Business Textbook

Table of Contents {#table-of-contents.TOCHeading} ================= [*Unit 1 (intro to business)* 1](#unit-1-intro-to-business) [The nature of a business 1](#the-nature-of-a-business) [Definition of a business 1](#definition-of-a-business) [Aims 1](#aims) [Factors of production 2](#factors-of-p...

Table of Contents {#table-of-contents.TOCHeading} ================= [*Unit 1 (intro to business)* 1](#unit-1-intro-to-business) [The nature of a business 1](#the-nature-of-a-business) [Definition of a business 1](#definition-of-a-business) [Aims 1](#aims) [Factors of production 2](#factors-of-production) [Business functions 2](#business-functions) [Different business sectors (Economic sectors) 3](#different-business-sectors-economic-sectors) [Entrepreneurship 3](#entrepreneurship) [Challenges for starting up a business 4](#challenges-for-starting-up-a-business) [Opportunities for starting up a business 4](#opportunities-for-starting-up-a-business) [Types of business entities 5](#types-of-business-entities) [Private and public sectors 5](#private-and-public-sectors) [Types offor-profit commercial organisations 6](#types-offor-profit-commercial-organisations) [For-profit Commercial organisations 7](#for-profit-commercial-organisations) [For-profit social enterprises 9](#for-profit-social-enterprises) [Private sector for for-profit social enterprise 9](#private-sector-for-for-profit-social-enterprise) [Public sector companies 9](#public-sector-companies) [Cooperatives 10](#cooperatives) [NON-PROFIT social enterprises 11](#non-profit-social-enterprises) [Business objectives 11](#business-objectives) [Vision and mission statement 11](#vision-and-mission-statement) [Common business objectives 12](#common-business-objectives) [ojectives 12](#ojectives) [Growth 12](#growth) [Profit 13](#profit) [Protecting shareholder value 13](#protecting-shareholder-value) [Ethical objectives 13](#ethical-objectives) [Corporate social responsibility (CSR) 13](#corporate-social-responsibility-csr) [Stakeholders 14](#stakeholders) [Internal stakeholders 14](#internal-stakeholders) [External stakeholders 15](#external-stakeholders) [Stakeholder conflict 16](#stakeholder-conflict) [Growth and evolution 17](#growth-and-evolution) [Economies and diseconomies of scale 17](#economies-and-diseconomies-of-scale) [economies of scale 18](#economies-of-scale) [Diseconomies of scale 19](#diseconomies-of-scale) [Growth 20](#growth-1) [benefits of growth: 20](#benefits-of-growth) [Reasons to stay small: 20](#reasons-to-stay-small) [Internal and external growth 20](#internal-and-external-growth) [Methods of external growth 21](#methods-of-external-growth) [Ansoff's matrix- helps decision making BMT 2 23](#ansoffs-matrix--helps-decision-making-bmt-2) [Multinational companies/transnational corporTION 24](#multinational-companiestransnational-corportion) [SWOT Analysis BMT 1 26](#swot-analysis-bmt-1) [*Unit 2 Human resource management (HRM)* 27](#unit-2-human-resource-management-hrm) [Role/function of HRM 28](#rolefunction-of-hrm) [Factors that influence HR planning 28](#factors-that-influence-hr-planning) [Internal factors influence HR planning (COMFSS) 28](#internal-factors-influence-hr-planning-comfss) [External factors (GIFCD) 29](#external-factors-gifcd) [Reasons for resistance to change in the workplace 31](#reasons-for-resistance-to-change-in-the-workplace) [HR Strategies reducing impact of change and resistance to change (PFENM) 32](#hr-strategies-reducing-impact-of-change-and-resistance-to-change-pfenm) [Organisational structures 33](#organisational-structures) [Types of organisation charts 36](#types-of-organisation-charts) [Appropriateness of organizational structures and external factors 38](#appropriateness-of-organizational-structures-and-external-factors) [Changes in organisational structure HL 43](#changes-in-organisational-structure-hl) [Project-based organisation 43](#project-based-organisation) [The Shamrock organisation 44](#the-shamrock-organisation) [Management and leadership 44](#management-and-leadership) [Scientific and intuitive thinking/management (HL only) 44](#scientific-and-intuitive-thinkingmanagement-hl-only) [Motivational and demotivation 49](#motivational-and-demotivation) [Motivational theories 49](#motivational-theories) [Taylor\'s scientific management theory of motivation 49](#taylors-scientific-management-theory-of-motivation) [Maslow's hierarchy of needs (SELSP) 49](#maslows-hierarchy-of-needs-selsp) [Herzberg's two factor theory (motivation-hygiene theory) 50](#herzbergs-two-factor-theory-motivation-hygiene-theory) [McClelland's acquired/learned needs theory (HL only) (AO3, 10 marks) (n-PowAch-Aff) 52](#mcclellands-acquiredlearned-needs-theory-hl-only-ao3-10-marks-n-powach-aff) [Deci and Ryan's self-determination theory (HL only) (AO3 10 marks) 53](#deci-and-ryans-self-determination-theory-hl-only-ao3-10-marks) [Equity and expectancy theory (HL only) 54](#equity-and-expectancy-theory-hl-only) [Labour turnover (%) 55](#labour-turnover) [types of appraisal (HL only) 57](#types-of-appraisal-hl-only) [Formative appraisals 58](#formative-appraisals) [Summative appraisals 58](#summative-appraisals) [360-degree feedback 58](#degree-feedback) [Self appraisal 59](#self-appraisal) [Methods of recruitment (AO2) 59](#methods-of-recruitment-ao2) [Internal and external recruitment 61](#internal-and-external-recruitment) [Internal recruitment 61](#internal-recruitment) [External recruitment 62](#external-recruitment) [Types of financial rewards 63](#types-of-financial-rewards) [Types of Non- financial rewards 67](#_Toc186276379) [Types of training 68](#types-of-training) [Organisational culture (Hl only) 71](#organisational-culture-hl-only) [Types of Org culture Charles Handy, Gods of management 72](#types-of-org-culture-charles-handy-gods-of-management) [Culture clashes when organisations change 72](#culture-clashes-when-organisations-change) [Types of Org culture Charles Handy, Gods of management 74](#types-of-org-culture-charles-handy-gods-of-management-1) [Culture clashes when organisations change 75](#culture-clashes-when-organisations-change-1) [Communication 76](#communication) [FOrmal and Informal communication 76](#formal-and-informal-communication) [Methods of communication for an org 77](#methods-of-communication-for-an-org) [Barriers to communication 79](#barriers-to-communication) [Industrial/employee relations (Hl only) 80](#industrialemployee-relations-hl-only) [Sources of conflict 80](#sources-of-conflict) [Approaches to conflict in the workplace by: 80](#approaches-to-conflict-in-the-workplace-by) [Approaches to conflict resolution 84](#approaches-to-conflict-resolution) [*Unit 3 Finance and Accounts* 85](#unit-3-finance-and-accounts) [Definition of finance 85](#definition-of-finance) [Capital and revenue expenditure 86](#capital-and-revenue-expenditure) [Sources of finance 87](#sources-of-finance) [Internal sources of finance PRS 87](#internal-sources-of-finance-prs) [External sources of finance 88](#external-sources-of-finance) [Summary of business ownership and sources of finance 93](#summary-of-business-ownership-and-sources-of-finance) [Shor term and LONG-TERM sources of finance 94](#shor-term-and-long-term-sources-of-finance) [Appropriateness of sources of finance for a given situation (SPACED) 94](#appropriateness-of-sources-of-finance-for-a-given-situation-spaced) [Costs and revenues 95](#costs-and-revenues) [Revenue vs Cost 95](#revenue-vs-cost) [Revenue streams 96](#revenue-streams) [Types of costs FIVD 97](#types-of-costs-fivd) [Final accounts 98](#final-accounts) [Profit and loss account (income statement) 99](#profit-and-loss-account-income-statement) [Balance sheet 100](#balance-sheet) [Purpose of accounts to stakeholders 101](#purpose-of-accounts-to-stakeholders) [Types of Intangible assets 102](#types-of-intangible-assets) [Depreciation (Hl Only) 103](#depreciation-hl-only) [Straight line method 104](#straight-line-method) [Units of production/Output method 104](#units-of-productionoutput-method) [Profitability and liquid ratio analyisis 105](#profitability-and-liquid-ratio-analyisis) [Profitability ratios (%) (formulas on exam) 106](#profitability-ratios-formulas-on-exam) [Liquidity ratios 108](#liquidity-ratios) [Boston Consulting Group matrix BMT 4 110](#boston-consulting-group-matrix-bmt-4) [Efficiency ratio analysis (HL only) 111](#efficiency-ratio-analysis-hl-only) [Efficiency ratios 111](#efficiency-ratios) [Strategies to improve these ratios 113](#strategies-to-improve-these-ratios) [insolvency vs bankruptcy 114](#insolvency-vs-bankruptcy) [Cash Flow 116](#cash-flow) [Cash slow, investment and profit and its relationships 116](#cash-slow-investment-and-profit-and-its-relationships) [Working capital 116](#working-capital) [Liquidity position 117](#liquidity-position) [Cash flow forecasts 117](#cash-flow-forecasts) [Causes of cash flow problems 118](#causes-of-cash-flow-problems) [Strategies for dealing with cash flow problems 119](#strategies-for-dealing-with-cash-flow-problems) [Investment appraisal 120](#investment-appraisal) [Method of investment appraisal 121](#method-of-investment-appraisal) [Budgets (HL only) DOES NOT COME MUCH IN EXAMS USUALLY DEFINITION 122](#budgets-hl-only-does-not-come-much-in-exams-usually-definition) [diff between cost and profit centres 123](#diff-between-cost-and-profit-centres) [Cost centres 123](#cost-centres) [Profit centres 123](#profit-centres) [The roles of cost and profit centres 124](#the-roles-of-cost-and-profit-centres) [Variances (can also be expressed as %) 127](#variances-can-also-be-expressed-as) [Constructing a budget 128](#constructing-a-budget) [importance of budgets and variances in decision-making 129](#importance-of-budgets-and-variances-in-decision-making) [Business Plans BMT 5 132](#business-plans-bmt-5) [Purpose 132](#purpose) [Elements of a business plan 132](#elements-of-a-business-plan) [STEEPLE analysis BMT 3 133](#steeple-analysis-bmt-3) [*Unit 4: Marketing* 136](#unit-4-marketing) [Introduction to marketing 136](#introduction-to-marketing) [Intro to marketing 136](#intro-to-marketing) [market orientation 137](#market-orientation) [Product orientation 137](#product-orientation) [Market Share (%) 138](#market-share) [Market growth (%) 140](#market-growth) [Market planning 141](#market-planning) [The role of market planning 141](#the-role-of-market-planning) [Segmentation, targeting and positioning (STP) 143](#segmentation-targeting-and-positioning-stp) [Segmentation 143](#segmentation) [Targeting 144](#targeting) [positioning 145](#positioning) [Difference between niche and mass market 147](#difference-between-niche-and-mass-market) [The importance of having a unique selling point/proposition (USP) 148](#the-importance-of-having-a-unique-selling-pointproposition-usp) [How org's can differentiate themselves and products from competitors 149](#how-orgs-can-differentiate-themselves-and-products-from-competitors) [Sales forecasting (HL only) 150](#sales-forecasting-hl-only) [Market research 153](#market-research) [Why and how organizations carry out market research 153](#why-and-how-organizations-carry-out-market-research) [methods/techniques of primary market research 154](#methodstechniques-of-primary-market-research) [Surveys 154](#surveys) [Interviews 155](#interviews) [Focus groups (common in exams) 156](#focus-groups-common-in-exams) [Observations 157](#observations) [methods/techniques of secondary market research 158](#methodstechniques-of-secondary-market-research) [Market analysis 158](#market-analysis) [Academic journals 159](#academic-journals) [Government publications 159](#government-publications) [Media articles 160](#media-articles) [Online 160](#online) [difference between qualitative and quantitative research 161](#difference-between-qualitative-and-quantitative-research) [methods of sampling 162](#methods-of-sampling) [Quota sampling 162](#quota-sampling) [Random sampling 163](#random-sampling) [Convenience sampling 163](#convenience-sampling) [The seven P's of the marketing mix 165](#the-seven-ps-of-the-marketing-mix) [Product 165](#product) [relationship between the product life cycle, product portfolio and the marketing mix 165](#relationship-between-the-product-life-cycle-product-portfolio-and-the-marketing-mix) [Extension strategies 167](#extension-strategies) [relationship between the product life cycle, investment, profit, and cash flow 167](#relationship-between-the-product-life-cycle-investment-profit-and-cash-flow) [following aspects of branding 167](#following-aspects-of-branding) [importance of branding 167](#importance-of-branding) [Command terms 167](#command-terms) ***Unit 1 (intro to business)*** ================================ The nature of a business ======================== Definition of a business ------------------------ An organization involved in the process of using inputs to produce goods or services that satisfy a need or demand in the maBusirket. Aims ---- 1. **Produce goods or services.** +-----------------------------------+-----------------------------------+ | **Goods** | **Services** | +===================================+===================================+ | - are tangible physical items | - (intangible) cannot be stored | | capable of being stored. | and are provided to customers | | | when they are needed. | +-----------------------------------+-----------------------------------+ 2. **Meet customer needs.** - Create products that meet the needs and preferences of customers and provide value to them. - By meeting customer needs, build customer loyalty, increase brand awareness, and generate revenue. - **Add value** (producing good or service that is worth more than the cost of the resources used to produce it.) E.x. a product that is easier to use, has a better design, or is of higher quality than competitors can create a competitive advantage for a business. Factors of production --------------------- To produce goods and services- combine human, physical and financial resources in an effective way. +-----------------------------------+-----------------------------------+ | **- Land** -\> Natural/physical | **Capital goods**- businesses | | resources needed to produce | that are related to banking | | goods, (raw materials). | services, financial services. | | | Physical products bought by | | **- Labour** -\> human effort | businesses to produce other good. | | used to produce goods and | | | services. AKA human resources. | Ex. Machinery, equipment, tools, | | (to make goods and transform | buildings, (products used to be | | product, need machinery and | able to make other products) | | labour) services given by the | | | employees. | **Consumer goods**- physical | | | goods | | **- Capital** **AKA financial | | | resources**. -\> manufactured | **Consumer services**- not | | resources used in the production | physical like school (you receive | | process. **Money used for | knowledge) | | production.** | | | | | | Ex. tools, machinery, motor | | | vehicles, physical premises, and | | | infrastructure. | | | | | | **- | | | Entrepreneurship** --knowledge, | | | skills and experiences of | | | individuals who have capability | | | to manage the overall production | | | process. Entrepreneurs are | | | willing to take risks in order to | | | produce goods and provide | | | services to customers, profitabl | | +-----------------------------------+-----------------------------------+ Business functions ------------------ +-----------------------------------+-----------------------------------+ | - **Human resources**-\> people | - **Marketing**-\> management | | that constitute the workforce | process of predicting, | | of an org. | identifying and meeting the | | | needs and wants of a | | Ex. Recruitment of staff, | customer, usually in a | | training, promotions, firing, | profitable way. Responsible | | pay, health, and safety | for promoting product and | | | branding to attract | | | customers. | | | | | | | | | | | | - Benchmarking: research about | | | competitors | | | | | | - talks about pricing of | | | products, distribution of | | | product, product itself | | | (including packaging) | +===================================+===================================+ | - **Finance and accounting**-\> | - **Operations management**-\> | | manages business money and | Producing goods and providing | | maintains financial records | services. Makes sure that | | of the firms' funds. Make | goods and services meet | | sure business has enough | production targets, | | funds. (recording, | deadlines, and certain | | summarising, and reporting | standard qualities. | | transactions) | | | | -manages production process, | | | manages stock, seeks | | | improvements to efficiency | | | (R&D&I research and | | | development and innovation). | | | Transportation and delivery | | | of goods (logistics) | +-----------------------------------+-----------------------------------+ - Stock management-\> things we have (finished goods, raw materials) Production planning comes from records and forecast. Stocks/inventories - raw materials - Work in progress - Finished goods - Obsolence-\> no place in market anymore Ex. New models have new a¡software and old phones can't take software therefore no place in market - Customers-\>people or business that purchase goods - Consumers-\> people who use goods and services Different business sectors (Economic sectors) --------------------------------------------- +-----------------------------------+-----------------------------------+ | **Primary**-\> Concerned with | **Secondary sector**-\> | | the **extraction of raw | manufacturing and constructing. | | materials** from land, sea or air | Transforms raw materials (like | | | oil refinement) gained into | | Ex. such as farming, mining, or | finished consumer/ capital goods | | fishing, extraction of oil and | (vehicles). | | gas, agricultural farming (crops) | | | | Manufacturing | | Added value= low | | | | 1. Raw materials (outputs) | | | | | | 2. Buy secondary manufacturing | | | | | | Ex. Buy wooden table (transform | | | into table=1) (Buy tables from | | | other businesses=2) | | | | | | - Car manufacturing, carpentry, | | | construction, engineering | +===================================+===================================+ | **Tertiary sector**-\> provide | **Quaternary sector**-\> Creation | | services | or sharing of knowledge and | | | information. Businesses operating | | 1. B2C services (business to | in these knowledge-based | | customer) | industries deal | | | with digital information | | 2. B2B services (business to | communication technology, | | business) | research and development (R&D), | | | and other high-level services. | | Ex. Banking, catering, education, | | | insurance, healthcare, medicine | Ex. Information and | | | communications technology (ICT), | | | management and consultancy, | | | tertiary and higher education. | +-----------------------------------+-----------------------------------+ **The Chain of Production (**linked to the four sectors) - **Chain of production**-\>series of steps taken to** turn raw materials into a finished product** that can be marketed and sold. A diagram of a production process Description automatically generated Entrepreneurship ---------------- +-----------------------------------+-----------------------------------+ | **Entrepreneur**-\>willing and | **Visionary**-\>entrepreneur who | | able to plan, organize, manage, | **has foresight** and driving | | invest in a business while taking | force behind an organization's | | the financial risks. Are often | growth and development.  **Can | | described as visionaries. | see market changes** and trends | | | before they actually happen or | | (transforms idea to business) | materialise, or even set the | | | trends themselves. | | | | | | Ex. a visionary will be | | | instrumental behind an | | | organization's product | | | development, acquisitions and | | | strategic partnerships.  | +-----------------------------------+-----------------------------------+ +-----------------------------------+-----------------------------------+ | Challenges for starting up a busi | Opportunities for starting up a b | | ness | usiness | | --------------------------------- | --------------------------------- | | ---- | ------- | +===================================+===================================+ | **Lack of finance**: Many | GET'M CUSH | | business **need finance** to | | | purchase fixed assets such as | **G-Growth** | | machinery, equipment, etc. | | | However, **don't have enough | Capital growth-\> when there is | | finance** to have **enough | an appreciation in the value of | | liquidity** to run the business | their businesses especially when | | on a daily basis. In some cases, | land and property increase. | | lack of sufficient working | | | capital **can lead to | **E-Earnings/money** | | bankruptcies.** | | | | Firm **earns profit** by selling | | - **Liquidity**-\> refers to | products at a higher price than | | the ease with which a | its production costs. Even though | | business can **convert its | there are many risks, owners get | | assets into cash** (to cover | to keep the profit as a reward. | | any short-term liabilities | | | such as loans, staff wages, | **Transference and inheritance** | | bills and taxes.) | | | | For many businesses, a business | | - **Liabilities**-\> debts of a | is something they are able to | | business | pass on (transference) to their | | | children (inheritance). | | **Marketing problems** | | | | Ex. Mars family (mars.inc, food | | - **Lack of market | company) Walton family (owns 50% | | research**-\> lack of | of shares of Walmart a large | | effective market research. | retail company). | | Ex. New business can | | | overestimate the size of | **Making a difference** | | their potential market. | | | Business fails to meet | Want to make a difference to | | customer needs and therefore | others. | | leads to lack of profit. | | | | Ex. provide service to local | | - **Poor marketing | community like medical clinic, | | strategy**-\> Not having a | day care centre, Nursing home for | | unique selling point so no | the elderly | | recognition in the market. | | | | **Challenge** | | **Long hours**-\> Entrepreneur | | | may spend many hours after | People want the challenge of | | business closes to work on firms | setting and running a business. | | financial accounts. | Being successful in a business | | | **boosts their self-esteem** and | | **Unestablished cost base** | make them satisfied. | | (brand awareness) | | | | **Unfulfilled market | | **Problem** is **attracting | opportunities** | | broad** and **loyal customers**. | | | Need good brand awareness | Some entrepreneurs **find gaps in | | | market** and start a business. | | **Cash flow problems** | | | | Ex. Travis Kalanick and Garret | | Financing working capital (money | Camp founded Uber. | | available for daily running of a | | | business). When the **cash going | **Security** | | out** of the business | | | **outweighs** **the cash coming | Although risks are high, it makes | | in**, causing a **lack of | them **feel more secure about | | liquidity** meaning a company | their job** as employees can be | | will **struggle to make | dismissed or replaced by | | payments** to suppliers, pay | technology. | | bills and ultimately running the | | | business effectively. They allow | **Hobbies** | | customers to pay later and deny | | | themselves inflows of cash. | Some people want to pursue their | | Customers may often wait a week, | own passion or **turn their | | month, year, or even longer to | hobbies into a business | | pay.The business still has to pay | opportunity.** | | for its ongoing costs like wages, | | | rent, bills, etc. | Ex. Linda McCartney, animal | | | rights activist started brand | | **People management problems** | called Linda McCartney foods | | | which specialized in vegan and | | - **Limited human | vegetarian meals. | | resources**-\> hard to | | | attract suitable skilled and | | | experienced staff | | | | | | | | | | | | - **Lack of knowledge, skills | | | and experiences**-\> New | | | entrepreneurs don't have | | | enough knowledge in industry | | | they are entering in. | | | | | | | | | | | | - Can lack knowledge of best | | | suppliers meaning higher | | | costs and distribution | | | problems. | | | | | | - Can lack experience of making | | | strategic decisions and staff | | | motivation. | | | | | | Ex. Lack knowledge in target | | | market, marketing trends, | | | competitors, etc. | | | | | | **Production problems** | | | | | | - **overproduce** - cost tends | | | to be high, can lead to | | | stockpiling and wastage. | | | | | | - **Underproduce**- loss of | | | potential sales and | | | dissatisfied customers. | | | | | | **Legalities** | | | | | | New businesses may **need to | | | follow to a range of laws** which | | | can be **complex** and | | | **time-consuming** to navigate | | | | | | Any **oversight** could lead to | | | business **paying penalties** | | | which is a problem for the | | | cashflow of the company. | | | | | | Ex. Rules about property, | | | insurance, toilets, etc | | | | | | **High production costs** | | | | | | Likely to have high set-up and | | | running costs **due to having to | | | pay for capital equipmen**t, | | | machinery, stocks, rent, etc. | | | **Smaller business** are at a | | | **cost disadvantage** whereas | | | economies of a larger scale can | | | have lower average costs of | | | production and are able to get | | | discounts. | | | | | |  | | | | | | **Poor location** | | | | | | Hard to find a good location for | | | business. Ex. For a convenience | | | store, need to find a location | | | where lots of people pass by. | | | | | | Many entrepreneurs will have to | | | start business in their own home | | | as fixed costs like rent, | | | mortgage payments, etc. cost a | | | lot for starting businesses. | | | | | | **External influences** | | | | | | Prone to exterior influences. | | | | | | Ex. Pandemic, golabal financial | | | crisis's, etc. | | +-----------------------------------+-----------------------------------+ Types of business entities ========================== Private and public sectors -------------------------- +-----------------------------------+-----------------------------------+ | **Private sector**-\> consists of | **Public sector (state-owned | | businesses owned and run by | enterprises)**-\> are owned & | | private individuals rather than | controlled by the Government and | | by the government. The main aim | usually funded through taxation. | | for most is to earn profit. | Aim: Usually provide essential | | | goods and services that can be | | | underprovided or inefficiently | | | provided by the private sector. | | | | | | Ex. UK's transport for London, | | | Singapore airlines | | | | | | - Ensure that everyone has | | | access to basic needs like | | | education, health care, | | | transport, libraries, | | | | | | - Create employment | | | opportunities. | | | | | | - Stabilize economies. | | | | | | Ex. Many private sector | | | commercial banks were | | | nationalized during the | | | global credit crisis of 2008 | | | to prevent further financial | | | turmoil. | +-----------------------------------+-----------------------------------+ - Nationalized-\>bought by the government. Types offor-profit commercial organisations ------------------------------------------- Sole traders, Partnerships, Privately held companies, publicly held companies, - **Unincorporated business**-\>owner and business are the same legal entity (same thing) - **(sole proprietor)**-\> A business that has a **single owner** (although they may still hire employees). Runs and controls business and is held responsible for its success or failure. - **Partnership**-\> Two or more people join together to form a commercial business. Owners of a partnership are called partners. - **Ordinary partnerships** max number of owners= 20 people. All partners have a function in the business. - Mainly financed from personal funds of each owner. However, partners can pool funds together to raise more finance than sole traders. Can also raise money from **silent/sleeping partners**. - **Silent/sleeping partners**-\> inactive owners of a partnership business, who provide additional capital without having any role in the actual running of the organization - Most partnerships are unincorporated businesses and therefore at least one owner has unlimited liability, however usually partners share liability. - Many partnerships have a legal agreement signed known as the deed of partnership. - **Deed of partnership**-\> legal contract between partners that says each of the partners responsibilities, voting rights, how the profits are shared, conditions for introducing new partners, etc. - **Privately held company**-\> Is a company that is **owned by various shareholders** however, the **shares cannot be sold or bought freely on the stock exchange**. Features: - Can't raise share capital from general public through the stock exchange. - Usually are small businesses and are usually family owned. - Shares are sold to private family members and friends. - Shares cannot be bought or sold without agreement of the BOD to maintain control of the company. Board of directors BOD-\> held responsible for running the company - Company and owner are separate legal entities. - **Publicly held companies (joint-stock companies)**-\> limited liability companies **owned by shareholders** with the **shares** in the business being **traded on a public stock exchange**. The shares in the company can be bought and sold by the general public without needing approval of existing owners. - **Stock exchange**-\> well-organized and highly regulated marketplace for trading stocks and shares. Is where individuals and businesses can buy and sell shares in publicly held companies. main functions of a stock exchange: - enable existing companies to raise share capital (through a share issue) - oversees the initial public offering (IPO) of new publicly held companies - provide a market for trading of second-hand shares - **IPO- initial public offering**-\> when company first sells its shares to become a publicly held company. For-profit Commercial organisations ----------------------------------- +-------------+-------------+-------------+-------------+-------------+ | | Sole | Partnership | Privately | Publicly | | | traders | s | held | held | | | | | companies | companies | +=============+=============+=============+=============+=============+ | Setting up | Easy and | Easy | | Most | | | inexpensive | | | adminsitrav | | | | | | ely | | | | | | difficult | | | | | | and | | | | | | **expensive | | | | | | ** | | | | | | commercial | | | | | | for-profit | | | | | | business to | | | | | | set up and | | | | | | run. Ex. | | | | | | High costs | | | | | | of | | | | | | complying | | | | | | with the | | | | | | rules and | | | | | | regulations | | | | | | of the | | | | | | stock | | | | | | market. | +-------------+-------------+-------------+-------------+-------------+ | Profits | Receives | **Profits | | | | | all profits | are often | | | | | | shared | | | | | | equally**, | | | | | | regardless | | | | | | of the | | | | | | contributio | | | | | | n | | | +-------------+-------------+-------------+-------------+-------------+ | Control | Complete | | Lots of | | | | control | | **control** | | | | over | | as shares | | | | business | | cannot be | | | | without | | bought or | | | | needing to | | sold | | | | consult | | without | | | | others | | agreement | | | | | | existing | | | | | | shareholder | | | | | | s. | | +-------------+-------------+-------------+-------------+-------------+ | Tax | Simple tax | | | | | | arrangement | | | | | | s. | | | | | | , many sole | | | | | | traders | | | | | | work from | | | | | | home so can | | | | | | claim. Tax | | | | | | concessions | | | | | | by using | | | | | | part of | | | | | | their home | | | | | | for | | | | | | business | | | | | | purposes. | | | | +-------------+-------------+-------------+-------------+-------------+ | Decision | **made** | **Slow | | | | making | very | decision | | | | | **quickly** | making** as | | | | | so the | there are | | | | | business | more owners | | | | | can react | involved. | | | | | swiftly to | Can be | | | | | market | disagreemen | | | | | change | ts | | | | | | and | | | | | | conflict. | | | +-------------+-------------+-------------+-------------+-------------+ | Privacy | **Privacy** | **Privacy** | **Privacy** | **Lack of | | | Financial | , | | privacy**, | | | records | only tax | | general | | | don't need | authorities | | public has | | | to be | know about | | access to | | | available | financial | | financial | | | to general | position of | | accounts | | | public | partnership | | | | | |. | | | +-------------+-------------+-------------+-------------+-------------+ | Benefits | **Personali | **More | | | | | zed | ideas, more | | | | | service, | skills, | | | | | high levels | less | | | | | of personal | workload, | | | | | satisfactio | and more | | | | | n** | expertise** | | | | | |. | | | | | | | | | | | | Ex. Law | | | | | | firm can | | | | | | have | | | | | | partners | | | | | | who | | | | | | specialize | | | | | | in | | | | | | corporate | | | | | | law, | | | | | | divorce law | | | | | | and | | | | | | criminal | | | | | | law | | | | | | therefore | | | | | | client base | | | | | | is larger. | | | +-------------+-------------+-------------+-------------+-------------+ | Finance | **Hard to | Can raise | **More | **Additiona | | | secure | more- more | finance** | l | | | funds** | owners who | can be | finance** | | | therefore | can invest | raised | can be | | | the finance | and have | compared to | raised | | | is usually | silent | sole | through a | | | provided by | partners. | trader. But | share issue | | | the owner. | | **hard to | (selling | | | Owner | | get** as | more shares | | | **can't | | can't raise | in a | | | easily | | share | company) | | | access | | capital | making it | | | external | | from | easy to get | | | sources of | | general | finance | | | finance.** | | public | from stock | | | As sole | | through the | exchange. | | | trader, | | stock | **Significa | | | banks don't | | exchange. | nt | | | think can | | shares | amounts of | | | be | | typically | capital can | | | successful | | owned by | be raised | | | and won't | | family, and | very | | | give loans | | friends. | quickly**  | | | as they | | Because of | | | | don't think | | this, you | **Easy to | | | sole trader | | **can only | borrow | | | can pay | | sell the | money** | | | loan back. | | shares to | from bank | | | | | family | loans and | | | | | members,** | mortgages | | | | | **close | due to | | | | | friends, or | lower level | | | | | employees,* | of risk for | | | | | * | financial | | | | | and even | lenders. | | | | | then, most | Banks think | | | | | of the | business | | | | | existing | will | | | | | owners need | succeed and | | | | | to agree to | therefore | | | | | the sale. | will be | | | | | | more | | | | | Because | willing to | | | | | shares in | give loans. | | | | | privately | | | | | | held | | | | | | companies | | | | | | cannot be | | | | | | openly | | | | | | traded on a | | | | | | stock | | | | | | exchange, | | | | | | investors | | | | | | in | | | | | | privately | | | | | | held | | | | | | companies | | | | | | **may find | | | | | | it hard to | | | | | | find buyers | | | | | | for their | | | | | | shares** | | | | | | | | | | | | Because | | | | | | privately | | | | | | held | | | | | | companies | | | | | | aren't on | | | | | | the stock | | | | | | exchange, | | | | | | raising | | | | | | funds is a | | | | | | lot harder | | | | | | and **more | | | | | | expensive** | | | | | | as they | | | | | | don't have | | | | | | access to | | | | | | the open | | | | | | market. The | | | | | | only way | | | | | | they can | | | | | | raise funds | | | | | | is by going | | | | | | to a bank, | | | | | | a private | | | | | | investor, | | | | | | friends and | | | | | | family or | | | | | | financial | | | | | | institution | | | | | | other than | | | | | | a bank. | | +-------------+-------------+-------------+-------------+-------------+ | Risks | **Accepts | | A private | As general | | | all | | company can | public can | | | risks**. | | **be at | buy and | | | Owner is | | risk of | sell | | | the same | | being taken | freely, can | | | legal | | over by a | be **taken | | | entity as | | bigger | over** by | | | the | | company** | rival | | | business | | that wants | company | | | itself (-- | | to buy a | | | | sole trader | | big chunk | Being too | | | can lose | | of its | large can | | | personal | | ownership. | cause | | | possessions | | However, | inefficienc | | | if business | | this can | ies | | | collapses. | | only happen | in the | | | | | if the | company | | | | | other | hence, | | | | | owners of | **higher | | | | | the company | average | | | | | agree to | costs** of | | | | | sell. | production. | +-------------+-------------+-------------+-------------+-------------+ | Liability | Has | **Unlimited | **Limited | **Limited | | | **unlimited | liability** | liability** | liability** | | | liability** |. |. | | | | and is | Are liable | Cannot lose | | | | **responsib | for any | more than | | | | le | debts | they | | | | for any | fines, | invested. | | | | debt** owed | penalties | | | | | to other | and law | | | | | individuals | suits even | | | | | and | if its | | | | | organisatio | caused by a | | | | | ns, | partner in | | | | | even if | the firm. | | | | | owner has | **Sleeping | | | | | to pay with | partners do | | | | | own assests | NOT** have | | | | | and | unlimited | | | | | belongings. | liability. | | | +-------------+-------------+-------------+-------------+-------------+ | Workload | **High**. | **Less More | | | | | As there is | ideas, more | | | | | no one to | skills, | | | | | share ideas | less | | | | | with, ask | workload, | | | | | questions, | and more | | | | | etc, lots | expertise** | | | | | of pressure |. | | | | | is added. | | | | | | They have | Ex. Law | | | | | to do their | firm can | | | | | own | have | | | | | accounts, | partners | | | | | marketing, | who | | | | | HR, etc. Is | specialize | | | | | unlikely to | in | | | | | be equally | corporate | | | | | effective | law, | | | | | for all | divorce law | | | | | roles so | and | | | | | adds to | criminal | | | | | pressure | law | | | | | and stress. | therefore | | | | | | client base | | | | | | is larger. | | | +-------------+-------------+-------------+-------------+-------------+ | Continuity | Lack of | **Does have | **Continuit | **Continuit | | | continuity | continuity | y** | y**. | | | | but, Lack | | Shareholder | | | | of | | s | | | | continuity* | | can sell | | | | * | | their | | | | if a | | shares, | | | | partner | | transfer | | | | leaves or | | ownership | | | | dies, the | | or pass | | | | partnership | | them on to | | | | deed is | | heirs. This | | | | invalid and | | makes it | | | | there would | | easier to | | | | be time | | plan for | | | | delay to | | the long-te | | | | set up a | | rm | | | | new | | continuity  | | | | contract. | | of | | | | | | the company | +-------------+-------------+-------------+-------------+-------------+ | Expansion | **Hard for | | | Can | | of business | expansion | | | **operate | | | of | | | on a larger | | | business** | | | scale.** | | | as it is | | | | | | hard to get | | | | | | external | | | | | | finance. | | | | +-------------+-------------+-------------+-------------+-------------+ For-profit social enterprises ----------------------------- **Aim**-\>Combine social and commercial agendas to **provide a solution to important or environmental issues**. Social enterprises typically **reinvest** a significant portion of their **profits back into their mission** rather than maximising profits for shareholders For profit social-care about money but also care about social, (being ethical) want a balance of both want to gain money as well as be ethical. ### Private sector for for-profit social enterprise Operates in a similar way to traditional for-profit business but they **reinvest or donate any surplus to create a positive change**. They **use ethical business practices** to **achieve social aim** related to needs of local communities and societies. Unlike charities that rely on donations, private sector for for-profit social enterprise **need to earn a financial surplus to survive and expand**. - Produces goods and services, - are different legal entities - competes with business operating in same market. **Microfinance providers** Operate as private sector companies. for-profit social enterprises that offer essential financial services to those without a job or on very low incomes. Aim of providing microfinance: to help entrepreneurs, especially women, struggling to finance their business start-ups to gain access to loans of a small amount. Microfinance can give these people the opportunity to become self-sufficient and empower them to run their businesses. ### Public sector companies **Owned and controlled by government**. Operates in a commercial like way (sells goods and services to gain a financial surplus). Exists to **create employment and reinvest profits** (financial surplus) back into business and local community. Help raise money needed government revenues while providing essential services that are lacking in the private sector. Ex. National airlines, airport authorities, transport operators, postal services, telecomunnication services, etc. **Public private partnership (PPP)**-\> contract between a private company and a government agency for providing a public asset or service in which privately party bears a significant risk and management responsibility. +-----------------------------------+-----------------------------------+ | Advantages (SFRS) | Limitations | +===================================+===================================+ | - **Solution: Give viable | - By funding a particular | | solution for the government | public sector enterprise, the | | to finance projects** that | government **gives up the | | don't have enough money for | option of financing other | | unless it is able to charge | items of government | | for the services provided. | expenditure,** such as road | | | maintenance, flood defense | | - **Fewer risks:** As the | systems and developing | | product is provided by the | communication networks. | | government | | | | - **Are expensive** to operate. | | - **Reduce debt burden:** By | Can be high risk businesses | | being able to charge for | with unpredictable rates of | | their services, public sector | return on the investments. | | companies help to **reduce | Ex. Hong Kong Disneyland | | the debt burden of the | opening in 2005 but took 7 | | economy and taxpayers in | year to declare profit. | | particular.** | | | | - **Hard to persuade private | | - **Security:** Public sector | sector parties or** | | companies **create secure | **investors** to help fund | | employment opportunities** | public sector companies. | | and have a **positive impact | Investors can be unwilling | | on local communities** and | and unsure to form a PPP. | | the country's overall | | | economic growth and | - Often associated with | | development. | bureaucratic policies and | | | procedures which **can cause | | | inefficiencies and delays to | | | decision making.** | +-----------------------------------+-----------------------------------+ Both private and public sector for profit social enterprises have **3 objectives**. - **Economic aims**-\> earn profit (or surplus) and to reinvest it back into the business for social benefits. - **Social aims**-\> provide benefits to people in society. Ex. Job opportunities, support less advantaged members - **Environmental aims**-\> protect planet by operating in environmentally friendly and sustainable ways. ### Cooperatives **Cooperatives**-\> for profit social enterprises owned and **managed by their members** (employees, customers, produces, managers) with the principle that **working together** means more **power.** **Features** - Want to provide a service for the members, providing and creating value, instead of seeking to earn a desired level of profit margin for their member owners. - Most are **limited liability** organisations. They have separate legal entity from shareholder owners. Shareholders, directors, managers and employees are **not held personally liable for any debts** incurred by the cooperative. - Each member owns **one share** and has **one vote **on key decisions. They have equal voting rights regardless of how much you invested in the company. - **Profits** are either **shared** **equally** between members or reinvested for their benefit - Members have **limited** **liability** - Tend to have democratic culture +-----------------------------------+-----------------------------------+ | Advantages | Disadvantages | +===================================+===================================+ | - **Easy and inexpensive** to | - **Hard to attract investors, | | set up | financiers and | | | member-shareholders** as they | | - Tax exempt (**don't need to | are not profit driven. | | pay taxes**) as focus of | | | business is on serving the | - May **lack financial | | collective interests of its | motivation** due to absence | | member-owners and the | of profit motive. | | community (home care | | | association for the elderly) | - **Limited sources of | | | finance** as capital depends | | - **More likely to success** as | on amount contributed by | | all member shareholders need | their members | | to help run the cooperative | | | | - **Unable to hire range of | | - **Equal voting rights**, more | specialist managers** to run | | harmonious working | the business due to lack of | | environment, more motivated | financial rewards and sources | | as they have a stake in the | to pay (remunerate) senior | | cooperative. | staff. | | | | | - **No pressure from external | - **Decision-making** in | | investors and shareholders,** | cooperatives can be | | member-owners of cooperative | **time-consuming** as members | | can run the business that | have the right to have a say | | best suits their own | | | interests. | - **Disagreements** can occur | | | when members possess | | - Often qualify for | differing social and | | **government financial | commercial objectives | | support** as are benefitting | | | members and society. | | | | | | - **Continuity** | | +-----------------------------------+-----------------------------------+ NON-PROFIT social enterprises ----------------------------- Non-profit social enterprises operate in a commercial way, but they don't distribute any profits or financial surplus to their owners or shareholders. Surplus is completely reinvested in the organization. Non-governmental organizations (NGO)-\> type of non-profit social enterprise that operates in the private sector. These are typically **voluntary**, community-based organisations which do not aim to make a profit but seek to meet a need or **provide a service. They still require money to survive but their main aim is to provide a service. (Non- profit social- don't really care about money, more social want money to be able to survive but care mostly about beong ethical and helping out.)** Ex. Amnesty international, Doctors without borders, World wildlife fund, Oxfam, etc NGOs operate locally, nationally and/or internationally and are **independent of government** +-----------------------------------+-----------------------------------+ | Advantages of nonprofit social | Disadvantages | | enterprise | | +===================================+===================================+ | - Exist for the **benefit of | - **Strict guidelines and | | local communities** and | restrictions**. Not all | | societies. | trading activities are | | | permitted, This is done to | | Ex. Fundraising events, | make sure general public is | | donations | protected against fraudulent | | | activities by dishonest | | - **No taxes** | organizations. | | | | | - Typically financed by a | - **Business survival** | | combination of **government | especially for smaller ones | | funding and donations** from | is **hard** as they depend on | | businesses or private | goodwill of general public | | individuals **thereby | and donors to fund their | | reducing costs of | operations. | | production** | | | | - **Lack of financial and cost | | - **Positive impact on | control**. Managers at NPO's | | employees and donors** who | are not expected to earn a | | feel that the non-profit | profit for their shareholders | | enterprise is pursuing a | and owners. | | socially meaningful ambition. | | | | - **Wages are often lower** | +-----------------------------------+-----------------------------------+ - **Surplus**-\>financial gain of a non-profit social enterprise. This belongs to the business organization and is reinvested back in the social enterprise. Business objectives =================== Vision and mission statement ---------------------------- +-----------------------------------+-----------------------------------+ | **Vision statement** | **Mission statement** | +===================================+===================================+ | -\> aspirational declaration of | -\> simple declaration explaining | | what an organization wants to | organizations core purpose (why | | achieve in the future. (broad and | it exists), identity (who they | | abstract statement) | are) and focus (what they do). | | | | | Ex. A just world without | Ex. To make people happy-Walt | | poverty-Oxfam | disney | +-----------------------------------+-----------------------------------+ They serve to guide the organizations strategies and strategic objectives. If it is positive and inspirational they help motivate employees. Common business objectives -------------------------- ### ojectives **Objective**-\> goals or targets organization want to achieve **Objective**-\> goals or targets organization want to achieve --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- **Strategies**-\> long term plans of action that businesses use to achieve objective. **Tactic**s-\> short term plans of action that businesses use to achieve objective. Are important for people to know where business is striving for and what they are trying to accomplish. Way to evaluate strategic and tactical objectives: **SMART.** Ex. To achieve sales growth of \$10 million in European markets by 2023. **S**pecific. To achieve sales growth of \$10 million in European markets by 2023 **M**easurable, need to compare to something else Ex. Ex. To achieve sales growth of \$10 million in European markets by 2023. **A**greed/achievable Ex. To achieve sales growth of \$10 million in European markets by 2023. **R**ealistic/relevant- for a large multinational company this objective is relevant. **T**ime specific- objective is for 2023. +-----------------------------------+-----------------------------------+ | **Tactical objectives/short | **Strategic objectives/long | | term** | term** | +===================================+===================================+ | **Specific targets** with | what **whole organization wants | | definitive timelines. **easy** to | to achieve**. Requires more | | **achieve** as is smaller. | investment in Human and financial | | | resources. Related to what owners | | Objectives include | of the business want to focus on | | | ex. Business survival, growth and | | - Survival is a key tactical | profit maximization. | | objective | | | | - Market standing-\> extent to | | - Sales revenue | which business has presence | | | in industry ( Ex. Microsoft | | | has high market standing as | | | market leader in the computer | | | software industry.) having | | | high or good market standing | | | brings competitive advantages | | | to the business. | | | | | | - Image and reputation | | | | | | - Market share, want to | | | increase market share over | | | time. | +-----------------------------------+-----------------------------------+ ### Growth ### Profit - **Profit (or financial surplus)**-\> positive difference between firms' revenue and its total cost of production. - Provides internal source of finance to further develop the business. Make business need to rely less on external sources of finance that can incur interest and debt. - Profit acts as an *incentive to produce*. The profit motive is probably the key driving force for most business transactions. - It acts as the *reward* *for risk takers* engaged in business activity. Reward for the owners and investors of the business. - It *encourages invention and innovation*. New technological ideas and processes that cut costs of production will result in higher profits. - Profit acts as an *indicator of growth* (or decline). Hence, it signals to the owners and investors of a business to switch from low profitability to high-profitability business activities. - Being an *internal* *source of finance* and used to fund the growth of a business. ### Protecting shareholder value **Protecting shareholder value**-\> making sure the value of a business stays the same or improves. safeguarding the interests of the owners of a limited liability company. Directors are responsible for protecting shareholder value. They need to make sure the company makes money and keeps growing in a smart way. Shareholders rely on the directors and other company leaders to do this because they don\'t run the company themselves. But the tricky part is that directors have to balance making money now (like giving out profits to shareholders (dividends)) with making sure the company becomes more valuable over time. It\'s like keeping both short-term and long-term goals in mind. ### Ethical objectives **Ethical objectives**-\> organizational goals based on moral guidelines to influence or determine a business decision making. Businesses have to **operate in a socially acceptable and responsible way**. Ex. Ensuring that the business activities don't damage the planet. Improve the image of the company. **Business ethics**- the actions organizations that are considered to be **morally correct employ**. An ethical business acts morally towards its workers, customers, shareholders and the natural environment. Ex. Ethical employer would ensure all employees are given sufficient rest breaks during the day. Adopting green and renewable technologies, etc. **Ethical code (code of conduct)-\>** A document detailing a company's rules and guidelines on staff behaviour that must be followed by all employees ### Corporate social responsibility (CSR) **Corporate social responsibility (CSR)**-\> Corporate social responsibilities-\> The business must **act morally** to **their stakeholders and society**. Ex. McDonald employees regularly go on litter patrol to get rubbish in the vicinity of their restaurants. Can form an **ethical code of practice**. -\> a **formal documented policy** setting out **the way the business** believes **it should behave**, so that people know what is acceptable and what is not. Can talk about how to respond to situations that challenge integrity or social responsibility. +-----------------------------------+-----------------------------------+ | Advantages | Disadvantages | +===================================+===================================+ | - **Improved corporate image**, | - **Compliance costs**, costs | | knowing business is ethical | for being socially | | can help to enhance the | responsible are high, Ex. | | corporate image and | Producing organic | | reputation of the business. | agricultural products is more | | Can improve sales and | expensive than growing and | | consumer loyalty. | harvesting genetically | | | modified crops. As well as, | | - **Increased customer | costs of production is | | loyalty**, more likely to be | expensive as workers get fair | | loyal to business that does | salaries and are not | | not act immorally. Ex. The | exploited. | | body shop established many | | | customers because it does not | - **Lower profits**, if | | animal test. | compliance costs are nt | | | highly priced, there are high | | - **Reduced costs,** Ex, being | production costs, but low | | environmentally friendly can | profit gained. | | reduce amount of excess | | | packaging. | - **Stakeholder conflict**, not | | | all stakeholders want to | | - **Higher sales revenue**, | adopt ethical objectives | | customers prefer buying from | especially if it affect | | ethically moral businesses | profit maximization. | | therefore can gain higher | | | sales revenues. | - **Subjectivity**, Is | | | subjective as what is | | - **Higher staff morale and | considered right or wrong is | | motivation**, employees feel | based on public opinion. | | better working for business | Different parts of the world | | that does the "right" things | can have different views. | | from a social point of view | | | and therefore helps improve | Ex. Serbia, Bangladesh and | | productivity and employee | Russia are huge consumers of | | loyalty. | tobacco so cigarette | | | advertising is less stringent | | - **Increased employee | than in other countries. | | loyalty**, having good | | | corporate image and | | | reputation for ethical | | | business practices makes it | | | significantly easier for | | | organisations to attract, | | | hire and retain employees. | | | | | | - **Avoid fines and | | | penalties**, acting | | | unethically can lead to | | | lawsuits and fines. | | +-----------------------------------+-----------------------------------+ Stakeholders ============ - **Stakeholder (AKA groups of interest**)-\> group has invested interest in the company and can either affect or be affected by a business operation and performance. Internal stakeholders --------------------- **Internal**-\> (people that work within the company)-\> members of the business-\> Managers, Employees, Directors, Shareholders **(MEDS)** +-----------------+-----------------+-----------------+-----------------+ | | Definition | Interests: | Types? | +=================+=================+=================+=================+ | **Managers** | -\> oversee the | \- Improve | Senior- | | | daily | operational | (responsible | | | operations of a | efficiency, | for middle | | | business | labour | managers)-\> | | | | productivity | higher ranking | | | (certain | and profits. | managers/direct | | | functions, | | ors | | | operations, or | \- Improve | who plan and | | | departments.) | customer | oversee long | | | Usually want to | relations to | term aims and | | | achieve their | maintain and | strategies of | | | objectives in | improve the | the | | | the shortest | company's | organization. | | | time and at the | competitiveness | | | | lowest possible |. | Middle- run | | | costs. | | individual | | | | \- Improve own | departments. | | | | salaries | | | | | bonuses, etc. | \- Set | | | | | departmental | | | | | objectives and | | | | | implement | | | | | strategies to | | | | | achieve goals. | | | | | | | | | | \- Are | | | | | responsible for | | | | | their | | | | | departmental | | | | | staff. | | | | | | | | | | Junior/supervis | | | | | ory | | | | | management- | | | | | | | | | | \- monitor and | | | | | control day to | | | | | day routine | | | | | tasks. | | | | | | | | | | \- Responsible | | | | | for their team | | | | | of workers. | +-----------------+-----------------+-----------------+-----------------+ | **Employees** | -\> worker in | \- Better pay | | | | the | and bonuses | | | | organization. | | | | | Usually want | \- Equal | | | | good working | opportunities | | | | conditions, | | | | | meaningful work | \- Improved job | | | | and maximum pay | security and | | | | for minimum | job | | | | effort. | satisfaction | | | | | | | | | | \- Improved | | | | | terms and | | | | | conditions of | | | | | employment | | | | | | | | | | \- More | | | | | opportunities | | | | | for career | | | | | progression | | +-----------------+-----------------+-----------------+-----------------+ | **Directors** | -\> responsible | \- They have | Executive | | | for overall | similar | | | | running of the | interests to | \- work full | | | company on | managers, but | time, make key | | | behalf of their | are also likely | decisions | | | shareholders | to strive to | | | | | improve their | Non-executive | | | | share ownership | | | | | rights and | \- Do not work | | | | performance | in | | | | related | organization, | | | | bonuses. | | | | | | -Do not work in | | | | \- Are | organization | | | | concerned with | | | | | the | -Are | | | | organization's | consultants | | | | return on | used for | | | | investment for | particular | | | | their | expertise | | | | shareholders. | | | | | | -Advise board | | | | \- improve the | of directors on | | | | competitiveness | corporate | | | | of the | strategy | | | | organization as | | | | | measured by | | | | | market share | | | | | and market | | | | | growth. | | +-----------------+-----------------+-----------------+-----------------+ | **Shareholders | -\> people that | \- They have | | | (stockholders)* | buy shares in | rights to a | | | * | the company. | share of any | | | | (They own a | profits that | | | | part of the | the company | | | | business.) | earns (dividend | | | | usually want to | payments); | | | | maximise | expect regular | | | | shareholder | payment of | | | | value. | dividends. | | | | | (want to | | | | | maximize | | | | | dividends) | | | | | | | | | | \- Also have | | | | | voting rights | | | | | (based on the | | | | | number of | | | | | shares they | | | | | own) on how the | | | | | company should | | | | | be run. | | | | | | | | | | \- As co-owners | | | | | of the limited | | | | | liability | | | | | company, | | | | | shareholders | | | | | expect the | | | | | business to | | | | | earn a certain | | | | | (financial) | | | | | return on their | | | | | investment. | | | | | (want to | | | | | achieve capital | | | | | gain, rise the | | | | | values of | | | | | shares) | | +-----------------+-----------------+-----------------+-----------------+ - Market share -\> portion of a market controlled by a particular company or product. Shareholder vs stakeholder Shareholders (owners of limited liability companies) are a type of stakeholder group, but business have other stakeholders too that are not necessarily shareholders (such as employees, suppliers and the government). External stakeholders --------------------- **External**-\> people or organizations **not part of the business** but have direct interest in its decisions, actions and performance. +-----------------------+-----------------------+-----------------------+ | | Definition | What are they | | | | interested in? | | | | Interested in... | +=======================+=======================+=======================+ | **Customers** | -\> people or | \- cheaper and more | | | business that | competitive prices | |