Module 1 revision cards Flashcards
Name 3 sectors of business activity
Primary, Secondary & Tertiary
Tertiary can be split into what 2 further sections
- Quaternary - knowledge sector. Scientific research, IT
- Quinary - high level decision makers and domestic activities. Gov officials, childminders
How do you define the size of a company
Number of employees & turnover. Micro, small, medium and large
What are SME’s
Small and medium sized enterprises
Why size an organisation
Helps to inform gov policy e.g. tax rates and decide who is eligible for subsidies
What is a limited liability structure
Can only lose what money has been invested/put in
What is an unlimited liability structure
Can lose their business and personal possessions up to the value of what is owed
Name all 6 types of organisation in the private sector
1.Sole Trader
2.Partnership - General, Limited Liability & Limited
3. Limited Companies - by shares (public or private) or guarantee
4. Parent & Subsidiary
5. Unincorporated Associations
6. Co-operatives
Name all types of organisation in the public sector
- Central & Local Government
- Public Corporations
- Municipal Enterprises
Name all types of voluntary organisations
- Charities
- Foundations
- Community Groups
- Recreational Clubs
Company objectives are dependant on what factors
- Business sector
- Legal structure/ownership type
- Goals of stakeholders
What are the objectives of a private sector organisation
Breakeven
Survival
Profit maximisation
Growth
What are the objectives of public sector organisations
Service provision
Reducing costs
Value for money
Meeting charitable purposes
What are the objectives of voluntary sector organisations
Helping a particular cause
Benefit and enrich society
Meet charitable purposes
What 3 statements are used to help achieve company objectives
Mission
Vision
Value
What are the main internal and external uses of vision and mission statements
Internal - help strategic planning, develop KPIs, motivate employees to work to common goals, develop ethical framework
External - encourages support from 3rd parties, better relationships with customers, suppliers and external stakeholders. good PR tool
What is the purpose of org charts
Show how work roles are delegated, controlled and coordinated
Show how information and work flow through an organisation
What should be considered when structuring workforce
Type of business and how complex operations are
Efficiency of operations
Culture and future growth
Layers of management
Where decision making lies
What 2 ways can organisations be designed/divided
Vertical/tall
Horizontal/flat
Characteristics of vertical organisation
Many layers of management (CEO and delegating down)
Employees and departments have well defined responsibilities
Must have strong leadership at the top to avoid poor decision making. reduced productivity and low morale
Characteristics of a horizontal organisation
Flat structure with less layers of manager
Better employee morale as they feel more part of decision making process
Faster response to issues as less layers
Cost less to run as less managers to pay
More transparent as easier for information to flow through the biz
May have less defined roles which can cause problems and make task delegation difficult
If organisation grows, becomes difficult to manage
Authority for decision making can be structured in 2 ways, what are they
Centralised
Decentralised
Explain the characteristics of centralised authority
Senior managers who delegate to middle/lower managers = well defined command
Good control and consistency across the business
Quick decision making
Info stored in one place
Less flexible when responding locally
Demotivating for managers lower down
Example: military
Explain the characteristics of decentralised authority
Decisions can be made more locally
Quicker decisions that affect local areas
Less control and consistency through business
Information not all stored centrally
More motivation for lower managers in decision making
More opportunities for staff development
Less bureaucracy
Incurred costs for role duplication
Policies can be harder to impliment company wide
Organisational structures are designed in 3 ways, what are they
Functional
Divisional
Matrix
How is a board made up and what is their role
Chair
CEO
Executive directors
Non executive directors
Independent directors
Senior independent director
What are the factors that make an NED independent
not an employee in the last 5 years
no material business relationship in the last 3 years
no additional remuneration except director fee
no close family tie with senior employees or advisors
doesnt represent a significant shareholder
hasnt served on the board for 9 years from first appointment
3 committees that INEDs are involved in
Remuneration
Audit
Nomination
Why is it important to separate the role of chair and CEO
Avoid dominance of 1 person
Encourage constructive challenge and discussion
Avoid poor decision making
What must be considered in board size and composition
A balance of skills and abilities
No domination of one person
Clear division of leadership of the board and leadership of the business
Excluding the chair at least half directors should be INEDs
Diverse in gender and ethnicity
Name the 2 types of board structure and how they are different
Unitary
Two tier
What is the definition and role of stakeholders
Individuals, groups or organisaitons who have an interest or stake in the business
They affect and influence the decisions made by the business
How are stakeholders grouped
Primary and secondary (by proximity to the business)
Internal and external (by their connection to it)
Define internal and external stakeholders
Internal - aware and involved in the internal matters of the business
External - do not know about the day to day matters but are affected by its activities
Based on their proximity to the business
Name internal stakeholders
Shareholders
Employees
Name external stakeholders
Financial institutions
Customers
Suppliers
Creditors
Debtors
Government
Trade unions
Define primary stakeholders
Anyone who has direct engagement, functional or financial interest in the business
Define secondary stakeholders
Those who have an interest in the business but no direct engagement or direct involvement
Give examples of conflicts between different types of stakeholder
Owners high profit may not want to pay high wages
Directors focus on increased sales, owners want high profit
Business move customer service abroad may impact customer service
Explain stakeholder theory of corporate governance
Business should make decisions considering and creating all stakeholders and not just owners or shareholders
Responsibility business has to society as a whole
Argues in favour of corporate social responsibility
Define “business environment”
A set of factors that have a DIRECT effect on the companies operations e.g technology, financial resource
Define internal and external organisation environment
Internal - factors inside the org that may affect the way it operates e.g company structure and resources to carry out its biz activities
External - factors outside of the org that may affect the way it operates e.g customers, suppliers, competitors
Define situational analysis and give example of types of analysis used
The process of collecting, evaluating and organising info regarding internal and external environments e.g SWOT & LoNGPESTEL to help determine where the biz is and where help to where it wants to go
List benefits of performing situational analysis
Thorough understanding of how biz operates
Devise clear path from where it is to where it wants to go
Helps realise company vision
Identify issues and anticipate changes in advance so can plan
What does LoNGPESTEL stand for
Local
National
Global
Politics - policy and legislation
Environment - climate change, eco friendliness
Sociocultural - consumer behaviour, demographics
Technology - advancements in mobile, new production
Economic - taxes, inflation, wage costs
Legal - health and safety, consumer protection
List benefits and drawbacks of PESTEL
Focuses specifically on key external areas
Doesnt consider internal
Relies heavily on sourcing external data and info
Some data not easy to find
Factors can change quickly
What does SWOT stand for
Strengths - internal to the org, tangible and intangible assets
Weaknesses - internal to the org, things that place biz at a disadvantage
Opportunities - external to the org, attractive factors that would allow the business to thrive and prosper
Threats - external to the org, factors beyond the biz control but can help foresee and put a plan in place to avoid
List benefits and drawbacks of SWOT
Looks at both internal and external factors
Doesn’t rely on obtaining potentially difficult info
Provides a visual overview
Quite black and white
Doesn’t cover anything that doesn’t fit into the 4 options
Doesn’t allow overlap into more than one area
Subjective to the individual creating the analysis
Doesnt specify where to focus attention
What are the 3 sectors of business
Private companies
Public companies
Voluntary organisations
What is the purpose of the vision, mission and values statements
To help with the companies strategic planning and company objectives
What is the purpose of the values statement for a company
Sets out the behaviour, principles and values that the leaders will follow when actioning their mission and values statements
Name the 3 types of partnership and how the differ
General - all equal for the debts and liabilities of co
Limited - General partner = liability. Silent partners = no liability. Silent must have no day to day running in the business
Limited liability - Assets of other partners not at risk if one is sued
What is the purpose of situational analysis
To collate, evaluate and organise information on internal and external environments to help devise a clear path from where the company is towards their desired position
Consequences of not understanding a business external environment
Management implementing unrealistic strategy
Declines in profit, reputation and market share
Not responding to opportunities or risks
