Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Higher Business Management > Understanding Business 2 > Flashcards

Understanding Business 2 Flashcards

1
Q

What are external factors?

A

External factors are influences OUTWITH the control of the business.

Although the business cannot control these factors a successful business will anticipate the impact and plan how to manage them effectively

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Name the external factors

A

Political (Legal) Factors
Economic Factors
Social Factors
Technological Factors
Environmental Factors
Competitive Factors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Describe political factors

A

Political factors come from the actions of the government at local and national level, each having different powers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Name the political factors

A

Legislation (laws)

Government revenues (taxes) and spending

Government policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Describe legislation (laws)

A

These are implemented by the central government and include:

Minimum Wage Act
Health & Safety at Work Act
Equality Act
Environmental and pollution laws
Ban on cigarette advertising

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Describe the national minimum wage act

A

Government changes the National Minimum Wage every year by increasing it.

This impacts on profits as the expenses increase due to an increase in wage costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Describe health and safely at work act

A

Governments can introduce new health and safety legislation or add onto current/existing ones.

This means that a business may have to change the way it works, for example by training its staff or upgrading its machinery or safety equipment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Describe government revenues (taxes) and spending

A

Both local and national government have to raise revenue to fund the services they provide. There are a number of ways to do this including:

VAT increase from 17.5% to 20%
Changes to Income Tax (personal)
Changes to Corporation Tax (business)
Council Tax
Charges for services e.g. leisure centres

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Describe VAT

A

VAT (value added tax) is a charge on the sales of goods and services based on the value of the item sold. It is collected by businesses which is then passed onto the government. This means that products will have be more expensive with the VAT included which may put customers off of purchasing them.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Describe corporation tax

A

Corporation tax is tax paid on the profit made by a company to the Government. This means that the business make less profit overall as a certain percentage of profits will go to the government in the form of tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Describe government policy

A

Example of government policy include:

Immigration
Recycling targets
Competition policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Describe competition policy

A

Competition policy can have a significant effect on a business and in some
cases can prevent a takeover or merger e.g. Sainsburys and Asda.

The Competition and Markets Authority (CMA) is responsible for implementing government policy. The main areas it is involved in are:
Consumer protection
Mergers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Describe economic factors

A

Economic factors refer to anything that encourages people to spend or not to spend money. There are 6 factors shown here.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the economic factors

A

Inflation
Unemployment
Exchange Rates
Boom/Recession
International Trades
Interest Rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Describe unemployment

A

Unemployment can effect the success of a business. This means that when
unemployment is high people have less to spend on goods and services
This will reduce demand for some goods/services which will reduce a businesses sales revenue and profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Describe exchange rates

A

Exchange rates can also effect the
success of a business as businesses
trading internationally will be affected by
changes in exchange rates. This means
that when the pound is weak, it becomes
more expensive to buy supplies from
abroad which can increase expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Describe boom/recession

A

During a boom demand for products is high, unemployment is low and prices rise quicker.

During a recession demand for products is low, unemployment is high and prices are lower.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Describe social factors

A

Social factors are the ways in which society changes and the need for businesses to adapt to these changes e.g. demographics, lifestyles, tastes and trends and ethical. These changes will impact on what consumers buy and when they buy it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Describe lifestyle

A

Lifestyles can have a effect on the success of a business. This means that businesses will need to adjust their product portfolios and marketing strategies to ensure they are taking into account the lifestyle trends and fashions or they will start to lose customers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Describe ethicality

A

How ethical a business is will impact their success as there is increased pressure on businesses to operate ethically. This means that it may cost businesses more to operate ethically but it will improve the image of the organisation which may result in greater sales.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Describe technological factors

A

Technology changes at a very fast pace now and can also bring pressure for the business to change and adapt to this. The use of technology can be split into 4 broad categories:

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are the technological factors

A

Communication
E-Commerce
Manufacturing
Research and Development

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Describe communication

A

Communication is enhanced and more efficient using technology. Most people now own a smartphone which makes
this very convenient. A business can communicate with customers,
suppliers and employees using e-mail, Intranet, OneDrive, Internet and social media. Using technology means that communication is now much faster.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Describe e-commerce

A

E-commerce has meant that even small businesses can increase their number of customers by using e-commerce and s-commerce (social media). Many businesses only operate online which reduces their costs meaning they can charge lower prices. Online retailer, is
able to carry a much larger stock in warehouses than even the largest stores. Customers use e-commerce to shop and pay for products without leaving the amazon comfort erener-own nome. Produces can be deivered the same day or next day, improving customer satisfaction.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Describe environmental factors

A

Environmental factors arise from the way the natural environment impacts the organisation and the expectation that they will act in an ethical or environmentally friendly manner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What are the environmental factors

A

Weather
Natural Resources
Natural Disasters
Pollution
Recycling Targets
Carbon Footprint

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Describe weather

A

Changing weather patterns can also affect a business. Flooding and storms can lead to delays in the delivery of stock and goods which affects production, as well as delivery of orders to customers. Business premises can also be badly damaged resulting in temporary or permanent closure.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Describe recycling targets

A

Being environmentally friendly can
increase the effectiveness of a business.
This means that businesses who work to
minimize their carbon footprint or to cut
down on pollution to rivers and the
environment can also be more attractive to customers who are interested in the
environment. This could also result in an
increase in market share due to customer loyalty.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Describe competitive factors

A

Most businesses face competition from other businesses which provide the same product/service. A business must try to reduce the impact of competitors and will use marketing strategies to do this.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Describe competitors prices

A

Competitor’s prices may effect a business as their prices may be more attractive to customers. This means that they are more likely to go and buy from them which could will gain competitors loyal customer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Describe the amount of competition

A

The amount of competition could also
effect a business as there may be many
businesses selling similar goods and
services, giving consumers a lot of choice
when choosing where to buy their goods
and services. This could decrease the
chances of them buying from you.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What are stakeholders

A

A stakeholder is a person or group of
people who have an interest and influence on an organisation and the way in which it is managed or run.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Describe stakeholder interests

A

This is what they want from the business
e.g. employees want a salary.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Describe stakeholder influences

A

This is how they impact the business e.g.
employees can go on strike.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

List the internal stakeholders

A

Owners
Shareholders
Employees
Managers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

List the external stakeholders

A

Banks
Customers
Suppliers
Local Community
Pressure Groups
Local Government
National Government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What are owner interests

A

Good return on the money they have invested into the business

Increase in value of the business

Stability to ensure future returns on investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What are owner influences

A

Make decisions which will affect the business

Invest more capital in the business

Sell their investment in the business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What are shareholder interests

A

Good return on the money they have invested into the business (dividend)

Increase in value of their shares

Stability to ensure future returns on investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What are shareholder influences

A

Invest more capital in the business

Sell their investment in the business

Contribute to decision making by voting at the Annual General Meeting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

What are manager interests

A

Fair salary and bonuses

Opportunities for promotion

Status and responsibility

Job satisfaction and security

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

What are manager influences

A

Poor decisions which can affect the success of the business.

Recruitment and management of staff

Motivating staff

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

What are employee interests

A

Good rate of pay/pay rise

Job satisfaction and security

Good working conditions

To be treated fairly

44
Q

What are employee influences

A

Standard or work/customer service

Lack of motivation

Industrial action

45
Q

What are customer interests

A

Value for money on product or service

Good quality product or service

Good customer service

Choice of products

46
Q

What are customer influences

A

Can choose to shop elsewhere

Complain about product or customer service

Damage reputation of business

47
Q

What are bank interest

A

Business to open an account with them

Business to repay on time and in full

Stable cash flow

48
Q

What are bank influences

A

Refuse to provide overdraft or loan

Charge higher interest rates

Change repayment terms

49
Q

What are supplier interests

A

Business to place repeat orders

To be paid for goods or services supplied on time and in full

50
Q

What are supplier influences

A

Increase/decrease their prices

Withdraw offers of discount

Refuse trade credit

Deliver late

Deliver goods which are not fit for purpose

51
Q

What are government interests

A

Correct amount of tax is paid

Legislation is adhered to

Provision of employment

Behaving in a socially

responsible way

52
Q

What are government influences

A

Change the rate of tax

Change the rate of minimum pay

Change legislation

Offer grants

Refuse to grant planning permission

53
Q

What are local community interests

A

Social responsibility in local area

Provision of employment

54
Q

What are local community influences

A

Protest against the business through MP’s and local press

55
Q

Describe conflicts of interests

A

All stakeholders want the business to succeed however, a business cannot satisfy the interests of all stakeholders all of the time (remember satisficing from business objectives), this is
known as a conflict of interest.

56
Q

Describe owner and employee conflicts

A

Employees are likely to want higher wages than the owner is willing to pay as this will reduce profitability

Owners want to cut costs and employees want a safe working environment e.g. health and safety - protective clothing

Reorganisation of the business to become more efficient will benefit the owner, however, employees may feel they are being given extra responsibility without training or financial reward or some may be made redundant

57
Q

Describe owner and manager conflicts

A

Owners want to maintain control of the business while managers want to have more power and influence

Managers will focus on their personal objectives e.g. high salary and bonuses which will conflict with the owner’s objective of maximising profit

58
Q

Describe customer and owner conflicts

A

The owner’s interest is to maximise profits and charge the highest price possible while customers want value for money and want prices to be low

Customers expect a satisfactory quality of goods for the price they paid. The business may try to reduce costs by using poorer quality materials, resulting in customers wanting a refund and the
business loses this sales revenue

59
Q

Describe supplier and manager conflicts

A

To improve cash flow, managers want to keep cash within the business for as long as possible and may delay paying suppliers for goods/services provided. However, if suppliers are not paid within a reasonable time (usually 28 days) this can cause them financial hardship and cash flow problems of their own.

60
Q

Describe the interdependence of stakeholders

A

Despite possible conflicts of interest stakeholders also rely on each other to achieve their own objectives

61
Q

Describe owner and manager interdependence

A

Owners rely on the skills and ability of the management team to achieve their objective, and the managers rely on the owners for job security, salary and support in their management role

62
Q

Describe employee and manager interdependence

A

Employees rely on managers to provide leadership and direction to successfully do their job while managers rely on employees to achieve their targets and meet deadlines. Managers are accountable if their employees work inefficiently.

63
Q

Describe manager and supplier interdependence

A

Managers need supplies to provide high quality raw materials when required and
suppliers need managers to buy supplies from them to keep them in business.

64
Q

Describe owner and customer interdependence

A

Business owners are reliant on customers to buy their goods/services to generate sales revenue while customers are employees of businesses and rely on them to earn their salary to generate enough income to buy goods/services to satisfy their needs and wants

Customers need owners to provide them with the goods and services they require, and owners need customers to buy their products

65
Q

Describe owner and employee interdependence

A

Owners need employees to work hard for them to help satisfy customers and increase sales and employees need owners to provide them with fair wages and good working conditions.

66
Q

Describe business structures

A

The structure of a business is very important as it defines how it operates. It clearly indicates the role and responsibility of employees and outlines the relationships between individuals
and groups of staff. Small businesses with few employees may have an informal structure; however, large businesses need a formal structure to ensure the best use of the resources
available.

67
Q

What factors should be considered when deciding on business structures

A

The size of the business

The marketplace

The technology used

The products and services made or supplied

The skills of staff

Finance available

68
Q

Describe the size of the business

A

In small business one or two managers can be responsible for decision making and control. However, larger businesses will have a more formal structure as there is a greater need of structure and control.

69
Q

Describe the marketplace

A

A small business is more likely to operate in a local market and need less formal structures. However, a business which operates nationally or internationally will need a formal structure to ensure efficient and effective use of resources.

70
Q

Describe the technology used

A

Introducing e-commerce will result in the business altering its structure to create a new department for this activity. In addition, if new technology is introduced this may result in redundancies or deskilling of jobs. Technology is widely used to facilitate communication in any business.

71
Q

Describe the products or services made or supplied

A

If a business is diverse and
produces many products or services there may be a higher number of
departments resulting a larger more formal business structure.

72
Q

Describe the skills of staff

A

Highly skilled staff may be given more independence resulting in a flat, decentralised structure.

73
Q

Describe the finance available

A

If finance is limited the business will not have as many options to choose from when structuring their business.

74
Q

What are the business structures

A

Tall (Hierarchical) structure
Flat structure
Centralised structure
Decentralised structure
Entrepreneurial structure
Matrix structure

75
Q

Describe the tall (hierarchical) structure

A

This is the traditional structure for many medium and large businesses. Decisions and instructions are passed down from senior staff to the workforce and information passes back up through the levels of management.

In a Tall structure employee’s position in the structure indicates their level of responsibility - the higher up the
structure the greater the responsibility.

76
Q

What are the feature of a tall (hierarchical) structure

A

many levels of management

the chain of command is long

the span of control is narrow

77
Q

What are the advantages of a tall (hierarchical) structure

A

There is a high level of control as
important decisions are made by senior
staff and are then passed down through
the various levels of management.

The role and responsibility of each
employee is clearly defined, along with
the procedures to be followed
Staff become specialist in their role
(often linked to functional grouping)

Supervisors/managers have a narrow
span of control, making it easier to
oversee the work of their staff

There are clear promotion and career
development opportunities

78
Q

What are the disadvantages of tall (hierarchical) structure

A

Slow response to market and consumer
demands because of the length of the
chain of command

Decision making is slow as many
individuals in the various levels of
management must be consulted

The system is rigid and inflexible as
roles and responsibilities are clearly
defined

The level of responsibility and authority
in the structure can be seen as a status
symbol causing divisions between
managers and staff.

79
Q

Describe a flat structure

A

A flat structure has very few levels of management. It is traditionally used by small businesses e.g. professional partnerships of doctors, dentists or lawyers. However, large businesses are increasingly moving towards a flatter structure to overcome the problems of
a hierarchical structure.

Moving to a flat structure will involve reducing the number of levels of
Flat Structure management through a process called delayering.

80
Q

What are the features of a flat structure

A

few levels of management

the chain of command is short

the span of control is wide

81
Q

What are the advantages of a flat structure

A

Faster communication as there are
fewer levels of management to be
consulted

Faster response to changes in the
marketplace

Employees have more responsibility
and a wider variety of tasks to complete
which can be motivating

82
Q

What are the disadvantages of a flat structure

A

Supervision of employees becomes
more difficult as span of control is wide

The level of support received by staff is
reduced as managers are now
responsible for more staff

Fewer promotion opportunities
available

83
Q

Describe a span of control

A

Span of control is the number of people who report to a manager. If a manager has a wide span of control, there are a number of impacts;

84
Q

Describe the chain of command

A

Chain of command is how decisions and information are communicated within the organisation i.e. down the levels of management.

A short chain of command (flat structure) means decision making and
communication is faster. A tall structure has a long chain of command which slows down decision making and communication.

85
Q

Describe centralized structure

A

This structure relies heavily on a relatively small number of key decision
makers which makes it easier to maintain the corporate image

The decision makers will be senior managers, directors and sometimes the owners, depending on the type of business, who will be based at the businesses “head office”. Branches)
departments are not consulted.

86
Q

What are the advantages of centralized structures

A

Economies of scale are gained by
purchasing materials centrally

Easier to promote corporate image as
communication will be standardised

Decisions made for the benefit of the
whole business rather than individual
departments

Managers are likely to be more
experienced and skilled in the role of
management and the decisions they
make will be of better quality

87
Q

What are the disadvantages of centralized structures

A

Heavy reliance on key decision makers

Stifles creativity of staff

Difficult for decision makers to relate to
local conditions

Employees become demotivated
through lack of responsibility

Does not prepare staff for promotion

88
Q

Describe decentralized structures

A

Decision making is devolved to individual branches/departments therefore employees at different levels are involved in decision making and they are more motivated and empowered.

Head office provides a supporting role rather than a controlling role. This
structure is often associated with a flat structure

89
Q

What are the advantages of decentralized structures

A

Decision making is quicker

More responsive to changes in local
market

Decision makers have better knowledge
of local needs

Staff are empowered - more motivated

Staff are prepared for promotion

Staff are more proactive and flexible

90
Q

What are the disadvantages of decentralized structures

A

Some overall control of the business is lost

Corporate image and consistency more
difficult to maintain

Inexperienced managers may make
poor decisions affecting the whole
business

Greater supervision may be required

Lower and middle managers may need
additional training

Higher salaries may need to be paid

91
Q

Describe a matrix structure

A

A matrix structure involves an organisation being arranged into temporary project teams to carry out a particular task e.g. developing new product or service, or a large-scale
construction project.

Teams are made up of employees from the different functional areas e.g. marketing, finance, operations. Each member of staff will have two managers: one from the functional area and the other is the project manager.

92
Q

What are the advantages of a matrix structure

A

Increased motivation as staff have the
opportunity to move to new projects

Increased job satisfaction as staff can
use their expertise

Staff can develop through working in
areas out with their expertise

Project benefits from different
viewpoints and skills

Effective use of resources as staff can
be moved between projects

93
Q

What are the disadvantages of a matrix structure

A

There can be confusion and conflict
between the 2 managers

Many managers across projects means
high salary costs

Duplication of resources increase costs
e.g. equipment

94
Q

Describe entrepreneurial structures

A

Entrepreneurial structure is common in many small businesses and decisions are made by the owner(s).

This structure is similar to a centralised structure but
for a small business.
This structure may not be suitable as the business grows. A heavy workload is placed on the owner(s) who have responsibility for decision making which can lead to inefficiency.

95
Q

What are the advantages of an entrepreneurial structures

A

Decision making is quicker

Decisions are made for the benefit of
the business as a whole

There is no confusion around
accountability/responsibility

High quality decisions as decision
makers are experienced

96
Q

What are the disadvantages of an entrepreneurial structures

A

Heavy workload for decision makers

No decisions can be made if decision
maker not available

Decision maker has to be expert in all
areas

Demotivating for employees

Stifles creativity and initiative

97
Q

Describe decisions

A

A decision is the process of making a choice between different options to achieve an aim or goal.

Some decisions in business are routine and made quickly while others are more
complex and take longer to make and implement.

98
Q

What are the decision making categories

A

Strategic
Tactical
Operational

Centralized
Decentralized

99
Q

Describe strategic decisions

A

These are long term (5-10 years) made by directors/senior managers

Difficult and expensive to reverse - carry the highest financial risk

They focus on where the business wants to be in the long term i.e. strategic objectives

These are proactive decisions - plan for future

These decisions take a long time to implement fully and do not consider the detail of how it will be achieved

Example - to increase market share by 10% within 5 years

100
Q

Describe tactical decisions

A

These are medium term (up to 5 years) and are made by middle managers.

They focus on the actions the business must take to achieve its strategic objectives

They can be reversed but it is time consuming and expensive

These carry less financial risk than strategic decisions

Example, to open 3 new stores within the next year

101
Q

Describe operational decisions

A

These are short term, day to day decisions made by lower level managers.

They are implemented quickly and have a short-term impact

They are reactive decisions - based on current situation

They do not have a significant effect on the business and can be easily reversed

These carry the least financial risk

Example, to open an extra checkout to reduce the queue.

102
Q

Describe centralized decisions making

A

In a centralised structure the decision making is kept at the senior level of the business e.g. fast food franchises do not let their franchises make any significant decisions on prices or promotions, so they retain overall consistency and identity.

103
Q

What are the advantages of centralized decision making

A

Decisions are made by the most
experienced people

Decision making is quick and efficient

Leads to greater uniformity/ standardisation within the organization

Decisions are made for the benefit of
whole organisation

Can maintain the corporate image

104
Q

What are the disadvantages of centralized decision making

A

Staff demotivated from lack of input in
decisions

Central team are slower to respond to
local changes in the market

105
Q

Describe decentralized decision making

A

In a decentralised structure decision making is delegated to branches or outlets e.g. Waterstones operates in this way and branch managers order books that reflect the local area and what local customers want to read.

106
Q

What are the advantages of decentralized decision making

A

Can improve staff motivation and morale as they are a part of the decision making process

Focus the decisions making on indivisible department and branches of the business which can increase efficiency

107
Q

What are the disadvantages of decentralized decision making

A

Some decisions are made by less
experienced managers

Local decisions may be inconsistent
with the overall strategy of the business

Higher Business Management (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions