aos 1: business foundations Flashcards
business
organisation where goods and/or services are exchanged for money
- provide employment
- aim to make profit
business sizes
the ABS classifies the size of business by the number of people they employ
ABS
the Australian bureau of statistics
what are the three business sizes
- small business
- medium business
- large business
small business
employs 20 or less
medium business
employs between 20-200
large business
employs 200+
sole trader
business structure owned and operated by one person
sole trader characteristics … listed
- simple and cost effective
- same legal entity (unincorporated)
- unlimited liability
- owner retains all profit
- can hire employees
sole trader advantages … listed
- simple and inexpensive to set up
- owner has complete control
- no disputes with partners
sole trader disadvantages … listed
- unlimited liability=personally responsible for all debts
- more difficult to gain finance
- often required to perform many different tasks=heavy reliance on owners skills
partnerships
type of business owned between 2 and 20 people
- owners=partners
partnerships characteristics .. listed
- simple and cost effective
- responsibilities and profits are shared
- same legal entity
- unlimited liability
- disputes can occur between partners
partnership advantages … listed
- simple and inexpensive to set up
- work load can be shared amongst partners
- different skills and expertise brought into business
partnership disadvantages … listed
- unlimited liability
- potential for disagreement over key decisions
- need to share profit amongst partners
the process of beginning a company structure is known as?
incorporation
company
owned by shares which are known as shareholders
company characteristics … listed
- limited liability
- business is registered with ASIC
ASIC
the Australian securities and investments comission
types of companies … listed
- private limited company
- public listed company
private limited company
incorporated business owned between 1 and 50 private shareholders
a private limited company is controlled by ????
board of directors
private limited company characteristics … listed
- seperate legal entity
- owners are called shareholders
- limited liability
- proprietary limited (pty ltd)
private limited company advantages … listed
- limited liability
- perpetuity
- can be easier to attract more capital than sole trader and partnerships
perpetuity
life of the company can live longer than the directors
private limited company disadvantages … listed
- more complex and expensive to establish
- more reporting requirements to the government
- shares cannot be traded freely
public listed company
incorporated business whose shares are freely traded on a public exchange to an unlimited number of shareholders
public listed company characteristics … listed
- initial public offering (IPO)
- purchase at share price on the ASX and earn dividends
- limited (Ltd)
- stricter government regulations
public listed company advantages … listed
- limited liability
- easier to raise capital by selling more shares to public
*life of the company can live longer than the directors (perpetuity)
public listed company disadvantages … listed
- highly complex and time consuming to establish
- high cost in establishment
- possible loss of control
social enterprise
business that exists primarily to fulfil a vision that BENEFITS THE COMMUNITY OR A SOCIAL NEED rather than shareholders
social enterprise characteristics … listed
- sell goods and/or services in order to make a profit
- can rely heavily on grants and donations
- reinvest profits to help further social/environmental causes
STREAT
aims to provide homeless and disadvantages youth with life skills, training and work experience
social enterprise advantages … listed
- meeting a social need can encourage community support=increasing profit
- improved morale within the business as employees value the work they are doing
social enterprise disadvantages … listed
- difficult to obtain finance to begin the business
- difficult to focus on financial AND social objectives
government business enterprise (GBE)
business that’s owned by the government
government business enterprise (GBE) characteristics … listed
- aim to fulfil government policies and offer services to the community
- aim to make a profit
- normally controlled by a board of directors
government business enterprise (GBE) examples … listed
- aus post
- VCAA
- vic roads
government business enterprise advantages .. listed
- provides healthy competition to private sector businesses and can lower prices in the market
- may be invest in areas that private companies may hesitate to invest
government business enterprise disadvantages .. listed
- strategic directions can change with changing governments
- can be political interference
unlimited liability
business owner must pay for any losses the business makes
unlimited liability example
if he/she doesn’t have enough money, then he/she would have to sell his/her house or car to pay the debt
business types with business unlimited liability … listed
- sole traders
- partnerships
limited liability
provides protection to the people investing in your company (the shareholders)
limited liability characteristics … listed
- can only lose the amount that they invested in the company - no more
- personal assets are protected (car, house, bank account)
types of businesses that have limited liability … listed
- private limited companies
- public listed companies
business objectives … listed
- make a profit
- increase market share
- improve efficiency
- improve effective ness
- fulfil a market need
- fulfil a social need
- meet shareholder expectations
business objective
goal that a business has set and is aiming to achieve in a specified period of time (clear specific measurable)
profit
the amount of money remaining after expenses have been deducted from revenue
market share
the proportion of sales that a business has compared to the total sales in the industry, expressed as a percentage
market share characteristics … listed
- to increase market share, means you steak it from someone else
- increase market share doesn’t always mean an increase in profit
efficiency
how well a business uses its resources (time, raw materials, labour, machinery, technology etc) when producing a good or service
improving efficiency could … listed
- allow the business to get products to the market quicker
- reduce costs in the business (improving profits)
- reduce the amount of waste, minimise impact on the environment
- allow the business to lower prices for customers
improve effectiveness
the extent to which a business achieves its stated objectives
improve effectiveness example
a business may set a target of increasing net profit by 10% in the coming year.
if it doesn’t increase profit by 10%, the business has been effective
if profit is increased by 8%, then it hasn’t been effective as it planned
market
specific group or industry that a business focuses selling its goods or services to
fulfil a market need
business fulfils market need by providing products and services which meet the desires of a group of customers with similar needs
gap in the market
needs or un met or unserved
fulfil a social need
business fulfils social need by improving the community and environment through its business activities
fulfil a social need example
profit earns is used to support a cause (social need) eg, thank you water
shareholders
those that have invested a sum of their own money into a business by purchasing company shares; they own a share of the business
they expect to make a return on their investment through capital gains and dividends
capital gains
value of the business increases
dividends
their share in the company profits
business strategies
the actions that a business takes to achieve specific objectives
business strategies example
a strategy to achieve the objective of increased profit may be the introduction of a new product range
stakeholders
people or groups that interact in some way with the business and have a vested interest in its activities
vested interest
strong connection to a business that leads to personal gain or benefit
stakeholders characteristics … listed
- have different interests in the business
- can come from inside the business or outside the business (internal environment or external environment)
stakeholders … listed
- owner
- manager
- employees
- customer
- supplier
- general community
owner
invest funds into a business
manager
coordinate employees and tasks to achieve business objectives
employees
complete a business’s work tasks
customers
purchase and use a business’s products or services
supplier
provide a raw materials resources
general community
observe the impact of a business’s operations
owners characteristics … listed
- may be owned by sole trader, partners or number of shareholders
- varying levels of involvement in the day-to-day operations
managers characteristics … listed
- responsible for day to day operations
- ensure the overall strategy of business is implemented
employees characteristics … listed
- work for business in exchange for money
customers characteristics … listed
- important for businesses to meet expectations of customers in order to remain competitive
suppliers characteristics … listed
- important for business to develop strong relationships with suppliers
general community characteristics … listed
- business is part of community and should look to benefit it
owners vested interests … listed
- establishing and fostering positive relationships with other stakeholders to enhance business reputation and performance
- receiving a return on their investment, often through business growth, in the form of increasing in share price, dividends or profits
mangers vested interests … listed
- being recognised for the achievement of business objectives
- receiving bonuses from business owners for achieving business objectives
- having opportunities to increase their status and engage in career advancement and promotion
employees vested interest … listed
- provision of long term job security
- receiving fair pay and working conditions
- having opportunities to engage ion personal and professional development, as well as training to advance their careers and receive promotions
customers vested interests … listed
- receiving high quality goods and services at affordable prices
- engaging with businesses that are ethical and sustainable
- receiving friendly and helpful customer service and assistance
suppliers vested interests … listed
- increasing their revenue
- earning a profit from the raw materials and resources they supply
- having reliable and honest relationships with businesses they supply
general community vested interests … listed
- observing business activities that lead to improvements un the community and environment
- increasing the local employment rate and boosting the local economy
conflict between employees and shareholders
employees require safe working conditions and reasonable wages, but this will reduce the business’s profit and dividends to shareholders
conflict between management and customers
management could attempt to maintain profit and a high dividend to satisfy shareholders by raising the prices of products, this will upset customers who expect reasonably priced products
conflict between management and members of the community
management might decide to cut cots by neglecting maintenance, which could possibly put members of community in danger
conflict between suppliers and members of the community
suppliers expect to be paid fairly and promptly, but they might reduce costs by using unethical and socially irresponsible practices, which can upset members of the community
conflict between management and suppliers
management wishes to keep costs down to improve profit but suppliers providing ethical materials require higher prices to cover their costs
management style
the attitude of the manager when making decisions and communicating with employees
management styles … listed
- autocratic
- persuasive
- consultative
- participative
- laissez-faire
autocratic management style
makes the decisions and tells the employees what tasks to perform
autocratic management style characteristics … listed
- manager has full control
- one-way communication
- centralised decision making
autocratic management advantages … listed
- decisions are made quickly
- clear communication to employees
- employees know exactly what their tasks are
when is autocratic best?
- nature of task: simple or lack complexity
- time: when time is lacking and decisions need to be made quickly
- employee expectations: when employees lack experience and knowledge
- manager preference: prefer to have control
persuasive management style
manager makes the decision and then sells the decision to employees
persuasive management style characteristics … listed
- centralised decision making (+info)
- one way communication
persuasive management style advantages … listed
- decisions are made quickly
- clear communication to employees
- employees are clear about what it is they need to achieve
persuasive management style disadvantages … listed
- no opportunity from employees
- small pool of ideas due to no consultation
- task focused with lack of employee development
when is persuasive best? … listed
- nature of the task: similar to autocratic-simple/lack complexity
- time: when time is lacking
- employee experience: inexperienced
- manager preference: complete control but would rather convince employees
consultative management style
seeks the ideas and opinions of employees before they make a final decision
consultative management style characteristics … listed
- two way communication
- centralised decision making
- discussion encouraged
consultative advantages … listed
- larger pool of ideas to choose from=improved quality of decision
- increased motivation as employees are more involved
- employees more likely to take ownership due to involvement in decision making
consultative disadvantages … listed
- more time consuming to make decisions
- some employees may feel undervalued if their ideas are overlooked
- some employees may not want to be consulted regularly
when is consultative best? …. listed
- nature of the task: tasks are more complex (more ideas generated)
- time: when more time is available
- employee experience: higher level of experience which allows strong ideas to be put forward
- manager preference: prefers to include employees in the process (values input)
participative management style
manager communicating and discussing info with employees in order to make decisions TOGETHER
participant management style characteristics … listed
- two way communication
- de centralised decision making
participant style advantages … listed
- employees feel trusted and valued
- improved morale and motivation due to involvement
- employees gain experience in decision making which can help with career development
participant style disadvantages … listed
- more time on forming decision=less time completing work
- time consuming as decisions are often discussed and debated
- some employees may not want to be involved in decision making
when is participative best? … listed
- nature of the task: tasks are complex
- time: long period of time required
- employee experience: high level of experience and knowledge
- manager preference: prefer to include employees/collaborative
laissez-faire management style
manager leaves majority of the decision making and authority with the employees
laissez faire management style characteristics … listed
- two way communication
- highly de centralised decision making
laissez faire advantages … listed
- creates an environment that can encourage creative and innovative solutions
- increased motivation and productivity due to a highly independent work environment, high levels of trust and empowerment
laissez faire disadvantages … listed
- potential for employees to allocate excessive resources to business decisions
- potential for conflict when employees don’t cooperate and insist on implementing their own ideas
when is laissez-faire best? … listed
- time: extended time available or when not much time and decisions can be delegated to highly experienced staff
- experience of employees: highly experienced employees that can be trusted to take control
- nature of tasks: either simple or simple
- manager preference: low desire for control or show full trust in employees
management skills
abilities or competencies that managers use to help them complete the tasks that are necessary for the c\achievement of business objectives
management skills … listed
- communication
- delegation
- planning
- leading
- decision making
- interpersonal skills
communication
the transfer of info from on individual to another
communication characteristics … listed
- can be verbal or non verbal
- can boost employee morale
communication advantages … listed
- effective communication=maintains good relationships
- informs people of business objectives
- effective communication=resolved conflict
communication disadvantages… listed
- possible to communicate disagreement thereby causing conflict
- time consuming, over sharing
- positive relationships formed through communication=distraction
communication link to management styles … listed
- autocratic:one way, from manager to employee
- consultative, participative, laissez faire: two way communication
delegation
the passing of authority and responsibility from a manger to employee
delegation characteristics … listed
- spreads workload
- free up time
- gain experience/skills
- job satisfaction
delegation advantages … listed
- enables staff to learn new things
- allows for effective time management
- can lead to fresh ideas and an improvement in employee motivation
delegation disadvantages … listed
- must still provide support and set deadlines for employees=time consuming
delegation link to management styles … listed
- autocratic/persuasive: delegation of tasks but NO delegation of responsibility or decision making
- consultative, participative, laissez faire: delegation of authority/responsibility
planning
the ability to set objectives and develop strategies to achieve them
3 levels of planning … listed
- strategic: long term goals (3-5 years)
- tactical: medium term goals (1-2 years)
- operational: short term goals (day to day)
planning characteristics … listed
- provides direction and reduces uncertainty
- identifying alternative options
- outlining strategies to achieve them
logical planning process
SADIM
SADIM … listed
- Set: the objective
- Analyse: the environment (use swot analysis)
- Develop: alternatives
- Implement: the plan
- Monitor: and evaluate
planning advantages… listed
- gives business purpose and direction
- planning reduces risk and uncertainty=resources being used efficiently
planning disadvantages … listed
- can be expensive
- time consuming
- opportunities will be lost while managers are planning
planning link to management styles … listed
- autocratic, persuasive: have more formal planning process, involving only management
- consultative, participative, laissez faire: slow planning process down, take ideas from a number of staff
leadership
ability of a manger to motivate and inspire employees to achieve business objectives
leadership characteristics … listed
- motivates employees
- communicates direction
- responsible
- empathetic/supportive
- demonstrate values
business managers can lead by … listed
- providing employees with a clear sense of direction aligned with business objectives
- influencing staff behaviour and decision making to meet the business goals
leadership advantages … listed
- good leadership=motivated employees
- good leadership=high staff morale
leadership disadvantages … listed
- time consuming=take time away from other important business activities
- clashes can occur between leaders and employees if staff feel they cannot relate to management
leadership link to management styles … listed
- autocratic, persuasive: involves more instruction, telling staff what they need to be doing
- consultative, participative: involves high level of leading, management has more interactions with staff
- laissez faire: no leading from management
decision making
ability to make a choice on a course of actions from a range of alternatives
decision making characteristics … listed
- informed=positive impact
- assess available info and draw conclusions
- independent/collaborative
common decision making process :
IGDACE
IGDACE… listed
- Identify: the problem/objective
- Gather: info on the issue
- Develop: alternatives
- Analyse: alternatives
- Choose: and implement the most appropriate alternative
- Evaluate: gather feedback on final decision and see if it meets the objective
decision making advantages.. listed
- important in situations where there’s an emergency or crisis requiring quick decision making
- team decision making generates a lot of knowledge and ideas
decision making disadvantages … listed
- team decision making=time consuming
- if excluded from the decision making process, employees may feel ignored
decision making link to management styles
centralised v decentralised
interpersonal skills
managers ability to communicate and interact with a range of people to create and maintain POSITIVE relationships
interpersonal skills characteristics … listed
- empathetic
- getting to know employees personalities and backgrounds
- recognising individual employees motivation
interpersonal skills advantages … listed
- likely tp lead to greater staff morale and higher productivity
- managers with solid interpersonal skills often better at conflict resolution
- creates a workplace where people feel respected and work well together
interpersonal skills disadvantages … listed
- may use these skills to manipulate others
- can take a long time to learn and make use of interpersonal skills
- manager may be prone to making emotional decisions
interpersonal skills link to management styles … listed
level interpersonal skills for each style relies on …
* communication (one way or two)
level of staff interaction
corporate culture
the shared values, ideals, beliefs and expectations of the people within the business
corporate culture is also known as..
VIBE
two types of corporate culture …
- official
- real
official CC
what the owners/directors of the business want shared values and beliefs to be, is often expressed through elements such as formal rules and symbols
official corporate culture characteristics … listed
- vision statement/mission statement
- business policies and procedures doccuments
- scheduled training programs
- business name, logos, slogans
- compulsory uniform for employees
real corporate culture
the ACTUAL shared values and beliefs of the people within the business expressed through unwritten rules and habits
real corporate culture characteristics … listed
- hiring
- promotion criteria
- management style
- work layout
- dress code
- rituals
- celebrations
- how employees treat each other
