May/June 2016

EDGE manufactures mobile (cell) phones. It sells in a highly competitive market. The Marketing manager thinks that, because EDGE is successful at keeping customers loyal, demand for its phones is price inelastic. Its top-selling product, Z, is close to the final stage of its product life cycle. The Marketing manager must decide whether to invest in new product development or to apply extension strategies to product Z. Fig. 1: EDGE - units sold by product category in 2015 Total quantity sold: 800 000

Marketing strategy

Bushall operates as a farm. This primary sector firm produces award-winning fruits including pineapples and bananas. Bushall employs 10 full-time staff and 50 part-time staff. All part-time vacancies are placed on its website. The Government has introduced employment laws, including a minimum wage of $8.50 per hour and a cap on the number of hours an employee can work each week. Our team of employees enjoy what they do. These laws are not good for our employees or our business!

Recruitment, selection and training of employees

Rafiq serves as the Operations manager in a small factory. The business produces a variety of soft drinks by using batch production. Last year, one of the 40 employees suggested an idea, and Rafiq successfully put in place just-in-time inventory control based on it. Since the business is planning to grow, Rafiq believes switching to flow production would be a sensible move.

Production of goods and services

Nuwan is a sole trader. He runs a specialist sports shop that sells a broad selection of cricket and tennis products. His 3 employees are trained to deliver high-quality customer service. Nuwan is glad that the economy is expanding, but he is concerned that interest rates may rise. He thinks his small business has benefits when compared with large retailers. Nuwan wants to raise profit margins and believes the best approach is to cut costs.

Economic issues

Saltan produces a variety of cars. Inventory levels are too high, so the company intends to cut output at its factory. Staff were informed that, because competition is rising, the business must shrink the size of its workforce. The trade union is unhappy that 360 of the 1200 skilled full time employees at Saltan will become redundant. A trade union spokeswoman said: ‘Saltan ought to shorten the hours of all employees instead of cutting jobs.’ Saltan’s Operations Director is weighing up methods of improving efficiency in the factory.

Production of goods and services

F&G is a major fashion retailer, and it operates 20 shops in country C. The business applies market segmentation, with men aged between 25 and 40 years old as its target market. The Marketing Director has been examining the marketing data in Table 1. She is concerned that the amount the business spends on marketing is not cost effective. She would like to close down all F&G shops and rely only on e-commerce.

Marketing, competition and the customer

Alex and Raul are business partners. They set up a bicycle repair business using their own savings because the bank would not provide a loan. Raul carries out most of the repair work, whereas Alex handles the accounts. Alex is surprised that the business has earned a small profit in the first year. ‘We can use this profit to expand. I do not see why people believe we would gain from having a business plan. A lot of the demand for our repair business comes from our friends who own bicycles.’

Cash-flow forecasting and working capital

KLG operates in country X. It makes electrical parts and sells them to washing machine manufacturers in country X. The Managing Director intends to move to country Y, which is a low-cost country. She said: ‘This will let us pay employees low wages for long hours because there are few legal controls on employment and health and safety. KLG cannot be both ethical and profitable. Changes in exchange rates and import tariffs may create problems once we start exporting.’

Business and the international economy

Identify and explain one advantage and one disadvantage of Rosa and Eduardo setting up as a business partnership.

Business objectives and stakeholder objectives

Identify and explain two ways of training employees so they can use the new computer system.

Recruitment, selection and training of employees

The Government is enlarging public sector health care provision, including dental clinics (see Appendix 1).

Cash-flow forecasting and working capital

Identify and explain four factors Rosa and Eduardo should take into account when selecting larger premises.

Location decisions

Identify and explain two possible reasons that Thao and Liang have chosen ‘excellent customer service’ as the business's main objective.

Business objectives and stakeholder objectives

Identify and explain two possible benefits to FF arising from changes in IT. See Appendix 1.

Market research

Identify four stakeholder groups that would want to inspect FF’s accounts and explain the reason each group would want to do so.

Business objectives and stakeholder objectives

To curb inflation, the Government has raised interest rates. Identify and explain two ways that a rise in interest rates could affect FF.

Business finance: needs and sources