Advantages and disadvantages + important info business management exam

Advantages of Sole trader

The owner has full control and decision making power.

Low risk of disputes as there is only one owner making decisions.

Less expensive to start up with.

Easy to register and start up with

Disadvantages of Sole Trader

Unlimited liability puts owners personal assets at risk.

Knowledge and skill may be limited to the owners capabilities, meaning owner may not have appropriate expertise in that field

Difficult to raise money to expand the business due to being limited to owners financial savings.

It may be difficult to take time of work as there is nobody else to operate the business

Advantages of Partnership

Greater range of expertise and ideas amongst numerous partners

Financial and legal risks are shared amongst partners

Owners can share the workload and take time of as there are other people to manage the business.

Greater access to finances as there is a greater number of people involved.

Disadvantage of Partnership

Unlimited liability means partners personal assets are at risk

Conflicts may arise due to the shared decision-making and personality clashes between partners

Profits need to be shared between partners

Advantages of Private limited company

There is limited liability for shareholders

There is greater variety of experience and ideas as more people are involved

Since incorporated businesses have greater access to capital, banks are more inclined to provide them with loans.

Disadvantages of Private Limited Company

Complex reporting requirements, such as annual reports, need to be published for shareholders.

It is complex to establish as the set up process requires more time

It is expensive to set up and operate as there are higher set-up and ongoing administration costs.

Advantages of Public Listed Company

Shareholders have limited liabilty

Greater access to expertise and ideas as there are more people involved

There is no need for permission to sell or trade shares

Greater access to capital as anyone in the public can purchase shares

Disadvantages of Public Listed Company

Conflicts could arise through shared decision-making between directors.

There are complex reporting requirements, such as annual financial reports, that need to be published to the public.

Producing annual financial reports can be a time-consuming process.

Advantages of social enterprise

The community benefits from business activities

Employees have purposeful work so they are more likely to be satisfied with their job.

Likely to receive financial support from other businesses and the government as they have a positive social mission

Disadvantages of Social Enterprise

Difficult to balance the achievement of financial objectives with social objectives.

May be difficult to obtain a bank loan as the business does not solely focus on financial objectives.

Advantages of Government Enterprise

Delivers goods and services that help the community and the community’s needs.

GBEs can rely on the government for the initial investment.

GBEs provide services that the private sector would hesitate to invest in.

Disadvantages of Government Business enterprise

Governments and politicians can interfere and change the strategic direction of the business.

GBEs have to follow significant ‘red tape’, which refers to excessive rules and formalities, compromising how quickly GBEs can do things.

Productivity may be lower than private-sector businesses as there tends to be a lack of accountability in the public sector

Owners vested interest

Establishing and fostering positive relationships with other stakeholders to enhance business reputation and performance.

Receiving a return on their investment, often through business growth, in the form of increases in share price, dividends, or profits.

Managers vested interests

Being recognised for the achievement of business objectives.

Having opportunities to increase their status and engage in career advancement and promotion.

Receiving appropriate wages and working conditions that reflect their managerial role and responsibility within the business.

Employee vested interests

Provision of long term job security

Receiving fair pay and working conditions

Having opportunities to engage in personal and professional development, as well as training to advance their careers and receive promotions.

Customer vested interests

Receiving high-quality goods and services at affordable prices

Engaging with businesses that are ethical and sustainable.

Receiving friendly and helpful customer service and assistance.

Suppliers vested interests

Increasing their revenue

Earning a profit from the raw materials and resources they supply

Having reliable and honest relationship with the businesses they supply

General community vested interests

Observing business activities that lead to improvements in the community and environment.

Increasing the local employment rate and boosting the local economy.

Advantages of Autocratic management style

Decision making power solely lies on management

Employees have clearly defined roles with reduced responsibility and risk, as they only have to follow the manager’s instructions.

Decision-making can be quick as it is only done by the manager and no discussion or consultation is required with employees.

Disadvantages of Autocratic management style

All solutions and ideas come from the potentially limited views of the manager alone, as there is no contribution from employees.

Lack of involvement in decisionmaking processes can lead to low employee motivation, as they feel undervalued due to their inability to contribute.

Employees’ potential for promotions may be restricted as they are not given the opportunity to contribute to decision-making.

Advantages of persuasive management style

Management retains full decisionmaking control within the business and may gain employee trust and support by explaining the reasons for decisions.

Decision-making can be quick as it is only done by the manager and no consultation is required with employees.

Quick decision-making allows for work processes to be completed faster, leading to improvements in productivity which may increase revenue.

Disadvantages of persuasive management style

All solutions and ideas come from the potentially limited views of the manager alone, as there is no contribution from employees.

Businesses lack the opportunity to take into account a broader range of approaches and ideas from employees.

Employee motivation may be low as they feel undervalued from being excluded from decision-making.

Advantages of consultive management style

Management can gain multiple perspectives and suggestions from employees who carry out the work, which can lead to more informed decision-making outcomes.

Employees may feel more motivated and involved with the business when asked to contribute their ideas, therefore improving their sense of value.

There is potential for increased sales and profit as the quality of decisions may be improved by obtaining multiple perspectives.

Disadvantages of consultive management style

Employees may offer unsuitable suggestions because they may not fully understand the complexity of a business situation.

The collection and consultation of different perspectives can take a significant amount of time, leading to slower decision-making processes.

Employee conflict and resentment could arise if their ideas are ignored or overlooked when the final decision is enacted by the manager.

Advantages of Participative management style

Relationships between management and employees may improve due to open two-way communication.

Employees may feel more motivated when contributing their ideas and participating in decisionmaking, therefore improving their sense of value.

There is potential for a more positive corporate culture and a supportive work environment.

Disadvantages of Participative management style

Accommodating multiple perspectives from managers and employees may result in a compromise that decreases the overall quality of a business decision.

It can be time-consuming to collate ideas and make decisions as a consensus between everyone must be reached.

There is potential for conflict between employees and managers when there is a disagreement between different views and opinions.

Advantages of Laissez-faire management style

Business objectives may not be met by employees due to a lack of direction from managers.

There is potential for conflict when employees do not cooperate and collaborate with each other and instead insist on implementing their own ideas.

There is potential for employees to make poor decisions, leading to an inappropriate allocation of business resources and unnecessary costs.

Advantages of Maslow Hierarchy of Needs

Motivation can occur quickly when employees progress through the lower levels of the hierarchy.

Can help managers determine which level of the hierarchy is motivating an employee. This therefore allows a manager to introduce targeted strategies that directly address specific employee needs.

Employees can work in an engaging environment that allows them to reach their full potential.

Disadvantages of Maslow Hierachy of Needs

It is difficult to measure success, as the levels of satisfaction gained at each stage can vary among people.

Not all employees will be motivated by the same needs at once.

It may be time-consuming for a manager to determine the level of each individual employee, and implement appropriate strategies for each.

Advantages of Lawrence and Nohrias 4 drive theory

The model provides a simple approach for motivating employees and is easy for managers to implement

All four drives can be attained simultaneously, and are not restricted to sequential orders, therefore increasing motivation efficiently for the business.

The four drives act as a means to motivate employees and can allow them to feel more engaged in their work.

Disadvantages of Lawrence and Nohrias 4 drive theory

Some drives can be overlooked and therefore, an employee’s full potential may not be achieved.

Rewarding individual employees may lead to unhealthy competition in the workplace.

Individual employees may have different drives that are yet to be met and a manager may spend a lot of time analysing these to cater to employees.

Advantages of Locke and Latham goal setting theory

Goals that align employee goals with achieving business objectives are likely to improve business performance.

An employee can clearly understand management’s expectations through straightforward goals and regular feedback.

The process of managers setting goals with employees can improve levels of trust and the relationship between employees and management.

Disadvantages of Locke and Latham goal setting theory

It may be difficult for a manager to always align an employee’s personal goals with business objectives.

Employees may become stressed and demotivated if they have too many goals at once.

The process of setting goals and providing feedback to each employee can be time-consuming for management.

Similarity between Maslow and Lawrence & Nohria

Both theories focus on motivating employees holistically, through addressing their physical, social, and emotional desires.

Both theories suggest employees are motivated by the desire to feel a sense of belonging within the workplace through social needs and the drive to bond.

Difference between Maslow and Lawrence & Nohria

Maslow’s Hierarchy of Needs must be met in sequential order, whereas the Four Drive Theory suggests any drive may be relevant to an employee in no particular order.

The Hierarchy of Needs states that employees are motivated to fulfil only one need at a time, whereas the Four Drive Theory states that all needs can drive employee behaviour simultaneously.

Similarities between Maslow and Lock & Latham

Both theories recognise that personal gain is a factor that can motivate employees. Esteem needs can be satisfied by providing jobs with higher status to employees, whilst goals fulfilling the commitment principle consider the personal objectives of employees.

Both recognise the importance of feedback from management. Self–esteem needs can be satisfied by recognising employees’ efforts and goals that fulfil the feedback principle require management to acknowledge employee efforts in reaching their goal.

Difference between Maslow and Lock & Latham

Maslow’s Hierarchy of Needs focuses on fulfilling one need at a time in sequential order, whereas the Goal Setting Theory requires all principles to be incorporated simultaneously to motivate an employee.

The Goal Setting Theory believes that an individual can be motivated through purely intrinsic factors, whereas Maslow’s theory focuses on both intrinsic and extrinsic motivators, such as physiological needs.

Similarities between Lock & Latham and Lawrence & Nohria

Both theories recognise that employees are motivated to achieve success. This can be through the drive to acquire a higher position or achieve the goal of being promoted to a position with more responsibility.

Both suggest that multiple factors motivate an employee at any given time. All four drives may be active simultaneously, and business goals should incorporate multiple principles simultaneously.

Difference between Lock & Latham and Lawrence & Nohria

The Goal Setting Theory involves employee input, whereas the Four Drive Theory is applied by a manager alone

The Goal Setting Theory believes that an individual can be motivated through purely intrinsic factors, whereas the Four Drive Theory also addresses extrinsic motivators through the drive to acquire.