Exam Flashcards
State and describe each sector of industry (4)
Primary
The primary sector of industry is concerned with the extraction of raw materials or natural resources from the land. Any business that grows goods or extracts materials from the land would be classed as a primary sector business.
Examples of businesses that operate in the primary sector would be farming, mining, fishing or oil production.
Secondary
The secondary sector of industry is concerned with manufacturing. This would involve taking the raw materials from the primary sector and converting them into new products.
Examples of businesses that operate in the secondary sector would be car manufacturers, food production or building companies.
Tertiary
The tertiary sector of industry is concerned with providing a service. Services are activities that are done by people or businesses for consumers.
Examples of businesses that operate in the tertiary sector would be hairdressers, banks, supermarkets or cinemas.
Quarternary
The quaternary sector consists of those industries providing information services, such as computing, ICT (information and communication technologies), consultancy (offering advice to businesses) and R&D (research, particularly in scientific fields).
The quaternary sector is sometimes included with the tertiary sector, as they are both service sectors. The tertiary and quaternary sectors make up the largest part of the UK economy, employing 76 per cent of the workforce.
Difference between structures in terms of ownership, control and finance between public sector organisations and plc’s
Larger businesses may choose to become a public limited company (PLC) in a plc shares are sold to the public on the stock market. People who own a share are called shareholders. They become part owners of the business and have voice in how it operates.
They have limited liability, meaning an investor only loses the initial stake if a company goes bust.
Whereas,
The public sector means the organisations run by government that exist to provide a service for the population and communities.
Money to pay for these is raised through a variety of taxes, eg:
income tax National Insurance VAT air passenger duty fuel duty Once this tax is collected it is allocated to various government budgets.
There are three different levels of government in Scotland:
UK Government
Scottish Government
local government
What is the objective Corporate Social Responsability? (SCR)
Corporate social responsibility (CSR) is when a company aims to act ethically and responsibly to ensure the public perceive them in a positive light.
What is the objective Growth?
Growth
Most businesses within the private sector will aim to grow. In order to survive in a competitive market a business must change and develop over time to keep up with market demand. The larger a business becomes, the more opportunities become available for profit and increased economies of scale. Larger companies are at less risk of being taken over by competitors.
What is the objective Satisficing?
A company who aims to satisfice will be looking to be just good enough to achieve their other objectives but no more than that. They do not aim to be the best possible but to do the best they can to satisfy stakeholders such as shareholders and customers. This may be due to external pressures such as low economic growth or internal factors such as a lack of finance.
What is the managerial objective ‘Working with a budget’
Working within a budget – managers will be given a set budget to which they have to adhere. This may prevent them from meeting some of the objectives of the organisation.
Different types of objectives
survival increased profit increasing market share growth satisficing managerial objectives e.g. working within a budget corporate social responsibility provide a quality service
What is outsourcing, describe and disadvantages and advantages
Outsourcing is when a company hires another business to do some work for them. Many firms outsource cleaning or IT operations to smaller, more specialist companies.
ADV
You Get More Experts
You’re Able to Focus on What Matters
Things Get Done Fast
DISADV
You Lose Some Control
You Reduce Quality Control
There are Hidden Costs
The impact of PESTEC (Political)
Political factors involve the decisions and laws that governments make. These include:
tax
laws
political stability
Political factor Impact
Governments can raise or lower corporation tax. They can also affect businesses by increasing value-added tax on products or business rates
This can impact profits. If the rate of VAT is raised a company will need to increase their selling price which may reduce sales
Government can implement new laws like the National Minimum Wage Impacts on profits as the wage costs of the business will rise
Governments can introduce new health and safety legislation This means that a business may have to change the way it works, for example by training its staff or upgrading its machinery or safety equipment
The vote to leave the European Union, also known as Brexit will have an impact on the way UK firm’s trade with the EU single market
The impact may be negative (a loss of trade with EU customers) or positive (less restrictions placed on firms by EU lawmakers). For example, Scottish fishermen hope that leaving the EU will help boost their industry. On the other hand UK-based car manufacturers are worried about losing out on free access to wealthy customers in France and Germany
The impact of PESTEC (Economic)
This is the behaviour of the government in influencing the economic performance of the country. This would include the decisions the government make on:
taxation
government spending
interest rates
Economic policy covers two areas:
fiscal policy – this area deals with tax rates and the level of government spending
monetary policy – this area deals with setting interest rates and controlling the supply of money in the economy
Economic factors are all concerned with the so called ‘levers’ of the economy. These include:
economic growth unemployment rate interest rates inflation exchange rates
The impact of PESTEC (Social)
Social factors are the things that affect the habits and spending of customers. These include:
demographics lifestyles tastes and trends ethical Demographics Demographic change is most commonly used to reflect changes in population such as:
birth rate
life expectancy
levels of immigration
Tastes and trends
Tastes and trends are changing constantly. For example:
loom bands became the biggest selling toy of 2014 but fell from popularity the following year
fidget spinners grew rapidly in popularity over a matter of months in 2017
The impact of PESTEC (Technological)
Technological factors refers to the ways new practices and equipment can affect businesses. These include:
ICT
research and development
automation
e-commerce
Automation
Automation refers to the introduction of machines to do work that was previously done by people.
For example the introduction of self-scan checkouts in supermarkets means that fewer employees are needed on the tills.
E-commerce
More and more firms are online. E-commerce:
widens the number of customers
lowers the costs of production
is highly competitive
The impact of PESTEC (Environmental)
Environmental factors cover two main aspects:
The physical conditions that a business has to deal with, such as:
climate change
weather
Physical conditions
The weather can have a major impact on a firm’s sales:
many products and services are seasonal
good summers mean the increase in sales of fizzy drinks and sun tan lotion
bad weather can cause disruption to deliveries which could lead to a business being unable to fulfil customer orders
The impact of PESTEC (Competitive)
Competitive factors cover how businesses who offer similar products or services affect each other. This includes:
imitators
price wars
product differentiation
Imitators
When a successful product is introduced, rival organisations will often respond by trying to undercut it by quickly producing cheaper alternative versions which will affect the sales of the existing company.
Price wars
Companies may start a price war in order to:
gain customers
increase market
A price war happens when companies compete for customers by dropping their prices below the rate of their competitors.
Describe Tall and flat structures
A hierarchical or ‘tall’ structure has many leaders and layers of management has a long chain of command.
Flat organisational structure is an organisational model with relatively few or no levels of middle management between the executives and the frontline employees
Adv/disadv tall structure
Advantages
more opportunities for promotion which can lead to greater staff motivation
staff gain more support from their line manager
there is a higher degree of supervision as each line manager has a limited number of people they are responsible for
Disadvantages
many levels of hierarchy
span of control is narrow, and the chain of command is long, making communication slower as instructions take longer to travel through the levels of the organisation
longer lines of communication can make the firm less responsive to change
can be expensive to run due to high wage costs
Adv/disadv Flat structure
Advantages
few levels of hierarchy
lines of communication are short, making the firm responsive to change and decision-making quicker
staff working in a flat management structure can be empowered to work independently and take on more responsibility
Disadvantages
wide span of control means that tasks must be delegated, which can lead to employees feeling stressed and managers feeling overstretched
less promotion opportunities within a flat structure, which may lead to the company losing staff to other organisations
Describe delayering
Delayering involves removing a layer of management
Within hierarchical structures a method that can be used to reduce costs is to remove a layer of management, while expecting staff to produce the same level of output. This can:
save the company money on managerial wages
make the business more responsive to change due to the reduction of layers of management
Describe factors that affect quality decisions and ways of measuring the success of decisions.
Finance
There may not be finance available to the business to make the decisions they would like to.
For example, a business may wish to invest in new machinery to increase production but they do not have enough capital to allow them to do this.
Human resources
The quality of decisions made by managers can be affected by:
their skills and expertise
the amount and quality of information they have available
The staff involved in implementing the decision need to be willing to cooperate and work with the decision for it to be successful.
Technology
Lack of the correct equipment or technology may restrict the decision-making process.
The role of a manager making decisions (POCCDM)
Managers have different jobs or roles they undertake in order to be efficient and effective.
plan - preparing for the future and create action points
organise - having resources ready and putting plan into action
command - ensuring employees are working
co-ordinate - making sure all departments work together to achieve the end goal or objective
control - checking the effectiveness and
efficiency of the proposed plan
delegate - entrusting a task or responsibility to another member of staff
motivate - encouraging staff to give their best
Different methods of field research
+ costs and benefits
Face-to-face interview
ADV
Two-way communication
Mistakes and misunderstandings can be cleared up right away
Researcher can encourage respondent to answer
Disadvantages
Personal interviews can be expensive
Researchers have to be selected and trained
Home interviews unpopular with consumers
Online survey
ADV
Large sample sizes
Inexpensive
DISADV
Limited to people with internet access
Focus group
ADV
Qualitative information provided in the form of opinions, feelings and attitudes
Topics can be explored in some depth
Disadv
Can be difficult to analyse qualitative information
Expensive
Different methods of desk research
+ costs and benefits
Methods of collecting desk research include:
sales figures
newspapers
websites
government publications e.g. social trends
commercial publications e.g. Keynote and Mintel reports
ADV
Saves time
Relatively inexpensive
Widely available
Disadv
Not specifically gathered for the business
May be out of date
May contain bias
Product portfolios costs and benefits
A product portfolio is the range of items sold by a business.
A company like Sony has a product portfolio that includes computers, cameras, televisions and games.
Costs of maintaining a large product portfolio
increased research and development costs due to multiple products being produced
marketing and advertising costs may be high due to the promotion of a large range of products
bad publicity incurred by one product may affect sales of all products within the portfolio
resources may be spread too thin and this could affect the performance of existing cash cow products
Benefits of maintaining a large product portfolio
having different products can spread risk between markets. This mean there is less chance of a company making losses
having a range of products can lead to
greater brand awareness
can encourage customer loyalty as customers are more likely to buy multiple products from the same brand
easier to launch new products due to
greater brand awareness
can meet the needs to different market segments
can allow for seasonal fluctuations
allows for new products to replace products at the end of the product life cycle
can increase profits from selling a range of different products
Advantages and disadvantages of skimming price strategy
Advantages of Price Skimming
Higher Return on Investment.
It Helps Create and Maintain Your Brand Image.
It Segments the Market.
Early Adopters Help Test New Products.
It Only Works if Your Demand Curve is Inelastic.
It’s Not a Great Strategy in a Crowded Market.
Price skimming Attracts Competitors.
Disadvantages of price skimming
Price skimming only works with an inelastic demand curve that doesn’t respond to price changes.
Early adopters might become turned off by price decreases after their initial purchase.
A skimming pricing strategy doesn’t work if you have competitors creating similar technologies.
