Oct/Nov 2017

Ella has recently finished college and plans to launch her own business. She has created a new bicycle light with a safety feature that is absent from rival products. Ella realises that securing finance will be hard. She intends to have the lights made in another country. It will cost $8 to make each light. Ella is unsure whether to use price skimming. She said: ‘I have received orders for 300 lights and I have not even started promoting them’. Ella wants to become a successful entrepreneur.

Enterprise, business growth and size

NMBJ produces a variety of cookies (biscuits) by means of batch production. In the previous year, profit rose by $1.5 million. The directors believe this happened because productivity improved and working capital was managed more effectively. NMBJ keeps inventory at a low level. NMBJ intends to raise the wages of all 300 employees by $50 per month from March. The Finance Director is concerned: ‘This decision will add $15 000 to wages each month. Many employees are leaving. Is paying higher wages the best way to improve motivation?’

Cash-flow forecasting and working capital

GDC operates a transport delivery business in country Z. It competes in a competitive market. GDC employs 5000 staff and owns 1000 delivery vehicles. GDC’s organisational structure contains many layers of hierarchy and a long chain of command. The managers adopt an autocratic leadership style. In the previous year GDC delivered 2 billion parcels for businesses. The Managing Director said: ‘Having a good reputation is important. We have also benefited from economies of scale’. GDC plans to expand its operations into another country, but it cannot decide the best way to do this.’

Organisation and management

CHONS is a public limited company. The directors are planning to open a new coal mine. All of the coal will be exported. The Managing Director is optimistic that the Government will permit the coal mine to open. She commented: ‘CHONS always complies with legal controls. In an area with high unemployment, surely creating jobs matters more than protecting the environment. Most stakeholder groups, including shareholders and suppliers, are satisfied. CHONS will not be seeking any Government support.’

Business objectives and stakeholder objectives

FlyAway operates as an airline company. It belongs to the tertiary sector. For business customers in country J, it provides low-price flights. On board, customers must pay extra for luggage and food. Competition in this market is intense. The Marketing manager understands that better customer service matters. Bookings and advertising are handled through FlyAway’s ticket shops and its website. The Marketing manager is unsure whether the ticket shops should be shut and e-commerce used on its own.

Costs, scale of production and break-even analysis

CGM uses job production to make high quality shoes. This production method relies on specialisation. CGM operates in a niche market. The managers at CGM understand that every business activity generates external costs, so they always try to behave in ways that protect the environment. The Operations Director wants profit to rise. CGM could either purchase cheaper raw materials or add new technology to the production process. The new technology would cost $30000 and could cut the workforce from 30 to 26.

Production of goods and services

Yanis runs a busy restaurant in the city centre. He has 4 skilled chefs and 6 workers employed in the restaurant. Every member of staff is on a part-time contract. The chefs receive a high hourly pay rate, but there are no bonuses. Yanis is concerned that too many chefs are leaving. He is considering other ways to motivate the chefs. Yanis would like to open another restaurant, but he is worried about issues associated with growth. As part of his business plan, he has drawn up a balance sheet. An extract is shown in Table 2. The current ratio was $1.2 : 1$ in 2016.

Analysis of accounts

VIS offers a variety of insurance services, such as cover for cars and electrical products. Last year, retained profit fell. The Managing Director says this was due to higher taxation and also believes that some markets are now more competitive. Customer complaints have also risen. The Managing Director intends to alter the business organisational structure by removing both the regional directors and the regional managers. She commented: 'Shorter chains of command may be beneficial. I realise that some employees might require training.' She is unsure which communication method would be most suitable for telling employees about the organisational changes.

Organisation and management

Identify two ways in which the size of AH may be measured. Explain the weaknesses of each measure.

Enterprise, business growth and size

Calculate the profit per day for AH using the information in Appendix 3.

Analysis of accounts

Identify and explain two ethical issues that AH needs to take into account.

Location decisions

Identify and explain one advantage and one disadvantage of using social media networks to advertise AH. Advantage: Explanation: Disadvantage: Explanation:

Recruitment, selection and training of employees

Identify and explain one advantage and one disadvantage of GS operating as a partnership.

Business finance: needs and sources

Identify and explain two methods by which GS can raise added value.

Marketing mix

Identify and explain four traits that the partners ought to state in the person (job) specification when appointing the new employees.

Location decisions

Identify and explain two disadvantages for GS of holding inventory at a high level.

Analysis of accounts