May/June 2021

BKH is a sizeable public limited company. It has 2 000 employees working across 18 sites. BKH offers a range of insurance products, including house insurance and car insurance. BKH’s shareholders want the business to raise profit. The Managing Director understands that raising profit can clash with the aims of other stakeholder groups. She said: ‘Businesses in the private sector pursue objectives that are different from those of public sector organisations.’ BKH is also planning to grow by taking over another insurance company.

Enterprise, business growth and size

PJA manufacture fashion clothing for 16-25 year olds. Several of its rivals are multinational companies. PJA launch new products every 3 weeks. Because of import quotas, all PJA products are made in a local factory. The Managing Director is examining PJA’s financial statements with ratio analysis. An extract is given in Table 2.1.

Analysis of accounts

Alex set up APB as a sole trader business 4 years ago. APB offers printing services to local businesses, including leaflets and brochures. Alex believes that a strong location matters to every business. All of APB’s employees are trained on-the-job. Alex uses a democratic leadership style and job rotation to maintain employee motivation. To cope with higher demand, Alex intends to purchase another printing machine. It will cost $1800. Alex must choose the most suitable source of finance.

Motivating employees

Strong economic growth in country X has opened up many opportunities for new businesses such as TGH. TGH produce a range of personalised mobile (cell) phone cases by using job production. Quality assurance matters to all 8 employees. TGH operate in a niche market. The Marketing Manager uses e-commerce as TGH’s channel of distribution. She is thinking about ways to strengthen customer relationships.

Marketing, competition and the customer

Pamela is a sole trader. She launched her thriving photography business 30 years ago. She focuses on photographing people and places for use in posters, calendars and fashion magazines. This is a niche market. Pamela uses cost-plus pricing as part of her marketing mix. Providing a high-quality service is important to Pamela and her 2 employees.

Marketing mix

NPX is an online retail business. Every order is dispatched straight to customers from its warehouse. NPX employs 60 full-time workers. The Operations Manager is studying NPX’s cash-flow forecast. An extract appears in Table 2.1. To raise productivity, the manager intends to bring in new technology that can choose and pack all the items for each order. As a result, 35 workers will become redundant. The technology will cost $40000. The manager is weighing up whether to finance this technology from internal sources or external sources.

Cash-flow forecasting and working capital

GHT operates as a public limited company. It manufactures steel items such as gates and garage doors. The business uses a flat organisational structure and a short chain of command. GHT has several stakeholder groups, among them 600 employees. The Managing Director is thinking about using job rotation to raise employee motivation. He has also been reviewing some financial data. An extract appears in Table 3.1.

Costs, scale of production and break-even analysis

Raul runs a small orange farm in country Z. As with every primary sector activity, farming generates external costs and external benefits. Raul sells all 600 tonnes of his oranges straight to a drinks manufacturer in country E. The Government of country E plans to bring in either import tariffs or quotas. Raul commented: ‘This might help country E’s Government meet one of its economic objectives, but what effect will it have on firms that export to country E?’

Business and the international economy

Marty runs a book shop in the city centre. He has been looking at how financially successful his business is. Table 1.1 shows an extract from the accounts. Over the last 2 years, revenue has fallen by 50%. Marty believes that rising competition is one cause of this. He intends to alter his pricing strategy. He is also thinking about the different promotion methods he could use to boost sales.

Income statements

STH is an ethical business. It makes beds. Employees work in teams to produce the beds in batches of 10. Delegation is promoted so that employees can reach the higher levels of Maslow’s Hierarchy of Needs. Every team must keep in regular contact with management. The Operations Manager is concerned because the amount of wasted materials has risen during the last 3 months. She wants to raise efficiency and has found two choices; increasing training or introducing automation.

Organisation and management

JCP is a small private limited company. The paper-making business began 170 years ago. JCP has numerous stakeholder groups, among them 50 employees. The Managing Director stated: ‘JCP is continually creating new products. We now supply products to the airline industry as well as producing paper.’ JCP sells its products to 60 countries.

Types of business organisation

During the previous year, economic growth in country Y rose from 2% to 5%. Rohit is planning to set up a car washing business in country Y. He will need to select an appropriate source of finance. Rohit has worked out some data. An extract is shown in Table 4.1. He knows that every business activity creates external costs. Rohit must choose a suitable location for his business.

Location decisions

Explain four reasons why the relative importance of the primary, secondary and tertiary sectors changes in a country.

Economic issues

Explain two reasons why FO needs to manage all of its resources efficiently when making products.

Internal and external communication

Explain how FO could use one internal source and one external source of finance during its expansion.

Business finance: needs and sources

Use the information in Appendix 2.

Costs, scale of production and break-even analysis

Explain two benefits and two drawbacks of creating a business as a private limited company.

Location decisions

Explain one likely benefit and one likely drawback for Tandeep if he chooses to import the pushchairs (strollers) that he sells.

Marketing mix

Explain two reasons why the cash-flow forecast in Appendix 3 matters to TT.

Recruitment, selection and training of employees

Explain four reasons why inventory levels matter to TT.

Marketing mix

Explain two business objectives Andrew is likely to set for AAR.

Business finance: needs and sources

Explain two benefits to AAR of employing well-motivated employees.

Cash-flow forecasting and working capital

Explain four factors Andrew may have taken into account when choosing the location of AAR’s shop.

Location decisions

Explain four promotion methods that a business could use to draw customers to a new service.

Marketing mix