UNIT 3 AOS 1- BUSINESS FOUNDATIONS, TYPES OF BUSINESS Flashcards
what are the key characteristics/ distinguishing features to determine ownership?
- number of owners, ownership structure, legal structure, decision making features, market share
what is a sole trader?
is a business structure that is owned and operated by one individual.
what are key characteristics of a sole trader?
- Unlimited liability
- Contributes all capital
- Private sector
what are advantages of a sole trader?
- Low cost to start up and operate
- Simple to register using the owners name/ registering with ASIC
- Owner gets to keep all the profits
what are disadvantages of a sole trader?
- Unlimited liability
- Difficulty raising finance for expansion
- burden on owner to make all decisions
what is a partnership?
is a business structure that
is owned by two to 20 owners.
what are key characteristics of partnerships?
- 2-20 owners with some exceptions
- Shared decision making
- Unlimited liability
- Limited or general partnership
what are advantages of a partnership?
- Access to more capital
- Less pressure on owners as there is shared workload
- Low start up and operating cost
- bring in new ideas and expertise
what are disadvantages of a partnership?
- Unlimited liability
- Disputes can arise with partners disagreeing over decisions
- Profits are shared between partners
what is a private limited company (PTY. LTD.)?
Is an incorporated business structure that has at least one director and a maximum of 50 shareholders.
what are key characteristics of a private limited company?
- <50 non-employee shareholders invited/ approved to purchase stock
- Incorporation (separate legal entity)
- Must be registered with ASIC and have an ACN
- Private sector
what are advantages of a private limited company?
- Finance easier to obtain
- Limited liability
- Experienced management through board of directors
What are disadvantages of a private limited company?
- Costly to establish
- company taxed on any profits and dividends
- Income to the shareholder is personal income tax
- Personal liability to debts if known debts couldn’t be paid
- More difficult to close the business
what is a public listed company?
is an incorporated business that has an unlimited number of shareholders and lists and sells its shares on the ASX
what are key characteristics of a public listed company?
- Must disclose financial annual report
- Highly complex structure and strict gov regulation
- Must be registered with ASIC and have an ACN
what are advantages of a public listed company?
- Greater access to finance
- limited liability
- Has perpetuity and continues to trade regardless of shareholders
what are disadvantages of a public listed company?
-Expensive to establish (registration costs)
- Public disclosure of financial records
-high costs of taxation/ meeting taxation record keeping
what is a government business enterprise?
what are key characteristics of a GBE?
- provide subsidised essential services to benefit the community
- controlled by a board of directors and government input
what are advantages of a GBE?
- deliver community services where private businesses don’t invest
- Employ a huge number of staff, stimulating economic growth
- Can compete with private companies, encouraging competition
what are disadvantages of a GBE?
- Sometimes less efficient, reputation of poor customer service and low productivity
- government interference adding limitations
- Changes in government can be disruptive to operations
what is a social enterprise?
what are characteristics of a social enterprise?
- Trades to achieve objectives that benefit the community
- Financially sustainable whilst providing economic, social or cultural benefits
- Private sector
what are advantages of social enterprises?
- generate competition, stimulating economic growth
- Raise awareness and build social cohesion
- Provides employment and sense of purpose for those who want to ‘give back’
what are disadvantages of a social enterprise?
- Difficult to raise initial capital
- Significant operating costs due to ethical engagement and environmental considerations
- Inefficiencies may arise as the business compromises financial performance for social objectives
what are business objectives?
desired outcomes that give businesses direction and improves the ability to perform successfully over a specified period of time.
what are strategies?
are the actions undertaken to achieve objectives. How the business will achieve the objective
what are key performance indicators?
criteria used to measure the performance of businesses operations against set targets. Measures efficiency and effectiveness
what is the business objective: to make a profit?
Can use profit to grow, such as implementing a new advertising campaign, building a website, creating new products etc.. or it can be distributed to the owners
what is profit?
indicator that measures the difference between total revenue earned minus total expenses incurred over a period of time
what is the business objective: to increase market share?
aim to increase their market share as it is an indicator of how competitive they are
what is market share?
is a business’s proportion of total sales within a given industry
what is the business objective: to meet shareholder expectations?
-Investment of shareholders can facilitate the growth of a business, leading to different market opportunities
- The financial return is through the payment of dividends or achieving capital gains
what are dividends?
-are regular sums of money paid out to shareholders from a businesses profit
what is capital gain?
is an increase in the value of a share, meaning an investor can sell their shares at a higher price than what they originally purchased them for
what is the business objective: to fulfil a market need?
when a business fills a gap in the market, which involves addressing customer needs that are currently unmet or underrepresented by other businesses in the same industry
what is the business objective: to fulfil a social need?
is improving society and the environment through business activities
what is the business objective: to improve effectiveness?
is the extent to which a business achieves its stated objectives
- For a business to be competitive it must continually set and achieve targets and therefore be effective
what is the business objective: to improve efficiency?
how productively a business uses its resources when producing a good or service, producing something without wasting any resources
what are stakeholders?
are a person, group or organisation with a vested interest in the performance, behaviour or conduct of a business
who are external stakeholders?
- Customers
- Suppliers
- General community
who are internal stakeholders?
- Employees
- Managers
- Owners
what are employee stakeholders?
Provide labour in exchange for wages and produce the goods or services of the business
what are employee stakeholders impact/interest?
- rely on the business to provide them with income to survive, benefit from financial stability
- Represent a huge financial cost to the business as well as a benefit if they are highly productive
what are manager stakeholders?
Act on behalf of owners/ directors to direct the business and its employees towards the achievement of objectives
what are manager stakeholders impact/interest?
- want recognition of their ability to achieve business objectives, provides security of their role
- Improved business success and achievement of objectives is gained from successful, loyal management
what are owner stakeholders?
Invest in businesses in order to receive profit/ dividend in return for their investment. Those who have overall responsibility for managing the businesses strategic direction.
what are owner stakeholders impact/interest?
- relies on owner for the capital invested
- Want long term success for the business derived from their decisions that aim to improve business performance
what are the general community stakeholder?
Includes the general public or groups external to the business
what are the general community stakeholders impact/interest?
- Community benefits as the business offers employment and attracts customers
- need to build positive relationships with the local community by acting ethically and being environmentally responsible
what are customer stakeholders?
Purchase the product or service of the business to satisfy their needs
what are the customer stakeholders impact/ interest?
- rely on the business to provide them with high quality goods/ services at reasonable prices
- expect well priced product and availability
- Expect a high level of quality customer service
what are supplier stakeholders?
Provide the business with the resources/ raw materials used in the production process
what are supplier stakeholders impact/interest?
- want to sell a large quantity of materials at the highest price in order to benefit the suppliers’ wealth/ profits
- want prompt payment and long term relationships to ensure stable survival
what is planning?
the process of determining a business’s objective and establishing strategies to achieve these aims
what are the types of planning?
strategic planning, tactical planning, operational planning
what is strategic planning?
involves the broadest scope of what a business aims to achieve in the next 2-5 years and affects the general direction of business decisions made
what is tactical planning?
involves the long-term strategies a business intends to use in the next 1-2 years in order to fulfil its strategic plan
what is operational planning?
involves the short-term actions a business takes on a daily basis to achieve its tactical plan
what is decision making?
is the skill of selecting a suitable course of action from a range of plausible options
what is communication?
is the skill of effectively transferring information from one party to another.
what is delegation?
is the skill of assigning work tasks and authority to other employees who are further down in a business’s hierarchical structure.
what are interpersonal skills?
is the skill of creating positive interactions with other employees, to foster beneficial professional relationships.
what is leadership?
is the skill of motivating others in order to achieve a businesses objectives
what is corporate culture?
corporate culture is the shared values and beliefs of a business and its employees
what is real corporate culture?
real corporate culture involves the shared values and beliefs that develop organically within a business, and are practised on a daily basis by its employees.
what are examples and the impact of types of employees?
eg: hiring criteria, staff diversity
- business chooses which employees to hire
- should be carefully selected for both their skill and ability to uphold business values
what are examples and the impact of workplace environment?
eg: office layout
- Arrangement/ organisation of the workspace can impact interaction levels between employees
what are examples and the impact of business ideologies?
eg: celebrations, rituals
- highlight the standard practices and expectations of employees within the business
what are examples and the impact of management strategies?
eg: Autocratic, persuasive, consultative
- affects the relationship between employees and their managers
- therefore, impacting their interactions in the workplace
what are the components of real corporate culture?
types of employees, workplace environment, business ideologies, management styles
what is official corporate culture?
involves the shared views and values that a business aims to achieve, often outlined in a written format.
what are the components of official corporate culture?
shared objectives, policies, training, symbols, uniform
what are examples and the impact of shared objectives?
eg: vision statement, mission statement
- Highlights what the business aspires to achieve
- providing a common goal for employees
what are the examples and impact of policies?
eg: established policy and procedure documentation, code of conduct
- Used to create standards for the behaviour of employees in the workplace.
what are the examples and impact of symbols?
eg: business names, logos, slogans
- Enables employees and customers to easily identify the business
what are the examples and impact of training?
eg: employee training programs
- Ensures that employees are following the standards set for acceptable behaviour at work
what are the examples and impact of uniform?
eg: regulations around employee attire
- Unites employees, and promotes a business’s professional reputation
what are management styles?
the approach and manner in which employees are directed and motivated within a business.
what are the types of management styles?
autocratic, persuasive, consultative, participative, laissez-faire
what is autocratic management strategy?
involves a manager making decisions and directing employees without any input from them
- top down communication
- centralised control
what are pros and cons of autocratic management strategy?
+communication is direct/ efficient
+employees have clearly defined roles
- potentially limited manager view
- employees feel left out/disrespected
what is persuasive management strategy?
involves a manager making decisions and communicating the reasons for those decisions to employees without their input.
- top down communication
- centralised control
what are pros and cons of persuasive management?
+employees feel more supportive and respected
+communication can occur quickly
- detachment from business goals
- some time wasted
what is consultative management strategy?
involves a manager seeking input from employees on business decisions but making the final decision themselves.
- centralised control
- two-way communication
what are pros and cons of consultative management strategy?
+more informed decision making
+employees feel valued as their ideas are considered
- low employee motivation if overlooked
- slower decision making process
what is participative management strategy?
involves a manager sharing information with employees so that employees can participate in decision-making.
- decentralised control
- two way communication
what are pros and cons of participative management strategy?
+employees have ownership of decisions, higher motivation
+open communication- employees feel valued
- potential for conflict in disagreements
- some employees don’t like lack of direction
what is laissez-faire management?
-involves a manager communicating business
objectives to employees and giving them freedom to make decisions independently.
- decentralised control
- 2 way communication
what are pros and cons of laissez-faire management?
+employees are motivated as they work towards their objectives
+fosters environment of high creativity value
- unsuitable for low skilled employees
- loss of control may mean business objectives aren’t met
