U3AOS1 Flashcards
Define a Sole Trader
One person that owns and runs a business
What does an individual have in common with a business? (sole trader)
They have the same legal entity with unlimited liability
Define unlimited liability
Owners held fully responsible for all operations of a business (business is sued, the owner is sued)
Advantages of a sole trader business
- simple and inexpensive
- complete control
- minimal government regulations
- the owner keeps net profit
Disadvantages of a sole trader business
- unlimited liability
- difficult to gain finance
- large burden
- heavy reliance on owners skills
Define partnerships
A business owned by two or more people (generally up to 20 partners)
What is the difference between general and limited partnerships?
General partnerships have unlimited liability and in limited each partner has liability depending on the proportion of investment
Advantages of partnerships
- workload shared
- simple and inexpensive
- risk and debt shared
Disadvantages of partnerships
- potential for disagreements
- profit shared
- unlimited liability
What are the main two different types of companies?
- private limited
- public listed
Define incorporated
Incorporating a business means turning your sole trader or general partnership into a company formally recognized as a company. When a company incorporates, it becomes its own legal business structure set apart from the individuals who founded the business.
Define corporation
A large company or group of companies authorized to act as a single entity and recognized as such in law.
What is the difference between a business and a company?
A business is a sole trader or partnership while a company involves owners that purchase shares and become shareholders. Owners have a separate legal entity and limited liability in a company
Define private limited companies
Companies owned by private shareholders (can be owned by up to 50 shareholders) Has ‘Pty Ltd’ after its name
Advantages of private limited companies
- limited liability
- separate legal entity
- pay company tax rate (>17%)
- the company is bigger than directors
Disadvantages of private limited companies
- more complex and expensive
- more reporting requirements to government
- shares cannot be traded fairly
Define public listed companies
A company where shares can be purchased or sold on an open market (has ‘Limited’ or Ltd’ after their name)
What is a company called when it first lists an exchange?
Initial public offering (IPO)
Advantages of public listed companies
- limited liability
- separate legal entity
- pay company tax rate (>17%)
- the company is bigger than directors
Disadvantages of public listed companies
- possible loss of control
- more complex and expensive
- more reporting requirements to government
- shares cannot be traded fairly
Define social enterprise
A business that primarily exists to fulfil a vision that benefits the community. They usually make a profit commercially that is put towards a social cause
Advantages of social enterprise
- meeting a social need can encourage community support
- improved morale within a business as employees value what they are doing
Disadvantages of social enterprise
- difficult to balance financial objectives and social objectives
- can be difficult to raise initial capital
Define a government business enterprise
A business that’s shareholders are 100% made from the government and is involved in commercial activities that aim to make a profit (Australian Post)
Advantages of a government business enterprise
- relies on the government for initial investments
- provides healthy competition to private sectors
- may develop infrastructure in areas that private companies may hesitate to invest in
Disadvantages of a government business enterprise
- strategic directions can change with a change of government
- may be inefficencies caused by government ‘red tape’
- political interference
- GBE’s may not be a productive as private sector businesses
What is a business objective?
It described what a business expects to accomplish over a set period, provides a business with direction and helps measure success.
What is the difference between financial and social objectives?
Financial objectives are concerned with making a profit. Social objectives are concerned with fulfilling a social need.
What are the five examples of business objectives?
- Make a profit
- Increase market share
- Fulfil a market need
- Fulfil a social need
- Meet shareholders expectations
How is a profit calculated?
Profit is calculated as a business’s revenue minus expenses. A positive result of that equation is profit.
What is a market share?
The portion of a market controlled by a particular company or product.
How do you fulfil a market need?
Identify a gap in the market, and fill it.
How do you fulfil a social need?
By providing goods or services that will improve equality of life in the community.
How do you meet shareholders expectations?
Maintaining/growing share prices and paying the valuable dividends.
What is a for-profit business?
Any business that’s primary objective is concerned with making a profit. Secondary objective is concerned with fulfilling a social need.
What is a non-for-profit business?
Any business that’s primary objective is concerned with fulfilling a social need. Secondary objective is concerned with making a profit.
Define corporate social responsibility
The continuing commitment of a business to operate above and beyond the minimum acceptable standard in an economically, socially and environmentally sustainable manner whilst balancing the interests of diverse stakeholders.
What is a stakeholder?
Someone with a vested interest in the business.
What are the 6 main categories of stakeholders?
- Management
- Employees
- Customers
- Competitors
- Suppliers
- Government
What are the corporate social responsibility considerations in management?
- management expect to work in an ethically and socially responsible business
- they have to make decisions considering CSR
What are the corporate social responsibility considerations with employees?
- should be paid fairly, in good conditions, have job security and career advancement.
- want to carry out tasks that are ethical and SR
What are the corporate social responsibility considerations with customers?
- good quality adds value to product for the customer
- customers are aware of impact business has on community/ environment.
What are the corporate social responsibility considerations with competitors?
-fair and healthy dealing
What are the corporate social responsibility considerations with suppliers?
- suppliers implement CSR practices
- using local suppliers where possible
What are the corporate social responsibility considerations with the government?
- practices should minimise the impact on the environment and a positive impact on the community
- keeping operations in Australia by supporting local jobs
What are managements expectations?
They expect to be involved in decision making and remunerated fairly.
What are the employees expectations?
They expect fair pay, good conditions and ongoing employment.
What are the customers expectations?
They expect good quality products at competitive prices.
What are the competitors expectations?
They expect healthy and fair competition.
What are the suppliers expectations?
They expect strong relationships with the business and to be paid on time.
What are the governments expectations?
They expect businesses to contribute to the economy and the community in which they serve, as well as to pay taxes.
What are the fiver areas of management in a business?
- Finance
- Human resources
- Sales and marketing
- Operations
- Technology support
What does the finance department do?
- Controls expenditure
- Record revenue
- Ensuring the business is profitable
What does the human resources department do?
- Manage employment contains and contracts
- Hire and fire employees
- Ensure that there are enough skilled employees to run the business
What does the operations department do?
- ‘Do the thing’
- Inputs > Processes > Outputs. Ensure there are adequate inputs and efficient processes to produce quality outputs
What does the sales and marketing department do?
- Ensure that the market is aware of the outputs by informing and persuading
What does the tech support department do?
Without adequate tech support, a business risks being crippled if the tech aspects of their business fail
What is the relationship between autocratic management and communication?
In autocratic management, communication is all one-way as the manager tells employees what to do and how to do it. It is important that the manager is able to explain what they want from the employees clearly.
What is the relationship between laissez-faire management and decision-making?
Laissez-faire managers are only required to make decisions when the employees ask for their help, or when they need to set certain perimeters. Decision making is not a strong skill that laissez-faire managers need.
What is the relationship between consultative management and leading?
Consultative managers keep their leadership position over the employees but communicate with them. This increases the employees motivation to work towards the business objectives.
Define corporate culture.
The shared values and beliefs of the people within a business.
Define and give an example of official corporate culture.
Official corporate culture is what the business intends the culture to be.
It can be seen in documents such as:
- The mission and vision statements
- Policies
Define and give an example of real corporate culture.
Real corporate culture is what the actual values are of the people within the business.
It can be seen in areas such as:
- Staff dress
- How employees relate to each other
What are ways a business can develop corporate culture?
- Management providing an example of culture in action
- Recruiting employees that fit in with the desired culture
- Communicating desired values
- Training in line with the desired culture
- Recognising and rewarding employees that demonstrate the desired values
- Building on the elements of the culture
What are the 5 management styles?
Autocratic, persuasive, consultative, participative and laissez-faire
What is an autocratic management style? Advantages and disadvantages? When is it best used?
-Centralised decision making
-One way communication
-Advantage: fast decisions, clear
-Disadvantage: low morale, a small pool of ideas and no employee development
MOST APPROPRIATE in an emergency
What is a persuasive management style? Advantages and disadvantages? When is it best used?
-Centralised decision making
-One way communication
-Advantage: fast decisions, can gain support
-Disadvantage: low morale (same as autocratic)
MOST APPROPRIATE when there is little time and employees lack experience, employees have to know why.
What is a consultative management style? Advantages and disadvantages? When is it best used?
-Centralised decision making
-Two-way communication
-Advantage: a greater variety of ideas and higher morale
-Disadvantage: time-consuming, ideas overlooked
MOST APPROPRIATE during times of change and more complex tasks.
What is a participative management style? Advantages and disadvantages? When is it best used?
-Decentralised decision making
-Lateral communication
-Advantage: high level of trust, creative freedom, high motivation
-Disadvantage: time-consuming, managers role can be undetermined, possible waste of resources
MOST APPROPRIATE during times of change, with highly experienced staff with creativity.
What is a laissez-faire management style? Advantages and disadvantages? When is it best used?
-Decentralised decision making
-Lateral or no communication
-Advantage: high motivation, creative freedom, encourages teamwork
-Disadvantage: complete loss of control, can cause conflict, overall objectives can be lost.
MOST APPROPRIATE with highly skilled employees who have high levels of creativity.
What are the 4 conditions when a management style should be changed?
- time
- nature of task
- experience of employees
- managers preference
What are the 6 main management skills?
Communication, delegation, planning, decision making, leadership and interpersonal skills.
What are the three levels of planning?
-strategic: long term (3-5 years)
-tactical: middle term (1-2 years)
-operational: short term (now/ week to week)
IT IS IMPORTANT ALL OF THESE GOALS ALIGN
What is the planning process acronym?
S et objective A nalyse the environment D evelop alternatives A ssess alternatives I mplement M onitor
What is the decision making process acronym?
I dentify the problem A nalyse the problem D evelop alternatives A ssess alternatives I mplement M onitor
