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Unit 1 Business Management > Outcome 3 > Flashcards

Outcome 3 Flashcards

Planning a business - Internal environment

1
Q

NATURAL RESOURCES

Definition:

A

Items used by the business that come from the natural environment. These include land, water, raw materials etc.

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2
Q

NATURAL RESOURCES

Factors to consider when planning:

A
  • Are their products environmentally friendly, and how can they minimise the negative effect of their
    products on the environment?
  • How can they reduce wastage and environmental damage during the production process?
  • Are the raw materials that they plan to use in production sustainable, accessible and reasonably priced?
  • Are the shops, offices and/or factories of the business designed in a sustainable way that minimises
    energy usage?
  • Where will they source their natural resources from?
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3
Q

LABOUR RESOURCES

Definition:

A

The people that provide their skills, effort and knowledge

to the business e.g. employees

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4
Q

LABOUR RESOURCES

Factors to consider when planning:

A
  • How many workers will be needed and what kind of skills will they need?
  • How will the business attract and retain these workers?
  • What kind of training should the business offer to its workers to help them grow and benefit the business?
  • How will the business provide fair pay and healthy working conditions for its employees?
  • What are the legal responsibilities of the business towards its employees?
  • How will the business resolve any disputes that arise with employees?
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5
Q

CAPITAL RESOURCES

Definition:

A

The tools and machinery that are used to produce goods or perform services.

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6
Q

CAPITAL RESOURCES

Factors to consider when planning:

A
  • What kind of tools and machinery will be needed?
  • How will the business repair, maintain and replace their capital equipment when needed?
  • Do they have the right workers with the right skills to operate the machinery they need?
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7
Q

TYPE OF LOCATION - SHOPPING CENTRES
Definition:
Advantages:
Disadvantages:

A

D: Includes small suburban shopping centres or large regional shopping centres, such as Chadstone or Doncaster.
A: Proximity to customers, Weather does not impact business
D: Rent eats up profit of business, Visibility: may get lost amongst other businesses in the area

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8
Q

TYPE OF LOCATION - HOME-BASED
Definition:
Advantages:
Disadvantages:

A

D: Can include service providers, such as hairdresser with a salon in the garage of their home.
A: Cost, Have a choice in customers
D: No foot traffic, Parking depending on where you live

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9
Q

TYPE OF LOCATION - RETAIL SHOPPING STRIP
Definition:
Advantages:
Disadvantages:

A

D: Developed around major roads and transport links, generally including conveniences such as the local milk bar.
A: Unique businesses,Around major roads: foot traffic
D: Parking may be limited, Locals are the main customer: doesn’t really attract new people

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10
Q

TYPE OF LOCATION - ONLINE PRESENCE
Definition:
Advantages:
Disadvantages:

A

D: Removes limitations around physical location and can include having an eBay shop front.
A: Attracts customers Australian wide or possibly international, Removes limitations on physical location
D: Not as reliable as website could crash, Spend more on deliveries

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11
Q

SOURCES OF FINANCE

Equity:

A

The funds contributed by the owner(s) of a business to start and build the business.

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12
Q

SOURCES OF FINANCE

External:

A

Most external sources of finance are in the form of dept, which refers to the funds provided by banks, other financial institutions, government and suppliers.

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13
Q

SOURCES OF FINANCE
EXTERNAL > DEPT > LONG TERM
Mortgage:

A

A loan on a property, secured by the property at the borrower (the business)

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14
Q

SOURCES OF FINANCE
EXTERNAL > DEPT > LONG TERM
Leasing:

A

A way of financing the purchase of assets without a large initial capital outlay.

  • Don’t need the total amount of money up front
  • Decrease your profit
  • Usually cannot be cancelled without an exit fee
  • Pay interest, other than trade credits
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15
Q

SOURCES OF FINANCE
EXTERNAL > DEPT > SHORT TERM
Bank Overdraft:

A

When a bank allows a business or individual to overdraw their account up to an agreed limit for a specified time to help overcome a temporary cash shortfall. E.g. Ice Cream shop thriving over Summer but struggling over Winter

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16
Q

SOURCES OF FINANCE
EXTERNAL > DEPT > SHORT TERM
Trade Credit:

A

When a supplier provides products to a business with an agreement to charge for the goods and services later.
- No interest

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17
Q

ESTABLISHING A NEW BUSINESS

What are the benefits?

A
  • The owner has freedom to set up the business exactly how as they wish
  • The owner can determine the pace of growth and change
  • There is no goodwill for which the owner has to pay
  • If funds are limited, it is possible to begin on a smaller scale
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18
Q

ESTABLISHING A NEW BUSINESS

What are the costs?

A
  • There is a high risk and difficulty to obtain finance
  • Time is needed to develop a customer base, employ staff and develop lines of credit from suppliers
  • If the start up period is slow, then profits may not be generated for some time
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19
Q

PURCHASING AN EXISTING BUSINESS

What are the benefits?

A
  • Sales will be to existing customers
  • A good business history increases the likelihood of business success
  • A proven track record makes it easier to obtain finance
  • Stock has already been acquired
  • The seller may offer advice and training
  • Equipment acquired
  • Current employees experienced
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20
Q

LEGAL STRUCTURES

Unincorporated:

A
  • Sole traders
  • Partnerships
    Unlimited liability means the owner may have to sell assets to pay for the losses of the business
21
Q

LEGAL STRUCTURES

Incorporated:

A
  • Private companies
  • Public companies
    As a seperate legal entity with limited liability, the owner’s assets are protected from the losses of the business
22
Q

LEGAL STRUCTURES

Private limited company:

A
  • Most common type of structure in Australia
  • At least one shareholder
  • Maximum of 50 non-employee shareholders
  • At least one director
23
Q

LEGAL STRUCTURES

Public listed company:

A
  • Minimum of one shareholder with no maximum number
  • No restrictions on the transfer of shares
    A requirement to issue a prospectus when selling its shares for the first time
  • Minimum requirement of 3 directors (whom 2 live in Australia)
  • The word Limited or Ltd in its name
24
Q

FACTORS AFFECTING CHOICE OF BUSINESS STRUCTURE

What are they?

A

Some key factors:

  • Does the owner need the extra legal security offered by limited liability?
  • Will the business need public finance, as is possible with a public company?
  • Will the owners be willing to relinquish control of the company to unknown investors by going public?
  • Is it worth the extra costs associated with establishing a company and preparing separate yearly tax returns?
25
Q

LEGAL STRUCTURES

Sole trader:

A
  • 1 person owns and runs business
  • Owner provides all the finance
  • May employ other people
  • Owner makes all decisions
  • Owner takes all responsibility for operation
26
Q

LEGAL STRUCTURES

Partnership:

A
  • Unincorporated
  • Minimum of 2 & a maximum of 20 partners
  • Exceptions for number of partners, such as medical practitioners allowed up to 50 partners
  • Subject to unlimited liability
27
Q

BUSINESS MODELS

Online Business:

A
  • exist on the internet

- only have a small number of offices to support online presence

28
Q

BUSINESS MODELS

Bricks & Mortar:

A
  • physical location such as a store in a shopping centre
29
Q

BUSINESS MODELS

Social Enterprise:

A
  • dedicated to improving the world we live in instead of making profit
  • aims to improve the wellbeing of others (community or environmental needs)
30
Q

BUSINESS MODELS

Franchise:

A
  • where a person buys the rights to use a business name and distribute the goods or services of an existing business
  • franchisor (grants rights)
  • franchisee (buys the rights)
31
Q

BUSINESS MODELS

Import & Export:

A
  • earning income by trading goods internationally
  • imports (produced overseas and sold in Australia)
  • exports (produced in Australia and sold overseas)
32
Q

BUSINESS SUPPORT SERVICES

Legal:

A

who provides: solicitor

advice: legal matters, business formation, registration, contracts and legislation

33
Q

BUSINESS SUPPORT SERVICES

Financial:

A

who provides: accountant

advice: tax, financial costs, registering the business

34
Q

BUSINESS SUPPORT SERVICES

Technological:

A

who provides: ICT Consultant

advice: establishing online business, setting up social media, purchasing equipment, online marketing

35
Q

BUSINESS SUPPORT SERVICES

Community Based:

A

who provides: Apex, BEC, Rotary

advice: engage in community service projects, membership put business owners in touch with other local business people

36
Q

BUSINESS SUPPORT SERVICES

Formal & Informal Networks

A 
who provides: 
formal & private- Chambers of Commerce
formal & government- ABS
informal- Friend, Colleague
advice: legal or financial help, provide support, provide data about community, information about starting a business, provides entry and links to information
37
Q

BUSINESS SUPPORT SERVICES

Business Mentors:

A

who provides: business owner, friend

advice: provide invaluable advice and strategies to the business owner on a variety of issues

38
Q

PLANNING TOOLS

Market research:

A

collecting and analysing data and information to assists the business in its understanding of potential customers and competitors

39
Q

PLANNING TOOLS

Business plan:

A

A written statement of the goals and objectives for the business, and the steps to be taken to achieve them

40
Q

PLANNING TOOLS

SWOT Analysis:

A

A type of situational analysis that looks at where the business currently stands.

41
Q

What does SWOT Analysis stand for?

A

Strengths, Weaknesses (internal environment)

Opportunities, Threats (external environment)

42
Q

BUSINESS PLAN - ELEMENTS

Executive summary:

A
  • one page document describing the business and its objects

- prepared at the end

43
Q

BUSINESS PLAN - ELEMENTS

Operations plan:

A
  • outlines how the business will be set up
44
Q

BUSINESS PLAN - ELEMENTS

Financial plan:

A
  • how business will be financed, projected cash flow, revenue, expenses and profit
45
Q

BUSINESS PLAN - ELEMENTS

Marketing plan:

A
  • outlines key information from the entered industry
  • gap in the market
  • marketing strategy included
46
Q

What are the benefits of using a BUSINESS PLAN?

A
  • identifies strengths and weaknesses
  • helps test the viability of the business
  • assists business to be proactive instead of reactive
  • assists in maintaining the business operation, focusing on goals
  • indicates the owner’s ability and level of commitment
  • helps the business owner to justify their plans and actions
47
Q

What is Corporate Social Responsibility?

A

owner outlines: environmental and resource impacts, community impact and engagement, risks and constraints, and strategies for minimising or mitigating the business’s environmental impact as well as any risks to the business.

48
Q

How to be a socially responsible business:

A
  • must not JUST abide by laws
  • they go above and beyond
  • improve the welfare of its stakeholders including its employees, customers and the wider community

Unit 1 Business Management (3 decks)

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