Business EOY exams

Division of labour

When the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialisation.

Entrepreneur

A person who organises, operates and take the risk for a new business venture.

Benefits of being an entrepreneur

• Independence

• Able to put own ideas into practice

• May become famous and successful if the business grows

• Able to make use of personal skills

Disadvantages of being an entrepreneur

• Risk of a failing

• Capital

• Lack of knowledge and experience

• Opportunity cost

reasons why the government supports business startups

• To reduce unemployment

• To increase competition

• To increase output

• To benefit society

Internal growth

Occurs when the business expands its existing operations.

External growth

When a business takes over or murders with another business. It is often called integration as one business is integrated into another.

Takeover

When one business buys out the owners of another business, which then becomes part of the business which has taken over.

Merger

When the owners of two businesses agreed to join their businesses together to make one business.

Benefits of horizontal integration

• Reduces the number of competition in the industry

• Opportunities for economies of scale

Reasons why some businesses remain small

• Market size

• Owners objectives

Causes of business failure

• Lack of management skills

• Lack of capital

• Lack of experience

Sole trader

A business owned by one person

Advantages of being a sole trader

• Own boss

• Freedom

• Close contact with customers

• Few legal regulations

Disadvantages of being a sole trader

• No one to discuss to about business matters

• Business is likely to remain small

Partnership

A form of business in which two or more people agreed to jointly own a business.

Advantages of a partnership

• Shared responsibilities

• More To expand the business

Disadvantages of a partnership

• Does not have a separate legal identity

• Partners can disagree on business decisions

Unincorporated business

Business that does not have a separate legal identity.

Shareholders

Owners of a limited company. They buy shares which represent part-ownership of the company.

Private Limited company

Businesses owned by shareholders but they cannot sell shares to the public.

Advantages of a private Limited company

• Limited liability

• Control over ownership

Disadvantages of a private Limited company

• Restricted share transfer

• Higher costs

Public Limited companies

Businesses owned by shareholders, but they can sell shares to the public and their shares are tradeable on the stock exchange.

Advantages of a Public Limited company

• Limited liability

• Large capital

Disadvantages of a public limited company

• Legal formalities are time consuming

• More regulations and controls

Dividends

Payments made to shareholders from the profits after tax of the company. They are the return to shareholders for investing in the company.

Franchise

A business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buy the license to operate the business from the franchisor.

Advantages of franchising (to the franchisor)

• Faster growth

• Franchisee handles management

Disadvantages of franchising (to the franchisor)

• Poor management would lead to bad reputation of the business

• Franchisee keeps more profits

Advantages of franchising (to the franchisee)

• Lower risk of failure

• The franchisor pays for advertising

Disadvantages of franchising (to the franchisee)

• Less freedom

• Can’t offer different products

Joint venture

Where two or more businesses start a new project together, sharing capital, risks and profits.

Advantages of joint ventures

• Sharing of costs

• Risks are shared

Disadvantages of joint ventures

• If the project is successful, profits have to be shared

• Disagreements over important decision might occur

Public corporation

A business in the public sector that is owned and controlled by the government.

Advantages of public corporations

• Essential services are provided

• Government can save failing businesses

Disadvantages of public corporations

• Used for political reasons

• Little competition

Business objectives

The aims or targets that are business works towards.

Benefits of setting objectives

• Motivates people

• Business managers can compare how the business has performed to their objectives

Main objectives for businesses in the private sector

• Survival

• Growth

• Profit

Market share

(Company sales/ total market sales) x 100

Stakeholder

Any person or group with a direct interest in the performance and activities of a business.

Benefits of a well motivated workforce

• High output per worker

• Willingness to accept change

• Low rate of absenteeism

• Low rate of strike action

Maslow’s hierarchy

Physiological needs, Safety/security needs, Social needs, Esteem needs, Self actualisation

Herzberg

‘Hygiene’ (status, security, work conditions, salary)

Motivators (achievement, recognition, personal growth, work itself)

Financial methods of motivation

• Wages

• Time rate

• Salaries

• Bonuses

Advantages of wages

• Workers do not have to wait long for some money

Disadvantages of wages

• Have to be calculated every week which can be time-consuming

Advantages of time rate

• Easy to calculate workers’ wages

Disadvantages of time rate

• Good and bad workers get paid the same amount of money

Advantages of salaries

• Easy to calculate

Disadvantages of salaries

• Workers may prefer to be paid weekly

Advantages of bonuses

• Workers consider themselves as recognized

Disadvantages of bonuses

• If not paid workers can be disappointed

Non-financial methods of motivation

• Job rotation

• Job enrichment

• Teamwork

• Training

• Opportunities for promotion

Job rotation

Involves workers swapping around and doing each specific task for only a limited time and then changing around again.

Advantages and disadvantages of job rotation

• Easier for the managers to move workers around the factory if people are sick

• Does not make the tasks themselves more interesting

Job enrichment

Involves looking at jobs and adding tasks that require more skill and/or responsibility.

Advantages and disadvantages of job enrichment

• Increased productivity due to increased job satisfaction

• Increased workload and stress

Teamwork

Involves using groups of workers and allocating specific tasks and responsibilities to them.

Advantages and disadvantages of teamwork

• Increasing jobs satisfaction because workers have a feeling of control

• Communication issues

Advantages and disadvantages of training

• Workers can feel a great sense of achievement

• Time consuming

Advantages and disadvantages of promotions

• Increased productivity

• Increased workload and stress

Chain of command

The structure in an organization which allows instructions to be passed down from senior management to lower levels of management.

Span of control

The number of subordinates working directly under a manager.

Advantages of short chains of command

• Communication is quicker and more accurate

• Span of control will be wider

Delegation

Giving a subordinate authority to perform particular task tasks.

Advantages of delegation for the manager

• Managers cannot do every job themselves

• Managers are less likely to make mistakes if some of the tasks are performed by their subordinate

Advantages of delegation for the subordinate

• The work becomes more interesting and rewarding

• The employee feels more important

Why is it important to have a good manager?

• Motivate employees

• Increase profitability of the business

Autocratic leadership

Where the manager expects to be in charge of the business, and to have their orders followed

Democratic leadership

Gets other employees involved in the decision-making process

Trade unions

A group of employees who have joined together to ensure their interests are protected

Closed shop

When all employees must be a member of the same trade union

Advantages and disadvantages of a Trade union

• Improve job satisfaction by encouraging training

• Cost money to be a member

Recruitment

The process from identifying that the business needs to employ someone up to the point at which applications have arrived to the business

Job analysis

Identifies and records the responsibilities and tasks relating to a job

Job description

Outlines the responsibilities and duties to be carried out by someone employed to do a specific job

Job specification

A document which outlines the requirements, qualifications, physical characteristics, etc, for a specific job

Internal recruitment

When a vacancy is filled by someone who is an existing employee of the business

Advantages of internal recruitment

• Quicker and cheaper than external recruitment

• The person is already known to the business

Disadvantages of internal recruitment

• No new ideas or experience come into the business

• The quality of internal candidates might be low

External recruitment

When a vacancy is filled by someone who is not an existing employee and will be new to the business

Induction training

An introduction given to a new employee explaining the businesses, activities, customs, and procedures, and introducing them to their fellow workers

On the job training

Occurred by watching a more experienced worker doing the job

Off the job training

Involves being trained away from the workplace usually by specialist trainers

Advantages of induction training

• Helps new employees to settle into their job quickly

• Workers are less likely to make mistakes

Disadvantages of induction training

• Time consuming

• Delays the start of the employee starting the job

Advantages of on the job training

• Less expensive than off the job training

• The training is tailored to the specific needs of the business

Disadvantages of on the job training

• Bad habits from the trainer may me passed on to the trainee

• The trainer will not be as productive as usual

Advantages of off the job training

• A broad range of skills can be taught

• Uses expert trainers to have up-to-date knowledge of business practices

Disadvantages of off the job training

• Expensive

• Wages are paid, but no work as being done by the worker

Dismissal

When employment is ended against the will of the employee usually for not working in according with the employment contract

Redundancy

When an employee is no longer needed and so loses their job. It is not due to any aspect of their work being unsatisfactory.

Legal controls over employment issues

• Employment contracts

• Unfair dismissal

• Discrimination

• Health and safety

• Legal minimum wage

Internal communication

Between members of the same organization

External communication

Between the organization and other organizations or individuals

Choosing the appropriate communication method

• Speed

• Cost

• Message details

• Leadership style

Examples of verbal communication methods

• Face-to-face

• Telephone conversations