U1 AOS2 - Internal business environment and planning Flashcards
(27 cards)
The internal environment
the factors a business has control over
The external environment
the factors a business has little or no control over. Includes the operating environment and the macro environment
What is a sole trader
A business owned and operated by one person
Advantages and disadvantages of sole traders
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
What is a partnership
a legal form of business ownership where 2 -20 own the business and work together, with a view of making a profit
Advantages and disadvantages of a partnership
Advantages- risk is shared, broader access to capital and skills
Disadvantages- unlimited liabilities- potential for disputes
What are the two types of companies
Private Limited Companies (Pty Ltd) and Public Listed Companies (Ltd)
What is a Public Listed Companies (Ltd)
Listed on the stock exchange (ASX). Anyone can buy and sell shares. Usually large. Shareholders may be paid dividends- unlimited shareholders.
What is a Private Limited Companies (Pty Ltd)
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.
What is a social enterprise
Social Enterprises are in the private sector and distribute profit to benefit the community rather than individual shareholders
What is a government business enterprise
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.
What is an online business and examples
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.
What is an direct-to-consumer business and examples
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
What is a bricks and mortar business and examples
having a physical location. Although some stores may now have both a physical store and the ability to sell online (bricks and clicks).
What is a franchise business and examples
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
What is an import and export business
those businesses that earn their income by trading goods internationally
Advantages and disadvantages of purchasing an existing business
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
Advantages and disadvantages of starting a business from scratch
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
Name 3 types of business locations
Shopping centres, shopping strips, online presence
Advantages, disadvantages, and example of shopping centres
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
Advantages, disadvantages, and example of shopping strips
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
Advantages, disadvantages, and example of online presence
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.
Sources of internal finance available to establish a business
Equity - Funds contributed by the owner/s
Self-funding
Family and friends
Private investors
Selling shares in the business
Crowdfunding
Sources of external finance available to establish a business
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.
