AOS2 - internal business environment and planning

Question 1

business environment

Answer 1

the surrounding condition in which the business operates

Question 2

internal environment

Answer 2

made up of elements created by the people within the business
business owners have control over the internal environment

main elements
-employees
-managers
-location
-legal business structure

Question 3

operating environment

Answer 3

made up of stakeholders external to the business which have a direct impact on the operation of the business

main stakeholders
-customers
-competitors
-suppliers
-special interest groups

Question 4

macro environment

Answer 4

comprises of broad forces, conditions, and trends in the economy and society within which the business operates

main factors:
-legal and government regulations
-societal attitudes and behaviour
-economic conditions
-csr considerations

Question 5

how do the different business environments interact?

Answer 5

-generally, the external environment has a bigger impact on the business and its internal environment
-internal environment has to respond to external environment
-internal environment can still impact external environment

Question 6

incorporated business

Answer 6

has its own separate legal existence from the owners (private, public, gbe)
brings shareholders limited liability, meaning the most money shareholders can lose is the amount paid in shares

Question 7

unincorporated business

Answer 7

has no separate legal existence from its owners (sole trader, partnership)

Question 8

sole trader

Answer 8

has one owner, who makes all the decisions, is responsible for the business and can be sued if business is sued

Question 9

pros and cons of sole trader

Answer 9

pros
-low cost of entry
-complete control
-no partner disputes

cons
-personal liability for business debts
-need to carry all losses
-end of business when owner dies

Question 10

partnership

Answer 10

two or more owners, not a separate legal entity
can be verbal or in writing

Question 11

pros and cons of partnership

Answer 11

pros
-shared responsibility and workload
-pooled funds and talents
-business can operate if a partner dies

cons
-personal unlimited liability
-possibility of disputes
-difficulty finding a suitable partner

Question 12

private limited company (Pty Ltd)

Answer 12

must have:
-at least one shareholder and a max of 50 non-employee shareholder
-at least one director

Question 13

public limited company (Ltd/limited)

Answer 13

shares are listed on ASX
minimum of one shareholder
required to issue a prospectus when selling shares for the first time

Question 14

pros and cons of companies

Answer 14

pros
-limited liability
-long life
-easy transfer of ownership

cons
-cost of formation
double taxation (company and personal)
-public disclosure

Question 15

social enterprise

Answer 15

produces goods and services, primary objective of fulfilling a social need

Question 16

pros and cons of social enterprise

Answer 16

pros
-open up new markets
-meeting social needs

cons
-difficulty in obtaining capital
-significant operating costs

Question 17

government business enterprise (gbe)

Answer 17

controlled by government (eg auspost)

Question 18

pros and cons of government business enterprise

Answer 18

pros
-able to carry out government policies
-can operate with some independence
-healthy competition

cons
-political interference
-management can be less effective
-less accountability

Question 19

online business (pro, con, example)

Answer 19

-exists solely on the internet with a number of small offices
-able to reach customers from around the world
-customers can’t see or try items before purchasing, scams
-spotify

Question 20

brick and mortar (pro, con, example)

Answer 20

-has physical locations
-face-to-face interactions and security with purchases
-expensive to start and maintain
-coles

Question 21

direct-to-consumer (pro, con, example)

Answer 21

-sells directly to consumer without intermediaries
-connections with customers, customer loyalty
-time-consuming and less efficient than selling to retailers
-glossier

Question 22

franchise (pro, con, example)

Answer 22

-someone buys the rights of an existing business
-starting with established business name
-little chance to make independent decisions
-7-11

Question 23

importer/exporter (pro, con, example)

Answer 23

-generates sale revenue by trading goods
-fulfils market need
-risks, must be aware of legal requirements
-mining/ore/fuel

Question 24

pros and cons of purchasing an existing business

Answer 24

pros
-business already has a place in the market
-name and reputation
-inheriting cash flow and systems to sustain it

cons
-buying business for 3 times its cash flow
-existing reputation can be negative
-clients might not like new owner

Question 25

pros and cons of establishing a new business

Answer 25

pros
-only limited by imagination
-can run it part time
-can establish any processes

cons
-time and energy
-many not see profit for first few years
-no existing business systems

Question 26

types of business resources

Answer 26

-natural: items used by the business that comes from the natural environment (land, water etc)

-labour: the people that provide their skills, effort, and knowledge to the business (employees, managers etc)

-capital: the tools and machinery used to produce goods or perform services (computers etc)

Question 27

factors that affect choice of location

Answer 27

-visibility
-cost
-proximity to complementary businesses
-proximity to customers
-proximity to suppliers
-proximity to competitors

Question 28

types of business locations

Answer 28

-shopping centres
-retail shopping strips
-online presence
-home-based businesses

Question 29

finance

Answer 29

provide funding for (a business or enterprise)

Question 30

sources of finance

Answer 30

-internal (business owner contributes own funds)
-external (bank loans etc)

Question 31

equity (internal sources)

Answer 31

the funds contributed by business owners to start and expand a business
doesn’t have to be repaid unless business owner leaves business

Question 32

sources of equity

Answer 32

-self-funding
-family or friends
-private investors
-shares
-crowdfunding

Question 33

external sources of finance (debt finance)

Answer 33

-debt must be repaid over time with interest
-short term: repaid in 1-2 years
-long term: longer than 2 years

Question 34

how to decide between different sources of finance?

Answer 34

-terms of finance
-business structure
-overall cost
-flexibility
-level of control

Question 35

business support services

Answer 35

-legal and financial advice
-technological advice
-community based services
-private formal networks
-government formal networks
-informal networks

Question 36

SWOT analysis

Answer 36

-strengths (internal)
-weaknesses (internal)
-opportunities (external)
-threats (external)

Question 37

business plan

Answer 37

-a statement about the goals and objectives for a business and the steps needed to achieve them
-summary and evaluation of business concept
-should be a living document

should include:
-executive summary (describes business and objectives)
-operations plan
-financial plan
-marketing plan

Question 38

benefits of a business plan

Answer 38

-identifies strengths and weaknesses
-tests viability of business
-assists in maintain business operation, by focusing on goals and objectives

Question 39

corporate social responsibility (csr)

Answer 39

the idea that a business should be socially responsible
-a failure to act in a socially responsible manner can result in boycotts
-acting socially responsible can attract customers, and benefits staff morale, and greater employee retention

Question 40

how can companies be socially responsible

Answer 40

-consider environment
-look after customers
-look after staff