May/June 2015

Gomez runs a small computer repair firm and manages it himself. Table 1 lists some of the costs and prices for his business. Because the market is competitive, Gomez understands that keeping customers loyal and revenue high matters. He also knows that a lower break-even point would improve profits. He believes the most effective way to reduce the break-even point is to increase prices.

Costs, scale of production and break-even analysis

Country S is going through an economic boom. In this period, business profits have risen and unemployment has dropped. The only problem is inflation. All Active is a private limited company. It runs 20 sport and fitness clubs in country S. The Managing Director said: ‘This is a good time to expand by opening 5 more clubs. We will need to recruit more employees.’ He cannot decide whether it would be an advantage for All Active to become a public limited company.

Types of business organisation

Si and Ramon are friends who plan to start a photography business. They would photograph weddings, birthdays and other special events. The business is to be organised as a partnership. From their primary market research, Si thinks demand is sufficient. Ramon has drawn up a business plan showing that they require $8000 for a shop and $4000 for equipment. They intend to spend $500 on promotion, but they disagree about which method would be best.

Types of business organisation

Javid is a company which produces a variety of luxury chocolates by using batch production. During the last year, profit has decreased because competition has grown. To reduce costs, the Finance Director has proposed that the company brings new technology into the production process. The Human Resources Director is uncertain that workers would gain from the introduction of new technology.

Production of goods and services

PJK manufactures a selection of luxury sports watches. Every watch is handmade by skilled workers. Quality assurance is important. The Operations Director has been examining costs and prices because he wants to carry out a break-even analysis. Table 1 shows the data. He is planning to invest in new technology to automate some parts of the production process. The Operations Director believes that this is the most effective way to raise profitability. Table 1: Cost and revenue data ($) Price per watch: $100 Variable cost per watch: $50 Annual sales: 6000 Annual fixed costs: $200 000

Costs, scale of production and break-even analysis

Alkin is a multinational company that manufactures breakfast food products, including several leading cereal brands. It intends to begin selling in country Z, a rapidly expanding market. Alkin plans to create a joint venture with a local business based in country Z. ‘Effective communication will be vital to our success, but I believe there are many advantages in expanding in this way’ said Alkin’s Managing Director. The Government of country Z is concerned about the effect that multinational companies like Alkin may have on consumers.

Types of business organisation

Mabel is planning to launch her own hairdressing business. To do this, she must develop strong customer relationships. She has already carried out some secondary market research to discover possible demand and to decide which methods of promotion to use. She has chosen to purchase her inventory (stock) from a wholesaler. Mabel is now searching for the best location for her business. She believes that location will matter more than the price charged in determining the success of her business.

Marketing, competition and the customer

A2Z is a small yet profitable airline in country B that provides flights for business people. A2Z’s management wants the business to grow. This will mean purchasing additional aeroplanes and hiring more airline pilots. The Human Resources manager has written a job description for the pilots. She is now prepared to advertise for the new pilots. She thinks the most effective way for A2Z to motivate its pilots is through financial rewards.

Recruitment, selection and training of employees

GK Hotel is a small hotel located in the city centre. It contains 15 rooms. Most of the guests are tourists. In the previous year, customer numbers decreased because consumer spending patterns changed and competition became stronger. The Marketing manager thinks GK needs to appeal to customers from a range of market segments if the hotel wants to raise its profits. He intends to improve the GK website. He is unsure whether the cost plus pricing method he currently uses ought to be changed.

Costs, scale of production and break-even analysis

Camille is an entrepreneur who runs a popular and thriving hairdressing business. She plans to expand her small business. At the moment, Camille employs 5 part-time workers, but she will need to hire 3 more workers who must be trained on the job. She believes that her laissez-faire leadership style will need to change as the business expands.

Enterprise, business growth and size

Bowland assembles bicycles from components it buys from suppliers. The production process uses specialisation. The Finance manager commented: ‘The year has been successful because profit has risen. However, cash flow remains negative. Trade receivables (debtors) have grown and we have bought a large amount of new equipment.’ Bowland’s management thinks that better quality has been the main reason for the rise in bicycle sales.

Cash-flow forecasting and working capital

BRZ trades in country X by selling outdoor apparel, including waterproof trousers and coats. Most of its stock is brought in from low-wage countries. The Operations Director commented, ‘Globalisation has changed how we do business. It offers many opportunities but I have to consider import quotas and exchange rates’. BRZ aims to behave ethically towards all of its stakeholders. The Operations Director is uncertain whether BRZ can be both ethical and profitable at the same time.

Business and the international economy

Identify and explain two characteristics David needs in order to become a successful entrepreneur.

Organisation and management

Identify and explain two ways marketing matters to DD.

Marketing strategy

The company Balance Sheet enables David to judge how well the business is performing.

Analysis of accounts

Identify and explain four factors DD should take into account when cakes are packaged for export.

Business and the international economy

Samah and Selina prepared a business plan before FF began trading 5 years ago. Identify and explain two ways in which that business plan may have contributed to the business’s success.

Recruitment, selection and training of employees

Identify and explain two benefits for FF from aiming its products at a particular market segment.

Marketing mix

Samah and Selina are thinking about buying ingredients from a different supplier named ABC (see Appendix 2). Identify and explain one advantage and one disadvantage to FF of switching to ABC.

Production of goods and services

The Government of country X has recently raised interest rates. Identify and explain two ways in which a rise in interest rates could affect FF.

Economic issues

Chris is planning to launch a new business. Identify and explain two ways Governments may support new business start-ups.

Internal and external communication

Identify and explain two reasons why marketing matters to CB when Chris launches his new business.

Marketing mix

Chris is aware that quality will matter greatly when he produces his products. Identify and explain two methods Chris could use to achieve quality production.

Achieving quality production

Laws introduced by governments can affect businesses, including minimum wage laws. Identify and explain two legal controls (other than minimum wage laws) that could affect Chris’s new business.

Types of business organisation