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2.4.1 Why effective communication is important and the methods used to achieve it:

• Effective communication and its importance to business
• Benefits and limitations of different communication methods including those based on information technology (IT)
• Recommend and justify which communication method to use in given circumstances

2.4.2 Demonstrate an awareness of communication barriers:

• How communication barriers arise and problems of ineffective communication; how communication barriers can be reduced or removed

Effective business communication ensures clarity, unity, informed decisions, customer trust, conflict resolution, and streamlined operations, fostering productivity and positive relationships within and outside the organization

Benefits:

Face-to-Face Communication: Offers immediate feedback, builds trust, and allows for nuanced understanding via body language and tone.

Written Communication: Provides a record, allows for detailed information sharing, and facilitates communication across time zones.

Telephone/Video Calls: Enables real-time conversation, reduces misunderstandings compared to written communication, and allows for visual cues in video calls.

Emails: Offers a formal record, asynchronous communication, and the ability to share information with multiple recipients.

IT-Based Communication: Enhances speed and reach, facilitates global connectivity, and enables diverse media integration (videos, images, etc.).

This lesson is covered on my Youtube channel, you can watch it here:

Limitations

Face-to-Face: Limited scalability, costly for distant interactions, and can be affected by non-verbal biases.

Written: Lack of immediate feedback, potential for misinterpretation, and time-consuming for lengthy messages.

Telephone/Video Calls: Dependency on network quality, lack of visual cues in phone calls, and potential for technical issues.

Emails: Risk of miscommunication due to tone, potential for information overload, and susceptibility to security breaches.

IT-Based: Dependency on technology, potential for misinterpretation in non-verbal cues, and challenges with privacy and security.

Each method offers unique advantages and drawbacks, and the choice depends on context, purpose, and the nature of the information being communicated.

The choice of communication method depends on various factors like urgency, complexity, audience, and context. Here are some examples:

Urgent Matters: For immediate needs or urgent matters requiring quick responses, a phone call or instant messaging might be best. It allows for real-time interaction and quicker decision-making.

Complex Information: Complex information or detailed instructions are better conveyed through written communication like emails. It provides a documented record and allows recipients to refer back as needed.

Sensitive Discussions: Face-to-face communication is best for sensitive topics or discussions requiring empathy, as it allows for nuances in body language and tone. If not possible in person, video calls can be a good alternative.

Communication barriers stem from various sources like language differences, distractions, emotional barriers, or technological issues. Ineffective communication leads to misunderstandings, lowered productivity, and conflicts.

These barriers can be mitigated by promoting active listening, fostering a transparent and open culture, providing clear instructions, offering language training, using multiple communication channels, encouraging feedback, and employing appropriate technology.

Emphasizing empathy, clarity, and regular communication training diminishes barriers, fostering clearer, more effective interactions within teams and across diverse environments.

Take the test on this topic to help you remember key points.

2.3.1 Recruitment and selecting employees:

• Recruitment and selection methods
• Difference between internal recruitment and external recruitment
• Main stages in recruitment and selection of employees
• Recommend and justify who to employ in given circumstances
• Benefits and limitations of part-time employees and full-time employees

2.3.2 The importance of training and the methods of training:

• Importance of training to a business and to employees
• Benefits and limitations of induction training, on-the-job training and off-the-job training

2.3.3 Why reducing the size of the workforce might be necessary:

• Difference between dismissal and redundancy with examples
• Understand situations in which downsizing the workforce might be necessary, e.g. automation or reduced demand for products
• Recommend and justify which employees to make redundant in given circumstances

2.3.4 Legal controls over employment issues and their impact on employers and employees:

• Legal controls over employment contracts, unfair dismissal, discrimination, health and safety, legal minimum wage

‌Why recruit?

‌Before we start to learn this topic, we need to know Why do businesses recruit? They recruit because of the followings:

• To replace staff who have left or been promoted
• Bring in staff with new skills
• Recruit more staff as business expands
• To complete a specialised project or job in the organisation
• when an employee resigns from a job or is dismissed by the management
• When someone in the company retires.

I have explained this lesson in the video below, if reading is not your thing!

‌Recruitment

‌Overall process of attracting, shortlisting, selecting and appointing suitable candidates for jobs within an organisation.

• ‌Job Analysis – A study of the tasks and activities to be carried out by the new employee
• Job Description – This describes the main duties and responsibilities of the job
• Job Specifications – The qualifications and qualities necessary to perform the job (e.g. educational requirements, experience needed)

‌Type of recruitment

‌Once we have done the job analysis, created a job description and job specification we need to Advertising the vacancy

‌Internal Recruitment

‌Promoting or moving workers from one job to another within the company.

Advantages

• Saves time and money – Don’t need to spend money on advertising the job vacancy
• Applicants ‘know’ the firm – the firm know the applicant
• Motivates other workers (chance for them to get promoted)

Disadvantages

• Applicants may not bring in new ideas
• Promoting an employee may make other employees jealous and demotivated

‌Recruiting channels:

• Noticeboards
• Company Newsletters
• HR sends to all Email

‌External Recruitment

‌Recruiting someone who is not an existing employee and will be new to the business.

Advantages

• New ideas from new workers
• More likely to hire someone who matches job specification

Disadvantages

• Expensive – need to advertise job
• Demotivating for internal candidates

‌Recruiting channels:

• Local newspaper
• National newspaper
• Recruitment agencies
• Job centres
• Careers websites

‌Selection process

‌Review Application and CV of all applicants

Testing – we can ask them to take one of the below test to identify their suitability

• Skill test
• Aptitude test
• Personality test
• Group situation test

Interviews – to find out more about the applicant

Selection – picking the best candidate

Making offer

You can watch this lesson here

‌Benefits and limitations of full-time employees

‌A full time contract is where the employee works around 36-40 hours a week.

Ups

• Full time workers tend to have better performance
• Better knowledge of the service or product
• More commitment to the business – as they feel part of belonging
• Better communication within the team

Downs

• Organisation will be paying wages even if it is very quite or not busy.
• Can be expensive having too many full time workers

‌Benefits and limitations of part-time employees

‌This is where the company employs people to work less hours than a full time worker. Normally around 16-20 hours a week.

Advantages

• Have more employees during busy periods
• Flexible working hours
• Less expensive than hiring full-time employees

Disadvantages

• Workers are less trained than full-time employees (because their job is temporary)
• Less committed to the business (temporary job)
• More difficult to communicate with part-time workers when they are not at work

‌Importance of training to a business and to employees

Training is important to a business as it will improve the worker’s skills and knowledge and help the business be more efficient and productive, especially when new processes and products are introduced. It will improve the workers’ chances at getting promoted and raise their morale.

• ‌Trained workers are more productive
• Decrease the amount supervision required
• May lead to job satisfaction
• Reduce accidents and injuries
• Improve chances for internal promotion

‌Induction training

‌an introduction given to a new employee, explaining the firm’s activities, customs and procedures and introducing them to their fellow workers.

Advantages:

• Helps new employees to settle into their job quickly
• May be a legal requirement to give health and safety training before the start of work
• Less likely to make mistakes

Disadvantages:

• Time-consuming
• Wages still have to be paid during training, even though they aren’t working
• Delays the state of the employee starting the job

‌On-the-job training

‌This occurs when a more experienced worker doing the job trains an inexperienced member of staff on certain task. Some organisation will bring an external trainer to train employees on the job.

Advantages:

• It ensures there is some production from worker whilst they are training
• It usually costs less than off-the-job training
• It is training to the specific needs of the business

Disadvantages:

• The trainer will lose some production time as they are taking some time to teach the new employee
• The trainer may have bad habits that can be passed onto the trainee
• It may not necessarily be recognised training qualifications outside the business

‌Off-the-job training

‌This involves being trained away from the workplace, usually by specialist trainers in a college or university.

Advantages:

• A broad range of skills can be taught using these techniques
• Employees may be taught a variety of skills and they may become multi-skilled that can allow them to do various jobs in the company when the need arises.

Disadvantages:

• Costs are high
• It means wages are paid but no work is being done by the worker
• The additional qualifications means it is easier for the employee to leave and find another job

You may watch this lesson here:

‌Difference between dismissal and redundancy

‌Dismissal:

Where a worker is told to leave their job because their work or behaviour is unsatisfactory.

Redundancy:

When an employee is no longer needed and so loses their work, through not due to any fault of theirs. They may be given some money as compensation for the redundancy.

‌Downsizing the workforce

‌Here is why might a business need to reduce the number of employees.

• ‌Automation – technology takes over.
• Reduced demand for products – meaning less people needed to make the product
• Factory/shop closure
• business relocating
• business merging
• Some jobs are no longer needed

‌Legal controls over employment contracts, unfair dismissal, discrimination, health and safety, legal minimum wage

‌All countries have laws to ensure that employees are treated equally, fairly and are not discriminated because of their age, colour or beliefs.

‌So businesses are required by law to treat their employees equally in the workplace and when being recruited and selected- there should be no discrimination based on age, gender, religion, race etc.

‌Here in the UK employees are protected from:

• Unfair discrimination at work and when applying for job
• Wage protection minimum wage)
• Health and safety standards
• Unfair dismissal
• And many more

‌H.R. (Human Resource) Department

‌Normally all organisations have a deportment called HR and they are responsible for the whole of the recruitment process:

• Recruitment and selection:
• – attracting and selecting the best candidates for job posts
• Wages and salaries:
• – set wages and salaries that attract and retain employees as well as motivate them
• Industrial relations:
• – there must be effective communication between management and workforce to solve complaints and disputes as well as discussing ideas and suggestions
• Training programmes:
• – give employees training to increase their productivity and efficiency
• Health and safety:
• – all laws on health and safety conditions in the workplace should be adhered to and they will ensure right training is provided
• Redundancy and dismissal:
• – the managers should dismiss any unsatisfactory/misbehaving employees and make them redundant if they are no longer needed by the business. HR will help and assist with this.

2.2.1 Draw, interpret and understand simple organisational charts:

• Simple hierarchical structures: levels of hierarchy, span of control, chain of command e.g. tall/short
• Roles and responsibilities of directors, managers, supervisors, other employees in an organisation and inter-relationships between them

2.2.2 The role of management:

• Functions of management, e.g. planning, organising, coordinating, commanding and controlling
• Importance of delegation; trust versus control

2.2.3 Leadership styles:

• Features of the main leadership styles, e.g. autocratic, democratic and laissez-faire
• Recommend and justify an appropriate leadership style in given circumstances

2.2.4 Trade unions:

• What a trade union is and the effects of employees being union members

‌Levels of management and division of responsibilities within a business can be represented on organisational charts

‌Types of organisational structure

‌Tall organisational charts –
These have a long chain of command and a small span of control
Flat organisational charts –
Short chain of command, wide span of control

‌Advantages of an organisational chart

• ‌Shows how everybody is linked together in a businessLines of communication are clear
• Motivational as employees can see where they belong and can plan their career paths
• All employees are aware of which communication channel is used to reach them with messages
• They know who they are accountable to and who they are accountable for
• It shows the links and relationship between the different departments
• Gives everyone a sense of belonging as they appear on the organisational chart

‌Disadvantages of an organisational chart

• ‌It will lead to poor communication and coordination across functional units.
• There maybe be lack of understanding across departments.
• They may focus more on their own goals and neglect the overall company objectives.
• Slow to react in response to environmental changes.

I have prepared this lesson in a video format, you can watch it here.

‌Chain of command

‌The power and authority is passed down from the top of the organisation to lower employees.

Instructions are passed on from senior managers to lower levels of management. In the below figure, there is a short chain of command since there are only four levels of management shown.

‌Advantages of short chain of command

• ‌Faster communication – Communication is quicker and more accurate since it is passed on by fewer people.
• Stronger relationship between high-level managers and employees – This is because there are fewer levels between managers and employees.
• Each manager is responsible for more employees – This encourages them to delegate more work to employees.
• Top managers are less remote from lower employees, so employees will be more motivated and top managers can always stay in touch with the employees

‌Span of Control

• ‌The number of employees working directly under a manager is span of control.
• The number of people you are directly responsible for.

‌Levels of Hierarchy

‌Levels of Hierarchy simply mean the Number of layers in an organisation structure

‌The role of management

‌The Role of managers in a an organisation is to:

• Plan
• Organise
• Coordinate
• Command
• Control
• Delegate

‌Plan

• Set goals for the future of the organisation.
• Give the business a sense of direction and purpose
• setting aims and targets for the organisations/deportment
• Plan for resources required to achieve these targets
• the number of people required
• the finance needed

Organise

• Organise the resources.
• Allocate responsibilities to employees
• Managers need to organise people

‌Coordinate

• Managers need to bring people together in a business for it to succeed. This is called co-ordination. If different functional departments do not co-ordinate, they could be doing completely different things which does not follow any common plan.
• Managers could co-ordinate the departments by holding regular meetings or setting up a project team with different members from different departments.

Command

• Commanding refers to guiding and leading employees which is very important in any organisation.
• Managers need to make sure that all subordinates are following targets and deadlines.
• It is the responsibility of the manager to ensure that all tasks are completed and therefore instruction and guidance must be provided to employees so that they can complete the tasks.
• Supervise, coach and support their employees

‌Control

• Evaluating the performance of employees, so that corrective action can be carried out if the employees are not sticking to goals.
• Monitoring performance to ensure that objectives are met
• If employees fails to achieve their target, the manager must see why it has occurred and what he can do to correct it

Delegate

• Passing down authority and responsibility to employees.
• Delegation refers to giving a employee the responsibility and authority to do a given task. However, the final responsibility still lies with the person who delegated the job to the employee.
• Managers cannot do all work by themselves so they will need to delegate
• Employees may feel more important and feel trusted

‌Each of these examples are explained in my lesson, you can watch it here:

Leadership styles

‌Leaderships styles refer to the different approaches used when dealing with people when in a position of authority. There are mainly three styles you need to learn:
Autocratic
Democratic
Laissez-Faire – “let it be”

‌Autocratic

• ‌Leader is in charge and gives orders to employees
• Makes decision alone
• Everything depends on the leader
• May de-motivate employees
• May be an advantage for some businesses where decision needs to be made quickly
• This is standard in police and armed forces organisations.

‌Democratic

• ‌Other employees involved in decision making
• Communication between managers and employees
• Future plans are discussed with other employees
• Motivates employees because they are involved in making decisions.
• Sharing of ideas within the business.
• Can delay decision making

Information about future plans are openly communicated and discussed with employees and a final decision is made by the manager.

‌Laissez-faire French for ‘leave to do’

‌style makes the broad objectives of the business known to employees and leaves them to do their own decision-making and organize tasks. Communication is rather difficult since a clear direction is not given. The manger has a very limited role to play.

• Can be useful when creative ideas are needed
• Highly motivational for employees as they control their own working life
• Poor coordination and decision making
• Relies on good team work

‌Trade unions

‌Group of workers who have joined together to ensure their interest are protected.

They negotiate with the employer or organisation for better conditions and treatment.

Can threaten to take industrial action if their requests are denied.

• Industrial action can include overtime ban – refusing to work overtime
• Work at the slowest speed as is required by the employment contract
• Strike – refusing to work at all and protest instead

Trade unions can also seek to put forward their views to the media and influence government decisions relating to employment.

‌Why join Trade unions?

• ‌Improved conditions of employment
• Improved work environment
• Improved benefits – for workers who are not working, because they’re sick, retired or made redundant
• Improved job satisfaction
• Advice/financial support
• strength in number- a sense of belonging and unity
• Union can accompany you in important investigation against you within the organisation

Down sides to joining the trade union

• costs money to be member- a membership fee will be required
• You may be asked to take industrial action even if you don’t agree with the union- you may not get paid during a strike.

You can watch this lesson to understand this topic better if reading is not something you enjoy.

As always I recommend you take past exam papers as many times as possible. Take the online tests I have prepared for you too! As they will help you remember the key points.

I have prepare this test to help you remember key points of this topic.

Remember to take this test as many times as you can so that you fully understand this topic.

Do as many past exam papers as possible to get yourself ready for the exam.

2.1.1 The importance of a well-motivated workforce:

• Why people work and what motivation means
• The benefits of a well-motivated workforce: labour productivity, reduced absenteeism and labour turnover
• The concept of human needs, e.g. Maslow’s hierarchy
• Key motivational theories: Taylor and Herzberg

2.1.2 Methods of motivation:

• Financial rewards, e.g. wage, salary, bonus, commission and profit sharing
• Non-financial methods, e.g. job enrichment, job rotation, teamworking, training, opportunities for promotion
• Recommend and justify appropriate method(s) of motivation in given circumstances

‌Why people work and what is motivation

‌People work to earn money and fulfil their basic necessities and wants.
To buy that car, house, clothes or holiday they want! This is why people work.

‌Motivation is getting someone to do what you want them to do, that is something they want to do and take pride in. getting someone to work to their best capacity and getting the best out of them.

Motivation is the reason why employees want to work hard and work effectively for the business.

Note: Money is always the main motivator.

Other factors that may motivate a person to choose to do a particular job may include: social needs, esteem needs – to feel important, worthwhile, job satisfaction – to enjoy good work, Job security – knowing that your job and pay are secure- that you will not lose your job

‌Benefits of a well-motivated workforce

‌When workers are well-motivated they become highly productive and effective in their work and thus increases the firm’s efficiency and output, leading to higher profits.

When workers are motivated they work to their best ability and enjoy their work environment. They get the job done.

For example, in the service sector, if the employee is unhappy at his work, he may act lazy and rude to customers, leading to low customer satisfaction, more complaints and ultimately a bad reputation and low profits.

‌Benefits of a well-motivated workforce

‌When staff are motivated in an organisation there is high possibility of reduced absenteeism – people enjoy coming to work and do not try to avoid it.

Low Staff turnover –low compared to organisation where staff are not motivated. At the end of the day no one wants to work where they are board and there is no pride in the job they do. Better labour turnover

I have prepared this lesson please watch as it will certainly help you out.

‌Motivation Theorist and Their Theories

‌F. W. Taylor
Maslow
Herzberg

These are the three well known motivation theorists.

‌F. W. Taylor

‌Taylor based his ideas on the assumption that workers were motivated by personal gains, mainly money so increasing pay would increase productivity (amount of output produced).

He proposed the piece-rate system, whereby workers get paid for the number of output they produce. So in order, to gain more money, workers would produce more.

‌Maslow

‌Abraham Maslow’s hierarchy of needs shows that employees are motivated by each level of the hierarchy going from bottom to top.
Mangers can identify which level their workers are on and then take the necessary action to advance them onto the next level.

‌One limitation of this theory is that it doesn’t apply to every worker. For some employees, for example, social needs aren’t important but they would be motivated by recognition and appreciation for their work from seniors.

‌Herzberg

‌Frederick Herzberg’s two-factor theory, states that people have two sets of needs- one basic needs called ‘hygiene factors’, the other needs that allow the human being to grow psychologically, called the ‘motivators’.

‌According to Herzberg, the hygiene factors need to be satisfied, if not they will act as de-motivators to the workers. However hygiene factors don’t act as motivators as their effect quickly wear off. Motivators will truly motivate workers to work more effectively.

I have covered this topic in the video below, if you would rather listen than read please watch.

‌Motivating Factors Financial

‌Wages: often paid weekly or monthly.

Can be calculated in two ways:

Time-Rate: pay based on the number of hours worked. No guarantee that workers will work sincerely to produce more outputs- they may simply waste time on very few output since their pay is based only on how long they work. The productive and unproductive worker will get paid the same amount of money, irrespective of their output.

Piece-Rate: pay based on the number of output produced. This doesn’t ensure that quality output produced is high. Efficient workers may feel demotivated as they’re getting the same pay as inefficient workers, despite their efficiency.

Salary: paid monthly or annually.

Commission: paid to salesperson, based on a percentage of sales they’ve made. The higher the sales, the more the pay. Although this will encourage salespersons to sell more products and increase profits, it can be very stressful for them because no sales made means no pay at all.

‌Bonus: additional amount paid to workers for good work or high productivity

Performance-related pay: paid based on performance. Looking at KPI’s to measure performance and a pay is given based on this.

Profit-sharing : a scheme whereby a proportion of the company’s profits is distributed to workers. Workers will be motivated to work better so that a higher profit is made. So they can have a share of it.

Shared ownership: shares in the firm are given to employees so that they can become part owners of the company. This will increase employees’ loyalty to the company, as they feel a sense of belongingness. Knowing you own part of the company you tend to put more effort into your work. resulting in motivated staff and increased profit.

‌Motivating Factors ‌Non-Financial

‌Company vehicle/car
Free healthcare
Children’s education fees paid for
Free accommodation
Free holidays/trips
Discounts on the firm’s products

‌Job Satisfaction- could be promotional opportunities, team involvement, relationship with superiors, level of responsibility, chances for training, the working hours, status of the job, Responsibility, recognition and satisfaction.

Job Rotation: involves workers swapping around jobs and doing each specific task for only a limited time and then changing round again.

Job Enlargement: where extra tasks of similar level of work are added to a worker’s job description.

Job Enrichment: involves adding tasks that require more skill and responsibility to a job.

Team-working: a group of workers given responsibility for a particular process, product or development.

I have put this test together to help you get good understanding of the topic so please take the test as many times as you can to ensure you have understood this chapter.

If you get any of the questions wrong do not worry, keep taking the test and go through the lesson again and again until you are confident.

Also make sure you take as many past exam papers as possible to help you get used to the exam environment and exam questions.

1.5.1 Businesses can have several objectives and the importance of them can change:

• Need for business objectives and the importance of them
• Different business objectives, e.g. survival, growth, profit and market share
• Objectives of social enterprises

Business objectives are the specific, measurable goals a company sets to guide its operations and measure success. They provide direction, focus, and a framework for decision-making within an organization.

The importance of business objectives lies in:

Clarity and Direction: Objectives define where the company is headed and what it aims to achieve, aligning everyone toward common goals.

Decision-Making: They guide resource allocation, helping prioritize initiatives, investments, and strategies.

Performance Evaluation: Objectives provide benchmarks for measuring success, allowing for assessment and improvement.

Motivation and Alignment: Clear objectives motivate employees by giving them a sense of purpose and direction. When everyone works toward the same goals, it fosters cohesion and teamwork.

Adaptability: Objectives allow for agility in responding to changing market conditions, helping businesses stay focused while adjusting strategies.

In essence, business objectives are vital for defining a company’s purpose, setting targets for growth, guiding actions, and evaluating progress toward achieving its vision. They serve as a roadmap for sustainable success and effective decision-making.

Business objectives vary based on priorities and strategies. Survival objectives focus on short-term viability, ensuring the company’s continuity amid challenges by managing costs, cash flow, and market presence.

Growth objectives emphasise expanding operations, market reach, or product lines, aiming for increased revenue, customer base, or geographical expansion.

Profit objectives prioritise financial gains, optimising revenue and reducing costs to maximise profitability.

Market share objectives concentrate on capturing a larger portion of the market, often through aggressive marketing, competitive pricing, or product differentiation.

Each objective carries its significance: survival ensures stability, growth drives expansion, profit ensures financial health, and market share establishes competitiveness.

Businesses often balance these objectives to maintain stability while pursuing long-term success, aligning strategies with their stage of development and market conditions. The mix of objectives may shift over time as businesses evolve and adapt to changing environments.

Social enterprises aim to achieve both social and financial goals. Their objectives revolve around creating positive social impact while maintaining financial sustainability.

These enterprises focus on addressing social or environmental issues, such as poverty alleviation, healthcare accessibility, education improvement, or environmental conservation.

Their goals include delivering tangible benefits to communities or specific groups, fostering social innovation, promoting ethical practices, and often reinvesting profits into their social mission. Balancing financial viability with societal impact, they strive to create lasting and meaningful change while operating as self-sustaining businesses.

I have prepared this lesson. I think you will love it.

1.5.2 The role of stakeholder groups involved in business activity:

• Main internal and external stakeholder groups
• Objectives of different stakeholder groups
• How these objectives might conflict with each other, use examples

Stakeholders are individuals or groups with an interest or “stake” in a company’s operations, success, or outcomes. They can be categorized into internal and external groups:

Internal Stakeholders:

Employees: They’re vital internal stakeholders, contributing directly to a company’s operations, success, and culture.

Management and Board Members: Executives, managers, and board members hold significant influence in decision-making and shaping the company’s direction.

Shareholders/Owners: Individuals or entities holding shares in the company have a financial stake and influence through voting rights.

Workers’ Unions or Associations: Representing employees’ interests, they negotiate terms, working conditions, and policies affecting the workforce.

External Stakeholders:

Customers/Clients: They drive revenue and demand, influencing product/service offerings and market perceptions.

Suppliers: External partners providing goods or services crucial to operations and product/service quality.

Investors/Financial Institutions: Individuals or organizations investing capital or providing financial support impact a company’s financial health.

Government and Regulatory Bodies: Enforcing regulations, setting policies, and providing permits or licenses affecting business operations.

Community and Society: Local communities or broader society affected by a company’s actions, impacting reputation and social responsibility.

NGOs/Advocacy Groups: Organizations advocating for specific causes or issues may influence a company’s practices or reputation.

Understanding and managing the needs, expectations, and interests of these stakeholder groups are crucial for a company’s success, reputation, and sustainability. Each group holds varying degrees of influence and impact on the company’s decisions and operations.

Business objectives can conflict due to differing priorities and resources allocation. For instance:

Profit vs. Social Impact: Maximizing profit might involve cost-cutting measures that conflict with social impact goals requiring investment in community or sustainability initiatives.

Growth vs. Stability: Pursuing rapid growth might strain resources, conflicting with stability objectives that prioritize maintaining a secure financial position.

Customer Satisfaction vs. Cost Reduction: Maintaining high customer satisfaction often requires investment in quality and service, conflicting with cost-cutting measures that might compromise service levels.

Employee Welfare vs. Cost Efficiency: Prioritizing employee welfare might involve higher labour costs, conflicting with cost-efficiency goals that aim to streamline operations.

This lesson covers this topic in great detail.

1.5.3 Differences in the objectives of private sector and public sector enterprises

Private sector enterprises aim primarily for profit maximisation and shareholder value. Their objectives focus on generating revenue, increasing market share, and maximising profitability to satisfy shareholders’ interests. Efficiency, innovation, and competitiveness are key goals to gain a competitive edge in the market.

In contrast, public sector enterprises prioritise public service, societal welfare, and fulfilling government mandates. Their objectives revolve around providing essential services, addressing societal needs, and ensuring equitable access to services or utilities.

They emphasise public interest, social responsibility, and delivering quality services over profit. Efficiency and cost-effectiveness are important but not the sole driving factors, as their primary aim is to serve the public good.

While private sector enterprises operate in a competitive market, striving for financial gains, public sector enterprises operate in a regulated environment, often with a focus on equitable service delivery and meeting the needs of citizens.

The objectives of these sectors align differently due to their distinct purposes and stakeholders.

Here I have prepared a test to help you remember the key points of this topic 1.4 Types of business organisation:

Remember take this test many times to ensure that you have fully understood it.

As always make sure you take all the tests and practices I have prepared for you on this website as they will help you get high grades.

Download and practice on as many past exam papers as you can because they will really help you out on the actual exam.

1.4.1 The main features of different forms of business organisation:

• Sole traders, partnerships, private and public limited companies, franchises and joint ventures
• Differences between unincorporated businesses and limited companies
• Concepts of risk, ownership and limited liability
• Recommend and justify a suitable form of business organisation to owners/management in a given situation
• Business organisations in the public sector, e.g. public corporations

Sole Traders: Individuals running businesses alone, having full control and responsibility for profits and liabilities, often found in small enterprises.

Advantages:

Full Control: Sole traders have complete autonomy over decision-making and business operations.
Simplicity: Minimal regulatory requirements and straightforward tax filings.

Disadvantages:

Unlimited Liability: Personal assets are at risk as there’s no legal separation between business and owner.
Limited Resources: Sole traders may face limitations in raising capital or resources compared to larger entities.

I have explained this topic in the below lesson, you will find it very useful.

Partnerships: Business structures involving two or more individuals sharing responsibilities, profits, and liabilities, typically with shared decision-making and legal obligations.

Advantages:

1. Shared Responsibility: Partnerships distribute workload and resources among multiple individuals.
2. Diverse Skills: Partners bring varied expertise and perspectives, enriching business strategies.

Disadvantages:

1. Shared Liability: Each partner’s actions can impact others’ finances, as all share unlimited liability.
2. Potential Conflicts: Disagreements among partners can arise, affecting decision-making and relationships.

Private Limited Companies: Entities with limited liability, owned privately by shareholders, limiting shares trade and often catering to smaller operations.

Advantages:

1. Limited Liability: Shareholders’ personal assets are protected from business debts.
2. Capital Raising: Easier access to capital through shares without the complexity of public listings.

Disadvantages:

1. Compliance Demands: More regulatory requirements and administrative burdens compared to sole traders or partnerships.
2. Limited Growth: Restrictions on share trading can limit avenues for expansion or investment.

Public Limited Companies: Companies with publicly traded shares, allowing for raising capital from the public, subject to stringent regulations and broader ownership.

Advantages:

1. Access to Capital Markets: Ability to raise substantial funds from the public by selling shares.
2. Growth Potential: Broader ownership can attract larger investments for expansion.

Disadvantages:

1. Regulatory Stringency: Stringent regulations and reporting requirements from regulatory bodies.
2. Shareholder Pressure: Subject to shareholder demands and expectations, impacting decision-making.

Franchises: Businesses operating under a parent company’s brand and business model, paying royalties, receiving support, and adhering to set standards.

Joint Ventures: Collaborative partnerships between two or more entities to pursue a specific project or venture, sharing risks, resources, and profits temporarily.

Advantages:

1. Shared Resources: Pooling of expertise, resources, and risk-sharing between partners.
2. Flexibility: Temporary partnerships allow for specific project focus without long-term commitments.

Disadvantages:

1. Conflict Potential: Differences in goals or strategies among partners may lead to disputes.
2. Shared Risk: Each party shares the risks, potentially impacting individual entities.

You will find the below lesson very useful.

Unincorporated businesses, like sole traders or partnerships, lack a separate legal status from their owners and offer no limited liability. Owners are personally liable for debts.

Limited companies, distinct legal entities, provide limited liability to shareholders. They face more regulations, file separate taxes, and require formalities.

Shareholders’ liability is usually confined to their investment. Unincorporated businesses offer more direct control but entail personal risk, while limited companies shield personal assets but have more formalities and governance. Choosing between them involves weighing liability protection, taxation, continuity, and governance preferences.

Risk involves the uncertainty of potential losses or adverse outcomes in business. Ownership signifies control and possession of assets or entities. Limited liability is a legal principle in certain business structures, like limited companies, safeguarding owners’ personal assets from business debts or liabilities. It restricts shareholders’ financial risk to their investment, shielding personal belongings in case of business failure.

I have prepared this test to help you understand topic 1.3 Enterprise, business growth and size

Take the test as many times as you can before your exam to make sure that you understand the key point of this topic.

Remember that practice makes perfect. Keep practicing and you will get high grades.

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