Unit 1 - Introduction to Business Management Flashcards

Question

Public Sector

Answer 1

Refer to the parts of the economy controlled by the government. It is a BROAD WORD referring to: Any type of activity that is run by the government and has meaningful economic implications. Created by the government to provide services and protection to the population. Surplus instead of profit -> not distributed amongst any owners, only reinvested. NOT AS EFFICENT AS THE PRIVATE SECTOR - More people rely on it - MUST be available to everyone - Supported by tax - Supported by TIGHT government funds DONT HAVE TO COMPETE with anyone, so they DO NOT strive to innovate.

Answer 2

- Sole traders - Partnerships - Publicly held companies or corporations - Privately held companies or corporations

Answer 3

An individual who owns his/her own business and are the only person held responsible for its success or failure. · The sole trader owns and runs the business. Sole traders may employ other people, including those empowered to make some of the decisions, but the sole traders themselves make management decisions and have ultimate responsibility for the business.

Answer 4

· The business is often geographically close to the customer. A sole trader is usually a small business that allows the sole trader to interact with each customer. Sole traders get to know their customers on an individual basis, which allows them to provide a more personalized service than larger businesses. · The sole trader has privacy and limited accountability. Most of the time, sole traders do not have to declare their finances to anyone except the tax authorities. · Relatively low capital and legal formalities needed to start · Being your own boss · More likely to take risks · Fast decision making · Profit taking -> gives them an incentive to work hard and do well

Answer 5

· They have "unlimited liability". · The finance is usually limited. High failure rate of startup businesses! · High risk of competition · Excessive workload and stress · Limited economies of scale · Lack of continuity · Limited scope for expansion

Answer 6

It is an unincorporated for-profit private sector business owned by two or more people, usually no more than 20. No legal distinction exists between the business and the partners, each of whom are legally responsible for 100% of the liabilities (risks) of the partnership. Usually includes a DEED OF PARTNERSHIP. Not legally required. Sets out the rights and duties of partners. - Responsibilities - Financing - Division of profits - Liabilities - Procedures for changing circumstances

Answer 7

· Greater financial strength due to partners being able to pool together funds. · Benefit from specialization and division of labor. As partners may share their own expertise, share workload, and emotional support. · Financial privacy · Cost-effective, each partner may specialize in their own area of the business, thus increasing labor productivity and operational efficiency and lessens the need to immediately hire help. · Partners can help one another -> potential continuity (HOWEVER THIS IS ARGUEABLE)

Answer 8

· Unlimited liability · Profits must be shared · Prolonged decision making · Potential lack of harmony as disagreements and conflict within are common. Because partners are legally accountable to others, they cannot put each other at risk. One mistake by one reduces profits for ALL

Answer 9

Is a limited liability company that cannot raise share capital from the general public. Instead, shares are sold to PRIVATE individuals, only with prior agreement form the BOD. Limits amount of finance available but avoids diluted ownership and maintains control! -> typically, family-owned businesses

Answer 10

Companies are businesses owned by their shareholders. They are incorporated and thus limited liability businesses. What separates them from any business is that they have a LEGAL IDENTITY Keep profits for themselves unless payout to shareholders through dividends. (this is if they are publicly held)

Answer 11

A limited liability company that can advertise and sell their shares to the general public through the stock exchange. They must disclose their financial status to the public, and no prior permission is needed to sell shares, making it one of if not the largest source of external finance.

Answer 12

Shareholders own but do not necessarily run the business - only applicable to PUBLICLY LISTED COMPANIES The business and owners are legally separate entities The details of the company's formation are legally recorded and available to the public. Greater finance is generally available They are held to a HIGHER DEGREE OF ACCOUNTABILITY -> must provide information to shareholders Possibilities for expansion, and lots of continuity Have established organizational structures! (Unit 2) Loss of privacyy

Answer 13

A business that advances a social purpose in a financially sustainable way. While aiming to do social good, social enterprises rely on business models, have sales revenue, and reinvest what profits they make in the business. Social enterprises generally do not depend on philanthropy. (THEY DEPEND ON MAKING PROFITS AND SURPLUS NOT DONATIONS) Could be non-profit organizations or for-profit social enterprises.

Answer 14

"Revenue generating enterprises with social objectives at the core of their operations" An organization with many similarities to a normal social enterprise, except that it often earns a profit, some of which might be distributed to owners. The primary aim of a for-profit social enterprise is to provide a social service. THEY WANT TO MAKE A PROFIT but... They do not want to maximize profits if doing so COMPROMISES their social purpose. THREE TYPES: - Private sector companies - Public sector companies - Cooperatives

Answer 15

The main features of a cooperative include: * an aim is to serve the members of the cooperative/members with a common interest; DOESNT have * a cooperative is a type of corporation; * a cooperative has a board of directors or trustees; To be for the * members of the cooperative have limited liability; of sochery * cooperatives have democratic or democratically spirited management; buf * legal existence is separate from the members themselves; RATHER * membership is usually open; mutial benefit . * cooperative's priority is not to make profit; ma servi * surpluses/profit are distributed except when needed for finance; the lutereste * the organization will not end if a member dies or withdraws; of its * all owners have equal voting rights; MEMBERS * profits distributed amongst members; * common goal. decision making is usually shared by all members any profits (or surpluses) and losses arising from this decision are also shared decision making is regarded as more democratic membership is voluntary although a for-profit business there is usually some sort of social improvement goal. RELY ON SALES RATHER THAN RAISING MONEY THROUGH DONATION. The main features of a cooperative include: * An aim is to serve the members of the cooperative/members with a common interest. * A cooperative is a type of corporation. * A cooperative has a board of directors or trustees. * Members of the cooperative have limited liability (accept the cooperative has limited liability). * Cooperatives have democratic or democratically spirited management. * Legal existence is separate from the members themselves. * Membership is usually open and voluntary. * Surpluses/profit are distributed among the members except when needed for finance. * The organization will not end if a member dies or withdraws. * All owners have equal voting rights. * There is no maximum to the number of members. * A cooperative is owned and run by its members. * For profit social enterprise

Answer 16

- Incentives to work because every member has a stake, so they want to do good also for THEIR OWN benefit. - Decision making power is equal due to democracy, giving them commitment and loyalty as members -> more ideas and innovation may come - More employment oppertunties - Social Gains therefore wider community benefits from their operations - Public support

Answer 17

- Limited sources of finance, as they must only rely on their operations and the members themselves. - Disincentive effects as employees cannot be paid much higher, they also may not usually receive bonuses (discuss motivational theories here) - Slower decision making - Limited promotional opportunities (discuss organizational structure here)

Answer 18

- Benefit society - Create employment opportunities - Improve economic and social landscape of local communities - Run in a transparent way - Provide tangible benefits

Answer 19

Businesses that run in a commercial-like manner but without any profit being the main goal. Instead, it is to use their SURPLUS revenues to achieve their social goals rather than distribute them as dividends to their shareholders or owners. Main one is NON-GOVERNMENTAL ORGANIZATIONS

Answer 20

They are separate from the government and are made to further the goals of members/founders to cover a wide range of issues. Although they are separate they often receive grants or funding from the government. Instead of benefiting members directly, NGO's aim to benefit the greater public or specific groups or situations in need. Instead of voluntary, an NGO has a more rigid structure with trustees, a BOD, and its very hard to be appointed into an NGO from the general public. TWO TYPES: - Operational NGOs Established from a given objective and/or purpose. They are more community and relief based. They tend to focus on many things that may relate to such purpose or objective, not just one. - Advocacy NGOs Take a more aggressive approach to promote or defend a particular cause, striving to raise awareness and support through DIRECT ACTION e.g. Mass Demonstrations.

Answer 21

A SPECIFIC FORM OF NGO Whose aim is to provide as much relief as possible for those in need. Charities differ from other NGOs in that their focus is on philanthropy and the desire to help those that cannot help themselves. They are also different as they have no interest in politics. Charities are also different because they are exempt from paying taxes.

Answer 22

A high degree of collaboration between the business and the local community exists. The business operates the same functions as any other normal business - HR - Marketing - Finance and Accounts - Operations management etc. BUT they treat some areas with more CARE and focus than others which often are the areas that generate the most profits.

Answer 23

A strong communal identity exists. - For-profit social enterprises often have highly motivated employees and other stakeholders working together with a common sense of purpose. - Employees often report a high degree of satisfaction, knowing that they are doing something positive for society. They may help the government more, because for-profit social enterprises typically tackle human, social, or environmental problems that a government is not addressing.

Answer 24

- Decision making is complex and time consuming. Because of them being consultative and transparent, they need long timing to allow all parties and people involved to contribute to a singular decision. - Have LOWER PROFIT MARGINS than traditional for-profit businesses. Because they often try to make their PRODUCTS AS INEXPENSIVE AS POSSIBLE.

Answer 25

- Funding can be irregular - They may also struggle with balancing social goals and business efficiency

Answer 26

- Help people or causes in need - Can foster a philanthropic spirit in the community, thus make the community a better place to live, foster the same caring actions in those within it. - Can foster INFORMED DECISIONS in the community about the ALLOCATION OF RESOURCES. Because the non-profit enterprises help address issues not targeted enough or with gaps from the government and public eye and priority.

Answer 27

A philosophy, vision or set fo principles which steers the direction and behavior of an organization. They are for the future and longevity of the business. Outline of their aspirations Expresses BROADLY what the company wants to see itself as in the future. SHOULD NEVER CHANGE - Expression of business core values and vision - Inspires and motivates employees

Answer 28

Why are we doing what we are doing? A mission statement states a company's PURPOSE and explains why the business exists. A mission statement generally includes the business's aims, whether explicitly or implicitly it also says its most important values. Helps create well defined objectives. - Well written - Realistically achievable - SMART Goal - Medium -> Long term

Answer 29

The articulated, measurable targets that a business must meet to achieve the aims or long-term goals of the business. It is critical that objectives are SMART.

Answer 30

Long term goals of a business that indicate how the business intends to fulfill its mission. - Performance goals e.g. Increase market share e.g. Improve profitability MORE SPECIFICALLY: - Market standing - Image and reputation - Market share Typically set by the Board of Directors

Answer 31

They are short term goals that affect a SECTION OF AN ORGANIZATION. THEY ARE SPECIFIC GOALS THAT GUIDE THE DAILY FUNCTIONING OF CERTAIN DEPARTMENTS OR OPERATIONS WITHIN THE BUSINESS. May include: - Survival - Sales revenue maximization (both esp relevant for new businesses) Set by middle management

Answer 32

The day-to-day goals of what a business wants to achieve to work towards it tactical objectives. Set by floor managers and sometimes workers themselves

Answer 33

A plan to achieve a strategic objective to work towards the aims of the business. They are medium to long term and require senior managers to make decisions approved by the owners/CEO

Answer 34

- Change of leadership - Human Resources - Organizational structure - Any types of internal growth methods - Products sold/where sold/performance - Finance available - Operations (are they developing better methods of production or delivering? are they relocating?)

Answer 35

USE STEEPLE! -> its only ever about EXTERNAL never internal changes Social - changes in society or culture, like demographic or cultural change Technological Economic - competitors, market conditions, changes in the economy e.g. interest, inflation, etc. Ethical - changes in societal values Political Legal Ecological

Answer 36

CSR is the view that businesses, rather than focusing solely on increasing shareholder value, should contribute to the economic, social, and environmental wellbeing of society. As part of its CSR policy, a business would want to assess its actions/hold itself accountable, thus they may set an ETHICAL OBJECTIVE. The nature of CSR could be subjective. What is considered right and wrong is based on PUBLIC OPINION. Meaning CSR may change over time. ALSO CSR changes between countries (another limitation)

Answer 37

Sometimes referred to as organic growth, this occurs when a business grows by relying on its own resources and capabilities: investment in new products, or new sales channels, or more stores etc. to increase sales

Answer 38

Occurs when a business expands with the aid of resources and capabilities not developed internally by the company itself. Instead, the company obtains these new resources and capabilities by acquiring another company or forming some type of relationship. Examples: - Joint venture - Strategic alliance - Franchising - Merger - Acquisition - Takeover

Answer 39

Occurs when two companies that are theoretically "equal" legally become one company

Answer 40

When one company purchases a majority or all the hares of another company. A merger is a voluntary (NOT LIKE TAKEOVER) legal agreement executed between two different companies to unite them into a new entity. Mergers allow companies to recognize new synergies, reduce costs, expand their operations, target new market segments, offer new products and services, or gain market share.

Answer 41

A takeover is a type of acquisition that occurs when one company (the acquirer) successfully purchases another company (the target). This process typically involves a larger company buying the majority is not all the shares a smaller one, and it can be either friendly or hostile. -> the target must be a publicly listed company so their shares can be bought

Answer 42

When an organization created, owned, and operated by two or more other organizations. The joint venture is legally distinct from the organizations that created it.

Answer 43

Occurs when two or more businesses COOPERATE in some legal way that enhances the value for all parties. Members of the alliance retain their independence. A strategic alliance is less binding than a joint venture, as no new organization is created. Different from joint venture because: - More than two businesses can be part of the alliance - No new business is created - More fluid than joint venture -> members can leave easy

Answer 44

A method of distributing products or services, where the franchisor develops products or services and its brand and then sells the right to use the brand and its products or services to franchisees. The franchisee pays a fee and typically some percentage of revenue or profits to the franchisor.

Answer 45

- Corporate culture (the accepted norms and customs of an organization) - Type and size of the organization (e.g. publicly held companies need to consider shareholder perspective) - Private versus public sector because public don't focus on profit MAXIMISATION. - Age of business - Finance - Crisis management

Answer 46

- State of the economy - Government constraints - Pressure groups (and their power extent) - New technology

Answer 47

Opportunity cost represents the potential benefits that a business, an investor, or an individual consumer misses out on when choosing one alternative over another.

Unit 1 - Introduction to Business Management Flashcards

(72 cards)