Business Management Unit 3 AOS 1

Types of Businesses

Sole trader, Partnership, Private Limited Company (Pty Ltd), Public Company (Ltd), Social Enterprise, Government Business Enterprise (GBE)

Sole Trader (Definition)

A business structure that is owned and operated by one individual.

Ad's of Sole Trader

-Simple and inexpensive to establish

- Owner has total control and decision-making power

- Owner keeps all profits

Disad's of Sole Trader

- Unlimited liability, i.e. Liable for all debts incurred

- Reliant on owners' talents and skills

- Harder to get finance (loans) from banks

Partnership (Definition)

A business owned and operated by a minimum of two to twenty owners.

Ad's of Partnership

- Relatively simple and inexpensive to establish

- Risk shared between partners

- Broader access to Capital ($), Skills and Knowledge

Disad's of Partnership

- Unlimited liability - liable for debts incurred by partners

- If one partner leaves, it could be time-consuming to restructure partnership

- Potential for disputes and conflict among partners

Private Limited Company (Definition)

Is an incorporated business structure that has at least one director and a max of 50 shareholders.

Ad's of Private Limited Company

- Limited liability (to the value of original investment)

- Is a separate legal entity (company can be sued and can sue)

- The business's existence is not threated by the removal of one director

- Greater access to capital

Disad's of Private Limited Company

- Complex reporting requirement (annual reports)

- Complex to establish, as setup process requires more time

- Stricter government regulation

Public Listed Company (Definition)

an incorporated business that has an unlimited number of shareholders obtained through listing and selling shares on the ASX.

Ad's of Public Listed Company

- Limited liability (to the value of the original investment).

- Is a separate legal entity (company can sue and be sued).

- No permission is needed to trade and sell shares.

- The life of the company can live longer than the directors.

- Greater access to capital.

Disad's of Public Listed Company

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

- Complex to establish, as the setup process requires more time.

- Increased government regulation

Social Enterprise (Definition)

a type of business that aims to fulfill a community or environmental need by selling goods or services.

Ad's of Social Enterprise

- The community benefit from the business's activities.

- The business can develop a positive reputation as they are helping and contributing to society.

- Employees have purposeful work so likely to be satisfied with their job.

Disad's of Social Enterprise

- Difficult to balance the achievement of financial and social objectives.

- Difficult to obtain a bank loan as business does not solely focus on financial objectives.

Government Business Enterprise (Definition)

a business that is owned and operated by the government.

Ad's of Government Business Enterprise

- Can rely on the government for initial investment.

- Delivers goods and services that help the community and the community needs.

- Provides healthy competition to the private sector.

Disad's of Government Business Enterprise

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

- GBE's follow the excessive rules and formalities.

- Productivity may be lower than private sector as there is no economic benefit.

Business Objective (Definition)

The goals a business intends to achieve.

To Make A Profit (Definition)

The total revenue earned minus the total expenses incurred.

To Increase Market Share (Definition)

is a business's percentage of total sales within an industry.

To Meet Shareholders Expectations (Definition)

Shareholders expect to make a return on their investment.

To Fulfill a Market Need (Definition)

is when a business fills a gap in the market, which involves addressing customer needs that are currently unmet or underrepresented.

To Fulfill a Social Need (Definition)

is improving society and the environment through business activities.

To Improve Efficiency (Definition)

is how productively a business uses its resources when producing a good or service.

To Improve Effectiveness (Definition)

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

Stakeholders (Definition)

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

Owners (Definition)

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

Managers (Definition)

Individuals who oversee and coordinate a business's employees and lead its operations to ultimately achieve the business's objectives.

Employees (Definition)

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

Customers (Definition)

Individuals or groups who interact with a business by purchasing and utilising its goods and services.

Suppliers (Definition)

Individuals or groups that source raw materials, component parts, and then processed materials and sell them to a business for us in the production of its goods and services.

General Community (Definition)

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.

Management Style (Definition)

the approach and manner in which employees are directed and motivated within a business. They are characterised in terms of communication flow and decision-making style.

Communication Flow (Definition)

the direction of information transfer between managers and employees, which can occur in a one-way or two-way manner.

Decision Making Management Style (Definition)

determining a course of action for a business from a set of alternatives. Either centralised or decentralised

Management Styles

- Autocratic

- Persuasive

- Consultative

- Participative

- Laissez-faire

Autocratic (Definition)

involves a manager making decisions and directing employees without any input from them. It features centralised decision-making and one-way communication.

Ad's of Autocratic

- Employees have clearly defined roles.

- Decision-making can be quick.

- Faster work process.

Disad's of Autocratic

- All solutions and ideas come from potential limited views of manager.

- Low employee motivation.

- May increase costs associated with replacing employees.

Persuasive (Definition)

involves a manager making decisions and communicating the reasons for those decisions to employees without their input. It features centralised decision-making and one-way communication.

Ad's of Persuasive

- Managers may gain employee trust and support by explaining the reasons for decisions.

- Employees have clearly defined roles.

- Employess may feel a greater sense of involvement and engagement.

Disad's of Persuasive

- Explaining the reason behind decision making is time-consuming.

- Employee motivation may be low as they are excluded from decision making.

- Solutions and ideas come from potentially limited views.

Consultative (Definition)

Involves a manager seeking input from employees on business decisions but making the final decision themselves. It features centralised decision making and two-way communication.

Ad's of Consultative

- Managers can gain multiple perspectives and ideas leading to more informed decision making.

- Employees feel more motivated when contributing ideas.

- Multiple perspectives = increased quality of decisions = potential increase in sales and profits.

Disad's of Consultative

- Employees may offer unsuitable suggestions due to not understanding.

- Employee conflict if ideas are ignored.

- Can take longer time to make decisions.

Participative (Definition)

involves a manager sharing information with employees so that employees can participate in decision making. It features decentralised decision making and two way communication.

Ad's of Participative

- Quality of decisions improve (more people = more ideas)

- Employees feel more motivated contributing ideas.

- Employees grow and develop skills and experiences.

Disad's of Participative

- Accommodating multiple perspectives may decrease quality of decision.

- Potential conflict when there is a disagreement.

- Time consuming to collate ideas and reach consensus.

Liassez-Faire (Definition)

- involves a manager communicating business objectives to employees and giving them freedom to make decisions independently. It features decision making and two way communication.

Ad's of Laissez-Faire

- Fosters a creative and innovative environment.

- Increased motivation as employees feel empowered.

- Collaboration between employees leads to more insights and innovation = more sales and profit.

Disad's of Laissez-Faire

- Loss of control by management to reach business objectives.

- Conflict if individuals don't collaborate well.

- Potential for poor decisions to be made.

Factors Affecting Appropriateness of Management Style

- Time

- Experience of employee

- Nature of the task

- Manager preference

Management Skills

- Planning

- Decision Making

- Communication

- Delegation

- Interpersonal

- Leadership

Planning (Definition)

The process of determining a business's objectives and establishing strategies to achieve these aims.

Decision Making (Definition)

Is the skill of selecting a suitable course of action from a range of plausible options.

Communication (Definition)

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

Delegation (Definition)

Is the skill of assigning work tasks and authority to other employees who are further down in a business's hierarchical structure.

Interpersonal (Definition)

The skill of creating positive interactions with other employees, to foster beneficial professional relationships.

Leadership (Definition)

The skill of motivating others in order to achieve a business's objectives.

Corporate Culture (Definition)

is the shared values and beliefs of a business and its employees

Official Corporate Culture (Definition)

the shared views and values that a business aims to achieve, often outlined in a written format.

Real Corporate Culture (Definition)

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