EOY

• Sole trader:

  • few requirements set up
  • owned by one person but can employ other people
  • must observe laws that apply to the business 
  • health & safety laws 
  • obtaining a licence
• Advantages of sole trader:

  • few legal regulations to worry about
  • freedom to choose own holidays and hours
  • close contact with customers
  • incentive to work hard
  • can keep info private
  • keep all profits to yourself
• Disadvantages of sole trader:

  • business is likely to remain small - hard to expand due to lack of capital
  • no one to discuss matters with
  • does not have a separate legal identity 
  • unable to enter into legal contracts as a business
  • business can’t own property
  • can’t take legal actions against others
  • no one to cover holidays & illness
  • no continuity of the business after death of the owner
• Partnership 

  • a group of at least 2 people (max 20)
  • partners contribute to capital and have a say in the running of the business
  • easy to set up, require a written legal partnership agreement
• Advantages of partnership:

  • more capital can be invested
  • responsibilities of the business can be shared
  • losses of the business can be shared
  • most of the advantages of a sole tracker can still apply
• Disdvantages of partnership:

  • do not have liability
  • partners may disagree on decisions
  • if one partner makes a mistake, others are liable
  • business growth is still restricted
• Private limited company

  • business is owned by shareholders 
  • a separate legal unit from its owners
  • separate legal identity
  • known by the title ‘limited’ or ltd
  • can make contracts or legal agreements
  • company accounts are kept separate
  • will continue to exist if an owner dies
  • business is usually run by a board of directors
• Advantages of LTD:

  • shares can be sold to friends and relatives
  • shareholders have limited liability
  • people who started the business can keep control
  • if one partner wants to sell the business’s shares, the other partner(s), will have to agree with it
  • so people are unable to sell the business’s shares behind their partners’ backs
  • business has continuity
• Disadvantages of LTD:

  • there are significant legal matters to form a business
  • shares cannot be sold on the stock market
  • shares can’t be transferred without the permission of the other shareholders
  • details of accounts sent to the Registrar of Companies each year
  • other people can access the Registrar of Companies and look at the details of the business
• Public limited company

  • businesses owned by shareholders but can sell shares to the public on the stock exchange
  • this allows them to raise significant capital
  • this is still a private company, but it’s called public because the public can buy it’s shares
  • known by the title ‘plc’
  • able to raise the capital to expand nationally or internationally
• Advantages of PLC:

  • limited liability to shareholders
  • worse thing that can happen to the business is to lose the worth on shares
  • a separate legal identity
  • large sums of capital can be raised
  • rapid expansion possible/specialist managers appointed
  • no restriction on buying/selling/transfer of shares
  • business trading usually has high status and should find it easier to attract:
  • suppliers prepared to sell goods on credit 
  • banks willing to lend to it than other type of businesses
• Disadvantages of PLC:

  • legal formalities in setting up a business
  • floatation
  • more regulations and controls over PLC to protect interests of shareholders
  • publication of accounts
  • can’t keep any information secret
  • everybody will know the amount of shares and the dividends that are paid, etc
  • everything is made public 
  • selling shares to the public is expensive and requires specialist merchant bank
  • a danger that the original owners may lose control
  • expensive to set up
• Franchise  

  • a widespread form of business growth
  • a franchise owns the business with a product or service
  • the franchisee buys the licence to operate the business
• Advantages for a Franchisor:

  • chances of business failure are much reduced because a well-known product is being sold
  • franchisor pays for advertising
  • all supplies are obtained for them
  • fewer decisions to make than with an independent business
  • training for staff and management is provided
  • banks are often willing to lend to franchisees due to relatively low risk
• Disadvantages to Franchisor:

  • may be unable to make decisions that would suit the local area, for example, new products that aren’t part of the range offered by the franchisor
  • less independence 
  • licence fee must be paid to the franchisor and possibly a percentage of the annual turnover
• Advantages to Franchisee:

  • expansion of the franchised business is much faster than if the franchisor had to finance all new outlets
  • the franchisee buys a licence from the franchisor to use the brand name
  • the management of the outlets is the responsibility of the franchisee
  • all products sold must be obtained from the franchisor
• Disadvnatages for Franchisee:

  • poor management of one franchised outlet could lead to a bad reputation for the whole business
  • the franchisee keeps profits from the outlet
• Joint ventures

  • where two or more businesses start a new project together, sharing capital risks and profits
  • many European companies have set up joint ventures with Chinese companies 
• Advantages of joint ventures:

  • sharing the costs
  • local knowledge when the JV (joint venture) is in a different country (locals know of the company)
  • risks are shared
• Disadvantages of joint ventures:

  • if the project is successful, profits have to be shared
  • may lead to disagreements
  • different cultures may lead to business running difficulties
• How decisions are made in AGM:

  • shareholders elect the directors to run the business
  • the directors will appoint managers to help
  • the shareholders own the business and the directors and managers control - divorce between ownership and control
  • directors and managers run the business and make the decisions
  • shareholders are not able to influence these decisions
  • however shareholders can replace directors at the annual general meetings
• Businesses in the public sector:

  • companies in the public sector are owned by the government and the local government
  • public corporations are businesses that have been purchased by the government such as water supply, gas, electricity, and rail services
  • government ministers appoint a Board of Directors to manage the business
• Advantages of public corporations:

  • some industries are very important and government ownership is essential
  • if industries are controlled by monopolies it would be wasteful
  • ensures consumers aren’t taken advantage of 
  • a monopoly can increase the price of the product and reduce its quality, hence taking advantage of the lack of knowledge the consumer has and also gain more profit
  • government can protect an important business
  • government provides subsidies to the business
  • ownership of TV and radio allows non-profitable programmes to still be made
• Disadvantages of public corporations:

  • lack of a profit motive may lead to inefficiencies
  • you may be overstaffed
  • the staff may not be carrying out their job and instead just be on their devices doing god knows what
  • government subsidies may be unfair on the private sector
  • private sector is at a disadvantage 
  • a lack of close competition may limit customer choice
  • if government has control over all corporations, there’ll be less competition
  • hence there is no variety in the product
  • government can use these businesses for political reasons
• Delayering in organisations may be due to:

  • increase efficiency of communication
  • delegate more responsibilities
  • cut cost
• Benefits of having an organisational structure:

  • an organisation hart shows how everyone is linked together
  • the chain of command can clearly be seen and allows instructions to be passed down to lower levels
  • everyone is aware of the communication channel and can see their own position in the company
  • gives employees a sense of belonging
• Advantages for short chains of command:

  • communication is quicker
  • top managers are less remote from the lower level of the hierarchy
  • each manager will be responsible for more subordinates, this will encourage delegation
  • less direct control of workers, workers will be able to make more decisions themselves = job satisfaction
• Disadvantages for short chains of command:

  • wider spans of control could mean that managers lose control of what subordinates are doing (e.g. a manger has to supervise 30 subordinates, there is a high chance that one or two subordinates go unnoticed by the manager)
  • this could lead to mistakes being made
• Planning (future target):

  • this creates an aim or target and gives the organisation a sense of direction
  • to achieve the aim, a manager must plan the resources which will be needed
• Organising (resources):

  • tasks must be delegated to others who should have the resources to complete these tasks
  • managers must organise people effectively
  • the organisational chart shows who has the authority
  • makes sure that specialisation occurs and people don't end up doing the same tasks
• Coordinating (labour):

  • a manager must ‘bring people together’ in the organisation
  • departments should make contact with each other
  • marketing must coordinate with the operations department
  • a good manager makes sure that all departments work together to achieve the plans
  • this can be done by:
  • regular meetings between people in different departments
  • or a project team could have been set up to develop and launch the new product (team would be made up of people from different departments)
• Commanding (labour):

  • as well as guiding, leading, and supervising, managers also need to tell people what to do
  • they have to make sure targets and deadlines are being met
  • it’s also their responsibility to make sure that the tasks are carried out by people below them in the organisation
• Controlling (factors of production):

  • managers measure and evaluate the work of all individuals
  • have to take corrective action when required
  • may involve disciplining staff
  • it’s the managers job to find out why targets aren’t being met
• Delegation:

  • manager gives the subordinated the authority, not the responsibility
  • if a job is done badly, the manager has to accept the responsibility
  • because the manager had delegated that task to someone
• Advantages of delegation for the manager:

  • by delegating, a manger can concentrate on other important management functions
  • managers are less likely to make mistakes if some of the tasks are performed by subordinates
  • managers can measure the success of their staff more easily
• Advantages of delegation for the subordinate:

  • work becomes more interesting and rewarding
  • employee feels more important now that trust has been put in them
  • helps to train workers giving them career opportunities
• Why some managers choose not to delegate:

  • fear some subordinates will fail and want to control everything themselves
  • there’s also a risk the subordinate might do a better job that the manager
• Why it’s important to have good managers:

  • they motivate employees
  • give guidance and advice to employees
  • can inspire employees
  • manage resources and keep costs under control
  • increase profitability of the business
• Autocratic leadership - 

  • managers make all the decisions themselves
  • managers tell employees only what they need to know

  Advantage: 

  • good for quick decision making

  Disadvantage: 

  • can be demotivating (as your opinions aren’t taken into account so it feels as if no one is listening to you)
• Democratic leadership:

  • information is openly discussed
  • communication is both downward and upwards

  Advantage:

  • can result in better decisions being made

  Disadvantage: 

  • unpopular decisions, such as redundancy, couldn't be made using this style
  • can also slow down decision making