Business Management Unit 3 AOS 1 (Business Foundations)

All Types of Businesses

- Sole Trader
- Partnership
- Private Limited Company
- Public Listed Company
- Social Enterprise
- Government Business Enterprise

Sole Trader

- One Owner
- Name must be registered if different from own name
- Owner and the Business are the same legal entity
- Unlimited Liability
- Profit payed as PAYG tax

Sole Trader Advantages (3)

- Low entry and operation costs
- Owner keeps all of the profit
- Profit is taxed as personal income

Sole Trader Disadvantages (3)

- Unlimited Liability for all debts
- Business will die with the owner
- All management is by one person

Partnership (4)

- Owned by 2-20 People
- Unlimited Liability for all partners
- Requires a seperate Tax File Number (TFN) from the partners
- Once profits are divided it is treated as personal income

Partnership Advantages (2)

- Low cost to start and operate
- Shared Workload

Partnership Disadvantages (3)

- Unlimited Liability
- Possibility of Disputes
- Difficult finding a suitable partner

Incorporation (1)

The process a business goes through to become a registered company and a seperate legal entity from the owner

What is the ASIC and what does it do when incorporating (1)

- Australian Securities and Investments Commision
- Will issue a certificate of incorporation and an ACN (Australian Company Number)

Private Limited Company (Ltd) (4)

- At least one shareholder and a max of 50 non-employee shareholders
- Shareholder can only sell shares to those approved by the director
- Not listed on the Stock Exchange
- Requires at least one director

What is a Director (1)

- People who an overall responsibility for managing a company's activities

Private Limited Company Advantages (3)

- Limited Liability
- The business does not die when a shareholder dies
- Company tax rates being lower then personal ones

Private Limited Company Disadvantages (2)

- High cost of formation
- Required to produce annual report of audited accounts

Public Listed Company (Ltd) (4)

- Shares of the company are listed on the ASX
- A minimum of 3 directors
- Required to publish financial accounts each year
- No maximum number of shareholders

Public Listed Company Advantage (2)

- Can generate capital buy selling shares
- Same advantages as a private limited company

Public Listed Company Disadvantages (2)

- Follow strict rules
- Subject to public scrutiny

Social Enterprise (3)

- Primary purpose is to fulfil a social need
- A majority of profit will be reinvested, at least 50%
- They exist to benefit society rather then make money

Social Enterprise Advantages (2)

- May meet needs that commercial business choose not to do
- Can have a positive effect on profits and market share

Social Enterprise Disadvantages (3)

- Difficult to obtain finances
- Significant operating costs
- Difficult to focus on social and financial objectives

Government Business Enterprise (5)

- Government owned and operated
- Carry out government polices
- Aim to earn a profit
- Government maintains a strong interest in preformance
- Examples: Aus Post, Vic Roads

Government Business Enterprise Advantages (2)

- Provides healthy competition
- Able to carry out Gov policies where other companies may not want to

Government Business Enterprise Disadvantages (2)

- Political interference in day-to-day operations
- Can be less accountability resulting in low productivity

Types of business objectives (7)

- Make a profit (Increasing sales, expanding)
- Increase market share
- Improve efficiency (Up to date tech, high skilled workers)
- Improve effectiveness (How successful the objectives are met)
- Fulfil a market need (Gap in the market)
- Fulfil a social need (Making the world a better place)
- Meet shareholder expectations (Return profit to shareholders)

Efficiency (1)

how well a business uses resources to achieve objectives

Effectiveness (1)

the degree to which a business has achieved its stated objectives

What is a stakeholder (1)

Groups or individuals who interact with the business and have a vested interest in its activities

All business stakeholders (6)

- Owners
- Managers
- Employees
- Customers
- Suppliers
- General community

Owners Interests (3)

- Want their business to make a profit
- Want the business to conduct itself in a socially acceptable manner
- Owners have more vested interest then shareholders

Managers Interests (3)

- Want the business to perform financially well, and expect fair remuneration in return
- Want the business to be socially responsible
- Need to satisfy shareholders/owner expectations

Suppliers Interests (3)

- Provide high quality materials delivered promptly
- Expected to be paid promptly and in full
- Establish good relationships

Employees Intrests (3)

- Expected to be paid fairly, trained properly and treated ethically in response for their work
- Want job security in the long run
- Safe working conditions

Customers Interests (2)

- Expect quality products at reasonable prices
- Want a socially responsible business to purchase from

General community (3)

- Expect the business to give back to the community
- Expect the business to employee locally
- Expect the business to care about the environment

Employee and owners conflicting intrests (2)

- Employees want safe working conditions and increased wages
- However this might result in reduced profit for the owner

Management and customers conflicting interests (2)

- Attempts to increase profit to meet shareholder expectations
- Upsets customers as they want cheaper products

Suppliers and the General community conflicting interests (1)

- Suppliers may use unethical practices to reduce costs but upset members of the community

Corporate Social Responsibility (1)

Obligations business have above its legal responsibilities to the wellbeing of employees, customers, shareholders and community as well as the environment

Why do businesses act socially responsible (3)

- Increase amount of customers willing to purchase your products
- Increase employees willing to work
- Increase suppliers willing to work with you

What happens when a business lacks CSR (3)

- Lose a competitive advantage
- Damage reputation
- Losing customers

Management Styles (5)

- Autocratic
- Persuasive
- Consultative
- Participative
- Laissez-Faire

Factors in deciding what management styles (4)

- The Nature of the task
- Time requirements
- Experience of employees
- Managers Preference

Autocratic Management Style (4)

- Tells staff what decions have been made
- Centralised decision-making
- Motivates through disciplinary action
- Communication is one-way

Advantages of an Autocratic Management Style (3)

- Directions and procedures are clearly defined
- Easy to manage employee performance
- Effective time use, problems are dealt with quickly

Disadvantages of an Autocratic Management Style (3)

- Employees skills don't develop
- Increases employee turnover and absenteeism
- Decreased employee satisfaction

When is Autocratic best used? (2)

- When business need tasks done quickly
- If employees are inexperienced

Persuasive management style (4)

- Manager sells employees on decisions
- Centralised
- One way communication
- Reassurance that the decision is the best

Advantages of a Persuasive management style (3)

- Managers gain trust and support
- Employees believe their feelings are considered
- More acceptance of negative situation

Disadvantages of a Persuasive management style (2)

- Communication is poor and one way
- Employees are denied full participation in decision making

When is Persuasive best used? (3)

- When tasks need to be completed quickly but are not super urgent
- When employees are inexperienced
- When the nature of the task does not benefit the employee

Consultative Management Style (4)

- Managers discuss decisions with employees
- Two-way communication process
- Final decision making remains with the managers
- Asking

Advantages of a Consultative Management Style (3)

- Greater variety of ideas
- Increased employee motivation and satisfaction
- Decisions better discussed, tasks completed more efficiently

Disadvantages of a Consultative Management Style (3)

- Slower process due to time taken to consult
- Needs to be consistent otherwise staff will be uncertain
- Some ideas will be ignored leading to conflict

When is Consultative best used? (3)

- When a business has time to ensure the best option is used
- When employees have some experience
- When a task requires input

Participative Management Style (4)

- Manager shares decision making with employees
- Decentralized, Two-way communication
- Employees can implement their own solutions
- Dicussing

Advantages of a Participative Management Style (3)

- Good employee manager relationships
- High employee motivation and job satisfaction
- Employees learn new skills

Disadvantages of a Participative Management Style (3)

- Time consuming
- Quality may suffer as compromises are made
- Not all employees want to contribute

When is Participative best used? (3)

- When a task has a long time limit
- When employees are experienced
- If the task requires creativity or inovation

Laissez-Faire Management Style (4)

- Employees responsible for workplace operations
- Decentralised
- Employees operate individually or in a small group
- Tasks are Delegated to empoyees

Advantages of a Laissez-Faire Management Style (3)

- Employees feel a sense of ownership
- Encourages creativity
- Communication is open and ideas are discussed and shared

Disadvantages of a Laissez-Faire Management Style (3)

- Potential misuse of resources as management has no control
- Employees can ignore objectives leaving the business failed
- Management can not sort out personal conflicts

When is Laissez-Faire best used? (4)

- When there is no time limit or lose deadlines
- When employees are very experienced
- When creativity and innovation are needed

Contingency management theory (1)

The flexibility and adaptation of management styles to suit the situation

Management skills (6)

- Communication
- Delegation
- Planning
- Leadership
- Decision-making
- Interpersonal skills

Communication (2)

- The transfer of information from a sender to a receiver, and listen to feedback
- It can be verbal (Words or written form) or non-verbal (body language and visual)

Benefits to Communication (2)

- Helps to maintain good relationships
- Let staff know what is expected

Drawbacks to Communication (2)

- Time consuming
- Cause distractions

Delegation (2)

- The ability to transfer authority and responsibility from a manager to an employee to carry out specific activities
- Manager remains accountable for employees actions

Benefits to Delegation (2)

- Manages time effectively
- Allows employees to learn new skills

Drawbacks to Delegation (1)

- Employees may misuse their power

Planning (1)

- The ability to define business objectives and decide on the methods or strategies to achieve them

Benefits of Planning (2)

- Gives the business purpose and direction
- Encourages employee motivation

Drawbacks to Planning (2)

- Time consuming
- Creativity can be hindered as everything must be planned

Levels of Planning (3)

- Strategic (Long term) Planning: 2-5 Years
- Tactical (Mid-term) Planning: 1-2 Years
- Operational (Short term) Planning: day-to-day operations

The planning process (5 Steps)

- Step 1: Define the objective
- Step 2: Analyse the environment (SWOT Analysis)
- Step 3: Develop alternative strategies
- Step 4: Implement an alternative
- Step 5: Monitor and evaluate progress

Leadership (3)

- The ability to influence or motivate people to work towards the achievement of business objectives
- Transactional leaders rewards staff for good work
- Transformational leader inspires staff

Benefits to Leadership (2)

- Motivated employees
- Higher productivity and meeting business objectives

Drawbacks to Leadership (2)

- May not contribute to productive activities
- Staff may feel as if they can not relate to the managers

Decision making (1)

- Process of choosing best alternative from a range of different options, to bring an unacceptable situation to an end

Benefits of Decision making (2)

- When working on your own decision making can be fast
- When working in a group better decisions will be reached

Drawbacks of Decision making (2)

- When working on your own decisions may not be the best
- When working in a group decision making can be long

Interpersonal skills (1)

- The ability to deal with people and build positive relationships with staff

Benefits of Interpersonal skills (1)

- Inspire and influence staff
- Greater staff morale and higher productivity

Drawbacks of Interpersonal skills (2)

- Long time to learn this skill
- Managers may abuse it by manipulating employees into siding with them

Autocratic Manager Skills (6)

One way or Two way Communication: One Way

What is being Delegated: Tasks

Who is responsible for Planning: Manager

Transactional or Transformational Leading: Transactional

Centralised or Decentralised Decision making: Centralised

Little or Abundant Interpersonal Skills: Little

Persuasive Manager Skills (6)

What type of Communication: One Way (includes reasoning for decisions)

What is being Delegated: Tasks

Who is responsible for Planning: Manager

Transactional or Transformational Leading: Transactional

Centralised or Decentralised Decision making: Centralised

Little or Abundant Interpersonal Skills: Little

Consultative Manager Skills (6)

What type of Communication: Two Way

What is being Delegated: Responsibility

Who is responsible for Planning: Employees

Transactional or Transformational Leading: Transformational

Centralised or Decentralised Decision making: Centralised

Little or Abundant Interpersonal Skills: Abundant

Participative Manager Skills (6)

What type of Communication: Two Way

What is being Delegated: Decision Making

Who is responsible for Planning: Employees

Transactional or Transformational Leading: Transformational

Centralised or Decentralised Decision making: Decentralised

Little or Abundant Interpersonal Skills: Abundant

Laissez-Faire Manager Skills (6)

What type of Communication: None

What is being Delegated: Decision Making

Who is responsible for Planning: Employees

Transactional or Transformational Leading: None

Centralised or Decentralised Decision making: Decentralised

Little or Abundant Interpersonal Skills: Little

Corporate Culture (1)

- The values, ideas, expectations and beliefs shared by members of the business that guide collective attitudes, behaviours and decision making

Official Culture (2)

- Values and beliefs adopted by the organisation
- Revealed in the policies, objectives or slogans

Real Culture (2)

- Values and beliefs actually prevailing in the organisation
- Revealed in the way staff dress, language staff use and the way they treat each other

Ways to develop a positive corporate culture (4)

- Reward employees who embrace culture
- Establish policies and procedures
- Use symbols such as logo, uniforms and lanugage
- Establish positive relationships between managers and staff

-Training of business values

Benefits of a positive culture (3)

- Improved productivity
- Increased job satisfaction
- Achieve all business objectives

Elements of corporate culture (4)

- Values and practices (The way things are done)
- Symbols (Represents something the business believes in)
- Rituals (Routines)
- Heroes (Successful employees)