Chapter 1 Flashcards
Why do organisations exist
overcome peoples individual limitations
let people specialise
save time (work together)
accumulate
pool expertise
enable synergy
enable people to be more productive
define organisation
a social arrangement for the controlled performance of collective goals which has a boundary separating it from its environment
Controlled performance meaning
performance is monitored against goals and adjusted as necessary to ensure goals are accomplished
Who owns private sector organisations
private investors/shareholders
Who owns public sector organisations
owned by the nation and managed by the government
Goal of a non-profit organisation
to provide goods and services for its beneficiaries
Secondary objective of profit oriented organisation
output goods/services
secondary objective of not-for-profit organisation
minimise cost of primary goals
Define business
an organisation that is oriented towards making a profit for its owners so as to maximise their wealth and that can be regarded as an entity separate from its owners
What is a stakeholder
A person who has a stake in the organisation. Meaning they have an interest to protect in respect of what the organisation does and how it performs
What is at stake for shareholders
capital invested - expect return on it
Primary objective of a business
maximise shareholder wealth
Secondary Objective
Market position
achieve a particular market share of each market in which the business operates (grow sales, customers, potential customers etc)
Secondary Objective
Product development
bring in new products, develop range, invest in R&D
Secondary Objective
Technology
Improve how much is produced from resources, reduce cost per unit of output, develop or exploit appropriate tech
Secondary Objective
Employees and management
train employees in necessary skill, reduce labour turn over
Why do managers not always maximise shareholder wealth
may have no personal interest in creating wealth
market may lack competitive pressure to be efficient (min cost max rev)
Profit satisfying explained
decisions taken by managers with own objectives in mind, achieving satisfactory profit by operating at levels acceptable to shareholders
Revenue maximise explained
act to maximise revenue to maintain or increase market share, ensure survival and discourage competition
How do managers benefit from revenue maximisation
revenue grows becomes bigger company, more prestige running large company and salaries and benefits often better
Eight key areas where objectives are needed
market standing
innovation
productivity
physical and financial resources
profitability
manager performance and development
worker performance and attitude
corporate responsibility
Environmental issues explained
organisation activities may have impact on natural environment. poor behaviour can lead to fines, loss of reputation and legal claims by those affected by poor environmental behaviour
Social issues explained
refers to relationship with stakeholders and society as a whole - labour relations, modern slavery can impact reputation
Governance issues explained
refers to how an organisation is managed and led - e.g. structure of BOD and how activities are monitored by other stakeholders. Poor governance can lead to significant problems
Ethical behaviour explained
underlies all three factors of ESG, about doing the right thing form a moral perspective
Mission definition
the business’s basic function in society expressed in terms of how it satisfies various stakeholdersq
two types of goals
non-operational/qualitative
operational/quantitative
Purpose of setting operational objectives in a business
implement the mission
publicise direction to managers and staff
appraise whether decisions are valid
assess and control actual performance by using objectives as targets
Plan definition
state what should be done to achieve operational objectives
Standard and targets definition
specify the desired level of performance
three types of standards
physical
cost
quality
sustainability definition
ability to meet the needs of the present without compromising the ability of future generations to meet their own needs
what is sustainable development
aims to ensure that economic activity can continue without causing permanent harm to society and the planet. Describes a world of thriving economies and just societies based on what nature can afford
Three categories of sustainability (SEE)
Social
environmental
economic
what is social sustainability
meeting the needs of a wider group of stakeholders and society as a whole
examples of socially sustainable behaviour
fair treatment of employees
avoiding unethical activities and relationships such as bribery and corruption
contributing to societies in which organisations operate
Economic sustainability - economic activity and growth are sustainable if
they can occur without harming social and environmental sustainability
when are organisations activities economically sustainable
if they can provide return to stakeholders over long erm while meeting obligations to society
what is considered in the triple bottom line
people
planet
profit
what is climate change
long term shifts in temperatures and weather patterns, some due to natural causes, some due to human activity
what is the Paris agreement
legally binding treaty in which 193 parties have committed to reduce carbon emissions. limit increase ni global temperature
business impact on environment examples
emission of GHG during production
manufacturing products with non recyclable material
use of fossil fuels for heating
petrol/diesel trucks for transports
sending waste to landfill
How does climate change impact organisations
extreme weather
changing regulatory environment
reputational damage
four Rs of sustainability
reduce
reuse
recycle
replace
SMART
Specific
measurable
Achievable
Relevant
Time bound
What questions should a mission statement answer
what is our business
what is our value to the customer
what do we want our business to become
what should our business be
If directors have run way designed solely to increase prestige in business community - what is the directors aim
maximise sales revenue
To determine whether an organisation should be classed as business or not, it would be necessary to enquire as to the nature of its
primary objective
What is a company’s vision
how the organisation sees itself at some future time
