Unit 2 Flashcards
What is a horizontal merger?
When two similar businesses at the same stage of production in the same industry merge
What is a lateral merger?
When two businesses that are related merge (e.g. A brush shop and a comb shop)
What is a vertical merger?
When two businesses at different stages of production merge
Advantages of a sole trader 3
Easy to set up
Relatively cheap
Owner can make decisions quickly
Disadvantages of a sole trader 3
No one to share responsibility with
Long hours
Unlimited liability
What is a Deed of Partnership?
A legal document stating the responsibilities of the partners, e.g. How profits and losses are to be shared
Advantages of a partnership
More partners = more capital invested
Someone go consult about business decisions
Disadvantages of a partnership
Disputes
Unlimited liability
What is:
A franchise?
A franchisee?
A franchisor?
A franchise is when someone buys into an existing business and get the right to use their ideas
A franchisee is the person who buys the right to copy a business format
A franchisor sells the right to use a business idea
Advantages of a franchise 2
The franchisee is adopting a proven business model and selling a well known product
Continued support
Disadvantages of a franchise 2
Less control
Have to pay profits to franchisor as a royalty payment
What is a cooperative?
A business owned and controlled equally by owners and customers
Advantages of a cooperative 2
Everyone has an equal day; it is democratic
Limited liability
Disadvantages of cooperatives 2
Inefficient management as the owners don’t have any special skills
Lack of secrecy
What is a public sector business?
A business owned and run by the government
What is a multinational company?
Companies that operate in several countries
Advantages of multinationals
Cheap raw materials
Cheap labour
Advantages of Limited companies
They are incorporated (they have their own legal identity)
Limited liability
Disadvantages of limited companies
Financial information must be publicised
What is an LTD?
A private limited company: a small business that can only sell shares to family and friends
What is a PLC?
A public limited company: usually a larger, well known business. Can sell shares over the stock market to anyone
What is privatisation?
The transfer of a business, industry of service from the public to private sector
What is an objective?
A short term objective the company much achieve in order to meet their aims
Possible objectives of a business:
Survival (when a business just starts up)
Profit maximising (maximum profit)
Profit satisfying (enough profit to keep owners comfortable)
Sales growth (sell as much as possible)
Provide a service
Ethical objectives
Why might a business change its objectives?
May have achieved an objective
The competition might change
Technology advances
Primary sector and its decline
Produces raw materials, involves some sort of extraction
We are running out of natural resources
Cheaper foreign labour
More leisure time for tertiary jobs
Secondary sector and its decline
Manufacturing sector
We can’t compete against foreign goods
Advance of robots
Deindustrialisation
Tertiary sector and its rise
Retail and service businesses
We have a higher standard of living
More money
Less time
A service
Something you can’t touch
What is a business aim?
The long term, overall thing a business is set up to achieve
Factors to consider when choosing a location
Customers (convenient for them?) Staff (do locals have right skills?) Support services (any nearby?) Cost Infrastructure (can people get there easily, are there corrects services?)
Problems with moving overseas
Culture and language barriers
Legal issues with variations in law
Exchange rates
What is a stakeholder?
Anyone with an interest in a business (e.g. Employees, suppliers)
What are the interests of the following?: Government Owners Workers Customers
Government: taxes and employment
Owners: profits
Workers: incomes, benefits
Customers: good value and quality products
What are economies of scale
Reduction in unit/ average cost due to an increase in production
Why would a business choose to grow?
Increased market share
Economies of scale
Rule out competitors
What does the term ‘recruitment’ mean?
Attracting people to apply for a job
What does internal recruitment mean?
Recruiting known staff
Job description
Explain the work to be done and basic information
Person specification
List desirable qualities of candidate
Methods of advertising
Local newspapers
National newspapers
Job centres
Internet
Selection
Selecting the most appropriate candidate for the job
Why is training important? 3
Improves efficiency
Avoids accidents
Retrain workers so they understand new technology
What is induction training?
The initial, first training an employee gets. Includes things such as:
Health and safety
Meeting co workers
Lunch and breaks
On the job training
Takes place in the work place, whilst employee is carrying our job. It is cheap and specific to the ways of the company
Off the job training
Takes place away from work place. It is good because it is provided by experts and there are no distractions. However, it can be very expensive
Why should employees be motivated?
Increased output
Improved quality
Higher staff retention
Monetary methods of motivation
Profit share
Pay rise
Non montage methods of motivation
Improves working conditions
Appraisals
Job rotation
Autocratic leadership
Senior managers make all important decisions
Democratic leadership
Workers allowed to make own decisions
What is communication?
Passing messages between people or organisations
Channel of communication
Path takes by a message
Horizontal communications
Messages sent between staff on same level of hierarchy
Vertical communications
Messages sent between staff on different levels of hierarchy
Verbal communications
Sending messages face to face or over phone
Written communication
Messages sent using words
Why is communication important?
Customers enjoy a good relationship with the business (complaints are dealt with )
Staff understand responsibilities
Staff are more motivated when listened to
Barriers to communication
Timing, clarity and the wrong method may be used
How can ICT help a business?
Decision making (knowledge is power) Helps staff (quickly access data) Maintains records Communications (email etc)
What is an organisation chart and why is it needed?
It is a diagram that shows the structure of a business. It is easy to identify roles and responsibilities of staff and how different roles are related
What is the hierarchy?
The management levels in an organisation
What is a person’s span of control?
The number of subordinates directly reporting to that person
What is the chain of command?
The path of authority along which instructions travel
What are lines of communication?
Routes messages travel along
Tall organisations
Many levels of hierarchy with narrow span of control
What is a flat organisation?
Few levels of hierarchy, wide span of control and short lines of communication
What is a trade union?
A group of workers who join together to protect their own interests
Aims of a trade union
To improve pay and working conditions
To support training and development of members
To ensure members are looked after by employers
Types of industrial action
Non cooperation
Work to rule (working to a minimum)
Strikes
What is the chain of production?
The stages involved in making a product
What is Specialisation?
When a business or employee is good and focussed on one specific thing
How does a business add value?
When the selling price of an item is higher than the production costs (e.g. Convenient)
What is a social enterprise?
A business that reinvests in the community. Makes money in a socially responsible way
Characteristics of a social enterprise
Directly involved in producing goods
Social aims and ethical values
Self sustaining (don’t rely on donations)
Why might a business fail?
Lack of planning Not focussed Poor cash flow No monitoring of performance Not making a profit Small number of customers
How might a business succeed?
Unique selling point
Clear vision
Attracting wide customer base
Making profit
Name the 6 legislations
Minimum wage act Race relations act Sex discrimination act Health and safety in the workplace Equal pay Disability discrimination
Why might a business fail?
Wrong staff
Not focussed
Underestimating money and time
Why might a business succeed?
Clear vision Efficient staff Location Timing Leadership
Advantages to internal recruitment
Motivation
Cheaper
Disadvantages to internal recruitment
Limited choice
Favouritism
Disadvantages of external recruitment
Employees may be annoyed
Retrain
Cost and time
Advantages of external recruitment
Wider choice
Fresh outlook
Advantages of a tall chain of command/disadvantages of a short chain of command
More opportunity for promotion
Easier to supervise staff
Clearly defined roles
Smaller, manageable workload for employees
Disadvantages of a tall chain of command/advantages of a short chain of command
High wages cost
Indecisive
Employees have little responsibility - demoralised
Advantages to a wide span of control 3
Wages saved
Quick decision making
Faster communication
Disadvantages to a wide span of control 3
The managers have a larger workload
Fewer promotion opportunities
The employees must multitask which results in more training being required
Advantages to a narrow span of control 3
Better communication between employees
Better quality of decision making
Those in command can closely monitor the work of their subordinates
Disadvantages to a narrow span of control 3
Increase in wages
Numerous smaller departments can result in ineffective communication
Remoteness and demoralisation
What is commission?
Sum of money paid after selling a certain amount
What is democratic leadership
Employees have a say
What is autocratic leadership?
Managers make all decisions without consulting others
What is laissez faire leadership?
Leaders make no decisions
Disadvantages to ICT
Unreliable Security breaches Job elimination Training Cost Time
What does ACAS do?
It is invlved in disputes between employees and their employers
What are the three ways of reaching an agreement in a dispute in the workplace?
Negotiation
Consultation
Arbitration
What is negotiation?
When employees and employers discuss their problems and issues together and try to reach a solution or compromise that is mutually acceptable
What is consultation?
Employers consult employees about their views on the issue but they would also involve other stakeholders in this process.
What is arbitration?
When a dispute cannot be resolved. When this happens, a third party is called in who will make a judgement or ruling on the matter e.g. ACAS
What is a merger?
When two companies decide to join together
What is a takeover?
When a company buys out a rival
What is a dividend?
A regular payment made from the business to its shareholders from its profit
What is a needs analysis?
A process focusing on how the product meets the needs of the consumer
What is continuity?
Continuing the business after the owner has died
What is bankruptcy?
A person or an organisation
which cannot repay the debts owed to creditors, therefore, it ceases to trade
What does insolvent mean?
When the business goes bankrupt and can’t repay their debts
