Understanding Business

Question 1

State the ownership, control and method of finance used by the public sector.

Answer 1

Ownership: The government
Control: Local government
Finance: Government via tax

Question 2

What does the quaternary sector consist of?

Answer 2

The quaternary sector consists of organisations that provide information e.g. Research labs and help lines

Question 3

State the ownership, control and method of finance used by the private sector.

Answer 3

Ownership: Shareholders
Control: A board of directors
Finance: Selling shares, taking out loans or grants

Question 4

State the ownership, control and method of finance used by third sector.

Answer 4

Ownership: Founder/s
Control: A board of trustees
Finance: Donations and grants

Question 5

State objectives of the private sector.

Answer 5

• To maximise profit
• To survive
• To satisfy customers
• To grow

Question 6

State objectives of the public sector.

Answer 6

• To stay within budget
• To provide the best service possible
• To meet government targets

Question 7

State objectives of the third sector.

Answer 7

• To increase donations
• To increase volunteers
• To make a difference to their specific cause

Question 8

What is a multinational?

Answer 8

An organisation that operates in more than one country

Question 9

State 3 advantages of being a multinational organisation.

Answer 9

• Risk of a takeover is lowered as the organisation is very large
• Due to economies of scale production costs are lower and more profit can be made
• Labour may be cheaper in some countries meaning more profit can be made
• Tax may be cheaper in some countries meaning more profit can be made

Question 10

State 3 disadvantage of being a multinational organisation.

Answer 10

• Legislation differences may require products to be altered in order to be sold, this is a cost meaning less profit will be made
• Products may have to be altered in order to suit different cultures
• Language barrier may require linguists to be employed, this is an extra cost meaning less profit is made

Question 11

State the interdependence between managers and employees.

Answer 11

Managers require employees to do work for them.

Employees require managers to pay them.

Question 12

State methods of organic growth.

Answer 12

• Selling more products
• Opening more stores
• Employing more staff
• Entering new markets

Question 13

What is forward vertical integration?

Answer 13

When the manufacturer takes over the customer. This allows the manufacturer to have full control over distribution and sale of products.

Question 14

What is divestment?

Answer 14

Divestment is when an organisation sells of assets or smaller parts of the organisation in order to gain finance. Any capital raised is normally put back into the organisation.

Question 15

What is corporate culture?

Answer 15

Corporate culture is the character of an organisation. Every organisation has a uniques corporate culture which distinguishes it from others. It influences the attitude of staff and the way they treat customers. An organisation may develop a culture with uniorms, mottoes, shop layouts and logos.

Question 16

What is responsibility?

Answer 16

Responsibility is being answerable to decisions.

Question 17

What is authority?

Answer 17

Authority is the power to make decisions.

Question 18

What is functional grouping?

Answer 18

Functional grouping is when activities are grouped into departments based on skills i.e. HR, finance, operations etc.

Question 19

What is line/staff grouping?

Answer 19

Line/staff grouping is when activities are separated into core and support activities. The core activities are the focus of the organisation and the support activities assist in running the organisation.

Question 20

What is the chain of command?

Answer 20

The chain of command is based on the number of layers in the hierarchy. If an organisation has many layers of management (tall), it has a long chain of command. I an organisation has few layers of management (flat), it has a short chain of command.

Question 21

What is the line of communication?

Answer 21

The line of communication is the way information filters through the organisation. Decisions are made by the most senior managers and information then filters down through the layers of management.

Question 22

What is span of control?

Answer 22

The span of control is the amount of control spread through the organisation. Small organisations and flat structured organisations have a wide span of control. Large organisations and tall structured organisations have a narrow span of control.

Question 23

Compare a centralised and a decentralised structure.

Answer 23

• In a centralised structure control and decision making lies with the person who had the most authority whereas a in a decentralised structure control and decision making power lies with different departments throughout the organisation.
• In a centralised structure subordinates have little or no authority whereas in a decentralised structure subordinates have more authority
• In a centralised structure employees are demotivated whereas in a decentralised structure employees are motivated
• It is easy to achieve consistency with a centralised structure whereas it is difficult to achieve consistency with a decentralised structure

Question 24

What is outsourcing?

Answer 24

When an organisation looks externally for a specialist to do a job that the organisation itself cannot do.

Question 25

Describe the matrix structure.

Answer 25

The matrix structure involves grouping employees around particular projects within the organisation. Groups often consist of employees with expertise in selected areas. Once a project is finished the group is no longer needed e.g. A group of staff working on an oil rig