May/June 2023

WLT makes carpets and ships 40% of its products overseas. Globalisation has brought both chances and dangers for WLT. Its production method enables WLT to benefit from specialisation. Every one of its 60 employees knows that quality assurance matters. WLT’s directors are weighing up the most effective way to improve efficiency.

Production of goods and services

LMA is a family-run restaurant. The business was launched 20 years ago and has stayed small. LMA operates as a partnership. The partners are weighing up whether LMA ought to convert into a private limited company. The Finance Manager is reviewing LMA’s cash-flow forecast. An extract is shown in Table 2.1.

Cash-flow forecasting and working capital

DZD is a large business that delivers parcels. A significant number of its workers are employed part-time. The directors at DZD are preparing to grow the business and must choose an appropriate source of finance for 20 new vehicles. DZD will also hire 60 new employees. The Human Resources Director is drafting a job description for the new employees. She is thinking about using Maslow’s hierarchy of needs to raise the motivation of DZD’s employees.

Recruitment, selection and training of employees

NLR produces a variety of branded skincare goods, including hand cream. The packaging of these goods matters. As with many businesses, NLR uses market segmentation. The Marketing Director knows that the stage of the product life cycle may affect NLR’s pricing choices. He is studying market research findings. These indicate that 85% of consumers expect businesses to react to environmental pressures.

Marketing mix

FBW makes watches through job production. It has 5 full-time production employees. Regular training is given to each worker. In the previous year, FBW sold 600 watches. The Managing Director intends to use break-even analysis to help decide whether product prices should be increased. FBW’s present break-even chart appears in Fig. 1.1. Fig. 1.1 is headed 'Break-even chart for FBW’s watches'. The vertical axis reads 'costs and revenue $' and goes up to 120 000. The horizontal axis reads 'number of watches' and goes up to 800. A horizontal line labelled 'fixed costs' is shown at $20 000. One straight line slopes upwards and is labelled 'total costs'. A steeper straight line slopes upwards and is labelled 'total revenue'. The total revenue line and the total costs line meet at about 500 watches and $60 000.

Costs, scale of production and break-even analysis

Gloria runs a sole trader business that offers house-cleaning services. She communicates with her 4 employees by telephone. She intends to grow the business by adding a repair service. Gloria is planning to conduct some market research. She has been advised that drawing up a business plan may reduce risk. She also wants to cut her own workload, so she is thinking about bringing in a business partner.

Enterprise, business growth and size

VVA is a business located in country X. It makes school backpacks (bags). VVA sells through retailers as its distribution channel. The Managing Director is aware that demand can be influenced by many factors, including the stage of the business cycle and the degree of competition in the market. VVA imports 45% of its raw materials. The Managing Director is concerned that import tariffs and import quotas being introduced, together with an appreciation in country X’s exchange rate, will have an impact on VVA.

Business and the international economy

CPF is a clothing retailer. It is a private limited company. It operates 4 shops and employs 30 people. The Finance Director is worried about the level of current assets because working capital is important. Retained profit is also low. CPF’s directors are planning to grow the business by opening a new shop. A suitable long-term finance source will have to be chosen. The expansion plan will influence many of CPF’s stakeholder groups.

Cash-flow forecasting and working capital

TDG is a bicycle retailer with 3 employees. Because it sells in a mass market, it needs to keep customers loyal. Simon, the manager, understands that cash-flow management matters, so he is examining TDG’s cash-flow forecast. An extract is given in Table 1.1. Simon is thinking about how TDG can deal with its short-term cash-flow difficulty in September.

Cash-flow forecasting and working capital

KCL makes paper that is used to produce newspapers and books. KCL keeps a large inventory level and purchases all raw materials, including wood, from nearby suppliers. Quality control matters. The Operations Director is thinking about methods to raise efficiency in the factory. Pressure groups are attempting to shape KCL’s decisions so that the business does not generate more external costs than external benefits.

Production of goods and services

PCY offers insurance services to businesses like farms and factories. Ethical behaviour matters greatly to PCY. The business operates 4 offices and employs 500 people. Managers adopt different leadership styles. The Managing Director is intending to reorganise and manage PCY in a different way. He stated: ‘I want communication barriers inside the business to be reduced. Delegation will be promoted. The span of control may change.’

Organisation and management

Meena is planning to give up her teaching post and set up as a successful entrepreneur. Her enterprise will make handmade jewellery. Meena is aware that the government offers support for business start-ups. She intends to use market research to help her pinpoint a market segment for her jewellery. Her brother has said he will be her business partner, but she is unsure whether trading as a sole trader would be the better option.

Enterprise, business growth and size

Explain four communication barriers that a business may face.

Internal and external communication

Explain two advantages and two disadvantages of VP’s Restaurant Managers passing tasks on to their Assistant Managers.

Location decisions

Explain two possible reasons why VP wants to expand.

Enterprise, business growth and size

Explain, with an example, one reason why VP might need: • short-term finance • long-term finance.

Business finance

Explain four characteristics that an entrepreneur needs in order to be successful.

Types of business organisation

Explain one business objective for ET and one different objective that a social enterprise such as Daycare may aim for.

Business objectives and stakeholder objectives

Explain four reasons why it is important for Zane to prepare a cash-flow forecast before he starts ET.

Cash-flow forecasting and working capital

Explain two leadership styles that Zane and Zaara could adopt when they manage ET’s employees.

Motivating employees

Explain four reasons that may lead a business to become a multinational company.

Business and the international economy

Explain two problems RR may encounter as it expands.

Internal and external communication

Explain one responsibility carried out by each of the following in RR: • Directors • Managers • Supervisors • Production employees

Organisation and management

Explain one opportunity and one threat for RR arising from the use of ecommerce.

Analysis of accounts