AOS2 Flashcards
Internal Environment
The factors inside the business that impact on its day-to-day planning, activities and success.
External
Consists of the factors outside the business that impact either directly (operating)
or indirectly (macro) on its day-to-day planning, activities and success.
Internal environmental factors
- Business structure
- Business model/strategy
- People (i.e. managers, employees)
- Resources (i.e. natural, physical, capital)
- Policies
- Business objectives
- Corporate culture
Operating environmental factors
*Customers
*Competitors
*Suppliers
*Creditors
*Interest groups
Macro environmental factors
*Social
*Legal/political
*Economic
*Environmental
*Technological
*International
Incorporation
A process that companies go through to become a seperate legal entity from the owner/s. This means the business can own assets, sue or be sued, and the owners have limited liability.
-company
-private&public
Unicorporation
A business that is not a separate legal entity from its owner. The owner is personally responsible for all debts and legal actions against the business which is unlimited liability.
-sole trader
-partnership
Sole trader
Type of business that is owned and operated by one individual
Sole trader advantages
-Low cost of entry to start
-Simplest form
-Less costly to operate
-no partner disputes
-keep all profits
-less government regulations
-no tax on profits(only personal income)
Sole trader disadvantages
-personal unlimited liability for business debts
-Business ends when owner dies
-hard to operate if unwell
-burden of management
-need wide variety of expertise
-difficulty in raising finance for expansion
Partnership
Form of business ownership that combines the expertise and resources of between 2-20 people.
Partnership advantages
-flexibility
-low start up costs
-less costly to operate than a company
-shared responsibility/workload
-no tax on business profits(only person al income)
-less government regulations
-pooled funds/talents
Partnership disadvntages
-personal unlimited liability
-possible disputes
-liability for all debts including partners even from the past
-difficulty in finding a suitable partner
-divided loyalty
Company
A company is an incorporated business structure that is a separate legal entity from its owners (shareholders), meaning it has limited liability.
Private limited company
Is san incorporated legal entity that has between up to 50 shareholders. It has limited liability and recognised by its name as it includes Pty.Ltd.
Private limited company advantages
-Limited liability
-Separate legal entity
-Can raise more capital than sole trader/partnership by selling shares
-Perpetual succession
-More credibility with banks and investors.
-Tax rate may be lower than personal income tax (especially for small businesses).
Private limited company disadvantages
-More complex and expensive to set up and run.
-More government regulation and reporting requirements.
-Profits are divided among shareholders (not kept by one person).
-Harder to change ownership compared to sole trader or partnership.
-Must follow rules under the Corporations Act.
Public listed company
Incorporated legal entity whose shares are freely traded on the Australian securities exchange(ASX) for any members of the public.
Unlimited shareholders, min 1 shareholder and 3 directors.
Required by law to publish audited financial accounts each year in an annual report
Public listed company advantages
Can raise large amounts of capital by selling shares on the stock exchange (e.g. ASX).
Limited liability for shareholders – personal assets are protected.
Separate legal entity – business is legally separate from owners.
Perpetual succession – company continues even if shareholders change.
More public awareness and status (can attract investors, customers, talent).
Public listed company disadvantages
Very complex and expensive to set up (must meet ASX listing rules).
High level of regulation and reporting requirements (e.g. annual reports, audits).
Loss of control – original owners may lose control as shares are sold to the public.
Profits must be shared among many shareholders (dividends).
Decisions can be slower due to board of directors and shareholder input.
Social enterprise
A business that exists to make a profit, but its main goal is to fulfil a social, environmental or community need.
Profits are usually reinvested into the business or the cause, rather than being distributed to owners or shareholders.
Social enterprise advantages
-Aims to make a positive impact on society or the environment.
-Attracts customers and supporters who value ethical practices.
-Can receive government grants and support.
-Employees and volunteers may be more motivated by the mission.
-Profits are reinvested to grow the social cause.
Social enterprise disadvantages
-Can struggle to raise capital – harder than companies selling shares.
-Often depends on grants, donations, or support to survive.
-May find it hard to balance financial goals with social goals.
-Limited profits for owners/investors (money goes to the mission).
-Complex compliance and auditing requirements
Government Business enterprise
A business owned and operated by the government, which provides goods or services to the public and aims to make a profit.
It is run like a corporation but is accountable to the government.
Online business
A business model
where the business
carries out its main
activities and sells its
products via the World
Wide Web (Internet).
example: Ebay
Direct-to-Consumer (DTC)
Business model is when a business sells its products straight to customers, without using any third-party stores, retailers, or wholesalers.
example:Frank Green
Online business advantages
- Open 24/7 – customers can shop anytime.
- Global reach – wider customer base.
- Convenient for customers – shop from anywhere.
- Lower costs – no rent or physical store.
- Quick to set up and flexible staffing.
Online business disadvnatges
- Customers can’t try products – may hesitate to buy.
- Harder to build strong customer relationships.
- Online security risks can harm trust and reputation.
- Website setup and maintenance can be costly.
- Staff need training for online systems.
Direct-to-Consumer (DTC) advantages
*More convenient for customers – buy directly from the brand.
*Full control over branding and marketing.
*Access to customer data – better understanding of customers.
*Higher profit margins – no middlemen.
*Saves time – no need to deal with wholesalers/retailers.
Direct-to-Consumer (DTC) disadvantages
*Harder to grow without support from retailers or distributors.
*More competition – easy for others to start DTC businesses.
*Smaller reach – fewer customers than through big retailers.
Franchise
A franchise is a business model where an individual (the franchisee) buys the right to operate a business under the name, branding, and systems of an existing company (the franchisor). Example:Mcdonalds
Franchise advantages
*Established and known business name and reputation
*Established customer base
*Access to trusted supplier network,
*Training and development programs
*No need to ‘re-invent the wheel’
Franchise disadvantages
*Establishment costs
*Must pay ongoing royalties to the franchisor.
*Limited flexibility
*No freedom or control.
*May be locked into long-term agreement,
*Actions of another franchisee can impact on brand and reputation of your franchise.
Bricks and Mortar
A traditional business that operates from a physical store or building, where customers visit in person to buy goods or services. Example: Kmart, Myer, Bunnings, your local bakery or hairdresser.
Bricks and Mortar advantages
-Customers can see, touch, and test products.
-Builds strong customer relationships through face-to-face service.
-In-store displays and signage attract walk-in customers.
-Offers instant gratification – buy and take products home immediately.
-Creates local brand presence and provides employment opportunities.
Bricks and Mortar disadvantages
-Customers must travel to the store – not always convenient.
-Higher costs – rent, maintenance, and staffing.
-Time-consuming to set up and manage a physical location.
-May face crowded stores, queues, and parking issues.
-Staff may feel stressed during busy periods.
Importer
An importer purchases goods and services from overseas and sells them in its home country. Products need meet local laws regarding safety and quality, and must consider the costs associated with shipping products from overseas.
Importer advantages
-Access to products and resources not available locally
-Can import seasonal items when not in season at home
-May find cheaper prices overseas
-Expands product variety for customers
Importer disadvantages
-Long wait times for delivery
-Supply chain issues can hurt business reputation
-May reduce local jobs, harming public image
-Must handle different laws and regulations
-Can face import tariffs and higher delivery costs
Exporter
A business that sells its products or services to customers in other countries. The goods are produced in the home country and then shipped overseas to be sold in international markets.
Exporter advantages
-Access to more customers overseas = increased sales
-Helps grow Australian industries and promote local products
-Higher prices may be charged in markets where products are not locally made
Exporter disadvantages
-Environmental impact if non-renewable resources are exported
-Cultural and legal differences can be challenging
-High transportation costs when selling internationally
Business model
A business model is the plan or structure a business uses to operate, make money, and deliver value to its customers. It explains how a business sells its products or services, who it sells to, and how it earns a profit.
Starting a new business advanatge
Full control over business model
Opportunity to create a unique brand
Flexible decision-making
Can target niche markets
Personal satisfaction from building from scratch
Starting a new business disadvanatge
High risk of failure
Takes time to establish brand and gain customers
Lack of experience may cause challenges
High initial costs with no guaranteed success
Uncertainty in cash flow and profitability
Buying an existing business advantage
Established customer base and reputation
Proven systems in place
Easier to obtain finance
Faster start-up
Existing employees familiar with operations
Positive cash flow from the start
Buying an existing business disadvantage
High purchase cost
May inherit existing issues
Limited flexibility in decision-making
Potential reputation issues
Hidden problems may arise
Legal or contractual obligations transferred
buying a franchise advantages
Brand recognition and marketing support
Proven business model and systems
Ongoing support and training
Easier access to finance
Bulk buying power
buying a franchise disadvantages
High franchise fees and royalties
Limited control over business decisions
Must follow strict franchisor rules
Profit potential may be restricted
Potential conflicts with franchisor
