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UNIT 3 AOS 1 - Business foundations (Types of businesses (Social…
UNIT 3 AOS 1 - Business foundations
Types of businesses
Public listed companies
Advantages/Disadvantages similar to private limited companies, except the level is disclosure for public listed companies is much higher!
Legal entities seperate from their owners, owners buy shares on the ASX share market available to everyone
Social enterprises
Advantage - Customers are more likely to shop at a business that is known to support a social cause (eg. Product red)
Disadvantage - Can be difficult for owners to manage the balance of social and economic goals, had to set-up business becuause profits are low
Companies created with the intention of supporting social causes. They still act like a business, but the majority of their profits go towards a social cause
Private limited companies
Advantage - limited liability, company continues to run if the owner dies, company tax rate is lower than individual tax rate
Disadvantage - high requirements to disclose information to the government, expensive to set-up
Legal entities that are seperate from their owners. 'PTY LTD' at the end of their name, shares are not listed on the stock market but are generally offered to employees or family members
Partnerships
Advantage - each partner can share the financial costs, more ideas can be brought forward, partners can share the workload
Disadvantage - unlimited liability, partners can have disagreements
Businesses owned by 2-20 people generally
Sole traders
Responsible for all aspects of the business, financially and legally
Disadvantage - unlimited liability, no one to share the workload, the business cannot continue if the owner dies
Advantage - Low cost of entry (business name), keeps all profits, complete control of the business, no disputes
Government business enterprises
Advantage - Can provide competition to other businesses, the government has a vested interest in the running of the business who has large profits available
Disadvantage - Less accountability for GBE's, management can be less effective than in the private sector
A type of business that is government owner and operated, run with the aim of making a profit whilst carrying out government policies (eg. Auspost)
Business objectives
To increase market share
The percentage of sales that one business has made compared with its competitors in the same industry.
To meet social/market need
Business aim to 'fill the gap' in a market that exists, such as retirement homes
Social enterprises are developed to meet a social need, such as Thankyou water
To make a profit
The amount of money left when the businesses expenses are subtracted from its revenue. Most businesses aim to increase their profits every year.
To meet shareholder expectations
Shareholders will only invest in the business if they're satisfied with the businesses performance. If they're not satisfied, they will sell their shares
Stakeholders
A stakeholder is anybody with a vested interest in the activities and performance of the business
Potential conflicts
Employees and management
Employees may want to increases their wages or salaries, whilst management want to spend profits elsewhere than on employees
Customers and Managers/shareholders
Shareholders/managers may want high prices to maintain profit, whilst customers will want reasonably priced products
Suppliers and the community
suppliers want to be paid fairly and reasonably but may want to cut costs by using unethical practises that may upset the community
Areas of management responsibility
Human resources
Responsible for the people within the organisation, including hiring, training, promotion, pay rises and disputes
If employees are motivated, well-trained and well-paid they are more likely to help the business achieve their objectives
Sales and marketing
Responsible for marketing the business and ensuring that it meets the needs of the customers, as well as monitoring the competition
Can achieve business objectives because the business is constantly meeting the needs of the customers
Finance
Ensures that the businesses transactions are recorded accurately and ensures that the information is passed onto management
Allows the business tell as soon as profits or market share is decreasing, and is able to make changes quickly
Operations
The process of overseeing the converting of inputs to outputs, and involves ensuring operations are efficient while using as few resources as possible
Achieves business objectives by increasing profits and market share by reducing waste and increasing quality of products
Technology support
Responsible for all the technology resources within the business and ensuring they're managed correctly in relation to the needs of the business
If managed correctly, business objectives will be achieve because the effectiveness will be high (less inputs, greater outputs ect)
Management styles
Consultative
Advantage - Workers opinions may create greater ideas, workers may feel greater motivated if their ideas are being valued
Disadvantage - Can be time consuming for the business, workers may resent the business if their ideas as ignored or not valued
The manager consults with the staff before making the decision alone, centralised authority although worker input is considered, two-way communication (most useful in situations where a new process or change is implemented)
Participative
Advantages - Employees' morale motivation and productivity will increase if they feel part of decision making, employer/employee relationships are positive, high level of trust = greater employee performance
Disadvantage - Very time consuming, can cause conflicts between employees, not all workers want to be involved in the process, the role of management is weakened
The manager and the employees make a decision together, authority is decentralised, two way communication (most appropriate in situations where diverse groups need to be coordinated and when the business is undergoing change)
Persuasive
Advantage - Fast, managers gain trust though persuasion, clear instructions are given, employees may accept negative situation
Disadvantage - No opportunity for employee input, employees may resent being 'ordered around'
The managers makes all decisions but attempt to explain and convince employees why, centralised authority, one way communication
Laissez-faire
Avantage - Employees take ownership of actions leading to increased motivation, communication is completely open and ideas are discussed openly
Disadvantage - Complete loss of control of management can lead to misuse of recourses, if there is a conflict managers cannot intervene, the focus on meeting objectives can disappear
Management style where employees take total responsibility of their workplace actions and decisions, decentralised authority
Autocratic
Disadvantage - No opportunity for employee input, workers may resent being 'ordered around' leading to low morale motivation and productivity
The manager makes all the decisions with no employee input, centralise authority, communication is one way
Advantage - Fast, clear directions are given, works in situations such as defence forces or emergency situations (bush fire or hospitals)
Management skills
Planning
Planning refers to the process of setting objectives and deciding on the process used to achieve them
Poor planning can have drastic consequences because the impacts on the business will be more widespread over a longer time period
Leading
Leadership is the ability to influence or motivate people to work towards the objectives of the business
Good leadership may result in high staff morale, higher productivity, and easier achievement of business objects. However, if managers spend long periods of time with employees they have less time to contribute on other business activities
Delegating
Delegation is the transfer of authority and responsibility from a manager to an employee to carry out specific activities
Effective delegation can lead to reduced stress and greater planning time for employees and experience and responsibility for employees, as well as building good trustful relationships. However, delegation can be problematic if employees refuse to delegate, managers are unwilling to trust employees or are fearful of being shown up by subordinate
Decison-making
Decision making refers to the qualities involved in making decisions to solve problems or accept opportunties
Communicating
Communication is the transmission of information from one individual to another in a way that the recipient clearly understands the message in the way that the sender wanted
Effective communication allows good relationships to be formed between employers and employees. However barriers such as age, culture and environment may limit good communication
Interpersonal
Interpersonal skills refers to the ability to deal or liaise with people and build positive relationships
Good interpersonal skills can lead to higher staff morale and productivity. However, it may take a long time for a manager to develop good interpersonal skills, and can result in managers making decisions based on emotions and not for the business
Corporate culture
Real corporate culture
How things actually operate, can the the same as the offical corporate culture or completely different
Official corporate culture
Generally stated in the businesses mission statement, it refers to the businesses preferred values, beliefs, behaviours and expectations of employees
Developing corporate culture
Leading by example
Senior management must model the desired culture
Rewarding behaviour
management should reward/acknowledge employees that reflects the desired corporate culture
Training employees
employees that are recruited need to be trained according to the official/desired corporate culture
Team building activities
Events such as afterwork dinners or group work projects develop relationships and trust within employees and encourage teamwork
The shared values, beliefs, behaviours and expectations of employees at a business. Can be observed through the businesses: dress, rites, rituals, celebrations, socialisation, attitude, symbols ect.