Unit 3; Outcome 1- Business Foundations

Question 1

Business

Answer 1

A business is an organisation that aims to produce goods and/or services to satisfy the needs and wants of consumers, they aim to make a profit.

Question 2

Unlimited Liability

Answer 2

Owner responsible for all debt of the business if the business can’t pay its liabilities

Question 3

Limited Liability

Answer 3

Pty. Ltd. Responsible only liable up to extent of their nominal value- shares

Question 4

Sole Trader

Answer 4

A business owned by one person. Business and owner have same legal entity. Owner has unlimited liability.

Question 5

Sole Trader- Pros/Cons

Answer 5

+ Inexpensive to set up, owner has complete control, less government regulations, owner keeps all net profits.
- Unlimited liability, more difficult to gain finance, take 100% of the financial risk.

Question 6

Partnership

Answer 6

When 2 or more (up to 20) people go into business together and distribute income or losses between themselves.

Question 7

Partnership- Pros/Cons

Answer 7

+ Inexpensive to set up, greater pool of experiences to help make stronger decisions.
- All partners are 100% liable, potential for disagreements between partners, may be difficult to remove a partner.

Question 8

Public Listed Company

Answer 8

A company with a separate legal entity with unlimited shareholders, with shares traded publicly on the ASX.

Question 9

Public Listed Company- Pros/Cons

Answer 9

+ Limited liability for shareholders, greater ability to raise capital through sales of shares.
- Very complex and expensive to establish, no control over who owns the company.

Question 10

Private Limited Company

Answer 10

A company with a separate legal entity with limited shareholders (up to 50) with shares traded privately.

Question 11

Private Limited Company- Pros/Cons

Answer 11

+ Potential tax benefits, life of company can live longer than directors, maintain control over who owns the company.
- More complex and expensive to establish, shares cannot be traded freely.

Question 12

Social Enterprise

Answer 12

An organisation that applies business strategies to maximize improvements in human and environmental well-being

Question 13

Social Enterprise- Pros/Cons

Answer 13

+ May attract customers due to them believing in the social cause, can improve employee morale as the employees feel they are contributing to a worthy cause.
- Difficult to focus on profits while also focussing on the social cause, may need to constantly work with tight budgets.

Question 14

Government Business Enterprise

Answer 14

An enterprise which is owned by the Government (is in the public sector) but operates like a business.

Question 15

GBE- Pros/Cons

Answer 15

+ Able to offer services to the community that other businesses may not find financially desirable, help provide competition to the market.
- Objectives and funding may change with change of government, use of resources may not be as effective/efficient as other business types.

Question 16

Business Objectives

Answer 16

Goals the business is aiming to achieve in the future, they give the business and employees a sense of purpose and direction.

Question 17

Vision

Answer 17

An expression of what the business wants to become. A long term objective.

Question 18

Mission

Answer 18

Defines the company’s business, it’s objectives and it’s approach to reach these objectives.

Question 19

Objective- to make a profit

Answer 19

A business wants to maxmise their profits. Profit is what is left after business expenses have been deducted from sales revenue

Question 20

Objective- to increase market share

Answer 20

Market share is a business’s proportion of total sales in a market or an industry.
To increase market share many large businesses will often develop an extensive product range, using many different brand names to gain an extra few percent of market share

Question 21

Objective- to improve efficiency

Answer 21

Efficiency – how well a business uses resources to achieve objectives

Question 22

Objective- to improve effectiveness

Answer 22

Effectiveness refers to how successful a business has been in terms of achieving its stated objectives.

Question 23

Objective- to fulfil a market need

Answer 23

Businesses may exist to meet customer expectations or provide a good or service that is not otherwise available to a market

Question 24

Objective- meet shareholder expectations

Answer 24

They expect the business they invested in to make a profit and to receive a share of that profit (called dividends)

Question 25

Objective- to fulfil a social need

Answer 25

Producing/providing a good and service for the purpose of making the world a better place

Question 26

Stakeholders

Answer 26

Those who have a vested interest in the business

Question 27

Stakeholders- Owners

Answer 27

people who own the business (sole traders, partners)

Question 28

Stakeholders- Managers

Answer 28

the person who has the responsibility for successfully achieving the objectives of the business

Question 29

Stakeholders- Employees

Answer 29

the people who work for the business

Question 30

Stakeholders- Customers

Answer 30

the people who purchase goods and services from the business, they expect to purchase quality products at a reasonable price and expect high levels of service

Question 31

Stakeholders- Suppliers

Answer 31

businesses or individuals who supply materials and other resources to a business so that it can conducts its operations

Question 32

Stakeholders- Community

Answer 32

Members of the community, they expect that a business will give back to society. Eg socially responsible business

Question 33

Management Styles

Answer 33

the behaviour and attitude of the manager when making decisions, when directing and motivating staff, and when implementing plans to achieve business objectives

Question 34

Features of Management Styles (CADE)

Answer 34

Communication- one way/two way
Authority/Control- centralised/decentralised
Decision making- input from employees
Level of Employee participation- none, employee valued, high

Question 35

Contingency Management Theory

Answer 35

Stresses the need for flexibility and adaptation of management styles to suit the situation.

Question 36

Autocratic

Answer 36

Manager tells staff when decisions have been made

Question 37

Autocratic- Pros/Cons

Answer 37

+ Fast decisions, clear direction given to business.
- Smaller pool of ideas, ideas are not encourages can lead to low morale

Question 38

Persuasive

Answer 38

Manager makes the decisions and sells it to the staff

Question 39

Persuasive- Pros/Cons

Answer 39

+ Fast decisions, employees can feel more valued.
- No employee input, possibility for low job satisfaction

Question 40

Consultative

Answer 40

Manager seeks feedback before making decisions. Uses feedback to make informed decisions.

Question 41

Consultative- Pros/Cons

Answer 41

+ Improved job satisfaction, improves confidence in employees.
- More time consuming, ideas may be overlooked causing conflict.

Question 42

Participative

Answer 42

Manager joins in with staff to make decisions. Decision-making authority is shared.

Question 43

Participative- Pros/Cons

Answer 43

+ High level of trust, larger pool of ideas.
- Time consuming, managers role may be undermined.

Question 44

Laissez-Faire

Answer 44

Manager give employees full responsibility for the operations.

Question 45

Laissez-Faire- Pros/Cons

Answer 45

+ Employees feel a sense of ownership, often encourages teamwork.
- Complete loss of control by management, objectives can become lost.

Question 46

Management Skills

Answer 46

the competencies that managers use to help them achieve required objectives

Question 47

Communication

Answer 47

Communication is the transfer of information from sender to receiver, and to listen to
feedback.

Question 48

Delegation

Answer 48

The ability to transfer authority and responsibility from a manager to an employee to carry out
specific activities.

Question 49

Planning

Answer 49

The ability to define business objectives and determine methods or strategies that will be used to
achieve those objectives.

Question 50

Leading

Answer 50

The ability to influence or motivate people to work towards the achievement of business
objectives.

Question 51

Decision-making

Answer 51

The ability to identify the options available and then choose a specific course of action
from the alternatives.

Question 52

Interpersonal skills

Answer 52

Management’s ability to deal or liaise with people and build positive relationships
with staff.

Question 53

Corporate Culture

Answer 53

The shared values and beliefs of the people in the business.

Question 54

Real Corporate Culture

Answer 54

The unwritten rules and values that people within the business have. Seen in; the way staff dress, how employees treat each other and customers.

Question 55

Official Corporate Culture

Answer 55

What the business intend the culture to be. Seen in; official documents such as; mission statement, stated values, and policies.

Question 56

Element of Corporate Culture- Values

Answer 56

Stated values of the business

Question 57

Element of Corporate Culture- Physical Layout

Answer 57

E.g. open spaces encouraging collaboration

Question 58

Element of Corporate Culture- Heroes/Narrative

Answer 58

The unique stories of the business or people they look up to or celebrate

Question 59

Element of Corporate Culture- Rituals

Answer 59

E.g. social gatherings

Question 60

Element of Corporate Culture- Practices

Answer 60

The practical process that are in place within the business.