May/June 2015

Gomez manages a small computer repair business. Table 1 sets out some of the business’s costs and prices. Because the market is very competitive, Gomez knows that keeping customer loyalty and revenue high is important. Gomez also realises that a lower break-even point would improve profits. He believes the most effective way to reduce the break-even point is to increase prices.

Costs, scale of production and break-even analysis

Country S is in the middle of an economic boom. Over this period, business profits have risen and unemployment has decreased. The only difficulty is inflation. All Active is a private limited company. It operates 20 sport and fitness clubs in country S. The Managing Director stated: ‘This is a good time to grow by opening 5 more clubs. Choosing the correct locations matters. We will need to hire more employees.’ He is unsure whether it would benefit All Active to change into a public limited company.

Types of business organisation

Si and Ramon are friends. They are planning to start a photography business that would take pictures at weddings, birthdays and other special events. The business is to be run as a partnership. From their primary market research, Si thinks there is enough demand. Ramon has drawn up a business plan showing that $8000 is needed for a shop and $4000 for equipment. They intend to spend $500 on promotion, but they cannot agree on the best method to use.

Enterprise, business growth and size

Javid is a firm that makes a range of luxury chocolates through batch production. Over the last year, profit has declined because competition has increased. To reduce costs, the Finance Director has proposed that the business introduces new technology into the production process. The Human Resources Director is uncertain whether workers would gain from the introduction of new technology.

Production of goods and services

PJK manufactures a selection of luxury sports watches. Skilled workers handmake each watch. Quality assurance is important. The Operations Director has been examining costs and prices because he wants to carry out a break-even analysis. This information appears in Table 1. He plans to invest in new technology to automate parts of the production process. The Operations Director believes this is the best route to improving profitability.

Costs, scale of production and break-even analysis

Alkin is a multinational company. It produces breakfast foods, including many leading cereal brands. Alkin intends to begin selling in country Z, which is a rapidly growing market. Alkin plans to set up a joint venture with a local business based in country Z. ‘Effective communication will be important to our success but I think there are many advantages in expanding this way’ said Alkin’s Managing Director. The Government of country Z is concerned about the impact of multinational companies such as Alkin on consumers.

Business and the international economy

Mabel is planning to open her own hairdressing business. To succeed, she will have to develop strong customer relationships. She has carried out some secondary market research to discover possible demand and the promotion methods she might use. She has chosen to purchase her inventory (stock) from a wholesaler. Mabel is now searching for the best location for her business. She believes that location will matter more than the price she charges for the success of her business.

Marketing mix

A2Z is a compact yet successful airline company in country B that offers flights for business travellers. The management of A2Z wants the business to grow. It would need to buy more aeroplanes and hire more airline pilots. The Human Resources manager has written a job description for the pilots and is now ready to advertise for the new pilots. She thinks the best way to motivate A2Z's pilots is through financial rewards.

Recruitment, selection and training of employees

Identify and explain two characteristics David must have to succeed as an entrepreneur.

Organisation and management

Identify and explain two ways that marketing is important for DD.

Marketing strategy

David can use the company Balance Sheet to judge how well the business is performing.

Analysis of accounts

Identify and explain four factors DD ought to think about when cakes are packaged for export.

Business and the international economy

Samah and Selina prepared a business plan before FF began trading 5 years ago. Identify and explain two ways that their business plan may have helped the business to become successful.

Recruitment, selection and training of employees

Identify and explain two benefits to FF of aiming its products at a particular market segment.

Marketing mix

Samah and Selina are thinking about purchasing ingredients from a different supplier, ABC (see Appendix 2). Identify and explain one advantage and one disadvantage to FF if they switch to ABC.

Marketing strategy

The Government of country X has recently raised interest rates. Identify and explain two effects that an increase in interest rates could have on FF.

Economic issues