Key principles Flashcards
Importance of profit
- Return on investment
- Reward for risk
- Source of finance
- Measure business success
- Motivating factor
Unincorporated
Sole trader
Partnership
No legal difference
Owner has unlimited liability
Incorporated
Ltd + Plc
Legal difference
Owners have limited liability
Ltd key points
Shares cannot be traded publicly
Quick and cheap
More control - few shareholders
Plc key points
On stock market
Less control
More detailed disclosure of information
Costly to administer
Better access to capital
More prestigious profile
PESTLE
Political
Economic
Social
Technological
Legal
Environmental
PESTLE - P
Competition policy
Industry regulation
Govt. spending & tax policies
Business policy & incentives
PESTLE - E
Interest rates
Consumer spending & income
Exchange rates
Economic growth (GDP)
PESTLE - S
Demographic change
Impact of pressure groups
Consumer tastes & fashions
Changing lifestyles
PESTLE - T
Disruptive technologies
Adoption of mobile technology
New production processes
Big data and dynamic pricing
PESTLE - L
Employment Law
Minimum / Living Wage
Health & Safety Laws
Environmental legislation
PESTLE - E
Sustainability
Tax practices
Ethical sourcing (supply chain)
Pollution & carbon emissions
Ageing population
Greater demand for services that support older people.
Increasing disposable incomes, resulting in higher demand.
Blake Mouton Grid
Different leadership styles.
Concern for people high: Country Club, Team Leader
Concern for people low: Impoverished, Produce or Perish
Concern for task high: Produce or Perish, Team Leader
Concern of task low: Impoverished, Country Club.
Tannenbaum and Schmidt Continuum of Leadership
Decreasing authority of leader, increasing area of freedom for employees.
Tells, Sells, Consults, Shares, Delegates
Influences on decision making.
Business Objectives
Organisational Structure
Attitude to risk
Availability and Reliability of Data
External Environment
Intuition - Experience
Stakeholders
Shareholders
Managers
Employees
Customers
Suppliers
Community
Government
Stakeholder mapping
Helps manage stakeholders.
Sorts them according to level of power and level of interest.
Difficult to meet needs of stakeholder so will need to prioritise.
Stakeholder conflict
Primary Market Research
First-hand data for specific purpose.
Focus group, interviews, surveys.
+
Directly focused
More up-to-date
Detailed
-
Time-consuming and often costly.
Risk of bias.
Secondary Market research
Organisations
Government
Competitors
Media
Income Elasticity of Demand
Measures the extent to which the demand for a product is affected by a change in income.
%Change in demand
/
%Change in demand.
More than 1:
Incomes grows, demand increases.
Holidays, Branded Goods.
Below 1:
Incomes grows, no change in demand (necessity)
Staple groceries
Price Elasticity of Demand PED
Measures responsiveness of demand to change from a change in price.
Price elastic, Price inelastic
Niche market advantages
Less competition
Clear focus
Build up specialist skill + knowledge
Charge a higher price, higher margins
Loyal customers
Niche market disadvantages
Lack of ‘economies of scale’
Risk of over-dependence
Likely to attract competition
Marketing Mix
7ps
Product, Price, Place, Promotion, People, Process, Physical
Boston Matrix
Categories products based on Market Share and Market Growth.
Stars - High Growth + High share, likely become Cash Cow if they keep market share.
Cash Cows - Low Growth + High Share, mature successful products, continued profit.
Question Marks - High Growth + Low Share, have potential, need substantial investment. Should invest?
Dogs - Low Growth + Low Share, usually sold or closed.
Product life cycle
Development, Introduction, Growth, Maturity, Decline.
Price Skimming
High price before competition.
People willing to pay more for latest tech.
Short-term
Penetration Pricing
Low entry price, increase market share.
Dynamic Pricing
Sets flexible prices based on current market demands.
Dynamic Pricing
Sets flexible prices based on current market demands.
Ways in improve productivity
Training
Improved Motivation
Better equipment
Improved Organisation
Ways to improve labour productivity
Measure performance and set targets.
Invest capital equipment
Invest in employee training
Just-in-time
Enables a firm to produce only what is required.
Stock levels can be kept to a minimum.
Sophisticated scheduling
Delivered only when needed.
Causes of cash flow problems
Low profits
Over-investment
Too much stock
Too much credit
Seasonal Demand
Hard HR
Treats employees as just another resource.
Soft HR
Treats employees as the most important resource and a source of competitive advantage.
hackman and Oldman’s job characteristics model
Task Variety (Meaningfulness)
Task Identity
Task Significance
Autonomy (Responsibility)
Feedback (Knowledge of results)
Leads to motivation and satisfaction with job and therefore to efficient performance.
