Business studies

why do businesses fail?

- finance- not enough money to cover costs

- poor/ lack of record keeping

- poor management skills

- underestimating the competition

- changes in the business environment e.g recession, fashion changes

what skills should an entrepenuer have?

- risk taking

- innovation

- commitment and self motivation

- multi skilled

- leadership skills

- self confidence

measuring business size!

- number of employees- simplest measure easy to understand

- sales turnover- used for comparing size when firms in the same industry

- capital employment- total value of all long term finance used in business

- market capitilization- for businesses which have shares quoted on stock exchange

- market share- if firm has high market share it must be amoung leaders in the industry

leadership types?

sole trader- owner provides finance

partnership- 2 or more shared finances between owners

private company- owned by shareholders

public company- owned by shareholders

franchise- a business that uses yej name, logo and trading systems of existing sucessful business

pay systems

piece rate- the calculation of wages based entirely on the quantity of outpu produced over a given time.

performance related- when a bonus or salary increase is paid to a member of staff who has met or exceeded certain pre-set performance criteria.

salary- this is an annual sum that is usually paid on a monthly basis. it is the most common form of payment for professional, supervisory and management staff.

commision- most frequently used in personal selling, where sales person is paid a commision or a proportion of sales gained.

business objectives!

profit maximisation

profit satisfactory

growth

increasing market share

survival

social responsibility

increasing short term sales

maximising/increasing value

theory x and y

mcgregor argued that management attitudes to the work force vary between 2 extremes

X- negative position in which workers are viewed as unwilling to work, unable to be creative and unprepared to accept responsibility.

Y- positive workers wanting to work, able to be creative and seeking responsibility.

leadership styles

autocratic- take their decisions on their own with no discussion. they set business objectives themselves, issue instructions and check they are carried out. Motivation levels will be low so supervision of staff is essential.

democratic- will engage in discussion with workers before making decisions. managers who use this link will need good communication skills themselves to explain issues clearly.

paternalistic- will listen, explain issues and consult with the workforce, but will not allow them to take decisions. Will decide what is best for the business.

laissez faire-(let them do it) little input from management into the work to be undertaken by subordinates. this style could be effective in the case of research and design. leaving workers to their own may lead to lack of confidence and poor motivation.

factors of production

land-all renewable resources of nature

labour- manual and skilled labour make up workforce business

capital- pay to set up business, computers, machines factories and vehicles

enterprise- driving force prodived by risk taking individuals that combines teh other factors of production.

primary- farming,fishing,oil extraction all places that extract natural resources so that they can be used and processed by other firms.

secondary- computers,brewing, baking, clothing making firms that manufacture and process products from natural resources.

tertiary- retailing,transport,insurance,banking those firms that provide services to consumers and other businesses.

limited liability- the ownership of teh companies is divided into small units called shares.people can buy these and become shareholders- part owners of the business

people are prepared to provide finance to enable companies to expand.

the greater risk of teh company failing to pay its debts is now transferred from investigators to creditors.

these occur when two businesses agree to work closely together on a particular project and create business division to do so.

reasons are

costs and risks of a new business venture are shared this is a major consideration when the cost of developing new products is rising rapidly

different companies might have different strengths and experiences and they therefore fit well together.

they might have their objectives major markets in different countries and they could exploit these with the new product more effectively than if they decided to go it alone.