May/June 2017

QCH is a global company that manufactures a range of luxury cars. In the previous year, it made a profit of $700m. One of QCH’s objectives is to enter new markets. QCH wants to begin producing cars in country C, a fast-growing economy. The Finance Director said: ‘Meeting customer needs is important. We could form a joint venture or establish our own factory. Both choices would be expensive, costing $800m. I think QCH’s expansion into country C could also benefit other businesses there.’

Business and the international economy

Josh runs an office cleaning business and has a mix of large and small business clients. He employs 6 full-time cleaners, all of whom receive off-the-job training. Josh thinks that using the newest cleaning equipment raises added value. He said: ‘Customers are happy with the service. I am always sending text (SMS) messages to workers about additional work.’ Josh has been studying his balance sheet. He is unsure whether a bank loan is the best source of finance for buying new equipment. The new equipment will cost $60 000. Table 1: Extract from Josh’s balance sheet as at 30 April 2017 ($000): Current assets = 120; Trade receivables = 90; Cash = X; Current liabilities = Y; Net current assets = 70.

Statement of financial position

Wilde Soup Stop (WSS) offers a variety of soups and hot drinks. It owns 30 shops and has granted its franchise to 10 other shops in country Z. The Marketing Director said: ‘Results from our focus group show that being an ethical business matters’. WSS intends to widen its product range so that it also includes curries and cakes. WSS will need to alter its brand image. The Marketing Director cannot choose between sponsorship and newspaper advertising as the main promotion method.

Marketing mix

GKK manufactures plastic bottles for a wide variety of products, ranging from food products to chemicals. Its raw materials are purchased from a low-cost country. GKK has a broad organisational structure with a short chain of command, so delegation is possible. The Government intends to bring in new legal controls to protect the environment. The Operations manager commented: ‘The Government may meet one of its objectives, but what effect will this have on GKK? This is a competitive market, so prices matter.’ He aims to raise efficiency and is planning to use lean production.

Production of goods and services

Cheung runs a small retail shop in the city centre that sells fashion clothing for children. Because the market is highly competitive, Cheung understands that market research matters. Cheung is concerned that an increase in shop rent will raise his costs. Cheung said: ‘I will have to pay this higher rent as it is a good location. I need to increase revenue or reduce costs.’ Cheung sources all his supplies from a wholesaler in a nearby town. He is considering purchasing straight from a clothing manufacturer in another country.

Location decisions

LWM manufactures car tyres in 15 different sizes by means of batch production. In the previous year, LWM sold 60 million tyres, and 40 million of these were the best-selling size. The Finance Director has been examining some financial information shown in Table 1. She commented: ‘Liquidity is important. I need to carry out ratio analysis to assess business performance.’ In the year before that, our Return on Capital Employed was $33\%$. The directors are concerned about rising competition, yet they cannot agree on the best response for LWM.

Analysis of accounts

Five years ago, Manisha began baking cakes for celebrations such as weddings and birthdays from her home. She now runs a small shop and employs 3 staff. Product quality matters greatly to her business. Manisha said: ‘I have benefited from the economic boom but I did not expect demand to increase by 500% each year. Somehow I have managed to cope with higher interest rates and all the challenges of being a sole trader. The business is profitable at last but I have to work every day.’ A friend has offered to become Manisha’s business partner.

Economic issues

Steppa is a private-sector shoe manufacturer. The business employs 200 workers, all of whom are paid a high hourly wage rate. The Human Resources Director stated: ‘We use a democratic leadership style. Employees are an important stakeholder group. Happy workers help the business. Revenue rose by 10% last year.’ She cannot work out why so many workers leave the business every year. She is considering other non-financial ways to motivate employees.

Motivating employees

Identify and explain two ways in which TT could achieve quality production.

Achieving quality production

Identify two motivational theories and explain how TT could put these theories to work to raise worker motivation.

Business and the international economy

Identify two communication barriers that could arise within TT and explain how each barrier may be reduced.

Marketing mix

Identify and explain one reason TT will need short-term finance and one reason TT will need long-term finance.

Business finance: needs and sources

Identify two financial statements that the directors should review before CC expands. Explain why they will want to examine each statement.

Analysis of accounts

Identify and explain two reasons why on-the-job training matters for new employees at CC.

Recruitment, selection and training of employees

CC is reconsidering its business structure and exploring profit opportunities for Fizz Bomm.

Types of business organisation

Fizz Bomm is at the development stage of the product life cycle. Identify and explain four other stages in Fizz Bomm’s product life cycle.

Marketing mix