AOS 1 - Business Foundations Flashcards
Business
A business is an entity that offers goods or services to customers in exchange for money with the aim of getting a profit
Private Sector
The part of Australia’s economy that is operated by private individuals, groups, or institutions usually for the purpose of making a profit
Public Sector
The part of Australia’s economy that is owned and operated by the government
Sole Trader
A sole trader is a business structure owned and operated by a single person
Sole Trader - A + D
A
- low cost of entry
- simplest form
- no partner disputes
D
- unlimited liability for debts
- difficult to operate if unwell
- carry all loses
Partnership
A type of business owned by 2 or more people
Partnership - A + D
A
- shared responsibility and workload
- minimal gov regulation
- low start-up costs
D
- unlimited liability
- the possibility of disputes
- difficulty in finding a suitable partner
Incorporation
When a company is set up, a number of shares are issued. Shares are units of ownership of a business that it sells to raise funds.
Private limited company (INC)
An incorporated business with at least 1 director and up to 50 selected shareholders. Shares are offered only to those people whom the business wishes to have as part owners.
Public listed company (INC)
An incorporated business whose shares are freely traded on the exchange. This means the members of the general public area are able to own part of a company by purchasing shares.
Company - A + D
A
- limited liability
- easier to attract public finance
- a long life
D
- double taxation - company & personal
- public disclosure
- cost of formation
Social Enterprise
A revenue-generating business with primarily social objectives whole surpluses are reinvested for that purpose in the business or in the community.
Social Enterprise - A + D
A
- can open up new markets
- meeting social need can have positive impact on profit and market share
D
- difficulty in obtaining capital to start business
- significant operating costs
Government Business Enterprise
A profit driven business that is owned by the government but managed separately. Operates within the public sector and participates in commercial activities with the goal of making a profit.
Government business enterprise - A + D
A
- carry out gov policies
- operate with some independence
- healthy competition to businesses
D
- political interference
- management can be less effective
- less accountability
Business objectives
The goals that the business intends to achieve
Overarching objectives
Vision statement - A statement that broadly expresses what a business aspires to become in the future
Mission statement - A statement that formally expresses the reasons for a business’s existence, its purpose and its method of operation
Making a profit
Businesses can increase their profit by increasing their revenue or reducing expenses ( or both)
Increasing market share
Market share is the proportion of total sales in a market or industry controlled by a particular business, expressed as a percentage
Meeting shareholder expectations
Shareholders anticipate a return on their investment
Fulfilling a market need
A business fulfills a market need by providing products and services which meet the desires of a group of customers with similar needs
Fulfilling a social need
A social need is where a business aims to improve an area of the community that requires attention
Analysing performance
After establishing objectives and implementing strategies management will need to analyse performance by determining whether the business has actually achieved its objectives.
Owner/Shareholder
- Invest funds into business
- Return on their investment through profits
- Create a maintain positive impacts on other stakeholders
Manager
- Coordinate employees and tasks to achieve business objectives
- Pay that matches responsibility
- Status and recognition for work achievements
Employees
- Complete a business’s work tasks
- Fair pay & work expectations
- Opportunities for professional development
Customer
- Purchase and use a business’s products or services
- A product or service that’s quality and value for money
Supplier
- Provides raw materials and resources
- To earn a profit by providing supplies
- To maintain or increase its revenue
General community
- Observe the impact of a business’s operations
- Business activities that improve the community and environment
Manager vs Shareholder
M = wants increased salaries for achieving business objectives S = wants to reduce managers salaries to increase profits
Employee vs Customer
E = wants to complete fewer tasks and work fewer hours C = wants a higher level of product or service quality
Customer vs Supplier
C = wants a higher level of product or service quality at prices that offer value for money S = may deliver lower quality supplies to reduce costs & increase profits
CSR
The ethical conduct of a business beyond legal obligations to cover the social, economic, and environmental outcomes by stakeholders
Advantages and Disadvantages of CSR
A
- Practices improves business’s rep and may lead to increased sales
- Can increase employee satisfaction as they’re working for ethical business, therefore improving employee retention
D
- Can be time consuming
- Can be more expensive in long run
Operations
Produces the goods or services that a business sells to customers
Contributes to business objectives by producing the goods and services necessary to generate revenue which can contribute to business objectives such as to make a profit
Human resources
Establishes and manages the relationship the business has with its employees including their hiring, training and termination
If employees treated well they may feel more motivated in their role and perform better contributing to business objectives
Sales and marketing
Promotes and sells the business’s goods or services to customers
Attracting customers and increasing sales contributes to business objectives such as meeting shareholder expectations as more sales can increase business’s value
Finance
Handles the monetary requirements of a business
If finance manages the money and budgets of a business well, contributes to business objectives such as making a profit
Technology support
Installs automated equipment, machinery and devices within the business and provides assistance to employees on the use of these technologies
Consequently, contributes to business objectives by enabling other areas of management to use their electronic equipment and machinery effectively without disruption
Corporate culture
The shared values and behaviors practiced by managers and employees within a business
Official corporate culture
The shared values and beliefs desired by a business and expressed through elements such as formal rules and symbols
OCC - strategies
Shared objective - vision statement, mission statement - provides an indication of a business’s purpose, values and beliefs give employees a shared goal
Policies - business policies, procedure documents - develops consistent behaviors and expectations among employees through written rules, regulations and processes
Real corporate culture
The shared values and behaviours that are actually practiced by employees and managers and expressed through informal rules and habits
RCC - strategies
Hiring - hiring external employees - introduces new ideas, skills and experiences
Celebrations - an employee of the month - rewards work achievement and impressive performance
Autocratic management style
The manager makes decisions and directs employees without any input from them
Autocratic - A &D
A
- management has full control over decisions
- production can occur quickly due to quick decision making which results in higher outputs and potentially increased sales
D
- all solutions and ideas generally come from the manager, as no communication from employees
- business’s can’t benefit from ideas of employees
Persuasive management style
The manager making decisions and communicating the reasons for those decisions to employees without their input
Persuasive - A & D
A
- the manager has full control and may gain employees trust and support by explaining the reasoning
- production can occur quickly due to quick decision making which results in higher outputs and potentially increased sales
D
- business’s can’t benefit from the ideas of employees
- the manager has to take time to explain
Consultive management style
The manager seeks input from employees on business decisions but makes the final decisions themselves
Consultive - A & D
A
- can gain a variety of ideas from suggestions of employees which can lead to better decision-making outcomes
- potential for increased sales and profits as the quality of decisions and outcomes may be increased
D
- potential for employee conflict, as ideas overlooked or ignored
- decision making may be slower
Participative management style
The manager communicates and discusses information with employees in order to make decisions together
Participative - A & D
A
- can gain a variety of ideas from suggestions of employees which can lead to better decision-making outcomes
- potential for increased sales and profits as the quality of decisions and outcomes may be increased
D
- accommodating multiple views may result in a compromise that decreases the quality of decisions
- decisions can take a long time as a consensus between everyone has to be reached
Laissez-faire management style
The manager communicates business objectives to employees and allows them to make decisions independently
Laissez-faire - A & D
A
- creates an environment that can encourage creative and innovative solutions
- can increase opportunities for employee growth
D
- potential for employees to spend large amounts of time on discussions rather than decisions
- potential for employees to allocate excessive resources to business decisions
Time
- Manager may have very limited time in emergency situations to research a suitable option. Autocratic or persuasive management styles allow decisions to be made quickly
- Extended periods of time available for a task allow the use of management styles such as consultative, participative or laissez -faire
Experience of employees
- Inexperienced employees could find it difficult to contribute to business decisions as may lack relevant knowledge or experience, should use styles with one-way communication or decisions
- Managers should utilize the opinions and knowledge of highly experienced employees to produce better quality decisions and outcomes
Manger preference
- Manager with a higher desire for control would prefer centralized decision making and one-way communication to complete work activities with minimal disruption from employees
- Manager with a lower desire for control would benefit from management styles with employees playing part in the decision process
Planning
Managers ability to establish objectives and strategies to achieve them, setting business objectives, outlining strategies
Decision making
The manager’s ability to determine a suitable course of action or the business from a range of alternatives, considering relevant info, advantages, and disadvantages
Communicating
The manager’s ability to clearly exchange information with employees and relevant stakeholders, convey desired objectives, provide feedback
Delegating
The manager transfers authority and responsibility to employees for business tasks, selecting appropriate employees for the task, setting clear objectives for employees to achieve
Interpersonal
The manager’s ability to interact positively with employees to create and maintain professional employees, praising employees, get to know employees
Leading
The managers ability to motivate employees to work towards business objectives, sharing business vision
Relevant skills for autocratic
- planning - only manager can set objectives
- interpersonal - employees are expected to implement decisions made by manager reduces need for interpersonal relationships
- decision - making - manager must consider all alternatives before making decisions
Relevant skills for persuasive
- planning - only manager can set objectives
- decision - making - manager must consider all alternatives before making decisions
- communication - used to explain decisions to employees so they can support them
Relevant skills for participative
- planning - plans made by groups that allow planning responsibilities to be shared
- interpersonal - productive and positive relationships can directly affect the quality of group decisions and discussions
- communication - used to share and discuss information with employees to make decisions together
Relevant skills for consultive
- planning - plans made by groups that allow planning responsibilities to be shared
- interpersonal - productive and positive relationships can directly affect the quality of group decisions and discussions
- communication - used to share and discuss information with employees to make decisions together
Relevant skills for laissez-faire
- planning - strategies most likely determined by employees
- communication - used to clearly outline business decisions to employees
- interpersonal - manager may have limited contact with employees
