Business Management Unit 3 AOS 1 Business Foundations

unlimited liability

business owners fully responsible by law if business fials to the extent of their personal assets

limited liability

business owners only personally responsible by law to the level of their original investment in the business

private sector

owned by private individuals, groups or institutions

public sector

owned by the government

private sector businesses

sole trader partnership

types of businesses (6)

sole trader partnership private company public company social enterprise government business enterprise

public sector businesses

private company public company social enterprise government business enterprise

sole trader (definition + 3)

business owned by one person who is entitled to keep all profits after tax has been paid but is liable for all losses

unlimited liability

business and owner same legal entity

allowed to employ staff to help run business

advantages of sole trader (4)

simple and inexpensive to set up

owner total control

minimal government regulation

owner keep all net profits

disadvantages sole trader (4)

unlimited liability

harder for owner to get finance for business

burden to manage entire business - 100% financial risk

reliant on owner’s own knowledge and skills

partnership (define + 3)

business owned by 2-20 people

unlimited liability

silent partner - invests but no active role in operations

official partnership agreement can minimise disputes between partners

partnership advantages (5)

simple and inexpensive to set up

risk and workload shared between partners

minimal government regulation

greater experience pool stronger decision

increased access funds

partnership disadvantages (4)

unlimited liability

shared profits

potential for disputes

can be difficult to remove a partner

company (define + 3)

business that has cgone through the process of incorporation
shareholders (owners of a company purchase shares to give them ownership portion)

company separate legal entity to owners so limited liability

perpetuity

private limited company define +2

incorporated business owned by 1-50 shareholders

at least 1 director making decisions on behalf of shareholders

shares only traded with other shareholders’ permissions

advantaged of private company (4)

limited liability

extra capital from issuing up to 50 more shares

perpetuity

potential tax benefits

define perpetuity

existence not threatened by death or the removal of one of the shareholders

disadvantages of private company (3)

highly complex structure and expensive to establish

more reporting requirements to owners and government

more difficult to sell shares and raise funds compared to public company

social enterprise (define +2)

private sector business that distributes surplus funds to benefit the community rather than indivdiaul shareholders

two main goals to achieve social cultural community or environmental outcome and earn revenue

most adopt legal structure of a company

advantages of social enterprise (2)

attract customers who believe in social cause

improve business morale as employees value their work di

disadvantages of social enterprise (3)

hard to get starting capital

hard to balance financial/social objectives

constantly working with tight budgets making it hard to compete

social enterprise qualifications (compared to a not for profit)

engage in commercial trade

market style income streamw with customers and payments for gs

may receive grants but must eventually develop self sustaining business and stable income stream

not for profit qualifications (vs social enterprise)

historically relied on government grants and donations

don’t provide goods or services

government business enterprise

government owned business which seeks to run profitably by controlling costs and selling their gs at a price to cover costs

board of directors and 2 shareholder gov ministers

essential services like communicaiton transport

advantages goernment business enterprise

offer services other businesses may find financially undesirable

healthy competition to market, benefitting customers

disadvantages gbe

strategic direction can change when government changes creating difficulties

inefficiencies caused by strict governemnt regulations and processes (e.g approval for major decisions)

business objectives

goal a busienss wants to achieve within a specified period

objective strategy action

7 business objectives

make profit
increase market share
fulfil market need

fulfil social need

meet shareholder expectations

improve efficiency

improve effectiveness

make a profit

money left after expenses are deducted from revenue

increase market share

proportion of sales a business or product has compared to the total sales in the industry (%)

fulfil a market need

business aims to provide gs that fill a gap in the market and thus meet consumer demand

fulfil a social need

social objectives relate to the role of the business in the community and how they can better the lives of others and environment; revolve around being a good citizen

meet shareholder expectations

shareholders expect businesses to make profit and for their purchased shares to increase in value to receive a divident

improve efficiency

how well a business has used its resources to achieve its stated objectives

best use of resources in production of gs

outcome can be judged on gs quantity and quality

improve effectiveness

degree to whcih business meets its shared objectives

ability of business strategy to achieve intended outcome

stakeholder

individual/group with direct or vested interest in business activities

owner definition

invested money into business and owns portion of the business

manager definition

person responsible for controlling or administering group/organisation

owner interests and issues (4)

increase profitability

ensure operations are ethical

adopt socially responsible behaviour

(shareholders) receive dividends and increase share values

manager interests and issues (4)

involved in setting goals and objectives

ensure strict adherence to ethical and social responsibility

gain personal power and status via promotions

well renumerated

employee definition

complete work within business in exchange for work or salary

employee interests and issues (5)

receive fair wage and salary

opportunity for career advancement

work life balance

gain job satisfaction

job security

customer definition

those who purchase gs from the business

customer interests and issues (4)

high qualtiy gs for reasonable price

high customer service

aus made products or aus owned businesses

socially responsible business

define supplies

business that provide resources to the business

suppliers interests and issues

develop long term relationship with businesses for steady revenue streams

be paid properly

ensure customer’s business is paid well so they get paid well

general community define

group of people that live in the business’ local area

general community interests and issues (3)

benefit from employment opportunities created by the business

business to participate in community

ensure business operations are sustainable in local community

define competitor

business rival in same market for gs offered by business

competitor interests and issues (2)

ensure competitive advantage over business by differentiating gs

compare and evaluate performance over other

trade union define

organisation of employees who have joined together to achieve common goal like higher pay and better working conditions

trade union interests and issues (2)

fair wages and work conditions

involved in decision making related to employees in workplace

environment lobby group define and interest and issue

group promoting environemtnal issues to gov public and business

ensure business acting sustainably

corporate social responsibility

business obligations over its legal responsibilities to wellbeing of employees customers shareholders community and enviornemtn

competitive advantage (define + 1)

when a company has a lower cost price structure than its rivals

gs can be sold cheaper to undercut competitors, expand domestic and foreign sales, increase product quality and ability to adapt in new market trends

management style

manner and approach of providing direction, implementing plans and motivating people

centralised decision making

management makes decisions and passes directions to those below them in the hierarchy

decentralised decision making

employees given responsibility for decision making in their own areas

one way communication

communication from sender to receiver with no opportunity for feedback or discussion

two way communication

communicaiton openly encouraging discussion and feedback

5 management styles

autocratic persuasive consultative participative laissez faire

autocratic management style (define + 4)

manager maitnains all control whilst directing staff

centralised
one way downward

task oriented

information given on a need to know bases

advantages and disadvantages of autocratic management style (3 + 3)

clear direction, quick decisions, experienced leader making decisions

ignores employee ideas so fewer ideas, decrease employee motivation as workers not empowered so higher turnover, creates unease and feeling of exclusion

persuasive management style (define + 3)

manager makes decision and convinces worker of its benefits

centralised

one way downward

manager gains trust assuring workers that decisions are made with their best interest in mind

advantages and disadvantages of persuasive (3+3)

quick decision making, experienced leader, employees may feel valued

ignores employee ideas so fewer ideas, decrease employee motivation cos not empowered so higher turnover, increased potential for conflict as employees may not agree with decision

consultative (define + 3)

manager asks employees opinions when discussing an issue but management makes final decision

centralised

two way

improtance of positive rleaitonships and employee contributiosn

advantages and disadvantages of consultative (3+3)

variety of ideas for better decision, employees feel valued to increase morale and job satisfaction, experienced leader can use employee ideas to make informed decision

time consuming to consult, conflict as not all ideas can be used, employees may not understand problem complexity

participative (define + 3)

management and staff work together to solve the problem

decentralised

two way

recognise staff skills and expertise

advantages and disadvantages of participative (4+3)

variety of ideas for better dm, manager trust employees increasing morale, employees feel ownership and empowerment, shared vision of management and employees to achievement of objectives

time consuming, conflict with varying viewpoints, employees may not understand problem complexity

laissez faire (define + 3)

management leave the majority of decision making running of business to employees '

decentralised

two way

suitable for creative industries which need freedom

advantages disadvantages of laissez faire (3+3)

promote creativity, motivation, empowerment and job satisfaction, teamwork and morale

lack fo guidance can lead to loss of direction and motivation, more people involved leads to risk of losing control, unskilled staff may not be able to complete tasks independently reducing productivity

contingency (or situational) management approach

managers use a range of variables to determine the most appropriate management style to achieve organisational objectives

5 categoeis of the variables to determine the most appropriate management style

nature of task

deadlines and constraints

employee experience

manager preference

corporate culture

left wing appropriate management style

simple tasks

short deadlines

less expeirenced employees

stricter manager

right wing appropriateness management style

creative or complex tasks

longer/nonexistent deadline

highly experienced employee

relaxed manager

management skills (6)

communication

delegation

planning

leading

decision making

interpersonal

communication management skill (define+2)

most important

process of creating and exchangin information between people to produce a required response

open communication vital to gain employee involvement to achieve objectives

forms of communication

personal internal external

delegation (define + 2)

passing of authority down the hierarchy to perform tasks or make decisions

senior managemetn responsible for business direction but not always equipped for every task so pass authority down hierarchy

top guy is accountable

benefits of delegation

work continues without manager

time saver freeking management

personal development

employees feel trusted and valued

delegation good for

tasks part of big project

repetitive/time consuming tasks

organisation of data

training of subordinates

delegation bad for (4)

strategic planning

high risk or cost decisions

confidential

specialised areas w specific training

define planning

process of determining objectives and devising strategies to achieve them

5 steps of planning

set objectives

analyse situation and forecast future

develop alt strategies

implement the best action plan

monitor and review the results

levels of planning and management

senior strategic 2-5 years

middle tactical 1-2 years

frontline operational daily and weekly

define leading (define +1)

manager’s skill to influence and motivate employees to achieve of business objectives

decision making (define + 2)

multistep approach hwere a selection is made between a range of different alternatives

managers at all levels faced with problems and situations

decisions vary in complexity and states; consider many factors before making the final decision

6 steps to decision making

identify problem and define objective

gather info

develop alt

analyse and rank alts

choose an alt to implement

evaluate

interpersonal define

skills used everyday to understand and interact with other people individually and in groups

core interpersonal skills (6_

team player

empathetic and assertive

good communicator

able to motivate and encourage others

ethical honest and respects values, belies, etc

manage conflict with internal and external stakeholders

corporate culture (define + 2)

shared values and beliefs of people in a business

how people behave and what is acceptable behaviour

taught to new employees as a correct way to thinking feeling and doing

observable corporate culture

language symbols objects layout of work environment

non observable corporate culture

values assumptions beliefs

official corporate culture (define + 2)

set of shared values and beliefs a business wants its people to display

seen in official documents like mission and values statement, slogans, logos

often used as a tool to attract and retain employees to portray a positive image

real corporate culture (define + 1)

actual shared values and beliefs displayed by people in business

identified through observation of what actually occurs

some strategies to develop corporate culture

formal written mission vision and values statement

put desired values in the training program

recruit employees that fit with the desired culture

define public company + 3

incorporated business owned by unlimited number of shareholders, shares openly traded on asx

shares freely traded to public

notify public of performance

advantages public company (4)

limited liability

perpetuity

gain capital by selling extra shares

easy ownership transfer from selling on asx

disadvantages of public company (3)

complex structure and expensive

accountability and complaince paperwork like annual report and audited accounts

no control over ownership from free trade