Business Management U1AOS2 Flashcards

Define ‘environment’ in a business context.

A business’ environment consists of the surrounding conditions in which the business operates.

What is the internal environment of a business?

A business’ internal environment consists of the factors over which the business has some degree of control (i.e., the factors within the business).

What is the external environment of a business?

A business’ external environment consists of the factors over which the business has minimal control (i.e., the factors outside the business).

What is the operating environment?

A business’ operating environment consists of the external stakeholders with whom a business interacts when conducting its business.

What is the macro environment?

A business’ macro environment consists of the broad conditions and trends in the economy and society within which a business operates.

Define ‘stakeholders’.

Stakeholders is an umbrella term for all the individuals and groups that have one or more vested interests (i.e., stakes) in a business’ activities and performance.

What are internal stakeholders?

Internal stakeholders are stakeholders that are found in a business’ internal environment (i.e., within the business).

What are external stakeholders?

External stakeholders are stakeholders that are found in a business’ external environment (i.e., outside of the business).

Can a person be more than one type of stakeholder?

Yes, one person may be a stakeholder in a business in multiple ways, e.g., a shareholder and a manager.

Define ‘owner’.

An owner is an individual who partially or completely controls a business’ activities, due to them having partial or complete ownership of the business.

What is a key role of owners?

One key role of owners is to invest funds into a business.

What are two key interests of owners?

(1) For their business to make a profit. (2) For their business to be socially responsible.

How does an owner's involvement affect their interests?

An owner's vested interests are affected by the extent to which they are involved in the management and daily operations of the business.

Define ‘shareholders’.

Shareholders are individuals or groups (such as businesses) that own a percentage of a company via shares.

What is a key role of shareholders?

One key role of shareholders is to invest funds into a business.

What are two interests of shareholders?

(1) To make a return on their investment. (2) For the business to be socially responsible.

How do shareholders influence a business?

Shareholders have a say via voting at annual general meetings (AGMs), e.g., to appoint or remove directors.

What is a key role of directors?

To have overall responsibility for managing a company’s business activities and overseeing its strategic direction.

List four interests of directors.

(1) Fair remuneration. (2) Business being socially responsible. (3) Status and recognition. (4) Meeting shareholder expectations.

Define ‘manager’.

A manager is an individual who is responsible for overseeing employees, and day-to-day tasks, in order to help achieve business objectives.

What is a key role of managers?

To oversee different areas of a business such as human resources or operations.

List four interests of managers.

(1) Fair remuneration. (2) Social responsibility. (3) Status and recognition. (4) Career advancement.

How does a manager’s area affect their interests?

Managers are interested in the performance of their area, as it impacts their financial rewards and job security.

Define ‘employees’.

Employees are individuals who, in exchange for a wage or salary, complete tasks they have been allocated by a business’ management.

What is a key role of employees?

To complete, in a competent manner, the tasks assigned by management.

List five interests of employees.

(1) Fair remuneration and conditions. (2) Career advancement and development. (3) Job security. (4) Social responsibility. (5) Creative and innovative work environment.

What is the link between employee interests and motivation?

If an employee’s interests are being met, they’re more likely to be motivated to complete their tasks efficiently and effectively.

Define ‘customers’.

Customers are individuals or businesses that purchase a business’ goods and/or services in return for a monetary payment.

What is a key role of customers?

To purchase and use a business’ goods and/or services.

List four interests of customers.

(1) Reasonable price for quality. (2) High-quality customer service. (3) Environmentally friendly products. (4) Social responsibility of the business.

Define ‘suppliers’.

Suppliers are individuals or businesses that provide a business with the resources it needs to conduct its operations in return for payment.

What is a key role of suppliers?

To provide businesses with resources used to produce goods and services.

List four interests of suppliers.

(1) Deliver high-quality resources on time. (2) Be paid promptly and in full. (3) Make a profit. (4) Be socially responsible.

Define ‘the general community’.

The general community consists of individuals and groups that do not interact with the business directly, but are affected by the business’ activities.

What is a key role of the general community?

To observe the impact of a business’ activities on their community.

List two interests of the general community.

(1) For businesses to improve local communities. (2) For businesses to minimise environmental harm.

Define ‘competitors’.

Competitors are rival businesses that sell similar goods and/or services in the same market.

What is one main interest of competitors?

To have a sustainable competitive advantage.

What are three ways a business can gain a competitive advantage?

(1) Lower cost price structure. (2) Broader range of goods/services. (3) Better ability to adapt to trends.

What is 'economies of scale'?

Cost savings a business experiences when it produces a large number of products, spreading fixed expenses and gaining supplier discounts.

Define ‘the government’.

The government consists of individuals elected by enrolled electors to represent their interests when making and administering laws.

What is one role of government in relation to business?

Governments can regulate or deregulate business activities and offer grants to support business growth.

List two interests of government in business.

(1) For businesses to perform well and contribute to the economy. (2) For specific business activities to be encouraged or discouraged.

Define ‘interest groups’.

Interest groups are organisations of people that attempt to directly influence businesses to adopt or change particular business activities.

Define ‘unions’.

Unions are organisations formed by employees in a particular industry to represent them in improving wages and work conditions.

List three interests of unions.

(1) Fair wages. (2) Fair and safe work conditions. (3) Preventing rights violations.

What do consumer groups monitor?

Product safety, packaging, pricing and advertising.

What is a key interest of consumer groups?

That businesses sell goods that are safe, reasonably priced, well-packaged, and honestly advertised.

What are specific issue groups?

Collections of people focused on an area of community or environmental interest.

What is a key interest of specific issue groups?

For businesses to consider their area of concern (e.g., environmental protection, youth unemployment) in their operations.

Define ‘lenders’.

Lenders are individuals or businesses that loan money to a business with the expectation of repayment (usually with interest).

What is a key role of lenders?

To provide funding to a business with repayment and interest expected.

List two key interests of lenders.

(1) Loan repayment. (2) Earning interest as a return on their investment.

How can lenders influence a business?

By pressuring directors and managers to avoid exposing the lender to excessive financial risk.

What are the two possible relationships between stakeholder interests?

(1) The interests are compatible. (2) The interests conflict.

What does it mean when stakeholder interests are compatible?

The vested interests of multiple stakeholders can be satisfied simultaneously.

Give an example of compatible stakeholder interests.

Customers want high-quality goods at reasonable prices; if a business delivers this, increased sales and profit can also satisfy shareholders.

What does it mean when stakeholder interests conflict?

Satisfying one stakeholder’s interests likely results in at least one other stakeholder being dissatisfied.

Give an example of conflicting stakeholder interests.

Increasing employee wages may reduce profits, which could dissatisfy shareholders.

How should managers resolve stakeholder conflicts?

Managers should consider the interests of all stakeholders and aim to maximise benefits and minimise detriments in their decisions.

What is a conflict between employees and shareholders?

Employees want fair wages and conditions, but these may reduce net profit, which dissatisfies shareholders.

What is a conflict between customers and shareholders?

Raising prices to satisfy shareholders’ profit interests may dissatisfy customers seeking value for money.

What is a conflict between directors/managers and the general community?

Cutting maintenance costs may increase profit but endanger the public.

What is a conflict between suppliers and the general community?

Suppliers may cut costs with unethical practices, which harms the environment and upsets the community.

What is a conflict between managers and suppliers?

Managers want cheaper supplies to increase profit; suppliers may want to maintain socially responsible but costlier practices.

What is a conflict between employees and suppliers?

Employees may want to work for ethical businesses; suppliers may use unethical practices to cut costs.

What is a manager vs employee conflict over wages?

Managers may want to cut wages to increase profits; employees want higher pay and better working conditions.

What is a manager vs customer conflict over price?

Managers may want to raise prices for higher profit; customers may see this as unfair.

What is a manager vs general community conflict over labour?

Managers may automate to cut costs; the community may want more human employment to reduce unemployment.

What is a manager vs supplier conflict over costs?

Managers want cheaper supplies; suppliers want higher prices for better margins.

What is a manager vs shareholder conflict over salaries?

Managers want salary increases for performance; owners/shareholders may want to reduce expenses to increase profit.

What is a customer vs general community conflict?

Customers want cheap, fast goods; the general community wants ethical labour and sustainability, which cost more.

What is an employee vs customer conflict?

Employees may want shorter hours or fewer tasks; customers expect consistent high-quality service, which demands effort.

What is a customer vs supplier conflict?

Customers want good value and quality; suppliers may deliver cheaper, lower-quality resources to save money.

Define ‘business’.

A business is any activity that involves one or more human beings creating and selling products in order to satisfy the needs and wants of society, while also making a profit.

Define ‘needs’.

Needs are things human beings require in order to survive, such as food, water, clothing and shelter.

Define ‘wants’.

Wants are things human beings desire, but do not require to survive.

Define ‘goods’.

Goods are items that are tangible (usually) and able to be sold in a market.

Define ‘services’.

Services are intangible activities that are able to be sold in a market.

Define ‘market’.

A market is any situation in which potential buyers are in contact with potential sellers and there is a means of exchange.

What is a ‘means of exchange’?

A method of payment for goods and services, such as money.

Define ‘incorporated’.

A business has become incorporated if it has changed into a company from a type of business that is not a company (e.g., a partnership).

Define ‘separate legal entity’.

A business is a separate legal entity if it is recognised by the law as being distinct from the individuals who own the business.

Define ‘sole trader’.

A sole trader is a type of unincorporated business in which one person owns and operates the business.

Is a sole trader a separate legal entity?

No, a sole trader business is not a separate legal entity.

What is ‘unlimited liability’?

The owner’s personal assets can be sold to pay off the business’ debts if the business assets are insufficient.

What are the responsibilities of a sole trader owner?

They provide all finance, make all decisions, and take full responsibility for the business’ operations.

How is a sole trader business taxed?

Its profits are taxed via the owner’s personal income tax.

What percentage of profits does a sole trader owner retain?

100%.

What legal requirement is needed to create a sole trader business?

The business name must be registered with ASIC unless it’s the owner’s name.

Define ‘partnership’.

A partnership is a type of unincorporated business in which at least two people own and operate the business together.

What is the general maximum number of partners?

20, with some exceptions (e.g., 400 for solicitors/accountants).

Is a partnership a separate legal entity?

No, and all partners have unlimited liability for the partnership’s actions.

What is the difference between general and limited partnerships?

General partners have unlimited liability and manage the business; limited partners have limited liability and don’t run the business.

How can a partnership be created?

Verbally, in writing, or by implication.

What determines how profits are shared in a partnership?

The partnership agreement.

How is a partnership taxed?

It has a TFN and lodges a return, but profits are taxed via each partner’s personal income tax.

What is ‘limited liability’?

A shareholder’s legal responsibility for company debts is limited to the amount they paid for their shares.

What does 'Ltd' in a company name indicate?

That the company has limited liability.

Can directors be personally sued?

Yes, in cases such as misconduct, giving false information, or offering personal loan guarantees.