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How Businesses Operate: Key Functions and Theories

Paper Type: Free Essay Subject: Business
Wordcount: 3846 words Published: 13th Sep 2017

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AC. 1.1 Describe the types of organisations found in the public and private sectors in a named country.


A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems–they affect and are affected by their environment.

There are different types of organisation:    

1- Public sector
2- Private sector
3- Voluntary sector

4- cooperative organisations     

Private organizationrefers to any person, partnership, corporation, association or agency which is not a public body that is operated for profit. It can be a self-sustaining, non-federal entity, constituted or established and operating on Federal property, by individuals acting outside any official capacity in the federal Government.

A public sector organizationis one that is operated by the government. This contrasts with private sector organizations, which are controlled by private entities. Public sector organizations often provide services for citizens regardless of the person’s ability to pay. For example, the public school system is open to all children, regardless of their parents’ income. This makes the public schools very different from private schools, for which the child’s parents must pay a fee.

Public Sector


A legal form of business operation between two or more individuals who share management and profits. The federal government recognizes several types of partnerships. The two most common are general and limited partnerships.

Sole Traders

As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them. You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone. You’re personally responsible for any losses your business makes.


An authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities, for example acting as an agent for a company’s products


A Company is a legal entity made up of an association of persons, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise. Company members share a common purpose and unite in order to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals

The Partenership

A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations.

Types of organisations found in the public sector

Public sector’s are owned and run by the government and the money is used to finance most the public sector for example:

NHS (National Health Service) – they give free services to the public such as free health care and medication and this is funded by the Taxpayer.

State Schools – funded by the government for free education from the age of the age of 4 to 16.

Private Sector Organisation

Private organization refers to any person, partnership, corporation, association or agency which is not a public body that is operated for profit. It can be a self-sustaining, non-federal entity, constituted or established and operating on Federal property, by individuals acting outside any official capacity in the federal Government.


The definition of business environment means all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand and business regulations.

An example of a part of a business environment is how well customers expectations are met.

CSR helps business organisation to:

  • 1. Improves Public Image
  • 2. Increases Media Coverage
  • 3. Boosts Employee Engagement

Organisation Types

There are three main types of organizational structure:

  1. Functional: is set up so that each portion of the organization is grouped according to its purpose
  2. Divisional: typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas
  3. Matrix structure: is a hybrid of divisional and functional structure, typically used in large multinational companies, the matrix structure allows for the benefits of functional and divisional structures to exist in one organization

Macroeconomic Influence

Macroeconomic factors are events or situations that affect the economy on a broader level, influencing the economic outcome of large groups of people on a national or regional level.

Some macroeconomic factors include:

  • unemployment
  • savings
  • inflation
  • Investments

Microeconomic Influence

Microeconomics involves factors of resources availability and usage that impact individuals and businesses. As a company operator, understanding the core microeconomic factors affecting your business helps in planning and preparation, as well as long-term business strategy development.

Six microeconomic business factors that affect almost any business are:

  • customers
  • employees
  • competitors
  • media
  • shareholders
  • suppliers.

Task 2 – Business Functions

AC. 2.1 Explain the importance of accounting for business success

Accounting is also called the “language of business.” because it communicates so much of the information that owners, managers and investors need to assess the financial performance of a company. The purpose of accounting is to help stakeholders better business decisions by providing them with financial information. Accounting make use of a financial statements such as Balance Sheet, Income Statement and Cash Flow Statement. These statements help business managers to calculate the ratios such as gross profit, net profit, current, quick, ROE, ROI, inventory turnover and asset turnover ratios.

Data analysis

Part of parcel numbers is the easiest part when all you have to do is open the accounting softwer site. What is the hardest is analyzing, interpreting and communicating information.

Business strategy

Accountants ensure that stakeholders understand the significance of financial information and working with individuals and organizations to help them use financial information to meet business problems.


Planning means managers to choose the company’s objectives with the resources available. The ability of a manager to plan budgets depends developed by accountants.

AC. 5.1 Describe the different functions carried out by the HR department in a business


Recruitment is based on the principles of creating a picture of the vacant workplace with the help of the supervisors, inviting candidates for interviews that later the potential to be elected. It is very important in developing the workforce of the employer.


Safety at work is very important. Due to occupational health and safety law of 1970, employers are obliged to provide a safe working environment for employees.

Employee Relations

HR Employee Relations is discipline that deals with strengthening employer-employee relationship by measuring job satisfaction, employee engagement and conflict resolution in the workplace.

Compensantion and Benefits

Compensation and benefits functions of HR can be manipulated by a human resources specialist double experienced. On the compensation, human resource functions play a role in determining compensation structures and assessment practices competitive wage


Compliance with labor law and employment is a necessary function of HR. Noncompliance can result in complaints in the workplace based on unsafe conditions and general dissatisfaction with working conditions that can affect productivity and ultimately, profitability. HR staff must know federal and state laws.

Training and development

The training and development site helps improve the candidate qualities and skills that contribute to personal development. HR observed deficiencies and prepares individuals for training those qualities that must be developed.

AC. 5.2 Outline key features of employment legislation


The number of the holidays that a person can take it in a year would depend on how many days is he working on a week. In the UK there is a right to 5.6 weeks of paid annual leave capped at 28 days.

Contract of Employment

The contract of employment is done when one party agrees to pay the other for services offered. The contract is usually written one, but could also be verbal, by letter, or implied by other actions. This character became legally binding between the parties

Minimum wage

In the UK, the minimum wage is the hourly rate to be paid to all workers aged over 16 years.
The minimum wage change every October in the UK. As the national wage rate changes in April.

Hours of Work

The maximum hours that can normally a worker can do a week is 48 hours. This law is sometimes called “regulations on working time.” You can choose to work longer by giving up to 48 hours per week. Those who are under 18 can not work more than 8 hours per day or 40 hours per week.

Sick Leave and Pay

In the UK any employee is entitled to paid sick leave. Somehow the employee can ask for medical bills or doctor’s approval if the sick leave exceeds a period of 7 days. The holiday days is built up while an employee is off work sick. Any employee can take their annual leave as long as they are off sick. For example when they do not fit for the sick pay.

Rest Period

It takes a rest of 11 consecutive hours in any period of 24 hours. If the working day is greater than 6 hours the employee must have 20 minutes for the rest. At least one day off each week. Night workers have a limit of 8 hours of work every 24 hours and a right for night workers to receive regular medical assessments.

Task 3 – Accounting Workshop

AC. 3.1 Interpret the information on the profit and loss account


Is the amount of money that a company receives during a given period by selling products or providing services to the customers.

Cost of Sales

It is the total of all costs used to help create a product or service that has been sold. Retailers use this term.

Gross Revenue

It represents the total amount of money a company receives before any expenses. Net income is gross income the value of a company including negative items of income.


Represents money spent or costs incurred if an organization’s efforts to generate income toward the cost of doing business. Costs may take the form of actual cash payments (salaries and wages), a calculated expired portion of an asset or a lump removed from revenue.

Operational Income

Represents net income of a company without having any financial activity or impact fees. This measure highlights of the company’s ability to generate revenues from its operational activities. Formula operating income is as follows: Net sales – Cost of goods sold – Operating expenses = Operating income

Taxes and Interest

“The deduction of interest” is a deduction for taxpayers who pay certain interest. Interest deductions decrease the amount of income subject to tax. The two main types are deductions for home mortgage interest and interest home equity loan, and the interest margin account.

Net Income

Business net income represents revenue less cost of goods sold to a company charges and expenses for an accounting period. Also it is called as the net increase in equity resulting from operations of a company.

Task 4 – Teams

AC. 4.1 Carry out an analysis to determine your and others’ roles within a team. Write up the results of your work

I have done some research and after that I found out that for a team to be successful it needs to have access to each of the 9 Belbin Team Roles. Most people have two or three team roles with which they feel comfortable. They are Resource Investigator, Teamworker, Co-ordinator, Plant, Monitor Evaluator, Specialist, Shaper, Implementer, Completer Finisher. Resource Investigator side are using their instinctive in finding ideas to bring back to the team. They are very enthusiastic and can easily develop contacts. Team worker use their versatility to identify and complete the work required on behalf of the team. They are very cooperative and diplomatic. The Co-ordinator is required to focus on team goals, to find team members and delegate work accordingly. The defining qualities are confident, mature, identify talent, gaps clarify. The Plant tends to be very creative and good at solving problems in unconventional ways. It represents the qualities that are creativity, imagination, free thinking, generating ideas and solving difficult problems. Monitor Evaluator is the part that deals with logic, making impartial judgments only if necessary and weighed options in an uninterested team and is got the advantages of being sober and strategic. They find all choices and judgments accurately. Specialist improves in-depth knowledge of key areas for the team. His strengths are: self-starting, dedication, single-minded. It provides knowledge and skills specialist. Shaper ensure the necessary drive to be sure that the team continues to travel and not lose focus or momentum. The basic qualities are: challenging, dynamic and has the courage to overcome obstacles. Implementer plan a viable strategy as efficiently as possible. His benefits are practical, reliable and effective. Lead to the fulfillment of ideas and organize their work they must do. Completer Finisher are used most effectively at the end of tasks to polish and control work for errors. His qualities are diligent, conscientious, anxious. Is in continuous search of errors.

AC. 4.2 Describe the stages of team development

Dr. Bruce Tuckman developed the first model used, which led to the publication of the four stages of team development: Forming, Storming, Norming and Performing model in 1965. Dr. Tuckman added a fifth step, postponement in during the 1970s.

Forming: a group of people gather together to achieve a common goal. Their initial success will depend on their familiarity with each other’s style of working, their experience on previous teams and clarity of their assigned mission.
Storming: Disagreement about mission, vision and means to address the problem or assignment is constant in this stage of development. This struggle is combined with that the team members get to know each other, learning to cooperate with each other and growing familiar with interaction and communication group members.

Norming: The team formed so consciously or unconsciously relationships that allow progress on team goals work. Members agreed consciously or unconsciously, to comply with certain rules and they become functional group working together.

Performing: This is the stage that true teamwork progresses. Relationships, processes team, and the team’s effectiveness working all together to apply the successful operation of the team.

Ending: The team has reached the target that proposed and it is time for team members to pursue new goals or projects.

AC. 4.3 Assess three motivation theories

Frederick Taylor’s theory of motivation

Frederick Taylor motivation theory says that most workers are motivated solely by salary they receive for the work they do. He realized that most workers do not enjoy the work they do and perform only when administered directly reward of monetary payment. His ideas were adopted by Henry Ford and other industrialists who paid factory workers depending on the number of items produced. This theory lost favor of workers became frustrated and production was halted due to frequent strikes by disgruntled employees.

Elton Mayo’s theory of motivation

Elton Mayo’s theory of motivation examined the social needs of the worker. He was the only one who believed that the payment is not sufficient to motivate employees to strive. He believed that social needs of the workers were also very important. He advised employers to treat their workers in a humane and considerate, showing an interest in the individual, in order to produce their best work.

Abraham Maslow and Frederick Irving Herzberg theory of motivation

Abraham Maslow and Frederick Irving Herzberg believed strongly that psychological forces driving human behavior. Their theory postulated a graduated scale of human needs, from basic physical, like hunger and thirst at the top level, such as the need to aulto-fulfillment and to be love. They were of the opinion that employers will obtain satisfactory results from employees if they recognized the different needs of individual workers and their reward if they varied depending on the person.

AC. 4.4 Describe different types of leadership style


Laissez-faire leader has the disadvantage direct supervision of employees and fails to provide regular feedback to those who are under his supervision. Even employees with a huge experience and trained supervisors need in this type of leadership. However, not all employees have these features. This style of leadership hamper the employees who need supervision. Laissez-faire style does not make any effort management or supervision from managers that result in lean production, lack of control and increased costs.


Managers using transactional leadership style have certain tasks to perform and to offer rewards or punishments for team members based on performance results. Managers and team members predetermined set goals together and the employees agree to follow the direction and leadership of the manager to achieve these objectives. The manager has the power to review the results and to train and instruct employees when team members fail to meet their targets. Employees receive rewards such as bonuses when they achive goals.


This type of leadership depends on a high level of communication from management to meet the objectives. Leaders motivate employees and increase productivity and efficiency through communication and high visibility. This includes engaging leadership style of management to meet objectives. Leaders focus on the big picture within an organization and to delegate smaller team to achieve its goals.







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