Unit 1: Business Organization & Environment Flashcards
business
a business is an entity which tries to combine human, physical, and financial resources into processing goods & services to respond and satisfy customer needs
the role of human resource
responsible for managing the personnel of the organization
the role of finance and accountants
manages organization’s money
the role of marketing
meeting customers needs and ensuring product’s sell
the role of operations
manages resources dedicated to production and delivery of products
primary sector
raw materials
secondary sector
manufactures goods
tertiary sector
services
quaternary sector
provides info
entrepreneur
someone who takes financial risk of starting and managing a new business venture
intrapreneur
someone who turns ideas into profitable products and services as an employee of a company
reasons for starting up a business or an enterprise
- pursuing a passion
- opportunity
- a good idea
- income potential
- new lifestyle
- autonomy/ own boss
- challenge
- creativity
what is a business plan
a written document that describes a business, its objectives and strategies, the market, and its financial forecasts
the distinction between the private and the public sector
a private sector is a business owned and controlled by individuals or groups of individuals
a public sector is an organization accountable to and controlled by central or local government
sole traders
- easy to set up
- owner has full control and keeps the profit
- flexible
- unlimited liability
- limited access to finance
- no benefit of economies of scale
partnership
- partners bring different expertise to the organization and share in decision-making
- flexible
- additional finance
- unlimited liability
- profit is shared
- conflict between partners
companies/corporations
- limited liability: the shareholder’s potential loss is the amount invested in the company
- legal personality: company is legally recognized as having an identity separate from that of its owner
- continuity: death of an owner does not end the company
cooperative
an organization jointly owned by a group of people (members) who democratically run the organization to meet the needs and aspirations of its members
- motivation because of democratic decision making
- income goes to members
- income can be reinvested to the enterprise
- slow decision making
- managers do not have full control
microfinance
provides financial services to poor or low-income customers who do not have access to normal banking services
- helps people get out of poverty
- improve healthcare, education, and employment
- unethical since you earn profit from low-income individuals
- unlikely to make a big difference in society
- struggle to attract or retain employees and managers
public-private partnerships (PPP)
public sector organization has a contract with a private sector business to support the provision of a public service
- aim to make a profit, therefore, operate services as efficiently as possible
- schools, roads, and prisons have been funded by PPP schemes
- the private sector is profit-oriented
- lack of experience needed to operate
- large profit comes from rent charges that comes from taxpayers pockets
non-governmental organizations (NGO’s)
include non-governmental organizations and charities (they don’t aim to make profits)
charities
not-for-profit organizations set up to provide money and support for people in need
vision statement
an inspiring statement that provides all stakeholders with information about the business’s purpose, values, and what it wants to achieve in the future (long-term)
mission statement
organizations formally set out and publicize their core objectives. a mission statement declares an organization’s purpose, or why it exists (present)
aims
long-term goals that a business wants to achieve in the future
objectives
are targets set by an organization to achieve its corporate aim
strategy
is the long-term plan that sets out the ways a business is going to achieve its corporate aims
tactics
are the specific techniques used by a business to achieve its objectives
Ethical objectives
are business objectives influenced by moral values. these values often come from different stakeholders un the organization and reflect their ethical position on moral issues
CSR (corporate social responsibility)
is where the organization considers the interests of society by taking responsibility for the effects their decisions and activities have on customers, employees, communities and the environment
SWOT analysis
is a planning tool used by organizations as a method for guiding business strategy by considering the strengths, weaknesses, opportunities, and threats the business faces
Ansoff matrix
a tool used by the management to develop a marketing plan by considering growth strategies related to the products the business sells and the market it operates in
- market penetration
- product development
- market development
- diversification
stakeholder
person, group or organization that can affect or be affected by an organizations actions, objectives and policies
stakeholder concept
the view that businesses and their managers have responsibilites to a wide range of groups not just shareholders is known as the stakeholder concept (traditional view of business)
internal stakeholders and their interests
- employees (pay, conditions, job security)
- shareholders (profit, vision, liquidity)
- managers (financial performance, profits, sale targets)
external stakeholders and their interests
- suppliers (speed of payment, level and regularity of orders, fairness of treatment)
- customers (service quality, ethical)
- government (taxation, obeying laws)
- banks and other creditors (liquidity)
- pressure groups (change a business’s policy towards pollution)
STEEPLE analysis
strategic planning tool used by businesses to focus on the opportunities and threats of the external environment
Social, Technological, Environemntal, Economic, Political, Legal, Ethical
economies of scale
decrease in average cost of production due to expansion
diseconomies of scale
an increase in average cost of production due to expansion
cost benefits that arise
Purchasing economies Technical economies Financial economies Marketing economies Managerial economies
difference between large and small organizations
- larger organizations have more financial muscle and can withstand changes in the extrenal environment
- increased profitability
mergers and acquisitions
an agreement by shareholders and managers of 2 businesses to bring both firms together under a common board of directors
takeover
when another company buys over 50% of shares of another company and becomes a controlling owner
join venture
2 or more businesses agree to work together on a particular project and create a seperate busness division to do so
- costs and risks are shared
- diff companies have diff strengths and weaknesses
- major markets in diff countries
- styles and cultures may be different
- failure of one partner puts project at risk
strategic alliance
an agreement between firms in which agrees to commit resources to achieve an agreed set of objects
franchising
a franchise is a type of license that a party requires to allow them to have access to a business’s trademarks to sell products or provide service under the business’s name
globalization
growing integration and interdependence of the world’s economies causing consumers around the world to have increasingly similar habits and tastes
- closer to main markets
- lowers cost of production
- increased sales and profits
- communication barriers
- language, legal, cultural differences
- skill level
internal growth
expansion from within a business by expanding the range of products and/or locations and/or factories
external growth
business expansion achieved by means of merging with or taking over another business from either the same or different industry
