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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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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Edexcel A-level Business
(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
12
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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