Studied by 41 peopleWhat are the questions you need to help discern the type of business you want to be?
Do I have money?
Can I manage my business alone?
Do I want to share ownership of my business and any profits?
Am I prepared enough to risk everything I own?
What are the forms of business organization under private sector business?
Sole trader, partnership, private limited company, public limited company, joint venture, franchise.
Which of these businesses are unincorporated?
Sole trader and partnership.
Which of these businesses are incorporated?
Private limited company and public limited company.
What is the difference between an unincorporated and an incorporated business?
The key difference is registration. While an unincorporated business is unregistered, an incorporated business is registered. This means that the government recognizes the business owner and the business itself as two separate entities, protecting the owner from liabilities.
What is a sole trader?
When a business is owned and managed by one person and is financed with the sole traders' savings or loans.
What are the advantages of becoming a sole trader?
Complete control over the business.
It is quick and easy to set up said business.
The business may be set up with only a small amount of start-up capital.
Keeps all profit.
Makes all the decisions.
Personal contact with customers which increases loyalty.
No tax.
What are the disadvantages of becoming a sole trader?
Unlimited liability (If one of Haziq’s customers gets sick because of his products, he is morally and legally responsible to pay fees. This also means he is responsible for all business debts and payments with his own wealth and savings).
Difficult to raise funds to expand the business.
Difficult to compete with larger firms in the same industry.
Owners can lack essential business skills for running a business.
Have to work very long hours to make a living and usually have no holidays.
If the sole trader retires or dies, the business will cease to exist.
What is a partnership?
People, organizations, or companies that approach a business to expand, thus becoming partners.
What is a deed/contract of partnership?
A document that serves as protection for each partner that lists out respective responsibilities.
What is a silent/helping partner/investor?
Those who just invest money into a business without really making any decisions.
What are the advantages of becoming a partner?
Have greater access to finance than sole traders as there are more people investing in the capital of the business. This can help finance the businesses’ expansion.
Decision-making is shared and can often lead to better decisions.
Less workload and hours compared to a sole trader due to division between partners.
Easy to set up but not as easy as the set up of a sole trader. All you need is the deed of partnership.
Partners bring new skills and ideas.
What are the disadvantages of becoming a partner?
Unlimited liability which can mean they still may be denied loans due to unregistration.
Share profits.
If one partner leaves then the business ceases to exist and will need to be re-formed if the other partners want to continue trading.
Business decisions are binding on all partners, even if they don’t agree with them.
Difficult to raise capital to expand the business.
More risk due to more people at hand that may derail the company so you must really trust your partners.
Discussion between partners can slow down decision making and they may disagree on important business decisions.
Some countries place a limit on the number of partners allowed in each partnership which can be a loss of profit.
What is a private limited company or LTD?
This is what a company becomes after registration. Partners become shareholders. The business is run by these (Ordinary) shareholders. These are investors who invest money in the company in exchange for shares. If the business fails, they are at risk of losing their shares (No longer their savings). All profit belongs to them but is shared through the payment of dividends, which relies on the amount of shares you have. Shareholders vote on major decisions taken by the company.
Who will submit the requirements of registration?
All partners.
What are the advantages of becoming a private limited company?
Profit is shared through the payment of dividends, which relies on the amount of shares you have.
Shareholders can elect directors to manage the business.
Shares can only be sold privately and only with the agreement of all other shareholders.
Limited liability which finally means a separate legal identity from the owners.
Sale of shares can raise significant capital.
What are the disadvantages of becoming a private limited company?
Large shareholders can outvote others on decisions that affect the company.
Legally required to keep detailed financial statements and publish them.
Directors may run a company in their own interests rather than in the best interests of the company's shareholders.
What is a public limited company or PLC?
A public limited company shares many features with a private limited company, however, they diverge in the fact that a public limited company is placed on the stock market for shares to be bought by anyone. Shareholders become stockholders.
What are the advantages of becoming a public limited company?
The public sale of shares through the stock market can raise significant capital.
Stockholders can elect directors with more skill.
Profit is shared through the payment of dividends, which relies on the amount of shares you have.
Limited liability which finally means a separate legal identity from the owners.
What are the disadvantages of becoming a public limited company?
Expensive (Many legal documents and complicated investigations called audits are needed before a company can be listed on a stock exchange to sell shares).
Prone to be taken over by a majority stockholder.
Required to publish detailed annual reports and accounts and to hold AGMS (Annual general meeting; only in PCC) with shareholders.
The company is always at risk of a takeover by another company, because its shares can be freely bought and sold. Any other business only needs to buy 51% of the shares in a company to become the new owner. This process is called a takeover.
What is a franchise?
An agreement between a business and a family/person/etc. A franchise is allowed to use an existing business model (Name, product, trading system, logo, etc) by an already established business known as the franchisor which can either be unincorporated or incorporated. Franchisee on the other hand is the person or business that borrows these things.
What are the advantages of a franchise?
There is less chance of business failure because of the already established brand.
The franchisor often provides advice and training to the franchisee as a part of the franchise agreement.
The franchisor will finance the promotion of the brand through national advertising.
The franchisor will already have checked the quality of suppliers, so the franchisee is guaranteed quality supplies.
What are the disadvantages of a franchise?
The initial cost of buying into a franchise can be very expensive.
The franchisor will take a percentage of the revenue or profits made by the franchisee each year.
There are very strict controls over what the franchisee is allowed to do with the product, pricing, and store layout. There is very little creative expression permitted.
What is a joint venture?
A partnership between businesses usually used for big business ventures. Joint ventures can only be within a limited period of time, but products may remain forever. After that, further alterations to the product will go to one of the company’s as they split their ways. This is usually established if money is not enough. Organizations agree to develop a new separate corporate identity separate from their own. Even governments can do a joint venture.
What are the forms of business organization under public sector business?
Public corporations and trading bodies.
What is a public corporation?
A government-owned enterprise funded through taxes to carry out a governmental function or public service usually provided without a fee or at a low price.
What are examples of public corporations?
Congress, barangay, public school, etc.
What are trading bodies?
Public corporations that carry out commercial activities to earn revenue.
What are examples of trading bodies?
Train, casino, etc.
What are the benefits of a well-motivated workplace?
Will help a business achieve its objectives.
Efficient workforce with an output of quality goods and services.
Increase in labor productivity and this will help a business to reduce average cost and competitiveness.
Employees will enjoy going to work and are less likely to take days off.
A lower labor turnover will reduce recruitment costs.
A well-motivated workforce is easier to manage and will want to work with management to help improve a business.
What is Maslow's hierarchy theory?
A concept created by the American psychologist Abraham Maslow that relies on the concept of human needs. To help visualize, there is a pyramid of the hierarchy of needs.
In order from the bottom to the top, name all levels of the pyramid of the hierarchy of needs and give examples of these.
Physiological needs (Food, warmth, water, and rest), safety needs (Security, safety), belongingness and love/social needs (Intimate relationships, friends), esteem needs (Prestige and feelings of accomplishment), and self-actualization (Achieving one's full potential, including creative activities). The first two are basic needs, the second two are psychological needs, and self-actualization is a self-fulfillment need.
According to Maslow, all humans start at a certain need. What need is this?
Physiological needs.
What are the advantages of Maslow's hierarchy theory?
It is a management guide that helps you through each step/level.
It helps you set goals.
It is easy, simplistic, and common sense.
What are the disadvantages of Maslow's hierarchy theory?
It is difficult to identify how much of each need has been met and what level an employee is on.
Money might also satisfy esteem needs as well as those lower down the hierarchy.
Not everyone has the same needs as those in Maslow's hierarchy.
Self-actualization is rarely, if ever, achieved. Therefore, unless more challenging tasks are always being provided, it is unlikely that work will help satisfy this need. There is a risk that if jobs are no longer challenging, employees will become demotivated.
Every person is different.
What is Taylor's scientific management theory?
A concept created by the American mechanical engineer Fredrick Winslow Taylor that aims to lessen inefficiency in the workplace by finding the quickest method of completing each task and then instructing all employees to utilize this technique. Taylor's theory was centered on seeing humans as machines and the idea that improving the way the work was done was more effective than making people work as hard as they could. This means that workers that specialize in flow production (workers moving a product from one facet of specialized production to the next; the production of enormous quantities of identical goods using a continuously moving process) do one task proficiently. This theory is highly surveillanced and there is strict control within the employees.
Which theory did the scientific management theory encourage?
The theory of the economic man which stated that humans are motivated by money alone.
What are the principles of the scientific management theory?
Using scientific methods to determine and standardize the one best way of doing a job.
A clear division of tasks and responsibilities.
Performance-based pay.
High pay for high-performing employees.
What are the advantages of Taylor's scientific management theory?
Per unit, the cost is reduced.
Better quality products.
Increased production due to the economic man theory and the highly supervised environment.
There is control in the rigid hierarchy system therefore the managers are always aware of the actions of their workers.
Reduced cost in production in accordance with the fact that finding quicker and better methods of producing a good or service always takes into account capital.
There is a payment system in which the hardest workers are rewarded.
Decreased inaccuracy due to expertise in the already established practices of production.
What are the disadvantages of Taylor's scientific management theory?
The fact of finding a perfect method of production is costly in their trying efforts, planning, investigations, etc.
The employees view on the tight grip the managers have on them. The work is repetitive and unbending. There is no true way to express creativity or to even fall out of line with the flow of production.
There is alienation as the work takes over, leaving no time for social interactions and collaborations with colleagues.
Increased unemployment as the workers may be replaced with technology.
Deskilling where workers never develop skills besides the ones they are specialized in.
What is Herzberg's two-factor theory?
A concept created by the American psychologist Fredrick Herzberg that identified two groups in his research which are hygiene factors and motivators. Herzberg claims these two factors help with job satisfaction and employee motivation. He opposed Taylor’s theory, saying finances weren’t the sole factor of a worker's performance.
What are job motivators/satisfiers and what are examples of these?
Factors that influence a person to increase their performance and improve job satisfaction. Examples of these include: The work itself, responsibility, advancement, achievement, and recognition of achievement.
What are hygiene factors/dissatisfiers and what are examples of these?
The factors that must be present in the workplace to prevent job dissatisfaction. They are essential and must be present to prevent de-motivation, but they do not necessarily motivate a worker. Examples of these include: Working conditions, relationships with others, salary and wage, supervision, and company policy and administration.
What are financial rewards and methods?
Cash and non-cash rewards paid to employees which are often used to motivate and increase their efforts.
What is an hourly wage rate?
A payment to employees based on a fixed amount for each hour worked. An advantage is that the business pays employees only for the number of hours they worked, while a disadvantage is that employees’ pay is not linked to how much they produce which can cause an unfair salary between workers.
What is a salary?
A fixed annual payment to certain grades and types of staff. An advantage is that employees do not receive more pay if they have to work longer hours to complete a task while a disadvantage is that salary is not linked to employee effort or the amount produced.
What is piece-rate?
A payment to employees based on the number of units they produced. An advantage is that employees are paid only for the number of items they produce while a disadvantage is that the quality of goods produced can be poor because employees work too quickly to increase their output and pay.
What is a commission?
A payment to sales staff based on the value of the items they sell. An advantage is that the pay is linked to the value of goods sold, while a disadvantage is that they are never certain about how much they will earn.
What is a bonus scheme?
An additional reward paid to employees for achieving targets set by managers. An advantage is that this method is linked to performance targets meaning that increased productivity means increased pay, but a disadvantage is that if the targets set are unrealistic the employees could lose motivation.
What are fringe benefits?
Non-cash rewards often used to recruit or retain employees and to recognize the status of certain employees such as health insurance, company discounts, pension, etc. An advantage has been mentioned, while the disadvantage is that fringe links to status and not performance.
What is profit sharing?
An additional payment to employees based on the profits of the business. This is usually paid once a year. An advantage is that profit sharing is linked to the performance of the business, while a disadvantage is that any profit given to employees might reduce the dividends to shareholders or reduce the amount available to be reinvested into the business.
What are non-financial rewards and methods?
Non-cash methods instilled in workplace environments that help motivate and increase employee efforts that are more relevant to an employees mental and/or social state.
What is job rotation?
Increasing variety in the workplace by allowing employees to switch from one task to another.
What is job enlargement?
Increasing or widening tasks to increase variety for employees.
What is job enrichment?
Organizing work so that employees are encouraged to use their full abilities.
What are quality circles?
Groups of employees who meet regularly to discuss work-related problems.
What is team working?
Organizing production so that groups of employees complete the whole unit of work.
What is delegation?
Passing responsibility to perform tasks to employees lower down in the organization.
What are the advantages of non-financial methods?
Career advancements opportunities.
Job security.
Job enrichments.
Employee participation.
Multiskilled employees.
Resolved boredom.
What are the disadvantages of non-financial methods?
High training cost.
Different skill levels.
Complicated to organize.
Workload stress.
Note
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