UNIT 3 AOS 1 Flashcards
Sole Trader
Individual owners of a business
Entitled to keep all profits of the business after tax
Liable for all losses
Unlimited liability: liable for all debts accrued by the business
Examples; Plumber, Carpenter, Hairdresser
Sole Trader advantages and disadvantages
Advantages Simple and inexpensive to established Owner has total control of the business Simple to close Minimal government regulation
Disadvantages
Unlimited liability
Harder to get finances
Reliant on the knowledge and skill
Partnership
It’s a business owned between 2-50 people
Either partener is jointly liable for the debts in the business (unlimited liability)
Most partnerships have a partnership agreement between the parties
Examples; Accountants, Builders, Cafe owners
General Partnership
All partners are equally responsible for the management of the business. Each has unlimited liability
Limited Partnership
Liability of one or more partners is limited. Silent partners can be apart of the business partnership but are not involved in the day to day running of the business
Partnership advantages and disadvantages
Advantages Inexpensive and simple to start Risk is shared Minimal government regulations Shared workload Broader access to capital money (invested in business), knowledge, skill and experience
Disadvantages
Unlimited liability
Liable for debts caused by other partners
Business could be threatened by one partner leaving
Potential personality clashes
Company
Separate legal entity
Limited liability
Same rights as a natural person
Has perpetuity (ongoing life)
Must be registered for GST if the earnings are greater than a certain amount ($75,000)
Must keep financial records for at least 7yrs
Private Limited Companies
Many sole traders/partnerships become private limited companies due to expansion and the opportunity to gain protection by limited liability
Can have up to 50 shareholders
Shares can only be traded with the permission of the other owners/shareholders
Private Limited Companies advantages and disadvantages
Advantages
Limited liability
Extra capital can be obtained by selling more shares
Business will still continue if a shareholder/director leaves or passes away
Disadvantages Complex to start Expensive establishments costs Higher degree of government control and reporting requirements Addition compliance costs
Public Listed Company
An organisation listed on the Australian stock exchange
Any individual can by shares
Run by a board of directors (runs the company on behalf of the shareholders)
Shareholders are not involved in the day to day running of the business
Examples; BHP, Myer, Commonwealth bank
Public Listed Company advantages and disadvantages
Advantages
Limited liability
Able to get more capital by selling more shares
Separate legal entity
Business will still continue if a shareholder/director leaves or passes away
Disadvantages Highly complex to start High establishments costs Needs accountability and compliance paperwork Extra compliance costs
Social Enterprize
A business that uses strategies to improve human wellbeing or the environment rather than maximise PROFIT for its owners/shareholders
GOAL is to achieve socio, cultural, community and environmental outcomes and ern revenu
They aim to make a profit to help solve an environmental or social problem
Example; Thankyou group, The salvation army
Government Business Enterprise (GBE)
Operates in the public sector (run by the government). Management of a GBE runs the business, but they must report reguary to the shareholder, parliament and the public.
3 Characteristics of a GBE
- The government controls the business
- The business is engaged in commercial activities
- The business is a separate legal entity to the government department.
Financial Objectives
The desired financial performance of the business
Including;
- Profit (looking for new ways to run the business/ increasing profit = reducing business costs)
- Growing sales (advertising, increasing product range, overseas sales, opening new stores)
- Improving market share
- Increasing productivity
Market Share
- Proportion or percentage of the market (and total sales) controlled by the business
- Market leaders can ask for discounts on supplies
- Can be cheaper than competitors
Marketing Objectives
- Creation of demand for your good or service
- Maximise the appeal of your good or service to the most people possible
Social Objectives
- Role of business in the community
- Above and beyond your legal objectives
- Can also be achieved via workplace policies
- equal opportunity policies
- Anti discrimination policies
Shareholders and Stakeholders
Shareholder;
Owners of the company, can own the whole part or shares in a business
Stakeholders;
An individual/group that has a direct interest in the activities of the business. (can be shareholders, employees, customers, suppliers)
Macro Environment
The conditions that a business operates in that they have no control over
Examples; Exchange rates, Trends, Weather, Political environments
Operating Environemnt
The environment immediately external to a business to which it has close interaction with when conducting business
Examples; Suppliers, Customers, Bank, Unions
Internal Environment
The areas of a business that have control over
Examples; Staff, Management, Employees
Key stakeholders in the macro environment
Community/society, Government
Key stakeholders in the operating environment
Creditios/banks, Trade unions, Customers, Suppliers, Competitors
Key stakeholders in the operating environment
Shareholders, Directors of a company/partnership, Management, Employees
Issues a stakeholder needs to consider
- Is the business conducting itself in a fair and ethical manner
- Does the business conduct itself in a social responsible manner
Management and customers possible conflicts
Management may try to maintain profit and a high dividend to satisfy shareholders
BUT – this will upset customers who want to pay reasonable prices for products
Management and members of
the community
Management may decide to cut costs by not completing maintenance
BUT - but this could endanger the community
Suppliers and members of the
community
Suppliers want to get paid quickly and fairly
BUT – the may use unethical practices which will upset the community
Management and suppliers
Management wants to reduce costs to increase profit
BUT – suppliers may charge higher prices for ethical material
Corporate social responsibility
The obligation that a business has over and above the legal responsibilities to the wellbeing of employees, customers, shareholders, the community and the environment
Things to consider about CSR
How business decisions affect the TRIPLE BOTTOM LINE - (financial) (economic), (social and environmental)
Customers like to deal with businesses that implement a strategy of CSR
Businesses need to understand that reconciling conflict interests and increasing stakeholders values ensure long term growth and survival.
Management responsibility; operations
Running of business
Responsible for the protection of the business product or the provision of a service
Management responsibility; finance
Responsible for managing the financial aspect of the business
Includes; Financial policies, raising finance, budgeting, accounting, reporting, cash control
Management responsibility; human resources
Responsible for coordinating all activities from acquiring to terminating (hiring/firing) employees in the business
Manages the relationship between employer and employee
Focus on employee motivation, staff retention, staff reviews
Management responsibility; sales and marketing
Responsible for the marketing mix
Includes developing products, pricing, promoting distributing and promoting products to customers
Management responsibility; technology support
Responsible for installing and maintaining technology, as well as providing assistance to the users of technology in the business
Business objectives (5)
- Financial objectives
- Market share
- Marketing objectives
- Social objectives
- Shareholder expectation
Autocratic management style
All decision making is centralized
Communication is one way – downward
Managers are in full control and want to retain authority
Focus on achieving the task in a set format and processes must be followed
No input from employees
Managers believe the main motivator is money
Task oriented
Autocratic advantages and disadvantages
Advantages
Decision making is quick – only one person
Employees roles and expectations are defined and monitored
Communication is direct
Suits high risk and difficult decisions
Disadvantages
A quick non collaborative decision is not always the best one
Discourages teamwork
No focus on open communication
Low motivation and job satisfaction for employees
Task focused
Employees feel low job security and kept in the dark
Persuasive Management style
Management make the decision and then persuade employees of the benefit of that decision
Has similar characteristics to an autocratic style
Characteristics
Manager has centralized control and authority
Manager is focused on achieving the task and following process, and regularly checks this process
Decision making is centralized and controlled by management
Communication is centralized
Persuasive Management style advantages and disadvanatages
Advantages
Decision making is quick and still made by one person
Suits high risk decision (factory closure)
Employees have a clear idea of what they have to achieve
Disadvantages
No input from workers into the decision making process
Workers may feel alienated not respected
Low levels of motivation and job satisfaction
Consultative Management style
Takes into consideration the opinions of the team member before making a decision
Shifts from being task centered to people centered.
Management consult with employees about the issue/ process, but the manager makes the final decision based on suggestions and input received.
Characteristics
Control and authority are more centralized, employees have the opportunity to voice their opinion, ideas and concepts
Manager involves the employees in decision making which leads to more motivated employees
Decision making, is centralized but decisions are only made after consultation with employees
Two way communication
Consultative Management style advantages and disadvantages
Advantages
Get lots of ideas from employees, which help in the decision making outcome
Reasonable level of employee involvement
Is a motivator and increase job satisfaction
Disadvantages
Employees may not understand the complexity of the problem
Can take a long time
Employees will be upset if management does not take on their ideas
Participative Management style
Managers work closely with employees, to get them to work together to improve the businesses overall performance
Encourages employees to share in the decision making and problem solving tasks
Management are still entitled to have the final say but consider employee input
Characteristics
Recognise employees strengths and actively involve them in the decision making process
Makes use of two way communication
Good management style when a business is undergoing rapid change
Participative Management style advantages and disadvantages
Advantages
Positive employer/employee relationship (less likely for conflict)
High levels of motivation and job satisfaction
Opportunity for employee to put forward ideas and gain skills
Disadvantages
Can take a long time to reach a decision as everyone needs to be considered
Manager’s role may be weak or undermined
Internal conflicts/arguments may arise, employees given to much power
Not all employees want to be involved
Laissez Faire Management style
Employees assume total responsibility for control of workplace operations
Management does not play a central decision making role in the organisation and employees are empowered to make decisions
Management set the business objectives, BUT employees take responsibility for implementing strategies to achieve these objectives
Works well in creative work or research where employees require minimal supervision and direction
Laissez Faire Management style advantages and disadvantages
Advantages
Employees feel a sense of ownership and are intrinsic in the results obtained by the business
Dynamic creative environment
Open communication lines and people are valued
Disadvantages
Loss of control by managers
Potential misuse of business resources
Personal conflicts may impact the achievements of business outcomes
Influences on management style
The manager – personality, experience, values, beliefs, skills
The staffs – personality, experience, values, beliefs, skills
The nature of the task
Internal and external constraints including time and resources
If you have limited time = autocratic, persuasive
If you have lots of times = consultative, participative, laissez faire
Not one best management style
Contingency management theory
Is the need for managers to adapt their management style to suit the situation at hand
Examples
A manager who prefers a consultative style may be asked to shut down an unprofitable
factory site in Dandenong. She will need to shift her management style from consultative to
authoritative
The appropriateness of management styles (4)
Managers use different styles when making decisions and working with employees
It often depends on situational variables
Nature of task (what is the task you are asking employees to complete)
- Easy = autocratic
Complex = participative (teamwork)
- Time that is available
- Less time
- Lots of time
The experience and skill level of employees
- Lots of experience = Laissez Faire
Managers experience
- Finding your management style
Relationship between management style and skill
The type of management style a manger selects determines the management skills they will need
Example
An autocratic manager would not need to use delegating or interpersonal skills, but they would use planning, leading and communication skills
Management skill; Communication
Is the transfer of information from a sender to receiver
Non-verbal communication (body language, visual)
Verbal communication (written, oral form)
Can be used to help explain a vision, outline changes and ask for opinions
Management skill; Delegation
Is the ability to transfer authority and responsibility from a manager to an employee to carry out specific activities
Helps with the time management and enables staff to learn new skills
Helps build trust and lead to a mutual understanding
Example
Mcdonalds assigned a shift to complete cafe for 2 hours then for the 2 hours the employee is incharge of cafe while the manger does other jobs.
Management skill; Planning
The ability to define business objectives and decide on methods and strategies to achieve them - help with long term planning of the business
3 types of planning (time)
Strategic (long term) planning - 2-5 years Tactical (medium term) planning - Flexible, adopting planning 1-2 years - Helps achieve the strategic planning Operational (short term) planning - Specific details on how the business can conduct in the short term
Management skill; Leading
Is the skill of a manager when guiding workers towards achieving the goal of the business
Effective leading requires a manger to…
Have conditions that motivates, engages and inspires staff
Good communicator
Be able to build teams
Role model
Resolves conflicts
Emotional intelligence
The ability to perceive, understand, monitor and regulate emotion in each other and themselves
Management skill; Decision making
Is a multi step approach where a selection is made between a range of alternatives
Decision making may be routine and easy OR complex and difficult
Steps to making a decision (6)
- Identify the problem and define the objective
- Gather necessary information to establish the cause of the problem
- Develop alternative solutions (plan B)
- Analyse the alternatives
- Choose and implement an alternative
- Evaluate
Management skill; Interpersonal skills
Skills used everyday to communicate and interact with other people both individually and groups Team player Empathetic and assertive Good communicator Good motivator
Corporate Culture
The shared values and beliefs and behaviours of the people in the business
Official corporate culture
The preferred values, beliefs and behaviours of the people, within a business stated in official documents like a company motto or mission statement
Real corporate culture
How things actually operate, the actual values and beliefs presented in the company
Why is corporate culture important?
Offers better retention rates
Makes the organisation attractive to potential employees - allows companies to choose employees to be the best in their field
Improved productivity - more business success
What helps create a good corporate culture
Employees desire to win - wanting to achieve business objectives
Considering the impact of the decision on the business
Focus on internal (people inside the business eg colleges managers) and external customers (suppliers, people that buy products)
Prioritising teamwork
Delivering what was promised
How can you determine the corporate culture of an organisation?
Communication channels - Top down - Collaborative - Bottom up Dress code - more relaxed - more relaxed corporate culture is Willingness to achieve Staff interaction
Strategies to develop corporate culture (official and real)
- The creation of a vision statement.
- Branding of the business - it represents the way customers view the business
- People - employing the right people that suit the business
- Physical environment and material symbols - eg open plan offices. Business location, size of offices
- Stories, narratives and rituals - Employees of the week, Christmas parties
Types of vision statements
Vision statement = the future vision for the business (aspirational)
Mission statement = written statement that defines a business core purpose and focus
Values statement = the values of the organisation (trustworthy, honest, organised, reliable)
