ACCA FBT (BUSINESS AND
TECHNOLOGY)
COMPLETE SUBJECT NOTES
BY VERTEX LEARNING SOLUTIONS
VALID UNTIL SEP 2025
Table of Contents
Chapter 1 - Business Organizations and their Stakeholders..................................................................7
1.1 Purpose, Type and Reasons for Existence of Organizations ......................................... 7
1.2 Public Sector vs Private Sector .......................................................................................... 9
1.3 Stakeholders ...................................................................................................................... 13
1.4 Mende Low’s Matrix ......................................................................................................... 16
Chapter 2 - Business Environment .................................................................................................... 19
2.1 Definition of Environment................................................................................................. 19
2.2 Models ................................................................................................................................ 20
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Chapter 1 - Business Organizations and their Stakeholders.
1.1 Purpose, Type and Reasons for Existence of Organizations
Organizations can achieve results which individuals cannot achieve by themselves
Definition of Organization
A social arrangement which pursues collective goals, controls its own KEY performance and has a
boundary separating it from its environment.
The common characteristics of organizations are as follows:
1. They work towards a variety of objectives and goals
2. There are several people who do different things resulting in specialization in one activity.
3. Organizations target to achieve good performance by working on improvements of standards or
meeting target goals in the best possible way.
4. Organizations are based on formal, documented systems and procedures which help them control
their tasks.
5. Mostly organizations are obtaining inputs like raw materials to process them into saleable outputs
which others can buy.
Why Do Organisations Exist?
Organisations play a crucial role in society by addressing individual limitations and maximizing collective
efficiency. The reasons for their existence include:

Overcoming Individual Limitations: Organisations combine resources and talents to overcome
physical, intellectual, or resource-based constraints that individuals may face.

Facilitating Specialisation: By enabling individuals to focus on tasks they are skilled at, organisations
improve productivity and the quality of work.

Enhancing Time Efficiency: Through teamwork and division of labor, organisations save time by
accomplishing multiple tasks simultaneously.

Accumulating and Sharing Knowledge: Organisations serve as repositories of expertise, allowing
knowledge to be shared, preserved, and utilized effectively.

Creating Synergy: Collaboration within organisations often leads to a combined output that exceeds
what individuals could achieve separately, fostering innovation and efficiency.
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Organizations are different from each other due to several reasons:
Ownership
Control
Activity
(i.e private vs public
scetor)
(i.e owners vs
Managers)
(i.e Manufacturing vs
Services)
Purpose
Legal Form
(i.e Profit vs Nonprofit Organisations)
(i.e Limited Liability vs
Partneship)
Sources of finance
(i.e Shares vs bank vs
governmant
funding)
Size (i.e small family
businees vs small
and medium sized
entities vs
multinational
Technology (i.e
complexity of
production)
Sectors in which Organizations Operates:
1. Agriculture: To Produce and process food
2. Manufacturing: Acquiring raw materials using labor and technology to convert raw material acquired
into a product (e.g., a car)
3. Extractive/raw materials: This includes Extraction and refining of raw materials (e.g., mining)
4. Energy: This includes Converting of one resource (e.g., coal) into another (e.g., electricity)
5. Retailing/distribution: To Deliver goods to the end consumer
6. Intellectual production: Involve in Production of intellectual property (e.g., software, publishing,
films, music)
7. Service industries: This involves different areas like retailing, distribution, transport, banking, various
business services (e.g., accountancy, advertising) and public services such as education, medicine.
Organizations are categorized into different types including:
a. Commercial
b. Not for profit
c. Public sector
d. Charities
e. Trade unions
f.
Local authorities
g. Non-governmental organizations (NGOs)
h. Co-operative societies and mutual association
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Areas of differentiate between Profit and Non-Profit Organizations:
1. Owners and other stakeholders are different, and their goals also vary:
o
Primary goal of profit-making organizations is to maximize shareholders wealth
o
The primary goal of not-for-profit organizations is the provision of goods & services.
2. Funding sources:
o
Profit making organizations are funded from revenues
o
Not for profit are funded from donations
3. Performance measures:
o
Profit making organizations takes profitability as a performance measure
o
Not for profit organizations investigates value for money or efficiency
4. Technology usage:
o
Profit making organizations are more focused on the latest technologies like Apple Inc.
o
Not for profit making like newspaper agency are simpler.
1.2 Public Sector vs Private Sector
Organizations which are owned and run by the government fall under the public sector. Apart from these
all the others are part of the private sector.
Legal Status of Organisations
The legal status of a business determines its structure and the liability of its owners. Here are the main
types:
1. Sole Proprietor – Unlimited Liability: A single individual owns the business and is personally liable for
all its debts.
2. Partnerships – Unlimited Liability: Two or more individuals share ownership and profits, with
personal liability for business debts.
3. Limited Liability Companies – Limited Liability
Limited Liability Companies

These companies are denoted by X Ltd or X plc in the UK

These companies hold the status of separate legal entity that means they are separate from their
owners (shareholders).
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
This means that the shareholder’s liability is limited to the amount they have invested in that
company, which is the key benefit.

Directors are appointed by shareholders to run the company
Types Of Directors

Executive directors participate in the daily operations of the organisation.

Non-executive directors are invited to join in an advisory capacity, usually to bring their particular
skills or experience to the discussions of the board to exercise some overall guidance.
In UK, there are 2 types of limited companies:
1. Private limited companies (e.g., X Limited): Usually owned by a small number of people (family
members), and their shares are not easily transferable usually
2. Public limited companies (X plc): Shares will usually be traded on the Stock Exchange. The directors
of a public company are less likely to hold a significant shareholding in the company.
Private Company Sources of Capital
1. Founder or Promoter: The individual or group that establishes the company often provides initial
funding.
2. Business Associates or Employer: Close associates or even the employer of the founder may invest.
3. Venture Capitalists: Professional investors who provide funding in exchange for equity stakes in highgrowth potential businesses.
Public Company Sources of Capital
1. Direct Public Investment: Shares can be offered directly to the general public through an Initial Public
Offering (IPO).
2. Institutional Investors: Entities such as pension funds, mutual funds, or insurance companies invest
in shares.
3. Recognised Markets: Public companies often list their shares on stock exchanges for trading and to
attract more investors.
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Advantages of Limited Companies
1. Increased Investment: Access to more funds through share issuance.
2. Limited Liability: Investors’ risk is limited to their investment amount.
3. Separate Legal Entity: The company can own property, enter contracts, and operate independently
of its owners.
4. Ownership and Control Separation: Shareholders own the company but do not need to manage it.
5. No Size Restrictions: Can scale with millions of shareholders.
6. Flexibility: Combines capital and enterprise efficiently.
Disadvantages of Limited Companies
1. Compliance Costs: Auditing and publishing financial statements add expense.
2. Limited Shareholder Power: Shareholders have little control beyond selling shares or voting to
replace directors.
3. Lack of Privacy: Financial information is publicly available.
The Public Sector
Comprises organisations owned and operated by the government or local authorities.
Examples: Armed forces, Government departments, Most schools and universities
Objectives of Public Sector Organisations
1. Social Welfare: E.g., The UK Pensions Service manages social security systems for pensions and
benefits.
2. Profit with Social Function: E.g., The Post Office earns profits from mail services but also fulfils a social
role.
Key Characteristics
1. Accountability: Must answer to the public and government.
2. Funding: Primarily funded by taxes and government revenue.
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3. Demand for Services: Often provides essential services in high demand.
4. Limited Resources: Operates within budgetary constraints.
Advantages
1. Filling Gaps: Addresses needs not met by the private sector.
2. Public Interest: Operates for societal benefit rather than profit.
3. Economies of Scale: Delivers services efficiently on a large scale.
4. Cheaper Finance: Access to government funding and lower borrowing costs.
5. Efficiency: Centralised management can streamline operations.
Disadvantages
1. Accountability: Bureaucratic processes can hinder decision-making.
2. Interference: Political involvement may affect operational autonomy.
3. Cost: High expenditure often funded by taxes.
NGOs
A Non-Governmental Organisation (NGO) is a legally established organisation where people work
collaboratively and independently of any government to pursue specific objectives, often related to social,
environmental, or humanitarian causes.
Key Organisational Features of NGOs
1. Staffing: Mix of volunteers and paid employees who support operations and initiatives.
2. Finance: Funding typically comes from grants, donations, or contracts with other organisations or
institutions.
3. Expertise in Media and Advertising: NGOs often have skills in media relations and advertising,
helping to raise awareness and promote campaigns effectively.
4. Centralised Headquarters: Many NGOs operate with a national headquarters to coordinate activities
and decisions.
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5. Planning and Budgeting Skills: Effective planning and budgeting expertise are crucial for sustainable
operations and achieving organisational goals.
Co-operative Societies and Mutual Associations

Owned by their workers or customers, who share the profits

Some common features include:

o
Open membership
o
Democratic control (one member, one vote)
o
Distribution of the surplus in proportion to purchases
o
Promotion of education
However, unlike limited companies there is some measure of democratic control, this is based on one
share, one vote which means:
o

No shareholder can dominate a co-operative.
Mutual associations are organizations that exist for the mutual benefit of their members. Such as:
o
Savings and loan organizations (building societies in the UK) in which the members are the
savers who deposit their savings in the organization.
o
As there are no external shareholders to pay dividends to, the profits of the organization are
enjoyed by members in the form of more favorable interest rates.
1.3 Stakeholders
A person or group of people who have a stake in the organization.
Agency Relationship:

Managers of the organizations are the agents for the stakeholders.

Agency relationship refers to the concept of separation between an organization’s owners (the
shareholders) as the ‘principal’, and those managing the organization on their behalf (the company
directors) as their “agent”.
Primary vs Secondary Stakeholders
1. Primary stakeholders:
o
They are the shareholders or the partners of the proprietor.
o
Their major stake/interest is the money invested in the business.
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o
Therefore, they expect a return on their investment so that their wealth increases either in
terms of growing profits or increasing share value.
2. Secondary stakeholders:
All other parties apart from primary stakeholders who have a stake/interest in the business fall under
this category.
Stakeholders
What is at stake?
What is expected out of them from
the business?
Directors/managers

Livelihoods

Fair and growing remuneration
employees and trade unions

Careers

Career progression

Reputations

Safe working environment

Training

Pension

Products/services that are of
Customers
Their custom
good quality and value

Fair terms of trade

Continuity of supply
Suppliers and other business The items they supply

Fair terms of trade
partners

Prompt payment

Continuity
Lenders
Money lent
Government & it’s agencies

A return on their investment:
National

Interest

Repayment of capital

Reasonable employment and
infrastructure used

by business

The
welfare
other business practices
of
Steady or rising stream of tax
revenue
employees

Tax revenue
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
The local community and
public at large
National
Reasonable employment and other
infrastructure used business practices
by business

The
welfare
of
employees
The natural environment
The environment shared by Reasonable environmental and other
all
business practices
Types of Stakeholders by Johnson & Scholes (2005):
Internal
•Corporate management
•Employees
Connected
•Shreholders
•Debt holders (e.g. banks)
•Intermediate (busienss) and final (consumer) cutomers
•Suppliers
External
•Imediate community(Society at large)
•Competitors
•Special interest groups
•Government
As per this model internal and connected falls under “primary stakeholders” category whereas external
is part of “Secondary stakeholders”.
Stakeholder Conflict

As the interests of different stakeholders may be widely different, conflict between stakeholders may
exist.

Potential for such conflict should be considered by managers while policy setting

Managers must be prepared to deal such scenarios with their effecting organization’s performance.

Most commonly occurring conflict is usually between managers and shareholders. The relationship
gets disputed when the managers’ decisions focus on maintaining the organization as a vehicle for
their managerial skills whereas the shareholders are pleased to see changes which will enhance their
dividend stream and increase the value of their shares.

These conflicts can be seriously damaging to the company’s stability.
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o
Shareholders may force resignations and divestments of businesses
o
Managers may try to preserve their empire and provide growth at the same time by
undertaking risky policies.
o
Managers despite their willingness need to acknowledge that the shareholders have the
major stake as owners of the company and its assets therefore focus shall be paid on profit
maximizations and increasing worth of the company’s shares
o
This may happen at the expense of long-term benefit of the company resulting in hijacking of
long-term strategic plans of the company as focus is on a particular year profitability
compromising other prospects.
1.4 Mende Low’s Matrix

Stakeholders can be mapped on Mende low’s Matrix in terms of:
1. How interested they are in the company’s strategy (would they want or resist it)
2. How much power they have over the company’s strategy (would they be able to resist it)


The matrix can be used to:
o
Track the changing influences between different stakeholder groups over time.
o
This can act as a trigger to change strategy as necessary
o
Assess the likely impact that a strategy will have on different stakeholders’ group
Its aim is to assess:
o
Whether stakeholders’ resistance is likely to inhibit the success of the strategy
o
What policies or actions may ease the acceptance of the strategy
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Segment D: Key Players

Attributes: High power, high interest.

Strategy: The strategy must be acceptable to them, as their support is crucial for success. Examples:
major customers, key investors. They may actively participate in decision-making.
Segment C: Keep Satisfied

Attributes: High power, low interest.

Strategy: Stakeholders in this category might become more interested and move to Segment D if not
managed well. Keep them satisfied with occasional updates. Examples: large institutional
shareholders.
Segment B: Keep Informed

Attributes: Low power, high interest.

Strategy: They might influence powerful stakeholders indirectly, for example, through lobbying or
advocacy. Keep them informed and engaged to maintain goodwill. Examples: community
representatives, charities.
Segment A: Minimal Effort

Attributes: Low power, low interest.

Strategy: Minimal effort should be expended on this group as they have little impact on or interest in
strategy.
The Strategic Value of Stakeholders
Effective management of stakeholder relationships brings strategic benefits to a firm, including:
1. Employee and Customer Loyalty:

Studies show a positive correlation between employee loyalty and customer loyalty.

Example: Lower staff turnover in service-based firms often leads to higher repeat business.
2. Continuity and Stability:
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
Stable relationships with employees, customers, and suppliers are crucial.

They enable organisations to adapt to changes and maintain sustainability in business
operations.
Measuring Stakeholder Satisfaction
Organisations measure satisfaction across various stakeholder groups using specific metrics:
1. Employees:

Staff turnover rates.

Pay and benefits compared to market standards.

Job vacancy rates within the organisation.
2. Government:

Pollution levels and compliance with environmental standards.

Timeliness of filing annual returns and other regulatory requirements.

Workplace accident rates and energy efficiency levels.
3. Distributors:

Percentage of joint promotions funded by the organisation.

Frequency of inventory shortages affecting their operations.
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Chapter 2 - Business Environment
2.1 Definition of Environment
The environment can be described as everything which is beyond the organizational boundary.
Analysing the Business Environment - Key Steps
1. Assess the Environment: Determine if it is stable, dynamic, simple, or complex.
2. Identify Influences: Examine past and future external factors like economic trends, regulations, and
competition.
3. Structural Analysis: Use tools like Porter’s Five Forces to evaluate competitive forces (rivalry, new
entrants, suppliers, buyers, substitutes).
4. Position Analysis: Benchmark against competitors using tools like SWOT.
5. Opportunities and Threats: Identify external factors that benefit or challenge the organization.
Environmental Dimensions
1. Global vs. Local: Evaluate if operations are global or local.
2. General vs. Task Environment:
o
General: Broad factors like political, economic, social, and technological trends.
o
Task: Industry-specific factors like suppliers and customers.
Assessing Uncertainty
1. Simplicity/Complexity: Fewer factors (simple) vs. many interconnected factors (complex).
2. Stability/Dynamism: Predictable (stable) vs. frequently changing (dynamic).
Uncertainty Levels:

Simple + Stable: Low.

Complex + Stable: Low to Moderate.
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
Simple + Unstable: Moderate to High.

Complex + Unstable: High.
Drivers of Change

Globalization: Expanding markets and competition.

Technology: Automation and digital advancements.

Strategic Shifts: Mergers and alliances.

Customer Dynamics: Changing values and behaviours.

Scrutiny: Focus on ethics and accountability.

Trade Liberalization: Reduced trade barriers.

Business Practices: Downsizing, outsourcing, and re-engineering.

Relationships: Evolving stakeholder interactions.
2.2 Models
There are three models which can be used to assess the environment for an organization:
1. PESTEL Analysis
This is usually related to macro-economic factors:
P
E
S
•Political
•Economical
•Social/Cultural/Fashion
•Technological
T
E
L
•Environmental
•Legal
2. The Value Chain Analysis
3. Porter’s Five Forces
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THE POLITICAL AND LEGAL ENVIRONMENT:

Government policy has an impact on the legal system, the structure of the economy, and some
operational concerns.

Political instability is a risk as long-term objectives for firms cannot be realized.

Different approaches to the political climate are used in various nations.

Extra layer of international law and regulations is applicable to international trade.
Legal Factors Affecting All Companies
Factor
Example
Explanation
General Legal Contract, tort, agency - Basic ways of Governs the legal basis for business
Framework
doing business, negligence proceedings
Criminal Law
Theft,
insider
dealing,
bribery, Addresses unlawful activities that can
deception
Company Law
operations and liabilities.
result in criminal charges.
Directors'
duties,
reporting Regulates company operations, director
requirements, takeover proceedings, responsibilities,
shareholders' rights, insolvency
and
shareholder
protections.
Employment
Trade union recognition, social chapter Protects employees' rights and sets
Law
provisions,
minimum
wage,
unfair workplace standards.
dismissal, redundancy, maternity leave,
equal opportunities
Health
and Fire precautions, safety procedures
Safety
Ensures a safe working environment for
employees and customers.
Data
Use of information about employees Safeguards personal data from misuse
Protection
and customers
Marketing and Consumer
Sales
and unauthorized access.
protection
laws
(e.g., Regulates fair marketing practices and
refunds, replacement, 'cooling off' consumer rights.
period
after
credit
agreements),
advertising restrictions
Environment
Pollution
regulations
control,
waste
disposal Ensures
environmental
businesses
harm
minimize
and
follow
regulations.
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Tax Law
Corporation tax payment, collection of Governs
tax
income tax (PAYE), National Insurance corporate
contributions, sales tax (VAT)
obligations
taxes
and
including
employee
deductions.
The Economic Impact of Government:
The economic structure of a business can be directly influenced by the government in several ways,
according to Porter. They are explained below:
1. Capacity: Government policies may encourage businesses to expand. (e.g., using taxation or interest
rates) Therefore there are various incentives for locating capacity in a specific area.
2. Demand: The government is a significant consumer, and it has the power to influence demand
through laws, tax breaks, and subsidies.
3. Emerging Industries: Government can either foster it or harm it. Government policy can deter
businesses from joining a market by restricting investment or competition or by making it more
difficult for foreign businesses to compete in the domestic market using quotas and tariffs
4. Competition:
o
The government's purchase decisions will have a significant impact on the competitive power of
one firm (such as weaponry) compared to another.
o
Industry regulations and restrictions, such as minimum product quality standards, will have an
impact on industry growth and profitability.
o
Because it provides infrastructure (e.g., highways), the government is also able to affect industrial
competition.
o
Governments and supranational organizations like the EU may enact regulations to maintain an
industry's fragmentation and prevent the concentration of a sizable portion of the market in the
hands of one or two companies.
Influencing Government Policies
1. Employ Lobbyists: Businesses can hire lobbyists to advocate for their interests with individual
ministers or civil servants, ensuring that their case is heard in government decision-making processes.
2. Provide Non-Executive Directorships to MPs: By offering MPs non-executive directorships,
businesses hope to gain influence over legislation that could impact their operations, encouraging
MPs to take an active interest in such matters.
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