Business - 2023 exam

External influences:

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

1. Profit as reward.

2. Profit maximisation.

3. Profit as a source of finance.

4. Profit as a performance indicator.

5. 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

1. establish standards in line with firms goals and influences

2. measure performance and determine how comparisons will be made against standards

3. 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