Unit 1 Flashcards
Characteristics of a entrepreneur
-Willingness to take risks.
-Hardworking and committed.
-Innovative.
-Organised.
Business sectors
-primary
-secondary
-tertiary
-primary - Organisations that. extract the Earth’s natural resources.
(The first stage of production, examples include agriculture, forestry, mining.)
-secondary - Organisations that use raw materials to manufacture goods or to construct items.
(Converts resources from the primary sector into products, examples include car manufacturing, construction.)
-tertiary - Organisations that provide services to consumers or to other organisations.
(Comprises businesses that supply services, examples include education and health care.)
What is unlimited liability
The personal possessions of the owner of a business are at risk if there are any problems. There is no limit to the amount of money the owner may have to pay out.
What is limited liability
Exists when a business and its owners are legally separate.
This means that the owners’ personal possessions cannot be sold to pay the business’s debts.
What are Private limited companies
A business owned by its shareholders whose shares cannot be freely traded on the Stock Exchange.
What are public limited companies
A large business owned by its shareholders whose shares can be sold freely on the Stock Exchange.
Advantages of PLC (private limited companies)
-Limited liability - shareholders are only liable to pay the amount they have invested or have agreed to invest. This helps to attract shareholders
-a separate legal identity, which means the company continues in existence even when its owners die.
-able to hire expert and specialist managers
-customers prefer to deal with a company as they feel it has a higher status than a sole trader, and this can help to boost sales.
disadvantages of PLC (private limited companies)
-complex to set up a company, more rules and laws to comply with,
-expensive to operate a business as a company.
-financial information is available to anyone who cares to see it. This might benefit rivals.
-Selling shares to raise money may reduce the amount of control the original owners have over the business. They may lose control entirely.
Advantages of Public limited companies
- sell shares to the general public via the Stock Exchange. This makes it easier to raise money when needed,
- receive a lot of coverage in the media, helping to advertise the business and its products.
- Banks and other financial institutions are often more willing to lend
money to public limited companies.
Disadvantages of public limited companies
-Being listed on the Stock Exchange can put public limited companies under pressure to increase profits in the short term.
- Larger companies are more likely to suffer from adverse publicity in the media.
-subject to more laws and regulations than other businesses.
Complying with these regulations and laws can be costly and involves the publication of detailed financial information about the company.
- Public companies can be bought by other companies.
What is a stakeholder
Individuals and businesses that are affected by, and affect, a business.
What is a owner
The individuals or organisations to whom a business belongs. In the case of a company, these are the shareholders.
What is a employees
These are the individuals who work for a business and receive
wages or salaries in return.
STAKEHOLDER
- customers
These are the people or businesses who pay for the products produced by a business.
STAKEHOLDER
- local community
This includes the people and other enterprises who live and operate close to the business in question.
STAKE HOLDERS
- supplier
These are businesses or individuals that sell the business the goods and services it needs to carry out its activities.
FACTORS EFFECTING BUSINESS LOCATION
- proximity to market
How close the business’s location is to its customers.
FACTORS EFFECTING BUSINESS LOCATION
- availablity of raw materials
Products such as oil, steel and cotton which are used in the production of other goods.
FACTORS EFFECTING BUSINESS LOCATION
- competition
This exists when more than one business is attempting to attract the same customers.
FACTORS EFFECTING BUSINESS LOCATION
- cost
The expenditure that is necessary to set up and run a business.
FACTORS EFFECTING BUSINESS LOCATION
- suitable supplies of labour
Businesses seek to locate where there are supplies of labour with the required skills and where wages are as low as possible.
Calculate profit
Total cost - revenue = profit
How do Bussiness grow or expand
A business can grow (or achieve expansion) by:
- selling more of its products - which is called internal growth or organic growth
- joining together with, or buying, another business - this is external growth or integration.
What is Internal/organic growth
This growth occurs when a business gets bigger by selling more of its products
What is Expansion:
This is when a business becomes bigger by increasing its output and sales.
What is External growth/ integration:
This occurs when a business gets bigger by joining with, or buying, another business
Methods of Internal or organic growth (franchising)
This occurs when a franchisor sells the rights to sell its products to a franchisee; this is usually in return for a fee or a percentage of turnover.
Methods of internal or organic growth (opening new stores)
a business can open new stores, hotels or restaurants. To do this a business has to find the necessary finance to purchase the property and other items it needs, as well as recruiting new staff. This is likely to be a relatively slow means of expansion.
Methods of internal/organic growth (e-commerce) and disadvantages
Also known as electronic commerce, this is the act of buying or selling a product using an electronic system such as the internet.
+ Retailers may suffer from falling sales in their shops.
+ It can be difficult and expensive to distribute goods to customers,
especially if the goods are bulky or heavy.
+ Some customers prefer to see a product - or to try on clothing - before
buying.
Methods of internal/organic growth ( outsourcing )
Occurs when a business uses another business to produce for it.(using other businesses to produce its goods or services.)
this method of expansion can be risky as the business is dependent on the other business. Sales may be lost and reputations damaged if the outsourcing business does not deliver on time or produces low quality products.
What is external growth
External growth - or integration - is the result of smaller enterprises joining together to create a larger business. This can be done in two ways.
What is a merger
Merger: Occurs when two or more businesses join together to form a new business.
What is a takeover
Takeover: Occurs when one business buys control of another business.
What is a take over
Takeover: Occurs when one business buys control of another business.
What is economies of scale
Occur when a business’s unit costs of production fall as its output rises and the business expands.
What is unit cost
The cost of producing a single unit of production. It is calculated by dividing total costs by the number of units of output produced. Also called average cost.
What is technical economies of scale
When cost per unit falls as a result of a business using machinery in production.
What is diseconomies of scale
Occur when the cost per unit increases as a business expands.
Advantages of growth
Advertising and publicity. Large businesses can afford to spend more on advertising their products. Sales may rise further as a result.
Technical economies
Attracting the best employees. Large firms can provide excellent training and more opportunities for promotion, which helps to attract and retain more talented employees.
Disadvantages of growth
Failure to meet customers’ needs. Some large businesses may sell their products to many different and diverse groups. Their products may not meet the precise needs of any of these groups.
Diseconomies of scale
- It can become more difficult for employees within very large firms to communicate. This can result in errors and inefficiency.
- It is more difficult to co-ordinate a large business and employees may not all be working towards the same goals.
- Some employees may feel isolated and poorly managed in a large business. They may be demotivated and less efficient in their work.
Unit cost equations
Unit cost = total cost divided by number of units of output produced
What is a flat organizational structure
A structure with few levels of hierarchy, comparatively wide spans of control and a short chain of command.
Using the appropriate organisational structure
-Skills of the workforce.
-Type of work.
-Type of management style.
- SKILLS OF THE WORKFORCE. - If the workforce is highly skilled then a flat structure may be used,
-employees need relatively little supervision
-spans of control can be wide. - Delegation may be used extensively. With unskilled employees, a tall organisational structure may be more appropriate.
-TYPE OF WORK -Some jobs are creative
-therefore do not require close supervision.
-so appropriate to use delegation
-so a flat structure would be more appropriate.
TYPE OF MANAGEMENT STYLE - If managers favour close supervision
-little freedom for employees to make decisions at work,
-tall structure may be most appropriate.
-management style which grants more freedom to employees may work best with a flat organisational structure.
Communication within flat organisational structures
+Communication can be easier because there are fewer levels of hierarchy
for information to pass through.
+ However, some senior employees may have wide spans of control and may not have sufficient time to communicate effectively with all the staff they control.
Communication within tall organisational structures
+ Information has to pass through many levels of hierarchy. There is a risk that the information is not passed on or is miscommunicated.
+ Communication may be improved by narrower spans of control as managers will have to exchange information with fewer people.
What is recruitment
The process of finding and appointing new employees
What is training
The action of teaching an employee a skill or type of behaviour
What is training
The action of teaching an employee a skill or type of behaviour
What are the benefits of tranining employees
- Motivtaion =
- skilled employees
- more productive
- customer satisfaction - customer loyalty
- better service
- staff retention = feel cared about
- ability to deal with changes in technology
TRAINING STAFF
- increase productivity
As staff are better trained, and get good at making products they will produce more
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• Staff productivity depends on the skill of the staff, the machines avallable and the efficiency of management
• Investment in staff training can result in an increase in long-term productivity
TRAINING STAFF
- Ability to deal with changes in technology
• Training can help staff to get comfortable with the technology and understand how it makes their work lives easier
• This will help reduce resistance to change in the organisation
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Training staff will help them to understand that the new technology in a business is an improvement
TRAINING STAFF
- motivation of retention
• This will motivate the employees
• This may also reduce the rate at which employees leave the business
• The main advantage is a reduction in recruitment costs
• This cost reduction will have an impact on profit
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Training staff shows a commitment to their future in the business
TRAINING STAFF
- Good customer service
- In a highly competitive market having good customer service can have an Impact on sales and theretore profit
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• Customer service may be what gives the business its edge or USP
• Training employees is important to give correct levels of customer service e.g. Poundland vs M&S
What is induction training
• Induction training happens when an employee starts working for a new business
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• It may involve training on how to use fire extinguishers, or shown round the building, or introduced to colleagues
• What is Involved In the training will vary depending on the business and the job role
On the job training
Definition,
Training given in the workplace, usually by another more experienced employee.
On the job training
Benefits
+ It can provide the precise skills and knowledge required by the business’s employees.
+ It can be a relatively cheap form of training and a cost-effective way of improving productivity.
+ Employees remain in the workplace
throughout the training period, saving time and avoiding travel and hotel expenses.
On the job training
Drawbacks
+ If the business provides the trainers, it can temporarily lose the services of those employees for the period of the training.
+ It does not generate new ideas and may be less effective than off-the-job training.
Off the job training
Definition
Training provided outside the employee’s place of work.
Off the job training
Benefits
+ It can help to bring fresh ideas and approaches to the business, and provides the most up-to-date knowledge and skills.
+ This form of training is valued by employees, especially if it leads to formal qualifications. It can improve levels of motivation.
Off the job training
drawbacks
It is very costly and may not be cost-effective if employee performance does not improve significantly.
+ It can be a risky choice as employees may leave the business soon after training as their new skills may be attractive to other employers.
Induction training
Benefits
• Employees learn important health and safety information e.g. how to use a ladder correctly
• Employees make less mistakes, which will improve the quality of products and services
• Employees quickly feel part of the team and may be less likely to leave
