[GCSE/IGCSE BUSINESS STUDIES SECTION 2.1 REVISION NOTES]

Transcription

1 Choosing the form of organization When you want to chose the form of organization you should consider these factors: Objectives Growth Finance Limited liability Types of business organisations Sole trader Partnership Limited companies Franchise Joint ventures Sole trader A business owned and managed by one person One person makes the decisions Profit is not shared, sole trader enjoys the entire profit If business loses money, the sole trader has to sell his/her personal assets to pay off creditors (unlimited liability) Partnership The business is owned and managed by 2-20 people Partners make the decisions Profit is shared among the partners If businesses lose money, the partners have to sell their personal assets to pay off creditors (unlimited liability) Limited company A business owned and managed by a group of people Directors make the decisions Profit is shared among the shareholders If businesses lose money the shareholders don t have to sell their personal assets to repay creditors F R E E O N L I N E L E C T U R E S & R E V I S I O N M A T E R I A L B Y F E T S Y S T E M Page 1

2 Franchise To use the name of a large business to conduct business activities Franchisee uses the name Franchisor grants the permission to franchisee to use the name for a fees Eg. Mc Donald s has many restaurants all over the world which are mostly run by the franchisee Joint venture Joint venture happens when two separate companies join hands to complete a project They share knowledge and expertise to complete the project successfully Difference between sole traders and partnerships Sole trader Partnership 1 owner 2-20 people are owners Decision made by 1 person Decisions are made by partners Limited capital Extra capital Sole trader enjoys all profits Partners have to share the profit Sole trader has to suffer all losses Partners have to share the losses Difference between unincorporated buninesses and limited company Unincorporated business Example: Sole trader, partnerships No shares can be issued Unlimited liability Not a legal entity Less capital available If the owner dies business dies Limited company Example: Private limited company Shares can be issued Limited liability Legal entity More capital available If the owner dies th business still exists F R E E O N L I N E L E C T U R E S & R E V I S I O N M A T E R I A L B Y F E T S Y S T E M Page 2

3 Difference between internal communication and external communication Internal communication External communication Communication within the company Communication outside the company Mostly oral communication Mostly written communication Informal Formal Why multinational companies are created To operate in many different countries and provide goods and services all around the globe The begin business activities in other countries to avoid trade barriers They want aim to understand the tastes and needs of their customer by employing their marketing staff in the country Reasons for the growth of multinational companies Reduced costs by operating in 3 rd world countries People demanding foreign products Globalisation Businesses want to avoid trade barriers It is very important to understand the behavior of people in order to make them customers Advantages of multinational companies to the countries Employment opportunities Tax revenue to the country Providing goods and services Global image Country is introduced to new technology Disadvantages of multinational companies on the countries Domestic market is badly affected Dumping may ruin the entire industry The revenue is taken back by the multi-national company Technology may not be applicable F R E E O N L I N E L E C T U R E S & R E V I S I O N M A T E R I A L B Y F E T S Y S T E M Page 3

4 Control and responsibility The organisational structure defines the roles and responsibilities of the people in a company It also shows who has to report to whom Span of control Span of control is the number of employees who directly report to their superior The number of people a manager directly controls Scalar chain and hierarchy Scalar chain is the number of layers ranging from top to bottom levels in a organization Hierarchy is a ranking of people from top to bottom level. The person at the top of the hierarchy the possesses the most power Delegation When the superior gives his/her subordinate the power to complete a task or make important decisions Role and function of Entrepreneurship The role of function of entrepreneur is to combine all resources in an effort to make profit A person incurring loss in business is also called a entrepreneur Risk The entrepreneur takes the risk of his money and time to provide goods and services with the aim of earning profit Limited liability If the business is unable to pay his/her creditors the owner does not have to pay his/her personal assets to repay the money F R E E O N L I N E L E C T U R E S & R E V I S I O N M A T E R I A L B Y F E T S Y S T E M Page 4

5 Functions of management Planning Organizing Staffing Directing Controlling Ownership and control In a limited company ownership and control are divided The shareholders own the company The directors and managers control the company Directors have to safeguard the interests of shareholders Different means of communication Internal communication External communication Concept of communication The exchange of information between people is called communication The exchange of information can be on individual or organizational level Importance of communication To motivate employees To get the decisions implemented To get feedback How communication takes place Sender Message Medium Receiver Feedback F R E E O N L I N E L E C T U R E S & R E V I S I O N M A T E R I A L B Y F E T S Y S T E M Page 5

6 Barriers to effective communication Physical- Noise Attitude- Disinterest of either the sender or receiver Technical knowledge- The receiver might not understand it Language- Might not know the language How to overcome the barriers Choosing the suitable medium Keep the message simple and precise Always ask for feedback Positive attitude by both sender and receiver Message should be given in a place where there is no noise Effective communication When both sender and receiver know that the information has been conveyed and understood Consequences of a breakdown in effective communication Frustration Wrong decision implemented F R E E O N L I N E L E C T U R E S & R E V I S I O N M A T E R I A L B Y F E T S Y S T E M Page 6