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Understanding Business Flashcards

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1
Q

Sectors of Industry

A

Primary - raw materials extraction.
Secondary - manufacturing.
Tertiary - services and retail
Quaternary - consultancy and research

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2
Q

Sectors of Economy

A

Private - PLC, Ltd, Sole Trader etc.
Public - NHS, Local Govt etc.
Third - Charities, Social Enterprise

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3
Q

Advantages and Disadvantages of a Sole Trader

A

Keep all the profits and make all decisions, however unlimited liability and large workload.

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4
Q

Advantage and Disadvantage of a Partnership

A

More capital, shared skills and knowledge, however unlimited liability and shared profits.

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5
Q

What is a Public Limited Company?

A

A company owned by shareholders, shares sold on the stock exchange, run by an appointed board of directors.

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6
Q

Advantages and Disadvantages of a Public Limited Company

A

Limited liability and can take advantages of economies of scale, however no control over share purchases and financial statements must be prepared.

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7
Q

What is a Private Limited Company?

A

A company owned by at least two shareholders, shares not sold on the stock exchange, but to family and friends.

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8
Q

Advantages and Disadvantages of a Private Limited Company

A

Limited liability and owners control who buy shares, however high startup costs and must be with a registrar of companies.

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9
Q

What is Franchising?

A

An individual pays for the right to operate under a well established firm, such as McDonalds. In return, the franchisor receives a share of profits and royalties.

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10
Q

Advantages and Disadvantages of Franchising

A

The business well established, advertising and marketing carried out by franchisor, however expensive to set up and little or no control over decisions.

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11
Q

What is a multinational?

A

A company with headquarters in a different country but with manufacturing plants, stores etc in others. Such as Primark, Starbucks or BT.

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12
Q

Advantages and Disadvantages of a Multinational

A

Cheaper labour costs abroad and can take advantages of economies of scale, however laws abroad can impact the product/service and currency rates may fluctuate causing instability.

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13
Q

What is Public Sector business?

A

Organisations owned by the government which provide a service to the taxpayer. They operate in a specific budget and are funded by taxes.

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14
Q

What is Privatisation?

A

Selling off public businesses to the private sector, because the government can no longer subsidise these failing businesses and can make money from it.

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15
Q

What is Third Sector business?

A

This is non profit organisations such as charities and social enterprises, they are owned and controlled by a board of trustees or committee members, raise finance through grants, donations or trading.

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16
Q

Features of a Social Enterprise

A

Sell goods and services, and reinvest profits into a social or environmental aim. Don’t rely on grants or loans, and can build a positive reputation, less regulation than charities.

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17
Q

Business Objectives

A

Survival, Profit, Customer Satisfaction, Market Leader, Corporate Social Responsibility, Satisficing, Managerial, Growth.

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18
Q

Methods of Growth

A

Organic (Internal) Growth, Merger, Takeover or Integration (Horizonal, Backwards Vertical or Forwards Vertical).

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19
Q

Organic Growth

A

When a firm grows by reinvesting profits into expansion, no loans required and less risk, however it’s a slower method.

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20
Q

Merger

A

An amicable agreement to bring two firms under one board of directors, with possible redundancies.

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21
Q

Takeover

A

When a firm buys over 51% of share capital to control the business, can be hostile.

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22
Q

Horizonal Integration

A

Taking over a firm at the same stage of production, such as Ford and Toyota.

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23
Q

Backwards Vertical Integaration

A

Taking over suppliers, the stage of production behind.

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24
Q

Forwards Vertical Integration

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A

Taking over customers or retailers, the stage of production ahead.

25
Diversification
Moving into a new market or area of business.
26
Benefits of Horizontal Integration
You gain profits of competitor, you become bigger and benefit from economies of scale, reducing competition creates monopoly.
27
Business Reduction
Demerger (splitting a firm into two parts) | Divestment (reducing costs by selling parts or closing)
28
External Factors: PESTEC
Outwith control of business; political, Economic, Social, Technological, Environmental, Competitive.
29
External Factors: Political
Government can increase taxes, introduce minimum pricing, grant planning permission, increase the minimum wage etc.
30
External Factors: Economic
High unemployment meaning less disposable income but easier recruitment. Low interest rates encourages spending and borrowing. High interest means high loan repayments and saving money.
31
External Factors: Social
Changes in fashion and trends, changes in demographics; the grey pound, different cultures, people more into healthy lifestyles etc, fast changing tastes makes market research even more important.
32
External Factors: Technology
Developments of computing makes communication and selling easier, e-commerce etc, automation makes production cheaper and faster, must stay ahead of competition, can be expensive to keep up.
33
External Factors: Environmental
Pressure on businesses to recycle, change in weather patterns could disrupt delivery or production, using renewable energy, being socially responsible gives good reputation etc.
34
External Factors: Competition
Competitor opening next door impacts profitability, can enter a price war driving it down, must increase marketing campaigns, may need to patent to prevent imitation products, impacts market share etc. Competitor opening next door impacts profitability, can enter a price war driving it down, must increase marketing campaigns, may need to patent to prevent imitation products, impacts market share etc.
35
Internal Factors:
Within business control; employees, management, finance and technology.
36
Internal Factors: Employees
Without correct skills, may provide poor customer service. Low motivation can reduce productivity and high staff turnover, increased training costs etc.
37
Internal Factors: Management
Inexperienced managers may make poor decisions, may fail to motivate staff, and cause lower productivity and missed opportunity.
38
Internal Factors: Finance
Without finance, can't buy new machinery, can't pay staff, can't conduct marketing and advertising, may lose out to competitors.
39
Internal Factors: Technology
Automated factories are more productive, can reduce labour costs so more profits, can allow business to sell worldwide, can allow for customer feedback and market research.
40
Corporate Culture
Positive corporate culture can be achieved by having clear aims, a mission statement, taking on board staff views, having visible branding and signage.
41
Advantages of Positive Corporate Culture
Creates good working relationships, employees feel motivated and part of the business, gives the business a good image, ensures consistency.
42
Advantages and Disadvantages of Tall Organisation
Lots of promotion opportunities, clear who manager is, small span of control, however, slow flow of information and high managerial staff costs.
43
Advantages and Disadvantages of Flat Organisation
Fast flow of information and lower staff costs, however large span of control and fewer promotion opportunities.
44
Centralised Organisational Structure
All decisions are made in the HQ, easier to promote corporate culture and decisions can be made for whole organisation quickly.
45
Decentralised Organisational Structure
Decisions made branch by branch, allowing you to empower staff, keep them motivated and communicate decisions faster.
46
Matrix Organisational Structure
A project team is created, bringing people from different functional areas to launch new products. Increases experience and motivation, however many teams can be expensive.
47
Entrepreneurial Structure
Decisions are made by the owner with little or no staff input. Decisions made quickly and accountable, however can damage motivation and heavy workload.
48
Changing Structures: Delayering
Removing a layer of management, going from tall to flat. Saves money, improves communication and decision making, and staff feel empowered.
49
Changing Structures: Outsourcing
Contracting work to a third party; business can focus on core activities, specialists can do a better job, however can be more expensive and lose control of work.
50
Changing Structures: Downsizing
Closing a department, store or branch. Staff laid off and labour costs reduced, however gives a greater workload.
51
Functional Groupings
Creating departments for staff with similar skills and duties, such as finance, marketing, and human resources. Makes staff training easier however unresponsive to change.
52
Product Groupings
Creating departments based on what the business sells, such as for iPhones, Macbooks, iPads etc. Responsive to change and accountable, however duplication of effort and potential competing.
53
Geographical Groupings
Creating departments for staff based on geographical location, such as The Scottish Sun, Wales, Ireland etc. Means you can cater to local tastes and more responsive to change, but duplication of effort.
54
Customer Groupings
Grouping by market segment, such as family holidays, ski holidays, pensioner holidays. Can cater for customer needs but high staffing costs.
55
Stakeholder
A stakeholder is a person who has an interest and an influence on a business. Stakeholders depend on each other, but can also have conflict between them.
56
Strategic Decision Making
Long term decisions, concerned with the overall direction of the business. Made by senior management, such as merging or expanding.
57
Tactical Decision Making
Tactical Decision Making
58
Operational Decision Making
Short term day to day decisions, made by team leaders or supervisors. Includes decisions on overtime required etc.
59
Fayol's Role of the Manager (POCCC)
Planning, Organising, Commanding, Co-Ordinating and Controlling.

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