Internal Environment Flashcards
Resources of Business- Natural +Factors to consider
Raw materials- Iron, wood., the land its self, farming , water and animals.
Factors to consider is the environmental impact and waste management
Resources of Business- Labour + Factors to consider
Employees, cooperate culture, connecting with employees and having training modules.
Factors to consider is the skills (How well does the employee implement into the business)
Resources of Business- Capital + Factors to consider
Machinary, factory or plant buildings.
Factors to consider is the quailty (needs to ensure high quality products so they can beat out competitors and increase demand)
Business Location- Shopping Centre
Mostly indoors, Range of businesses, air conditioned, easy parking
Business Location- Shopping strip
High visibility, Lack of parking
Business Location- Online Presence
Have to create an app or website, social media as a from of advertising, use of paypal
Business Location- Home Based Businesss
Traditionally sale of services but as a result of increased use of ICT, many home made businesses also sell goods
Factors affecting choice of Business Location
Visibillity, Cost, Proximity to customers and supplers, Proximity to competitors, Complementary businesses
Factors of Location- Visibility
A Business wanting high visibility would locate in a prime shopping area (Centre). Manufacturing businesses do not need high visibility to attract customers
Factors of Location- Cost
Leasing or purchasing a central location in a busy shopping centre will be far more expensive that a location with lower level of customer traffic
Factors of Location- Proximity to customers and suppliers
Depends on nature of business. Retail will need to be convienant for customers so Shopping centre of strip . proximity to customers in manufactoring is not a priority.
Factors of Location- Proximity to competitors
Would be unwise to establish a new business in a shopping centre that already has one or more businesses of that type. Being first to establish the business will be more likely for success
Factors of Location- Complementary buisness
Can exist in bringing customers to a new business. Offer goods or services aimed at the same customers eg Summer store and Pool
Sources of Finance (Define)
A Financial institution is an establishment that conducts financial transactions such as investments loans and deposits. Everything from deposting money to taking out loans must be done through financial instituions
Sources of Finance- Commerical Banks
They Accept deposits and provides security to their customers. With banks consumers no longer need to keep large amount of currency on hand. Banks can also make loans that businesses to buy goods or expand business operations
Sources of Finance- Insurance Companies
Pools risk by collecting preniums from a large group of people who want to protect themselves and/or their loved ones against a particular loss such as a fire, car accident, law suit or death
Sources of Finance- Unit investment Trusts
A company under an indenture or similar agree agreement. The management of the trust is supervised by a trustee. UIT trusts sell a fixed number of shares to unit holders who revceive a share of net income from underlying trust
Sources of Finance - Differences between Bank and Union
Credit unions offer more business loans than the banks and Credit union is based on a daily basis rather than a fixed rate in the commercial banks
Sources of Finance- Overdraft
An extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it.
Equity (Define)
Funds controlled by the owner of the business. these funds are used to start a business or expand one. Equitty does not have to be repaid unless an owner leaves the business.
External sources of Finance- Short term borrowing
Bank overdraft- Overdraw account to an agreed amount
Bank Bills- Short term securities issued by the business and bought by the bank
Trade credit- Suppliers change business at a later date
External sources of Finance- long term borrowing
Mortage- Loan secured by property of the borrowe
Leasing- Money paid to use buildings or equipment owned by someone else
Equity - Advantages and disadvantages of using equity
Advantage
Equity does that have to be repaid unless the owner leaves buisness
Equity is cheaper than other sources of finance because there are no interest payment
Disadvantage
The owner may expect a good return on their investment but the small amount of finance may only generate low returns
May take a long time to organise new owners
Equity - Adavantages and disadvantages of using debt
Advantages
Using Debt should result in increased earnings and profits
Australias tax system promotes debt financing for businesses.
Disadvantages
Regular repayments on the borrowing must be made
there is a higher risk for businesses using debt as the interest and government charges have to be paid on top of the principal amount borrowed.
Factors affecting choice of finance
Business structure
Overall cost
Flexibility
Level of control
External Sources of Finance - Grants
Financial grants for businesses are available from both the federal and state government
External Sources of Finance- Differences between internal and external sources of finance
Internal sources of finance are funs that come from the owners themselves, while external sources of fiance are those that come from outside the business. internal is equity. external is debt or mortages.
Purchasing an Established Business (Define)
when an established business is purchased, the business is already operating and everything associated with the business is included in the purchase
Purchasing an Established Business- Benefits
- Sales to existing customers generate instant income
- A good business history increases the likelyhood of success
- Stock has already been acquired,
- Equipment is avalible for immiedate use
Purchasing an Established Business- Costs
Exisiting image may be difficult to change especially if the business has a poor rep.
- the success may of been due to the previous owners personality
- Some employees may resent change
Starting from scratch (Define)
The recognition of a gap in the market. Where it is clear that existing providers are not catering to the demand of particular products of services .
Starting from scratch - Benefits
- The owner has freedom to set up the business exactly as he or she wishes
- The owner can determine the pace of growth and change
- There is no good will for which the owner has to pay
Starting from scratch- Costs
There is a high risk and a measure of uncertainty . it may be difficult to secure finance
- Time is needed to develop a customer base and employ staff.
- profits may not be generated if start up period is slow.
Legal Business Structures
Sole trader, Partnership, Public Listed company, Private limited company
Legal Business Structures- Pty Ltd
Private company. limited liability
Legal Business Structures- Ltd
Public company. Limited liabillity
Business Model (Define)
A plan that outlines how the business will run its operation to generate profits. it is how the business will generate its income and function on a day-day basis. Questions to consider are
- What is the main goal of the business?
- What type of good or service will the business offer?
- Who is the target community?
Business Model- Types
Online Busines Bricks and Mortar Import Export Franchise
Business Model- Online buisness
They exist solely on the internet, as well as having a small number of offices to support their online presence eg Facebook
ADVANTAGE
They are able to reach customers across the globe
DISADVANTAGE
They expose the customer to the risk of online theft
Business Model- Bricks and Mortar
Offer face to face customer interaction as well as the security that comes with being able to physically inspect or test a good prior to purchase.
They are expensive to establish and to maintain thier online counterparts
Business Model- Import
Goods and services that are produced over seas and sold to australian consumers. Import businesses need to factor the costs of purchasing international manufactor and taxes such as tariffs
Business Model- export
Goods and services that are produced in australia to be sold overseas. Exporters need to ensure that they are aware of the legal requirements of the nation to which they are exporting
Business Model- Franchise
Under a franchise agreement, a person buys the right to use the business name and distribute the products of an existing business. The business owner receives benefits of a succesful formula and well recongised name. The problem is that the franchisee has little room to make independant desicions due to franchises control
Business Support Services (FORMAL) Legal and financial Advice
Evaluating the different legal structures is an important part of the planning stage but are unlikely to know all legal and financial ramifications
It would be wise to consult accountants, solicitors and bank managers
Accountants provide valuable info on all financial managment issues
Solicitors provide info concerning buisness structures, registration and contracts
Business Support Services - Formal Networks/ Private
Buisness owners can access info and support from a large number of proffesional organisations
- Chambers of commerce
- Victorian Employers chamber of commerce
- Trade associations
Business Support Services - Formal Networks/ Gov
Fed- operates business.gov.ay as a service to businesses.
State- victoria website provides entry and links to info on starting a business
Local council- offer advice on landing zoning and consider development applications
Business Support Services - Informal networks
Businesses can use their network or friends and colleagues
Menotoring
Small businesses will seek advice on a regular basis from a person who is expereinced or have knowledge in the feild
Market research-
Involves collecting and analysing data and info to assist the business in its understanding of potential customers and competitors. Market research helps existing businesses as the business owner knows the needs and wants of customers and can be implemented as an advantage to destroy competitors
SWOT
Strengths INTERNAL
Is our product popular?
Are consumers loyal?
Weaknesses INTERNAL
Do we have compentent managers and staff?
Have we experinced past failures
Oppurtunites EXTERNAL
what will new tech bring us? Are interest rates low?
Threats EXTERNAL
what trends have been evident in our market? Are there new competitors?
Benefits of developing a Business plan
Helps test the visabillity of the business, Identifies the business’s strengths and weaknesses, indicates the owners abillity and level of commitment, and it assists the business to be proactive rather than reactive
Business plans should Include
Executive summary
Operations plan
Financial plan
Marketing plan
CSR in the internal Enviroment
A business acting in a socially responsible manner is far more likely to attract customers. A failure to do so can result in customers boycotting the business, turning it into a more socially responsible competitor
CSR in the internal Enviroment - How to be SR in the internal enviroment.
- Fair pay
- Safe and healthy working conditions
- Employing disadvantaged groups
- Socially responsible groups
Location- huminant
Industrial, online presecence. Needs to make customers be aware so include workshops
