Flashcards in Unit 3: AOS 1 Deck (70):
1
What is a business?
A business is a structured organisation which is involved in buying and selling of goods/services to make a profit
2
Private Sector
Businesses owned by private individuals, groups or institutions
3
Public Sector
Businesses owned by the government- public schools, hospitals, Australia Post.
4
Centralised
Rely on one individual to make decisions and provide direction for the company. Often used by small businesses.
5
Decentralised
Several individuals responsible for making business decisions and running the business. Decentralised organisations rely on a team environment at different levels in the business.
6
Market Share
Proportion or percentage of the market (and total sales) controlled by the business. If market share increases, the business has a greater percentage of the market and sales.
7
Limited Liability
Entities are only liable for the debts and obligations of the organisation to the extent of their investments, and enjoy protection of personal assets.
8
Unlimited Liability
The business as a whole has a legal responsibility to disburse funds in compliance with third party contractual arrangements, court judgments and operating expenses.
9
Sole Trader
Individual owner who is liable for all losses eg. plumber, mechanic
10
Positives and Negatives of a Sole Trader
Positives: receive all profit after tax, total control, simple structure
Negatives: unlimited liability (eg. death), harder to get finances
11
Partnership
Owned by 2-50 people. Each partner is jointly liable. Most partnerships have a partnership agreement Eg. Accountants, Pub, Cafe
12
Positives and Negatives of a Partnership
Positives: risk is shared, shared workload, still simple to set up
Negatives: unlimited liability, liable for debts incurred by other parties, personal clashes
13
Establishing a company
- A separate legal entity
- A company must be formed in accordance with the Corporations Act 2001, and registered with ASIC as a separate legal entity
- Board of directors ‘runs’ the company on behalf of the shareholders
14
When you establish a company
- It has the same rights as a natural person
- Has perpetuity (on going life)
- Can incur debt
- Can sue and be sued
- Has shareholders who have limited liability (limited liability = shareholders are only liable to the value of their shareholders)
- Has company officers and directors
- Must be registered for GST
- Must lodge a tax return
- Must keep financial records for at least seven years
15
Private Limited Company
- Many sole traders or partnerships become Pty Ltd companies, due to expansion and the opportunity to gain protection by limiting liability
- Can have up to 50 shareholders
- Shares can only be traded with the permission of the other shareholders
16
Positives and Negatives of a Company
Positives: Limited liability, extra capital can be obtained by issuing more shares, separate legal entity, business will still continue if a shareholder/director leaves or dies
Negatives: complex to start, expensive establishment costs, higher degree of government control and reporting requirements, additional compliance cost
17
Public Company
- An organisation listed on the Australian stock exchange
- Any individual can buy shares in a public company
- Run by a board of directors
- Answerable to shareholders
- Shareholders receive a dividend for their investment if profit results are favourable
- Shareholders are not involved in the day to day running of the business
18
Positives and Negatives of a Public Company
Positives: Limited liability,
Able to get more capital by selling more shares , Separate legal entity , Business will still continue if a shareholder/director leaves or dies
Negatives: High complex structure, High establishment costs, Needs accountability and compliance paperwork, Extra compliance cost
19
Social Enterprises
- A business that uses strategies to improve human well being or the environment rather than maximise PROFIT for its owners/shareholders
- Goal= to achieve social, cultural, community and environmental outcomes and earn revenue
- They aim to make a profit to help solve an environmental or social problem
- Limited liability
20
Government Business Enterprises & the 3 Characteristics
- Operates in public sector (run by the government)
- Management of a GBE runs the business, but they must report regularly to the shareholder, parliament and the public
3 Characteristics of GBE
1. Government controls the business
2. Business is engaged in commercial activities
3. Business is a separate legal entity to the government department
21
Types of Business Objectives
1. Financial Objectives
2. Marketing Objectives
3. Social Objectives
4. Meeting shareholder expectations
22
Financial Objectives
--> The desired financial performance of the business
1. Profit: the difference between revenue and expenses, can be achieved by advertising etc.
2. Growing sales: open new stores, sell product/services overseas
3. Growing Sales: Proportion or percentage of the market (and total sales) controlled by the business
4. Increasing Productivity: improving operational efficiencies
23
Marketing Objectives
- Creation of demand for your good or service
- Maximise the appeal of your good or service to most people possible
24
Social Objectives
- Role of the business in the community
- Above and beyond your legal obligations
- The Body Shop, Nespresso and Thankyou group fulfill social objectives
- Social Objectives can also be achieved via workplace policies - equal opportunity policies, anti discrimination policies etc.
25
Shareholder Expectations
- Shareholders: owners of the company, can own the whole, part or shares in a business
- Stakeholder: an individual or group that has a direct interest in the activities of the business (can be shareholders, employees, suppliers, customers etc.)
- Expectation is make a return on their investment
26
Business Stakeholders and CSR
People/ Groups who have a vested interest in the business
27
Environments that a business operates in
Macro: The conditions that a business operates in that they have no control over. Example: Exchange rates, Weather, Trends, Political Environments
Operating: The environment immediately external to a business to which it has close interaction with when conducting business . Example: Suppliers, Customers, Bank, Unions
Internal : Areas of a business that a business has control over. Examples: Staff, Management, Employees
28
Key Stakeholders in a business
Shareholders/ Company Owners
Directors of a company or partners in a partnership
Management
Employees
Trade Unions
Customers
- Shareholders/ Company Owners
- Directors of a company or partners in a partnership
- Management
- Employees
- Trade Unions
- Customers
29
Issues that stakeholders need to consider
1. Is the business conducting itself in a fair and ethical manner
2. Does the business conduct itself in a socially responsible manner
30
Potential Conflict between stakeholders
- Employees and shareholders
- Management and customers
- Management and members of the community
- Suppliers and members of the community
- Management and suppliers
31
Corporate Social Responsibility Considerations
- The obligation that a business has over and above its legal responsibilities to the wellbeing of employees, customers, shareholder, the community and the environment
- How Business affects the TRIPLE BOTTOM LINE (Financial, social and environmental performance)
- Businesses need to understand that reconciling conflicting interests and increasing stakeholder value ensures long term growth and survival.
- Customers like to deal with businesses that implement a strategy of CSR
32
Areas of Management Responsibility
- Operations
- Finance
- Human Resources
- Sales and Marketing
- Technology Support
33
Operations
- The business function responsible for managing the process of creating goods and services.
- It involves managing the raw materials or component parts, equipment, technology, information and people
- It’s closely aligned to helping the business to achieve its financial objectives
- For example at a Hotel, they’re in charge of maintenance, procurement of goods and services, making sure there is enough clean sheet, laundry, uniform etc.
34
Finance
- Is the functional area responsible for planning and preparing internal financial information such as budgets
- It is also responsible for keeping records such as sales revenue and business expenses, paying creditors and employees and monitoring cash flow
- It is also responsible for preparing financial accounts such as the Profit and Loss Statement and Balance Sheet
- Strategies include accountants, financial controls, payroll, procurement etc.
35
Human Resources
- Is the functional area which relates to managing the overall relationship the business has with its employees
- It is also responsible of this area of management to ensure that workplace relations are harmonious and there is no conflict disrupting the productivity levels at the workplace
- Focus on employee motivation, staff retention, staff reviews
- HR are involved with union negotiation - wage + salary negotiation
36
Sales and Marketing
- Marketing is responsible for developing strategies, such as market research, advertising and branding to create an ongoing relationship between the business and the customers.
- This functional area generates customer demand, understands the customers wants and needs and is responsible for promoting the product or services to the target customers
- Sales is about developing relationship with an individual customer
- Includes developing products, pricing, promoting, distributing and promoting products to customers
37
Technology Support
- Responsible for installing and maintaining technology, as well as providing assistance to the users of technology in the business
- Includes phones, computers, tablets, computer networks and other products
38
Management Styles
- The manner and approach of providing direction to staff, implementing business plans and strategies and motivating employees
- They are: Autocratic, Persuasive, Consultative, Participative and Laissez- Faire
39
Autocratic
- All decision making is centralised
- Communication is one way - downward
- Managers are in full control and want to retain authority
- Focus on achieving the task in a set format and processes must be followed
- No input from employees
- Managers believe the main motivator is money
- Task orientated
40
Advantages and Disadvantages of Autocratic Management
Advantages: Decision making is quick, Employees roles and expectations are defined and monitored , Communication is direct, Suits high risk and difficult decisions
Disadvantages: A quick non collaborative decision is not always the best one, Discourages teamwork , No focus on open communication, Low motivation and job satisfaction for employees, Employees feel low job security and are kept in the dark
41
Persuasive
- Management make the decision and then persuade employees of the benefit of that decision
- Has similar characteristics to an autocratic style
- Differences to autocratic- once a persuasive manager makes a decision, they try to convince others as to why it was the best decision
- Has centralised control and authority
- Manager is focused on achieving the task and following process, and regularly checks this process
- Decision making is centralised- top down/hierarchical
42
Advantages and Disadvantages of Persuasive Management Style
Advantages: Decision making is quick and still made by one person, Suits high risk decisions ie. factory closure , Employees have a clear idea of what they have to achieve
Disadvantages: No input from workers into the decision making process, Workers may feel alienated- not respected, Low levels of motivation and job satisfaction
43
Consultative
- Takes into consideration the opinions of the team member before making a decision
Shifts from being task centered to people centered
- Management consult with employees about the issue/process, but the manager makes the final decision based on suggestions and input received
- Control and authority are more centralised, employees have the opportunity to voice their opinion, ideas and concepts
- Manager involves the employees in decision making which leads to more motivated employees
- Two way communication
44
Advantages and Disadvantages of Consultative Management Style
Advantages: Gets lots of ideas from employees- which will help in the decision making outcome, Reasonable level of employee involvement, Is a motivator and increases job satisfaction
Disadvantages: Employees may not understand the complexity of the problem, Can take a long time, Employees will be upset if the management don't take on their ideas
45
Participative
- Managers work closely with employees to get them to work together to improve the businesses performance overall performance
- Encourages employees to share in the decision making and problem solving tasks
- Management are still entitled to have the final say but consider employee input
- Recognise employees strengths and actively involve them in the decision making process
- Makes use of two way communication
- Good management style when a business is undergoing rapid change
46
Advantages and Disadvantages of Participative Management Style
Advantages: Positive employee/employer relationships- less likely for industrial disputes, High levels of motivation and job satisfaction , Opportunities for employees to put forward their ideas- high level of commitment, Employees have the opportunity to acquire more skills
Disadvantages: Can take a long time to reach a decision as everyone needs to be consulted, Managers tole way be weak or undermines , Internal conflict/arguments may arise as employees may be given too much power, Not all employees want to be involved
47
Laizze Fair
- Employees assume total responsibility for and control workplace operations
- Management does not play a central decision making role in the organisation and employees are empowered to make decisions
- Management set the business objectives, BUT employees take responsibility for implementing strategies to achieve these objectives
48
Advantages and Disadvantages of Laizze Fair Management Style
Advantages: Employees feel a sense of ownership and are intrinsic in the results obtained by the business, Dynamic creative environment, Open communication lines and people are valued
Disadvantages: Loss of control by management, Potential misuse of resources by staff, Personal conflicts may impact the achievement of business outcomes
49
Influences of Management Style
- The manager/staff - personality, experience, values, beliefs, skills
- The nature of the task- what are you actually asking people to do
- Internal and external constraints including time and resources
- Limited time = Autocratic, Persuasive
- Lots of time = Consultative, Participative, Laizze Fair
50
Contingency Management Theory
- Is the need for managers to adapt their management style to suit the situation at hand
- For example: A manager who prefers a consultative style may be asked to shut down an unprofitable factory site in Dandenong. She will need to shift her management style from consultative to authoritative
51
Appropriateness of Management Styles
- Managers use different styles when making decisions and working with employees
It often depends on:
1. Nature of task - What is the task you are asking employees to complete
- Easy
- Complex
2. Time that is available- the more time you have = two way communication, the less time you have = one way communication
3. The experience and skill level of employees
4. Managers experience
52
Management Skills
- Communicating
- Delegation
- Planning
- Leading
- Decision Making
- Interpersonal
53
Communication Skills
- The transfer of information from a sender to a receiver
- Non verbal (body language and visual) skills
- Verbal communication skills (written or oral form)
- Can be used to help explain a vision, outline changes, ask for opinion
- Poor communication skills can lead to conflict and resentment
54
Delegating
- The ability to transfer authority and responsibility from a manager to an employee to carry out specific activities
- Helps with time management and enables staff to learn new skills
- Helps build trust and lead to a mutual understanding
55
Planning
The ability to define business objectives and decide on methods and strategies to achieve them-helps with long term and short term planning of the business
56
The Planning Process
1. Define the objective
2. Analyse the environment (SWOT analysis)
3. Develop alternative strategies
4. Implement an alternative
5. Monitor and seek feedback
57
Leading
--> Is the skill of a manager when guiding workers toward achieving the goals of the business
58
Effective leading requires a manager to...
- Have conditions that motivate, engage and inspire staff
- Good communicator
- Role Model
- Be able to build teams
- Act as a mentor
- Resolve conflicts
--> Emotional Intelligence
The ability to perceive, understand, monitor and regulate emotions in each other and themselves
59
Decision Making
- Decision making is a multistep approach where a selection is made between a range of alternatives
- Decisions may be routine and easy or complex and difficult
60
Steps to making a decision
1. Identify the problem and define the objective
2. Gather the necessary information and establish the cause of the problem
3. Develop alternative solutions
4. Analyse alternatives
5. Choose and implement an alternative
6. Evaluate
61
Interpersonal Skills
- Skills used everyday to communicate and interact with other people both individually and in groups
- Team player
- Empathetic and assertive
- Good communicator
- Good motivator
62
Other Skills
-Time management skills
- Stress management skills of self and employees
- Technical Skills- managers knowledge, the ability and proficiency in a specialised field ie. engineering
63
Types of business Planning
→ Strategic (long term) planning- 2-5 years
→ Tactical (medium term) planning- flexible, adaptable planning 1-2 years. Helps achieve a strategic plan
→ Operational/ Short Term planning- specific details on how the business can contribute in the short term
64
Relationship between Management skills and Management Styles
- The type of management style a manger selects, determines the skills they will need
- For example an autocratic manager would not need to use delegating or interpersonal skills, but they would use planning, leading and communication skills
- The abilities or skills that a manager uses to achieve a business objectives
65
Corporate Culture and the two types
- The shared values, beliefs and behaviours of the people in the business
→ Official
- The preferred values, beliefs and behaviours of the people within a business starred in official documents like a company motto or mission statement
- How we want our business to be perceived
→ Real
How things actually operate
66
Why is corporate culture important?
- Offers better retention rates (percentage of customers over customers that have left the business)
- Makes the organisation attractive to potential employees- allows companies to choose employees to be the best in their field
- Improved productivity- more business success
67
What helps to create to a good corporate culture?
1. Employees desire to win
2. Considering the impact of the decision on the business
3. Focus on internal (inside the business) and external customers (outside the business- suppliers etc.)
4. Prioritising teamwork
5. Delivering what was promised
68
How can you determine the corporate culture of an organisation?
1. Communication channels
2. Dress code
3. Willingness to achieve
4. Staff interaction
69
Strategies to develop corporate culture
1. The creation of a vision and mission statement
- Vision statement = future vision for the business (aspirational)
- Mission statement = written statement that defines a business core purpose and focus
- Value statement = the values of an organisation ie. trustworthy, honest, organised, stable, reliable
2.Choice of management styles
3. Branding the business
4. Physical environment and material symbols eg. open plan offices, business location etc.
70