Business Management

• Sole Traders - A business owned and operated by 1 individual who is entitled to keep all profits after taxes have been paid but is fully responsible for all losses with unlimited liability - Unincorporated
• Sole Trader advantages

  • Simple and inexpensive to set up
  • Owner has full control
  • Low gvmt regulations
  • Simple to shut down
  • Low potential for disputes
• Sole Trader disadvantages

  • Unlimited liability
  • Only a problem when the owner cannot pay debts
  • Harder to obtain finance
  • Banks will find it riskier to loan
  • Dependant on owner's ability to run business
  • Business ends when owner dies
• Partnerships - A business structure with 2-20 owners. That in unincorporated and begins with a partnership agreement that is a document signed by all owners
• Partnerships advantages

  • Greater range of expertise
  • Financial risks and workload are shared
  • Easy to set up
  • Fewer reporting requirements
  • More access to finances
  • Low stat-up costs
• Partnership disadvantages

  • Unlimited liability
  • Conflicts in decision making
  • If one partner leaves, it will be time consuming to restructure partnership agreement
  • Profits are shared
  • Liability for debts is on all partners
• Private Limited company - Incorporated business structure with at least 1 director and maximum 50 shareholders. Not listed on the stock exchange meaning shareholders must be approved by the board of directors, limited liability due to seperate legal entity
• Private LC Advantages

  • Limited liability
  • Greater variety of shareholders
  • Business existence is not threatened by one directors removal
  • Greater access to capital - therefore easier to access loans
• Private LC Disadvantages -

  • Complex reporting requirements
  • Difficult to change structure
  • Complex to establish
  • Increased reporting and gvmt regulations
  • Expensive to set up and operate
• Public listed company - An incorporated business that has unlimited shareholders and lists its shares on the ASX with a minimum of 1 shareholder and 3 directors
• Private LC Advantages

  • Limited liability
  • Greater access to expertise
  • No permission to buy and sell shares
  • Access to capital from public
  • Life of company is unreliant on directors
• Public LC Disadvantages

  • Conflicts may arise through shared decision making
  • Complex reporting requirements
  • Which must be published
  • Complex & time consuming set up
  • Expensive to operate
• Social Enterprise - A business aiming to fulfill community or environmental needs by selling goods + services, found in the private sector
• Social enterprise advantages

  • Community benefits for the public
  • Develop a positive reputation
  • Employees have purposeful work
  • Likely to receive financial assistance due to targets
• Social enterprise disadvantages

  • Difficult to balance finance and social goals
  • Struggle to secure loan as profit is not the only interest
• Gvmt Business Enterprise (GBE) - A business owned and operated by the gvmt, aims to make profit by controlling goods + services
• GBE advantages

  • Delivers g/s that help the community
  • Provides competition to private sector
  • Operate with some independence from the gvmt
  • Provides services requiring little investment
• Business objectives - Goals businesses want to achieve, providing a clear direction set by owners and directors
• Financial Goals - To make a profit, increase revenue and profit margins whilst improving market share and productivity
• Increasing market share - Proportion or percentage of total sales within an industry controlled by the business. If market share increases the business has a greater portion of market and sales
• Meeting shareholder expectations -

  • Earn dividends
  • Increase value of shares
  • Return on investment

  Shareholder - An entity/individual who has invested in the business as shareholders in hopes to earn dividends and increase shares.
• To fulfill a market need - Businesses filling a gap in the market, addressing customer needs that are currently not met in a certain industry
• Fulfill a social need - Setting a target to develop strategies to benefit the community as it is no longer acceptable for businesses to just focus on profit
• Improving efficiency and effectiveness

  efficiency - how productively a business uses its resources when producing a g/s

  effectiveness -

  • Must set targets
  • Extent to which a business achieves objectives
• Stakeholder - An individual or group who has a direct or vested interest in a business' activities and performance
• Key stakeholders

  • Owner
  • Managers
  • Employees
  • Customers
  • Suppliers
  • General Community
• Owners interest

  • Establishing positive relationships with others to enhance business reputation
  • Receiving return on investment, often through business growth
• Managers interest

  • Being recognized for achieving business objectives
  • Having opportunities to increase their status and engage in career advancements
  • Receiving bonuses
  • Receiving appropriate wages
• Employees Interest -

  • Long-term job security
  • Receiving fair pay and working conditions
  • Having opportunities to engages in professional development and get promoted
• Supplier interest

  • Increases their revenue
  • Earn profit from the raw materials and resources they supply
  • Reliable and honest relationships with businesses they supply
• General Community Interests

  • Observing business activities that lead to improvements in community and environment
  • Increasing the local employment rate and boosting the local economy
• Manager styles - Approach providing direction, implementing plans and motivating people.
• Autocratic - Managers retain control over employees, decisions are made and coordinated that way.

  • One-way communication
  • Centralized decision-making
  • Employee input is not valued
  • Money is the primary motivator
  • Policies are strictly adhered to
• Autocratic Advantages

  • Directions and procedures are clear
  • Employees roles are detail and precise which is easy to monitor
  • Control is centralized, meaning decisions and problems can be dealt with fast with no discussions

  Disadvantages

  • No employee input is allowed, meaning ideas arent shared for decisions
  • Job satisfaction falls as employees have no responsibilities - absenteeism and turnover
  • Conflict may arise as employees look for manager approval
  • 'US and them' mentality
• Persuasive management - A persuasive management style is where managers make decisions, then persuade workers to the benefits of the decisions

  • Centralized
  • Task-orientated process
  • Pay is the primary motivator
  • Value sort of staff attitude
  • One-way communication
• Persuasive management advantages

  • Managers can gain some trust
  • Workers believe there feelings are somewhat considered
  • Some acceptance of negative situations as it is explained
  • Instructions are clear

  Disadvantages

  • Attitudes and trust are negative
  • Communication is poor and one-way
  • Employees are frustrated as they can't help decisions
• Consultative management style - Managers consults with employees when discussing an issue, but ultimately the decision is made by the manager based on input

  • Centralized but more employee based
  • Important to achieve tasks
  • More motivated to complete tasks
  • Value staff contributions
  • Top-down with feedback
• Consultative management advantages

  • Asking for suggestions will give a variety of decisions and should be improve decisions
  • Employees have some choice in the way the business is run and will remain interested and motivated
  • Decisions being discussed will mean tasks are completed more efficiently

  Disadvantages

  • Time taken to consult all relevant people will be slow
  • Some issues are not suitable for consultation, inconsistencies may create staff confusion
  • When ideas are shared, people will get ignored and upset
• Participative Management style - Decision-making is performed as a team with management and staff working together, with manager retaining responsibility

  • Decentralized, highly employee based
  • Focus is towards people
  • Motivating staff is important
  • Value staff contribution
  • Two-way communication
• Participative Advantages

  • Employee relations are positive making employees more acceptable to decisions
  • Motivation and satisfaction is optimal
  • Opportunity for employees to gain skill and develop ideas
  • High level of trust which should improve performance

  Disadvantages

  • Time consuming to make decisions
  • Decisions may be less clear
  • Role of management may feel weak, with employees too powerful
  • Not all employees want to contribute
  • Internal conflict may arise with a variety of views