COMPONENT 1 (Business functions)

Question 1

What does marketing involve?

Answer 1

-Researching the market
-Analysing the market
-Setting of marketing goals
-Developing a marketing strategy

Question 2

What does a product portfolio do?

Answer 2

-spreads fixed costs
-allows for greater economies of scale
-allows the targeting of wider markets
-reduces risk
-smooths out overall sales
-creates opportunities for growth.

Question 3

What is breadth?

Answer 3

Breadth is the number of product lines a business produces or retails

Question 4

What is depth?

Answer 4

Depth is the number of product varieties within each product line

Question 5

What is market orientated?

Answer 5

When a business bases its marketing mix on its perception of
what the market wants

Question 6

What are key features of a market orientated approach?

Answer 6

-consumers are central to a business’ decision making and there is a strong understanding of their needs
-being able to respond quickly to changes in the market
-being in a strong position to meet the challenges of new competitors entering the market
-being more able to anticipate market changes
-being more confident that the launch of a new product will be a success

Question 7

What are the advantages of being market orientated?

Answer 7

-flexible to changes in taste and fashion
-decisions based on effective market research
-new products designed to meet consumer needs
-customer focus means the business will continue to improve and upgrade products/respond to changes
-customers get greater satisfaction which leads to repeat purchases and brand loyalty
-loyal customers buy more frequently and in greater volume
-loyal customers are less susceptible to competition and are more willing to pay higher prices
-long term profitability means that a business will remain viable and successful
-familiarity with the market allows a business to build emotional impact into their advertisements, meaning marketing is more effective.

Question 8

What are the disadvantages of being market orientated

Answer 8

-high cost of market research to understand the market
-constant internal change as the needs of the market are met
-unpredictability of the future, especially from the point of view of staff
-abandonment of earlier product investment.

Question 9

What is product orientated?

Answer 9

When a business bases its marketing mix on what the business
sees as its internal strengths

Question 10

What are the key features of a product orientated approach?

Answer 10

-emphasis on developing a technically sound product, producing it, and selling it
-contact with the consumer, largely at the final stage
-an approach that is more likely to succeed when there is little or no competition
-fashion and tastes are not accounted for in product mix

Question 11

What is an advantage of being product orientated?

Answer 11

-increased economies of scale
-focus on product development
-focus on quality
-easier to apply production management methods

Question 12

What are the disadvantages of being product orientated?

Answer 12

-changes in market structure will not be responded to
-fashion and taste are not accounted for in the product mix

Question 13

What is asset led marketing?

Answer 13

When marketing decisions are based on the needs of the consumer and the strengths of the business

Question 14

Why is increasing brand awareness important?

Answer 14

-It creates brand loyalty
-It differentiates the product
-To gain flexibility when making price decisions
-To help brand recognition
-To develop a brand image

Question 15

What are the disadvantages of branding?

Answer 15

-The cost of advertising can be very high as brands must constantly be kept in the consumer’s eye.
-The loss of brand value for one product can affect a whole range of similarly branded products.
-Brands invite competition which can often be from copycat manufacturers.
-There is the high cost of research and development in ensuring that the brand continues to develop and lead the market

Question 16

How can products be differentiated?

Answer 16

-Methods of promotion
-Packaging
-Form
-Provisions of add ons
-Quality and religion

Question 17

Why is design important? (packaging)

Answer 17

Packaging should be eye catching. It should help the consumer distinguish them from other products. Should be consistent with the brand image. Colour may also be important.

Question 18

Why is convenience important? (packaging)

Answer 18

Consumers must be able to open the products easily in order to access the contents. Packaging must not be too bulky as this will add to distribution costs and may deter customers.

Question 19

Why is protection important? (packaging)

Answer 19

The contents must be well protected and not easily damaged as this will be a problem for both distributors and customers. This will also be costly for a business and may lose customers if the products are poorly protected. Storage must also be considered, and the product may need to maintain freshness during storage

Question 20

Why is information important? (packaging)

Answer 20

Customers now need to be fully informed about the ingredients used in their products that they purchase; this is required by law and all legislation must be complied with. The sources of raw materials are increasingly important for ethical customers.

Question 21

Why are environmental factors important? (packaging)

Answer 21

More and more consumers are becoming environmentally aware and recyclable materials are used when possible. Manufacturers are increasingly coming under pressure to reduce waste in relation to packaging.

Question 22

Why is cost important? (packaging)

Answer 22

The cost of materials to make the packaging must be considered, e.g. comparing cardboard and plastics.

Question 23

What are the stages of the product life cycle?

Answer 23

-Introduction
-Growth
-Maturity
-Saturation
-Decline

Question 24

What happens in the introduction stage?

Answer 24

The product is new to the market and few potential consumers know of its existence. The price can be high, and sales may be restricted to early adopters (those that must have new technology, gadgets or fashions first). Profits are often low as development costs have to be repaid and advertising expenditure can often be high.

Question 25

What happens in the growth stage?

Answer 25

The product is becoming more widely known and consumed. Advertising tries to establish or strengthen the brand and develop an image for the product. Profits may start to be earned, but advertising expenditure is still high. Prices may fall.

Question 26

What happens in the maturity stage?

Answer 26

The product is becoming more widely known and consumed. Advertising tries to establish or strengthen the brand and develop an image for the product. Profits may start to be earned, but advertising expenditure is still high. Prices may fall.

Question 27

What happens in the saturation stage?

Answer 27

Very few new customers are gained, replacement purchases are the trend. Businesses should try to reduce their costs, so that prices can be more flexible. The battle to survive is beginning and the market for the product is ‘full’. Profits may start to decline.

Question 28

What happens in the decline stage?

Answer 28

Sales can now fall quickly, and the product range may be reduced, with the business concentrating on core products. Advertising costs will be reduced, with attempts made to mop-up what is left of the potential market. Overall profits will fall. Price is likely to fall, but by concentrating on remaining market niches there may be some price stability.

Question 29

What are extension strategies?

Answer 29

Extension strategies are used to extend the life cycle of the product. They may be necessary because a new product has not been developed to replace an ageing product. They may also be used as a product has a declining market share in a large or growing market.

Question 30

What is the Boston Matrix?

Answer 30

It is a technique which allows businesses to analyse their product portfolio with the use of a Matrix. Products are categorised according to market growth and (relative) market share. Products are placed into one of four categories: stars, cash cows, dogs and problem children (also known as question marks)

Question 31

What are stars (Boston matrix)?

Answer 31

-High market growth and high market share
-They are in markets experiencing high growth rates with a high or increasing share of the market
-There is potential for high revenue growth; the market may be somewhat immature, with new customers being attracted to the marketplace and new competitors being tempted by potential profits and market share
-competition is high: businesses are fighting for a share of potentially huge profits

Question 32

What are cash cows?

Answer 32

-Low market growth and relatively high market share
-very profitable products and expenditure on such things as advertising is relatively low
-Customers know and understand the product, and brand value has been established
-It is also likely that development costs have already been recouped, increasing profitability further

Question 33

What are problem children?

Answer 33

-High market growth but relatively low market share
-one of the worst situations for professional marketing people
-They have a product in a fast-growing market but the products are not selling (Being beaten by competition/ failing)

Question 34

What are dogs (Boston Matrix)?

Answer 34

-Low market growth and relatively low market share
-It is not generally worth spending money on redeveloping, redesigning or advertising the products as it is unlikely to be recouped in increased revenue

Question 35

What are some issues addressed when products that are characterised as dogs?

Answer 35

-Are they worth persevering with?
-How much are they costing?
-Could they be revived in some way?
-How much would it cost to continue to support such products?
-How much would it cost to remove from the market?

Question 36

What are the benefits of the Boston matrix?

Answer 36

-very simple to use and explain
-It helps firms to design a strategy
-It has been used successfully by many firms over a long period of time
-relatively easy to construct
-Clear guidance
-It is an important model for allocating resources to the right areas

Question 37

What are the disadvantages of the Boston matrix?

Answer 37

-Too simplistic
-It is only a snapshot of the current position and has no predictive value
-It is based on a series of assumptions
-The definition of the market can be a problem
-Some of the terminology of the four quadrants might be considered misleading

Question 38

What are price takers?

Answer 38

When businesses have to accept the price set by the market

Question 39

What are price makers?

Answer 39

They can use a market orientated strategy where a business will produce what the market wants so they will set a price that the market is willing to meet. They can also use cost based strategy where businesses focus on their internal costs and their pricing strategies are based around the costs of production.

Question 40

What is market/price skimming and the pros/cons?

Answer 40

-Initially charge a high price when a good or service is released then after time, decrease the price
-Pros- Can increase profits via segmentation (Wealthy customers) and recover research and development costs asap
-Cons- This will only work if there are no rivals as they will lower their own price and over time you might have a history of skimming so customers will delay their purchase

Question 41

What is penetration pricing and the pros and the cons?

Answer 41

-Initially charge a low price when the good or service is released then after time increase the price
-Pros-people will try the good or service as it is cheaper this will result in a higher market share and will create brand loyalty
-Cons- Initially the business will make a low profit
Evaluation- The length of time you keep the prices low may depend on your financial situation and if the business is able to handle a loss for a period of time

Question 42

What is loss leader pricing and the pros and cons?

Answer 42

-When a product is sold at a price less than its cost
-Pros- Encourages customers into the outlet where they are likely to buy other goods
-Cons- Some people may bulk buy these products with these pricing strategies

Question 43

What is destroyer/predatory pricing?

Answer 43

-This involves setting a price low enough to drive competitors out of the market
-This type of pricing is not only used by the largest businesses on a national scale, but it can also appear in battles between local businesses
-Cons- Destroyer pricing is often seen as anti-competitive and therefore illegal

Question 44

What is competition based pricing and the pros and cons?

Answer 44

-When a business charges in a similar price range to its competitors and is used when there are lots of rivals or the goods/services sold are similar (homogenous)
-Pros- Protect your market share by having a stable customer base, consistent profits and consistent profits
-Cons- Increased marketing costs and if 100% is focused on competitive pricing then it might not cover total costs

Question 45

What is psychological pricing and the pros and cons?

Answer 45

-Prices are set at the level that matches what consumers may expect to pay. Consumers perceive that they are receiving value from the price paid e.g. ending a price with .99

Question 46

What is cost plus pricing and the pros and cons?

Answer 46

-A profit percentage is added to the average cost of producing the good (mark-up)
-Pros- changes in costs can be passed directly on to the buyer and every good sold is sold at a profit
-Cons- Actions of competitors are often totally ignored. This can lead to loss of sales or loss of profits if a higher price could be charged because of little or no competition
-Cons- Also, for exporters, this method makes no allowance for currency changes that will affect the price of goods and order levels

Question 47

What are the advantages of using pricing strategies?

Answer 47

-Selecting the right strategy is likely to increase sales which will in turn increase revenue, resulting in profits rising
-Prices can be applied to specific niche/market segment. This can often mean that a higher price may be charged
-Prices can reflect the market for the product. For example, skimming may work in some markets such as those with high income, whist penetration works in others
-Prices can take into account actions of competitors which can help stop customers switching to rival firms

Question 48

What are the disadvantages of using pricing strategies?

Answer 48

-Competitors may follow the same pricing strategy. If they do so, there is likely to be no effect seen by the business and thus no increase in sales
-Competitors may not follow a pricing strategy, and the customers are not attracted
-There is likely to be a need for expensive advertising to promote pricing strategy. This will increase the business’ costs so that the profits are not as expected
-Some segments may not be happy with pricing strategy, for example those that allow the less well-off to afford expensive products and customers may boycott the product as a result

Question 49

What is promotion?

Answer 49

A promotional strategy attempts, through various forms of media, to draw attention to a product or service, with the intention of gaining new customers and retaining existing customers

Question 50

What are the objectives of promotion?

Answer 50

-To increase sales
-Raise awareness
-Target specific groups
-To try and beat the specific groups
-To develop/improve the image of the company
-To reassure consumers after the products have been purchased

Question 51

What are the phases of commitment to a product?

Answer 51

1- Being unaware of the products existence
2- Awareness of the products existence
3- Understanding of the benefits of the product
4- Establishing a liking for or committing to the product
5-Finally the purchase of the product

Question 52

What is above the line promotion?

Answer 52

Above-the-line promotion is what is generally called advertising. It is used to reach a mass audience. Above-the-line promotion is through independent, mass media which is indirect and allows a business to reach a wide/large audience.

Question 53

What are methods for above the line promotion?

Answer 53

-(regional) television
-(local) newspapers
-(local) radio
-(local) magazines
-billboards
-cinema
-websites / internet

Question 54

What does the choice of media depend on?

Answer 54

-Target market
-Whether the objective is to convey information or another type of message
-cost
-The reach of the media
-The product itself

Question 55

What are the advantages of promoting using televison?

Answer 55

-Can reach millions of people throughout the country
-Use of sound, video, famous people humour etc. can make it appealing

Question 56

What are the disadvantages of promoting using television?

Answer 56

-Very expensive to make the advert and buy airtime.
-Not effective for targeting potential customers if not a mass product.
-Not affordable for smaller businesses

Question 57

What are the advantages of promoting using newspapers (National and local)?

Answer 57

-very popular form of advertising(national)
-Visual impact often in colour is effective(national)
-Can include a lot of information about the service(national)
-Local papers are quite cheap compared to TV and radio and national newspapers
-Can target the local market(local)
-Visual impact, often in colour is effective(local)
-Can include a lot of information about the product/service(local)

Question 58

What are the disadvantages of promoting using newspapers (National and local)?

Answer 58

-Still expensive, especially the main tabloid newspapers (national)
-No use of sound or video to show the product/service(national
-Full page adverts in colour are very expensive and only large business will be able to afford them(national)
-Local papers tend to have smaller readership numbers and only advertise locally; a larger business may have to place adverts in many local papers to cover their target market(local)
-Colour adverts are more expensive(local)

Question 59

What are the advantages of promoting using radio?

Answer 59

-Use of sound and music is effective.
-Can reach large audiences.
-Choice of national or local stations to help target the audience.
-Cheaper than TV advertising

Question 60

What are the disadvantages of promoting using radio?

Answer 60

-Still expensive for smaller businesses and a smaller audience than TV
-No visual image to show what the product looks like

Question 61

What are the advantages of promoting using websites?

Answer 61

-Relatively cheap and a very large coverage as most households now have internet access which they use regularly.
-Good selection of different types of advertising: pop ups, social media sites, direct mail.
-Can use sound and video.
-Can target certain individuals or groups

Question 62

What are the disadvantages of promoting using websites?

Answer 62

-A lot of people ignore internet advertising as there is so much of it.
-It can have a negative impact on the business if it is seen as a nuisance: who actually looks at junk mail

Question 63

What are the advantages of promoting using billboards?

Answer 63

-Very eye catching, high visual impact and can be seen by many people, many times
-Very good for products with short life cycle such as films

Question 64

What are the disadvantages of promoting using billboards?

Answer 64

-Can be very expensive to produce and are vulnerable to the weather and graffiti
-Limited reach: only passing trade will see them

Question 65

What is below the line promotion?

Answer 65

Below-the-line promotion offers a wide range of alternative promotional strategies and these are often used to support above-the-line promotion. Below-the-line promotion targets consumers directly

Question 66

What are methods for below the line promotion?

Answer 66

-personal selling
-packaging
-Sales promotion
-Direct mailing
-Public relations

Question 67

What is personal selling?

Answer 67

-using sales staff within town centres, bars, leisure centres to speak to the public directly
-Although it does not reach a wide coverage, it is a good way to promote the product

Question 68

What is packaging?

Answer 68

When a customer buys a product, advertisements and logos on the product could entice other potential customers to buy it for themselves

Question 69

What is sales promotion?

Answer 69

E.g buy one get one free to encourage customers to buy more of their products

Question 70

What is direct mailing?

Answer 70

-Companies could send offers about their products to their customers, usually in conjunctions with supermarkets so customers know where to go to buy

Question 71

What is public relations?

Answer 71

-media reports and sponsoring events could be a way of building brand image and trust with potential customers through third party organisations

Question 72

What are the benefits of marketing via the internet?

Answer 72

-Widens potential market which could lead to increased sales and profits
-A well-constructed and up to date website can improve the image of the business
-For some businesses it is their core marketing tool, e.g. Amazon
-They can be open 24/7
-Raises awareness of the existence of a business which gives businesses a competitive edge
-More and more people shop on the Internet

Question 73

What are the drawbacks of marketing via the internet?

Answer 73

-Can be expensive to set up: £10,000 plus is a significant investment for a small business, especially in a recession
-May not be cost-effective: has to generate enough profit to justify the initial expenditure
-A poorly constructed or out of date website can project a negative image of the business and sales may be lost to competitors
-Not particularly useful where personal service is the key to sales
-Not everyone has access to the internet
-Technical problems on website can result in loss of reputation and sales

Question 74

What are the benefits to a business selling via the internet?

Answer 74

-can eliminate or reduce the need for expensive high-street premises
-Costs can be lowered by moving to places where rent and wages are considerably lower
-It can reduce the need to employ staff
-It adds flexibility to business operations and businesses can reach their customers 24 hours a day
-Data on customers can be cheaply stored and easily accessed
-They can reach a world-wide audience

Question 75

What are the drawbacks to a business selling via the internet?

Question 76

What are the benefits of internet shopping on the customer?

Answer 76

-it is often easier to shop from home rather than physically visit the shops
-Home delivery
-Orders can be placed anytime day or night
-Customers do not have to travel or pay parking fees
-Customers can view a huge range of products
-It is possible to buy products from other countries
-It is easy to compare prices and read reviews

Question 77

What are the drawbacks of internet shopping on the customer?

Answer 77

-Delay in delivery: the item ordered may arrive too late
-Fraud/security
-Unable to try before buying
-Lack of access

Question 78

What are the factors impacting on the promotional strategy?

Answer 78

-The marketing budget available
-The stage in the product life cycle
-Cultural sensitivity
-The target market
-Competitor actions

Question 79

What is place?

Answer 79

Place is ‘the marketplace’, where buyers and sellers meet and exchange payment in return for goods and services

Question 80

What are the different distribution channel methods known as?

Answer 80

Intermediaries

Question 81

What is the traditional distribution method using a whole seller?

Answer 81

Producer > Wholesaler > Retailer > Consumer (Small companies use this method as they don’t have enough money to bulk buy)

Question 82

What is the modern distribution method using a retailer?

Answer 82

Producer > Retailer > Consumer (Large companies use this method as they can bulk buy straight away)

Question 83

What is the direct mailing/e-commerce distribution method?

Answer 83

Producer > Consumer

Question 84

What is a multi-channel distribution channel?

Answer 84

Multichannel distribution is where a combination of distribution channels are used
-Businesses are maximising as many of the advantages as it can from each distribution channel chosen

Question 85

What are decisions related to the marketing mix?

Answer 85

-What shall the price be?
-What is the best design for the product?
-Where should it be sold?
-How should the product be promoted?

Question 86

What is global marketing and what does it involve?

Answer 86

-Global marketing is the process of placing a product in a worldwide marketplace
Involves:
-market planning
-manufacturing to meet demand
-changing the marketing mix as appropriate

Question 87

How can the marketing mix be applied in different contexts?

Answer 87

-Local markets
-National markets
-Global markets
-Goods or services markets
-Mass markets
-Niche markets

Question 88

What makes overseas market so different?

Answer 88

-Political differences
-Cultural differences
-Legislative differences
-Social differences
-Economic differences
-Differences in business practice

Question 89

what are political differences?

Answer 89

changes in government; financial and market instability

Question 90

what are cultural differences?

Answer 90

-language: inappropriate names, colours
-payments to government officials, bribes, greetings

Question 91

what are legislative differences?

Answer 91

-product labelling
-product safety
-environmental impact
-advertising: cigarette advertisements are banned in Europe

Question 92

what are the social differences that make overseas marketing so different?

Answer 92

-attitude/role of women
-religious attitudes
-habits

Question 93

what are the economic differences that make overseas marketing so different?

Answer 93

-the general level of income local wage rates
-taxation
-import barriers

Question 94

what are the differences in business practice that make overseas marketing so different?

Answer 94

-payment methods
-accounting procedures
-distribution methods

Question 95

What does having to adapt the marketing mix depend on?

Answer 95

-type of product sold (e.g. petrol versus food)
-the differences in customer tastes, cultures, religions and languages of the different geographical regions
-income levels and unemployment rates of the different markets whether the business is selling online or through physical stores
-the level of competition in the new market whether the business is planning to sell the same products or new products in the new market; this will determine how many changes are needed to other elements of the marketing mix
-if the marketing mix is not suitable for the new target market, the business is less likely to gain enough sales to cover costs and could fail

Question 96

How can technology be used for businesses?

Answer 96

-Clicks and bricks
-Digital media
-Social media
-E-tailing
-M-commerce

Question 97

What are the benefits of new technology (online)?

Answer 97

-it is convenient for customers
-it is cheap for new companies to set up as they do not need a high street presence
-online shops can be open 24/7
-social media can be used to target certain market segments very effectively
-it grabs customers attention very effectively by having a presence (‘popping up’) whilst they are using a mobile phone, tablet or laptop for reasons other than shopping
-digital natives (those under 35 years old) are very internet literate and so businesses that predominantly target this segment will find it more useful to use new technology

Question 98

What are the benefits of traditional methods (marketing)?

Answer 98

-it can be used for market segments which prefer to shop on the high street (over 35s)
-it can be used for market segments which do not have access to social media or even the internet
-it is not reliant on good internet access
-many countries across the world do not have the same broadband capabilities or internet access at home compared to the UK
-it is less affected when there are technical problems
it may give them a USP, e.g. direct line is not represented on comparison websites
-if they have a physical shop, there will not be the delivery problems which e-commerce may encounter

Question 99

What are the main functional activities carried out by the finance department?

Answer 99

-Preparing budgets
-Raising finance
-Preparing final accounts (Cash flow/ Profit and loss)
-Business performance

Question 100

What is a budget?

Answer 100

A budget is a financial plan of action that usually covers a certain period of time, such as six months or a year. A budget would outline a business’s planned revenues (income), expenditures (costs) and profits.

Question 101

What is the purpose of a budget?

Answer 101

The purpose of budgeting for a business is so that it can exercise financial control within the business – this is known as budgetary control

Question 102

What are variances?

Answer 102

A variance is the difference between budgeted revenues and/or expenditures and the actual revenue and/or expenditures

Question 103

What are favourable variances?

Answer 103

A favourable budget variance indicates that the actual result is better for the business than the amount that was budgeted

Question 104

What are adverse variances?

Answer 104

An adverse variance is where actual income is less than budgeted or actual expenditure is more than budgeted

Question 105

What can budgets be used for?

Answer 105

-control revenues and expenditures to help a business make a profit
-direct and coordinate business aims and objectives so that they can be achieved
-assign responsibilities to budget holders (managers) and allocate resources (mainly money)
-create a list of objectives and numerical goals for the business, which will help to motivate workers and managers
-communicate targets from management to subordinates, which will again help to motivate workers
-improve efficiency as management try to control costs but maintain standards of work - for example, a business may reduce production costs but aim to produce the same quantity of goods
-monitor performance to ensure budgets are met

Question 106

What are the drawbacks of budgeting?

Answer 106

-Budgets can lead to managers making rash short-term decisions in order to stay within the budget rather than making effective long-term decisions that go beyond the budget
-Those who are not involved in the budgeting process may not be committed to the budgets and may become demotivated
-Unrealistic budgets (targets) may be set for the sales team, which may be unachievable which may demotivate workers
-If budgets are rigid (inflexible), changes in the economy or other market conditions cannot be accommodated. This may also lead to budgeted figures not being met and potentially unfavourable variances as well
-A successful budget can only be built on the foundation of high-quality data. To cover their departments, often managers exaggerate (overstate) their budgetary requirements
-Budgeting is a time-consuming process; in large businesses, whole departments can be devoted to budgeting and control

Question 107

What are the impact of budgeting for a manager?

Answer 107

-Budgeting helps managers to improve efficiency
-Budgets can help managers minimise costs and allocate resources more efficiently
-The resources allocated may not be not sufficient for the managers to run the business/department efficiently
-Perhaps the set budget is inflexible and as a result the management may not be able to meet certain objectives, such as sales targets

Question 108

What are the impacts of budgeting for the employees?

Answer 108

-The employees may be rewarded financially because the budgeted figures will act as a motivator
-setting unrealistic figures (targets) may have a negative impact on employee motivation

Question 109

What are the impacts of budgeting for suppliers?

Answer 109

-suppliers are more likely to be paid on time and in full because budgeting helps a business to control its revenue and costs
-A budget is only a prediction and the data may be inaccurate or external factors may cause adverse variances, and this may meant that a business is unable to pay expenditures

Question 110

What are the impacts of budgeting on shareholder/owners?

Answer 110

-Controlling revenue and expenditures will have a positive impact because the business is more likely to achieve its revenue targets and control its costs
-Budgeting can be demotivating and may have a negative impact because worker performance levels may fall

Question 111

What is meant by cash flow?

Answer 111

Cash flow describes the movements of cash in and out of a business

Question 112

What is net cash flow?

Answer 112

Is the difference between cash inflows and outflows over a given time period

Question 113

What is a cash flow forecast?

Answer 113

A cash flow forecast is a financial document that is a prediction of the money coming into and out of a business over a specific period of time of six months to a year. This financial document will therefore show the owners or managers of a business whether the net cash flow is positive or negative

Question 114

What are cash inflows?

Answer 114

All of the money that comes into the business, which can be broken down into various categories such as sales receipts (revenue) and interest on savings and loans

Question 115

What are cash outflows?

Answer 115

Any of the money leaving the business to cover its expenses or payments, such as raw materials and stock, rent, workers’ wages and other overheads

Question 116

What happens when cash flow forecasts are not controlled properly?

Answer 116

-The business may not be able to pay its suppliers in which case the suppliers will stop supplying them and the operations of the business will come to a halt
-The business may not be able to pay its rent (or mortgage), which could result in it being evicted
-The business may not be able to pay the wages of its staff (if it has any). Which could lead to possible stoppages in business operations because workers will not work if they do not get paid
-The business may not be able to pay its rates and/or other taxes, in which case it is likely to be prosecuted, leading to increased costs.
-The business may not be able to afford to advertise. This would result in loss of business or the failure to gain new customers, which in the long term will affect the future of the sales revenue and future of the business
-Banks may be unwilling to lend if there are serious cash flow problems because it is too risky. Therefore the business owners will not be able to carry out planned business activities
-The owner(s) may not be able to pay themselves a reasonable salary. Therefore, they will have no reward for running the business. This may lead to them closing the business

Question 117

What are the benefits of cash flow forecasting?

Answer 117

-It helps with planning
-It supports attempts to raise finance
-It assists in determining the viability or feasibility of a new business venture

Question 118

What are the drawbacks of cash flow forecasting?

Answer 118

-Only a rough estimate, not very accurate
-Only accounts for a small portion of the year
-May not take into account payments that will affect the business in the future

Question 119

What are the causes of cash flow problems?

Answer 119

-Low profit or losses
-Too much stock
-Allowing customers too much credit
-Unexpected changes
-Seasonal demand

Question 120

What are strategies to improve cash flow?

Answer 120

-Increase the selling price of goods and/or services
-Reduce the selling price of goods and/or services
-Increase advertising or sales promotions
-Find an alternative supplier
-Offer discounts to customers to pay upfront
-Arrange trade credit agreement with suppliers
-Arrange an overdraft or renegotiate an existing overdraft

Question 121

What are the main components of a profit and loss account?

Answer 121

-Sales revenue
-Cost of sales
-Gross profit
-Expenses
-Net profit

Question 122

What is gross profit?

Answer 122

The difference between sales revenue and the cost of sales

Question 123

What is net profit?

Answer 123

Difference between gross profit and total expenses

Question 124

What are expenses?

Answer 124

Expenses are the indirect costs incurred by a business in a trading year

Question 125

What are the ways to improve profit?

Answer 125

-Increase sales revenue
-Reduce direct costs
-Reduce indirect costs

Question 126

What is gross profit margin and the formula for it?

Answer 126

-Gross profit margin is the percentage of money left after paying for a business’ costs of sales
-Gross profit/sales revenue x 100

Question 127

What is net profit margin and the formula for it?

Answer 127

-The net profit margin is the proportion of sales revenue that is left once all costs have been paid
-Net profit/sales revenue x 100

Question 128

How do you interpret the ratios?

Answer 128

-The higher the percentage (%) for both profitability ratios the better a business is performing
-It means that the business managing to keep more money from the sales turnover
-If Gross profit margin is high but Net profit margin is low then a business is paying a lot out on expenses
-If Gross profit margin is low then it means the cost of sales for the business is high

Question 129

What is job sharing?

Answer 129

-Job sharing means that two people share the same job, often on a fifty-fifty split
-Job sharing often lets professional workers continue in employment, when otherwise they may have had to take a career break

Question 130

What is multi-skilling?

Answer 130

This is when an employee can complete multiple tasks as they are skilled in them

Question 131

What are zero hour contracts?

Answer 131

This type of contract means that an employee must be available for work but is not guaranteed any work
-This provides employers with total flexibility

Question 132

What is hot desking?

Answer 132

-Hot-desking means that an employee has no fixed workspace within an office environment
-Hot-desking cuts down the need for office space – if a business has a sales team that spends little time in the office, supplying permanent desks for the team is a waste of resources

Question 133

What are the types of technology that businesses can use to enable employees to work flexibly?

Answer 133

-computers
-the internet
-broadband
-communication platforms and apps (including Zoom and Microsoft Teams)
-specialist telephone systems
-bespoke company software

Question 134

What are some factors to consider when evaluating the impact of new technology on working practices?

Answer 134

-how they manage potential isolation of employees
-how the risks of working from home or using technology for working practices are managed
-how employees’ performance will be monitored and managed

Question 135

What are the benefits of flexible working hours for employers?

Answer 135

-Businesses can expand and contract their workforce quickly in response to a rise or fall in the demand for their product or service
-Temporary staff and subcontractors may be cheaper to employ as they are unlikely to get any of the benefits that may be available to permanent staff
-A flexible workforce is likely to make a business more efficient

Question 136

What are the drawbacks of flexible working hours for employers?

Answer 136

-Temporary workers are less likely to have the same commitment to a business compared to permanent workers
-Communicating with a workforce which works largely from home can be an issue and the benefits of teamwork may be lost

Question 137

What are the benefits of flexible working hours for employees?

Answer 137

-Employees can work around their personal commitments and home life
-They can save time, money and stress by not commuting during busy times or at all if working from home

Question 138

What are the drawbacks of flexible working hours for employees?

Answer 138

-Employees may be expected to be more flexible, for example by accepting a zero hours contract where no working hours are guaranteed
-Some employees who are temporary or part time may not see themselves as important to the organisation or as well integrated, as they may not be there that long or may work less hours

Question 139

What is workforce planning?

Answer 139

Workforce planning is about trying to predict the future demand for different types of staff and seeking to match this with supply

Question 140

What are the components of workforce planning?

Answer 140

-Plan how many workers will be needed in the future.
-Estimate the cost of employing the workforce.
-Estimate the balance between part time or full time workers.
-Identify the skills necessary for the vacancies that may be filled.
-Predict when these workers will be needed in order to put recruitment plans in place
-Identify where workers will be needed if more than one location exists
-Identify who may need training to improve skills
-Identify who can be redeployed to fill gaps where certain skills are necessary

Question 141

What is the process of recruitment?

Answer 141

-Job analysis
-Job description
-person specification
-Job advert
-Shortlisting
-Interview

Question 142

Why can job vacancies in a business arise?

Answer 142

-expansion
-retirement of existing workers
-workers leaving for a new job elsewhere
-workers having a promotion
-temporary reasons such as maternity leave

Question 143

What is the recruitment process?

Answer 143

1-Job specification
2-Internal/external adverts
3-Candidates fill out application form
4-Shortlist is created
5-Interview process
6-Job offer
7-Induction training

Question 144

What are the benefits of recruiting internally?

Answer 144

-Cheaper
-More informed process
-Faster process

Question 145

What are the benefits of recruiting externally?

Answer 145

-Larger pool of potential workers
-Fresh ideas
-Don’t need to replace worker

Question 146

What is a job analysis?

Answer 146

The process which identifies and determines the duties and requirements of a job and what the position requires in terms of aptitudes, knowledge and skills

Question 147

What is a job description?

Answer 147

This explains the tasks involved in the job, the job title, responsibility attached to the job, place of work, and employment conditions

Question 148

What is a person specification?

Answer 148

This describes the skills , knowledge, educational requirements and experience needed by an individual to complete the job

Question 149

What are examples of on the job training?

Answer 149

-mentoring
-job rotation
-graduate training schemes

Question 150

What is off the job training?

Answer 150

-college and university courses
-online courses
-external training providers

Question 151

Benefits of on the job training?

Answer 151

-Cheaper
-Hands on
-Builds relationships

Question 152

Disadvantages of on the job training?

Answer 152

-Mentors ability (Are they good?)
-Mentors time
-Friction

Question 153

Benefits of off the job training?

Answer 153

-Focused
-New skills
-Expert mentor

Question 154

Disadvantages of off the job training?

Answer 154

-Expensive
-Not at work
-Not bespoke

Question 155

What is appraisal?

Answer 155

An appraisal is a formal assessment or evaluation of the performance of an employee over a particular time period in terms of meeting set objectives or performance targets

Question 156

What are the types of appraisal?

Answer 156

-Superior’s assessment
-Peer assessment
-Self assessment
-360 degree feedback

Question 157

What is superior assessment?

Answer 157

Involves the employee’s direct line manager conducting the appraisal

Question 158

What is peer assessment?

Answer 158

Refers to the process of having employees of a similar level of responsibility critically comment upon the performance of a co-worker and perhaps suggest methods of improvement

Question 159

What is self assessment?

Answer 159

Self-assessment is the process of having the employee critically reflecting upon their own performance, recording their progress, and suggesting targets for the future

Question 160

What is 360 degree feedback?

Answer 160

Having appraised staff members receiving feedback from people whose views are considered helpful and important

Question 161

What are the benefits of appraisal to an employee?

Answer 161

-Motivates
-Improves performance
-Allows the setting of achievable objectives
-Identifies training needs
-Identifies potential
-Bonus earned
-Give a value to the work done

Question 162

What are the drawbacks of appraisal to the business?

Answer 162

-Cause tension in the workplace (allocation of bonuses)
-Puts workers under tremendous pressure to keep improving performance
-Line managers may not be prepared for this kind of responsibility
-Line managers can abuse the power the system gives them

Question 163

What is the formula for absenteeism rates?

Answer 163

(Total number of staff absence days over a year / total number of working days that should have been worked)* 100

Question 164

What is the formula for labour turnover?

Answer 164

(Number of staff leaving / Average number of staff employed) * 100

Question 165

What is the formula for labour productivity?

Answer 165

(Total output per period of time / Average number of employees per period of time)

Question 166

What is organisational design?

Answer 166

Organisational design is the process of aligning the structure of an organisation with its objectives, with the ultimate aim of improving efficiency and effectiveness

Question 167

What is authority?

Answer 167

Authority is defined as the right to give orders, supervise the work of others and make decisions. It is linked with the managerial position to give orders and expect others to follow the orders

Question 168

What is chain of command?

Answer 168

These are the paths along which communication takes place and instructions or orders are passed down

Question 169

What is span of control?

Answer 169

Tells us how many workers are directly responsible to a manager or supervisor

Question 170

What are the factors determining the internal structure?

Answer 170

-Views and philosophy of management
-The need for different communication systems
-The industry within which the business operates
-The traditions of the business
-The skills of the workforce

Question 171

What are the types of business structures?

Answer 171

-Traditional hierarchal structure
-Flatter hierarchal structure
-Matrix structure

Question 172

What are the advantages of a traditional hierarchal structure?

Answer 172

-Control is at the centre, and senior management fully understand exactly who does what, and what their responsibilities are
-Paths of communication and responsibility are clearly defined
-Departments understand their position in relation to other departments within the organisation
-Each worker knows how they fit into the organisational structure

Question 173

What are the disadvantages of a traditional hierarchal structure?

Answer 173

-Senior management are distanced from those who implement decisions. What senior managers perceive as being the case may, in reality, be very different.
-Vertical communication is difficult, with information that is received by management distorted by the layers it must pass through. Very long chains of communication could even mean that instructions are out of date by the time they are received
-Communication between different departments is hampered by the lack of direct contact between departments

Question 174

What are the advantages of a flatter hierarchal structure?

Answer 174

-increased motivation as a result of the delegation of authority;
-decisions are made more quickly by those nearest the ‘ground’;
-communication is quicker and suffers less distortion;
-empowerment of workers

Question 175

What are the disadvantages of a flatter hierarchal structure?

Answer 175

-loss of central control of the workforce;
-different departments may not be working to the same objectives

Question 176

What are the advantages of a matric structure?

Answer 176

-It allows individuals with specific skills to contribute to a number of different projects.
-It breaks down barriers to communication and ensures that projects can be better coordinated.
-It helps ideas and innovation spread throughout the business.
-There is more efficient use of human resources. The structure can improve flexibility and the motivation of employees.

Question 177

What are the disadvantages of a matrix structure?

Answer 177

-Defining what each employee’s main responsibilities are is difficult – being answerable to two bosses may put a lot of strain on individuals. Placing too great a burden on individuals may slow down decision-making
-Project management using a matrix structure can be expensive because extra support systems, such as ICT and office staff, may be required
-Coordinating a team drawn from a number of different departments may be difficult as the culture and methods of operation in each department may be very different.

Question 178

What is Taylors theory of scientific management?

Answer 178

He believed that workers produce more output if they have less responsibility for decision-making and planning and that tasks should be broken down into smaller parts to increase effectiveness. Workers are thought of as machines for completing tasks. (Links to autocratic leadership)

Question 179

What is Mayo’s Hawthorne experiment?

Answer 179

-Mayo believed that working conditions has a large effect on the amount of output produced
-He changed the environment such as lighting and humidity and also the arrangement such as breaks, hours and leadership

Question 180

What is Maslow’s hierarchy of needs?

Answer 180

He argued that we all have a hierarchy of needs, which is :
1.Self Actualisation/Reaching goals
2.Self-Esteem/Feeling good
3.Love and belonging/Trust and acceptance
4.Security protection
5.Physiological or basic needs
(Food, warmth and rest)

Question 181

What is shortlisting?

Answer 181

The process of identifying the candidates from your applicant pool who best meet the required and desired criteria for the job and who you want to move onto the next step

Question 182

What is Psychometric testing?

Answer 182

A test that assesses a candidates personality in a measured and structured way so employers can identify candidates with suitable personality traits for the job

Question 183

What is are aptitude tests?

Answer 183

A test that assesses a candidates ability to complete the core tasks of the jobs

Question 184

What is an induction?

Answer 184

A part of the initial training process that introduces a new employee to a workplace

Question 185

What is mentoring?

Answer 185

A form of training where an experienced employee in the workplace who gives advice and help to a junior employee

Question 186

what is job rotation

Answer 186

Job rotation involves the movement of employees through a range of jobs in order to increase interest and motivation

Question 187

What are Herzberg’s motivators?

Answer 187

-Management recognition
-Achievement of goals
-Responsibility
-Opportunities to improve skills
-Opportunity for promotion

Question 188

What are Herzberg’s hygiene factors?

Answer 188

-Poor working conditions
-Lack of status
-Lack of job security
-Unsatisfactory wages
-Poor workplace relationships

Question 189

What are Vrooms expectancy theories?

Answer 189

Valence- an individual will undertake a task if they believe that they will receive a worthwhile reward as a result
Instrumentality- the individual will be motivated to work hard to achieve a particular target if he or she believes that it will lead to a positively valent result
Expectancy- individual’s belief in the likelihood of them being able to achieve the target that has been set for them

Question 190

What is Porter and Lawler’s expectancy theory?

Answer 190

Porter and Lawler also propose that an individual’s motivation is affected by the reward they expect to receive for completing the task. The individual’s view of the attractiveness of the possible reward will determine their level of motivation

Question 191

What are intrinsic rewards?

Answer 191

Include the positive feelings that the individual experiences from completing the task – e.g. pride, satisfaction

Question 192

What are extrinsic rewards?

Answer 192

Rewards that come from outside the individual, for example material rewards such as pay increases and bonuses

Question 193

What are the financial methods of motivation?

Answer 193

-Piece rates (workers are paid for each item they produce or for each task completed)
-Commission (a payment given to employees based on the sales they make)
-Bonus (one-off payments given at a particular time of year or under specific circumstances)
-Wage and salary
-Profit sharing (links part of an employee’s income to the profits of a company)
-Share ownership (allows employees to acquire shares in their company)
-Performance related pay ( is a way of rewarding staff for hard work in their role)

Question 194

What are the non financial methods of motivation?

Answer 194

-Consultation
-Job design
-Job enlargement
-Job rotation
-Job enrichment
-Empowerment
-Team working
-Flexible working

Question 195

What is job design?

Answer 195

Job design is the process of establishing employees’ roles and responsibilities. Its main purpose is to optimise work processes to create value and maximise performance.

Question 196

What is job enlargement?

Answer 196

Increasing the number of tasks completed by a worker

Question 197

What is job enrichment?

Answer 197

This means giving workers more control over the tasks that they complete, and allowing workers to complete tasks that have a meaning and are complete in themselves

Question 198

What is job rotation?

Answer 198

Changing workers’ tasks which are completed at regular intervals

Question 199

What is empowerment?

Answer 199

This means giving workers the power to control their own jobs, make decisions and implement their own ideas

Question 200

What is flexible working?

Answer 200

Allowing workers to have elements of their schedule which are under their control

Question 201

What are the problems with implementing these non financial methods of motivation?

Answer 201

-(Existence of Theory X managers) These managers will see no value in using expensive methods of motivation when workers have no commitment to the business or quality of the products
-Cost
-External factors
-The structure of the workforce

Question 202

What are the functions of management?

Answer 202

-planning
-organising
-controlling
-leading
-coordinating
-allocating resources
-monitoring
-communicating

Question 203

What are the roles of management?

Answer 203

-Interpersonal roles, which include activities such as hiring, firing, training, motivating and organising
-Information roles, which includes acting as a channel for information to flow between divisions/departments within an organisation
-Decision-making roles – the access to information that managers have enables them to use their formal authority to make decisions

Question 204

What are the roles of a leader?

Answer 204

-creating a vision
-motivating staff
-empowering workers
-anticipating problems
-deciding on structures

Question 205

What are the characteristics needed to be a leader?

Answer 205

-intellectual skills
-interpersonal skills
-realistic aspirations
-vision
-communicative skills

Question 206

What is the MBO process?

Answer 206

1- Review objectives for the whole business (corporate objectives)
2- Set objectives for the management of the different functions of the business
3-Set objectives for individual departments and workers
4-Moniter progress (Managers and workers check to see if the objectives are being reached)
5- Evaluate performance and give reward if the objectives were reached

Question 207

What are the advantages of MBO?

Answer 207

-Improved management control of the organisation
-Improved financial control
-It allows managers to be aware of their responsibilities
-The work of departments and managers is coordinated
-It can motivate the workforce
-It can improve communication systems within the organisation

Question 208

What are the disadvantages of MBO?

Answer 208

-Management time is spent on the process of setting objectives rather than managing the organisation
-The ever-changing business environment or context in which the goals are set may change over time, making the objectives unrealistic
-Demotivation and breakdown of working relationships
-Objectives can be seen as a form of management control

Question 209

What do theory x managers believe?

Answer 209

-Workers must be supervised or quality and quantity of output will fall
-Workers only respect the type of manager who tells them what to do and does so with complete authority
-Money is the only motivator
-Workers do not want to be involved in the decision-making process
-Workers wish to remain faceless and unknown to management
-Workers have little ambition

Question 210

What are the consequences of theory x managers on the business?

Answer 210

-strict control of formal methods of communication
-tasks must be designed so they are broken down into their simplest units
-responsibilities must be clear and unambiguous
-supervisors must maintain quality
-high level of dependence on the decision-making of senior management

Question 211

What do theory y managers believe?

Answer 211

-Workers cannot be motivated by money alone – they seek more than financial satisfaction from their jobs
-Workers are ambitious, willing to train and contribute to improve their chances of promotion
-Workers will be more efficient if they are left to their own devices – trust breeds responsibility
-Workers want to contribute to improving efficiency – they want to be seen, be noticed, rewarded and appreciated when they work well

Question 212

What are the consequences of theory y managers on the business?

Answer 212

-requirement for training
-use of cell working – restructuring of production and service methods
-setting up of formal communication channels, with both vertical and lateral communication
-promotion structures
-flexible working practices

Question 213

What are the different type of leadership styles?

Answer 213

-Autocratic leadership
-Paternalistic leadership
-Democratic or participative leadership
-Laissez-faire leadership
-Bureaucratic leadership

Question 214

What is meant by an autocratic leadership?

Answer 214

-Full control of decision making
-Employees have little or no input
-Good in crisis situations
-Motivation through rewards or punishment

Question 215

What is meant by a paternalistic leadership?

Answer 215

-Leader decides what is best for employees
-Similar to a parent/child relationship
-Still little delegation
-Typical paternalistic leader explains the specific reason as to why he/she has taken certain actions

Question 216

What is meant by a democratic leadership?

Answer 216

-Encourages participation in decision making
-Strong coaching, listening and motivating skills
-Teamwork and communication is important
-Prepared to make final decision when agreement can’t be reached

Question 217

What is meant by a Laissez-faire leadership?

Answer 217

-Gives employees as much freedom as possible
-Managers communicate goals to employees but allow them to choose how to complete objectives, make decisions and resolve problems on their own

Question 218

What is meant by a bureaucratic leadership?

Answer 218

-Everything is done ‘by the book’ or by the policy
-They reinforce the rules
-If it isn’t covered by the book, the manager refers to the next level above

Question 219

Why has there been a gradual shift away from autocratic leadership?

Answer 219

-Changes in society’s values
-Better educated/skilled workforce
-Focus on need for soft HR skills
-Changing workplace organisation
-Greater workplace legislation (laws)
-Pressure for greater employee involvement

Question 220

What is Fiedler’s contingency theory and his model?

Answer 220

-Believed that the quality of leadership was the most important factor affecting the success or failure of an organisation
-Fiedler’s model gives organisations a way to identify the best potential leaders for a particular situation, group of workers or task
-Fiedler did not believe that leaders were very good at changing or even adapting their style, making it difficult for them to alter their approach to suit changing circumstances
-Fiedler’s contingency model states that ‘the effectiveness of a group or an organisation depends on two interacting or “contingent” factors
-The first factor is the personality of the leaders which determines their leadership style
-The second factor is the amount of control and influence that the situation provides leaders over their group’s behaviour, the task and the outcome

Question 221

What is the LPC scale?

Answer 221

-This scale was used to identify two types of leadership style
-The high LPC leader sees other people as relatively pleasant, industrious or sincere even if they find it difficult to work with them
-The low LPC person, who sees their co-workers in negative terms, is determined to get the job done and believes that a poor co-worker is bad in almost every possible respect

Question 222

When are task orientated leaders effective in the case of an extremely favourable situation?

Answer 222

-when there is enormous trust, respect and confidence
-when the task is very clear
-when followers accept the leader’s power without question

Question 223

When are task orientated leaders effective in the case of an extremely unfavourable situation?

Answer 223

-when trust and respect do not exist
-when the challenge people face is vague and undefined
-when the atmosphere is anarchic or even rebellious (for example, an emergency or crisis)

Question 224

What is Wright and Taylors leadership theory?

Answer 224

-P. Wright and D. Taylor believed that a lot of leadership theory was theoretically correct, but did not actually show leaders how they could improve the way that they worked
-They believed that it is possible to improve a leader’s performance and that this could be done through education
-Believed that leadership is based around behaviour and not position power
-A good leader is the one that adapts to the needs of the employees and not the one that makes everyone to adapt to him/her

Question 225

What is Wright and Taylor’s checklist for improving work performance?

Answer 225

1.What is the problem in behavioural terms? What precisely is the individual doing or not doing which is adversely influencing his or her performance?
2.Is the problem really serious enough to spend time and effort on?
3.What reasons might there be for the performance problem?
4.What actions might be taken to improve the situation?
5.Do you have sufficient information to select the most appropriate solutions?
6.Select most appropriate solution(s)
7.Is the solution worthwhile in cost benefit terms?
8.Could you have handled the problem better?

Question 226

What are the possible reasons for the performance problem?

Answer 226

-Goal clarity
-Ability
-Task difficulty
-Intrinsic motivation
-Extrinsic motivation
-Feedback
-Resources
-Working conditions

Question 227

What are the possible solutions for workforce performance?

Answer 227

-Goal clarity (Give guidance concerning expected goals and standards. set targets. MBO)
-Ability (Provide formal training. On the job training)
-Task difficulty (Simplify task, reduce workload, reduce time pressures)
-Intrinsic motivation (Redesign job to match job holders needs)
-Extrinsic motivation (Arrange positive consequences for good performance and zero or negative consequences for poor performance)
-Feedback (Provide or arrange feedback)
-Resources (Provide staff equipment, raw materials as appropriate)
-Working conditions (Improve light, heat, layout, remove distractions)

Question 228

What is employee relations?

Answer 228

-The term used to describe the relationship between employers and employees
-Today’s interpretation of employee relations refers to individual as well as collective workplace relationship

Question 229

What is a contract?

Answer 229

A contract is an agreement that sets out an employees employment conditions, rights, responsibilities and duties.

Question 230

What is it illegal to discriminate anyone against?

Answer 230

-age
-being or becoming a transsexual person
-being married or in a civil partnership
-being pregnant or having a child
-disability
-race including colour, nationality, ethnic or national origin
-religion, belief or lack of religion/belief
-sex
-sexual orientation

Question 231

What is direct discrimination?

Answer 231

Treating someone with a protected characteristic less favourably than others

Question 232

What is indirect discrimination?

Answer 232

Putting rules or arrangements in place that apply to everyone, but that put someone with a protected characteristic at an unfair disadvantage

Question 233

What is harassment?

Answer 233

Unwanted behaviour linked to a protected characteristic that violates someone’s dignity or creates an offensive environment for them

Question 234

What is victimisation?

Answer 234

Treating someone unfairly because they have complained about discrimination or harassment

Question 235

In the workplace, what does the law protect people against discrimination in relation to?

Answer 235

-dismissal
-imposition of unfair employment terms and conditions
-pay and benefits
-promotion and transfer opportunities
-opportunities for training
-recruitment
-redundancy

Question 236

What are trade unions?

Answer 236

organisations that represented workers in a particular trade, industry or occupation

Question 237

Why do people join unions?

Answer 237

-Representation
-Negotiation of pay and conditions with employers
-To help ensure high standards of health and safety
-Union members can benefit from a wide range of services which are not directly related to the workplace
-Unions support the development of equal opportunities policies
-Collective bargaining assists employers because it simplifies the process of negotiating with workers
-Trade unions can also help ensure that agreements are complied with by workers and can assist with communication between management and workers
-Trade unions are able to take a longer-term view than individuals and are therefore able to see why difficult decisions have to be made

Question 238

What are the types of industrial action?

Answer 238

-An overtime ban (workers just work basic hours and refuse to do any extra work)
-A work-to-rule (workers stick very closely to every rule in the workplace, especially health and safety rules. This slows down production and reduces output)
-Strikes (a withdrawal of labour)

Question 239

What is ACAS?

Answer 239

-Advisory, Conciliation and Arbitration Service (ACAS) is often used to help find a solution that is acceptable to both sides
-plays an important role in settling disputes but only has a role to play when it is invited by both sides to conciliate (offer and suggest solutions) or arbitrate (when ACAS’s solution will be accepted by both sides)

Question 240

What is the conciliation process?

Answer 240

Involves an invited independent ACAS conciliator discussing disputed workplace issues with both parties in order to help them reach a better understanding of each other’s position and underlying interest. The impartial conciliator tries to encourage the parties in dispute to come to an agreement between themselves and so avoid the disruption and expense of progressing the dispute through industrial action

Question 241

What is the arbitration process?

Answer 241

Involves an impartial ACAS advisor being asked to make a decision on a dispute. The arbitrator makes a firm decision on a case, based on the evidence presented by the parties. Arbitration is voluntary, so both sides must agree to go to arbitration; they should also agree in advance that they will abide by the arbitrator’s decision

Question 242

What are the ways a business can add value?

Answer 242

-Purchasing cheaper raw materials
-Improving the efficiency
-Raising the price of the product
-Achieving brand status
-Offering additional services
-Improving customer access or convenience

Question 243

What is the difference between added value and profit?

Answer 243

Added value is not to be confused with profit. Out of the £80 added value in this example the wages of the carpenter plus any overheads his business may have, such as transport and insurance, must be deducted

Question 244

What are the 3 types of production?

Answer 244

-job production
-batch production
-flow or mass production

Question 245

What is job production?

Answer 245

This method produces unique products and they are made one at a time

Question 246

What is batch production?

Answer 246

This is the method which involves manufacturing a limited number of identical products. At each stage of the production process work will be completed for the whole batch before the next stage is begun

Question 247

What is flow production?

Answer 247

Flow production involves the production of products on production lines. There is a continuous process – the product flows from one stage of production to the next

Question 248

What is an advantage of job production?

Answer 248

-Customer requirements and changes can be handled.
-Associated with higher quality
-Employees can be better motivated, due to varied tasks - More job satisfaction
-A flexible production method.
-Production is easy to organise

Question 249

What are the disadvantages of job production?

Answer 249

-Individual cost of one unit may be high
-Often labour intensive = High labour costs due to skilled workers
-Requires close consultation with the client
-Usually reliant on high skills
-Wide range of specialist tools may be required
-production may be slow- Longer lead times

Question 250

What are the advantages of batch production?

Answer 250

-Workers are likely to specialise in one process
-Unit costs are lower because output is higher
-Production is flexible since different orders can be met
-More use of machinery is made
-Unexpected orders can be handled

Question 251

What are the disadvantages of batch production?

Answer 251

-More complex machinery may be needed
-Careful planning and co-ordination is needed
-Less motivation because workers specialise
-If batches are small, costs will still be high
-Money may be tied up in work-in-progress

Question 252

What are the advantages of flow production?

Answer 252

-Very low unit costs due to economies of scale
-Output can be produced very quickly
-Modern plant and machines can allow some flexibility
-Production speed can vary according to demand
-less need for training

Question 253

What are the factors that dictate what type of production method will be used?

Answer 253

-the product being produced;
-the cost of labour;
-the cost of capital;
-the availability of money for investment;
-technology;
-the skills of labour;
-the size of the market;
-customer requirements.

Question 254

What are the disadvantages of flow production?

Answer 254

-Products may be too standardised
-Huge set-up costs before production can begin
-Worker motivation can be very low- repetitive tasks
-Breaks in production can be very expensive

Question 255

What is productivity?

Answer 255

Productivity is a measurement of the efficiency with which a business turns production inputs into output. Labour productivity (output per worker) is the most common measure of productivity

Question 256

What is the formula for labour productivity?

Answer 256

Output (per period)/Number of employees (per period)

Question 257

What is the formula for capital productivity?

Answer 257

Output/Capital employed

Question 258

What are the advantages of high productivity?

Answer 258

-Increased economies of sale
-Increased competitiveness
-Spreading of fixed costs over higher output
-Lower unit costs
-Performance bonuses to workers - motivation

Question 259

What is full capacity?

Answer 259

Full capacity means that all employed factors of production are being used to their optimum level of efficiency – producing the maximum level of output, given the business’s current investment levels

Question 260

What is the formula for capacity utilisation?

Answer 260

(Actual output, max possible output) x 100

Question 261

What are the problems of spare capacity?

Answer 261

-Increased cost of the business
-Reduced profits
-Lack of return on investment capital
-Failure to adapt to demand shifts
-stakeholders may view spare capacity as a sign of inefficiency or poor management

Question 262

How can businesses resolve the problems of capacity underutilisation?

Answer 262

-subcontracting of production
-rationalisation
-increasing the use of assets

Question 263

What is subcontracting of production and the benefits/drawbacks?

Answer 263

-This means getting someone else to produce the goods for you
- There is a reduction in risk to the business (achieved through a reduction in capital investment required) (+)
-. If the business is not making the goods it does not have to buy the machines to make the goods, lease the factory space or employ and train the workers (+)
- There is a lack of control – especially with regard to quality (-)
- if there are a limited number of potential subcontractors then prices of the goods can become prohibitively high (-)
- There can be delays in delivery, leading to customer dissatisfaction (-)

Question 264

What is rationalisation and the benefits/drawbacks?

Answer 264

-This means concentrating on core products or services and disposing of those products or services that are not seen as profitable or necessary to the business’s long-term success
-There can be costs to rationalisation, such as writing down (reducing) the book value of assets, but it does allow management to concentrate and focus upon the business strengths (+/-)
- Some customers, especially business customers, who bought into the business’s whole package of products, may be less loyal when ‘one-stop shopping’ is not now available (-)
- Rationalisation also implies redundancy costs

Question 265

What are the problems at working at full capacity?

Answer 265

-lack of flexibility
-possible fall in quality
-pressure on staff
-more breakdowns and machine failures

Question 266

What are the most important technologies used in production today?

Answer 266

-CAD
-CAM
-IT
-robotics
-computer modelling

Question 267

What is CAD?

Answer 267

Computer-aided design is an interactive computer system which is capable of generating, storing and using computer graphics. It assists design engineers in solving design problems

Question 268

What are the benefits of using CAD and a drawback?

Answer 268

-Speeds up the design process
-Increases efficiency when it comes to altering design
-Can be used as a marketing tool
-Relatively cheap
-Skills are needed to use this tool (-)

Question 269

What is CAM?

Answer 269

Computer Aided Manufacturing (CAM) is the use of software and computer-controlled machinery to automate a manufacturing process

Question 270

What are the benefits and drawbacks of using CAM?

Answer 270

-Faster production process (+)
-Increases quality/consistency and is precise (+)
-Minimises waste (+)
-High initial costs (-)
-Increased wages for specialist workers (-)

Question 271

What is computer modelling?

Answer 271

With the right information input, computers can be used to model anything from wear and tear of a pair of shoes to the electricity generated from a wind turbine in different wind conditions. Use of modelling allows developers to try a huge range of ‘what if’ scenarios

Question 272

What are the uses of IT?

Answer 272

-IT is used in a number of ways throughout the process of businesses increasing their productivity
-Most businesses have a web presence
-The internet allows a much wider geographical market to be targeted, cheaper advertising and improved customer convenience
-Information gathered from browsing and purchasing habits allows sophisticated targeted marketing to take place, generating potential sales automatically
-Communications technology allows flexibility in the location of services and customer relations centres

Question 273

What are the advantages to a business using technology?

Answer 273

-Improved quality
-Faster innovation
-More effective marketing and sales
-Less dependency on labour
-Technology increases productivity, reduces waste and costs, and improves communications for a business

Question 274

What is lean production?

Answer 274

The idea of lean production encompasses theories of modern Japanese industrial management that are all designed to achieve the reduction and removal of waste within a business

Question 275

What are some elements of waste within a business?

Answer 275

-raw materials lying around unused
-work in progress which is sitting in parts bins waiting to be used in production
-the finished product sitting in a warehouse waiting to be delivered to customers
-skills and knowledge of workers not being used by management

Question 276

What are the most important parts in an effective lean production system?

Answer 276

-Just-in-time
-Kaizen
-Cell production
-Time-based management methods

Question 277

What is JIT?

Answer 277

A method of lean production that aims to ensure that inputs into the production process only arrive when they are needed?

Question 278

What tools or features are needed for JIT to be successfully incorporated?

Answer 278

-Good supplier relationships
-customer relationships
-Higher employee involvement
-kanban
-management understanding

Question 279

What are the objectives of JIT?

Answer 279

-Elimination of waste in production
-Improved productivity

Question 280

What are the benefits of JIT?

Answer 280

-Lower stock holding means a reduction in storage space which saves rent and insurance costs
-As stock is only obtained when it is needed, less working capital is tied up in stock
-Less likelihood of stock perishing, becoming obsolete or out of date
-Less time spent on checking and re-working production as the emphasis is on getting the work right the first time

Question 281

What are the drawbacks of JIT?

Answer 281

-There is little room for mistakes as minimal stock is kept for re-working faulty product
-Production is highly reliant on suppliers and if stock is not delivered on time, the whole production schedule could be delayed
-There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders
-A need for complex, specialist stock systems

Question 282

What is kaizen?

Answer 282

Kaizen is a Japanese word meaning continuous improvement

Question 283

What are the key elements of kaizen?

Answer 283

-Effective communication systems
-A management with belief in the capabilities of the workforce
-A trained workforce
-Security of jobs
-Management must have a clear understanding of the production processes in order that they can organise, control and plan appropriately
-All employees, from the managing director down to the shop floor workers, should be asking questions such as ‘how can I do what I do better?’ or ‘how can we do what we do better?
-Kaizen does not ignore the need for new technology or large-scale capital investment; however, it does recognise that these are not the only methods of achieving increased competitiveness

Question 284

What are the benefits of kaizen?

Answer 284

-improved labour relations
-increased competitiveness
-reduction in waste
-less large-scale investment
-improved motivation
-increased productivity
-improved quality

Question 285

What is cell production?

Answer 285

-The production line is subdivided into a number of cells
-These cells are groups of workers involved in related tasks
-The workers are trained so that they can fulfil a number of tasks within the cell, and this allows job rotation
-The skills of the workers mean that they can each play a role in improving quality, and also creating flexibility in the production process
-communication is improved, and the job enrichment and enlargement elements of cell design improve motivation

Question 286

What is time based management?

Answer 286

-With time-based management, emphasis is placed on reducing time taken in all aspects of the production process
-It involves concepts such as just-in-time, the use of CAD (computer-aided design) and CAM (computer-aided manufacture), critical path analysis and simultaneous engineering

Question 287

What is quality?

Answer 287

-Quality is often defined simply as ‘fitness for purpose’
-The features of a product or service that allows it to satisfy customers’ wants

Question 288

What are tangible measures of quality?

Answer 288

-reliability
-Functions and features
-Support levels and standards
-Cost of ownership

Question 289

What are intangible measures of quality?

Answer 289

-Brand image
-Exclusiveness
-Market reputation

Question 290

What are the benefits of quality?

Answer 290

-increased sales
-reduced costs
-reduced waste
-market orientation
-customer satisfaction

Question 291

Which departments work to achieve quality?

Answer 291

-Purchasing
-Operations
-Finance
-Human resources
-Marketing

Question 292

What is quality assurance?

Answer 292

A guarantee given by producers to consumers that certain standards have been met throughout the production process. Legal standards have been met and/or codes of practice have been followed.

Question 293

What are the number of methods used for quality assurance?

Answer 293

-recognised standards
-bench marking
-product design checking
-production control
-team working

Question 294

What does production control involve?

Answer 294

-monitoring of costs through use of budgeting and variance analysis
-control of operations through use of critical path analysis and monitoring of individual processes
-supervision of output (now largely replaced by cell and teamwork)
-feedback methods, involving the monitoring of customer satisfaction, and the feedback of problems to the relevant department

Question 295

What is TQM?

Answer 295

-Total quality management is an operations management system that creates structures within an organisation that satisfy internal and external customers and suppliers
-It creates quality through continuous improvement, development of systems and products, and by creating an organisational culture of quality

Question 296

What does the T stand for (TQM)?

Answer 296

T stands for total – it is the integration of the staff, suppliers, customers and other stakeholders

Question 297

What does the M stand for (TQM)?

Answer 297

M stands for management – the need is for management to improve processes and to monitor them continually in order to identify improvement opportunities

Question 298

What does the Q stand for (TQM)?

Answer 298

Q stands for quality – quality can be the speed in which a service is delivered. It can be:
-consistency
-innovation
-reflected in low maintenance or favourable repair history

Question 299

What production management and control methods need to be used for TQM to be effective?

Answer 299

-Quality chains
-Empowerment
-Monitoring
-Team work
-Quality circles
-Zero defects
-Benchmarks

Question 300

What are the key aspects of stock management?

Answer 300

-Businesses must ensure that stock is available for use within the manufacturing process as and when it is needed
-Part-finished goods (work in progress) do not sit around the factory floor unused and losing value; instead, they are brought to the next stage as soon as possible
-Finished goods are available for timely delivery to customers and are not made until customers are found for them.

Question 301

What is the reorder level?

Answer 301

the level of stock at which a new order is placed

Question 302

What is the reorder quantity?

Answer 302

The quantity ordered in order to return the stockholding to maximum level – measured by the difference between the maximum and minimum stock holding levels

Question 303

What is lead time?

Answer 303

The amount of time that elapses between placing an order and the delivery of that order

Question 304

What is buffer stock?

Answer 304

The amount of stock held between the minimum stock holding and zero stock. Used in case of late deliveries or extra orders

Question 305

What is computerised stock control?

Answer 305

Businesses today hold their stock details on computer databases. This improves efficiency and accuracy. When the quantity of stock decreases or increases, the database is updated instantly, which allows for accurate stock checks and the automatic reordering of stock if the level falls below the reorder level

Question 306

What are the advantages of effective stock management?

Answer 306

-Reduction in working capital
-Improved relationships with customers
-Freeing of storage space
-Less stock wastage and discounting
-Easier stock rotation

Question 307

What are the consequences of not having enough stock?

Answer 307

-Production of that model will have to cease and production schedules reorganised
-Employees may have to be laid off and sent home if alternative work cannot be found
-Orders may be late and the firm’s reputation may be damaged
-Orders may be cancelled and profits may fall

Question 308

What are the consequences of having too much stock?

Answer 308

High costs – storage, insurance, lighting, refrigeration, handling, security, warehouse staff wages, etc.
-Takes up space that may be more productively used e.g. better factory layout.
-Opportunity cost – money is tied up and could be more effectively used elsewhere in the business. Loss of interest if in bank account
-Could be left with stocks if they cannot be sold due to unexpected change in demand.
-Stock may become obsolete if superseded by newer, better product.
-Theft may occur – employees may feel that theft from large stocks may not be so readily noticed.
-Stocks can be damaged – temperature, vermin, mishandling, etc
-Health and safety issues - danger to staff through accidents etc

Question 309

What is research and development?

Answer 309

Research and development (R&D) is essential today for businesses to compete in a dynamic marketplace. It involves identifying new ideas and turning them into products, services and processes. Businesses who invest in R&D are considered to be innovative and always looking to bring new ideas and products to the market

Question 310

What is research?

Answer 310

Research is the inquiry into, and discovery of, new ideas

Question 311

What is pure research?

Answer 311

Research just to find out how or why, with no product objective. This type of research is often carried out by universities or research institutes

Question 312

What is laboratory research?

Answer 312

For example, the testing of new pharmaceutical compounds on animals

Question 313

What is brainstorming?

Answer 313

Using discussion groups – thinking outside of the box, novel ideas for solving existing problems, etc

Question 314

What is the evaluation of an existing product?

Answer 314

Looking into if there are any problems with this product and how can such problems be resolved?

Question 315

What is development?

Answer 315

The process that changes ideas, which result from the research process into commercially viable products or processes

Question 316

What is innovation?

Answer 316

The commercial exploitation of an invention

Question 317

What is product innovation?

Answer 317

Bringing a new idea to the marketplace

Question 318

What is process innovation?

Answer 318

bringing a new idea to the workplace

Question 319

What is the process of research and development?

Answer 319

1.Identification of problem
2.Research
3.Development of ideas and solutions to solve the problem
4.Development of prototypes
5.Final design
6.Testing
7.Manufacturing and launch

Question 320

What are the benefits of research and development?

Answer 320

-R&D can lead to the development of new products, which may give a business a competitive edge
-Important because it creates new/innovative products that may appeal to consumers – may have positive impact on image
-Improved working environments. New machinery can be developed, which may cut costs and raise productivity
-Improved image
-Can motivate employees – may help to satisfy their higher order needs. May create optimism and give the organisation a positive feel
-Increased sales - consumers benefit from a wider variety of goods and services
-Important because it helps to adapt products to new technology, such as microwaveable food

Question 321

What are economies of scale?

Answer 321

The reduction in average costs of production that occur as a business increases its scale of production

Question 322

What is meant by the short/long run average costs?

Answer 322

In the short run, costs can be both variable and fixed, but in the long run all costs become variable. For example, rent negotiated over a 12 month contract is a fixed cost in the short run – i.e. it does not alter in relation to changes in demand or output. However, if rent rises after 12 months, then it too is regarded as a variable cost. It is this switch to all costs becoming variable that separates the short run from the long run.

Question 323

What are the 5 types of internal economies of scale?

Answer 323

-purchasing
-managerial
-financial
-marketing
-technical

Question 324

What is purchasing economies of scale?

Answer 324

As businesses grow, they increase the size of orders for raw materials or components – this may then result in discounts being given and the cost of each individual component purchased will fall

Question 325

What is managerial economies of scale?

Answer 325

Able to employ specialist staff, e.g. accountants – likely to work more efficiently and thereby reduce the average costs of producing

Question 326

What is financial economies of scale?

Answer 326

Easier to access loans as are able to offer security – negotiate more favourable rates of interest

Question 327

What is marketing economies of scale?

Answer 327

As businesses grow, each pound (£) spent on advertising will have greater benefit for the business – the advertising costs are spread over more units

Question 328

What is technical economies of scale?

Answer 328

Machinery allows products to be made/jobs to be performed quicker – more use of division of labour/specialisation

Question 329

What are the 3 external economies of scale?

Answer 329

-Supplier
-Education
-Financial

Question 330

What is supplier economies of scale?

Answer 330

A network of suppliers may be attracted to an area where a particular industry is growing. The setting up locally of supplier businesses, often in competition with one another, reduces buying costs and allows the use of systems such as just-in-time

Question 331

What is educational economies of scale?

Answer 331

local colleges will set up training schemes suited to the largest employers’ needs, giving an available pool of skilled labour. This reduces recruitment and training costs for those businesses who make up the industry concerned

Question 332

What is financial economies of scale?

Answer 332

Financial services can improve, with banks and other financial institutions providing services that may be particularly geared towards a given industry. For example, for an industry where cash flow may be a particular problem, debt factoring services may be made available at competitive rates

Question 333

What are internal economies?

Answer 333

Highlight the advantages that a business obtains due to the use of modern techniques

Question 334

What are external economies?

Answer 334

Advantages that a business obtains because of external factors

Question 335

What are diseconomies of scale?

Answer 335

The factors that cause higher costs per unit of output when the scale of an organisation continues to increase – the causes of inefficiency in large organisations

Question 336

What are the 3 main internal types of diseconomies of scale?

Answer 336

-Communication
-Commitment/motivation
-Co-ordination

Question 337

What is meant by the communication diseconomies of scale?

Answer 337

As an organisation grows and levels of hierarchy increase, the efficiency and effectiveness of communication breaks down. This leads to an increase in misunderstanding and inefficiency as each level of hierarchy grows further and further apart and messages become distorted, resulting in increasing average costs

Question 338

What is meant by the commitment/motivation diseconomies of scale?

Answer 338

With larger businesses it is harder to satisfy and motivate workers as many may feel that their views are ignored because of how distanced they are from the organisation’s decision makers. This means that they may not give their best as they are not focused on the organisation’s aims and objectives

Question 339

What is meant by the co-ordination diseconomies of scale?

Answer 339

The larger an organisation becomes, the more difficult it is to coordinate. Inevitably, there is a good deal of delegation and this empowerment of more and more managers to make their own decisions can result in different departments heading in different directions. To counter this, numerous management meetings have to be held. The time that managers spend in meetings, in an attempt to ensure better coordination within large organisations, can be viewed as a significant overhead cost

Question 340

What are the 2 external diseconomies of scale?

Answer 340

-Overcrowding in industrial areas
-Increased price of resources

Question 341

What is the overcrowding in industrial areas diseconomies of scale?

Answer 341

Traffic congestion may occur, resulting in late deliveries and staff arriving late for work. Local residents may resent this and therefore public relations could suffer

Question 342

What is the increased price of resources diseconomies of scale?

Answer 342

More businesses in an area means increased demand for labour to work in that industry and the best employees may be harder to recruit and keep. Land, services and materials may all become more expensive as the industry grows and demand for such resources increases

Question 343

Why do small firms continue to survive?

Answer 343

-They are able to provide a personal service,something that is very difficult to do in large organisations
-Some entrepreneurs are simply happy to remain as a small business
-They can be a lot more flexible in some circumstances
-Target market size
-Serving the local community
-They are often easy to set up
-Customer loyalty
-Small businesses often serve niche markets