AOS2 - internal business environment and planning Flashcards
unit one
business environment
the surrounding condition in which the business operates
internal environment
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
operating environment
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
macro environment
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
how do the different business environments interact?
-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
incorporated business
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
unincorporated business
has no separate legal existence from its owners (sole trader, partnership)
sole trader
has one owner, who makes all the decisions, is responsible for the business and can be sued if business is sued
pros and cons of sole trader
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
partnership
two or more owners, not a separate legal entity
can be verbal or in writing
pros and cons of partnership
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
private limited company (Pty Ltd)
must have:
-at least one shareholder and a max of 50 non-employee shareholder
-at least one director
public limited company (Ltd/limited)
shares are listed on ASX
minimum of one shareholder
required to issue a prospectus when selling shares for the first time
pros and cons of companies
pros
-limited liability
-long life
-easy transfer of ownership
cons
-cost of formation
double taxation (company and personal)
-public disclosure
social enterprise
produces goods and services, primary objective of fulfilling a social need
pros and cons of social enterprise
pros
-open up new markets
-meeting social needs
cons
-difficulty in obtaining capital
-significant operating costs
government business enterprise (gbe)
controlled by government (eg auspost)
pros and cons of government business enterprise
pros
-able to carry out government policies
-can operate with some independence
-healthy competition
cons
-political interference
-management can be less effective
-less accountability
online business (pro, con, example)
-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
brick and mortar (pro, con, example)
-has physical locations
-face-to-face interactions and security with purchases
-expensive to start and maintain
-coles
direct-to-consumer (pro, con, example)
-sells directly to consumer without intermediaries
-connections with customers, customer loyalty
-time-consuming and less efficient than selling to retailers
-glossier
franchise (pro, con, example)
-someone buys the rights of an existing business
-starting with established business name
-little chance to make independent decisions
-7-11
importer/exporter (pro, con, example)
-generates sale revenue by trading goods
-fulfils market need
-risks, must be aware of legal requirements
-mining/ore/fuel
pros and cons of purchasing an existing business
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
pros and cons of establishing a new business
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
types of business resources
-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)
factors that affect choice of location
-visibility
-cost
-proximity to complementary businesses
-proximity to customers
-proximity to suppliers
-proximity to competitors
types of business locations
-shopping centres
-retail shopping strips
-online presence
-home-based businesses
finance
provide funding for (a business or enterprise)
sources of finance
-internal (business owner contributes own funds)
-external (bank loans etc)
equity (internal sources)
the funds contributed by business owners to start and expand a business
doesn’t have to be repaid unless business owner leaves business
sources of equity
-self-funding
-family or friends
-private investors
-shares
-crowdfunding
external sources of finance (debt finance)
-debt must be repaid over time with interest
-short term: repaid in 1-2 years
-long term: longer than 2 years
how to decide between different sources of finance?
-terms of finance
-business structure
-overall cost
-flexibility
-level of control
business support services
-legal and financial advice
-technological advice
-community based services
-private formal networks
-government formal networks
-informal networks
SWOT analysis
-strengths (internal)
-weaknesses (internal)
-opportunities (external)
-threats (external)
business plan
-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
benefits of a business plan
-identifies strengths and weaknesses
-tests viability of business
-assists in maintain business operation, by focusing on goals and objectives
corporate social responsibility (csr)
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
how can companies be socially responsible
-consider environment
-look after customers
-look after staff
