Business Management

Business Management

1. PESTEC

   • Political
     • If the government raises minimum wage.
   • Economic
     • If inflation occurs then it could damage the business
   • Socio-cultural
     • An increased concern for the environment causes the business to react e.g: (Businesses having to react to global warming)
   • Technology
     • If a rival starts using new software and hardware that makes them more efficient the the business may fall behind if appropriate steps are not taken
   • Environmental
     • An increase in extreme weather conditions can affect the business. Also an increase in pollution from the business can lead to customers being driven away
   • Competitors
     • Every business faces domestic and foreign competition. The global marketplace affects the business
   • PESTEC is a list of external factors that can have an affect on a business
     • External factors are things a business CANNOT control

2. Entrepreneurs

   • An Entrepreneur organizes, manages and assumes the risks for an enterprise
     • Official Dictionary definition: A person who sets up a business or businesses, taking on financial risks in the hope of profit
   • An entrepreneur takes calculated risks
   • An entrepreneur shows initiative and makes things happen
   • An entrepreneur has the imagination required to take on new business ventures

3. The economy

   • The voluntary sector
     • Charities
     • Voluntary organisations
   • Private Sector
     • Sole Trader
       • A business set up and run by one person
         • Sole traders often have unlimited liability
           • Which means that
             • that if they get sued they can lose all of their personal assets
     • Partnerships
       • A business that contains 2 - 20 'partners'
         • These partners will sign a 'deed of partnership' which details the partnership, like working hours. Partnerships can have unlimited limited liability, or they can be Limited Liability Partnerships (LLP) e.g: most solicitors and accouting firms are LLPs
     • Companies
       • Private Limited Company (Ltd)
         • Can sell shares to family members. Cannot sell shares to the public. Not on the stock exchange
         • Often small to medium sized companies/enterprises (hence SMEs)
       • Public Limited Company (PLC) A PLC must be capable of selling shares to the public (If listed on the stock exchange a company must be a PLC. However a company may be a PLC without being listed on the exchange)
         • Sells shares on the stock exchange. When a business is put on the exchange it can be called "Floating it"
         • Often big corporations, like Boots PLC or Vodafone PLC (in America a PLC is known as 'INC' meaning incorporated
       • Franchises
         • A franchise is a business structure that allows people to buy into an already established business, like McDonalds
         • The FRANCHISEE is the person who will buy into the already set up business
         • The FRANCHISER is the person who already owns the business and will allow people to buy into it
         • Advantages for the FRANCHISEE: they are buying into an already established business, they don't have to worry abut overall management only their area.
         • Disadvantages for the FRANCHISEE: if another franchisee is doing a bad job it could affect their business (Brand contamination). it is difficult to get out of a franchise
       • Multinationals
         • These are large companies that are based in several different countries
   • Public Sector
     • Nationalised industries
       • These are businesses that have been taken over and run by the government, such as: Royal Bank of Scotland
       • The opposite of Nationalisation is when the government sells off companies into the private sector via the stock exchange for example Royal Mail
     • Local government
     • Local Authorities

4. Growth

   • There are many different ways a business can grow
     • Internal
       • This is when the business grows without involving other businesses
       • This includes hiring new employees, investing in new equipment, opening new retail outlets and widening the product range.
     • External
       • This is when a business grows involving another business
       • Merger
         • This is when two companies join together. Can be aggressive or friendly.
       • Takeover
         • This is the more aggressive version of a merger. This can be done through several different ways, the predator can simply buy the business. Or if the business is on the stock exchange then the predator could buy all of its shares
       • Acquisition
         • This is when a business only buys a part of another business
       • Intergration
         • A company can grow in several different ways
           • Vertical Forwards
             • This is when the business buys another business that sells its product, meaning the business is closer to the customer
           • Vertical Backwards
             • This is when the business buys the supplier, which means that they can control the supply to their competitors as well
           • Conglomerate (Diversification)
             • This is when two businesses who are not in the same market merge. i.e: a beauty salon and a corner shop
             • this makes the business larger and more financially stable because the business does not rely on one area of the market
             • This means the business has a larger range of products
         • Hoizontal
           • This is when two businesses who provide similar services combine.
   • This is self explanatory, its when a business grows
   • There are several reasons a company may want to expand
     • It provides an opportunity for the company to dominate the market
     • If the company grows they are less likely to be taken over by another company
     • The company will gain an increased market share and sales
     • A company expanding also means that their name will be shown around more, meaning more advertising

5. Economies of scale

   • In essence, the larger you are the lower the cost.
   • Trading economies
     • When you are a large business, you are more likely to get better deals from traders/suppliers
     • A large business can transport more units at a lower cost than a smaller business
   • Financial
     • Larger firms find it easier and cheaper to raise funds
   • Managerial
     • Larger firms can afford specialist managers (marketing experts, accounting experts)
       • Which means that efficiency is increased
   • Technical
     • Larger firms can afford to buy specialist equipment, the division of labour allows workers to specialize
   • Risk bearing
     • Larger companies can take larger risks
     • Larger companies can spread risk by investing in more markets and products
   • Diseconomies of scale
     • This is the complete opposite of economies of scale
     • Very large businesses may become less efficient than smaller ones
       • Which means that they have an increased unit cost
     • Diseconomies of scale can occur if there is a break down in communication. If coordination within the company is poor, ie:departments not working with each other. Morale, if the staff don't feel valued they may become inefficient

6. Stakeholders

   • This is anyone with a vested interest in the companies success
     • A stakeholder could even be a rival company
   • Interest and Influence
     • An interest is what a stake holder wants to see happen
     • An influence is what the stakeholder can do in the business, how they can influence it
     • Owners
       • Interest: To get a large profit, to see the business succeed
       • Influence:They can invest more or less money into the business, they make descions
     • Shareholders
       • Interest: To get dividends on the money they have invested, to see the business succeed
       • Influence: Can invest more or less capital, can vote at the AGM or call an EGM
     • Employees
       • Interest: To receive a good salary, to have 'perks' like a company car
       • Influence: can affect the quality of the service or product, can take industrial action like strike or sit in
     • Banks
       • Interest: for the business to open a bank account, wants loans to be repaid on time
       • Influence: can alter interest rates, can demand repayment of loans instantly
     • Customer
       • Interest: to get good value for money, to receive good customer service
       • Influence: Can vote with their feet and go elsewhere, can badmouth the company and disuade other customers from going there
     • Suppliers
       • Interest: To get repeat orders from the business, to get paid on time
       • Influence: can change delivery times, can alter the price of the delivery
     • Local community
       • Interest: Want jobs in the local area, want the business to be environmentally friendly
       • Influence: can complain to the council
     • Pressure Groups
       • Interest: support and promote a specific cause
       • Influence: can organise demonstrations
     • Local Government
       • Interest: want jobs in the local area, want the business to invest money in the local area
       • Influence: can refuse planning permision, can close down businesses that don't comply with regulations.

7. Internal Factors

   • These are factors inside the business that can affect it
   • Finance available
   • Ability of staff
   • Information available
   • ICT available
   • Ability of management
   • Changes in costs