Higher business - understanding business

Quaternary Sector

consists of those industries providing information services, such as computing, ICT, and R&D

Private Sector

Controlled by board of directors, owned by shareholders, financed by bank loans, shares, own savings

Public Sector

Owned by the government, financed by taxes, controlled by government appointed managers.

Third Sector

Controlled by an appointed board of trustees, financed through donations, fundraisers, grants

Private Limited Company (Ltd)

A company which sells shares, but only if agreed between shareholders. They have a bit more privacy - don't have to publish as much info. Ownership is usually limited to a small group (friends, family, private investors).

Public Limited Company (Plc)

A company which sells shares to the general public - company can raise huge amounts of capital. Owned by shareholders, includes individuals, institutions or other companies.

Local Government

The governing body of a municipality or county.

Central Government

The governing body that acts for all the states within the country

Multinational

A corporation that has manufacturing or service operations in a number of different countries.

Reasons for becoming a multinational company

increase market share, secure cheaper premises and labour - cost of labour is cheaper in developing countries, legislation in other countries may be more relaxed - working hours, minimum wage, building regulations

Multinational adv

Sales/ profits will increase - happier shareholders/ owners, much larger market, creating jobs - boosts the local economy and employs more workers which increases tax payments

Multinational disadvantages

Transportation can become expensive if moving inventory and people between countries, exploiting the workforce and the environment - workers can be paid very low wages and long hours which can harm the reputation of the organisation, language barriers may exist - marketing will need to be adapted and not just translated for each country

Memorandum of Association

details about a limited company

Articles of Association

details of the internal running of a limited company.

Franchisor

The company that owns the product or service and grants the rights to another business.

Franchisor adv and disadv

Adv: starts with an established name, provides them with a reliable revenue, cheap way of expanding market share. Disadv: share of profits depends on the success of the franchisee, reputation of business is dependent on each franchisee

Franchise

When a business is run under the name of another. Franchiser gives franchisee a license to sell under their name, in return the franchisee gives a percentage of their profits to the franchiser.

Franchisee adv and disadv

Adv: risk of failure is reduced Disadv: have to give a percentage of profits to franchiser, costly to buy franchise

Social Enterprise

A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners.

Private sector objectives

maximise profits, operate ethically, provide a good quality service, survive

Public sector objectives

To provide a quality service, work within a budget, operate ethically

Third sector objectives

Support a cause, provide a service, raise awareness for a cause

Mission Statement

A statement of the firm's business based on a careful analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions.

Organic growth

Often referred to as internal growth - this will increase market share without losing control of the business. Can be achieved by opening more outlets, hiring additional staff or developing new products

Horizontal Integration

When two businesses from the same sector of industry become one business

Forward Vertical Integration

When two businesses from different sectors of industry become one business

Backward Vertical Integration

Business takes over or merges with a business in an earlier sector of industry eg if Starbucks were to take over a coffee bean plantation

Lateral integration

When a business takes over or merges with a business in the same industry but doesn't provide the exact same product eg if greggs bought a wedding cake bakery

Conglomerate integration

Businesses in different markets join together

Diversification

When a business launches products across different markets eg Samsung

Takeover

When one business buys a smaller one. Adv: increase market share. Disadv: integration can lead to job losses

What is integration?

Merger

Combination of two or more companies into a single firm. Often friendlier than a takeover - can result in a new name and logo for the merged company. Adv: economies of scale can be achieved. Disadv: bad for customers as less competition may lead to higher prices

Ways to achieve growth

Takeovers, Mergers, Franchising, Becoming multinational, Internal growth

Shareholders interest and influence

Interest - profitable so that they get a good dividend, increase in share value, Influence - can decide to sell their shares

Employees interest and influence

Interest - good salary, job satisfaction, good working conditions, Influence- increase/ decrease productivity, industrial action

Customers interest and influence

Interest - want quality goods&services, low prices and good value for money

Influence - can choose whether or not to purchase goods&services, may recommend the business to others

Conflict between stakeholders - owners v customers/ staff

Owners want to maximise profits whereas customers want to buy goods at lowest prices/ staff want high wages

Organisation v local community

Organisation may want to build a new factory whereas local community will think it could harm the environment

Employees v organisations

Employees want high wages whereas organisations wants to keep down costs

Interdependence of stakeholders

Different stakeholders relying on one another for things

Owners and managers

• owners rely on the skills and ability of the management team to achieve their objectives, - managers rely on them for job security, salary and support in their management role

Owners and employees - Interdependence of stakeholders

• Owners need employees for the business to run, - Employees need the business in order to earn money

Owners and customers

• owners rely on customers to buy their goods/ services to generate sales revenue, - customers and employees of businesses rely on them to earn their salary to generate enough income to buy goods/services to satisfy their needs and wants

Employees & Government

• employees need the government in order to protect their rights at work, - the government needs people in work in order to get taxes in.

Types of decision making

Strategic - long-term decisions, set out the company objectives, usually made by very senior managers Tactical - medium-term decisions, taken to achieve strategic decisions, made by middle managers Operational - day-to-day decisions, made by all staff, carry a low financial risk

Ways in which a manager can measure the success of a decision

research customer's opinions using surveys, gather feedback from staff at meetings, check if targets have been met, review the number of complaints made, customer reviews/press coverage

Effects of widening the span of control of a manager

Impact of external factors on an organisation

Political: government introducing new health and safety legislation - business has to change the way it works (training its staff, purchasing safety equipment). Environmental: physical conditions - products and services are seasonal, bad weather - snow or heavy thunder can cause disruption to deliveries, pressure to be environmentally friendly. Social: changes in trends and tastes - operating ethically by reducing waste, providing goods and services that are ethically produced. Technological: e-commerce - gives company a competitive edge leading to increased sales and market share. Economical: inflation (when high, customers may stop buying goods and focus on essentials). Competitive: imitators, price wars, product differentiation

Internal factors - staffing: employees and managers

Employees can influence a business through good training, industrial action, productivity and motivation. Managers can influence a business through decision making, recruiting employees with high skills, hiring and firing employees.

Internal factors - financial

Lack of availability of finance - may need more expensive supplies to make sure what they produce is of the highest quality, meaning internal changes being made. Reducing the workforce to save on wages - customer demands not being met

Internal factors - technology

Video conferencing can be used to save travel time to meetings, - can be expensive to keep up to date. If it doesn't keep up with technological changes or upgrade its hardware or software, any advantage over rivals who do invest will eventually be eroded. Using social media.

Benefits of having a corporate culture

• employees feel part of a team which gives them job security and can improve motivation, - positive relationships created meaning better communication and decision-making, - image and identity of organisation can be improved

Corporate culture - factors to consider

• opinions and views of employees, - vision and aims of the organisation, - staff events to make employees aware of the culture

Methods of achieving corporate culture

• recognising employees for excellent work/being great 'team members', - company magazines and newsletters/intranet, - company social media/website, - logos and slogans and staff uniforms - all of these help individuals feel a sense of belonging to that organisation, which satisfies an emotional need to 'fit in', as well as presenting a single corporate image to suppliers and customers

• company magazines and newsletters/intranet

• company social media/website

• logos and slogans and staff uniforms - all of these help individuals feel a sense of belonging to that organisation, which satisfies an emotional need to 'fit in', as well as presenting a single corporate image to suppliers and customers

Tall structures

Many levels of management, managers have sparrow span of control, management posts usually specialised, clearly defined roles

Cost and benefits of tall structures

A: easier for manager to supervise staff, more promotion opportunities, employees will know immediate boss. D: many layers of communication, high labour costs due to many levels of management

Flat structures

Few levels of management, Managers have wider spans of control, Faster communications, Quicker decision-making

Cost and benefits of flat structures

A: employees have more authority and responsibility, better communication between managers and workforce, decision making is quicker D: employees have a great workload, may need training for many tasks, fewer promotion opportunities

Centralisation and decentralisation

Centra: control and decision making lie with top management in head office. Decentra: delegated to departments

Centralisation adv and disadv

A: decisions can be made for whole organisation, easier to promote corporate image. D: slower decision making, less room for staff initiative

Decentralisation adv and disadv

A: motivates staff, empowers staff, decision making quicker. D: less supervision, decision may differ from other branches

Matrix structure definition

Individuals from different functional areas or departments come together to work in project teams.

Matrix structure adv and disadv

A: increased experience, good motivation and job satisfaction, good for tackling complex problems D: expensive to have many teams, confusion as to who reports to whom

Entrepreneurial structure

Small businesses use this structure, decisions made by a few people, normally the owner

Entrepreneurial structure adv and disadv

A: Decisions made quickly, Staff know who they are accountable to, Decision-maker does not need to consult staff D: Difficult to use in large businesses, Can create a heavy workload for decision-makers

Delayering

Levels of management are reduced (move from tall to flat structure), Wider spans of control, Savings in management wages

Downsizing

Staff laid-off, wages (labour costs) are reduced

Functional grouping

Departments where staff have similar skills and expertise, and do similar jobs. Functional grouping usually consists of marketing, finance, human resources and operations. A: clear organisational structure, staff aware of formal relationships D: Organisation may become too large and wieldy, may be unresponsive to change

Product/ service

Divisions/departments where each deals with a different product or product range, eg Sky has Sky Sports, Sky Movies, Sky Atlantic etc. Each division has its own functional staff. A: More responsive to customer changes in tastes/fashions, easier to identify low sales in products D: Duplication of effort, divisions may be competing with each other

Customer groupings

Customer groups are divisions dealing with different types of customers, may have different divisions based on distribution, eg retail, online and international. A: Customer loyalty can build due to personal touch, can respond quickly to customer needs or changes in taste D: expensive due to higher staff costs, duplication of effort

Place/ territory grouping

Staff divided into divisions, each dealing with a geographic area, eg south, west, north, Scotland. A: Can cater for different local, regional, national tastes, more responsive to customer needs D: duplication of effort

Technology grouping

Manufacturing companies group their business activities according to technological or production processes. Only suitable for large organisations with different products and production processes. A: Increased specialisation, economies of scale D: higher salaries for skilled workforce, capital intensive

Plan

Looking ahead, seeing potential opportunities or problems and devising solutions, setting targets

Organises

Jobs within departments, brings together activities within the organisation, liaise with other department heads

Commands

Issuing instructions, motivating staff and displaying leadership

Co-ordinates

Making sure everyone is working towards the same goals, all the work being done fits together

Controls

Corrects activities of the organisation, looks at what is being done

Delegate

Gives subordinates the authority to carry out tasks. Helps with motivation and reduces the manager's workload.

Motivate

encouraging workers by helping to them enjoy their tasks through team-working, participation in decision making