Business Management Unit 3 Outcome 1 Business Foundation

1.2 Types of Businesses

Sole Trader

• A business owned and operated by one person

• Unincorporated business

• The owner is legally responsible for all aspects of the business including unlimited liability (personal assets at risk from debts of the business)

Partnerships

• A business owned by two or more people (generally a maximum of 20 people)

• Unincorporated business

• A partnership is not separate legal entity and therefore has unlimited liability (personal assets at risk from debts of the business)

• Some partnerships can have a silent partner who has a financial stake in the business but plays no role in the day to day operations of the business

Companies

• An independent legal entity made up of shareholders

• Incorporated business (the company is a separate legal entity from the shareholders, making the businesses debts not affect shareholders)

• Limited liability (the company is a separate legal entity from the shareholders, making the businesses

Private Limited Company

• A company with 1-50 non-employee shareholders

• Incorporated business (the company is a separate legal entity from the shareholders, making the businesses debts not affect shareholders)

• A private limited company will have the letters Pty Ltd after their name  (Proprietary Limited)

Publicly Listed Company

• A company with a minimum of 1 shareholder and no maximum, whose shares are openly traded on ASX  (Australian Securities Exchange)

• Incorporated business (the company is a separate legal entity from the shareholders, making the businesses debts not affect shareholders)

Government Business Enterprises  (GBE)

• A business owned by the government (federal or state level)

• Aim to make a profit

• E.g VicRoads

Social Enterprises

• A business that exists primarily to fulfil a vision that benefits the community rather than shareholders (still want to make a profit)

• Prioritise a social goal, and then aim to make a profit

• Do not rely on donations as charities do

1.4 Business Objectives (SPEMEMS)

• Business objectives: are the stated goals a business is aiming to achieve within a period of time

To meet shareholder expectations

• Shareholders (not managers of the business): are the people who own the business, which means they expect to have a good return on their investment

• They also expect the business to act in an ethical and socially responsible manner

To make a profit

• Profit: the excess amount of money left once expenses have been paid (revenue less expenses = profit)

• A businesses primary objective

• Allows the business to grow and expand

To improve efficiency

• Efficiency: refers to how well a business uses its resources (time, raw materials, labour, machinery, technology etc) in producing a good or service

To increase market share

• Market share: the percentage of sales a business has compared with its competitors in the same industry

• Result to increase in profit

To improve effectiveness

• Effectiveness: refers to the degree to which a business achieves its stated objective

• Businesses must ensure that it has measured tools in place, such as key performance indicators

To fulfil a market need

• In terms of fulfilling a market need, businesses are often developed with the objective of filling a gap in the market where there is demand for product or services, but limited or no supply

To fulfil a social need

• Social enterprises are often developed to fulfil a social need

• They aim to improve the conditions of the world, and make a profit

1.5 Business Stakeholders (GEMSCO)

1.8 Management styles (A Playful Cat Pounced Lazily)

• Management style: the way in which a manager makes decisions and how  they lead and communicate with their employees

• The style of the manager may come down to factors such as personality, skills and time available

Autocratic

• Where the manager makes the decisions and tells the employees what tasks to perform

• This management style is very task-oriented and uses one-way communication

• Best for when  there is less time and when employees lack of skill or knowledge

Persuasive

• Where the manager makes the decisions and then explains to employees the reasoning to convince them why is it the most appropriate

• Decisions are made by the manager, however the manager still tries to convince employees as why it is the best decision

• Two-way communication

• Best for when  there is less time and when employees lack of skill or knowledge

Consultative

• Where the manager seeks ideas and opinions of their employees before making a final decision themselves

• Two-way communication

• Best used when employees have a degree of skills and experience

Participative

• Where the manager and employees join together to make decisions as a team

• Employees motivation can be increased

• Two-way communication

• Can be  more time consuming

• Good style when employees are highly skilled and experienced

• Best used when there is an issue directly impacting the employees

Laissez-Faire (lazy)

• Where the manager leaves the majority of the decision making to their employees

• Most employee-centred style

• Employees need to be highly skilled and knowledgeable

• Can increase motivation

• Best used where a high level of  creativity is important and can lead to outstanding outcomes

1.9 The  appropriateness of management styles (MENT)

Manager’s preference

• A  manager's personality, experience, values, beliefs and skills might mean they prefer to use particular management style

Experience of employees

• A workplace with inexperienced staff might necessitate the use of an autocratic style

• A team of experienced staff would indicate that a consultative or participative style would be appropriate

Nature of the  task

• When the business undergoes change, the manager may need to make decisions quickly and so may adopt an autocratic style

Time

• An impending deadline might mean that an autocratic style is appropriate

• An  extended timeframe, with access to ample resources, might lend itself to a manager using a participative  style

1.11 Management skills

• Management skills: are the abilities that managers use to help them complete the tasks  that are necessary for the achievement of business objectives

Typical Management skills include: (CLIPDD)

• Communication

• Leadership

• Interpersonal-skills

• Planning

• Decision making

• Delegation

Communication

• Communication: is the ability to transfers of information from a sender to a receiver

• Effective communication is clear and concise

• Two-way communication is where the manager is able to send a message to the receiver as well as receive and listen to feedback

• It can be non-verbal  (body language) or verbal (words-written or verbally)

Leadership

• Leadership: the ability of a manager to influence and motivate employees to achieve business objectives

• effective leadership helps employees work towards a direction

• It provides motivation for accepting the importance of the direction

• Improves productivity

Interpersonal Skills (people skills or social intelligence)

• Interpersonal Skills: the ability of a manager to communicate with a range of people while building strong relationships

• Helps to create a positive work environment

• Benefit from higher productivity, enhanced problem solving, fewer conflicts and higher quality outputs

• If not used, employees can become defensive or display resentment

• It is important for relationships to remain professional

Planning

• Planning: the ability to define business objectives and determine methods or strategies that will be used to achieve those objectives

• Provides a key to short term and long term success

• Operational planning (short term): provides specific details of the way the business will operate to help achieve plans, usually daily, weekly or monthly e.g schedules

• Tactical planning (medium long term): is flexible, adaptable planning, usually 1 to 2 years e.g trying to achieve business objectives

• Strategic planning (long term): planning for the following 2 to 5 years e.g where the business wants to be in the market

• Planning process  (DADIM)

1. Define objective

2. Analyse the environment. With a SWOT analysis (strengths, weaknesses, opportunities and threats)

3. Develop  alternatives

4. Implement the plan

5. Monitor and evaluate

Decision Making

• Decision Making: the ability to make a choice on a course of action from  range of alternatives

• 6-step decision making process (IGDACE)

1. Identify the problem

2. Gather information

3. Develop alternatives

4. Analyse the alternatives

5. Choose an alternative and implement it

6. Evaluate

Delegation

•  Delegation: the passing of authority and responsibility from a manager to employee to achieve objectives

• Can help free a manager's time and spread the workload

• Delegation occurs in three main ways:

1. To an employee with strong skills and experience

2. To a group of employees with a variety of skills and abilities

3. To an employee without skills or experience who has a mentor (another employee) to develop their skills

1.13 Corporate Culture

• Corporate culture: is the shared values and beliefs of the people within a business

• Is an internal factor

Official corporate culture

• What the business wants the shared values and beliefs of the people in the business to be

• Just because the business makes official documents, doesn't mean people within the business follow them

• Official documents e.g written policies, objectives for the business etc

Real corporate culture

• Refers to the actual underlying value, beliefs and behaviors of the people within the business

Benefits of a positive business culture include:

• Reduced staff turnover (amount of money being taken from the business)

• Improved productivity

• Allows the business to select its best employees (high demand to work there)

Elements to corporate culture (CCHRP)

• Core values

• Communication

• Heroes

• Rituals and celebrations

• Physical environment

Core values

• What the business values most and will not change even when the business changes

• Core values can act as guideposts

Communication

• Businesses have open two-way communication with managers and employees to demonstrate how they value relationships

Heroes

• Are those that the business ‘looks up’ due to the way they demonstrate the business desired values e.g employee of the month

• Heroes can be a  person to look up to within the business

Rituals and celebrations

• Rituals are those things that occur regularly within a business e.g annual awards ceremony

Physical environment

• The space in which employees work in another element of the corporate culture e.g a more open space