AOS2 Business SACC

What is the internal environment?

The micro enviroment, where the owner has most control

What is the external enviroment?

The macro (owner has little to no control) & operating environment (owner has some control).

What does the internal enviroment include?

Employees & managers, legal business structure, type of business model, business location, sources of finance, business support services,

What does the operating environment include?

Suppliers, competitors, customers, special interest groups/stakeholders.

What does the macro environment include?

Cooperate social responsibility considerations, global issues, economic conditions, legal & government regulations, social attituides and behaviour and technological considerations.

In what ways does the external environment affect the internal environment of a business?

The external environment gas a much greater degree of influence on the internal environment of a business. A business often finds itself at the mercy of factors from the external environment. A business must take a proactive approach to planning for and responding to, such external factors.

The ways in which the internal environment affects the external environment of a business?

Businesses can have an impact on the various aspects of their operating environment and can eve effect the macro environment to a small degree. Eg, a business lowers the price of its product then the competitor will have to do the same to keep its customers.

Unincorporated business entities

Sole traders and partnerships.

Incorporated business entities

Privately & publicly owned companies.

What is incorperation?

Inorporation is the process of turning a business into a separate legal entity from its owners. This means the company can continue operating even if ownership changes, and the owners become shareholders instead of directly owning the business.

What is unincorperation?

An unincorporated business has no seperate legal existence from its owners, this structure is the easiest and cheapest to establish.

What is a sole trader + advantages/disagvantages?

A person who owns/ runs the business, + provides all finance.

• A: complete control, less gov regulations and less costly to operate

• Dis: unlimited liability for b&e debts and difficulty in raising finance expansion

What is a partnership + advantages/disadvantages?

A partnership is:

minimum of 2 maximum of 20 partners, no seperate legal entity and subject to unlimited liability

A: shared responsibility and workload, pooled funds, low start up cost + if death of partner you can continue

Dis: Personal unlimited liability, liability for all debts including partners + possibility of disputes + sketchy partner

What is a private company?

A private company must have at least one shareholder to a maximum of 50 non-employee shareholders + one director. The company must have “Pty Ltd” after its name to signal that it is a private company.

What is a public listed company?

The shares for public listed companies are listed on the Australian Securities Exchange (ASX), which means that the general public can buy and sell shares in those companies.

What does a public company have?

• A minimum of one shareholder, w no max number.

• A minimum of 3 directors (two must live in australia)

• The word “limited” or “ltd” in its name

• A requirement to publish its audited financial accounts each year- the annual reports.

What are two advantages of a public company?

• Easier to attract public finance

• Limited liability

• Seperate legal entity

What are two disadvantages of a public company?

• Cost of formation

• Requirement to publish an annual report of audited accounts.

Distinguish between an incorporated business and an unincorporated business.

An unincorporated business has no separate legal existence from its owner(s), and will be either a sole trader or partnership. An incorporated business has its own separate legal existence, so that regardless of what happens to individual shareholders of the company, the business can continue to operate.

What is a business model?

A business model is the way in which businesses eventually run its operations to generate profit.

What are the types of business models?

-Online business

-Bricks and mortar

-Import and export

-Direct to consumer

-Franchise

What is an online businesses advantages/disadvantages?

• A: Can reach customers across the globe via internet, avoid physical expenses (rent, wages)

• Dis: Customer exposed to risk of theft when paying, greater risk of dissatisfied customers due to not being able to physically inspect a item.

What is bricks and mortars advantages/ disadvantages?

• A: face-to-face customer interaction + physically being able to inspect a good before purchase + security

• Dis: Far more expensive to establish and maintain (makes it hard to remain competitive on price)

What is importing and exporting’s advantages/disadvantages?

IMPORTING

• A: Provided goods for customers that isn’t available locally

• Dis: Business needs to consider the cost of purchasing goods from international manufactures, shipping, distribution and tariffs + ensure goods meet Australian consumer standards.

EXPORTING

• A: Reduced dependance on local markets + open new ones

• Dis: Legal requirements of the nation they’re exporting to + foreign exchange, political, shipping and quarantine issues.

What is direct to consumer’s advantages/disadvantages?

• A: Strong focus on connection w/ customers + lower costs

• Dis: Business must master all steps required for each product to reach the customer, which can be time consuming + less efficient.

What is a franchise + advantages/disadvantages?

A person (franchisee) buys the rights to use the business (franchisor) name and distribute goods or services of an existing business.

• A: Owner receives the benefits of a successful business formula, a well recognised name and established trademark + success rate 3x that more of independent business’

• Dis: Franchisee has little scope for making independent choices bc the franchisor has majority control of the operations + shares of profits and fees often favour the franchisor + the lack of ability to expand

An existing business includes:

• Has different outtakes on guidelines of running the business.

• Has a secure flow of money generated from the business +loyal customers + setup

• Have to restore good reputation when in despair.

A new business includes:

• No competitors, fresh start, no controversial issues

• Success is unsure

• Start with nothing, build customer relationships, personal independence.

What are business resource needs?

Resources are the things needed for the business to function properly. There are three types : natural, labour & capital.

What are natural resrouces?

Natural resources are items used by the business that come from the natural environment.

What are labour resources?

Labour resources refer to the people who provide their skills, effort and knowledge to the business.

What are capital resources?

Capital resources refer to the tools and machinery that are used to produce goods or preform services. Capital resources are important as they maximise the efficiency of labour.

What are some factors affecting the choice of the business location?

• Visibility

• Cost

• Proximity to customers + suppliers

• Complementary businesses

What are two types of business funds?

External: debt

• Short term

• Long term

Internal: Equity (self funded)

• Savings

• Family/friends

• Shares

Equity’s advantages/disadvantages

• A: Cheaper + no repayments

• Dis: Slow to save, cant expand quicker + loss of full ownership to other shareholders

What is crowdfunding?

A method of raising finance by using online and social media networks.

What are external funds?

Most are in the form of debt. Sourcing funds from outside the business should result in increased earnings and profits

Short term borrowing includes?

• Bank overdraft : a bank allows a b&e to overdraw its account to an agreed limit.

• Trade credit : When a supplier provides products to a business with an agreement to charge for the goods and services later.

• Bank bills : given for larger amounts, usually over $100 000, for a period of 90–180 days

Long term borrowing includes?

• Mortgage: loan secured by the property of the borrower

• Leasing: paying money to use equipment owned by another party

Some business support services?

Legal & financial advice:

• Solicitors

• Accountants

• Bank managers

What is technological advice?

• Establishing a business presence

• Networking a number of computers within the business

• Making maximum use of mobile devices

Some community-based services?

• Business enterprise centres (BEC) Australia

• Small business centres Victoria (SBCV)

Some formal networks: Private

• Chambers of commerce

• Trade associations

• Governments - Federal, state + local

Informal networks:

• Business mentor : advice from a person who is experienced or knowledgeable in the field.

What does S.W.O.T stand for?

• S = Strengths

• W = Weaknesses

• O = Opportunities

• T = Threats

Business plans? (4+ Written statement) Hint: EOFM

• Executive summary : One page document describing the business and its objectives.

• Operations plan : How the business will be set up and the human resource needs.

• Financial plan : How the business will be financed, and projected cash flow, revenue and profit.

• Marketing plan. : Key info from the industry the business will be entering and the gap in the market the business is filling + market strategy.

What is corperate social responsibility?

Corporate Social Responsibility is a business commitment to going above and beyond their legal requirements to act in a socially, financially and environmentally sustainable manner.

How can a business act in an enviromentally responsible way?

• Complete an environmental audit + implement an environmental management system (EMS)

How can a business fix staffing issues?

• Pay above a minimum wage

• Above and beyond with safe and healthy working conditions.

• Additional training

• Employing disadvantaged groups

How can a business fix customer issues?

• Products should be high quality, safe and reliable.

• Customers must be treated fairly and equitably.

What is a social enterprise?

A social enterprise is a business that aims to make a profit while also solving a social or environmental problem.

What are some factors affecting choice of business location?

• Visibility

• Cost

• Proximity to customers and suppliers

What are some business locations?

• Shopping Centre: Lots of food traffic, Protected from weather, very costly

• Retail Shopping Strip: High visibility from passing traffic, less costly, loyal local customers, not protected from weather, lack of parking

• Online Presence: Large range/access to customers - international, less costly, can be slightly costly to develop and maintain a website, have to protect customer information.

• Home-Based Businesses: Less costly, hard to seperate home and work balance.