May/June 2023

WLT makes carpets and sends 40% of its output abroad. Globalisation has brought both chances and risks for WLT. Its production method enables WLT to apply specialisation. All 60 employees know that quality assurance matters. WLT’s directors are weighing up the most effective way to improve efficiency.

Production of goods and services

LMA is a restaurant owned by a family. The business began 20 years ago and has stayed small. LMA operates as a partnership. The partners are considering whether LMA ought to convert into a private limited company. The Finance Manager is examining LMA’s cash-flow forecast. An extract appears in Table 2.1.

Cash-flow forecasting and working capital

DZD is a large parcel delivery business. A significant number of its workers are part-time. The directors at DZD are planning a business expansion and must choose an appropriate source of finance for 20 new vehicles. DZD will also appoint 60 new employees. The Human Resources Director is drafting a job description for the new employees. She is thinking about applying Maslow’s hierarchy of needs to raise the motivation of DZD’s employees.

Recruitment, selection and training of employees

NLR produces a variety of branded skincare items, including hand cream, and how the products are packaged matters. As with many firms, NLR uses market segmentation. The Marketing Director understands that the stage of the product life cycle can affect NLR’s pricing decisions. He is studying market research evidence, which indicates that 85% of consumers expect businesses to act in response to environmental pressures.

Marketing mix

FBW makes watches through job production. It employs 5 full-time production workers. Every worker receives regular training. Last year, FBW sold 600 watches. The Managing Director intends to use break-even analysis when deciding whether to raise the prices of its products. FBW’s current break-even chart is shown in Fig. 1.1.

Costs, scale of production and break-even analysis

Gloria runs a sole trader business that offers house-cleaning services. She communicates with her 4 employees by telephone. She wants the business to grow by adding a repair service. Gloria intends to carry out some market research. She has been advised that writing a business plan may lower risk. Gloria also wants a lighter workload and is thinking about bringing in a business partner.

Enterprise, business growth and size

VVA is a business located in country X. It makes school backpacks (bags). VVA distributes its products through retailers. The Managing Director understands that demand can be influenced by several factors, including the stage of the business cycle and how competitive the market is. VVA brings in 45% of its raw materials from overseas. The Managing Director is concerned that import tariffs and import quotas, together with an appreciation in country X’s exchange rate, may have an effect on VVA.

Economic issues

CPF operates as a clothing retailer and is set up as a private limited company. It runs 4 shops and employs 30 people. The Finance Director is worried about the level of current assets, since working capital matters. Retained profit is also quite low. CPF’s directors are intending to grow the business by launching a new shop. They will need to choose an appropriate source of long-term finance. This expansion plan will have consequences for many of CPF’s stakeholder groups.

Business finance: needs and sources

Explain four barriers to communication that a business might face.

Internal and external communication

Explain two advantages and two disadvantages of VP’s Restaurant Managers assigning tasks to their Assistant Managers.

Location decisions

Explain two possible reasons for VP to expand.

Business and the international economy

Explain, with an example, one reason why VP may need: • short-term finance • long-term finance.

Business finance: needs and sources

Explain four characteristics that are needed for an entrepreneur to achieve success.

Types of business organisation

Explain one business objective for ET and one different objective that a social enterprise such as Daycare could have.

Business objectives and stakeholder objectives

Explain four reasons why it is important for Zane to prepare a cash-flow forecast before he starts ET.

Cash-flow forecasting and working capital

Explain two leadership styles that Zane and Zaara could use when managing ET’s employees.

Motivating employees