prelim Flashcards
advantages and disadvantages of a private limited company (5)
Advantages
Ownership is not lost to outsiders since existing shareholders agree who to admit as new shareholders
Ability to become larger than a partnership since there is no limit to the number of shareholders
Shareholders have limited liability, so they do not have to sell their personal possessions if the business were to fail.
Disadvantages
Limited ability to raise finance through shares as they are not sold on the stock market
Financial accounts need to be made public
advantages and disadvantages of a public limited company (8)
Generally large as it must have a minimum of £50,000 share capital
Shares can be bought on the stock market meaning they can raise large amounts of capital
Advantages
Shares in a public limited company can be resold on the stock market which encourages people to invest their money
Large amounts of shares can be made from individuals
All the above means financial stability
Disadvantages
Must make more information available to the public such as publishing annual reports
Employees may feel out of touch from those at the top so it may be hard to take a personal approach to customer service
They may become so large that they are inflexible and difficult to manage.
impact of economic external factors on a company
Inflation
Exchange rates. Strong currency = expensive exports
High interest rates = high cost of borrowing
Recession leads to unemployment = lower disposable income
Good economy means the country is producing more products, creating more jobs leading to more disposable income
Economic policies
Fiscal policy: changing levels of taxation such as corporation tax. It also involves government spending in public services such as health or infrastructure
Monetary policy: controlling the supply of money in an economy. This can involve altering the rate of interest to stimulate borrowing which then increases consumer spending on goods and services.
impact on political external factors on a company
Political
UK and EU legislation
Government policies and rates of taxation
Supplying of infrastructure
Changes in national government
Changed levels of taxation
Privatisation providing many business opportunities and increasing competition
Laws and policies
Can pressure businesses to change such as environmental reasons
impacts of environmental external factors on a company
Higher demands for recycling and using recycled material
Effects of extreme weather
Global warming
Increased environmental awareness
Increased CSR
Changes in legislations
Reduction of CO2
Renewable energy
impact of social external factors on a company
Changes in size and movement of population
People living longer
Decreasing birth rates
Companies must be more willing to accept older workers
Investing more in training for younger workers
Producing more goods and services for older people
Changes in lifestyle and attitudes
More women in work = supermarkets sell more ready meals and stay open longer and offer internet shopping
Consumer tastes change to be more health conscious = rise in sales of low-fat foods and bottled water.
Less people smoke
More people seeking a better work life and balance
Increasing car ownership
Concern about animal welfare and the environment = car manufacturers make cars that give off lower emissions
impact of technological external factors on companies
May make businesses change the products they sell or change the way they operate
Use of ITC such as email and internet communication with customers. Video conferences which allow the organisation to communicate globally and much rapidly
Internet growth and social media opens new markets, and ways to promote goods and services which enables customers to find out information more easily.
Software improvements such as electronic databases make businesses more efficient and allow them to store large amounts of information. Also allows the organisation to analyse details about their customers.
Automation or mechanisation
Developments such as these may mean that organisations which do not keep up to date may be unable to compete in the market which leads them to fail
Businesses have become more international
More global trade means more sales and profitability
Trading on larger scales allows businesses to benefit from economies of scale reducing production costs and prices for customers although there is increased competition
Changes in transportation of goods means it is quicker and more efficient to transport goods
Changes in production can be computer controlled machines and robots so less people re employed
impact of competition as an external factor on a company
Behaviour of rival businesses
May cause business to reduce prices to keep customer loyalty
features of a tall/hierarchical structure (bigger businesses)
- many levels of management
- many lines of communication
- management have narrow span of control
advantages of tall structure
- management has great control over decision making
- greater control over supervision subordinates
tasks performed by each staff member will be specialised and should become an expert in their tasks - economies of scale
staff members doing similar tasks are more likely to work together so they can share good practice - greater oppertunities for promotion
disadvantages of a tall structure
- slow communication and decision making
- slow response to customer needs and external change
features of a flat structure
- fewer levels of management
- fewer lines of communication
- management have a wider span of control
- smaller organisations
- many organisations are changing to a flat structure (delayering)
advantages of a flat structure
- quicker more efficient communication and decision making
- gathering information and consulting staff is more efficient and time consuming
- reducing staffing costs
- quicker at responding to external changes and customer needs
- increased in employee motivation as they have increased decision making
disadvantages of a flat structure
- management has less control over decision making
- fewer opportunities of promotion
increased workload and responsibilities - employees may feel isolated due to a wider span of control
- more difficult for management to supervise subordinates due to a wider span of control
- more delegation
matrix structure features
- when a business is involved in many projects or has few large customers like insurance companies
- getting people together with high skill to work on a project to complete specific tasks
- individuals have their own area of responsibility and everyone has the same amount of responsibility
- ## can be hard to coordinate
entrepreneurial structure
- small businesses
- heavy workload for managers
- staff lower down do not get to show initiatives
centralised structure features
- control and decision making lies with senior directors and management
- similar to a tall structure
advantages of a centralised structure
- benefit from strong leader ship
- economies of scale
- easier to promote a corporate image culture
features of a decentralised structure
- decision making is carried out by subordinates which relieves senior management of having to make all decisions
- similar to flat structure
advantages of a decentralised structure
- subordinates have better knowledge or work area which leads to better decision making
- quicker decision making that is more responsive to external change
4 ways in which stakeholders interests may conflict.
- Owners and employees – owners need employees to perform to their best to increase sales and profits. Employees need owners to make good decisions to keep the business profitable and ensure job security
- Owners and suppliers – owners need suppliers to provide high quality raw materials to ensure a high-quality finished product. Suppliers need managers to keep buying from them to keep then in business.
- Shareholders and owners – if owners make decisions that their shareholder’s disagree with then the shares will be sold and therefore the value of share decreases.
- Customers and employees – customers want a good service from the employees which if they receive will increase the sales and therefore increase profit. It will also increase the chance that they become more reliable customer.
