The Business Organisation And Its External Environment Flashcards
A1. The Purpose And Types Of Business Organisation A2. Stakeholders in business organisations A3. Political and legal factors affecting business A4. Macro-economic Factors A5. Micro Economics Factors A6. Social and Demographic Factors A7. Technological Factors A8. Environmental and sustainability factors A9. Competitive Factors
True or False?
Legal entities owned by private owners are known as limited companies
True
Name the different types of organisations
- Commercial –> company (ltd, plc), partnership, sole trader
- NFPs
- NGOs
- Public Sector
- Co-operatives
Name the primary stakeholders of an organisation
- Internal stakeholders (management and employees)
- Connected stakeholders (shareholders, lenders, customers, suppliers) –> people with the money
*they have a contractual relationship with the organisation
What is a NGO?
A non governmental organisation. An independent voluntary association of people who act together for some common purpose which does not include making money.
What are the benefits that derive from an organisation?
- Synergy –> people that work together towards a common goal achieve more than when they act as individuals.
- Expertise –> individuals can focus on what they do best
- Sharing knowledge
Name the segments of the Mendelow’s Matrix
- High power + high interest–> key players–> keep involved and happy e.g. shareholders
- High power + low interest –> keep satisfied e.g government
- Low power + high interest –> consult/ inform e.g. media
- Low power + low interest –> ignore
What does the Cyert & March theory say?
The consensus theory of company objectives
It states that at any time, NOT all stakeholders can be satisfied due to their conflicted interests. Organisations should be striving to achieve the most satisfaction.
What does PEST stand for and what is it used for?
Political/ Legal e.g. taxation, employment law
Economical e.g growth, government spending
Social e.g. demographics, lifestyle
Technological e.g. AI, new systems, online learning
It’s an analysis based on the above factors in order to understand the external environment the organisation operates into better.
Name the principles of GDPR under which an organisation can process personal data?
- Data not kept longer than necessary
- Data adequate, relevant and not excessive
- Fairly and lawfully processed
- Used for limited purposes
- Accurate and up to date
- Not transferred abroad
- Kept secure
True or False
The shift to homeworking would be classed as a social factors in a PEST analysis
True
True or False
Resources available to public sector are limited
True
What are the objectives of a shareholder?
Maximize share price, max divis and earnings, organisational growth, maintaining control
What are the objectives of lenders?
security of interest, repayment of money
What are the policy objectives a government can use to affect the economy?
- Unemployment
- Interest rates
- Growth/ stagnation
- Balance of payments (imports and exports)
What is inflation?
the rise of prices over time
What are the types of unemployment?
- Structural e.g. a declining industry (steel workers)
- Frictional: e.g. short term (increased number of graduates)
- Seasonal e.g. winter workers
- Cyclical e.g. economic cycle goes up and down
- Technological e.g. tech taking over jobs (AI)
“The current account is in deficit in the UK”. What does this mean?
Imports > Exports
More money going out than coming in
Describe the impact of inflation in the economy
Rise of prices–> the same amount of money buys you less products–> when income fixed, you struggle–> interest rates up to choke demand–> mortgage payments up–> people prefer to save than spending–> demand down–> exchange rates up–> uncertainty–> economy shrinks
List the government policies
- Fiscal - government spending
- Monetary - interest rates & exchange rates, price stability
- Quantitative Easing - prints money, helps circulation, increase demand
- Budget deficit - “expansionary” strategy, spends more than it earns
- Budget surplus - “inflationary” gap, takes money out of the economy
True or False
A negative public sector net cash requirement indicates a deficit in public finances.
False
it requires a surplus.
True or False
Frictional unemployment is long term.
False
Frictional and seasonal unemployment are short term.
What is the law of Demand?
if price increases, then demand decreases, ceteris paribus.
negative slope
What are the factors that can cause a shift in the curve of demand?
- change in price of a substitute product
- change in price of a complementary product
- change in the income of consumers
- change in tastes and preferences
- change in interest rates
What is the law of Supply?
If prices increases, then supply increases, ceteris paribus. The supplier is more willing to provide larger quantities for a larger price.
Upwards slope
What are the factors that can cause the supply curve to shift?
- Change in the cost of production (αν μου στοιχίζει λιγότερα να το παράξω, θα αυξήσω την παραγωγή μου–> shift to right)
- Changes in production technology
- government taxes and subsidies
- change in the price of substitute
- change in the number of producers in the market
What is Equilibrium Price? (or Market clearing price)
the point where Supply=Demand
How does the average cost behave in the long term and short term?
U curve
Initially, cost goes down
After a point, it goes up as we become less efficient, no more economies of scale
What is the Optimal Production Quantity?
It’s the point where the marginal cost curve cuts through the average cost curve.
How can you calculate the PED?
Price elasticity Demand=
% change in quantity/ % change in price
True or False
If PED>1, demand is inelastic
False
PED>1–> elastic demand
PED<1–> inelastic demand
What factors affect the elasticity of demand?
- substitutes
- cost of switching products
- necessity or luxury?
- proportion of income
- time period
- habitual consumption
- peak and off-peak
- breadth of definition of goods
Calculate YED
Income Elasticity of Demand
YED= % change in Demand/ % change in Income
On what 2 factors does YED depend on?
- the nature of the product (do I need it or do I want it?) and how much of my income i’m spending on it
- time period (creatures of habit, takes time to catch up)
What are the conditions to achieve Perfect Competition?
PHAFEN
- Atomicity
- Homogeneity
- Perfect and complete info
- Equal access
- Free entry
- Not a cartel, act independently
What are the benefits of cloud computing?
- no need to invest in infrastructure
- flexible - only use what you need
- cost effective
- disaster recovery
- collaboration
- secure
- environmental friendly
- remotely
What tasks can be automated?
Repetitive, rules-based, no decision making involved, no judgement, subject to human error, high in volume
Define Blockchain
a digital ledger with a list of transactions in “blocks”. eg. bit-coin
What are the characteristics of Big Data?
4Vs
Volume (amount of data)
Variety (structured/ unstructured)
Velocity (how quickly data change)
Veracity (truthfulness)
What are Porter’s 5 Forces?
Why would a company select to enter a specific industry?
- power of suppliers
- power of customers
- threat to new entrants
- threat of substitute
- competition within
Explain SWOT analysis
a “corporate appraisal”
Strengths (within firm)
Weaknesses (within firm)
Opportunities (external)
Threats (external)
The responsiveness of the demand for a product to changes in household income is known as..
Income elasticity of demand
True or False
It guarantees a maximum price above the market equilibrium price.
False
True or False
In the short term, the marginal cost curve will rise less steeply than the short term marginal cost curve.
True
True or False
If demand for an item is inelastic and its price falls, total revenue will decrease
True
True or False
A rise in the demand for consumer credit is due to the rise of interest rates.
False
due to the fall of interest rates.
e.g. buying a car on credit/ financial plan
True or False
Inferior goods have a positive income elasticity of demand.
False
Inferior goods have a negative YED.
Normal goods have a positive YED.
as income increases, we move away from buying inferior goods.
True or False
Elastic goods are luxuries and have an income elasticity of 1.
False
Greater than 1.
Why is organisational structure important?
- easier to delegate tasks to achieve the firm’s objectives
- clear communication
- easier to manage and control
What are the characteristics of informal organisational structure?
day to day interactions
easy
time saving
informal relationships formed
provide support to managers during changes (Ben helped me with recruitment)
- encourages social grouping which can exclude some team member –> demoralization
What are the characteristics of formal organisational structure?
focus on meeting objectives
use of organisational chart
What are the duties of directors?
fiduciary duty (θεματοφυλακας/ εμπιστος)= duty of utmost good faith
delegation
implementation
they set objectives–> managers achieve them
Span of control means…
how many people report to the next layer up in the hierarchy
CEOs control the directors (span of control = 8)
Ben controls me & Sam (span=2)
What are the advantages of a narrow span of control?
+ quick communication (less people)
+ easy to manage
+ easy to feedback
What are the advantages of a wide span of control?
+ fewer layers
+ cheaper
A scalar chain of commands refers..
..to all levels between the very top and the lowest in the hierarchy. (Line of authority)
CEOs
Directors
Heads of departments
Line managers
Assistants
Juniors
What are the classifications in Anthony’s hierarchy?
Strategic (directors)
Tactical (coordinators & guardians)
Operational
True or False
Centralisation leads to greater co-ordination and control but less flexibility.
True
Fill in the gap
_____ is NOT associated with flexibility and adaptability.
Matrix - Scalar chain - Horizontal
Scalar chain
According to Porter’s value chain model, what are the primary activities?
Logistics
Operations
Outbound logistics
MRK & sales
Service
Fill in the blank
According to Porter’s value chain model, procurement, tech development, HR and firm infrastructure are ______ activities.
Support - Secondary - Primary
Support activities
Advantages of centralisation are..
- quick decisions
- standardisation/ consistency
- expertise
- control
Classification of firms
- Functional (same tasks)
- Matrix (based on projects)
- Entrepreneurial (new business)
- Divisional (geographical, product)
True or False
An increase in interest rates will increase the cost of exports.
True
If interest rates rise, the value of the currency will also rise, thus making exports more expensive.
True or False
Limited company status means that a company is only allowed to trade up to a predetermined level of turnover in any one year.
False
Limited company status means that members’ liability is limited to the value of shares that they own.
True or False
For organisations that have limited company status, ownership and control are legally separate.
True
Limited companies are owned by the shareholders and are controlled by the board of directors. In some organisations directors may also be shareholders, however the roles are distinct.