Component 3

Question 1

What is change?

Answer 1

Change is an ongoing process and businesses cannot avoid having to deal with its consequences. Change in some businesses can be gradual, with small, incremental changes made to the way they operate year after year. However, increasingly there are factors that cause rapid change, totally altering the way a business operates in a relatively short period of time. This creates a far more challenging environment.

Question 2

What are the major internal causes of change?

Answer 2

-the introduction of new technology
-a change in management structure or leadership style
-changes in the size of the business through organic growth or external growth When a business grows with the use of other businesses, e.g. through mergers and takeovers. E.g. Carphone Warehouse and Dixons.

Question 3

What are the major external causes of change?

Answer 3

-developments in technology
-market changes (competitors, new markets or globalisation)
-changes in consumer tastes
-new legislation
-changes in the workforce
-changes in the economy

Question 4

What is planned change?

Answer 4

Planned change is created internally and is structured and timetabled. Clear objectives for the change are established, timetables created and resources applied to creating the change. For example, a bicycle manufacturer may decide to offer a new range of electric bikes to launch in the next twelve months and will gear up its manufacturing and marketing campaigns accordingly.

Question 5

what is unplanned change?

Answer 5

Unplanned change occurs in response to a shock to the business and is often unstructured and under-resourced. A shock could be external (exogenous), such as the financial crisis of 2007/2008 which caused a recession, or internal, such as a key worker suddenly leaving a business

Question 6

What are the effects of change?

Answer 6

-Shorter product life cycles
-Diminished brand loyalty
-New products need to be developed
-Production methods will need to be changed
-Retraining the workforce
-Flexible workforce
-The need to comply with constantly changing legislation

Question 7

What are the strategies managers need to put into place to combat change management?

Answer 7

-Employee preparation
-Increased research and development expenditure
-Additional capital investment

Question 8

What are the benefits of change management?

Answer 8

-assess and understand the need for and the impact of change
-allocate resources, such as capital, and staffing the business to support the implementation of change
-manage and control the costs incurred with change
-reduce the time needed to implement change
-plan and implement an effective strategy to communicate change with all stakeholders, in particular the staff, which will help the business support staff through the change
-maintain or improve the performance of the business, e.g. improve productivity for manufacturing businesses or improve service for those businesses in the tertiary sector.

Question 9

What are the indicators which help evaluate change management?

Answer 9

-delivery times
-production defects
-customer satisfaction surveys
-market share
-sales turnover
-profitability.

Question 10

What is Jstoreys 4 different approach theory?

Answer 10

1.A total imposed package
2.Imposed piecemeal initiatives
3.Negotiated total packages
4.Negotiated piecemeal packages

Question 11

What is meant by A total imposed package (Jstorey)?

Answer 11

This would be a whole package of changes and would simply be presented to the employees. The senior management team would work out the restructuring they feel is required and then impose this on the business and its workers. The advantage of this is that it will create rapid change and ensure that the vision for the direction of the business is clear, but if the organisational culture does not match this approach then there may be significant resistance to change

Question 12

What is meant by imposed piecemeal initiatives (Jstorey)?

Answer 12

This is a more gradual approach. Change and restructuring of a business is still imposed by senior management, but in stages rather than all at once. This may give employees more time to adapt and may help alleviate resistance, but it will still need to be accompanied by changes in the organisational culture to encourage change. To help the introduction of the initiatives, the firm may offer incentive payments or perhaps other non-financial rewards for the successful implementation of the changes.

Question 13

What is meant by negotiated total packages (Jstorey)?

Answer 13

The aim is to agree on the package of change through negotiation and consultation with the workforce. This may help significantly reduce the level of resistance to change though it may also act as a constraint on the extent of the change. This type of approach is growing more popular with trade unions keen to negotiate changes and ensure that their members benefit from change and are helped to cope with change.

Question 14

What is meant by negotiated piecemeal packages (Jstorey)?

Answer 14

This is similar to the imposed piecemeal initiatives, but also has similarities with the negotiated total package approach. The gradual implementation of change will be negotiated at each stage. The change may be linked to incentive payments.

Question 15

What are the 4 reasons why change is resisted (Kotter & Schlesinger)?

Answer 15

1.Self-interest – This arises from the perceived threat to job security or maybe suppliers fearing for future orders. Therefore, stakeholders tend to put themselves before the needs of the business.
2.Misinformation and misunderstanding – Stakeholders may not understand why change is needed because they have been misinformed about the strategy of the business. Some stakeholders may think that things are better the way they are.
3.Different assessment of the situation – This is where there is disagreement about what change is needed. Stakeholders have different views about what is needed for the best for the business.
4.Low tolerance and inertia – Many people suffer from reluctance to change. Many people need security, predictability and stability in their work.

Question 16

What are the reasons for a managers resistance?

Answer 16

Manager resistance may be a result of a lack of experience or expertise, e.g. a fear of new markets and conditions due to a lack of experience or knowledge of that market or a lack of leadership skills to manage the change effectively.

Question 17

What are the reasons for a workers resistance?

Answer 17

Worker resistance may be a result of their wish to preserve the existing routines, to protect pay and employment and to avoid threat to security and status, e.g. the threat of a change in a job role that may result in a demotion from a higher role, and threat to main group membership.

Question 18

What are the reasons for a suppliers resistance?

Answer 18

Supplier resistance may be a result of reluctance to changes made by their customers, e.g. manufacturers who change to a JIT system may see relationships with suppliers break down over the demand for components when needed as it imposes higher costs on suppliers.

Question 19

What are the reasons for a shareholders/owners resistance?

Answer 19

Shareholder/owner resistance may be a result of the fear that changes to strategy may increase risk, e.g. operating in a new market will be costly and damaging to dividends so shareholders will need some reassurance or persuading about the change.

Question 20

What is Lewin’s 3 step process of change?

Answer 20

1.unfreezing
2.Change or transition
3.refreezing

Question 21

What is meant by unfreezing (Lewin)?

Answer 21

This involves creating a motivation for change and creating a realisation amongst employees that change is necessary. They therefore have to ‘unfreeze’ from current approaches to work and be prepared to adapt to a new method of working. Employees have to be shown that change is necessary and then managers need to create a situation in which employees desire the change

Question 22

What is meant by change or transition (Lewin)?

Answer 22

Lewin described the period of transition as a potentially difficult time as workers are now moving toward a new way of doing things. They are learning about the changes and need to be given time to understand and adapt to these changes. Support from management and supervisors is important in making the transition period work. Support can come in the form of training, education, and learning from and not being criticised for mistakes. Allowing workers to develop their own solutions and maintaining clear communication of the objectives and benefits of the change are also important in maintaining the transition

Question 23

What is meant by refreezing (Lewin)?

Answer 23

This final stage in the change process is about establishing stability once the changes have been made. Workers have now accepted the change, and the new methods of working have become the new norm. Workers are settled in new structures and are comfortable with their routines. This refreezing clearly implies workers must not be forced into continual change, but allowed time to adapt. New methods need to become completely ingrained before further change occurs, otherwise any gains may be lost

Question 24

What is risk in a business capacity?

Answer 24

Business risk is a circumstance or factor that may have a significant negative impact on the operations or profitability of a given business.
Business risk can result from internal conditions or external factors that may be present in the wider business world. Risk can also be expressed as “uncertainty”. It means the possibility of incurring losses due to problems and circumstances, expected or unexpected.

Question 25

What are the types of quantifiable risk methods?

Answer 25

-Financial risk e.g. the probability that a major customer becomes bankrupt and does not pay money owed to a supplier.
-Operational risk e.g. the breakdown of key equipment or machinery.
-Strategic risk e.g. a new competitor coming on to the market.
-Compliance risk e.g. responding to the introduction of new health and safety legislation.

Question 26

What are insurable risks?

Answer 26

-Theft
-Fidelity insurance
-Burglary
-Money in transit
-Fire
-Natural disaster
-vehicles

Question 27

What are non-insurable risks?

Answer 27

-Shoplifting during trading hours
-Financial loss due to bad management
-Nuclear war/weapons
-Irrecoverable debts

Question 28

What are internal risks?

Answer 28

-Employee error
-product failures
-Failure of equipment
-public relations failure

Question 29

What are external risks?

Answer 29

-Natural disasters
-Legal challenges
-Supply chain problems
-economic factors

Question 30

What is risk management?

Answer 30

Risk management is the process of understanding and minimising what might go wrong in an organisation. It involves the activities undertaken by a business, which are designed to control and minimise threats to the continuing efficiency, profitability and success of its operations

Question 31

What is the risk management process?

Answer 31

-the identification and analysis of risks to which the organisation is exposed
-a measurement of the likelihood of the risks occurring
-an assessment of potential impacts on the business
-deciding what action can be taken to eliminate or reduce risk

Question 32

What are the examples of preventative measures?

Answer 32

-training staff appropriately
-regular backup of IT systems
-putting robust quality control systems in place
-installing a sprinkler system.

Question 33

What is a contingency plan?

Answer 33

A contingency plan is a plan of action to be followed in the event of an emergency or crisis which threatens to destroy or significantly disrupt the continued operation of normal business activities. The plan should restore to normal the business’ day-to-day functioning, or as near to normal as possible. All this needs to be done as fast as possible.

Question 34

What is meant by a crisis management?

Answer 34

Crisis management involves how a business responds to an unforeseen event that threatens the business. There are many recent examples of major events affecting businesses’ capability to operate normally. These have varied from terrorist atrocities, natural disasters or extreme climate events, to failures of operational control. A well-run business will have plans in place to deal with the unexpected; reduce the impact of unforeseen events; and get back to normal as soon as possible.

Question 35

What is the value of contingency planning? (benefit)

Answer 35

It is likely that an effective contingency plan will minimise the risk and limit the damage caused by a crisis. If damage to a business’s reputation can be minimised and profits/ dividends maintained, then undoubtedly it is of great value. The likely benefits of effective contingency planning that helps maintain staff morale and provides continuity of products or services cannot be underestimated. If it reduces the impact on customers and protects against potential
losses, then it is well worth the money.

Question 36

What is the value of contingency planning? (drawback)

Answer 36

Nonetheless, it can be a very costly activity. Large multinational businesses involve huge numbers of very expensive staff in assessing risk and planning what to do if things go wrong. It is essentially a form of insurance. If nothing goes wrong, it might be seen as a complete waste of money. However, the growth in contingency planning, especially in large organisations, seems to suggest that businesses are keen to reduce their risks to as low a level as possible. In other words, they see the costs involved as being money well spent

Question 37

What is a PEST analysis?

Answer 37

A PEST analysis examines the political, economic, social and technological environments that affect markets and businesses. It is recognised by decision makers that, in the longer term, the survival and success of a business is dependent upon adopting strategies appropriate to the external environment within which their business operates. It is not enough to have the right marketing mix or the best product portfolio without being aware of the external environment. It is also worth bearing in mind that the external environment is continually changing, and businesses have to adapt to such changes if they are to remain competitive.

Question 38

What are the political factors to include?

Answer 38

-Instability
-National security
-Major trading partners
-Changes in government
-Pressure groups

Question 39

What is meant by instability (political)?

Answer 39

One of the major objectives of government is to provide a stable economic and legal framework
within which businesses can operate and grow and individuals thrive. Competition needs to be fair; the
rule of law and clear property rights must apply. Businesses that venture into countries that are politically
unstable are taking considerable risks

Question 40

What is meant by national security (political)?

Answer 40

This is an increasingly important issue for many countries as terrorist attacks have become commonplace across the world. As governments seek to protect their citizens, they introduce measures that may well restrict the movement of goods, people and capital. Many businesses may suffer negative impacts as a result, especially when attempting to resolve skill shortages

Question 41

What is meant by major trading partners (political)?

Answer 41

Whilst the UK has decided to remove itself from membership of the European Union, the 27 remaining countries are still a vital market for many UK businesses. The UK may not be the only country that decides to make such a move. Such uncertainty has the impact of disrupting financial markets and creating considerable uncertainty in the European Single Market and the Eurozone.

Question 42

What is meant by changes in government (political)?

Answer 42

New governments may well have a more, or less, positive attitude towards business activity. For example, legislation may be put in place that lifts restrictions on businesses in terms of such matters as pollution or workers’ rights. This may result in cost increases for businesses and impact upon future profitability. Republican governments elected in the USA, for instance, have tended to be more probusiness than Democratic governments.

Question 43

What is meant by pressure groups (political)?

Answer 43

The activity of such groups can have a significant impact upon political decision-making. Campaigns against the tobacco, alcohol and gambling industries have all had a significant impact upon
bringing about changes in legislation. Businesses are required to put in place measures to comply with such legislation and this inevitably raises costs and lowers profits. Pressure groups are an increasingly significant factor in bringing about political change and businesses need to be fully aware of their activities

Question 44

What is Fiscal policy?

Answer 44

Fiscal policy can be used to target political economic or social objectives so expenditure or increased taxation is sometimes targeted at specific industry sectors or alternatively subsidies can be paid to industries. The use of taxation and public (government) expenditure as a means of controlling the level of activity within the economy.

Question 45

What are major direct taxes?

Answer 45

-Income Tax
-National Insurance
-Corporation Tax
-Capital Gains Tax
-Inheritance Tax

Question 46

What are major indirect taxes?

Answer 46

-Value Added Tax (VAT)
-Excise Duties
-Customs Duties
-Council Tax
-Business Rates

Question 47

What are the typical effects on business of changes in taxation?

Answer 47

Increasing or decreasing the level of consumer spending will inevitably have an impact on the majority of businesses. For example, if the government choose to lower the level of income tax this will stimulate consumer demand. On the other hand, a rise in council rates will have the opposite effect and reduce demand for goods and services. Prices can be impacted by a rise in VAT or Excise Duties. Businesses will try to pass such increases onto their customers
if they can, but this will depend upon the degree of competition they face in the marketplace. The brewing industry often complains about the level of taxes on beers and spirits, arguing that increases in taxes on these products is depressing demand

Question 48

What are subsidies?

Answer 48

Subsidies are payments to producers. They have the effect of reducing costs and therefore increasing output. The main sources of subsidies in recent years have been payments from the EU to farmers (Common Agricultural Policy). These payments help support farmers, ensuring domestic production of food. Subsidies in various forms are also paid to green power generators helping provide a guaranteed price for their electricity. The argument supporting payment of these subsidies is that green energy helps reduce the amount of CO2 emissions from fossil fuel power stations and therefore helps protect the environment.

Question 49

What is meant by government expenditure?

Answer 49

The government buys goods and services from UK businesses; this comes to over £100 billion a year. For some types of business the government may be the only or the key purchaser of the goods they produce. Examples include UK defence contractors, shipbuilders and some road builders. Government purchasing had been seen by many
businesses as a source of easy profits, but the culture has now changed with all government departments looking for cost savings and efficiencies. Competitive tendering and regular reviews of supply contracts are now the norm, putting pressure on traditional suppliers but offering opportunities for new entrants.

Question 50

What are the objectives for raising interest rates?

Answer 50

-reducing the level of consumer spending
-reducing inflation
-slowing the level of economic growth (GDP)
-reducing the number of imports
-dampening down an economic boom

Question 51

What are the implications of raising interest rates?

Answer 51

-many businesses may experience falling sales as consumers increase savings
-demand for products purchased on credit may decline significantly
-business cancelling or postponing investment plans
-businesses reduce borrowing
-increased value of sterling increasing the prices of exports while reducing import prices

Question 52

What are the objectives for reducing interest rates?

Answer 52

-reducing levels of unemployment
-stimulating the level of production in the economy
-promoting exports sales by reducing the exchange rate of the pound
-increasing rates of economic growth in the economy
-assisting in recovering from a slump

Question 53

What are the consequences of falling interest rates?

Answer 53

-demand and sales are likely to increase
-production is likely to be stimulated by increasing employment
-export sales of price sensitive products may increase whilst imports become less competitive

Question 54

What are the 2 type of fiscals policy that the government can operate?

Answer 54

-To increase the level of economic activity – achieved by cutting rates of taxation; increasing government expenditure. This results in increased output and spending, less unemployment, possible increase in inflation and more imports
-To reduce the level of economic activity – achieved by increasing rates of taxation; cutting government expenditure. This results in lowered output, spending and employment, lower inflation and fewer imports

Question 55

What categories can government expenditure be put into?

Answer 55

-Transfer payments
-The infrastructure

Question 56

What is meant by transferring payments (G.E)?

Answer 56

This is expenditure on unemployment benefit, pensions and other
social security payments. An increase in transfer payments often results in substantial increase in demand for basic goods, such as food, public transport and gas

Question 57

What is meant by the infrastructure (G.E)?

Answer 57

Governments improve the infrastructure through their spending on housing, roads and flood protection. Investment in these areas can increase the level of economic activity by boosting demand for the services of construction businesses whilst reducing costs for other businesses.

Question 58

What is inflation and how is it measured?

Answer 58

-Inflation is the rate at which the general level of prices is rising.
-The Government measure inflation using regular pricing of a nominal ‘basket of goods.’ This basket of goods is meant to reflect the spending habits of the average person within the UK economy, and includes both goods and services. The target rate of inflation is known as The Consumer Price Index including owner occupiers (CPIH), other measures of inflation include RPI, RPIX and a measure of Factory Gate Prices.

Question 59

What is cost push inflation?

Answer 59

Cost-push inflation occurs when firms have rising costs of production and they respond to these higher costs by increasing the prices they charge their customers. Examples would be an increase in the cost of raw materials, increasing cost of labour or increasing interest rates, and therefore the cost of capital increasing.

Question 60

What is demand pull inflation?

Answer 60

Demand-pull inflation is caused by excessive demand in the economy for goods and services. This means there is too much money chasing too few goods and services. The main causes of increased demand are increased confidence amongst consumers, higher real incomes (incomes allowing for inflation), or higher disposable incomes (incomes after taxation).

Question 61

What are the effects of the government raising interest rates as a way of combatting inflation?

Answer 61

-consumers are discouraged from spending their money by higher savings rates and are less likely to buy on credit as it is more expensive
-businesses reduce investment as borrowing becomes more expensive
-output and sales decline and the inflationary pressure reduces

Question 62

How do high rates of inflation affect businesses?

Answer 62

-rising wages and raw materials costs may force businesses to accept lower profit margins or to raise prices
-businesses face menu costs as prices listed have to be frequently updated
-businesses face shoe leather costs (businesses frequently need to spend time and money trying to find out which supplier has the cheapest prices)
-overseas businesses (with lower inflation rates) may gain a competitive advantage
-some businesses will invest more as the real value of loans falls quickly
-other businesses will hold back on investment because interest rates are likely to rise
-people save more due to uncertainty and because interest rates are frequently raised, so demand falls

Question 63

What is deflation, and what is a consequence of this?

Answer 63

Deflation (a general fall in price levels) can be a real problem if it takes hold in an economy. For individuals, it can lead to falls in wage levels and increasing real debt burdens (value of debts increases relative to value of assets and income). Both factors discourage expenditure.

Question 64

What is meant by GDP?

Answer 64

Gross Domestic Product (GDP) measures the level of economic output in the UK. GDP is a measure of annual output of an economy. An increase in real GDP (real means allowing for inflation) has always been important. Without growth, people’s standard of living will not increase. Growth reduces the real level of government debt in relation to GDP and increases tax receipts. The underlying trend for growth in the UK economy has been around 2.25% a year, which, if sustained, doubles GDP every 25 years. However, since 2008 growth has averaged about half this rate.

Question 65

What are the stages of the business cycle?

Answer 65

-Boom
-Downturn
-Recession
-Recovery

Question 66

What happens during a boom?

Answer 66

-The boom period benefits most businesses and consumers.
-Unemployment is low
-Consumer demand is high
-Business profits are high
-Budget surplus for the government is higher, due to high tax revenue and lower expenditure on social security
-Business confidence is high

Question 67

What happens during a downturn?

Answer 67

-There is less investment by businesses
-Business owners and managers become nervous about the future
-Higher inflation in a boom may have caused the Bank of England to increase interest rates, so people are spending less, and unemployment starts to creep up
-The economy may still be growing, but at a much lower rate

Question 68

What happens during a recession?

Answer 68

-increasing unemployment
-falling demand from consumer
-falling investment by businesses
-a decline in the levels of inflation and interest rates

Question 69

What happens during a recovery?

Answer 69

-Slow levels of economic growth
-cost of borrowing can be low
-investment by some businesses will start to increase
-New jobs are created

Question 70

What are exchange rates?

Answer 70

An exchange rate is the value of one currency expressed in terms of another currency. The fact that different countries use different currencies means that there is an impact on businesses when the price of these currencies change in relation to one another. The price of a currency is largely determined by market forces; in other words, demand and supply.

Question 71

What is the Impact of a rise in the value of the pound (appreciation)?

Answer 71

A rise in the value of the pound (appreciation) makes imports cheaper, reducing costs for businesses and consumers, and helps control inflation by lowering prices of imported goods. It also increases the purchasing power of UK residents abroad and makes foreign debt cheaper to repay. However, it reduces the competitiveness of UK exports by making them more expensive for foreign buyers, potentially leading to lower export revenues and job losses in export-dependent sectors. This can worsen the current account deficit, as higher imports and reduced exports negatively impact the trade balance

Question 72

What is the Impact of a fall in the value of the pound (depreciation)?

Answer 72

A fall in the value of the pound (depreciation) makes UK exports more competitive and affordable for foreign buyers, boosting demand and potentially increasing export revenues and job creation. It also makes the UK a more attractive destination for foreign tourists while encouraging domestic consumers to purchase locally produced goods due to higher import costs. However, it raises the cost of imports, increasing business expenses and leading to higher prices for consumers, which can drive inflation. This rise in inflation may reduce real incomes, increasing the cost of living and putting pressure on businesses and households reliant on imported goods and materials

Question 73

What is structural unemployment?

Answer 73

Structural unemployment appears when then there have been large changes in patterns of demand, or developments in technology, which have caused long-term unemployment in regions or industries. These changes mean that the structure of the industry or service has changed, and that jobs in their previous form are unlikely to return.
A good example would be the high levels of male unemployment in the South Wales valleys and regions of Yorkshire which had previously large coal mining and steel producing areas

Question 74

What is cyclical unemployment?

Answer 74

Cyclical unemployment, as its name indicates, appears as part of the business cycle. As an economy enters a downturn, unemployment increases: this will peak during any subsequent recessionary period. This type of unemployment will fall during recovery and reach a minimum at the peak of the boom period.

Question 75

What is frictional unemployment?

Answer 75

This perhaps is the least problematic of the three types of unemployment and occurs when there is a delay in finding a job after losing a previously held job. This unemployment is obviously less long-term than structural unemployment; it tends to be temporary. Nonetheless, the government still tries to reduce it by increasing the information available about vacancies that exist. This can be done through job centres and other employment recruitment services.

Question 76

What are the impacts of unemployment on a business?

Answer 76

Unemployment can impact businesses both positively and negatively. On the positive side, it increases the availability of workers, providing businesses with a larger talent pool and potentially reducing labor costs due to lower wage pressures. Additionally, employee turnover may decrease as fewer job opportunities exist elsewhere. However, unemployment also reduces consumer spending power, as households with lower incomes cut back on non-essential purchases. This decline in demand can negatively affect businesses, particularly those in consumer-facing industries, leading to lower revenues and potentially stifling growth opportunities

Question 77

What is meant by social factors? (PEST)

Answer 77

Social factors refer to changes in society that can have consequences for businesses. These include demographic changes, such as the UK’s increasing and ageing population; changing lifestyles; and changes in consumer tastes and fashions, such as the need for more environmentally friendly vehicles.

Question 78

What does demographics measure?

Answer 78

-the size of the population
-the median age of the population – ageing population?
-migration

Question 79

Why is the size if the population important?

Answer 79

This is of interest to businesses since, in general terms, if
the population increases, the size of their market will increase, and they will be able to sell more goods.

Question 80

Why is the median age of the population important?

Answer 80

The baby boomers of the 50s and 60s are now entering or moving toward retirement. These people are generally a well-off section of society, the majority with their own homes and many with high value final salary pensions. Baby boomers can have large amounts of savings and disposable income which can be used for holidays, conservatories, new cars, etc

Question 81

Why is migration important?

Answer 81

For example, young immigrants have added to the working population as they fill the skills gap in the UK and undertake those
jobs, such as agricultural labouring, which the UK population has been reluctant to do

Question 82

What are the lifestyle factors or decisions that can impact a business?

Answer 82

-An increase in the number of economically active women over the last half century means industries such as childcare are booming as a result.
-Society is becoming increasingly health conscious, increasing the demand for markets such as the fitness industry and healthy foods.
-The behaviours of consumers, particularly young ones: there are more ways of purchasing and accessing goods and services but targeting these consumers with marketing campaigns are becoming increasingly problematic, as there is a need to focus on a wide spread of media.
-There may be cultural changes within a population.
-Social change and fashion changes: consumers are now willing to spend £3 for a take-away coffee, provided the right brand is on the cup.
-There has been changes in attitudes towards becoming more environmentally friendly.
-Businesses also now focus more on social impact, with increasing numbers of social enterprises being set up.

Question 83

What is technological change?

Answer 83

Technological change describes the ongoing development of invention, innovation and sharing of technology or processes.

Question 84

What does technological change include?

Answer 84

-automation
-e-commerce and m-commerce
-intranet and internet
-social media
-CAD/CAM and robotics
-handheld computers
-software packages e.g. DTP, spreadsheets and databases
-online businesses
-integrated software packages
-big data and data mining
-app technology (m-commerce)

Question 85

What is meant by automation?

Answer 85

Automation once meant robots carrying out repetitive tasks in manufacturing industry. However, over the last 15 years the ability to combine different technologies within a process has resulted in widespread automation from the primary resource to the retailer

Question 86

Where is automation likely to be seen?

Answer 86

-Retailers: for retailers, automation has become one of the key issues in business efficiency. Whether it is automated ordering or the more visible self-checkouts
-Banks: bank clerks are disappearing, to be replaced by machines.
Warehousing: staff functions are being replaced by robots that can do more and more tasks. Robots are not yet capable of removing all goods from shelves but can transport and pack goods
-Online services: whole systems will be automated; mathematical analysis will determine which products are marketed, where they will be placed and what prices are charged
-Utilities (gas and electricity): smart meters will replace the need for manual meter reading; switching to the cheapest provider may become automatic

Question 87

How has ICT had an impact on internet marketing?

Answer 87

Internet sales are increasing year on year. Businesses that have already entered this lucrative market have seen share values rocket, as well as sales. Think of supermarkets such as Tesco who offer their full range online, or even an online retailer such as Amazon. Did you know that Amazon started at an online bookstore and expanded from there?

Question 88

How has ICT had an impact on Web-based customer relationships ?

Answer 88

It is becoming more and more typical for businesses in financial industries to have entirely web-based customer relationships. Banking is done online, bills are paid, direct debits set up and cancelled, loans and overdrafts are arranged without a single visit to a branch: everything is done over the internet. Technologies and features such as live chat capabilities are an advancement in customer service.

Question 89

How has ICT had an impact on B2B ?

Answer 89

B2B involves the finding of commercial buyers for businesses output, and the sourcing of components and raw materials for businesses production, via the internet.

Question 90

How has ICT had an impact on Manufacturing resource planning (MRP2) ?

Answer 90

This system is used by manufacturing businesses to plan all aspects of business activity. The MRP2 system takes forecasts and turns them into a series of objectives and targets for each function or department in an organisation. This system, when running efficiently, can replace an entire layer of management who have previously been employed to run the planning and budgeting processes. MRP2 allows the maximum possible use of ‘what if?’ questions. Senior managers can judge the impacts of otherwise untestable scenarios on the organisation. This ability to use computer modelling reduces costly errors.

Question 91

How has ICT had an impact on Electronic point of sale systems (EPOS) ?

Answer 91

The reading of bar codes at checkouts is the tip of the iceberg of EPOS systems. Beneath this we have a stock database that controls stockholding and ordering for retailers; warehouse stockholding for manufacturers and supply from businesses in the supply chain. Used most efficiently, retailers can use EPOS to determine promotions, selling space allocations and staff requirements. Manufacturers can use EPOS systems to reduce stockholding and working capital, thus ensuring that suppliers supply only as and when required

Question 92

What is an ethical business?

Answer 92

An ethical business is one that considers the needs of all stakeholders when making business decisions. An ethical business, when setting objectives and considering strategy, takes into consideration its social responsibilities. Ethical businesses consider the moral rights and wrongs of any strategic decisions that are made

Question 93

What should businesses take into consideration when it comes to employees? (Ethics)

Answer 93

Businesses should treat employees as their most valuable asset. This means taking care of their health and safety, ensuring high conditions of work and also paying a living wage. Their ethical responsibilities should not stop with their own employees. Those working for suppliers are equally as important. It cannot be regarded as ethical if a business claims to pay its own employees a living wage if workers further down the supply chain, in perhaps a less developed country, earn the equivalent of 40p an hour.

Question 94

What should businesses take into consideration when it comes to suppliers? (Ethics)

Answer 94

Suppliers should also be treated fairly. This means sticking to agreed contracts and not forcing renegotiation upon suppliers. It means sharing burdens of developing, supplying products, paying on time and not putting pressure upon suppliers’ cash flow. Fair Trade is a well-known organisation which ensures fair play to suppliers in all stages of the supply chain.

Question 95

What should businesses take into consideration when it comes to customers? (Ethics)

Answer 95

Above all, customers want a quality product or service at a fair price. Businesses which act unethically fail to fulfil this moral commitment to customers. For example, the PPI scandal was a double failure on the part of many of the major banks in the UK. Not only was the insurance cover provided through PPI often irrelevant to customer needs, it was massively overpriced. The end result has been billions of pounds of compensation payments to customers who were mis-sold PPI

Question 96

What is animal welfare?

Answer 96

Animal welfare is a major issue for those retailers with claims to be ethical. Grocers look down the supply chain to ensure the welfare of animals, and can focus their marketing on how well supplying farmers treat their livestock. The demand for ‘free range’ products is a good example of how retailers have responded to their customers’ concerns. Clothing retailers too have responded to animal rights issues in relation to the raw materials they use. PETA (People for Ethical Treatment of Animals) has ensured that the argument has progressed well beyond fur skin coats, covering treatment of other animals used in the clothing supply chain

Question 97

What is Corporate social responsibility?

Answer 97

This is the concept that businesses have a responsibility that goes beyond making profits for their shareholders. Businesses need to monitor and take responsibility for the impact they have on both social welfare and the environment

Question 98

What may social and environmental audits (SEAs) address?

Answer 98

-How well do we ensure human rights?
-Do we use suppliers who use child labour?
-Do we discriminate when recruiting?
-Do we pay the correct level of remuneration for the job?
-How many women do we have in senior positions?
-Do we support any charities in the locality of our factories?
-Have we broken any laws?
-Do we compete fairly?
-Do we comply with all health and safety legislation?
-Is our advertising truthful?
-Have we caused any pollution?

Question 99

What are the downsides of acting ethically?

Answer 99

-Costs are likely to rise. For example, paying a ‘living wage’, as opposed to complying with the minimum wage legislation, will increase labour costs. Building improved canteen facilities or providing sports facilities for employees would prove to be very costly
-Revenues are likely to fall. For example, a toy retailer that refuses to target children with blanket advertising prior to Christmas will no doubt lose sales to their competitors. A construction company that declines to offer a bribe to a Third World government official when tendering for a contract may well not be considered for that project

Question 100

What are the upsides of acting ethically?

Answer 100

-Some customers are attracted to those businesses that adopt an ethical approach. Restaurants and coffee shops that source their ingredients from ethical suppliers appeal to a growing number of customers. Using ‘ethics’ at the heart of their marketing campaigns can boost sales in certain instances. The growth of the Fair Trade movement is evidence of such a trend
-Acting ethically can improve public relations (PR) and have a positive impact on the image that a business portrays. No business wants to have its name splashed all over the newspapers for mistreating its employees or using low quality ingredients that may be harmful to consumers. The discovery of horsemeat in burgers supplied by a number of UK supermarkets is a crisis they could have well done without. Checking supply chains carefully is not only ethical, but can also prevent significant loss of revenue and reputation

Question 101

What is meant by company law?

Answer 101

When a business is incorporated, it exists as a separate legal entity. That is, it is separate from shareholders. The act of setting up a Limited Company (LTD or PLC) is incorporation. An incorporated business is responsible for its own debts and liabilities. The shareholders and, as a general rule, directors cannot be forced to pay them (unless fraudulent activity has occurred). Failure to comply with company law can lead to company directors being fined, struck off or even to the compulsory liquidation (winding up) of the company

Question 102

What is employment legislation?

Answer 102

-Health and safety legislation
-Employment rights (terms and conditions, holidays, working weeks etc.)
-Anti-discrimination legislation
-Age discrimination
-Racial or belief-based discrimination
-Sex discrimination
-Sexual orientation discrimination

Question 103

What is health and safety legislation?

Answer 103

Under the Health and Safety at Work legislation, employers have a duty to take all reasonable care to ensure the wellbeing and safety of their employees. Employers have a legal responsibility to ensure that working environments are safe and that employees are able to understand and are trained to deal with the risks involved in their jobs. Employees also have responsibilities, such as taking reasonable care and ensuring that they abide by health and safety rules – e.g. wearing hard hats on building sites

Question 104

What are employee rights?

Answer 104

This is the key legislation concerned with establishing workers’ rights in regard to their terms and conditions of employment. Employees have to be provided with a written contract of employment within two months of starting employment. The contract must state levels of pay, holiday entitlement, rights for maternity pay, pension rights, disciplinary procedures and length of notice period

Question 105

What is age discrimination?

Answer 105

It is illegal in the workplace to make decisions based on the age of employees when considering recruitment, employment terms and conditions, promotions, transfers, training and dismissal. The retirement age of 65 was abolished in 2011: retirement age is now when the employee choses to take retirement. An employer can only
retire a worker in particular circumstances, e.g. not being physically up the tasks involved in the job

Question 106

What is racial discrimination?

Answer 106

It is illegal to discriminate on grounds of colour, race, nationality or ethnic/national origin when considering recruitment, employment terms and conditions, promotions and transfers, training and dismissal. Employers are liable for acts of discrimination committed by their employees in the course of their employment, unless the
employer can show that they took reasonable actions to prevent the discrimination occurring

Question 107

What is sex discrimination?

Answer 107

It is illegal for employers to discriminate on the basis of a person’s sex, or because they are married or in a civil partnership or if they have gone through, are going through or intend to go through, gender reassignment. Sexual discrimination legislation also makes it illegal for employers to discriminate between men and women in
terms of their pay and conditions where they are doing either the same or similar work (like work) or work of equal value

Question 108

What is sexual orientation discrimination?

Answer 108

It is illegal to discriminate because of sexual orientation or ‘perceived’ sexual orientation. This includes orientation towards someone of the same sex (lesbian/ gay), opposite sex (heterosexual) or both (bisexual)

Question 109

What is meant by consumer protection?

Answer 109

-When consumers purchase goods or services, a contract is formed between the consumer, the retailer and the producer of those goods or services. Legislation clarifies the nature of the contract and how suppliers of goods and services are required to behave.
-Legislation, for example, makes it a criminal offence to give untrue or misleading descriptions of goods in regard to their content, size, weight and price. As a result of this legislation, manufacturers and retailers have to take a great deal of care about information presented on their packaging or within advertisements and any other form of promotional material.
-Goods must also be of merchantable quality – fit for their intended purpose and be as described. This means that the goods must be capable of doing what they were designed to do and what the purchaser would reasonably expect them to be able to do

Question 110

What is competition policy?

Answer 110

-Competition policy in the UK is focused on controlling the abuse of market power of big business. Since businesses in a monopoly or a near-monopoly position hold a dominant market position, they can have control over price or amount produced within the market.
-The behaviour of existing monopolies (potentially any business with over 25% market share) is monitored by the Competitions and Markets Authority (CMA).
-It also monitors potential mergers or take-overs of large businesses and may investigate prior to allowing any to go ahead. Another role of the CMA is to investigate situations where companies may be acting together, forming an illegal cartel which limits the competition within an industry. Businesses, if they have a choice, will not compete on price, and by creating a dominant market position by working with other large businesses they can limit price competition. This is known as collusion, which is illegal

Question 111

What is intellectual property law?

Answer 111

Intellectual property law covers the legal rights of individual and companies in regard to designs, inventions and artistic works. There are three main areas:
-Trademark Legislation
-Patent Law
-Copyright Law

Question 112

What is trademark legislation?

Answer 112

Trademark legislation covers designs and artwork, such a labelling, brand logo design and product design. Trademarks and other aspects of design can be registered, and protected from copying. A copy can infringe a trademark without being an exact copy, but instead similar enough to cause confusion in consumers.

Question 113

What is Patent law?

Answer 113

Patent Law covers inventions and gives rights to the inventor or patent owner for a limited period to stop others from making, using or selling an invention without the permission of the inventor or owner. Patent periods can vary in time but are normally for 20 years. Patents need to be registered by the UK Intellectual Property Office. The registration process can be relatively expensive for a small business because of the number of checks that need to be carried
out to ensure that the method, process or object being patented is new. Infringement of patents involves an illegal copy of a patented method, process or object has been produced and offered for sale. Businesses found guilty of infringement have to pay damages and a court injunction to prevent further infringements occurring

Question 114

What is copyright law?

Answer 114

Copyright law gives the creators of literary, dramatic, musical and artistic works, sound recordings, broadcasts and films, rights to control the ways in which their material may be used. The law means that it is an offence to do any of the following without the consent of the owner