3.1-3.3 Flashcards
(32 cards)
What types of Objectives Do Businesses have?
- Profit
- Growth - Based on increasing revenue, market share or expanding a business
- Survival Objectives - Often for new business however may apply to others depending on the state of the economy.
- Cash flow Objectives - Increasing cash flow increases the chance of survival
What are the Pros of
Sole Trader
Pros:
1.Control of The Business - Final decisions are made by the owner, No pressure for short-termism and you can follow your own vision.
2.Profit - Sole traders keep all the profit.
Its Easier to change your mind.
3.Saving on fees - There aren’t any legal costs for drawing up an ownership agreement.
What are the Pros of
Non - Profit Organizations
- Easier to get support from like minded indivduals - Lower wages - Tax Reductions
- Marketing and promotion is easier due to a social problem is being tackled- Lowers costs
- Easier to raise capital from government schemes.
What are the Cons Of
Sole Trader
- Unlimited Liability - This means business debts become personal debts meaning they would have to sell personal assets eg . house
- Time - Have to work long hours to meet tight deadlines.
- Lacking expertise - The sole trader may have limited skills in some areas - Lead to wrong decisions.
- Limited Finance - Unincorporated business therefore it will be harder to obtain loans
What are the Pros/Cons
PLC’s.
Pros : Easier to raise finance-Can sell shares to public to raise share capital
Limited Liability - Shareholders will only lose the money they put into the business.
Better Reputation - Brand Loyalty
Cons: Pressure for short term profits- Can lead to unsustainable growth.
Loss of Control - Due to shares being sold
Greater Public Scrutiny - Can affect brand image.
What are the Pros/Cons
LTD’s
Pros: LTD’s can keep their affairs quiet - Managers are not forced to earn short term profits therefore they can grow in the long run..
Cons: Ca n’t sell share to public - Limits the amount of capital they can raise
What is PESTLE (External Environment)
P - Political Factors E - Economic Factors S - Social Factors T - Technological Factors L - Legal Factors E - Environment
Political Factors
Government Policies :
Expansionary Fiscal Policy - Stimulate Demand by lowering taxes and increasing government spending.Lower Taxes means more disposable Income = More Spending
Contractionary Fiscal Policy - Higher Taxes Less Govt Spending. Higher Taxes = Lower Disposable Income = Lower spending = Reducing Demand = Reducing sales revenue
Indirect Taxes - Causing Higher prices = People will look for alternatives (Depends On Elasticity)
Economic Factors
Interest Rates - Affects Cost of borrowing / Return on Savings
Expansionary Monetary Policy - Lower Interest Rates = Cost of Borrowing decreases for businesses = Invest more. Lower Interest Rates means lower mortgage interest repayments leading to more disposable income.
It also reduces the reward for saving therefore consumers will spend more.
State Of the Economy - Booming Economy = Labour Is Scarce = Attract new workers higher wages = Higher Costs However it may stimulate Demand
Recession - Businesses Cut costs (Redundancies) = Lower Incomes = Lower Demand and spending
Other Factors - Inflation / Exchange Rate
Social Factors -
Ethical issues - Can cause production costs to increase, however improves brand image.
Demographic Factors - Age of population - Increase in demand for products and services that help older people - Higher Sales revenue.
Social Factors
Demographic Factors (Age of population) Demand for products/services that help older people will increase.
Ethical Issues - Being environmentally friendly may cause production costs to increase => Higher Costs => Lower Profits
Changing Lifestyles can cause demand for certain products to Increase/Decrease.
Technological Factors
New productions processes can lower unit costs => Higher profits, However a firm may require a lot of capital in the first place to develop production processes.
Legal Factors
Minimum wage - Workers get paid more => Higher costs => Lower Profits
Environmental Law - Increase In costs as firms may have to spend more in order to be more environmentally friendly.
Ethical Factors
Ethical Sourcing - Not using sweatshops => Increase in Costs, However can improve brand image and brand loyalty => Less sensitive to price => Higher price can compensate for the increase in unit costs.
3.2 Role of Managers
Managers Set Objectives for their departments, they decide what needs to be done in order to meet the objectives.
Managers analyse and interpret data and make decisions
Different Management styles : Authoritarian
The manager makes decisions on their own. It is useful when working with unskilled workers and in crisis management, allows managers to make rapid decisions
However it can cause frustration in the workforce and also demotivate workers.
Paternalistic
(Fatherly Style) - Softer form of Authoritarian. The manager consults workers before making decisions and explains the decision to them to persuade them. Paternalistic managers think that caring about human relations is a positive motivator.
Democratic
The manager encourages the workforce to participate in decision making process. Leaders discuss issues with workers and listen to their ideas, it can lead to better quality ideas as workers may have relevant skills and experience.
Laissez-Faire
Weak form of leadership. Leaders may offer training for employees and rarely get involved in decision making. This approach would be appropriate in a business where the employees are highly skilled.
Internal Factors Influencing Management and Leadership
Urgent Tasks - Will need autocratic leadership style as manager will have to tell employees what to do.
Large Unskilled workforce suits and authoritarian leadership while a small group of skilled employees suit a democratic leadership style.
External factors influencing management and leadership
State Of the Economy - In difficult economic times an autocratic leadership style may need to be used to help guide the business as they can issue quick decisions as they do not have to consult anyone.
Tannenbaum and Schmidt Continuum
Tells
Authoritarian Management Style, Zero involvement of employees. This Approach may be needed when a team is new, inexperienced or weak
Tannenbaum and Schmidt Continuum
Sells
The manager makes the decision but tries to present it to the workforce as having a sound rationale. The manager wants the team to understand why he is choosing this decision
Tannenbaum and Schmidt Continuum
Suggests
The workforce is invited to ask questions and discuss with the manager, helps employees feel that their opinion is considered.
