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1Edexcel A-level Business

Now test yourself answers

Chapter 11 (a) Apple’siPhone:design

(b) HeinzTomatoKetchup:qualityofproductandstrengthofbrandimage

(c) JohnLewis:staffknowledgeandcustomerservice

(d) Cadbury’schocolate:brandimage

Chapter 2 1 Twofrom:

(i) Morepotentialcustomers

(ii) Opportunityforeconomiesofscale

(iii)Canusemassmediatoadvertise

2 Twofrom:

(i) Canchargehigherprices

(ii) Higherprofitmargins

(iii)Lessexpensivetoenter

3 ThePESTLEfactors:political,economic,social,technological,legal,environmental

4 (i) Lowerprices

(ii) Betterquality

(iii)Moreinnovation

5 Marketresearch

6 Qualitative

7 Secondary

8 Primary

9 Quantitative

10 Product-orientated

11 (i) Smallsamplesize

(ii) Poorlyselectedsample

12 (i) Websitesgatheringinformation

(ii) Socialmediagatheringinformation

(iii)Databasestohelpanalysedata

13 (i) Productsandservicescanbedesignedtosuitspecificcustomers

(ii) Meetingcustomers’needspreciselyallowsahigherpricetobecharged

(iii)Promotionalactivityiseasiertotarget

14 Gapsinamarketortheidealpositioningforaproduct

15 (i) Lowestcost

(ii) Differentiation

16 (i) AldiandLidlhavetakenmarketsharefromTesco.

(ii) AldiandLidlhavepushedvalueformoneyfurtheruptheagendaformanycustomers—encouragingTescotorespondwithprice-match-typepromotions.

(ii) AldiandLidlhaveofferedno-frillscustomerservice,whichhashighlightedtoTescotheneedtoincreasethequalityofitscustomerserviceinordertostandout.

17 (a) iPhone:designandfunctions

(b) Yorkie:chunkiestbaronthemarket

(c) Nando’s:trendiestamongacertainagegroup

18 Efficiencyislikelytomeanlowestcost,meaningthefirmcanchargelowerpricesthananyoneelseandstillmakeaprofit

19 (i) Protectsfirmsfromtheactionsofcompetitors

(ii) Allowspricestoberaisedwithoutdamagingdemandverymuch

20 Successfuladvertisingcanincreaseconsumers’perceivedvalueoftheproduct,oftenbyattachingdesirableimagestotheconsumptionoftheproductorservice

Chapter 3 1 Sevenfrom:

(i) Price

(ii) Changesinthepricesofsubstitutesandcomplementarygoods

(iii) Changesinconsumerincomes

(iv) Fashions,tastesandpreferences

(v) Advertisingandbranding

(vi) Demographics

(vii) Externalshocks

(viii)Seasonality

2 Theyarecomplementary,sodemandforcarsshouldrise

3 Theyaresubstitutes,sodemandforNikesshouldrise

4 (i) ArrivalofanewcompetitorsuchasCosta

(ii) Majorlocalroadworks;newparkingcharges

5 Ifcostsofproductionrise,firmswillsupplylessandviceversa,becauseincreasedcostsofproductionmeanlessprofitcanbemade

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6 Astherobotislikelytocutthecostsofproduction,supplywouldincrease

7 Abadharvestcausedbytheweather

8 (i) Toencouragethesupplyofgreenenergytechnologies

(ii) Tocreatejobs

9 Supplywouldincrease

10 Commodities

11 Aspricerises,fewerpeoplearewillingtobuy

12 Aspricerises,firmsarewillingtosupplymore

13 Equilibrium

14 Twofrom:

(i) Changesinthepricesofsubstitutesandcomplementarygoods

(ii) Changesinconsumerincomes

(iii)Fashions,tastesandpreferences

(iv)Advertisingandbranding

(v) Demographics

(vi)Externalshocks

(vii)Seasonality

15 Twofrom:

(i) Changeincostsofproduction

(ii) Introductionofnewtechnology

(iii)Changeinindirecttaxes

(iv)Governmentsubsidies

(v) Externalshocks

16 Inelastic

17 Decreased

18 (i) Productdifferentiation

(ii) Availabilityofsubstitutes

(iii)Brandingandbrandloyalty

19 (i) Salesforecasting

(ii) Decidingpricingstrategy

20 Priceelasticitieschangeregularly,makingithardtouseittohelppredictthefuture

21 +1.5%

22 −2

23 (i) Whobuystheproduct

(ii) Whetheritisanindulgenceoranecessity

24 (i) Incomeelasticitymayhavechanged

(ii) Theeconomicforecastsusedtoestimateachangeinrealincomesmaybewrong

25 Inferiorgood

26 (a) Up

(b) Down

(c) Down

(d) Up

Chapter 41 (i) Aesthetics

(ii) Function

(iii)Economyofmanufacture

2 Firmslookingtouselowcostasapointofcompetitiveadvantage

3 Threefrom:

(i) Addsvalue

(ii) Canreducemanufacturingcosts

(iii)Canprovideapointofdifferentiation

(iv)Improvesbrandimage

(v) Mayboostbrandloyalty

4 Threefrom:

(i) Sustainability

(ii) Reuse

(iii)Wasteminimisation

(iv)Recycling

5 Designersshoulddesignwithonlyethicallysourcedingredients/componentsinmind

6 (i) Seasonalpricepromotions

(ii) BOGOF

7 Aproblemwithoneproductmayaffectallproductscarryingthecorporatebrand

8 Threefrom:

(i) Advertising

(ii) Sponsorship

(iii)Digitalmedia

(iv)USP

9 Digitalmediahasallowedthespreadof‘wordofmouth’tobecomefarwiderandmuchfaster

10 Consumerswillonlypayahighpriceifthenewproductisunique,notacopyofanexistingproduct

11 Alow-pricedlaunchmaydevalueitsbrandintheeyesofconsumers

12 Unitcost

13 Low,orcertainlynohigherthantheirmainrivals

14 Withnothingtodifferentiatetheproduct,pricingwillneedtobeclosetorivals

15 Unitcost=4p+3p+1p+(£24/600)=12p

Add200%mark-up=12p+24p=36psellingpriceperbun

16 Ifconsumerscannotfindawaytobuyaproduct,salestargetswillnotbeachievable

17 Producersselltowholesalerswhocanthensellontoawiderangeofretailers,allowingproducerstogettheirproductintomanysmallerretailers

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Edexcel A-level Business

18 (i) Benefit:completecontroloverhowitsproductissold

(ii) Drawback:extracostinvolvedinrunningretailoutlets

19 SmallproducerscannowusedirectchannelsofdistributionthatreachaverywideaudienceonlineviatheirownwebsiteoraplatformsuchaseBay

20 (i) Introduction

(ii) Growth

(iii)Maturity

(iv)Decline

21 Development

22 (i) Understandingtheneedsandwantsofthemarket

(ii) Creativitytosolveproblems

(iii)Findingandcommittingtheresources(moneyandpeople)

23 (i) Problemchild

(ii) Risingstar

(iii)Cashcow

(iv)Dog

24 (i) Lookstothefuture

(ii) Isachievable

(iii)Iscompany-specific

25 Twofrom:

(i) Offerscontroloverpromotion

(ii) Gainswidedistribution

(iii)Canallowafirmtoinfluencepricinginthemarket

26 Twofrom:

(i) Allowsafirmtochargehigherprices

(ii) Canmeetconsumerneedsmoreclosely

(iii)Mayfacelessdirectcompetition

27 Whileconsumersmakedecisionsbasedpartlyonemotion,businesstobusinessmarketingreliessimplyonexactlywhatproductcanbedeliveredattherightpricewiththerightlevelofreliabilityintermsofqualityandtiming

Chapter 51 Threefrom:

(i) Multi-skilling

(ii) Part-timeandtemporaryworking

(iii)Flexiblehoursandhome-working

(iv)Outsourcing

(v) Zero-hourscontracts

2 Cashflowwillbedamagedintheshorttermasredundancypaymentsaremade.Inthelongterm,withlowercosts,cashflowwillimprove

3 Collectivebargaining

4 Twofrom:

(i) Tailoredtothecompany’sownwayofworking

(ii) Noneedtosendstaffoutonexpensivecourses

(iii)Instantadvicecanbegivenfollowinganerror

5 (i) Awiderrangeofmethodscanbelearned

(ii) Fewerdistractionsthanattheworkplace

6 Interviewerbiasorprejudicemayaffecttheoutcome

7 Twofrom:

(i) Quickerandcheaper

(ii) Promotionopportunitiescouldmotivatestaff

(iii)Noneedforinductiontraining

(iv)Betterknowledgeofapplicants

8 Twofrom:

(i) Awiderpoolofapplicants

(ii) Bringsinnewideas

(iii)Preventscreatingavacancyelsewhereinthebusiness

9 Matrix

10 Flatstructureshavewidespansofcontrol,forcingmanagerstoallowsubordinatestomaketheirowndecisionsastheycannotcloselysupervisethemallthetime

11 Tallstructureshavemanylayers,offeringplentyofscopetobemoveduptothenextlevel

12 Alldecision-makingiskeptattheveryhighestlevelsofthestructureinacentralisedorganisation

13 (i) Scopetoshowinitiative:Maslowself-actualisationorHerzbergmeaningfulandinterestingwork

(ii) Extentofdelegation:MaslowesteemorHerzberg’sachievement

(iii)Responsibility:MaslowesteemorHerzberg’sresponsibility

(iv)Receivingallinformationrequiredtoperformajob:Herzbergspokeoftheneedfordirectcommunicationaspartofjobenrichmentandsawcompanypolicyasahygienefactor

(v) Opportunitiesforpromotion:Maslow’sesteemneedsandHerzberg’sadvancement

14 Taylorbelievedpeopleworkedtomaximisetheirincome.Therefore,peoplewillworkharderifworkingharderallowsthemtoearnmoremoney.Therefore,ifabusinesswantsanemployeetoworkharder,theymustensurethattheamountofworkdoneisdirectlylinkedtotheamountofpaytheemployeereceives

15 Thisshouldmeanthatevenifextrapayisearned,thefirmwillhavemoreproductsavailabletosellinordertogenerateahigherrevenuewhichcanbeusedtocoverhigherwagecosts

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16 Money

17 Humanrelations

18 (i) Physical

(ii) Safety

(iii)Social

(iv)Esteem

(v) Self-actualisation

19 (i) Hygiene:companypolicy,supervision,pay,interpersonalrelations,workingconditions

(ii) Motivators:achievement,recognition,meaningful,interestingwork,responsibility,advancement

20 Motivationmeansdoingsomethingbecauseyouwanttodoit,perhapsfindingoutmoreaboutHerzbergbecauseyouarefascinatedbyhistheory,whereasmovementisdoingsomethingtoachieveareward(perhapsyourparentshaveofferedyoucashforgrades)ortoavoidathreat(willtherebeaphonecallhomeifyoudon’thandinyourhomework?)

21 (i) Piecework

(ii) Commission

(iii)Bonus

22 (i) Jobenrichment

(ii) Empowerment

(iii)Delegation

23 Team-working

24 Staffwhoarebeinghandeddecision-makingpowermaylacktheexperiencenecessarytomaketherightdecisionswithoutpriortraining

25 (i) Performance-relatedpay

(ii) Profit-sharing

(iii)Possiblybonuses

26 (a) Democratic(usingmanagementbyobjectives)

(b) Paternalistic

(c) Autocratic

(d) Laissez-faire

27 Withfewstaff,theentrepreneur,whonaturallyislikelytobemakingkeydecisionsonwhatthebusinessshouldbedoingandhowtogetaroundproblems,willbeunlikelytoaffordtohireamanagerwhosefocuswouldbeonthedetailedimplementationoftheleader’splansandideas.Instead,onepersonwillhavetoperformtwosignificantlydifferentfunctions

Chapter 61 (i) Noticingthatacertaintypeofbusinessdoes

notexistinthelocalarea

(ii) Spottinglocalbehaviourthatsuggestsaneedexistsforacertaintypeofservice

2 Followingthecreditcrunch,banksoftenseestart-upsasparticularlyhigh-riskandlow-returncustomers

3 (i) Measuringperformanceobjectively

(ii) Steppingbackfromtheday-to-daychallengestothinkstrategically

(iii)Aneyefordetail

(iv)Lovingwhattheydo

4 (i) Profitmaximising

(ii) Profitsatisficing

5 Acceptsriskasafactofbusinesslifebutonlytakesonsensiblerisks,wheretherewardsoutweightherisk

6 Threefrom:

(i) Financeproviders

(ii) Customers

(iii)Staff

(iv)Suppliers

7 Maximisingprofitmayinvolveexploitingcustomers,destroyingabusiness’sreputation

8 Operatinginanethicalwayislikelytoleadtoextracosts

9 Sothewholebusinessisaimingtoachievethesamething

10 Specific,Measurable,Achievable,Realistic,Time-bound

11 (i) Survival

(ii) Profitmaximisation

(iii) Salesmaximisation

(iv) Marketshare

(v) Costefficiency

(vi) Employeewelfare

(vii)Customersatisfaction

(viii)Socialobjectives

12 (i) Soletrader

(ii) Partnership

13 £50,000

14 Twofrom:

(i) Accesstoatriedandtestedformulaforbusinesssuccess

(ii) Supportfromthefranchisorinprovidingmaterialsandfixturesandfittings

(iii)Adviceandtrainingonallbusinessfunctions

(iv)Possibilityofanationaladvertisingcampaignfromthefranchisor

(v) Aguaranteedlocalmonopolyforthatbrand

(vi)Easieraccesstoloansasbanksrecognisethelowerriskinvolvedinstartingasafranchisee

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15 Twofrom:

(i) Thefranchiseemayfeelfrustratedatbeingunabletomakedecisionsdictatedbythefranchisor

(ii) Thereislikelytobeaninitialfranchisefeetobuythelicence(perhapsseveralhundredthousandpoundsforthemostpopularfranchisedbrands)

(iii)Thefranchisorwillalsoexpectroyalties,apercentageofrevenue

16 Thevalueofthenextbestoptionforgonewhenabusinessdecisionismade

17 Theprocessofcompromisebetweenconflictingobjectiveswhenmakingadecision

18 Notallprofitisretainedforusewithinthebusinessandintheearlystagesofabusiness,theremaynothavebeentimetobuildupsufficientretainedprofittofinancegrowth

19 (i) Interestpayments(ii) Repaymentsoftheoriginalsumborrowed

20 Manyentrepreneursaresuccessfulbecausetheykeepaneyeonabsolutelyeverythinghappeninginthebusinessandmakeallthedecisions.Passingdecision-makingpowertoothersisthereforeveryhardformany

Chapter 7 1 (i) Loans

(ii) Overdrafts

2 Sharecapital

3 (i) Startingup

(ii) Growing

(iii)Dealingwithacashflowproblem

(iv)Financingextramaterialsneededwhenalargeorderisreceived

4 (i) Soletrader

(ii) Partnership

5 Shareholders

6 Twofrom:

(i) Peer-to-peerfunding

(ii) Crowdfunding

(iii)Sharecapital

(iv)Businessangels

(v) Venturecapital

7 Ifasoletraderdoesnotpayup,theirownpersonalassetscanbeusedtosettledebts;thisisnotpossiblewithalimitedcompany

8 Financeproviders

9 Thecashflowforecast

10 Monthlybalanceornetcashflow

11 Usuallybyusinganoverdraftfacility

Chapter 8 1 Threefrom:

(i) HR

(ii) Production

(iii)Cashflowforecast

(iv)Profitforecasts

(v) Budgets

2 (i) Consumertrends

(ii) Economicvariables

(iii)Actionsofcompetitors

3 Withmoretimetopassbeforetheforecastbecomesreality,thereismoretimeforchangesinthebusinessenvironmenttomessuptheaccuracyoftheforecastbyaffectingsales

4 (i) Salesvolume

(ii) Salesvalue

5 Coststhatdonotchangeinrelationtooutput

6 Coststhatchangeindirectproportiontooutput

7 Thishelpstospreadfixedcostsovermoreunitsofoutput,reducingthefixedcostscarriedbyeachunit

8 Fixedcosts/(sellingprice–variablecostperunit)

9 Theverticaldistancebetweenrevenueandtotalcosts.

10 (i) Fixedcosts

(ii) Totalcosts

(iii)Totalrevenue

11 Currentoutputminusbreak-evenoutput

12 Thebreak-evenwouldbelower

13 Thebreak-evenpointwouldbehigher

14 Threefrom:

(i) Topreventover-spending

(ii) Toprovideayardstickagainstwhichtomeasureperformance

(iii)Toallowspendingpowertobedelegated

(iv)Tomotivatestaffinadepartment

15 (i) Historicalbudgeting

(ii) Zero-basedbudgeting

16 Adverse

17 Favourable

Chapter 91 (i) Grossprofit

(ii) Operatingprofit

(iii)Profitfortheyear(netprofit)

2 Profitisanabsolutenumber–anamountofpounds–whileprofitabilitystatesprofitasapercentageofsalesrevenue

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3 Statementofcomprehensiveincome(profitandlossaccount)

4 Aproductsoldoncreditgeneratesrevenuewhenitissold,butnocashinflowuntilthecustomerpaysattheendofthecreditperiod

5 Onastatementoffinancialposition,otherwiseknownasabalancesheet

6 (a)(i) Currentratio

(ii)Acidtestratio

(b)(i) Currentratioshouldbe1.5:1

(ii)Acidtestshouldbearound1:1

7 Threefrom:

(i) Sellingunder-usedfixedassetssuchasequipmentormachinery

(ii) Raisingmoresharecapital

(iii) Increasinglong-termborrowingthroughloans

(iv) Postponingplannedinvestments

8 Withoutmanagingworkingcapitaleffectivelythefirmmayrunoutofcash

9 Failuretounderstandcustomers(poorresearch)canleadtopoordecisionswithinthemarketingmix:unwantedproductfeatures,poorpricingdecisions,etc.Thesearelikelytomeansalesarepoor,socashinflowsdryup

10Ifthebusinessisunabletomeetdemandbecauseitdoesnothavesufficientstock,customersarelikelyeventuallytogotorivals,leadingtoafallinsales

11Threefrom:

(i) Technologicalchange

(ii) Arrivalofanewcompetitor

(iii) Economicconditions

(iv) Theactionsofbanks

Chapter 101 Labourintensive

2 Efficiencyincludesconsiderationofwastage,notjustspeed

3 (i) Ageandqualityofmachinery

(ii) Skillsandexperienceofstaff

(iii) Levelofemployeemotivation

4 output

numberofworkers

5 currentoutput

maximumpossibleoutput×100

6 Fixedcostsarespreadovermoreunits,thereforefixedcostperunitwillbelower

7 (i) Noroomtotakeonextraorders

(ii) Notimeformaintenanceortraining

8 (i) Increasesalesvolume

(ii) Reducemaximumcapacity

9 (a) Saleswillbe1,000units,sototalcontribution=1,000×£250=£250,000.Deductfixedcoststocalculateprofit:£250,000−£120,000=£130,000

(b) Saleswillbe600units,sototalcontribution=600×£250=£150,000.Deductingfixedcostsgivesaprofitof:£150,000−£120,000=£30,000

10Bufferstock(orminimumstock)

11Thehorizontalgapbetweenthere-orderlevelandthedeliveryarrivingshowsthetimetakentodeliver;alsoknownasleadtime

12Threefrom:

(i) Opportunitycost

(ii) Cashflowproblems

(iii) Increasedstorage

(iv) Increasedfinancingcosts

(v) Increasedwastage

13Twofrom:

(i) Lostcustomers

(ii) Delaysinproduction

(iii) Lostreputation

14Withnobufferstock,productionwillhaltifadeliveryisdelayedorcontainsfaultymaterials.Thismeansthefirmishighlydependentuponitssuppliersdeliveringhigh-qualitysupplieswithabsolutereliability

15Ifmoreisbeingproduced,stockwillbeusedmorequickly,sothelinerepresentingthelevelofstockwouldfallmoresteeplyifproductionlevelsincreased

16Qualityinspectors

17Cell

18Qualitycircles

19Productionstaffthemselves

20(i) Allowsapricepremiumtobecharged:ifpricecanbepushedupmorethancostperunit,profitmarginswillrise

(ii) Helpstogaindistributionwithretailers:gainingextradistributionhelpstoboostrevenues

(iii) Createsbrandloyaltyandrepeatpurchase:maysaveonadvertisingspending,reducingthecostofmarketing

(iv) Canhelptobuildabrandreputationthatspreadstootherproducts:mayallowsuccessfulproductlaunches,boostingrevenueselsewhereintheportfolio,withrelativelylowproductlaunchmarketingcosts

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Chapter 111 Pricesarerisingmoreslowly

2 Consumersarelikelytoacceptpriceincreaseswithoutdemandbeingdamagedsignificantly

3 Spiced

4 Threefrom:

(i) Demandfallsasconsumers’disposableincomesfall

(ii) Consumersarelesswillingtoborrowtobuy

(iii) Firmsthatowemoneywillfacehigherinterestcosts

(iv) Investmentishardertojustifyaskeepingthemoneyinthebankismoreattractive

5 Luxurygoods(thosewithapositiveincomeelasticitygreaterthan1)

6 (i) Increasedcosts

(ii) Lesswastage

7 TheHealthandSafetyExecutive

8 Theemployer

9 Twofrom:

(i) Pricing

(ii) Collusion

(iii) Mergers

(iv) Takeovers

10Oligopoly

11Twofrom:

(i) Higherprices

(ii) Lessinnovation

(iii) Lesschoice

(iv) Poorerservice

12Threefrom:

(i) Branding

(ii) Productfeatures

(iii) Productdesign

(iv) Advertising

(v) Technicalinnovations

13Afeatureofamarketthatmakesithardfornewentrantstosuccessfullyenter

Chapter 121 Aimsaregeneralgoalsthatthebusinessis

currentlyseekingtoachieve,whilemissionislikelytobemoreinfluencedbythefounder’sbeliefs,explainingwhythebusinessexists.

2 (i) Purpose

(ii) Strategy

(iii) Values

(iv) Standardsandbehaviours

3 Asenseofmissionheldbyallstaffshouldhelptomotivatethemtoperformtheirjobsaswellaspossibleandensurethatallstaffareworkinginaco-ordinatedwaytowardsthesamegeneralgoals.

4 Strategyisthebroadplanforachievingobjectives,whicharethetargetsthatthebusinesssetsitself.

5 (i) Brand

(ii) Design

(iii) Quality

6 Evenatalowsellingprice,whererivalsbarelycovercosts,afirmwithlowerunitcostscanstillgenerateaviableprofitperunitbykeepingcostslow.

7ProductsExisting

Existing

Markets

New

New

Incr

easi

ng r

isk

Increasing risk

Market penetration

Product development

Market development

Diversification

Figure12.3 Ansoff’s Matrix and risk

8 (a) Understandingthedifferingneedsandwantsofanewgroupofcustomers

(b) Developingandsuccessfullylaunchinganewproductthatactuallyappealstothetargetmarket

9 Riskincreasesasyoumoveawayfromthetopleftofthematrixtowardsthehighestrisk,bottomright.

10Threefrom:

(i) Likeforlikesales

(ii) Marketshare

(iii) Capacityutilisation

(iv) Unitcost

(v) Brandrecognition

(vi) Staffturnover

11Threefrom:

(i) Demography

(ii) Newlawsandregulations

(iii) Technologicalfactors

(iv) Commodityprices

(v) Economicfactors

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12(i) Topdown

(ii) Consultative

13(i) Political

(ii) Economic

(iii) Social

(iv) Technological

(v) Legal

(vi) Environmental

14Negatives—twofrom:

(i) HardertoaccessEUmarkets

(ii) Hardertofilllowerpaidjobvacancieswithoutfreemovementoflabour

(iii) Moreexpensiveimportedmaterialsduetothereductioninthevalueofthepound

(iv) LessforeigndirectinvestmenttotheUKfromforeignmultinationals

Positives—twofrom:

(i) EUlawswillneedtobereplaced,whichmayallowtheUKParliamenttorelaxlegalresponsibilitiesplacedonfirmsinareassuchasemploymentprotectionorenvironmentalstandards

(ii) Aweakerpoundmaymakeexportingeasiertonon-EUmarketsforbusinesseswhohavepreviouslyonlytradeddomestically

(iii) UKbusinesseswillfinditeasiertocompeteonpricewithmoreexpensiveforeignimportsduetotheexchangerateshift

15OpportunitiesandThreats

16Astheexternalenvironmentchanges,sotheforcesarealmostcontinuallyshiftinginfavouroforagainstabusiness.Itshouldthereforeensurethattheseshiftsarenotoverlookedbeforeastrategicresponsecanbeplanned.

17Threefrom:

(i) Patentsandtechnicalknowhowofstaff

(ii) Strongbrandidentityandcustomerloyalty

(iii) Highcoststocustomersofswitchingsupplier

(iv) Substantialnetworkinfrastructure

18Competitiverivalry=low

Threatofnewentrants=low

Buyingpowerofcustomers=low

Sellingpowerofsuppliers=low

Threatofsubstitutes=low

Chapter 13 1 (i) Purchasing

(ii) Managerial

(iii)Technical

2 (i) Communication

(ii) Motivation

(iii) Co-ordination

3 Threefrom:

(i) Increaseprofitability

(ii) Achieveeconomiesofscale

(iii) Increasemarketpowerovercustomersandsuppliers

(iv) Increasemarketshare

(v) Brandrecognition

4 Thereislikelytobelessneedtosecureexternalfunding,meaningthatretainedprofit—probablythesafestsourceoffinance—maybesufficienttofinanceorganicgrowth

5 Inorganicgrowth

6 (i) Predictabilityleadingtolossofsomestaff

(ii) Failingtofullyexploitshort-livedopportunities

(iii) Thedangeroffallingbehindrivalsintermsofscale

7 (i) Costsynergies

(ii) Increasedmarketpower

(iii) Diversification

8 (a) Forwardverticalintegration

(b) Horizontalintegration

(c) Backwardverticalintegration

(d) Conglomerateintegration

(e) Merger(horizontalintegration)

9 Whenthecostofborrowing(interestpayable)ishigherthanthereturnsgeneratedbythetakeover

10Twofrom:

(i) Survival(lowerfixedcosts)

(ii) Costefficiency(maybeeasiertotrackwasteandavoiddiseconomiesofscale)

(iii) Employeewelfare(senseofbelonging)

(iv) Customersatisfaction

(v) Socialobjectives(especiallyiflocallyfocused)

11Focuseddifferentiation

12Staffwillfeelasenseofbelonging,motivatingthemtodotheirbestforthebusiness

Chapter 141 Theunderlyingtrend

2 Extrapolation

3 Thebusinessshouldbeable,oncestaffrotashavebeenplanned,tousethenumberofhoursstaffareexpectedtoworktoseewhatlevelofsalesthatshouldgenerate

4 Payback

5 Netpresentvalue

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6

YearNetcashflow

Discountfactor

Presentvalue

0 (120,000) 1 (120,000)

1 50,000 0.91 45,500

2 50,000 0.83 41,500

3 50,000 0.75 37,500

Payback=2yearsand4.8months

ARR=£150,000−£120,000=£30,000;£30,000/3=£10,000;£10,000/£120,000×100=8.3%

NPV=£45,500+£41,500+£37,500−£120,000=£4,500

7 (a) Circles

(b) Squares

8 Multiplyeachexpectedreturnbytheprobabilityofeachpossibleoutcome

9 Node3expectedvalue=£50;Node2expectedvalue=£170;Node1expectedvalue=£230.SochooseoptionA

10LFT—duration—EST

11ESTsallowacleardatebeforewhichresourceswillnotbeneeded.Thusalldeliveriesorresourcesrequiredcanarriveonthedaytheactivityisscheduledtobegin

12B,D,F,G

Chapter 151 Threefrom:

(i) Relationshipbetweenplcsandthefinancialmarkets

(ii) Useofshort-termmeasuresasdeterminantsofbonuses

(iii) Threatoftakeover

(iv) FinancialrootsofmanyUKbosses

2 Threefrom:

(i) Inadequateexpenditureonresearchanddevelopment

(ii) Accountingadjustmentsthatinflatecurrentearnings

(iii) Abiastowardsusingprofitforhighdividendpaymentsortobuybackshares,attheexpenseofinvestment

(iv) Adoptingpayschemesfordirectorsthatfocusonachievingshort-termfinancialobjectives

(v) Awillingnesstocuttheworkforcequickly,leadingtohighlabourturnoverandalossofexperienceandskillsthatmaybeneededinthefuture

(vi) Ignoringlong-termriskswithproductsandservices,suchasshiftsinconsumerhabitsorpotentialobsolescence

(vii)Afocusontakeoverstogrowratherthantheuseoforganicgrowth

(viii)Ashortageofinvestmentinimage-buildingadvertising

(ix) Minimaltrainingbudgets

3 Routinedecisions

4 Threefrom:

(i) Aimsormissionofthebusiness

(ii) Behaviourofcompanydirectors

(iii) Attitudeofseniormanagementtorisk

(iv) Recruitmentandtrainingprocedures

5 (i) Power

(ii) Role

(iii) Task

(iv) Person

6 Threefrom:

(i) Self-interest

(ii) Differentassessmentsoftheneedtochange

(iii) Misunderstandingchanges

(iv) Lowtolerancetochange

7 Internal—threefrom:

(i) Employees

(ii) Managers

(iii) Majorshareholders

External—threefrom:

(i) Suppliers

(ii) Society

(iii)Government

(iv) Creditors

(v) Smallshareholders

(vi) Customers

8 Regularlysatisfyingstakeholdershelpstobuildarelationshipwiththemsothatwhenthebusinessneedssomethingfromthestakeholdergroup(overtimefromemployees,anoverdraftextensionfromthebankorquickdeliveryfromsuppliers)theymaybemorewillingtohelp

9 (i) Replacingemployeeswithmachineryorrobots

(ii) Whendiscussingapayriseorachangetoworkingconditions

10(i) Thepersonalmoralbeliefsofthedecision-maker

(ii) Corporateculture

11(i) Risk

(ii) Reward

12Thegapbetweentheamountexecutivesreceiveandaveragepaylevelswithintheirorganisation;thisisalittlemoresubtlethansimplythesizeofCEOs’salaries

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Chapter 161 Whatabusinessownsandowesandwherethe

moneycamefrom

2 Thefinancialperformanceofabusinessforaperiod,deductingdifferentcostsfromrevenuetocalculatedifferenttypesofprofit(134characters!)

3 Accumulatedretainedprofits

4 (i) Staff,toseeifthefirmcanaffordapayrise

(ii) Suppliers,toseeifthefirmshouldbeofferedcredit

(iii) Bankers,toseeifthefirmislikelytobeabletorepaydebtandhandleinterestpayments

5 (a) Grossprofitmargin

(b) Gearing

(c) Acidtest(orcurrentratio)

6 (i) Paybackloans

(ii) Increasereservesbyretainingmoreprofitorsellingmoreshares

7 (a) 1.5

(b) 1

8 Over50%

9 (i) Improveoperatingprofitwithoutacquiringmorelong-termfinance

(ii) Reducecapitalemployedwithoutdamagingprofit

10Itappearsthatlabourproductivityisbeingdrivenupbymakingthelivesoftheworkerslesspleasant—perhapswithfewerbreaksorlongerhours—causingincreaseddaysoffandleavers

11Twofrom:

(i) Employeeshareownership

(ii) Financialrewards

(iii) Perhapsaloyaltybonus

(iv) Consultationstrategies

(v) Empowermentstrategies

12Ifnewstaffarebringinginnewideasorwaysofworkingthiscouldhaveledtotheincreaseinproductivity.Staffwithnew,morerelevantskillsmayhavearrived,capableofworkingmoreefficiently

Chapter 171 Changesinthemarket

2 Threefrom:

(i) Changesinorganisationalsize

(ii) Poorbusinessperformance

(iii) Newownership

(iv)Transformationalleadership

3 (a) Suppliersarelikelytogainextrarevenuefromlargerorders

(b) Staffwillbebusier,butperhapshappierwithincreasedjobsecurityandpossiblythechanceforovertimepayorpromotion

4 (i) Staffmustunderstandtheneedforchange

(ii) Staffmustunderstandwhatthepost-changeworldwillbelike

(iii) Staffmustunderstandhowtheorganisationwillmakethechanges

5 Thecultureofayoungtechnologyfirmmaybemorelikelytoacceptchangeasafeatureoftheirmarketandwithoutlongtraditionsofhowthingsaredone,incontrasttoalong-establishedfirminamarketthatexperienceslessradicalchangeataslowerrate

6 (i) Educationandcommunication

(ii) Participationandinvolvement

(iii) Negotiationandagreement

7 (i) Identifyrisks

(ii) Quantifycost

(iii) Allocateprobability

8 (i) Lossofkeystaff

(ii) ITsystemsfailure

(iii) Naturaldisasters

9 Havingtimetothinkthingsthroughleadstobetterdecisions.Meanwhile,resourceswhichmayberequiredtoensurebusinesscontinuitycanbesecuredinadvance

Chapter 181 (i) Willingnesstoacceptinwardinvestmentfrom

multinationals

(ii) Moreenterprisingbehaviourfromlocalbusinesses

(iii) Morestablegovernment

(iv) Easieraccesstoexportmarketsduetoimprovementsincommunicationandtransport:globalisation

2 (i) Increaseddomesticcompetition

(ii) Offshoring

(iii) Newexportmarkets

3 (i) GDPpercapita

(ii) Health

(iii) Education

4 1,300million(or1.3billion)

5 Threefrom:

(i) Governmentspending

(ii) AttractingFDI

(iii) Exportgrowth

(iv) Lowwages

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(v) Manufacturingsector

(vi) Weakcurrency

(vii)Openinguptheeconomytoforeigninvestment;apoliticalmove

6 Twofrom:

(i) Poorinfrastructure

(ii) Democracy

(iii) Inflation

7 (a) Stillscopefortheservicesectortogrowrapidly

(b) BetterhistoricallinkswithIndiamayhelpUKfirmsdoabetterjobthantheyhavedoneinChina

8 JapanandChina

9 (i) Corruption

(ii) Poorinfrastructure

(iii) Investorconcernaboutstability

10Eachcountrystopstryingtomaketheproductsandprovideservicestowhichitisnotsuited.Itmustthereforebuythesefromothercountries.Topayforthis,itwillneedtoexportitsspecialisms

11Import:themoneyisleavingtheUK

12Threefrom:

(i) Loweroperatingcosts

(ii) Accesstonaturalresources

(iii) Lowertransportcosts

(iv) Avoidingtradebarriers

(v) Avoidingproblemsofexporting

13(i) Quotas

(ii) Tariffs

(iii) Regulation

14(i) Companiesthatrelyonimportedmaterialsandcomponentswillenjoylowercosts,enablingthemtoreducepricestocompetewithcheaperimportedrivals

(ii) Duetothebilateralnatureoftradeagreements,liberalisationcanleadtoincreasedexportopportunitieswiththeremovalofbarriersintheotherdirection

15(i) Moreefficientengines

(ii) Largerboats,trucksandplanes

(iii) Theinternet

16(i) Decliningindustriesfacingjoblosses

(ii) Industriesintheirinfancy

17(i) Tariffs,legislationorquotasshouldcutimports

(ii) Subsidiesmayboostexports

18Threefrom:

(i) Managers

(ii) Staff

(iii) Shareholders

(iv) Suppliers

(v) Localcommunities

19Threefrom:

(i) EU(Europe)

(ii) NAFTA(NorthAmerica)

(iii) ASEAN(SouthEastAsia)

(iv) MERCOSUR(SouthAmerica)

(v) EastAfricanCommunity(EastAfrica)

20Operatingwithinafreetradeareaturnsthewholefreetradeareaintoyourdomesticmarket,thusboostingpotentialmarketsize,makingsignificantgrowthinscalemorefeasible

21Twofrom:

(i) Harmonisationoflaws

(ii) Freemovementofpeople

(iii) Freemovementofcapital

Chapter 191 (i) Economiesofscale

(ii) Opportunitiestooutsourceoroffshore

(iii) Riskspreading

2 (i) Saturatedhomemarket

(ii) Arrivalofanewcompetitor

(iii) Extendingtheproductlifecycle

3 Threefrom:

(i) Growth

(ii) Survival

(iii) Costminimisation

(iv) Riskspreading

4 Highendluxurygoods

5 Threefrom:

(i) Daystostartabusiness

(ii) Daystowaitforaconstructionpermit

(iii) Daystogetelectricity

(iv) Totaltaxrateasa%ofprofit

(v) Daystoimportanitem

(vi) Daystoenforceacontract

6 Threefrom:

(i) Roads

(ii) Railways

(iii) Runningwater

(iv) Reliableelectricity

(v) WiFiandbroadbandconnection

7 Labourintensive

8 India

9 Threefrom:

(i) Jobcreation

(ii) Extrataxrevenues

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(iii) Aboostforlocalsuppliers

(iv) Increasingskilllevelsamonglocallabourforce

(v) Potentialforapositiveimpactonthebalanceofpayments

10Amergerinvolvesachangeofownership:anewbusinessiscreated;ajointventuremeansthattwofirmsmaintainseparateidentities,butworktogether

11Insuchcircumstances,allegationsofunethicaltreatmentofstaffcouldbemade.Atakeoverensuresthebusinesshasabsolutecontroloverwhathappensatthesupplier’ssite,somethingthatisnotthecasewithajointventure

12Workingwithalocalpartner,whoislikelytohaveadeepunderstandingofthenewmarket,ensuresthatalackofmarketknowledgeisavoided

13Thosethatimportrawmaterials

14(i) Improveproductivity

(ii) Outsourcing

(iii) Offshoring

15Fourfrom:

(i) Design

(ii) Functions

(iii) Engineering

(iv) Performance

(v) Branding

(vi) Advertising

(vii)Sponsorship

(viii)Celebrityendorsement

Chapter 201 Polycentric

2 Glocalisation

3 (i) Economicfactors

(ii) Weatherfactors

(iii) Historyandtradition

4 Topendluxurygoods

5 Localknowledgeandexperienceamongdecision-makers

6 (i) Culturaldifferences

(ii) Differenttastes

(iii) Language

(iv) Unintendedmeanings

(v) Inappropriatetranslations

(vi) Inappropriatebrandingandpromotion

7 Threefrom:

(i) Food

(ii) Drink

(iii) Fashion

(iv) Music

8 Selling

Chapter 211 Multinationalsmayhaveinternalpoliciesthat

requirethemtooperateathigherenvironmentalstandardsthanlocallawsrequire.Thismaymeanthatdomesticbusinessesdomoredamagetotheenvironment

2 Differentratesofcorporationtaxapplyindifferentcountries

3 (i) Draininglocaloverqualifiedstaff

(ii) Forcinglocalfirmsoutofbusiness,creatingjoblosses

(iii) Failuretomaintainstandardsofworkingconditionsmayseethemslippingbacktolocal,lowstandards

4 Shouldmultinationals:

(i) payworkersindevelopingcountriesmore

(ii) offerbetterworkingconditions

(iii) beresponsibleforhowstaffaretreatedbytheirsuppliers?

Shouldconsumersinthedevelopedworldbeuneasyaboutwearingclothesmadeinexploitativeconditions?

5 (i) Emissions

(ii) Wastedisposal

6 Themoralcodegoverningexpectationsastohowbusinessshouldbeconducted

7 (a) Majorshareholders,government

(b) Pressuregroups,customers

8 Twofrom:

(i) Safetyconcerns

(ii) Short-termmineralextraction

(iii) Weakeningoflocalcultures

(iv) Lackofcommitmenttothehostcountry

9 Taxandtakeovers

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