Business studies - Grand pointers

Packaging

Importance if packaging:

Protect the product and ensure its quality
Promote brand image while differentiating it from other products
Add value and a higher price
Help advertise and attract customers, increasing sales
Ease of storage and display
Flexibility in transport
Provide information about the product and meet legal requirements

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Roles of packaging:

1 - Protecting the product:

Product could break easily - delivered to customer in damaged state if packaging not suitable - which could reduce the reputation for high quality products - leading to lower sales
Needs to ensure the product stays fresh and best quality - to be consumed in a good condition - not deteriorated in any way - keeps customers loyal to business and managing sales
May prevent damage when being transported - may lead to increased costs as products have to be replaced - more customer complaints - decreased customer satisfaction

2 - Promoting the brand image:

“Look for appendix with advert of showing product as high quality or a well recognized logo” - consumers will see the logo and associate the packaging with business’s products helping to advertise the product when they see the packaging
Colour of packaging can be used to associate the logo with the product - make the product easily identifiable on places with competing products

3 - Providing information about the product:

The ingredients can be listed on the packaging - in case customers need to know about allergies - prevents customers from falling ill when consuming the product - stops the business getting a bad reputation for selling products that can cause illness
Information about fresh ingredients may be a legal requirement - stops the business from being persecuted and being fined

Crowdfunding: (Knowledge and Analysis) - Crowdfunding is funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet.

Adv:

No interests need to be paid - Does not increase cash outflows
Allows for the public reaction to be tested - which could lead to more customers
No need of repayments - so does not add to the business’s liabilities/debts
No collateral needed

Disad:

No guarantee of raising the full amount required - having the need to find another source
Competitors may learn more about the product before its launch - leading to less revenue
Not a reliable/stable source of finance
A lot of paperwork

Distribution channels:

Wholesaler adv: (Advantages if a business uses wholesaler as its distribution channel)

Likely to buy in large quantities - increasing sales
Only deliver to one location - lowering transport costs
Access to many retailers - wholesaler might have links to many countries - leading to more sales
No need to deal with lots of retailers - able to focus on other tasks - saving time
May receive cash more quickly - improving cash flow

Wholesaler disad:

No direct contact/feedback with customer - so difficult to build customer relationship/loyalty
Price may be higher - leading to fewer sales
Lose some control over marketing/advertising - difficulty in building proper brand image
Wholesaler takes part of the profit - which lowers profit margin

Online adv:

Sell direct to customers/online/ecommerce - so has more control over its marketing

Retailers adv:

Retailers have wider range of customers - increasing brand awareness - lowers marketing costs
Sell in large quantities
Reduced distribution costs
No direct contact with customers
Price often higher - retailer will add their mark up

Agents adv:

Agents will have local knowledge - so higher sales

Direct to customers:

Lower price of products than if sold through intermediaries - more number of sales as attracts price sensitive customers - price may be lower than competitors
Can use internet or mail order to sell products - reaching a greater number of customers
Have direct control over marketing - establish proper brand image
Develops direct relationship between the customer and producer - easier to follow up with direct marketing to customer - can develop customer relationship - customer loyalty
May have increased distribution costs - selling to many customers than just few with other methods
Higher costs of administration
Not all customers feel confident or are able to order online

Business activity impact on environment:

Pollution/global warming/emission of greenhouse gases
Energy use/use fossil fuels
Congestion/transport of goods
Land use/use up natural resources/deforestation
Waste disposal/non renewable materials

Ways of business contribution to sustainable development:

Reduce amount of resources used
Reduce number of products made/level of output - could reduce potential sales
Reduce waste
Reuse products
Recycle products - which helps reduce number of materials needed waste
Use renewable energy - as this will conserve limited (finite) resources
Develop environmentally friendly products
Replant trees
Use electric vehicles

Inventory:

Problems of high inventory:

Rent and storage space needed - which can increase fixed costs and expenses
Ties up with working capital - which could lead to liquidity/cash flow problems/difficult to pay suppliers
Increase costs - which can increase cash outflows
Opportunity costs/funds could be used for other purpose - lack of capital to expand the business
Risk of damage/theft/wastage - leading to higher costs

Reasons for high inventory:

To maintain production
To protect against delays from suppliers
To benefit from economies of scale
To benefit from special offers
To reduce transport costs
To meet unexpected changes in demand
Gain economies of scale/bulk buy
Production does not need to stop

Factors when increasing production levels:

Enough workspace - so might have to relocate
Access to sufficient suppliers - might not be able to meet orders
Labour issues - need to train more workers - adding to business expenses
Market demands - if tastes change again could be left with unwanted inventory
Storage issues - may need to rent additional issues

Advantages of low inventory:

Lower inventory holding cost - help reduce variable costs
Lower security or rent costs - as less space is needed
More flexible - to keep customers returning
Help cash flow
Less risk of waste or damage

Disadvantages of low inventory:

Possible delays in production - leading to lower output
No purchasing economies of scale
Not able to meet orders - so could damage reputation

Quality methods:

Quality Control Adv:

Tries to eliminate faults before products reaches customers - helps maintain reputations and few customer complaints
Does not stop production while checking - so some output is available - time is saved

Quality control Disadv:

Need to recruit inspectors - which increases labour costs
Spots errors at the end of the process - which could increase wastage

Quality assurance adv:

Erros stopped before products checked throughout - so less funds/time spent on rework
Increase employee motivation - leading to higher output

Quality assurance disadv:

Need to train all employees - which increases fixed costs
Not all workers interested/able to spot problems - increasing wastage
Production checked after each process - takes time, can slow output produced

Production methods:

Just in time:

1 - Advantages:

Less inventory held - so less chance of wastage
Lower storage costs - because there is less space needed
Improve working capital/cash flow - as less money tied up as stock
Less risk of inventory becoming damaged - which helps quality assurance

2 - Disadvantages:

Parts might not arrive on time - limited inventory held - causing production delays
No extra stock/materials available to meet unexpected orders - could lead to lower revenue/sales
Little room for mistake in production - no inventory kept for rework
May not have good relationships with suppliers. - a lot of planning to make sure goods delivered on time - if no, no output - delays
No economies of scale possible - leading to higher average costs

Kaizen:

1 - Advantages:

Increase productivity - which helps lower average costs - and improve its profit margin
Work in progress is reduced - reducing inventory controls
Can reduce amount of space needed for production - decreasing rent costs
Improved layout/combining of jobs - can release some employees to do other jobs
Help motivate employees - leading to less absenteeism and higher productivity

2 - Disadvantages:

Only designed to produce small changes - no radical changes - not gain any significant increase in output
Over time it is difficult to identify extra improvement - which can demotivate employees
Workers may need training - which increases costs
Not all employees may want to implement kaizen
Meetings take time - delay production.

Is size of market most important factor when considering which production method:

If high level of demand needs to be able to produce a lot - otherwise risk of losing sales

1 - Other factors:

Capital available - as business might not be able to afford machinery
Type of produce - as if the product is unique then do not need to produce on large scale
Factory space
Availability of suitable employees

Types of business organisation in private sector:

Soletrader
Partnership
Private limited company
Public limited company
Joint venture
Franchise
Social enterprise

Reasons for changes in importance of primary sector:

Depletion of resources - so workers must find jobs in other sectors/may need to import resources
Increased use of machinery/technology in primary sector - reduced the need for employees
Industrialisation/setting up factories - which creates jobs in the secondary sector
Better education - so workers seek higher paid jobs in other sectors
Fewer grants/less government support OR more grants for secondary/tertiary sector of businesses
Import cheaper raw materials

Multinationals company (pros and cons to countries)

Benefits:

Increased availability of jobs - reduces unemployment
Increase taxes - which can be used to improve public services
Increased reputation of country - encourage other businesses to set up
Increasing orders for local suppliers - increasing income for local businesses
Wider choice/quality of goods
Improve infrastructure/new investment/new technology
Knowledge sharing/new ideas

Drawbacks:

Increased competition- reducing sales for local businesses - which can force them out of business/reducing revenue
Use up scarce resources - so less resources for other uses
Repatriation of profits to home country - so country does not receive expected amount of tax revenue
Often only unskilled jobs created/may offer low wages/poor working conditions
Often try to avoid amount of tax paid in host country
Owed to influence government decisions/local economy

Multinational business - Effect of businesses turning multinational to stakeholder groups:

Shareholders:

Value of assets increases - as increased profit can be reinvested
Increased dividends - profit increases from avoiding barriers to trade
Lower dividends - if need to fund expansion into other countries
Increased share price - become more well-known business
Easier to seek shares - as company is known globally with higher revenue

Employees:

May lose jobs - as business moves to produce in a country with lower production costs
May gain control - from business expanding into different markets and employing new employees
May have a more secure job - as business remains competitive if competitor companies are also expanding abroad
Higher wages paid - as business is more successful and can afford to increase wages

Suppliers:

May have increased sales - as output of multinational business increases
May lose sales - multinational may purchase cheaper suppliers in other countries

Government:

Higher tax revenue - higher profit repatriated
May lose tax revenue if multinational locates head office in another country

Advantages of maintaining customer loyalty

Maintain/increase sales from repeat customers
Improve reputations/brand image
Current customers recommend/less advertising needed/lower cost of marketing
Easier to introduce new products
Easier to gain feedback/learn about trends
May be able to increase prices/become price inelastic

Importance of profit:

Source of finance/reinvest in the business/pay back debts
Measure success of business over the years
Reward for risk-taking
Provides a return to shareholders and helps attract new investors
Support loan applications

Profit margin importance:

Profit as a proportion of sales revenue, a higher margin would mean more profit
Influence price charged - it could mean more people buy product
Indicates efficiency
Measure success
Comparison with other business

Importance of finance:

For the purchase of investment - buy equipment to replace worn out machinery - high amount of finance needed so may not all be from owner’s capital
To finance the expansion/growth of the business
To invest in the latest technology - remain competitive
To provide working capital/pay expenses - payment of wages/raw materials - if not able to pay costs then output cannot be produced - prevents liquidity issues
Development of new product - high costs of producing new product - outflow of cash with no inflow for a certain time.
Start up another business - needs to purchase equipment/raw materials - may take time for sufficient cash to built up in the business to pay for assets

Wide span of control:

Advantages:

Fewer supervisors needed - helping reduce labor costs
Faster communication - leading to quicker/better decision-making
Encourages delegation - which can increase motivation of employees

Disadvantages:

Less control - so less work done/lower productivity
Workers might not have skills to cope with extra responsibilities- leading to mistakes
Effective communication may be difficult - as large number of subordinates are present
Managers might not have the necessary skills - leading to poor management and reduced output of business

Training:

Off-the-job adv:

Allows for mistakes to be made - lower risk of damaging reputation
Up to date/new skills can be gained - greater output by worker and can solve harder tasks
Skills might not be availability in the business - so benefit from new technique ideas

Off-the-job disadvantages:

Use specialist trainers - which is expensive and increases costs
Travel cost - increasing cash outflow
Output might decrease - busy training away from workplace - wages are paid but no output from the trainee
Additional qualifications may make it easier for trainee to leave for another job - increasing recruitment costs

On-the-job Advantages:

Employee can carry on working so some work is done
Control what is taught employees learn exact wat business wants things done - so workers only learn skills needed
Cheaper - reducing training costs

On-the-job disadvantages:

Reinforce errors/bad habits of trainers - reducing sales and damaging reputation
Trainer is less productive when training others
No qualifications may be gained by the trainee

Induction training:

Helps employees settle into job quickly/familiarize with workers - so can can help maintain standards
Aware of health and safety/legal issues
Know who to ask if there is a problem
Opportunity to communicate culture
Help keep productivity/efficiency high
Less likely to make mistakes - can help protect business reputation
Employees are not working but are still pared - which could increase costs
Delays when employees start their job - so may have reduced output

Importance of training:

Improve efficiency - increase output/faster production - which may help lower average costs - benefiting from economies of scale
More skilled/flexible employees able to cover absence of others
Fewer mistakes/better quality - which could lower costs - better customer satisfaction - fewer complaints - better brand image
Increase motivation - which can help reduce labour turnover
Fewer customer complaints - increasing customer loyalty
Less supervision - so managers have time to focus on other activities

Added value

Increase price:

Improving quality of product - so customers may be prepared to pay higher prices - better than competitors - but it depends on the prices charged by competitors - may lose sales
Reduce material/variable costs
Branding - improving brand image/change packaging - so customers think the product is worth more - more well known
Excellent/better service - customers will be willing to pay a higher price if the product is made to appear more attractive
Additional product features by improving designs - making the product more desirable than similar products so willing to pay more
Convenience - customers may pay more of a product they can have straightaway - attractive to a wider range of customers

Lower costs:

Buy cheaper raw materials - reduces input costs - widening the gap between cost and price - but customers may find products are of lower quality - unhappy customers lead to bad reputation - lower sales
Reduce the number of material used

Franchise:

Franchise fee must be paid/license has to be bought - providing funds for investments
Can expand at a faster rate - which can help increase its market share
Receives royalties/share of profit
Franchisees responsible for day-to-day management - business can focus on other issues
Increasing brand awareness - by increasing sales

Ethical business:

Advantages:

Enhance reputation/brand image - helps attract customers - willing to pay higher prices
Customers may pay higher prices - increasing revenue which could help cover costs
Can help motivate employees - increasing production and reducing absenteeism
Good relationships with customers - can develop customer loyalty
Increase demand - increasing revenue
Business more attractive to potential employees - they will want to be associated with an ethical company
Keeps suppliers trusted - less likely to lose suppliers

Disadvantages:

Can increase costs - leading to higher prices - which may lead to fewer customers/sales
May not be sufficient/difficult to find ethical suppliers - reducing output
Ethical suppliers may have higher prices
May need to charge a fair price to customer - decreasing revenue

Ways to become ethical:

Pay fair wages
Ensure fair working conditions for employees
Pay suppliers on time
Pay fair price to suppliers
Charge customers fair prices
Source environmentally friendly materials

Importance of cash:

Pay wages to employees
Pay suppliers
Pay expenses like advertising
Repay debts
For use in emergency

Reasons for demand of inelastic products

Unique products - increase in price is likely to result in a lower percentage change in demand
Consider a need for customers - so customers likely to remain brand loyal even if price increases
Low proportion of income spent on product - so customers would still buy if the price increased

Advertising methods:

Advantages of specialist magazines:

Attract specific customers/target market - increasing sales
Able to use colour/pictures - which can help attract attention
Can keep for future reference

Disadvantages of magazines:

Magazines are often only listed once a week/month
Not everyone reads/buys specialist magazines

Other methods:

Social media - as large potential market - seen by many people
Newspapers - not everyone reads them - so can retail target market - lead to fewer sales
Leaflets - but people may throw them away - seen as litter

Promotion methods:

Advertising - using leaflets/posters - which raise brand awareness
Point of sales displays - as attracts attention of customers
Samples - if liked more willing to buy
Money off incentives - promotional pricing or buy one get one free - will encourage customers to buy the product - appeal to price sensitive customers
Competitions - have a better chance of winning prices

Reasons for the need of finance:

Short-term:

Pay day-to-day costs
Pay wages/salary
Purchase inventory
To prevent cash flow problems

Long term:

Purchase a non-current assets
Fund expansion/growth
Fund takeover of another business
Develop new products/services

Reasons for working capital:

Needed to pay for day-to-day costs - if lack then may not be able to pay wages
Not able to buy supplies for products - not abet to satisfy customer needs - gain poor reputation with customers as being unreliable
So the business does not lack liability - to avoid cash flow problems - so does not become insolvent
Holding too high a level of inventories - not good use of cash if working capital is high

Effects of economic recession:

Less/lower demand - reducing revenue
Lower competition - which could increase potential customer base
Widen pool of potential employee - which may lower recruitment costs
Reduce number of employees - so does not need finance
Material costs may be lower - which may increase profit margin
May delay any expansion plans - so business must remain small
May have cash problems - so need overdraft/loan

Increase in interest rate:

Increased costs of finance/borrowing - so less cash to spend on other areas of the business
Decreased demand/fewer sales - which could lower revenue
More difficult to get loan - could delay investments - become less competitive

Economic recession:

Recession could mean fall in disposable income - lower sales
Higher unemployment - so fall in people's living standards

Increase in rate of inflation problems:

Lower demand - fewer sales - reducing revenue
Workers may demand more wages - increasing in labour costs - could cause the business to have cash flow problems
May need to increase prices - could lose customers who are price elastic

Batch production

Advantages:

Flexible - helping the business adapt to the new markets
Production may not be affected to any great extent if machinery breaks down
Range/variety of products - better motivation for the employees
Can motivate workers
Large quantity produced than job production - can keep restocking the shop with full variety of products
Raw materials can be purchased in larger quantities than job production so gain economies of scale - lower unit cost of products

Disadvantages:

Can be expensive - to move part-finished goods around the factory
Machines have to be reset between batches - takes time - delays production
One mistake in production may mean the whole batch is affected - needs to be thrown away - waster raw materials
Warehouse needed - for finished batches stored before being sold
Size of batch may be too small - not enough products to meet demand

Flow production:

Advantages:

High output/fast production - increase efficient - able to meet orders on time, will be able to cope up if increase in demand
Benefit from economies of scale - leading to lower average unit costs
Can produce 24 hours a day/ continuous production - so able to produce large output
Allows for capital intensive methods/fewer employees - reducing labour costs

Disadvantages:

Inflexible - which could lead to high level of wastage
Lower motivation as work may be boring - so employee are less efficient/lower output/high labour turnover
If one machine breaks down whole production will stop - fewer output - fewer sales
High set up costs - leading to large cash outflows - requirement of source of finance

Joint venture:

Advantages:

Increase capital - which can help the business reduce borrowing
Access to shared knowledge- increasing productivity/efficiency
Less need for market research - lowers marketing costs
Avoided/reduce competition - increasing market share
Share/lower financial risks - which reduces possible loses

Disadvantages:

Possible management conflicts/disagreements - slow decision making
Mistakes will reflect on all parties - which can damage reputation
Must share profit - which may reduce motivation of each party
Takes time to find the right partner - which may delay the expansion

Primary research:

Advantages:

Up to date - which can help make better decisions to satisfy customer demand
Business specific data can be gathered - so should help the business find out only what it needs to know - saving money
Only available to own business/not available to competitors

Disadvantages:

Expensive - as need to recruit experts to assists which increase cash outflows
Time to collect - which could mean opportunities are missed

Recruitment:

Importance of recruitment stages:

Job analysis:

helps work out whether need to recruit someone - duties can be given to someone else

Job description:

Provides a clear idea of what job involves - so can help avoid applications from people who cannot do the job
Provides basis for drawing up a contract
Helps decide basis for pay
Helps create person specification
Helps resolve disputes

Job advertisements:

Makes applicants aware of the job
Helps attract a range of applicants

External recruitment:

Wider pool of candidates - improving chances of dining the most appropriate person
Bring new ideas/experience/skills - could help increase efficiency
Avoids risk of upsetting other employees when someone who is internal promoted

Internal recruitment:

Quicker and cheaper than external recruitment - which reduces expenses
Acts as incentive/motivation for employees - so reducing labour turnover
People know the business - so can start to work more quickly
Company knows the people/employee

Job specification - identifies qualifications and skills that an employee requires

Diseconomies of scale:

Less motivation - leading to higher labour turnover
Poor communication - as more levels for messages to pass through
Weak coordination - leading to wrong decisions
Lack of control - which may lead to some employees working less efficiently

Leadership styles:

1 - Democratic leadership

Advantages:

Gain more ideas - which may increase sales
Can increase motivation - leading to less absenteeism - less likely to leave
Better decisions could be made - as can use employees experience and skills

Disadvantages:

Employees may not have the necessary experience - leading to mistakes
Takes time to consult employees - which can slow decision-making
Unpopular decisions may need to be made and employee ideas ignored

2 - Autocratic leadership

Advantages:

Quicker/faster decision making - so can respond to opportunities sooner
Do not need to consult employees - leader to quicker decision making - no conflicts between employees
Decisions are made by experienced workers - so less chance of mistakes

Disadvantages:

Demotivate employees - leading to higher labour turner because they have not input into decisions
Supervisors have less time to focus on other tasks - leading to lower productivity as employees are closely monitored
Lack of ideas from employees - communication is one way - workers might lack commitment

Laissez-faire:

Main objectives of the business shared with employees but they they are left to organise their own work and take decisions without any interference which can be demotivating
Communication can be difficult as the leader has little involvement in the decisions being made
Employees can be motivated as are value and trusted in to making decisions
Employees can be creative with fresh ideas
Not suitable if a clear direction is needed and consistent approach to customers

Public limited company:

Advantages:

Able to sell shares to the public - so additional capital can be raised to finance the business - no need to repay
Rapid expansion possible by raising large sums of capital
Limited liability would encourage more people to invest in the public limited company
High status and easier to attract suppliers

Disadvantages:

Accounts available to the public
Pressure to pay large dividends to stakeholders - restricts the planned expansion
Risk of takeover - no control over who buys the share
More legal agreements - controls to follow - which increases costs/time consuming
Complicated legal formalities - takes time and costs money - adding to cash outflows/costs for the business

Piece rate:

Employees would receive payment for each product - encourage them to work harder - produce more output - possible increased sales
Increased pay leads to employees being more motivated - rude the labour turnover
Maybe unfair if some take longer than other - so some employees have higher payment - may demotivate employees
If machinery breaks down - the employees will earn less - demotivated
May work rapidly - increased risks and increased wastage costs

Teamworking:

Production employees become more involved with decision making - makes them feel more valued, more responsibilities
More control over tasks - less likely to leave so may reduce recruitment costs

Job rotation:

Makes the employees’ job more interesting - more motivation to work
Change tasks from one product to another - may need different skills to complete this work - increased training costs
Quality can decrease - if employees are less specialized in different tasks

Short chain of command:

Communication is more accurate - fewer people for messages to be passed through - less chance of errors
Senior managers are less remote from lower levels - allows there’s managers to be more aware of views of employee - less likely to be disputes between employees and managers
Decision making can be quicker - fewer levels to discuss issues and pass on decisions
Managers have wider span of control - which may increase the opportunities for delegation - employees feel more trusted - increased job satisfaction
Managers less control of subordinates - more likely to make mistakes - increased cost

Location/Markets

Why want to enter new markets

different target market will see products - may be attracted to buy - increasing potential sales
May have more customers wanting to buy this type of product - greater number of sales
Home market has slow growth - so future growth in sales is limited - new markers provide opportunities for growth not available in current location
Spread risk - less dependent on one location/factory
Economies of scale
Increase sales or market share
Fast growing economy
Greater recognition or brand awareness
Access to cheaper labour/resources
Fewer trade restriction

Deciding location (12 marker)

Availability of raw materials - make it easier and qualifier to revive supplier - less need to import - can be cheaper - saving costs
Many competitors - demand may be lower - reduce selling price to attract customers
Spend more on marketing to enter the new market - increasing costs - possibly reducing profit
Harder to recruit new workers - may have to offer more benefits to attract employees from other competitors
Availability of skilled workers - can provide ideas in business - leading to more sales
Communication issues - might not speak local language
Closer to major market of the business - so could respond quicker to customers
Changes in demand - market might change in further
Lower distribution costs - could be more expensive to move
Allowed tariffs or quotas - reducing costs
Different legal restrictions - procedures may need changing
Cost of setting up
Demand from customers - so generate revenue
Environmental considerations - must be away from housing
Access to subsidies or grants - which could reduce costs

Television advertising:

Wide range of people see it - greater brand awareness - higher sales
Can be attractive and persuasive - developing brand image and attracting customers
Can be made for targeted audience - increasing effectiveness of marketing budget - marketing economies of scale

Acid test ratio:

High(more than 1) - can repay its current liabilities - good liquidity - current assets could be put to better use in the business to increase revenue

Low(less than 1) -

Technology:

Effect on production method:

Wide/variety of products can be designed - increasing potential sales
High/faster output - improve efficiency
Fewer mistakes/ better quality - improve its reputation
Fewer employees/replace labour - reducing wage costs
Automation/ become capital intensive
Improved inventory control - as easier to keep track of raw materials

When to introduce new technology (factors to consider)

Cost of technology - which may not be able to afford
Cost of training/are workers willing to learn how to use it - increasing its expenses as training cost required
Potential efficiency gains - to lower average costs
Level of demand - so may not be bye to justify costs
Sufficient space available - as if not the rent might increase
Customer ability to operate the technology - as if cannot use could result to fewer sales/ less revenue

Tariffs, taxes and interest rates

Import tariffs - Impact on manufacturing business

Higher costs of importing raw materials - could lead to higher prices/lower profit margin/so need to find new suppliers locally

May increase price of imported finished goods - which may lead to fewer sales/less revenue/increase demand for locally made products
Other countries may retaliate/introduce tariffs - making it more difficult to export

Decrease in interest rates:

Decrease in interest costs for a new bank loan - may be more likely to invest in new operations using bank loan - or may buy new products - lower interest rates reduce expenses
Reduces the costs of overdrafts - reduces interest payment for expenses - lower costs
May lead to higher economic growth - lower unemployment higher incomes for consumers - increased demands for products
Increases the available come consumers can spend
If customers had a mortgage to repay - lower repayments - may increase demand for the business’s high-quality products

Increase in taxes:

May reduce the businesses sales - as a result of less spending by consumers on products
Less retained profit and less investment in product’s raw materials
May lead to an increase in price of products - may lead to lower sales and revenue
May allow an increase in government payments to people on a lower income - May increase the sales of the business

Cheap imports:

Reduced demand - as its customers are able to buy from rivals
May reduce prices - so revenue is reduced
Labour costs of production - as raw materials may be cheaper
Reduce market share

Stakeholders:

Use of financial statements for stakeholders:

1 - Employees

To know if they have job security - ask may decide to look for job elsewhere
To know if they will receive wage payments on time - if less - may not be able to cover their basic needs
To know whether to ask for a pay rise - look at level of profit

2 - Suppliers

To see current level of debt - to help decide whether to give trade credit
To see level of cash/liquidity - know whether they will revive payments on time
To know whether they will revive payments of time - if not, may stop supplying
Asses level of sales - as high/low may lead to fewer orders

3 - Shareholders/Investors

to know if they should invest in buying more shares - look at level of profit and/or compare profitability ratio - (dont want to invest in business with cash or liquidity problem)
to know statement of financial position - to see if business was more worth at the end of the year than the beginning

Mass market:

Potential for high sales - increased revenue
Benefit from economies of scale - so lower average cost
Spread risks - so falling sales in one area may be offset by sales elsewhere
High levels of competition - may mean have lower prices

Nice market:

May be possible to charge higher prices - which can increase profit margin
Able to closely meet customers needs - could lead to high customer loyalty
Opportunity to earn higher profits might attract new competitors - so prices may be reduced

Sources of finance:

Bank loan:

Can receive all money at once
Long time to repay - can be spread out over several years - does not affect cash flow
Need to pay increase - which can increase costs
Increases liabilities - must be repaid
Banks may not be willing to lend the money

Retained profit:

No repayments costs - no interest to pay - keeps expenses down
May not be enough funds available

Sell shares:

No need to repay/no interest - so fixed costs do not increase
Access to greater amount of capital - as no restriction on shareholder numbers
Permanent source of capital - so no need to repay
Will dilute ownership - lead to loss of control - making it difficult to manage or take decisions
Shareholder may expect dividends
Cost or time to arrange - so not able to focus on other issues

Sales of existing non-current assets:

These might be unused equipment and not affect existing production levels

Sale of intern tires to reduce inventory levels:

Grants and subsidies from the government:

Funsa may be available from the government to support business
Do not have to be repaid

Sole trader:

Keeps all profit - so if successful will make more money/will encourage him to do better
Own boss/has complete control - so make decisions more quickly
Does not have to give information about his business to anyone else - reducing possible competing
Has freedom to choose own holidays
Has close contact with employees - so able to respond quickly to changes in demand - better customer relationship/loyalty

Difficult to raise capital - which could restrict growth
Unlimited liability - so his personal assets are at risks if he cannot pay off his debts
Has all the responsibility/make decisions on own - so may lead to wrong decisions being made
May have long hours to work - opportunity cost - otherwise may lose out on potential sales
If not present - production will stop - no one else to do the work - decreased sales

Reasons for starting own business:

Made redundant - need to provide an income as lost job
To be own boss - independence from instruction from employer
Able to decide how to spend time - flexible working hours/take time off
To make a profit - as may revive a higher income than working for another business
To gain recognition and status - to become well known and respected

Motivation and employees:

Methods of motivation

Bonus - employees will try to achieve targets set
Job rotation - can make work more interesting
Job enrichment - as employees feel they are given more responsibility
Training - so employees have a higher level of skills
Increase wage rate - increases business costs
Profit sharing - which only pay if a profit is made
Commission - employees will have incentive to sell more

More motivated workforce:

More output
Workers more committed - work harder - which clears to an increase in productivity
Lower wage costs - as might not need to employ many workers - saving on recruitment costs
More flexible - workers will be able to respond to changing tastes
Lower levels of absenteeism
Lower training/recruitment costs - because lower level of staff turnover
Loyal staff - reduce turnover
Less mistakes - save money

Improve employee productivity:

Switch to piece rate - as workers might produce more in order to gain more money
Increase pay - which improves motivation - so workers produce more per hour
Better working conditions to improve morale
New and better machinery
Training - improves motivation

Profit sharing:

Employees now receive an additional payment to their wages. A share of the profits may increase motivation which may lead to increased productivity, and this may lead to lower costs per unit and possible higher profit
However, existing shareholders may lose some control if profit sharing is from the issue of shares to employees
Employees may see no link between their day-to-day effort and their contribution to profit which employees may have no influence over
May lead to reduced dividends per saber or less retained profit
Motivate workers/improve efficiency
Creates team spirit - sense of belonging - common goal
Improve employee loyalty - retention
Helps attract new employees

Trade Union effect on business:

Easier to negotiate with just one organisation representing all employees at the business
May have to face increased wage costs if union successfully negotiates a pay rise
Improve communication between managers and workers
Improve relations between managers and workers
May be affected by industrial action

Trade Union effect on employees:

May be able to negotiate a wage increase
May be able to improve working conditions
Collective bargaining increases likelihood of success for workers demands
Worker views are put forward to management
Can seek advice about issues of pay, dismissal, woker’s rights
More aware of employee rights

Reasons for downsize of workforce:

Need to reduce costs
Economic crisis
Merger or takeover
Excess workforce
Relocation
Changes in management
Automation

Motivation theories:

Taylor - scientific management approach - money is main motivator
Maslow - hierarchy of needs, satisfy physiological, safety, social, self-esteem, self-actualisation needs to increase motivation
Herzberg - two factor theory - hygiene factors relate the working environment and motivating factors relate to improving job itself - work more meaningful and worker given more responsibility

Full-time and Part-time employees:

Part-time employees:

More flexible hours of work - increase motivation of the part-time employees - willing to work more
Easier to increase the employee hours during busy times - allows the business to meet customer demand effectively
Easier to recruit part-time employees - because hours may be more flexible and fit in with family commitments
May reduce labour costs compared to employing full-time employees - as may only employ workers when needed at busy times

Full-time:

More likely to be trained - increasing productivity of employees
Reduce labour turnover - more likely to see the job as a long-term rather than temporary - lower recruitment costs
More committed to the business - leases to more motivated workers which increases efficiency
More likely to be suitable for promotion as gained more skills and experiences if the business expands in the further
Easier to communicate with than part-time workers - as in work for more hours a day
May be more motivated - so productivity would raise

Questionnaire:

Reason for Sampling for questionnaire:

To reduce the time taken to carry out the questionnaire - takes a lot of time to ask whole population - sampling means reduced number of questionnaires have to be collected and analyzed
To reduce the cost of carrying out the questionnaire - reduced number of questionnaires printed - reduced time taken by staff to carry out questionnaire
More accurate/relevant information - as potential customers can be targeted - so answers only relate to potential customers and results are not influenced by answers from people not interested - able to work towards feedback of customer and increase customer satisfaction

Advantages:

Large amounts of information can be collected in a short period of time
Many people can be asked the same question - increase the sample size
Respondent had time to consider question so more likely to come Oleg
Relatively easy to analyze - so quickly able to do something to solve it

Disadvantages:

questions may be poorly worded - so business makes the wrong decisions
People may not tell the truth
Customers may not return to fill in the questionnaire

Marketing:

Leaflets:

Chepa method - low printing costs
Handed out in the streets - wide range of people - wide distribution to potential customers
Could contain promotion - increase the likelihood of attracting customers
Can be kept for later use - provides remainder of contact details for customers
Home owners may not read the leaflets or throw them away - waste of money and ineffective

Advertisements:

Will reach the target market - targeted advertising - using marketing costs effectively
Relatively cheap compared to national advertising- reducing advertising costs as only target targeted audience
Information can be cut out and kept for later use - reminds potential customers of contact details
A lot of information can be included - may encourage and persuade more customers
Only black and white - so may not be attractive - reducing efficiency

Social media :

Can be free with no costs - unless paid for advertising - seen by many young consumers
Allows video and audio to be added - makes the advertisement more attractive - may be more likely to persuade consumers
Can be seen everywhere - so more targeted on potential customers
Customers may not trust posts on social media - may think they are fake

Newspaper:

A large number of people see the advert
A lot of information can be included

Age profile/which people read newspapers - so costs more to advertise in a range of papers
Restricts target market - bad use of marketing budget
Day to miss/limited visual impact - if lots of other adverts - mailing in black and white - not stand out
Additional costs of larger or colourful adverts - will increase expenses
Many customers may not read newspapers - cannot attract potential customers - no increase in sells

E Commerce threats:

More competitions - difficult to stand out - leading to less revenue
No passing trade - so could mean lower sales
Not everyone has access to internet - which reduces its target market
Cost to design website - increasing cash outflow
Lack of personal contact with customers - difficult to develop brand loyalty - which could damage reputation
Risk of hackers and frauds

E commerce Opportunities:

Increase potential number of customers/sales/can access customers around the world - increasing its market share
Low costs - way to promote/advertising business - which can raise awareness
Fewer employees needed - so lower labour costs

Roles of marketing for a business:

Identifies customer needs - finds out exactly what goods or services consumers want before producing them
Satisfies customer needs - so that the goods or services provided by the business will be sold at a profit
Maintains customer loyalty - makes sure the business continues to meet any changing customer needs to ensure they keep coming back to buy from the business
Builds customer relationships - over the long-term to keep a good relationship with customers to understand them and to understand any change in their needs

Methods of market research:

Observation/ visiting competition
Questionnaire
Surveys
Interviews
Free samples
Access government statistics
Newspapers/magazines

Factors to consider when developing products in new markets:

Size and nature of marts
Legal requirements - meet safety requirements
Language
Competing - Need to develop a product with a USP that is different to competitor’s products
GDP/income levels - may need to make a more affordable product
Cultural differences

Communication:

Newsletter: (To communicate with employees)

Contains a lot of information - can read when want
Workers familiar with approach - can easily food out what they need
Information may not be up-to-date - only published weekly
Other alternatives/new technology available - which might be more suitable - quicker and easier
No two-way communication - no was of knowing if message is acknowledged

Methods to communicate with employees:

Memo - short written message that can be on paper or emailed
Letter - when more of a formal document is required such as informing an employee of dismissal
Report - a detailed document about a particular issue
Notice/poster - put on a board so that all employees can read the detailed information on it
Text message – can be quickly sent to employees’ mobile phones and can be reread if necessary
PowerPoint presentation – can give a lot of visual information in a meeting with employees/managers
Meeting with employees/briefing/video conferencing – can give
information to many employees at once and feedback is not necessary
Face-to-face conversation - where the manager can discuss an issue with
an employee / can be two-way communication with an employee/ give instructions to an employee
Telephone/mobile phone call – two-way communication which allows discussion/explanation
Email - can send detailed information which the employees can refer back to in the future
To annoy/public address (PA) system
Newsletter
Social media

Factors to consider when choosing communication for employees:

How many employees need to be informed so a method such as notice board could be suitable if many employees
If feedback is needed - if so then the manager could use telephone calls to discuss points
How much information needs to be included in the message - if it is a lot of information written form of communication should be used
If there is a need for written record - could use email
Speed of communication - if an employee needs to be told quickly then face-to-face could be chosen
Cost of communication methods chosen

Problems in communication:

1 - Different languages are spoken in markets in other countries:

Harder to understand what is being said or asked
Recruit managers with language skills
May increase costs of employing an interpreter
Customers may have difficulty reading labels/instructions

2 - Problems with medium + message lost/no feedback given, message not picked up

3 - Problems with receiver - not listening - may not trust sender - not understanding

4 - Problems with feedback - only-one-way communication - no feedback

Starting to use several new suppliers:

No relations established
May big know who to contact if there are queries
Different suppliers to communicate with which takes time to know who to contact and some errors may be made
Culture may be different if suppliers are in other countries meaning communication may be misunderstood

Meeting:

No written record so message may be forgotten
Meeting only once a week and there may be issues arising before the next meeting that needs attention
Workers may be absent and miss the meeting and therefore not receive information

Communication methods when contacting suppliers about a late delivery:

1 - Email:

can be set up quickly
Can be sent to many people at once
Hard copy if email printed out
Can be saved for reference to later
No guarantee it has been read by suppliers
Could have gone into junk folder
May not be secure
If many emails are sent, then it could be lost amongst them
Required an internet connection

2 - Mobile phone:

Know the message has been received
Caller can ask questions about the products
Feedback can be given
Receiver more likely to have mobile phone on them so easier to reach
May take time to reach the correct person
Time/language differences
Can be expensive
Time consuming if need to contact many different suppliers

3 - Letter:

Hard copy
More formal or legal documents
A lot of detail can be included about the late delivery
Slower than other two methods
Can be more expensive than other 2 methods
No guarantee the letter has been received by the supplier

Break even point:

Usefulness of break-even analysis:

Predicts how many sales the business needs to make
Predicts how many sales could fall by and still make a profit
Shows potential profit/loss for the business at different levels of output
Shows possible effect of change in price
Shows possible effect of change in costs
May be useful to show to the bank manager to indicate a profit is predicted and therefore, more likely to gain a bank loan

Advantages of break even analysis:

Shows the expected level of profit/loss at different levels of output - could help motivate workers
Shows the margin of safety
Helps planning/decision making
Can see what helps if costs/price changes
Helps apply for finance - loans

Limitations:

Assumes all output sold/sales not always the same as output
Variable costs do not always stay the same
Not easy to separate costs into fixed and variable
Hard to calculate when to sell products
Only focuses on break even when there are many other factors to consider when running a business
Assumes single product
Hard to split costs between fixed and variable

Promotion methods:

Advertising by social media - which can attract large audience - more customer’s attention
Public relations/sponsorship/celebrity
Promotional pricing - product will become affordable
Special offers
Free gifts

Promotion or product? (Which is more important)

Promotion:

Helps raise awareness/inform people - leading to more sales - increased revenue
Can help attract/persuade potential customers
Can help create brand image - increasing customer loyalty

Product:

A poor bad quality product will not last long in Marley - no point in marketing/promotion

Using internet to improve promotion:

1 - Improve existing website:

Makes the information more accessible to potential customers
May look more attractive - so more potential customers, can bring new customers
Have complete control over the way the brand is shown in adverts - proper brand image formed
Can include interactive adverts, which are more attractive than static adverts in magazines - effective use of marketing budget
Increased costs of paying for a specialists to carry out the website - increasing capital required
On-going costs of maintenance of the website
Search engines may not bring up the business first page of a search, unless paid for the advertising
Relies on people finding the website

2 - Advertise using social media:

Can target specific demographic groups
Viral marketing - share information with family and friends enables recommendations to be spread quickly and to a large group
Potential customers will see an advert for the business when they go to sites like Facebook - increased awareness of business
Social media is widely used by consumers - large scale exposure
Can easily be ignore - lot of adverts on social media
Can be expensive for business to pay for pop-ups
Potential customers may not use social media
Bad reviews can lead to fewer sales - may be unfair if only small proportion are bad

Email special offers to existing employees:

Cheap way to get information to a lot of customers
Emails go directly to existing customers
May reach customers that are difficult to reach in other ways
Directs more traffic to the website
Email may go into spam and so be ignored
No guarantee the email is correct and therefore will not be seen
Existing customers may see this as annoying and get a negative view about business
Only sent to existing customers - some customers may not have new email - cannot target new potential customers

Sponsorship:

Can target intended market - attracting more customers
The business will be linked to the event sponsored
Actions of the sponsored person or group could damage reputation - reducing sales

Newspaper:

Can be seen by a lot of people
Cheaper

Aims of promotion:

Inform/ raise awareness of new products
Create brand image
Compete with competitors
Persuade/increase sales
Customer loyalty

Pricing methods:

Penetration pricing:

Setting a lower price than competitors should attract customers - leading to higher number of sales
Help build up market share quickly - brand recognition
Customers may get used to low prices and may not buy if prices increase - leading to fewer sales/damaged reputation
Might not be appropriate for a product which is being promoted as high quality - can damage image/reputation

Cost-plus:

Easy to apply to product - as just add a percentage mark up costs
Can have different markups in different markets - can gain more profit from markeys where a higher price can be charged
Each product makes a profit for the business
Profit will only be made if business sells sufficient number of products to break even
Time is taken to research costs of all the raw materials and difficult to calculate costs
No incentives to reduce costs
If costs are high then the selling price of the products with nice market may be too high to be competitive

Promotional:

Low price attracts customers and increase sales of products - attracts attention to the products to encourage new customers to try them - establish regular sales
Helps to ensure a successful launch into a new market - could increase sales and potentially id read market share
It is useful to get rid of unwanted inventory that did not sell
Can help to renew interstate in a product if sales are falling
Low price will mean low profit per product
Customers may expect prices to remain low and therefore not purchase products when the price is raised at a later date
Consumers may think low price is due to low quality of the product
May lead to price competition with competitors - so business may have to reduce prices again

Competitive pricing:

Reduce profit margins - so need to sell more to make same level of profit
Possible increase in sales - because prices could be lower - helping attract price sensitive customers
Impact on image - as need to lower costs to managing competitive
May lose suppliers
High research costs to find out competitor’s prices - may increase overall costs
Product may be of high quality - might need to be sold at a higher price to emphasize the higher quality image

Price skimming:

Recover costs quicker - to pay for development
Gives the image of a quality product - which can attract wealthy customers
Higher revenue per item
Break even at lower output - lower risk
May put off some potential customers - leading to lower sales
Only work in short term - as competitors could produce cheaper alternatives

Redundant and dismissal:

Factors when redundant:

Identify which jobs are essential - so would not want to spend money recruiting them again
Performance/experience - so will want to get rid of people who make mistakes
Length of service - might be cheaper to let go
Attitude/attendance - will want to lose poor/bad workers
Age/physical ability

Low labour turnover:

Advantages:

Saves time - so managers can focus on other issues
Better reputation - can help attract new workers
Lower recruitment costs - do not need to advertise people
Lower training costs - as workers already know what to do
Keep expertise/knowledge - which may not be easy to replace

Stakeholder groups - how they are affected if business - success

Managers - know performance improved
Employees - pay increase - from a successful business
Lenders/bank - so know if able to repay capital
Suppliers - may be more risky to sell stock (current ratio fallen)
Government - to see tax revenue paid

Takeover:

Would business benefit from takeover:

Could lead to more sales - could mean higher dividend
Increase in share price
Larger company might mean more secure investment - more capital to invest
ROCE increased - so profitability has improved
Price offered is more than net assets - so shareholders receive more than value of business
Depends on objectives
Level of influence - as likely to have less say in larger company

Problems of takeovers:

1 - More difficult to control business:

Increased number of employees - managers may not be in direct contact with employees
Need to employ more supervisors to control workers - increases costs as more wages to pay
May mean some workers are not supervised and may not work efficiently - less output generated from each worker
Difficult communication with employees

2 - Lack of finance:

Expansion costs high
Take out loans to finance the takeovers - increased interest payments for loans - lower profits

3 - Clash of business cultures:

if the new takeover businesses have different cultures and way of doing things - may have clashes between staff
Employees not working effectively together - reduced efficiency as output per employee drops
Resistance by workers to do things differently - reduces efficiency - workers demotivated after the takeover

Economies of scale:

Technical - invest large amounts in business - can develop new products
Managerial - can afford to hire specialists - better use of resources - raise ROCE
Purchasing - bulk buying - lower average costs - increase profit/revenue
Financial - banks more lemon to lend money
Risk bearing - as spread risk of operating in different locations/markets/countries

Target different market segment:

Different customers may have different needs - so have to adapt their services
Wider market - so possibility of additional sales
Need to advertise to potential customers - increase costs
Cost of market research - a they will want to know more about customers
Reaction of existing competitors - which could lead to a price war

Advantages of bank overdraft:

Flexible form of borrowing
Interest only paid on amount overdrawn
Can be cheaper than loans
Can be used for whatever purpose the customer requires
Ease/speed of arrangement
No security needed
Help avoid cash flow problems

Profitability from opening a new shop?

Sales revenue of the business should increase - customers attracted
Extra costs - such as additional rent or may need to hire more workers - which will increase Lu’s expenses
Is there sufficient demand - if not, might have loss

Why is net profit not the same as net cash flow?

shares are on credit - money will not be received until later
Purchase of stock is by cash - profit is not earned until it is sold
Some costs may not be paid every week
Buys the raw materials for cash - and so only makes profit when they are sold

Managers:

Delegation:

1 - Advantages:

would allow managers to give more time to other tasks - more time to make decisions, not rushed - improved the success as less likely to make mistakes
More aware of what is happening with employee - can help see if change is required - keep more control of whole business
Employees could be more motivated - as feel trusted to do additional work - increases efficiency
Employees may be more productive as their skills are developed

2 - Disadvantages:

Could lose some control - as tasks are carried out by employees who may not know what to do - can make wrong decisions - wastage of time and money
May need to train employees - so that they know how to carry out delegated tasks - which increase costs and takes time
Mistakes may be made by subordinates - this may lead to customers complains - bad reputation for the business

Roles and the operations manager

Planning the production such as setting a target of an increase in output if production
Organizing the tasks done by the production line workers such as deciding which worker will do what task
Coordinating different departments with the production department ensuring that for example the purchasing department orders the right quantity of components
Commanding the supervisors on the production lines to ensure they all know what they should be doing to keep their target and meet deadlines
Controlling the employees on the production line to make sure they are all meeting their targets and producing toys efficiently

Functions of a manager:

Planning - setting aims and targets for the business - will give a sense of direction with common targets to work towards
Organizing - arranges the tasks for the employees - as a manager could not do al the tasks and will need to delegate
Coordinating - bringing tighter the different departments in the organisation - so tasks are carried out efficiently
Commanding - instructs the employees on how to carry out their tasks - gives guidance as required
Controlling - checking the employees work so that the expected output is produced each week - and that all aims are achieved

Partnership:

Advantages:

able to raise more capital - so less need to borrow money
Responsibilities/decisions are shared - less likely to make errors
More ideas from new partners - could offer advice about new methods - could make business more competitive
Partners can specialize in particular tasks
Other partner can cover if one is absent or ill

Disadvantages:

Different objectives - leading to disagreements
Have unlimited liability - as personal belongings at risk if business fails
Have to share product - so each person makes less than if it’s a sole trader - opportunity cost
Slow decision making or risk of disagreements - as takes time to resolve differences

Private limited company:

Can control who buys shares - so keep control in this competitive market
Easier to raise finance - increasing market share rapidly
Limited liability
Incorporation - separate legal identity
No need to publish accounts

Cash flow:

Increase cash flow:

1 - Arrange a bank loan:

Provides cash injection into the business - provides working capital to enable the business to keep trading
Provides a large cash inflow at one time - possible removing negative cash flow
May be quick to arrange and receive cash inflow quite quickly
Interest payable on bank loan
Interest and repayment if the loan will be an outflow each month may make business cash flow worse in the long run
May take time if ball reajests doumeng to support the application for the loan

2 - Ask deposit from customers:

improved the cash inflows as deposits is revived when the customer decides to buy
Helps to reduce the chance of customers canceling if deposit is non refundable- improves cash inflow
May lose some customers who prefer not to pay deposit
Existing customers may not return as not happy about deposits being introduced

3 - Trade credits from suppliers

Reduce the cash outflows
Business may have received payment for products before payment to suppliers is given
Some suppliers may be unwilling to offer trade credit, may have to find new suppliers
Trade suppliers may offer lower discounts which would increase cash outflows in the longer term
It takes time to arrange for trade credit and the business may not have time

Ways to improve cash flow:

Delay payments to suppliers - which delays cash outflows
Selling unwanted assets - reduces cash outflows

Ways to keep costs low:

Choose low cost locations - leading to lower fixed costs
Pay minimum wage - keep variable costs low
Economies of scale - leading to lower average costs
Set lower marketing budget
Replace workers with machinery
Set up online
Buy direct from manufacturer - so lower cost than buying from an wholesaler

Business plan:

Advantages:

Help get a bank loan/finance - as lender can see that the business is able to repay
Provide targets/ sense of purpose/direction - as can see what the business needs to achieve
Helps decision-making - so does not waste time/money on the wrong target market/products
Act as checklist - way to monitor progress

Problems of selling at low prices:

Seen as cheap/low quality - could lead to fewer sales
Cash flow problems - so does not generate as much revenue per unit
Low profit margin - harder to break even

Legal controls

Import controls affect on business:

Increased import costs - more expensive to import
Can export less products/fewer sales in other countries
May not be able to obtain sufficient number/range of parts - so delay in production
May have to spend time finding local suppliers - which could delay output
Might have to charge higher prices - could decrease revenue/lose customers

Legal control of protecting environment effect:

Change or stop using certain methods - changing production
Increase costs - because they may have to pay more fines
May need to change supplier - increasing variable costs
Reduced demand - so lose revenue
My have to change location - as not allowed to operate in certain places

Legal controls on marketing affect on businesses:

Cannot make false claims about what the product will do
Contents or product must be described accurately
Products must be safe to use
Mistakes could lead to fines or damaged reputation

Legal control of age limit for workers:

May increase wage costs if cannot find workers - reduces profit
May already employ skilled worker - no effect
Efficiency might increase

Small businesses:

Why business might remain small:

The product - not suitable for production on a large scale
Market size - doesn’t have a large market
Owners choice and preferences - to keep work life balance
Easier to manage/control - owner makes decisions himself - may not have skills to manage a larger business
Lack of finance - wishes to maintain customer loyalty
Not willing to take additional risks - does not want more responsibility
Market dominated by large business - restricting growth and sales

Government:

Government grant as a source of finance:

1 - Advantages:

No need to repay
No finance costs/interest to pay

2 - Disadvantages:

May not provide full amount needed
May have restrictions about how to use it
Can take time to apply/obtain

Why government support business start-ups:

To reduce unemployment - as new businesses will create jobs
To increase completion - as new businesses will increase the number of competitors providing more choice of goods and services
To increase output - as new businesses will provide more goods and services to buy
To benefit society - as entrepreneurs may create social enterprises
May grow in the future - as large businesses started small at the beginning and the new start-up may become a large important business in the future

Debts:

Problems of having debts:

Difficult to arrange finance - may be difficult to expand
High level of interest - increasing cash outflows
Cannot meet repayments - leading to liquidity problems
Increase financial risk - so bank may not be willing to lend extra funds

Brand image:

Changing brand image:

1 - Advantages

Reflect new product range - can help attract a wider target market/range of people
Image might be out of date - so need to change it to remain competitive
Customers like something new - therefore they are more likely to try
Attract new customers

2 - Disadvantages:

Damage customer loyalty - as existing customers do not like the new logo created
Customers might not reconsider the new logo - therefore reducing sales
Time/cost - increasing expenses

Organisational structure:

1 - Advantages:

Employees have a clearly defined role
Clear chain of command
Employees have a clear career structure
Specialists can be employed

2 - Disadvantages:

Slow communication
Heavy workload
Communication between departments can be difficult
Can create rivalry between departments
Workers can feel isolated

Globalization:

Opportunities:

Lower variable costs
Access to larger market
Build reputation
Easier to find suitable workers
Access better or quicker distribution networks
Able to spread risks
Easier to import materials needed

Product:

Advantages of range of products

spread risks
Increase customers
Able to increase prices
Increase brand loyalty
Improve brand image

Advantages of developing new products:

Boost sales - as existing customers would buy a new product
Increase market share - by attracting customers away from competitors
Able to increase prices - can lead to greater customer interests
Create additional consumer interest - as better range of products available
Spreading risks - others can help make up the shortfall in sales
Need to replace opd products - this could help business survival

Strategies for extension of products:

Introduce new features
Look for new target markets
Rebrand to appeal to new market segments
Re-packaging
Create new uses

Disadvantages of developing new products:

No guarantee customers will like the product
Competitors might introduce rival products - reduce prices
High costs
Production issues
Having access to suitable materials

Paper 1: (V2)

External costs question:

Overproduction
Deforestation - had factories in 6 countries
Uses and extracts raw materials - Manufactured tyres which require rubber
Pollution