Area of Study 2, Outcome 2

• To describe the internal business environments.

• Analyse how factors from internal environments affect business planning.
 Introducing the Internal
Environment (2.2)

• There are many factors that affect how a business

operates.
• Internal environments can make or break a
business.
• Planning allows businesses to manage their
internal environments.
Introducing the Internal Environment (2.2)
• Internal environments are factors which business has control.
• External environments are factors which business has no control.
 Internal – External
Relationships (2.2)

Internal and external environments

work together to affect a business.
External affecting Internal Environments
(2.2.4)
• Social trends and customer preferences.
• Environmental issues.
• Legal.
• Competitors.
Internal affecting
External Environments
(2.2.5)
• Customers.
• Suppliers.
• Competitors.
• Local community.
• Technological developments.
 Exercises – Page 74
• Describe the relationship between the internal and external environment of a
business.
• With reference to a contemporary business that you are familiar with, discuss the
ways in which factors from the internal environment of a business can affect
groups from its external environment.
Legal Business Structure (2.3)
• There are different legal structures to own a business.
• Two types of business entities: Unincorporated and incorporated.
Legal Business Structure (2.3.1)
Legal Structure – Sole Trader (2.3.2)
• Unincorporated.
• One person owns and runs the business.
• One person personally responsible for his/her/their business.
Legal Structure – Sole Trader (2.3.2)
Legal Structure – Sole Trader (2.3.2)
Legal Structure – • Unincorporated.
• From 2 (minimum) to 20 (maximum).
Partnerships
• Partners personally responsible for their business.
(2.3.3) • Limited partnerships: one partner only contribute
financially.
Legal Structure – Partnerships (2.3.3)
Legal Structure – Partnerships (2.3.3)
 Exercises – Page 80
• Distinguish between an incorporated business and an unincorporated business.
• Suggest why unincorporated businesses are the most common form of legal
business structure.
• Under what circumstances will a sole trader not need to register a business name?
• Outline the similarities and differences between a sole trader and a partnership.
(4 marks)
• Discuss partnership as a type of legal business structure. (4 marks)
• Analyse how a business owner’s decision to operate as a sole trader may affect the
planning for their business. (4 marks)
 Legal Structure – Private
Companies (2.3.5)
• Incorporated means a registered company and
separate legal entity.
• Limited liability means owner and business are
different.
• One shareholder (minimum).
• Shares as way to own part of private companies.
Legal Structure – Public
Companies (2.3.6)
• Incorporated.
• Public companies trade their
shares at the ASX.
• Initial public offering.
Legal Structure – Public Companies (2.3.6)
 Exercises
• Explain why a business might choose to become incorporated as it grows.
• Who are the owners of a company and what are they entitled to?
• Explain the significance of limited liability for shareholders in a company.
• Explain the difference between the liability of a sole trader and the liability of a
public limited company. (2 marks)
• Discuss the use of a private limited company as a type of legal business structure.
(4 marks)
• Analyse how a business owner’s decision to use an incorporated business structure
may affect the planning for their business. (4 marks)
 Business Models (2.5)

• Different ways businesses run their

operations to make a profit.
• Provide framework or plan of how the
business work.
• May change as the business grows.
Business Models: Online (2.5.1)
• Consumers access online businesses through
phone and laptop anytime.
• Advantage: Online business reaches people
across the globe through internet.
• Disadvantage: Risk of theft and cannot inspect
the products before buying.
Business Models: Online Categories (2.5.2)
Advertising-Based Websites
• Websites offer free access
to people on the internet.
• Generate revenue through
advertising.
Business Models: Online
Categories (2.5.2)
Freemium
• Free service with
advertisements or
premium subscriptions.
Business Models: Online Categories (2.5.2)
Merchant
• Online sellers who use personal website or platforms to do business.
Business Models: Online
Categories (2.5.2)
Brokerage
• Online websites charge a
brokerage fee for sales.
Business Models: Bricks
and Mortar (2.5.3)
• Businesses that have physical locations.
• Examples include retail and
manufacturing businesses.
• Allows face-to-face interactions with
customers.
• Expensive to establish and maintain.
 Business Models: Direct-to-Consumer (2.5.4)
• Businesses sell their products direct to
consumers.
• No intermediaries like retailers or
wholesalers.
• Strong costumer focus and
connections, thereby building loyalty.
• Must master or control all steps in
selling directly to customers.
Business Models: Social
Enterprise
• Businesses to make the world a better place.
• Strong values and social causes may attract
customers.
• Significant financial costs to cover social
and financial goals.
Business Models:
Franchise (2.5.4)

• Franchise buys the rights to use

business name and distributions.
• Avoids the problems of starting
a new business.
• Difficult to modify the business
and little share for profits.
Business Models: Export
and Import (2.5.6)
• Business earn money through
international trading.
• Provide products otherwise not
available in Australia.
• Complex processes, taxes, and
exchange rates.
 Exercises – Page 92
• Outline what is meant by the term ‘business model’.
• Identify three things that should be considered when developing a business mode
• List four different franchise businesses that operate in your suburb or town.
• Kehinde has developed a new pizza recipe that he believes will sell strongly. He is
trying to choose the most appropriate business model for his idea:
• Describe a business model that would be suitable for Kehinde's business.
(3 marks)
• Explain the advantages and disadvantages of the business model you identified in
previous question. (4 marks)
• Analyse how a prospective business owner’s decision to use an ‘importer’ or
‘exporter’ model may affect the planning for their business. (4 marks)
Starting a New Business (2.6.2)
Why a start-up?
• New business recognise the ‘gap’ in the market.
• Develop new goods and services
• Market their innovation.
 Benefits
Starting a New • The owner has the freedom to set up the
business.
Business (2.6.2) • The owner determines the pace of growth
and change.
• No goodwill for which the owner must pay.
 Starting a New
Business (2.6.2)
Costs
• High risk and uncertainty.
• Difficult to secure initial
funding.
• Need time to develop customer
base, staffs, and suppliers.
 Purchasing an Established Business (2.6.1)

Why an Established Business?

• The business is already operating
and running.
• Equipment, business locations, and
employees.
• Must know the financial factors and
why the business is on sale.
 Purchasing an Established Business (2.6.1)

SALES TO EXISTING EASIER TO OBTAIN EMPLOYEES AND

CUSTOMERS GENERATE FINANCE AND EQUIPMENT
INSTANT INCOME. FUNDING. ALREADY EXISTS.
 Costs
• Existing image and policies of the business
Purchasing an difficult to change.
Established • Difficult to assess the value of goodwill.
Business (2.6.1) • Some employees may resist the change in the
business operation.
 Exercises – Page 95
• In what circumstances might someone choose to start a business from scratch?
• Tori is trying to choose between purchasing an existing business and establishing a
new business. She has never owned a business before, but she does have experience
working in several retail stores. Tori has been offered the opportunity to purchase the
business for which she currently works; however, she is wondering if it might be
better to start a totally new business from scratch. Identify an appropriate option for
Tori and justify your response. (3 marks)
• Distinguish between the costs and benefits of purchasing an existing business and the
costs and benefits of establishing a new business. (4 marks)
• Explain how the decision to purchase an established business will affect business
planning and ultimately the success of the business. (2 marks)
• Paul has decided to establish a new business. Explain why he might have chosen this
Business Resource Needs (2.7)
Resources are important things for
business to work properly

Natural. Labour.

Capital.
 Natural Resources (2.7.1)
• Resources from natural environments.
• Responsible use of natural resources.
 Labour Resource (2.7.2)
Examples:
• Human resources.
• People who provide their skills.
• Business must treat workers fairly.
 Capital Resources (2.7.3)
Example:
• Tools and Machinery to deliver goods or services.
• Maximise labour and efficiency.
Business Resource Needs (2.7)
Factors Affecting Resource Choices
Natural. Labour. Capital.
What is the environmental impact? How many workers will be What kind of machinery will be
required? needed?

How sustainable is the natural What level of skill will our workers How will be business service it’s
resource choice? require? capital and keep it working?

What is the cost of the natural What are the legal responsibilities Are workers equipped to maximise
resource choice? and requirements for employing the capital?
these people?
 Exercises – Page 99
• Define what is meant by the term resources.
• Explain the three types of resources available to a business and provide an
example of each.
• Talia is planning the resource needs for her new business. Explain the factors
affecting the choice of labour resources and capital resources. (4 marks)
• Identify two business resource needs relevant to a bakery and provide an example
of each resource. (4 marks)
Business Locations and
How to Choose Them (2.8)
Business Locations:
Shopping Centres (2.8.1)

• Might be good for established

business.
• Business in a shopping centre could
be successful if zero competitor.
• Leasing is expensive.
Business Locations: Retail Shopping Strips (2.8.1)
• Business have high visibility for passing traffic.
• Popular locations for restaurant and entertainments.
Business Locations: Home-
Based Businesses (2.8.1)
• Tradespeople run their business
from home.
• Technology allows home-based
business to operate efficiently.
• Flexibility around working time
and reduces commuting.
Business Locations:
Online Presence (2.8.1)
• Cheaper because no need to
rent land for business.
• Convenient for business
and customers.
Factors Affecting Location
Choice (2.8.2)
Business Locations: Zoning
• Local councils use zoning to allocate land for different uses.
• Determines what specific businesses can operate.
Business Locations: Visibility (2.8.2)
• Definition: How easy for customers to enter the business?
• Depends on types of businesses and their needs.
 Business Locations: Cost (2.8.2)
• Definition: Expense or the price for
specific business location.
• Leasing or purchasing a good area is
expensive.
• Business revenue must cover the
leasing or purchasing cost.
Business Locations: Proximity to Customers (2.8.2)
• Definition: How close the businesses to their customers?
• Depends on the purposes and needs of different businesses.
Business Locations: Proximity to Competitors (2.8.2)
• Definition: How close the businesses to their competitors?
• Depends on the purposes and needs of different businesses.
• Could be good for business in highly competitive markets.
• Could be bad for business that sells same things.
Business Locations: Complementary Business (2.8.2)
• Definition: Different products for the same customers in same location.
• Customers buy many things in one location.
 Exercises – Page 104
• In what ways do local council decisions affect the location of different types of
business?
• What advantages do shopping centres have over traditional ‘main street’ shopping
strips?
• Outline the main activities of an online store.
• Explain two factors that a business must consider when selecting an appropriate
location. (4 marks)
• Lorenzo and Jamal have decided to locate their fruit and vegetable business in a
shopping centre. Discuss the suitability of their decision. (4 marks)
• Analyse how decisions about location affect business planning. (4 marks)
Sources of Finance (2.9)
Finance
Sources of Finance (2.9.1)
Sources of Finance (2.9.1)
 Sources of Finance: Equity (2.9.1)
• Equity is funds that business owners
contributed to start the companies.
• Business owners who contribute equity
retain control over the companies.
• Does not need repayment until business
owners close the companies.
• Require a return on investment.
Sources of Finance: Examples of Equity (2.9.1)

Self-Funding (Bootstrapping)
• Business owners use their own money to
start the company.
• 100% ownership of the company.
• Risky because the self-funding business
owners lose everything if the business fail.
Sources of Finance: Examples of Equity (2.9.1)
Private Investors
• First inventors who contribute money to new businesses.
• Examples include venture capital that invest in start-up companies.
• Business owners give some business control to private investors.
Sources of Finance:
Examples of Equity (2.9.1)
Shares
• Business raise money by offering
shares in the capital market.
• Examples include initial public
offering (IPO).
• Shares is expensive and complex
option.
Sources of Finance: Examples of Equity (2.9.1)
Crowdfunding
• Method of raising finance
through online and social media
networks.
• Examples include GoFundMe
website.
• Requires business owners to
create interests and supports
Sources of Finance: Debt (2.9.2)

• Debt refers to funds by

banks or other financial
institutions.
• Require regular repayments
through interests.
Sources of Finance: Examples of Debt (2.9.2)
Short-Term Debt
• This type of debt finances cash flow and working capital.
• Examples include bank overdraft and short-term bonds.
• Must meet fixed interest payments.
 Short-Term Debt: Bank
Overdraft (2.9.2)

• Bank allows individuals to overdraw

their account at specific limit.
• Assist business with short-term
liquidity problems.
Short-Term Debt: Short-Term Bonds (2.9.2)
Short-Term Debt
• Business issues short-term securities or bonds.
• Bank buys these short-term bonds.
• Business get money from issuing these short-term bonds.
Sources of Finance: Examples of Debt (2.9.2)

Long-Term Debt
• Long-Term debt is borrowing
longer than 2 years.
• Examples include loan and lease.
• Must meet fixed interest payments
or court can seize assets away.
Short-Term Debt: Short-Term Bonds (2.9.2)
Short-Term Debt
• Business issues short-term securities or bonds.
• Bank buys these short-term bonds.
• Business get money from issuing these short-term bonds.
Long-Term Debt: Loans (2.9.2)
• Companies can engage a loan for business purposes.
• Business may use mortgage loan to finance properties.
Long-Term Debt: Lease (2.9.2)
• Business lease or rent equipment for
specific time periods.
• One way to finance assets without large
initial capital.
 Sources of Finance: External (2.9.3)
• Governments provide finance to
business in the forms of grants.
• Businesses must use government grants
for specific purposes.
Factors Affecting the Choice of Finance (2.9.4)
Term of Finance
• Time to repay the debt and equity.
• Term of finance must meet business situations.
• Revenue ≥ Cost
Factors Affecting the
Choice of Finance (2.9.4)
Business Structure
• How large or small is the
business?
• Small business has limited
access to sources of finance.
Factors Affecting the Choice of Finance (2.9.4)
Overall Cost
• Which one is cheaper, debt or equity?
• Predict future revenues cover the overall cost.
Factors Affecting the Choice of Finance (2.9.4)
Flexibility
• Net Present Value (NPV)
 Factors Affecting the
Choice of Finance (2.9.4)

Flexibility
• Business conditions change rapidly.
• Flexibility allow business to adjust
as situations change.
Factors Affecting the
Choice of Finance Level of Control
(2.9.4) • Business is reflection of an owner’s
characters and personality.
• Most owners would like high level of
control.
 Exercises – Page 112
• Prepare a table using two columns to list the advantages and disadvantages of
using equity to finance a business.
• Prepare a table using two columns to list the advantages and disadvantages of
using debt to finance a business
• 10. Jordy is planning to finance his new business using funds provided by his
family. Outline one other source of finance that Jordy might use to start his
business. (2 marks)
• 11. Polly is hoping to finance her business using crowdfunding. Discuss Polly’s
decision to use crowdfunding as a source of finance. (4 marks)
• 12. Analyse how decisions about finance will affect business planning. (4 marks)
• 13. Identify two sources of finance and explain one advantage and one
Support Services:
Legal Advice (2.10.1)
• Support to follow the legal
requirements of businesses.
• For example, solicitors provide
information about business law.
• Business uses legal advice to obey
relevant laws.
Support Services:
Financial Advice (2.10.1)
• Supports to establish and improve
financial management.
• Business managers provide valuable
information about corporate management.
• For example, accountants advice on
corporate finance and taxes.
Support Services:
Technological Advice (2.10.2)

• Supports to establish technological assets

in the business.
• For example, ICT consultant create online
network and database.
• Business uses technological advice for
efficiency within virtual environment.
Support Services:
Community-Based (2.10.3)
• Supports to allow business
engagement in community.
• For example, lions club connects
business with community services.
• Business uses community-based
supports to ‘give back’.
Support Services: Small Business
Victoria (SBC) (2.10.3)
• Supports across many factors like advice and
mentoring.
• SBC partners with government, companies, and
communities.
• Business uses SBC to receive business guidance,
services, and skills.
Support Services: Formal
Networks (2.10.4)
Private
• Supports from private
organisations.
Support Services: Formal
Network (2.10.4)
Federal, State, and Local Governments
• Supports from government organisations.
 Support Services: Informal
Network (2.10.6)
Business Mentors
• Advice from those who are experienced
and expert in the business.
• Business mentor provides advices on
multiple issues.
 Exercises – Page 116
• Why do you think a mentor might offer their advice to a business if not for
money?
• Imagine you were starting up a business. Write a list of five questions you would
ask a mentor.
• Explain the effect that using business support services will have on business
planning. (2 marks)
• Explain how a mentor can assist business planning. (2 marks)
• Distinguish between formal and informal networks used to assist business owners
with planning. (2 marks)
Business Plan (2.12.2)
• Written statement about goals and objectives of a business.
• Helps others people know about the point of your business.
• Just a plan and does not guarantee successes.
Business Plan (2.12.2)
SWOT Analysis (2.12.1)
• Provide analysis of internal and external environments.
• Helps business owners with a decision-making process.
• Owners must decide the best course of actions.
 Exercises – Page 124
• Explain what is meant by a SWOT analysis and why it is an important planning
tool for a business.
• Outline the benefits and limitations of conducting a SWOT analysis.
• Define the term ‘business plan’. (1 mark)
• Explain how a SWOT analysis can be used to evaluate a business’s current
situation. (2 marks)
• Discuss the use of a business plan. (4 marks)
• Explain how a business plan contributed to the success of a contemporary
business. (3 marks)
Corporate Social
Responsibility (CSR) (2.14)
• How business go above their basic legal requirements
• To improve the wellbeing of stakeholders.
• Stakeholders ≠ shareholders.
Why Corporate Social
Responsibility (2.14.1)
• Customers are more conscious about the
effect of business.
• Customers could boycott unethical
business.
• Ethical businesses may attract more
customers.
• May increase staff morale and retention.
CSR – Environmental Issues (2.14.2)
• Consider the impact of businesses on environment.
• Business may chose to engage an environmental audit.
• Business may chose to implement an environmental management
system (EMS).
 CSR – Customer Issues (2.14.2)
• Meet the needs of customer in socially responsible ways.
• Not engage in misleading or deceptive behaviour.
• Businesses go above legal requirements to protect their
customers.
CSR – Customer Issues (2.14.2)
 CSR – Staffing Issues (2.14.2)
• Fair pay
• Safe and healthy working conditions.
• Employing disadvantaged groups.
CSR – Socially Responsible
Policies (2.14.2)

• Company’s policy to reflect a social

responsibility.
• Business’ policy to define and manage
ethical behaviours.
• Environmental sustainability,
workplace bullying, and equality.
Why Corporate Social Responsibility?
 Exercises – Page 132
• Outline the benefits of a business being socially responsible.
• Explain what might happen if a business fails to consider corporate social
responsibility.
• Why do you think it is so costly to replace a worker who has left the business?
• Describe two corporate social responsibility management issues regarding
business planning. (4 marks)
• Discuss the issues that should be considered by a business planning to implement
practices related to corporate social responsibility. (4 marks)
• Define ‘corporate social responsibility’ and analyse the impact to a business of
being socially responsible. (5 marks)