business unit 3 aos 1 - business foundations

types of structures

• sole trader

• partnership

• public listed company

• private limited company

• social enterprises

• government business enterprises (GBE)

unincorporated business

a business is not a seperate legal entity from its owner

unlimited liability

business owner is fully responsible for business debts or harm due to not being seperate legal entities

sole trader

owned and operated by one person
- name must be registered to ASIC if its different to BO name

evaluating sole traders

positives:
- owner has complete control over business decisions
- owners right to keep all profits

negatives:
- unlimited liability
- significant burden of management due to working alone

partnership

owned and operated by 2-20 people
- general: partners have unlimited liability
- limited: liability to partners is limited to portion of investment
- seperate tfn and lodge own tax return
- after taxes, profits are divided according to agreement

evaluating partnerships

positives:

• shared responsibility and workload

• pooled funds and talents - variety of expertise and ideas, potential for expansion
  

negatives

• unlimited liability

• disputes affect cooperation

incorporated

business and owner are seperate legal entities - becomes a registered company

limited liability

shareholders are legally responsible for the debts of a company only to the extent of the nominal values of their shares

private limited company

1-50 non employee shareholders (must be offered and approved by owners)
- one director has overall responsibility for managing
- identified by pty ltd

evaluating pty ltd companies

positives:
- limited liability
- greated variety of expertise due to experience management

negatives:
- taxed on profits or dividends, and income from company to shasreholder is taxed as personal income
- cost of formation is more expensive than sole trader or partnership

public listed company

shared are available to the public and are purchased on the ASX
- min one shareholder, no max
- required to publish audited financial accs each year

evaluating public lsited companies (similar to pty ltd)

positive:
- additional capital through issuing shares
negative:
- more legal compliance
- complex structure

social enterprise

primary objective of fulfilling a social need whilst still aiming to make a profit (reinvested to meet objectives)
- reliant on govt funding and grants

evaluating social enterprises

Positives:

• Meeting social needs can have a positive effect on profit and market share

• Open up new markets by targeting needs traditional businesses choose not to (little competition)

Negatives:

• significant operating costs as SE take on costs that conventional businesses would not (in relation to CSR)

• Difficulty in focusing on both social and financial objectives (pursuing social goals increases costs, pursuing financial goals requires cost cutting)

GBE

govt owned and operated
- make profit whilst carrying out govt policies
- aims to increase value and returns for their shareholder (govt)

evaluating GBEs

Positives:

• able to carry out government policies delivering community services in areas where private sector businesses might hesitate to invest (fill gap in the market)

• provision of healthy competition to businesses operating in the private sector (due to their low prices as they do not solely aim to make a profit) - lowering prices in the markets where GBEs are operating (avoids private sector businesses from overcharging)

Negatives:

• political pressures and influence can affect decisions and operations of the business (to benefit politics rather than customers) which can impact long term success

• management of GBEs can be less effect than that of a private sector because they face more government rules, slower decision-making processes, and less pressure to maximise profit.

business objectives

• To make a profit
• To increase market share
• To improve efficiency
• To improve effectiveness
• To fulfil a market need
• To fulfil a social need
• To meet shareholder expectations

to make a profit

aim to generate higher revenue than expenses to make profit and avoid loss

increase market share

make product/business more competitive to boost sales and increase revenue

improve efficiency

using fewer resources to produce same number of output (reduces operating costs = more profit)

improve effectiveness

the capacity of the business to meet objectives
• consistently make a profit, implement strategies to increase market share
• skilled, engaged and motivated staff are better positioned to achieve its objectives

fulfil a market

identify a product or service that is not available (gap) in the market that is desired and produce that product that people would purchase (filling it)

fulfil a social need

providing goods or services that will improve quality of life in the community

meet shareholder expectations

• maintain/grow share price
• pay out valuable dividends

stakeholders

• owner (incl. shareholders)

• manager

• employees

• customers

• suppliers

• general community

interest of owners

want business to make profit as their income and wealth is dependent on its success

interest of shareholders

receiving a return on their investment - value of shares and amt of dividends affected by business success

interest of managers

• fairly renumerated when business performs well and achieves its objectives

• maintianing socially responsible practices to increase sales

• satisfy stakeholder expectations whilst maintaing secure position

interest of employees

• fair pay

• proper training

• ethical treatment

• job security

interest of customers

• awareness of socially responsible business - influences purchasing decisions

• high quality goods/services for fair pricies

• market needs addressed

interest of suppliers

• provide quality materials to produce high quality goods and services

• reliable and timely delivvery in correct quanitity

• good business performance = more demand for materials

interest of general community

• expect business to contribute positively to society when it benefits from the resources and support that society provides

• show concern for future welfare through their own employment within businesses

• show concern for environment, social issues and economic conditions (TBL)

potential conflicts

owners vs employee conflicts

owners want to maximise return on profit whilst minimizing expenses, done so by reducing wages/hours, upset employees and have a financial impact on them

managers vs customers conflicts

implement strategies on behalf of the owner to achieve their interests (profit)) and business objects, by increasing prices, lowering quality - conflicts customer expectations for well priced goods and quality service

suppliers vs general community

partake in unethical practices to reduce costs and maximise profits, conflicting with the interests of general community

managers vs suppliers

management wants to keep costs down to improve profits, but suppliers want to charge higher prices for raw materials to cover their costs and make profit

management styles

• autocratic

• persuasive

• consultative

• participative

• laissez-faire

autocratic

owner/manager assertively dictates objectives and how they are achieved

evaluating autocratic management style

positive

• control retained by manager allows for clearly defined directions and procedures, limiting uncertainty

• time efficient due to lack of consultation or discussion

negatives

• control retained by manager can cause them overwork and deal with pressure alone

• no discussion discourages employee input, leading to lost opportunities for better decisions → negative morale

persuasive

owner/manager dictates objectives and how they are achieved through persuasion (justifies why their way is right)

evaluating persuasive management style

positive

• control retained by manager allows for clearly defined instructions

• more likely to gain trust and support compared to autocratic

negatives

• poor communication leads to less considered decisions

• employees may not feel empowered

consultative

owner/manager asks for employees opinion before making the ultimate decision themselves

evaluating consultative management style

positive

• enhanced decision making as ideas are expanded and shared

• seeking employee input increases satisfaction

negatives

• consultation slows down decision making process

• possibility of resentment if employee suggestions are ignored

participative

decision-making responsibility is shared with the employees to create a consensus decision

evaluating participative management style

positive

• recognises skills and abilities of employees, empowering them to make decisions

• optimal job satisfaction as employees feel that they have played an active role

negatives

• reaching decisions can be time consuming when considering differing views

• conflict and disagreement can arise with different opinions being shared

laissez-faire

employees are totally responsible for decision-making and operations of the business, and the manager has no central role or power

evaluating laissez-faire management style

positive

• trusting and empowering for employees, providing a sense of ownership

• creative ideas can arise given the high degree of individual responsibility

negatives

• can potentially lead to a loss of control or conflicts arising between staff over direction

• focus on meeting objectives can erode due to too much freedom, causing the business to fail

appropriateness of management style

• nature of the task

• time

• experience of employees

• manager preference

nature of task

• urgent and vital tasks lead to a greater desire for the manager to take control (autocratic leaning)
• more creative tasks that would benefit from team discussions and input are more laissez-faire leaning.

time

• tighter deadlines are more autocratic leaning

• extended timeframe may be more participative

experience of employees

• autocratic style is more appropriate for inexperience employees as it may not be worth asking their opinion and instead need to be ‘instructed’

• highly experienced staff should be trusted for their opinion and are left to their own decision making via laissez-faize style

manager preference

a manager will often utilize a management style that matches their personality, beliefs, skills or values

management skills

• communication

• delegation

• planning

• leadership

• decision-making

• interpersonal relationships

communication

the transfer of information from a sender to a receiver

delegation

transfer of responsibilities from a manager to an employee to carry out specific activities

planning

the process of determining the strategies required to best achieve a business objective

• strategic: long term plans (2-5 yrs)

• tactical: medium term (1-2 yrs)

• operational: short term (daily, weekly)
  

SOS AIM • Set • Objective • SWOT analysis • Alternatives • Implement • Monitor

leadership

guiding the business and its employees towards achieving its objectives

• clear vision

• sharing that vision with others

• coordinating and balancing conflicting interests of stakeholders

decision making

the process of purposely choosing a course of action from a set of alternatives to achieve business objectives

interpersonal relationships

employees ability to build positive relationships with others while getting the job done

relationship b/w management styles and skills

skills for autocratic management

• communication: one way, ensure that the message is delivered correctly the first time - dont rely on feedback for clarification

• delegation: sole decision maker, decides on the delegation of tasks without other opinions

• planning: setting objectives and action plans that employees are expected to follow without input

skills for persuasive management

• communication: one-way, no feedback, in a persuading way, explains and gives justification for decisions

• leadership: directing and guiding employees through one way communication

• interpersonal: taking account of employees to adjust the way info is communicated

skills for consultative management

• communication: two way, ask for feedback before making the ultiamte decision

• decision-making/leadership: consider all ideas employees and actually makes the final decision

• interpersonal: encourages two way communication and employees feel comfortable sharing their ideas

skills for participative management

• communication: two way communication between employees to express their ideas (may need to be constrained due to time-consuming nature)

• leadership: guides the groups vision to make a decision

• decision making: decision is made jointly by the group and manager

skills for laissez-faire management

• communication: two way, providing minimal guidance and allows employees to communicate and make decisions independently

• delegation: handing responsibility of tasksfor employee to work on individually

• planning: manager outlines terms and due dates of a project before employee works on it

corporate culture

the shared values, beliefs and practices of a business

• official

• real

official culture

the values and beliefs that a company is conveying to the public

• logos

• mission statement

• symbols

• slogan

real culture

the actual values and beliefs present in a company observable from:

• behaviour

• language, treatment

• celebration of events

• policies, procedures