Business Management - Unit Three, Area of Study One - Summary and Guide

First post of 2020 and zombie Hazel VCE blog has been resurrected! I decided to have a little break from posting over the Christmas break because I was a little burnt out, but I'm back now! I have been working on other blog posts slowly for the past couple of months though, so those should be released shortly.

Anyway, the very first one is a summary for the first area of study for unit three business management!

If you undertook the first two units of business management, you are probably familiar with most of these concepts. There isn't really a focus on one specific area of business like human resources in the second area of study, it's generally just an overview of businesses. 

Types of Businesses

•         Sole Traders
•           Partnerships
•           Companies (Private and public)
•          Government Business Enterprises
•           Social Enterprises

Sole Traders

Sole traders are an individual who own and run the business. They provide all the finance, make all the decisions and take all the responsibility for the business. Although there is only one owner, they are able to employee other people to work for the business. Sole traders only have one legal requirement, which is to register their business name if it differs from their full name. The name will be registered on the Australian Securities and Investments Commission if it is different from the name of the owner. Sole Traders also have unlimited liability, which means that the owner and the business are regarded as the same legal entity.                          

Advantages	Disadvantages
Low Cost Simple Complete control Lack of disputes Keep all profits Less government regulations	Unlimited Liability Burden of management Needing to perform a wide variety of tasks Difficulty is raising finance

Partnerships

Partnerships are businesses owned by between two and typically a maximum of twenty people. There are such things as limited partnerships, where an owner contributes only financially to the business. Partnerships also have unlimited liability, like sole traders.

Advantages	Disadvantages
Low cost Shared workload Pooled funds Less government regulations	Unlimited liability Likelihood of disputes Difficulty in finding a suitable partner Divided loyalty and authority

Incorporation is the process of a business registering themselves as a company and being viewed as a spate legal entity. When a business becomes a company, the name will be registered on the ASIC and an Australian Company Number will be issued. Companies also have limited liability, which means that the business will be regarded as its on legal entity.

Advantages	Disadvantages
Easy to attract finance Limited liability Easy to transfer ownership Experienced board of directors Company tax is lower than income tax Growth potential	Cost of formation Required to produce financial reports Public disclosure requirements

There are two types of companies: private limited and public listed.

Private limited companies have to have at least one shareholder and has a maximum of fifty non-employee shareholders. There is also a minimum of one director. Shareholders have to be invited by the business, shares are not listed publicly on the stock exchange.  To identify whether a business is a private limited company, it will have ‘Pty Ltd’ after the name, meaning ‘proprietary limited’.

Public listed companies are listed on the stock exchange, referred to the Australian Securities Exchange. There is a minimum of one shareholder and there is no maximum amount. To identify if a company it is publicly listed, it will have ‘Ltd’ after its name (meaning ‘limited’).

Social Enterprises

A social enterprise is a business that produces goods and services for the market, but operate to achieve a social objective. Social enterprises may aim to address issues in society such as unemployment, training, standard of living or environmental issues.

Advantages	Disadvantages
Opens new markets Positive effect on profit	Difficult to obtain finance (such as from banks) Operating costs Difficult to focus on two objectives

Government Business Enterprises

A government business enterprise is a type of business that is government owned and operated, with the goal of making a profit. They are managed and controlled by a board of directors.

Advantages	Disadvantages
Carry out government policies Some independence from government Competition with private sector	Political interference Strict conformity to rules Less accountability, leading to less productivity

Business Objectives

Business objectives are a business’ desired outcome a business want to achieve. They give the business direction, increasing chances of success.

When developing business objectives, there are certain steps involved:

1. Set objectives.
2. Develop strategies. 
3. Analyse performance. 

Strategies are the ways which the business will attempt to reach business objectives, such as targeting a new customer base to increase market share.

When analysing performance, the business needs to identity if the objective have been achieved in an effective and efficient manner. In order to analyse performance, key performance indicators can be used. These are criteria used to measure the success of the business, such as the percentage of market share or net profit figures.

The business objectives are:

-          To make a profit

-          To increase market share

-          To fulfil a market need

       To fulfil a social need

       To meet shareholder expectations

To make a profit

Making a profit is a major indicator of success. It is correlated with an increase in sales, expansion of the business and increase in market share.

To increase market share

Market share is a business’ proportion of total sales in a market or industry. In order to increase market share, a business could develop a wide product range and different brand names.

To fulfil a market need

In order to fulfil a market need, the business will sell good or services which are currently not available. Thus, filling a ‘gap’ in the market. This could be improving the quality of an existing product or service, changing the price or making it more convenient to use.

To fulfil a social need

Businesses which aim to fulfil a social need sell goods and services for the purpose of marking the world a better place. This could be regarding environmental, social and economic sustainability.

To meet shareholder expectations

Shareholders have an expectation to make a return on investment, receiving a portion of the business’ profit referred to as dividends. 

                               

Areas of Management Responsibility

The area of management are:

• -          Human Resources
• -          Finance
• -          Operation
• -          Sales and Marketing
• -          Technological support

Operations

Operations is responsible for the production of the business’ products. They oversee the inputs being created into outputs. Strategies which operations use is materials management, quality management and waste management. Operations management can aid in the achievement of:

-          Making a profit.

-          Increasing productivity.

-          Increasing market share.

Finance

Finance is responsible for developing financial policies, obtaining finance, creating budgets and accounting.  Finance management can help analyse if a profit has been made or the market share objective has been reached.

Human Resources

Human resource management is responsible for coordinating all the employees in a business. They may input strategies such as building positive relationships, promoting employee motivation and increasing labour productivity. Human resource management can improve productivity, increasing profit and market share.

Sales and Marketing

The responsibility of this management area is promoting the sale of goods and services. Strategies may include creating new sales channels and building brand loyalty. This can lead to the achievement of increasing market share and profit.

Technological Support

Technological support is involved in installing and maintain the technology in a business, including assisting employees with using the technology in the business. This can increase productivity, which can lead to increased profits.

Stakeholders

Stakeholders refer to the people and groups that interacting with the business and have a vested interest in its activities and success.

Internal Stakeholders

Owners (Sole Traders and Partnerships)

Owners want the business to make a profit as they depend on the success of the business for their income.

Shareholders (Companies)

Shareholders are individuals who purchase shares in a company, so they are partial owners of the business. They want the business to make a profit, as this affects the value of their shares and the amount of dividends they receive.

Directors

The directors in a business are the people who have overall resonability for managing the business’ activities. They expect to have high status in the business and be adequately remunerated.

Management

Managers have the responsibility to ensure that strategies which have been implanted will achieve the business objectives. Management expect the business to perform well, so they can be adequately remunerated. Typically, they want the business to be socially responsible.

Employees

Employees are the individuals who work for the business. They expect to be paid fairly, trained properly and treated ethically. They also expect job security.

External Stakeholders

Government

The government make and change laws. Therefore, they expect businesses to follow them. In addition, government also collect tax from businesses.

Competitors

Competitors are other businesses who provide rival goods or services to those offered by another business. Competitors attempt to have competitive edge and are prepared to respond to change.

Interest Groups

Interest groups, such as trade unions, consumer groups and specific issue groups, are groups who attempt to influence businesses to change their practises.

Customers

Customers expect to purchase quality products or services at reasonable prices. Customers are also becoming more aware of social responsibility issues.

Suppliers

Suppliers provide resources to businesses that will be used to produce products or services. They expect to be fully paid in a prompt manner.

Members of the community

The community expects businesses to give back to the community, showing concern for the community’s welfare and environment.

A skill which you will need to acquire is to describe how the desires of some stakeholders may not go together. For example, employees want increased wages yet shareholders want more profit.

Corporate social responsibility

Corporate social responsibility is defined as a business going over and above its legal requirements to better the wellbeing of the stakeholders.

This may involve the business analysing the triple bottom line, focusing on the economic, social and environmental performance of the business.

Corporate social responsibility is important because businesses are more attracted to it, ensuring the community won’t want to boycott the business. Employees will want to work for business and the reputation will increase. Being a socially responsible business also allows for competitive edge.

Management Styles

Management styles are the ways managers do things, including their behaviour and attitude. The management styles are:

• -          Autocratic
• -          Persuasive
• -          Consultative
• -          Participative
• -          Laissez-faire

Autocratic

Autocratic managers make all the decision. This include dictating work methods and limiting employee knowledge. It is a centralised management style with one-way communication.

Advantages	Disadvantages
Directions are clearly defined. Employees know expectations Time effective	Ideas are not encouraged Job dissatisfaction Conflict increases “Us vs them” mentality

This management style is ideal when a business is in a time of crisis, needs to meet sudden deadlines or the employees lack skills.

Persuasive

In this management style, managers attempt to convince employees that their way is the best. Therefore, it differs from autocratic because it involves the manager providing justification for their decision.

Advantages	Disadvantages
Managers gain trust through persuasion Employees feel considered Expectations are clear	Lack of employee trust Poor communication Lack of employee input

This management style is also ideal when a business is in a time of crisis, needs to meet sudden deadlines or the employees lack skills.

Consultative

This involves the manager consulting with staff prior to making decisions. Yet, the final decision-making power remains with the manger.

Advantages	Disadvantages
Greater variety of ideas Employees may increase motivation Better results	Time consuming Staff may be confused on role Some ideas must be denied or ignored

The consultative management style is useful when a new procedure or change is to be introduced in the business. 

Participative

The participative management style involves the manager sharing decision-making authority with employees, allowing them to initiate, implement and monitor its own solutions.

Advantages	Disadvantages
Reduced likelihood of disputes Increased motivation Acquire new skills Lower staff turnover High levels of trust	Time-consuming Management may be weakened Internal conflict Not all employees may want to contribute

This management style is useful when the business is undergoing rapid change.

Laissez-Faire

In this management style, employees are responsible for all workplace operations. Managers will establish the objectives, while employees take full responsibility for achieving them. This ‘extreme’ management style is mainly used when businesses have highly skilled employees or when the business is in a creative industry.

Advantages	Disadvantages
Employees feel sense of ownership Encourages creativity Open communication	Potential misuse of resources and time Personal conflict Business objective can be forgotten

Management Skills

Management skills are the abilities that managers use to complete tasks which aim to reach the business objectives. They include:

• -          Communication
• -          Delegating
• -          Planning
• -          Leading
• -          Decision making
• -          Interpersonal skills

Communication is the transfer of information. It is useful when informing employees on changes in the business, but it can lead to conflict.

Delegating is when a manager transfers specific activities to various employees, spreading the workload. This enables time efficiency, yet it may make it more likely for confidential information to be spread.

Planning involves defining a business’ objectives and determining strategies for how those objectives will be achieved. The planning process involves:

-          Defining the objectives

-          Analysing the environment

-          Developing alternative strategies

-          Implementing an alternative

-          Monitoring and seeking feedback.

Leading involves a manager attempting to influence employees to meet the business objectives. This can be done through modelling good practise, praising good performance and delegating tasks.

Decision-making involves identifying the options available to a business and selecting the right one.

Interpersonal skills refers to a manger’s ability to build positive relationships with employees. This involves being understanding and empathetic, inspiring staff and being sensitive to their needs.

Corporate culture

Corporate culture is the values, ideas, expectations and beliefs shared by the employees and managers in the business.

Official corporate culture: Revealed officially in policies, objectives and slogans of the business.

Real corporate culture: Unwritten informal rules, such as how staff dress, the language staff use and how staff are treated.

The elements of corporate culture are:

        Values and practises

         Symbols

          Celebrations

          Successful employees.

Strategies for corporate culture:

-          Establish social gathering.

-          Sufficient training.

-          Communicating values

-          Rewarding good employees

-          Changing management style

-          Changing dress and language.

Benefits of good corporate culture:

-          Easier to implement change

-          Positive attitude towards business.

-          Staff turnover decreases.

-          Increased productivity

-          Positive reputation.

Attract skilled employees.