon an escort, consisting of fifty armed
horsemen sent by Bello, arrived, to conduct me to Soccatoo. They
brought with them my master’s two camels, to carry the goods,
which, as I afterwards learnt, the Gadado had borrowed under false
pretences. A messenger belonging to the sultan of Kano brought a
letter from my master, unknown to the escort, and was on his way to
Kano with it. The letter informs me of the total ignorance of my
master of my having left Kano, and his expectations of seeing me
there in a week or two. It struck me forcibly at the time that Bello
wished to get me in his power, in order to put us out of the way, to
become the sole possessor of the sheik of Bornou’s presents, &c. As
soon as I had read the letter, I asked the Gadado’s brother, who
commanded the escort, if it was the sultan’s intention to murder us
on my arrival at Soccatoo, as my master knew nothing of the
transaction. He answered, “Fear nothing, the king will not hurt you;
as he has never seen but one Christian, he wishes to view a
second.”
17th and 18th.—The Gadado’s brother came to me several times
for money to buy goora nuts. I at length told him the money in my
possession belonged to my father, who would not permit me to part
with any, unless I had previously obtained his consent. This answer
by no means pleased him: but on my telling him he should be
handsomely rewarded on our safe arrival at Soccatoo, he became a
little appeased.
19th.—Liberated old Pascoe in the morning, who had behaved
peaceably since his imprisonment, and seemed truly sorry for the
offence he had committed; and at two in the afternoon went out of
the town, but was obliged to leave a bullock behind, being lamed and
unable to proceed. Travelled till eleven o’clock the next night, when
we arrived much fatigued at Magaria. The poor camels and horses
could hardly stand, and suffered dreadfully from thirst, not having
drank during this long journey.
21st and 22d.—The horses and camels not being sufficiently
recovered to continue the journey, staid at Magaria both these days.
Resided at a house belonging to the Gadado, who supplied me with
abundance of provisions. Received a message from him to come to
see him, with my gun, in order to show the head men of the town the
manner in which birds were shot in my country. I soon gratified their
curiosity by firing at a small bird, at a distance of fifty yards. The
whole of them testified the greatest astonishment on taking it up, and
would not for a long time believe it was really dead.
23d.—To my great joy I entered the gates of Soccatoo in the
afternoon, about two o’clock, after a tedious and wearisome journey
of nearly a month. Not having seen my master for three months, I
hastened to his house; but not finding him at home, I went to the
Gadado’s, where, I was told, he had gone. My master was in earnest
conversation with the Gadado and an old Arab, and was much
surprised when informed of the reason of my leaving Kano: he spoke
with warmth of the artful and unhandsome conduct of the sultan; and
after this act of duplicity on the part of Bello, to the hour of his death,
I never observed him to smile. My master had been ill of dysentery
before my arrival, but was then much better.
RESIDENCE AT SOCCATOO — MY MASTER’S DEATH — BURIAL.
On the 13th December, the day after my arrival, Sultan Bello sent
for my master and myself to repair to his residence. As soon as we
entered, he began to make inquiries of the nature of the presents I
had with me, and was extremely desirous to know if I had left any
with Hadji Ben Sallah for the sheik of Bornou. I replied, I had not.
“Are you sure you have not?” said he. I again answered with
firmness in the negative. The sultan then demanded the king of
England’s letters to the sheik of Bornou, which my master reluctantly
produced; but refused to accede to the sultan’s request to open and
read them, observing that, when his king discovered, on his return to
his country, he had so unfaithfully broken his trust, he would
immediately be beheaded. The sultan himself took the letters, and
waving his hand for us to withdraw, we left the apartment. We had
not been in our hut more than a couple of hours when the Gadado,
his brother, Hadji Ben Sallah, and several of the principal inhabitants
of Soccatoo, entered, and demanded, in the name of Bello, the
presents intended for the sheik of Bornou, together with all the arms
and ammunition we did not want ourselves. My master became
deeply agitated when he had heard their errand, and rising up from
his couch, exclaimed with much energy and bitterness—“There is no
faith in any of you; you are an unjust people; you are worse than
highway robbers.” They cautioned him to be more guarded in his
expressions, or it might cost him his head. “If I lose my head,”
rejoined my master in the same determined manner, “I lose it for
speaking for the just rights of my country only.” Ben Sallah and
others entreated him to moderate his anger, or it might indeed be
fatal to him. I also implored him to accede to the demands of the
sultan, how unjust and tyrannic soever they might be, observing, that
two debilitated white men stood no chance in holding out against the
united force of so many Fellatas, who only waited the command of
their sovereign to assassinate them. After much entreaty, and not
without considerable reluctance, my master desired that they should
be given to them; and said to the Gadado, on his leaving the hut,
“Tell your sovereign I never wish to see him again; my business with
him is now at an end.” A short time after Mallam Mudey returned with
a message from the sultan, acquainting my master of his intention of
writing to the king of England in explanation of his conduct. He
desired Mallam Mudey to tell Bello that the king of England would
not even look at a letter from him, after the treatment his subjects
had received.
I took an opportunity one day of acquainting my master of
Pascoe’s villany, who immediately dismissed him, without paying his
wages. The old man went to a native lawyer to obtain advice in what
manner he was to act; but instead of holding out the hope of
obtaining the sum due to him, the learned Fellata expressed his
astonishment that Abdullah had not cut off his head. Pascoe then
turned snuff-merchant; but having given too extensive credit, soon
became a bankrupt, and was finally obliged to cut wood from the
adjoining country, and sell it in the market at Soccatoo, by which
means he contrived to procure a precarious subsistence.
One day the Gadado came and begged me to lend him my camel
to go to the war against the sheik of Bornou: knowing it would be
impolitic to refuse, I let him have it. The animal was returned to me,
about six weeks after, in a most shameful state, reduced to a mere
skeleton, and having two immense holes in its back. I wished the
Gadado to give me another in its stead, but he would not listen to
me.
My master and myself enjoyed pretty good health for some time
after my arrival at Soccatoo, and amused ourselves with going a
shooting almost every day. At one shot my master brought down
thirteen wild ducks, about two miles to the north-east of the city, ten
of which were secured. We remained at Soccatoo much longer than
was intended, believing the sultan would consent to our proceeding
to Bornou when the war had become somewhat abated; but this he
never granted.
On the 12th of March, 1827, I was greatly alarmed on finding my
dear master attacked with dysentery. He had been complaining a
day or two previously of a burning heat in his stomach,
unaccompanied, however, by any other kind of pain. From the
moment he was taken ill he perspired freely, and big drops of sweat
were continually rolling over every part of his body, which weakened
him exceedingly. It being the fast of Rhamadan, I could get no one,
not even our own servants, to render me the least assistance. I
washed the clothes, which was an arduous employment, and obliged
to be done eight or nine times each day, lit and kept in the fire, and
prepared the victuals myself; and the intermediate time was
occupied in fanning my poor master, which was also a tedious
employment. Finding myself unable to pay proper attention to his
wants in these various avocations, I sent to Mallam Mudey, on the
13th, entreating him to send me a female slave to perform the
operation of fanning. On her arrival I gave her a few beads, and she
immediately began her work with spirit; but she soon relaxed in her
exertions, and becoming tired, ran away, on pretence of going out for
a minute, and never returned. Alla Sellakee, a young man my master
had purchased on the road from Kano to take care of the camels,
and whom he had invariably treated with his usual kindness, and
given him his freedom, no sooner was made acquainted with his
master’s illness than he became careless and idle, and instead of
leading the camels to the rich pasturage in the vicinity of Soccatoo,
let them stray wherever they pleased, whilst he himself either
loitered about the city, or mixed with the most degraded people in it:
by this means the camels became quite lean; and being informed of
the reason, I told my master, who instantly discharged him from his
service.
My master grew weaker daily, and the weather was insufferably
hot, the thermometer being, in the coolest place, 107 at twelve in the
morning, and 109 at three in the afternoon. At his own suggestion I
made a couch for him outside the hut, in the shade, and placed a
mat for myself by its side. For five successive days I took him in my
arms from his bed in the hut to the couch outside, and back again at
sunset, after which time he was too much debilitated to be lifted from
the bed on which he lay. He attempted to write once, and but once,
during his illness; but before paper and ink could be brought him, he
had sunk back on his pillow, completely exhausted by his ineffectual
attempt to sit up in his bed. Fancying by various symptoms he had
been poisoned, I asked him one day whether he thought that, in any
of his visits to the Arabs or Tuaricks, any poisonous ingredients had
been put into the camel’s milk they had given him, of which he was
particularly fond. He replied, “No, my dear boy; no such thing has
been done, I assure you. Do you remember,” he continued, “that
when on a shooting excursion at Magaria, in the early part of
February, after walking the whole of the day, exposed to the
scorching rays of the sun, I was fatigued, and lay down under the
branches of a tree for some time? The earth was soft and wet, and
from that hour to the present I have not been free from cold: this has
brought on my present disorder, from which, I believe, I shall never
recover.”
For twenty days my poor master remained in a low and distressed
state. He told me he felt no pain; but this was spoken only to comfort
me, for he saw I was dispirited. His sufferings must have been acute.
During this time he was gradually, but perceptibly, declining; his
body, from being robust and vigorous, became weak and emaciated,
and indeed was little better than a skeleton. I was the only person,
with one exception, he saw in his sickness. Abderachman, an Arab
from Fezzan, came to him one day, and wished to pray with him,
after the manner of his countrymen, but was desired to leave the
apartment instantly. His sleep was uniformly short and disturbed, and
troubled with frightful dreams. In them he frequently reproached the
Arabs aloud with much bitterness; but being an utter stranger to the
language, I did not understand the tenor of his remarks. I read to him
daily some portions of the New Testament, and the ninety-fifth
Psalm, which he was never weary of listening to, and on Sundays
added the church service, to which he invariably paid the
profoundest attention. The constant agitation of mind and exertions
of body I had myself undergone for so long a time, never having in a
single instance slept out of my clothes, weakened me exceedingly,
and a fever came on not long before my master’s death, which hung
upon me for fifteen days, and ultimately brought me to the very verge
of the grave. Finding myself unequal to pay that attention to my
master’s wants which his situation so particularly required, I solicited
and obtained his consent to have old Pascoe once more to assist
me. On entering the hut, he fell on his knees, and prayed to be
forgiven, promising to be faithful to my master’s service. Master
immediately pardoned him, and said he would forget all that had
passed, if he conducted himself well: by this means the washing and
all the drudgery was taken from my shoulders, and I was enabled to
devote all my time and attention to my master’s person. I fanned him
for hours together, and this seemed to cool the burning heat of his
body, of which he repeatedly complained. Almost the whole of his
conversation turned upon his country and friends, but I never heard
him regret his leaving them; indeed he was patient and resigned to
the last, and a murmur of disappointment never escaped his lips.
On the 1st of April, he became considerably worse, and though
evidently in want of repose, his sleep became more and more
disturbed. He swallowed eight drops of laudanum, four times a day,
for three days; but finding it did him not the least benefit, he
discontinued taking it altogether: this, with the exception of two
papers of Seidlitz powders and four ounces of Epsom salts, was the
only medicine he had during his illness. On the 9th, Maddie, a native
of Bornou, whom master had retained in his service, brought him
about twelve ounces of green bark from the butter tree, and said it
would do him much good. Notwithstanding all my remonstrances,
master immediately ordered a decoction of it to be prepared,
observing, “No man will injure me.” Accordingly Maddie himself
boiled two basins-full, the whole of which he drank in less than an
hour. Next morning he was much altered for the worse, and regretted
his not having followed my advice. About twelve o’clock of the same
day, he said, “Richard, I shall shortly be no more; I feel myself
dying.” Almost choked with grief, I replied, “God forbid, my dear
master: you will live many years yet.” “Don’t be so much affected, my
dear boy, I entreat you,” said he: “it is the will of the Almighty; it
cannot be helped. Take care of my journal and papers after my
death; and when you arrive in London, go immediately to my agents,
send for my uncle, who will accompany you to the Colonial Office,
and let him see you deposit them safely into the hands of the
secretary. After I am buried, apply to Bello, and borrow money to
purchase camels and provisions for your journey over the desert,
and go in the train of the Arab merchants to Fezzan. On your arrival
there, should your money be exhausted, send a messenger to Mr.
Warrington, our consul at Tripoli, and wait till he returns with a
remittance. On reaching Tripoli, that gentleman will advance what
money you may require, and send you to England the first
opportunity. Do not lumber yourself with my books; leave them
behind, as well as the barometer, boxes, and sticks, and indeed
every heavy article you can conveniently part with; give them to
Malam Mudey, who will take care of them. The wages I agreed to
give you my agents will pay, as well as the sum government allowed
me for a servant; you will of course receive it, as Columbus has
never served me. Remark what towns or villages you pass through;
pay attention to whatever the chiefs may say to you, and put it on
paper. The little money I have, and all my clothes, I leave you: sell
the latter, and put what you may receive for them into your pocket;
and if, on your journey, you should be obliged to expend it,
government will repay you on your return.” I said, as well as my
agitation would permit me, “If it be the will of God to take you, you
may rely on my faithfully performing, as far as I am able, all that you
have desired; but I trust the Almighty will spare you, and you will yet
live to see your country.” “I thought I should at one time, Richard,”
continued he; “but all is now over; I shall not be long for this world:
but God’s will be done.” He then took my hand betwixt his, and
looking me full in the face, while a tear stood glistening in his eye,
said, in a low but deeply affecting tone, “My dear Richard, if you had
not been with me, I should have died long ago; I can only thank you,
with my latest breath, for your kindness and attachment to me, and if
I could have lived to return with you, you should have been placed
beyond the reach of want; but God will reward you.” This
conversation occupied nearly two hours, in the course of which my
master fainted several times, and was distressed beyond measure.
The same evening he fell into a slumber, from which he awoke in
much perturbation, and said he had heard with much distinctness the
tolling of an English funeral bell: I entreated him to be composed,
and observed that sick people frequently fancy they hear and see
things which can possibly have no existence. He made no reply.
About six o’clock in the morning of the 11th, on asking how he did,
my master answered he was much better, and requested me to
shave him. He had not sufficient strength to lift his head from the
pillow; and after finishing one side of the face, I was obliged to turn
his head, in order to shave the other. As soon as it was done, he
desired me to fetch him a looking-glass which hung on the other side
of the hut. On seeing himself in it, he observed that he looked quite
as ill at Bornou, on his former journey; and as he had borne his
disorder so long a time, he might yet recover. On the following day
he still fancied himself getting better. I began to flatter myself, also,
that he was considerably improved. He eat a bit of hashed guinea-
fowl in the day, which he had not done before since his illness,
deriving his sole sustenance from a little fowl-soup and milk and
water. On the morning of the 13th, however, being awake, I was
much alarmed by a peculiar rattling noise, proceeding from my
master’s throat, and his breathing was loud and difficult; at the same
instant he called out “Richard!” in a low and hurried tone. I was
immediately at his side, and was astonished at seeing him sitting
upright in his bed, and staring wildly around. I held him in my arms,
and placing his head gently on my left shoulder, gazed a moment on
his pale and altered features: some indistinct expressions quivered
on his lips; he strove, but ineffectually, to give them utterance, and
expired without a struggle or a sigh. When I found my poor master
so very ill, I called out with all my strength, “O God, my master is
dying!” which brought Pascoe and Mudey into the apartment. Shortly
after the breath had left his body, I desired Pascoe to fetch some
water, with which I washed the corpse. I then got Pascoe and Mudey
to assist me in taking it outside of the hut, laid it on a clean mat, and
wrapped it in a sheet and blanket. Leaving it in this state two hours, I
put a large clean mat over the whole, and sent a messenger to
Sultan Bello, to acquaint him of the mournful event, and ask his
permission to bury the body after the manner of my own country, and
also to know in what particular place his remains were to be interred.
The messenger soon returned with the sultan’s consent to the former
part of my request; and about 12 o’clock at noon of the same day a
person came into my hut, accompanied by four slaves, sent by Bello
to dig the grave. I was desired to follow them with the corpse.
Accordingly I saddled my camel, and putting the body on its back,
and throwing an union-jack over it, I bade them proceed. Travelling
at a slow pace, we halted at Jungavie, a small village, built on a
rising ground, about five miles to the south-east of Soccatoo. The
body was then taken from the camel’s back, and placed in a shed,
whilst the slaves were digging the grave; which being quickly done, it
was conveyed close to it. I then opened a prayer-book, and, amid
showers of tears, read the funeral service over the remains of my
valued master. Not a single person listened to this peculiarly
distressing ceremony, the slaves being at some distance, quarrelling
and making a most indecent noise the whole of the time it lasted.
This being done, the union-jack was taken off, and the body was
slowly lowered into the earth, and I wept bitterly as I gazed for the
last time upon all that remained of my generous and intrepid master.
The pit was speedily filled, and I returned to the village about thirty
yards to the east of the grave, and giving the most respectable
inhabitants, both male and female, a few trifling presents, entreated
them to let no one disturb its sacred contents. I also gave them
2,000 cowries to build a house, four feet high, over the spot, which
they promised to do. I then returned, disconsolate and oppressed, to
my solitary habitation, and leaning my head on my hand, could not
help being deeply affected with my lonesome and dangerous
situation; a hundred and fifteen days’ journey from the sea-coast,
surrounded by a selfish and cruel race of strangers, my only friend
and protector mouldering in his grave, and myself suffering
dreadfully from fever. I felt, indeed, as if I stood alone in the world,
and earnestly wished I had been laid by the side of my dear master:
all the trying evils I had endured never affected me half so much as
the bitter reflections of that distressing period. After a sleepless
night, I went alone to the grave, and found that nothing had been
done, nor did there seem the least inclination on the part of the
inhabitants of the village to perform their agreement. Knowing it
would be useless to remonstrate with them, I hired two slaves at
Soccatoo the next day, who went immediately to work, and the
house over the grave was finished on the 15th.
One instance, out of many, of the kindness and affection with
which my departed master uniformly treated me, occurred at Jenna,
on our journey into the interior. I was dangerously ill with fever in that
place, when he generously gave up his own bed to me, and slept
himself on my mat, watched over me with parental assiduity and
tenderness, and ministered to all my wants. No one can express the
joy he felt on my recovery: and who, possessing a spark of gratitude,
could help returning it but by the most inviolable attachment and
devoted zeal? It was his sympathy for me in all my sufferings that
had so powerful a claim on my feelings and affections, and taught
me to be grateful to him in hours of darkness and distress, when
pecuniary recompense was entirely out of the question.
The great sufferings, both mental and bodily, I had undergone at
the death and burial of my master, and the constant agitation in
which I was kept, occasioned a rapid increase in my disorder; and on
the 16th I could with difficulty crawl round my hut, and was obliged to
lay myself on my mat, from which I had not strength to arise till the
27th; old Pascoe, during that period, being very kind and attentive to
me. The Arabs in the city visited me daily, and did all in their power
to raise my spirits; telling me not to be disheartened at the death of
my father, and that no injury would happen to me. But I plainly saw
these visits of condolence did not proceed from a charitable spirit;
they came more for the purpose of obtaining presents than any thing
else: but I did not give them any. The sultan also sent messengers to
inquire after my health nearly as often. The weather was dreadfully
warm; and I was obliged to have a tub of water close at my side, into
which I frequently plunged my hands and arms, and occasionally
sprinkled my head and body. This much refreshed me; indeed it was
the only means by which I was enabled to obtain a little sleep. I had
given up all hopes of life, when on the 26th I found my health
improve in a wonderful manner; the next day I was able to sit up on
my mat. In the course of this day (27th) the Gadado, Malem Moodie,
and Sidi Sheik, came with a commission from the sultan to search
my boxes, as he had been informed they were filled with gold and
silver; but, to their great amazement, found I had not sufficient
money to defray my expenses to the sea-coast. They, however, took
an inventory of all my articles, and carried it to Bello. The gold watch
intended for him, and the private watches of Captains Clapperton
and Pearce, I had taken the precaution to conceal about my person.
In a short time the Gadado and his companions returned with a
message from the sultan, commanding me to deliver to them the
following articles, viz. a rifle-gun, double-barrelled ditto, two bags of
ball, a canister of powder, a bag of flints, a ream and a half of paper,
and six gilt chains, for which he promised to give me whatever I
might ask. I consequently charged him 245,000 cowries, which I was
to receive from Hadji Hat Sallah, at Kano; and an order was given
me to receive this sum, and what more I might require in my journey
over the Great Desert. A letter was also sent by me to Hadji Hat
Sallah.
On the 28th I made Ben Gumso a present of four yards of blue,
and the same quantity of scarlet damask, an unwritten journal-book,
two pairs of scissors, and two knives: with these articles I
endeavoured to get into the good graces of this old Arab. By a
singular piece of good fortune he had just begun to exercise a
powerful influence over the mind and opinions of the sultan. Bello, in
an excursion into the Gooberite country, had come to an
engagement with a large party of the natives; and in the midst of the
fight was shot in the neck with a poisoned arrow, which turned the
tide of victory in favour of his enemies. On his return to Soccatoo,
Ben Gumso wrote a charm on a bit of wood, which was washed off
into a calabash of water, and drank immediately by the sultan; who,
shortly after recovering, attributed it solely to the virtues of this
charm, and he was advanced accordingly. I begged Ben Gumso to
use his influence with the sultan to obtain leave for my departure
from his capital, and make the best of my way homewards. He
accordingly represented to Bello the impolicy and injustice of
detaining any longer a subject of the king of England; advised him to
allow me to quit Soccatoo as soon as possible; and insinuated that, if
I were to die in his dominions, a report would be circulated and
believed that he had murdered both my father and me, by which he
would get a bad name. The sultan approved of these weighty
arguments of Ben Gumso; and word was sent me, almost
immediately, to appear before him. After a little preliminary
conversation, Bello asked me which route I should prefer. Although
my master had advised me to proceed with the Arabs to Fezzan, just
before his death, I much feared that the papers intrusted to my care
would be stolen, and myself murdered, by that wily and treacherous
race, whose behaviour to my master, from the time of his arrival in
Houssa, I very much disliked; and would rather cast myself, unarmed
and unprotected, upon the good faith of the natives, than go with
them. Under these impressions I answered the sultan that, as I
wished to get to England in as short a time as possible, the route to
Kubbi, through Boussa, was most likely to answer that end. “It is
impossible,” he continued, “to travel that way: the rainy season is
commenced; the rivers are overflowed; the country is inundated; and
you will not be able to reach the sea-coast in safety. It will be much
better for you to go over the desert; and, to facilitate your progress, I
will write Hat Sallah to get a trustworthy person to accompany you;
he will also furnish you with camels and provisions, and advance you
what money it is likely you will want.” I only replied, “Very well,
sultan.” He then asked if Abdullah had forgiven Pascoe in his book,
for the roguery he had committed. I said, “He had not been able to
write during the whole of his sickness; and therefore nothing was
stated about the matter.”—“If Abdullah has not pardoned him in his
book,” rejoined the sultan, “your king will certainly cut off his head on
his arrival in England.” I assured him Pascoe would not be punished
by any one, if his future conduct was good; but this the sultan was in
no haste to believe; and observed, “I cannot suffer him to go with
you; he shall stay here to clean and repair my guns!” this latter
consideration having evidently more influence with the sultan than
Pascoe’s safety, which he cared nothing at all about. I then besought
Bello to permit him to accompany me as far as Kano, as an
interpreter; to which he rather reluctantly consented, on condition
that I should procure him a horse to return, and pay him wages, on
my arrival at Kano, to the amount of 15,000 cowries, which of course
I agreed to do; and finding the sultan had nothing more to say, I
bowed profoundly and retired. I never saw him again.
FROM SOCCATOO TO DUNRORA.
On the evening of the 3d of May, a messenger came from the

sultan, and told me to get every thing in readiness to depart on the
following morning, with a promise of a camel and provisions, which I
never received. Early next day, therefore, I left Soccatoo, where I
had suffered so much, heartily tired of the place and its inhabitants;
and, accompanied with a messenger from the kind old Gadado,
Pascoe and Mudey, with our three camels and two horses,
proceeded to a flat, five miles to the east of Magaria, where we
arrived in the afternoon, and rested for the night under the branches
of a large tree, near to a small lake. Mosquitoes were numerous and
troublesome, and consequently could not sleep till morning, when a
refreshing breeze springing up, it drove them away. At this flat we
joined a party of above 4,000 people, consisting of Tuarick salt-
merchants returning to Kilgris, pilgrims on their way to Mecca, Goora
merchants returning to Kano and Nyffé, &c. &c.; all travelling in
company, for mutual protection, with an immense number of camels,
horses, and bullocks. The merchants invariably meet at Kashna,
where they disperse for their different destinations. In the same train
was the king of Jacoba, with fifty slaves, which he had driven to
Soccatoo, as a present to the sultan, who, having learnt the dreadful
losses he had sustained in men and cattle in his wars with the sheik
of Bornou, and the number of his villages which had been plundered
and burnt by the soldiers of the sheik, would not accept of them, and
desired the king of Jacoba to re-conduct them to his own dominions.
At eleven o’clock in the morning of the 4th of May, a signal to
prepare to depart was made with the horns and drums of the party,
which made a loud and most discordant noise; and, about an hour
after, the whole body was in motion. We travelled in great haste till
three o’clock in the afternoon of the 5th, when Boussa Jack, the
horse on which I rode, and which was made a present of by the king
of Boussa to my late master, became much fatigued, and began to
lag. The weather was at this time intolerably hot, and the dust was
rolling in thick clouds in every direction, entering my eyes and
nostrils, and penetrating into the very pores of the skin. I felt nearly
suffocated, and was faint and exhausted. Finding I was unable to
proceed, I ordered Pascoe to overtake the camels, his horse being
fresh and vigorous, and bring me some water. I then dismounted,
and sat under a tree by the road-side, whose branches afforded but
an indifferent shelter against the scorching rays of an African sun,
and holding the bridle of my poor horse in my hand, I implored the
hundreds of Fellatas and Tuaricks who were passing to sell me a
drop of water; but the cold-hearted wretches refused my earnest
request, observing one to another, “He is a Kafir; let him die.” At
length a young Fellata, from Footatoora, accidentally seeing me,
came to the spot, exclaiming, “Nasarah, Nasarah, triffi manora!”
(Christian, Christian, go on!) I answered, “I am faint and sick for want
of water; no one will give me any; and I am so weary that I cannot
proceed.” On hearing which the young man kindly gave me a small
calabash full; part of which I drank, and with the remainder washed
the nostrils of Boussa Jack, and sprinkled a little into his mouth. The
people, who observed the Fellata performing this generous action,
upbraided him in strong language for giving water to the Christian;
but he, showing them a double-barrelled gun, remarked that he had
obtained it of my countrymen, who were all good men, and would do
no harm. This somewhat appeased them. On examining the gun
shortly afterwards, I found it to be of English manufacture, with
“Arnold, maker, London,” on its lock. I, as well as the horse, was
greatly refreshed with the small quantity of water I had taken; but
soon becoming again weak and dispirited, I was almost in as bad a
state as on the former occasion; my legs were swollen prodigiously,
and I felt the most acute pains in every part of my body. At length I
perceived Pascoe, whom I had sent for water three or four hours
previously, comfortably seated under a tree, and seeming to be
enjoying himself much with Mudey,—the camels feeding at a short
distance. I had half an inclination to shoot the heartless old
scoundrel, knowing as he did how keen my sufferings must have
been. Reflecting, however, that the safety of my papers, and even
my own life, was placed in some measure in his hands, I restrained
myself, and merely asked why he did not return with the water, on
which he answered, very composedly, “I was tired.”
The young Fellata who had so generously saved my life came to
me on the 7th, and informed me that the whole of the slaves of the
king of Jacoba being missing, a party of horsemen had been sent in
quest of them, and had just returned with the dreadful account of
having seen thirty-five of their dead bodies exposed on the road; the
remaining fifteen could not be found, but were strongly suspected of
having met a similar fate. These unfortunate creatures had to carry
heavy burdens on their heads the day before; and being unable to
keep up with the rapid pace of the camels, were necessarily obliged
to be left behind, and thus miserably perished of thirst. I
congratulated myself on my own good fortune in having so narrowly
escaped so horrid a death; and thanked the Almighty for having so
providentially rescued me. On leaving me, I gave the Fellata a pair of
scissors, and twenty flints for his gun, which pleased him highly. On
our road to Kano, the king of Jacoba became very sociable with me,
and was my constant companion. He pressed me very much to visit
his country, where he would do all in his power to make my stay
agreeable. He told me that his neighbours, the Yamyam people, who
had assisted him in his war against the sheik of Bornou, were
surrounded, with some of his own people, on a plain near Jacoba, by
the sheik’s soldiers, who made a dreadful slaughter of them. The
fight lasted a whole day, when the Yamyams and people of Jacoba
were entirely routed; he himself narrowly escaping being taken
prisoner. The morning after, the surviving Yamyams repaired to the
field of action, and bearing off a great number of the dead bodies of
their enemies, made a fire, roasted, and ate them!
Soon after our arrival at Markee, on the 19th, the spouse of the
chief, a finely formed and intelligent looking woman, aged about 22
years, came to me with tears in her eyes, and implored me to give
her some magarie, as she had no child. I accordingly presented her
with a couple of tea-spoonfuls of oil of cinnamon, and ordered her to
put two drops of it into a pint of cow’s milk, which should be taken
three times a day till the whole was consumed. I told her that on my
return to Markee I had not the least doubt I should have the pleasure
of seeing her the happy mother of a numerous progeny. On her
husband being made acquainted with the circumstance, he came
and thanked me in the heartiest manner for my kindness, gave me
abundance of fresh milk, fowls, rice, &c.; telling me at the same time,
that on my return from England he would give me a large sum of
money, which, no doubt, he will do. Bidding them adieu the next
morning, they said to me, “Christian! God send you safely to your
country, and may you speedily come back to Markee.”
On my arrival at Kano on the 25th of May, I delivered Sultan
Bello’s order and letter to Hadji Hat Sallah; but he declared, after
perusing the letter, he would have nothing to do with it: he had nearly
lost his head on my father’s account at Soccatoo, and therefore
positively refused to lend me a single cowrie. He had no objection to
give, in goods and a slave, the amount of my demands on Bello, but
refused to let me have any money. I accordingly received from him a
strong female slave, a quantity of unwrought silk, and scarlet caps
and beads. I sold my weakened and diseased camels for 15,000
cowries each, and discharged their keeper, Maddie. Not having
sufficient money to purchase fresh camels, provisions, and presents
for the chiefs on my way to Fezzan, I was necessitated to take a
different route; and for that purpose purchased a horse and two
asses. Bello had not forgotten to mention in his letter for Hadji Hat
Sallah to send back Pascoe to Soccatoo, on his arrival at Kano. I
begged of him, however, to let me take him as far as Coulfo, in
Nyffé, which he at first refused; but giving him two yards of scarlet
damask, two pairs of scissors, two dollars, a large knife, and two
yards of blue damask, the old Arab seemed to relax in his
determination; and calling Pascoe to him, gave him leave to
accompany me to Coulfo, but cautioned him to return the moment he
arrived, on pain of having Jerrub (the devil) sent after him. The old
man came to me just after in great trepidation, every member of his
body trembling like an aspen leaf, and gave me to understand, as
well as he was able, the conversation he had had with Hadji Hat
Sallah, and in consequence thereof, his great reluctance to quit
Kano with me. I did all I could to laugh him out of his superstitious
fears, but it utterly failed of the desired effect; the name of Jerrub
being enough to put him in a fever. I had given the slave that Hadji

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Jacaranda Business Studies in Action

Preliminary Course 5th Edition S.

A catalogue record for this

TOPIC 1 NATURE OF BUSINESS 2

3 Influences in the business environment 48

4 Business growth and decline 86

TOPIC 2 BUSINESS MANAGEMENT 116

6 Achieving business goals 144

8 Management process 198

9 Management and change 290

TOPIC 3 BUSINESS PLANNING 316

11 Influences in establishing a small to medium

13 Critical issues in business success and failure 430

BUSINESS MANAGEMENT Case study: Andrew Thorburn — a successful business manager

has an opening double

An engaging case Nature of Management

action� the business to shape the industry.

116 TOPIC 2 • Business management TOPIC 2 • Business management 117

All Preliminary syllabus

Analyse the alternatives

134 TOPIC 2 • Business management Nature of management • CHAPTER 5 135

vi HOW TO USE THIS BOOK

3.4 Internal influences on business location for their production and

70 TOPIC 1 • Nature of business Influences in the business environment • CHAPTER 3 71

192 TOPIC 2 • Business management Management approaches • CHAPTER 7 193

Business management (c) Technical

Sample HSC-style (d) Creditors and mortgage

are provided for each (c) Individual common law contract

multiple choice, short Current Assets

response questions Non-current Assets

312 TOPIC 2 • Business management Business management • TOPIC 2 313

HOW TO USE THIS BOOK vii

This book features eBookPLUS:

Step 2. Enter your registration code Minimum requirements

ABOUT THE AUTHORS ix

TOPIC 2 | Business management 116

TOPIC 3 | Business planning 316

Business growth Types of

2 TOPIC 1 • Nature of business

TOPIC 1 • Nature of business 3

FIGURE 1.1 As consumers, we rely

4 TOPIC 1 • Nature of business

1.1.1 Why learn about business?

FIGURE 1.2 You’re never too

1.1.2 Importance of business to you

Role of business • CHAPTER 1 5

1.2 The nature of a business

FIGURE 1.4 Do you have oniomania?

6 TOPIC 1 • Nature of business

Controlling production Planning finances,

Role of business • CHAPTER 1 7

EXERCISE 1.1 REVISION

Activity undertaken by business Example

Production — creating products Making necklaces and bracelets

EXERCISE 1.1 EXTENSION

8 TOPIC 1 • Nature of business

FIGURE 1.6 The economic and social importance of business

FIGURE 1.7 A business must earn a

Role of business • CHAPTER 1 9

TABLE 1.1 Employment in Australia by industry sector (2017)

Industry sector Number %

Health care and social assistance 1 562 600 12.9

10 TOPIC 1 • Nature of business

8 Management process 198

9 Management and change 290

TOPIC 3 BUSINESS PLANNING 316

13 Critical issues in business success and failure 430