Topic 2: Internal Organizational Resources

Question 1

4 main categories of internal organizational resources.

Answer 1

physical resources
intellectual property
financial resources
human resources.

Question 2

3 main categories of physical resources

Answer 2

1. Location
2. Equipment
3. Plant

Question 3

The location of a business is usually determined by the location needs of the stakeholders. Give 5 categories of location needs.

Answer 3

1. Customers
2. Labour market
3. Suppliers
4. Competitors
5. Land

Question 4

The tools needed to run the business.

Answer 4

Equipment.

Question 5

Give examples of factors to be considered with equipment.

Answer 5

1. Cost of leasing vs. buying or making
2. Longevity
3. Quality
4. Maintenance costs
5. Productivity (more expensive equipment may increase output)

Question 6

When it comes to Plant (building and facilities), the main consideration is between buying, leasing, or building. Explain the pros and cons.

Answer 6

Building = slow, expensive, risky (hard to sell because very specialized); highly productive if successful because specialized.

Lease = fast, cheap, not as productive because not specialized.

Buy = middle ground.

Question 7

typically includes things like a logo, brand, trade secret, design or invention.

Answer 7

Intellectual Property

Question 8

4 main types of Intellectual Property.

Answer 8

Patent, Copyright, Trademark, Trade secret

Question 9

The legal right to exclude someone else from producing and/or selling an invention for a finite period of time; exist to encourage innovation.

Answer 9

Patents

Question 10

Allowing somebody else to produce the patented/copyrighted item in exchange for a fee.

Answer 10

License arrangement

Question 11

Similar to a patent, but for a creative rather than a physical, invention (for example, a song, movie, book or images)

Answer 11

Copyright

Question 12

Does copyright require an application in New Zealand?

Answer 12

No.

Question 13

Know-how that isn’t protected by law, but is protected by their owners because of the competitive advantage they provide (ex// 11 herbs and spices).

Answer 13

Trade secrets

Question 14

An Intellectual Property category; example is Ford’s moving assembly line. Can be protected as a trade secret, and occasionally patented.

Answer 14

Processes

Question 15

Is a recognisable word or image that identifies a unique product or service.

Answer 15

Trademark.

Question 16

A type of trademark that assert ownership, which will hopefully deter (some) others from using the same word/image, but lacks legal enforceability

Answer 16

Unregistered Trademarks (TM).

Question 17

Trademark that provides full legal protection, but takes resources (time/money) to apply for, and can only be renewed if the ‘brand’ is still in use – that is, you can’t trademark a brand of soap then stop producing/selling the soap for ten years and expect to be able to renew the trademark.

Answer 17

Registered trademark (R).

Question 18

The only two sources of funding.

Answer 18

Equity and debt.

Question 19

money received in return for a portion of ownership in the business.

Answer 19

Equity finance

Question 20

wealthy people (or companies acting on behalf of wealthy clients) who invest in young privately owned (that is, not publicly share traded) businesses. These ‘investors’ rely on their ability to identify potential (whether in a product, a brand, or an individual) – Dragon’s Den and Shark Tank are perfect examples of this.

Answer 20

Venture capitalists

Question 21

A company decides to go public, and ‘offers’ an initial allocation of shares to the public – who give the company cash in return for shares.

Answer 21

Initial Public Offering (IPO)

Question 22

What is the negative impact of equity finance on a business?

Answer 22

Sacrificing a portion of the ownership; these part owners will exert varying levels of influence.

Question 23

What is the positive impact of equity finance to a business?

Answer 23

Most part-owners are in it for the long run. They are fine with minimal returns in the initial years.

Question 24

money lent which must be paid back in agreed intervals plus interest.

Answer 24

Debt finance

Question 25

Two main forms of debt finance.

Answer 25

Loans Bonds

Question 26

The business approaches the creditor (entity with money to lend), and the creditor dictates the terms and conditions of the debt.

Answer 26

Loan

Question 27

How do bonds work?

Answer 27

The business "issues" the bonds and they dictate the terms of payment and creditors buy them. They are like IOUs. They may issue $1,000 bonds today to be paid one year from now, and the bond costs $900 to buy.

Question 28

What is the negative impact of debt in a business?

Answer 28

if a business cannot meet their repayments, they may be forced into bankruptcy (sole traders and/or partnerships) or liquidation (companies).

Question 29

What is the positive impact of debt to a business?

Answer 29

Debt enables a business to generate a greater return on investment (equity) – via ‘leverage’.

Question 30

refers to the strategic use of borrowed money (debt) to increase the potential return on an investment, acquire assets, or fund business operations.

Answer 30

Leverage.

Question 31

What does it mean when a company is "highly leveraged"?

Answer 31

A company with a high debt-to-equity ratio is considered highly leveraged. This means a significant portion of its assets are financed by debt, increasing both potential rewards and risks.

Question 32

Two ways for businesses to generate income and revenue.

Answer 32

Cash sales Credit sales

Question 33

What are the differences between cash sales and credit sales?

Answer 33

Cash sales mean payment is received immediately while credit sales are paid in the future. Cash sales are more common for cheap items and goods while credit sales are more common for expensive stuff and services (quality of work is determined after the service).

Question 34

is a financial state in which an individual or a business is unable to pay their debts because their assets are insufficient to meet their liabilities.

Answer 34

Insolvency

Question 35

is a legal procedure that is initiated when an insolvent party is unable to settle their debts through other means; basically the process of addressing debts when insolvent.

Answer 35

Bankruptcy

Question 36

Is a specific instance of failing to fulfill a contractual obligation, often a missed payment.

Answer 36

Default

Question 37

are people who start a new business with a vision and a risk-taking attitude. They tend to be people who are innovative with new ideas for products or services.

Answer 37

Entrepreneurs

Question 38

are people, appointed by shareholders, who are in charge of managing the operation of a company.

Answer 38

Directors and board members.

Question 39

What are 'volunteers' not allowed to do?

Answer 39

They are not allowed to perform tasks material to the profit-making nature of the business. A business cannot replace a paid employee with a volunteer.