SAC 1 (characteristics of business foundations)

Advantages of sole trader

low entry cost

no partner disputes

complete control

owners right to keep all profits

cheaper to operate

Disadvantages of sole trader

difficult to operate if sick

unlimited liability for business debts

burden of management

need to perform variety of tasks

end of business when owner dies

Advantages of partnerships

low start up cost

less costly to operate than a company

minimal government regulations

shared responsibility and workload

Disadvantages of partnerships

personal unlimited liability

possible disputes

difficult to find suitable partner

divided loyalty and authority

Advantages of private limited companies

easier to attract finance

easier to transfer ownership

growth potential

can have 1 stakeholder and 1 director

Disadvantages of private limited companies

higher cost of formation than either a sole trader or partnership

required to produce annual report of audited accounts

Advantages of public listed companies

similar to private limited companies but can attract extra capital by issuing shares on the share market.

Disadvantages of public listed companies

similar to private limited companies but are required to abide by stringent compliance rules and disclose corporate financial info.

Advantages of social enterprises

can open up new markets, may meet a need that commercial businesses choose not to.

meeting a social need can have a positive effect on profit and a market share

Disadvantages of social enterprises

difficulty obtaining capital to start the business, can be hard to find finance

difficult to focus on social and financial objectives

Advantages of government business enterprises

can operate with some independence from government

able to carry out government policies delivering community services in areas where private sector businesses might hesitate to invest

Disadvantages of government business enterprises

political interference in the daily operation of the GBE

GBE management can be less effective than the private sector

less accountability with a GBE meaning less productivity

Business objectives

make a profit

increase market share

improve efficiency

improve effectiveness

fulfill market need

fulfill social need

meet shareholder expectations

How to achieve a profit

businesses focus on maximising revenue and minimizing costs.

How to achieve market share

business focus on attracting new customers by improving product quality, privacy competitively, or expanding their marketing efforts.

Improve efficiency

businesses streamline operations by adopting technology automating processes, and optimizing workflows to reduce waste and save time.

Improve effectiveness

businesses focus on aligning their goals with customer needs by offering high quality products/services that meet expectations.

fulfill a market need

a business can fulfill a market need by identifying gaps in the market, understanding customer expectations, and tailoring it's products or services to meet those specific needs.

fulfill a social need

a business can fulfill a social need by creating products or services that benefit society or the environment.

meet shareholder expectations

businesses can focus on maximising profits by improving efficiency, cutting costs, or expanding routine streams.

owners interests

want the business to make profit

want business to conduct itself in a socially responsible manner

Manager

want business to perform financially

want business to be socially responsible

need to satisfy many stakeholders expectations as possible while ensuring their position is secure

Employees

expect to be paid fairly, trained properly and treated ethically in return for contribution

secure and long-term job

Customers

purchase good quality products at reasonable prices and receive high service

Suppliers

provide quality materials that are delivered reliably to ensure the business makes profit

paid fairly promptly and in full

General community

expect business will give back to society

expect businesses to show concern for environment

expect business to show concern for their future welfare

Conflicting interests between employees and shareholders

employees demanding higher wages while shareholders seek higher profits

Conflicting interests between management and customers

customers expecting lower prices while businesses try to increase revenue

Conflicting interests between management and general comm

community advocating for environmental responsibility while management seek cost reduction

Conflicting interests between suppliers and general comm

supplier expect fair and prompt pay but might reduce costs by using unethical practices, upsetting general community

Conflicting interests between management and suppliers

management wants to keep costs low to profit but suppliers require higher prices to their costs

Advantages of autocratic

directions are clear with little uncertainty

employees roles are detailed and precise

management can monitor performance

Disadvantages of autocratic

employees may not feel valued because their input is not permitted

job satisfaction decreases due to little-no responsibility

Advantages of persuasive

managers gain trust and support through persuasion

workers believe their feelings are considered leading to a positive approach to tasks

Disadvantages of persuasive

communication is poor and limited

employees are frustrated because they are denied full participation

Advantages of consultative

greater variety of ideas due to employee input

improve management decisions

employees interest is increased due to having some ownership

Disadvantages of consultative

slowed process due to consulting all employees

some issues are not suitable for all employees which may cause confusion in roles

some ideas may be ignored causing conflict

Advantages of participative

employees are more likely to accept management decisions

employees feel that they have an active role leading to high motivation

Disadvantages of participative

may lead to poor quality decisions because compromises are made

more involvement may lead to disagreement

reaching decisions and introducing tasks may be time consuming

Advantages of laissez faire

employees feel a sense of ownership promoting good results

continual encouragement of creativity

communication is open

Disadvantages of laissez faire

may breed personal conflicts if there is little cooperation

meeting business objectives may be eroded

management is not their to direct or negotiate

Appropriateness of management styles

Nature of task

Time constraints

Employee experience

Managers preference