Unit 1 Assessment - Understanding Business Flashcards
Describe a Private Limited Company
Owned by shareholders
Run by a board of directors whom are appointed by the shareholders
Financed by selling shares
Describe a Public Limited Company
Owned by shareholders
Controlled by a board of directors whom are appointed by shareholders
Financed through individuals and institutional investors
Describe a charity
Owned by trustees
Controlled by a board of directors
Financed through donations
Describe sales maximisation
A decision to focus on maximising sales often means reducing prices to increase sales.
A business may choose to achieve this objective as it can allow them to grow its market share.
Describe growth
A decision to expand a business.
A business may choose to achieve this objective as it may enable them to take advantage of economies of scale and become more efficient through having lower costs.
Describe corporate social responsibility (CSR)
This is when a business aims to help people and the environment.
A business may choose to do this as it can improve its public image and chances of survival.
Describe survival
This is when a business tries to ensure its survival as a business, this is especially important in small family firms and new businesses.
A business will often choose to do this to prevent the business from failing or being taken over.
Justify why a business may use specific objectives
Asda tries to maximise its sales in order to improve its market share and have market dominance.
Kellogg’s have ‘Social K’ which is a CSR initiative in order to improve its image and reputation as a business.
McDonald’s is growing its business by starting to instil a home delivery service to its customers.
A small local business such as Opal Moon may have survival as an objective as it only has one store and will need to ensure it works efficiently to prevent the business from failing.
Describe functional grouping
Functional grouping is when an organisation is grouped based on similar skills, expertise and the resources which they use.
Describe product/service grouping
A product/service grouping is when the grouping of activities is based around a particular product or service and these are often described as divisions.
Describe a customer grouping
A customer grouping is structured around certain groups of customers that require different needs and is often used when customers need to interact with the business.
Discuss the benefits of a functional grouping
Staff skills are all together in the same group which is good for specialisation.
Clear organisation structure with defined roles.
However :
It can be an unmanageable structure in a large organisation.
Discuss the benefits of a product/service grouping.
Each division can focus on its own market segment and will be more responsive to change.
Each divisions performance can be measured.
However :
Duplication of functions could be wasteful.
Discuss the benefits of a customer/service grouping
Can cater for specific customer needs
The market can be segmented.
However :
There is a loss of control by senior management over divisional managers.
Describe a hierarchical structure
It is shaped like a pyramid and has many levels of authority and a long chain of command.
