AOS 1: Business Foundations Flashcards
Business structures
sole trader, partnership, private limited company, public listed company, social enterprise, government business enterprise
Unincorporated business
Where a business is established as a single legal entity with the owner/s
Incorporated business
Where a business establishes itself as a separate legal entity from its owner/s
Sole trader: define, eg. pros/cons
A business structure that is owned and operated by one individual. Eg. ABC Accountants
Pros: The owner has full control and decision-making power, simple and inexpensive to set up/register, minimal legal paperwork
Cons: Unlimited liability puts the owner’s personal assets at risk as they can be seized to pay off business debts, the life of the business ends when the owner dies, difficult to take leave/time off
Partnership: define, eg. pros/cons
A business structure that is owned by two to 20 owners. Eg. Reddy & Associates (law firm)
Pros: The financial and legal risks are shared between partners, greater access to finances as there are more people involved, simple and inexpensive to set up/register, minimal legal paperwork.
Cons: Unlimited liability means that the partners’ personal assets are at risk as they can be seized to pay off business debts, profit needs to be shared between the partners, potential for disagreement over business decisions.
Private Limited Company (Pty. Ltd.): define, eg. pros/cons
An incorporated business structure that has at least one director and a maximum of 50 shareholders (invited owners). Eg. Cotton On
Pros: Limited liability for shareholders, greater variety of expertise and ideas, the business’s existence is not threatened by the removal of one director, as incorporated businesses have greater access to capital, banks are more inclined to provide them with loans.
Cons: It is complex to establish as the setup process requires more time, is difficult to change structure once a company has been established, Increased reporting requirements and government regulation.
Public Listed Company (Ltd.): define, eg. pros/cons
An incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX. Eg. Commonwealth Bank of Australia
Pros: Limited liability for shareholders, greater variety of expertise and ideas, no permission is needed to trade and sell shares, greater access to capital as any member of the public can purchase shares.
Cons: Higher degree of government regulations and reports (eg. annual reports- time consuming), conflicts could arise through shared decision-making between directors.
Social enterprise: define, eg. pros/cons
A type of business that aims to fulfil a community or environmental need by selling goods or services. Eg. Thankyou
Pros: The community benefits from the business’s activities, the business can develop a positive reputation as they are helping and contributing to society.
Cons: Difficult to balance the achievement of financial objectives with social objectives, may be difficult to obtain a bank loan as the business does not solely focus on financial objectives.
To make a profit
A business makes a profit by generating more revenue than expenses.
Government Business Enterprise: define, eg. pros/cons
sA business that is owned and operated by the government. Eg. Australia Post
Pros: Delivers goods and services that help the community and its needs, GBEs can rely on the government for the initial investment, operates independently from the government
Cons: Governments and politicians can interfere and change the strategic direction of the business, have to follow significant ‘red tape’, which refers to excessive rules and formalities compromising how quickly GBEs can do things.
Business objectives
Are the goals a business intends to achieve in a specific amount of time, often using the SMART principle.
to make a profit, to increase market share, to meet shareholder expectations, to fulfil a market need, to fulfil a social need, to improve efficiency, to improve effectiveness
To increase market share
Is increasing a business’s percentage of total sales within an industry.
To meet shareholder expectations
Is achieved through providing a financial return on their investment in the company, in the form of dividends or capital gains.
To fulfil a market need
Is meeting customer needs for goods or services not met by other businesses
Is to identify and fill a gap in the market which is desired by customers, yet unmet by other businesses
To fulfil a social need
Aims to improve society or the environment through business activities.
To improve efficiency
(also define efficiency)
Is increasing how productively a business uses their resources when producing a good or service
or:
Involves a business increasing productivity when producing a good or service
efficiency: how productively a business uses their resources
To improve effectiveness
is the extent to which a business achieves its stated objectives.
Stakeholders VS Shareholders
Stakeholders are individuals, groups, or organisations who have a vested interest in the performance and activities of a business.
Shareholders are individuals who have purchased shares in a company and are therefore part-owners.
A key difference between shareholders and stakeholders is that all shareholders have ownership in the company, whereas stakeholders do not necessarily have ownership in the business and are often only affected by its activities.
Stakeholders (topic)
owners/shareholders, managers, employees, customers, suppliers, general community
Internal stakeholders
are individuals/groups/organisations who are employed by or have a financial share in the business.
Owners (internal)
(interests & conflicts)
Are individuals that establish, invest, and have a share in a business, often with the goal of earning a profit from its operations.
INTERESTS: vested interest in establishing and fostering positive relationships with other stakeholders & receiving a return on their investment.
CONFLICTS: want to increase profits by sourcing cheaper supplies, but suppliers also want to increase their profits
External stakeholders
are individuals/groups/organisations who are outside the business and are impacted by or interested in a business’s activities.
Managers (internal)(interests & conflicts)
Are individuals who oversee and coordinate a business’s employees and lead its operations to ultimately achieve the business’s objectives.
INTERESTS: having career advancement opportunities & receiving bonuses from business owners for achieving business objectives
CONFLICTS: want to receive recognition for achieving business objectives with minimal delegation but employees want to have opportunities for personal growth and skill development
Employees (internal)(interests & conflicts)
Employees are individuals who are hired by a business to complete work tasks and support the achievement of its objectives.
INTERESTS: Long-term job security & career advancement opportunities
CONFLICTS: want higher wages, but conflicts with the owners who want to increase profits which can be done by decreasing employee wages
Customers (external)(interests & conflicts)
Are individuals or groups who interact with a business by purchasing and utilising its goods and services.
INTERESTS: receiving high-quality goods and services at affordable prices & engaging with businesses that are ethical and sustainable
CONFLICTS: want high quality products that are produced in a timely manner, at an affordable price, but the general community wants to increase the level of sustainable practices within a business.
also:
want employees to be fairly paid (CSR) but owners want to increase profitsby decreasing pay
Suppliers (external)(interests & conflicts)
are individuals or groups that source materials and sell them to a business for use in the production of its goods and services.
INTERESTS: Earning a profit from the raw materials/resources they supply & having reliable and honest relationships with businesses
CONFLICTS: want to minimise costs and enhance profits and therefore may utilise unsustainable methods, but the general community want ethical practices to be upheld
General community (external)
(interests & conflicts)
are the individuals/groups who are impacted by a business’s operations and decisions, often because they are located in close proximity to the business.
INTERESTS: observing business activities that lead to improvements in the community and environment & increasing the local employment rate and boosting the local economy
CONFLICTS: wants environmental damage minimised and ethical practices to be upheld, but suppliers want to increase profit margins by unethically sourcing cheaper products.
Management styles (name and define broad topic)
autocratic, persuasive, consultative, participative, laissez-faire
management styles refers to the behaviours and attitudes of a manager when making decisions, directing, and motivating staff to achieve business objectives
Autocratic management style
is a manager making decisions and directing employees without any input from them
Autocratic management style PROS/CONS
Pros: Quick decision-making allows for work processes to be completed faster, employees have clearly defined roles with reduced responsibility
Cons: All solutions and ideas come from the potentially limited views, lack of involvement in decision-making processes can lead to low employee motivation
Persuasive management style
is a manager making decisions and communicating the reasons for those decisions to employees without their input.
Persuasive management style PROS/CONS
Pros: quick decision making allows for work processes to be completed faster, may gain employee trust by explaining the reasons for decisions made by management.
Cons: All solutions and ideas come from the potentially limited views, employee motivation may be low as they feel undervalued and excluded from decision-making
Consultative management style
involves a manager seeking input from employees on business decisions but making the final decision themselves
Consultative management style PROS/CONS
Pros: Management can gain a greater variety of ideas and perspectives from employees,
potential for increased sales and profit as the quality of decisions may be improved
Cons: Employees may offer unsuitable suggestions because they may not fully understand the complexity of a business situation, employee conflict and resentment could arise if their ideas are ignored
Participative management style
involves a manager sharing information with employees so that they can participate in decision-making.
Participative management style PROS/CONS
Pros: The quality of decisions may improve because there are various perspectives from managers and employees, there is potential for a more positive corporate culture anda supportive work environment.
Cons: Hierarchical structures within the business can be disrupted as managers may lose some control, there is potential for conflict between employees and managers
Laissez-faire management style
involves a manager communicating business objectives to employees and giving them freedom to make decisions independently
Laissez-faire management style PROS/CONS
Pros: Potential for increased sales and profit as the quality of decisions may be improved, employees may have increased motivation as they feel empowered in a work environment that fosters creativity.
Cons: management loses control since employees make final business decisions, decision-making may be very time-consuming due to extensive employee discussion
Appropriateness of management styles
time, experience of employees, nature of the task, manager preference,
Experience of employees
Inexperienced employees: autocratic or persuasive:
When a manager is working with inexperienced employees who may have little to contribute to the decision-making process, due to their lack of experience in planning or analysing the broader scale of the business, one-way communication and centralised decision-making is ideal.
Experienced employees: consultative, participative, laissez-faire:
The insights and suggestions of highly experienced and skilled employees can be utilised to make well-informed business decisions. These styles establish two-way communication and create opportunities for the contribution of different perspectives.
Nature of the task
Simple tasks: autocratic or persuasive:
When business tasks are simple, the discussion of ideas may not be needed, and the one-way communication mode is ideal.
Complex tasks: consultative, participative, and laissez-faire:
Two-way communication and open discussions are important for complex tasks, as managers and employees can make more innovative and well-informed decisions by sharing ideas and suggestions.
Time
No time: autocratic or persuasive:
Managers don’t need to discuss options with employees; therefore decisions can be made rapidly.
Extended period of time for task completion and decision-making: the consultative, participative, or laissez-faire:
Allow for two-way communication between managers and employees; therefore promotes the sharing of ideas and decision-making responsibility.
Manager preference
Desire for control: autocratic or persuasive:
A manager with a desire for control may prefer a management style that has centralised decision-making and one-way communication. This allows for the efficient completion of work tasks, and decision-making processes that exclude employees.
Reduced desire for control: consultative, participative, and laissez-faire:
A manager with a reduced desire for control may prefer a management style with two-way communication and employee involvement in the decision-making processes.
Management skills
planning, decision making, communication, delegation, interpersonal, leadership
Planning (pros/cons)
Planning is the process of determining a business’s objectives and establishing strategies to achieve these aims
Pros: Outlines how the business will achieve its objectives, gives a sense of direction
Cons: some managers may get overwhelmed, too much planning- time consuming and unrealistic
Planning process: SOSAIM
-Set objective
- SWOT analysis
- Alternatives
- Implement
- Monitor
Types of planning: STO
Strategical: long term, 1-5 years, high degree of uncertainty
Tactical: medium term, less than a year moderate degree of certainty
Operational: short term, current/everyday, high degree of certainty
Decision making (pros/cons)
Decision-making is the skill of selecting a suitable course of action from a range of plausible options.
Pros: decisions can be made efficiently by senior management, gives a sense of direction to the business/employees
Cons: timely, employees may feel less motivated to work as they don’t get to contribute to business decisions
Skills for persuasive
planning, decision making,
sometimes communication, sometimes delegation, sometimes interpersonal
planning: frequent: all business decisions made by manager
decision making: frequent: managers have centralised control
communication: sometimes: one way communication, REASONING FOR DECISION must be clear and concise
delegation: sometimes: managers decide which employees can handle complex tasks (necessary skill and knowledge)
interpersonal: sometimes: managers provide reasoning for decisions –> foster trust and promote professional work relations
leadership: infrequent: explain reasoning behind decisions can help employees understand the importance of the work they complete not as concerned with sharing business’s vision and expect employees to follow orders
Decision making process: IGDACE
- Identify the problem and define the objective
- Gather information
- Develop alternatives
- Analyse alternatives, then rank and sort
- Choose an alternative to implement
- Evaluate
Communication (pros/cons)
Communication is the skill of effectively transferring information from one party to another.
Pros: Helps maintain relationships, is effective (clear and concise information)
Cons: Leads to conflict (tension and resentment), time consuming
Delegation (pros/cons)
Delegation is the skill of assigning work tasks and authority to other employees who are further down in a business’s hierarchical structure.
Pros: managers can use their time for higher value work, allows co-workers to experience new jobs & advance their career
Cons: managers remain accountable if job is incomplete, the standard of the delegated task may not be great
Interpersonal (pros/cons)
Interpersonal is the skill of creating positive interactions with other employees, to foster beneficial professional relationships.
Pros: employee satisfaction with the business can influence their productivity, is effective in fostering and developing workplace relationsand a positive corporate culture
Cons: employees may feel neglected if managers are taking an interest in other co-workers but themselves, time is taken away from achieving the business’ objectives.
Leadership (pros/cons)
Leadership is the skill of motivating others in order to achieve a business’s objectives.
Pros: can develop a positive corporate culture, employees are more informed as they are given a sense of direction
Cons: some employees may not like the managers leadership style- result in lower productivity, employees may feel under appreciated for their work without recognition
Transformative VS Transformational leaders
Transformative: gives rewards and incentives (eg. money, promotion)
Transformational: tries to inspire and motivate employees
Skills for persuasive
planning, decision making,
sometimes communication, sometimes delegation, sometimes interpersonal
planning: frequent: all business decisions made by manager
decision making: frequent: managers have centralised control
communication: sometimes: one way communication, REASONING FOR DECISION must be clear and concise
delegation: sometimes: managers decide which employees can handle complex tasks (necessary skill and knowledge)
interpersonal: sometimes: managers provide reasoning for decisions –> foster trust and promote professional work relations
leadership: infrequent: explain reasoning behind decisions can help employees understand the importance of the work they complete not as concerned with sharing business’s vision and expect employees to follow orders
Relationship between management styles and skills (POV: manager)
autocratic, persuasive, consultative, participative, laissez-faire
planning, decision making, communication, delegation, interpersonal, leadership
Skills for autocratic
planning, decision making, sometimes communication
planning: frequent: all business decisions made by manager
decision making: frequent: managers have centralised control
communication: sometimes: one way communication, must be clear and concise
delegation: infrequent: no complex tasks and responsibilities
interpersonal: infrequent: don’t provide reasoning for their decisions & employees are expected to follow orders
leadership: infrequent: not as concerned with sharing business’s vision and expect employees to follow orders
Skills for consultative
planning, decision making, communication,
sometimes delegation, sometimes communication, sometimes leadership
planning: frequent: all business decisions made by manager
decision making: frequent: managers have centralised control
communication: frequent: two way communication, instructions must be clear and concise so workers no how to do their work (efficiently)
delegation: sometimes: managers decide which employees can handle complex tasks (necessary skill and knowledge)
interpersonal: sometimes: managers provide reasoning for decisions –> foster trust and promote professional work relations
managers engage with employees to gain insights and ideas, –> promoting professional work relations & placing value on employee involvement in discussions
leadership: sometimes: involving employees in discussions can help motivate and understand the vision of the business
Skills for participative
communication, interpersonal, leadership
sometimes planning, sometimes decision making, sometimes delegation
planning: sometimes: employees are involved and help determine the strategies that are used to achieve business objectives
decision making: sometimes: manager has reduced responsibility and decentralised control (employees decide WITH manager)
communication: frequent: managers facilitate discussions amongst workers so that work can be quickly completed to an appropriate standard, two way communication
delegation: sometimes: employees and managers are both responsible for assigning work tasks to employees who are capable of completing them to a high standard.
interpersonal: frequent: A manager must understand how employees approach work (optimise productivity)
leadership: frequent: should share the vision and purpose of the business with employees to motivate them to strive towards achieving objectives. A manager’s ability to lead by example can influence how well employees work in a group, which can affect the overall efficiency and effectiveness of the business.
Skills for laissez-faire
communication, delegation, leadership, sometimes interpersonal
planning: infrequent: employees determine strategies used by the business to meet its objectives, a manager rarely utilises this skill.
decision making: infrequent: employees decide, not manager
communication: frequent: managers facilitate discussions amongst workers so that work can be quickly completed to an appropriate standard, two way communication
delegation: frequent: managers should assign different tasks to workers based on their level of experience/knowledge.
interpersonal: sometimes: A manager must understand how employees approach work (optimise productivity)
leadership:frequent: should share the vision and purpose of the business with employees to motivate them to strive towards achieving objectives. A manager’s ability to lead by example can influence how well employees work in a group, which can affect the overall efficiency and effectiveness of the business.
Corporate culture
Corporate culture is the shared values and beliefs of a business and its employees
Official corporate culture (and examples)
Involves the shared views and values that a business aims to achieve, often outlined in a written format.
(formal, written aspirations of the business)
Eg. logos (easily identify the business), employee training (employees are given standards and expectations), vision statement (what the business aspires to achieve)
characteristics of official corporate culture
- Official corporate culture tends to arise from a business’s shared objectives, codes of conduct, training and symbols
(These elements reflect the official corporate culture that has)
2.Been developed and documented in a formal manner to create shared beliefs and values between employees
characteristics of real corporate culture
- Real corporate culture tends to arise from a business’s office layout, staff diversity, management styles, hiring criteria, rituals, and celebrations.
(These elements reflect the real corporate culture that has)
- Developed in an organic, informal manner to create shared beliefs and values between employees.
Real corporate culture (and examples)
Real corporate culture involves the shared values and beliefs that develop organically within a business, and are practised on a daily basis by its employees.
(informal, unwritten interactions between employees of the business)
Eg. workplace environment/office layout (open/closed- can impact level of interaction between employees) management styles (affects the relationship and interactions between managers and their employees)
