department of business exam Flashcards
advantages of the private limited companies (3)
- owners/shareholders have limited liability
- ownership is not lost to outsiders
- the business contains a friendly feel with good customer service
Disadvantages of private limited companies (4)
- dividends have to be split between many shareholders
- requires a complicated legal process to set up the company
- limited amount of money can be raised as shares are not sold publicly
- financial statements have to be shared publicly
advantages of a public limited company (4)
- shareholders have limited liability
- large amount of finance can be raised
- easy to borrow finance due to size and reputation so less risky for banks
- can easily dominate the market
disadvantages of a public limited company (4)
- dividends are split between many shareholders
- control of the business can be diluted or lost as shares are sold on the stock market
- annual accounts must be shared
- setting up cots are high and complicated
advantages for the franchiser (2)
- low risk form of growth
- receives a percentage of all franchisee’s profits each year
disadvantages for the franchiser (2)
- the reputation of the franchise can be ruined by one poor franchisee
- only a share of profits is received rather than all profits
advantages of a franchisee (3)
- the franchise is a well known business with existing customers
- industry knowledge and training is provided
- the franchisee benefits from national advertisements carried by the franchiser
disadvantages for the franchisee (3)
- little control over decision making as franchiser decides on products. store layout and uniform
- royalties have to be paid each year
- high initial start up fees
advantages of a multinational (4)
- wages and raw material costs are lower in different countries
- businesses can avoid legislations in the original country
- grants can be issued by governments to expand which do not have to be paid back
- business can avoid tariffs issued by their governments
disadvantages of a multinational (4)
- language barriers can slow communication
- cultural differences can affect production
- exchange rates can affect purchasing and paying expenses in different countries
- time differences can slow communication between head office and branches around the world
central government facts (6)
- provides national service to citizens living in the UK
- armed forces, NHS, healthcare, transport and infrastructure
- paid through taxation
- controlled by politicians
- includes nationalised companies
- public sector can be sold making it private
local government facts (3)
- provide service to public schools, refuse collection and street lighting fro free
- finance comes form taxation collected by the government
- aim to provide service not to make profits
charities advantages (3)
- charities do not pay tax such as VAT and corporation tax
- low wage costs due to volunteers working for free
- private companies are willing to donate and sponsor charities as it is good PR
charities disadvantages (2)
- can be difficult to compete with large marketing budgets of organisations within the private sector
- charities rely heavily on volunteers who may leave for paid work
voluntary organisation facts (3)
- aim to provide a service for their members or community
- finance raised through membership subscription
- controlled and run volunteers
social enterprise advantages (4)
- social aims can mean a social enterprise is liked
- good quality employees who believe in values attract to organisation
- likely to receive government grants
- asset lock - if enterprise shuts down, sales of assets go to benefit the cause
company objectives (8)
- maximising profits
- managerial objectives
- survival
- satisfying
- providing good quality service
- sales maximisation
- CSR
- growth
methods to ensure good CSR (4)
- ethical responsibilities such as not using child labour
- donating to charity
- environmental responsibilities such as being sustainable
- following laws set by the government
advantages of good CSR (4)
- business gets a good reputation for a caring nature
- customers agreeing with the aim are more likely to use the business
- business can attract high quality staff who believes in the ethics of the business
- society and the environment are kept well benefiting the business in the long run
Advantages of growth (4)
- reduce the risk of failure as business with more products or branches can spread the risk
- increase in profits as more products are sold
- removed competition as larger businesses take over smaller ones
- economies of scale such as bulk buying, finance, specialist functions.
internal growth strategies (4)
- launching new products
- opening new branches
- introducing e-commerce
- hiring more staff
what is diversification benefit and drawback
when products are launched across different markets
- which increases potential customers
- spreads the risk across different markets
- although it requires numerous resources and finance
what is horizontal integration
this occurs when two businesses form the same sector of industry become one business. can be merging or take over
advantages of horizontal integration (3)
- new larger businesses can dominate the market as competition willi be vastly reduced
- new business can benefit from economies of scale to reduce prices
- due to reduced competition the larger businesses can raise prices increasing profits
disadvantages of horizontal integration (3)
- the merge or takeover may breach competition rules
- quality may suffer due to lack of competition
- customers may have to pay higher prices for the same goods
what is forwards vertical integration
occurs when businesses takes over another business form in a later stage of production.
such as a manufacturer of mobiles taking over mobile phone shop
a secondary business sells products directly to the customers at a higher price increasing profits
advantage of forwards vertical integration (2)
- the business can control supply of its products and could decide to not supply to competition
- can increase profits by cutting the middle man and adding value itself
advantage of backwards vertical integration (3)
- guaranteed and timely supply of inventory
- no need to pay a suppliers marked up prices so inventory is cheap
- quality of supplies can be strictly controlled
Disadvantage for both backward and horizontal vertical integration (2)
- company may be incapable of managing new activities efficiently meaning higher costs
- focusing on new activities can adversely affect core activities
what is backwards vertical integration
a business taking over or merging with a business in an earlier sector of industry such as their supplier
what is lateral integration
when a business takes over or merges with a business that is in the same industry but doesn’t provide the same product is they are not in direct competition with each other
advantages of lateral integration (2)
- the business can target new markets and therefore increase sales
- new products can compliment existing ones
disadvantages of lateral integration (2)
- the lack of knowledge in a slightly different market may affect the performance for the products
- may affect core activities
what is conglomerate integration
when a business in different markets join together (merge) whose activities are unrelated.
advantages of conglomerate integration (5)
- business can spread the risk. is one market fails the losses can be compensated by others
- overcome seasonal fluctuations meaning all year round sales
- competition is reduced
- the buyer acquires the assets of the other company
- the business gains the customers and sales of the acquired businesses
disadvantages of conglomerate integration (3)
- a business may take over a market they know nothing about causing new businesses to fail
- having too many products across different markets can cause the company to loose focus on core activities impacting other products
- business may become too large and inefficient to manage
advantages of takeovers (4)
- buying businesses gains the market share and resources of the taken over business
- risk of failure can be spread
- economies of scale can be achieved
- competition is reduced which willi increase sales
disadvantages of takeovers (5)
- integration can lead to job losses in the taken over business as the buying business wants its own management and employees
- if the buying of the business involves moving production to its home country which can have a negative impact on the businesses local economy
- can be bad for customers as less competition means higher prices
- changes mean loyal customers are lost as they may dislike them
- can be expensive to acquire another business
advantages of merging (5)
- market share and resources are shared spreading risk of failure and increases profits
- economies of scale
- each business can bring different areas of expertise
- jobs are more likely to be spared in both businesses
- overcome competition therefore increase prices
disadvantages of merging (3)
- customers may dislike changes a merger makes as familiarity of pervious businesses are lost
- marketing can be expensive
- can be bad for customers as less competition willi mean higher prices
advantages of deintegration (2)
- business can focus on core activities
- meet competition rules set by EU
disadvantages of deintegration (2)
- the business willi have to pay marked up prices for suppliers
- competitors could acquire deintegrated components and take control of the supply chain
what is divestment
selling off parts of the business such as branches in order to concentrate on others
what is asset stripping
taking over another company in order to sell of its assets for a profit
de-merger advantages (3)
- each component can concentrate on its own core activities and grow as a result
- each new component has the best chance to operate efficiently
- de merger components can divested which can meet competition regulations
what is de-merger
when a single business splits into two or more separate components
disadvantages of de-merger (2)
- customers may be put off by the de merger and abandon the business
- financial significant costs involved
what is outsourcing
- when a business plans for another business to carry out certain activities
- organisations will do this to concentrate core activities
outsourcing advantages (4)
- allows a business to concentrate on core activities
- less labour and equipment is required for outsourced activities
- there should be high quality work from the outsourced business
- benefits form economies of scale so cheaper
political factors (5)
- changing laws or legislation
- changing income tax rates
- VAT
- corporation tax
- public spending
political policy
- fiscal
- monetary
economic factors (6)
boom
recession
recovery
interest rates
exchange rates
European union - tariffs
social factors (5)
ageing population
women with professional careers
changing fashion trends
flexible working arrangement
ethical considerations
technological factors (4)
cloud computing
social media
wi-fi
4G
environmental factors (3)
weather
recycling
carbon footprint
owners interest and influence
interest - profits in order to see a return in investments
influence - can invest more money and make important decisions
managers interest and influence
interest - pay rise or promotion
influence - decision making
employees interest and influence
interest - job security and pay rise
influence - standard of work and industrial action
customers interest and influence
interest - want good quality products and services
influence - can spread good or bad word
suppliers interest and influence
interest - get business debts payed
influence - can change prices and quality
conflict between owners and employees
employees want a pay rise whereas owners want to maximise profits
conflict between customers and owners
customers want low prices and value for money whereas owners want to raise prices to maximise profits and meet objectives
conflict between suppliers and owners
suppliers want to be paid as soon as possible with cash whereas the owners want trade credit to keep cash flow good
conflict between government and owners
government may want to introduce legislation to improve society however owners may disagree as it impact their company negatively
tall structure advantages (4)
- each staff member knows their role and who to report too
- high chances of promotion opportunities to motivate staff
- narrow span of control so employees can be regulated
- managers do not feel as under pressure as there are others who can support them
tall structure disadvantages (3)
- communication is slow through the levels which slows down decisions
- slow reaction to external changes
- expertise cant share their knowledge with other staff
flat structure advantages (4)
- communication is fast
- fast response to external factors
- managers have less delegated tasks so staff feel trusted
- staff are empowered to make decisions
flat structure disadvantages (4)
- fewer promotion opportunities so staff may leave to gain promotion
- staff may have more tasks which can increase the pressure
- snap decisions and less planning time
- subordinates have no one to seek help form
flat structure features (3)
- few levels of management
- short chain of command
- for small to median organisations
tall structure features (3)
- many levels of management so different levels of responsibility
- for larger organisations
- long chain of command
what is delayering
- removing levels of management
delayering advantages (4)
- money is saved from paying salaries of the management level that is removed
- quicker decision making and communicating as shorter chain of command
- faster response to external changes
- wider span of control
delayering disadvantages (3)
- fewer promotion opportunities for staff
- organisation will loose key members of staff in the reconstruction
- remaining employees may feel unsecured as others were kicked off
what is a centralised structure
- decision making and control is kept at the very top level
advantages of a centralised structure (2)
- high corporate identity and decisions are made for the whole organisation
- low risk of information leaking from branches or departments
disadvantages of a centralised structure (3)
- less responsibility is given to subordinates which can results in demotivation of staff
- decisions willi not reflect the need of the local market
- organisation willi react slowly to external factors
what is a decentralised structure
- control is delegated to individual branches
advantages of a decentralised structure (4)
- quick reaction to external factors
- decisions are made quickly
- subordinates are empowered encouraging creativity
- senior management feel relieved from all decision making
Disadvantages of decentralised structures (4)
- corporate image can be lost if each branch is operating differently
- local branches could compete if they can make key decisions
- additional training is required for middle management which is time consuming
- lower level management can make decisions that could harm the whole businesses
what is a matrix structure
teams of skilled workers to make a project or carry out a skilled task
advantages of a matrix structure (3)
- skills and knowledge can be shared
- complex problem solving occurs
- staff can use their expertise and have job satisfaction and motivation
disadvantages of a matrix structure (3)
- many managers means higher wage costs
- duplication of resources such as administration and equipment
- staff may be confused on who to report to
what is an Entrepreneurial structure
used by small organisations with one main decision maker
advantages of an entrepreneurial structure (3)
- decisions are made quickly
- staff know who to report too
- high quality decisions are made as decision makers are experienced
disadvantages of entrepreneurial structure (3)
- heavy workload for main decision maker
- if owner is busy decisions cant be made
- other staff cant show initiative and creativity and possibly demotivating some staff
what is a strategic decision (4)
- made to set out aims
- made by senior management
- long term decisions
- high risk
what is a tactical decisions (4)
- made to put strategic decisions in action
- made by middle management
- middle term
- medium risk
what is an operational decision (4)
- day to day decisions so short term
- made by supervisors and all staff
- low level risk
- made in response to external factors
