May/June 2016

EDGE produces mobile (cell) phones and sells in a highly competitive market. The Marketing manager thinks that EDGE is strong at keeping customer loyalty, so demand for its phones is price inelastic. Its most successful product, Z, is close to the end of its product life cycle. The Marketing manager must choose whether to invest in developing new products or to use extension strategies for product Z. Fig. 1: EDGE - quantity sold by product type in 2015. The pie chart presents product types with these labels and percentages: X 20%, Y 25%, Z 40%, T 15%. Overall quantity sold: 800 000.

Marketing strategy

Bushall is a farm. This business in the primary sector produces award-winning fruit such as pineapples and bananas. Bushall employs 10 full-time staff and 50 part-time staff. Every part-time vacancy is placed on its website. The Government has introduced employment laws, including a minimum wage of $8.50 per hour and a limit on the number of hours an employee may work each week. Our team of employees enjoy what they do. These laws are not good for our employees or our business!

Recruitment, selection and training of employees

At a small factory, Rafiq works as the Operations manager. The business produces a range of soft drinks by batch production. Last year, Rafiq successfully brought in just-in-time inventory control after receiving an idea from one of the 40 employees. Because the business is preparing to expand, Rafiq believes that moving to flow production would be sensible.

Production of goods and services

Nuwan is a sole trader. He owns a specialist sports shop that sells a broad selection of cricket and tennis products. His 3 employees are trained to deliver strong customer service. Nuwan is happy that the economy is expanding, but he is concerned that interest rates could rise. He thinks his small business has benefits when compared with large retailers. Nuwan wants to raise profit margins and believes the most effective way to achieve this is to cut costs.

Types of business organisation

Saltan manufactures a range of cars. Inventory levels are too high, so the firm intends to cut output at its factory. Staff were informed that the business has to shrink its workforce as competition is rising. The trade union is unhappy that 360 of the 1200 skilled full-time employees at Saltan are due to be made redundant. A trade union spokeswoman commented: 'Saltan ought to shorten the hours of all employees instead of cutting the number of jobs.' Saltan's Operations Director is weighing up methods to raise efficiency in the factory.

Production of goods and services

F&G is a major fashion retailer with 20 shops in country C. The business applies market segmentation, and its intended market is men aged 25 to 40 years old. The Marketing Director has been examining the marketing data in Table 1. She is concerned that the business’s spending on marketing is not cost effective. She wants to shut every F&G shop and rely only on e-commerce.

Marketing strategy

Alex and Raul are business partners. They set up a bicycle-repair business using their own savings because the bank would not agree to lend them any money. Raul carries out most of the repair work, while Alex is responsible for the accounts. Alex is astonished that the business has earned a small profit in its first year. ‘We could put this profit towards expansion. I do not understand why people say we would gain from having a business plan. A large share of the demand for our repair business comes from our friends who own bicycles.’

Cash-flow forecasting and working capital

KLG operates in country X. It makes electrical parts and sells them to washing machine manufacturers in country X. The Managing Director is intending to move the business to country Y, a low-cost country. She stated: ‘This would let us pay employees low wages for long hours because there are few legal controls over employment and health and safety. KLG cannot be both ethical and profitable. Changes in exchange rates and import tariffs could create difficulties for us once we begin exporting.’

Business and the international economy

GCN manufactures many types of clothing, such as shirts and trousers, for both men and women. Its small factory has 75 skilled employees. The Operations manager believes staff like working there because very few resign each year. He stated: ‘Who needs to offer financial bonuses when I can use Herzberg’s theory to motivate employees?’ He wants to raise efficiency in the factory because he believes that is the most effective route to improving GCN’s low profit level. He is uncertain whether new technology should be added to the production process.

Motivating employees

In country Y, the Government wants to promote more secondary sector business activity in order to cut unemployment. It has announced lower taxes and intends to relax some legal controls on business activity. Kasper Construction is a multinational company from country X that wants to grow. If it can locate a suitable site, it plans to build a brick-making factory in country Y. Some pressure groups oppose this plan because Kasper Construction is known for environmental damage. Fig. 1: Employment in country Y. A pie chart shows employment by sector: primary sector 60%, secondary sector 15%, tertiary sector 25%. Total number of people employed in 2015 = 20 000 000.

Location decisions

Jenson Travel (JT) provides a broad selection of holidays designed for the mass market. It offers these holidays through its 350 shops in country F. JT has agreed to acquire another company that focuses on activity holidays, including skiing. This takeover will give JT 50 more shops and raise its market share to 40%. The takeover may cut JT’s costs by $35m per year. Table 1 shows a summary of JT’s accounting information for 2016. The Finance Director believes shareholders and customers will gain from the takeover.

Analysis of accounts

Having spent 20 years working in a bank, Luis has savings of $5000. He wants to launch his own business that sells and repairs mobile (cell) phones. The market is highly competitive. Luis has chosen not to buy a franchise for $4500 because he thinks it is better to run the business on his own rather than act as a franchisee. From his primary market research, he estimates he will need 15 customers each week to break even. Luis thinks that creating customer relationships will matter. He intends to use social networks to promote his new business.

Marketing, competition and the customer

Identify and explain one advantage and one disadvantage for Rosa and Eduardo of setting up a business partnership.

Business objectives and stakeholder objectives

Identify and explain two ways of training employees to use the new computer system.

Recruitment, selection and training of employees

The Government is widening public sector health care provision, including dentist clinics (see Appendix 1). Identify and explain two external benefits to the wider society arising from this extra provision of health care for poor families.

Cash-flow forecasting and working capital

Identify and explain four factors Rosa and Eduardo should take into account when selecting larger premises.

Location decisions

Identify and explain two possible reasons why Thao and Liang have chosen 'excellent customer service' as the main business objective.

Business objectives and stakeholder objectives

Identify and explain two possible benefits to FF from changes in IT. Refer to Appendix 1.

Market research

Identify four stakeholder groups that would want to examine FF’s accounts and explain why each one would want access to them.

Analysis of accounts

The Government has raised interest rates in an effort to reduce inflation. Identify and explain two ways that higher interest rates could affect FF.

Business finance

Identify four stakeholder groups linked to DADS in the case study and explain one objective for each group.

Business objectives and stakeholder objectives

Identify and explain two reasons why well qualified employees matter to this business.

Analysis of accounts

Identify and explain one benefit and one drawback of handing marketing tasks to the new manager.

Market research

The Government wants to persuade people to take exercise and improve their health (see Appendix 3). Identify and explain two possible external benefits that could result from an increase in the number of dance studios.

Economic issues