Business Managment Unit 1- Business Organisations and Environments

Higher Level

Define human resources

Management of the workforce and deals with recruitment, wages, communications and motivation

Define goods

Physical articles that have been produced for sale or use. Three examples are food, clothing, and cars.

Define services

intangible goods

Define finance and accounts

Manage money and assets. Ensure accurate recording and reporting of financial documentation.

Define marketing

Ensure company's product sells. By advertising and making sure customers needs/wants are satisfied

Define operations

In charge of business functions and processes

What are the main inputs in a business?

Capital: Amount of money needed
Land: Space
Labour/ Manpower: Physical and mental efforts of people to produce a product
Entrepreneurship: Management, Organisation and planning

What are human resources?

The right quality+Quantity of people required to make a product

What are physical resources?

Raw materials, machinery, land space

What are financial resources?

Cash and other forms of money to make the product

Define primary sector

The production of raw material and basic foods e.g. eggs and wood

Define secondary sector

The processing of raw materials, food manufacturing, textile manufacturing, and industry.

Define tertiary sector

Provides services to its consumers

Define quaternary sector

This includes the high tech industry, with information technology and some forms of scientific research, as well as education and consulting, and information industry.

What us the chain of production?

primary then secondary then tertiary then quaternary

Define industrialisation

When a country moves towards the manufacturing sector as their primary output and employment.

Define integration

Expanding the business through taking over other businesses in the chain of production

What is backwards vertical integration?

Expanding backwards in the chain of production

What is forwards vertical integration?

Expanding forwards in the chain of production

What is horizontal integration?

Expanding across the same level of the chain of production

What is diversification?

The process of firms expanding their operations by entering new markets

Name some reasons to start a business

Profit, fame, benefit society, fulfilment, gap in market, legacy, limited resources

State the process of starting a business.(6 steps)

1. Researching the market

2. Planning the business

3. Establish legal requirements

4. Raising the finance

5. Testing the market

6. Organizing the basics (This is a cycle)

State some organisational problems a new business might face

Location of business may not be appropriate, name not good, structure does not work

State some finance problems a new business might face

Raising startup capital was too difficult, accounts not kept well, medium/long term finance was hard to obtain

State some market research problems a new business might face

Too optimistic, target market not appropriate, research was poor, weak channels of communications

State some problems a new business might face with it's business plan

too vague

State some legal problems a new business might face

tax obligations not addressed, registration was too difficult, labor laws not addressed

State some problems with the market that a new business might face

limited success, launch failed

What are the 6 elements of a business plan?

1. The idea, aim, and objectives

2. Business organisation

3. Human resources

4. Finance

5. Marketing

6. Operations

Distinguish between the public and private sector

Private sector:

• Goal is to make profit

• Owned, financed and run by private individuals Public sector:

• Goods and services provided by the government

• may be free or require a small fee

State the forms of profit making businesses

1. Sole trader

2. Partnerships

3. Companies/corporations

4. For-profit social enterprise: cooperatives, micro-financiers, public-private partnerships

Equation for profit?

Total revenue-Total costs

Features of a sole trader

The sole trader runs and owns the business, the business and owner are indivisible meaning unlimited liability, limited finance, business is close to customers, privacy, easy to register the business

Advantages of sole-trader

Control, work hours are flexible, privacy guaranteed, owner keeps all profit, being close to customer gives competitive advantage, legal formalities can be kept to a minimum.

Disadvantages of sole-trader

intimidating to compete against others by yourself, decision making can be stressful, success depends on owner's drive, cannot continue after owner dies, lack of capital, unlimited liability

Features of partnerships

The partners own and run the company together, owned by more than one person, partners are indivisible from the business meaning there is unlimited liability, more finance available , may have sleeping partners, more varied services can be offered, more accountability due to deed of partnership

Advantages of partnerships

more efficient as partners can specialise, access to more finance, can rely on partners, business will not end if one partner dies

Disadvantages of partnerships

Unlimited liability, limited access to funds, no one has complete control, profits, must be shared, disagreements may occur

Features of companies/corporations

can either be private limited or public limited, shareholders provide finance and have a limited input, limited liability, memorandum of associations and articles of association must be provided, greater finance available

Advantages of companies/corporations

greater finances, limited liability, stronger chance business will continue, stability

Disadvantages of companies/corporations

takes time to setup and costs money, IPO may not generate expected value of sales, owners must give up control(PLC), reliant on stock market, PLC has limited control over who buys shares

Features of a cooperative

A form of partnership whereby the business is owned and run by all the 'members' but unlike the partnerships there may be more than 20 members and each member participates actively in the running of the business.

What are the types of cooperatives?

Financial co-op: A financial institute whose ethical and social aims are prioritised over profits
Housing co-op: run to provide housing for it's members
Workers co-op: failed business taken over by workers whose main aim is to provide employment
producer co-op: druducers collaborate in production
Consumer co-op: provide services to customers who are also part owners

Features of micro-financiers

Provide small amounts of finance to thoes who normally would not otherwise have access to it. The money is lent w/ conditions of use and repayments and the micro-financier expects to make a profit on the loans.

Features of public-private partnerships

Profit important but not priority, collab. between business and community, democracy in business, same functions as other business

Advantages of public-private partnerships

socio-economic needs more easily met, helps gov., communal identity leads to an increase in motivation

Disadvantages of public- private partnerships

decision making can be complex, not sustainable in the long term, may cost a lot

Define surplus

Excess money which is put back into the business

Equation for surplus?

total revenues-total cost

Features of NGO's

A social enterprise which redistributes majority of their surplus revenue to a cause which is considered socially desirable

Features of charities

profits are not generated, importance of donations, unclear ownership and contol

Advantages of charities

provide outlet for direct action, can innovate, help those in need

Disadvantages of charities

lack of control, legal issues, reliant on donations

Describe the two types of objectives

Strategic: aka global- these are medium term objectives set by senior management to set the right direction in order to achieve aims
Tactical: aka operational- these are the short term objective and are set by middle management in order to achieve the strategic objectives.

State possible changes in the internal environment.

1. Leadership

2. Human resources

3. Organisations

4. Production

5. Finance

6. Operations

State possible changes in the external environment that could affect the business

1. Social

2. Technological

3. Economical

4. Ethical

5. Political

6. Legal

7. Ecological (STEEPLE)

Define mission

Statement explaining why a company exists

Define vision

a statement that outlines the aspirations and values of the business

Define corporate social responsibility

Organisations consider the interest of society by taking responsibility for the impact of their activities on various stakeholders

Describe some of the impacts of implementing ethical objectives.

may be short term costs to pay, competitors may feel the need to respond, customer loyalty may increase business will have stronger ties with local community, and create positive image

What is the difference between CSR and ethical objectives?

CSR is a concept that a business has no obligation to stick to strictly where as ethical objectives are specific goals that a business may set based on established codes of behaviour.

What is Ansoff's Matrix used for?

A marketing planning model that helps a business determine its product and market strategy.

Draw Ansoff's matrix

show the arrows going outwards on both sides with increased risk as well

What interests do entrepreneurs have in a business?

Focus on achieving mission

What interests do shareholders have in a business?

Focus on return on investment

What interests do CEOs/managing directors have in a business?

Focus on coordinating strategy

What interests does senior management have in a business?

Focus on strategic objectives for functional area

What interests does middle management have in a business?

Focus on tactical objectives for functional area

What interests do supervisors have in a business?

Focus on organising tactical objectives

What interests do employees have in a business?

Focus on protecting rights of working conditions

What interests do the government have in a business?

Focus on how the business operates in the country and how it is beneficial to the country

What interests do suppliers have in a business?

Focus on maintaining a stable relationship

What interests do customers have in a business?

Focus on getting the best product that meets their needs

What interests do the local community have in a business?

Focus on business impact on the local area

What interests do financiers have in a business?

Focus on return on investment

What interests do pressure groups have in a business?

Focus on how business impacts the area of concern for them

What interests do the media have in a business?

Focus on the impact of business in terms of new stories

Equation for total cost?

fixed cost + variable cost

Equation for average cost?

total cost/quantity produced

Draw an economies of scale graph.

Define economies of scale

Cost advantages associated with large operations

Define diseconomies of scale

The cost disadvantages that firms and governments accrue due to an increase in firm size or output, resulting in production of goods and services at increased per-unit costs.

What are the 3 factors that make a business hard to control?

Communication, control, coordination

State some advantages of being a big business.

more sales, survival, higher status, market leader, higher market share

State some advantages of being a small business.

Don't spend much, high end products= high profit margin, high satisfaction from job, personalised advantages, serve a niche market

How does a business grow?

Internal (organic) growth and external (fast track) growth(getting money from angel investors or other fast ways of getting money to grow)

Define merger

Two companies joining together

Define joint venture

Two companies join together for one or two products. e.g. sony erikson

Define strategic alliances

not financially joining together but they support eachother

Define franchise

Franchiser does nothing, franchisee does a lot and makes the business

State some market drivers

Con vergence of lifestyle and tast, per capita income converging amoung industrialised natins, more travel, establishment of world brands, push to develop global advertising

Define market drivers

A driver is a factor that has a material effect on the activity of another entity.

State some cost drivers

continuing to push for economies of scale, accelerating tech innovations, advances in transportation

Define cost drivers

cost driver is any factor which causes a change in the cost of an activity

State some competition drivers

increase in world trade, growth on global network

Define competition drivers

Are defined by the actions of competing firms, such as the extent to which competitors from different continents enter the fray, globalize their strategies and corporate capabilities, and create interdependence between geographical markets.

What is the function of a fishbone diagram?

Link problem with the potential root cause

How do you make a fishbone diagram?

1. Get people who know the problem

2. Draw skeleton

3. Enter problem statement

4. Select categories (Manufacturing:men, method, materials, machine. Services:place, procedure, people, politics. Administration: surroundings, suppliers, system, skill)

5. Continue brainstorm on next category

6. Repeat 5

Draw a fishbone diagram

(Manufacturing:men, method, materials, machine. Services:place, procedure, people, politics. Administration: surroundings, suppliers, system, skill)