UNIT 3 AOS 1

Question 1

Sole Trader

Answer 1

Individual owners of a business
Entitled to keep all profits of the business after tax
Liable for all losses
Unlimited liability: liable for all debts accrued by the business
Examples; Plumber, Carpenter, Hairdresser

Question 2

Sole Trader advantages and disadvantages

Answer 2

Advantages 
Simple and inexpensive to established 
Owner has total control of the business
Simple to close
Minimal government regulation 

Disadvantages
Unlimited liability
Harder to get finances
Reliant on the knowledge and skill

Question 3

Partnership

Answer 3

It’s a business owned between 2-50 people
Either partener is jointly liable for the debts in the business (unlimited liability)
Most partnerships have a partnership agreement between the parties
Examples; Accountants, Builders, Cafe owners

Question 4

General Partnership

Answer 4

All partners are equally responsible for the management of the business. Each has unlimited liability

Question 5

Limited Partnership

Answer 5

Liability of one or more partners is limited. Silent partners can be apart of the business partnership but are not involved in the day to day running of the business

Question 6

Partnership advantages and disadvantages

Answer 6

Advantages 
Inexpensive and simple to start
Risk is shared
Minimal government regulations 
Shared workload
Broader access to capital money (invested in business), knowledge, skill and experience  

Disadvantages
Unlimited liability
Liable for debts caused by other partners
Business could be threatened by one partner leaving
Potential personality clashes

Question 7

Company

Answer 7

Separate legal entity
Limited liability
Same rights as a natural person
Has perpetuity (ongoing life)
Must be registered for GST if the earnings are greater than a certain amount ($75,000)
Must keep financial records for at least 7yrs

Question 8

Private Limited Companies

Answer 8

Many sole traders/partnerships become private limited companies due to expansion and the opportunity to gain protection by limited liability
Can have up to 50 shareholders
Shares can only be traded with the permission of the other owners/shareholders

Question 9

Private Limited Companies advantages and disadvantages

Answer 9

Advantages
Limited liability
Extra capital can be obtained by selling more shares
Business will still continue if a shareholder/director leaves or passes away

Disadvantages 
Complex to start 
Expensive establishments costs 
Higher degree of government control and reporting requirements 
Addition compliance costs

Question 10

Public Listed Company

Answer 10

An organisation listed on the Australian stock exchange
Any individual can by shares
Run by a board of directors (runs the company on behalf of the shareholders)
Shareholders are not involved in the day to day running of the business
Examples; BHP, Myer, Commonwealth bank

Question 11

Public Listed Company advantages and disadvantages

Answer 11

Advantages
Limited liability
Able to get more capital by selling more shares
Separate legal entity
Business will still continue if a shareholder/director leaves or passes away

Disadvantages 
Highly complex to start 
High establishments costs 
Needs accountability and compliance paperwork
Extra compliance costs

Question 12

Social Enterprize

Answer 12

A business that uses strategies to improve human wellbeing or the environment rather than maximise PROFIT for its owners/shareholders
GOAL is to achieve socio, cultural, community and environmental outcomes and ern revenu
They aim to make a profit to help solve an environmental or social problem
Example; Thankyou group, The salvation army

Question 13

Government Business Enterprise (GBE)

Answer 13

Operates in the public sector (run by the government). Management of a GBE runs the business, but they must report reguary to the shareholder, parliament and the public.

Question 14

3 Characteristics of a GBE

Answer 14

1. The government controls the business
2. The business is engaged in commercial activities
3. The business is a separate legal entity to the government department.

Question 15

Financial Objectives

Answer 15

The desired financial performance of the business
Including;
- Profit (looking for new ways to run the business/ increasing profit = reducing business costs)
- Growing sales (advertising, increasing product range, overseas sales, opening new stores)
- Improving market share
- Increasing productivity

Question 16

Market Share

Answer 16

• Proportion or percentage of the market (and total sales) controlled by the business
• Market leaders can ask for discounts on supplies
• Can be cheaper than competitors

Question 17

Marketing Objectives

Answer 17

• Creation of demand for your good or service

- Maximise the appeal of your good or service to the most people possible

Question 18

Social Objectives

Answer 18

• Role of business in the community
• Above and beyond your legal objectives
• Can also be achieved via workplace policies
  
  • equal opportunity policies
  • Anti discrimination policies

Question 19

Shareholders and Stakeholders

Answer 19

Shareholder;
Owners of the company, can own the whole part or shares in a business

Stakeholders;
An individual/group that has a direct interest in the activities of the business. (can be shareholders, employees, customers, suppliers)

Question 20

Macro Environment

Answer 20

The conditions that a business operates in that they have no control over
Examples; Exchange rates, Trends, Weather, Political environments

Question 21

Operating Environemnt

Answer 21

The environment immediately external to a business to which it has close interaction with when conducting business
Examples; Suppliers, Customers, Bank, Unions

Question 22

Internal Environment

Answer 22

The areas of a business that have control over

Examples; Staff, Management, Employees

Question 23

Key stakeholders in the macro environment

Answer 23

Community/society, Government

Question 24

Key stakeholders in the operating environment

Answer 24

Creditios/banks, Trade unions, Customers, Suppliers, Competitors

Question 25

Key stakeholders in the operating environment

Answer 25

Shareholders, Directors of a company/partnership, Management, Employees

Question 26

Issues a stakeholder needs to consider

Answer 26

1. Is the business conducting itself in a fair and ethical manner 2. Does the business conduct itself in a social responsible manner

Question 27

Management and customers possible conflicts

Answer 27

Management may try to maintain profit and a high dividend to satisfy shareholders BUT – this will upset customers who want to pay reasonable prices for products

Question 28

Management and members of | the community

Answer 28

Management may decide to cut costs by not completing maintenance BUT - but this could endanger the community

Question 29

Suppliers and members of the | community

Answer 29

Suppliers want to get paid quickly and fairly | BUT – the may use unethical practices which will upset the community

Question 30

Management and suppliers

Answer 30

Management wants to reduce costs to increase profit | BUT – suppliers may charge higher prices for ethical material

Question 31

Corporate social responsibility

Answer 31

The obligation that a business has over and above the legal responsibilities to the wellbeing of employees, customers, shareholders, the community and the environment

Question 32

Things to consider about CSR

Answer 32

How business decisions affect the TRIPLE BOTTOM LINE - (financial) (economic), (social and environmental) Customers like to deal with businesses that implement a strategy of CSR Businesses need to understand that reconciling conflict interests and increasing stakeholders values ensure long term growth and survival.

Question 33

Management responsibility; operations

Answer 33

Running of business | Responsible for the protection of the business product or the provision of a service

Question 34

Management responsibility; finance

Answer 34

Responsible for managing the financial aspect of the business Includes; Financial policies, raising finance, budgeting, accounting, reporting, cash control

Question 35

Management responsibility; human resources

Answer 35

Responsible for coordinating all activities from acquiring to terminating (hiring/firing) employees in the business Manages the relationship between employer and employee Focus on employee motivation, staff retention, staff reviews

Question 36

Management responsibility; sales and marketing

Answer 36

Responsible for the marketing mix | Includes developing products, pricing, promoting distributing and promoting products to customers

Question 37

Management responsibility; technology support

Answer 37

Responsible for installing and maintaining technology, as well as providing assistance to the users of technology in the business

Question 38

Business objectives (5)

Answer 38

- Financial objectives - Market share - Marketing objectives - Social objectives - Shareholder expectation

Question 39

Autocratic management style

Answer 39

All decision making is centralized Communication is one way – downward Managers are in full control and want to retain authority Focus on achieving the task in a set format and processes must be followed No input from employees Managers believe the main motivator is money Task oriented

Question 40

Autocratic advantages and disadvantages

Answer 40

Advantages Decision making is quick – only one person Employees roles and expectations are defined and monitored Communication is direct Suits high risk and difficult decisions Disadvantages A quick non collaborative decision is not always the best one Discourages teamwork No focus on open communication Low motivation and job satisfaction for employees Task focused Employees feel low job security and kept in the dark

Question 41

Persuasive Management style

Answer 41

Management make the decision and then persuade employees of the benefit of that decision Has similar characteristics to an autocratic style Characteristics Manager has centralized control and authority Manager is focused on achieving the task and following process, and regularly checks this process Decision making is centralized and controlled by management Communication is centralized

Question 42

Persuasive Management style advantages and disadvanatages

Answer 42

Advantages Decision making is quick and still made by one person Suits high risk decision (factory closure) Employees have a clear idea of what they have to achieve Disadvantages No input from workers into the decision making process Workers may feel alienated not respected Low levels of motivation and job satisfaction

Question 43

Consultative Management style

Answer 43

Takes into consideration the opinions of the team member before making a decision Shifts from being task centered to people centered. Management consult with employees about the issue/ process, but the manager makes the final decision based on suggestions and input received. Characteristics Control and authority are more centralized, employees have the opportunity to voice their opinion, ideas and concepts Manager involves the employees in decision making which leads to more motivated employees Decision making, is centralized but decisions are only made after consultation with employees Two way communication

Question 44

Consultative Management style advantages and disadvantages

Answer 44

Advantages Get lots of ideas from employees, which help in the decision making outcome Reasonable level of employee involvement Is a motivator and increase job satisfaction Disadvantages Employees may not understand the complexity of the problem Can take a long time Employees will be upset if management does not take on their ideas

Question 45

Participative Management style

Answer 45

Managers work closely with employees, to get them to work together to improve the businesses overall performance Encourages employees to share in the decision making and problem solving tasks Management are still entitled to have the final say but consider employee input Characteristics Recognise employees strengths and actively involve them in the decision making process Makes use of two way communication Good management style when a business is undergoing rapid change

Question 46

Participative Management style advantages and disadvantages

Answer 46

Advantages Positive employer/employee relationship (less likely for conflict) High levels of motivation and job satisfaction Opportunity for employee to put forward ideas and gain skills Disadvantages Can take a long time to reach a decision as everyone needs to be considered Manager's role may be weak or undermined Internal conflicts/arguments may arise, employees given to much power Not all employees want to be involved

Question 47

Laissez Faire Management style

Answer 47

Employees assume total responsibility for control of workplace operations Management does not play a central decision making role in the organisation and employees are empowered to make decisions Management set the business objectives, BUT employees take responsibility for implementing strategies to achieve these objectives Works well in creative work or research where employees require minimal supervision and direction

Question 48

Laissez Faire Management style advantages and disadvantages

Answer 48

Advantages Employees feel a sense of ownership and are intrinsic in the results obtained by the business Dynamic creative environment Open communication lines and people are valued Disadvantages Loss of control by managers Potential misuse of business resources Personal conflicts may impact the achievements of business outcomes

Question 49

Influences on management style

Answer 49

The manager – personality, experience, values, beliefs, skills The staffs – personality, experience, values, beliefs, skills The nature of the task Internal and external constraints including time and resources If you have limited time = autocratic, persuasive If you have lots of times = consultative, participative, laissez faire Not one best management style

Question 50

Contingency management theory

Answer 50

Is the need for managers to adapt their management style to suit the situation at hand Examples A manager who prefers a consultative style may be asked to shut down an unprofitable factory site in Dandenong. She will need to shift her management style from consultative to authoritative

Question 51

The appropriateness of management styles (4)

Answer 51

Managers use different styles when making decisions and working with employees It often depends on situational variables Nature of task (what is the task you are asking employees to complete) - Easy = autocratic Complex = participative (teamwork) - Time that is available - Less time - Lots of time The experience and skill level of employees - Lots of experience = Laissez Faire Managers experience - Finding your management style

Question 52

Relationship between management style and skill

Answer 52

The type of management style a manger selects determines the management skills they will need Example An autocratic manager would not need to use delegating or interpersonal skills, but they would use planning, leading and communication skills

Question 53

Management skill; Communication

Answer 53

Is the transfer of information from a sender to receiver Non-verbal communication (body language, visual) Verbal communication (written, oral form) Can be used to help explain a vision, outline changes and ask for opinions

Question 54

Management skill; Delegation

Answer 54

Is the ability to transfer authority and responsibility from a manager to an employee to carry out specific activities Helps with the time management and enables staff to learn new skills Helps build trust and lead to a mutual understanding Example Mcdonalds assigned a shift to complete cafe for 2 hours then for the 2 hours the employee is incharge of cafe while the manger does other jobs.

Question 55

Management skill; Planning

Answer 55

The ability to define business objectives and decide on methods and strategies to achieve them - help with long term planning of the business

Question 56

3 types of planning (time)

Answer 56

``` Strategic (long term) planning - 2-5 years Tactical (medium term) planning - Flexible, adopting planning 1-2 years - Helps achieve the strategic planning Operational (short term) planning - Specific details on how the business can conduct in the short term ```

Question 57

Management skill; Leading

Answer 57

Is the skill of a manager when guiding workers towards achieving the goal of the business Effective leading requires a manger to… Have conditions that motivates, engages and inspires staff Good communicator Be able to build teams Role model Resolves conflicts

Question 58

Emotional intelligence

Answer 58

The ability to perceive, understand, monitor and regulate emotion in each other and themselves

Question 59

Management skill; Decision making

Answer 59

Is a multi step approach where a selection is made between a range of alternatives Decision making may be routine and easy OR complex and difficult

Question 60

Steps to making a decision (6)

Answer 60

1. Identify the problem and define the objective 2. Gather necessary information to establish the cause of the problem 3. Develop alternative solutions (plan B) 4. Analyse the alternatives 5. Choose and implement an alternative 6. Evaluate

Question 61

Management skill; Interpersonal skills

Answer 61

``` Skills used everyday to communicate and interact with other people both individually and groups Team player Empathetic and assertive Good communicator Good motivator ```

Question 62

Corporate Culture

Answer 62

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

Question 63

Official corporate culture

Answer 63

The preferred values, beliefs and behaviours of the people, within a business stated in official documents like a company motto or mission statement

Question 64

Real corporate culture

Answer 64

How things actually operate, the actual values and beliefs presented in the company

Question 65

Why is corporate culture important?

Answer 65

Offers better retention rates Makes the organisation attractive to potential employees - allows companies to choose employees to be the best in their field Improved productivity - more business success

Question 66

What helps create a good corporate culture

Answer 66

Employees desire to win - wanting to achieve business objectives Considering the impact of the decision on the business Focus on internal (people inside the business eg colleges managers) and external customers (suppliers, people that buy products) Prioritising teamwork Delivering what was promised

Question 67

How can you determine the corporate culture of an organisation?

Answer 67

``` Communication channels - Top down - Collaborative - Bottom up Dress code - more relaxed - more relaxed corporate culture is Willingness to achieve Staff interaction ```

Question 68

Strategies to develop corporate culture (official and real)

Answer 68

1. The creation of a vision statement. 5. Branding of the business - it represents the way customers view the business 6. People - employing the right people that suit the business 7. Physical environment and material symbols - eg open plan offices. Business location, size of offices 8. Stories, narratives and rituals - Employees of the week, Christmas parties

Question 69

Types of vision statements

Answer 69

Vision statement = the future vision for the business (aspirational) Mission statement = written statement that defines a business core purpose and focus Values statement = the values of the organisation (trustworthy, honest, organised, reliable)