Feb/March 2020

HSN makes breakfast cereals through batch production. The goods are marketed through several distribution channels. HSN employs 600 production workers. HSN is facing difficulties because many employees are leaving. After the Operations Manager was dismissed, the Human Resources Director must appoint a new manager. She stated: ‘The person must have good communication skills to help solve the communication barriers HSN has with employees.’ The Human Resources Director must decide whether to use internal recruitment or external recruitment for the new manager.

Internal and external communication

Gomez trades as a sole trader and offers painting and decorating services to business clients. Because the business is small, it gains no economies of scale. Gomez must pay suppliers within 1 month, but he allows customers 3 months to settle their bills. He uses an old van borrowed from his father to reach customers’ offices and shops. As the van often breaks down, Gomez is considering buying a replacement van. Table 2.1 shows a cash-flow forecast for the next 3 months.

Cash-flow forecasting and working capital

Globalisation has transformed the way many businesses work. VKW manufactures cell (mobile) phones. It operates just-in-time inventory control. VKW sends 40% of its products abroad. To help keep total costs lower, it imports most of its raw materials. Every one of VKW’s 800 employees understands how important quality assurance is. The Operations Director has instructed all suppliers to make sure that child labour is not used. She is also worried that many governments intend to tighten import controls such as quotas.

Business and the international economy

WFG is a private limited company based in country X. It owns 120 supermarkets, and 20 of these are run as franchises. One of WFG’s aims is to expand by launching 30 additional shops within the next 18 months. The Managing Director said: ‘Market research shows that fewer people are going to the local markets each day to buy food. It is important for us to set prices at the correct level.’ The Managing Director is considering whether new technology should be introduced into the business.

Market research

Explain four reasons why someone may start their own business.

Enterprise, business growth and size

Explain two reasons why Bob decided to use sampling when he carried out a questionnaire.

Market research

Explain two reasons that show why working capital matters for BW.

Cash-flow forecasting and working capital

Calculate the break-even level of output for BW from the data in Appendix 2.

Costs, scale of production and break-even analysis