bus

• Some businesses grow while others remain small
• Reasons why owners choose not to expand

  • Owner does not want to increase responsibility or workload of managing a large business
  • Owner wants to have full control over the business
  • Owner wants to have a close relationship with customers
  • Owner does not want to take risks of growth
  • Lack of available capital for expansion
• Some industries are dominated by very large companies, making it difficult for small businesses to compete
• Consumers may have loyalty to larger businesses, so some businesses remain small
• Reasons why owners want to expand the business

  • Increase in profits
  • Increase market share
  • Benefit from economies of scale
• How businesses grow

  1. Internal growth: Increase goods produced, develop new products, find new markets

  2. External growth: Merger or takeover of another business, vertical integration, conglomerate integration
• Internal growth

  • Slow developing, can cause disagreements between merged companies, fear of job losses, can lead to diseconomies of scale
• External growth

  • Increases profit and market share, but can cause disagreements in management, need for two managers
• Types of integration

  • Horizontal integration
  • Vertical integration backward
  • Vertical integration forward
  • Conglomerate integration
• Vertical integration backward

  Joining with raw material suppliers
• Vertical integration forward

  Joining with customers
• Conglomerate integration


  Joining of two businesses in completely different industries
• Advantages of conglomerate integration include reduced risk of failure
• Reasons for business failure

  • Poor planning
  • Poor management skills
  • Lack of business plan
  • Failure to invest in new technology
  • Lack of finance
  • Poor marketing
  • Poor choice of location
  • Competition
  • Liquidity problems
  • Economic influences
• Types of business organization

  • Sole trader
  • Partnership
  • Limited company
  • Franchise
  • Joint venture
• Sole trader

  Enjoys all profits, quick and easy to start up, complete control, small capital needed, unlimited liability, difficult to raise finance, may lack management skills, long working hours, no continuity
• Partnership

  Can share losses, reduce workload, everyone provides finance, easy to start up, better decisions and ideas, disagreements, shared control
• Limited company

  Limited liability, separate legal identity, continuity, can sell shares, more finance, difficult and expensive to start up, can be taken over
• Franchise

  Profit, market expansion, get expertise, anything franchisee does affects business, have to provide raw materials
• Joint venture


  Make new ideas, more finance, disagreements, reputation damaged if one business acts unacceptably
• Unincorporated businesses

  • Sole trader
  • Partnership
• Incorporated businesses

  • Limited company
• Business objectives

  • Survival
  • Profit
  • Market share
  • Growth/expansion
  • Corporate social responsibility
• SMART objectives

  • Specific
  • Measurable
  • Acceptable/agreed
  • Realistic
  • Time-bound
• Internal stakeholders

  • Owners/shareholders
  • Managers
  • Employees
• External stakeholders

  • Customers
  • Suppliers
  • Lenders
  • Government
  • Local community
• Importance of a well-motivated workforce

  • Improved productivity
  • Lower absenteeism
  • Better quality goods and services
  • Lower labour turnover
  • More competitive
• Motivation theories

  • Maslow's hierarchy of needs
  • Taylor's theory
  • Herzberg's two-factor theory
• Financial rewards


  • Salary
  • Hourly wage rate
  • Piece rate
  • Commission
  • Bonus scheme
  • Profit sharing
• Non-financial rewards


  • Job rotation
  • Job enlargement
  • Job enrichment
  • Quality circles
  • Team working
  • Delegation
• Importance of a well motivated workforce

  • Improved productivity, output will increase
  • Lower rate of absenteeism, this will lead to increase in number of output produced
  • Better quality goods and services, this will create a good image about the business and also helps to charge a high price
  • Low rate of labour turnover, this will help to keep the skilled workers and recruitment costs will be reduced
  • More competitive, this will help to increase market share and to lower costs of business
• How to motivate workers-theories

  • Maslow's hierarchy of needs
  • Taylor theory
  • Fredrick Herzberg two-factor theory
• Maslow's hierarchy of needs

  Hygiene factors, Motivating factors
• Limitations of Maslow's hierarchy of needs
• Taylor theory


  The theory says all humans are only motivated by money, piece rate paying employees for each unit produced
• Advantages of Taylor theory


  Increase output because the more they produce the more they earn
• Disadvantages of Taylor theory

  Quality issues as workers concerned for quantity and not quality
• Fredrick Herzberg two-factor theory

  Hygiene factors, Motivating factors
• Hygiene factors


  • Salary/wage
  • Working condition
  • Supervision
  • Relationship with others
• Motivating factors

  • Work itself
  • Responsibility
  • Promotions
  • Recognition of work