U1 AOS2 - Internal business environment and planning

Question 1

The internal environment

Answer 1

the factors a business has control over

Question 2

The external environment

Answer 2

the factors a business has little or no control over. Includes the operating environment and the macro environment

Question 3

What is a sole trader

Answer 3

A business owned and operated by one person

Question 4

Advantages and disadvantages of sole traders

Answer 4

Advantages - easy to start, complete control, low cost to set up, owner keeps all the profit

Disadvantages - Unlimited liability, the business ends when the owner dies, difficult to operate if sick/holidays

Question 5

What is a partnership

Answer 5

a legal form of business ownership where 2 -20 own the business and work together, with a view of making a profit

Question 6

Advantages and disadvantages of a partnership

Answer 6

Advantages- risk is shared, broader access to capital and skills
Disadvantages- unlimited liabilities- potential for disputes

Question 7

What are the two types of companies

Answer 7

Private Limited Companies (Pty Ltd) and Public Listed Companies (Ltd)

Question 8

What is a Public Listed Companies (Ltd)

Answer 8

Listed on the stock exchange (ASX). Anyone can buy and sell shares. Usually large. Shareholders may be paid dividends- unlimited shareholders.

Question 9

What is a Private Limited Companies (Pty Ltd)

Answer 9

Maximum of 50 shareholders. Usually for a small to medium sized family-owned businesses. Shares can only be sold to people once all the shareholders agree on.

Question 10

What is a social enterprise

Answer 10

Social Enterprises are in the private sector and distribute profit to benefit the community rather than individual shareholders

Question 11

What is a government business enterprise

Answer 11

A GBE is government owned and operated, runs profitably, but aims to control costs and sell products and services at a price to cover these costs.

Question 12

What is an online business and examples

Answer 12

no factories, warehouses, shops or any face-to-face customer contact. They exist solely on the internet and perhaps an office to support. Think Facebook, YouTube and Google,Ebay.

Question 13

What is an direct-to-consumer business and examples

Answer 13

businesses that sell directly to consumers without any intermediaries. DTC could use bricks and mortar or online. Eg Dollar shave club, BarkBox and Blue Apron

Question 14

What is a bricks and mortar business and examples

Answer 14

having a physical location. Although some stores may now have both a physical store and the ability to sell online (bricks and clicks).

Question 15

What is a franchise business and examples

Answer 15

a person buys the rights to use the business name and distribute the products or services of an existing business. The business that grants the right to others to use its name and products is known as the franchisor. The franchisee is the business who buys those rights. EG 7 Eleven, McDonalds, KFC, Jim’s Mowing etc

Question 16

What is an import and export business

Answer 16

those businesses that earn their income by trading goods internationally

Question 17

Advantages and disadvantages of purchasing an existing business

Answer 17

Advantages - instant income cause of existing customers, good history, stock and equipment ready, things like registration of the business name and staffing have already been done
Disadvantages - existing image/policies may be difficult to change, goodwill is hard to assess. May pay more than the goodwill is worth, success may be because of previous owner

Question 18

Advantages and disadvantages of starting a business from scratch

Answer 18

Advantages - complete control over the concept and forming of the business, it will be their business with their personal stamp on it, the price of the business will not include the added cost of goodwill
Disadvantages - there is a far greater degree of uncertainty with no previous sales history or figures to refer to, more work initially, it will take longer to establish a client/customer base and therefore, cash flow

Question 19

Name 3 types of business locations

Answer 19

Shopping centres, shopping strips, online presence

Question 20

Advantages, disadvantages, and example of shopping centres

Answer 20

Advantages - lots of parking, shops undercover facing internal walkways.
Disadvantages - expensive leasing, have to follow the centres hours, lots of competitors.

E.g. Bayside, Cranbourne, Chadstone

Question 21

Advantages, disadvantages, and example of shopping strips

Answer 21

Advantages - near public transport, off-street parking, high visibility for passing traffic, cheaper rent than shopping centre
Disadvantages - little parking, less foot traffic (less protected from weather)

E.g. Main street in Mt Eliza

Question 22

Advantages, disadvantages, and example of online presence

Answer 22

Advantages - huge growth recently, don’t have to pay rent, often do this first then when get customers, move to a physical space, convenient.
Disadvantages - scams, no face-to- face interaction/reputation.

Question 23

Sources of internal finance available to establish a business

Answer 23

Equity - Funds contributed by the owner/s
Self-funding
Family and friends
Private investors
Selling shares in the business
Crowdfunding

Question 24

Sources of external finance available to establish a business

Answer 24

Debt finance - (needs to be paid back) – most common
Grants - (do not have to be paid back)
Short term borrowing - (1-2 years) Bank overdraft. Bank bills. Trade Credit.
Long term borrowing - Long-term loan. Mortgage. Leasing.

Question 25

Business support services

Answer 25

are professional bodies such as lawyers and financial advisors who provide advice or guidance around key decision making

Question 26

What does SWOT analysis stand for?

Answer 26

Strengths
Weaknesses
Opportunities
Threats

Question 27

What should be considered in business planning

Answer 27

Environmental issues - How is the business going to impact the environment?
Customer issues - Need to plan to meet the needs of customers. Customer satisfaction is critical
Staffing issues - Employers who treat their staff well are likely to have more loyal workers
Socially responsible policies - A business needs to plan how they are going to be socially responsible by ensuring that appropriate policies are in place