Oct/Nov 2023

Desmond is aiming to become a successful entrepreneur. He has chosen to leave his office job and set up a gardening business that will cut grass and plant flowers. The business will be unincorporated. Desmond knows that a new business faces a higher chance of failure than an established one. He has set his business objectives for the first year. Desmond has worked out that $750 will be needed as start-up capital.

Enterprise, business growth and size

LCT makes cooking pots. It employs 16 workers. Because it is a small business, LCT advertises through social media. The owner, Carole, understands that a strong brand image matters. She is examining LCT’s break-even chart, which is displayed in Fig. 2.1. Carole is thinking about different ways to reduce LCT’s break-even output level. Fig. 2.1 shows a break-even chart for LCT. The vertical axis is marked ‘costs / revenue ($)’ and the horizontal axis is marked ‘units’. There are three labelled lines: ‘total revenue’, ‘total costs’, and ‘fixed costs’.

Costs, scale of production and break-even analysis

ACP is a computer manufacturer. Ethical behaviour matters to ACP. The business has 3000 employees in its factory. ACP brings in 65% of its raw materials from abroad. As internal users of the accounts, the directors intend to examine ACP’s financial performance by using profitability ratios. The Finance Director believes that earning a profit is more important for a business than controlling its cash flow.

Analysis of accounts

MRN operates as a food retailer. It has 490 shops and 70 000 employees. MRN has announced plans to shut 80 of its shops. The Human Resources Director stated: ‘20% of management jobs will be cut. We want to promote delegation.’ MRN will still comply with legal controls over employment. MRN’s directors understand that businesses need to react to increased competition.

Organisation and management

Paolo is planning to launch a cake-making business. He intends to supply every product to a wholesaler. Paolo recognises that the packaging for his products will matter. He has put together some financial and sales information. An extract from this information appears in Table 1.1. Paolo is thinking about crowdfunding as a way to obtain finance. He also knows that the business will require working capital.

Cash-flow forecasting and working capital

TBX makes high-quality steel for railway construction. The production method it uses enables TBX to gain economies of scale. The business keeps a large inventory, including iron ore. The Managing Director recognises that business activity may affect the environment and is thinking about how the business can help sustainable development.

Achieving quality production

Country X operates a mixed economy, with organisations in both the private and public sectors. These organisations are active in different sectors of economic activity. Over the past 20 years, the primary sector has become less significant in country X’s economy. The changes are summarised in Table 3.1. The government is intending to encourage multinational companies to establish factories in country X.

Business activity

TFN is a travel company that sells holidays. It operates 37 shops and employs 1000 people. In the previous year, TFN’s profit rose to $46 million$. The Managing Director recognises that strong customer service has helped to keep customers loyal. He said: ‘TFN’s managers apply ideas from Herzberg’s two-factor theory to motivate employees. Every employee receives off-the-job training and every manager has a broad span of control.’

Motivating employees

DBR is a mining company. It is a large public limited company operating in the primary sector. DBR runs 8 diamond mines and employs 3000 workers. Specialisation matters. Over the last 5 years DBR has expanded rapidly. The Managing Director is concerned that diseconomies of scale may appear as the business keeps growing. In 2022 DBR made a profit of $600 million.

Enterprise, business growth and size

NPZ runs a pizza restaurant and employs 35 part-time staff. Trent, the owner, wants to look at different ways of improving motivation because he believes that having employees with high motivation is important. He is examining NPZ’s financial statements, and an extract is given in Table 2.1. Trent is also thinking about ways to raise NPZ’s profit.

Motivating employees

BKS is a manufacturer that produces a variety of food products. A strong brand image matters. Most of BKS’s products are sold straight to large retailers. The business is continually creating new products. The Marketing Manager understands that the stage of the product life cycle will affect BKS’s promotion decisions. She also knows why the business ought to react to environmental pressures.

Marketing mix

FXN makes mobile phones. It operates as a multinational company. FXN is intending to construct a new factory in country Y. One reason for this is the government of country Y’s decision to bring in import quotas. The Managing Director stated: ‘The new factory will create 1200 jobs and help reduce unemployment in country Y. FXN will begin the recruitment process as soon as a decision has been reached about an appropriate site for the new factory’.

Business and the international economy

Explain two advantages and two disadvantages that PH would have as a public limited company.

Types of business organisation

Explain two drawbacks and two advantages to a business of developing new products.

Market research

Explain two reasons why training is significant for PH.

Analysis of accounts

Explain two advantages of PH’s employees joining a trade union.

Enterprise, business growth and size

Explain two benefits of specialisation in the production of SSE’s products.

Market research

Explain four factors that a business ought to take into account when deciding which source of finance to use for expansion.

Business finance

Explain one advantage and one disadvantage to SSE of recruiting its new managers from within the business.

Internal and external communication

Explain four ways in which the break-even chart in Appendix 3 could help SSE.

Costs, scale of production and break-even analysis

Explain four ways in which a partnership differs from a limited company.

Types of business organisation

Explain four methods of primary market research Benjy could use to find out whether there is demand for BB’s services.

Market research

Explain one advantage and one drawback of using job production for BB.

Production of goods and services

Using Appendix 3 and the other information provided, explain two ways exchange-rate depreciation could influence BB.

Business objectives and stakeholder objectives