Franchises
A franchise is the right given by a business to someone who has bought part of it to use its name when selling his or her product. A franchisee is the business, which buys the right to sell the other company’s product or service. The advantages of being a franchisee is that they have a recognised product, which almost guarantees immediate success. The franchisee gets support from the franchisor with problems such as quality control or tax problems. The franchisee gets a share of the profits, which he or she makes from the business. There is also a reduced risk of failure as the product or service has been tried and branded a success already. The disadvantages of being a franchisee are that they do not have complete control. They cannot make decisions without the permission of the franchisor. Not all the profits are retained by the franchisee. A percentage of the profits must be given back to the franchisor. The franchisor can also end the franchise without giving a reason. A franchisor is the business, which sells its product or service to a franchisee in return of a share of the profits. The advantages of being a franchisor are that the business can expand without having to pay out any money. They receive the money for the expansion. The franchisees are motivated to gain the largest profit possible, which means the franchisor has a greater payment in return. The franchisor still has some control over the franchisee because if the franchisor decides to sell the franchise, he or she can do so without a reason. The disadvantages of being a franchisor are they cannot have complete control as it is expanding externally. The franchisor does not retain all the profits for this reason. An example of franchise is McDonalds.
Sony Corporation is a public limited company. This means it sells shares to the general public on the Stock Exchange. It has a separate legal existence as it can sue and be sued. it has limited liability. This means that there is finance available to the business because it sells shares on the Stock Exchange. The business can also raise capital through venture capitalists, selling assets and large loans, for example. They benefit from economies of scale because they buy in bulk. It may be inefficient because of its size. It is difficult to make decisions, as the shareholders have to be consulted. Communications are slow because of the size. The business is under the public eye that means it has to produce annul reports, which are seen by the public.
Local, regional, national and international markets.
Local markets are where a business is set up to receive custom from people living nearby. These are usually small business such as sole traders.
Regional markets are where a business operates to targets consumers within a large area within a country such as a county. These businesses are usually relatively small but have more than one branch, such as a partnership.
National markets are those which are found throughout the country. These businesses are medium to large businesses such as limited company.
International markets are ones, which are throughout a continent or the whole world. They are large businesses such as franchises.
Sony Corporation is a business in the international market because there are offices throughout the world and their products are sold all over the world. Sony has offices all over Europe (UK, Austria and Germany for example), the USA, Japan, Asia-Pacific, Middle-East and Africa and Latin America.
Change of ownership
Some businesses may decide to change ownership for one or more of the following reasons:
- Limited liability- If the business has unlimited liability, the owner risks loosing personal possessions when in debt. The business may decide to change ownership to have limited liability so the owner(s) do not risk loosing personal possessions or assets. They will only be limited to the amount of shares they have in the business. The benefits of having limited liability are that the owner(s) is only liable to loose the amount they put into the business. They do not risk loosing personal possessions. There are no disadvantages to limited liability.
- Assess to different sources of finance- Small businesses such as sole traders, are limited when choosing sources of finance. They can loan money from family or friends. They can apply for a grant from the government. They could get a loan from the bank or building society. It may also take out a mortgage. Larger businesses have wider sources of finance available. They can sell shares to family, friends and employees. If they are a public limited company, they can also sell shares on the stock market to the general public. They may get a loan from banks and building societies as well as venture capitalists, such as HSBC. It could sell assets. For example, Kunick Ltd could sell Leisure Connections Ltd to another company. The advantages of having different sources of finance are that they have a wider choice. They can decide which suits the business best. They can also raise more money. The disadvantages of having different sources of finance are s
- Control- As a business grows, control is lost. If a business is a sole trader, there is only one owner, who has complete control. If it grows to a partnership, the control is shared between up to twenty people. If a business becomes limited, the control is shared between all shareholders. In a franchise the control is shared between the franchisee, franchiser and shareholders. When a business takes out a loan from a bank for example, the bank will also be considered to own part of the business. So, as a business grows, control is lost. The advantage of being a small business is that the owner has more control. Larger businesses have a disadvantage of being so large control is lost.
- Use of profits- The profits made by the business can be used to help the business expand. The money can be reinvested by the business to expand into new market. For example, Asda originally sold groceries only. It then used the profits to expand into the clothing market to help to increase profits further. The advantage of using profits is that the business does not have to look for alternate sources of finance. The disadvantages of using profits are that sufficient profits must be made in order to be used in a profitable way.
- Legal liabilities- If a business grows in size, it usually involves more paperwork. For example partnerships have to compile a deed of partnership and limited companies have to produce annual reports. The advantages of having legal liabilities are that if the partners have a dispute, the agreements made are laid out in the deed of partnership so the dispute can easily be resolved. The disadvantages of having legal liabilities are that the business will be tied to being viewed by the public, if a public limited company.
Sony Corporation is a public limited company because it benefits from limited liability so shareholders are only liable to lose the amount they put into the business. Because Sony is a limited company, it can sell shares to the general public on the stock exchange and therefore raise more capital. Sony uses some of the profits made to expand. However, often the profits made by the business are not enough to fund ventures so Sony will have to look elsewhere. The reasons that Sony may regret being such a large business are that in large businesses, control is lost and also there are often more legal liabilities.
Business objectives and cultures
Identifying and explain against objectives
All businesses have objectives, which help them to govern the way they operate. The objectives of a business vary according the size of the business. Examples of objectives, which businesses may have, are:
Make a profit- Having an increased sales revenue compared with costs.
Increase market share- A business having increasingly larger sales in their chosen market compared with the other businesses in the same market.
Increase sales- Increase the amount of goods sold.
Survive- For a business to break-even.
Provide a service to the community- This could be through sponsorship for local events for example.
Fulfilling non charitable objectives e.g. caring for the environment
Developing a skilled workforce- This involves putting money into the employees to train them to encourage them to stay loyal.
Producing high quality products/services- this involves continually checking the standard of the product or service. This could involve creating new products or services, which they could offer.
Sony has the following objectives:
To increase profits- this year, Sony Cellular Services, a business within Sony is unprofitable but it is expected to reach profitability next year.
To increase sales turnover. In order to do this they must increase sales.
To increase sales. This then helps to meet the objective to increase profitability.
To increase market share. By increasing market share, they can increase their sales.
Produce a high quality service. By producing a high quality service, they will retain customers more easily and therefore maintain a base level of customers.
Expand the product range. They are extending the business to provide not only a voice service but a data service.
Attitudes, values and beliefs that make up a business
Businesses have cultures, which affect the running of the business. This includes attitudes, values and beliefs.
An attitude is the way you feel or act towards someone or something. This involves Sony by their attitude towards customers, staff and the environment.
A value is something of importance or that is useful. To Sony, would be the consumer’s opinion or the opinions of staff.
A belief is a feeling of certainty that something is true. This could be the businesses view on issues such as racism.
Sony has a positive outlook. They always try to focus on how they can achieve or create something and not why you cannot do it. They believe that success is only achieved by those who find the solution. The employees attitude is that “it can be done”. To Sony, there are many opportunities to retain current customers and acquire new customers. They deal wit each opportunity to the best of their ability. The management provides targets each month for week individual and the team to work together as a whole, encouraging a positive atmosphere. They value that the business needs constant improvement.
How culture affects objectives and structure
There are many economic influences, which contribute to Sony’s culture. If the economy in the UK is bad, most businesses will be affected if they are a public limited company. As the economy is bad, people are unlikely to buy shares as they see it as a risky investment. Because Sony are public limited company, when the economy is bad, less people are likely to buy shares as they see the business as a risky investment. This in turn affects Sony because it means they have less capital available to them.
This graph shows the stock performance of Sony
There are social influences, which contribute to Sony. For example,
There are many environmental influences over a business. Environmental groups like businesses to stop any activity, which may be harming the environment in any way. This could cause conflict between the business and the environmental groups. This may mean the business having to compromise with the environmental group by only producing at certain times of day, for example. It is important that while the business aims to maximise profits, it must also consider the environment when getting rid of waste. This can be done by recycling products such as paper and plastic rather than disposing of in an un-environmentally friendly way. Currently, Leisure connections Ltd has a bike compound outside the various leisure centres, which encourages consumers and employees to cycle to the leisure centre rather than walk. They also have a separate bins in the offices; one for paper which can then be recycled and one for rubbish which will be disposed of in the normal way.
There are ethical influences, which may affect the business. One ethical influence would be employment policies. They ensure that they pay all workers doing the same job the same rate of pay. The do not pay according to age as they see this as ethically wrong. They also have peak rates to use the swimming pool at various leisure centres because they feel that it is unfair to charge higher prices at times when the pool is not in demand.
Culture effects a businesses objectives and structure. Culture affects objectives because as well as wanting the business to gain maximum profits, it also aims to help the environment. This may mean the profits of the business will not be as high as they could be because more money may be spent on going out of their way to help the environment. This may hinder the success of the business because they have to spend some of the profits on helping the environment. It also helps because consumers may prefer to go there as they see them as charitable. Culture affects structure because the businesses attitude to workers affects it management style. For example, Leisure Connections Ltd’s have a laissez-faire leadership. This means that operatives are given freedom to make their own decisions and use their initiative. However, if they fail to sort out the situation, they can go to their line manager for advice and help. There is fast throughout the business because of this and so this helps the business to run more efficiently.
Measuring performance against objectives
You can measure the businesses performance by looking at the objectives of a business and how well these objectives have been met. A business can measure performance by using quantitative and qualitative. Quantitative is relating to the size or amount of something. This includes the profit the business makes.
This shows that Kunick did continue to make a profit. However, it shows that Kunick did not continue to increase profits as a plc. This may be one of the reasons for changing back to a private limited company. As the public cannot see the financial state of the business, the will not be able to see any difficulties the business is having and so this will not effect the consumer. Previous, consumers may have turned else where for custom because of this.
Qualitative relates to the quality of something. This is done by checking the quality of the televisions, playstations and stereo systems for example and checking the quality of the after-sales service. The quality of the service provided is checked by customer questionnaires and the customer’s opinion on the service they are being provided with. The quality of the electronic products produced by Sony is measured monthly quality checks on random products. The number of complaints shows how well the products are made.
Factors of production
There are four factors of production; land, labour, capital and enterprise. To produce products and services, you need these four factors. Land is the sites which the business is located and all the natural resources it uses, such as gas, oil, coal and water. Sony has offices all over Europe and the world, making it an international company. It also has land for the factories where they produce the products such as televisions and playstations.Labour is the workforce used by the business to help it run efficiently. For Sony, this is 6000 people in the UK and 180,000 all over the world. They are involved in different functions of the business including Manufacturing and Sales and Marketing. Capital is anything of value to the business, including machinery, buildings and cash owned by the business. For Sony this is the buildings, retained profits and equipment used by the business such as computers. Enterprise the idea to form a business is a certain industry and have the initiative to follow through this idea. Sony was formed in 1946 by Masaru Ibuka and Akio Morita, who came up with the idea and invested capital into it. They employed 20 people and attempted to build their own products. It started with capital of 190,000 Yen, which in pounds sterling is about £1000.
Combining the factors of Sony Corporation
Combining the four factors of production (land, labour, capital and enterprise) leads to businesses being divided into functions. The major functions of a business include:
Marketing- The marketing department deals with market research, retailers and distribution, customer service and promotional activities.
Human Resources- Also known as the Personnel Department, the Human Resources department is involved with recruitment, market share, liability, organisational structure, type of ownership, wages and salaries, motivating workers and industrial relations.
Finance- The finance department:
Record all financial activities undertaken by the business,
List the businesses revenue,
Monitor the expenditure of each department of the business
Interpret financial data to help with decision making,
Provides financial data for external bodies e.g. Inland Revenue.
Analyse costs incurred by the business to help businesses forecast production costs.
Production- The production department covers all activities that must be undertaken to make the businesses products form the buying of raw materials to the output of the final product.
Administration- The Administration department holds important information about the organisation, security and maintenance, public relations and support services.
Research & Development- This department undertakes scientific research into how products can be developed and what is needed to fill gaps in the market for example.
Sony has different departments to these because not all are relevant to the products and services, which Sony provides. For example, Sony The following are functions in Sony:
Operations
Sales
Marketing
Finance
Activities and characteristics of each department
Sony is divided into many departments, which helps the business to function efficiently. In Sony , there are the following functions:
- Sales
- Marketing
- Operations
- Finance
The function of the Sales Department in Sony is to sell to the customers. It records the sales made by the business to ensure the objective of to increase sales is met. It looks into the consumer market to find gaps and target parts of the market where they lack customers. This helps to find new customers, which they previously did not have. They also look after the current customers through after-sales services.
The Marketing Department’s function in Sony is to develop campaigns to promote the business and target new markets. This helps to increase customers and so increase sales. This then leads to an increased market share, another objective that Sony aims to meet.
The Operations department in Sony is extremely important because
runs a call centre for customer care. The call centre takes orders, process orders and distribute them to the customer. They also deal with the payment for these purchased goods and deal with the cash collection.
The Finance Department in Sony acts as most Finance Department do. It monitors the monthly expenditure of each department and ensures that each department stays within its monthly budget. It produces profit and loss accounts each month so Sony can see how much was spent in comparison to how much profit was made.
Connections between functions
Each department contributes to the running of the business. By communications with other departments, it ensures that people are not doing work, which overlaps. It means that more time can be spent meeting its targets and developing the business. Because of this, all departments communicate as this allows the business to do well as a whole. This is constantly monitored along with each department’s progress. The forms used to communicate are email, communications meetings once a week, general talk in the office environment and telephone (the use of mobile phones is extremely important for those who are not based in the office.
Business structures
Many organisations are structured in a pyramid structure with many layers known as hierarchy. A basic structure is shown below.
However different businesses structure themselves differently because this makes them more efficient in the running of the business. The factors effecting organisational structure are the number of employees, the type of premises used and the type of business.
Larger businesses such as public limited companies and private limited companies however find it difficult to be efficient because of the size. This is why they usually have more layers and are defined into functions as this allows the business to run much more efficiently. An example is shown below:
This again is adapted to suit the individual business. The higher up the pyramid you are an employee, the more authority you have. Important decisions need to be made those with more authority so decisions must be taken to the relevant person. This however takes time and so decision making in large organisations is slow. Also, putting decisions into practice is slow because there is such a long chain of command in large organisational structures.
Hierarchal structures are not always tall. In smaller businesses, such as sole traders and partnerships, the business has a flat hierarchal structure. An example is shown below:
Flatter hierarchal structures have fewer layers because there are fewer employees. This is an advantage because it means the business is more efficient. Decisions can be made and put into practice quickly because there is a shorter chain of command. This makes communications much easier compared with tall hierarchal structures. This also means employees lower down the organisation have more responsibility through delegation and this helps to keep them motivated.
There is also the matrix structure. This is more commonly used by a projected-based organisation. Firms which are planning to launch a new product or involved in large "one off" contracts may develop their organisation structure around these and have two separate structures: one of the main bulk of the business and one for the employees involved in the new launch or the "one off" contract.
The matrix structure is useful to manage projects and encourages employees to be flexible. It does however make the chains of authority and responsibly unclear.
This is the organisational structure of Sony. It is a tall hierarchal structure because it has so many employees and this helps to keep the business running efficiently. Businesses can also be structured by centralisation and decentralisation. Centralised organisations are those where individual branches and offices have to report to before they can make decisions. There is little delegation. Decentralised organisations are businesses where there is a lot of delegation. Decisions are made without the need to go to the head office. This is important as it motivates employees.
Influences on organisational structures
It is important that managers assess how well the structure of the business enables them to meet overall objectives. Many problems within businesses are caused by poor structures:
- Bad structures may cause low morale within a business because there is less clarity of the personal job.
- Poor co-ordination is present, as there is less clarity of the responsibility held by each individual. This then affects the way the employees work as a team.
- There may be a poor response to new business opportunities and changes in the market place if there is bad communication between departments.
- There are high costs in large businesses. If the business is structured badly, there may be managers employed who are unneeded and this wastes money.
There are also many other reasons for the change in organisational structure:
- Management style changes may mean a change in organisation structure because if more responsibility is given the employees, there is less need for more layers in the hierarchical structure.
- Customer requirements affect structure because the business has to change with the customer requirements to maintain a competitive advantage.
- Population changes affect an organisation structure because it may limit activities in certain markets if there is not a demand for it.
- Information technology is a major affect on businesses structure. It changes the nature of business operations and helps make decisions more effective. It causes organisations to become flatter with fewer levels because the information technology takes the place of positions, which were originally occupied by employees.
A business is structured in a particular way to suit the market it is in and how big the organisation is. The bigger the organisation, the more employees there are. This means that the structure needs to be larger to accommodate all the employees. And the more employee the less efficient the business is so there more layers needed.
Sony has a tall structure because it is a large organisation and has over 17000 employees so it is important that the business is as efficient as possible. Sony can do this by having many layers to each employee is given a restricted role within the business. If the business was to decrease in size and so make some employees redundant, the business could remain efficient by de-layering. This means reducing the number of layers present in the business.
Management styles
There are different styles of management, which are used by different businesses. There are four main types: autocratic, democratic, consultative and laissez faire.
Autocratic is where the management take full responsibility for everything and decisions are made only by them. There is little delegation and the employees with no authority are expected to put any decision made into practice. Businesses which use an autocratic management styles shows that the business has little believe in the employees and do not trust them to make important decisions. This gives the employees little motivation.
Democratic is where management delegate some authority to other employees and allow them to make the decision themselves. The management still have overall control but other employees are given some responsibility. This style of management gives the employees some motivation as it shows that they have some faith in the employees.
Consultative management is when the management delegate some responsibility to other employees. However, once the employees give their opinion, the management will make the final decision based upon the opinion of the other employees. This management style gives the employees some motivation as it shows that the management value the employees opinion but they may feel they do not trust them enough to make a decision without agreement with the management.
Laissez faire is where the employees are given full responsibility by the management. They delegate all authority to them because they believe the team are capable of making the decisions themselves. The management then concentrates on co-ordinating the team’s activities and in communication. This method of management shows that the management have faith in employees and trust them completely. This helps motivate employees and make them feel valued as an employee.
Sony use the management style of
Affects on performance and meeting objectives
Organisational structure affects how well a business performs. If Sony is badly structured, the business will not function properly. It is important employees know their position in the company and who to report to in the chain of command. If not, the businesses performance will suffer and it will not meet all its set objectives. However if Sony is well structured to suit its size and function, the employees will work well as a team and so are more likely to meet objectives.
Culture affects how the business performs because if a business believes there employees are important and trust them to make decisions, they will use a management style such as consultative and laissez faire. This will motivate employees to perform to the best of their ability and the business will work well as a team and work harder to meet objectives. But, if a business has little confidence in employees and use a management style such as autocratic, the employee will not be motivated to perform well and meet objectives as they fell worthless.
Communication channels
Communications in organisations
Sony communicates in many ways, internally and externally. Internally, there are communications down the chain of command. For example, there are communications from the managers to the supervisors who then communicate with the operatives. There are also communications going up the hierarchical structure. In Sony, the Human Resource department is involved in communications between departments. For example, Human Resources ensures that the Finance and Marketing departments communicate to ensure that the Marketing department don’t go over budget.
Externally, Sony communicates with customers through advertising. It informs the customer of the products and services it offers in an attracting way. Sony could also communicate with the customer through sponsorship. By sponsoring, it gives the customer a positive view of the business. Sony can also send newsletters to customers to communicate to them the events that are taking place in the business.
Sony communicates with competitors through annual reports. Sony can look at the annual reports of competitors such as Panasonic as Panasonic can look at the annual reports of Sony. Looking at reports of other businesses in the same market will help the business to compete for more market share.
Sony communicates with suppliers through
Communication Channels
There are many different communication channels used by businesses:
- Internal and external
- Formal and informal
- Upward and downward
- Open and restricted
Internal communications are communications, which occur within the business. This includes international communications between employees of Sony in the UK and Japan for example. Internal communications also includes the communications, which occur down the chain of command, for example the communications between operatives and supervisors and supervisors and managers. External communications occur between the business and external bodies, including customers, suppliers and other businesses. Sony uses both internal communication and external communication because it is essential that the business communicates internally to ensure the business is run efficiently and successfully. Sony must also communicate externally as the customers need to know what Sony has to offer them. It is also important to communicate with suppliers so the business has the right raw materials to produce enough goods to meet demand but not too much which will lead to unwanted stock left. It must also communicate with other businesses to ensure that they are producing the right type of product and selling at the price, which agrees with the market.
Formal communication is communication, which is done officially between employees. Formal communication involves official reports being written in full detail, often including findings, procedure, conclusions and recommendations. Informal communications are written communications, which involves only the main points of the communications. Sony uses both formal communication and informal communication. Sony uses formal communications when an employee has to write a report to another employee with more responsibility on an large, important issue. For example, an operative would write a formal report to his or her supervisor. Informal communications are used between employees on smaller less important issues. For example, a supervisor may phone human resources to ask for advice on an issue.
Upwards communications is where employees with less authority communicate with those, which have more authority than them. For example, an operative communicating with his or her supervisor. This type of communication is done through face-to-face conversation and telephone. Downwards communication is where employees with more authority communicate with those with less authority, for example, a manager communicating with his or her span of control. This type of communication is done through meetings, formal reports and letters.
