Oct/Nov 2020

SRB is a bank that lends to business customers. SRB plans to make 100 managers’ jobs redundant across its 80 branches. This would eliminate one level of hierarchy. This forms part of its plan to cut $1m in costs over the next 2 years. The Managing Director stated: ‘SRB is discussing this plan with the trade union. SRB will rely more on delegation. The bank must react to tougher competition from online banks. SRB could either increase advertising or create new products and services.’

Organisation and management

YMG is a private limited company and the biggest producer of soft drinks in country Y. YMG makes 1 billion litres each year by using flow production. The Managing Director wants YMG to grow. He said: ‘My aim is to raise output to 3 billion litres during the next 5 years. This would let us begin selling our products in fresh markets in other countries. I realise import quotas and a shortage of local knowledge may create difficulties, but there are methods that could help us deal with them.’ The Managing Director also intends to put $60m into new technology to raise efficiency.

Production of goods and services

Elton runs his business as a sole trader. He sells specialist sports clothing and equipment, including baseball and hockey items. This is a niche market. He began the business 5 years ago, and it has stayed small. Having a broad range of inventory matters. Elton has been reviewing how well his business is performing financially. In 2018, the profit margin was 35%. Table 3.1 shows an extract from the accounts.

Analysis of accounts

KTF manufactures building materials, such as cement and bricks. In the last year, KTF achieved sales of $25bn. Since it was established 60 years ago, KTF’s objectives have frequently altered. The Managing Director wants KTF to grow. KTF plans to acquire one of its major rivals. The larger business will record combined sales of $40bn. The Managing Director remarked: ‘Many stakeholder groups will be affected by this decision.’ She is aware that a number of external influences shape business activity, including the business cycle, interest rates and laws that protect the environment.

Enterprise, business growth and size

Kolo runs a profitable hairdressing salon in the city centre and has 4 part-time employees. The business has recorded a profit in each of the last 3 years. He plans to grow by opening a second hairdressing salon so that he can benefit from the economic boom. For the new salon, Kolo intends to appoint a manager through external recruitment, and he has already chosen 2 possible candidates for the role. Details about them are given in Table 1.1.

Recruitment, selection and training of employees

DSY is a private limited company. It manufactures washing machines and cleaning equipment. The Managing Director wants DSY to move into a different market. He intends to spend $2bn on developing electric cars. Competition in the electric car market is intense. This market is expanding very quickly. A leading pressure group has pointed out the environmental issues caused by non-electric cars. The Managing Director is aware that key choices about the production method and the new car’s brand image still need to be decided.

Enterprise, business growth and size

Veronique feels bored by her job in a large factory. Because she is creative, she wants to resign and open a flower shop. She has asked about micro-finance and drawn up a cash flow forecast; an extract appears in Table 3.1. Veronique has also done some market research and discovered that demand for flowers is likely to be high at festival times. She believes she has the right qualities to become a successful entrepreneur.

Cash-flow forecasting and working capital

Gino runs a fast-food restaurant that serves fried chicken and potato fries. He has 5 full-time chefs and 12 part-time workers who prepare and serve the food. Communication matters, so Gino holds regular meetings with his part-time staff to keep them updated about any changes to the menu. It took 3 years for Gino’s business to reach break-even. He wants to achieve a Return on Capital Employed (ROCE) of 10%. Gino is always searching for ways to increase customer numbers. Inflation could be a difficulty for Gino’s business.

Internal and external communication

Mercy and Ayo are entrepreneurs. They intend to open a shop that sells homemade ice cream. Mercy wants the business to behave ethically and to buy only high-quality organic milk from local farms. Ayo used sampling to help him conduct some primary market research. Table 1.1 shows an extract of the results from the 300 people in the sample. Ayo believes that a new business stands a better chance of success if it is sited where there is no competition.

Market research

Lola and Raul run a business partnership. They use job production to create a range of hand-printed products, including t-shirts, bags and posters. Most of their customers are tourists. Lola designs and prints all the products at the back of a small shop. Raul looks after sales and finance. Output is slow and Lola finds it hard to match demand. Raul wants to raise output. One possible way to do this is to add some machinery to the process. Raul also wants to create a website.

Types of business organisation

CLN is a public limited company. It sells a variety of electrical products, including televisions and computers. The Managing Director has been examining CLN’s accounts. An extract appears in Table 3.1. He stated: ‘We need more finance. Last year CLN made a loss of $250m. I blame increased competition from e-commerce.’ CLN intends to shut 30 of its 120 shops. This choice will affect many stakeholders, including the local communities. The number of sales made by each shop will be used to choose which shops are closed.

Analysis of accounts

Kane founded LFP 8 years ago. LFP produces high quality furniture. LFP imports 40% of its materials, including wood. Kane understands that business activity is affected by many external factors, such as employment levels and import quotas. Because demand is rising, LFP needs to hire 5 extra production workers. Kane is busy drafting a job advertisement. Well-motivated employees are important to LFP. Kane is deciding between raising wages and introducing profit sharing. Kane also believes that a clear organisational structure is beneficial for a business.

Organisation and management

Explain two reasons why having business objectives matters to Gemma.

Business objectives and stakeholder objectives

Job outline for the shop manager Post title: Shop manager Workplace: New shop Job details: Oversee the shop and its employees

Recruitment, selection and training of employees

Explain why liquidity and profitability matter to a business.

Business finance

Explain the effect of the following changes on GJ. • Depreciation in the exchange rate of country Z • Increase in income tax in country Z

Business and the international economy

Explain two reasons why CC needs finance.

Achieving quality production

Explain two possible reasons why Aisha decided to establish CC as a business partnership.

Recruitment, selection and training of employees

Explain two factors that make a new business more likely to fail than an established business.

Marketing mix

From the information in Appendix 3, work out these ratios for CC: • Gross profit margin • Profit margin • Current ratio • Acid test ratio Show your working.

Analysis of accounts

Explain two advantages and two drawbacks to a business of becoming a public limited company.

Business objectives and stakeholder objectives

Explain four duties performed by AD’s Operations Director.

Organisation and management

Explain one economy of scale and one diseconomy of scale as AD expands.

Enterprise, business growth and size

Explain one benefit and one drawback to AD of selling to a niche market.

Economic issues