NCEA 2.1 Internal Operation of a business

Leader

A business leader is an individual who is responsible for guiding and directing a company or organization towards its goals and objectives. They are typically in charge of making important decisions, managing resources, and overseeing the work of employees. A successful business leader is able to inspire and motivate their team, while also being strategic and forward-thinking in their approach to managing the business.

Formal leader

people with positions of power in a business. this is a job that they have therefore have authority over others e.g CEO

Informal leaders

possesses leadership qualities that people want to follow without having authority over others

Managers

always have people working for them. their job is to be incharge of someone and for people to follow their instructions

Managers do what

set expectations, motivate staffm train staff, use business resources in a way that gets the most output for the business

communication

having the ability to communicate clearly when they speak and write as they are usually passing compex information so that it can be understood by everyone

4 Functions of management

planning, organising, leading and controlling

hierarchy

A hierarchy is a system or organization in which people or groups are ranked one above the other according to status or authority. It is commonly used to establish a chain of command and ensure efficient decision-making.

autocratic leadership

very strict, one person makes all the decisions

advantages to autocratic leadership

gets decisions made quickly and expectations are clear

disadvantages to autocratic leadership

staff may feel micromanaged which leads to less motivation and less productivity

Democratic leadership

Democratic leadership is a style of leadership where the leader involves the team members in the decision-making process. This style of leadership promotes open communication, collaboration, and participation from all members of the group.

advantages to democratic leadership

staff feel like their opinion is valued which means that they may feel obliged to be hard working

disadvantages to democratic leadership

can take a long time to reach a decision and this can slow the business down

Laissez-faire

hands off leadership approach allows group members to make their own decisions

Advantages to laissez fare

staff feel trusted therefore likely to feel motivated as they have autonomy over their own decisions

disadvantages to laissez-faire

not motivating for people who need to interact with their managers as there is less care the safety risks may be higher and may be a decrease in productivity

Tall structure

there are long chains and usually a narrow span of control as there are only a few direct reports to each manager

centralised decision making

when decisions are made at the top of the hierarchy

examples of when a centralised decision-making would be efficient

* when a business needs to follow a set way of doing things
* when employees/staff don’t have experience

Flat structure

wide span of control. each manager has a lots of direct reports

de-centralised decision making

decisions are made at the lower levels of the hierarchy

examples when de-centralised decision making is most efficient

* its a good use of managers time as they can delegate responsibilities
* more viewpoints
* greater motivation as employees feel valued

Matrix structure

teams made up of different departments work together and report to more then one manager

A matrix structure is used when

* launch of a new product
* a specific big task needs to be done

Shamrock organisation structure

business employees core workers (permanent staff), freelance workers (brought in to do a specific task) and flexible (part time and temporary workers)

inputs

resources a business puts into the production process

human resources

peoples time, knowledge and effort

capital resources

buildings or machinery

natural resources

natural materials to support peoples lives and meet needs such as animals, vegetables, minerals

job production

final product is produced from start to finish by the same person

Advantages to job production

Customer requirements and changes can be handled 

Because the costs can be made higher as it is easily customised 

Associated with higher quality

motivation — increase in productivity (flexible production method), increased quality and increase in efficiency 

disadvantages to job production

* Individual costs one unit may be high as it costs more to make one unit
* Often labour intensive = high labour costs 
* Humans cost money, robots don’t = labour intensive requires more money 
* Requires close consultation with the client

batch production

products are made in batches in stages with changes between batches allowing some flexibility

advantages to batch production

* Cost saving can be achieved by buying in bulk 


* Still allows some choice 
* Products can be worked on by specialist staff or equipment at each stage
* Allows a firm to handle unexpected orders 

disadvantages to batch production

* Takes time to switch production of one batch to another 
* takes time and employees to do quality check and switch the production 


* Requires the business to maintain higher stock of raw materials and work in process 


* Tasks may become boring/repetitive - reducing motivation 
* decrease in productivity, decreased quality and decrease in efficiency


* Size of batch dependent on capacity allocated

Flow production

the products are produced in a continuous flow ready to be dispatched

advantages to flow production

* Costs per unit of production reduced through improved work and material  flow 


* Suitable for manufacturing of large quantities 
* Capital intensive which means it can work constantly 
* Less need for training and skills

disadvantages to flow production

* Very long setup time and reliant on high quality machinery 


* High raw materials and finished stocks unless lean production used 
* Goods are mass produced - less differentiation for the consumers 
* Production is shut down if flow is stopped

productivity can be improved by

* training
* greater motivation
* installing better equipment
* better organisation or production

over and under utilisation of a plant

for a plant to be successful a business needs to run at the right capacity

economies of scale

Economies of scale refer to the cost advantages that a business can achieve by increasing its production output. As production increases, the cost per unit of output decreases, allowing the business to lower its prices and/or increase its profit margins. This is often achieved through the use of specialized equipment, increased bargaining power with suppliers, and improved efficiency in production processes.

diseconomies of scale

Diseconomies of scale refer to the situation where a company's costs per unit increase as the company grows beyond a certain size. This can be due to factors such as increased bureaucracy, communication difficulties, and decreased motivation among employees.

Lean production

maximising outputs while minimising inputs which reduces waste

TIMWOOD

transportation, inventory, motion, waiting, overprocessing, overproduction, defects

why is it important to keep financial information

a way to measure past performance and plan for future financial sustainability

balance sheet

current balance of assets (owned), liabilities (owed) and equity (assets-liabilities)

profit and loss statement

revenue (money coming in) expenses (money going out) and determines whether the business is in surplus or deficit

cashflow statement

shows where the money coming in is coming from and where the money going out is going towards. shows the business their net cashflow

budget

a plan of estimated income and expenses for a given timeframe

benefits of using a budget

* expenditure can be tracked
* encourages quick financial decision making
* able to demonstrate tangible results
* contingency plans can be made
* plan for company growth

variance analysis

the difference between budgeted figures verses the actual financial statement figures for a given time. expressed in a percentage that is either favourable or unfavourable

policy

a set of ideas or a plan of what to do in particular situations

why are policies important

* explain what is important to a business
* makes operation clear and transparent
* makes it clear to customers what their rights are
* helps managers make good decisions that align with business vision/putake

\

procedure

the way or instruction/method on how to follow a policy

why are procedures important

* sets out the right way to do things
* protects health and safety of customers and staff
* mistakes and wastes are minimised
* the businesses will comply with legislation
* protects business from fraudulent behavior

corporate social responsibility

businesses acting in a positive way to ‘build a better world’

advantages for businesses performing CSR

* good brand image
* positive publicity
* increases staff morale when they have shared interests

disadvantages to businesses performing CSR

* costs money
* makes shareholders frustrated