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• Internal environment (macroenvironment) factors

  • employee
  • managers
  • management style
  • corporate culture
  • company policies
  • legal business structure
  • sources of finance
  • business location
• Operating environment (task environment)


  • supplies
  • competitors
  • customers
  • special interest groups
• External and internal environment

  The external environment has a much larger affect on the internal environment, businesses find themselves in control of external factors, and often must take precautions. Legal, environmental issues, competitors. Businesses can affect the external environment, like customers, suppliers, competitors, the local community and technological advancements
• Macro environment

  • corporate social responsibility
  • global issues
  • economic conditions
  • legal and government regulations
  • social attitudes and behaviour
  • technological considerations
• Online Business

  1. Easy to operate

  2. Internet has caused growth of online business

  3. Problem is that you don’t get to see products

  4. Can have a physical presence
• External environment


  • legal
  • political
  • social
  • economic
  • technological
  • global
  • corporate social responsibility laws
• Types of legal business structures
• Direct to consumer

  1. Typically sell directly to consumers and avoid other intermediaries

  2. wholesalers
• Bricks and Mortar

  1. Physical presence

  2. Retail/wholesale/manufacturing

  3. Advantage is in person contact

  4. Disadvantage is having to pay utilities, employees, lease

  5. Also, can have an online presence
• Franchise


  1. Buying the right to run the business and use its goods and services

  2. franchisor – owner of the business

  3. franchisee – the person buying the rights

  4. Disadvantage- franchise does not have control over the business

  5. Most pay royalties to franchisor

  6. Advantage is the preestablished reputation
• Import and export

  1. Businesses who buy from businesses

  2. clothes from China

  3. technology from overseas

  4. export – sell overseas

  5. Disadvantages include not knowing quality of product, shipping costs, overseas conflicts causing delays
• purchasing an existing business
• Advantages and disadvantages of establishing a new business
• Family and Friends

  • Must make contract/formal agreements
  • Advantages: Quick and Easy
  • Disadvantages: Damage relationships
• Factors affecting the choice of finance

  • Terms of finance
  • Business structure
  • Overall cost
  • Flexibility
  • Level of control
• Sources of Finance

  1. Internal Sources of Finance

  2. Equity

  3. Self-funding

  4. Family and Friends

  5. Private investors

  6. Shares

  7. Crowdfunding

  8. External sources of finance – debt finance

  9. Short term borrowing

  10. Long-term borrowing

  11. Leasing

  12. Government grants
• Private investors


  • People willing to support you in exchange for a return
• Equity

  • Funds contributed by the owner of the business
  • If it is a company, equity will be shareholders value/equity
• Purchasing an existing business

  1. Sales to existing customers generate instant income

  2. Good history increases chances of success

  3. Proven track record is easier to obtain finance

  4. Stock is already acquired

  5. Seller may offer advice or training

  6. Equipment readily available

  7. Existing employees already have knowledge
• Success because of owners’ characteristics


  May be lost when purchasing an existing business
• Employees resent change in operation


  When purchasing an existing business
• Self-funding


  • Owner pays all funds
  • Not borrowing from external sources
• Short term borrowing

  • Bank overdraft
  • Bank bills
  • Trade credit
• Crowdfunding

  • Raising money online or social media networks
  • Examples: Go Fund Me
  • Quick way with low fees
• Shares


  • Public listed companies can raise more capital by selling shares than private
• Long-term borrowing

  • Loan: Money given by the bank that will be paid back, they must secure an asset in case it cannot be paid back
  • Leasing: Paying money to use equipment owned by someone else. Lessee uses equipment. Lessor owns and leases the equipment
• Government grants


  • Government funding to start a business
  • Does not need to be paid back
• Factors affecting the choice of finance

  Include terms of finance, business structure, overall cost, flexibility, level of control