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unit 3/4 busman > U3 AOS1: Business foundations > Flashcards

U3 AOS1: Business foundations Flashcards

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1
Q

What are the 5 types of businesses

A

Sole trader

Partnerships

Companies

Social enterprises

Government business enterprises

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2
Q

What are shareholders?

A

The owners of a company

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3
Q

Unlimited liability

A

Refers to when the business owner is personally responsible for all the debts of their business

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4
Q

Limited liability

A

Refers to when the shareholders in a company will not be held personally responsible for the debts of that business

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5
Q

Sole trader

A

A business owned and operated by one person

  • Name of business must be registered with ASIC (unless name is same as owner)
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6
Q

Advantages of a sole trader

A
  • Easy to set up
  • Low cost of entry
  • Complete control
  • Keep all profits
  • Less govt. regulation
  • Profit is taxed as personal income
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7
Q

Disadvantages of a sole trader

A
  • Unlimited liability
  • No perpetuity
  • Burden of management
  • Perform wide variety of tasks
  • Work long hours
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8
Q

Partnership

A

A business owned by two or more people (generally a max of 20)

  • Partners share the profit
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9
Q

Advantages of a partnership

A
  • Low cost of entry
  • Low cost of operating
  • Shared responsibility and workload
  • Pooled funds and talent
  • Less govt. regulation
  • Perpetuity
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10
Q

Disadvantages of a partnership

A
  • Unlimited liability
  • Possibility of disputes
  • Difficulty of finding suitable partners
  • Divided loyalty and authority
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11
Q

What is incorporation?

A

The process that businesses go through to become a registered company and a separate legal entity from the owner/shareholder

  • Allows shareholders the benefits of limited liability
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12
Q

What is a director?

A

The ppl who have overall responsibility for managing the company’s business activities

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13
Q

Private limited companies (Pty ltd)

A
  • Incorporated business
  • 1-50 non-employee shareholders
  • Shares only offered to those by business
  • At least 1 director
  • Required to publish its audited financial accounts each year
  • Small to medium sized
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14
Q

Public listed companies (Ltd)

A
  • Incorporated business
  • Min of 1 shareholder, no max
  • Shares openly traded on the ASX
  • Min 3 directors (2 must live in AUS)
  • No restrictions on transfer of shares
  • ‘Ltd’ or ‘Limited’ in name
  • Required to publish its audited financial accounts each year
  • Large sized
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15
Q

Advantages of companies

A
  • Easier to attract finance
  • Limited liability
  • Easy transfer of ownership
  • Perpetual succession
  • Experienced management
  • Company tax rate lower than personal income tax
  • Growth potential
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16
Q

Disadvantages of companies

A
  • Cost of formation
  • Tax on all profits and dividends
  • Tax on all income from the company to shareholder
  • Requirement to produce an annual report of audited accounts
  • Public disclosure - must report certain information
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17
Q

What is liquidation?

A

Process of selling off assets of business to repay creditors

  • Remaining assets to be distributed amongst shareholders
  • If company enters liquidation, shareholders cannot be forced to sell personal assets
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18
Q

Social enterprises

A

A business with the objective of fulfilling a social need.

  • Provide opportunities to unemployed
  • Provide training opportunities for disadvantaged individuals
  • Create accessibility for better quality of life
  • Provide essential services to disadvantaged individuals
  • Waste minimisation and recycling
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19
Q

Advantages of social enterprises

A
  • Can open up new markets (meet need that commercial businesses choose not to)
  • Can subsequently have +ve effect on profit and market share
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20
Q

Disadvantages of social enterprises

A
  • Obtaining capital to start business
  • High operation costs
  • Difficulty focusing on both social and financial objectives
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21
Q

Government business enterprises (GBE’s)

A

A type of business that is government owned and operated.

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22
Q

Advantages of GBE’s

A
  • Can operate with some independence from govt.
  • Deliver community services in areas where private sector businesses may hesitate to invest
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23
Q

Disadvantages of GBE’s

A
  • Political interference
  • Inefficiencies caused by excessive regulation/conformity to rules
  • Less accountability in GBE, resulting in less productivity
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24
Q

What is a business objective?

A

A desired outcome or specific result that a business intends to achieve

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25
Q

Objective: to make a profit

A
  • Central to most businesses
  • Returned to shareholders/owners
  • Main reason of investing/starting a business
  • Other objectives may simultaneously help achieve this objective
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26
Q

Objective: to increase market share

A

MS is the proportion of total sales in a market/industry that is controlled/held by a business, calculated for a specific period of time

  • Pie chart can be used to visualise business performance against competitors
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27
Q

Objective: to improve efficiency

A

Refers to how well a business uses resources to achieve objectives

  • High efficiency = waste minimisation + output maximisation
  • Can be done via technology, skilled workers, quality inputs, etc.
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28
Q

Objective: to improve effectiveness

A

Is the degree to which a business has achieved its stated objectives.

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29
Q

Objective: to fulfil a market need

A

Refers to being specific and targeting particular unmet needs in a market

  • Geographical areas
  • Demographics (Groups of people)
  • Niche markets (specialised products)
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30
Q

Objective: to fulfil a social need

A

Refers to the purpose of making the world a better place through operations

  • May generate income
  • Primary purpose is the common good
  • Can include improvement of wellbeing, animal welfare, environmental needs, waste minimisation, etc.
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31
Q

Objective: to meet shareholder expectations

A

Shareholders expect a ROI

  • Expect business to profit (as they receive dividends)
  • Incr. profit = Incr. share value
  • Can include combination of other objective
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32
Q

Where do businesses communicate their objectives?

A

Vision and mission statement

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33
Q

Vision statement

A

States what the business aspires to become.

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34
Q

Mission statement

A

Expresses why the business exists, its purpose and how it will operate.

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35
Q

What is a business strategy

A

Strategy = actions business take to achieve specific objectives

  • Successful bus. develop range of diff strategies to achieve objectives in diff areas of management
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36
Q

How is performance analysed?

A

Can be done via KPI’s. Business can identify and investigate discrepancies within their objectives.

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37
Q

Key performance indicators (KPI’s)

A

Refers to specific criteria used to measure the efficiency and/or effectiveness of the business’s performance.

  • Precisely analyses performance
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38
Q

Examples of KPI’s

A

Objective = make a profit > KPI = net profit figures

Objective = increase market share > KPI = % of market share

Objective = fulfil social need > KPI = level of wastage

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39
Q

What is a stakeholder?

A

Groups and individuals who have a vested interest in a business and its activities

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40
Q

Internal stakeholders

A
  • Owners
  • Managers
  • Employees
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41
Q

External stakeholders

A
  • Customers
  • Suppliers
  • General community
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42
Q

Owner’s interest in a business

A
  • Want business to make profit (may depend on success of business for income)
  • Shareholders want ROI
  • Want business to conduct itself in socially responsible manner
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43
Q

Managers interest in a business

A
  • Want business to perform, in return expect to be fairly remunerated
  • Act socially responsible (lead to increased sales)
  • Satisfy as many stakeholders to secure position
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44
Q

Employees interest in a business

A
  • Fair pay, proper training, ethical treatment in return for contribution to production
  • Job security
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45
Q

Suppliers interest in a business

A
  • Provide quality materials that are delivered reliably
  • Be paid promptly and in full
46
Q

Customers interest in a business

A
  • Purchase quality products at reasonable prices
  • High levels of service
  • Socially responsible businesses
47
Q

The general community’s interest in a business

A
  • Give back to society
  • Concern for environment
  • Concern of future welfare
48
Q

Potential conflicts between stakeholders

A

Expectations between stakeholders may be incompatible, thus satisfying one stakeholder will dissatisfy the opposing stakeholder.

Examples
Employees and owners/shareholders

  • Employees require safe working conditions and reasonable wages, but this may reduce the business’s profit and dividends to owners/shareholders

Management and customers

  • Management could attempt to maintain profit and a high dividend to satisfy shareholders by raising the prices of products, but this will upset customers who expect reasonably priced products

Suppliers and the general community

  • Suppliers expect to be paid fairly and promptly, but they might reduce costs by using unethical or socially irresponsible practices, which can upset members of the community
49
Q

Corporate social responsibility (CSR)

A

The obligations a business has over and above its legal responsibilities to the wellbeing of employees and customers, shareholders and the community, as well as the environment.

50
Q

Management style

A

The behaviour and attitude of the manager when making decisions, when directing and motivating staff, and when implementing plans to achieve business objectives.

51
Q

Continuum of management styles (from most to least control)

A
  1. Autocratic
  2. Persuasive
  3. Consultative
  4. Participative
  5. Laissez-faire
52
Q

Autocratic management

A

One where the manager tells staff what decisions have been made.
“do it the way I tell you”

53
Q

Characteristics of autocratic management

A
  • Motivation through disciplinary actions
  • Expects compliance and obedience from staff
  • One way communication
54
Q

Advantages of autocratic management

A
  • Clearly defined directions and procedures
  • Roles and expectations are detailed
  • Control centralised at top management level > time is used efficiently
55
Q

Disadvantages of autocratic management

A
  • No employee input > lose sense of value
  • Lose job satisfaction, impacts absenteeism and staff turnover
  • Potential for conflict (workers seeking/competing for management approval)
56
Q

Persuasive management

A

One where the manager attempts to ‘sell’ decisions made.
“I think it is best if you do it this way”

57
Q

Characteristics of persuasive management

A
  • Authority and control remain centralised
  • Management attempt to convince employees to accept objectives and plans of business
  • Convince employees that decisions are made in their best interest
  • One-way communication
  • Employees may be given opportunities to share ideas
58
Q

Advantages of persuasive management

A
  • Potential to gain trust and support from employees
  • Employees believe that their feelings are being considered
  • Instructions and explanations clear and constant
59
Q

Disadvantages of persuasive management

A
  • Employees denied full participation in decision-making (frustration)
  • Communication limited to top-to-bottom, one-way system
  • Attitudes and trust remain -ve
60
Q

Consultative management

A

One where the manager consults employees before making decisions.

61
Q

Characteristics of consultative management

A
  • Seek opinions of employees
  • Hold information sharing meetings
  • Recognise good performance
  • Two-way communication
62
Q

Advantages of consultative management

A
  • Greater variety of ideas, improves quality of decisions
  • Employees gain vested interest, reflected in their levels of motivation/commitment
  • Decisions that are discussed/tuned before implementation efficiently product results
63
Q

Disadvantages of consultative management

A
  • Time taken to consult
  • Some issues are not fit for consultation, if process isn’t consistent, it may confuse staff about their role within business
  • Some ideas may be overlooked in final decision, causing potential conflict or resentment
64
Q

Participative management

A

One where the manager unites with staff to make decisions together

65
Q

Characteristics of participative management

A
  • Two-way communication
  • Employee commitment to business objectives
  • Staff strengths recognised
66
Q

When is participative management effective?

A
  • Most effective when business is operating in environment undergoing rapid change
  • Individual employees accept responsibility for and can implement change, making business more responsive to change (more ideas = better decisions made)
67
Q

Advantages of participative management

A
  • +ve employee/employer relations
  • less disputes
  • acceptance of management decisions
  • job motivation + satisfaction
  • employees gain skills
  • high levels of trust = high performance
68
Q

Disadvantages of participative management

A
  • time consuming to reach decisions
  • quality of decisions may suffer due to compromises
  • role of management can be weakened/undermined
  • internal conflict may arise
69
Q

Laissez-faire management

A

One where the employees assume total responsibility for, and control of workplace operations

70
Q

Characteristics of laissez-faire management

A
  • Management has no central role/decision making power
  • Management to set objectives, but employees take responsibility for the means of achieving the objectives
  • Management still responsible for performance of business
71
Q

Advantages of laissez-faire management

A
  • Employees feel sense of ownership
  • Continual encouragement of creativity, contributes to dynamic working environment
  • Open communication of ideas
72
Q

Disadvantages of laissez-faire management

A
  • Loss of control by management
  • Potential misuse of resources (time and money)
  • Individuals may only implement own ideas
  • Focus of meeting business objectives may be eroded
73
Q

Appropriateness of management styles: the nature of the task

A

When business undergoes change and quick decisions need to be made, autocratic style will be adopted.
If a business has experienced employees, then a consultative style may be opted for.

74
Q

Appropriateness of management styles: time

A

Tighter deadline = autocratic
Extended timeframe with various resources = more participative

75
Q

Appropriateness of management styles: experience of employees

A

Inexperienced staff = autocratic
Experienced staff = consultative/participative

76
Q

Appropriateness of management styles: manager preferences

A

Personality, experience, values, beliefs and skills are contributing factors to which management style to use.

77
Q

Contingency management theory (situational management)

A
  • Stresses need for flexibility and adaptation of management style to suit situations
78
Q

Management skills

A

The abilities or competencies that managers use to achieve business objectives

79
Q

What are the 6 management skills?

A
  • Communication
  • Delegation
  • Planning
  • Leadership
  • Decision-making
  • Interpersonal
80
Q

Communication

A

The ability to transfer information from a sender to a receiver, and to listen to feedback

81
Q

What are the 2 types of communication

A

Non-verbal = body language, visual
Verbal = written, oral

82
Q

Effective communication

A

Clear, articulate and concise, helps maintains good relationships.

  • Outline possible business changes
  • Inform staff of expectations
  • Answer questions
  • Listen to feedback
83
Q

Barriers to effective communication

A
  • Credibility of manager
  • Environment for communication
  • Clear + conciseness
  • Language barriers
84
Q

Delegation

A

The ability to transfer authority and responsibility from a manager to an employee to carry out specific activities

85
Q

Benefits of delegation

A
  • Time is freed up
  • Reduces stress
  • Increase in employee motivation
  • Practical experience in different areas for employees, learn skills needed for senior positions
  • Increased prospects of advancement
86
Q

Risks of delegation

A

Subordinate employee may misuse power (share confidential info, unethical practices)

87
Q

Planning

A

The ability to define business objectives and decide on the methods or strategies to achieve them

88
Q

What are the 3 levels of planning?

A
  • Operational (short term) planning = day to day
  • Tactical (medium term) planning = 1-2 years
  • Strategic (long term) planning = 2-5 years
89
Q

Planning process

A
  1. Define the objective
  2. Analyse the environment (SWOT)
  3. Develop alternative strategies
  4. Implement an alternative
  5. Monitor and seek feedback on the implemented strategy
90
Q

SWOT analysis

A

The identification and analysis of the internal strengths and weaknesses of the business, and the opportunities in, and threats from, the external environment.

Strengths = internal, helpful
Weaknesses = internal, harmful
Opportunities = external, helpful
Threats = external, harmful

91
Q

Leadership

A

The ability to influence or motivate people to work towards the achievement of business objectives

92
Q

Attributes of good leaders

A
  • Lead by example (model good practice)
  • Encourage and praise good performance
  • Actively listen
  • Remain calm
93
Q

Types of leaders

A

Transactional leaders = provide rewards in return for compliance

Transformational leaders = treat staff well, inspire them to reach common vision

94
Q

Decision making

A

The ability to identify the options available and then choose a specific course of action from the alternatives

95
Q

Decision making process

A
  1. Develop objectives and criteria
  2. Outline the facts
  3. Identify alternative solutions
  4. Analyse the alternatives
  5. Choose one alternative and implement it
96
Q

Interpersonal

A

The ability to deal or liaise with people and build positive relationships with staff

97
Q

Interpersonal manager considerations

A
  • How others are feeling (empathy)
  • How others view and think about things
  • How others view manager actions (be self aware)
98
Q

Good interpersonal skills

A
  • Create positive communication
  • Build trust and respect
  • Make staff feel valued
99
Q

Relationship between autocratic management and management skills

A

Planning = frequent
Decision making = frequent
Communication = sometimes
Delegation = infrequent
Interpersonal = infrequent
Leadership = infrequent

100
Q

Relationship between persuasive management and management skills

A

Planning = frequent
Decision making = frequent
Communication = sometimes
Delegation = sometimes
Interpersonal = sometimes
Leadership = infrequent

101
Q

Relationship between consultative management and management skills

A

Planning = frequent
Decision making = frequent
Communication = frequent
Delegation = sometimes
Interpersonal = sometimes
Leadership = sometimes

102
Q

Relationship between participative management and management skills

A

Planning = infrequent
Decision making = sometimes
Communication = frequent
Delegation = sometimes
Interpersonal = frequent
Leadership = frequent

103
Q

Relationship between laissez-faire management and management skills

A

Planning = infrequent
Decision making = infrequent
Communication = frequent
Delegation = frequent
Interpersonal = sometimes
Leadership = frequent

104
Q

Corporate culture

A

The shared values, ideas, expectations and beliefs of a business

105
Q

Real corporate culture

A

The actual values and beliefs present in a company - observable from dress, behaviour, and the way employees and managers relate to each other

106
Q

Official corporate culture

A

Values and beliefs that a company attempts to convey to the public (how they want to be seen).
Usually observed in mission statements, logos, slogans and symbols

107
Q

What are the 4 elements of corporate culture?

A
  • Values and practices
  • Symbols
  • Rituals, rites and celebrations
  • Heroes
108
Q

Values and practices

A

The way things are done in the business

Eg. honesty, hard work, teamwork, quality customer service, employee participation + innovation

109
Q

Symbols

A

The events or objects that represent something the business believes to be important

Eg. slogans, uniform, dress code, visual symbols (posters)

110
Q

Rituals, rites and celebrations

A

Routine behavioural patterns in a business’s everyday life.

Eg. regular social gatherings to help develop sense of belonging

111
Q

Heroes

A

The business’s successful employees who reflect its values and act as an example for others.

Eg. employee of the month

unit 3/4 busman (6 decks)

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