AOS1 - Business

Comprehensive vocabulary flashcards generated from Area of Study 1 Business study notes, covering business structures, objectives, stakeholders, management styles, skills, and corporate culture.

Sole Trader

A business owned and operated by one person who is responsible for all aspects of the business. It is a simple business structure that gives the owner all the decision-making power.

Features of a Sole Trader

Simple to set up and operate, provides full control of assets and decisions, requires fewer reporting requirements with low costs, and involves unlimited liability where personal assets are at risk.

Sole Trader Advantages and Disadvantages

Advantages: Low start-up and running costs, complete control without disputes, and all profits are kept by the owner. Disadvantages: Unlimited liability, high workload, and lack of ideas for growth and improvement.

Partnership

A business structure that is owned by 2 to 20 people.

Partnership Features

Easy and inexpensive to set up, requires a separate Tax File Number, is not a separate legal entity (unlimited liability), involves shared control and management, and each partner manages their own superannuation.

Partnership Advantages and Disadvantages

Advantages: Low start-up cost, shared workload allowing flexibility and less stress, more ideas for growth, and greater access to funds. Disadvantages: Unlimited liability and potential conflict between partners.

Private Limited Company

A business that is owned by 1 to 50 shareholders, often a small business, whose shares are not traded on a stock exchange.

Features of a Private Limited Company

Separate legal entity, limited liability, complex structure with high set up and running costs, governed by Corporations Act 2001, controlled by directors and owned by shareholders, must register for GST if annual turnover is $75,000, and requires an annual company tax return to the ATO.

Private Limited Company Advantages and Disadvantages

Advantages: Limited liability (only money invested can be lost, personal assets are protected) and perpetuity of existence. Disadvantages: High cost and expense to set up and operate as a separate legal entity.

Public Listed Company

A business owned by shareholders, listed on the stock exchange, with an unlimited number of shareholders.

Features of a Public Listed Company

Separate legal entity, limited liability, listed on ASX with an unlimited number of shareholders, governed by Corporations Act 2001, controlled by directors and owned by shareholders, and requires an annual tax return to the ATO.

Public Listed Company Advantages and Disadvantages

Advantages: Limited liability, perpetuity of existence, and access to public finance via ASX shareholders. Disadvantages: High set-up and operational costs, and public disclosure requirements.

Social Enterprise

A business that aims to make profit with the objective of fulfilling a social need. They exist to benefit society rather than owners, run like a business, and do not rely on donations as their main income source.

Social Enterprise Features

Can open up new niche markets, creates positive brand image affecting sales and profit, carries significant operating costs, and can be difficult to manage both social and financial objectives simultaneously.

Social Enterprise Advantages and Disadvantages

Advantages: Opens new markets and creates a positive brand image that boosts sales and market share. Disadvantages: Significant operating costs and difficulty focusing on both financial and social goals at once.

Government Business Enterprise (GBE)

A Commonwealth entity owned and operated by the government that acts under general business principles and aims to make a profit.

Features of a Government Business Enterprise

Carries out government policies while delivering community services, operates with some independence from government, provides healthy competition in the private sector, but faces political interference and red tape.

Government Business Enterprise Advantages and Disadvantages

Advantages: Provides healthy competition and competitive pricing, and has access to government funding for sustainability. Disadvantages: Potential political interference, excessive regulation, and less accountability impacting productivity.

Company Tax Rate + Personal Tax Rate

Company tax rate is 30% on income, whereas the personal tax rate is 35% on income.

Business Objectives

Desired outcomes or specific results that a business intends to achieve over a period of time.

Main Business Objectives

To make a profit, to increase market share, to fulfil a social need, to fulfil a market need, to meet shareholder expectations, to improve efficiency, and to improve effectiveness.

to make a Profit

The surplus remaining after total expenses are deducted from total revenue.

to increase Market Share

The percentage of total industry sales that the business in question receives.

Fulfil a Market Need

Providing a product or service required by customers or target markets to fill a gap in the market.

To improve efficiency

A business using resources to the best of its ability, resulting in fewer inputs for the same or more outputs.

To improve effectiveness

The extent to which a business achieves its specific objectives.

Fulfil a Social Need

Fulfilling or supporting a community cause, such as reinvesting profits back into community initiatives.

Meet Shareholder Expectations

Increasing share values, delivering better dividend returns, granting voting rights at AGMs, and maintaining ethical practices, safety, and reputation.

Stakeholders

A group or individual that has a vested interest in the operations and performance of a business.

Six Business Stakeholders

Owners, managers, employees, general community, customers, and suppliers.

Owner Interests

Individuals who have invested capital into the business and aim to make a profit, earn dividends, and build a good reputation.

Manager Interests

Individuals responsible for running a successful business who seek to meet performance targets, achieve job security, gain career advancement, receive pay increases, and maintain workplace safety.

Employee Interests

Workers of the organisation who seek fair pay, job security, career advancement, workplace safety, and motivation.

General Community Interests

The surrounding society that expects businesses to provide employment, stimulate the local economy, provide services, and protect the environment.

Customer Interests

Buyers of products or services who expect good quality, affordable pricing, and ethically produced products.

Supplier Interests

Providers of raw materials and resources who aim to earn a profit, maintain ongoing customer contracts, and expand market share.

Autocratic Management Style

A management style where the manager retains control and tells staff what decisions have been made. Control is centralized, decision-making is done alone, and communication is top-down and one-way.

Autocratic Positives and Negatives

Positives: Highly time-efficient and decisions are very clear. Negatives: Employees feel unvalued and unempowered, lacks development opportunities, and can cause resentment. Best in crises or simple urgent tasks.

Persuasive Management Style

A management style where the manager makes decisions independently and then attempts to sell or persuade employees of their merit through top-down communication.

Persuasive Benefits and Limitations

Benefits: Time-efficient, clear expectations, and builds trust by explaining reasoning. Limitations: Employees are not empowered and lack development opportunities.

Consultative Management Style

A management style where the manager seeks input and opinions from employees before making the final decision. Features centralized control with two-way communication.

Consultative Limitations and Benefits

Benefits: Broader pool of ideas enhances decision quality and employees feel valued. Limitations: Time-consuming and ignored suggestions may create conflict.

Participative Management Style

A management style where the manager and staff unite to make decisions together. Control is decentralized with two-way communication.

Participative Benefits and Limitations

Benefits: Builds strong workplace relationships, increases employee motivation, and leverages teamwork for optimum decisions. Limitations: Time-consuming and potential conflict if ideas are rejected.

Laissez-Faire Management Style

A management style where employees assume total responsibility and control over workplace operations with minimal manager input.

Laissez-Faire Benefits and Limitations

Benefits: Trusting and empowering, fosters high creativity and individual responsibility. Limitations: Can lead to loss of control, lack of direction, and conflict among staff.

Management Skills

The key abilities required by managers, including Communication, Delegation, Planning, Leading, Decision-making, and Interpersonal skills.

Communication (Management Skill)

The transfer of information from a sender to a receiver and listening to feedback.

Delegation

The transfer of authority and responsibility from a manager to an employee to carry out specific tasks, while the manager remains ultimate accountable.

Planning

The ability to define business objectives and determine strategies to achieve them. It includes SWOT analysis and follows the process: Set objectives, Develop strategies, Implement strategy, and Monitor.

Leading

The ability to motivate people to work towards achieving business objectives.

Decision-Making

The ability to identify available options and select a specific course of action from alternatives.

Interpersonal Skills

The skills used to interact, deal, or liaise with others, build relationships with staff, and demonstrate empathy toward employees.

Corporate Culture

The shared values, ideas, beliefs, and expectations of the individuals within a business.

Ways to Identify Corporate Culture

Dress code, employee language and interaction, treatment of customers, slogans and logos, celebrated rituals, and official company policies.

Official Corporate Culture

The values and beliefs a company explicitly attempts to convey to the public, typically expressed through mission statements, logos, and slogans.

Real Corporate Culture

The actual values and beliefs practiced within the company, observable from real dress standards, behavior, and staff interactions.

Strategies to Develop Corporate Culture

Providing rewards and recognition, hosting rituals or social gatherings, leading by example, creating policies enforcing expected values, and recruiting alignment with company values.