Ultimate Business Unit 3/4 Exam cue cards

what are the types of businesses

• sole trader

• partnership

• private limited company

• public listed company

• social enterprise

• government business enterprise

define sole trader

a sole trader is a business structure that is owned and operated by one individual

advantages of a sole trader

• the owner has full control and decision making power

• easy to register and set up and is less expensive

• owner retains all business profits

disadvantages of a sole trader

• unlimited liability puts the owners assets at risk if the business goes into debt, they can be seized to pay them off

• the knowledge and skills are limited to the owner

• it may be difficult to take time off for work or holidays or when sick as no one else can operate the business

define partnership

a partnership is a business structure that is owned by two to 20 owners

advantages of a partnership

• greater range of expertise and ideas amongst numerous partners

• greater access to finances as there are more people involved

• owners can share the workload and take time off as there are multiple people that can manage the business

disadvantages of a partnership

• unlimited liability means that the partners personal assets can be seized to pay off business debts

• profit needs to be shared between the partners

• conflicts could arise due to shared decision making

define private limited company

A private limited company is an incorporated business structure that has at least one director and a maximum of 50 shareholders.

advantages of a private limited company

• limited liability for the shareholders

• greater variety of expertise and ideas

• the businesses existence is not threatened by the removal of one director

disadvantages of a private limited company

• increased reporting requirements and government regulation

• complex and time consuming to establish

• ongoing administration costs so it is costly to operate

define public listed company

A public listed company is an incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX. 

advantages of a public listed company

• shareholders have limited liability

• no permission is needed to buy and sell shares

• the life of the company can live longer than the directors

disadvantages of a public listed company

• time consuming to produce annual financial reports

• expensive to set up and operate

• greater time taken to set up as its a complex business structure

define a social enterprise

A social enterprise is a type of business that aims to fulfil a community or environmental need by selling goods or services. 

advantages of a social enterprise

• the community benefits from the business’s activities

• the business can develop a positive social reputation as they are helping society

• employees have purposeful work so they are more likely to be satisfied with their job

disadvantages of a 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

define a government business enterprise

A government business enterprise (GBE) is a business that is owned and operated by the government.

advantages of a GBE

• delivers goods and services that help the community and the community’s needs

• GBE’s provide services that the private sector would hesitate to invest in

• GBE’s can rely on the government for the initial investment

disadvantages of a GBE

• governments and politicians can interfere and change the strategic direction of the business

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

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

define unlimited liability

the personal legal responsibility a business’s owner has for an unincorporated business’s debts

define limited liability

Limited liability is when shareholders are only liable to the extent of their original investment, meaning they are not personally responsible for the business debts. 

define unincorporated

Unincorporated is a legal status of a business whereby the business owner and the business are viewed as the same legal entity. 

define incorporated

Incorporated is a legal status of a company whereby the company
is established as a separate legal entity to the shareholder/s. 

what are the business objectives

• to make a profit

• the increase market share

• the meet shareholder expectations

• to fulfil a market need

• to fulfil a social need

• to improve efficiency

• to improve effectiveness

define to make a profit

profit occurs when a business creates more revenue than expenses it incurs

define to increase market share

Market share is a business’s percentage of total sales within an industry

define to meet shareholder expectations

Shareholders are the owners of private limited companies and public listed companies. 

define to fulfil a market need

To fulfil a market need is when a business fills a gap in the market,

define to fulfil a social need

To fulfil a social need is improving society and the environment through business activities.

define efficiency

efficiently is producing something without wasting any resources

define effectiveness

Effectiveness is the extent to which a business achieves its stated objectives.

types of stakeholders

• owners

• managers

• employees

• customers

• suppliers

• general community

define stakeholders

Stakeholders are individuals, groups, or organisations who have a vested interest in the performance and activities of a business. 

define owners

Owners are individuals who establish, invest, and have a share in a business, often with the goal of earning a profit from its operations.

define managers

Managers are individuals who oversee and coordinate a business’s employees and lead its operations to ultimately achieve the business’s objectives. 

define employees

Employees are individuals who are hired by a business to complete work tasks and support the achievement of its objectives. 

define customers

Customers are individuals or groups who interact with a business by purchasing and utilising its goods and services. 

define suppliers

Suppliers are individuals or groups that source raw materials, component parts, and processed materials and sell them to a business for use in the production of its goods and services.

define general community

The general community is the individuals and groups who are impacted by a business’s operations and decisions, often because they are located in close proximity to the business. 

interests of owners

• receiving a return on their investment in the form of profit

• establishing positive relationships with other stakeholders to improve business reputation

interests of managers

• having opportunities to progress in their career

• being recognised for the achievement of business objectives

• receiving appropriate wages that reflect their managerial role

interests of employees

• provision of long term job security

• receiving fair pay and working conditions

• having opportunities to engage in professional development and advance their careers

interests of customers

• receiving high quality goods and services at affordable prices

• engaging with ethical and sustainable businesses

• receiving friendly and helpful customer service

interests of suppliers

• increasing their revenue

• earning a profit from the materials they supply

• having reliable and honest relationships with businesses they supply

interests of the general community

• observing business activities that lead to improvements in the community

• increasing the local employment rate and boosting the economy

types of management styles

• autocratic

• persuasive

• consultative

• participative

• laissez faire

define autocratic management style

An autocratic management style involves a manager making decisions and directing employees without any input from them. 

advantages of autocratic management style

• decision making power lies solely with management, therefore quick

• employees have clearly defined roles with reduced responsibility and risk

• quick decision making can allow for work processes to completed faster, leading to improved productivity

disadvantages of the autocratic management style

• employees may have low motivation as they are not included in decision making

• all solutions and ideas come from the potentially limited views of the manager

• employees potential for promotion may be restricted as they are not given the opportunity to contribute to decision making

define persuasive management style

A persuasive management style involves a manager making decisions and communicating the reasons for those decisions to employees without their input.

advantages of persuasive management style

• may gain employee trust by explaining reasoning behind decision making

• decision making can be quick and is only done by the manager with no consultation with employees

• management retains full decision making control within the business

disadvantages of persuasive management style

• the process of informing employees about the reasons behind the decision making process can be time consuming.

• employee motivation may be low due to feeling undervalued from being excluded from decision making.

• may increase costs associated with replacing employees as staff may leave the business due to low motivation

define the consultative management style

A consultative management style involves a manager seeking input from employees on business decisions but making the final
decision themselves. 

advantages of the consultative management style

• management can gain multiple perspectives and suggestions from employees who carry out the work which can lead to more informed decision making

• employees may feel more motivated and involved with the business when asked to contribute their ideas

• potential for increased profits as quality of ideas may be improved by obtaining multiple perspectives

disadvantages of the consultative management style

• employees may offer unsuitable suggestions because they may not fully understand the complexity of a business situation

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

• the collection and consultation of different perspectives can take a significant amount of time, leading to a slower decision making process.

define a participative management style

A participative management style involves a manager sharing information with employees so that employees can participate in decision-making. 

advantages of a participative management styles

• employees may feel more motivated when contributing their ideas and participating in decision making

• employees may be able to grow and develop their skills due to more opportunities within the workplace.

• opportunity for a more positive corporate culture and collaborative work environment.

disadvantages of a participative management styles

• potential for conflict between managers when there is a disagreement between different views and opinions

• time consuming to collate ideas and make decisions, as a consensus between everyone must be reached

• some employees prefer to follow directions, and feel intimidated contributing ideas

define laissez faire management style

A laissez-faire management style involves a manager communicating business objectives to employees and giving them freedom to make decisions independently. 

advantages of a laissez faire management style

• fosters an environment in which creativity and innovation are valued

• employees may have increased motivation as they feel empowered and trusted in the work environment

• collaboration between employees to reach a decision making outcome can lead to innovation.

disadvantages of laissez faire management style

• loss of control by management as employees make the final business decisions

• potential for conflict when employees do not cooperate and collaborate with each other

• potential for business objectives not to be met due to lack of direction from managers

define centralised control

one individual having concentrated authority to make decisions

define decentralised control

occurs in a business when multiple people have the authority to make business decisions

what determines the appropriateness of a management style

• time

• experience of employees

• nature of the task

• manager preference

appropriateness of autocratic management style

• quick decision in an emergency

• urgent decision

• less experienced employees

• managers who value control

appropriateness of persuasive management style

• quick task where managers decision is crucial

• quick decision making but allowance for explanation is needed

• less experienced employees

• managers who desire control but need employee support

appropriateness of consultative management style

• where employees input can add value

• when there is sufficient time

• skilled employees

• managers who value employee input

appropriateness of participative management style

• tasks requiring divers input and expertise

• when time is not a factor

• highly skilled employees

• managers who value collaboration

appropriateness of laissez faire management style

• where creativity and innovation is needed by employees

• when time is not a factor

• highly skilled employees

• managers who trust employees and want a low level of control

what are some management skills

• planning

• decision making

• communication

• delegation

• interpersonal

• leadership

define planning

Planning is the process of determining a business’s objectives and establishing strategies to achieve these aims. 

define decision making

Decision-making is the skill of selecting a suitable course of action from a range of plausible options. 

define communication

Communication is the skill of effectively transferring information from one party to another.

define delegation

Delegation is the skill of assigning work tasks and authority to other employees

who are further down in a business’s hierarchical structure.

define interpersonal

Interpersonal is the skill of creating positive interactions with other employees, to foster beneficial professional relationships.

define leadership

Leadership is the skill of motivating others in order to achieve a business’s objectives.

define corporate culture

Corporate culture is the shared values and beliefs of a business and its employees.

define official corporate culture

Official corporate culture involves the shared views and values that a

business aims to achieve, often outlined in a written format.

examples of official corporate culture

• mission statement

• business names, logos, slogans

• uniform

• established policy and procedure

define real corporate culture

Real corporate culture involves the shared values and beliefs that develop organically within a business, and are practised on a daily basis by its employees.

examples of real corporate culture

• staff diversity

• office layout

• celebrations

• management styles

similarities between official and real corporate culture

• concerned with the shared beliefs and values of a business

• both official and real CC aim to change the way employees interact with each other and the business

differences between official and real corporate culture

• official corporate culture is often written in business documents, whereas real corporate culture is often unwritten

• official corporate culture is institutionalised by formal rules whereas real corporate culture develops organically in day to day interactions between employees

• official corporate culture includes the ideals of the business, whereas real corporate culture includes what occurs in actuality.

what are the performance management strategies?

• management by objectives

• performance appraisals

• self evaluation

• employee observation

define management by objectives

management by objectives involves both managers and employees collaboratively setting individual employee goals that align with the business objectives

advantages of management by objectives

• aligning employee objectives with business objectives can lead to improvements in business performance

• may gain a sense of personal achievement, increasing motivation

• reviewing employees can be done quickly by assessing the extent to which objectives are met

disadvantages of management by objectives

• employees that reach objectives may be given financial rewards, increasing business expenses

• developing objectives that benefit both the employee and the business can be time consuming

• failure to achieve personal objectives may be demoralising

define performance appraisals

performance appraisals involve a manager assessing the performance of an employee against a range of criteria, providing feedback, and establishing plans for future improvements

advantages of performance appraisals

• communication between managers and employees during one on one reviews can improve workplace relationships

• employees who demonstrate strong performance may be recognised for promotional opportunities

• criteria allows for consistent performance appraisals across all the employees

disadvantages of performance appraisals

• employees may lose motivation if they receive multiple poor performance appraisals

• can be time consuming as managers individually review each employees performance

• training courses provided to address employee weaknesses can increase business expenses

define self evaluation

self evaluation involves an employee assessing their individual performance against a set of criteria

advantages of self evaluation

• employer can gain insight into an employees understanding of their own strengths and weaknesses and assign accordingly

• employees may be empowered to improve performance, as they are directly involved in their own performance

• can save managers time as employees evaluate their own performance

disadvantages of self evaluation

• if employees are dishonest the process can be a waste of time

• employees may underestimate or exaggerate their own skills, therefore the evaluation may not be reliable

• training courses provided to address employee weaknesses can increase business expenses

define employee observation

employee observation involves a range of employees from different levels of authority assessing another employees performance against a set of criteria

advantages of employee observation

• involvement of a group of employees can improve the interconnectedness of the business and its corporate culture

• employees may be responsive to feedback provided by peers as they value their opinion

disadvantages of employee observation

• results may be misleading if employees know they’re being evaluated, as they may work harder in the presence of an observer

• employees may feel stressed if they are made aware that they’re being observed, leading to poorer performance

• time consuming for employees to observe their peers

define termination

the process whereby a business ends its employment contract with an employee

what are the four types of termination?

• retirement

• redundancy

• resignation

• dismissal

define retirement

involves an individual deciding to leave the workforce permanently as they no longer wish to work e.g. have reduced physical ability

define redundancy

involves an employee no longer working for a business because there is insufficient work or the job no longer exists