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Flashcards in Understanding Business Deck (16):
1

What are the key features of public limited companies?

Minimum 2 shareholders
Minimum 2 directors
Sell shares to public
Run by appointed board of directors and owned by shareholders

2

What are the advantages of becoming a public limited company?

Able to raise large amounts of capital by selling shares on the stock market
Lenders more likely to give money as they have more confidence it will be paid back
Shareholders have unlimited liability, attracts more potential shareholders
Shares can be given to employees to motivate them
Larger business so dominate the market and dictate prices

3

What are the disadvantages of becoming a public limited company?

Set up costs are high resulting in poorer profits for the first few years
No control over who buys shares so vulnerable to takeover large amounts of legislation has to be complied with or business suffers fines or legal action
Must publish annual accounts meaning information is available to competitors
Have to share profits between all shareholders which can result in small dividends

4

What are the key features of a multinational?

Subsidiaries in more than one country
Distinct home/base country
Global brand
May dominate markets across many countries
Greatly influence local economies
Cultural differences

5

What are the reasons to become a multinational?

Reduce costs
- able to secure cheaper labour and premises giving higher profitability
- achieve economies of scale reducing unit costs
- manufacturing in country goods are sold in gives cheaper transportation costs

Gain from host-government financial assistance
- may be given grants to set up in a specific country

Earn higher after tax profits
- minimise tax that has to be paid on profits

Minimise risk of takeover
- company is larger so harder to takeover

6

What are the different organisational structures that can be used in a business?

Hierarchical
Flat
Matrix
Entrepreneurial
Centralised
Decentralised

7

What are the benefits and problems with hierarchal structure?

Benefits
Lots of control and supervision over employees
Roles and procedures clearly defined
Staff become experts in performing their role

Problems
Decisions requiring information from different layers can take a long time
Communication can be slow so staff find it difficult to respond quickly to customer requests
Vulnerable to changes in market due to inability to change quickly

8

What are the benefits and problems with flat organisational structure?

Benefits
Quick flow of information up and down the business
Quicker identification of customer needs and able to adapt to changes in the market
Decisions made quicker as gathering information and consolation takes less time

Problems
Removal management layers means less control throughout business
Easier to make mistakes and harder to identify them
Fewer opportunities for promotion decreasing employee motivation

9

What are the benefits and problems of matrix organisational structure?

Benefits
Different specialists do range of skills, increasing innovation
Learning new skills and gaining experience motivates employees
Improves relationships between staff from different functional areas

Problems
Employees have to report to two managers
Confusion and conflict may occur between department and project group
Costly to set up and manage extra admin/support staff for groups

10

What are the are the benefits and problems of entrepreneurial organisation structure?

Decisions made quickly by experienced decision makers
Decisions made for benefit of organisation
Staff know who they are accountable to

Problems
Decisions cannot be made without decision maker
Heavy work load for key decision makers
No involvement of staff in making decisions demotivating them

11

What are the benefits and costs of centralised organisational structure?

Benefits
Easy to promote corporate image as standard method of operation developed across the whole business
Economies of scale achieved throughout purchasing centrally
Decisions made for benefit of whole organisation

Problems
Decisions may not reflect local conditions
Burden of decision making lies with just a few senior directors
Staff have little authority so feel demotivated

12

What are the benefits and problems of decentralised organisational structure?

Benefits
Quick decision making as there is no need to consult up the chain
Develop skills so empowers staff
Decision makers closer to customers so have better knowledge of their needs

Problems
Inexperienced managers making decisions can damage the reputation of the whole business
Overall control of business is lost
More training for staff costs more money

13

What are the different types of decision making?

Strategic
Tactical
Operational

14

Describe strategic decision making

Long term decisions 5-10 years
Set out objectives without much detail
Often proactive to stay ahead of competition
made by top management
Examples what products will the business produce

15

Describe tactical decision making

Monthly/yearly basis
Made to achieve businesses main objectives and often very specific
Made by middle management
Example - if the business wants to increase sales it could increase the number of product lines

16

Describe operational decisions

Daily/weekly basis
Often reactive to a change that occurs
Made by all staff/managers
Examples - if an employee is ill the manager would need to reorganise the shift rota