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Question

Explain what a co-operative is

Answer 1

A co-operative is an organisation owned and run by its members. They are not run for the benefit of the shareholders and operate in the interests of the members.

Answer 2

The primary sector extracts and harvest raw materials from the earth. Farming Fishing Mining Forestry

Answer 3

Stakeholders are often grouped and defined according to their perceived proximity to the business (internal or external) or by their connection to it (primary or secondary)

Answer 4

Stakeholders are individuals, groups or organisations that have an interest or ‘stake’ in a business. They are affected by activities and policies of a business and in turn can influence decision making within the business.

Answer 5

The chair leads the board and is responsible for ensuring its effectiveness as a decision-making group. The chair sets the agenda for board meetings and acts as a liaison between the shareholders and the board, ensuring shareholders are kept informed of board decisions and that the board are aware of shareholder concerns.

Answer 6

A sole trader is often financed using the owners personal funds (and sometimes topped up with borrowed funds, eg a bank loan). Any profits made accrue to the owner.

Answer 7

Private sector A sole trader is a business that is owned and run by one, self employed individual who may or may not employ other staff.

Answer 8

Focusing purely on the number of employees means critical information about a company such as turnover can be ignored. There are many organisations that may be small in terms of number of employees but generate significant amounts of revenue.

Answer 9

Public Private Voluntary

Answer 10

Categorising organisations according to size helps to inform government policy, such as tax rates for businesses and eligibility criteria for subsidies. It is also a useful measure when analysing different types of business on the economy.

Answer 11

Small and medium sized enterprises

Answer 12

250+ employees

Answer 13

50 - 249 employees

Answer 14

10 - 49 employees

Answer 15

0 - 9 employees

Answer 16

Micro Small Medium Large

Answer 17

Different countries have different criteria for categorising organisations in terms of size, but number of stuff and turnover are often used as the main defining criteria.

Answer 18

Inside organisation: Assist management in developing business strategy Develop performance measures / KPIs Motivate and focus employees Develop an ethical framework & culture Outside organisation: Encourage suppose / funding from third parties Create closer links with customers, suppliers & other stakeholders Basis for public relations enquiries

Answer 19

For example, in the private sector, a sole trader may be focussed on breaking even & establishing its place in the market. However, a larger more established private sector organisation may be interested in generating large profits for shareholders or pursuing growth to dominate the market. In contrast, a voluntary sector organisation such as a charity is motivated to generate revenue to fund projects to meet its charitable purpose.

Answer 20

The defining characteristic of voluntary organisations are: Their voluntary nature They are run through a trustee board Finance through donations and grants Through the help of volunteers

Answer 21

Charities - cancer research Foundations - bill and Melinda gates foundation Advocacy groups - world wildlife fund Faith based organisations - churches Community groups - neighbourhood watch Recreational sports - running / tennis clubs

Answer 22

The purpose of a voluntary organisation is to help a particular cause and benefit and enrich society. They are often set up without profit as a motive and instead of returning profits made to its owners, they are usually invested back in to the community or the organisation itself. They are independent of the government so are often referred to as non-governmental organisations (NGOs)

Answer 23

Provide support for the chair acting as a sounding board where appropriate Act as an intermediary for other directors if and where necessary Be an alternative point of contact for investors who feel their concerns have not been adequately addressed by the chair, CEO or Finance director

Answer 24

Executive directors are involved in the day-to-day running of the business.

Answer 25

Previous employment – five years Business relationships with the company – three years Close family ties to the company Additional remuneration Significant shareholding Been on the board for nine years

Answer 26

Provide a balancing influence and help minimise conflicts of interest Improve the effectiveness of a board by providing objective challenge and criticism in board meetings Act as a mentor to chair and CEO providing advice and guidance

Answer 27

To prevent the risk of power and information being concentrated in one or a few individuals, boards need to have a balance of different members. This is to ensure that matters and issues are discussed and examined from a variety of perspectives leading to more effective decision making that will benefit the organisation and its stakeholders

Answer 28

A chairperson CEO Executive directors NEDs SID (who often acts as deputy for the chair) Possibly a deputy chairperson

Answer 29

Into three sectors. Primary Second Tertiary

Answer 30

In a centralised structure, all of the decisions are made by senior management at the centre of the business. For example at the head office

Answer 31

In a decentralised structure decision-making is delegated to the managers of different areas or divisions of the business who will make decisions based on their own experiences.

Answer 32

Consistency across the organisation Able to show strong leaders Quick decision-making Communication and reporting is more straightforward Easier to control and coordinate the business

Answer 33

More bureaucracy Less flexible to local market conditions or customer needs Demotivating for managers who are not in a decision-making position

Answer 34

Decisions can be made with local markets or customers in mind Individual units are self-sufficient Managers of each branch are able to resolve issues quickly without referring back to the head office More empowering for managers at a local level Higher staff motivation

Answer 35

Limited opportunity for promotion as your levels available to climb Employee rules and responsibilities may be less defined which makes it difficult to delegate tasks Difficult structure to maintain if the organisation grows

Answer 36

Benefits of a flat structure are; Higher employee morale as employees have more control over every day decisions Fewer levels of management go through to get to the ultimate decision maker resulting a faster response to issues Cost less to run as few management salaries to pay

Answer 37

Understanding the shape of an organisation can help management to make more effective decisions on how to change or adapt the organisation to achieve objectives and business goals

Answer 38

A mission statement communicates how an organisation plans on achieving its objectives and is very much focused on the present, where as a vision statement communicates where an organisation wants or aspires to be in future

Answer 39

Core values are how the organisation will behave when achieving its mission and vision

Answer 40

The query sector represents highest level decision-makers and an economy or society For example Top executives/officials in government Universities Not for profit organisations Police and fire Services Media

Answer 41

The quaternary sector is also known as knowledge economy. It represents organisations involved in intellectual services linked to technological innovation. For example Scientific research Information technology

Answer 42

The tertiary sector provides finished goods and services For example Banks and other financial institutions Retail and sales businesses Transport and distribution Restaurants Leisure Tourism

Answer 43

The secondary sector manufacturers goods from raw materials, such as making plastic from oil building/constructing and assembling products such as houses and roads

Answer 44

If one individual occupies both rules it increases the chances of that individual dominating the board Other board members may feel that they cannot raise objections or challenge constructively if one person is dominating discussions Can lead to matters and issues not being thoroughly discussed in challenged, resulting in decisions made by the board

Answer 45

A NED is a member of the companies board who is not part of the executive team and hence does not engage in the day-to-day management of the organisation The role is to provide constructive challenge, strategic guidance, or specialist advice and hold management to account

Answer 46

Whilst being eligible to receive all the profits is definitely an advantage for the owner of a trader business, one significant disadvantage is that if the business makes any losses, the sole trader is personally responsible for them. Since this type of business does not have separately personality, the owner has unlimited personal liability for its debts and liability. This means the owners personal assets can be seized to pay off any debts if they do not have the funds from the business.

Answer 47

The purpose of PESTEL is to identify the external influences on the company and identify the main factors that may impact the business.

Answer 48

L ocal o N ational G lobal P olitical E conomic S ociocultural T echnological E nvironmental L egal

Answer 49

SWOT analysis is used to understand the interconnection between an organisations internal and external environment

Answer 50

Formal agreement used for professional firms (accountancy, law or architect firms) Limited liability for all partners Must be incorporated and file documents so less privacy

Answer 51

PESTEL or LoNGPESTEL

Answer 52

Limited liability partnership is popular with businesses at career estate or profession and is often the preferred legal structure of professional firms such as accountancy law or architect firms. In the event of one partner being sued from misconduct or negligence, e.g. malpractice, the assets of the other partners are not put risk.

Answer 53

It can result in senior management developing and implementing unrealistic or inappropriate business strategies that cause issues such as decline in profitability, loss of market share, reputational damage, a decreased level of sales are even causing the organisation to fail completely. Being slow to respond to issues identified in an analysis of the business environment, not developing an appropriate response or failing to respond at all, can also cause an organisation to miss out on opportunities on eventually fail.

Answer 54

Effective situation analysis is crucial in helping organisations realise their vision by identifying factors that may impact on their current mission activities Since the business environment changes constantly, organisations need to constantly analyse the environment to develop the capacity to identify potential issues and anticipate changes that may affect their activities and be able to respond accordingly

Answer 55

A subsidiary company is a company owned or controlled by another company which is referred to as the parent or the holding company. Generally, the parent will own 50% or more of the subsidiary.

Answer 56

The shareholders delegate the responsibility of the day-to-day running of the company to the board of directors

Answer 57

Disadvantages of a sole trader business are No separate legal personality Owner has unlimited personal liability for its debts and liabilities Owner must enter into any contracts personally

Answer 58

Stakeholder theory suggests that a business should make decisions that consider and create value for all of its key stakeholders and don’t just satisfy the needs of its owners or shareholders. Key stakeholders may include, customers, investors and employees. The theory also considers the role of businesses in society and responsibilities businesses have to society as a whole.

Answer 59

Owners having an interest in generating high profits may be reluctant to pay employees high wages Directors deciding to make the pursuit of higher sales a top priority over owners wishes of generating higher profits Making a business decision to move customer service operations overseas to reduce costs that may result in customers suffering if they receive per customer service

Answer 60

Primary stakeholders can be defined as anyone who has a functional or financial interest in the business Customers Suppliers Employees Shareholders

Answer 61

A limited company is a corporate association with its own legal identity that separate from that of its owners. The company is set up as a legal person in its own right. These companies have undergone the process of incorporation They are limited by shares or guarantee

Answer 62

Secondary holders are those who may affect relationships with primary stakeholders E.g. pressure group may influence customers by suggesting that companies products failed to meet eco-standards of corporate governance

Answer 63

Customers Suppliers Creditors Debtors Government Local and National communities Trade unions Pressure groups

Answer 64

Hybrid model combining the principles of a general partnership and Limited liability partnership At least one general partner who has unlimited liability and run to business plus limited partners who have limited liability but not involved in the day to day management Fewer filing requirements than LLPs

Answer 65

An unincorporated association is an organisation set up through an agreement between a group of people who come together for a reason other than to make profit Eg voluntary groups or a sports club

Answer 66

External stakeholders are individuals or groups outside of the business who are affected by its activities

Answer 67

No – hence the term unincorporated

Answer 68

Shareholders – invest money into the business and are directly affected by how much profit it makes Workers/employees – investor labour in the business and are impacted by decisions that affect their salaries and job security

Answer 69

An internal stakeholder are individuals or groups within a business. They actively participate in the management of the business and are directly affected by its activities.

Answer 70

Advantages of a sole trader business are: Easy to set up Owner retains all the profits Fewer filing requirements Privacy

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