Understanding Business 2 Flashcards

Question

Describe environmental factors

Answer 1

Environmental factors arise from the way the natural environment impacts the organisation and the expectation that they will act in an ethical or environmentally friendly manner.

Answer 2

Weather Natural Resources Natural Disasters Pollution Recycling Targets Carbon Footprint

Answer 3

Changing weather patterns can also affect a business. Flooding and storms can lead to delays in the delivery of stock and goods which affects production, as well as delivery of orders to customers. Business premises can also be badly damaged resulting in temporary or permanent closure.

Answer 4

Being environmentally friendly can increase the effectiveness of a business. This means that businesses who work to minimize their carbon footprint or to cut down on pollution to rivers and the environment can also be more attractive to customers who are interested in the environment. This could also result in an increase in market share due to customer loyalty.

Answer 5

Most businesses face competition from other businesses which provide the same product/service. A business must try to reduce the impact of competitors and will use marketing strategies to do this.

Answer 6

Competitor's prices may effect a business as their prices may be more attractive to customers. This means that they are more likely to go and buy from them which could will gain competitors loyal customer.

Answer 7

The amount of competition could also effect a business as there may be many businesses selling similar goods and services, giving consumers a lot of choice when choosing where to buy their goods and services. This could decrease the chances of them buying from you.

Answer 8

A stakeholder is a person or group of people who have an interest and influence on an organisation and the way in which it is managed or run.

Answer 9

This is what they want from the business e.g. employees want a salary.

Answer 10

This is how they impact the business e.g. employees can go on strike.

Answer 11

Owners Shareholders Employees Managers

Answer 12

Banks Customers Suppliers Local Community Pressure Groups Local Government National Government

Answer 13

Good return on the money they have invested into the business Increase in value of the business Stability to ensure future returns on investment

Answer 14

Make decisions which will affect the business Invest more capital in the business Sell their investment in the business

Answer 15

Good return on the money they have invested into the business (dividend) Increase in value of their shares Stability to ensure future returns on investment

Answer 16

Invest more capital in the business Sell their investment in the business Contribute to decision making by voting at the Annual General Meeting

Answer 17

Fair salary and bonuses Opportunities for promotion Status and responsibility Job satisfaction and security

Answer 18

Poor decisions which can affect the success of the business. Recruitment and management of staff Motivating staff

Answer 19

Good rate of pay/pay rise Job satisfaction and security Good working conditions To be treated fairly

Answer 20

Standard or work/customer service Lack of motivation Industrial action

Answer 21

Value for money on product or service Good quality product or service Good customer service Choice of products

Answer 22

Can choose to shop elsewhere Complain about product or customer service Damage reputation of business

Answer 23

Business to open an account with them Business to repay on time and in full Stable cash flow

Answer 24

Refuse to provide overdraft or loan Charge higher interest rates Change repayment terms

Answer 25

Business to place repeat orders To be paid for goods or services supplied on time and in full

Answer 26

Increase/decrease their prices Withdraw offers of discount Refuse trade credit Deliver late Deliver goods which are not fit for purpose

Answer 27

Correct amount of tax is paid Legislation is adhered to Provision of employment Behaving in a socially responsible way

Answer 28

Change the rate of tax Change the rate of minimum pay Change legislation Offer grants Refuse to grant planning permission

Answer 29

Social responsibility in local area Provision of employment

Answer 30

Protest against the business through MP's and local press

Answer 31

All stakeholders want the business to succeed however, a business cannot satisfy the interests of all stakeholders all of the time (remember satisficing from business objectives), this is known as a conflict of interest.

Answer 32

Employees are likely to want higher wages than the owner is willing to pay as this will reduce profitability Owners want to cut costs and employees want a safe working environment e.g. health and safety - protective clothing Reorganisation of the business to become more efficient will benefit the owner, however, employees may feel they are being given extra responsibility without training or financial reward or some may be made redundant

Answer 33

Owners want to maintain control of the business while managers want to have more power and influence Managers will focus on their personal objectives e.g. high salary and bonuses which will conflict with the owner's objective of maximising profit

Answer 34

The owner's interest is to maximise profits and charge the highest price possible while customers want value for money and want prices to be low Customers expect a satisfactory quality of goods for the price they paid. The business may try to reduce costs by using poorer quality materials, resulting in customers wanting a refund and the business loses this sales revenue

Answer 35

To improve cash flow, managers want to keep cash within the business for as long as possible and may delay paying suppliers for goods/services provided. However, if suppliers are not paid within a reasonable time (usually 28 days) this can cause them financial hardship and cash flow problems of their own.

Answer 36

Despite possible conflicts of interest stakeholders also rely on each other to achieve their own objectives

Answer 37

Owners rely on the skills and ability of the management team to achieve their objective, and the managers rely on the owners for job security, salary and support in their management role

Answer 38

Employees rely on managers to provide leadership and direction to successfully do their job while managers rely on employees to achieve their targets and meet deadlines. Managers are accountable if their employees work inefficiently.

Answer 39

Managers need supplies to provide high quality raw materials when required and suppliers need managers to buy supplies from them to keep them in business.

Answer 40

Business owners are reliant on customers to buy their goods/services to generate sales revenue while customers are employees of businesses and rely on them to earn their salary to generate enough income to buy goods/services to satisfy their needs and wants Customers need owners to provide them with the goods and services they require, and owners need customers to buy their products

Answer 41

Owners need employees to work hard for them to help satisfy customers and increase sales and employees need owners to provide them with fair wages and good working conditions.

Answer 42

The structure of a business is very important as it defines how it operates. It clearly indicates the role and responsibility of employees and outlines the relationships between individuals and groups of staff. Small businesses with few employees may have an informal structure; however, large businesses need a formal structure to ensure the best use of the resources available.

Answer 43

The size of the business The marketplace The technology used The products and services made or supplied The skills of staff Finance available

Answer 44

In small business one or two managers can be responsible for decision making and control. However, larger businesses will have a more formal structure as there is a greater need of structure and control.

Answer 45

A small business is more likely to operate in a local market and need less formal structures. However, a business which operates nationally or internationally will need a formal structure to ensure efficient and effective use of resources.

Answer 46

Introducing e-commerce will result in the business altering its structure to create a new department for this activity. In addition, if new technology is introduced this may result in redundancies or deskilling of jobs. Technology is widely used to facilitate communication in any business.

Answer 47

If a business is diverse and produces many products or services there may be a higher number of departments resulting a larger more formal business structure.

Answer 48

Highly skilled staff may be given more independence resulting in a flat, decentralised structure.

Answer 49

If finance is limited the business will not have as many options to choose from when structuring their business.

Answer 50

Tall (Hierarchical) structure Flat structure Centralised structure Decentralised structure Entrepreneurial structure Matrix structure

Answer 51

This is the traditional structure for many medium and large businesses. Decisions and instructions are passed down from senior staff to the workforce and information passes back up through the levels of management. In a Tall structure employee's position in the structure indicates their level of responsibility - the higher up the structure the greater the responsibility.

Answer 52

many levels of management the chain of command is long the span of control is narrow

Answer 53

There is a high level of control as important decisions are made by senior staff and are then passed down through the various levels of management. The role and responsibility of each employee is clearly defined, along with the procedures to be followed Staff become specialist in their role (often linked to functional grouping) Supervisors/managers have a narrow span of control, making it easier to oversee the work of their staff There are clear promotion and career development opportunities

Answer 54

Slow response to market and consumer demands because of the length of the chain of command Decision making is slow as many individuals in the various levels of management must be consulted The system is rigid and inflexible as roles and responsibilities are clearly defined The level of responsibility and authority in the structure can be seen as a status symbol causing divisions between managers and staff.

Answer 55

A flat structure has very few levels of management. It is traditionally used by small businesses e.g. professional partnerships of doctors, dentists or lawyers. However, large businesses are increasingly moving towards a flatter structure to overcome the problems of a hierarchical structure. Moving to a flat structure will involve reducing the number of levels of Flat Structure management through a process called delayering.

Answer 56

few levels of management the chain of command is short the span of control is wide

Answer 57

Faster communication as there are fewer levels of management to be consulted Faster response to changes in the marketplace Employees have more responsibility and a wider variety of tasks to complete which can be motivating

Answer 58

Supervision of employees becomes more difficult as span of control is wide The level of support received by staff is reduced as managers are now responsible for more staff Fewer promotion opportunities available

Answer 59

Span of control is the number of people who report to a manager. If a manager has a wide span of control, there are a number of impacts;

Answer 60

Chain of command is how decisions and information are communicated within the organisation i.e. down the levels of management. A short chain of command (flat structure) means decision making and communication is faster. A tall structure has a long chain of command which slows down decision making and communication.

Answer 61

This structure relies heavily on a relatively small number of key decision makers which makes it easier to maintain the corporate image The decision makers will be senior managers, directors and sometimes the owners, depending on the type of business, who will be based at the businesses "head office". Branches) departments are not consulted.

Answer 62

Economies of scale are gained by purchasing materials centrally Easier to promote corporate image as communication will be standardised Decisions made for the benefit of the whole business rather than individual departments Managers are likely to be more experienced and skilled in the role of management and the decisions they make will be of better quality

Answer 63

Heavy reliance on key decision makers Stifles creativity of staff Difficult for decision makers to relate to local conditions Employees become demotivated through lack of responsibility Does not prepare staff for promotion

Answer 64

Decision making is devolved to individual branches/departments therefore employees at different levels are involved in decision making and they are more motivated and empowered. Head office provides a supporting role rather than a controlling role. This structure is often associated with a flat structure

Answer 65

Decision making is quicker More responsive to changes in local market Decision makers have better knowledge of local needs Staff are empowered - more motivated Staff are prepared for promotion Staff are more proactive and flexible

Answer 66

Some overall control of the business is lost Corporate image and consistency more difficult to maintain Inexperienced managers may make poor decisions affecting the whole business Greater supervision may be required Lower and middle managers may need additional training Higher salaries may need to be paid

Answer 67

A matrix structure involves an organisation being arranged into temporary project teams to carry out a particular task e.g. developing new product or service, or a large-scale construction project. Teams are made up of employees from the different functional areas e.g. marketing, finance, operations. Each member of staff will have two managers: one from the functional area and the other is the project manager.

Answer 68

Increased motivation as staff have the opportunity to move to new projects Increased job satisfaction as staff can use their expertise Staff can develop through working in areas out with their expertise Project benefits from different viewpoints and skills Effective use of resources as staff can be moved between projects

Answer 69

There can be confusion and conflict between the 2 managers Many managers across projects means high salary costs Duplication of resources increase costs e.g. equipment

Answer 70

Entrepreneurial structure is common in many small businesses and decisions are made by the owner(s). This structure is similar to a centralised structure but for a small business. This structure may not be suitable as the business grows. A heavy workload is placed on the owner(s) who have responsibility for decision making which can lead to inefficiency.

Answer 71

Decision making is quicker Decisions are made for the benefit of the business as a whole There is no confusion around accountability/responsibility High quality decisions as decision makers are experienced

Answer 72

Heavy workload for decision makers No decisions can be made if decision maker not available Decision maker has to be expert in all areas Demotivating for employees Stifles creativity and initiative

Answer 73

A decision is the process of making a choice between different options to achieve an aim or goal. Some decisions in business are routine and made quickly while others are more complex and take longer to make and implement.

Answer 74

Strategic Tactical Operational Centralized Decentralized

Answer 75

These are long term (5-10 years) made by directors/senior managers Difficult and expensive to reverse - carry the highest financial risk They focus on where the business wants to be in the long term i.e. strategic objectives These are proactive decisions - plan for future These decisions take a long time to implement fully and do not consider the detail of how it will be achieved Example - to increase market share by 10% within 5 years

Answer 76

These are medium term (up to 5 years) and are made by middle managers. They focus on the actions the business must take to achieve its strategic objectives They can be reversed but it is time consuming and expensive These carry less financial risk than strategic decisions Example, to open 3 new stores within the next year

Answer 77

These are short term, day to day decisions made by lower level managers. They are implemented quickly and have a short-term impact They are reactive decisions - based on current situation They do not have a significant effect on the business and can be easily reversed These carry the least financial risk Example, to open an extra checkout to reduce the queue.

Answer 78

In a centralised structure the decision making is kept at the senior level of the business e.g. fast food franchises do not let their franchises make any significant decisions on prices or promotions, so they retain overall consistency and identity.

Answer 79

Decisions are made by the most experienced people Decision making is quick and efficient Leads to greater uniformity/ standardisation within the organization Decisions are made for the benefit of whole organisation Can maintain the corporate image

Answer 80

Staff demotivated from lack of input in decisions Central team are slower to respond to local changes in the market

Answer 81

In a decentralised structure decision making is delegated to branches or outlets e.g. Waterstones operates in this way and branch managers order books that reflect the local area and what local customers want to read.

Answer 82

Can improve staff motivation and morale as they are a part of the decision making process Focus the decisions making on indivisible department and branches of the business which can increase efficiency

Answer 83

Some decisions are made by less experienced managers Local decisions may be inconsistent with the overall strategy of the business

Understanding Business 2 Flashcards

(107 cards)