Business Management definitions

Sole trader

An individual owner of a business who is the same legal entity as the business. The owner keeps all profits after tax but has unlimited liability, meaning they are personally responsible for all losses and debts.

Partnership

A legal form of business ownership where 2 to 20 people combine knowledge and capital to work together for profit. Partners share profits and workload but have unlimited liability.

Private Limited company

An incorporated business and separate legal entity restricted to a maximum of 50 non-employee shareholders. Shares are not publicly traded, providing owners with limited liability.

Public listed company

An incorporated business and separate legal entity whose shares are openly traded on a public exchange (such as the ASX). It offers limited liability and has no limit on shareholders.

Social enterprise

A private sector business that operates commercially to sell goods or services but redirects profits to fulfill a social or community need rather than maximizing shareholder returns.

Government business

A government-owned and operated business that engages in commercial activities to make a profit while providing essential community services. It has a separate legal identity from government departments.

Business objective

Statements of desired achievements or specific goals a business aims to achieve within a specified timeframe, providing direction for actions.

To make a profit

The objective of achieving a positive difference where total revenue exceeds total expenses, ensuring survival, growth, and investor satisfaction.

To increase market share

The objective of gaining a greater proportion of total industry sales compared to competitors, indicating increased competitiveness.

To fulfill a social need

The objective of acting as a good citizen by focusing on community or environmental concerns and improving human wellbeing.

To fulfill a market need

The objective of identifying and satisfying buyer requirements by providing goods or services that are unavailable or in demand.

To meet shareholder expectations

The objective of providing owners with financial returns through dividends and increased share value.

To improve efficiency

The objective of making the best use of resources such as time and labour to maximise output with minimal waste.

To improve effectiveness

The degree to which a business achieves objectives and does the right things to produce positive results.

Stakeholder

Any individual or group with a direct interest in the activities, decisions, and performance of a business.

Owner/shareholder

Internal stakeholders who invest capital in a business and seek profitability, dividends, and increased share value.

Manager

Internal stakeholders who coordinate resources, oversee operations, and implement strategies to achieve business goals.

Customer

External stakeholders who purchase goods and services and seek quality products, reasonable prices, and good service.

Employee

Internal stakeholders who provide labour and skills in exchange for wages. They seek security, fair pay, career growth, and a safe workplace.

Supplier

External businesses providing resources needed for production. They seek prompt payment and long-term profitable relationships.

General community

Stakeholders affected by business activities who value employment opportunities and socially responsible behaviour.

Corporate culture

A system of shared values, beliefs, ideas, and expectations within a business, often described as "how we do things around here."

Official corporate culture

The desired culture a business presents through formal documents, mission statements, policies, slogans, and logos.

Real corporate culture

The actual workplace culture shown through daily behaviours, relationships, and interactions.

Management styles

The approach or behaviour used by managers when making decisions, providing direction, and communicating with staff.

Autocratic

A management style where all decisions are controlled by the manager. Communication is one-way and employees have little input.

Persuasive

A management style where managers make decisions independently and convince employees of their benefits to gain support.

Consultative

A management style where managers seek employee opinions before making the final decision, using two-way communication.

Participative

A management style where managers and employees share decision-making through teamwork and collaboration.

Laissez-faire

A management style where employees have freedom to make decisions with little direction or interference from management.

Management skills

The abilities, competencies, and proficiencies managers use to perform roles and achieve business objectives.

Communication

The ability to transfer and exchange information between a sender and receiver, including feedback, to achieve a response.

Delegation

The process of passing authority to subordinates to complete tasks while the manager remains responsible for outcomes.

Decision-making

The ability to identify alternatives and choose the most appropriate action to solve problems.

Interpersonal

The ability to build positive relationships through empathy, conflict management, and teamwork.

Planning

A future-oriented process involving setting objectives and determining strategies and resources required to achieve them. It reduces uncertainty by identifying a path to goals.

Human Resource Management

The area of a business that manages the relationship between employees and the business.

Motivation

The willingness, drive, or desire to use energy and effort to achieve a goal or complete a task.

Maslow’s hierarchy of needs

A motivation theory suggesting that human needs are arranged in a five-stage hierarchy.

Physiological needs

Basic survival requirements such as food, water, and shelter.

Safety needs

The need for security and protection from physical and emotional harm.

Social needs

The need for love, belonging, affection, and acceptance.

Self-esteem needs

The need for status, recognition, respect, and achievement.

Self-actualisation

The need for personal growth, reaching full potential, and self-fulfilment.

Locke and Latham’s Goal-Setting Theory

A motivation theory stating that clear, challenging goals and feedback motivate employees.

Clarity

A principle requiring goals to be specific and measurable.

Challenge

A principle stating goals should require effort but remain achievable.

Commitment

A principle where employees understand and support the goals set.

Feedback

A principle involving communication about progress towards goals.

Task complexity

A principle requiring goals to be challenging without becoming overwhelming.

Lawrence and Nohria Four Drive Theory

A motivation theory identifying four biological drives based on human evolution.

Drive to acquire

The need to gain necessities, material goods, and status.

Drive to bond

The need to connect with others and form relationships.

Drive to learn

The need to satisfy curiosity and develop knowledge and skills.

Drive to defend

The instinct to protect oneself, possessions, achievements, and ideas.

Performance-related pay

A financial motivation strategy where pay is linked to achieving a set standard.

Career advancement

The opportunity for employees to gain promotions with more responsibility or pay.

Investment in training

A strategy where businesses provide opportunities to improve employee skills and knowledge.

Support

A non-financial strategy involving encouragement, recognition, and assistance.

Sanction

A strategy involving penalties or discipline for poor behaviour or performance.

Job enlargement

A strategy adding more tasks to an employee’s role at the same responsibility level.

Job enrichment

A strategy increasing job depth by giving employees more control and responsibility.

Job rotation

A strategy where employees move between different jobs or tasks.

Training

The process of providing employees with skills and knowledge to perform a job effectively.

On-the-job training

Training conducted at the workplace while employees complete normal duties.

Off-the-job training

Training conducted away from the workplace in a formal environment.

Performance management

A process used to improve employee and organisational performance by aligning work with goals.

Management by objectives (MBO)

A strategy where managers and employees set clear, measurable goals together.

Self-evaluation

A process where employees assess their own performance against set criteria.

Appraisals

A formal evaluation of employee performance against targets over a period.

Employee observation

A strategy where managers observe employees performing their work.

Termination

The ending of the employment contract between an employer and employee.

Resignation

A voluntary termination when an employee chooses to leave their job.

Retirement

A voluntary termination when an employee leaves the workforce permanently.

Redundancy

Termination when an employer no longer requires a position to exist.

Dismissal

The involuntary termination of employment by an employer.

Entitlement considerations

Legal obligations employers must follow when terminating employees.

Transition considerations

Social and ethical support provided to employees after termination.

Workplace relations

The relationship between employers and employees regarding wages, conditions, and disputes.

Employee

An individual who works for a business in exchange for wages or salary.

Employer associations

Organisations that represent and support the interests of employers.

Union

An organisation that represents and protects workers’ rights.

Fair Work Commission (FWC)

Australia’s independent national workplace relations tribunal.

Award

A legal document outlining minimum pay rates and working conditions for an industry.

Enterprise agreement

An agreement negotiated between an employer and employees about wages and conditions.

Individual contract

A legal agreement between an employee and employer outlining rights, obligations, and pay.

National Employment Standards (NES)

Minimum employment entitlements required by law for Australian employees.

Dispute

A workplace conflict or disagreement between employers and employees.

Dispute resolution procedure

Steps used by businesses to resolve workplace disagreements and complaints.

Strike

Industrial action where employees stop working for a period of time.

Mediation

A dispute resolution method where an independent third party helps parties communicate.

Arbitration

A dispute resolution method where an independent third party makes a legally binding decision.

Operations management

The area of business involved in transforming inputs into outputs to achieve business objectives.

Operations system

The process where a business transforms inputs into outputs through inputs, processes, and outputs.

To improve efficiency

The objective of maximising output from inputs while minimising waste, time, and costs.

To improve effectiveness

The objective of achieving desired outcomes, meeting goals, and satisfying customer needs.

Inputs

The resources used in production, including materials, labour, equipment, information, and time.

Processes

The procedures that transform inputs into finished goods or services, affecting quality, efficiency, and productivity.

Outputs

The final goods or services produced through the transformation process, either tangible or intangible.

Service business

A business providing intangible products where value is created through labour or expertise.