Understanding Business Flashcards
What is a private limited company
•has a limited liability
•controlled by board of directors
•owned by shareholders
•are invited to buy stocks
What is a public limited company?
•owned by shareholders
•shares are sold on stock exchange
•limited liability
•minimum 1 director
•£50,000 min start up cost
What is a multi national company?
A multi national company (MNC) is a business which owns or controls production or service facilities in more than one country
Advantages of home country of a multi national company?
•cheaper labour
•cheaper raw materials
•tax relief
•retain core workforce
•economies of scale
•avoid differing legal requirements
•reduced transport time
Disadvantages of home country of multi national company?
•create language barrier
•differing finical requirements
•exchange rates
•time difference
•legislation differences
•cultural differences
Advantages of a franchisee?
•less risk as brand is already established
•provided with training and support
•start up costs are known in advance
Disadvantages of a franchisee?
•royalty payment and annual profit share given to franchiser
•strict rules have to be followed so no room for creativity
•legal contract may not be renewable
Advantages of a franchiser?
•provides growth for brand without heavy investment
•receive a percentage of franchisee profits
•quick method to reach more geographical areas
Disadvantages of a franchiser?
•some control of brand image is lost
•reputation will depend on all outlets including the franchisee’s
•franchisee’s need to be provided with training and support
What are the objectives of a private sector organisation?
•maximise profits
•growth
•sales
•satisfaction
•managerial objectives
Corporate social responsibility
What are the 8 methods of growth?
•forward vertical integration
•backward vertical integration
•horizontal integration
•internal/organic growth
•lateral integration
•conglomerate integration
•merger
•takeover
What is backwards and forwards vertical integration?
•Backwards vertical integration is when you buy your supplier.
•Forwards vertical integration is when you buy the business that sells your product
What is horizontal integration and internal/organic growth?
•Horizontal integration is the combining of two firms who operate at the same stage of production
•Internal/Organic growth is when a business grows expanding sales or operations which is financed through internal growth
What is a Merger or a Takeover?
•A merger is when two or more firms join together after they agree
•A takeover is when one business buys the majority of the others shareholding
What is conglomerate and Lateral integration?
•Conglomerate integration is the combining of firms in completely different markets
•Lateral integration is the combining of a business that have similar or related products
What are advantages of outsourcing?
•May be cheaper due to economies of scale
•less equipment as company will provide their own
•organisation only pays for when activity is required
•allows organisations to concentrate on its core activities
•reduces costs as no staff need to be employed for specific aspects
•work should be a high quality as you can use specialist firms
Disadvantages of outsourcing?
•organisation can lose some control over the business
•sensitive information may be passed to the organisation
•may be more expensive as the organisation also need to make a profit
•job completed might not be to the highest standard
•firms might take a long time to complete their tasks
•mistakes may arise due to lack of communication
Why do businesses have conflict?
•Mangers want to increase influence when shareholders want to keep control of the business
•Mangers want employees to work overtime whereas employees want good working conditions
•Mangers want high profits and bonuses whereas employees want a fair pay
•Mangers want to focus on personal objectives whereas shareholders want high profits
•shareholders want high dividends whereas costumers want a good price for the product their purchasing
•shareholders want high dividends whereas employees want a fair wage
What interdependence does a business have?
•Shareholders need employees to produce high quality products whereas employees need them to pay their wage
•Shareholders need managers to improve profitability whereas managers need job security
•Shareholders need costumers to buy products whereas costumers need high quality products
•Shareholders needs the supplier to have high quality raw materials whereas supplier needs regular orders
What does PESTEC stand for?
•Political
•Economic
•social
•Technological
•Environmental
•Competitive
What is the Monetary policy?
Deals with settling interest rates and controlling the supply of money in the economy
What is the Fiscal policy?
Deals with government actions regarding taxation+ government spending
What is delayering?
Delayering is removing levels of management from a tall structure to create a flatter structure
Advantages of delayering?
•Finance saving on salaries as less staff
•quicker decision making
•more responsive to change and are able to pass on information quicker
Disadvantages of delayering?
•fewer promotional opportunities
•redundant costs are initially high
•may lose key sales or members of staff
What is a tall structure?
A tall structure is when managers have a narrow span of control and they’re are lots of empty
+clear roles in the business
+good for idea generation
-high managerial cost as lots of staff
-commutation can be misunderstood
What is a flat structure?
A flat structure is when managers have control of lots of employees at once
+quicker and clearer communication
+clear roles in business
+lower wage costs
-not as many mangers to make big decisions in company
-less ideas can be generated
What is a entrepreneurial structure?
A entrepreneurial structure is when all decisions are made by one or two owners
+clear roles in business
+cheaper wage costs as not as many managers
-not many ideas can be generated
What is the matrix structure?
A matrix structure is when employees work closely together and individuals tell supervisors or leaders
+flexibility between departments
+open clear communication
-managerial roles may not be clear
- to much work can cause overload
What is a centralised structure?
A centralised structure is when all decisions are made at the top of the structure or head office
+consistency across the business
+business has clear direction
+clear roles
-can demotivate employees
-may lower production
What is a decentralised structure?
A decentralised structure is when middle or low managers make most of the decisions
+decisions made quickly
+upper managers can focus on long term goals
+employees feel empowered
-waste of resources
-emergency decisions cant be made
-lack of qualified managers
What is a strategical decision?
•long term decision
•set the overall aim and direction of the business
•they are set by senior managers
•they are to increase market share
•high risk
What is a tactical decision?
•medium term decision
•taken to help achieve the strategic decisions
•are set by middle managers
•open a new brand
•medium risk
What is a operational decision?
•short term decision
•made to deal with changing circumstances
•set by supervisors or employees
•to deal with staff absence
•low risk
