business paper 1

opportunity cost

opportunity cost

sacrifice we make when we have to decide anything next best opportunity forgone

primary

extracting raw materials

secondary

processing or refining material

tertiary

providing public or private sector servicd

factors of production

CAPITAL, ENTERPRISE, LAND, LABOUR

sole trader

advantage ; be your own boss, get all profit, easy to set up

disadvantage ; unlimited liability (personal possessions at risk of business), have to work long hours, may be hard to get loans

partnership

advantage ; more ideas, share workload, more money so it grows faster

disadvantages ; unlimited liability, disagreements, shared profits

private limited company (LTD)

shares can only be sold if all shareholders agree

advantages ; limited liability, easier to borrow and raise funds

disadvantages ; more expensive, legally obliged to publish its accounts

public limited company (PLC)

anyone can buy shares traded on stock exchange

advantages ; much more capital can be made, limited liability

disadvantages ; competitors can see accounts, more shareholders wanting share of profit, easy for someone to buy enough shares and takeover company

stakeholder

indivual of group which has an effect on or is effected by an organisation eg suppliers, customers, staff, owners

business plan

document used to help entrepreneurs set up their business, help gain financial suppirt, set out aims and objectives, coordinates actions

total costs

fixed + variable cost

fixed costs

dont vary/change directly with the level of output eg heating cost, rent, salaries,

variable costs

come directly from output therefore the more you produce eg raw materials, wages, running machinery

average unit cost

total cost / units

revenue

sales x price

profit

revenue - total cost

economies of scale

managerial. technical, risk bearing, purchasing, financial

diseconomies of scale

coordination, communication

disadvantages of economies of scale/advantages

advantages ; more power, more expensive to takeover, rewards for staff increased. disadvantages ; desicion making becomes slower, employees may feel isolated

Span of control

number of employees managed DIRECTLY by another employee

Flat structure

structure with few levels in the organisation

advantages to flat / disadvantages

advantages ; clear communication disadvantages ; limited hierachy

tall structure

structure with a number of different layers in the organisation

advantages of tall '/ disadvantages

advantages ; can build up the hierachy disadvantages ; many people to pay, lack of communication

wide span of control

many people to manage ; may struggle, communication loss although wide span of skills

narrow span of control

minimal amount of people to manage

Retention

proportion of employees that stay in the business after a certain period of time usually a year

Diversification

producing different goods or services sometimes selling in different markets recruiting employees with experience of that market

Recruitment

the process of finding and appointing new employees

Selection

choosing the right employees from those who have applied

Internal recruitment

takes place when a job vacancy is filled by someone within the workforce

External recruitment

business looks to hire employees who do not already work for the business

Job analysis

collection and interpretation of information about the job

Person specification

sets out qualifications and skills required by an employee to fill a particular job

Job description

states information about the duties and tasks that make up a particular job

Delayering

taking out a full layer of the hierarchy

Delegation

passing down of authority to more junior employees

Chain of command

line of authority within a business which communication passes

Decentralisation

allows employees working in all areas of the business to take decisions

Centralisation

small number of senior managers take all important decisions

business employment

JOB ANALYSIS \n JOB DESCRIPTION/PERSON SPECIFICATION \n ATTRACT APPLICANTS \n APPLICANTS APPLY FOR POST \n SHORTLIST \n SELECT PERSON FOR THE JOB \n INDUCTION

On the job training

• Shadowing ; learning by working alongside an skilled colleague

• Training sessions led by experienced employees

• IT based training

• Given in the workplace

advantages of on the job training

• Cheaper

• Mentor also learns

• 1 on 1 training

disadvantages of on the job training

• Takes time out of mentors time

• Mentor is not fully experienced

• May pick up bad habits

off the job training

• Provided by a specialist away from workplace

• Eg aylesbury college or a special training centre

• Lectures, demonstrations, role play/simulations, team building exercises

advantages of off the job training

• Professional

• Low pressure

• Does not pick up bad habits

disadvantages of off the job training

• High costs

• Time from work taken

• Less ‘hands on’ practice

financial motivation

• Salaries (annual)

• Wages ( weekly)

• Piecework ; method of payment according to the quantity of products they produce

• Commissions ; payment based off the level of sales made over a period of time + wages

• Profit share ; employees receive a share of the business profits alongside their normal wages

• Bonus ; extra money paid due to better work performance added to wages

non financial motivation

• Job enlargement

• Job enrichment ; designing a job to give interesting & challenging tasks

• Training

• Management styles

• Flexible working

• Fringe benefits ; company car , health insurance , discount on company products

Autocratic

• Makes decisions on their own

• No consulting employees

• No motivation

• No feeling of involvement

• Only motivated by money

• Advantage ; quick work for harder tasks

• Disadvantage ; employees feel unmotivated

Democratic

• Makes decisions with employees

• Allows more freedom

• Motivates staff

• Advantage ; motivated employees

• Disadvantage ; slow work & disagreement

Laissez Faire

• Back off and allow employees to work on their own

• Laid back

• No motivation

part time

• employees that work for a short period of time during the week eg 2 - 3 days for a shorter amount of hours

full time

• employees that work a full working week and have an increased number of hours

Job share

• when two or more employees agree to share the responsibility of a singular job

Zero hour contract

• allows employees to hire staff without any guaranteed hours of work

net pay

gross pay - total deductions

deductions in pay check

• Income tax ; government

• Pension ; old age

• National insurance ; medical

the law

• Protection ; equal pay act, contacts, health & safety, minimum (living) wage

• Leaving work ; dismissal or redundancy

• Working time

• Pensions, holidays, sickness, maternity/paternity

• Discrimination ; age, sex, race, disability

job production

making each product indivually

batch production

groups of items are produced together and move together from one stage of production to the next

Flow production

items are produced continuously moving through an identical process (machinery)

job production advantages

• Better quality

• Unique products

• Charge more

job production disadvantages

• Time consuming

• Special skills required

flow production advantages

• Good quality

• Efficient

• Less time consuming

• Allows for specialisation

flow production disadvantages

• High set up costs

• If machinery breaks down whole production line will not work

• Lack of flexibility

• Division of labour can lead to boredom

productivity

Output/number of workers

lean production

approach to production that aims to minimise waste

• Holding stock can be wasteful if not used

• Wasted time is inefficient and costs money

• Avoiding excess supply (overproduction)

• Eliminating wasted time

• No faults

• Minimal stock levels

just in time (JIT)

holds as little stock as possible. Items are ordered just in time to be used.

• Supplies must be quick to get customers orders

• Cannot afford for anything to go wrong

• Reduces excess stock

• Saves money on storage

• Reliance on supplier & production

• Hard to meet a surge in demand

kaizen

means ‘continuous’ improvement. It is an approach to production that aims to achieve change from a series of small steps.

• Everyday employees look at their previous day of work and create improvements in their production

• Changes may be small but can lead to significant improvements in the long term

• To have meetings with managers to talk about improvements

• ‘Little steps’ are constantly taken to improve operations and quality

just in case (JIC)

Keeping a buffer (minimum amount) of stock - just in case it is needed

Takes advantage of purchasing economies of scale with large orders & lower delivery costs

Can be inefficient -

Excess stock

Storage costs

procurement

Involves selecting suppliers, establishing payment & contract terms

Suppliers provide:

• General items - telephone, cleaning products, energy, furniture

• Production materials

• Equipment for production & operations

quality control

aims to identify any faults or errors and maintaining consistent levels of quality (QC)

total quality management (TQM)

• TQM requires everyone in the business to be working towards ensuring the quality targets are met

• focuses on preventing any mistakes occurring rather than fixing them later