Higher Business Management - Understanding Business

Advantages of a social enterprise

- Social aims can endear a social enterprise to customers - Good quality employees who believe in the social 'mission' are attracted to the business - They are likely to receive government grants due to their positive impact on society - 'Asset lock' means that if the enterprise closes down, the sale of any assets and any profits remaining will be used to benefit the cause

Technological factors affecting the quality of decision-making

- Spreadsheets can improve the accuracy of calculations using formulae - Databases can improve the speed of decision-making by making it easy to search for information using queries and sort functions - Email can be used to communicate information regarding decisions to many employees at once and attachments containing information can be sent, reducing printing costs - Internet sites can be used to find out information to help make a decision - Video conferencing can be used to reduce the need for managers to travel to meetings to make decisions, saving time and on travel costs

Effects of flexible working arrangements

- Staff will work at a time when they are most productive, improving quality and efficiency within the organisation as well as raising staff morale - Businesses can save money on renting office space if more employees work from home - They can lead to a lack of supervision and direction of staff, reducing productivity, and organisations may have to provide staff with equipment such as laptops and mobile phones so they can work at home, which can be costly

Advantages of functional grouping

- Staff with similar skills and expertise are together, allowing for specialisation so that the department can become excellent at what they do - Staff know who to report to and can get guidance from more experienced staff within their area of expertise

External stakeholders

- Stakeholders from outside the organisation - Include the government, banks, customers, suppliers, pressure groups, the local community and the Inland Revenue

Internal stakeholders

- Stakeholders from within an organisation - Include employees, owners/shareholders and managers

Suppliers vs. Owners/Managers

- Suppliers want to be paid as soon as possible, whereas the owners/managers want trade credit to keep good cash flow in the business - Suppliers want as high a price as possible for the goods they supply, whereas owners/managers want to maximise profits by keeping costs low - Suppliers want to avoid offering discounts to maximise profits, whereas owners/managers want to receive discounts to keep their costs low and maximise profits

Asset stripping

- Taking over another company with the intent to sell of its assets for a profit - This could lead to a business selling a company's factories, retail spaces or fleet of vehicles as they may be more valuable than the organisation as a whole - Can cause the buyers to gain a bad a reputation as it can occur after a hostile takeover and can result in job losses as areas of the business are sold or closed down

Effects of weather

- The business can benefit from prolonged periods of favourable weather (e.g. ice cream vans during heatwaves and the ski industry in snowy periods) - Prolonged spells of adverse weather, such as flooding and snow, can affect transport networks across the UK, making it difficult for delivered materials to arrive and for staff to get to work, causing production to slow down or stop

Advantages of forward vertical integration

- The business can control supply of their products and could decide to not supply to competition - Can increase profits by cutting out the middle man

Advantages of decentralised management

- The business reacts quickly to changing external factors - The needs of the local market can be met - Decisions are made quickly as local managers don't need to consult senior managers before implementing decisions - More subordinates become empowered, encouraging creativity and increasing motivation - Senior management at head office are relieved of the burden of constant decision-making

Advantages of takeovers

- The buying business gains the market share and resources of the taken-over business - Risk of failure can be spread better over the bigger business - Economies of scale can be achieved as the business grows - Competition is reduced, increasing sales for the business

Advantages for the franchisee

- The franchise is a well-known business with an existing customer base, so the risk of business failure is reduced - Industry knowledge, administration and training is provided by the franchiser - National advertising is carried out by the franchiser

Effects of public spending on infrastructure

- The government could decide to fund the development of infrastructure such as building new motorways and tram networks, which would increase the likelihood of businesses attracting customers to the areas with improved infrastructure - Funding the development of infrastructure would also create jobs, enabling more people to spend money on goods and services - The negative impact of this is that only specific areas benefit from improved infrastructure - the money spent on one area can't be spent on another - so only certain businesses benefit

Effects of changing laws and legislation

- The government could introduce environmental protection laws, such as 'Zero Waste Scotland' that, if complied with, show organisations in a positive light, attracting more customers to the business - The government could increase the minimum wage, giving the organisation higher wage costs, resulting in lower profits for the year

Effects of changing VAT rates

- The government could lower VAT, making products more affordable for customers, increasing the business' sales - The government could raise VAT, putting off customers from purchasing products and decreasing the business' sales

Effects of changing corporation tax

- The government could lower corporation tax, increasing the business' profits The government could increase corporation tax, decreasing the business' profits

Effects of changing income tax rates

- The government could reduce income tax, giving customers a higher disposable income, meaning that the business will experience an increase in sales - The government could increase income tax, giving customers a lower disposable income, meaning that the business will experience a decrease in sales

Government vs. Owners/Managers

- The government may want to raise the minimum wage, whereas owners/managers don't want wage costs to increase as this will lower the business' profits - The government may want to introduce legislation to ensure organisations recycle, whereas owners/managers don't want to increase their costs by recycling rather than disposing of waste as they want to maximise profits - The government may want businesses to reduce their carbon footprint by making them use more renewable energy, whereas owners/managers may not want to use renewable energy as it is expensive to invest in solar panels, for example

Disadvantages of horizontal integration

- The merger or takeover could breach EU competition laws - Quality may suffer due to a lack of competition, leading to angry customers - Customers have to pay higher prices for the same goods

Advantages of horizontal integration

- The new larger business can easily dominate the market as competition has been reduced - Business can benefit from economies of scale - Due to the reduced competition, the new business can raise prices, increasing profits

Disadvantages of functional grouping

- The organisation can become too large and inefficient to manage if functional departments grow rapidly - This grouping type is also often paired with centralised management so communication can be slow, causing the organisation to react slowly to external factors - The departments can be more interested in their own objectives rather than the organisation's main objectives

Disadvantages of decentralised management

- The organisation can lose an overall corporate image if each department or branch operates differently - Consistency across the business can be lost - Important information can leak from branches or departments - Local branches could start to compete with each other, leading to them abandoning the key objectives of the organisations in favour of their own

Outsourcing

- Also known as contracting out - When an organisation arranges for another organisation to carry out certain activities for them, instead of doing it themselves

Internal/Organic growth

- Businesses decide to grow on their own without getting involved with other organisations - Increases market share without losing control of the business to outsiders

Technological factors

- Concern the quickly evolving technological advancements that can impact an organisation - Examples include faster broadband connections, cloud computing and social media

Social factors

- Concern the ways in which society changes - Can be a change in demographics or a change in cultural behaviour

Effects of a new competitor entering the market

- Improves the market as it brings with it more choice, new ideas and keeps prices low, benefitting all businesses in the market - The competition could launch new or improved products, causing the businesses to have to spend money researching and developing new products to compete

Disadvantages of a matrix structure

- Many managers across all project teams mean high wage and salary costs - Duplication of resources, such as administration staff, can occur - Staff can be confused as to who to report to as they have two managers

Franchiser

- Original business that gives franchisees licenses to sell goods or services under their brand name - Aims to grow, increase market share and maximise profits

Nationalised companies

- Private sector businesses that have been bought in part or in full by the government - e.g. the UK Government bought shares in the Royal Bank of Scotland during the recession to stop it going bust

Advantages of a private limited company

- Shareholders have limited liability - Capital can be raised by selling shares - They do not have to disclose most of the information that public limited companies have to provide - Ownership is not lost to outsiders as all shareholders are known

Weaknesses

- Things the organisation is ineffective at - Examples include a lack of finance, a lack of technology, poor customer service reputation, faulty products, products or branches that are making losses, assets that are in a state of disrepair, untrained staff and low staff morale

Customer satisfaction

- To provide a service in the best possible way to meet the needs of customers - Private sector aim - Keeps customers happy, generating repeat business, customer loyalty and increased sales and profits

Subsidiary

A branch of a multi-national corporation in a different country

Organisations

Groups of people who combine their efforts and use their resources for a particular purpose

Quotas

Limits on the number of imports and exports

Business organisations

Organisations whose purpose is to satisfy consumers' wants by producing goods and services

Franchisee

Owner of each individual branch of the franchise

Business activity

Providing goods and services to satisfy consumers' needs and wants

Delayering

Removing one or more levels of management from a tall structure to make it flatter

Economies of scale

Savings in costs gained by an increased level of production

Tariffs

Taxes on imports and exports

Forward vertical integration

- A business takes over or merges with a business in a later sector of industry, often a distributor or customer - An example would be if a mobile phone manufacturer took over a mobile phone shop, such as Carphone Warehouse

Backward vertical integration

- A business takes over or merges with a business in an earlier sector of industry, such as a supplier - An example would be a coffee company, such as Starbucks, taking over a coffee bean plantation

GDP

- A figure that sums up the amount of goods and services produced and consumed by a country - An indicator of wealth, employment, output and business profits

Advantages of centralised management

- A high degree of corporate identity and strategy exists as decisions are made to meet the objectives of the whole organisation - Procedures are standardised, ensuring consistency - Low risk of important information leaking from branches or departments

SWOT analysis

- A structured decision-making model - Allows a business to examine its internal strengths and weaknesses and its external opportunities and threats - Allows for easy comparison of the organisation's position - Helps to make informed decisions about future actions

Co-operatives

- A type of democratic enterprise - Aims to provide a quality service for the benefit of its members and customers - Invite their customers and employees to become members, who then share ownership, decision-making and profits - In this way, customers can influence the business they use and employees can have a say in how their organisation is run - Subscribe to an internationally agreed set of values and principles which give them their ethical business approach and distinguish them from social enterprises - Some well-known co-operatives in the UK are The Co-operative Group and Nationwide Building Society

Mission statement

- A written statement outlining the overall aims and objectives of the organisation - Can allow an organisation to let customers know the overall aim of the business, promote CSR aims, attract quality staff that agree with the aim and inform potential investors about the goals of the business

Effects of reducing carbon footprints

- Achieving this by, for example, using renewable energy, can eventually save money on fuel bills for businesses in the long term - There is a financial cost associated with investing in renewable energy (e.g. solar panels can be costly to install)

Democratic enterprises

- Aim to generate profit, not necessarily maximise profit - Decision making and profits are shared among members democratically - Popular with governments trying to encourage enterprise and increase wealth in the economy, but which also want their citizens to share in this prosperity

Voluntary organisations

- Aim to provide a service for their members and the local community - Examples include local sports clubs (e.g. golf clubs or youth football teams) - Finance is raised through membership subscriptions and fees - Controlled and run by an elected committee and helped by volunteers

Competition policy

- Aims to promote competition for the benefit of consumers - Prevents organisations from participating in cartels - Can block mergers from occurring if it is likely to lead to the lessening of competition in any market - Prevents organisations from using their dominant position in the market to charge drastically lower prices, pay lower prices to suppliers or control the supply of goods to the detriment of the market - Aims to protect consumers from unfair practices such as hidden charges and poor customer service

Advantages of outsourcing

- Allows the business to concentrate on doing what they are good at, rather than getting bogged down with additional services - Less labour and equipment is required for outsourced activities - High-quality work is produced from the outsourced business as it should have greater expertise and specialist equipment - Outsourced business may be able to provide the service cheaper than an in-house department as they do the same work for many businesses and can benefit from economies of scale - The business only needs to use the service when required, saving costs on idle staff and machinery

Matrix structure

- An organisation is arranged into temporary project teams to carry out a specific task, such as developing a new product or service - Teams are made up of employees from different functional areas (e.g. marketing, finance, operations, HR...) - Each staff member has two managers - one is the manager of their functional area and the other is their project manager

Effects of social media

- An organisation with a presence on Instagram, Facebook and Twitter can keep in touch with customers and raise their profile to a potentially global market - It can be used by customers to spread bad reviews about an organisation, leading to a poor reputation that can put customers off

Political factors

- Arise from decisions made and actions taken by the government at a local or national level - Can be changes in laws and legislation or alterations to fiscal policy

Advantages of product/service grouping

- Business can react quickly to external factors that affect each group's market - Easy to identify struggling products and services

Effects of changing fashion trends

- Businesses can cater for the latest fashion trends and offer products that customers want, increasing their sales - Businesses have to more spend time and money researching and developing new products as some of these products have a short shelf-life

Disadvantages of an entrepreneurial structure

- Can create a heavy workload for the main decision maker - Key decisions can't be made if the owner is busy or unavailable - Other staff don't get a chance to show initiative, stifling creativity and demotivating some employees

Disadvantages of takeovers

- Can lead to job losses in the taken-over business, leading to bad publicity - If the buying business moves the headquarters or production to its area, this can have a negative effect on the taken-over business' local economy - Less competition means that the business can employ higher prices and customers get a bad deal - A change of name can put off loyal customers of the taken-over business - Can be expensive to acquire another business

Advantages of conglomerate integration

- Can spread risk, as if one market fails, the losses can be compensated for by profits in another - Can overcome seasonal fluctuations in their markets and have more consistent year-round sales (e.g. if a mince pie company took over a company that made chocolate bars) - The business is larger and therefore more financially secure - The buyer acquires the other company's assets and resources - The business gains the customers and sales of the acquired business

Cartels

- Colluding with other organisations to fix prices to make higher profits - The owners and management of organisations acting in this way can be fined or sent to prison

Disadvantages of a tall structure

- Communication and decision-making can be slow due to the many levels of the structure - The organisation can be slow to react to changes in the market - The narrow span of control means that staff can be put under pressure due to the close supervision of managers - The span of control also means that there is less delegation, meaning that employees feel less trusted and therefore less motivated - Employee innovation is less common as workers rarely get to communicate with the senior managers and owners - Higher costs due to the high number of levels

Disadvantages of forward and backward vertical integration

- Company may be incapable of managing new activities efficiently, meaning that costs could become higher - Focusing on new activities can negatively affect core activities - Monopolising markets can have legal repercussions

Other factors affecting the quality of decision-making

- Company policy may restrict the decisions made or the options available to decision makers - A lack of opportunity to consult others may mean that the decisions made are poor and can result in staff being resistant to change - Time constraints can result in a rash decision being made, which could affect the organisation negatively - The quality of the information available can lead to a poor decision being made if it is out of date, biased, not relevant or incomplete

Private sector

- Consists of businesses that aim primarily to maximise profits and that are owned by private individuals - Includes all profit-making businesses from small local businesses to multinational companies

Third sector

- Consists of organisations that have been set up to provide goods or services to benefit others - Includes charities, voluntary organisations, social enterprises and democratic enterprises

Effects of the UK's ageing population

- Creates a vast, growing market segment, allowing businesses that can produce products tailored for this market to succeed - Many customers in this segment are retired and well off, so there is a potential to offer quality products at high prices - Extensive market research must be carried out to identify the needs and wants of the growing market segment, which costs an organisation time and money

Disadvantages of a strong corporate culture

- Culture is hard to introduce unless it begins with the founders of the organisation - Staff have to be made aware of changes to the culture and, if the organisation fails to do so, they can be resistant to change - Modern office culture can leave some employees physically and socially distanced from others, demotivating them - Some cultures can appear to bribe to get staff on board - Management can lose focus and control if a culture is too easy going and loose

Effects of a reduction in interest rates

- Customers are less likely to save as interest rates are unattractive, meaning they are more likely to spend on businesses' products - Customers are more likely to borrow money as it less expensive to pay back loans and credit card debts, so they are more likely to spend

Effects of a rise in interest rates

- Customers become more likely to save due to the attractive rates as they will earn more money on their savings - Customers begin to spend less on business' products as they want to save their money instead - Customers are less likely to take out loans or spend on credit cards as they have to pay back more money on their borrowed amount, causing them to spend less

Disadvantages of a de-merger

- Customers may be put off by the de-merger and abandon the business - Significant financial costs are involved, such as rebranding

Disadvantages of mergers

- Customers may dislike the change as the familiarity of the previous businesses are lost - Marketing campaigns designed to inform customers about the change can be expensive - Can be bad for customers as less competition means higher prices

Customers vs. Owners/Managers

- Customers want low prices and value for money, whereas owners/managers want to raise prices to maximise profits and meet their objectives - Customers want good customer service, whereas owners/managers may not want to pay out more in wages to employ staff to improve customer service

Advantages of downsizing

- Cuts the cost of wages and rent - The business becomes more efficient and can become more competitive

Decentralised management

- Decision making and control is delegated to individual branches or departments in decentralised organisations - Best used in retail chains that need to respond to the needs of their local markets, such as supermarkets

Centralised management

- Decision making and control is kept at the very top level of a centralised organisation - Important decisions are made within head office by senior management, directors or owners

Advantages of an entrepreneurial structure

- Decisions are made quickly as there is little consultation needed - Staff know exactly who they need to report to

Interest rates

- Determine the percentage that is added to borrowings or savings - Set by banks and building societies - A base rate - the minimum rate of interest that banks and building societies must apply to loans and savings - is set by the government bank, the Bank of England - Increasing rates attempts to curb spending and reduce inflation - Decreasing interest rates attempts to encourage spending to avoid a recession or to recover the economy

Exchange rates

- Determines the amount of one currency that can be bought using another currency which changes on a daily basis - A high value or 'strong' pound is caused by high demand for the currency, meaning that UK products are selling well abroad and that there is a low demand for exports - The Bank of England can affect the value of the pound through interest rates, as high interest rates attract savings from abroad, causing the price of the pound to rise - A low value or 'weak' pound is caused by low demand for the currency, meaning that UK products are not selling abroad, there is a high demand for exports and there are low interest rates

Internal factors

- Different situations that impact an organisation's success which arise from inside the organisation - Can be controlled by organisations

External factors

- Different situations that impact on an organisation's success that arise from outside the business - Cannot be controlled by the organisation

Disadvantages of public limited companies

- Dividends are shared with many shareholders - Control of the business can be lost as anyone can buy shares on the stock market - Annual accounts have to be published - Setting up a PLC is costly and complicated - Employees can feel alienated from those at the top - They can grow so large that they cannot be managed effectively - Decision making can be slow due to its size

Disadvantages of product/service grouping

- Duplication of resources can occur - A new group needs to be set up each time the business launches a new product, which can be costly

Disadvantages of customer grouping

- Duplication of resources can occur - Only suitable for large businesses with many customer types/segments that are of a sufficient size

Disadvantages of location grouping

- Duplication of resources, such as administration staff or computer equipment, can occur, creating inefficiency - Divisions may compete against each other and forget the organisation's objectives

Advantages of location grouping

- Each division can easily meet the needs of its local market - The business can react quickly to external factors - Failing areas are easily identifiable and regional managers can be held to account

Advantages of customer grouping

- Each group can tailor its product or service to its own type of customer (different types of customers want different things) - Customer loyalty can be quickly built up due to a high level of personal service which can be achieved

Advantages of a de-merger

- Each new component can concentrate on its own core activities, leading to growth - Each new component has the best chance to operate efficiently - The components can be divested to meet competition regulations set by the EU, as well as generating money for the business

Advantages of a tall structure

- Each staff member has a clearly defined role and knows who to report to - There are many promotion opportunities, which motivates staff and helps the business to retain employees - The narrow span of control gives managers more time for planning, supervision and decision-making as they have less subordinates to supervise - The span of control also allows managers to better support subordinates

Advantages of a matrix structure

- Each team has specialised staff from all functional areas - Complex problems can quickly be solved with input from all areas - Staff can use their expertise and skills, increasing their job satisfaction and motivation

Effects of 4G

- Enables employees to communicate and download information while on the move much more quickly - Not all areas are equipped with 4G capabilities, which can leave organisations in these areas behind

Advantages of charities

- Exempt from paying some taxes, such as VAT anf corporation tax - Low wage costs as volunteers work for free - Private companies are often willing to donate and sponsor charities for good PR

Disadvantages of delayering

- Fewer promotion opportunities are available, so staff may leave - Redundancy payments will cost the organisation a significant amount of money - The business will lose key members of staff

Disadvantages of a flat structure

- Fewer promotion opportunities so quality staff may leave to gain promotion elsewhere - Due to the lack of management levels, staff are delegated more tasks, putting them under more pressure - The wide span of control means that managers have less time to make decisions and plan due to the higher number of subordinates they have to supervise - Subordinates may also receive less support from their managers

The availability of finance

- Finance is essential for organisations to achieve their objectives - With a lack of finance, an organisation may be unable to implement decisions such as expanding the business by developing new products or offering wage rises to motivate staff - To address the lack of finance, an organisation may need to cut costs by making staff redundancies through downsizing or by removing a layer of management through delayering

Advantages of a strong corporate culture

- Flexible working arrangements mean staff work when and where they are most productive, which is not always an office environment - Employees can feel part of the organisation through the use of uniforms and jargon - Customers can gain a sense of receiving a quality product/service - Rituals create a relaxed ethos and can improve employee relations - Employee loyalty is increased as they have high morale and job satisfaction due to the feeling of belonging they gain - High-quality new staff are attracted to the business as they like the idea of working within the culture - A relaxed working environment, empowerment and a flat hierarchy can motivate staff

Recession

- GDP, employment and demand are low - Businesses have to react to falling demand by making staff redundant, leading to their costs increasing due to redundancy payments and to them losing the skills and knowledge of employees - Prices have to be cut by businesses to try and increase demand, which lowers their profits

Boom

- GDP, employment and demand are very high - Businesses can take advantage of the demand for products and the wealth of consumers by increasing prices, improving their profits - Causes an increase in inflation, meaning that prices rise quickly

Recovery

- GDP, employment and demand begin to rise again - Businesses can rely on consumers being in a better financial position due to rising employment to spend money so sales increase - Businesses can develop new products and start to increase prices, which lead to larger profits

Functional grouping

- Grouping an organisation into departments called functional areas, based on skills and expertise - The main functional areas include marketing, finance, operations and HR - Only suitable for large organisations

Product/Service grouping

- Grouping an organisation into divisions dealing with different products or services - Suitable for large conglomerate organisations, such as Virgin

Customer grouping

- Grouping an organisation into divisions that each deal with a different type of customer - For example, an organisation could have a retail division, a wholesale division and an online division

Location grouping

- Grouping an organisation into geographical divisions - Each division operates to serve customers in a particular location

Advantages of backward vertical integration

- Guaranteed and timely supply of stock - No need to pay a supplier marked up prices, therefore stock is cheaper - Quality can be strictly controlled

Flat structure

- Has fewer levels of management - Wide span of control - Suits smaller organisations - Shorter chain of command that flows from top to bottom

Tall structure

- Has many levels of management - Suits large organisations with many specialised departments - Narrow span of control - Commands flow from top to bottom

Advantages of technology grouping

- High degree of specialisation can occur in production, increasing efficiency - Problems in the production process or with certain technology can easily be identified - Focuses on being capital intensive, which reduces wage and salary costs for staff

Disadvantages of technology grouping

- High degree of specialised training is required to deal with the different production processes used - Only suitable for large businesses that use a variety of production processes - Focuses on being capital intensive, which incurs large costs for purchasing and maintaining equipment

Advantages of using SWOT

- Identifies strengths and allows them to be built upon - Identifies weaknesses and allows them to be addressed - Identifies opportunities that can be exploited - Identifies threats that can be turned into opportunities - Time is taken to analyse the business' positions so rash decisions aren't made

Finance factors affecting quality decision-making

- If finance is available, this can help the business to exploit opportunities, address weaknesses and build on strengths - A lack of finance can prevent the organisation from choosing the best solution to the problem

Effects of recycling

- If organisations encourage recycling (e.g. by selling bags for life) to impact less negatively on the environment, this can gain the company a favourable reputation for being 'environmentally friendly' - Undertaking recycling of certain materials, such as waste paper and printer cartridges, take time, effort and money

Advantages of a flat structure

- Information can be communicated quickly between levels - The organisation can make decisions and respond quickly to external factors - The wide span of control means that delegation is more common, raising employee motivation and staff morale - Employee innovation is more common, meaning staff feel more empowered - Staff feel less under pressure due to the fact that managers supervise less closely

Disadvantages of charities

- It can be difficult for them to compete with the large marketing budgets of private sector organisations - They rely heavily on volunteers who may leave for paid work elsewhere

Disadvantages of multinationals

- Language barriers can slow down communication - Cultural differences can affect production (e.g. siestas in Spain) - Exchange rates can affect purchasing and paying expenses in different countries - Time differences can hinder communication between head office and branches located elsewhere in the world

Methods of internal/organic growth

- Launching new products or services allows the business to meet the needs of different market segments, especially if they diversify - Opening new branches allows the business to reach new markets by opening up in new locations - Introducing e-commerce allows the business to trade 24/7 to a global market - Hiring more staff improves the business' ability to make sales, decisions and develop more products - Increasing production capacity allows the business to make more products themselves

Disadvantages of outsourcing

- Less control over outsourced work, therefore quality may fall - Communication has to be clear to ensure exact specifications are met - Sensitive information may have to be shared with the outsourced business, which could fall into the hands of competitors - Outsourcing could be more expensive than in house as specialists and expertise come at a high price

Effects of an evolving work-life balance

- Less employees are working the traditional 9-5 working week so businesses must cater to people who work around the clock for 7 days a week with 24 hour opening hours and e-commerce to ensure repeat custom - Organisations therefore have to provide more staff to work 24 hours a day, 7 days a week to meet customer needs, increasing wage costs

Disadvantages of centralised management

- Less responsibility is given to subordinates, resulting in demotivated staff - Decisions made do not reflect the needs of local markets - Organisation reacts slowly to external factors

Strategic decision-making

- Long term - Made by senior managers - Designed to meet the overall purpose and direction of the organisation - e.g. To grow

Advantages for the franchiser

- Low risk form of growth as the franchisee invests the majority of the capital - Receives a percentage of all franchisee's profits each year - Risk is shared between the franchiser and franchisee

Role of the manager

- Managers must look ahead, see potential opportunities or problems and set targets and strategies by planning - They must organise by setting tasks for other employees that must be carried out to achieve targets - Managers have to command by issuing instructions to employees - They have to coordinate by bringing together the business' resources to achieve objectives - They have to control the situation by measuring and correcting the organisation's activities - Managers must delegate by giving subordinates the authority to carry out management-level tasks to lessen their workload - They have to motivate by giving his or her team a reason to enjoy their work

Human resources factors affecting quality decision-making

- Managers' ability, training and experience to make good decisions - The level or risk managers are willing to take - Staff resistance to change - Managers' ability to handle stressful and complex situations - The likelihood of overpowering directors or owners overturning decisions made by middle management

Advantages of mergers

- Market share and resources are shared, which can spread the risk of failure and increase profits - Economies of scale can be achieved - Each business can bring different areas of expertise to the newly merged organisation - Jobs are more likely to be spared in both businesses - Can make it easier for a business to enter a market with strong competition

Examples of franchises

- McDonald's - Subway - Papa John's - Red Driving School - KFC - Burger King - Hertz - Kumon - Hard Rock Cafe - Hilton Hotels

Ways of assessing the effectiveness of a decision

- Measuring sales levels to see if they have increased - Analysing profit levels to see if they have improved - Interviewing staff to assess their opinion - Monitoring staff morale, absence and turnover - Finding out from customers - Tracking changes in share prices

Tactical decision-making

- Medium term - Made by middle managers - Designed to help to achieve the strategic decisions - e.g. To launch new products

Advantages of delayering

- Money is saved on paying the salaries of the management level removed - Quicker decision-making and communication is possible as there is a shorter chain of command - The organisation can be more responsive to changes in the market - There is a wider span of control, meaning that delegation increases, increasing morale and staff feel less under pressure by their managers

De-merger

- Occurs when a single business splits into two or more separate components - The de-merged components are still owned by the same organisation as before, but they are managed independently of each other - An example is when Lloyds TSB split into two separate banks - Lloyds Bank and TSB - after the EU judged that more competition had to be created in the UK banking industry

Horizontal integration

- Occurs when two businesses from the same sector of industry become one business - Could be through a takeover or merger

Conglomerate integration/Diversifying

- Occurs when two businesses in different markets join together through a takeover or merger - An example of this is Proctor & Gamble (P&G), who took over Gillette to enter the male grooming market

Disadvantages of conglomerate integration

- One business may take on another in a market they know nothing about, causing the new business to fail - Having too many products in different markets can cause the business to lose focus on core activities - The business may become too larger and inefficient to manage

Social enterprises

- Organisations that aim to make a profit to benefit a specific group or cause - e.g. The Big Issue aims to help the homeless in the UK - They operate like private sector businesses as they can be owned by a sole trader, partners or shareholders, can be controlled by directors or managers and finance can come from capital investment or bank loans - However, they use their profits to benefit a social, environmental or cultural cause and not solely the business' owners

Public limited companies

- Owned by shareholder who have limited liability - Must have a minimum of £50,000 share capital (usually a large company) - Controlled by a Board of Directors - Can sell their shares publicly through the stock market - They aim to dominate the market, increase market share and market value

Private limited companies

- Owned by shareholders, who have one or more shares in the business - Shareholders have limited liability - Shares are sold privately to investors whom the business knows - Aim to maximise profits, grow and increase market share - Controlled by a Board of Directors who are managed by a managing director - Have to produce documents called the Memorandum of Association and Articles of Association

Owners and employees

- Owners need employees to perform their best to increase sales and profits through providing good customer service - Employees need owners to make good decisions to ensure the business succeeds so that they have job security

Owners/managers and customers

- Owners/managers need customers to buy their products to keep the organisation in business - Customers need the business to provide good customer service and a high quality product

Owners/managers and suppliers

- Owners/managers need suppliers to provide quality raw materials to ensure the business produces a high quality finished good - Suppliers need managers to keep buying from them to keep them in business

Owners/managers and the government

- Owners/managers need the government to make good decisions, such as lowering income tax to improve the spending power of customers, which will increase their sales - The government need owners/managers to create jobs

Hierarchy

- Positions within the organisation with different levels of authority and responsibility - Those with the least authority and responsibility are at the bottom of the organisation and those that have the most are at the top

Opportunities

- Possible chances a business could take that arise due to something happening outside the organisation's control - Examples include a competitor going bust, a boom period in the economy, customer tastes and fashions falling in line with the business' specialism, the government introducing favourable legislation and advances in technology that the business could exploit

Survival

- Private and third sector aim - To avoid going out of business and having to cease trading - Allows a business to respond to changes in the market, such as recession

Providing a quality service

- Private, public and third sector aim - Encourages customers to return and gives and gives the business a good reputation that will attract new customers (private) - Satisfies the needs of the community and improves the standards of living in the area (public) - Helps the organisation to better aid the individuals or groups they aim to help (third)

Disadvantages of a private limited company

- Profits have to be split with shareholders by issuing dividends - Legal process required to set up the company - Shares cannot be sold publicly on the Stock Exchange, so there is a limited source of capital available - Financial accounts can't be kept private as they must be shared with the Companies House and are therefore made publicly available - Larger companies are more difficult to manage effectively

Effects of competition opening a physical store next to the business

- Provides more choice for customers - Brings passing trade to the area that the business can take advantage of - Competition can lower prices, undercutting the business and forcing them to lower prices too or risk losing customers

Effects of WiFi

- Providing free WiFi can attract customers to the business - There is a financial cost of setting up and maintaining WiFi

Privatised companies

- Public sector organisations sold to the private sector - e.g. the Royal Mail was floated on the stock market in 2013

Disadvantages for the franchiser

- Reputation of the whole franchise can be tarnished by one poor franchise - Reliant on the franchisee to make it a success - Only a share of profits is received rather than all profits

Divestment

- Selling off part of an organisation, such as a subsidiary company or one of the company 's brands - An organisation may do this to concentrate on more profitable areas of the business, to focus on a specific target market or simply to cash in on selling part of the business - Examples of divestment are when Lloyds Banking Group divested TSB after Lloyds TSB had de-merged and when P&G divested Pringles and sold it to Kellogg's

Charities

- Set up to raise money to benefit others - Raise finance through donations, sponsorship, fundraising events and trading arms (e.g. a retail outlet such as an Oxfam shop) - Any profits they make from trading arms are given to their cause rather than kept by the owners - Not owned by one individual - Set up by a trust, which is controlled by a board of trustees - Outlets and departments of the charity are often run by paid managers who are assisted by volunteers - Can have a variety of aims related to their cause (e.g. the SSPCA aims to improve animal welfare in Scotland)

Advantages of public limited companies

- Shareholders have limited liability - Large amounts of finance can easily be raised through the public sale of shares - Banks are very willing to lend PLCs money due to their size and reputation, as they are seen as less risky - Organisation has financial stability, enabling it to develop and expand

Operational decision-making

- Short term - Made by supervisors and all employees - Designed to help the business to react to situations as they arise - e.g. To deal with a customer complaint

Corporate culture

- The set of values, beliefs and customs shared by the people in an organisation - Many methods can be used to develop it - Company values, such as having a strong CSR policy, must be developed by founders as they are harder to adopt down the line - Corporate colours give organisations and their staff a strong corporate identity and help customers recognise the business easily - Office layout, such as an open-plan layout, can encourage a relaxed atmosphere and can improve communication and idea sharing between staff - Uniformity of the layout of premises such as offices, shops and restaurants can make it easier for staff to transfer between branches and encourage customers to feel at ease, no matter which branch they visit - Language and jargon can be used by an organisation to give employees a sense of belonging and to appeal to customers looking to buy from a business that is different - Symbols, such as brand logos, can help given organisations an identity that can be recognised by staff and customers - Slogans and mottos can help reinforce business objectives to staff - Rituals, such as 'dress-down Fridays' and Friday afternoon barbecues can help to relax staff and break down barriers created by uniforms or office attire - Stories of past important events in an organisation's life can help new staff become familiar with the expectations and direction of the organisation - Reward culture, including financial incentives like bonuses, commission and pay rises and others such as 'employee of the month' awards, can increase employee motivation and morale - Flexible working arrangements, such as flexitime or teleworking, can be utilised to create trust and empowerment amongst employees

Human resources

- The staff in the organisation (managers and employees) - Managers can have an impact by either going for the 'safe' option, which may not meet the organisation's objectives, or by taking too much risk and putting an organisation into financial difficulties - Employees can have an impact by the level of training they have, which impacts how efficiently they can carry out their role, their morale, which can impact performance levels, staff absenteeism and the use of industrial action, and their experience, which can also impact how efficiently they can do their job

Technology

- The standard of an organisation's existing technology - This affects their competitiveness - E-commerce can be used to sell online and can allow a business to access a global market and 24/7 sales - Apps can be used to give an organisation a presence on mobile technology, keeping them up-to-date and allowing them to meet current customer expectations as they can find out information and interact with the business - Email can be used to improve the speed of communication and save paper but can have a detrimental effect as it is very impersonal and can lead to staff relationships breaking down

Threats

- Things that might impact negatively on a business achieving its or aim or making positive decisions - Examples include competitors providing better quality products at cheaper prices, a downturn in the economy, customer tastes and fashions shifting away from what the business specialises in, the government introducing legislation that impacts badly on the organisation and advances in technology that could leave the business behind its rivals

Strengths

- Things the organisation is good at - Examples include well-known brands or products, benchmark products in the market which competitors try to copy, assets the business owns, such as technologies or premises, high quality staff and good staff morale

Effects of cloud computing

- Through technology such as OneDrive and Dropbox, an organisation can save money on their own IT hardware - Businesses require less IT staff to maintain equipment, saving on wage costs - Creates a heavy reliance on the 'cloud' as if the internet connection stops working, the organisation cannot access files stored on the cloud, causing production to stop - There are privacy and confidentiality issues regarding storing information on the cloud, as it can make an organisation susceptible to hackers

Satisficing

- To aim for a satisfactory result rather than for the best possible outcome - Short term objective set at times of uncertainty, such as economic changes, or when new legislation is introduced

Increasing market share

- To increase the percentage of total sales in a market a business has - Private sector aim - Allows the firm to weaken competition - Takes a firm closer to becoming market leader

Sales maximisation

- To make as many sales as possible - Private sector aim - Allows the business to increase their market share - Also helps them to get rid of unwanted stock - Could be achieved by dropping product prices

Maximising profits

- To make as much profit as possible - Private sector aim - Keeps shareholders satisfied, ensuring future investment - Generates money for future growth

Growth

- To make the business larger - Private and third sector aim - Reduces the risk of the business failing - Reduces the risk of a takeover - Brand becomes more well known - Allows the business to benefit from economies of scale

Public sector objectives

- To provide a quality service - To provide an efficient service - To stick to a budget - To raise revenue

Third sector objectives

- To provide a quality service - To raise awareness of a cause - To raise funds for a cause - To maximise donations - To recruit more volunteers - To grow - To survive

Merger

- Two businesses agree to join forces and become one organisation - Friendlier than a takeover - Results in a new name and logo for the new, merged organisation - Examples are when Disney merged with Pixar and when insurance companies Norwich Union and CGU merged to become Aviva

Integration

- Two businesses become one - Can occur through a takeover or a merger

Effects of a weak pound

- UK exporters can sell more goods to foreign countries as their goods will be less expensive for customers out-with the UK - Imports will become more expensive, increasing costs for businesses that source their materials from abroad, decreasing their profits - May lead to businesses charging higher prices to generate more sales revenue to increase profits

Effects of a strong pound

- UK exporters struggle to sell their products abroad as they will be more expensive than foreign goods, causing sales to fall - Imports will become cheaper, decreasing costs for businesses that source materials from abroad, increasing their profits - Allows a lower selling price to be charged for products made in the UK to attract customers

Economic policy

- Used by the government to try and control the economy - Fiscal policy concerns the tax rates set by the government and the level of public spending - Monetary policy concerns the ways in which the government controls the supply of money in the economy, which affects spending, and is often achieved by varying interest rates

Entrepreneurial structure

- Used primarily by small organisations - There is one main decision-maker, usually the owner - Other staff have some input but generally they are rarely consulted

Local government organisations

- Used to provide essential services to the public, such as schools, refuse collection and street lighting, free of charge - Decision making surrounding these organisations is carried out by elected councillors, whilst the day-to-day running of the organisations involves managers and council employees - Financed by taxation collected by central government, local council tax and local business rates - Aim to provide a quality service, stick to their budget and not overspend

Central government organisations

- Usually national services that would be difficult to rely on the private sector to provide - Examples include defence provided by the armed forces, healthcare provided by the NHS and transport infrastructure through the road network - Paid for through taxation - Control of policy surrounding the organisations is held by elected politicians - Individual departments are controlled by civil servants - Aim to provide a quality service

Disadvantages of downsizing

- Valuable skills and knowledge are lost through making redundancies - Remaining staff feel vulnerable and demotivated

Disadvantages for the franchisee

- Very little autonomy over decisions as the franchiser decides on products, store layout, uniforms etc - Royalties have to be paid each year, so not all of the profits can be kept - High initial start-up fees - The franchiser can decided not to renew the franchise

Disadvantages of using SWOT

- Very time consuming, which can slow down decision-making - Structured process can stifle creativity - Can generate many ideas, but doesn't help to pick the right one - Produces a result which could be biased depending on who carries it out - Considers only the information which is available at the time, so can become outdated quickly

Advantages of multinationals

- Wages and raw material costs are often lower in the foreign countries they operate in - Can avoid legislation in their home country - They can take advantage of grants issued by governments to locate in their countries - They can avoid certain quotas and tariffs issued by their own governments

Suppliers

- Want continued business and the business to pay its debts if goods are bought on credit - Can change prices, change the quality of supplies and can change account terms

Owners/Shareholders

- Want the business to make a profit in order to receive a return on their investment - Can invest more money in the business and can make important decisions

Customers

- Want the business to provide a quality product/service at a good price - Can take their custom elsewhere or give the business a good or bad reputation through word of mouth recommendation

Employees

- Want the business to succeed so that they have job security and can perhaps get a pay rise - Can vary their standard of work or take industrial action

Managers

- Want the organisation to perform well so that they can receive bonuses, pay rises and promotions - Can make decisions

Takeovers/Acquisitions

- When a larger business buys another smaller business - Can often be hostile and comes as a result of the smaller business struggling financially and the larger business exploiting this - Examples are when the Spanish bank Santander took over Abbey National and when Google bought YouTube

Corporate Social Responsibility (CSR)

- When an organisation aims to act in an ethical or responsible way - Can be achieved through philanthropy and by being ethically and environmentally responsible - Gives the business a good reputation - Allows them to win customers from less ethical competitors - Can help them to attract high quality staff who believe in their mission

Managerial objectives

- When managers pursue their own objectives to improve their status in the business - Motivates them, helping the business to operate more efficiently - Examples include to expand into new markets or to develop new technologies

Effects of more women having professional careers

- Women are waiting longer to have families, leading to couples being generally better off when they have their children so businesses can offer high quality maternity and baby products at a high price - More women will be taking maternity leave when they are well into their careers, meaning that organisations have to pursue flexible working arrangements (e.g. part time or job share) so they have to spend time recruiting and training replacement staff

Multinational

A business (usually a limited company) that has operations in more than one country, with a head office based in their home country

Franchise

A business run by one firm under the name another

Stock exchange

A market where shares are bought and sold

Dividend

A share of a business' profits paid regularly to its shareholders

Stakeholder

An individual or group of people who have an interest in the success of an organisation

Competitive factors

Arise from the actions of rival organisations

Economic factors

Arise from the state of the economy

Environmental factors

Arise from the way in which the natural environment impacts on organisations or the way organisations act in an ethical and environmentally friendly manner

Chain of command

Commands flow down from decision-makers at the top of the organisation to the worker at the bottom

Tertiary sector

Consists of businesses and organisations that are involved in providing services rather than goods

Quaternary sector

Consists of businesses providing information and knowledge-based support services, such as ICT, consultancy and research and development services

Secondary sector

Consists of businesses that are involved in manufacturing and construction, by taking the natural resources provided by the primary sector and turning them into goods to be sold later

Primary sector

Consists of businesses that are involved in the extraction and exploitation of natural resources

Public sector

Consists of government-owned organisations and agencies which aim to provide a service to society

Employees vs. Owners/Managers

Employees want a pay rise which could increase costs, whereas owners/managers want to maximise profits

Technology grouping

Grouping an organisation into divisions that each deal with a different technology or product process used

Services

Intangible things that are done for us (e.g. banking, health, getting a haircut)

Downsizing

Involves an organisation either closing down an unprofitable division or merging two divisions together

Needs

Items essential for survival (e.g. food, clothing and shelter)

Wants

Luxury items that are not essential for survival (e.g. holidays, mobile phones and cars)

Capital

Man-made resources used to make the good or service that money has been invested into (e.g. machinery, equipment, tools and factories)

Managers and employees

Managers and employees need each other so that they can work together to help the business succeed and keep their jobs secure

Share

One of the equal parts into which a business' capital is divided, entitling the holder to a proportion of the profits

Objective

Something an organisation sets out to achieve

Interdependence of stakeholders

Stakeholders rely on each other to help them achieve their interests

Goods

Tangible items that we get ownership of when we purchase them

Labour

The human resource used to produce the good or service

Land

The natural resources used to make a good or service (e.g. oil, water, land)

Limited liability

The owners' personal possessions are not at risk if the business gets into debt, as they only lose their investment in the company

Market share

The percentage of total sales in a market captured by a business

Organisational groupings

When an organisation structures themselves through the use of groupings

Vertical integration

When two businesses from different sectors of industry become one business