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Business Management Unit 1 > Unit 1 AOS 2 > Flashcards

Unit 1 AOS 2 Flashcards

1
Q

what is the business environment?

A

the surrounding conditions in which the business operates

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2
Q

what are the two categories of the business environment?

A

internal and external

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3
Q

what is the internal environment?

A

factors over which the business has some degree of control

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4
Q

what is the operating environment?

A

The specific outside stakeholders with whom the business interacts in conducting its business.

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5
Q

what are the factors of the internal environment?

A
  • employees and managers
  • legal business structure
  • type of business model
  • business location
  • sources of finance
  • business support services
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6
Q

what is the external environment?

A

all the elements outside a business that may act as pressures or forces on business operations

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7
Q

what are the factors of the operating environment?

A
  • suppliers
  • competitors
  • customers
  • special interest groups
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8
Q

how much control does a business have over the operating factors?

A

A business has less control over these factors than the internal environment.

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9
Q

what is the macro environment?

A

the broad conditions and trends in the economy and society within which a business operates

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10
Q

what are the factors of the macro environment?

A
  • corporate social responsibility considerations
  • global issues
  • economic conditions
  • legal and government regulations
  • societal attitudes and behaviours
  • technological considerations
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11
Q

what do changes in the macro environment affect?

A

Changes in the macro environment can affect ALL businesses, therefore, businesses have no control over these factors

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12
Q

How does the external environment affect the internal environment?

A

Essentially, anything that happens in the external environment will impact the internal environment of a business and how it runs. Businesses have to adapt to changes in the external environment.

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13
Q

factors of the external environment?

A
  • legal
  • political
  • social
  • economic
  • technological
  • global
  • corporate responsibility
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14
Q

what does the environment consist of?

A

various stakeholders, each of these stakeholders have an interest in the business and places different demands on the business (interests may be similar of conflict)

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15
Q

do factors change?

A

factors that make up the business environment are continually undergoing change and act as pressures on operations of a business

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16
Q

what are the different types of legal business structures?

A
  • Sole trader
  • Partnership
  • Public listed company
  • Private limited company
  • Social enterprise
  • Government business enterprise
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17
Q

what is a business entity?

A

is any organisation that exists separately to its owner in order to produce and sell goods and services

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18
Q

what is incorporated?

A

an incorporated business has a separate legal existence apart from its owner/s (public listed company or private limited company)

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19
Q

what is unincorporated?

A

an unincorporated business has no separate legal existence from its owner/s (sole trader or partnership)

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20
Q

what is a sole trader?

A

business owned and operated by one person

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21
Q

what may a sole trader do?

A

The owner may employ other people to work in the business but the owner makes all the decisions & takes all the responsibility for the operation of the business

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22
Q

features of sole trader?

A
  • Easy to establish- only legal requirement is for the name to be registered with ASIC (Australian Securities & Investment Commission) but only if it is different from the name of the owner
  • Not regarded as a separate entity (owner and business regarded the same eg if the business is sued, the owner is sued)
  • If the business enters a legal contract, the owner is entering that contract
  • Sole trader pays tax using his or her personal tax file number
  • If the business runs into financial difficulties, the owner has the financial problem & is personally responsible for any debts. Known as unlimited liability
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23
Q

what is unlimited liability?

A

the business owner is personally responsible for all the debts of their business
- Owner may have to sell personal assets, to pay for the liabilities of the business

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24
Q

advantages of sole trader?

A
  • low cost of entry
  • simplest form
  • complete control
  • less costly to operate
  • no partner disputes
  • owners right to keep all profits
  • less government regulation
  • no tax on profits, only on personal income
25
Q

disadvantages of sole trader?

A
  • unlimited liability for business debts
  • end of business when owner dies
  • difficult to operate if sick
  • need to carry all loses
  • burden of management
  • need to perform wide variety of tasks
  • difficulty in raising finance for expansion
26
Q

Sole Traders - factors to consider

A
  • Is the owner prepared to risk the unlimited liability of operating their business?
  • Will the owner have enough finances, skills and expertise to establish and grow the business?
  • Is the owner prepared to take complete responsibility?
  • Does the lower cost of establishing a sole trader outweigh the benefits of incorporation (making it a company)?
27
Q

what is a partnership?

A

a business owned by a minimum of two and a maximum of 20 people

28
Q

features of a partnership?

A
  • Similar to a sole trader in that it’s not a separate legal entity from the partners
  • Also subject to unlimited liability- personally responsible for any debts
  • Partnership can be made orally or in writing or by implication (if 2 people set up a business together without a legally binding partnership agreement)
  • Written partnership agreement is not compulsory but advised as disputes can arise
  • A partnership agreement usually has a standard set of conditions
29
Q

what is a limited partnership?

A
  • Limited partnerships were introduced to allow one or more partners to contribute financially to the business but take no part in running the partnership
  • In this case, the partner is referred to as a silent or sleeping partner
  • They invest to add more finance to an existing partnership
  • Profits are divided among the partners according to the partnership agreement
  • Each partner adds their share of the profit to their personal income to be assessed by the ATO (Aus Tax Office)
30
Q

whats a silent partner?

A

contributes financially to the business but takes no part in running of the partnership

31
Q

partnership advantages?

A
  • low start up cost
  • less costly to operate than a company
  • shared responsibility and workload
  • pooled funds and talent
  • minimal government regulations
  • no taxes of business profits, only on personal income
  • if one partner dies the business can continue
32
Q

partnership disadvantage?

A
  • personal unlimited liability
  • liability for all debts, even partners before the business had begun
  • possibility of disputes
  • difficulty in finding a suitable partner
  • divided loyalty and authority
33
Q

Partnership - Factors to consider

A
  • Are the owners prepared to risk the unlimited liability?
  • Will the prospective partners have enough finances, skills and expertise to establish and grow the business?
  • Do the individuals believe that their prospective partners will act in the best interests of the business?
  • Can the prospective partners foresee disputes arising between them?
34
Q

what is incorporation?

A

the process that businesses go through to become a registered company and a separate legal entity

35
Q

how can a business become incorporated?

A
  • This process is governed by the Commonwealth Corporations Act 2001 and is administered by the Australian Securities and Investments Commission (ASIC)
  • To become incorporated, a company name must be registered with ASIC and they will be given an Australian Company Number (ACN).
  • Directors must be appointed to run the company on behalf of the owners
  • Once incorporated, the company has a separate legal identity to its owners who are known as shareholders
36
Q

what are shareholders?

A

are the owners of a company who are entitled to a share of its profits

37
Q

what is limited liability?

A

the shareholders cannot be held personally responsible for the debts of that business

38
Q

whats a private listed company?

A

an incorporated business with a minimum of two and a maximum of 50 private shareholders, and whose shares are offered only to those people whom the business wishes to have as part owners.
Most common type of company

39
Q

features of Proprietary (private) company

A
  • Most common type of company structure in Australia
  • Has between 2-50 private shareholders
  • Tend to be small-medium sized, family owned
  • Usually, one family owns most of the shares
  • Shares offered only to people whom the business wishes to have as part owners
  • Shareholders can sell their shares only to people approved of by the other directors
  • Not listed on the ASX
  • Must have the words ‘Proprietary Limited’ (Pty Ltd) at end of name
  • Closing a private company is quite complex. All shareholders must agree, a liquidator will manage the process of selling the company’s assets, paying its debts & distributing funds from asset sales among the shareholders
40
Q

what is a public listed company?

A

an incorporated business with a minimum of 5 shareholders and whose shares are freely traded on the Australian Stock Exchange.

41
Q

features of a public listed company?

A
  • Shares listed on the ASX
  • General public may buy and sell shares- no restrictions
  • Minimum of 5 shareholders with no maximum number
  • Large in size and market a large range of products eg Telstra, BHP Billiton, Woolworths, Virgin Blue and Westpac
  • A requirement to issue a prospectus when selling its shares for the first time
  • Minimum requirement of 3 directors (who must live in Australia)
  • The word Limited (Ltd) in its name
  • Required to publish its audited financial accounts each year- the annual report
42
Q

advantages of a company?

A
  • easier to attract public finance
  • limited liability
  • easy transfer of ownership
  • growth potential
43
Q

what is a social enterprise?

A

Social enterprise: a business with the objective of fulfilling a social need

44
Q

advantages of social enterprises?

A
  • open up new markets
  • positive effect on market share an dprofit due to fulfilling a social need
45
Q

diadvantages of social enterprises?

A
  • difficult in obtaining capital to start, finances
  • significant operating costs
  • difficult to both be social and profit
46
Q

what is a Government Business Enterprise (GBE)?

A

Government business enterprise: a type of business that is government owned and operated
Goal is to make a profit

47
Q

advantages of GBE?

A
  • able to carry out government policies and provide support in communities
  • healthy competition to other business
48
Q

disadvantages of GBE?

A
  • political interference
  • less accountability
  • inefficiencies
  • management less effective than private
49
Q

Factors to consider overall when choosing a legal structure

A

Size of the business
People involved
Type of business being run
Tax and other financial issues
Finance
Start up costs
Degree of risk
Personal preference

50
Q

Types of business models

A

online business, direct to consumer business, bricks and mortar business, franchise, importer and exporter

51
Q

whats a business model?

A

Business model: Outlines how the business will run its operations to generate profit

52
Q

Online business?

A

Online businesses exist solely on the internet
Online businesses have the advantage of being able to reach customers across the globe via the internet
Avoid the expenses of having a physical store such as rent and wages
Disadvantages are they expose the customer to the risk of theft when making payments online and there’s also a greater risk of unsatisfied customers who couldn’t inspect the product before purchasing it
No face to face customer contact
Relies on a small number of highly skilled workers to run technical operations
Many different types of online models mentioned on the following slides…

53
Q

Advertising-based websites

A

Many websites offer free access to people on the internet and generate revenue through advertising
Other businesses will pay top dollar to a website to feature their advertisements because it reaches their target markets
Blogs, after attracting enough followers, become an attractive space for advertisers

54
Q

Freemium

A

Some websites or apps, such as Spotify, attract a large customer base with their free service offers
They generate income through advertisements or the offer of a subscription premium service option

55
Q

Brokerage

A

Websites such as eBay brings buyers and sellers together in exchange for a brokerage fee when sales are made

56
Q

Merchant

A

Merchants are online sellers who operate through their own independent website or through the use of platforms such as eBay
These online retailers generally buy in bulk directly from manufacturers or wholesalers and sell the products to customers for a profit

57
Q

Bricks and mortar?

A

the traditional business model that is based on a store with a physical presence such as those located on shopping strips and in shopping centres

58
Q

Bricks and mortar features

A

Offer face to face customer contact
The ability to physically see what you are purchasing
Much more expensive to establish and maintain than an online business, therefore can be difficult to remain competitive on price
Many traditional bricks and mortar stores have needed to establish an online presence to complement their physical store
The chosen business model for many of the biggest retail, manufacturing and wholesale businesses

59
Q
A

Business Management Unit 1 (3 decks)

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