Business Management 1.1 - 1.3

What are the BM concepts?

Sustainability

Ethics

Creativity

Change

What is SWOT?

Strengths (internal)

Weaknesses (internal)

Opportunities (external)

Threats (external)

Strengths

Opportunities

- external

- market is good

- job pays good money

What is STEEPLE?

Social

Technological

Economic

Environmental

Political

Legal

Ethical

What is the Ansoff matrix?

Market penetration, market development, product development, diversification

Discuss Ansoff Matrix

USE THE TERMS HIGH RISK AND LOW RISK

What is market penetration?

Achieving higher market shares in existing markets with existing products. It has the lowest risk.

What is product development?

Development and sale of new products or new developments of existing products in existing markets

What is market development?

Strategy of selling existing products in new markets

What is diversification?

Process of selling different, related/unrelated goods or services in new markets. It is a high risk growth strategy.

What is a business?

An organisation that uses resources to meet the needs of customers by providing a product or service that they demand

What are the business outputs?

Consumer goods

Consumer services

Capital goods

What are the business inputs?

Land

Labour

Capital

Enterprise

What are the four business functions?

Marketing

Human resources

Finance

Operations management

What are the economic sectors?

Primary

Secondary

Tertiary

Quaternary

What is the primary sector?

businesses engaged in industries that extract natural resources to be used and processed by other firms

What is the secondary sector?

businesses that manufacture and process products from natural resources

What is the tertiary sector?

businesses that provide services to consumers and other businesses

What is the quaternary sector?

information technology businesses and information service providers

What is a business plan?

A written document that describes a business, its objectives and strategies, the market it is in and its financial forecasts

Elements of business plan

1. name of business

2. type of organisation

3. details of business owners

4. business aim

5. product

6. price

7. market aimed for

8. market research undertaken and results

9. human resources plan

10. production details and business costs

11. location of business

12. main equipment required

13. forecast profit

14. cash flow forecast

15. finance

Advantages of business plan

- obtain finance for new business

- help entrepreneur gain a full and better understanding of each element of her business with a clear vision and long-term objectives, and hence the chances of success or failure

- financial and other forecasts can be business targets for employees to focus and aid motivation

- help in making strategic choices

- allows potential investors in the new business and bank to make judgment about viability of idea and chances of success

- financial forecast act as budget and control benchmark for internal stakeholders such as managers

- updated versions of the business plan can be used to apply for additional funding, attract more partners or supply data for experts if stock market flotation becomes option

- suppliers can tell from parts of business plan communicated externally whether it is worthwhile to establish a long-term trading relationship with business

What is the private sector?

Business owned and controlled by individuals or groups of individuals

What is the public sector?

Organisations accountable to and controlled by central or local government

What is a sole trader?

Business that is exclusively owned by one person who has full control of it and is entitled to all of the profit after tax

Advantages for sole traders

- easy to set up, no legal formalities

- owner has complete control, not answerable to anyone else

- owner keeps all profits

- able to choose time and pattern of working

- able to establish close personal relationships with staff and customers

Disadvantages for sole traders

- Unlimited liability, all of the owner's assets are potentially at risk

- Faces intense competition from rivalling firms

- Owners of small business may have responsibility for all aspects of management and may therefore be unable to specialise

- Difficult to raise additional capital

- Long hours necessary

- Lack of continuity

What is a partnership?

Business formed by two or more people to carry on a business together, with shared capital investment and shared responsibilities

Advantages of partnership

- Partners may specialise in different areas of business management

- Shared decision-making

- Additional capital can be injected by each partner

- Business losses are shared between partners

- Greater privacy and fewer legal formalities than corporate organisations

Disadvantages of partnership

- Unlimited liability for all partners

- Profits shared

- Lack of continuity

- All partners are bound by the decisions of any one of them

- Not possible to raise capital by selling shares

- Partners need to discuss and agree to major decisions, might take a long time

What is a privately held company?

Business that is owned by shareholders who are often members of the same family. This company cannot sell shares to the general public.

Advantages of privately held company

Shareholders have limited liability

Separate legal personality

Continuity in the event of death of a shareholder

Original owner is still able to retain control

Ability to raise capital from sale of shares to family, friends and employees

Greater status than non-company or unincorporated business

Disadvantages of privately held company

Legal formalities in establishing business

Capital cannot be raised by sale of shares to general public

Difficult to shareholders to sell shares

Less secrecy over financial affairs

What is a publicly held company?

Limited company with the legal right to sell shares to financial institutions and the general public. Its share price is quoted on the national stock exchange.

Advantages of publicly held company

Limited liability

Separate legal identity

Continuity

Ease of buying and selling shares for shareholders, encourages investment

Access to substantial capital sources as can offer shares for sale to public

Disadvantages of publicly held company

Legal formalities

Cost of business consultants and financial advisers

Share prices subject to fluctuation for reasons beyond business's control

Legal requirements to disclose information to shareholders and public

Risk of takeover due to availability of shares on stock exchange

Directors influenced by short-term objectives of major investors

What is a social enterprise?

Business with social and/or environmental objectives that reinvests most of its profits into benefitting society rather than maximising returns to owners

Why would you choose to change a partnership to a privately limited company?

- limited liability

- management control

Why would you choose to become a sole trader?

- Full control

- Confidentiality

Compare the four types of businesses

x

Compare for-profit business vs social enterprise

x

What is a charity?

Organisation set up to raise money to help people in need or support causes that require funding

What is the triple bottom line?

The three objectives of social enterprises: economic, social and environmental

What is a public corporation?

Business enterprise owned and controlled by the state

What is a cooperative?

Group of people acting together to meet the common needs and aspirations of the members, sharing ownership and making decisions democratically

What is a non-profit organisation?

Organisation that has aims other than making and distributing profit, usually governed by a voluntary board

What is a non-governmental organisation (NGO)?

Legally constituted body that functions independently of any government and has a specific humanitarian or social aim

Compare for-profit business vs NGO

What is a mission statement?

Statement of the business's core aims to motivate employees and stimulate interest from outside groups

What is a vision statement?

Statement of what the organisation would like to achieve or accomplish in the long term

Advantages of mission and vision

- gives a sense of purpose and direction

- quickly informs groups outside the business what the central aim and vision are

- motivate employees

- guide and direct individual employee behaviour

- help other groups establish what the business is about

Disadvantages of vision and mission

- too vague, unquantifiable

- too similar

- PR exercise

- virtually impossible to really analyse or disagree with, so may be ignored or not taken seriously

What is a corporate aim?

Long-term goals which a business hopes to achieve

What is a business objective?

Short- or medium- term goals that are specific and must be achieved so as to achieve overall corporate aim

What are the advantages of corporate aim and business objectives?

- gives genuine sense of direction and purpose

- motivates employees and raises labour productivity

- promotes greater sense of belonging and team spirit

- enables organisations to measure progress

What are common business objectives?

- profit objective

- growth objective

- protecting shareholder value

- ethical objectives

- limitations

What are strategic objectives?

Long-term target for the whole organisation to achieve corporate aim (broad ways and means)

What are tactical objectives?

Short-term target at specific problem or goal for longer-term objective (detailed day-to-day ways and means)

What is corporate social responsibility?

The concept that the activities of businesses have an impact on society, so businesses should act responsibly and ethically towards all stakeholders, such as customers, employees, communities and the environment.

What are benefits to CSR?

- enhance/maintain PR, goodwill of community and suppliers

- enhance employee morale, motivation and cohesion

- enhance/maintain brand image, create niche position

- improve long-term profitability of business

Disadvantages of CSR

- Increase costs (raw materials, wages, technology)

- Limitations in working partners

What are SMART goals?

Specific

Measurable

Achievable

Realistic

Time specific