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mod 1: business planning Flashcards

1
Q

transformation process

A

the business process that involves adding value through transformation of inputs to outputs

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2
Q

transformation

A

the conversion of inputs (resources) into outputs (G+S)

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3
Q

value adding

A

the creation of extra or added value as inputs are transformed to output

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4
Q

goods inputs

A

entrepreneurship, natural resources, human resources, capital, technology

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5
Q

services inputs

A

materials, skill, education, time, qualification

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6
Q

business goals include…

A

profit maximization, market share, growth, share price, social goals, environmental goals

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7
Q

economic contribution of businesses

A

employment and development of human capital, provision of income, wealth creation, quality of life

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8
Q

commercial contribution of businesses

A

innovation, invention

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9
Q

entrepreneur

A

a person who sets up a business or businesses, taking on financial risk in the hope of profit

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10
Q

entrepreneurship

A

the activity of setting up a business or businesses, taking on financial risks in hopes of profit

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11
Q

effects of entrepreneurship

A

creates new businesses, contributes to national income, generates social change, forms community development, steers government policy making

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12
Q

CSR

A

the open and accountable business actions based on respect for people, community/society and the broader environment, placing value on the Triple Bottom Line

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13
Q

Triple Bottom Line

A

financial returns, social responsibility, environmental sustainability

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14
Q

in business a tension exists between

A

what is most cost effective/profitable and what is right/what society expects business to do

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15
Q

examples of CSR

A

planting trees, sustainable power sources, donating money

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16
Q

personal qualities of an entrepreneur

A

motivated, logical, risk-taking, strong work ethic, innovation, perseverant

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17
Q

benefits of business ownership

A

overcome unemployment, profit, security, better lifestyle, capital gain, wider overall choice

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18
Q

qualifications

A

the conditions that must be fulfilled before a right can be acquired

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19
Q

skills

A

ability/capacity to carry out tasks correctly

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20
Q

motivation

A

personal drive and factors that fuel drive

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21
Q

cultural background

A

the religious, family and social upbringing that contributes to fostering entrepreneurial abilities

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22
Q

sources of business advice

A

trade associations, TAFE colleges, solicitors, universities, accountants, government

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23
Q

trends

A

patterns of consumer behaviour. Business owners need to analyse market trends to plan ahead, take advantage of opportunities and protect the business from changes which may reduce their success.

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24
Q

what factors cause trends to change

A

advancement in technology, change in competitive positioning, change in tastes and preferences, cost of production, incomes, seasons

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25
Q

sources of short term debt finance

A

overdraft, commercial bills, factoring

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26
Q

long term debt finance

A

mortgage, debentures, unsecured notes, leasing

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27
Q

external equity finance

A

ordinary shares, private equity

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28
Q

owners equity

A

equity contributed by owners

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29
Q

retained profits/earnings

A

profits from business activities that haven’t been distributed to owners

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30
Q

overdraft

A

negotiated use of bank funds to a specified amount on a cheque account which allows businesses to draw on more funds than what are available

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31
Q

commercial bills

A

bank-issued short term loans that allow businesses to utilise up to $100,000 in an agreed time

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32
Q

factoring

A

the business sells its debtors (accounts receivable) to a factor (debt collector) eg. Victor

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33
Q

credit sales

A

when businesses sell products to customers and they pay at a future date eg. “put it on my tab” in US movies

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34
Q

mortgage

A

a legal agreement by which a bank lends money at interest in exchange for the title of the debtors property

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35
Q

debentures

A

debt securities issued by public companies

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36
Q

unsecured notes

A

similar to debentures but offer a higher rate of return to the buyer as they aren’t secured by company assets

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37
Q

float shares

A

finance raised by a company through inviting new owners who have voting rights and dividends

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38
Q

private equity

A

money invested into private companies by invitation of new owners to fund expansion

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39
Q

laws that businesses need to comply with

A

copyright, consumer protection, employment of people, safe food handling, taxation, registration

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40
Q

business names

A

firms have to register their business name with ASIC to prevent other businesses from trading under a similar name. They must comply or risk fines and the right to continue trading. Registering name doesn’t give ownership of name.

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41
Q

zoning

A

local governments control zoning which ensures that factories and residential areas aren’t located together. A new business must enquire with local council regarding the local of business.

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42
Q

health compliance

A

must be compliant with the Public Health Act (2010) and the Food Act (2003) which aim to ensure businesses dealing with food sell safe products.

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43
Q

Competition Consumer Act (2010)

A

protects consumers and other businesses from undesirable and misleading practices eg. misleading product, bait advertising

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44
Q

taxation

A

compulsory payment of a proportion of earnings to the government

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45
Q

different tax include

A

income tax, GST, company tax, payroll tax

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46
Q

general skills

A

skills looked for in every employee (employability skills) eg. work ethic, confidence, motivation, communication

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47
Q

specific skills

A

skills specific to a particular job eg. customer service for a front counter crew member

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48
Q

overriding recruiting objective is to…

A

attract a pool of qualified applicants with the most suitable skills. Skilled employees are more productive and generate income and wealth for a business.

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49
Q

employment

A

the type of employment a business offers is important as it has implications on both wage and non-wage costs.

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50
Q

full-time employment

A

work at least 38 hours per week and are usually employed on a permanent basis. Entitled to leave, 4 weeks holiday pay at 17.5% holiday loading

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51
Q

different types of leave

A

maternity, family and DV, carers, long service, annual

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52
Q

part-time employment

A

permanently employed, work less that 38 hours per week and hours are regular. Entitled to prorate (part of full time benefits based on hours)

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53
Q

casual employment

A

a job from an employer with no advanced commitment from an employer. No entitlements, but have a high hourly rate, businesses have minimum obligations to notify termination.

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54
Q

awards

A

legal documents outlining minimum pay rates and conditions of employment

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55
Q

enterprise agreement

A

set out minimum employment terms and conditions

56
Q

common law contract

A

pay and conditions determined in relation to specific tasks/jobs

57
Q

unincorporated business

A

business and business owner are one legal entity, business owner has unlimited liability

58
Q

sole trader

A

one owner who operates the business under their own name or a Registered Business Name (RBN). Unincorporated, but may employ others.

59
Q

benefits of sole trader

A

owner has total control, easy to establish cost-wise, no legal requirements to disclose finances, less govt. regulation

60
Q

disadvantages of sole trader

A

unlimited liability, total commitment by the owner, higher taxation, harder to get debt finance

61
Q

partnership

A

business owned by 2-20 people with partnership agreements to establish conditions, making individuals jointly liable for business debts. unincorporated

62
Q

benefits of partnership

A

shared commitment/labour, low admin. costs, minimal govt. regulation

63
Q

disadvantages of partnership

A

unlimited liability, shared income, taxed higher than companies, disagreements/disputes between owners

64
Q

incorporated business

A

the process that a business has gone through to become a separate legal entity from its owners, therefore the company exists in its own right.

65
Q

private company

A

company registered with ASIC where 1-50 shareholders appoint directors to run the company. It operates under a company name and ASIC, but isn’t listed on the ASX.

66
Q

benefits of private company

A

limited liability, extra capital can be obtained (shares), ownership and management are separate, lower company tax rate

67
Q

disadvantages of private company

A

must submit annual return to Australian Security Commission (ASC), slower decision-making, annual return to ASIC, higher admin cost due to ASC

68
Q

public company

A

a company with an unlimited amount of shareholders as shares can be sold on the ASX, meaning they hold an IPO (initial public offering). It has an ACN and is ASIC registered.

69
Q

benefits public company

A

limited liability, extra capital can be obtained (shares), easily transferrable shares

70
Q

disadvantages public company

A

higher complexity and establishment cost, more government scrutiny, legal obligation to shar finances, more paperwork

71
Q

micro business

A

a business with 0-4 employees typically unincorporated sole trader or partnership, They are quite niche to local area, typically run by women from home and use equity.

72
Q

small business

A

a business with 2-20 employees typically unincorporated sole trader or partnership with one or more shareholders. Market share in the local govt. area and use equity and small amounts of debt finance.

73
Q

medium business

A

a business with 20-199 employees typically incorporated private company with one or more shareholders. Market share in suburb/region and use equity and debt finance. People on BOD appoint director.

74
Q

large business

A

a business with 200+ employees owned by unlimited amount of people, typically incorporated public or private company. People on the BOD appoint directors and have international/national market share.

75
Q

primary sector

A

those involved in collecting natural resources which marks the beginning of value adding eg. fishing, forestry

76
Q

secondary sector

A

involves taking raw materials from the primary sector and turning it into a semi-finished or finished product eg. iron to steel to car.

77
Q

tertiary sector

A

provides services which is done by combining skills and expertise with other physical imputs eg. trade, medicine, financial services.

78
Q

quaternary sector

A

subset of tertiary sector and is a service industry which specialises in the transfer of information and knowledge eg. NGS, internet, Real Estate.

79
Q

quinary sector

A

subset of tertiary sector and is a service industry which performs duties that were typically performed in the home eg. daycare, Hellofresh, cleaner.

80
Q

local business

A

businesses that generally serve the local area and are restricted by geographical spread except for online presence. They share a percentage of their specific market within their area eg. hairdresser, mechanic.

81
Q

national business

A

a rare type of business that operates within just one country eg. Coles, Sportsgirl, David Jones.

82
Q

international business

A

AKA Multinational corporations with branches and subsidiaries in different countries. They often have headquarters in developed countries and manufacture in less developed countries.

83
Q

factors affecting legal structure of business

A

size of business, ownership, finance

84
Q

to health laws businesses must comply with

A

Public Health Act (2010) and the Food Act (2003)

85
Q

Competition and Consumer Act 2010

A

Protects consumers and other business from undesirable and misleading practices eg. deceptive products, false/misleading representation, bait advertising

86
Q

profit maximisation

A

Profit is an indicator of business success as it reflects the level of sales revenue, relative to the expertise required to lower costs. Businesses will seek to maximize profits as this will create the largest return on their investment and assist in funding the growth of the business in the future.

87
Q

market share

A

the business’s share of the total industry sales for a particular product.

88
Q

growth

A

an increase in the net worth (value) and or physical expansion of a business.

89
Q

share price

A

A share is a part ownership of a company. The share price reflects the value of a company at a given point in time. Businesses will seek to maximise the share price by performing well. A business that is profitable and has a good reputation, will attract investors.

90
Q

social goals

A

Business’ responsibilities to individuals and society.

91
Q

environmental goals

A

Businesses now understand that customers expect environmentally sustainable production decisions. A business will pursue this goal as it contributes to a positive brand image, increased sales and higher profits.

92
Q

competitive positioning

A

An effort to influence consumer perception of a brand, product or business relative to the perception of competing brands, products or businesses.

93
Q

buying an existing business advantages

A

Business can be purchased as a turnkey operation, goodwill already exists, easier to obtain debt finance due to business’ history.

94
Q

buying an existing business disadvantage

A

existing limitations eg. size, existing brand image which can be hard to change, existing contracts must be adhered to, past success may have been reliant of previous owner.

95
Q

franchise

A

a franchisee buys the rights to sell the franchisors goods or services under an existing business model and trademark.

96
Q

advantages of franchising

A

lowered failure rates, immediate benefit from goodwill, all supplies already established, well-established and profitable product

97
Q

disadvantages of franchising

A

franchisor controls overall operations, threat of franchise termination at the end of contract, may cost more than starting a new business, poor products from one outlet with affect other outlets

98
Q

total revenue

A

sales*price

99
Q

total cost (TC)

A

fixed costs (FC) + variable costs (VC)

100
Q

break even

A

total revenue (TR) = total costs (TC)

101
Q

profit

A

total revenue (TR) is more than total cost (TC)

102
Q

loss

A

total revenue (TR) is less than total cost (TC)

103
Q

business plan

A

a written statement of a business’ goals and the steps to be taken to achieve them. It is a summary and an evaluation of a business idea in written form that should be updated regularly, making it a living/working document.

104
Q

benefits of business planning

A

helps to prioritise and provide clarity, provides oversight and control over business, vital when sourcing finance.

105
Q

practical applications of a business plan

A

tests business viablity, assists the business to be proactive rather than reactive to external change, reference point to guide management and staff when running a business

106
Q

Market research

A

testing who potential customers are likely to be and what motivates them. They test products to see if they are commercially viable which helps to identify market gaps and establish a strong primary market.

107
Q

two types of market research

A

primary market research: gathering first hand information for a specific purpose

secondary market research: info already gathered for another purpose

108
Q

common components of business plans

A

exec. summary, goals, strategies, business description and outlook, management and outlook, operational plans, marketing plans, financial plans, human resource plans

109
Q

business plan: executive summary

A

brief overview of plan

110
Q

business plan: goals

A

what the business hopes to achieve

111
Q

business plan: strategies

A

overview as to how the business will attempt to achieve goals

112
Q

business plan: business description and outlook

A

an overview of the industry the business will operate in including situational analysis

113
Q

business plan: management and outlook

A

the nature and type of organisation structure

114
Q

business plan: operational plans

A

details the production process and people required now and in the future

115
Q

business plan: marketing plans

A

product, price, promotions and distribution details

116
Q

business plan: financial plans

A

financial needs and methods to evaluate performance

117
Q

business plan: human resource plans

A

details present and future staff requirements

118
Q

breakdown of goals triangle

A

Vision
Strategic: long-term goals
Tactical: short term goals
Operational: day-to-day

119
Q

long term strategic business goals

A

growth, share price, social goals, environmental goals, market share, profit maximisation

120
Q

short term tactical business goals

A

operations: quality, cost, dependability, customisation, speed, flexibility, speed

finance: liquidity, profitability, efficiency, growth, solvency

marketing: sales, brand awareness, market share, social-ethical accountability, legal compliance

human resources: maximised profitability, minimised cost, ethical-social responsibility, legal compliance

121
Q

SWOT analysis or situational analysis

A

involves the identification and analysis of internal strengths and weaknesses of a business, and the opportunities and threats from the external environment. It is a planning and analysis tool used by businesses to identify objectives, goals and align strategies to achieve them.

122
Q

SWOT acronym

A

Strengths- champion them
Weaknesses- fix them
Opportunities- maximise them
Threats- minimise them

123
Q

internal business environment

A

factors that a business can control or change including Strengths and Weaknesses

124
Q

external business environment

A

factors that are outside of a business’ control including Opportunities and Threats

125
Q

business vision

A

broadly states what the business aspires to become and is often expressed in their vision statement

126
Q

mission statement

A

highlights specific goals, objectives and strategies that are intended to achieve the vision. It is common for businesses to include their values or virtues as part of these statements.

127
Q

goals

A

specific statements of intent of what is intended to be achieved

128
Q

objectives

A

specific statements (break down of goals) detailing what a business or individual needs in order to accomplish its vision.

129
Q

objectives

A

specific statements (break down of goals) detailing what a business or individual needs in order to accomplish its vision.

130
Q

visions, mission and goals are important as they:

A

direct and guide business owners, management and employees. They foster culture, cohesion and purpose within the business that is used to rationalise decisions.

131
Q

cost leadership

A

involves aiming to have the lowest costs and to be the most price-competitive in the market, whilst maximising profit

132
Q

product/service differentiation

A

developing and promoting differences between a business’ products to those of its competitors

133
Q

competitive advantage

A

where a business’ goods or services appear superior or more favourable to competitors

134
Q

cost leadership strategies

A

control product costs and expenses, economies of scale, technology, R + D

135
Q

product/service differentiation strategies

A

product features, service, price, brand image, cross-branding

136
Q

operation objectives that achieve product/service differentiation

A

cost, quality, speed, customisation, flexibility, dependability

137
Q

link between product/service differentiation and competitive advantage

A

product/service differentiation achieves competitive advantage, leading to profit maximisation and profit

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