Unit 3: AOS 1 Flashcards Preview

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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

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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

Other strategies to develop corporate culture

5. Established management structures - linking management and structures helps employees function and shape corporate culture
6. Implementation of policies- policy is a detailed process, procedures, rules etc. that must be observed
7. People
8. Stories, narratives and rituals- employee of the week, christmas party