UNIT 1 AOS 2

• the operating environment:

  • the specific outside stakeholders with whom the business interacts in conducting its business
• A business’s operating environment is made up of stakeholders external to the business which have a direct impact on the operation of the business.
• the macro environment:

  • the broad conditions and trends in the economy and society within which a business operates

  Changes in the macro environment can affect all businesses. This environment comprises the broad forces, conditions and trends in the economy and society within which the business operates.

  the business has no control over
• Both the internal and external business environments can influence and affect each other. As the business has control over the internal environment and can plan for internal factors, it can influence the impact of its activities and decisions on the external environment.
• Alternatively, the business is unable to control external factors, meaning changes in conditions of the external environment often have a more significant effect on the internal environment of a business.
• The business should consider and plan for how potential changes in external factors could affect the internal operations of the business. By proactively considering these factors, the business can remain competitive and viable in a continuously changing business world.
• internal environment includes: employees and managers, legal business structure, type of business model, source of finance, business support services
• employees - people working for a business who expect to be paid fairly, trained properly and treated ethically in return for their contribution to production
• managers - these are the people who have the responsibility for successfully achieving the objectives of the business
• location - the location of the business will determine whether or not the business is visible and accessible
• legal business structure - includes sole trader (unlimited liability), partnership (unlimited liability), private limited company (limited liability) or public listed company (limited liability)
• operating environment includes suppliers, competitors, customers, special interest groups
• customers - people who purchase goods and services from the business, expecting high quality at competitive prices
• competitors - other businesses or individuals who produce and sell rival, or competing, goods and services to the other offered by the business
• suppliers - the businesses or individuals that supply materials and other resource that the business needs to conduct its operations
• special interest groups - the groups of people who attempt to directly influence or persuade a business to adopt particular policies or procedures, including lobby groups, business associations and unions
• macro environment includes corporate social responsibility considerations, global issues, economic conditions, legal and government regulations, societal attitudes and behaviour and technological considerations
• legal and government regulations - laws or regulations made by parliaments and courts, which affect how businesses operate and behave
• societal attitudes and behaviour - the factors relating to changes in the attitudes, behaviour, tastes and lifestyles of communities on a local, national and international scale
• economic conditions - the set of influence that relate to economic activity, including interest rates, wages, unemployment, exchange rates and inflation
• technological considerations - the issues related to the growing use of tools, techniques or systems
• global considerations - the pressures that arise as a result of businesses operating in worldwide markets and competing on a globl scale
• corporate social responsibility considerations -> the pressures on a business to take into account environmental considerations to ensure broader social welfare
• unlimited liability - fully responsible by law (if their business fails) to the extent of their personal assests (bad)
• limited liability - business owners are only personally responsible by law to the level of their original investment in the business
• sole trader - an individual owner of a business, entitled to keep all profits after tax has been [aid but liable for all losses
• partnership - a legal form of business ownership where two to twenty owners work together
• private company - a company where the shareholding is limited with shares being sold privately
• public company - a larger company with unlimited shareholders. shares are freely traded on the stock exchanged
• sole trader adv:

  simple and inexpensive

  owner has total control over business

  minimal government regulation
• sole trader dis:

  unlimited liability for owner

  harder for owner to get finance for the business

  reliant on owners own knowledge and skills
• partnership adv:

  simple and inexpensive

  risk and workload is shared between partners

  broader access to capital, knowledge, skills and expertise
• partnership dis:

  unlimited liability

  liability for debts incurred by other partners

  potential for disputes and personality clashes
• private company adv:

  limited liability

  extra capital can be obtained by issuing more shares

  don't have to declare financial information to public
• private company dis:

  high establishment costs

  needs more accountability and compliance paperwork
• public company adv:

  limited liability

  ability to gain extra capital through selling extra shares

  exsistence not threatened by death or removal of one of the shareholders
• public company dis:

  must declare financial information to the public

  high establishment costs

  needs more accountability and compliance paperwork
• Business models:

  • includes the components and functions of the business, as well as how revenue will be generated and what expenses will be incurred
• business models include: online businesses, bricks and mortar, social enterprise and franchise
• Online business:

  • conducts its activities via the internet. Businesses that rely solely on the internet for sales are called ‘dotcom’ businesses