one hundred and FORTY-NINE??!! UNIT 3 AOS 1 - BUSINESS MANAGEMENT

Business

An organisation where goods and services are exchanged for money.

What are the 6 types of Businesses?

- Sole Trader

- Partnership

- Private Limited Company

- Public Limited Company

- Social Enterprise

- Government Enterprise

Sole Trader

An individual who owns and runs the operations of a business.

They trades under their own name or under a registered business name and is entitled to keep all the profits after tax but also has unlimited liability.

Sole Trader:

Advantages

- Simple & Inexpensive to establish

- Owner has total control over business

- Simple to wind up the business

- Minimal government regulation

Sole Trader:

Disadvantages

- Unlimited Liability

- Harder to obtain finance

- Highly reliant on the owners knowledge and skills which may be limited

- Often difficult to expand with limited capital

Partnership

A legal form of business ownership which two or more partners work together to manage and operate a business and each partner is jointly liable for business debts incurred, as unlimited liability applies to each partner.

There are 2 types of Partnerships - General and Limited.

General Partnerships

All partners are deemed equally responsible for management of the business.

Limited Partnerships

The Liability of one or more partners is limited.

Partnerships:

Advantages

- Inexpensive and Simple

- Risk is shared between partners

- Workload may be shared

- Offers broader access to capital, knowledge, skills & experience

Partnerships:

Disadvantages

- Unlimited Liability

- Liability for debts incurred by partners

- Business could be threatened by one partner leaving - no perpetuity

- Potential for diputes

Private Limited Company

A business owned by private shareholders which are not available to the public. It can be owned by up to 50 shareholders and has limited liability.

Private Limited Company: Advantages

- Limited Liability

- Extra Capital

- Company is sperate legal entity

- It has perpetuity

Private Limited Company: Disadvantages

- More complex

- Higher establishment costs

- Higher degree of government control & reporting requirements

- Additional compliance costs

Public Companies

As a business grows in terms of their size of operation, they may look to the option of becoming a public company, as a means of having much greater access to raising capital.

Public Companies: Advantages

- Limited Liability

- Ability to raise capital

- Company not threatened by debt

Public Companies: Disadvantages

- Highly complex structure

- Higher establishment costs

- Greater accountablity & Compliance paperwork

- Additional compliance costs

Social Enterprise

A type of business that uses strategies to maximise improvements to the community, rather than to maximise profits for owners or stakeholders

Social Enterprise: Advantages

- Benefits the community

- Donors can claim their donations as being tax deductable

Social Enterprise: Disadvantages

- Owners do not get to keep all the profits

- It may be more difficult to expand as profits are not neccessarily invested back into the enterprise/market

Government Business Enterprise

A government owned, provides an essential community service, but aims to make a profit and is run in a way similar to company, where it seeks to provide a return to its shareholders.

Governnent Business Enterprise: Advantages

- Provides an essential service to the public that otherwise may not be provided by the private sector

- Retains a certain level of autonomy and control over its operations

- It is run to be financially efficient to generate a profit

Government Business Enterprise: Disadvantages

- Regular reporting requirememts to relevant minister

- Ultimately accountablr for its performance to parliament and the public

Business Objective

A desired goal that an organisation intends to achieve

Government

Group of people with the authority to govern a community.

3 levels = Fed, State, Local

S.M.A.R.T

S pecific

M easureable

A chievable

R elevant

T imely

(S.M.A.R.T)

Specific

Objective needs to be specific and explicit.

Clear.

E.g. "Open your new store by July and increase sales by 20% within 2 years"

(S.M.A.R.T)

Measureable

Objectives should be measureable.

E.g. "We can accomplish this by..."

(S.M.A.R.T)

Achievable

Objectives need to be attainable and reachable.

(S.M.A.R.T)

Relevant

Objectives must be relevant to the business' over all mission.

(S.M.A.R.T)

Timely

Objectives need to be reached within a certain time frame.

Vision Statement

What the business wants to become in the future.

Mission Statement

What the business stands for, its purpose and how it intends to get there.

3 Basic Levels of Objectives

Strategic Objectives

Tactical Objectives

Operational Objectives

Strategic Objectives

Establish long term goals for the business - usually 2-5 years.

Determined by executive.

E.g. Director..

E.g. Less water usage, less waste...

Tactical Objectives

Generally set for a medium term - usually 1-2 years.

Determined by development department.

E.g. Creation of new image for product

Operational Objectives

Tend to be short term in nature and often relate to very specific goals over coming days, weeks or months - possibly a year.

E.g. Team is trained adequately.

Types of Business Objectives

- Financial Objectives

- Social Objectives

- Environmental Objectives

- Marketing Objectives

- Human Resources Objectives

- Health and Saftey Objectives

- Operations Objectives

Financial Objectives e.g.

- Maximising profit

- Increasing market share

Social Objectives e.g.

- Meeting a community need

Environmental Objectives e.g.

- Reducing a business' carbon footprint/energy use

Human Resource Objectives

- Improve staff skilss

- Reduce staff absenteeism..

Health & Safety Objectives

- Improve well being of staff

- Reduce injuries in workplace

Operations Objectives

- Improve efficiency levels

- Reduce wastage

-Improve quality of product

Marketing Objective

- To get your business or products/services known in the market

- Boost sales & increase market share

- Attract customers

Objective 2

2 A desired goal that an organisation intends to achieve

Strategies

The actions taken to achieve the specific objective

Analysing performance (How)

Assessing whether it has been effective as well as efficient

Effectiveness

To what degree a business has accomplished the objectives se to achieve

Efficiency

How well a business uses its resources needed to achieve an objective.

Key Performance Indicator (KPI)

Specific criteria used to measure the success of the businesses performance

Stakeholders

Those that have invested interest in the business.

Can come from the internal and external environment of a business.

Corporate Social Responsibility

Continuing commitment of a business to operate in an economically, socially and environmentally sustainable manner whilst balancing the interest of diverse stakeholders.

Owners/Shareholders

SH own part of the company. Want a return on their investment through capital gains and improved profits.

Owners/Shareholders: Corporate Social Responsibility considerations

- Managers need to be honest about financial reporting and about business' future.

- Some SH will only invest in businesses socially responsible.

Directors

People who have overall responsibility for managing company's busindss activities

Directors: Corporate Social Responsibility considerations

- Managers need to make decisions that consider the social and environmental impact, not just economic impact

Management

Responsibility for successfully achieving the objectives of a business

Management: Corporate Social Respinsibility considerations

- Mamagement expect to work in a business that is ethical and socially responsible

- Makes decisions that consider corporate social responsibility

Employees

Those who work for the business and expect to be paid fairly, trained properly and treated ethically in return for their contribution to production

Employees: Corporate Social Responsibility considerations

- Employees should be paid fairly, have job security and career advancement.

- Carry out work tasks that are socially and ethically responsible

Customers

Those who purchase goods and services from the business.

Customers: Corporate Social Responsibility considerations

- Ensuring good quality products that add value to the customer

- Customers are more aware of the impact the business has on the community and environment

Suppliers

Business or individuals who supply materials and other resources to a business so that it can conduct its operations

Suppliers: Corporate Social Responsibility considerations

- Business should ensure suppliers implement corporate social responsibility practices

- Use local suppliers

Competitors

Rival businesses that sell similar products or services in the same market

Competitor: Corporate Social Responsibility considerations

- Fair dealing with competitors

Interest Groups

Organisations who attempt to directly influence or persuade a business to adopt or change particular activities, processes or policies

Interest Groups: Corporate Social Responsibility considerations

- Fair dealing with interest groups and negotiating in good faith

Government: Corporate Social Responsibility considerations

- Business should implement corporate social responsibility practices to ensure it minimises its impact on the environment and jas positive impact on community

Management responsibility areas

Operations

Finance

Human resources

Sales & Marketing

Technology Support

Operations (area/manager)

Responsible for the production of the business' products.

Ensure goods are produced efficiently and have the desired quality.

E.g. Planning, developing strategies...

Finance

(Area/Manager)

Responsibile for managing the financial aspects of the business.

E.g. budgeting, cash control, raising finance, accounting...

Human Resources

(Area/Manager)

Responsible for coordinating all the activities involved from acquiring to terminating employees if the business.

E.g. Maintainance stage (training, monitored performance of employees, termination of management (retirement..), establishment phase (hiring people to work)...

Sales & Marketing

(Area/Manager)

Responsible for the marketing mix, often reffered to as the 7 P's.

Responsible for promoting the business and its products to sell to potential customers.

7 P's

-People

-Process

-Physical Evidence

Product

Place

Price

Promotion

Technology Support

Responsible for installing and maintaining technology, as well as providing assistance to the users of technology in the business.

Leadership

Act of establishing direction, purpose and the necessary capabilities among a group people.

Management

Organising a human and physical resources to achieve business aims and objectives.

Includes:

Planning objectives

Organising activities

Controlling performance

Leading people

Management styles

Autocratic

Persuasive

Consultative

Participative

Laissaz-faire

Autocratic Management style

Makes decisions alone, usually resulting in a well managed group or unhappy subordinates because of decision making.

Autocratic Management Style: Advantages

- Quick decisions

- Neccessary during crisis situations

Autocratic Management Style: Disadvantages

- Workers may become dependant on managers

- Little creativity us encouraged

- Employees may not be given opportunity to express their ideas.

- Employess may feel ignored or demotivated

Persuasive Management style

Often work with employees to convince them that correct course of action has been taken, but retains sole decision making powers.

Persuasive Management Style: Advantages

- Quick decisions are made

- Workers may be persuaded that the decision is the best.

Persuasive Management style: Disadvantages

- Little creativity is encouraged

- Employees not given opportunity to express their ideas.

- Workers may feel ignorwd or demotivated

Consultative Managment Style

Feedback to management is encouraged, and decisions are made in best interests of employees and the company.

Consultative Management Style: Advantages

- Employees feel valued

- The workers may feel persuaded that decisions were made in their best interests

Consultative Management Style: Disadvantages

- Little Scope for employees to make decisions

- There is still a 'them and us' culture..

Participative Management Style

High communication style of management that involves employees and managers making decisions together.

Participative Management Style: Advantages

- Gain committment, especially during periods of change

- Employees are more likey to buy into decisions

- Motivation may improve

Participative Management Style: Disadvantage

- Time consuming

Laissez-Faire Management Style

A casual, hands off style that leaves decision making solely to subordinates, often leads to low productivity.

Laissez-faire Management Style: Advantages

- Usefull for skilled, creative and well trained employees

- Can motivate workers as they have more control over their working lives

Laissez-Faire Management Style: Disadvantages

- Decision making may become time consuming and lack direction

- May lead to chaos and disagreements

Factors affecting management styles

- Personality of the manager

- Skills and abilities of the manager

- History and culture of the organisation

- Type of industry

- Circumstances

- Nature of tasks being carried out

Situational Approach

An effective manager may have to adopt their management style to the changing situations in which they find themselves.

E.g. changing from a participative to autocratic during a crisis situation

Management styles

Various management styles can be employed dependant on the culture of the business, nature of tasks, the experience and personalities of the workforce and the personality and skills of the leaders

Management Skills

Communicating

Delegating

Planning

Leading

Decision making

Interpersonal skills

Communication Skill

The ability to transfer information from a sender to a reciever and to listen to feedback.

Communication Skills: Characteristics

Can be in words (written - letters, emails..) or oral (meetings, one on one comversations..)

Can be non verbal such as body language or visual cues.