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Understanding business (Objectives (Managerial objectives (Sometimes…

- - - - Advantages
        
        PLCs often dominate their market, therefore having more power within the market.
        
        Limited liability
        
        Quick and easy finance can be raised through selling shares on the stock market.
      - Disadvantages
        
        Must publish annual accounts
        
        Must abide by the Companies Act
        
        No control over who buys the shares and how many they buy. The more shares you have the more control you have over the business.
  - - - Franchiser
        
        Advantages
        
        Franchisee will work hard as they have a lot to lose.
        
        Guaranteed, reliable income as the franchisee has to pay a share of their profits.
        
        Franchise expands quickly and becomes more well known (due to more outlets.) which in turn means bigger market share. Also cheap way to expand as the franchisee provides the investment.
        
        Disadvantages
        
        Have to share profits with franchisee, will earn less than if you expanded the business themselves.
        
        If one franchisee gains a bad reputation then the whole business is affected.
      - Franchisee
        
        Advantages
        
        Shared risk and support between franchisee and franchiser. (The franchiser pays for marketing and staff training for example)
        
        Franchisees get automatic right to use good ideas generated by other franchisees.
        
        The business name is already established, the risk of failure is reduced.
        
        Disadvantages
        
        High investment cost
        
        Strict rules imposed by franchiser- limited scope to apply own ideas.
        
        Have to split profit with franchiser
  - - - Advantages
        
        Control of business is not lost to outsiders- chooses who can become shareholders.
        
        More finance can be raised from shareholders and lenders
        
        Limited liability.
      - Disadvantages
        
        Profits shared among more people
        
        Costly to set up, the is (as with a partnership) a legal process to set up the business.
        
        Shares cannot be sold to the public, only family and freinds
  - - - Advantages
        
        Access to lower wage rates and costs of premises, which lowers the cost of production.
        
        Legislation is less restrictive, for example working hours and health and safety, resulting in a reduction in production costs.
        
        A larger organisation means increased sales and therefore profits, which leads to a larger market share and making the business safer from takeovers
      - Disadvantages
        
        Poor infrastructure can cause difficulties with the transportation of finished goods.
        
        Profits go back to parent country rather than being invested in the host country, which can result in negative publicity.
        
        Cultural differences may cause problems in the production processes. Their is different marketing techniques, products preferred in each country. There will also be a language barrier.
- - - - Benefits of a strong corporate culture
        
        Employees feel they are part of and belong to the organisation- this can create a sense of security and can improve motivation. It can motivate staff, this in turn will improve efficiency and higher productivity. It can create positive relationships, enable better communication and decision-making. Employee loyalty can be increased which will decrease staff turnover and staff absence rates. Customer loyalty might be higher- this is because customers associate themselves with the business's identity (eg logo. Uniform and store design). There will be consistency across the organisation- this allows employees to work in different locations or branches if necessary.
- - - - Owners and customers
        
        Owners want to make as much profit as possible by charging the highest price they can, whereas customers want as low as price as possible.
        
        Owners want to keep costs low by providing the cheapest possible service they can, whereas customers want the best possible service.
      - Employees and customers
        
        Employees want customers to spend as much as possible to increase their commission, whereas customers want as much discount as possible.
      - Owners and employees
        
        Owners want to pay as low wage as possible so that their profit is high, whereas employees want high wages for their work.
        
        Owners want employees to work as many hours as they can, whereas employees want to work as few hours as possible.
  - - - Owners and customers
        
        Owners need customers to buy products from them to make a profit and customers want to provide them with the product they want.
        
        Owners need customers to become loyal to increase market share and customers need owners to be rewarded for their loyalty (e.g. discounts)
      - Employees and customers
        
        Employees need customers to buy from an organisation so that they get paid and customers need employees to provide them with good customer service.
      - Owners and employees
        
        Owners need employees to carry out different tasks and employees need owners to provide them with the necessary job training.
        
        Owners need employees to be as productive as possible and employees need owners to pay their wages.
- - - - Provide a service. Employees are trained to offer the service, e.g. hairdressers and hotels
    - - Provide a knowledge-based and information service. This industry is often concerned with innovation, research and development. Employees are highly skilled, e.g. scientific research, education (universities) and consulting.
    - - Take the raw materials and create something new, e.g. builders.
    - - Extract raw materials from the ground, e.g. agriculture, fishing and mining.
  - - - Public sector organisations are managed and funded by the government on behalf of the public. They are funded through tax from UK citizens.
        
        National Government
        
        Local government organisations
    - - Third sector organisations are organised by volunteers and are managed by a board of trustees. They do not want to make a profit for themselves, money is raised from donations. E.g. cancer research UK.
        
        Social enterprises.
        
        Non-profit making organisations
      - They aim to get their point across, raise awareness and provide a service to the community
    - - Private sector organisation are owned by private individuals and aim to make a profit
        
        Partnership
        
        A business owned and managed by 2-20 people, the finance is from partners and any profits produced.
        
        Avantages
        
        Split responsibility- less stressful, partners bring different experiences and skills, more capital invested into the business.
        
        Disadvantages
        
        Unlimited liability, disagreements between partners may affect the running of the business, profit is split between partners.
        
        Private Limited Companies
        
        A business owned by shareholders and managed by a board of directors. They are financed through selling shares on the stock market and profit produced by the business.
        
        Can either be LTD or PLC
        
        Commonalities
        
        Differences
        
        Sole trader
        
        A business owned and managed by 1 person. It's financed through owners savings and any profit produced.
        
        Advantages
        
        Very simple to set up, get to keep all the profit, can choose when to work.
        
        Disadvantages
        
        Unlimited liability, difficult to borrow from the bank, can be stressful as only one person is running the business- no help
- - - - Product
        
        When a business is grouped around the products it sells. This allows employees to have specialist knowledge of the products. It is easy to identify if a product is under preforming. Each time a the businesses develops a new product it will need to employee more people. Their may be rivalries between departments which may affect working relations.
      - Functional
        
        When a business is grouped by department , e.g. human resources, marketing and finance. This allows the customers to contact specific departments. Sometimes department aims overtake the businesses aims, which may lead to the business not being able to respond to changes in the market.
      - Geographical
        
        When a business is grouped by location. This allows the business to focus on each specific location and cater for their specific needs and the business can familiarise with the locations culture. Technology can be used to communicate with each location although this can be expensive.
      - Customer
        
        When a businesses is grouped by customer types (market segment/ target market). This allows products to be marketed towards each specific customer group, which in turn can improve customer satisfaction and therefore customer loyalty. High staffing cost is a disadvantage of this structure.
  - - - This is when the business removes some of the activities that the organisation carries out (e.g. closing down a branch, factory or division) in response to external factors.
        
        Disadvantage
        
        Some of the activities might be outsourced to enable the organisation to concentrate on its core activities. The organisation carrying out the activity on behalf of the business that is downsizing will be paid for doing this, which may be expensive. It also means that the business needs to trust the outsourced organisation to deliver on time and to the standered expected. Communication between the two businesses is vital to the success of outsourcing.
    - - This means removing layers of management from the structure (e.g. moving from a tall to flat structure).
        
        Advantage
        
        Saves capital on management salaries. Allows quicker communication and decision-making due to there being less layers. The business can respond quicker to changes in the market. Employees may feel more empowered to make decisions and to use their initiative, which in turn will increase productivity and motivation.
        
        Disadvantage
        
        Managers have a wider span of control which means supervision and management of employees is more difficult. There will be fewer promotion opportunities for employees which can be demotivating.
  - - - Also known as hierarchical structure. This type of structure has many levels of management, meaning it has a narrow span of control and along chain of command
        
        Advantage
        
        Many opportunities for promotion which can motivate employees to improve their skills through additional training. Managers/ supervisors can check employees work more carefully as they have less in their control. The role, responsibility and procedures for each job is clearly defined.
        
        Disadvantage
        
        The levels of responsibility and authority within the structure can be seen as a status symbol, causing divisions between managers and staff. Decision making is slow as many individuals in the multiple levels of command must be consulted. Slow response to change in the market and consumer behaviour.
    - - When all the decisions are made by the owner and senior managers, they make the decisions then it’s filtered out to the rest of the company. The matrix structure is no more once the project has been completed,
        
        Advantage
        
        The decisions are made from the point of view of the whole business, meaning they will do what's best for the whole business.
        
        Disadvantage
        
        Employees at various levels within the hierarchy are not consulted about decisions which can result in them becoming demotivated
    - - This type of structure has few levels of management, meaning it has a wide span of control and a short chain of command
        
        Advantage
        
        Employees are able to work in teams and are not so closely watched by managers meaning employees have more responsibility and a wider variety of tasks and allowing them to gain a variety of skills which in turn will motivate them. Faster response to changes in the marketplace because they are already use to doing a variety of jobs, meaning they will have the skills already. Faster communication due to fewer levels of management needed to be consulted.
        
        Disadvantage
        
        Fewer promotion opportunities available. Level of support and supervision from managers to employees is reduced, as managers have more employees to watch. Increased workload for employees in the levels of management, as there is less levels.
    - - Normally used by small businesses. It’s used when the owners and senior managers make major decisions with very little input from employees.
        
        Advantage
        
        This means decisions can be made quickly and effectively but it can reduce employee motivation.
        
        Disadvantage
        
        Good ideas or creative solutions to problems are not considered because employees have not been consulted.
    - - This type of structures is generally only used for when a specific task or project is being carried out. It consists of employees from various departments the organisation.
        
        Advantage
        
        Motivates employees as everyone is involved from across the organisation. Provides employees with the opportunity learn new skills, through participating in a project or task.
        
        Disadvantage
        
        Can be costly to implement and for the organisation to coordinate. Employees may find having two managers (e.g. from their own department and from the matrix structure) confusing.
    - - When decisions are delegated to the departments and subordinates.
        
        Advantage
        
        All levels of the hierarchy are involved in the decision making which will motivate employees, and subordinates have first-hand knowledge of what the individual departments require. There are lots of people who can input in the decision making process, it also means that departments can cater for their sector of the market.
        
        Disadvantage
        
        Can be harder to ensure consistency across the organisation, for example departments might make decisions to suit their own needs rather than those of the whole organisation.
  - - - More empowerment is possible due to the number of subordinates. There are a large number of subordinates, this can cause extra stress for the manager who may have little time to deal with staff-related issues. Managers may feel that , as they have more subordinates to manager, they are more powerful which in turn motivates them. The organisation will have fewer managers and therefore saves them capital. Shorter chain of command will exist and therefore communication and decision-making is less likely to be more effective.
    - - Less empowerment as there are fewer subordinates to manage and the manager is unlikely too delegate as much. Subordinates have more opportunities to communicate and interact with their manager. Subordinates are more likely to have the chance to participate in decision-making and planning, which is motivating.
- - - - Long term decisions, where the business wants to be in the future. These decisions are made by the owners and the most senior managers. They are non routine decisions. Their are lots of variables in the future that need to be considered, a major policy statements represent strategic decisions. For example the businesses aims and objectives.
    - - Day to day routine decisions. They are made in response to minor but sometimes important problems that arise each day to week and are routine and repetitive. These decisions are made by all levels of management, but mainly the lower levels. for example dealing with customer complaints or ordering materials from suppliers.
    - - Short term decisions on how the strategic decisions will be achieved. They are based on achieving the goals and aims of the business, they go into detail about what is needed and how they will be used. These decisions are made by middle managers. For example increase number of staff.
  - - - Commanding
        
        Instructing others to carry out tasks and trying to get the best from them.
      - Co-ordinating
        
        Ensuring resources are in place when necessary so that work is carried out effectively.
      - Organising
        
        Making sure resources are available and organised properly.
      - Controlling
        
        Ensuring things are carried out according to plan by monitoring and evaluating.
      - Planning
        
        Thinking about the future and what might happen.