2023 exam questions Flashcards
Define monopolistic competition
Many relatively small businesses, no dominant businesses, few barriers to entry, similar products with some differentiation and little control over prices most likely price takers.
Define a monopoly
A single or dominant business within a market (could be a pure monopoly with 100% market share or, most likely, a business with 25% or more market share, which could be regarded as a monopoly according to UK/EU competition authorities) high barriers to entry, price makers and high economies of scale
Define oligopoly
examples are sainsburys, ASDA, Tesco etc
A few large companies dominate the market in terms of sales, revenue/market share as well as which there may be many small firms but only a few dominate. brand loyalty, strong brand identity and some barriers to entry do exist.
Two types of internal economies of scale and how these can lead to a change in unit costs
1) Purchasing economies of scale - purchasing higher quantities of raw materials from suppliers may lead to being able to negotiate discounts for buying in bulk, which leads to a fall in average unit costs
2) Technical economies of scale - investing in more advanced technology or using new methods of production can increase productivity and efficiency and therefore result in lower average unit costs
Outline three possible reasons for a change in profit
-Advertising costs
-Increase wages costs
-increased competition which decreased revenue
Evaluate the change in profits on stakeholders (10)
PEK +HDB x 2/3 +LTQ
conclusion
*customers who live in the local area - If prices increase to increase profits then low income customers will not be able to afford the service. Depends on how much the price increases by and the brand loyalty - depends on if theres a change in quality
*Owner - increase stress and may -> ability to make appropriate decisions -> shut business down. Depends on her ability to work under pressure and make suitable decisions
*Competitors - likely to benefit -> more customers -> increased sales and revenue. Depends on brand loyalty -> customers may not switch to competitors
*Internal stakeholders may be impacted the most, as external e.g. customers can gain service from rivals but internal may loose jobs etc
Benefits of bank loan
(+) May be able to gain advice
(+)Immediately available if agreed
(+)Control isn’t lost/compromised
(+)Allow for budgeting/cost control because of fixed monthly payments
Draw backs of a bank loan
(-)Interest
(-)May not qualify
Define the term job analysis
Part of the recruitment process that occurs after a vacancy has been identified. It includes identifying in detail, the skills, responsibilities, duties and knowledge required to carry out the position
Define the term labour productivity
The measure of efficiency of the workforce. Can be measured by divided the output by the number of workers over a period of time.
Labour turnover formula
Number of leavers/average number of employees x100
Analyse the possible reasons for a change in labour turnover (decrease labour turnover)(6)
AO1, AO2 and AO3
AO1) Labour turnover is the rate at which employees leave a business. Employees may leave the business due to retirement, to work for competitors or they are unhappy with working conditions/pay.
AO2) analyse data - the lower the labour turnover the better
AO3) increase job security
increase motivation as there is a chance of promotion
Outline the difference between quality control and quality assurance (2)
Quality control is based on inspection of a sample of finished products. Quality control occurs at the end of the production process
Quality assurance is a system of agreed quality standards at each stage of production. Quality checks are carried out by employees throughout the production process. It focuses on the prevention of poor quality
Define the term lean production
Lean production aims to remove/eliminate waste from the production process and as a result it increases productivity by minimising the use of resources and reduces cost, whilst maintaining quality.
How to calculate re-order quantity
maximum stock level - the stock level when ordering stock
What is meant by buffer stock? How to describe the use of a buffer stock.
The number of units between the minimum stock level and zero.
*The buffer stock was used in week … and week…, although the buffer stock was used it did not reach 0 before it was replenished
Recommend whether … should adopt a JIT system
NO - demand is variable and inconsistent and if the products are perishable this would not be suitable
Depends - on if the supplier could meet demands to deliver more frequently
Yes - May decrease costs by decreasing rent
What are two types of JIT systems
Kaizen - continually making small incremental steps in the improvement of quality, design and waste reduction.
Kanban - Regular and timely supply of components. ensuring the right parts are in the right place at the right time
Advantages and disadvantages of a JIT system
(+)factory space can be freed up for more productive use
(+)motivation is improved as employees are given greater responsibility and encouraged to work in teams
(+)lead times are cut
(+)Costs decrease
(-)reputation can be damaged if customers are let down by late deliveries as no buffer stocks are held
(-)a lot depends on the reliability and flexibility of suppliers
(-)Difficult to cope with unexpected, sudden increases in demand
(-)Puts pressure on staff because of added responsibility associated by a JIT system - may affect motivation
Cost-plus pricing definition
price is determined by adding a profit percentage to the average cost of producing the good
Cost-plus pricing evaluation
(+)Ensures all costs are covered
(+)Niche market - may be willing to pay more (-)doesn’t aim for mass market
(-)May affect demand - depends on price/income elasticity
(-)Completely ignores the market
Competitive pricing definition
Involves the producer offering goods for sale at a price at or below that set by competitors.Prices tend to be broadly in line with competitors
Competitive pricing evaluation
(+)In line with customer expectations - customer satisfaction
(+)Easy to implement compared to cost-plus - only requires basic research into what other competitors are charging
(-)Customers may be used to buying from competitors so revenue might not change / customers may not switch from rivals - depends on brand/customer loyalty
(-)Product may blend in with others and may loose potential benefits. Differentiation
pricing strategy - depends on
-objectives
-market
-competition
-if the business is new (competitive may be safer, however depends on whether they can break even/ make a profit)
-market research
Control vs empowerment
Empowerment gives employees the power to use their initiative make decisions and be creative. May lead to increase job satisfaction and motivation.
Control involves more monitoring and support.
Control vs empowerment evaluation
Control:
(+)Mc Gregors Theory X explains the importance of heightened supervision, external rewards, and penalties. May b useful when employees have little ambition. Can ensure quality and quantity doesn’t fall.
(+)May mean having improved communication and support
(-)May give employees less opportunity to be creative and work in a way that best suits them
(-)May not always be beneficial or useful to control a workforce- employees may feel they are not being listened to/ not valued if the control is too strict and non-cooperative
Empowerment:
(+)increased productivity and quality
(+)decreased staff turnover increase job satisfaction
(-)Theory y managers may give their employees too much freedom - loose focus and steer away from business objectives
(-)Less- motivated employees may take advantage of the freedom and not be productive - decrease reputation, quality, quantity etc
Control vs empowerment depends on
*The market
*Staff experience, skills and knowledge
*The employees - e.g. their moivation/what they are motivated by (Mcgregors theory - theory X managers assume employees are only motivated by money)
What are three reasons why consumers sometimes need protection from exploitation by businesses
-Ensure product is fit for purpose
-some consumers are especially vulnerable e.g. elderly people and people with disabilities
-Prevent being mislead about a product/service and ensure its so a standard quality
formula for net cash flow
TR-TE or inflows - outflows
Formula for break even
FC/CPU
CPU formula
selling price per unit - variable costs per unit
Gross profit formula
sales revenue - cost of sales
Net profit formula
GP - expenses
Gross profit margin formula
GP/revenue x 100
Net profit margin formula
NP/Revenue x100
PED formula
%change in quantity demanded/ %change in price
YED formula
%change in quantity demanded / %change in income
Labour productivity formula
output per time period / number of employees
Two impacts on a business if they don’t control its cash flow
-unable to generate a desirable amount of profit
-may affect their ability to get a loan
Two ways cash flow can be improved
1) Increasing revenue e.g. increase selling price
2)Decreasing costs e.g.changing suppliers or negotiating a cheaper/ better price
Two reasons why entrepreneurs are important to the UK economy
1)Increasing spending in local economies can improve facilities, increase employment and provide incomes, and pay tax to government
2)Entrepreneurs operating in the secondary sector can buy resources from the primary sector and sell finished goods to the tertiary sector
Inferior products
-Have negative income elasticity of demand, demand rises when income falls e.g.supermarket own brand products
-An increase in income may lead to a decrease in demand for inferior products as some people may switch to more expensive/branded and higher quality alternatives, as they become more affordable
Although consumer incomes affect the demand for products, what else affects demand?
- a change in consumer taste
Advantages and disadvantages of using management by objectives (MBO)
(+)Improved management control of the organisation. Managers know who is doing
what and what they are supposed to be achieving. Clarity of goals.The work of departments and managers are co-ordinated. Everyone is working together towards a common goal.
(+)It can motivate the workforce. When managers at all levels are involved in setting and agreeing on objectives, they will have a commitment to ensuring that objectives and goals are achieved. Involving all employees in the whole process of goal setting will give employee empowerment. This increases employee job satisfaction and
commitment
(-)Management time is spent on the process of setting objectives rather than managing the organisation.
(-)loss of focus means managers concentrate on short-term objectives at the cost of
ignoring the long-term goals.
