Unit 3 AOS 1 Flashcards
Sole trader
The cheapest and simplest business type, unlimited liability, owned and controlled by one person, no perpetuity, individual tax rate, only need abn
Negatives of sole trader
Unlimited liability
Limited knowledge and skills available
No perpetuity
Positives of sole trader
Owner has full decision making power
Owner earns all profit
Easiest to register and set up
Partnership
2-20 partners, jointly responsible for all debts, no perpetuity, risk is shared
Limited partnership
Liability of one or more partners is limited, these partners are not involved in day to day operations, liability is in proportion to amount invested
General partnership
All partners are deemed equally responsible for management of the business
Partnership negatives
Unlimited liability
Business threatened by one partner leaving
Potential of disputes
Partnership positives
Risk is shared
Workload shared
Government regulations are minimal (ABN+annual tax return)
Company
A separate
legal entity (incorporated body) that is subject to the requirements of the Corporations Act 2001
ASIC
Independent Australian Government body that acts as Australia’s corporate regulator
ACN
A nine-digit number to be used on
a company’s common seal and all public documents involving the company
Limited liability
Shareholders are only personally liable to the level of their original investment in the company
Private limited company
1-50 shareholders, at least one director, optional company secretary, separate legal entity, has perpetuity
Negatives private limited company
High degree of complexity
More government control
Higher establishment and compliance costs
Prospectus
An invitation
to the public and potential investors to purchase shares in a particular company
Public company
Limited liability, has perpetuity, separate legal entity, no limit on shareholders, at least three directors, at least one company secretary
Negatives of public company
Highly complex structure
High establishment costs
Must ensure directors comply with directors duties
Positives of public company
Limited liability for shareholders
Able to gain additional capital through selling extra shares
Experienced management team
Corporate culture
Refers to the system of shared values and beliefs of people within a business
Official corporate culture
Formal written expression of values and beliefs desired by management
Real corporate culture
Unofficial practices and values that are actually held by the employees in the business
Ways to influence corporate culture
-Organisational mission
-Form of management structure
-Choice of management styles
-Choice of people hired
-Stories, narratives and rituals shared
Business objectives
The stated, measurable targets of how to achieve business goals
Three levels of business objectives
-Strategic (long term 2-5 years)
-Tactical (medium term 1-2 years)
-Operational (short term day to day-up to 1 year)
List 7 business objectives
-Make a profit
-Increase market share
-Improve efficiency
-Improve effectiveness
-Fulfil a market need
-Fulfil a social need
-Meet shareholder expectation
Market share
Percentage of total sales within an industry that is controlled by the business
Efficiency
Making use of resources in the production of the product
Effectiveness
The degree to which a business achieves its objectives or how well it does what its trying to do. Determined by evaluating how well a strategy has helped to achieve a goal
Corporate social responsibility
The continuing commitment of a business to operate in an ethical manner, above and beyond minimum acceptable standard in an economically, socially, and environmentally sustainable manner whilst balancing the interests of diverse stakeholders.
Stakeholders
Individuals or groups who have a vested interest in the activities of the business
Stakeholders of businesses
-Owner/shareholder
-Managers
-Employees
-Customers
-Competitors
-Suppliers
-General community
Key concerns for stakeholders
-Is the business conducting its operations in an ethical manner?
-Is the business acting in a socially responsible manner?
-Is the business profitable?
Management styles (in order)
-Autocratic
-Persuasive
-Consultative
-Participative
-Laissez-faire
Characteristics that differentiate the management styles
-Centralised/decentralised decision making
-One way or two way communication
-Involvement of employees
-Importance of achieving tasks vs employee satisfaction
Autocratic management
Centralised decision making, one way communication, little delegation or employee involvement. Suits high risk situations or when staff are inexperienced.
Advantages of autocratic management
Quick decision making
Experienced person making decisions
Disadvantages of autocratic management
Employees can feel unvalued
Doesn’t allow for feedback
Persuasive management
Manager makes decisions, then convinces employees that its the right decision.
Centralised decision making, one way communication, task oriented but with some concern for employees, suits when staff are inexperienced or in high numbers
Advantages of persuasive management
Employees more likely to support decision when they know why it’s made
Most experienced person making decisions
Disadvantages of persuasive management
Does not allow for employee feedback
Employees may feel unvalued
Consultative management
Takes into account team member opinions in decisions. Centralised decision making, two way communication, medium level of employee involvement, suits large numbers and knowledgeable employees
Consultative management advantages
Motivates employees as they are involved
Can foster culture of continuous improvement
Consultative management disadvantages
Employees may not understand complexity of issues
Can lead to conflicting ideas
Participative management
Discuss problems and come up with decisions together. Decentralised decision making, two-way communication, employee focused, suits highly qualified employees and small teams.
Participative management advantages
Employees feel valued
Ideas and suggestions from knowledgeable staff.
Participative management disadvantages
Can take longer to reach a decision
Requires employees to be of similar skill and knowledge level
Laissez-faire management
Decentralised decision-making, two-way communication, lots of employee involvement, suits highly qualified and experienced teams, who work autonomously.
Laissez faire management advantages
Encourages high level of communication
Good environment to foster creativity and innovation
List all management skills
-Communication skills
-Delegation
-Planning
-Leading
-Decision making
-Interpersonal skills
Communication skills
Creating and exchanging information between people, produced a required response, can be written or oral.
Delegation
Passing down of authority down the hierarchy to perform tasks and make decisions
Delegation process (AABCA)
Analysis- Decide tasks to be delegated
Appointment- Nominate subordinate to allocate task to
Briefing- Define the task to be delegated
Control- Monitor and encourage person undertaking task
Appraisal- Review and revise
Planning
Formalised decision-making process that has a focus on the future, must understand business purpose and objectives
Three levels of planning
Strategic (long term)
Tactical (medium term)
Operational (short term)
Leading
Guiding, motivating and influencing employees towards achieving business goals and objectives
Decision making
Making a choice/selection between a range of different alternatives
Decision making process
-Identify problem, define objective
-Gather information
-Develop alternatives
-Analyse alternatives
-Choose and implement alternative
-Evaluate
Interpersonal skills
Day-to-day skills used to communicate and interact with others. Implanted in a ‘personal’ capacity to build rapport.
Three levels of corporate culture
Artefacts- Clearly visible symbols/appearances
Values: Shared rules residing just below the surface
Assumptions: Beliefs about human nature and environment that reside just below the surface and are taken for granted.
