Business studies

Need

A good or service that is essential for people's living

Want

A good or service which people want to have, not essential

Economic problem

When wants exceed the resource available to make scarcity

Scarcity

when there are unlimited wants but limited resources

Factors of Production (4)

Land, labor, capital, enterprise

Opportunity cost

The next best alternative choice given up as another was chosen

Specialization

When workers specialize in one task which they do, best at

Division of labor

When labor force is divided into sections in which people at those sections are specialized in one particular job

Purpose of business activity

Combine 4 factors of production and make products/services

Added value

Selling price - cost of making products

Primary sector

Where people extract natural resources from earth and turn them into raw materials

Secondary sector

Turn raw materials into products

Tertiary sector

Provide services to customers and sell products

De-industrialization

Decline of importance for secondary sector

Mixed economy

Has private and public sector businesses

Private sector

Businesses own by individuals

Public sector

Businesses own by the government

Capital

Money (invested into a business)

Entrepreneur

A person who combines all 4 factors of production together

Qualities of an entrepreneur

Risk-taking, confident, patient, optimistic, creative, hard-working

Business plan

A plan which outlines a business' objectives, name of organization, finance and owners of business

Capital employed

Amount of money invested into a business

Comparing the size of businesses (4)

Number of employees, output, sales and capital employed

Why owners want business to grow

More profit, status, lower average costs, more market share

Expansion problems (4)

Bad communication, management, increase expansion costs

Why business want to stay small

Nature of product/service, owner wants, market size

Why business fail

Poor management (finance), communication, rapid expansion, failure plan to change, risks when start up

Internal growth

Growth within the business (more branches, expansion)

External growth

Growth outside of the business (integration, etc.)

Merger

When two businesses agree upon joining together into one

Takeover

When a business buys another business firm and make into one

Horizontal integration

Joining with another business in the same sector

Vertical integration

Joining with another business in a different sector (forward, backward vertical integration)

Conglomeration integration

When a business merge with another of a different industry

Diversification

Sole trader

When a business is owned by one single person

Limited liability

There is a limitation in the liabilities of shareholders

Unlimited liability

There are no limitations in the liabilities of shareholders

Partnership

When a business is owned by two or more people

Partnership agreement

A document which shows the agreement of people within a partnership company

Unincorporated business

A business which does not have a separate legal identity (sole)

Incorporated businesses

A business which has a separate legal identity

Shareholders

People who have shares in a business, usually owners

Limited company

Type of business in private sector where shares may be issued

Private limited company (Ltd)

Private sector business with no more than 25 owners who may buy and sell shares

Public limited company (plc)

Private sector business which can sell shares to the public

Annual general meeting

An annual meeting held for shareholders of plc

Dividends

Money pay back to shareholders when profit is made

Joint ventures

When two or more businesses agree to do a project together

Franchising

When the brand name and operations of a certain business is bought by another business

Public corporation

Businesses which are owned and operated by the government

Business objective (6)

1. Make profit 2. Survival in industry 3. Increase market share 4. Pay back to shareholders 5. Growth 6. Service to community

Profit

Income of a business

Social enterprises

Business with social objectives as an aim to make profit

Market share

proportion of product/service in the total market

Why business objectives change

1. Business facing economic problems 2. Want to earn more market share and return to shareholders 3. Owners aim to expand business

Stakeholder (7)

Banks, investors, employees, entrepreneurs, people

Motivation

The reason why employees work hard and efficiently

Motivation theories:

• F.W Taylor

Workers work mainly for money (motivation factor)

• Maslow (6)

Hierarchy of needs: psychological needs, health and safety, social needs, esteem (recognition), self-actualization (promoted)

• Herzberg (motivators, hygiene)

Has motivators (promotion, recognition) and hygiene (mandatory to satisfy before motivators: health and safety, relationships, salary, statues, etc.)

Financial rewards:

• Wages Payment for work, usually weekly - time rate Paid based on number of hours worked - piece rate Paid based on number of products made - salaries (rewards: commission, profit sharing, bonus, performance-related pay, share ownership) Payment for work, paid monthly - commission: extra money given based on sales made, hoa hồng - profit sharing: get money which comes from the business profit - bonus: extra money paid as reward at the end of the year - performance-related pay: extra pay based on how well worked, used appraisal to access performance - share ownership: employees may own shares of the company

Non-financial rewards:

• fringe benefits Non-financial rewards given to employees (cars, house, school for children, healthcare, holidays) - job satisfaction (job rotation, job enlargement, job enrichment, team working) The good feeling derived from doing the job well - job rotation: switch stations with different jobs around at specific times, then change back - job enlargement: give more tasks to do at the same level - job enrichment: give more tasks to do at a higher level - team working: work together as a group to complete a product

Organizational structure

Refers to the levels of employees in a business organization

Chain of command

A structure which outlines the path of communication

Span of control

The amount of subordinates under a level of management

Role of management (5)

Planning, organizing, coordinating, commanding, controlling

Delegation

Giving a task to a subordinate + less work on shoulder - work may not be done well + subordinate feels trusted - subordinate may do a better job

Autocratic leadership

Type of leadership which the managers assign employees specific tasks to do and they have no involvement in decisions

Democratic leadership

Type of leadership which employees are involved in decision making

Lasseiz-faire leadership

Type of leadership which managers give employees the business objective and they are given the choice of choosing how they want to complete the task

Trade union

A group of people gathered together to fight for fairness in a business

Recruitment and selection process (8)

1. Job vacancy arises 2. Job analysis 3. Job description 4. Job specification 5. Advertisement 6. Applications short-listing 7. Interviews and final selection 8. Vacancy filled

Job analysis

Analyze and list out the responsibilities and tasks of that job

Job description

Make a description of all of the responsibilities, tasks for that job

Job specification

Make a document with requirements and qualifications for job

Internal recruitment

Recruit employees within the business structure, ~promotion

External recruitment

Recruit employees outside of the business

Part time workers

Workers who work only for a certain amount of time, 30-35h

Full time worker

Workers who work full working time set by a business, 35h/week

Induction training

Training which informs the new employee about the organizational structure of the business, activities, employees

On the job training

Training given on the spot by current employees, such as demonstrating how the job is done

Off the job training

Training given away from workplace, often by a specialist

Workforce planning

Planning out the number of workers need for the business

Redundancy

Dismissal of employees not because of bad work but because they are no longer needed

Industrial tribunal

A meeting where workers' complaints are considered because of unfair dismissal or discrimination at work

Contract of employment

A contract which shows that the employee is working for a company, legal agreement also listing the rights and responsibilities of workers

What is effective communication

When a message is passed to another person and the sender receives a response from or understood by receiver

Internal communication

Communication within a business organization

External communication

Communication outside of business organization with another

Process of effective communication

The sender sends the message through appropriate medium to receiver and receiver sends back a response show understanding

One way communication

Communication in one direction, no reply

Two way communication

Communication in which a reply is expected

Choosing appropriate communication method (7)

1. Who is sending 2. Who is receiving 3. Content of message 4. Speed 5. Costs 6. Importance of response 7. Importance of written record

Communication methods (3)

1. Verbal a. Meeting, talks, video conferencing 2. Written a. Emails, reports, memos, business letters, notice, text 3. Visual a. PPT presentation, video clips, posters, photo

Market share

Proportion/share of the company on the total market

The role of marketing (4)

1. Identify customer needs 2. Satisfy customer needs 3. Anticipation changes in customer needs 4. Gain relationships with customers

Why customer spending pattern change (4)

1. Advancement in technology 2. Taste in fashion/trend changes 3. Change in income 4. Aging populations

Why some markets become more competitive (3)

1. globalization 2. transportation improvements 3. e-commerce