unit 3 aos1 business foundations Flashcards
what are the 6 business types?
sole trader, partnership, private limited company, public listed company, social enterprise, government business enterprise
sole trader
an unincorporated business that is owned and operated by one person
unincorporated business
is a legal status of a business whereby the business owner and the business are viewed as the same legal entity
unlimited liability
is the personal legal responsibility a business owner has for an unincorporated business’s debts
3 advantages of sole traders
owner has full control, low start up costs, owner keeps all profits
3 disadvantages of sole traders
unlimited liability where the owner is responsible for all debts of the business, business ends when the owner dies, burden of management
partnership
an unincorporated business that is owned by 2-20 people. they typically have a partnership agreement which outlines the roles and expectations of the partners
3 advantages of partnerships
greater range of expertise, owners can share the workload, greater access to finance as there are more than one owner
3 disadvantages of partnerships
unlimited liability where the partners’ personal assets are at risk, conflicts could arise due to shared decision making, profit is shared between partners
private limited company
an incorporated business that has a minimum of one shareholder and a maximum of 50 non-employee shareholders, and whose shares are offered only to those people whom the business wishes to have as part owners. must have at least 1 director
limited liability
when shareholders are only liable to the extent of their original investment, meaning they are not personally responsible for the business debts.
incorporated business
is a legal status of a company whereby the company is established as a separate legal entity to the shareholder/s.
3 advantages of private limited companies
limited liability, greater variety to expertise, business’s existence is not threatened by the removal of one director
3 disadvantages of private limited companies
complex reporting requirements (annual reports to shareholders), complex and time consuming to establish, expensive to set up
example of a private limited company
Cotton On Clothing Pty Ltd, Australia
public listed company
an incorporated business with an unlimited amount of shareholders and whose shares are openly traded on the ASX
3 advantages to public listed companies
limited liability of shareholders, greater access to expertise, no permission is needed to sell and trade shares
3 disadvantages to public listed companies
conflicts could arise through shared decision making, complex reporting requirements such as annual financial reports that need to be published to the public, expensive to set up
example of a public listed company
Woolworths Group Limited, supermarket retailer, Australia. CEO Brad Banducci
social enterprise
is a type of business that aims to fulfil a community or environmental need by selling goods or services.
3 advantages of social enterprises
the community benefits from their activities, the business can develop a positive reputation, likely to recieve financial support from the government
3 disadvantages of social enterprises
difficult to balance the achievement of financial objectives with social objectives, may be difficult to obtain a bank loan, significant operating costs
example of a social enterprise
STREAT, cafe, Melbourne
government business enterprises (GBEs)
a governement owned and operated business. GBEs carry out government policies while they deliver community services. They operate at a state and federal level of government.
3 advantages of GBEs
deliver goods and services that help the community and their needs, they can operate with some independence from the government, can rely on the government for initial financing
3 disadvantages of GBEs
goverment can interfere with the strategic direction of the business, GBEs have to follow excessive rules and formalities, Productivity may be lower
example of a GBE
Australia Post, parcel and mail delivery, Australia
business objectives
Business objectives are set goals that helps management and relevant stakeholders to understand the priorities and what the business aims to achieve over a period of time.
strategies
Strategies are the activities undertaken to achieve objectives, usually set by management, and undertaken by employees
mission statement
A brief description of why a business exists
what are the 7 business objectives
to make a profit, to increase market share, to fulfill a market need, to fulfill a social need, to meet shareholder expectations, to increase efficiency, to increase effectiveness
to make a profit
Businesses seek to minimise costs and/or maximise revenue so that revenue is greater than expenses leading to the achievement of net profit and financial objectives
why do businesses want to make a profit (3)
- Expand locations
- Improve product range (innovation)
- Offer more or better services
example of a business making a profit
Woolworths recorded a profit of $2865 million for the 2023 financial year. 19.1% increase from 2022
to increase market share
Businesses seek to increase their control over an industry/market by increasing sales relative to competitors
why do businesses want to increase market share
When sales increase, relative to competitors, a business is able to reduce the power of its competitors and use its resources to grow/improve the businesses operations.
increasing market share is achieved by: (3)
- improved marketing strategies
- increased quality standards
- improved delivery of goods or services to the customer
example of a business increasing market share
Woolworths market share has remained steady at 37% in 2023, compared to 37.1 in 2022. Their biggest competition is Coles at 28%
to fulfill a market need
Businesses seek to provide a product that is not otherwise available to customers who need the service or wish to buy the product.
why do businesses want to fulfill a market need
they want to provide products that customers need/want that they cannot obtain otherwise.
example of a business fulfilling a market need
Woolworths created two new customer fulfillment centres to meet the increasing demand for online grocery shopping (same-day delivery) in the inner city suburbs
to fulfill a social need
Businesses seek to sell products for the purpose of generating an income that can be used to improve the wellbeing of the community.
why do businesses want to fulfill a social need?
to improve community wellbeing.
Fulfilling a social need is achieved by: (3)
- donate funds to charities
- establish a charity/foundation within the business
- reduce environmental damage
example of a business fulfilling a social need
Woolworths (in partnership with Community Corporate) has provided sustainable employment for over 245 refugees since 2018
to meet shareholder expectations
Shareholders have the expectation of receiving a return on their investment, and the expectation that the business will act in an ethical and corporate socially responsible manner
shareholder
investors who buy a portion (a ‘share’) of a business, with the aim of making more money from the business than their initial investment
why do businesses want to meet shareholder expectations
Shareholders are entitled to some level of decision-making
Meeting shareholder expectations (recieving dividends) is achieved by: (3)
- reducing operating costs
- downsizing (reduces wages expense)
- increasing net profit
example of a business meeting shareholder needs
Woolworths, In 2023 they delivered strong returns to investors and shareholders with a 13.7% increase in net profit
efficiency
is about how well resources (materials, time, money, labour) are used to make a good or service
3 ways to increase efficiency
LOWER COSTS
INCREASE OUTPUT
USE LESS TIME TO MAKE THE PRODUCT
example of a business improving efficiency
Woolworths has implemented AI tech at self serving checkouts to detect incorrect item scanning
effectiveness
related to achievement of business objectives such as improved quality, decreased waste, meeting CSR goals, increased customer or employee satisfaction
how do we increase effectiveness (3)
INCREASE COSTS IN SHORT TERM BUT LONGER TERM BENEFITS such as improving quality, meeting corporate social responsibility goals, improving customer satisfaction,
example of a business improving effectiveness
Woolworth’s emmisions have reduced by 8% in the last year, resulting in a cumulative reduction of 36% from its 2015 baseline. The company is on track to achieve 100% renewable electricity by 2025
stakeholders
are individuals, groups, or organisations who have a vested interest in the performance and activities of a business.
what are the 6 stakeholders?
owners/shareholders, managers, employees, suppliers, customers and the general community
owners
are internal stakeholders who establish, invest, and have a share in a business, often with the goal of earning a profit from its operations. In public listed and private limited companies, owners are known as shareholders.
qantas example of an owner
Vanessa Hudson
An owner’s interest in a business
Receiving a return on their investment, often through business growth, in the form of increases in share price, dividends, or profits.
managers
are internal stakeholders who oversee and coordinate a business’s employees and lead its operations to ultimately achieve the business’s objectives.
qantas example of managers
Qantas senior managers e.g. Chief Customer Officer, Chief financial officer as well as regional and team managers
a manager’s interest in a business
Receiving appropriate wages and working conditions that reflect their managerial role and responsibility within the business.
employees
are internal stakeholders who are hired by a business to complete work tasks and support the achievement of its objectives.
qantas example of employees
head office employees, ground crew, flight crew, pilots
an employee’s interest in a business
Receiving fair pay and working conditions.
customers
are external stakeholders or groups who interact with a business by purchasing and utilising its goods and services.
a customer’s interest in the business
Receiving high-quality goods and services at affordable prices.
suppliers
are external individuals or groups that source raw materials and sells them to a business for use in the production of its goods and services.
qantas example of suppliers
Qantas partners with Orro Group for IT infrastructure
supplier’s interest in a business
Earning a profit from the raw materials and resources they supply.
general community
are the external stakeholders and groups who are impacted by a business’s operations and decisions, often because they are located in close proximity to the business.
the general community’s interest in a business
Increasing the local employment rate and boosting the local economy.
what are the 5 management styles?
autocratic, persuasive, consultative, participative, laissez-faire
autocratic management
involves a manager making decisions and directing employees without any input from them.
3 advantages of autocratic style
communication is quick and direct, full decision making control lies with manager, efficient
3 disadvantages of autocratic style
leads to low employee motivation as they feel undervalued, increased staff turnover, decisions may be incorrect as employees may have relevant info that is unconsidered.
persuasive management style
involves a manager making decisions and communicating the reasons for those decisions to employees without their input.
3 advantages of persuasive management
communication is quick and direct, full decision making control lies with manager, employees feel more respected when managers justify decisions
3 disadvantages of persuasive style
leads to low employee motivation as they feel undervalued, increased staff turnover, time may be wasted justifying decisions
consultative management style
involves a manager seeking input from employees on business decisions but making the final decision themselves.
3 advantages to consultative style
communication is two way therefore improving the quality of decisions, employees feel valued, management still retains control over the final decision
3 disadvantages to consultative style
some input by employees may be ignored due to their inexperience, time consuming, employee conflict and resentment could arise if their ideas are ignored
participative management style
involves a manager sharing information with employees so that employees can participate in decision-making.
3 advantages of participative style
Relationships between management and employees may improve, Employees may feel more motivated, Employees can broaden their skillset
3 disadvantages to participative style
time consuming, manager loses control, some employees do not like the lack of direction
laissez-fair management style
involves a manager communicating business objectives to employees and giving them freedom to make decisions independently.
3 advantages of laissez-fair style
employees work independently, higher employee motivation, manager acts more as an administrator of budgets
3 disadvantages to laissez-fair style
Loss of control by management, Business objectives may not be met, potential for employees to make poor decisions
4 considerations when deciding the appropriateness of management styles
time, experience of employees, nature of the task, manager preference (high or low control)
what are the 6 management skills? (CLIPDD)
communication, leadership, interpersonal, delegation and decision making
communication
is the skill of effectively transferring information from one party to another.
leadership
is the skill of motivating others in order to achieve a business’s objectives.
interpersonal
is the skill of creating positive interactions with other employees, to foster beneficial professional relationships.
planning
is th e process of determining a business’s objectives and establishing strategies to achieve these aims.
delegation
is the skill of assigning work tasks and authority to other employees who are further down in a business’s hierarchical structure.
decision making
is the skill of selecting a suitable course of action from a range of plausible options.
3 management skills required in an autocratic style
decision making, communication (one-way), planning
3 managament skills required in a persuasive style
decision making, communication (one way), planning
4 managment skills required in a consultative style
communication (two-way), interpersonal, decision making and delegation
4 managment skills required in a participative style
communication (two-way), interpersonal, decision making and delegation
4 managment skills required in a laissez-faire style
communication (two-way), interpersonal, leadership and delegation
corporate culture (+2 types)
is the shared values, ideas, expectations and beliefs of a business and its employees. official and real
official corporate culture
involves the shared views and values that a business aims to achieve, often outlined in a written document
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.
2 similarities between official and real corporate culture
Concerned with the shared values and beliefs of people in the business, aim to change the way employees interact with each other and the business
the difference between official and real corporate culture
Official corporate culture is often written in business documents (policies and rules), whereas real corporate culture is usually unwritten (what the employees do on a daily basis).
what are the 4 elements of corporate culture?
values/practices, symbols, rituals/celebrations, heroes
values and practices element of corporate culture
The way things are done in the business. E.g. honesty, hard work, teamwork, and innovation.
symbols element of corporate culture
The events or objects that are established to represent something the business believes to be important.
rituals, rites and celebrations element of corporate culture
The routine behavioural patterns in a business’s everyday life. E.g. regular social gatherings can be held to help develop a sense of belonging among employees who work in small teams during the week.
heroes element of corporate culture
The business’s successful employees who reflect its values and, therefore, act as an example for others.
difference between efficiency and effectiveness
Efficiency is concerned with how well resources are used to create output; such as how well you are using time, raw materials, labour, or machinery to produce goods and services, whereas effectiveness is the degree to which a business has achieved its stated objectives; for example whether the business has achieved its profit or market share target, or whether they have met their shareholder expectations
