Business Management Unit 1

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Questions and Answers

What is the definition of a sole trader?

A business owned and operated by one person with no legal distinction between the business and themselves.

Explain the concept of partnerships.

A business owned and operated by two or more people with no legal distinction between the business and the owners, leading to unlimited liability.

Which of the following is an advantage of a company?

Unlimited liability for owners

Complete control over decisions

Requires minimal legal formalities

Limited liability for shareholders (correct)

Entrepreneurs and intrapreneurs share the same roles and responsibilities within a business.

False Signup and view all the answers

A ___ is a set of exclusive rights granted by a state to the inventor of a product.

patent Signup and view all the answers

What does CSR stand for?

Corporate Social Responsibility Signup and view all the answers

SWOT analysis helps in understanding the internal and external factors of a business.

True Signup and view all the answers

Economies of scale result in a decrease in per unit cost production as output or activity _______________.

increases Signup and view all the answers

Match the following types of growth with their definitions:

Horizontal Integration = Businesses at the same stage of the chain of production join together. Vertical Integration = Businesses at different stages of the chain of production join together. Conglomeration = Unrelated businesses integrate. Franchising = Expanding by distributing goods or services under a brand's name. Signup and view all the answers

What are the benefits to the franchisor?

Expansion, gains market share, more profits, majority of decisions, spreads knowledge Signup and view all the answers

What are the disadvantages of franchising?

Loses control on daily operations, suffers image if franchise fails, must supply franchisee Signup and view all the answers

What is the impact of globalisation on domestic businesses' growth?

Greater brand awareness Signup and view all the answers

What are the factors contributing to rapid growth in multinational businesses?

Improved communications, dismantling of trade barriers, deregulation of financial markets, increased economic and political power of MNCs Signup and view all the answers

Match the advantages with the impacts of multinational businesses on host countries:

Economic growth = Boosts economy by creating jobs, taxes, and capital injections New ideas = Introduce innovative business practices and interactions Skills transfer = Enhance local employees' capabilities and enable new business ventures Greater choice of products = Offer a wider variety of products to consumers Short-term infrastructure projects = Contribute to short-term infrastructure development like roads and schools Signup and view all the answers

What are the disadvantages of multinational businesses in host countries?

Profits repatriated, loss of cultural identity, brain drain, loss of market share, short-term plans Signup and view all the answers

What is the main difference between publicly held and privately held companies?

Public companies sell shares to the public while private companies sell shares privately. Signup and view all the answers

Private companies tend to have more control over their operations compared to public companies.

True Signup and view all the answers

What are the two main documents in which details of a company's formation are legally recorded?

Memorandum of association and Articles of association Signup and view all the answers

Social enterprises focus on improving human, social, or environmental wellbeing rather than solely maximizing ____________.

profits Signup and view all the answers

Match the following types of cooperatives with their descriptions:

Financial cooperatives = Financial institution with ethical and social aims Housing cooperatives = Provides housing to its members Workers cooperatives = Owned and operated by workers Consumer cooperatives = Provides services to customers who are also part owners Signup and view all the answers

Which statement best describes the difference between vision statements and mission statements?

Vision statements speak to long-term aims, while mission statements indicate how objectives will be achieved. Signup and view all the answers

Study Notes

Business: Definition and Scope

A business is an entity that aims to satisfy the needs or wants of individuals by acquiring, producing, delivering, or informing them through goods or services.
Key components of a business include:
- Resource inputs: factors of production required to produce goods or services.
- Product outputs: results of processing and manufacturing goods or services.
- Human inputs: right quantity and quality of people required to produce a good or service.
- Physical inputs: right quantity and quality of land, machinery, or technology used to produce a good or service.
- Financial inputs: right amount of cash or other financial resources required to produce a good or service.

Types of Businesses

Enterprise: a concept that includes the people and activities involved in running a business, including their skills, experience, and knowledge.
Capital-intensive businesses: processes that use a large portion of land or machinery to produce goods and services.
Labour-intensive businesses: processes that use a large number of people to produce goods and services, often related to land or machinery.

Business Functions

Human resources: sector responsible for managing human relationships, employee training, payment, and sometimes firing.
Finance and accounts: sector responsible for managing an organisation's financial resources, including budgeting, financial reporting, and strategic planning.
Marketing: sector responsible for promoting products or services to attract customers.
Operations management: sector responsible for ensuring resources are applied effectively during the production of goods and services.

Sectors of the Economy

Primary sector: sector involved in the acquisition of goods, such as fishing, hunting, and farming.
Secondary sector: sector involved in the processing of goods, such as manufacturing and construction.
Tertiary sector: sector involved in the provision of services, such as wholesale, retail, and healthcare.
Quaternary sector: sector involved in informing, such as education, media, and web-based services.

Starting a Business

Reasons to start a business:
- Rewards for profits
- Independence
- Necessity
- Challenge and skill development
- Interests
- Finding a gap in the market
Steps to start a business:
- Organising the basics
- Refining the business idea
- Planning the business
- Establishing legal requirements
- Raising finance
- Testing the market

Types of Ownership

Private sector: portion of the economy not owned or controlled by the government.
Public sector: portion of the economy owned or controlled by the government.
Profit-based (commercial) organisations: entities that aim to make a profit.
Sole trader (sole proprietor): a business owned and run by one person, with unlimited liability.
Partnerships: a business owned and operated by two or more people, with unlimited liability.
Companies or corporations: a type of business where owners (shareholders) have limited liability over the business and are recognised with a legal distinction.

Advantages and Disadvantages of Each Type of Ownership

Sole trader: advantages include profits for the owner, complete control, flexibility, and minimal legal formalities; disadvantages include unlimited liability, stress, and lack of continuity.
Partnerships: advantages include skills and qualities of multiple partners, greater stability, and mutual help; disadvantages include unlimited liability, disagreements, and loss of control.
Companies: advantages include limited liability, higher stability, and access to loans; disadvantages include loss of control, less access to loans, and higher legal requirements.

A form of business that aims to improve human, social, or environmental wellbeing, with a financially sustainable approach.
Types of social enterprises include:
- Cooperatives: business organisations owned and operated by members, aiming to improve wellbeing.
- Non-profit social enterprises: organisations that aim to provide a social service, with a focus on serving the community rather than earning profits.

Other Business Concepts

Intrapreneurs: people who design new products or services within a business.
Entrepreneurs: people who start their own businesses.
Initial Public Offering (IPO): shares sold to the public for the first time by a business.
Patent: a set of exclusive rights granted to the inventor of a product.### Types of Organizations
Non-Governmental Organizations (NGOs):
- Support a socially desirable cause
- Focus on a single issue or a broader spectrum
- May not have political affiliation or agenda
- May have a philanthropic focus
Charities:
- A specific type of NGO
- Provide relief to those in need
- Have a philanthropic focus
- Exempt from taxes
- May have single-event or single-issue focus

Vision and Mission Statements

Vision statement:
- Establishes a future view of what the company wants to achieve
- Speaks to long-term aims and highest aspirations
- Inspiring and motivating
- Brief
Mission statement:
- Establishes the company's purpose of existence
- Includes aims and important values
- Helps to accomplish objectives
- Communicates what needs to be done to achieve the vision
- Longer than vision statements

Business Objectives

Business objectives:
- Articulated, specific, and measurable targets
- Must be met to achieve the company's aims
- Include growth, gaining market share, increasing sales, etc.
Strategic objectives:
- Long to medium-term goals
- Set by the CEO, board of directors, and senior managers
- Indicate how the company intends to fulfill its mission
- Include performance goals
Tactical objectives:
- Medium to short-term goals
- Set by executive managers and middle-level managers
- Help to reach strategic objectives
Operational objectives:
- Short-term goals
- Set by middle-level managers, floor managers, and employees
- Help to reach tactical objectives

CSR:
- View that businesses should contribute to the economic, social, and environmental wellbeing of society
- Focus on philanthropy, generous salaries, benefits, and environmental support
Ethical objectives:
- Objectives based on moral principles
- Include building customer loyalty, creating a positive image, and reducing the risk of legal redress
- Impact the business itself, competitors, suppliers, customers, and the local community

SWOT Analysis and Ansoff Matrix

SWOT Analysis:
- Classifies a business' strengths, weaknesses, opportunities, and threats
- Helps with strategic planning
- Strengths and weaknesses arise from the business itself, while opportunities and threats arise from the external environment
Ansoff Matrix:
- Evaluates strategies for growth in regards to the product and market
- Includes market penetration, product development, market development, and diversification

Stakeholders and Stakeholder Analysis

Stakeholders:
- Any individual or group with an interest in a business
- Can affect or be affected by the business
- Include market stakeholders, non-market stakeholders, primary stakeholders, and secondary stakeholders
Stakeholder analysis:
- Classifies stakeholders according to their importance within a business
- Includes stakeholder mapping, which classifies stakeholders according to their level of interest and degree of power

PESTLE and STEEPLE Analysis

PESTLE Analysis:
- Includes political, economic, social, technological, legal, and ecological factors
- Helps to analyze the external environment
STEEPLE Analysis:
- Includes social, technological, economic, ethical, political, legal, and ecological factors
- Helps to analyze the external environment

Economies and Diseconomies of Scale

Economies of scale:
- Decrease in per unit cost production as output or activity increases
- Conditions include capacity, less average costs, more productivity, and more demands
- Internal economies of scale include technical, managerial, risk-bearing, purchasing, and marketing efficiencies
- External economies of scale include efficiencies due to external factors
Diseconomies of scale:
- Increase in per unit cost production as output or activity increases
- Internal diseconomies of scale include technical, managerial, risk-bearing, purchasing, and marketing inefficiencies
- External diseconomies of scale include inefficiencies due to external factors

Growth Strategies

Internal growth:
- Growth by using a business' own capabilities and resources
- Happens slowly, steadily, and is less risky
External growth:
- Growth with the aid of external factors
- Types include merger, acquisition, takeover, and joint venture
- Can be horizontal, vertical, or conglomerate
Decision trees:
- A diagram that helps businesses decide on whether to grow or stay small
- Includes square nodes, round nodes, and probabilities

Globalization and Multinational Businesses

Globalization:
- Process of integrating the world in economic, social, cultural, political, technological, and other aspects
- Impact on domestic businesses' growth includes increased competition, greater brand awareness, skills transfer, and closer collaborations
Multinational businesses (MNCs):
- Companies that are legally registered and operate in two or more countries
- Considered the biggest type of business
- Factors of rapid growth include improved communications, dismantling of trade barriers, and increasing economic and political power
- Impact on host countries includes economic growth, new ideas, skills transfer, and greater choice of products, but also profits being repatriated, loss of cultural identity, brain drain, and loss of market share

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Description

Learn about the basics of business, including the definition of business, resource inputs, product outputs, and human inputs. Understand the fundamental concepts of business management.