U3 AOS1 Flashcards
private sector
type of business owned by private individuals, groups, or instituitions
public sector
type of business owned by government
limited liability (only under private sector)
definition
Business owners are only personally responsible by law to the level of their original investment in the business.
unlimited liability
definition
business owners are fully responsible by law if their business fails, to the extent of their personal assets.
sole trader definition
business model
a business owned by one person who is entitled to keep all profits after tax has been paid but liable for all losses.
sole trader - advantages
- simple/inexpensive to set up
- owner has total control
- minimal government regulations
- owner keeps all profits
sole trader - disadvantages
- unlimited liability
- reliant on owner’s knowledge/skills
- burden of managing entire business, 100% financial risk
- harder for owner to get finance for business
partnership definition
business model
A business owned by between 2-20 people.
partnership - advantages
- simple/inexpensive to set up
- risk and workload shared between partners
- minimal government regulation
- shared experience
- increased access funds
partnership - disadvantages
- unlimited liabiltiy
- profits shared
- potential disputes
- difficult to remove partner
private limited company ptyltd definition
a private company is an incorporated business that is owned by between 1-50 shareholders.
private limited company - advantages
- limited liability
- exptra capital by issueing shares
- perpetuity
- potential tax benefits
private limited company - disadvantages
- expensive to establish
- more government regulations + paperwork
- difficult to sell shares and raise funds COMPARED to public company
public company [ltd] definition
a public company is an incorporated business that is owned by shareholders and has no upper limit to the number of shareholders. Shares are openly traded on the ASX.
public comapany - advantages
- limited liability
- can gain extra capital through shares
- easy transfer of ownership through ASX
- perpetuity
public company - disadvantages
- expensive to establish
- needs more paperwork
- no control over who owns company - shares are freely traded
social enterprise def
social enterprise are private sector business that distribute surplus funds to benefit the community rather than individual stakeholders.
eg. Thankyou
2 goals of social enterprise
- achieve an environmental/social goal
- earn revenue
social enterprise - advantages
- may attract customers due to them believing in social cause
- improved morale within business -> employees value the work they are doing
social enterprise - disadvantages
- difficult to obtain finance to start business
- difficult to balance financial and social objectives
- may need to work with consistently tight budgets = difficult to compete
government business enterprise (GBE) definition
a business that is government owned. GBEs seek to run profitably by controlling costs and selling their goods and services at a price to cover costs
public sector
GBE - advantages
- able to offer services to the community that other business may not find financially desirable.
- provides healthy competition to the market, benefiting customers.
GBE - disadvantages
- strategic directions can change when the government changes which can be difficult for the employees
- may be inefficiencies cause by government’s strict regulations and processes. eg. getting major decisions approved.
business objectives
a goal that the business wants to achieve within a specified period of time.
vision and mission
purpose and reason business exists
hierarchy of business objectives
vision and mission, strategic objectives, tactical objectives, operational objectives
make a profit - definition
money left after expenses are deducted from revenue earned.
eg. aim to make $2 million profit in 2022
increase market share
market share: the proportion of sales that a business or product has compared to the total sales in the industry, expressed as a percentage.
fulfil a social need
social objectives relate to the role of a business in the community and how they can improve the lives of others or the environment.
meet shareholder expectations
shareholders expect that the business will make a profit and for any shares purchased to increase in value and receive dividends.
improve efficiency
efficiency: how well a business has used its resources to achieve its stated objectives
improve effectiveness
effectiveness: the degree to which a business achieves its stated objectives.
stakeholders - definition
an individual or group that has** direct or vested interest** in the activities of a business.
6 stakeholders of a business
- Owner
- manager
- employee
- customers
- suppliers
- general community
stakeholder interest - owner, manager, employee
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stakeholder interest -customer, suppliers, general community
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Manager
A manger is a professional who takes a leadership role in an organization and manages a team of employees.
Management style
A management style is the manner and approach of providing direction, implementing plans and motivating people.
centralized decision making
management makes decisions and pass on directions to those below them in a hierarchy
decentralized decision making
where employees are given responsibility for decision making in their own areas
autocratic management style - definition
a management style where all decisions making is centralized, there is little delegated authority and communication is one way - downwards.
recall as many things you can about it
autocratic management style - advantages
- task orientated
- no staff consultation
- direction is clear, little uncertainty
- decisions are made quickly as control is centralized
- decisions are made by an experienced leader
autocratic management style - disadvantages
1. does not take into account employee experience and knowledge resulting in less ideas
2. decreases employee motivation -> workers not empowered -> staff turnover may increase / less productive
3. creates feeling of unease and being kept in the dark
persuasive management style - definition
recall as many things you can about it
a management style where the manager makes a decision and convinces workers of the benefits of those decisions. Decision-making is centralized and communication is one-way downwards.
- still task orientated
- manager wants to gain trust from employees
- reasons are given for decisions made
persuasive management style - advantages
- decisions are made quickly as control is centralised
- deicisions are made by an experienced leader
- employees may feel valued if the “selling” is done effectively
persuasive management style - disadvantages
**1. does not take into account employee experience and knowledge resulting in less ideas
2. decreases employee motivation as workers are not empowered. **
3. increased potential for conflict, as employees may not agree with decisions.
consultative management style - definition
recall as many things you can remember about it
a management style with** centralized decision making** and two-way communication. The manager asks employees their opinions when discussing an issue, however management make the final decision.
- values employee contributions
- they understand importance of positive relationships
consultative management style - advantages and disadvantages
advantages
1. gain a variety of ideas which may lead to a better decision
2. employees feel valued, increases morale and job satisfaction
3. the experienced leader is able to use the ideas of employees to make an informed decision
disadvantages
1. time consuming to consult with employees
2. not all ideas are good -> some employees not feel valued
3. employees might not understand the complexity of the problem
participative management style - definition
a management style with two way communication and decentralized decision making management and staff work together as a team to make decisions.
employee-orientated
participative management style - advantages & disadvantages
advantages
1. gain a variety of ideas -> leads to better decisions
2. manager shares trust in employee’s ability -> increase employee morale
3. employees feel sense of ownership and empowerment
4. shared vision and direction between management and employees towards goal
disadvantages
1. time consuming to inolve all employees
2. can cause conflict between employees with different viewpoints
3. employees might not understand complexity of problem
Laissez-faire management style - definition
a management style with decentralized decision-making and two way communication, management leave the majority of decision-making and running of the business to employees.
- managers steps back and leaves decisions to employees
- suitable for creative industries where employees need freedom to be creative
Laissez-faire management style - advantages and disadvantages
advantages
1. can promote creativity
2. strong motivation, empowerment and job satisfaction for employees
3. promotes teamwork -> increasing morale
disadvantages
1. lack of guidance can cause employees to lose directionand lack motivation
2. more people involved, greater risk of losing control
3. unskilled staff may not be able to complete tasks independently, leading to decreased productivity.
communication
definition
process of creating and exchanging information between people that produces the **required response. **
delegation
definition
passing of authority down the hierarchy to perform tasks or make decisions
planning
definition
process of determining objectives and devising strategies in order to achieve them
leading
definition
the skill of a manager to influence and motivate employees towards the achievement of business objectives
decision making
definition
a multi-step approach whereby** a selection is made between a range of different alternatives. **
interpersonal
definition
skills used every day to understand and interact with other people, both individually and in groups.
corporate culture
definition
corporate culture is the shared values and beliefs of people within a business
official corporate culture
definition
The set of shared values and beliefs that the business wants its people to display.
real corporate culture
definition
The actual shared values and beliefs that are displayed by the people in a business
fulfil a market need
business aims to provide goods or services that fill a gap in the market and therefore meet customer demand.
