Studied by 4 people
External influences:
Piecework
markets
economic
geographic
political
legal
social
financial
technological
institutional
competitive situation
Internal influences
(MR PLC)
Management
resources
Products
Location
Business culture
Roles of a business
quality of life
Profit
employment
wealth
incomes
Choice (Giving consumers freedom of choice)
Innovation
entrepreneurship and risk (Provide ppl with opportunity)
How wealth created by businesses is redistributed
Employees
governments
businesses/shareholders
lenders (Loan repayments)
The business itself
Four overarching methods used to classify businesses
size
legal structure
geographical spread
industry sector
Classification by size:
what can a classification by size depend on. and what are the different sizes.
number of employees (most common)
market share
ownership
Sizes:
micro, small, medium, large
Micro business employs:
fewer than 5 ppl
Small business employs:
5 - 19 ppl
Medium business employs:
20 - 199 ppl
Large business employs:
200+
Classification by geographical spread: ( can be classified as…)
local
national
global
Classification by industry sector:
(name all 5 and what they do + example)
primary industry - collection of natural resources (agriculture, mining)
Secondary - production of finished or semifinished goods (construction, clothing, manufacturing)
tertiary - performing a service (Entertainment, acting)
Quaternary - transfer and processing of info and knowledge (Robotics, software)
Quinary - services traditionally performed in the home (Healthcare, childcare)
Classification by Legal sector:
What are the four main legal structures of privately owned businesses?
Sole trader
partnerships
private companies
Public companies
What is an incorperated business structure?
The process companies go through to become a separate legal entity from the owners
what is a sole trader?
business owned and operated by only one person.
its easy to establish legally
owner and business are regarded the same, meaning if the business is sued, so it the owner → financial risks
has unlimited liability
What is unlimited liability?
When the business owner is personally responsible for all of the businesses debt
The four different legal structures of privately owned businesses cAn be divided into unincorporated, and incorporated. What is it?
Incorporated:
Private
public
Unincorporated
Sole traders
partnerships
What is a partnership?
It’s an unincorporated business entry - business owned and operated by between 2 and 20 people.
has unlimited liability
factors that influences the choice of legal structure
usually depends on size, ownership, and finance
Size: as business expands, the business may seem protection from limited liability
Ownership: how much control and ownership does owner require
Finance: How much finance required to expand.
Business life cycle. State the stages.
establishment
growth
maturity
post maturity
steady state
decline
renewal
state methods of business expansion
merger
aquisition
What does the term merger, and acquisition mean?
Merger = owners of two businesses agree to combine and create new organisation
Acquisition = takeover. Business takes control of another by purchasing it.
Vertical integration:
business expands at different but related levels in production and marketing
Horizontal integration
business acquires or merges with another firm that makes or sells similar products
Diversification
business acquires or merges with another firm in completely different industry
Voluntary cessation
owner ceases to operate business of own accord
involuntary cessation
owner is forced to cease trading by creditors of business
Liquidation
an independent and qualified person is to take control of business with the intention of selling all the company assets to pay the creditors.
a effective manager needs to be good at:
planning
organising
leading
controlling
What are the 9 skills a manager needs to posess?
interpersonal skills
Communication
Strategic thinking
vision
problem solving
decision making
flexibility
reconciling conflicting interests of stakeholders
Triple bottom line
The economic, social, and environmental performance of a business
Profit maximisation
occurs when there is a maximum difference between the total revenue coming in, and the costs being paid out.
Market share
portion of the market controlled by particular company or product. its the business’s share of the total industry sales for a particular product
when maximising staff involvement, what are some methods?
involving them in decision making process
giving necessary skills and rewards
Examples of fixed costs
rent
leases
wages of permanent staff
Examples of variable costs
Inputs (products and raw materials)
Forecast budget
Stating what we want in the future
Monitering
Measuring the actual performance against the planned performance. measuring your actual to your goals.
this should be done monthly
What is geographical spread
The presence and range of a businesses products across the suburb, city, state, or country
Marketing mix
Promotion
price
place
product
SWOT
Strengths, weaknesses, opportunities, threats
Evaluating
Process of assessing whether the business has achieved their goals. Drawing meaning from the data to make future decisions and modifications if necessary.
What are the 5 reasons why a business’ profit levels must be monitored
Profit as reward.
Profit maximisation.
Profit as a source of finance.
Profit as a performance indicator.
Profit as a dividend payment.
Common business goals
profits
market share
growth
share price
social
environmental
Achieving a mix of the business goals
Some goals are interdependent/compatible with another, in the sense that by achieving one goal, it helps to achieve another, assisting a business in achieving multiple goals.
Sometimes their goals are incompatible and have no link - they conflict with each other. this situation will force a business owner to adopts a compromise, which can be challenging, but they must be able to make a decision.
Staff involvement
A business can only be fully successful by providing employees with and recognising the importance of:
Innovation
mentoring
motivation
training.
Innovation in staff involvement
a business should encourage its employees to be innovative and creative thinkers in order to allow growth of the business and maintain its competitive advantage.
Some businesses who have too many rules and regulations can suppress creative thinking, and therefore eliminate any innovation.
Motivation in staff involvement
High levels of motivation result in increasing rates of productivity. It drives a person to behave a certain way, or achieve a certain goal
Intrinsic motivation (motivation that comes from within someone), is a more long term motivating force than any external rewards such as money, grades, or promotions.
Tips for motivating staff:
lead by example
delegate responsibility
take interest in employees development
communicate regularly
give recognition and appreciation
encourage suggestions
Mentoring in staff involvement
mentoring new employees and teaching them the expectations of the business helps strengthen their dedication and commitment to the business, it also assists in passing on important skills for the job, and support.
Training in staff involvement
Training is used to develop employee productivity, by developing multi-skilled workers. Informal on the job training is the most common type used.
Management approaches
Classical approach
Behavioural approach
Contingency approach
Classical approach
Ok this ones confusing:
Stresses how best to manage and organise workers as to improve productivity
There are two parts to the classical approach
classical scientific
approach that studies a job in detail to discover the best way to perform it
The four principles to this study are:
examine each part of task and best way to perform it
select suitable workers and train them using scientific methods
make sure they use the scientific methods taught
divide work and responsibility, making sure there is a hierarchy where management plans, organises, and controls scientific work methods.
Classical bureaucratic
this one is seen as the most efficient form of organisation
strict hierarchal organisation structure
clear lines of communication & responsibility
Jobs broken down into simple tasks → specialisation
defined job roles
rules & procedures
impersonal evaluation of employee performance to avoid favouritism & bias.
The management function of the classical approach is: planning organising and controlling
Planning:
Strategic (long term) planning
Tactical (Medium term) planning
Operational (short term) planning
Organising:
refers to a range of activities that translate business goals into reality which are three steps
determining the work activities
classifying and grouping the activities
assigning work and delegating authority
Controlling:
the process management goes through to evaluate performance.
It goes through 3 steps
establish standards in line with firms goals and influences
measure performance and determine how comparisons will be made against standards
take corrective action
Has a hierarchal organisational structure
autocratic leadership style
Behavioural approach to management
it’s an approach that stresses that employees should be the main focus of the way in which the business is organised.
management as:
leading
Motivating
communicating
teams:
businesses realise that having employees work together as a team ca be a catalyst for superior performance. This makes it important for the manager to understand group dynamics, teams, and teamwork.
Participative or democratic leadership style.
(asks employees for suggestions when making decisions, allowing the team to participate and feel included)
Contingency approach
Stresses the need for flexibility and adaptation or management practices and ideas to suit changing circumstances.
adapting to changing circumstances
Management process: The four key business functions
operations
marketing
finance
human resources
Key business function: Operations
The businesses processes that involve transformation or more generally ‘production’
Goods and/or services - transforming inputs to tangible products, or into services which is intangible
The production process - Inputs, processes, outputs
Quality management - the strategy which a business uses to make sure that its products meet customer expectations
Key business function: Marketing
identification of the target market
marketing mix
Key business function: finance
cashflow statement
income statement
balance sheet
Key business function: Human resources
recruitment
training
employment contracts
separation - voluntary.involuntary
Note
Flashcard