Understanding Bus Man Act Flashcards
How do businesses satisfy needs and wants
Businesses will firstly identify customers needs and wants
Then combine the factors of production CELL to make the good or service
Sell it to the customer to satisfy their needs and wants
Describe how businesses create wealth in the economy?
Lots of jobs
High income
Lots of income for local firms
Economic growth- firm are creating more goods and services then increasing income
Advantages of creating wealth
More jobs for people which increases there income
Taxes are raised so that they can increase the standard of living
Businesses income increases as people are spending more money making the business have more profit and they can continue to produce outputs
Disadvantages of creating wealth?
Demand increases for housing meaning people with less money can find if difficult to buy a house
Businesses have a large environmental impact like noise pollution, air pollution
The volume of non-renewable resources can decreases
Describe the sectors of the industry
Primary - businesses that are involved in extracting raw materials from earth and sea
Secondary - businesses that are involved in manufacturing the raw materials
Tertiary - providing services eg- cinema
Quaternary - industries providing information services such as computing, consultancy
Describe the sector is economy?
Private - business set up and owned by private individuals, who invest there own money in the businesses known as capital, they set up the businesses to provide goods and services to people who can afford them eg- apple
Public - organisations set up and owned by different levels of the government, they get there money from taxes that the public pay, they set up goods and services to improve the quality of life for the public eg- NHS
third - non governmental organisations been set up to rise money for good causes and provide goods and services to help specific groups that need it eg- Oxfam
Describe a sole trader organisation?
Owned by one person and set up by one person
Invests there own money
Have the right to make all decisions for the business
Describe a private limited company?
The capital is divided into shares, each member or shareholder owns a number of shares. They are run by the board of directors who are appointed by the shareholders.
They are not allowed to offer shares to the public thought stock exchange
They have limited liability
They are private nothing has to be shown publicly
What is a public limited company
A Large company minimum of £50,000 shares
The shares can be bought and sold of the stock exchange market
Register with the register do companies
What are the advantages of a Public limited company?
Shareholders have Limited liability
Huge sums do capital can be raised by individuals and investors as
They have financial sustainability meaning it can develop and expand without the worry of money
What are the disadvantages of a PLC?
Members of public can see financial information
They can grow so large that it can become inflexible and difficult to manage
It can cost a lot of legal procedures to set this type of business up
Eg-boots and marks and Spencer’s
What is a franchise?
A businesses run by one firm under the name of another, the franchiser gives permission to the franchisee to sell goods or services under the Franchisers brand name, usually in return for a share of the franchisees profits
What are the advantages for the franchiser
Quick way to enter new geographical markets and gain more market share
Ideas can be brought from the franchisee helping the franchiser
The profits that are made by the franchisee a percentage goes to the franchiser
What are the disadvantages of a franchiser?
The businesses reputation depends on the success of the franchisee
Franchiser has to devote time and training to the franchisee
A percentage of profit goes to the franchisee - May have been more profitable to set it up themselves.
Advantages for the franchisee
Training and support from franchiser will occur
The franchiser is likely to advertise nationally, this saves the frag he’s money
The reputation of the businesses is already on what the franchiser has made it reducing the ricks of failure of the franchisee
What is a multinational business?
Very large businesses which have production facilities in a number of different countries, and they are said to be global
Advantages of becoming a multinational business?
In different countries the government may offer lower tax meaning a higher profit for the business
Legalisation in other countries are way more relaxed meaning production is much cheaper
Higher skilled workers may be on offer for lower costs
Disadvantages for a franchisee
Capital investment to set up
Profits have to be shared with franchiser
The franchiser may impose strict rules on the franchisee and restrict there ability to operate on their own initiativ
Disadvantages of a multinational business?
Currency may be weak to allow profits to be converted back to a good rate
Language barriers may make if difficult to operate abroad
The country may be politically unstable
Sectors of the economy?
Private - owned by private Individuals and financed by personal investments there aims are to stay on the market and to have profit survival
Public - owned and set up by parts of the government and funded by local taxes paid by the public, there aims are to provide services to the public and use taxes wisely
Third - are non profitable organisations that is funded by donations and fundraising there aims are to help a good cause
Describe corporate culture?
When a business has branches that have the same logo and brands and hold training events
the values and beliefs that a business has that shapes how they behave.
Methods businesses use to start corporate culture?
Have the staff wear uniforms so they are ergo missed by customers
Advertisement like press events
Phrase or motto used so that customers recognise the business
What are the advantages of corporate culture?
The staff have a sense of belonging and that may increase there motivation
Employees know there positions and roles in the organisations this means that employees are more productive and less likely to make mistakes
The relationship between employees are strong meaning the business has a highly motivated work force meaning it’s a good working environment and increases motivation
Staff can move to different branches meaning the business is more flexible and is able to react to changes
What is a mission statement?
Is a summary of the aims and objective the business has, to give direction to the organisation. They contain long term strategic decisions
Stakeholders?
What are the private sectors objectives
Managerial objectives - managers peruse their own individual aims
Corporate social responsibly - improve its public image by becoming more ecological and Eco friendly
Growth- become a bigger company
What is organic growth?
Means when a business grows by expanding its sales or their operations and is financed through its own profits
Eg- lowering the prices of goods and services, increasing advertisement, sell in a different location
Mergers and acquisitions?
Businesses joking or buy other businesses, not necessary of the same type. When two or more companies agree to join together to become one larger company
Eg - latter market share, higher prices and gain more profit
What are the benefits of growth?
Capital is easier to raise if it’s a larger business
Other businesses can bring in new skills ams knowledge
Reduces competition if a rival is taken over
What are the costs of growth?
Conflicts may arrive between the organisations meaning decisions can be harder to make
May need to make some workers redundant, more managers this may have an effect on motivation.
Horizontal integration?
Combining two firms operating in the same stage of production, for example - two super markets. One form might merge with another in Order to - eliminate competition, become stronger business’s
Vertical integration?
The joining of firms operating at different stages of production.
Backwards vertical - when a firm takes over another at an earlier stage of the production - for example, a jam manufacturer taking over a fruit farm, the main reason for this is for the firm to be sure of the availability and quality of the outputs
Forward vertical - is when a firm takes over another at a later stage eg- pie manufacturer takes over delicatessens, the main reason for this is to control the distribution outlets for the product
What is conglomerate integration?
This is when the businesses takes over firms that are completely different markets eg- airline takes over record shops
Reasons are make the firm larger, firms overcome seasonal fluctuations in its markets
Compare the objectives within the public sector and the private sector
Public sector objectives are made by different departments of the government whereas the private sectors decisions are made my the private individuals
Public sector organisations want to increase the quality of living whereas the private sector wants to increase market share
Public sector wants to use taxes wisely whereas private sector wants to increase here profit
Compare the objectives of the private sector to the third
The private sector want to increase there profit whereas the third sector want to maximise funds to help a good cause
The private sector wants to increase there market share whereas the third sector wants to prevent poverty
External factors and there influences and interests
PESTEC
Internal factors and here Influences and interests
Finance, managers, employees, technology,
Internal stakeholders? Interest and influence
Owners, managers, employees
External stakeholders? Influences and interests
Government, banks, customers, suppliers, local community
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What is a social enterprise?
Business’s that tackle social problems improve communities, peoples live changes and the environment
They make money but selling goods and services in the open market, but then reinvest there profit back into the business or the local community
Funded by grants, loans
Aims - make a income to tackle social issues
Strategic decisions
Long term decisions made by senior managers, decisions that would impact the future for the business eg- to have 100% customer satisfaction
Tactical decisions?
Are made by middle managers and are short term decisions that will impact the business not a lot, eg- to reduce costs
Operational decisions?
Day to day decisions made by employees eg- dealing with customer complaints
What is a SWOT analysis?
Strengths
Weaknesses
Opportunities
Threats
Strengths are?
What the business is doing well - internal
Weaknesses are?
What the businesses weak points are
Opportunities are?
Looking a strengths and see if they open any opportunities and the same with weaknesses but if we can close hem to make the business a better organisation
Threats are?
The obstacles that the business faces
Functional grouping?
Organisations are grouped into departments based on similar skills eg- marketing, finance
Benefits - efficient use of resources eg- marketing resources are In one place, staff specialisation they all have knowledge in there departments
Disadvantages - rivalry between departments, poor communications between departments might occur, slow decision making
Product or service?
Product or service grouping of activities based around a particular product or service
Benefits - respond quicker to external changes in there field, easier to Identify areas of the business that are not performing well, product specific expertise is achieved
Disad- duplication occurs, new groups need to be issued when a new product or service is put out
Customer grouping?
Organisations structured around customers or groups of clients are more likely to be found in the service sector.
Benefits - allows the company to have depth knowledge of their customers, allows customer loyalty to build up, gives the customer a feeling of personal service,
Costs - expensive in terms of personnel, duplication of services,
Place and territory grouping?
A structure designed for geographical and territorial base. The grouping is grouped around the world and had a HQ eg- hq will be in UK but has branches in North America and Middle eats and Australia
Benefits - healthy competition between regions, can serve the needs of local people more easily, the local branch is more responsive to chambers in customers needs
Costs - expensive in terms of personnel, can be expensive, duplication is services
Technology grouping?
Organisations may set up there activities along technological lines this is because they often produce products that require different technological processes.
Benefits - easier to train staff, easier to introduce new technology at a particular stage of the production line
Costs - work can become very low skilled and repetitive so the staff may become demotivated, expensive to set up
Line and staff grouping?
Line grouping is when the business is divided up into line department, each department has a line manager responsible for the work of the department.
Benefits- staff become specialised, improved communications between staff
Costs - line mangers may focus on departments rather than business aims, coordination of activities can be hard between departments
Hierarchical structure?
Pyramid structure main people at the top less main people at the bottom
Benefits - clear limes of responsibility, opportunities of promotion
Costs - structure is unable to respond to change quickly as they have to go through the layers, commutation can be slow
Flat structure?
Fewer levels of a a hierarchy.
Benefits - Improved communication, can respond to ch ages faster as there is less layers to get the information through
Costs - fewer promotions for the staff results into demotivating the staff
Matrix structure?
Getting people together who have a specialised skills placing them in a a project reams to compete specific tasks.
Benefits - allows all individuals to uses their talents, job satisfaction which means an increase in motivation.
Costs - costly in terms of support staff as each project team needs their own admin staff, difficult to co-ordinate a team of individuals for different functional areas
What is a business?
A business is a organisation set up to provide goods or services to consumers to satisfy there needs and wants
How do businesses use ICT?
Spreadsheets- graphs can be created to make comparisons, statistics can be easy to analyse
Internet- can get information quickly from the web, decisions can be made by social media
Email- communications can take place almost at any time or place and between departments
Explain 3 economic factors that can affect the profitability of a business
The employment rate - if the employments rate is low the firm will have less skilled workers and this can lead to a a decrease in production and a decrease in profit.
The economic state - if there is a recession that is occurring it can lead to a decrease in profit as many people are not spending money of luxury goods and services because they simple cannot afford it.
Interest rate - if the interest rate is high and business’s relies on loans from the banks and the I rest rate is high, it could lead to suppliers not being paid and then suppliers do not supply the business no more and a decrease in production occurs leading to a decrease in profit.
