UNDERSTANDING BUSINESS Flashcards
Explain the advantages of franchising for the franchiser.
-It is a quick way to to enter new geographical markets and the franchisers name becomes more well known as their expanding
this meaning the franchiser can get more sales while being more well known meaning more customers
Distinguish between the features of NHS Scotland and a PLC in terms of ownership and control.
(3) marks
Definition
A PLC is a generally large company with a minimum of £50000 in market share ,PLC members must also sign a memorandum of Association
In terms of the CONTROL The NHS is ran by the Scottish government/Scottish parliamentt Whereas a PLC is ran by shareholders
In terms of Ownership The NHS is Owned by the government Whereas a PLC is owned by a board of directors
Describe the benefits of being a multinational company
(5marks)
- An increase in market shares
-A decrease in cost of production such as lower wages due to operating in other companies(cheaper)
-lower tax rates in different countries
-To take advantages of government grants available
-secure cheaper premises and labour
all private sector organisations
sole trader
partnership
Private limited company
public limited company
franchise
describe the advantages and disadvantages of a sole trader
-its easy to set up and also cheap compared to other private sector organisations as there isn’t any legal formalities
-The owner has complete control and takes all decisions.
-Profits are kept by the owner
-business affairs kept private
Disadvantages
Unlimited liability
Limited capital
New ideas are limited
Commitment to the business
what objectives would businesses have
-maximising profits
-survival i.e staying alive
satisfying i.e hitting an objective of profit to keep the stakeholders happy
-CSR (corporate social responsibility) i.e good reputation
-growth
What is Horizontal Integration
Advantages and Disadvantages
-Two organisations joining together at the same stage of production
A=can dominate the market as the company has gotten larger
A=benefit from ecnomies of scale
A=Due to reduced competition,the new business can raise prices therefore increasing profits
D=merger could break EU laws/break laws making it illegal
D=Overall quality of product may drop because of lack of competition
D=customers may have to pay higher prices for the same goods due to less competiton
what are the four factors of production
land,labour,capital and enterprise
what is “land”
land is the natural resources businesses use to create products
what is “labour”
labour is the human resources used,i.e businesses employ people to make/manufacture products
what is “capital”
capital is the man made resources required to create the products
what is “enterprise”
Enterprise is the combination of land,labour and capital that the entrepreneur use to create the product
what are the four sectors of industry
Primary,secondary,teritary and Quaternary
What do primary,secondary,teritary and Quaternary DO
primary-Raw materials
Secondary-Produce goods
Quaternary-Knowledge based services
Teritary-sales and goods
What does the primary sector do
businesses taking natural resources from the land
What does “teritary sector” do
businesses that provide services instead of goods i.e messages
What does the “secondary sector” do
Involved in manufacturing and construction i.e take natural resources and turn them into goods that can be sold
what does the “quaternary sector” do
businesses providing information and knowledge based services
What are the 3 sectors of the economy
Private,public and charity
What is a private sector organisation
owned by a private individual and a board of directors/investors
What is a public SECTOR organisation
owned by the government and also has a board of directors
What is a third sector organisation
organisations that are set up for a good cause to raise money
Benefits/disadvantages of a partnership
A=increased capital
-shared workload
-holiday/sickness cover
D=unlimited liability
=profits are shared
=disagreement and fallout
Advantages/disadvantages of a PLC(private)
A=Increased capital
-limited liability
-less risk of business failure
D=Dividends only paid to shareholders if profits are made
-must be registered with companies house(legal proceddings are costly
Advantages/disadvantages of a PLC(public)
A=limited liability
-can dominate the market
-more capital than Private limited companies due to shares being issued through stocks
Easier for PLCS to borrow money
D=must publish account
-Formation highly expensive (legal and admin)
-dividends need to be shared among shareholders
Diseconomies of scale (rising average of costs)
Multinationals
advantages and disadvantages
-provide Jobs and income,increasing the brands reputation
-economies of scale (Lower average costs
-lower tax rates
-legislation is relaxed
D=All profits go back to parent nation
D= Language barrier
D=cultural differences
D=exploiting workers with lower wages could lower the companies reputation
Difference between public sector organisation and a public limited companies
Public sector organisations serve the General public and public limited companies this sells shares
Advantages and disadvantages of social enterprises
A social enterprise is is an organisation that exists with a decisive goal to help the community but runs the organisation like a business.All money is reinvested
Advantage
-help tackle social problems
-attract customers who support the cause
Disadvantages
-lack of support and funding if grants are not available
-the initiative may require hard work to achieve success
What are the 3 business objectives
Survival
CSR
Profit maximisation
Profit maximisation
Make as much profit as possible
Two ways to do this include
I-ncrease/sales/selling price
-reduce costs
CSR
CSR is an organisation aiming to act in a ETHICALWAY or in any way that benefits either society or the environment
Positives of CSR
Business gets a good reputation for being kind/care
Customers are more likely to use the business
What is managerial objectives
Usually large organisations with many managers
What is satisficing
To have a “satisfactory result” instead of an exceptional one
Because it may not be ideal to maximise profits due to external factors
What does growth means
-advantages and disadvantages
Growth means expanding sales and increasing profits this would be a business objective
Ad
Reduces the risk of failure
Increases profits
Avoids being taken over
What are some advantages of customer service
-Increased sales and profits
-Less staff turnover as staff will be more motivated
-good word of mouth
Objectives of public sector businesses
(PRIVATE and PUBLIC limited companies)
Private limited companies
-growth
-profit maximisation
Public limited companies
Growth
Profit maximisation
What does a Public sector organisations objectives
Public corporations
-provide a quality product
-to make best use of funds
what is internal and external growth
Internal growth also known as organic growth is besically a business growing naturally i.e through staff/new branches
external is through joining with another organisation usually by takeover or merger
Advantages of a merger and disadvantages
market share and resources are shared, increasing profits
-economies of scale
customers may dislike the changes a merger can bring
marketing the merger may cost loads in advertisement
advantages and disadvantages of a takeover
Advantages
risk of failure reduced
competition reduced
-economies of scale
Disadvantages
expensive to take over a business
less competition could mean higher prices
Quality of products can go down
What is backward and forward Vertical integration
Backward forward integration
-Business joining with a supplier e.g previous stage ,starbucks taking over a coffee bean plantation
Forward vertical Integration
business joining with the next stage
-breward taking over a pub
What is backward and forward integration
backwards
business joining with their supplier
forward
business joining with sales/retail like a alcohol company joining with a pub
Advantages of Forward and backwards integration
Forward
business can control supply of stock
increase profits as no middleman
backwards
cheaper stock/supply costs
quality can be controlled
advantages and disadvantages of diversification/Conglemerate integration
(conglomerate integegration)
Joins with another organisation in a completly different market
Advantages
business is larger and more fiancially secure
-business can reduce risk
-business gains customers and sales
-can overcome seasonal fluctuations
Disadvantages
-business could become to big to handle
-business may not know much about the market
too many products can make the company lose focus
advantages and disadvantages of outsourcing
-Could be cheaper to outsource
-business can concentrate on what their good at
-could be more expensive trying to get a specilist
-communication needs to be clear
advantages and disadvantages of a merger
-each new branch can focus on what they specialise
–they can run more efficiently
-expensive to market and brand the new branches
-customers may be put off and not go to either company
Describe a Tall hierarchical system
-many levels of management
-commands go from top all the way to the bottom
-long chain of command
Describe a flat structure
along with the advantages and disadvantages
-few levels of management
-shorter chain of command
-managers have a wider span of control
advantages
-employees have more authority
-decision making is quicker
disadvantages
-employees onload a greater workload
-fewer promotion opportunities
Adantages and disadvantages of delayering
advantages
-quicker communication
-moneys saved on salaries as less people can get promoted
disadvantages
-less promotions
-wider span of control
Entrepreneurial
management system
One boss
advantages
decisions are made extremely quick
decision makeing doesnt need to consult other staff
disadvantages
can annoy employees as there thoughts and ideas are stifled
heavier workload
What is centralised management system
Advantages and Disadvantages
Decisions made from HQ,senior managers
-Decisions made for whole organisation
-Benefit from economies of scale
-greater uniformity in the organisation run more smoothly
disadvantages
-slower decision making
-slower communication
-less responsive to external factors
Decentralised MANAGEMENT system
(Advantages and disadvantages)
Advantages
-empower staff/motivates staff
-decisions can match local needs
-business can react well to external factors
Disadvantages
-less supervision
-decisions made differ from each branch
-transfer of staff may lead to confusion due to different practices
-Slower decision making
Downsizing
Advantages and Disadvantages
-costs are cut
-the business is more effective
-valueable skills and resources are lost
-staff feel vulnerable
What is functional grouping
Departments where staff have similar skills and expertise and do similar jobs
What are the advantages and disadvantages of functional grouping
Advantages
Allow specialisation
Clear organisational structure
Disadvantages
Organisation may become too large and unwieldy
May be unresponsive to change
What is Product/service grouping
Divisions/departments that each deal with a different product range
Customer grouping advantages and disadvantages
Each division has varying customer needs
Customer loyalty can build due to personal connections
Expensive due to staff costs for each
New staff lose feelings of importance
Customer grouping
Customer groups are divisions dealing with different types of customers
Advantages and disadvantages of product/service grouping
-easy to identify low sales in products
-expertise can develop in dealing with each product/service
-Duplication of effort
-divisions may end up competing with each other
What is location grouping
Staff divided into divisions each dealing with a geographical area
Advantages and disadvantages of location grouping
Advantages
Can cater for local needs/tastes
-better response times to customers
Disadvantages
-Duplication of effort and resources
Very costly to staff to be relocated
Technology grouping
Grouping their business according to technology or production process
Advantages and disadvantages of technology grouping
-increased specialisation amongst staff
-quicker and cheaper to train staff
Specialist training requires
Higher salaries for skilled special workers
Advantages and disadvantages of corporate culture
-employees feel part of the organisation
-staff loyalty
-staff may resist change
-hard to introduce staff culture
What does PESTEC stand for
Political
Environmental
Social
Technology
Environmental
Competitive
What is political factors
Actions taken by the government
-change in VAT rates
-change in income tax rates
What are some examples of Economic factors
-Economic growth
-interest rates
-exchange rates
Economic influence -unemployment rate
Advantages
-high unemployment means a larger pool for vacancies-people
-low unemployment means higher disposable income
Disadvantages
-low unemployment means less people to choose from
-High unemployment means consumers feel insecure about their future
Economic factor-Interest
Lower interest means it’s cheaper to pay back a loan thus businesses can expand as it’s easier for a loan
-lower interests means consumer can take out loans for cheap to fianance large purchases
-high interest means businesses will hold of from expanding
-high interest means consumer will save more
Economic factor-Economic factor
-changes by the chancellor may increase consumer spending meaning more disposable income meaning more sales and profits
-changes to ecnomic policy means the banks will be unable to lend money as freely
Social factor-changes in taste
Market research may indicate holes in the market which businesses can exploit as a development opportunity
Having a market based orientated approach means the business needs to constantly watch the market
technology-social media
increasing access to more customers thus increasing sales and profits
costs of administration i.e keeping the website up
environment-Recycling
use recycling as a marketing method which enhances their public image
adds to overall costs as specific bins might need to be added to recycle effectively all the different kinds of waste futhermore increased wages as pick up men will have to paid for more frequently
Environment-weather
Depending on the product Summer might cause an increase in sales compared to in winter
poor summer could mean a businesses crop has a poor harvest decreasing sales as sales have fallen
Competitive-Competitive influence
Improves the market as more competition means businesses have to improve their quality over their competitors
wider choice for customers
expensive as businesses will have to conduct more market research to develop their product
What are stakeholders and what are the 3 “I” when answering a stakeholder question
groups of individuals who have an interest in and stand to be affected by the success or failure of an organisation
Identify-who are they
Interest-what do they want with the business
influence-how will what they want affect the business
internal stakeholders
owner/shareholders-want high profits, high dividends
managers-want promotions, job security
employees-better wages, job security
External stakeholders
Government-can change legislation i.e tax
banks-can grant/deny loans
what are the 3 types of decisions
Strategic,Tactical,Operational
Strategic Decision making
-Long term
-Made by CEO or board of directors
tactical Decision making
-made by middle level managers
-try to hit the strategical decision
-made over weeks and months
Operational Decision making
-short term day-to-day activities
-made by the lowest in the company i.e employees day managers
SWOT Strenghts and weaknesses
-Identifies strengths and weaknesses
-allows weaknesses to be focused on
Time consuming to make
chosen decisions could be biased
Role of a manager
Planning
Organising
delegating
co-ordinating
commanding
What does diversification mean
Diversification is when a business reduces risk by expanding their goods and services
What does delayring mean
-This Involves cutting layers of management within the organisation which in turn flattens the structure
Private sector
Organisations are owned and controlled by private individuals and investors
Public sector
Organisations are owned and controlled by the government
Third sector
Organisations are set up raise money for a good cause
What is the difference between Privately owned Organisations and publicly owned organisations
Privately owned businesses are business which sells us things
Publicly owned things are things done for us by the government hospital and school
What is a social enterprise
A social enterprise is a business that trades for a social and or environmental purpose
They are specifically set up to generate their income by selling goods and services rather than through grants and donations
Franchisee benefits and downsides
A=takes over a known brand,winning formula
A=franchiser still controls and owns their business
A=franchise benefits from centralised advertisement
A=low risk form of growth for franchiser
D=may not agree with decisions made by franchiser
D=A large fee and royalties is paid to the franchiser
D=franchisee doesn’t have complete freedom
D= reputation easily damaged as one poor performance from a different franchise can damage every franchise
Difference between public sector and public limited
Public sector organisations serve the general public, while public limited companies sell shares to the general public
Advantages and Disadvantages for a tall structure
A=more promotion opportunities
A=employees will know immediate bosses
A=clear lines of responsibility and communication
A=Narrow span of control, managers have more time for planning
D=many layers of management
D=slow decision making
D=higher labour costs due to many labours increasing (salary demands)
D=managers have more time to supervise employees which could make them nervous, influencing them into making a mistake
What happens when interest rates are high
Customers are less likely to borrow money
banks have to pay out more money
Reasons why a businesses profit for the year could increase
Increased sales revenue
decreased expenses
What is the private sector
Organisations ran by private individuals and controlled by private individuals/shareholders/investors
What is the public sector
organisations ran and owned by the government
