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Higher Business > Understanding Business > Flashcards

Understanding Business Flashcards

1
Q

What is the basic economic problem

A

Scarce Resources: what to produce, how to produce, and who to produce for

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2
Q

What is a planned economy

A

When the resources are used by Government for everyone: Decides what people need, who to produce for such as free education, and how to produce such as using the cheapest production methods

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3
Q

What is a market economy

A

Resources belong to who can afford: Products are produced for businesses and consumers, produced for whatever consumers can pay and for pricing for businesses and is made using the cheapest method or the best quality

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4
Q

What is a mixed economy

A

Private Sector and public sector

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5
Q

What are the two equations of equilibrium in the circular flow of income

A

income = expenditure Savings + taxes + imports = bank investment + govt investment + exports

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6
Q

What are the leakeges

A

savings , tax and imports

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7
Q

What are the injections

A

Bank investment, govt investment and exports

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8
Q

What is the paradox of thrift

A

when households save their income instead of spending on goods and services, the economy is worse off

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9
Q

What are the two methods of government intervention

A

raising interest rates and taxes and cutting spending during times of inflation In times of recession the government can put more money into the economy by reducing taxes and interest rates and investing

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10
Q

What is a business

A

A business is any organisation that provides goods or services to society

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11
Q

What are the three sectors of the economy

A

Private, public and third sector

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12
Q

What are the four sectors of industry

A

Primary Secondary Tertiary Quarternary sector

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13
Q

What is the Quartenary Sector

A

businesses which provide information and technology services

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14
Q

Who controls a franchise

A

Franchiser makes the long-term strategic decisions, which affect the whole franchise. Franchisee makes the day-to-day decisions for their own branch.

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15
Q

What are the sources of finance in a franchise

A

Each Franchisee pays a start-up fee to the Franchiser as well as a percentage of their profits each year. Banks will be willing to lend to Franchisees as they are buying into an established business.

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16
Q

Who controls local authorities

A

Locally elected Councillors, who sit on various committees and devolve running of the authority to managers.

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17
Q

Who controlls public corporations and agencies

A

A Cabinet Minister, called a Secretary of State for — who sets the objectives but devolves the running of the organisations to agency managers.

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18
Q

Who controls government funded service provides

A

A Cabinet Minister, called a Secretary of State for — who sets the objectives but devolves the running of the organisations to service managers.

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19
Q

Who controls are charities

A

Board of trustees

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20
Q

Four advantages and disadvantages of running a franchise

A

Advantages · Effective method of raising finance · Franchisees motivated to increase profits · Franchisees will enhance reputation of company · Day-to-day control of outlets is delegated Disadvantages · Need to invest in effective training of franchisees · Co reputation depends on the performance of all the franchisees

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21
Q

Four advantages and disadvantages of being a franchisee

A

Advantages · buying into established Co so more likely to survive and to get bank loans · Training and support is provided by the Franchiser · Main decisions made by experienced staff · Some decision making for their own outlet Disadvantages · Constrained by company policy – eg not allowed to introduce own ideas without first checking with Franchiser · Must hand over share of profits or sales to the Franchiser

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22
Q

Four advantages and disavantages of running an ltd

A

Advantages · Owners have limited liability · Greater amount of capital can be raised by selling shares · Owners retain control as shares sold by invitation · No requirement to publish annual reports but these can be accessed through the Registrar of Companies Disadvantages · Quite expensive to set up as must comply with Companies Acts legislation. · Need to have a Memorandum and Articles of Association and apply for a Certificate of Incorporation from the Registrar of Companies

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23
Q

Four advantages and disadvantages of running a plc

A

Advantages · Owners (shareholders) have limited liability · Greater amount of capital can be raised (by selling shares on Stock Exchange) · Reputation and stability due to being quoted on the Stock Exchange · Public have access to financial reports - accountability Disadvantges · Responsibility and decision-making shared over wide range of shareholders – possible conflicts may arise · Costly to set up (due to legal requirements (as above) and the cost of launching on the Stock Exchange) · Division between ownership and control (shareholders and management) · Division between employees and management

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24
Q

Two advantages and disadvantages of running a local authorite

A

Advantages · Know what services are required for specific area · Individual authorities know best how to allocate finance and support in own areas – ie decentralisation Disadvantages · Financial difficulties may affect some authorities more than others (eg Aberdeen City Council overspend/budget cuts in recent years)

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25
Q

Two advantages and disadvantages of public corporations and agencies

A

· Allows the public to have a say in how these organisations are run and managed (BBC) · Protects the public from the actions of corrupt or dishonest business practices. Disadvantages · There is little accountability for poor decision making and budget overspending (eg BBC decision making has been shown to be poor lately)

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26
Q

Business Objectives of a franchise

A

· Good Reputation and Growth · Sales and Profits

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27
Q

Business Objectives of a Private LTD

A

· Survival · Adequate profits (Satisficing) · Maintaining reputation · Growth (within limits)

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28
Q

Business Objectives of a PLC

A

· To maximise sales and profits · Satisficing · Growth · Increased market share

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29
Q

Three Business objectives of Local Authorities

A

· Delegated control of local services – eg education and health · Targeting needs of own area · To work within the budget available

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30
Q

Business objectives of Charities

A

· To raise awareness of a cause eg poverty, education, health · To raise funds to help the cause · To help as many people in need as possible

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31
Q

What is internal(organic growth)

A

When a business grows by itself by taking on more staff and by opening new branches

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32
Q

What are the methods of integration

A

Horizontal integration Vertical integration Lateral integration Conglomerate Diversification

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33
Q

What is integration

A

when two businesses combine in order to become larger and more powerful.

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34
Q

What is integration on equal terms called

A

A merger

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35
Q

What is integration when one business takes over another called

A

A takeover or acquisition

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36
Q

What is horizontal integration

A

When two businesses at the same stage of production and in the same line of business merge together

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37
Q

What are the benefits of horizontal integration

A

Elimate the competition and gain a larger market share Achieve greater economies of scale Become stronger and therefore more secure from hostile takeover

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38
Q

What is vertical integration

A

Occurs when two businesses at different stages of production join together

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39
Q

What are the benefits of vertical integration

A

Eliminate the middleman and his profit Benefit from economies of scale Control where products are sold Control source and cost of supplies

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40
Q

What are the two types of vertical integration

A

Backward vertical integration Forward vertical integration

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41
Q

What is backward vertical integration

A

When a Business merges with or takes over a business at an earlier stage in production

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42
Q

What is forward integration

A

When a Business merges with or takes over a business at a later stage of production.

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43
Q

What is lateral integration

A

When two businesses with related goods which do not compete with each other join together. For example, Google and Youtube.

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44
Q

What is conglomerate diversification

A

When a business either merges with or takes over a business operating in a completely different market

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45
Q

Why may a company choose to grow through conglomerate diversification

A

To spread the risk of being in business Acquire more assets Develop into new markets and gain new expertise complementary to core business

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46
Q

What are the positive and negative effects of integration

A

Positive Customers will benefit from more choice, expertise and better prices Negative Staff may find that their jobs are at risk, or they may be moved to different position or even location within the company A business may have purchased the company simply for asset stripping purposes.

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47
Q

What is de-integration or de-merger

A

When a business is cutting back by separating from a business it had previously merged with to form 2 separate businesses again.

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48
Q

The reasons for de-integration or de-merger

A

So they can concentrate on their core business activities and raise more funds on the stock market for the separate business activities.

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49
Q

What is divestment

A

When a business sells of a subsidary business in order to raise finance

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50
Q

What is a management buy-out

A

When a subsidary business is being sold because it is making a loss, and managers of the business get together to raise the finance to buy it out and run it as their own business.

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51
Q

What is management buy-in

A

A similar situation but occurs when the management who buy the business do not already work for the business

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52
Q

What are economies of scale?

A

Economies of scale arise when the cost per unit falls as output increases

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53
Q

What are internal economies of scale

A

As a business grows in scale, its costs will fall due to internal economies of scale - an ability to produce units of output more cheaply

54
Q

What are external economies of scale

A

These are advantages gained for the whole industry, not just individual businesses. The oil industry in Aberdeen is a good example for this.

55
Q

What is diseconomies of scale

A

When a business grows so large that it has grown larger than its most efficient scale, resulting economies of scale being reversed.

56
Q

What causes internal diseconomies of scale

A

Mainly caused by difficulties of managing and communiating in a very large business. This can lead to low staff morale and more unrest within the workforce.

57
Q

What causes External diseconomies

A

This is caused by overcrowding in certain geographical areas where larges industries are located. This can lead to congestion on roads leading to staff and deliveries taking longer to arrive .

58
Q

What is a multi-national

A

A very large business which has outlets or production facilities in a number of different countries, while maintaining a definite home base.

59
Q

Four advantages of a multi-national

A

Host countries may offer grants and financial incentives such as tax breaks to entice them to open a facility in the country Costs of land and labour can be considerably lower in the host countries, thus reducing costs and increasing profits Can sell more in the host country than they could if they had been exporting as they are not restricted by quotas and tariffs. Corporation tax may be lower in host countries which means owners can keep more of their profits

60
Q

Four disadvantages of a multi-national

A

The local currency may be too weak to allow profits to be converted back at a good rate Technical expertise and local infrastructure may be poor, requiring a lot of investment The host country may be politically unstable Local legislation may restrict business practices that are legal in other countries

61
Q

What are the benfits of a global market

A

Can market and sell goods and services to a much larger area, thus increasing sales and profits Can develop an international brand more easily Greater external economies of scale

62
Q

What are the costs of a global market

A

There is increased competition from both local and international businesses Transportation costs to reach international markets is higher Language barriers may make it more difficult to trade with some countries cultural differences may restrict what some markets will buy

63
Q

What is stakeholder interpendence

A

Each stakeholder group is dependent on another stakeholder group

64
Q

What are four examples of stakeholder conflict

A

Shareholders and employees Managers and employees Customers and Business Owners Local community and the Business Owners

65
Q

Explain the shareholders and employees conflict

A

Shareholders want good dividends whereas employees want good pay and conditions of work.

66
Q

Explain the Managers and Employees conflict

A

Managers want to keep within the budget so they get a bonus while employees want more pay.

67
Q

Explain the customers and business owners conflict

A

Customers want good value for money while owners want good profits.

68
Q

Explain the local community and the business owners

A

The local community can suffer at the hands of businesses through the effects of pollution, noise, congestion and the building of new factories.

69
Q

What are internal factors

A

Avaliability of Finance Corporate Culture Staff Abilities and Atitudes Use of technology

70
Q

What are the external factors

A

Political Economic Social Technological Environmental/Ethical Competition

71
Q

What are some problems with large firms

A

Less agile than smaller firms It can be difficult to motivate workers Firms can suffer from diseconomies of scale It can be more difficult to communicate

72
Q

What are the three roles in mintzberg’s theory

A

Interpersonal - the relationship the manager has with others Informational - the collection and passing on of information within and between departments Decisional - the making of all kinds of decisions

73
Q

What are the five function of management in fayols theory

A

Planning Organising Commanding Co-ordinating Controlling Modern managers: Delegating Motivating

74
Q

What are three styles of management

A

Autocratic Democratic Lassez-faire

75
Q

What are theory x workers

A

lazy and need autocratic managment to make them work

76
Q

What are theory y workers

A

Though to be motivated by being given responsibility and enjoy their work. This lends itself to a more democratic or laissez-faire approach to management

77
Q

Four factors that impact leadership style

A

The task Organisational culture Type of workforce The size of the business

78
Q

What are the three types of decisions

A

Strategic Tactical Operational

79
Q

What are strategic decisions

A

Long term decisions about where the organisation wants to be in the future. They don’t go into great detial about how the decisions will be acheived.

80
Q

What are Tactical decisions

A

How strategic decisions are going to be achieved in the short term. They go into detail about the resources needed how these will be used to achieve the aims.

81
Q

What operational decisions

A

Day-to-day routine decisions

82
Q

What are four activities of the marketing area

A

Finding out what the customer wants by conducting market research and communicating with operations to make sure products are designed and produced to meet customer requirements Ensuring the customer continues to be satisfied with the product after it has been purchased (after sales service) Devising ways to extend the product life cycle of products that have been on the market for a long time Making sure the product is available to buy in a place that is convenient for the customer, whether this is a shop, a discount warehouse or by e-commerce

83
Q

What does the operational area do

A

Transforms inputs through a process into outputs

84
Q

Four operational area activities

A

distributing the product Deciding on the best production method, including using technology effectively Ensuring the quality of output is high Deciding which suppliers for raw materials to use and managing stock

85
Q

Human Resource Activities

A

Conducting workforce planning to ensure adequate staffing now and in the future Recruitment and Selection of staff for job vacancies Training and development of staff Managing grievance with disciplinary procedures.

86
Q

Finance activities

A

Sourcing finance which enables the business to meet its objectives Receiving and processing requests for payment Managing the payroll (paying staff) Preparing end of year financial statements to establish if the business is profitable

87
Q

What is a functional grouping

A

Where the activities in an organisation are grouped into departments based on similar skills, expertise and resources used.

88
Q

What are four advantages of a functional grouping

A

Business has a clear structure and direction Staff expertise is contained in one department, which encourages specialisation Support avaliable from colleagues in functional grouping Easy to identify what each functional grouping deals with

89
Q

What are four disadvantages of a functional grouping

A

Can be slow at responding to external change Staff can become loyal to their department at the expense of the business as a whole Communications between functional groupings can be poor Can be difficult to manage as the business expands

90
Q

What is a product/service grouping

A

The grouping of activities are based around a particular product or service and is described as a divison

91
Q

What are four advantages of product/service grouping

A

Improved responsivness to external change Staff become experts for their product/service Allows managment to identify successful and unsuccesful product/service divisions Allows a differentiated approach to be adopted to suit each product/service

92
Q

What are three disadvantages of product/service grouping

A

Rivalry between divisions Duplication of equipment , administration and staffing for each division Communication between divisions can be poor

93
Q

What is customer grouping

A

Businesses can be structured around groups of customers who have similar needs, for example a medical practice could have two groupings: one for NHS patients and one for private patients

94
Q

What are four advantages of customer grouping

A

Improved customer loyalty due to the specialised service recieved Allows management to identify poorly performing groupings improved responsivness to the changing needs of the customer Easier to anticipate future customer needs

95
Q

What are four disadvantages of customer grouping

A

Duplication of equipment, administration and staffing Very expensive to staff Continuity of customer care lost if staff change Record keeping and administration can be very time consuming

96
Q

What is place/territory grouping

A

When a business groups around a geographical location. For example, NHS Tayside, NHS Grampian

97
Q

Three advantages of territory grouping

A

The needs of specific customers can bet met, for example different languages and cultures Improved customer service, as staff are familiar with local customs and cultures More cost-effective to employ a local workforce, especially unskilled and semi-skilled workers

98
Q

Three disadvantages of territory grouping

A

Continuity of local client care can be lost if staff change Communication can be difficult between branches due to time and language differences Duplication of equipment, administration and staffing

99
Q

What are technology grouping

A

Activities will be grouped around the technological requirments of the product or service Staffing will be grouped around the stages of technical input/processes required This is mainly used in car manufacturing businesses

100
Q

What are four advatanges of technology grouping

A

Can achieve a high degree of specialisation in production processes Technology can reduce wastage caused by human error and its associated cost Lends itself to large organisations with complex production processes Problems with technology can be easily identified

101
Q

What are four disadvantages of technology grouping

A

Extensive capital investment will be required in the technology required Staff will require a lot of training to keep up with technological changes Duplication of resources will occur Lost production time due to technology breaking down

102
Q

What factors influence the structure of a business

A

Size of a business: Larger businesses have more managers and thus a more formal structure the market place: a small business is more likely to operate in a local market and need fewer formal structures The technology used: introducing e-commerce will result in the business altering its structure The skills of staff: highly-skilled staff may be given more independce

103
Q

What is a Hierarchial (tall) structure

A

Decisions and instructions are passed down from senior staff to the workforce and information passes back up through levels of management. Many levels of management

104
Q

Who uses a tall structure

A

Commonly found in traditional organisations such as .NHS .Local Authorities .Armed Forces .Police

105
Q

What are four advantages of hierarchial structures

A

There is a high level of control as important decisions are made by senior staff and are then passed down through various levels of managment The role and responsibility of each employee is clearly defined, along with the procedures to be followed Staff become specialists in their role in their role Supervisors/managers have a narrow span of control, making it easier to oversee the work of their staff

106
Q

What are four disadvantages of hierarchial strcutures

A

Slow responses to market and consumer demands because of the length of the chain of command Decisions-making is slow as many individuals in the various levels of managment must be consulted The system is rigid and inflexible and causes an emphasis on close control rather than what the business exists to do The level of responsibility and authority in the structure can be seen as a status symbol, causing divisions between managers and staff.

107
Q

What is a flat structure

A

A flat structure has a very few levels of management

108
Q

Who uses a flat structure

A

flat structures are commonly found in smaller organisations and those that need to be very responsive to their market Doctors Dentists Vets Lawyers Accountants

109
Q

Four advantages of flat structures

A

Faster communication and decision making as there are fewer levels of management to be consulted Faster response to changes in the market place Employees have more responsibility and wider variety of tasks to complete, which can be motivating Organisation works well as ‘a team’ and there is less rivalry between departments

110
Q

Four disadvantages of flat structures

A

Supervision of employees becomes more difficult as each managers span of controlis wide The level of support recieved by staff is reduced as managers are now responsible for more staff there is an increased workload for the staff in the levels of managment above and below the level that is removed when the structure is ‘delayerd’ fewer promotion oppourtunities

111
Q

What is a matrix structure

A

This structure emphasises getting people together who have particular specialist skills and placing them in project teams to complete specific tasks

112
Q

Who uses the matrix structure

A

Oil industry Construction

113
Q

Four advantages of the matrix structure

A

It gives scope for all individuals to use their talents effectivley There is no hierarchy - everyone in the project team has the same level of responsibility and authority Staff get the chance to develop skills in other areas which increases job satisfaction and motivation It gives the organisation the ability to work closely with customers

114
Q

What are four disadvantages of the matrix structure

A

It is costly in terms of support as each project team may need its own dedicated back-up staff There can be problems co-ordinating a team made up of individuals from different functional departments Loyalty of staff may lie with the project instead of with the business as a whole Economies of scale, avaliable with the hierarchial structure, are not avaliable

115
Q

What is an entrepenurial structure

A

A system in which decisions are made centrally with very little input from staff, and are based on the expertise of only one or two individuals

116
Q

Who uses the entrepuniral structure

A

Newspaper/magazine industry Commerical banks Clothes designers

117
Q

What is an advantage of using an entrepreneurial structure

A

Decisions making is quick and is made by experts, so should be accurate

118
Q

What are two disadvantages of using an entrepreneurial structure

A

They place too much stress on the staff making the decisions which can quickly lead to ‘burn out’ There is little or no consultation with other staff, which can be demotivating for them

119
Q

What are centralised structures

A

These tie in closely with the hierarchial structure and traditional businesses. All of the control and decision-making lies with a few key individuals in the business,such as senior directors or managers

120
Q

What are four advantages of centralised structures

A

Business may benefit from strong leadership from the top Senior managment have control of all aspects of finance and budgeting Procedures, such as ordering, purchasing and storage, can be standardised,which can lead to the organisation benefiting from economies of scale decisions are made from the point of view of the business as a whole, not for the particular benefit of one department or another

121
Q

What are three disadvantages of centralised structures

A

Little consultation with staff before decisions are made Little oppourtunity for staff progression Staff morale and motivation may be low due to lack of oppourtunity/involvment in decision making

122
Q

What are decentralised structures

A

When decision-making and control is delegated to and carried out by subordinates

123
Q

What are four advantages of a decentralised structures

A

The delegation of authority is felt by many to be a key motivator for subordinates and allows them to be groomed for senior positions when they become avliable Subordinates often have better first-hand knowledge of the requirments of their departments or customers, and can therefore make better quality decisions based on this knowledge Delegation allows a more proactive approach and much greater flexibility of roles Decision-making is quicker and more responsive to external changes

124
Q

What are two disadvantages of decentralised structures

A

Senior management lose some control over the organisation Company policy may be at competition with local decisions

125
Q

What is re-structuring

A

The size of the organisation has changed The availability of finance has changed market conditions have changed New technology has become available

126
Q

What is delayering

A

thie involves removing levels of managment withi the ornaisation in order to flatten the structure

127
Q

What is delayering

A

thie involves removing levels of managment withi the ornaisation in order to flatten the structure

128
Q

What is downsizing

A

This involves the removal of certain areas of the business’s activities in an atempt to cut costs. Whereas delyaring affects only managment jobs, downsizing can affect many different jobs

129
Q

What are four advantages of outsourcing

A

Improved focus on core business activities

Increased efficiency due to specialisation

Increased reach due to access facilities

Greater competitive advantages due to leveraged knowledge

130
Q

What are four disadvantages of outsourcing

A

Confidentiality and security may be at risk

lack of flexibility within contract

service delivery may fall below expectations

instability of the outsourcing business

131
Q
A

Higher Business (8 decks)

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