Oct/Nov 2023

Desmond aims to become a successful entrepreneur. He has chosen to give up his office job and launch a gardening business that cuts grass and plants flowers. It will operate as an unincorporated business. Desmond knows that a new business faces a higher chance of failure than one that is already established. He has worked out his business objectives for the first year. Desmond has worked out that he will need $750 as start-up capital.

Enterprise, business growth and size

LCT makes cooking pots and employs 16 people. Being a small firm, LCT advertises through social media. The owner, Carole, understands that a strong brand image matters. She is studying LCT’s break-even chart, which appears in Fig. 2.1. Carole is thinking about ways to reduce LCT’s break-even output level.

Costs, scale of production and break-even analysis

ACP makes computers. Ethical conduct matters to ACP. The business has 3000 workers in its factory. ACP sources 65% of its raw materials from abroad. As internal users of accounts, the directors plan to assess ACP’s financial performance by using profitability ratios. The Finance Director believes that generating profit is more important for a business than controlling its cash flow.

Analysis of accounts

MRN is a food retailer. It runs 490 shops and employs 70 000 people. MRN has announced plans to shut 80 of its shops. The Human Resources Director said: ‘20% of management jobs will be removed. We want to encourage delegation. MRN will continue to follow legal controls over employment.’ MRN’s directors know it is important for businesses to react to stronger competition.

Organisation and management

Paolo is planning to launch a cake-making business. He intends to sell all of his products to a wholesaler. Paolo knows that the packaging for his products will be important. He has drawn up some financial and sales information. An extract from this information is shown in Table 1.1. Paolo is thinking about crowdfunding as a source of finance. He also knows that the business will need working capital.

Cash-flow forecasting and working capital

TBX produces premium steel that is used in railway construction. This production technique enables TBX to gain economies of scale. The business keeps a large inventory, including iron ore. The Managing Director understands that business operations may affect the environment and is looking at how the business could help sustainable development.

Achieving quality production

Country X is a mixed economy, with organisations in both the private and public sector. These organisations operate across different sectors of economic activity. Over the past 20 years, the primary sector has become less significant in country X’s economy. Table 3.1 summarises the changes. The government plans to encourage multinational companies to establish factories in country X.

Business activity

TFN is a travel business that sells holidays. It has 37 shops and 1000 employees. Last year TFN’s profit rose to $46 million. The Managing Director knows that strong customer service has helped to preserve customer loyalty. He said: ‘TFN’s managers use ideas from Herzberg’s two-factor theory to help motivate employees. All employees receive off-the-job training and each manager has a wide span of control.’

Motivating employees

Explain two advantages and two disadvantages that PH has because it is a public limited company.

Types of business organisation

Explain two limitations and two benefits for a business when it develops new products.

Market research

Explain two reasons why training matters to PH.

Recruitment, selection and training of employees

Explain two benefits of PH’s employees joining a trade union.

Enterprise, business growth and size

Explain two advantages of using specialisation when producing SSE’s products.

Market research

Explain four factors that a business should take into account when selecting a source of finance for expansion.

Business finance: needs and sources

Explain one advantage and one disadvantage for SSE of recruiting its new managers from within the business.

Internal and external communication

Explain four ways in which the break-even chart in Appendix 3 could assist SSE.

Costs, scale of production and break-even analysis