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Chapter One

Chapter One. People in Business Unit 1 – important for Q1 (long q’s ) and for ABQ. 1. Role of Stakeholders. People in Business. 3. Contract Law. 2. Relationships between Stakeholders. Interest Groups. Government. Entrepreneur. Service Provider.

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Chapter One

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  1. Chapter One People in Business Unit 1 – important for Q1 (long q’s) and for ABQ Ms. Marshall

  2. 1. Role of Stakeholders People in Business 3. Contract Law 2. Relationships between Stakeholders Ms. Marshall

  3. Interest Groups Government Entrepreneur Service Provider Stakeholders- people affected by how a business is run Consumer Investor Producer Employer Manager Employee Ms. Marshall

  4. Section 1: Role of Stakeholders • Entrepreneur • Spots an opportunity and takes the initiative to set up a business in order to make a profit. • They are risk takers. • Financial & Personal Risk. • E.g. Tony Ryan set up Ryanair • Bill Gates set up Microsoft • Gillian Bowler set up Budget Travel • Investor • Investors provide the finance for the business (shareholders/banks/state bodies) and expect a return on their investment. • Equity Capital – Shareholders- Dividends • Debt Capital – Banks-Interest • E.g. Ulster Bank loaned money to Gillian Bowler. • Enterprise Ireland gives grants to entrepreneurs setting up. • The Body Shop sold a half share in the business for €7500 Ms. Marshall

  5. Role of Stakeholders • Employer • The business itself is the employer. It hires employees to work for them and pay them according to their contract. • Employers rights include: • Recruiting and selecting the employees • Directing the employees • Dismissing unsatisfactory employees • Employer’s responsibilities include: • Providing a contract • Payment of wages • Providing safe working conditions • Obeying employer law • Employee • An employee is a person who works for an employer in return for a wage. • Employees’ Rights • Receiving a written contract of employment • Being paid the agreed wage. • Working in a safe and healthy workplace. • Freedom to join a trade union • Employees’ Responsibilities • Following instructions • Doing a fair day’s work for a fair day’s pay. • Being honest and loyal in their work. Ms. Marshall

  6. Role of Stakeholders • Manager • The manager is responsible for running the business and making sure that it achieves its objective. • Must have the skills of leading, motivating and communicating. • Must engage in the activities of planning, organisingand controlling. • Michael O’Leary of Ryanair. • Producers • Producers are manufacturers who take raw materials and turn them into a finished product to sell on. • E.g. Coca-Cola, Cadburys, Tayto, Butlers. • They use the factors of production to make a product: land, labour, capital and enterprise. Ms. Marshall

  7. Role of Stakeholders • Consumer • A consumer is a person who buys goods or services from the entrepreneur for his own personal use. • Provide the entrepreneur with a market and with market research. • Service Provider • Provide a range of valuable supports/services to a business. • E.g. Banks, solicitors, telephone companies, couriers. • Vital for efficiency. Ms. Marshall

  8. Role of Stakeholders • Interest Groups • An interest group is an organisation which represents the common viewpoints, objectives and goals of a particular group, e.g. IBEC and ICTU would have negotiated with the Government in National Wage Agreements during the Celtic Tiger. • They seek to influence decisions and policies affecting its members, through various activities including negotiation, lobbying, boycotting and possibly legal action. • E.g. IBEC (Irish Business and Employers Confederation) is the main organisation representing large and medium-sized businesses in Ireland. It attempts to influence trade unions, the Irish government, the EU and wider society on issues such as legislation, taxation and pay & conditions. • Other interest groups: ISME, Greenpeace. • Greenpeace organised a boycott of Shell Oil when they attempted to dump an old oil rig in the sea. Ms. Marshall

  9. Role of Stakeholders • Government • Refers to local and national authorities that set the rules and regulations by which businesses must operate. • Changes in laws or taxes can affect how a business is run and what profits are earned. • The government wants businesses to: • Provide Jobs • Pay their fair share of taxes • Obey the law In return the government provides services such as schools, hospitals, roads and policing needed by business and society. Ms. Marshall

  10. Recent Exam Questions • Stakeholders • HL 2009/2003 (10 marks) • Outline, using an example, the role of interest groups in business. • HL 2007 (10 marks)/ OL 2007 • Explain the term ‘producer’ and give two examples. • HL 2002 (10 marks) • Outline the role of any two parties involved in business. • OL 2009/2003 (Section 1, 10 marks) • Explain the term investor and give two examples of investors. • 1999 (Section 1, 10 marks each) • List the main parties involved in business. • Explain the role of the entrepreneur in business. Ms. Marshall

  11. Section Two: Relationships between Stakeholders • Common Questions • Discuss the relationship that would typically exist between: • Entrepreneur – Investor • Producer – Consumer • Competitors/ Producers • Employer - Employee Ms. Marshall

  12. Relationships between Stakeholders • To answer this type of question we need to follow the following steps: • 1) State the type of relationship that exists • 2) Quick introduction to the stakeholders • 3) Define the type of relationship. • 4) Expand your answer • 5) Illustrate your answer with an example relevant to the stakeholders in question. Ms. Marshall

  13. Relationships between Stakeholders Dynamic Cooperative Relationships Dependent Competitive Ms. Marshall

  14. Relationships between Stakeholders Cooperative Relationship: this is where both parties work together to achieve their goal. It is a win-win situation. Working together produces better results than working alone. Examples from recent exams: Describe the relationship which exists between an employer and employee. (15 marks). • Employers hire other people to perform specific duties. Employees are hired to carry out certain duties in return for a wage e.g. Dept of Education is an employer, teachers are their employees. • Cooperative Relationship: this means that the parties in business work together to achieve their goals. It is a win-win relationship. For example, employees agreeing to take a pay cut during the recession to help the company reduce costs. The employee keeps their job, the employer reduces expenses. Ms. Marshall

  15. Relationships between Stakeholders Competitive Relationship: this is a win-lose situation where one party wants to be more successful than the other. They are rivals. Competitive: This means that one party wants to be more successful than the other. It is a win lose situation e.g. The employees want job security but the employer wants to make redundancies. Dependent Relationship: This means that the parties in business need each other to be successful. e.g. The employer needs the workers to do the jobs he is not able to do. The employee needs their boss to provide wages Dependent Relationship: the two parties rely on each other for success. They need each other. Ms. Marshall

  16. Relationships between stakeholders • Describe important aspects of the relationship between producers and consumers in business. (15 marks). • Approach: define the two terms. Describe the relationships under 3 headings to be safe as it is worth 15 marks. Some years they might have allocated 8m and 7m. • Answer: Producers turn raw materials into finished products by combining the four factors of production, i.e. Land, labour, capital and enterprise. e.g. Tayto turn potatoes into crisps. • Consumers buy products for their own personal use and do not sell them on, e.g. Buying a packet of Tayto crisps and eating them. • Cooperative: this is where both parties work together to achieve their goal. It is a win-win situation. Working together produces better results than working alone. When consumers take the time to fill out questionnaires or take part in focus groups they provide market research for the producer. This results in products that a consumer actually wants and the ability to make a profit for the producer. • Competitive: this is a win-lose situation where one party wants to be more successful than the other. They are rivals. e.g. A producer in a monopoly situation can charge a higher price to consumers without improving quality e.g. The ESB are increasing prices by 5%. • Dependent: the two parties rely on each other for success. e.g. The producer needs customers in order to make a profit and continue in business, in the pharmaceutical business industry profits may be reinvested into further research and development of drugs. The consumer needs producers to provide them with essential products such as medicine. Ms. Marshall

  17. Relationships between stakeholders • 2008 • Competitive and Co-operative relationship between producers in the same business (describe with examples): • (A) Competitive Relationship • A competitive relationship between two producers in the same line of business means each is pursuing different objectives in an effort to achieve particular objectives at the expense of each other. This is a win lose situation. This is beneficial for the consumer as every business must work harder to satisfy consumer needs • Examples: • Producers in the same line of business may compete on prices of goods and services, quality, sales, the recruitment of labour etc. • Co-operative Relationship • A co-operative relationship exists where joint action or effort is required so that producers work together to everyone’s benefit/towards a common goal/act in a mutually beneficial manner. This is a win win situation. • Examples: • Producers in the same line of business sometimes get together and co-operate with each other to protect their specific industry against an outside threat/to encourage economic development and to create jobs for the benefit of the community/ two producers may get together to lobby government to solve problems of mutual interest. Ms. Marshall

  18. Relationships between stakeholders • 2009 • Discuss how consumers may benefit from the existence of a competitive relationship • between producers. • A competitive relationship between producers in the same line of business means each is • pursuing different objectives in an effort to achieve particular objectives at the expense of the • other (win-lose relationship). This is beneficial for the consumer as every business must work • hard to satisfy customer needs. • Examples: • Producers in the same line of business may compete on prices of goods and services, • quality, sales, recruitment of labour etc. • Customer will benefit from: • 􀁸 Improved quality • 􀁸 Improved customer Service • 􀁸 Better choice of products • 􀁸 Better value for money Ms. Marshall

  19. Relationships between stakeholders • The CEO of Mecca Enterprises, a national firm in the leisure business, believes that good relationships, which help in resolving situations of conflict between business organisations are most important. At present, however, she feels that there is a very high risk of ongoing conflict in the future. (20 marks) • Describe a cooperative and a competitive relationship that would typically exist between Mecca and other business organisations. • Approach: decide on business organisations they would be dealing with, e.g. Competitors. You could choose two different organisations or just one. Define cooperative and competitive relationships and give examples relevant to the text. • Cooperative: this is where both parties work together to achieve their goal. It is a win-win situation. Working together produces better results than working alone. For example, Mecca may provide certain leisure facilities but maybe not all. e.g. They may have a beauty salon but not a hairdressers. They could enter into a strategic alliance or joint venture with the local hairdressers. e.g. Half price manicure with highlights. • Competitive: this is a win-lose situation where one party wants to be more successful than the other. They are rivals. e.g. Mecca Enterprises could compete with other National Leisure businesses, e.g. Salons, gyms, on the basis of price. They could increase advertising to increase awareness amongst consumers or to directly compare themselves with their competitors which can be seen in the leisure industry already with Jackie Skelly and Ben Dunne. Ms. Marshall

  20. Class work • 2011 • (A) Outline, using examples, the relationship that can exist between ‘Investors’ and • ‘Entrepreneurs’ in business. (15 marks) • 2012 Mocks • Describe a cooperative and a competitive relationship that could exist between two competing businesses in the transport industry. Support your answer with examples. (15 marks). Ms. Marshall

  21. Dynamic • Some relationships could also be called dynamic. This is a situation where the relationship is changing. E.g. People’s roles in a business can change. An employee might be promoted to manager, changing his relationship with his work colleagues and management. He could buy shares if the company becomes a PLC, making him an investor. E.g. Facebook employees. • “Now, after a blockbuster $5billion Facebook stock exchange flotation moved a step closer today, at least 1,000 employees of the social network based in Menlo Park, California, are finally on their way to becoming millionaires. • Facebook today submitted paperwork to regulators for the most anticipated initial public offering since Google in 2004, expected to value the hugely-successful company at up to $100billion.” Ms. Marshall

  22. Contract Law Contract: a legally binding agreement between two or more parties that is enforceable by law. E.g. an employment contract given to an employee by an employer. • There are eight elements which must exist in order for a contract to be deemed legally binding. Ms. Marshall

  23. Contract Law 7. Legality of Form 1. Offer 8. Legality of Purpose 6. Capacity 2. Acceptance 8 Elements of a Valid Contract 5. Consent 3. Consideration 4. Intention Ms. Marshall

  24. Contract Law • Offer: One party ask another party to enter into a deal with clear terms. It is a promise to by bound by the contract if offer is accepted. • Offers may be made verbally, in writing or by conduct. • Terminated if: • withdrawn before acceptance. • Not accepted in time. • Rejected by other party. Note: Invitation to Treat: price tags are an invitation to pay a certain price for an item. They are not a legal offer, the seller can still refuse to sell the item to you for that price. Ms. Marshall

  25. Contract law • Acceptance: Other party agrees to accept all terms of the offer without any conditions. • Any change in terms would be a counter offer. • Acceptance can be verbal, in writing or by conduct. • Consideration: this is what each party offers the other as evidence of their agreement. Both parties must receive something real and valuable, quid pro quo. E.g. one party gets the product, the other the money. Ms. Marshall

  26. Contract Law • Intention to contract • This means that both parties must mean the agreement to be a legally binding contract. • Irish law makes two assumptions: • 1. Agreements between business people are always contracts. • 2. All social agreement are not intended to be legally binding. Non-business transactions between family members are included in this. • Consent to Contract • Each party must enter the contract of their own free will and cannot be forced. • Consent may not exist if: • There was physical or mental intimidation • There was deliberate misrepresentation Ms. Marshall

  27. Contract Law • Capacity to Contract: • This means that the people entering the contract have the legal ability and power to do so. • Those who do not have capacity to contract include: • Under 18’s • Those who are mentally incapacitated because they are drunk, on drugs or insane. • Diplomats – they have diplomatic immunity. • Company directors who act ultra vires. • Bankrupt persons • Legality of Form: • This means that certain contracts must be drawn up in writing before they can become legally binding. E.g. when buying a house, entering a hire purchase agreement or taking out insurance policies. • Legality of Purpose: • Means that for a contract to be legally binding, it must be for a legal purpose and not involve committing any crime or breaking the law. E.g. if someone refuses to pay you for illegal drugs you cannot bring them to court. Ms. Marshall

  28. Definitions relating to contract law Ultra Vires: this is when a company director acts outside their authority by authorising actions not covered in the Memorandum of Association. Condition: an essential part of the contract, if it is broken the contract is breached. E.g. a singer fails to turn up to a concert. Warranty: an element of a contract, if it is broken the contract is not cancelled but the injured party can claim for damages in court. E.g. a builder finishing a project late. Ms. Marshall

  29. Termination of a Contract • Performance: both sides to a contract carry out their duties as agreed. E.g. John hires Tom to build a wall. Tom builds the wall and John pays him the agreed price. • Agreement: both parties agree to end the contract. E.g. John and Tom both agree to leave this contract. • Frustration: the contract ends due to an unforeseen event. i.e.death of one party, insanity or bankruptcy. E.g. Michael Jackson died just before his “This is it” tour. • Breach of Contract: this is where one party breaks a condition in the contract. E.g. John does not pay Tom for the work completed. Ms. Marshall

  30. Remedies for Breach of Contract • Damages: the party who breached the contract is ordered by the judge to pay financial compensation. E.g. a singer pulling out of a concert at the last minute may have to pay damages for the lost revenue of the event organisers. • Specific Performance: the court may order that the contract be carried out in accordance with the term of the agreed contract. E.g. the court orders that a singer who backed out of a concert at the last minute plays the concert at a later date. • Rescind the Contract: the contract is cancelled and the situation returns to what it was before. E.g. when Michael Jackson died any contracts such as his concert dates were terminated due to frustration. The judge could not order compensation to these event organisers. Instead they would return to the situation they were in before. Ms. Marshall

  31. At HL Offer & Acceptance are accepted only as one element “Agreement” Contract Law - Summary Ms. Marshall

  32. Contract Law - Summary Ms. Marshall

  33. Recent Exam Questions • Contract Law • 2012 • A legal contract can be terminated by breach, frustration or agreement. Illustrate your understanding of the underlined terms. (hl 20 marks). • OL • (A) Joe and Michael entered into a contract. What is a contract? (10 marks) • (B) Offer, Acceptance, Consideration, and Consent to Contract are elements of a valid contract. • Explain any three of these elements. Illustrate your answer with reference to the above text. • (25 marks) • (C) A contract can be terminated (ended) by Performance or Frustration. • Explain the underlined terms. (15 marks) • 2009 /2007 Higher Level (10 marks) • Explain the term ‘consideration’. Outline two other elements of a legally binding contract. • 2009 Ordinary Level (30 marks 15*2) • James has decided to sell his car privately. He advertised in a local newspaper. Tom rang James and after much discussion he said he would drop by the following day to buy the car. Tom did not however come to buy the car. • (I) State and explain two elements of a valid contract. • (ii) Do James and Tom have a contract? Explain your answer. Ms. Marshall

  34. Recent Exam Questions • 2008 HL (10 marks) • In relation to the law of contract distinguish between the terms ‘offer’ and ‘invitation to treat’ • 2008 Ordinary Level (10 marks) • List three elements of a valid contract. • 2006 HL • Explain the elements of a valid contract.(20 marks) (give 5 points) • 2005 HL (10 marks) • Explain four methods by which a legal contract may be terminated. (20 marks) • 2005 HL (10 marks) • Explain the legal term ‘capacity to contract’ Give two examples of situations where an individual or legal entity does not have capacity to contract. • 2001 HL (20 marks) • Define Contract. Outline why an invitation to treat in not a contract. Ms. Marshall

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