Unit 1 - Understanding Business Flashcards Preview

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Flashcards in Unit 1 - Understanding Business Deck (41)
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1

Describe the private sector (run by, objectives, businesses, financed by)

Owned and controlled by Private individuals
Objective is to make a profit
Business include sole trader, partnership, franchise, companies; PLC, LTD, MNC
Financed by savings, loans, grants and bank overdraft

2

Describe the public sector (run by, objectives, financed by)

Owned and controlled by central and local governments
Objectives are to provide a service, make effective use of funds
Financed via taxes paid by publics

3

Describe the third sector (objectives and financed by)

Objectives are to raise awareness and raise funds
Financed by donations

4

What is a business objective?

What a business aims to achieve

5

What is satisficing?

Aiming for a satisfactory result rather than the ‘best possible’ result, allows survival rather than profit maximisation

6

What are managerial objectives?

When managers set objectives they believe will improve the status of the company (expanding into new markets etc)

7

What is corporate social responsibility?

When a business aims to act in an ethical way so that they benefit society or the environment (good pay and working conditions, recycling etc)

8

What is growth?

Making the business larger

9

What are the factors affecting structure?

SIZE - as the business grows it becomes harder to control

TECHNOLOGY - introduction of new technology can change the structure

MARKET - if the market is small then the organisation will be small with an entrepreneurial structure

10

What is a flat structure?

Only a few levels of management
Short chain of command
Wider span of control for managers
Managers are directly responsible for employees

11

What are advantages and disadvantages of a flat structure?

Advantages
-info flows quickly
-consulting staff on decisions takes less time
-business is more able to respond to market changes
-customers needs are quickly dealt with

Disadvantages
-removal of management levels means there is less control
-mistakes are easier to make

12

What is a hierarchical structure?

Has many layers of management
Long chain of command
Each manager has a narrow span of control
Information and decisions need to go through each level

13

What are the advantages and disadvantages of a hierarchical structure?

Advantages
-great deal of control and supervision
-clearly defined roles and procedures

Disadvantages
-decision making can take a long time as every level must be consulted
-communication can be slow

14

What is an entrepreneurial structure?

One or two main decision makers
Usually used in small businesses
Relies on the expertise of the decision maker

15

What are advantages and disadvantages of an entrepreneurial structure?

Advantages
-decisions are made quickly
-decision makers are experienced
-staff know who they are accountable to

Disadvantages
-decisions can’t be made if the decision maker is unavailable
-difficult to use in large businesses

16

What is a matrix structure?

Used when the business is involved in a number of large projects/long-term contracts
Staff teams are formed within their functional departments

17

What are the advantages and disadvantages of a matrix structure?

Advantages
-specialist teams provide innovation
-new skills can be learned from working in teams

Disadvantages
-two managers to report to
-can be conflict and duplication of tasks between departments
-can be costly to set up and manage

18

What is functional grouping?

When organisation is split into departments which represent the main functional areas (HR, marketing, admin etc)

19

What are the advantages and disadvantages of functional grouping?

Advantages
-resources are better used
-good communication and cooperation

Disadvantages
-staff loyalty to the department rather than the business
-rivalries between departments

20

What is customer grouping?

Gives close contact with customers
Caters to individual needs of customers
Most likely to exist in the service sector

21

What are the advantages and disadvantages of customer grouping?

Advantages
-highly responsive to customer needs
-personal service
-respond faster to individual needs

Disadvantages
-admin can be time consuming
-large staffing costs
-competition between groups

22

What are the external factors?

PESTEC
political
economic
social
technological
environmental
competitive

23

Describe the political external factor

Decisions made by the government can influence a business
Both local and national governments can influence

Changes to laws - if a business adheres it is shown in a positive light, changes to minimum wage can result in increased costs for business

Changes to tax rates - if taxes were reduced, customers would buy more due to their higher income, opposite effect if taxes increase

Changes to VAT rates - if VAT was lowered products would be more affordable, works opposite way

24

Describe the technological external factor

Includes the use of social media, e-commerce, order tracking, mobile pay etc

Social media - enables business to keep in touch with customers and raise their profiles, but bad reviews spread faster

WiFi - offering free WiFi can attract customers, but costs a lot to set up and maintain

25

Describe the competitive external factor

Most businesses face competition

To compete, business can : alter prices to attract new customers, bring out improved versions of products, launch new marketing campaigns, introduce better customer service/support

Stores next door - provide choice and brings trade to the area, but competition could undercut prices therefore business may have to reduce prices to keep up or lose customers

Market/products - competition improves a market as it brings new ideas and keeps prices low, however businesses will have to spend more money on developing new products of their own

26

Describe the economic factor

Economic influences are anything that encourages people to spend/not spend due to the state of the economy

Boom - demand is high so business can take advantage and raise prices, rise in prices leads to wage rises so that people can keep up

Recession - high unemployment rates so demand falls, may need to make staff redundant to survive

Recovery - sales will increase as more employment and spending, business may find it hard to employ due to previous redundancies

27

Why are shareholders and customers in conflict?

Shareholders want to maximise profits
Customers want a quality product for low prices

28

Why are shareholders and employees in conflict?

Shareholders want to pay as low a wage as possible so that profit is high
Employees want high wages for their work

29

Why are shareholders and suppliers in conflict?

Shareholders want to buy on credit to ensure good cash flow
Suppliers want to be paid ASAP

30

Describe internal growth

Achieved through
-hiring more staff
-opening new outlets
-introducing new products