AOS1 Flashcards
What is a business?
A business is an entity that provides goods or services to customers in exchange for money, with the aim of generating profit.
what are the 6 business types
sole trader, partnership, private limited company, public listed company, government business enterprise, social enterprise
sole trader definition
A business structure that is owned and operated by one individual
what are 4 ways to identify a sole trader?
- unlimited liability
- owner retains all profits after personal income tax is paid
- simple and cost effective
- single individual makes all decisions
what are 3 advantages of a sole trader?
- simple to set up and run
- all profits go to owner
- owner has full control over business decisions
what are 3 disadvantages of a sole trader?
- Unlimited Liability (owner is personally responsible for all business debts, risking personal assets)
- Limited Capital (Relies on personal funds, which may limit business growth)
- Limited Expertise (may lack diverse skills, making it challenging to manage business effectively)
partnership definition
A business that is owned by 2 to 20 people
what are 4 ways to identify a partnership?
- 2-20 owners
- simple and cost effective structure
- profits shared between owners
- unlimited liability
what are 3 advantages of a partnership?
- distribution of tasks, leveraging the skills and expertise of each partner
- partnerships are easier and less expensive to set up than companies
- benefit from the combined capital contributions of partners
what are 3 disadvantages of a partnership?
- Unlimited Liability
- Differences in opinion or conflicts among partners can arise
- Profits must be shared among partners
Private limited company definition
An incorporated business structure that has at least one director and a maximum of 50 shareholders
what are 4 ways to identify a private limited company?
- pty ltd after business name
- only up to 50 shareholders
- limited liability of the shareholders
- shares can only be sold privately
what are 3 advantages of a private limited company?
- limited liability
- raise funds by selling shares to a selected group of investors
- company exists independently of its owners, providing stability and continuity (seperate legal identity)
what are 3 disadvantages of a private limited company?
- Compliance with regulatory requirements and administrative duties can be complex
- Profits are taxed at the company level, and shareholders also pay personal income tax on dividends (double taxation)
- Limited to 50 shareholders, restricting the ability to raise capital publicly
public listed company definition
An incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX
what are 6 ways to identify a public listed company?
- ltd after business name (limited liability)
- shares sold publicly
- unlimited shareholders
- limited liability of shareholders
- stricter regulations due to public listing
- have to display financial info publicly
what are 3 advantages of a public listed company?
- limited liability
- can raise significant funds by selling shares to the public on stock exchanges
- shareholders can easily buy or sell shares on the open market
what are 3 disadvantages of a public listed company?
- Subject to stringent government regulations and reporting requirements
- Loss of Control, Shareholders have a say in major decisions, potentially diluting the control of the original owners
- The process of becoming a public company can be expensive and time-consuming
social enterprise definition
Type of business that aims to fulfil a community or environmental need by selling goods or services
what are 2 ways to identify a social enterprise?
- mission, focus is on social or environmental cause
- profits are reinvested in the business or donated to charities
what are 3 advantages of a social enterprise?
- Focuses on both profitability and contributing to community
- Can take various legal forms, adapting to the specific goals of the enterprise
- may attract support from customers who value socially responsible businesses
what are 3 disadvantages of a social enterprise?
- Profits must be reinvested or used for charitable purposes
- Balancing social and financial objectives can be challenging
- May face challenges in gaining acceptance or understanding from consumers or investors
Government Business Enterprise definition
A business that is owned and operated by the government
what are 3 ways to identify a GBE?
- owned by the government but managed separately
- exists to provide a public service
- accountable to the government and the public
what are 3 advantages of a GBE?
- Exists to fulfill a designated government purpose
- Operates with a focus on remaining profitable to sustain its activities
- Can benefit from government support, including funding or regulatory advantages
what are 3 disadvantages of a GBE?
- Subject to potential changes in strategic directions dictated by the government
- Accountable to both the government and the public
- Management decisions may be influenced by government directives
what are business objectives?
the goals a business intends to achieve
what are the 7 main business objectives?
- to make a profit
- to increase market share
- to meet shareholders expectations
- to fulfil a market need
- to fulfil a social need
- to improve efficiency
- to improve effectiveness
what is making a profit?
make more revenue than business expenses
what is increasing market share?
to increase the total sales within an industry, and it reflects a businesses competitiveness
what is to meet shareholder expectations?
providing a financial return on their investment in the company, which is in the form of dividends or capital gains.
what are dividends?
regular sums of money paid out to shareholders from a business’s profit.
what is to fulfil a market need?
When a business addresses customer needs that are currently unmet or underrepresented by other businesses in the same industry
what is to fulfil a social need?
improving society and the environment through business activities.
what is improving efficiency?
How well a business uses its resources when producing a good or service. Getting the most out of a business’s resources, including time, money, effort, employees (labour) and materials
what is improving effectiveness?
Competitive businesses must consistently set and achieve targets. Effectiveness is the extent to which a business achieves its stated objective
what are stakeholders?
Stakeholders are individuals, groups, or organisations who have a vested interest in the performance and activities of a business.
what are 5 internal stakeholders?
- shareholders
- owners
- directors
- management
- employees
what are 5 external stakeholders?
- customers
- competitors
- suppliers
- trade unions
- general community
customers definition
Individuals or groups who interact with a business by purchasing and utilising its goods and services
competitors definition
a business rival in the same market offering the same/similar product or service of a business
suppliers definition
individuals or groups that source Raw Materials, component parts, and proceeds materials and sell them to a business for use in the production of its goods and services
trade union definition
an organised association that represents workers in a particular trade or profession. they act on behalf of members to negotiate with management on issues and protect and further the rights and interests
general community definition
individuals and groups who are impacted by a business’s operation and decisions often because they are located in close proximity to the business
shareholders definition
Individuals who have purchased shares in a company and are therefore part owners of that company
owners definition
individuals who establish, invest, and have a share in a business, often with the goal of earning a profit
directors definition
An individual or member of a board of people that have overall responsibility for managing the company’s business activities
management definition
individuals who oversee and coordinate a business’s employees and lead its operations to ultimately achieve the business’s objectives
employees definition
individuals who are hired by a business to complete work tasks and support the achievement of its objectives
what are 5 interests of customers?
- to receive high-quality goods and
services at affordable prices - to receive high levels of customer
service - to potentially establish a long-term
relationship with the business - to ensure that products are
Australian made - to engage with a business that is
acting in an ethical and socially
responsible manner
what are 5 interests of competitors?
- to gain a competitive edge over another business
- to gain a larger market share
- to differentiate the products or services from their competitors
- to compare and evaluate their performance against other businesses
- be prepared to respond to any change in the actions of another business
what are 5 interests of trade unions?
- to negotiate for its members: fair wages, working conditions, working hours, and other related work issues
- to be represented in the workplace
- to be involved in the decision-making with managment over issues relating to the employees
- to ensure the welfare of their members, both health and safety
- to be able to act as a bargaining agents for employees when negotiating new collective agreements
what are 5 interests of suppliers?
- turn a profit from the raw materials and resources they supply
- to be paid promptly and in full
- to increase their own revenue
- to be able to establish and guarantee a long-term preferred supplier relationship
- to develop reliable and honest relationships with businesses they supply
what are 4 interests of general community?
- to ensure the business operations are environmentally responsible and sustainable
- to increase the local employment rate and boost the local economy
- to ensure that a business is socially responsible and ethical in its operations
- to observe business activities that lead to improvements in the community and environment
what are 3 interests of shareholders?
- profitability of the business
- increasing the value of their investment through capital gains and dividends (portion of the profits made)
- ethical business operations
what are 2 interests of owners?
- 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 increases in its share price, dividends or profits
what are 4 interests of directors?
- to develop and direct strategy and major business decisions
- to ensure strict adherence to corporate governance, social responsibility, and ethical and honest behaviour
- to gain personal power and status by being a director/partner of the business
- to be well remunerated/paid (money and share options)
what are 5 interests of management?
- to be recognised for the achievement of business objectives
- to receive bonuses from business owners for achieving business objectives
- increase their status and engage in career advancement and promotion
- to receive an appropriate remuneration package that reflects their managerial role and responsibility within the business
- to satisfy and balance as many stakeholder expectations as possible
what are 7 interests of employees?
- to receive a fair wage or salary
- to receive sufficient training
- to work in a non-discriminatory and ethical workplace
- to have an opportunity of career advancement
- to gain job satisfaction
- to feel secure in a long-term survival of their job
- to work for a business that is ethical and socially responsible
what is a management style?
the approach and manner in which employees are directed and
motivated within a business.
what are the 5 types of management styles?
autocratic, persuasive, consultative, participative, laissez-faire
what are 3 things to look for when identifying a management style?
- communication
- decision-making
- employee involvement
what does the autocratic management style involve
a manager making decisions and directing employees without any input from them
does a manager have centralised control with an autocratic management style?
yes
what type of communication is used in an autocratic management style?
one-way
what are 2 advantages of an autocratic management style
- Directions and procedures are clearly defined; there is little uncertainty
- Employees’ roles and expectations are clear
what are 3 disadvantages of an autocratic management style
- No employee input; fewer ideas; employees less able to develop; employees don’t feel valued
- No responsibility for lower-level staff, resulting in lower job satisfaction & low motivation
- Increased potential for conflict
what does the persuasive management style involve
a manager making decisions and communicating the reasons for those decisions to employees without their input (trying to convince the employees)
does a manager have centralised control with a persuasive management style?
yes
what type of communication is used in an persuasive management style?
one-way
what are 3 advantages of an persuasive management style
- Decisions can be made quickly as there is no consultation
- Managers gain some trust/support by explaining reasons for their decisions
- More positive response, as employees receive more information
what are 3 disadvantages of an persuasive management style
- Attitude and trust remain negative as there is no employee participation
- Employees remain frustrated because they are denied any participation in the decision-making process
- Time may be wasted at meetings that justify decisions, but don’t seek employee input
what does the consultative management style involve
a manager seeking input from employees on business decisions but making the final decision themselves
does a manager have centralised control with a consultative management style?
yes
what type of communication is used in an consultative management style?
two-way
what are 3 advantages of an consultative management style
- As employees are consulted, there is greater variety of ideas, which can help make a better decision
- Employees have some ownership in the way in which the business is run and take more interest in it
- Employees are more involved in the business so can feel a sense of fulfilment which can improve morale
what are 3 disadvantages of an consultative management style
- it takes time to consult with employees prior to making decisions
- Some issues don’t suit a consultation process
- if the process is not consistent, staff will be uncertain of their roles
what does the participative management style involve
a manager sharing information with employees so that employees can participate in decision-making (making decisions jointly)
does a manager have centralised control with a participative management style?
no, decentralised control
what type of communication is used in an participative management style?
two-way
what are 3 advantages of an participative management style
- Positive relations between management and employees means there is a lower likelihood of disputes
- The two-way communication process means greater flow of ideas
- High motivation and job satisfaction as a result of employee participation
what are 3 disadvantages of an participative management style
- More time consuming, as more views must be considered
- Compromises made rather than clear, decisive decisions
- Not all employees may wish or be equipped to contribute
what does the laissez-faire management style involve
a manager communicating business objectives to employees and giving them freedom to make decisions independently
does a manager have centralised control with a laissez-faire management style?
no, decentralised
what type of communication is used in an laissez-faire management style?
two-way
what are 3 advantages of an laissez-faire management style
- Helps employees feel a sense of ownership towards the project they are working on
- Encourages creativity, which is conducive to a dynamic working environment
- Communication is open and ideas are shared
what are 3 disadvantages of an laissez-faire management style
- Resources, including time and money may be misused or used ineffectively, due to the loss of management control
- May lead to creative differences and thus internal conflict
- Focus on business objectives can be easily lost
what are the 4 factors when deciding a management style that needs to be considered
time, employee experience, nature of the task and manager preference
time definition (management style)
The length of time in which a manager must complete a task or make a business decision can change and thus influence the management style utilised.
what management styles are suitable when there is limited amount of time and why
autocratic or persuasive as the manager can make decision quickly and do not need to discuss with employees
what management styles are suitable when there is a lot of time available and why
consultative, participative, or laissez-faire as there can be lots of discussion about the best option (two-way discussions)
what management styles are suitable when they have inexperienced employees and why
autocratic or persuasive, as they will be unlikely be able to help
what management styles are suitable when they have experienced employees and why
consultative, participative, or laissez-faire as they can give there experienced opinion and ideas (two-way communication)
what management styles are suitable when the tasks are simple and why
autocratic or persuasive, the discussion of ideas may not be needed so the manager can figure it out themselves
what management styles are suitable when the tasks are complex and why
consultative, participative, or laissez-faire as they allow for two-way conversations and managers and employees can make more innovative and well-informed decisions by sharing ideas and suggestions
what management styles are suitable when the manager likes to have control and why
autocratic or persuasive, has centralised decision-making and one-way communication
what management styles are suitable when the manager likes to have shared control and why
consultative, participative, or laissez-faire, allows for two-way conversations and employee involvement in the decision-making processes
what are management skills
the abilities or competencies that managers use to complete tasks for business objectives
what are the 6 main management skills?
- planning
- decision-making
- communication
- delegation
- interpersonal skills
- leadership
planning definition
The process of determining a business’s objectives and establishing strategies to achieve these aims.
what are the 3 levels of planning?
- strategic
- tactical
- operational
what does strategic planning involve?
the broadest scope of what a business aims to achieve in the next two to five years and affects the general direction of business decisions made
what does tactical planning involve?
the long-term strategies a business intends to use in the next one to two years in order to fulfil its strategic plan
what does operational planning involve?
the short-term actions a business takes on a daily basis to achieve its tactical plan.
what are 3 examples of how planning can be used?
- To create budgets, allocating financial resources to various departments and projects based on business priorities
- To define the long-term vision and objectives of the business
- To guide the initiation, execution, and completion of projects by outlining tasks, timelines, and resource requirements
decision making definition
The skill of selecting a suitable course of action from a range of plausible options is decision-making.
what are 3 examples of how decision making can be used
- To set long-term objectives
- To identify and address operational challenges, ensuring the smooth functioning of the business.
- To evaluate potential risks and determine strategies to mitigate or navigate them effectively
communication definition
Communication is the skill of effectively transferring information between parties. There can be verbal or non-verbal communication.
what are 3 examples of how communication can be used
- To clarify tasks (Ensuring understanding of tasks that need completion)
- To resolve conflict (Addressing misunderstandings and disputes)
- To maintain good working relationships (Fostering positive interactions for a harmonious work environment)
delegation definition
Delegation is the skill of assigning tasks and authority to lower-level employees in the business hierarchy.
what are the 5 steps that should be taken to delegate a task?
- task
- employee
- expectations
- monitoring
- appraisal
what happens in the task stage (delegation)
Determine which tasks should be delegated, taking into consideration the complexity of the work and the appropriateness of selecting another employee to complete the task
what happens in the employee stage (delegation)
Select the subordinate that will complete the task, evaluating the skillset of the employee and their knowledge of the area.
what happens in the expectation stage (delegation)
Outline to the employee the expected standards to which the task should be completed.
what happens in the monitoring stage (delegation)
Observe the progress made by the employee when completing the task and provide encouragement for them to accomplish their assigned work
what happens in the appraisal stage (delegation)
Evaluate and revise the work done by the employee.
what are 3 examples of delegation being used
- To ensure efficient task distribution and meet tight deadlines
- To ensure efficient project management
- To focus on high-priority activities like strategic planning and team leadership
interpersonal definition
the skill of creating positive interactions with other employees, to foster beneficial professional relationships
what are 3 examples of interpersonal being used
- Active listening (Demonstrating genuine interest in a colleague’s ideas during a team meeting)
- Empathy (acknowledging and understanding a team member’s challenges and offering support)
- Collaboration (Actively participating in group discussions and contributing valuable insights)
leadership definition
the skill of motivating others in order to achieve a business’s objectives
what are 3 examples of leadership being used
- To set a vision (A manager articulates a compelling vision for the team, outlining ambitious but achievable goals)
- To lead by example (A manager embodies the values and work ethic expected from the team, setting a positive example that inspires others)
- To build team culture (A manager promotes a positive team culture by fostering collaboration, recognising achievements, and encouraging open communication)
what management skills are used frequently or sometimes in the autocratic style?
- planning, decision-making
- communication
what management skills are used frequently or sometimes in the persuasive style?
- planning, decision-making
- communication, delegation, interpersonal
what management skills are used frequently or sometimes in the consultative style?
- planning, decision-making, communication
- delegation, interpersonal, leadership
what management skills are used frequently or sometimes in the participative style?
- communication, interpersonal, leadership
- decision-making and delegation
what management skills are used frequently or sometimes in the laissez-faire style?
- delegation, communication, leadership
- interpersonal
what is corporate culture (CC)
the shared values and beliefs of a business and its employees.
what does official corporate culture involve
the shared views and values that a business aims to achieve, often outlined in a written format.
what does real corporate culture involve
the shared values and beliefs that develop naturally within a business, and are practised on a daily basis by its employees.
what are 3 indicators of official corporate culture
- logos
- slogans
- written policies
what are 3 indicators of real corporate culture
- language used
- dress
- behaviours of employees
what are 3 similarities of real and official CC
- concerned with the shared values and beliefs of people in the business.
- aim to change the way employees interact with each other and the business
- can lead to improved business performance
what are 3 differences between real and official CC
- OCC is often written, whereas RCC is usually unwritten
- OCC is institutionalised by formal documents and rules, RCC develops organically in unwritten interactions between employees
- OCC includes the ideals of businesses, RCC includes what occurs in actuality
what are 3 benefits of positive culture
- Increased productivity
- Increased work ethic
- Greater profitability
what are 3 costs of negative culture
- Decreased productivity
- Decreased work ethic
- Decreased profitability
