Section 1- Business And Its Environment°°°°°°°°section 2- People In Organisations Flashcards
Definitions 🤓
Consumer goods :
The physical and tangible goods sold to the general public - they include durable consumer goods, such as cars and washing machines; and non-durable goods, such as food, drinks and sweets that can only be used once (have a short life span)
Consumer services
The non-tangible goods sold to the general public - they include hotel accommodation 🏩, insurance services and hair salons. This is when a business does something for their consumer (providing the service) in return for money in most cases
Capital goods
The physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles.
Creating value
Increasing the difference between the cost of purchasing the bought in materials and the price the finished goods are sold for
Added value
The difference between the cost of purchasing bought-in materials and the price the finished goods are sold for.
Opportunity cost
The benefit of the next desired option which is given up. This concept exists for all economic decision makers :consumers, businesses and government
Entrepreneur 😎
Someone who takes the financial risk of starting and managing a new venture.
The characteristics of successful entrepreneurs is :innovation, commitment and self motivation, multiskilled, leadership skills, self confidence and ability to bounce back, and risk taking.
The challenges they face : identifying successful business opportunities, sourcing capital, determining location, competition and building a customer base.
Social enterprise
a business with mainly social objectives that reinvest most of its profits into benefiting society (the community) rather than maximising returns to owners.
Their objectives are referred to as the triple bottom line : economic, social and environmental.
Common features include :
- Directly produce g/s
- have social aims & use ethical ways of achieving them
- Need surplus /profit to survive as they cannot rely on donations as charities do
Triple bottom line
The three objectives of social enterprises : economic, social and environmental.
💵 Economic refers to making a profit to reinvest back into the business and provide some to owners.
👬Social insinuates that they will provide jobs / support for locals, often disadvantaged communities.
🌄Environmental refers to protecting the environment and managing the business in a environmentally sustainable way.
Primary sector business activity
Firms engaged in farming, fishing 🎣, oil extraction and all other industries that extract resources so that they can either be used or processed by other firms.
Secondary sector business activity
Firms that manufacture and process products from natural resources, including computers, brewing, clothes - making and construction 🚧
Tertiary sector business activities
Firms that provide services to consumers and other businesses, such as retailing, transport 🚘, insurance, banking, hotels 🏩, tourism and telecommunications
Public ⛣ sector
Comprises of organisations accountable to and controlled by central / local government (the state and municipality )
Private sector
Comprises of business owned and controlled by individuals / groups of individuals
Mixed economy
Economic resources are owned and controlled by both the private and public ⛣ sectors. E. G South Africa 🌍
Free-market economy
Economic resources are owned largely by the private sector with very little state intervention. E. G US
Command economy
Economic resources are owned, planned and controlled by the the state. E. G North Korea
Sole trader/proprietor
A business in which one person provides the permanent ♾ finance and, in return, has full 🌕 control of the business and is able to keep all the profits.
An advantage would be that it is easy to set up(no legal formalities) and a disadvantage is that it has unlimited liability (all of owners assets are potentially at risk)
Business
Any organisation that uses resources to meet the needs and wants of customers by providing a product or service they demand
Partnership ⚯
A business formed by 2 or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
An advantage s that partners may specialise in different areas of business management. A disadvantage is that profits are shared as well as there is unlimited liability.
Limited liability
The only liability - or potential loss - a shareholder has if the company fails is the amount they invested into the company, not the total wealth of the shareholder
Private limited company
A small to medium sized business that is owned by shareholders who are often members of the same family ; this company cannot sell shares to the general public.
An advantage is that shareholders have limited liability. A disadvantage is that capita cannot be raised by the sale of shares.
Share
A certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.
Shareholder
A person / institution owning shares in a limited company (part ownership)
Public ⛣ limited company
A limited company, often a large business, with the legal right to sell shares to the general public - share prices are quoted on the national stock exchange 💱.
An advantage is continuity and a disadvantage is share prices are subject to fluctuation.
Memorandum of association
This states the name of the company, the address of the head office 🏢 through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business.
Articles of association
The document covers the internals workings ⚒ and controls of the business - for example the names of directors and the procedures to be followed at the at meetings will be detailed.
Cooperative
Very common form of ownership, especially in agriculture and retailing. All members can contribute to the running of the business, sharing the workload, responsibilities and decision-making, although in larger cooperatives some delegation to professional managers takes place. All members have one vote at important meetings and profits are equally shared. An advantage is buying bulk and a disadvantage is slow decision - making if all members are to be consulted on important issues.
Franchise
A business that uses the name, logo and trading systems of an existing successful business e.g. Mc Donald’s.
An advantage is that there are fewer chances of new business failing as an established brand and product are being used. A disadvantage is that the initial franchise license fee can be expensive.
Joint venture
2 or more businesses agree to work closely together on a particular project for mutual benefit and create a separate business division ➗ to do so.
One of the reasons for having one is the costs and risks of a new business venture are shared - this is a major consideration when the cost of developing new products is rising rapidly. A problem of a joint venture is that the business failure of one of the partners would put the whole project at risk
Holding company
A business organisation that owns and controls a number of separate businesses, but does not unite them into one unified company. Often, the separate business are in completely different markets, meaning that the holding companies have diverse interests
Public cooperation
A business enterprise owned and controlled by the state - also known as nationalised industry. They usually do not have profit as a major objective.
An advantage is that their finance raised mainly from the government and a disadvantage is that they have a tendency towards inefficiency due to lack of strick profits margins.
Revenue
The total value of sales made by a business in a given period of time
Capital employed
The total value of all long - term finance invested in the business
Market capitalisation and formula
The total value of a company’s issued shares. This can be used only for business who have shares quoted on the stock exchange 💱.
Market capitalisation =
current share price ×total number of shares issued
Market share and formula
Sales of the business as a proportion of the total market’s sales.
Market share =
( total sales of business /total sales of industry) ×100
Internal growth
Expansion of a business by means of opening new branches, shops or factories (also known as organic growth)
Mission statement
°A statement of the business’s core aims, phrased in a manner to motivate employees and to stimulate the interest of outside groups.
They are an attempt to condense the central purpose of the business’s existence in one statement.
They are not concerned with specific or quantifiable goals.
Corporate social responsibility
The concept applies to those businesses that consider the interests of society by taking responsibility for the impact their decisions and activities on customers, employees and the environment.
For example businesses that refuse to stock goods that have been tested on animals
Management by objectives
A method of co-ordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department 🏬, manager and employee.
E. G the hierarchy of objectives starting with individual targets, then departmental, divisional, corporate objectives and at the top the aim of the business
Ethical code (code of conduct)
A document detailing a company’s rules and guidelines on staff behaviour that must be followed by all employees.
Stakeholders
People /groups of people who can be affected by and therefore have an interest in - any action taken by the organisation.
The main stakeholders of a business- others than owners /shareholders - are :customers, suppliers, employees and their families as well as the local communities
Stakeholders concept
The view that businesses and their managers have responsibilities to a wide range of groups not just shareholders
Corporate social responsibility
The concept that accepts that businesses should consider the interests of society in their activities and decisions, beyond the legal obligations that they have.
Manager
°Responsible for setting objectives, organising resources and motivating staff so that an organisations aims are met.
They are responsible for:
- Setting objectives and planning
- organising resources to meet objectives
- Directing and motivating staff
- Coordinating activities
- controlling and Measuring performance against targets
Leadership
The art of motivating a group of people towards achieving a common goal
Autocratic leadership
4 features
°A style of leadership that keeps all the decision making at the centre of the organisation.
Main features :leader takes all the decisions, gives little information to staff, supervises workers closely and one way communication. This leadership is usually applicable in defense forces and police (where quick decisions have to be made.)
Democratic leadership
3 features
°A leadership that promotes the active participation of workers in taking decisions.
Main features : participation is encouraged, 2 way communication which allows feedback from staff and workers are given information about the business to all full staff involvement
Paternalistic leadership
°A leadership style based on the approach that the manager is in a better position than the workers to know what is best for an organisation.
Main features : managers do what they think is best for the workers and some consultation is but the final decision is made by the managers - so there is no true participation in decision making. Usually schools will adopt this leadership style
Laissez-faire leadership
A leadership style that leaves much of the business decision making to the workforce - a ‘hands-off’ approach and the reverse of the autocratic style.
Main features : managers delegate virtually all the authority and decisions making powers ; and very broad criteria or limits might be established for the staff to work within. This style is usually applicable in research institutions
Informal leader
A person who has no formal authority but has the respect of colleagues and some power over them.
Emotional intelligence
The ability of managers to understand their own emotions, and those of the people they work with, to achieve better business performance. Namely : self - awareness, self-management, social awareness and social skills.
Motivation
The internal and external factors that stimulate people to take actions that lead to achieving a goal. Motivation levels have a direct impact on the level of productivity and thus the competitiveness of the business
Self actualisation
A sense of self - fulfillment reached by feeling enriched and developed by what one has learnt and achieved. This need may be satisfied at work from challenging work that stretches the individual- this will give a sense of achievement ; opportunity to develop and apply new skills will increase potential.
Motivating factors (motivators)
Aspects of a worker’s job that can lead to positive job satisfaction, such as achievement, recognition, meaningful and interesting work and advancement at work
Job enrichment
Aims to use the full capabilities of the workers 👷 by giving them the opportunity to do more challenging and fulfilling work.
Time based wage rate
Payment to a worker 👷 made for each period of time worked e.g. Per hour ⏳. This is the most common way of paying manual, clerical and ‘non-management’ workers
Piece rate
°A payment to a worker for each unit produced.
The level of the rate is important. If it is set too low, it will demotivate staff. If it is set too high, it could reduce the incentives because workers will be able to meet their target 🎯 wage level by producing relatively few units
Salary
Annual income that is usually paid on a monthly basis. It is most common form of payment for professional, supervisory and management staff
Commission
A payment to sales person for each sale made. Frequently used in personal selling, where the salesperson is paid a commission or a proportion of the sales gained.
Bonus
A payment made in addition to the contracted wage /salary. Criteria of this are usually agreed upon between the managers and workers e.g. If the net number of additional customers is acquired.
Performance related pay
A bonus scheme to reward staff for above average work performance. It requires regular target setting and establishing specific objectives for the individual.
Profit sharing
A bonus for staff based on the profits of the business - usually paid as a proportion of the basic salary. This scheme shares some of the company’s profits not just with the shareholders but also with the workers 👷
Fringe benefits
Benefits given, separate from the pay, by an employer to some or all employees. These are non-cash forms of reward e.g. Free insurance offered to employees
Job rotation
Increasing the flexibility of employees and the variety of the work they do by switching from one job to another. This may relieve boredom and give the workers multiskills
Job enlargement
Attempting to increase the scope of a job by broadening or deepening the tasks undertaken
Job redesign
Involves the restructuring of a job - usually with employees’ involvement and agreement-to make work more interesting, satisfying and challenging
Quality circles
Voluntary groups of workers who meet regularly to discuss work - related problems and issues
Workers participation
Workers are actively encouraged to become involved in decision-making within the organisation
Human resource management
The strategic approach to the effective management of an organisation’s workers so that they help the business gain competitive advantage.
Recruitment
The process of identifying the need for a new employee, defining the job to be filled and the type of person needed to fill it and attracting suitable candidates for the job
Selection
Involves the series of steps by which the candidates are interviewed, tested and screened for choosing the most suitable person for the vacant post.
Job description
A detailed list of the key points about the job to be filled - stating all its key 🗝 tasks and responsibilities.
For example the job title, details of the tasks to be performed, responsibilities involved, place in the hierarchical structure, working conditions and how the job will be assess a decision performance measured.
Person specification
A detailed list of the qualities, skills and qualifications that a successful applicant will need to have.
Employment contract
A legal document 📄 that sets out the terms and conditions governing a worker’s job.
For example : the employee’s responsibilities and main tasks to be undertaken as well as their working hours
Labour turnover and formula
° measures the rate at which employees are leaving an organisation.
Labour turnover =
(number of employees leaving in 1 year
/ average number of employees employed) ×100
Example :
If result is high and increasing over time~then this is a good indicator of employee discontent, low morale and possibly a recruitment policy that leads to the wrong people being employed
Training and the three types
Work-related education to increase workforce skills and efficiency.
There are 3 different types :
- Induction training - given to all new recruits
- on the job training
- Off the job training
Induction training
Introductory training programmes to familiarise new recruits with the systems used in the business and the layout of the business site.
On the job training
Instruction at the place of work on how a job should be carried out
Off the job training
All training undertaken away from the business e.g. Work related college 🎓 courses
Employee appraisal
The process of assessing the effectiveness of an employee judged against preset objectives.
Dismissal
Being dismissed or sacked (fired) from a job due to incompetence or breach of discipline
Unfair dismissal
Terminating a worker’s employment contract for a reason that the law regards as being unfair. For example : because of pregnancy, a discriminatory reason, being a member of a union and/ or a non-relevant criminal record
Redundancy
When a job is no longer required, the employee doing thus job becomes unnecessary though no fault of their own
Work - life balance
A situation in which employees are able to give the right amount of time and effort to work and to their personal life outside of work. E. G. Their family
Equality policy
Practices and processes aimed at achieving a fair organisation where everyone is treated in the same way and has the opportunity to fulfill their potential
Diverse policy
Practices and processes aimed at creating a mixed workforce and placing positive value on diversity in the workforce
