Mock Revision Flashcards
(54 cards)
1
Q
What are Handy’s 5 organisational culture models?
A
- Power Culture
- Role Culture
- Task Culture
- Person Culture
- Entrepreneurial Culture
2
Q
What is a strong and weak organisational culture and what are the benefits of culture being strong and negatives of being weak?
A
- Strong organisational culture is when employees agree with corporate values of the company. Benefits include:
- Employees need less supervision because their behaviour naturally fits in with corporate values.
- Staff are more loyal, so staff turnover is lower.
- Employee motivation will be higher, increase productivity.
- Weak organisational culture is when employees disagree with the firms organisational culture and are forced to comply to them. Leads to need for more supervision, higher staff turnover.
3
Q
What is power culture and what are the positives and negatives?
A
- Power Culture is when one or a few managers are in charge of all decisions, usually centralised and autocratic leadership.
- Positives include that less mistakes will be made as employees will be supervised and told exactly what to do. Decisions will usually be good as managers usually have experience and good knowledge of the firm and market.
- Negatives include decreasing employee motivation as they have less freedom due to high levels of supervision. Employees will be more resistant to change as they do not have a say in decisions so therefore likely to be against it which can lead to a weak culture and high staff turnover.
4
Q
What is Role Culture and what are the positives and negatives?
A
- Role Culture is when authority is defined by job title. Decisions come from senior managers, so employees don’t have a say in the decision making process.
- Positives include they avoid risk for fear of failure so change is low which can be positive as loss of capital is less.
- Negatives include they tend to have poor communication between departments and seem to be slow to respond to change which can lead to competitors taking customers. Will also meet resistance to change as employees are not used to doing things differently.
5
Q
What is Person Culture?
A
- Is common in loose organisations and in professional partnerships such as solicitors or doctors where employees are highly skilled and work independently.
- Positives include less supervision needed, decisions are made jointly so all employees agree on the decisions made.
- Negatives include employees are often looking out for their own self interests rather than the businesses, so decisions may be hard to make and will need to find areas in the business that will benefit themselves.
6
Q
What is Task Culture?
A
- Task Culture is where the focus is on different tasks and projects, businesses will assemble small teams to focus on tasks and the business supports the culture around completing tasks.
- Positives include employees welcome change as they are already adaptable and familiar with change so will meet less resistance.
- Negatives include it may cause conflicts on decisions and budgets and it may be confusing if firms have too many projects.
7
Q
What is Entrepreneurial Culture?
A
- This is when a business encourages employees to look for new ways of bringing revenue into the company.
- Positives include that change is massively welcome due to employees always finding out more ways to improve the business. If employees are more innovative and creative it leads to being more open to change and also an increase in motivation and decrease in staff turnover.
8
Q
What are other organisational cultures outside the main 5?
A
- Customer Culture- All based on customer feedback and satisfaction.
- Clan Culture- Organisation acts as a family(Paternalistic management).
- Market Culture- Focus is on competition between employees and other organisations.
9
Q
What are the 6 reasons to change organisational culture?
A
- May be affecting sales negatively.
- Customer Service.
- Competitors.
- Trends.
- Change in management.
- Internal issues.
10
Q
What are the issues with changing organisational structure on the business?
A
- Employees usually resist to any type of change including changes to organisational culture. Long-term employees are the most susceptible to change as they believe the old ways always worked.
- Changing leads to a shift in changes of attitude and behaviour for staff, so its much more complicated to help achieve employees being on board with the new culture.
- Changes to the organisational structure can also be very expensive and time consuming such as extra training to staff or a new office layout.
- The HR department plays a crucial role in the change. They will need to change things such as their reward system or recruitment style.
11
Q
What is Monetary Policy?
A
- It is tweaking the interest rate to control inflation and exchange rates.
- The government will increase interest rates, leading to decreasing inflation due to less spending encouraging saving rather than spending.
- Foreign investors want to keep their money in UK banks when IR is high.
12
Q
What is the main aims of Monetary Policy?
A
- Control inflation
- Control the overall rate of economic growth.
- Manage unemployment levels( If IR are low then people have more money to spend and increased demand leading to an increase in demand for labour.
- Influence foreign exchange rates.
13
Q
What is Fiscal Policy?
A
- It sets tax rates and the amount of government spending.
- It is the about the balance between taxation and spending, if one is more than the other it can cause problems.
14
Q
What is Contribution?
What is the formula for Contribution per unit?
A
- Is the difference between the selling price of a product and the variable costs it takes to produce it.
- CPU= Selling price per unit-variable cost per unit
15
Q
What is cost-push inflation?
A
-Rises in inflation can be due to rising costs pushing up prices.
- Wage rises can make prices go up- especially if productivity isn’t rising.
- Makes profit margins go down if businesses don’t put prices up.
16
Q
What is Net Present Value and what is it used for?
A
- Is the value of the project assuming all future returns are discounted to what they would be worth if you had them now, which is always less than face value due to inflation and lost interest.
17
Q
What does it mean if you have a positive and negative Net Present Value?
A
- If negative, it means that the business could get a better return by putting their money into a savings account rather than going ahead with the project.
- If positive, a business will usually go ahead with the project as it is likely to make them money.
18
Q
How to calculate Total Contribution?
A
- TC= Total revenue-total variable costs OR Contribution per unit X number of units sold.
- Contribution is used to pay fixed costs the rest left over is profit.
19
Q
What is break even output and what is the formula?
A
- Break even output is the level of sales a business needs to cover its costs.
- BEO= Fixed Costs/contribution per unit.
20
Q
What is the Margin of Safety formula?
A
- MOS= Actual output- break-even output
21
Q
What are the benefits of knowing your break even output and margin of safety for businesses?
A
- Allows the business to make important decisions.
- For example, if the businesses MOS is low, they will need to increase prices or output and decrease costs.
- For BEO they will need to decrease variable costs.
22
Q
What are the advantages of break-even analysis?
A
- Its easy to do and not very time consuming, meaning managers can act quickly in cutting costs or increasing output.
- Shows how variation in price and costs will affect how much they need to sell.
- Can be used to help secure a loan from a bank.
- Insight into whether a new product can be launched, a high break even output means they can.
23
Q
What are the disadvantages of break even analysis?
A
- Assume that variable costs always rise steadily using extrapolation, this isn’t always the case as sometimes there are discounts, so can provide inaccurate results.
- Is simple for a single product but businesses that sell a range of products can be complicated and time consuming.
- Assumes a business will sell all its products
24
Q
Why do businesses need sources of finance?
A
- Need it to purchase fixed assets like factories and machinery. Also need it for day to day costs, like wages and other bills for the business to survive.
25
What are internal and external finances?
- Internal finance is money from within the business eg. profit.
- External finance is money from outside the business eg. bank loans and shareholder investments.
26
Why may businesses need short term and long term finance?
- May need short term debts to pay off suppliers or cover temporary shortages of cash and are paid off within a year.
- Need long term investments to benefit the business over 3 years such as new machinery and will take a while before you drastically financially benefit.
27
What factors does a business need to consider when choosing a source of finance?
- The legal structure of the business- limited companies can sell shares, sole traders cannot.
- The amount of money required- larger amount, less likely internal finance can be raised.
- Level of risk involved- a riskier business is less likely to find a loan, venture capital is an option however.
- is it short or long term finance- how long will it take to repay?
28
What are the two internal sources of finance?
- Retained profits
- Rationalisation
29
What is retained profits in terms of sources of finance?
What are the benefits and drawbacks?
- Profit can be retained and built up over the years after dividends have been paid.
- The main benefit of using profit is there is no interest on the money. However, not all businesses use this as they may not have enough profits.
30
What is Rationalisation in terms of sources of finance?
What are the benefits and drawbacks?
- Rationalisation is when managers reorganise the business to make it more efficient. They can do this by selling assets such as machinery then leasing them back when required.
- Benefit is they don't pay any interest on money made for selling assets.
- Main drawback is that the business no longer owns the asset which introduces a new cost when hiring them back and they also lose value overtime.
31
What are some external sources of finance for short term?
- Overdraft
- Debt factoring
32
What are overdrafts and what are benefits and drawbacks?
- When a bank lets a business go into a negative balance.
+ Easy to arrange and flexible- businesses can borrow as much as they need to a certain limit and only pay interest on the overdraft they actually use.
- Charge high interest rates and may be a fixed charge, also unsuitable for long term.
33
What are bank loans?
- External sources of finance and businesses can borrow a fixed amount of money and pay it back over a fixed amount of time.
34
What are the benefits of using a bank loan?
+Your guaranteed the money for the duration of the loan(Bank doesn’t ask for it back)
+ You only have to pay back the loan and interest, don’t need to pay share of profits.
+ Usually lower interest than overdraft.
35
What are the disadvantages to using a bank loan?
- They can be difficult to arrange because a bank needs to know the business will pay it back.
- Keeping up with repayments can be difficult if cash isn’t coming into the business quickly enough. May need to sell fixed assets.
- Business may face a charge if they wish to pay off the loan early.
36
What is Share Capital and what are benefits and drawbacks?
- Capital raised by selling shares in the business.
+ The money doesn’t need to repaid and new shareholders bring additional expertise into the business.
- The owner doesn’t own the shares anymore and therefore loses further ownership in the business, now needs to pay a dividend and also has a say in how the business is run.
37
What is Venture Capital and what are the benefits and drawbacks?
-Venture capital is funding in terms of share and loan capital invested into the business. Venture capitalists are professional investors that will invest in a business if they believe the business will be successful.
+ Bring expert business advice and capital in the business.
- Loss of ownership, pressure to pay back loans to venture capitalist.
38
What are liquidity ratios and what is a liquidity of an asset?
- Show how much capital is available to pay off expenses.
- The liquidity of an asset is how easily it can be turned into cash and used to buy things. Cash is very liquid, non current assets like factories are not very liquid.
39
What is current ratio formula?
- Current assets/current liabilities
- A value below 1.5 suggests the business is facing liquidity problems.
40
What is capital employed and what is the formula?
- ROCE(%)=
Operating profit/Total equity+ non current liabilities X 100
- Is a profitability ratio that tells you how much money is made by the business in comparison to what is being put into the business.
- Investors compare with Bank of England ROCE to see whether it’s more profitable to put there money into the bank.
41
What is Soft HRM and what are the benefits and drawbacks of it?
- Soft HRM is treating employees as the most valuable resource in the business and making sure they feel valued and may use non-financial methods of motivation and employ for long term.
- Benefits include higher staff motivation, increased staff retention, training done which will increase skills and will breed productivity.
- Drawbacks include higher costs due to investment in employees, employees may not be interested in empowerment, can be very time consuming and you can lose your trained staff to competitors.
42
What is Hard HRM management and what are the benefits and drawbacks?
- Hard HRM is more short term employment, and treating employees as a resource which should be used efficiently and training is only done to meet production needs.
- Benefits include it is a much lower cost as employees are not the main priority and training is not time consuming, employees also are not too effected when staff leave as staff turnover is high which can be beneficial as more ideas are coming into the business.
- Drawbacks include high staff turnover which can cause high costs in recruitment costs, employee motivation may be low which will make employees feel undervalued which can stop a business using employees to their full potential.
43
What is Strategic Drift?
- When strategy and reality really grow apart and the original strategy becomes less and less suited to the business.
44
What are the 6 factors that cause strategic drift to occur?
PESTLE
45
What techniques do businesses use to monitor how strategy is going?
- Market analysis which is used to see is assumptions about the market is correct and will use primary and secondary market research to see the strategies effectiveness.
- Management information systems are computer systems that constantly collect and process routine departmental data to picture the current set of data.
46
What are some factors that influence implementing strategy?
- Resources(eg.money,skills,time). Heavy investment may mean less working capital available for day to day activities.
- Communication, all managers need to understand the strategy to implement good leadership.
- Strategy may rely on assumptions which may be changed.
- Changing the structure.
- Flexibility.
47
What is a planned and emergent strategy?
- Planned is planned out before any action is taken place.
- Emergent is strategies implemented overtime as management discover the business behaviour.
48
What is Lean Production and what are the benefits and drawbacks?
- Lean Production is an efficient form of production that aims to minimise waste and keep costs low. It includes Just in Time, Time Based Management and Kaizen.
- Benefits include lower costs, can help meet some of the operational objectives such as benefitting the environment which will increase reputation.
- Drawbacks include it is a more time consuming process.
49
What is Just in Time Production and what are the benefits and drawbacks?
- Aims to have as little stock as possible and contacts suppliers around when the sale is made. Aims to reduce waste and costs.
- Benefits include you miss out on storage costs and an improved cash flow, the business is more flexible and easily adapt its products to suit customers.
- Drawbacks is there is no buffer stock which can lead to lack of supply to meet demand and are heavily reliant on suppliers.
50
What are the four stages in strategic drift?
1st Stage- Incremental change
2nd Stage-Strategic drift
3rd Stage-Flux
4th Stage-Transformational change or death.
50
What is incremental change phase?
- This is when managers recognise a change in the business environment.
- However, there is not much drift yet.
51
What is Strategic Change phase?
- Rate of change is starting to grow.
- Managers doing more now to change.
52
What is Flux phase?
- Managers have fully recognised the issue yet they are unsure how to solve it.
- The gap in strategic drift shows how they have lost their competitive advantage.
53
What is the Transformational or death phase?
- Has to be a transformational change or business will die/crash due to PESTLE.
- NOKIA, blockbuster failed to do this.
- Netflix transformational change to use digital film to increase competitive advantage.
