Business Management Review Flashcards

Comprehensive practice flashcards covering key topics in business management including sectors, legal structures, stakeholder management, economies of scale, leadership, motivation theories, financial decision-making, costs, pricing strategies, marketing mixes, and distribution channels.

How does the primary sector differ from the secondary sector?

The primary sector controls the gathering, manufacturing, or production of natural resources, whereas the secondary sector controls the physical distribution of goods and or services (e.g., retailers).

What defines the quaternary sector in business?

The quaternary sector is the IT sector that controls online selling and the sales of items.

What is the key difference between private companies and public companies?

Private companies are privately owned with the main goal to generate profit and retain control, while public companies are owned by the government and typically have goals that benefit the community.

What are non-profit social enterprises (NGOs)?

NGOs are a type of public sector company whose aim is to benefit the community by donating profits to a charitable fund.

How do vision statements and mission statements differ?

A vision statement is a long term goal/objective the company is working towards in the future, while a mission statement outlines the day-to-day processes of the company and their operations in order to achieve their vision statement.

Who are internal stakeholders, and what examples are provided in the notes?

Internal stakeholders directly influence the day-to-day running of the company. Examples include employees, managers, directors, and shareholders.

Who are external stakeholders, and what examples are given?

External stakeholders have an interest in the company but are not directly involved in it. Examples include customers, suppliers, and the local community.

What is the purpose of a stakeholder mapping table?

The stakeholder mapping table outlines how important a stakeholder is in the business and what level of say they should have in the final decision.

What is internal economies of scale, and how can it be achieved?

Internal economies of scale is achieved when a business has the lowest cost of production per unit item. It can be achieved through managerial, specialist, and technological methods.

What causes internal diseconomies of scale?

Internal diseconomies of scale occurs when the cost of production starts to increase after being low, indicating the company is no longer operating at maximum efficiency. This can result from miscommunication and leadership disputes.

How do external economies of scale compare to external diseconomies of scale?

External economies of scale occurs when the whole industry benefits from economies of scale, whereas external diseconomies of scale occurs when the whole industry is negatively impacted by an increase in cost per unit item.

What are four key integration strategies for external business growth?

1. Merger (new legal entity formed)
2. Acquisition (purchasing another company with consent from BOD)
3. Takeover (purchasing another company without consent of BOD)
4. Joint venture (businesses working together for mutual benefits)

How do transnational corporations differ from multinational corporations (MNCs)?

Transnational companies have regional offices in all locations, whereas MNCs have one head office in their original location (not in host countries).

What are the positive and negative impacts of MNCs on host countries?

Positives: creation of jobs through additional businesses entering the market. Negatives: loss of GDP (income goes back to home country) and loss of competition for host country businesses.

What is span of control?

Span of control outlines how many subordinates one line manager is responsible for.

How is bureaucracy defined in business operations?

Bureaucracy is defined as the logistical politics and decision-making processes within a business.

How does organization by product, region, and function break down an organizational hierarchy?

Organization by product breaks down hierarchy according to specialization of products made; organization by region breaks down hierarchy according to production location; organization by function breaks down hierarchy by role/job sector (e.g., finance, marketing).

How do scientific thinking and intuitive thinking differ in management and leadership?

Scientific thinking is based upon hard facts with little room for interpretation (common in managers), whereas intuitive thinking is based upon personal judgement and experience (common in leaders).

What characterizes autocratic leadership versus democratic leadership?

Autocratic leadership centralizes decisions and tells workers exactly what to do. Democratic leadership uses employee opinions and voices in the decision-making process, with the majority of decisions being decentralized.

How does paternalistic leadership differ from laissez-faire leadership?

Paternalistic leadership treats workers like family and considers their opinions, but the manager/leader makes the final decision. Laissez-faire leadership gives employees full control over decisions, with the manager ensuring they head in the correct direction.

What is situational leadership?

Situational leadership is a combination of all leadership styles depending on the circumstances.

What is Maslow's hierarchy of needs?

A triangular structure that outlines the needs that people must have met (e.g., physiological needs) before they can move up the triangle (e.g., safety needs).

What is Herzberg's theory of hygiene motivation?

Herzberg outlines that hygiene factors do not motivate an individual, but they keep them from being demotivated and dissatisfied.

What three acquired needs are outlined in McClelland's theory?

1. Need for affiliation
2. Need for power
3. Need for autonomy

What components make up Deci and Ryan's self-determination theory?

Competency, Autonomy, and Relatedness.

How do equity theory and expectancy theory explain employee motivation?

Equity theory states that people judge what they earn relative to others and balance effort input against earnings output. Expectancy theory states that individuals expect their work input to be rewarded in output (financial, benefits, etc.).

What is the formula for labor turnover?

$$LT = \frac{\text{number of employees left}}{\text{total number of employees}} \times 100$$

What is the difference between time rate and piece rate pay?

Time rate is a financial motivator where an individual is paid for the time spent working, whereas piece rate pays an individual based on their amount of output or sales.

How does performance-related pay (PRP) differ from profit-related pay?

PRP refers to pay received based on how many items an individual sells, while profit-related pay is based on the total amount of profit the company makes.

What are fringe benefits in remuneration?

Fringe benefits are financial motivators consisting of additional elements included in a contract, such as a company car, housing, or health insurance.

What are the advantages and disadvantages of on-site training?

Advantages: less costly and specific to company equipment. Disadvantages: lower level of training, and managers lose time on other jobs when serving as trainers.

What are the advantages and disadvantages of off-site training?

Advantages: high level of training with an experienced trainer. Disadvantages: expensive travel costs and the company must find replacements while trainees are away.

What are the four organizational culture types named after Greek gods?

1. Power culture (Zeus): one clear leader makes all decisions.
2. People culture (Dionysian): people believe they are most important.
3. Role culture (Apollo): defined role within team represented through visual hierarchy.
4. Task culture (Athena): strong teamwork and collaboration among employees.

What is the difference between a culture clash and a culture gap?

A culture clash occurs when two company cultures do not align resulting in dispute (such as during mergers), whereas a culture gap is the difference between current company culture and desired company culture.

What is informal (grapevine) communication?

Informal communication is information communicated through unofficial channels, such as talking in the hallway or office.

What are four main barriers to communication?

1. Misinterpretation
2. Miscommunication
3. Technology
4. Distance

What is collective bargaining?

Collective bargaining occurs when one representative from each side (employers and employees) meet, present ideas, discuss concerns, and reach a binding agreement.

How do conciliation and arbitration work as conflict resolution methods?

Conciliation and arbitration bring in an independent third party to help resolve conflict. The third party makes a judgement that is final.

What is the difference between capital expenditure and revenue expenditure?

Capital expenditure is spending money on long-term investments (like machinery) to improve efficiency, while revenue expenditure is spending money on everyday expenses (like wages).

What is share capital as an external method of finance?

Share capital involves a private limited company becoming a public limited company (PLC) and selling shares on the stock market through an initial public offering (IPO).

What is an overdraft, and what is its primary drawback?

An overdraft is a loan taken out for more than what is currently in the business's bank account; its main drawback is that it often carries high interest rates.

What cost elements are represented in this cost graph?

The graph illustrates Fixed Costs (FC) as a horizontal line, Total Variable Costs (TVC) starting from the origin, and Total Costs (TC) starting from the Fixed Cost intercept and running parallel above TVC.

What is the difference between direct costs and indirect costs?

Direct costs are variable costs directly related to the sale of a product (expenses that won't occur if product isn't sold), while indirect costs are fixed costs not directly associated with product sales.

What are the formulas for Total Costs (TC) and Total Variable Costs (TVC)?

$TC = TVC + FC$$TVC = \text{Output} \times \text{Cost per unit sold}$

How does market orientation compare to product orientation?

Market orientation focuses on making products based on market wants/needs, guaranteeing customers. Product orientation focuses on what the business specializes in making, rendering it more cost-effective and efficient.

What is market leadership?

Market leadership refers to the top 2 or 3 companies that dominate the majority of the market share.

What is market segmentation?

Market segmentation refers to breaking down the market based upon demographic, psychographic, or geographic factors to make marketing easier.

How does niche marketing differ from mass marketing?

Niche marketing targets a small, well-defined market segment with specifically designed marketing, whereas mass marketing targets multiple market segments to appeal to a wider range of consumers.

What are the benefits and limitations of sales forecasting?

Benefits: predicts quiet vs. busy seasons for stocking and plans income to cover expenses in quiet months. Limitations: it is only a prediction and is almost impossible for new businesses lacking historical sales data.

What concept does this graph represent?

The Product Life Cycle curve showing R&D, Growth, Maturity, and Decline stages alongside corresponding BCG matrix classifications (Question mark, Star, Cash cow, Dog).

What are the four categories of the BCG matrix product portfolio?

1. Question mark: still being developed, requires large funding.
2. Star: product is growing, requires time to generate majority income.
3. Cash cow: main source of income.
4. Dog: decline phase, costing money and ending its life cycle.

What is product life cycle (PLC) extension?

PLC extension is the process of extending a 'dog' product's life cycle through methods like rebranding and repricing.

What is predatory pricing?

Predatory pricing is an illegal pricing method where a business continually lowers prices in hopes of forcing competitors out of business.

What is price elasticity, and what do values greater or less than 1 indicate?

Price elasticity is the ability of a business to shift pricing based on competitiveness and demand. A value $> 1$ means highly elastic and adaptable, while $< 1$ indicates a lack of competitors or refusal to change prices.

What are Above the Line (ATL), Below the Line (BTL), and Through the Line (TTL) marketing?

ATL is mass marketing with no defined target market (e.g., TV ads, billboards). BTL is small-scale marketing targeting a well-defined segment (e.g., samples in PaknSave). TTL is a combination of both ATL and BTL.

What are zero, first, and second level distribution channels?

Zero level: manufacturer sells directly to customer (0 intermediaries). First level: manufacturer sells to retailer who sells to customer (1 intermediary). Second level: manufacturer sells to wholesaler who sells to retailer who sells to customer (2 intermediaries).

What role do People, Process, and Physical Evidence play in the extended 7 Ps marketing mix?

People: employee appearance, attitude, and efficiency impact service and customer experience. Process: efficiency in payment, waiting time, customer care, and delivery. Physical evidence: physical objects given or bought by customers (e.g., tickets, show bags).