Understanding Business Flashcards
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Describe the 4 sectors of Industry 4
Primary - raw materials
Secondary - manufactured
Tertiary - service
Quarternary - H-Tec research and information services
Distinguish between an tactical and operational decision 3
Tactical is medium terms whereas operation is day to day.
Operation is low risk tactical is medium risk
Tactical made by middle managers Operation by anyone
Compare the features of a PLC with that of an organisation in the public sector. 3
A PLC is owned by shareholders, WHEREAS an organisation in the public sector is owned by the government
A PLC is finance through the selling of shares, WHEREAS an organisation in the public sector is finance through taxes
A PLC is controlled by a board of directors, BUT a public sector organisation is controlled by the Government
A PLC aims to maximise profits, HOWEVER a public sector organisation aims to use taxes efficiently.
Describe the advantages of being a social enterprise. 3
Help tackle social problems it has chosen
Some funding/grants/support is only available to social enterprises
Publicity for the social issue promotes the business
Attract customers who appreciate the good causes they help
Attract good quality staff who want to help the social cause
Compare the objectives of a private sector organisation with the objectives of a public sector organisation. 3
Private sector organisations objectives will focus on profit maximisation whereas public sector will require to operate within a specific budget
Private sector will focus on sales maximisation but public sector organisations will focus on provision of a specific product or service
Private sector organisations will be responsive to shareholders opinions however public sector will have local or national government priorities and objectives
Describe the possible methods of growth for a public limited company 5
Vertical Integration — organisations at a different stage in the same industry combine together.
Horizontal Integration — organisations at the same stage of production combine together.
Backward Vertical Integration — when a business takes over a supplier.
Forward Vertical Integration — when a business takes over a customer.
Conglomerate/Diversification — organisations in completely different industries combine together.
De-integration/de-merger — organisations cut back and concentrate on only their core activities.
Divestment — sell off assets or subsidiary companies to raise finance for growth.
Organic growth — organisations increase the number of products sold or number of outlets
Merger — when two firms opt to join their operations together.
Takeover — when an organisation purchases the majority of shares in another organisation.
Describe the impact of competition policy on an organisation. 2
Cannot collude with other organisations to fix prices eg cartel
Cannot fix the bid for tendering on projects with other firms
Cannot use market power to pay unfairly low prices to suppliers
Prevents monopolies occurring
Block mergers and take-overs that are deemed anti-competitive
Describe the methods an organisation could use to create a strong corporate culture. 5
Implementing the ideals and beliefs of the owner
By use of symbols or logos that customers recognise
Staff uniforms consistent throughout the organisation
Uniformity of layout of offices/branches
Use of a phrase or motto that can be recognised by customers / used in marketing
How staff interact with customers
Merchandising of products linked to the organisation
Describe features of strategic decisions. 2
sets the objectives of an organisation
long term decisions
made only by top level managers/owners
are high risk decisions
Describe a conflict of interest between employees and managers 1
managers may want to cut wages to cut costs whereas employees may want wage rises
* managers may want to increase workload to increase efficiency whereas employees may want their workload reduced
Describe an interdependence between employees and managers. 1
employees need managers to set them tasks so that they can get paid, whereas managers need employees to carry out the tasks
Describe a matrix structure. 3
Employees from different functional areas work together on a project
Once complete the employees return to their functional department
Different employees can be a project leader at different times
Allows employees to develop new skills on different projects
o May motivate staff
Employees may have to report to two different managers
Describe the ways in which a manager can measure the success of a decision. 4
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
o Assess using other financial information for example ratio analysis
Compare absenteeism for a reduction
Monitor staff turnover for a reduction
Check if targets have been met
o Assess key performance measures for staff
Review the number of complaints made
Customer reviews/press coverage
Explain the effects of outsourcing on an organisation. 4
specialists can be used to do the work - which should mean better quality
* reduces staff costs in the area that has been outsourced − which may result in increased profits
* outsourced companies will have specialist equipment − which would mean the organisation can sell their equipment
* do not need to purchase specialist equipment − which will reduce up-front costs
Compare functional grouping with customer grouping. 3
Both groups can compete with each other inside the organisation.
Both groups allow staff to build expertise/specialise.
Functional grouping organises staff with similar skills and knowledge together whereas customer grouping structures staff around a targeted type of customer/client/supplier.
