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BUSINESS > Unit 1 - Understanding Business > Flashcards

Unit 1 - Understanding Business Flashcards

1
Q

Sectors of Industry

A

Primary
Secondary
Tertiary
Quaternary

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2
Q

Explain all sectors of Industry

A

Primary- Involved in the extraction of raw materials from the Earth (E.g. fisherman, miners)
Secondary- Turning the raw material into a product (E.g. factories)
Tertiary- They are businesses that do not produce products but provide a service (E.g. hairdresser)
Quaternary- A knowledge based organisation, providing help (E.g. IT Consultants, Accountants)

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3
Q

Public Sector Organisations

A

Public Sector Organisations are owned by the Government
Public Sector Organisations are controlled by a Board of Trustees
Public Sector Organisations are financed via Taxes (e.g. income tax, council tax)

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4
Q

Public Limited Companies (PLC)

A

Public Limited Companies are owned by shareholders
Public Limited Companies are controlled by a Board of Directors
Public Limited Companies are financed via selling shares publicly on the stock market

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5
Q

Aims & Objectives of Public sector Organisations

A

To satisfy the needs of the community and provide services to the public
To work within a given budget
To be ethically responsible:
- Use renewable energy such as solar
- Offer safe working conditions for staff
- Paying fair wages to employees
Offer customers fair prices for products and proper marketing

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6
Q

Aims & Objectives of Public Limited Companies (PLC) & CSR

A

Managerial Objectives- Managers try to achieve objectives which they believe will improve their status
- They may aim to also have many subordinates reporting to them to increase their responsibility and therefore their salary

Satisficing- Making enough profit to satisfy/cover satisfactory dividends to shareholders

Sales Maximisation- Making the most sales possible by dropping prices to get more commission for the number of sales made
Methods to ensure good CSR:
- Use renewable energy
- Sustainable raw materials
- Paying fair wages to employees
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7
Q

Methods of growth

A 
Merger
Takeover
Organic growth
Vertical integration
Backwards vertical integration
Forward vertical integration
Horizontal integration
Conglomerate integration
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8
Q

Describe: Organic Growth

A

“Organic Growth” is an internal method of growth used by a business. This method allows for a business to increase market share without losing control of the business.
This can be done by increasing the number of employees and increasing the variety of products they sell

Advantages- reduced risk of failure, increased sales and profit
Disadvantages- very expensive

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9
Q

Describe a merger and a takeover

A

Merger- when 2 or more organisations join together to form one large organisation
Takeover- when a large business takes over a smaller struggling business and takes control of there finances

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10
Q

Describe Vertical Integration

A

When a business joins with another business that operates in a different stage of production. e.g. A cider manufacturer joining together with a apple farmer

Advantages:

  • Greater control over stages of production
  • Eliminates middle man and his profits
  • Gives the firm greater scales of economy

Disadvantages:

  • The company may be incapable of managing new activities efficiently, meaning higher costs
  • Focussing on new activities can negatively affect core activities
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11
Q

Describe Forward Vertical Integration

A

When a firm takes over another firm in a later stage of production
this is usually done to control the distribution outlets for the product

Advantages:
- Can increase profits by cutting out the middle man and adding value its self

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12
Q

Describe Backwards Vertical Integration

A

When a firm takes over another firm in an earlier stage of production (It’s supplier)
This means a business can ensure availability and quality

Advantages:

  • Guaranteed and timely supply of stock
  • No need to pay supplier marked-up prices, cheaper stock
  • The quality of supplies can be strictly controlled
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13
Q

Describe Conglomerate Integration

A

This refers to when a business takes over a company in a completely different market

Advantages

  • It allows the business to spread the risk of failure
  • Enables a firm to overcome seasonal fluctuations
  • It makes a firm larger and more financially secure

Disadvantages:

  • May take on another business in another market they have no experience in causing them to fail
  • Can cause the business to lose focus on core activities, affecting the product
  • The business may become to large and hard to control
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14
Q

Methods of funding growth (Outsourcing)

A

Outsourcing- When an organisation contracts another to do work for them

Advantages:

  • Reduces cost of employing staff in non-core activities
  • Saves cost of specialised equipment
  • Allows firm to concentrate on their core activities
  • Specialist firms may be able to provide a higher quality service

Disadvantages:

  • Confidentially issues
  • May be very expensive
  • The organisation will have reduced control
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15
Q

External factors

A 
Political
Economic
Social
Technological
Environmental
Competition
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16
Q

External factors and their impact on an organisation (Political)

A

This refers to decisions made by the government affecting organisations. Such as changes in:

  • Laws and Regulations: The organisation must comply with new Laws and Regulations or they could potentially be fined or closed down.
  • Changing Income Tax Rates: The government could reduce taxes giving people more disposable income, meaning they are more likely to buy products
  • Changing VAT Rates: If VAT prices are increased the selling price of the product will be increased meaning customers are less likely to buy the products.
17
Q

External factors and their impacts on an organisation (Economic)

A

This refers to the state of the national economy, if the economy is in a;

  • BOOM: it means businesses are producing more products meaning more jobs are created. This leads to people having more disposable income, leading to an increase of profit for the organisation.
  • RECESSION: When there is high levels of unemployment meaning people have less disposable income leading to a lack of sales for the organisation.
18
Q

External factors and their impact on an organisation (Social)

A

This refers to a change in customer taste and wants;

  • Change in demographic: Ageing population means more products have to be produced to care towards them e.g. increased care providers.
  • Changes in Lifestyle: More women are working meaning there is an increase in different products e.g. chid care, ready meals
  • consumer tastes change all the time potentially meaning a business may be left with products they cant sell
  • Ethical considerations: If a business is seen in a positive light by customers it could lead to an increase in market share
19
Q

External factors and their impact on organisations (Technological)

A

If a business has old and outdated technology they may fall behind competitors losing sales and profit.
Having the best and most up to-date technology means a business can increase the rate of production.
Maintaining and ensuring a business has the most up to-date technology is very expensive potentially causing cash flow issues.

20
Q

External Factors and their impact on an organisation (Environmental)

A

This is when organisations aim to be socially reasonable and environmentally friendly

  • Weather;
  • Bad weather conditions may prevent customers from being able to go to the business, therefore decreasing profits
  • If it is a very hot day and you sell ice creams you may see a large increase in sales
  • Poor weather may damage the businesses premise meaning they are unable to re-open

Methods to ensure CSR:

  • Recycling
  • Population and industrial waste
21
Q

External factors that impact an organisation (Competitive)

A
  • New competition in the market may mean your business loses customers
  • If a competitor brings out a new product similar to yours it may become outdated and fall in sales
  • If a customer lowers the price of a product your business will need to do the same or risk losing customers
  • If competitors have better advertisement this could lead to a fall in profits
22
Q

Describe a Tall structure

A

A tall structure can also be known as a “Hierarchical” structure
A tall structure has many layers of management
It has a long chain of command meaning it takes time for instructions to be passed up/down the chain

23
Q

Advantages and Disadvantages of a Tall structure

A

Advantage:

  • Each staff member knows their role and who to report to
  • With so many layers the opportunity for promotion is high which can motivate staff
  • A narrow span of control means that managers have more time for planning, supervision and decision making
  • Managers can support subordinates

Disadvantages:

  • Communication can take a long time to flow down the many layers of management
  • The organisation can be slow to respond to changes in the market
  • Having a narrow span of control means employees may feel under pressure
  • Managers have less staff to discuss ideas with
24
Q

Strategic Decisions

A

Strategic decisions

  • These are long term decisions, aims of the organisation
  • These decisions are often made by senior management (e.g. Mr Abbot)
  • These decisions are often high risk.

Examples: increasing market share, expanding the business into a foreign country

25
Q

Types of Decisions

A

Strategic
Tactical
Operational

26
Q

Types of Decisions (Tactical)

A

Tactical Decisions

  • These are medium term decisions, required to achieve strategic decisions
  • These decisions are often medium risk
  • These decisions are often made by middle management (e.g. department head)
27
Q

Types of Decisions (Operational)

A

Operational Decisions

  • These decisions are often short-term decisions (day to day)
  • These decisions are often made by low level management (any employees)
  • These decisions are often low risk, dealing with customer complaint
28
Q

Factors affecting the quality of decisions

A

Human Resources

  • Managers ability, training and experience to make good decisions
  • How much risk managers are willing to take when making decisions
  • Managers ability to handle stressful and complex situations

Technology

  • Spreadsheets: they can improve the accuracy of calculations using formula to perform “what if” statements to calculate the projected outcome of a decision.
  • Databases: can improve the speed of decision-making by making it easy to search for information quickly using queries and sort functions.
  • Email: can be used to communicate information regarding decisions to many employees at once and attachments containing information can be sent which reduces printing costs
29
Q

Role of the Manager

A 
Plan
Organise
Command 
Coordinate
Control
Delegate
Motivate
30
Q

Role of the Manager (Explain)

A

PLAN- a manager plans the objectives which means they have to decide what has to be done in order to reach the objectives

ORGANISE- a manager organises resources therefore ensuring the organisation is successful in achieving the objectives

COMMAND- a manager commands by giving instructions this reduces confusion amongst staff

COORDINATE- a manager coordinates to make sure everyone is working towards the same goal which means the task is done more efficiently

CONTROL- a manager controls by evaluating what has been done and checks it against what was expected therefore they can put different plans in place to rectify the situation

DELEGATE- a manager delegates responsibility to carry out a task to a subordinate which gives the manager more time to focus on other work

MOTIVATE- a manager motivates staff and inspires them therefore the objectives may be achieved by staff working harder

31
Q

Ways of assessing the effectiveness of a decision

A

Managers will assess the effectiveness of a decision in the following ways:

  • Research customer’s opinions using surveys
  • Gather feedback from staff at meetings
  • Assess the situation to see if the problem has been solved
  • Compare the profits/sales figures for an increase this will include assessing using other financial information for example ratio analysis
  • Monitoring staff morale, absence and turnover following major decisions
  • Check if targets have been met and assess key performance measures for staffReview the number of complaints made
  • Researching customer review sites or social media feedback

BUSINESS (5 decks)

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