AOS 1: Business Foundations

Question 1

Business structures

Answer 1

sole trader, partnership, private limited company, public listed company, social enterprise, government business enterprise

Question 2

Unincorporated business

Answer 2

Where a business is established as a single legal entity with the owner/s

Question 3

Incorporated business

Answer 3

Where a business establishes itself as a separate legal entity from its owner/s

Question 4

Sole trader: define, eg. pros/cons

Answer 4

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

Question 5

Partnership: define, eg. pros/cons

Answer 5

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.

Question 6

Private Limited Company (Pty. Ltd.): define, eg. pros/cons

Answer 6

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.

Question 7

Public Listed Company (Ltd.): define, eg. pros/cons

Answer 7

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.

Question 8

Social enterprise: define, eg. pros/cons

Answer 8

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.

Question 9

To make a profit

Answer 9

A business makes a profit by generating more revenue than expenses.

Question 10

Government Business Enterprise: define, eg. pros/cons

Answer 10

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.

Question 11

Business objectives

Answer 11

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

Question 12

To increase market share

Answer 12

Is increasing a business’s percentage of total sales within an industry.

Question 13

To meet shareholder expectations

Answer 13

Is achieved through providing a financial return on their investment in the company, in the form of dividends or capital gains.

Question 14

To fulfil a market need

Answer 14

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

Question 15

To fulfil a social need

Answer 15

Aims to improve society or the environment through business activities.

Question 16

To improve efficiency
(also define efficiency)

Answer 16

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

Question 17

To improve effectiveness

Answer 17

is the extent to which a business achieves its stated objectives.

Question 18

Stakeholders VS Shareholders

Answer 18

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.

Question 19

Stakeholders (topic)

Answer 19

owners/shareholders, managers, employees, customers, suppliers, general community

Question 20

Internal stakeholders

Answer 20

are individuals/groups/organisations who are employed by or have a financial share in the business.

Question 21

Owners (internal)
(interests & conflicts)

Answer 21

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

Question 22

External stakeholders

Answer 22

are individuals/groups/organisations who are outside the business and are impacted by or interested in a business’s activities.

Question 23

Managers (internal)(interests & conflicts)

Answer 23

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

Question 24

Employees (internal)(interests & conflicts)

Answer 24

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

Question 25

Customers (external)(interests & conflicts)

Answer 25

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

Question 26

Suppliers (external)(interests & conflicts)

Answer 26

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

Question 27

General community (external)
(interests & conflicts)

Answer 27

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.

Question 28

Management styles (name and define broad topic)

Answer 28

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

Question 29

Autocratic management style

Answer 29

is a manager making decisions and directing employees without any input from them

Question 30

Autocratic management style PROS/CONS

Answer 30

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

Question 31

Persuasive management style

Answer 31

is a manager making decisions and communicating the reasons for those decisions to employees without their input.

Question 32

Persuasive management style PROS/CONS

Answer 32

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

Question 33

Consultative management style

Answer 33

involves a manager seeking input from employees on business decisions but making the final decision themselves

Question 34

Consultative management style PROS/CONS

Answer 34

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

Question 35

Participative management style

Answer 35

involves a manager sharing information with employees so that they can participate in decision-making.

Question 36

Participative management style PROS/CONS

Answer 36

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

Question 37

Laissez-faire management style

Answer 37

involves a manager communicating business objectives to employees and giving them freedom to make decisions independently

Question 38

Laissez-faire management style PROS/CONS

Answer 38

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

Question 39

Appropriateness of management styles

Answer 39

time, experience of employees, nature of the task, manager preference,

Question 40

Experience of employees

Answer 40

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.

Question 41

Nature of the task

Answer 41

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.

Question 42

Time

Answer 42

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.

Question 43

Manager preference

Answer 43

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.

Question 44

Management skills

Answer 44

planning, decision making, communication, delegation, interpersonal, leadership

Question 45

Planning (pros/cons)

Answer 45

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

Question 46

Planning process: SOSAIM

Answer 46

-Set objective

• SWOT analysis
• Alternatives
• Implement
• Monitor

Question 47

Types of planning: STO

Answer 47

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

Question 48

Decision making (pros/cons)

Answer 48

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

Question 49

Skills for persuasive

Answer 49

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

Question 50

Decision making process: IGDACE

Answer 50

• Identify the problem and define the objective
• Gather information
• Develop alternatives
• Analyse alternatives, then rank and sort
• Choose an alternative to implement
• Evaluate

Question 51

Communication (pros/cons)

Answer 51

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

Question 52

Delegation (pros/cons)

Answer 52

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

Question 53

Interpersonal (pros/cons)

Answer 53

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.

Question 54

Leadership (pros/cons)

Answer 54

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

Question 55

Transformative VS Transformational leaders

Answer 55

Transformative: gives rewards and incentives (eg. money, promotion)

Transformational: tries to inspire and motivate employees

Question 56

Skills for persuasive

Answer 56

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

Question 57

Relationship between management styles and skills (POV: manager)

Answer 57

autocratic, persuasive, consultative, participative, laissez-faire

planning, decision making, communication, delegation, interpersonal, leadership

Question 58

Skills for autocratic

Answer 58

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

Question 59

Skills for consultative

Answer 59

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

Question 60

Skills for participative

Answer 60

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.

Question 61

Skills for laissez-faire

Answer 61

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.

Question 62

Corporate culture

Answer 62

Corporate culture is the shared values and beliefs of a business and its employees

Question 63

Official corporate culture (and examples)

Answer 63

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)

Question 64

characteristics of official corporate culture

Answer 64

1. 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

Question 65

characteristics of real corporate culture

Answer 65

1. 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)

2. Developed in an organic, informal manner to create shared beliefs and values between employees.

Question 66

Real corporate culture (and examples)

Answer 66

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)