Unit 1.2.3 Types of Business Models

Question 1

Business model

Answer 1

• The way in which the business will run its operations
• To generate profit

Question 2

Elements considered when choosing a business model

Answer 2

• Main goal
• Types of goods/services offered
• Target customers
• New business or part of franchise agreement

Question 3

Online business

Answer 3

• Business model
• Trades goods + services
• Via the internet

Question 4

Advantages of an online business

Answer 4

• Reach more customers
• Available 24/7
• Avoid additional expenses for rent + retail staff

Question 5

Disadvantages of an online business

Answer 5

• No direct contact
• Customers exposed to the risk of credit card theft/scams
• Orders coming in 24/7

Question 6

Direct-to-consumer business

Answer 6

• Business model
• The business’s products are sold directly to consumers
• With no intermediaries involved

Question 7

Advantages of a direct-to-consumer business

Answer 7

• Saves time (no intermediaries)
• Direct control over brand presence
• Builds customer loyalty

Question 8

Disadvantages of a direct-to-consumer business

Answer 8

• Possible difficulties growing business
• May not reach as many customers
• Increased levels of competition

Question 9

Bricks + mortar

Answer 9

• Businesses that have a physical location
• Such as a store in a shopping centre

Question 10

Advantages of bricks + mortar

Answer 10

• Offers face-to-face customer interaction
• Offers security that comes with being able to physically inspect a product

Question 11

Disadvantages of bricks + mortar

Answer 11

• More expensive
• Difficult to maintain competitive prices
• Had to adapt to establish an online presence

Question 12

Franchise

Answer 12

When a business sells to others the rights to
- Operate under their name
- Use its business systems
- Sell its goods + services

Question 13

Franchise agreement

Answer 13

• States the obligations + responsibilities
• Of the distribution of the business name + product

Question 14

Advantages of a franchise

Answer 14

• Success rate almost 3x an independent business
• Established brand
• Successful product/service developed already

Question 15

Disadvantages of a franchise

Answer 15

• Franchisee must pay the franchisor a substantial amount each year to trade under their name
• Restrictions on where/how the franchise may be operated

Question 16

Imports

Answer 16

• Goods + services
• Produced overseas
• Sold to Australian consumers

Question 17

Tariff

Answer 17

• Tax that needs to be paid
• On goods being imported from overseas

Question 18

Advantages of importing

Answer 18

• Products competitively priced (cheaper production costs)
• May provide goods that aren’t available locally

Question 19

Disadvantages of importing

Answer 19

• Additional costs (shipping, tariffs)
• Goods imported must meet Australian consumer standards

Question 20

Exports

Answer 20

• Goods/services
• Produced in Australia
• To be sold overseas

Question 21

Advantages of exports

Answer 21

• Allows a business to reduce its dependence on local markets
• Opens new markets
• Opportunity for business to grow + further expand

Question 22

Disadvantages of exports

Answer 22

• Must be aware of legal requirements in nations they’re exporting to
• Shipping risks/costs
• Quarantine issues

Question 23

Types of business models

Answer 23

• Online business
• Direct-to-consumer business
• Bricks + mortar
• Franchise
• Import + export
• Social enterprise