Understanding Busines Flashcards
name 4 business objectives
social responsibility / survival (break even) / growth /satisficing /mangerial objectives/ profit maximisation/ customer satisfaction/sales maximisation/ corporate social responsibility
name 4 of the internal organic growth methods to improve a business
open new branches
develop new products
advertise to increase sales
hire additional staff
name the external factors
POLITICAL ECONOMIC SOCIAL TECHNOLOGICAL ETHICAL ENVIRONMENTAL COMPETITIVE
describe different factors that could be included in the political factor
gov legislation- health and safety at work
gov policy- recycling/immigration
gov spending- grants and allowances
what are the 5 internal factors
Leadership/management Information available finance available technology employees corporate culture
what are the 4 different ways to structure
by function
by product or activity
by place
by customer
what are the 2 different types of stakeholder
external- stakeholders from outside the business
internal- stakeholders from within the business
name different types of external stakeholders
suppliers banks and lenders government local community customers
name different types of internal stakeholders
employees
managers
shareholders
what are the 5 different roles of the manager
plans organises commands co-ordinates controls delegation motivation
what different types of conflict could occur between stake holders
manager may want to close a branch
employee will want to keep their job
managers will want to make high profits on goods and services
customers want best quality for cheap price
what are the 4 sectors of industry
primary
secondary
tertiary
quaternary
what is the primary sector of industry
the primary sector of industry involves businesses which extract natural goods such as fisherman
what is the secondary sector of industry
these types of businesses are involved with making things such as ships/planes
what is the tertiary sector of industry
these types of businesses do not produce goods but provide services such as shops and hotels
what is the quaternary sector of industry
this can also be described as the support sector it is knowledge based such as consultants/accountants
what is the private sector of economy
private sector aims to maximise profits to turn innovative ideas into successful businesses
what is the public sector of economy
the public sector aims to provide a high quality service to everyone in a country and to make good use of tax payers money
what is the third sector of economy
the voluntary sector aims to provide support for worthy causes (shelter,food,clothing) and also to promote awareness of good causes
what is a public limited company (PLC)
a company whose shares are available for purchase by the public on the stock market
minimum of 2 shareholders
owned by the shareholders
controlled by the board of directors
what is the advantages of PLC
huge amount of finance
fast method of expanding
provides a steady cash flow
shared risk between franchiser and franchisee
what is the disadvantages of a PLC
set up costs
only receives a share of the profits
poor franchisee on damage
what is a (MNC) multi national corporation
productional facilities in more than one country
what is a franchise
a business government that allows the use of an established business name and to sell their product and services
a franchise is NOT a type of business but a way the business can be run
what are business objectives
are long term goals which businesses aim to achieve that allow employees customers and suppliers to know what the business is working towards
what is social responsibility
an organisation with this aim will behave in a responsible way protecting the environment, large organisations will have a code of conduct or set of regulations which must be abided by within the organisation
what is profit maximisation
when the difference between total revenue earned from selling and total costs of these products is greatest
why do businesses need to grow
to avoid being a takeover target
to become a market leader
to increase profit
to remove a competitor
what is satisficing
aiming for a satisfactory position or minimum acceptable target usually profits
what is the advantages of internal organic growth
can be less risky than taking over another business
can be financed internally
can build on existing strengths such as brand loyalty
by expanding their product range allows the business to target new customers
opening new branches can increase the sales of the business
what is the disadvantages of internal organic growth
slow method of growth
limited by the size of the existing market
describe the term merger
when one firm combines with another
describe the term take over
when one firm takes control of another
describe the term de merger
when one firm splits from another
what is the advantages of external growth
larger and more financially secure
gets the profits that the other business has
increase in customer base
greater market presence
what is the disadvantages of external growth
duplication of resources
takes time for merger to be completed
what is diversification
when a business expands into markets different from its core activity
what is divestment
this is when a firm sells its business assets or subsidiary companies : focus on core activity
obtain funds
business may sell for more in chunks
remove underperformance
what is outsourcing
when one firm contracts another to do work for them.
what is the advantages of diversification
it reduces the risk of failure
increases profit stream
customers can be tempted to buy existing products
business has reputation as being successful
profit can be made from a variety of markets spreading the risk of failure
the business will become more well known and so will attract more customers increasing sales
what is the advantages of outsourcing
reduces cots of employing staff for non -core activities
saves costs of specialist of equipment
allows firm to concentrate on their core activity
what is the disadvantages of outsourcing
confidentiality issues
may be very expensive
the organisation will have reduced control
firm may take a long time to complete the job
may involve redundancies
what is corporate culture
corporate culture is the shared value and beliefs of the business and its staff
what is corporate culture affected by
the size and nature of the business
the number of employees involved in the decision making process
the flexible working practices employed by the business
why is having a strong corporate culture important
employees feel part of the organisation this increases loyalty and minimises staff turn over
positive relationships are built which leads to better communication and joint decision making
what factors should be considered within a corporate culture
the vision and aims of the organisation
the views of employees consultation with employees will encourage good working relationships
the designs of stores, logos, and uniforms
describe finance available
the amount of finance the company has access to without finance it will be unable to compete with competitors and will have to close
describe employees
the ability of staff and the amount of staff available
describe info available
the quality and quantity of information available, without it the business would be unable to expand as it has a lack f information to research
what is the advantages of functional structure
specialisation- each department focuses on its own work
accountability - someone is responsible for the section
clarity- know yours and other roles
what is the disadvantages of a functional structure
closed communication could lead to lack of focus
departments can become resistant to change
gap between top and bottom
what is a matrix structure
people with particular skills are placed in a project team to carry out a task
what is an entrepreneurial structure
this is a common structure in many small businesses and in those organisations where decisions have to be made quickly decisions are made constantly with very little imput from staff and are based on the expertise of only one or two individuals
what is the advantages of a product/service structure
expertise can develop in dealing with each product/service
managers can easily identify how each product is performing
what is the disadvantages of a product/service structure
duplication of functions
divisions may find themselves competing with each other
lack of central control over each separate division
what is the advantages of a place structure
serve local needs
more effective communication between firm and local customers
better knowledge of local staff
what is the disadvantages of a place structure
conflict between local and central management
duplication of resources and functions
what is the advantages of delayering
remove layers of management
saves money on management salaries
employees feel more empowered with decision making
what is the disadvantages of delayering
less opportunity for promotion
wider span of control means that there may be possible supervision issues
What types of businesses are involved in the private sector
Sole trader
Partnership
Private limited company
Public limited company
What types of organisation are involved in the public sector
Public sector organisation
Local council ( government )
Public corporation
What types of organisation are involved in the third (voluntary sector)
Charity
Voluntary organisation
what are the objectives of an MNC
increase market share cheaper production & labour take advantage of government grants save costs of transport avoid or reduce tax
what does the structure key term authority mean
the right to make decisions and carry out tasks
what does the structure key term hierarchy mean
shows the line of management in business and who has specific responsisbiltes
what is divestment
when a firm sells its business assets or subsidiary companies
name reasons for divestment
to focus on the core activity
obtain funds
business may sell for more in chunks
remove underperformance
what is diversification
when a firm expands into markets different from its core activity
what are the advantages of diversification
it reduces the risk of failure
increases profit streams
customers in the new marker can be tempted to buy existing products
business has reputation of being successful
what is the advantages of a matrix structure
there is no hierarchy
individuals get the opportunity to work in a variety of project teams
what is the disadvantages of a matrix structure
costly and difficult to set up and co ordinate
what is the business objective growth
when a business aims to increase the size of the business operations this can be done organically by increasing product range or by merging or taking over a competitor
explain the importance of growth for a business
- brand becomes better known
- economies of sale brings costs down
- protection from takeover
explain the importance of social responsibility to a business
- to improve public image and in turn their reputation
- to win business from less ethical competitors
explain the importance of satisfying in a business
- a short term objective that may be set times of uncertainty for example when new legislation or changes in the economy
describe the business objective sales maximisation
an objective seeking to maximise total sales revenue through generating cash flow from the sales of goods and services
explain the importance of sales maximisation
- allows business to gain market share from competitors
- it ensures that the business is not left with unwanted excess stock
describe managerial objectives in a business
managers might have their owen objectives within the business like a company car and could allow their own objectives to prioritise over the organisations objectives
explain the importance of managerial objectives to a business
highly skilled managers will be more motivated so the business will retain them which will help the business to run more efficiently and make better decisions
describe the business objective customer satisfaction
they aim to provide a service in the best way possible to meet the needs of the customers
explain the importance of customer satisfaction to a business
- to keep customers happy so that they remain loyal
explain the importance of profit maximisation to a business
- to keep shareholders satisfied and ensure future investment
- to generate enough money to fund future growth
describe the business objective survival
a short term business objective probably used by small businesses just starting out or when a new firm enters the market a business with this aim will want to continue trading to exist
explain the importance of survival to a business
- to continue trading and be able to cover business debts
- allows a business to respond to changes in the market e.g. a recession
what are the costs to a franchise
it can be expensive to start up a franchise and royalties have to be paid
what are a franchisee and franchisors objectives
franchisee
risk is shared
franchisor
the franchisers name becomes more well known as the business expands
what is time for franchisees and franchisors
franchisee
the new business can begin trading on the established reputation of the franchisor immediately
franchisor
it is a quick way to enter new geographical markets
profit for franchisee and franchisor
franchisee
a percentage of the profits needs to be paid to the franchiser
franchisor
a franchisees reputation and profitability depend in part on that of the franchiser and the performance of the other franchises
image for franchisee and franchisor
franchisee
trading on an already established reputation
franchisor
franchisers are reliant on franchisees to maintain the image and good name of the business
sales for franchisee
franchisee
sales have potential to be high since you have an already established organisation
stakeholders for franchisee anf franchisor
franchisee
may have to follow strict rules such as suppliers which may restrict their ability to operate
franchisor
all franchises can benefit from ideas generated by each of them
compare a LTD and a PLC
- both are limited companies which means that they are separate legal entities from shareholders
- both are owned by shareholders who have limited liability
- ltds tend to be smaller family businesses whereas PLCS often dominate their markets
describe technology internal factor
the availability and access to technology however technology is constantly changing and if the business is unable to keep up with the changing technology it will fall behind competitors
describe the leadership management internal factor
the capability and experience of management and leadership however poor decisions can be made by managers which could affect the business
what is a strategic decision
long term decisions made by senior management
they are broad or general in nature
what is a tactical decision
medium term decisions made by senior and middle management
these support strategic decisions and are more specific to detail
what is an operational decision
everyday decisions that are made by junior managers these are every day decisions that are unlikely to have a lasting consequence
horizontal integration advantages
businesses can take advantage from economies of scale which allows for larger unit costs
by becoming larger the business should become better known in the market and increase brand loyalty
it will lead to less competition increasing the market share of the business
as a bigger business there is less chance of being taken over
backward vertical integration advantages
there is constant supplies of raw materials at appropriate prices ensuring that too much finance is not tied up in raw materials
forward vertical integration advantages
the manufacturer will have complete control over how the product is sold increasing overall profit
the business can control how it is advertised ensuring the product retains the desired image
advantages of divestment
the parts of the business sold off are normally less profitable and this finance can be put back into the business allowing them to focus on more profitable areas
what is span of control
number of subordinates working under a superior or manager
what does span of control depend on
-calibre and ability of the manager
-calibre and ability of the subordinates (employees)
the actual task
the practices and customs of the organisation
advantages and disadvantages of a narrow span of control
- the manager can closely supervise staff however this may put staff under pressure
- the manager may not have enough staff to share ideas with
- subordinates may barely have time to complete a task before a manager gives them the next
- danger of interference by the manager
advantages of a wide span of control
-more empowerment is possible as subordinates are delegated to make decisions
-allows for delegation to staff as they should be reasonably skilled
can be motivational to managers as they can be seen as a greater power
disadvantages of a wide span of control
- managers time to deal with staff problems will be at a premium
- can place managers under stress
- can mean workers rarely have time to meet with their line manager to discuss ideas
- subordinates may result in having to make all the decisions
- managers will have less time for planning
- can result in poor decision making
- managers are in charge of more staff
what are the benefits of having a strong corporate culture
employees feel that they are part of a team and in the organisation so will be motivated to work harder
employee loyalty will be increased
there will be a consistency across the organisation which will allow for employees to work in different locations if necessary
what are the limitations of a strong corporate culture
advertisement could be costly
the visions and the aims of the organisation will have to be created by managers which is time consuming for them
name 6 grouping methods
functional grouping product service grouping customer grouping place/territory grouping technology grouping line/ staff grouping
what is functional grouping
when the organisation is organised into functional groups there are departments where the staff have similar skills and expertise typically HR,FINANCE,OPERATIONS,MARKETING
what are the advantages of using functional grouping
staff with similar expertise are kept together to allow specialisation
there is a clear structure (activities are kept separate which means that people know who does what)
what are the disadvantages of functional grouping
organisation may be too large to be managed effectively like this
it may be unresponsive to change
individual departments may become more concerned with own interests rather than the organisations strategic objective
what is product /service grouping
when the organisation is organised into departments where each deals with a different product or product range each would have its own functional staff
what are the advantages of product/service grouping
each division can be more responsive to external changes e.g. in customer requirements
expertise can develop within each division
can give more incentive for staff to perform better
management can more easily identify the parts of the business that are doing well and are not doing well
what are the disadvantages of product/service grouping
there may be unnecessary duplication of resources/tasks/products
divisions may find themselves competing with one another
what is customer grouping
customer groups are divisions dealing with different types of customers
what are the advantages of customer grouping
each division is able to give a service price and promotion suited to its own type of customer
customer loyalty builds up because of personal service
what are the advantages of place grouping
each division is able to give a service price and promotions suited to its own type of customer in a geographical location
what are the disadvantages of place grouping
can be more expensive due to possible duplication of administration , finance and marketing procedures
what is technology grouping
where a manufacturing company groups its business activities according to the technological or production process this is only suitable for large organisations which have different products and production processes
what are the advantages of technology grouping
increases the degree of specialisation in the production process
problems with technology can be easily identified
what are the disadvantages of technology grouping
a high degree of specialised training of the staff is required
these industries tend to be very capital-intensive which is expensive
what is line/staff grouping
where the organisation is divided up into line departments involving core activities and staff departments providing specialist support for the whole organisation
describe the centralised decision making structure
a business could be structured by using a centralised method this is when control and decision making lies with top management in head office an organisation using this method would benefit from the expertise of experienced decision makers which means that decisions are made for the whole organisation, also by using this method there is less of chance of a duplication of resources
describe an entrepreneurial structure
for a smaller business this would be best used this is when decisions are made by a few people who are at the core of the organisation this would benefit the organisation as decisions are made by experienced managers and the decisions are made quickly as the decision maker does not need to consult staff and staff also know who they are accountable to
describe a hierarchical structure
some organisations are structured using the hierarchical structure this is when there are many levels of management and decisions and instructions are passed down from senior management downwards these are usually organised in functional areas therefore employees can be specialised in the departments and know the levels of responsibility
describe a matrix structure
a matrix structure is when teams from different functional areas are formed with each member having specialist skills and responsibility for their own are of expertise
describe the interdependence that exists between owners and managers and governments
owners/managers need government to make good decisions like lowering taxes so that customers spend more
describe the interdependence that exists between owners/managers and suppliers
owners need suppliers to provide good quality raw materials so that the business has a good quality product likewise suppliers need businesses to continue to buy from them to keep them in business
describe the interdependence that exists between owners/managers and customers
owners need customers to buy their products and customers need a good level of quality and customer service
describe the interdependence that exists between owners and employees
owners need their staff to be highly motivated and productive so that sales and reputation are high owners also need to train their staff well and make good decisions so that they work hard in order to keep their jobs
describe the interdependence that exists between managers and employers
employees and managers need to work together in order for the business to achieve its strategic objectives and keep their jobs secure
describe the conflict that may exist between employees and owners
employees want high wages but owner wants high profit
describe the conflict that may exist between customers and owners
customers want low prices whereas owners want high prices to maximise profit
describe the conflict that may exist between suppliers and owners
suppliers want to be paid as soon as possible whereas owners want to delay payment to keep a healthy cash flow
describe the conflict that may exist between government and owners
government wants to introduce legislation to improve society but this may impact on the business e.g. living wage
