May/June 2019

Y2M is a bus company operating in the public sector. One of its aims is to break even on every bus route. Most of its rivals operate in the private sector. Y2M wants to raise the number of customers who travel by its buses. The Finance Director has been examining some cost data in Table 1. This is because Y2M plans to review how it prices its services. He is concerned that other businesses pay workers a higher wage rate and that some of its drivers might leave. She stated: ‘If the same wage rate were paid, variable cost would rise to $2.20 per passenger per journey.’

Costs, scale of production and break-even analysis

Kate is an entrepreneur. Two years earlier, she resigned from her role as a fashion designer at a multinational company. She launched BBB, a women’s sportswear clothing business. BBB aims at a market segment of high income consumers. BBB’s products are sold in 3 retail shops and also via its website. Kate said: ‘I spotted a gap in the market and decided to take the risk. Securing the finance I needed from the bank was not easy. I enjoy making decisions such as choosing leaflets to advertise the clothes.’ BBB’s revenue target for next year is $500 000.

Enterprise, business growth and size

BVC produces a variety of paints. It sells 60% of its output overseas. The Managing Director has been reviewing BVC’s cash-flow forecast in Table 2. He stated: ‘Success is not just about our return on capital employed.’ The Managing Director is concerned about the arrival of new legal controls to safeguard the environment. This would require BVC to cut down the number of chemicals used in paint production. He believes these new legal controls will harm the business.

Cash-flow forecasting and working capital

FGH is a private limited company. Its organisational structure is a tall hierarchy. It operates as a book retailer and intends to acquire one of its rivals for $800\text{m}$. If the acquisition goes ahead, FGH would operate $6500$ bookshops in $20$ countries. FGH’s Managing Director stated: “We expect to cut total costs by $300\text{m}$ a year once the takeover is completed. We will end all off-the-job training for employees.” The Managing Director believes FGH would gain from converting into a public limited company, although some of the other directors are unsure whether this would be a wise move.

Organisation and management

PLK is a social enterprise that trains young people who leave school without qualifications. PLK chefs show them how to prepare food, and this food is then sold at nearby markets or sporting events. Choosing the most suitable promotion method matters. PLK’s manager believes profit will rise more if prices are increased than if cheaper ingredients are used.

Marketing mix

JNK produces pottery such as plates and bowls for the mass market by using batch production. Quality control matters. JNK employs 30 unskilled workers, all of whom are paid the legal minimum wage. To motivate staff, JNK uses job enrichment. Because demand has risen, JNK plans to replace its old machines with new technology. The Managing Director believes that some of the low cost materials bought by JNK are made using child labour. One of JNK’s competitors has recently adopted a new ethical policy.

Motivating employees

REW has received many awards for the appearance and design of its carpets and rugs. All of the wool it uses comes from local suppliers. For this year, REW’s aim is to survive and keep operating. The Managing Director is worried that the country’s Gross Domestic Product has been declining for some time. During the recession, the Managing Director plans to begin selling REW’s products in other countries. Market research shows that demand would be strong.

Economic issues

George has spent 10 years working in a small flower shop. He dislikes his manager’s autocratic leadership style and wants to move on. He must choose between setting up his own business and purchasing a BunchesRUs franchise. The franchise would cost him $5000, although BunchesRUs would provide training and support. Whichever option he picks, George will need finance and to hire 2 part-time employees. George understands that building customer relationships will matter to his business’s success.

Motivating employees

Identify and explain one advantage and one disadvantage to SA of launching new products in a niche market.

Marketing mix

Identify and explain how the two stakeholder groups below may be affected by SA’s expansion plans.

Motivating employees

Identify two ways SA could use lean production in its factory, and explain each one. Way 1: Explanation: Way 2: Explanation:

Achieving quality production

Identify and explain two opportunities and two threats that globalisation creates for businesses in country Z.

Business and the international economy

Identify and explain one benefit and one drawback to WA from developing new products.

Business objectives and stakeholder objectives

Identify and explain two tertiary-sector businesses that contribute to WA’s success.

Classification of businesses

Identify and explain the likely effect of the reduction in profit in 2018 on two stakeholder groups of WA.

Motivating employees

Calculate the total monthly cost of making 100 items of furniture.

Costs, scale of production and break-even analysis