Notesale: Turn your study into money

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Sectors of Industry
Primary Sector
- Businesses that are involved in exploiting natural resources
...
BP Extract oil
Secondary Sector
- This consists of businesses that are involved in manufacturing and construction by taking natural
resources and turning them into goods that can be sold later
...

Tertiary Sector
- This consists of businesses and organisations that are involved in providing services rather than
goods
...
ICT,Consultancy
and R&D

Sectors of the Economy
Private Sector
- These are businesses that have the primary aim to maximise profits and includes all profit-making businesses
...
NHS, Politics, State education
...

Cancer Research of SSPCA, Voluntary like Golf clubs or Scouts

Private limited companies
Limited because of Limited Liability - This means owners personal possessions are not at risk - If
the business gets into debt with creditors, the owners only lose their investment in the company
...

In a an LTD shares are not available to the general public and are sold privately to investors whom
the business knows such as employees
...

They are controlled by a board of directors and a managing director
...


The business usually a close and tight knit, friendly
feel with a high level of consumer service
...


Public limited companies
They are owned by shareholders with limited liability and also are controlled by a board of directors
...

Example: Vodafone on FTSE 100 - Highest valued - Sold on London Stock market
They aim to dominate a market, increase their market share and market value
...


Control of the business can be lost as anyone can
buy shares on the stock market
...


Setting up a PLC is costly and complicated

Franchise
This is a business model in which businesses can pay a sum of money to own a branch of a well
known existing business
...

They also aim to maximise profits and if they are a PLC increase market share
...


For Franchiser
Advantages

Disadvantages

It is a low risk form of growth as the Franchisee
invests most of the capital

The reputation of the whole franchise can be
tarnished by one poor franchisee

Receives a percentage of all Franchisee’s profit
each year
...


For Franchisee
Advantages

Disadvantages

The Franchise tends to be a well known business
with an existing customer base

There is very little autonomy over decisions as the
Franchiser decides on products, store layout,
uniforms etc…

Industry knowledge and training is provided by the
franchiser

Royalties have to be paid each year

The Franchisee benefits from national
advertisements carried out by the Franchisor

There are high initial startup fees
...
The Head office is usually in the home country and they are usually Limited companies
...


Cultural differences can effect production
...


Exchange rates can effect purchasing and paying
expenses in different countries

Businesses can avoid quotas and tariffs issued by
their own governments
...


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Advantages

Disadvantages

There is less corporation tax in Host countries
...
These are funded through taxation
...

All central government aims to produce a quality service
They also own nationalised companies like RBS when the government bought shares during the
recession
...

Local Government
Split into Local councils
Strategic decisions are made by elected local councillors and operational and tactical ones are
made by individual organisations like the Head teachers of Schools
Finance comes from Central government and through small payments at things like local leisure
centres
...


The Third Sector
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Charities are set up with the Sole purpose of raising money for the benefit of others
...
They may also have a trading arm like
Oxfam shops, however shops profits will go to the charity and not the owner
...

The Main aims of these charities change depending on what they stand for as the SPCA who aim
for greater animal rights will have differing aims from Oxfam who support a range of causes
...


It can be difficult to compete with the large
marketing budgets of organisations within the
private sector,

There are low wage costs due to volunteers
working for free
...


Private companies are more willing to donate to
and sponsor charities than ever before as it is
good ‘PR’

Voluntary organisations like Golf Clubs or a local sports club are financed mostly through
membership and are run through elected committee members and by volunteers
...
An example is Jamie Olivers Fifteen or The Big issue

Objectives
Maximising Profits - This involves making more money through the business’ core activities than
they spend on purchasing materials and other running costs
...
They
will want as large a dividend as possible and money reinvested in the company will allow it to grow
...
This means the company avoids
going out of business and having to cease trading
...

Satisficing - Having a satisfactory or adequate result - only enough to satisfy shareholders - certain
amount of profit - particular relevant for public sector as they have a budget to work with
...

Increasing market share - percentage of sales in a particular market
...

managerial objectives - they may set specific objectives perhaps to improve their status within the
company perhaps by expansion into new markets or developing new technologies
...

Sales maximisation - Similar to managerial objectives a company may aim to increase sales which
may mean dropping the price or a new promotion
...
This may give them monopoly power (more
control_ meaning they may be able to contribute to the setting of prices
...

They may contribute to charity or support a local cause (ASDA) - morons active kids vouchers
...

Methods of Organic Growth:
-

New products
New branches or expanding existing ones
E-commerce (Online)
Hiring more staff
Increasing production capacity (New capital and technology)

Integration

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Situation where two firms combine to become larger and more powerful in the market
...

Takeover:
This happens when a Larger (Usually) business buys another, usually smaller business
...

Hostile - Larger swallows the other to gain a greater market share
...

They are also known as Acquisitions which is where a company may simple want to add something to their company like Google buying Youtube
...

This is less hostile
...

Horizontal Integration:
2 companies at the same stage of production join together
...

Advantages:
-

eliminate competition and increase market share
greater economies of scale
acquire assets
stronger - less likely to fail or be victim of hostile takeover

Disadvantages:
- Can become even larger and dominate market (Monopoly)
- eliminates competition to extent it can raise prices and exploit customers
...

If the public would suffer from a Merger the Government would not allow it
...

Forward - later stage of production - better distribution
Backward - earlier stage - sure of availability and quality
Diversification:
Virgin and Mars
...

Divestment:
This is where the selling off of one or more subsidiary companies is done to raise finance or to address diseconomies of scale
...


Internal Factors
Availability of finance:
- Lack of finance means less opportunities to grow and make decisions it wants
...

- They may have to take drastic action to cut costs - downsizing, remove layer of management
Human resources = staff - ‘employees/managers
Manager impact:
Level of risk - safe option - may not meet objectives - high risk - may lead to finance problems
Experience and expertise - a good manager leads and motivates employees - poor manager leads
to low morale, high staff turnover and a drop in productivity
...

Language and jargon - invention of quirky words - belonging - unique - disneyland call staff, “Actors” and customers, “The audience”
Slogans and mottos - Customers and staff recognise - reinforce objectives
Rituals - dress down friday - relax their staff
Reward culture - bonuses - employee of the month
Flexible working arrangements

Advantages

Disadvantages

A relaxed working environment can make staff
feel comfortable and motivated to work
...


Employee loyalty increased

Management can lose focus and control if a culture
is too loose
...


communications take time to flow down the levels
meaning slow decision making
...


slow to react to changes in the market
...


- Managers supervise work more, putting pressure
on staff
...


Flat Structure:
Fewer levels of management - smaller to medium organisations
Advantages

Disadvantages

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Information can be communicated quickly between
levels

Fewer promotion opportunities for promotion so
quality staff may leave for promotion elsewhere

The organisation can respond quickly to external
factors, such as competition

Staff may be delegated more tasks putting more
pressure on them
...


Fewer promotional opportunities

quicker decision-making and communication shorter chain of command

Redundancy payments can cost the organisation a
significant amount of money
...
e
...

Advntages

Disadvantages

Corporate identity - decisions are made by whole
organisation

less responsibility - less motivated staff

Procedures standardised - improves consistency

decisions will not reflect the needs of local markets

Information seeking - low risk

slow reaction to pestec

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Decentralised Management:
Decision making and control is delegated to individual branches or departments
...

- Know who to report to
Dis:
- too large to manage if rapid growth
- coupled with centralised management - slow reaction to Pestec
- more interest in groups department and not companies
Location grouping
Geographical divisions
Adv
- meet needs of local market
- react to PESTEC quickly
- identify failing area easily
Dis
- Duplication of resources - admin + equipment
- Compete - forget overall objectives
Product/service
Different products or services
Adv:
React to PESTEC
Easy to identify struggling areas
Dis:
Duplication
New one set up for each product

Technology Grouping
production processes
Adv:
- specialisation
- problems identified
- Capital intensive - reduce costs

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Dis:
- Special training required
- Very Large business only
- Capital intensive - expensive
Customer:
different types of customer, retail, wholesale
Adv:
tailor product for customer
customer loyalty
Dis:
duplication of resources
large business only
Downsizing
closing unprofitable division
Adv:
Cut costs of wages and rent
business= more efficient + competitive
Dis:
valuable skills and knowledge lost
remaining staff vulnerable + demotivated

Stakeholders
An individual or group of people who have an interest in the success of an organisation
...

Internal - employees - shareholders etc
external - banks, government, suppliers
Conflict + Interdependence
Employees v Owners - Pay rise/profits
customers v owners/managers - Low price v profit = equilibrium
suppliers v managers - trade credit v payment - other disagreement

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government v managers - disagree with legislation - minimum wage

Interdependence
-

Government and managers - low corporation tax needed + employment needed
Managers and suppliers - supply needed and managers needed to purchase in bulk
Owners need cutomers to purchase and maintain profits but they need a quality product
Owners need employees to perform where as employees need wages and business to be successful to maintain employment
...
g to
grow the business
...
g launch new
products to grow
organically
...
g dealing
with a customer
complaint
...
Meeting expectations?
Delegate - let staff carry out management tasks - lightens work load
Motivate - Give his team a reason to enjoy work
...

Technology
-

Email - communication
Internet - information
Video - conferencing - costs - travel
database
spreadsheet - improve accuracy

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