business u3aos1- business foundations

what are the 6 types of businesses

-sole traders

-partnerships

-government business enterprises

-social enterprises

-private limited companies

-public listed companies

define social enterprises

a business with specific social objectives as its primary objective

characteristics of sole traders

-makes all business-related decisions

-has unlimited liability, meaning they are personally responsible for any debts incurred by the business

-entitles to all of the businesses profits

advantages of sole traders

-simple/inexpensive to establish

-full control over decision making

-owner receives all profits

-no conflict between workers

disadvantages of sole traders

-unlimited liability

-limited access to capital

-may not have all skills needed for the job

-no new ideas

-long hours and limited time off

define partnership

a business that is owned and operated by 2-20 owners, where the owners and business are considered to be the same legal entity

characteristics of partnerships

-all owners sign a partnership agreement that details distribution of profit, responsibilities of partners and financial contributions of each partner

-all owners have unlimited liability over business debts

advantages of partnerships

-easier to raise more capital

-debts and obligations shared between partners

-workload shared between partners

-greater range of ideas and expertise

-easy and simple to set up

disadvantages of partnerships

-unlimited liability

-profits are shared among partners

-conflict could arise due to shared decision making and personality clashes among partners

define company

a separate legal entity (incorporated body) that is owned by shareholders

what are the 2 forms of companies

-private limited

-public listed

define private limited company

an incorporated business that has a minimum of one shareholder and a maximum of 50 shareholders

characteristics of private limited companies

-shares can only be traded with the permission of other shareholders

-1 to 50 shareholders

-separate legal entity from shareholders, limiting their liability for debts incurred by the business

-identified by the term proprietary limited (Pty Ltd) after the business name

advantages of private limited companies

-Limited Liability as it is a separate legal entity

-easier to raise capital as banks are more inclined to lend, or by offering more shares to investors

-effective way for sole traders of partnerships to expand

-company can carry on after owners are gone

-greater variety of expertise and ideas as more people involved

disadvantages of private limited companies

-more expensive to set up and operate

-increased reporting requirements and government regulation

-restricted number of shareholders

-shares cannot be traded freely

define public listed companies

incorporated business that has an unlimited number of shareholders and lists/sells its shares on the Australian Securities Exchange (ASX)

characteristics of public listed companies

-generally large companies

-managed by a board of directors

-has 'limited' (Ltd) after the business name, representing the limited liability of its owners

-any member of general public can freely buy and see. its shares

-high level of government regulation, requiring them to share their financial reports with the public

advantages of public listed companies

-limited liability

-greater access to capital as any member of the public can purchase shares

-company can carry on after directors are gone

-greater expertise and ideas as more people are involved

disadvantages of public listed companies

-complex and expensive to establish

-loss of control over who owns shares and who is on board of directors

-needs more accountability and compliance administration as financial performance open for public scrutiny

-conflicts could arise through shared decision making between directors

define social enterprise

business that exists to fulfil a social need that benefits the public or community through the sale of goods and services

characteristics of social enterprises

-they are run to make a profit, but they redirect the profit to help solve a social or environmental problems

-business must contribute at least 50% of profits towards fulfilling a social or environmental cause in order to be considered a social enterprise

-different from a charity as earns most of its revenue through sales rather than donations

-no specific legal structure they must take on

advantages of social enterprises

-can lead to enhanced reputation, therefore increased profit and marketshare

-may receive financial support from other businesses and the government as they have a positive social mission

-employees have purposeful work so are more likely to be satisfied with their job

disadvantages of social enterprises

-may be difficult to obtain a bank loan as the business does not solely focus on financial objectives

-high operating costs

-difficult to balance the achievement of financial objectives with social objectives

define government business enterprises (GBE's)

a business that is owned by the government and operates a commercial activity on their behalf

characteristics of GBE's

-seek to run profitability by controlling costs

-purpose is to cater for essential public needs through large scale public services

what are some examples of GBE's

Australia post, national broadband network, Australian rail track corporation, Defence Housing Australia

advantages of GBE's

-government can provide finances

-may invest in areas that private companies arent interested in

-offers competition for other businesses, helping to keep costs low and improve products/services

disadvantages of GBE's

-government has control over direction and political interference

-productivity may be lower than private sector businesses as there tends to be a lack of accountability in the public sector

-may be excessive government regulation leading to inefficiencies

define business objectives

the goals a business intends to achieve. they provide a business with direction

what are the 7 business objectives

-to make a profit

-to increase market share

-to fulfil a social need

-to fulfil a market needs

-to meet shareholder expectations

-to improve efficiency

-to improve effectiveness

define profit

the difference between revenue and expenses

define market share

a businesses percentage of the total sales within an industry

define efficiency

a measurement of how well a business is using its resources

define effectiveness

a measurement of how well a business is achieving its stated objectives

define fulfilling a market need

satisfying a gap in the industry that has not been addressed by an existing business

define fulfilling a social need

improve society and the environment through business activities. this is usually the primary aim of a social enterprise

define shareholders

The owners of a company who expect to get a return on their investment through capital gained and dividends

define stakeholders

individuals, groups or organisations who have a vested interest in a business

who are the 6 stakeholders in a business

-owners

-employees

-customers

-managers

-suppliers

-general community

define owners as a stakeholder and outline what they are interested in

individuals or groups that control the assets of a business and profits for them. they are interested in:

-profit

-return on investment

define managers as a stakeholder and outline what they are interested in

individuals who oversee and coordinate a business' employees and lead its operations to ultimately achieve the business' objectives. they are interested in:

-satisfying as many stakeholder expectations as possible

-having opportunities to increase status and engage in career advancement

-receiving appropriate wages and working conditions

define employees as a stakeholder and outline what they are interested in

individuals who are hired by a business to complete work tasks in exchange for a wage. they are interested in:

-fair wages and good working conditions

-healthy and safe workplace

-work-life balance and job security

define customers as a stakeholder and outline what they are interested in

those that purchase goods or services from a business. they are interested in:

-fair (and/or lower) prices

-good quality products

-receiving helpful customer service

define suppliers as a stakeholder and outline what they are interested in

those that supply businesses' with the raw materials used in the company's operations. they are interested in:

-the ongoing success of the business

-earning a profit from the raw materials they supply

-having reliable and honest relationships with businesses they supply to

define the general community as a stakeholder and outline what they are interested in

a group of people who live in close proximity to where the business operations. they are interested in:

-the level of waste

-the organisations' carbon footprint

-whether they are creating improvements in the local community

-increasing local employment and boosting the local economy

what are some possible areas of conflict between stakeholders

-prices charged for products or services

-the large profits made by organisations

-CEO and upper management salaries and bonuses

-outsourcing of work to other business in Australia and overseas

-wages and working conditions of employees

-overseas suppliers of businesses

define management styles

the way a manager makes decisions and communicates with employees

what are the 5 management styles

-autocratic

-persuasive

-participative

-consultative

-laissez faire

define autocratic management

where a manager makes the decisions and tells the employees what tasks to perform. there is no employee input, communication is one way and centralised decision making

what situations does autocratic management suit

-time is lacking and decisions must be made quickly and urgently

-staff are inexperienced

-simple tasks

advantages of autocratic management

-decisions can be made quickly

-clearly defined directions and procedures

-employees are clear about where they stand

-easily monitored due to clear staff roles and expectations

disadvantages of autocratic management

-low morale, motivation and job satisfaction among employees

-no staff input limits ideas, initiative and leadership potential

-requires constant supervision

Define persuasive management

where a manager makes all the decisions and then explains to employees why the decision has been made. centralised decision making and one-way communication. similar to autocratic

what situations does persuasive management suit

-task-orientated business (eg. factory production line)

advantages of persuasive management

-fast decision making

-managers gain trust and support through persuasion

-employees kept informed and might be more likely to accept difficult decisions because of communication

-directions and procedures are clearly defined

disadvantages of persuasive management

-communication is still only one way

-no employee input and staff may become frustrated, negative and unsupportive

-lack of responsibility and teamwork, skills and expertise of employees aren't fully utilised

define consultative management

where a manager seeks the ideas and opinions of employees before they make a final decision themselves. there is two-way communication but still centralised decision making

what situations does consultative management suit

-during times of organisational change

-when employees have experience and knowledge

-problem-solving or policy development which require employee feedback

advantages of consultative management

-Asking for input allows for a greater variety of ideas and should improve the quality of management decisions.

-employees take more interest due to their involvement

-may increase morale, job satisfaction, motivation, commitment, and confidence in employees

-policy generally moves smoothly and is more efficient

disadvantages of consultative management

-slower decision-making due to thorough consultation with staff being time-consuming

-consultation may not be suitable for all issues and situations

-some staff ideas will be ignored or overlooked (not every idea can be implemented) causing resentment or conflict

define participative management

where a manager and employees join together to make decisions as a team. staff share the responsibility for the decision making process. two way communication and decentralised decision making

what situations does persuasive management suit

-times of organisational change

-when employees have experience and knowledge

-problem solving or creativity is required

advantages of participative management

-open communication leads to a larger pool of ideas, greater innovation and better decision-making

-strong relationship between manager and employees

-increased motivation and job satisfaction

-high acceptance of decisions and change

disadvantages of participative management

-decision making may be time-consuming or slow

-decisions may lack direction due to compromisation being more common

-management role may be weakened if employees are given too much power

-internal conflict over ideas and opinions

define laissez faire management

where a manager leaves the majority of the decision making and authority with the employees. communication is still two way as employees inform management of their decisions and decentralised decision making

what situations does laissez faire management suit

-organisations with highly skilled employees needing little to no management

-problem solving or creativity is required

advantages of laissez faire management

-Employees feel a sense of ownership, which can promote outstanding results.

-Communication is completely open, and ideas are both discussed and shared.

-more idea sharing and creative solutions

disadvantages of laissez faire management

-loss of control by management

-overall objectives are lost

-can cause conflict amongst workers

what are the 4 factors that determine the appropriateness of management styles

-nature of the task: complex, simple, repetitive

-time: degree of urgency or any constraints?

-experience of employees: level of knowledge, skills, experience and values

-manager preference: influenced by their personality, characteristics, values, skills and how they communicate with staff

define management skills

the abilities or strategies that managers use to achieve business objectives

what are the 6 management skills

- Communication

- Delegation

- Planning

- Leadership

- Decision making

- Interpersonal skills

define communication as a management skill

the transfer of information from a sender to a receiver and listening to feedback. must be 2 way, articulate, clear and concise.

define delegation as a management skill

the passing of authority from a manager to the employee to achieve tasks. managers time is then freed up to focus on higher level tasks

define planning as a management skill

the ability to set objectives and determine strategies to achieve them

define leadership as a management skill

the ability of a manager to motivate and inspire employees to achieve business objectives

define decision making as a management skill

the ability to make a choice on a course of action from a range of alternatives

define interpersonal skills as a management skill

relate to the ability of a manager to liaise (communicate) with a range of people while building strong relationships

what is the relationship between management styles and management skills

the type of management style used will determine the type and degree of skills used, making them closely related

what skills would autocratic and persuasive management use

one way communication and centralised decision-making and leadership

what skills would participative management use

two way communication, delegation, leadership and interpersonal skills, decentralised decision making

define corporate culture

the values, ideas, beliefs and expectations (VIBE) shared by members of the business

what are some elements of corporate culture

-core values

-rituals and celebrations

-communication

-heroes

-physical environment

-dress code and behaviour

what are the two types of corporate culture with definitions

1. official corporate culture- what the business wants the culture to be, can be seen in documents like written policies, slogans and objectives

2. real corporate culture- the actual values and beliefs of the people within a business, which can be seen in the management style, standards of dress and how employees relate with each other and customers