Understanding Business Flashcards
What is the Primary Sector?
A business concerned with extracting natural resources from the earth.
Example: Farming, Mining, Fishing
What is the Secondary Sector?
A business that are in the manufacturing industry, These businesses use materials extracted by the primary sector and then turn them into products
Example: Wood into furniture
What is the Tertiary Sector?
A business that produce a service
Example: Banking, Hairdressing, Tourism
What is the Quaternary sector?
A business that provides information services.
Example: Research, App Development, Market Research Organisations
How many people own a Public Limited Company? (PLCs)
Owned by a minimum of 2 shareholders
Who controls a Public Limited Company? (PLCs)
Controlled by a Board of Directors
How are Public Limited Companies financed? (PLCs)
Financed by shareholder investment, bank loans, retained profits
Who are the Public Sector owned and controlled by?
Central government and Local Government
How are the Public Sector financed?
Financed via taxes payed by the public
What are the objectives of a Public Limited company? (PLCs)
Maximise profits, maximise sales, grow and market dominance
What are the objectives of the Public Sector?
To provide essential services and make effective use of funds
What is corporate social responsibility?
When a business aims to act in an ethical way so that they benefit society or the environment.
Example: Good pay and working conditions, reducing packaging, charity donations
What is growth?
To make the business larger
What is satisfying?
Aiming for a satisfactory result rather than the ‘best possible’ result, allows level of profit which satisfies shareholders, suppliers and employees
What is managerial objectives and working with budget?
When mangers set objectives they believe will improve the status of the company
Example: expand into new markets
Sticking to annual budget and not overspend
What methods of growth are available to organisations?
Internal and External
Describe an External method of growth
Growth from out with the business
Example: Takeover of competitor, Merger with competitor
Describe an Internal method of growth
Growth from within a business
Example: launching new products, hiring new staff, advertising campaigns
Why do businesses want to grow?
To reduce the risk of failure
To gain a better reputation in the market place
To remove a competitor
To increase profits and sales
Disadvantages of External methods of growth
There is more of a risk
Usually more expensive
Disadvantages of Internal methods of growth
Slower growth
What is outsourcing?
When an organisation employs an outside business to carry out certain activities
Example: marketing, accounting, printing etc. This outside organisation will usually be a specialist
What does the P in PESTEC stand for?
Political
What does the first E in PESTEC stand for?
Economic
What does the S in PESTEC stand for?
Social
What does the T in PESTEC stand for?
Technological
What does the second E in PESTEC stand for?
Environmental
What does the C in PESTEC stand for?
Competitive
Impacts that Political ( PESTEC ) have on organisations
Can have an impact on the economy as a whole and on individual businesses
For example: changes to law, new legislation, government targets etc
Impacts that Economic ( PESTEC ) have on organisations
When the economy is doing well, customers buy more
Economic Policy (PESTEC) Fiscal Policy-
Fiscal Policy: increasing income tax rates- customers have less money to spend
Increasing VAT- Selling price may have to be raised
Increasing corporation Tax- Will reduce profit for the year
Economic Policy (PESTEC) Monetary Policy-
Monetary Policy: increase/ decrease interest rates (borrowing money)
Impacts that Social (PESTEC) have on organisations
Changes in shopping habits- More online shopping, Apple Pay etc.
Ageing population- Must cater for older members of the public
Lifestyle changes- healthier populations, moving away from weekly shops
Constant changes in fashion tastes and trends
Impacts Technological (PESTEC) have on organisations
Increased use of social media Smart phones E-commerce Order tracking Mobile pay
Impacts Environmental (PESTEC) have on organisations
Weather Recycling Pollution and carbon emissions Ethical sourcing (supply chain) Sourcing local produce Reducing packaging
Impacts Competitive (PESTEC) have on organisations
Opening up a store next to a competitor can bring choice for customers and trade in the area.
Competition brings new ideas and keeps prices low.
To keep up with competition businesses may have to reduce their prices or lose customers to competition.
The competition can launch new products to keep up.
Info about flat structures
- Only a few levels of management
- Short chain of command
- Managers have a wider span of control
- Managers are directly responsible for employees
Advantages of a flat structure
Info flows quickly
Consulting staff of decisions takes less time
Business is more able to respond to market change
Customers needs are quickly identified and dealt with
Disadvantages of a flat structure
Removal of management levels means there is less control throughout the business
Mistakes are easier to make
Info about hierarchical (tall) structures
- Many layers of management
- Long chain of command
- Each manager has a narrow span of control
- Information and decisions need to go through each level
Advantages of a hierarchical (tall) structure
Great deal of control and supervision
Clearly defined roles and procedures to follow
All members of staff are supervised
Staff have the chance to become experts in their roles
Disadvantages of a hierarchical (tall) structure
Decision making can take a long time as every level must be consulted
Communication can be slow therefore customer needs may take a while to be met
Not being able to adapt to changes in market can quickly make the business vulnerable
Factors that affect the quality of decision making
STAFF- Managers ability/ experience, how much risk they are willing to take, staffs resistance to change.
FINANCE- Whether finance is available to address the weakness or for growth, financial constraints may mean that the best solution for the problem cannot be used.
TECHNOLOGY- Spreadsheets can improve accuracy, email can be used to communicate decisions and gather opinions on them, video-conferencing can reduce the need for travel allowing decision making meetings to be made more easily
Ways to measure the success of decision making
By measuring: Profit levels Sales levels Staff absence levels Feedback from customers and staff Researching review sites
Roles managers play in decision making
Planning Organising Commanding Co-ordinating Controlling Delegating Motivating
