Business

IGCSE

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Chapter
1
Business

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Consumer Goods and Producer Goods​
​
Consumer goods are products or goods that a consumer will buy for personal use. Produced
goods products or goods odds that a business would buy or use for business purposes.
wing
Needs and wants​
​
Needs are required by an individual to survive, such as water, food, clothes, and shelter.​
​
Wants are products that an individual would like to have but aren't required to use for
survival.​
​
Unlimited needs and wants vs limited resources = economic issue​
​
A business owner should understand the cost and profits​
​
Cost = what is needed to be paid (employees, products, resources, ads, services, etc)
​
Profit = Sales minus cost

_________________________________________________________________________

Business sectors:​
​
Public
Government-owned​
(Healthcare, schools, security)​

Private​
individual-owned​
​
Private enterprise
Profit​
(fast food, Sportswear, electronics)

Social Enterprise
Non-profit​
(people in need, orphanage, Animal shelter, Homeless shelter)
________________________________________________________________________​

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Stakeholders

A stakeholder is an individual or group that has a direct interest in a business.

Employees, Consumers, investors, and shareholders are considered stakeholders

Internal stakeholder: someone within the business

External stakeholder: someone outside the business

Stakeholder Interest Power/Influence

Owners/shareholders Profit and influence Authority, hire/fire,

Customers Product/Service Revenue.

Employees Salary, Discounts, and work Labor turnover

Managers Higher salary, Reputation and

decision-making, and status decision-making

Financiers Money. Loan givers No, or yes

Suppliers Money, regular supplies quality/costs

Government Fees, recognition, and legal Laws

issues

Local Community Support, quality, and jobs Boycotting, protesting

Competitors Your ideas, planning, and More productivity, idea

marketing strategy stealing

_________________________________________________________________________

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Stakeholder

Financial objectives

To survive (survival)​
To make profit​
To increase sales​
To increase market share
To achieve financial security.

SMART OBJECTIVES​
​
Specific - Specific exact state of what should be achieved
​
Measurable - An objective should be capable of measurement so that it is possible to
determine whether it has been achieved.
​
Achievable - The objective should be realistic given the circumstances in which it is set and
the resources available to the business.
​
Relevant - Objectives should be relevant to the people responsible for achieving them.
​
Timed - Objectives should be set with a deadline, a realistic due date

Case study

Independence and control are important objectives in this case because it showed that Omar
Hassan started from working at a hotel kitchen cooking basic food to creating his dining
services for airlines coming out of Doa, this shows independence. We can see the control in
his business journey when it was stated that he was proud to be in control and managing a
big dining service even gaining profit in 2013, this is because he is happy to be responsible
for the ups and downs as it shows how independent and resilient he was, he also did not like
being controlled and being told what to do which is what lead him to start his business.

________________________________________________________________________

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Why objectives differ between businesses.

Size of the business

-​ Small businesses may be happy to profit satisfactorily to keep a work-life balance for
their owners with no wish to grow.
-​ A big business may want to achieve further growth or higher market share. If the
domestic market is saturated it may look to expand abroad.

Level of competition

-​ In a highly competitive market businesses may struggle to survive.

-​ In a market where there are a limited number of businesses, they may all want to
increase sales and market share.

Type of business

-​ A company may have an objective to maximize ( to make the most) profits to

increase shareholder value.
-​ A nonprofit business will have social and ethical objectives.

More challenging task: ​

​
The objectives of a large business and small business may differ. For example, many small
businesses may be content to stay small. The people who own them may just wan to make
enough money to support their families and lifestyles. They may want to avoid the
responsibility that may come with growth for example. Small businesses may also be more
interested in some of the non financial objectives, such as personal satisfaction and
independence. It might also be argued that large businesses are more interested in financial
objectives.

Changing business objectives

-​ Legislations
-​ Market conditions
-​ Technology
-​ Performance

What is performance?​
​
The performance of a business is not likely to stay constant. Period of sustained profitability
may be interrupted by a less successful period. The performance levels of a business that
has been growing sales for several years will most likely decide to focus more on profitability.

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This might be because sales growth has been achieved by lowering prices and the owners
are unhappy with the negative impact this has had on profits.

Legislation

New legislation might have an impact on the objectives of a business. In recent years many
businesses have become more socially responsible. This might be a reaction to new
environmental, employment or consumer legislation. For example, in 2013, EU regulations
for the construction industry were tightened to reduce use of fossil energy in order to protect
the environment from CO2.

Internal Reasons
​
The reasons outlined above for a business changing it's objectives are mainly owing to
external factors: things beyond the control of business. However sometimes a business
might change it's objectives for internal reasons, for example, there might be a change in
ownership or management, or maybe a change in opinions by an owner or manager. In such
circumstances, the objectives might change. For example a new owner might want to
maximise profits so that higher dividends are spread.

Case study

1)​ A business objective is the key objective of a business, the aim of which the business
would like to achieve, example being SuperSkiSwiss.com’s objective is to grow in a
sustainable way.

2)​ Two non-financial objectives could be awareness, such as cancer awareness, human
rights, and maybe other current world issues. Another non-financial objective could
be moving to be more sustainable and eco-friendly.

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 3)​ Sales increased by 542%.

4)​ A benefit of increasing sales could be higher profit, more publicity, and more growth.

5)​ SuperSkiSwiss.com wants to have a good representation of the type of business it is

socially. This is shown when they started to move more sustainably and decreased
carbon emissions by 15%.

The owner is the business; there is no legal difference

The owner has unlimited liability for business actions (debt included)​

There is a legal difference between the company and the owners

The company has a separate legal identity

Owners have limited liability

Sole traders: Sole traders are the most common form of business in the UK; 64% of all
businesses are owned by one person. Sometimes sole traders will need to employ other
people, but often they work alone.

Positive being a sole trader: your own schedule, Your own salary, your own work days, your
own ideas, more independence

When there is a lot of work, no one can help, there are sibilare many responsibilities, table
issues, no time to rest. Limited growth, unlimited liability

_________________________________________________________________________

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B: Because​
L leadso T, therefore Therefore

Advantages of having partnership​

​
1 - Shared workload

B: Everyone is able to work.

L: Work being done at a good pace​
T: Work completed on time.

2: Expertise

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B: Diversity of ideas
L: Different roles
T: Being able to market, finance, and run the business better

-----------------------------------------------------

What is meant by the term partnership?​

​
To run a business with other people as the owners

What is the maximum number of partners in a general partnership?

Between 2 and 20 partners

What is a deed of partnership and what are its features?​

​
A deed of partnership is an agreement, and features could be percentages, legal and
financial contracts, permits, contracts and agreements

What advantages does a partnership have over sole-trading businesses?​

​
Unlimited liability​
Less responsibility
Less work (if the partner works as much as you)​
Less stress

_________________________________________________________________________

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Limited and Unlimited companies

Private limited company

2 shareholders with limited liability and incorporated legal structure ​

​
Shares are only sold to family and friends.

Advantages of Private shareholders

-​ Limited liability
-​ Incorporated legal structure

Disadvantages of Private shareholders

-​ Competitors can see financial information.

-​ Must complete two legal documents
-​ Can't sell shares to the public
-​ Profits are shared fairly

Public limited company

A publicly limited company is a company where shares are sold on the stock market and
anyone over the age of 18 can buy them.

Advantages

-​ It is easier to get more finance for investment (share capital)

-​ Limited liability
-​ Incorporated legal structure
-​ Lots of innovation and new​

Disadvantages

-​ Competitors can see their financial accounts

-​ Profits shared so more dividends given
-​ Arguments and disagreements can occur
-​ Difficult to set up
-​ Memorandum of association
-​ Articles of association

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 LIMITED COMPANIES: RECAP

Limited companies are always incorporated. Incorporation is the formation of a new

corporation. The corporation may be a business, a nonprofit organization, a sports
club, or the local government of a new city or town.

When a limited company (private or public) achieves as profit, they are likely to
allocate some of their profits as dividends​
​
A private limited company shares its dividends to family and friends while a
public allows anyone to buy shares.

Forming a limited company:​

​
!) Register with a registrar of Companies .

2) Produce the memorandum of association

3) Produce article of association

4) Obtain certificate of incorporation.

Memorandum of associations
-​ Name
-​ Address
-​ Objective
-​ Capitals shared
-​ Shares issued

Articles of association.
-​ Produces for pointing direction

Sole trader Partnership Private Limited company Public limited company

Easy to set up ✔ ✔ X X

Availability of capital from investors X X ✔ ✔

/ shareholders

Control of the business is shared X ✔ ✔ ✔

Profit is shared X ✔ ✔ ✔

Limited Liability X X ✔ ✔

Has 2 - 250 shareholders X X ✔ X

Unincorporated legal structure ✔ ✔ X X

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Public Corporations

Public Corporations vs Public Limited Companies ​

​
Public corporations are organizations set up by the governing body to run services or
industries on behalf of the country.

Public Limited companies are Business that is managed and owned by shareholders, A
limited company can offer shares to the public.​
​
Public Corporations exist in order to provide essential services to the public which are not
fully provided by the business in the private business sector. Aims to prevent the exploitation
of customers. The government can also protect jobs, create employment, and maintain key
industries.

Main Features​
​
Source of finance comes from Taxation or the money it gains from tourism or trade.​
​
Public Sector organisations do not often have profit as a major objective, but to serve all the
citizens in the country.​
​
What is a public sector
​
A public sector is a business that is owned by the government to provide services for
cheaper or for free.

Advantages of Public corporation​

​
1 - Provide product to benefit society​
2 - Can make a loss in the short term
3 - Availability and stability of finance.

Disadvantages of Public Corporation​

​
1 - Slow and inefficient​
2 - Decision based on political decisions rather than efficiency

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Franchises
Franchisee: buys the rights and operates the store​
Franchisor: owner who sells the rights to the franchisee to be able to operate on their behalf.

Rights: logo, Name, Recipe, Branding, Accounts, etc

Advantages of being a franchisee

-​ Brand image
-​ Global advertising and image
-​ Training and experience
-​ Reduced risk of business failure
-​ Support from the franchisor
-​ No prior experience needed
​
disadvantages of being a franchisee

-​ % of your profit taken by Franchisor

-​ Too many expenses
-​ Lack of skills
-​ Cannot personalise
-​ Continual service cost​

Advantages of Franchisor

-​ Gain % of profit
-​ Easier Growth
-​ Global Scale
-​ Easier to finance the business

Disadvantages of Franchisor​

-​ Bad image
-​ Reputation
-​ Franchisees keep more of the profit.
-​ Communication issues
​
Plenary Task​
​
The franchisor is the personis who owname,he trade name which is also known as the
franchise. They offer franchisees a franchise in return for a fee and a shar of the sales. The
franchisee will receive support from the franchise. They will also get all the equipment and
essentials they need to run the business

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What is a social enterprise?
​
A social enterprise is a business with the following:​

-​ Primarily, social objectives

-​ Profits are reinvested in the business or the community
-​ Not driven by the need to maximise profits for the shareholders or owners

Types of social enterprises​

​
Cooperatives
-​ Consumer and retail cooperatives are owned and controlled by their members.
Members buy shares and make decisions, and profit is given to them.​

-​ Worker cooperatives are businesses in which employees share ownership.

Why do social enterprises exist?​

-​ To fulfil social or environmental needs

-​ Consumers need ethical products and services.
-​ To fill a gap in market

Social enterprises need to be at least as good as competitors that work for profit
maximisation.

Define the following: ​

-​ Sole trader: singular owner of an unlimited business

-​ Partnership
-​ Liability
-​ Profit minus money made (total money minus cost = profit)
-​ Need: life essentials
-​ want—would like to have in life.
​
Types of Businesses
​
Businesses can be classified into three areas according to what they do:
​
The primary sector is where raw materials are grown, extracted, extracted or mined,e.g.,
farming, forestry, or mining. The first stage of production
​
is the secondary sector, where materials are processed and turned into goods through
manufacturing. This is the second stage of production.

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The Tertiary sector, where goods or services are provided the public and other businesses,
eg Banking, retail, entertainment

What sector do these people work in?​

​
​
Coal Miner: Primary​
A deep-sea fisherman: Primary
Teacher: Tertiary
Car production; secondary hairdresser; Secondary​
Hairdresser - Tertiary
Secretary, Tertiary​

The three sectors of business​

​
The primary sector depends on the secondary sector to make products from the raw
materials it produces. In turn, the primary and secondary help one another.​
​
Chain of products ​
​
It shows the stages that a product goes through before reaching the customer. ​

Changes om the three sectors ​

​
Primary: Natural resources have become depleted. Jobs have decreased in the primary
sectors due to technology being able to work more efficiently

Secondary: Most products can be made in China for cheap. Competitors in countries such
as China have taken advantage of the low-pay law.

Locations
Factors affecting business location.

1 - Proximity to the market

2 - Proximity to the labour
3 - Proximity to materials
4 - Proximity to competitors
5 - Transport links for suppliers and distribution
6 - Financial help
7 - History, tradition and culture

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Globalization​
​
Companies that operate internationally or on a global scale.

Benefits Drawbacks

-​ Economic growth -​ Economic inequality​

-​ Cultural exchange -​ Loss of sovereignty ​

-​ Improved quality of certain products​ -​ Tax laws​

-​ Networking -​ Political impacts

​
Interest rates
Interest is the reward of saving and the cost of borrowing. Eg $100 + 1% = $101​
In business, money is often borrowed but at times business may save money.​
​
A business takes out a $100 loan​
Bank charges 8% interest​
Business repays $108​
​
Interest rates rising​
- Lower profit for businesses as profit of loans increase
- the cost of product increase for the customer (The business cant afford lowering prices so
the customers arent able to buy the products for cheaper, if anything the prices increas)​

Interest rates failing​

- Increased profits for business
- Cheaper products for customers (The business can afford to make sales or decrease
product price meaning customers are able to buy the product for cheaper)​
​
What is meant by the word terrif?​
​
Teriff is the tax put on imports​

Here are possible answers to the questions:

Impact of 20% planned spending cuts on roads and motorways on businesses:

One possible impact on businesses is that transportation costs may increase due to poor
road conditions and longer travel times. Reduced spending on road maintenance or
infrastructure can lead to traffic congestion and delays, affecting the timely delivery of goods.
This can increase operational costs, reduce efficiency, and negatively impact profit margins,
especially for businesses that rely heavily on road transport.

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Reasons businesses prefer lower interest rates:

1. Lower borrowing costs: Businesses often need loans for expansion, purchasing
equipment, or managing cash flow. Lower interest rates reduce the cost of borrowing,
making it cheaper for businesses to take out loans. This encourages investment in growth,
innovation, or new projects, as the cost of financing is lower.

2. Increased consumer spending: Lower interest rates tend to reduce the cost of
consumer borrowing (e.g., mortgages, car loans), increasing disposable income. This can
boost consumer demand for products and services, driving higher business sales and
revenues. An environment of lower interest rates supports economic growth and allows
businesses to benefit from increased customer spending.

External Factors
Political - Taxation, corruption, business policy, regulating competition
​
Social - Trends, Pressure groups​

Legal - Minimum wage, Employment laws

Environmental -

Economical - Interest rates, unemployment, recession, inflation​

​
Technological - AI, Big Data, Cybercrimes, Robotics

Social factors

Businesses have to adapt to any changes that occur in society. Some examples of changes
that have occurred in recent years are outlined below:

●​ Increased consumer awareness: Consumers have higher expectations than ever

before. They have easy access through the Internet to lots of information about
products and are more aware of their rights. As a result, many businesses have
become more customer-focused.
●​ Changing demand patterns: Changes in society bring about changes in demand for
products. For example, modern lifestyles mean many people expect goods to be
delivered to their doors. Consequently, there has been a growth in home delivered
goods, such as takeaway food and a whole range of personal, domestic, and other
services. The rapid growth in online businesses has also led to changes in these
demand patterns.
●​ Increased numbers of women at work: In many countries, more and more women
have abandoned the traditional childcare role and have combined family life with
employment and running businesses. This has increased the supply of labor and
helped to increase the number of new businesses.

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 ●​ More part-time workers: In many countries, there has been a huge increase in the
number of people taking on part-time work. This has helped to improve flexibility in
business organizations because part-time labor is more adaptive.
●​ Urbanization: In some countries, such as Brazil, India, and China, many people
have left rural areas to live in towns and cities. This has provided businesses with
more labor and created additional markets to which goods and services can be
supplied.

Case Study: 3D Printing

3D printing is a rapidly developing new technology. Chuck Hull invented it in 1986. However,
only in recent years have businesses really started to exploit the new technology on a
commercial scale. Between 2016 and 2022, the 3D printing market is expected to grow to
US$190 million, although other forecasts are less optimistic.

3D printing involves producing a physical object from a 3D digital design made on a

computer. The physical object is produced by laser printers that build up a model by printing
very thin layers on top of each other repeatedly over a period of time—perhaps several
hours. However, 3D printers do not use ink because it would never build up enough volume.
Instead, the printer deposits layers of liquid plastic and sticks them together with a type of
glue or ultraviolet light.

3D printers reduce the need to produce hand-built models. They are said to be around ten
times faster than other methods of model production and five times cheaper. This means
that models of new products can be produced in hours rather than days. This will help to
speed up product development.

Another attraction of 3D printing is its wide range of applications. The technology can be
used to:

●​ make components for cars, aeroplanes, and spacecraft

●​ produce prosthetics (artificial body parts) for the medical industry
●​ provide models and shapes that can be used in education
●​ produce a range of personalised products such as jewellery, fashion accessories,
and toys.

3D printers do have some disadvantages. They may cost between US$25,000 and
US$50,000, although this is less than the more sophisticated rapid prototyping (RP)
machines, which can cost between US$100,000 and US$500,000. The surface on the
models is also a little rough compared with production using RP machines. Models can only
be made from one or two materials and there are only two colours.

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Advantages:

●​ Speeds up production by ten times compared to other manufacturing methods.

●​ Reduces the cost of production by five times.
●​ Can be used in various industries such as automotive, aerospace, healthcare (for
prosthetics), education (models), and consumer goods like personalized jewelry and
fashion.​
​
BLT - 1 advantage is the production speed, using 3D printers will speed up
manufacturing which will lead to more products being produced per period making
therefore allowing an increase in products in stock.​
​
Another advantage is the wide variety of industries it can be involved in, 3D printers
are used in many industries such as food, vehicle manufacturing and more. This will
allow for a 3D printing business to have many clients from many industries allowing
the business to grow it's public image and to gain profit therefore leading to an
increase in growth.

Disadvantages:

●​ Expensive, with printers costing between $25,000 and $50,000.

●​ Limited to printing models in two materials and only two colors.
●​ Printed objects might have rough surfaces compared to more advanced machines
costing between $100,000 and $500,000.

State one external factor that could cause a change in demand for NDF
products​
​
One external factor could be political conflicts such as a war, this will allow the
demand of NDF products being vegetables and products higher as more people are
trying to survive off of food during the war.

Cash Flow Issues

1. Revenue Problems

●​ Low Sales
○​ Weak demand
○​ Ineffective marketing
○​ Seasonal fluctuations
●​ Late Payments from Customers
○​ Long payment terms (Net 30, Net 60, etc.)
○​ Unpaid invoices
○​ Poor credit control policies
●​ Decline in Repeat Business
○​ Customer retention issues
○​ High churn rates
●​ Poor Pricing Strategy

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 ○​ Undervaluing products/services
○​ Inconsistent pricing structure

2. Expense Management

●​ Fixed Costs
○​ Rent/Lease
○​ Salaries
○​ Utilities
●​ Variable Costs
○​ Raw materials/supplies
○​ Shipping and logistics
○​ Marketing and advertising expenses
●​ Unexpected Expenses
○​ Equipment breakdown
○​ Regulatory fines
○​ Emergency repairs

3. Inventory Management

●​ Overstocking
○​ Cash tied up in unsold inventory
○​ Storage costs
●​ Understocking
○​ Missed sales opportunities
○​ Dissatisfied customers
●​ Slow-moving Inventory
○​ Obsolete or low-demand products
○​ Discounting required to move stock

4. Debt Obligations

●​ Short-term Loans
○​ High-interest rates
○​ Difficulty making timely payments
●​ Credit Lines
○​ Overuse of business credit cards
○​ Bank fees
●​ Supplier Credit
○​ Unfavorable terms with suppliers
○​ Late payment penalties

5. Financial Planning and Strategy

●​ Poor Cash Flow

○​ Lack of predictive financial models
○​ Failure to predict cash downfall
●​ Lack of Emergency Funds
○​ No cash reserves for emergencies

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 ○​ Dependence on credit for operational expenses
●​ Poor Capital Allocation
○​ Investing in non-essential assets
○​ Long-term investments with limited liquidity

6. External Factors

●​ Economic Downturn
○​ Reduced consumer spending
●​ Industry-Specific Challenges
○​ Disruption in the supply chain
●​ Regulatory Changes
○​ New compliance costs
○​ Taxation changes

1.​ Why did PepperTap fail?

○​ Inventory Management Issues: Local shops struggled to provide accurate
and up-to-date stock information. Many were not equipped to adopt electronic
inventory systems, which led to missing items and inconsistent service.
○​ Excessive Discounting: To attract and retain customers, PepperTap offered
large discounts, but this strategy proved expensive and unsustainable.
○​ High Staffing Costs: The business required a large workforce to fulfill quick
delivery promises, increasing operational expenses significantly.
2.​ What measures might have been taken to avoid failure?
○​ Improving Inventory Systems: Partnering with stores that could support
electronic inventory management or helping smaller stores upgrade their
systems might have reduced issues with stock accuracy.
○​ Reducing Discounts Gradually: Rather than offering high discounts,
PepperTap could have used targeted promotions or reduced discounts as it
gained a stable customer base.
○​ Optimizing Staffing: Streamlining delivery operations and investing in
technology to improve efficiency might have helped reduce staffing cost.

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Chapter
2 People
in
Business

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Communication

Communication- passing messages between people or organizations. Messages between a

sender and a receiver take place on a medium such as email

Different types of communications​

​
1 - Formal and Informal ​
2 - 1-way and 2-way
3 - Internal and External​
​
What are these types of communications?​
​
Internal is when you communicate within the business while External is communicating to the
people outside of the business
​
Formal is when you are talking professionally while Informal is usually used with colleagues,
friends, and family.​
​
1 way is when you are telling a person something without expecting a response while 2 way is
when you are talking to a person and they are obligated to respond.​

CEO
|
|​
v
Employee

Employee < - - - > Employee

Formal Informal

With a person who is higher ranked and more Friends and Family
respected than you

With parents of a student People you may have a closer relationship with

Job interview Informal meeting/presentation about insignificant topic

Meeting or important presentation

Visual Communication: This involves conveying information, ideas, or messages through

visual elements such as images, graphics, charts, diagrams, and videos. It aims to
communicate effectively by utilizing visual aids to enhance understanding and engagement.

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Oral Communication: It refers to the process of conveying information, thoughts, or ideas
through spoken words. It includes face-to-face conversations, speeches, presentations,
phone calls, and video conferences. Oral communication relies on vocal tone, gestures, and
other non-verbal cues to convey meaning.

Electronic Communication: This encompasses the exchange of information, data, or

messages using electronic devices and digital platforms. It includes email, instant
messaging, social media, video calls, and other forms of communication facilitated by
technology. Electronic communication allows for quick, efficient, and convenient interaction
over long distances.

Written Communication: This involves transmitting information, ideas, or messages

through written language. It includes letters, reports, emails, text messages, articles, and
other written forms of communication. Written communication provides a permanent record
of information and allows for careful crafting of messages for clarity and precision.
​
Impacts of poor communication - Unable to receive customers, misunderstandings,
decreased productivity, conflict, reduced trust, poor decision-making, negative customer
relations, and decreased morale. These consequences can affect individuals, organizations,
and relationships, leading to inefficiencies, tensions, and reputational damage. Effective
communication is crucial to mitigate these impacts and foster positive outcomes.

Exam questions

One benefit of business communication with employees is that the employees will have a
better understanding of one another and this will lead to further teamwork with one another
within the business department which will allow for a better quality of outcome

Barriers to communication
A barrier to communication is an obstacle that prevents effective communication between
the sender and the receiver.

1 - Physical barriers - examples are temperatures, tangible items, old computers, bad
internet connection
2 - Bad attitude - Creating a bad relationship with the person you are speaking to
3 - Languages - Not being able to communicate with people from other regions as they don't
speak the same language as you​
4 - Physiological barriers - medical illnesses, mental illnesses
5 - Problem with structural design

Removing barriers to communication

Train staff Invest in IT Short chain of command

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Social events Cultural change Templates

Question

NEXT is a well-known clothing retailer that operates in 70 countries and employs over
43,000 employees. Since NEXT commenced trading it has introduced many other
products to its range such as home interiors, flowers, and wedding list services.​
​
In 1999 NEXT launched its own online shopping platform enabling customers to
purchase wherever they live. It continues to improve its customer service by
introducing new initiatives such as next-day delivery. NEXT mainly uses its factories
for production. However, it does purchase some clothes such as ladies' dresses from
Turkish factories.

Analyze why next would want to remove any communication barriers within it's
organization​

Answer:
​
NEXT needs to be able to communicate effectively with its factories in Turkey. Since Turkey
primarily consists of Turkish speakers, rather than English speakers, NEXT will need to hire
translators or bilingual individuals. This step will lead to better communication and
understanding, therefore allowing improved production outcomes.

Furthermore, NEXT must ensure that its products can be launched in all 70 countries. In the
event of an error where a specific region cannot receive launch instructions, confusion may
arise, slowing down both sales and production processes and possibly therefore causing
conflict within the organization.

Types of Employment
Part-time: Cost-effective, Flexible as hours can increase or decrease​
​
Full-time: Majority of employees, Work 30+ hours per week, Spend more time on the job,
Greater ability to complete tasks, more loyal.​
​
Workshare - sharing work with a partner or another employee

Workshare requires a lot of communication which if not organized can cause

mismanagement.

Different types of part-time jobs​

​
Casual
- No guarantee of work from employers​
-Hours are uncertain​

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​
Seasonal
- Some businesses need workers at specific times (eg lifeguard or ski instructors)

Temporary​
- Staff hired for short-term
-Can be a doorway to a permanent position

Exam question: Explain 1 benefit for a business having full-time employees

​
Business will have more loyal and longer lasting employees leading to consistency within
production and work which will therefore lead to the quality outcome of service/product

Recruitment documents
Documents needed to be recruited to a Job ​
​
CV - Curriculum vitae
​
A CV should include experience, your major if you have one, your skills, your personal
experiences, and responsibilities.
​
​
Job Description

A Job description is a document that a business advertises to show what skills,

responsibilities, and necessities employees should have before requesting a job

Person specification​
​
Person specification is a document a business will need, it states the knowledge, skills,
qualifications, experiences, and personal mindset that an employee should have while
working.

Application forms​
​
A form an applicant (employee) uses to give info about the job. Address, Name, Gender, etc​

Case study​
​
1 - Draw up a job description for the cement production workers.​
​
- Can withstand carrying heavy weight (could be someone who carries heavy items
regularly)​

Page | 27
- Know how to use heavy machines​
- Understand different materials that is used for different qualities of cement

2 - Discuss 2 reasons why a business draws up a job description​

​
- To have consistency and little to no errors​
- To have workers make QUALITY products​
- To have workers maintain a loyal long-term relationship with their business.​
​
3 - Discuss 1 advantage of why a job application helps business​
​
It allows applicants to know what they need and allows a realistic idea of the job.

Internal and External recruitment

​
Attracting Applicants

Advertising Job offers - advertising​

Job centers - centers that help individuals gain a job, government-owned and free​
Headhunting - Looking for specific people who are known for doing the job well​
Word Of Mouth - conversations that allow people to hear about the job offer​
Employment agencies - agencies that hire individuals for certain businesses, private
businesses and costly​
Direct applicants - Organizations recruit individuals who are job-seeking, usually on
websites.

Shortlisting​

Selecting a small group to interview

Advantages of Internal Recruitment

Advantages Disadvantages

-​ Faster and cheaper recruitment​ -​ May not hire the most suitable
applicant​
-​ Familiar with business systems and
processes ​ -​ Potential conflict between staff​

-​ Motivating as opportunities for -​ Reduced numbers of applicants

promotions

Advantages of External Recruitment

Advantages Disadvantages

Page | 28
 -​ New ideas for business​ -​ It is a longer process​

-​ A larger pool of applicants to choose -​ More expensive​

from​
-​ The selection process may be too
-​ External staff could have more broad
experience

PET COWS​
​
P- Product​
E - External​
T - Target Market​
​
C - Competitors​
O - Ownership​
W - Workforce​
​
Case Study Answer​
​
Analyse why Emirates considers interviewing pilots as an important part of recruitment​
​
As we know, Emirates is an airline meaning that pilots are a must-need in their business,
pilots allow for a faster, safer, and more comfortable flight. A pilot is the key reason on why
an airline is successful, a comfortable and quick flight means a comfortable customer which
also means a happy and loyal customer. For this pilots should be interviewed to better
understand and gain information of the pilots. This will mean they can hire some of the best
pilots which will lead to a better image which will lead to better reviews and will lead to more
customers.​
​
Emirates main target customer base is wealthy and influential meaning that these customers
will need the comfort and quick flights they can be provided, interviews will allow Emirates to
know whether the pilots who applied can fulfill the standards that the customers set, and this
will allow for bringing new pilots who can truly fulfill these standards and will allow for
pleasant returning influential customers allowing for new customers to come due to the
positive review from the influential customers.​
​
Legislation (Laws with recruitment)​
​
Discrimination Laws, ​
​
What can be counted as discrimination?​
​
Preference in age, gender, race, disability, religion, etc.​
​
Minimum wage, the lowest legal amount a person can make.

Page | 29
 Minimum wage benefits (business) Minimum wage drawbacks (business)

-​ Allows paying little but still following -​ Employees are not as loyal and will
laws.​ leave immediately if they find a
higher-paying job.​
-​ Small businesses can higher
employees without needing to pay a -​ Does not motivate them.​
high expense
-​ Costs, If the minimum wage was not
implemented, the business would go
lower meaning they would have
lower costs, but the minimum wage
increases cost.
​

On the job training

Advantages Disadvantages

-​ Generally most cost-effective​ -​ Quality depends on ability of trainer

and time available​
-​ Employees are actually productive​
-​ Bad habits might be passed on​
-​ Opportunity to learn whilst doing​
-​ Learning environment may not be
-​ Training alongside real colleagues conducive​

-​ Potential disruption to production

Off the job training

Advantages Disadvantages

-​ Can bring new ideas to the business​ -​ It can be expensive​

-​ Employee motivation​ -​ Employee may leave the business

and you would have lost money
-​ Opportunity to learn
​
Induction (given to employees when they first start the job)
Advantages Disadvantages

-​ Allows employees to be familiar with -​ Time consuming​

corporate culture​
-​ Lower production
-​ Employee motivation​

-​ Employees get specific roles

Case study 12 mark question

Page | 30
The Better Toy Store (TBTS) is a children’s toy store. TBTS has three shops in Singapore.
Two of them being located in shopping malls and third being in the Airport. TBTS has a
website for customers looking to buy toys online. ​
​
TBTS selects toys to sell that are excellent to play with, value, design, longevity, and quality.
All TBTS toys are environmentally friendly​
​
Evaluate the importance of good internal and external communications to TBTS. You should
use the information provided as well as your own knowledge of business.​
​
Answer: it's very important to communicate within a business to be able to provide the best
quality toys, being able to communicate as a team will allow for motivation and friendly
competition within the business leading to an increase in productivity and evaluating toys
quality which will lead to faster and higher quality produced toys leading to more customers
who are interested in high-quality toys.​
​
But it's also important to be able to communicate with your customers which will lead to a
better understanding of customer needs which will therefore lead to fulfilling customer needs
and evaluating them. This helps TBTS grow in not just Singapore but the East Indies region
reaching more children and creating better toys for all of the children's interests.​
​
In conclusion, internal communication is better in my opinion as you can always use new
marketing strategies to gain back customers but TBTS needs business basic needs like
team support and high-quality toys. ​
​
​
Motivation - Motivation is an employee's desire to achieve a goal and work effectively for the
business​
​
Benefits of a well-motivated workforce​
​
- Easier to attract employees​
- Easier to retain employees​
- Higher labor productivity​
- Willingness to accept-change​
- Two-way communication with management​
- Low rates of strike action​
- Reduced labor turnover​
- Reduced labor absenteeism

Motivation tactics​
​
Taylorism​
​
Scientific management theory​
Motivated by Pay​
Science could increase efficiency ​

Page | 31
Workers were given one task to master​
​
Standardized approach to optimizing work for a more efficient workforce​
Time and motion study analyzing tasks and finding the quickest way of completing tasks​
Workers did not have to be skilled just highly productive in one job.​
​
Taylor believed that motivating an employee is by rewarding them with a pay increase.​
Pay should be per unit not per time. This means that pay is by productivity not by time. ​

Advantages Disadvantages

-​ Increased productivity​ -​ Unfulfilled employees​

-​ Fewer employees needed​ -​ Increases unemployment

rates
-​ Consistent products and
quality
​
Herzberg’s ​
​
2 Factor theory.​
​
1st Factor - Hygiene factor​
This will not motivate staff but if they slow down they will be demotivated​
​
Examples:​
- Job security ​
- Status​
- Relationship​
- Salary​
- Working conditions​
- Policies​
​
2nd Factor - Motivator factor​
​
Examples:​
- Growth​
- Advancements​
- Recognition

Financial methods:​
​
Financial rewards are the methods of payment employees receive as an incentive to work
hard effectively. ​
​
Non-financial methods:​
​
Non-financial rewards involve motivating employees in ways that don't involve money.​

Page | 32
​
Organizational charts - a diagram that shows the different job roles within a business and
how they are connected with one another.​
​
Financial methods

Remuneration - money paid to work for service​

​
Time rate - paid per hour​
Piece rate - paid per productivity​
Overtime - Additional pay for extra working hours​

Commission - % per sale/client​

Fringe benefits - Addition to a benefit to companies (for example being a car)​

Job enrichment - To improve working standards/conditions

Bonuses - A bonus on salary/commission due to an increase in productivity or work

​
Promotion - A higher position or rank due to working hard.

Explain one reason why a business uses fringe benefits (3)

One reason could be that it both benefits the business and the employee example being a
car, giving a car will both allow for motivation and allow for employees to come to work
regularly and on time. This will lead to higher productivity rates and a better outcome.

Non-Financial methods
​
Empowerment - (Allowing employees to have an opinion and speak their opinion)​
This increases employees sense of worth and sense of value​
​
Consultation - Employees are more involved in decision-making​
​
Team working - allows employees to befriend others and allow them to have less workload
​
Organizational structure and Roles

Page | 33
Chain of command - The chain of command in a business is the system that shows who reports to whom. It’s
like a ladder of authority, where decisions and instructions flow from the top to the bottom. At the top is the owner
or CEO, and below them are managers, team leaders, and employees. Everyone knows their boss and who they
should follow or report to, ensuring clear communication and organized decision-making.​
​
Delegation - Delegation is when a manager or leader assigns tasks or responsibilities to someone else, usually a
subordinate or team member. Instead of doing everything themselves, they trust others to complete certain tasks.
This helps share the workload, allows employees to develop their skills, and makes the organization run more
efficiently. While the manager still oversees the work, delegation allows others to take on more responsibility and
contribute to the business.​

Advantages Disadvantages

-​ Delegation saves managers time by -​ Employees may feel dissatisfied if given

allowing subordinates to handle tasks.​ extra tasks without rewards.​

-​ It can motivate employees by building -​ Not all employees can handle additional
trust in their ability to manage more responsibilities effectively​
challenging work.​ .
-​ Delegation can lead to increased stress
-​ Delegation serves as effective on-the-job and demotivation if it adds too much
training. workload.

​
Director Business managers that are appointed by owners or chairpersons

Manager Managers and functions of the business

Supervisor Monitors certain areas and departments of the business

Operator Skilled workers who are involved in the operations of the business

Professional Skilled and highly trained staff. Examples such as lawyers, doctors, etc. Employees with
Staff certain degrees that excel them further than others.

General Staff Staff who don't have any particular skills that are different from other employees but yet do
the work.

Centralization - in business means that decision-making is concentrated at the top levels of management.

A small group of leaders, usually at the headquarters, makes important decisions for the entire

Page | 34
organization. This approach ensures consistent control, uniformity, and streamlined operations, but can

sometimes be slow to respond to local needs.​

Decentralization - means that decision-making is spread out across different levels of the organization.

Local branches or departments can make decisions that affect their specific area. This allows for quicker

responses and more flexibility, but it can lead to less uniformity and control.
​
Explain 1 advantage of using delegation ​

One advantage of delegation is employee development, employee development will help

allow hearing those from other departments or other roles in the business, this will lead to a
motivated and happier employee which will therefore lead to a higher quality outcome.​
​
Explain 1 disadvantage of using delegation

One disadvantage of delegation is potential overloading staff, overloading staff will create a
more frustrated and stressed employee which will lead to an unmotivated and tired
employee which will reduce the quality of work, and productivity and might even make the
employee think of leaving.

Page | 35
Chapter 3​
Finance​

Page | 36
Source of Finance:
Trade Payables​
Businesses often buy goods and pay for them later, usually within 30-90 days. This is called
trade payables or trade credit. It helps businesses keep their cash longer but has some
drawbacks:

●​ Suppliers may offer discounts for early payment.

●​ Buying on credit can increase the cost of goods.
●​ Late payments might upset suppliers.

Trade Receivables​
When a business sells goods or services but gets paid later (usually 30-90 days), it creates
trade receivables. This helps customers but has downsides:

●​ The business must wait for cash.

●​ Late payments can cause cash flow problems.
●​ Collecting overdue payments takes time and effort.

Venture Capital​
Money from investors (venture capitalists) to help new or growing businesses.

●​ It provides funding but often means giving up some control of the company.
●​ Venture capitalists may want a share of profits or ownership.
●​ Useful for high-growth potential businesses.

Loan Capital​
Money borrowed from banks or other lenders.

●​ Businesses must repay it with interest.

●​ It’s good for quick funding but adds debt.
●​ Missing payments can hurt credit ratings.

Share Capital​
Money raised by selling shares in the business.

●​ Investors (shareholders) become part-owners.

●​ The business doesn’t need to repay the money.
●​ However, it may have to share profits as dividends.

Page | 37
Crowdfunding​
Raising money from many people, often through online platforms.

●​ It’s quick and can generate publicity.

●​ Works well for creative or innovative projects.
●​ Might not raise enough funds or attract the right audience.

Importance of income:
Paying suppliers/Factories - ​
​
Paying overheads - ​
​
What are overheads?

Paying employees - ​

Cash Flow Forecast

Net Cash Flow = Cash Inflows − Cash Outflows

Closing Balance = Opening Balance + Net Cash Flow​
​
(number) = Negative number​
​
Definitions:

Cash flow = how the money moves in and out​

Cash inflow = Cash put into a business
Cash outflow = Money that is made by a business
Cash flow forecast = Table made to measure the Total balance and cash flow of a business
per time period
Net cash flow = Total outcome of cashflow​
Closing Balance = The total money you currently have in your balance after the cash flow​
Cash = Money made by the business without considering expenses
Profit = Money made by the business after considering expenses

Page | 38
 January February March

Opening balance $5000 $6000 $5000

Cash inflow $3000 $4000 $11,000

Cash outflow $2000 $5000 $3000

Net cash flow $1000 ($1000) $8000

Closing Balance $6000 $5000 $13,000

January February March

Opening balance $25,000 $60,000 $15,000

Cash inflow $110,000 $90,000 $70,000

Cash outflow $75,000 $135,000 $95,000

Net cash flow $35,000 ($450,000) ($25,000)

Closing Balance $60,000 $15,000 ($10,000)

1. Describe what a 'cash flow forecast' shows.

A cash flow forecast predicts the inflows and outflows of cash in a business over a period. It
can identify cash shortages or surpluses, thus allowing a better financial planning and
decision-making.

2. Prepare a nine-month cash flow forecast for Linari Garden Design.

Data:

●​ Revenues: From the table (April to December).

●​ Expenditures:
○​ Loan repayment: €200/month starting in April.
○​ Overheads: €400/month.
○​ Drawings: €800/month starting in June.
○​ Business listing: €100 in May.
○​ Advertising: €100/month starting in May.
○​ Purchases in April:
■​ Van: €2,000.

Page | 39
 ■​ Tools & equipment: €3,400.
■​ Laptop: €600.
○​ Opening funds: €3,000 (bank loan) + €2,000 capital).

Forecast:

Month Revenue (€) Expenses (€) Net Cash Flow (€)

April 2,000 6,600 (4,600)

May 2,100 700 +1,400

June 2,000 1,500 +500

July 2,500 1,500 +1,000

August 2,500 1,500 +1,000

September 2,000 1,500 +500

October 1,000 1,500 (500)

November 500 1,500 (1,000)

3. Comment on the cash position of the business during the nine-month

period.

●​ The business experiences an initial drop in cash flow in April due to high start-up
costs (equipment, van, and laptop).
●​ From May to September, the business generates positive cash flow, steadily
improving its financial position.
●​ However, revenues decline significantly in October, November, and December,
resulting in negative cash flow during these months.

Page | 40
 ●​ By the end of December, the business still has €1,800, indicating a positive overall
position but highlighting the need to address seasonal dips in revenue.

4. What would you expect to happen to the cash position of the business
in early 2016?

●​ If revenues continue to decline as they did in late 2015, the business may face a
cash shortage.
●​ To improve the cash position, Sara should explore ways to increase revenue (e.g.,
marketing or diversifying services) and reduce expenses where possible.
●​ Alternatively, she may need to seek additional funding to cover overheads and
maintain operations.

Costs
Fixed Costs (Overheads) - Do not vary with the level of output
-​ Rent
-​ Advertising
-​ InsuranceI
-​ nterest on loans
-​ Research & development costs
-​ Salaries

Variable Costs - Do change with the level of output

-​ Wages
-​ Raw materials
-​ Fuel
-​ Packaging
-​ Commission on sales

average cost = total cost/quantity produced

Units 0 100 200 300

Fixed cost 300 300 300 300

Variable cost 0 600 1200 1800

Total costs 300 900 1500 2100

Average costs 0 9 7.5 7

Page | 41
 Units 200

Fixed cost 1800

Variable cost 1200

Total costs 3000

Sales Revenue
Revenues = Quantity Sold x Price

Profit = When revenue exceed Costs

Loss = When costs exceeds revenue
Fixed = Cost that does not change
Variable costs = Costs of production that increases when output increases
​
Break Even​

Break even is when total revenue equal total cost

No profit - No loss
​
Break even = Fixed Cost/ Selling price - Variable Cost Per Unit

Here's the table written out:

Sales Total Revenue (£) Fixed Variable Costs Total Costs (£)
(units) (sales × £180) Costs (£) (£) (sales × £120) (Variable Costs + Fixed
Costs)

50 9,000 12,000 6,000 18,000

100 18,000 12,000 12,000 24,000

150 27,000 12,000 18,000 30,000

200 36,000 12,000 24,000 36,000

250 45,000 12,000 30,000 42,000

300 54,000 12,000 36,000 48,000

Page | 42
Margin of Safety
This is the difference between the break-even point and the current sales

Page | 43
 ​
Because break-even charts assume constant costs and revenues of the production
of the racquets, therefore causes it to oversimplify scenarios where HRMW may face
fluctuating material costs of the tennis racket or changing production efficiencies,
which leads them to possibly not accurately reflect the profitability of manufacturing
tennis racquets.​

Because break-even charts do not account for market factors like competition or
demand, leads to limited insights into how HRMW can compete by adding unique
features, therefore relying solely on these charts might result in incomplete planning
for tennis racquets.​

3/6

Cost of Products Sold

Cost of sale = cost of products sold (How much it costs for us to make the sale)

Income statements = Profit and Loss account​

​

Page | 44
Case study - 6 marks​
​
SOFP is useful due to it being able to help Apple predict future decisions, this leads to
possible early investments and pricing decissions which will therefore cause Apple to
compare itself to other tech companies such as SamSung and invest into improving different
aspects of it's business such as customer care, better technology, and possibly new and
advanced features.​
​
SOFP also supports Apple by managing it's assets and liabilities, as we can see Apple has
many assets and liabilities, some liabilities could be debt, unpaid loans, overdraft, etc. This
leads Apple to being able to manage and schedule payments as long as managing ways to
reduce these liabilities. This will therefore cause Apple to reduce it's costs and have proof of
success for lenders and investors.

Page | 45
Ratio Analysis

Ratio analysis is a financial analysis tool used to evaluate a company’s financial health by
comparing different financial statement items. It helps stakeholders (investors, creditors, and
management) make informed decisions by assessing profitability, liquidity, efficiency, and
solvency.

1.​ Liquidity Ratios – Measure a company's ability to meet short-term obligations.

○​ Current Ratio = Current Assets / Current Liabilities
○​ Quick Ratio = (Current Assets - Inventory) / Current Liabilities
2.​ Profitability Ratios – Show how efficiently a company generates profit.
○​ Gross Profit Margin = (Gross Profit / Revenue) × 100
○​ Net Profit Margin = (Net Profit / Revenue) × 100
○​ Return on Assets (ROA) = (Net Income / Total Assets) × 100
○​ Return on Equity (ROE) = (Net Income / Shareholder’s Equity) × 100
3.​ Efficiency Ratios (Activity Ratios) – Measure how effectively a company uses its
assets.
○​ Inventory Turnover = Cost of Goods Sold / Average Inventory
○​ Accounts Receivable Turnover = Net Credit Sales / Average Accounts
Receivable
4.​ Solvency Ratios (Leverage Ratios) – Assess a company’s long-term financial
stability.
○​ Debt-to-Equity Ratio = Total Debt / Total Equity
○​ Interest Coverage Ratio = EBIT / Interest Expense
5.​ Market Value Ratios – Used by investors to assess a company’s stock performance.
○​ Earnings Per Share (EPS) = Net Income / Number of Outstanding Shares
○​ Price-to-Earnings (P/E) Ratio = Market Price per Share / Earnings per
Share

Groff profit margin - Example

Page | 46
Gross profit (8300/11000) * 100 = 45.1%

Mark up and Mark Up equations

Profit per product​
cost per product x 100 = Mark Up %

Eg:​
​
Profit per product = 320
Cost per Product = 25

320 ​
25 x 100 = 1280% Mark up

RoCE
​
(Return on Capital Employed)
​
ROCE can compare yourself to other competitors, your past preformance and industry
averages.

Stakeholders

Stakeholder Interest What financial information are

they looking for

Owners/shareholders Profit and influence Profitability, return on investment

(ROI), Cash flow

Customers Product/Service Pricing, discounts, and value for

money

Employees Salary, Discounts, and work Salary, job security, and benefits

Managers Higher salary, decision-making, and Company financial health, budgets,

status and cash flow

Financiers Money. Loan givers Cash flow, financial stability, debt

levels, and creditworthiness

Suppliers Money, regular supplies Payment terms, financial stability

Government Fees, recognition, and legal issues Balance sheet, and financial records

Local Community Support, quality, and jobs Prices

Competitors Your ideas, planning, and marketing Market share, pricing strategy, and
strategy financial performance

Page | 47
Chapter 4
Marketing

Page | 48
Market Research

Qualitative research​
Type of research that aims to gather and analyze non-numerical or
non-statistical data to understand an individual's social reality

Quantitative research​
Research that uses the process of collecting and analyzing numerical data

What is the purpose of market research?​

-​ Identify customer wants and needs

-​ Identify gaps in market
-​ Reduce risk
-​ Inform business decisions

Primary Research

Involves gathering new data that has not been collected before in the "field" via
direct contact with customers (physical and online). Created by the business for
their needs. Finding out the information yourself first hand.

Some examples of primary market research are:

Surveys and questionnaires.

Focus groups.
Observations.
Test marketing

Advantages of primary market research:

Direct opinions
Reliable
Up-to-date

Disadvantages of secondary market research:

Expensive
Time-consuming
Possible inaccuracies
It is difficult to find samples

Page | 49
Secondary Research

​ Secondary research is any research that is already collected

​ Examples being: the internet, magazines, textbooks, Government report,
​ Case studies, news (newspaper and TV),​
​
​ and advantages:
​
​ Easer
​ Faster
​ Cheaper

​ Disadvantages:

Information available for competitors

Unreliable/outdated
Gather for other reasons

**Proximity to Raw Materials: (3 marks)**

Cadbury, as a chocolate manufacturer, heavily relies on a stable and

cost-effective supply of raw materials, particularly cocoa. Choosing a location in
close proximity to cocoa-producing regions is essential for several reasons.

Firstly, it can significantly reduce transportation costs associated with

importing cocoa. This is crucial for maintaining cost efficiency in the production
process, as transportation expenses can be a significant portion of the overall
cost structure.

Secondly, proximity to cocoa sources ensures a more reliable and secure

supply chain. By being closer to the origin of cocoa production, Cadbury can
potentially reduce the risks associated with supply chain disruptions, such as
delays, quality issues, or geopolitical instability in cocoa-producing regions.

This strategic location allows Cadbury to have more direct and efficient
control over the sourcing and quality of cocoa, which is vital for maintaining the
high standards associated with Cadbury's brand.

**Market Access and Consumer Base: (3 marks)**

Another critical factor influencing Cadbury's decision to locate a new

factory is its proximity to target markets and the size of its consumer base.

Page | 50
 Choosing a location that provides easy access to the target consumer
markets is essential for minimizing distribution costs. By strategically placing the
factory, Cadbury can optimize its supply chain, reducing the time and expenses
associated with transporting finished products to distribution centers and retail
outlets.

Moreover, being close to key consumer markets allows Cadbury to respond

more effectively to changes in consumer preferences and market trends. This
proximity facilitates quicker market research, faster adaptation to evolving
consumer demands, and the ability to introduce new products more efficiently.

In summary, the location of a new Cadbury factory should balance the need for
proximity to raw materials, specifically cocoa, with the strategic advantage of
being close to target consumer markets. This dual focus ensures cost-effective
production and efficient distribution, contributing to the overall success and
competitiveness of Cadbury in the chocolate industry.

Marketing Research.

Surveys and questionnaires are very similar, but surveys are usually conducted
face-to-face, while questionnaires are conducted through a form online or on
paper.

Surveys allow businesses across all industries to collect honest feedback,

opinions and responses from customers efficiently
​
Test marketing is very good as you can give a sample to customers, which will
allow them to feel the quality of the product.

What is a questionnaire?

A questionnaire is a list of questions or items used to gather data from

respondents about their attitudes, experiences, or opinions

What is a survey?

Surveys allow businesses across all industries to efficiently collect honest

feedback, opinions and responses from customers

How would a business know if it should release its products?

Page | 51
When a business releases a product or service on trial in a small geographical
area, they check whether it is successful in the region or not to decide whether
they should launch in that region or not.

1 - Explain one advantage of test marketing to a business.

An advantage can be that you can get more specific feedback as the person who
tested the product can have a complete idea of the product.

2. Explain the disadvantage of test marketing to a business

Test marketing is time-consuming.

Textbook questions

1) Which of the following is an example of quantitative data

a) Examples of quantitative data: Our market share is 14%

1)​ Using the data in figure 33.6. Calculate Ford’s share of the global car
market in 2015.

2)​ Describe two benefits of using online surveys to gather information from
customers.

Marketing

What is marketing?

The activity or business of promoting and selling products or services, including

market research and advertising

Why is marketing important?

Satisfying customer needs

Building customer relationships
Keeping customer loyalty
Market share and analysis

Page | 52
Niche and mass marketing.

Satisfying the customer's needs

The main role of marketing is to convert the wants of an individual

Businesses often use promotional activities, especially advertising to persuade

customers that something wants needs

Building Customer relationships

Keeping customers loyal

Reward cards
Free gifts
Charitable donations
Partnership deals

Marketing orientations

Market orientation - Business responds to customer needs and wants

Business orientation - Business develops products based on what the business
is good at.

Marketshare is the share that represents the percentage of an industry or a

market's total sales, That is earned by a particular company over a specified
time period.

total product or business sales

Market share = total sales in the whole market x 100

What is mass market and niche market

Mass Market - Mass market - this is the market that is aimed at the general
population - large number of sales of a product e.g. regular toothpaste

Niche market - this is a small subset of the main market and addresses a
specialist need e.g. Sensodyne toothpaste for sensitive teeth

Pros and cons of mass market

Pros -

Page | 53
 -​ Marketing is straightforward
-​ Large volume of sales
-​ Opportunity for growth because of large probable sales

Cons -
-​ Products need to be marketed very well,​ ​ which can be
expensive

Pros and cons of niche market

Pros
-​ Easier to target customers’
-​ Charges premium price
-​ Less competition

Cons -
-​ Highly risky
-​ Small market​ ​

Market segmentation

Definition of market segmentation - the process of dividing markets into

different sections, each of which fits the needs of consumers.

Market segmentation involves dividing a target market into subsets for more
effective marketing. Demographic segmentation considers age, gender, and
income. Geographic segmentation focuses on location and climate.
Psychographic segmentation considers lifestyle and values. Behavioral
segmentation analyzes purchasing patterns and brand loyalty. Occasion-based
segmentation targets specific events. Product-related segmentation looks at
features and benefits. Benefit segmentation groups consumers based on
perceived benefits. Usage rate segmentation categorizes based on product use
frequency. Generation-based segmentation targets age groups. B2B
segmentation considers business characteristics. Employing these strategies
helps businesses tailor marketing efforts, enhancing their competitiveness and
success in meeting diverse consumer needs. ​
​
Market Segmentation

Subgroup -> Products to meet specific needs of a segmentation

Lifestyle

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Age
Gender
Location
Hobbies
​
Examples of businesses that use market segmentation​
​
McDonald's - They have different meals for children under 14 being the Happy
meal, McDonalds also creates different special meals for specific regions for
example Indian McDonalds do not sell beef products as most people in India and
Hindu

Exam Question

Yellow, a clothing retailer, is part of BEXIMCO Textiles Limited. Yellow opened in

2004 and now has 15 stores across Bangladesh and Pakistan, with new stores
opening in Dubai and Toronto. Yellow clothes are mainly manufactured in
Bangladesh. Some are bought from manufacturers in other countries. Yellow
expects its suppliers and manufacturers to provide fair wage and safe working
conditions. It requires every manufacturer to commit to meeting these
standards. It encourages suppliers to use Kaizen.

The company “Yellow” has low price points that all people can afford. This gives
most people the choice to try one of their products, no matter their economic
state. This leads to a wide range of customers being able to buy regardless of
prices By allowing Yellow to expand and gain more sales, this also creates more
diverse and friendly customer reviews, which act as free advertisements.
Therefore, Yellow will be able to obtain more customers, increasing the
company's profit.

Yellow has also been opening in new places, which gives more people access to
the business.

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The marketing mix is very vital to achieve a promising and stable company. New products
need to replace out-of-date products. When product development takes time, then it
becomes very risky for a business. A business may try to adapt or improve upon its rival
product. A business must conclude if products are marketable and legal. Development is an
important part of the process, it includes building different prototypes of the products and
building upon them, improving them with every prototype they make, and carrying out tests
on them.

Packaging

1)​ What is the main role of packaging?​

To create a decent first impression and to keep the items safe

2)​ Why is this necessary?​

​
To allow customers to have a good idea of your business and brand

Product life cycle

Development `: Sales are 0 at that time because the product is being tested and researched

Introduction : They are introduced with a launch. There may be a presentation party to give
the product good promotion

Growth : When the product is successful, sales will start to grow.

Maturity and saturation : Eventually the sales will start to level off, the development costs will
be recovered and the product will start to make money

Microsoft

1)​ What is meant by extension strategy?​

To maintain the maturity stage of the product's life cycle and increase market shares.​
Microsoft uses this by updating their software and computers every year; this is
similar to Apple's marketing strategy.

2)​ Discuss Microsoft's benefits of using the extension strategy.​

​
To have returning customers at every new launch. This will allow to creation of a
natural marketing strategy called word-of-mouth

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Marketing Mix

Price - Different strategies for Pricing

​
Skimming - To start a high and go lower ​
​
Cost Plus - To increase a percentage over the cost​

Promotional - To do a promotion (Buy 1 get 1 free, 20% off, etc)​

​
Competition - To go around the same price as your competitors but be slightly cheaper if
possible.

Location / Place
Location where customers buy items most

Distribution Channel ​
​
Producer ------> Consumer (Direct)​
​
Producer ------> Retailer -----> Consumer ( Modern)

Producer ------> Wholesaler ----> Retailer ----> Consumer (Traditional)

Types of retailers

Independents - 1 singular store by itself​

Department store - Many products in 1 retail store.z

​
Supermarkets ​
​
Hypermarket - A larger version of a supermarket, Hypermarket buys larger amount

Kiosks and street vendors - Small outlets that are temporary in streets and events.

Market traders - Small time business that sells in a mass market like Souq Waqif​
​
Online Retailers - Online stores.

E-commerce

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 What is E-commerce? E-commerce is when a store sells online ​
​
Examples of E-commerce, Amazon, Aliexpress, Spotify, Nike online.
​
What are the positives of E-commerce? (As a business)​
​
- Wider choice​
- Saves costs​
- More potential customers
- More convenient

What about some negatives?​

​
- Can be expensive and time-consuming
- Electric issues cause the website to slow down

Advantages Disadvantages

Consumer -​ Cheaper because online retailers have -​ Can not feel physical quality and
lower costs​ material​

-​ Customers can shop 24/7 without a -​ Has to rely on reviews rather than
close time​ being able to buy at the store​

-​ A wide amount of choices​ -​ Internet needed

-​ Accessible from anywhere as long as

there is an internet connection.

Business -​ E-sellers does not need to pay for -​ Customers could leave bad reviews
physical store​ for no reason.

-​ Lower start-up cost​

-​ Lower cost​

-​ Can resort to online documents and

receipts​

-​ Payments can be paid through card or

online payments methods such as
PayPal or even cash on delivery​

-​ Products provided globally

​
Case study: Bata​
​
​
Bata is the largest retailer and the leading footwear manufacturer in India. It has a global

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operation employing 30,000 people in over 70 different countries. It serves 1,000,000
customers every day and generated revenue of Rs 24813.42 million in 2016. In 2015, it was
‘India's most trusted brand’.

1)​ What is the difference between retailers and wholesalers

​
A retailer sells products that they buy to the consumer, while a wholesaler is an
organization that distributes different products to the retailer

2)​ Describe 2 features of a chain store like Bata

​
Well well-known​
trustworthy​
Recognized from different places
​
Factors​

Nature of Product ​
Market
Cost ​
Control

Promotion
Promotion on an attempt to obtain and retain the customer by drawing their attention
to a firm or it's products.

Above-the-line promotion
Involves advertising in the media. Businesses pay television companies or
newspapers for example to have their ads broadcasted or printed.​
​
Below-the-line promotion
Refers to any form of promotion that does not involve advertising. It can take many
forms.​
​
Why promote?​
​
To inform consumers about a new product​
To remind customers that you exist​
To show consumers that rival products are terrible​
to Reassure customers about the product​
Reach more customers​
Improve and develop the business image.
​
Many businesses use popular faces to promote​
Many businesses also promote via TV, Radio, and Social media​

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 Many businesses such as Coca-Cola also use rival products to make theirs look
better.

Below-the-line
promotion

Special offers
Sales promotion includes several communications activities that attempt to provide access
value or incentives, or other organizational customer

Product trials
A trial should give information on likely demand in the wider market who may have the same
tastes and preferences as trial customers. (A product that is released for a short period to
see how it will perform in the market).

Sponsorships
When a business sponsors, they are establishing an association with another organization or
even. This is used to enhance the reputation of the brand/company. Sponsorships usually
happen with celebrities or sports.

Public relations
Building a good relationship with customers. It is often free through newspaper releases or
charity work. It helps a business get its name known and build up a good image. Eg.
Business donations

Branding
Branding involves giving a product name, sign, symbol, or logo, and designing any feature
that allows consumers to instantly recognize the product and differentiate it from
competitors.

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 ​

Videos suggested

-​ Boston Box (Short version) - YouTube

-​ Boston Matrix (Long version) - YouTube
-​ Product Life Cycle (Long Version)
-​ Extension Strategies - YouTube
-​ Marketing Mix - YouTube
-​ Market Segmentation (youtube.com)
-​ Mass and Niche Markets Explained - YouTube​

Quiz​
​
1 - What is Market Segmentation​
​
2 - Give 4 different methods for Price​
​
3 - Give 4 importance of Marketing

4 - Name all the stages of Product Life cycle

5 - Give different Extension strategies

6 - Exam Question

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Yellow, a clothing retailer, is part of BEXIMCO Textiles Limited. Yellow opened in 2004 and now has
15 stores across Bangladesh and Pakistan, with new stores opening in Dubai and Toronto. Yellow
clothes are mainly manufactured in Bangladesh. Some are bought from manufacturers in other
countries. Yellow expects its suppliers and manufacturers to provide fair wages and safe working
conditions. It requires every manufacturer to commit to meeting these standards. It encourages
suppliers to use Kaizen.

(6 marks)

7 - Explain which extension strategy is important and why it is ​

​
(9 marks)

8 - What is niche marketing?​

​
9 - Give examples of niche markets

10 - TBTS should rather focus on packaging to attract children, maybe a visual of the toy with
color effect to attract customers

Artify Studio should choose Crowdfunding.

Because crowdfunding engages the studio's community and allows supporters to contribute directly to
the business and it's mission in growing as a music studio, this leads to building stronger customer
loyalty and interest in the new products, therefore increasing future sales and brand recognition.

Because crowdfunding reduces reliance on internal resources or debt, leads to preserving retained
profit

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Chapter 5​
Business
scales​

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Economies of scale

Economies of scale refer to the cost advantages that a business gains as it increases
production. These advantages result in a lower average cost per unit due to increased
efficiency.

1.​ Internal economies of scale – Cost savings within the business as it grows:​

○​ Purchasing economies (bulk buying discounts)

○​ Technical economies (better machinery and production methods)
○​ Managerial economies (specialized managers improve efficiency)
○​ Financial economies (easier access to loans at better rates)
○​ Marketing economies (spreading marketing costs over more products)​

2.​ External economies of scale – Cost savings from industry-wide growth:​

○​ Improved infrastructure (better roads, ports, and facilities)

○​ Skilled labor availability (more specialized workers in the industry)
○​ Supplier growth (more suppliers reducing material costs)

​
Average Cost (AC) = Output (Q) / Total Cost (TC)​

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The graph to the right shows that if a firm continues to expand beyond a certain point, average costs
eventually rise. This is because the firm suffers from diseconomies of scale. Average costs start to rise
because aspects of production become inefficient. There are several possible reasons for this:

BUREAUCRACY

Larger business rely more on bureaucracy. If a business becomes too bureaucratic, it means that too

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many resources are used in administration. Too much time may be spent filling in forms or writing
reports. Also, decision making may be too slow and communication channels too long. If resources are
wasted in administration, average costs will start to rise.

Diseconomies of Scale occur when a business grows too large, leading to higher per-unit
costs instead of cost savings. This happens due to inefficiencies in management,
communication, or production.

Types of Diseconomies of Scale:

1.​ Managerial Diseconomies – Difficulties in coordination and decision-making as the

business expands.
2.​ Communication Issues – Slow or ineffective communication in large organizations.
3.​ Worker Motivation – Employees may feel less valued in a big company, reducing
productivity.
4.​ Supply Chain Problems – Increased complexity in logistics and sourcing materials.
5.​ Bureaucracy & Inefficiency – More rules and procedures can slow down
operations.

Result: Increased costs, reduced flexibility, and lower overall efficiency.​

A cause of diseconomies of scale to happen is lack of communication which will slow down
production and cause supply chain issues which will lead to missing product/materials as
well as losing revenue from inaccurate work.

Batch of Production

Larger quantities of product is made and then the company begins production of another
item.​
​
It could be more expensive​
​
Flow of Production

Products moves continuously through production process​

When one task is finished the next task has to start IMMEDIATELY to keep the flow ongoing
as flow can not be stopped.​

Capital intensive vs Labor intensive

Labor productivity = Total output / Number of workers​
Capital productivity = Total output/ Capital employed​

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​
Formulas
and
definition
s
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 1)​ Sales revenue = Quantity x Sales Price
2)​ Gross profit = Sales Revenue - Cost/
3)​ Variable Cost = Cost of Sales
4)​ Fixed Cost = Expenses
5)​ Operating Profit = Gross profit - Expenses
6)​ Finance Cost = Taxes or interest
7)​ Net Profit =
8)​ Profit​
​

9)​
total product or business sales
Market share = total sales in the whole market x 100

10)​ Break even = Fixed Cost/ Selling price - Variable Cost Per Unit
11)​Average cost = total cost/quantity produced
12)​Net Cash Flow = Cash Inflows − Cash Outflows
13)​Closing Balance = Opening Balance + Net Cash Flow
14)​Profit = Revenue - Cost

9 Mark option layout - ​

​
Option Postive BLT

Option negative BLT

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Conclusion BLT​
​
Retaining profits = Profits being saved to be reinvested

Equity : The value of shares a person or entity owns in a business

Equity : The money put into a business through investments/reinvestments such as retained
profits and share capital​
Diseconomies of scale: The larger the business grows the more the cost increases
​
Assets: What you own, eg: Land, Machinery, Resources​
NON CURRENT ASSETS: Long term assets such as Land and Machinery

Liabilities: ​

Capital: Money used to into the business to grow and run​

Capital employed = Current Assets - Current Liabilities
Capital employed = Total equity + non current liabilities

ROCE: Operating profit x100​

Capital employed

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