Business Revision A292

Business Revision A292

1. Why a business exists - To provide a service or product to customers and make profit through sales, Provide employment.

2. Business Objectives

   • Set targets that are SMART:
     • Specific
     • Measurable
     • Achievable
     • Relevant
     • Time based
   • Targets are there to Motivate, Direct and Monitor
   • Survival - Temporary objective but vital for the first year
     • Profit - Main Objective generated by sales and minimum costs
     • Sales - More sales=More profit
     • Market Share - a bigger market share means more customers, more sales and more profit
     • Eliminating competitors - Merging or taking over another business, also increases market share
   • Changing Objectives
     • After the first year a business' objectives change - usually from survival to profit maximisation to growth
   • Growth
     • Merger - Two or more business' join togetehr
     • Takeover - On business buys control of another. Can be achieved by buying majority shares.
     • Internal expansion - Increasing production or building new shops

3. Stakeholders - People who have an interest in a business

   • Workers - want the business to do well so they keep their job and get paid. Essential for security in their lives.
   • Managers - Have to organise to plan for the future, also retain jobs and get paid.
   • Owners - Want as much profit as possible.
   • Shareholders - make as much profit to receive more dividends.
   • Customers - want low prices and a good service.
   • Suppliers - want the business they supply to make profit and grow so they continue buying from them.
   • Government - want to make sure the business pays their taxes.
   • Competitors - want to see rivals doing worse than them, and want to improver their own business ideas.
   • Different stakeholders may have conflicting views on what they feel is best for the business.

4. Sectors

   • Primary - First stage of production. extraction of raw materials, including fishing mining and farming.
   • Secondary - Second stage, manufacturing of raw materials for example factories.
   • Tertiary - Third stage, providing a service. includes retailing, travel, banking and customer service.
   • There has been a decline in primary and secondary jobs due to foreign competition and machinery. Increase in tertiary sector because people demand more services and there are more businesses opening. people have a more disposable income.
   • Interdependence - each production line is connected and they must maintain good communication so they know what each one is doing. they all rely on each other to run the business.

5. Business ownerships

   • Public Sector - owned by the government, funded through people paying their taxes, Examples: NHS, BBC and schools.
   • Private Sector - owned by private individuals, sole trader, partnerships and limited companies (PLC and Ltd)
   • Different types of business
     • Sole trader
       • Only one business owner, examples like hairdressers and plumbers.
       • Advantages: Keep all profit so increased motivation. In control and make all decisions without any interference
       • Disadvantages; workload can cause stress, decrease in motivation. unlimited liability so personal posessions are at risk
     • Partnerships
       • 2-20 owners, example John Lewis Partnerships.
       • Advantages; shared responsibility, less stress due to reduced workload and increased motivation. Shared investment and risk and dont have to work long hours.
       • Disadvantages; Unlimited liability so everything is at risk. risk of disagreements.
     • Private Limited Companies (Ltd)
       • Sells shares privately to family and friends so they have control over who can buy.
       • Advantages; limited liability, only owners investment and business at risk, not personal possessions. can control who buys shares so can keep majority of the business.
       • Disadvantages; lots of paperwork to start so takes up a lot of time. Have to publish financial accounts so competitors can see costs and sales.
     • Public Limited Companies (PLC)
       • Sells shares to general public. Are NOT owned by the government.
       • Advantages; limited liability, only owners investment and business at risk, not personal possessions. Can gather more funds so can boost capital.
       • Disadvantages; No control over shares so risk of takeover. Have to publish financial accounts so competitors can see costs and sales.
     • Multinational Companies
       • When a business has more than one organisation in a country or in more than one country around the world.Example Tesco.
       • Advantages; aim at a larger market, gain more profit and the chance of becoming market leader. more well known so better reputation.
       • Disadvantages; Costs a lot and more costs will lower profit. Larger competition could result in loss of customers. many barriers that could limit the business such as travel, language and culture.
     • Charities
       • Part of the voluntary sector and are non profit organisations.
       • Set up to make donations to the less fortunate.
     • Co-operatives
       • Three different types: 1) producers co-operatives, 2) worker co-operatives, 3) consumer co-operatives
       • Advantages; Can share expertise, risk and investment so there is more intelligence and its easier to generate funds. Shared workload so less stress.
       • Disadvantages; share profit so each person gets less. Can cause conflicts that could cause business collapse.
     • Social Enterprise
       • There to help the local community such as community services and youth groups.

6. Location

   • Local - One area only
   • National - More than one area in just one country
   • Multinational - More than one area in more than one country.
   • Affecting Factors
     • Availability of raw materials - Need to be close to raw materials to reduce transport costs
     • Accessibility for customers - Needs to be easy for customers to get to, to gain sales. If it's far away people will be less likely to travel.
     • Population of the area - Larger population means larger target market, generating more sales and increasing profit.

7. Integrartion

   • Horizontal - Business at the same stage of production
     • Disadvantages; Reduced choice, therefore may be reduced product range
     • Advantages; Reduce cost of production therefore increasing profit
   • Backwards Vertical - Business takes over or merges with a supplier
     • Advantages; Have control over supply/components/raw materials so not a major expense
     • Disadvantages; May lead to a reduction in product range so attracting a smaller maket
   • Forwards Vertical - business takes over or merges with a business at a higher stage of production
     • Disadvantages; May lead to higher prices or reduced choice therefore losing customers to competition
     • Advantages; Improve job security for workers, therefore improving motivation

8. Recruitment and selection

   • This is where an organisation finds the right person for the job.
   • Business' can recruit Internally and Externally
     • Internal - A job is filled from within the company. This could be through promotion.
       • Advantages; Cheaper to advertise so reduces costs - Know the workers already (less info needed like strengths and weakness') - The person already knows the business so no training payment needed.
       • Disadvantages; May be someone better suited to the job outside the business - New ideas are not brought in form outside the business.
     • External - A job is filled with someone outside the organisation.
       • Advantages; New ideas can be brought to the business, therefore improving the business.
       • Disadvantages; A recruitment agency would need to paid for - They may dismiss someone who is good for the job as the business wouldn't have much say.
   • Recruitment Process
     • Job Vacancy - A job can come availably if; A person be dismissed, the business growing, Maternity/Paternity leave, Retirement, Death.
       • Job Analysis - When analysing a job, an organisation needs to write up two documents;
         • Job Description - The roles within a job
         • Person Specification - The qualities and qualifications which are needed for someone to fulfil a job.
         • Job Advert - Advertise to the public including info from Person Specification and Job Description. The advert will depend on the size of the organisation and whether the company is national or local. Advertise in; magazines, newspapers, websites, Job centres.
           • Job Application - Potential candidates send in an application form that the company has created or a CV that is written by the candidate.
             • Short list - Use recruitment documents to compare applicants
               • Interviews - Fact-to-face, phone calls and internet are methods. Can be 1 to 1 or as a group where the interviews ask questions.
                 • Job offer - Present the best candidate with the job contract
                   • Induction Training - Talks about health and safety and can include initial training depending on experience

9. Training

   • On the job
     • In the workplace either shadowing and asking questions or being supervised on the job.
       • Advantages - Individual training means that the trainee is more likely to understand it. worker will still produce good whilst training.
       • Disadvantages - Wouldn't work for groups of workers. They will have to leave their work to train the trainee.
   • Off the job
     • Outside the workplace go to a different sit of a different site to work
       • Advantages - Experts can provide the training, and can train groups of people reducing costs.
       • Disadvantages - More expensive due to costs of travel and accommodation as the training is away form the workplace

10. Motivation

    • Maslow's Heirarchy of needs
      • 5. Can be achieved by being given more responsability
        • 4. Can be achived by a worker of the month award
          • 3. Can be achieved by working in a close team
            • 2. Can be achieved by having no health and safety risks
              • 1. Can be achieved by a high enough wage
      • 1
        • 2
          • 3
            • 4
              • 5
    • Motivation can be achieved through monetary or non-monetay methods
      • Monetary Methods - Using money to motivate the workers. this adds extra cost on to the company which is a disadvantage as it limits profits
        • Overtime Pay - extra money for working more hours
          • Bonus- Rewards for reaching set targets
            • Profit Sharing - The employees get a percentage of any profit the company makes
              • Fringe Benefits - Benefits such and company cars and free health insurance
      • Non-Monetary Methods - A non financial reward to employees
        • Job rotation - They perform different jobs therefore giving them something more interesting to do. May lead to one worker moving from one boring job to another.
          • Job enlargement - Given different tasks to do and filling any extra time they have and making them more motivated to get everything done.
            • Job Enrichment - Given more responsibility and boost skills.
              • Award Schemes - 'Employee of the month' encourages to do the best work they can to achieve the rewards which boosts self-esteem.

11. Employment Laws

    • In place to protect workers and employees
      • Equal Pay Act - Makes sure women and men are paid equally.
        • Race Relations Act - Makes sure people of different races and nationalities are not treated differently.
          • Sex Discrimination Act - Makes sure men and women are treated equally.
            • Health and Safety at work Act - Makes it the responsibility of the employer to provide a safe environment for employees to work in.
              • Minimum Wage Legislation - Stops workers form being exploited by employers giving them minimum wage

12. Trade Unions

    • They are in place to: 1) Act as a pressure group by influencing government decisions in the best interests of it's members 2) Protect its members by helping them with any matter
      • Advantages of being in a Trade union - 1) Strength in numbers so higher influence 2) Expert advice for members and settle disputes between workers and employers
      • They can also advise members on whether to take industrial action. The main forms are:
        • Strike - Workers withdraw form doing their work.
          • Overtime Ban - Only work the hours stated in their contract and do no overtime.
            • Work to rule - Workers will only do what is stated in their job description.
    • Industrial Action isn't always the best idea because of the many costs associated with it.
      • Cost to workers: 1) Lose wages therefore less disposable income 2) May lose bonuses which will reduce motivation.
      • Cost to the Business/Customers: 1) May not be able to buy the products they need, so they will switch to competition, lowering sales and reducing the business' profit.

13. Communication Methods

    • Verbal Communication
      • Examples; face-to-face, telephone, presentations or Skype.
      • Advantages; Receiver can check that they understand the information and the sender can ask for feedback.
      • Disadvantages; No permanent record of communication so cant check if it was sent or not.
    • Written Communication
      • Examples; e-mails letters, faxes, memos, reports.
      • Advantages; there is a record so can check if the right information was sent.
      • Disadvantages; Not possible to see if the message is understood so could slow things down in the business.
    • Barriers to Communication
      • Timing - May be sent at the wrong time so wont get a reply straight away.
      • Clarity - message may not be clear and may not be able to check the meaning straight away.
      • Attitude of Sender - sender may patronise the reciever so they wont trust what the sender is saying.
      • Feedback - may not be recieved ambiguous understanding

14. Organisation of a business

    • A TALL organisation has many layers and a FLAT organisation has very few layers.
      • Advantages of a TALL organisation:
        • 1) The responsibilities of worker is clear, therefore no confusion amongst employees 2) Managers will have a smaller span of control so less stress.
      • Advantages of a FLAT organisation:
        • 1) Communication will be quicker so messages will be delivered sooner so less time wasted 2) Wider span of control means managers have to delegate tasks, discussing it with the workers making them feel more trusted.
    • Chain of Command: Link in the levels of authority from those at the top to those at the bottom.

15. ICT

    • Forms of ICT include;
      • Word Processor for letters and reports.
      • Spreadsheets for keeping accounts and records of sales, costs, profits.
      • Databases for keeping records of previous customers and suppliers.
    • Advantages; Better communication to customers and suppliers trough e-mail. All records can be kept on computers, using less office space with documents.
    • Disadvantages; Expensive to buy and set up computers so increases business costs. Hackers gain access so it is not certain that records are safe. Viruses can wipe the system and lose all records.

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