Oct/Nov 2017

Ella has only just finished college and is planning to launch her own business. She has created a new bicycle light with a safety feature that is not included in any competitor products. Ella knows that raising finance will be difficult. She intends to have the lights manufactured in another country. Each light will cost $8 to produce. Ella cannot decide whether to use price skimming. She said: ‘I have received orders for 300 lights and I have not even begun promoting them’. Ella wants to become a successful entrepreneur.

Enterprise, business growth and size

NMBJ produces several kinds of cookies (biscuits) through batch production. In the previous year, profit rose by $1.5 million. The directors believe that this happened because productivity improved and working capital was managed more effectively. NMBJ keeps inventory at a low level. From March, NMBJ intends to raise the pay of all 300 employees by $50 per month. The Finance Director is concerned: ‘This choice will add $15 000 to wages each month. Many employees are leaving. Is increasing wages the best way to raise motivation?’

Cash-flow forecasting and working capital

GDC is a transport delivery firm in country Z. It works in a competitive market. GDC employs 5000 workers and has 1000 delivery vehicles. GDC’s organisational structure contains many layers of hierarchy with a long chain of command. The managers adopt an autocratic leadership style. Last year, GDC delivered 2 billion parcels for businesses. The Managing Director said: ‘Having a good reputation matters. We have also gained from economies of scale’. GDC plans to expand its operations into another country, but it cannot decide the best way to do this.

Organisation and management

CHONS is a public limited company. The directors plan to open a new coal mine. All of the coal would be exported. The Managing Director is hopeful that the Government will permit the coal mine to open. She said: ‘CHONS always complies with legal controls. In an area with high unemployment, surely creating jobs is more important than protecting the environment. Most stakeholder groups, including shareholders and suppliers, are satisfied. CHONS will not be asking for any Government support.’

Business objectives and stakeholder objectives

FlyAway is an airline company. It operates in the tertiary sector. It sells low-price flights for business customers in country J. Passengers must pay extra for luggage and food during the flight. This is a highly competitive market. The Marketing manager knows that better customer service is important. Bookings and advertising are carried out through FlyAway’s ticket shops and its website. The Marketing manager is unsure whether to shut the ticket shops and rely only on e-commerce.

Costs, scale of production and break-even analysis

CGM produces high-quality shoes through job production. This production method relies on specialisation. CGM sells in a niche market. The managers at CGM recognise that every business activity generates external costs, so they always try to behave in ways that safeguard the environment. The Operations Director aims to raise profit. CGM could either purchase cheaper raw materials or bring new technology into the production process. The new technology would cost $30 000 and might cut the workforce from 30 to 26.

Production of goods and services

Yanis runs a busy restaurant in the city centre. He has 4 skilled chefs and 6 workers who serve customers in the restaurant. Every employee is employed on part-time contracts. The chefs receive a high hourly wage rate, but they are given no bonuses. Yanis is concerned that too many chefs resign. He is considering other ways to motivate the chefs. Yanis would like to open another restaurant but is concerned about growth-related difficulties. He has drawn up a balance sheet as part of his business plan. An extract is shown in Table 2. The current ratio was 1.2:1 in 2016.

Analysis of accounts

VIS offers a range of insurance services, including cover for cars and electrical products. Last year, retained profit fell. The Managing Director blames higher taxation and also believes that some markets have become more competitive. Customer complaints have also risen. The Managing Director intends to alter the business organisational structure by removing both the regional directors and the regional managers. She said: ‘Shorter chains of command may help. I know some employees may need training.’ She is unsure which suitable communication method to use to tell employees about the changes to the organisational structure.

Organisation and management

HGH manufactures truck (lorry) engines through batch production. Quality assurance is important. Profit fell by 30% last year. After considering the information in Table 1, the Managing Director has chosen to shut one of its two factories. He stated: ‘The difficulties are high energy costs and tougher competition from imports. The Government ought to bring in measures such as import quotas to protect firms like us. If it does not, then both factories may have to close’.

Production of goods and services

BBT produces a variety of breakfast cereals. One of BBT’s aims is to behave ethically towards every stakeholder. The Marketing Director has been examining BBT’s marketing strategy for some of its products. BBT applies competitive pricing. She believes that product A, one of its well-known brands, is now at the decline stage of the product life cycle. She is unsure what action to take over product A.

Marketing strategy

ZumGo is a partnership run by two brothers, Richie and Justin. It offers bus tours for holidaymakers. After two profitable years, Justin wants the business to grow by purchasing another bus. The bus will cost $28 000. When Richie prepared ZumGo’s cash flow forecast as part of the business plan, he left out the $6000 for advertising in March. They cannot agree whether to lease the bus or use all of their retained profit to buy it. Leasing would cost $1000 per month for 2 years.

Cash-flow forecasting and working capital

CYB is an accountancy business employing 30 highly skilled staff. They operate in small teams to prepare customers’ final accounts, including those of many multinational companies. CYB believes that effective communication is vital to its success. The Human Resources Director must hire 3 new accountants. She explained: ‘External recruitment is not easy, especially during an economic boom. The new recruits will also need either on-the-job or off-the-job training in our computerised accountancy system’.

Recruitment, selection and training of employees

Identify two methods that can be used to measure the size of AH. Explain the weakness of each measure.

Market research

Calculate the profit per day for AH using the information in Appendix 3.

Cash-flow forecasting and working capital

Identify and explain two ethical concerns that AH ought to consider.

Environmental and ethical issues

Identify and explain one advantage and one disadvantage of using social media networks to promote AH.

Recruitment, selection and training of employees

Identify and explain one advantage and one disadvantage of GS operating as a partnership. Positive point: Explanation: Negative point: Explanation:

Business finance

Identify and explain two ways GS might increase added value. Way 1: Explanation: Way 2: Explanation:

Marketing strategy

Identify and explain four characteristics that the partners should add to the person (job) specification when appointing the new employees. Trait 1: Trait 2: Trait 3: Trait 4:

Recruitment, selection and training of employees

Issue 1: Why this matters: Issue 2: Why this matters:

Analysis of accounts

Identify and explain one benefit and one drawback of BB operating as a private limited company.

Market research

Identify and explain two leadership styles that Stella could adopt.

Motivating employees

Use the organisation chart shown in Appendix 2. Identify and explain the chain of command for BB and the span of control of Stella.

Costs, scale of production and break-even analysis

Identify and explain two reasons that make profit important to BB.

Economic issues