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.
Describe a flat structure
It is a flat pyramid shape with few levels of management and a short chain of command.
Describe a matrix structure
It is a horizontal structure in which employees are organised into teams, it is a project based set up and team leaders work within and lead teams. Teams work for a finite period of time then move onto another project.
Discuss the benefits of a hierarchical structure
Specialised staff are employed.
Narrow span of control enables greater supervision and effective delegation.
However :
Can cause slow communication/decision making.
Discuss the benefits of a flat structure
More flexibility in staff employment.
Junior staff feel empowered in decision making.
However :
There are fewer promotion opportunities for employees.
Discuss the benefits of a matrix structure
Good for problem solving.
Motivational for employees.
However :
It can be expensive to resource if there are many teams within the organisation.
Impact of finance
Unable to invest in new assets or fund research and development of new products
Impact of employees
Unmotivated employees will have a negative impact on the business whereas motivated and skilled employees will work better and more efficiently
Impact of management
Effective and strong leadership will give clear direction and is vital to the success of the organisation
Impact of political factors
New polices or laws may require procedures to be altered and costs may increase
Impact of economic factors
If there is a recession consumer spending will fall and the business will lose money.
If there is a boom consumer spending will increase and businesses must be able to keep up with this.
Impact of social factors
An ageing population will require more products/services for the elderly.
Must keep up with social trends to ensure they are offering products/services which the consumer wants.
Impact of environmental factors
If extreme weather occurs such as a flood or storm it can affect the distribution of products and supplies to factories.
Influence of owners
Bad decisions can have a serious effect on the business
Influence of managers
If management is not effective it can lead to poor employee motivation which can cause problems for the business.
Influence of employees
If employees do not do their job well it can lead to poor customer satisfaction.
Influence of customers
Customers influence the sales of the business and the reputation.
Government V. Owners
Govt wants high tax payments and minimum wage which can increase business costs.
Owners want high profits and therefore Donnie want to increase costs.
Employees V. Owners
Employees want good working conditions and high pay which can increase business costs.
Owners want high profits so they do not want high wage costs or to fund employees benefits/pensions.
Suppliers V. Owners
Suppliers want to sell their goods at a high price which increases business costs.
Owners want to buy their raw materials for as cheap as possible and try to force suppliers prices down.
