Unit 1 Flashcards
Public sector
Services that non-payers also benefit from, funded by taxes or the state, delivers public services (transport, education, healthcare)
Private Sector
Motivated by money, run by private individuals, legally regulated by the state and laws of the country
Public-Private sector
High cost public infrastructure projects funded with private sector money. Normally involves a long term maintenance contract. Also known as private finance initiative
Aim of PPPs
To share skills and resources to provide public services
Not for profit businesses are….
Non governmental organisations (NGOs) and Charities
For profit commercial businesses….
Sole traders, partnerships, and cooperations
For profit social businesses….
Cooperatives, Microfinance providers, PPPs
Sole Trader
For profit business ran and controlled by one person. Liable for their firm’s depts known as unlimited liability
Sole trader advantages
They have full control, they only have to invest a small amount of capital as companies are easy to set up, relationships with customers
Sole trader disadvantages
No one to share responsibilities with, may be forced to see personal assets
Partnership
Formed by two or more people with shared capital investment and responsibilities and unlimited liability
Examples of a partnership
Google, Twitter, Ben and Jerrys, Warner Bros
Examples of a sole trader
Taxi driver, plumbers, builder, butchers, small retailers
Partnership advantages
Can consult others, start-up funds decrease, share responsibilities
Partnership disadvantages
Each partner is equally liable, shared profit, disagreements, shortage of capital
Companies/Corporations
A group of individuals that have continuous existence independent of owners and investors
Examples of companies/corporations
Acer, Red Bull
Advantages of Companies/Corporations
Large amounts of finance from multiple sources, more stable business, shareholders have limited liability
Disadvantages of Companies/Corporations
Large fees and legal costs, double taxation, easy dysfunction within company
Cooperatives
Firm owned, controlled, and operated by a group comprising of employees, customers, and tenants
Advantages of Cooperatives
Ownership of business and share in profits, equal voting right regardless of involvement, easy to form, operation costs are low
Disadvantages of Cooperatives
Shared ownership is a risk, arguments, harder to exit
Microfinance prodiders
Small loan given to impoverished people to help them start a business or become employed
Advantages of Microfinance prodiders
Helps imperished back on their feed, low interest rates, those who don’t have resources gain access
Disadvantages of Microfinance prodiders
Clients may not be able to benefit from credit, large debt can occur because of borrowing, higher interest than normal loans
Non governmental organisations (NGOs)
A volunteer based organisation to meet a goal for the betterment of society with no profit
Advantages of NGOs
Can experiment with views, adapt to local needs, communicate on all levels, recruit anyone with no restrictions
Disadvantages of NGOs
Workers don’t earn income, Restrictions of approaching a problem or area
Charity
Works to raise money for those in need
Advantages of charities
Free of taxes, help people, public recognition and trust
Disadvantages of charities
Workers volunteer, sometimes aim is missed, restriction of work, dependent on others
Primary sector
Also known as “extractive production,” involves gaining access to raw materials before any modifications have been made to them. EG: drilling of oil from the ground
Secondary sector
process entails both assembly and manufacturing, involves taking the raw materials from the primary production and creating something else out of them. EG: turning oil into plastic Another component of the process is the assembly of products
Tertiary Sector
Describes the commercial side of business production and distribution - selling products created from both the primary and secondary sectors. EG: storage, transportation, insurance, finance, sales and marketing. Also known as the “service sector”
Quaternary sector
represents consultancy, information, support and technological services.
Entrepreneur
Someone who creates a business and is willing to take full responsibility for its success or failure. Starts a business based on dream and uses personal money, generates jobs for others
Intraperneur
Like an entrepreneur generating an idea but to benefit another person’s business
Vision statement
The preferred future, what an organisation would like to achieve in the long run, where they want to be
Mission statement
The present state of a company to its stakeholders and how they can reach the vision
Objectives
The specific ends an organisation must achieve to carry on its mission
Tactics
Daily functioning of certain business operations that help implement strategies
Strategies
The way and steps to be taken to achieve objectives
Aims
Long term goals a business wants to achieve
Order of business procedures
Aims - objectives - strategies - tactics
Cooperate social responsibility
As well as a priority of maximising profit, a business has legal and moral responsibilities- allowing businesses to adopt ethical code
A SWOT analysis….
Analyses the current situation of an organisation through both internal and external factors provides a realistic analysis of the business in relation to its environment. An important step in the planning process. Assists in the development of business strategies
Internal aspects of a SWOT
Strengths, Weaknesses
External aspects of a SWOT
Opportunities, Threats
Examples of strengths
Extensive training programme, resulting skilled employees, Modern technology, leading to the development of innovative products, Well-known brand, providing a large customer base.
Internal factors
Factors that can be controlled
External factors
Factor that can’t be controlled
Examples of weaknesses
Lack of innovation, out-dated products Obsolete technology, making workers less productive, High turnover rate of employees
Examples of Oppertunities
A strong economy, Falling trade barriers in foreign markets.
Examples of threats
Adverse demographic changes, economic recession
Inverted Y chart structure (Analysis/Evaluation)
Advantages, Disadvantages, recommendation
Evaluation steps:
Analyse each factor with advantages and disadvantages, Come to overall judgement
What is a steeple analysis?
A STEEPLE analysis analyses external environmental and global factors that may effect the business
Why are STEEPLEs used?
STEEPLEs are used to review a business’s objectives and strategies before a major decision to analyse the place in the external market
Example of when to use STEEPLE
When expanding into a new market
Factors of a STEEPLE
Sociocultural, Technological, Economic, Environmental, Political, Legal, Ethical
Sociocultural
Refers to social changes impacting the business, in addition to cultural aspects such as lifestyle, tradition, and attitude
Technological
The impact of a new or developing technology on a business
Economic
An analysis of the potential economic factors within the business location and relates it to how it may affect the business
Environmental
Supplies and dangers and other environmental factors, these could include resources like: energy, materials, and land
Political
Discusses how a change in leadership or power could have an affect on the business and their strategy.
Legal
Similar to the political analysis as it discusses the rules, regulations, and expectations as put in place by a government or leadership party
Ethical
Regulations within a specific area or culture. For example: Child labour, discrimination of those employed, bribery
Culture in organisations
In an organisation background, values and culture can influence the way that Stakeholders focus and how they work
Benefits of CSRs
Competitive advantage by applying more ethical policies, bad publicity is less likely, will attract more motivated employees
Drawbacks of CSRs
Running costs increase, shareholders will be reluctant to accept lower short term profits
What are Stakeholders?
Groups of people who have particular interest in a business organisation
How are Stakeholders categorised?
As either internal or external to the organisation
Internal stakeholders
Groups within the business / part owners: Managers/Directors, employees, Shareholders
External stakeholders
Groups outside the business who are still impacted by it: customers, suppliers, competitors, government, special interest groups
Stakeholders can….
Belong to both the internal and external category. EG: Manager can be a shareholder
Manager interest
To maximize profits, reach sales targets, have a steady income, and be responsible
Employee interest
Steady income and benefits, satisfactory working conditions, job security and professional development
Shareholder interest
To maximize dividends and the price of the share
Customer interest
To buy products or services to the highest quality and lowest prices as possible (+ varying ethical concerns).
Supplier interest
Regular orders and steady payments.
Competitor interest
Maximize profit, sometimes at the expense of the other businesses.
Government interest
To control a society in a way that benefits the public good. Ex: secure financial stability
Special interest groups interest
Achieving a solution to the issue the group is campaigning for.
What are special interest groups?
A group campaigning for a specific issue.
Economies of scale
The more goods produced, the less cost per unit
Reasons for economies of scale
Specialisation, division of labour, reduced price in purchase in bulk (volume cost)
Reasons for diseconomies of scale
Over hiring, external factors such as bad weather, higher transport costs
Internal ways to reach economies of scale
Technical advances, bulk, specialised staff, diversifying, forming a reliable network of suppliers, finances
External ways to reach economies of scale
Develop new infrastructure, when government improves transportation, when suppliers relocate
Ansoff Matrix
used to categorise different strategies that are implemented by a business. For a business to grow and achieve long-term business success. - to evaluate a growth strategy
How many options for growth are there?
According to Ansoff, a business is presented with four options for growth
Variables that growth has to consider
The product(s) intended for sale, The market in which the business operates
Two options for growth in terms of market
To remain in the existing market, to enter new markets
Two options for growth in terms of product
Sell existing products, develop new products
Market penetration (top left)
The business attempts to sell a greater quantity of an existing product to consumers in an existing market.
Product development (top right)
Involves selling new products to existing customers.
Market development (bottom left)
Requires the business to sell an existing product to new consumers
Diversification strategy (bottom right)
This is the process of selling new products to new consumers
What can Ansoff’s Matrix be used for?
Effectively asses the appropriateness of a particular strategy: the risk that will be taken, by referring to current state, whether it is a good idea
What is a Gantt chart?
A visual way to keep an organisation’s projects organised. It is a bar chart that clarifies what needs to be done and when. Roles, time restrictions, order, and amount of time required
Benefits of a Gantt Chart
Visual with clear objectives, useful, realistic times, helps with goal setting, helps collaboration
Limits of a Gantt chart
Overwhelming, confusing, constantly updated, timely, inefficient modifications
What is a force field analysis?
A tool to uncover the force behind change, it weighs up multiple factors to make decisions
What is in a force field analysis?
Internal and external factors identified as a driving or restraining force - users numbers 1-5 to identify the influence of the factor, maybe analysis at the end with reasoning
Advantages of a force field analysis
Both perspectives, clear layout with causes and effects, uses numbers
Disadvantages of a force field analysis
A consensus may not be reached, requires full participation and accuracy
Fishbone diagram
Investigates the causes of an event, (a problem) to implement strategies and identify areas for investigation (causes and sub-causes of an issue to identify solutions to a problem)
In a fishbone diagram….
Problem as the head, major causes as the bones, sub causes, analysis
Advantages of a fishbone
Clear, broken down / condensed, versatile
Disadvantages of a fishbone
Hard to follow with amount of points, works better in team with multiple opinions
Decision tree
Flow chart diagram made from nodes and branches
Node
Represents an event - in or our of company control. In company control - to do with decisions (decision note) shown with a square. Out of company control - shown with circle, probability, (chance node)
Branches
Lines to connect nodes as a potential path a business can take (various decisions from decision nodes, outcomes from chance nodes)
Decision tree diagrams go….
Left to right with calculations right to left
Advantages of decision trees
Can trace a path, show difference between in control and not in control factors, accurate info
Disadvantages of decision trees
Based on past experiences, hard to apply, complex, little significance
External Growth
When a business externally expands profits by mergers with a main goal of achieving greater market share through the provision of external finances
Merger
The combination of two different companies combining in order to make a new, more effective company with the aim of expansion or gaining market share
Takeover
The purchase of one company by another
Joint Venture
An agreement between multiple companies to combine resources in order to complete a task
Strategic alliance
An agreement between multiple companies to move forward as seperate organisations yet complete the same mutually beneficial project
Franchise
A special license that allows the franchiser to giv e certain rights to a franchisee
Franchisee
The franchisee buys the franchise and the rights to it. They also have to stick to decisions made by the franchiser
Franchisor
The company that has the final decision in allowing the franchisee to open up a branch of the franchise
Globalisation
The process of taking a business from the domestic market within one country to function within multiple
Multinational corporation
A business that operates in more than one country
Acquisition
When a company buys most of another company with the aim of gaining control over it
Organic growth
The maximum growth rate in which a company is able to achieve as a result of internal sales and an increase of quality (output) - revenues and earning higher than the year before
External growth
also know as inorganic growth. This is when instead of rising because of business activity, it rises because mergers or takeovers.
