Oct/Nov 2021

After spotting a gap in the soft drinks market, Jerome created a low-sugar drink. He borrowed $5000 from family and friends to finance the start-up and to supply working capital. Jerome runs the business as a sole trader. To advertise his product, Jerome gave out free samples in the town centre. During the first year, Jerome’s business sold 10 000 units. This is 200 units above his break-even output. Jerome is thinking about different ways to raise added value.

Costs, scale of production and break-even analysis

NSN is a multinational company. It manufactures cars. Over time, technology has altered production methods. NSN uses just-in-time inventory control in every factory. NSN plans to open a new factory in country Z, which will create 7000 jobs. Country Z’s Government has offered NSN an $80m grant. A spokesperson for NSN said: ‘Governments ought to support business activity. Other factors also influenced our choice to construct the new factory there, including the possible impact of economic growth.’

Production of goods and services

SBG produces a variety of items, including specialist paints. It operates 6 factories and employs 700 workers. Every one of SBG’s employees is encouraged to take part in decision-making. SBG’s products are exported to 16 countries, with wholesalers forming its main distribution route. The Managing Director stated: “Our objectives are to grow and make a profit.” He also understands that every business activity generates externalities for SBG’s stakeholder groups.

Business objectives and stakeholder objectives

BGR is a private limited company running 6 cinemas in different towns. Clear internal communication matters to BGR. The Finance Director has been studying BGR’s accounts, and an extract is included in Table 4.1. BGR intends to open another cinema and will need to hire 10 new employees. The new cinema will cost $8m. The Finance Director must decide whether BGR should issue new shares or take out a bank loan to finance the expansion.

Business finance: needs and sources

SWB operates in the secondary sector. It makes 150 wooden bookcases each week through batch production. All of its output is sold to a single customer. Quality control matters. SWB employs 240 workers, and 100 of them work part-time. To cut communication barriers, SWBs managers rely on noticeboards placed around the factory and monthly meetings with employees. The Operations Manager is thinking about adopting just-in-time inventory control to cut the amount of waste.

Production of goods and services

Tom set up ALB 5 years ago and produces trainers (sneakers) from sustainable inputs such as wool. Protecting the environment is one of ALB's aims. During his research, Tom worked out some costs that he could use for break-even analysis; Figure 2.1 shows an extract. ALB sells its products through retailers. Tom believes a successful entrepreneur must also be a good manager.

Costs, scale of production and break-even analysis

Aurelie runs her business as a sole trader. She launched her small hotel 1 year ago with government support. Aurelie realised that developing strong customer relationships would be vital. She now wants to analyse her financial statements by using ratio analysis. A section is shown in Table 3.1. She is concerned that the Government’s proposal to add a new tourist tax of $1 per tourist per night could affect her business.

Analysis of accounts

GCF is a public limited company that offers businesses a variety of computer services, such as designing websites and developing apps. The Human Resources Director uses ideas drawn from Maslow’s Hierarchy of Needs to help keep GCF’s 250 employees highly motivated. Table 4.1 shows an extract of the methods used. GCF plans to grow by acquiring one of its competitors. This will cost $50m. To fund the takeover, GCF is thinking about issuing new shares.

Motivating employees

Explain two advantages and two disadvantages that specialisation can create in a manufacturing process.

Production of goods and services

Explain two methods by which SSM can grow.

Market research

Explain four ways SSM could raise the motivation of its production workers.

Motivating employees

Explain two methods that could be used to overcome SSM’s cash-flow problems.

Cash-flow forecasting and working capital

Explain two reasons that could keep PPE small.

Types of business organisation

Explain two benefits and two drawbacks of using job production.

Production of goods and services

Explain one cost and one benefit to PPE of developing a new product.

Marketing mix

Explain four management functions performed by Kaari.

Organisation and management