Paper 1

Question 1

Define promotion

Answer 1

Is an attempt to obtain and retain customers by drawing their attention to a firm or its product

Question 2

Define Above the line promotion

Answer 2

Involves advertising in the media

Question 3

Explain the different forms of above the line promotion (3)

Answer 3

Informative advertising - Designed to increase consumer awareness of products, by giving clear information on the product.

Persuasive advertising- advertising designed to put pressure on consumers to buy a product, to appeal to peoples emotions

Reassuring advertising- advertising aimed at existing customers, designed to be comforting and to suggest to consumers they were right to buy the product and should continue to do so.

Question 4

Define Below the line promotion

Answer 4

Refers to any forms of promotion that does not involve advertising

Question 5

Explain the different forms of below the line promotion (4)

Answer 5

Sales promotion- incentives used to encourage people to buy products in order to break into a new market, reward loyal customers or help to kickstart repeat purchasing. Involves BOGOF deals, loyalty cards or free gifts.

Public relations- involves trying to increase sales by improving the brand image. Involves press releases or sponsorships.

Merchandising and packaging- occurs where a firm arranges the point of sale so that it is interesting and eye catching. Includes product layout and display material, such as posters and lighting to draw in customers.

Direct selling- uses a sales rep calling households or businesses hoping to sell products

Question 6

Define advertising

Answer 6

Involves communication between a business and its consumers where images are placed in the media to encourage the purchase of its product

Question 7

Explain the factors for a business to consider when choosing methods of promotion (6)

Answer 7

Cost - some forms of promotion are more expensive than others

Market- businesses in mass markets are more likely to use national television or newspapers rather than specialist methods

Product- certain products are better suited to certain types of promotion, car manufacturers are not likely to use BOGOF or coupon offers

Stage in product life cycle - promotional methods often change as a product gets older, become less aggressive.

Competitors - common for businesses to copy successful promotion methods used by rivals

Legal factors - legislation is put in place to protect consumers, in the EU tobacco products cannot be advertised

Question 8

Explain the different types of branding (3)

Answer 8

Manufacturer brands - are brands created by the producers of the good, bearing the producers name. E.G. Dell computers or Kellogg’s cornflakes

Own label brands - are products manufactured for wholesalers and retailers to sell under their own name. E.G. Tesco baked beans

Generic brands- products that only contain the name of the actual product category rather than the company. E.G. Carrots or foil

Question 9

Define a brand

Answer 9

Is a product with unique character, which is consistent and well recognised

Question 10

State the benefits of strong branding (5)

Answer 10

Added value - brand itself can add value

Can charge a premium price - inelastic in price

Inspires brand loyalty- good word of mouth marketing

Leads to higher barriers to entry

Allows new product development

Question 11

Explain the ways of building a brand (4)

Answer 11

Exploiting a USP- If a product has a USP it is much easier to differentiate the brand.

Advertising - a business can use advertising to introduce a new brand and spread the word about it.

Sponsorship- attaching the brand to specific events raises brand awareness and association

Social media - allows the firm to communicate more effectively to customers , to gain trust of the brand

Question 12

Explain the changes in branding and promotion to reflect social trends

Answer 12

Viral marketing- encourages people to pass on messages to others about a product, electronically. Creates exponential growth in the exposure of the brand. Led to many firms focusing marketing budget on social media.

Emotional branding - refers to the practice of using the emotions of a consumer to build a brand. Designed to develop a connection between a consumer and the brand. E.g. A football club

Question 13

Define Brand extension

Answer 13

Occurs when the strength of the brand can be exploited to develop new products in similar markets. For example, Oreo biscuits and Oreo ice cream

Question 14

Define brand stretching

Answer 14

Occurs when the strength of the brand is used for a diverse range of products, not necessarily connected. For example, virgin airlines and virgin broadband

Question 15

Define Contribution

Give the formula

Answer 15

Contribution is the amount of money left over after variable costs have been subtracted away from revenue.

Contribution per unit = Selling price - Variable costs per unit

Question 16

Define Break Even

Give the Formula

Answer 16

Is the point where a business is selling enough to just cover costs without making a profit.

Break Even Point= Fixed Costs / (Selling price - Variable costs per unit)

Question 17

Define Margin of Safety

Give the formula

Answer 17

Margin of Safety is the difference between the business’ actual level of output and the break even level of output.

Margin of safety = Actual output - Break even level of output

Question 18

Explain the limitations of break even analysis (6)

Answer 18

• Assumes all output is sold
• Based on firm selling only one product at the same price
• Variable costs are assumed to constantly increase
• Does not take into account uncertainties
• The data may not be accurate
• Assumes revenue and costs are linear and do not fluctuate

Question 19

Define Liquidity

Answer 19

Is the ability for a business to find the cash it needs to pay its bills.

Question 20

Define a Balance Sheet

Answer 20

A Balance sheet is a document describing the financial position of a business, comparing what it owns (assets) and what it owes (liabilities).

Question 21

Define Current Assets

Define Fixed Assets

Define Intangible Assets

Answer 21

Current Assets are assets that can be easily turned into cash. Includes cash, inventories or receivables.

Fixed Assets are assets used by the business to generate profits over a long period of time. Includes Land, Property, Equipment and Machinery

Intangible Assets are non physical assets. Includes patents and franchising agreements.

Question 22

Define Current Liabilities

Define Non Current Liabilities

Answer 22

Current Liabilities are debts owed by the business to be paid within one year. Includes Loans and Payables.

Non-Current liabilities relate are long term debts that do not need to be repaid for at least a year. Include bank loans and mortgages

Question 23

Define Shareholder Equity

Answer 23

Is the final section of the balance sheet providing a summary of what is owed to the owners of the business.

Question 24

Give the formula for the Current Ratio

Answer 24

Current Assets / Current Liabilities x 100%

Question 25

Give the formula for the Acid Test Ratio

Answer 25

(Current Assets - Inventories) / Current Liabilities x 100%

Question 26

Explain the ways of improving liquidity (5)

Answer 26

- Selling under used fixed assets - Raising more share capital - Using overdraft facilities and long term borrowing - Sell Stock to raise cash - Postpone planned investments

Question 27

# Define a Objective Define a Strategy

Answer 27

An Objective is a specific target set by a business A Strategy is the plan devised by the business to achieve its objective.

Question 28

Why do businesses need objectives (3)

Answer 28

- Employees need something to work towards - Allows owners to maintain control and prevent business failure - Help owners to decide where to take a business

Question 29

Explain the common Business Objectives (7)

Answer 29

- Survival - A focus on generating sufficient cash to sustain the business and establish itself within the market. - Growth - Is a focus on generating enough cash to be able to expand operations, either organically through opening new stores/ franchising or inorganically through mergers and takeovers. - Profit Maximisation- Involves a business trying to earn the most profit in the shortest amount of time. Sales Maximisation - Involves a business trying to grow the number of customers without a focus on costs, in order to increase market share and brand loyalty. Employee Welfare - Involves looking after employees in order to keep high levels of motivation and productivity. Consumer satisfaction- Involves prioritising consumer needs to ensure they have a positive interaction with the firm, in order to have high sales, repeat purchasing and brand loyalty. Social Objectives - Involves a business trying to achieve environmental and ethical objectives to benefit society and benefit from a positive brand image.

Question 30

Define the Mcgregor theory

Answer 30

explains the opposite approaches used for staffing, the hard approach and the soft approach

Question 31

# Define the Hard Approach Advantages and disadvantages

Answer 31

- Sees staff as a input who need to be controlled and supervised Advantages: Cost effective workforce Quicker decision making - Disadvantages: Low employee motivation Low labour turnover and absenteeism

Question 32

# Define the Soft Approach Advantages and disadvantages

Answer 32

Sees staff as a asset who are a source of innovation and can give a competitive advantage ``` Advantages: Can lead to innovation Easier recruitment High employee motivation High productivity ``` -Disadvantages: Expensive Longer decision making Can lead to lower productivity if staff get comfortable.

Question 33

Define Flexible Working

Answer 33

Flexible Working describes the range of employment options designed to help employees balance home and work life.

Question 34

Explain the types of Flexible Working (4)

Answer 34

- Multi-Skilling involves training staff to perform a range of different roles within the firm, to deal with absenteeism and demand - Part time and temporary brings people into the workforce who have the skills and experience but are not able to work full time. - Home working involves allowing people to work from home, due to technology. - Outsourcing involves contracting out work to another business to perform certain functions.

Question 35

Explain the advantages and disadvantages of flexible working

Answer 35

Advantages: - Can lead to reduced costs - High staff retention - Higher motivation Disadvantages: - High set up costs - Potential lower productivity - Mangers can find it difficult to manage flexible working

Question 36

# Define Labour Turnover Give the formula

Answer 36

Is the proportion of employees who leave the business over a year Labour Turnover= Number of employees who left the firm / Original Workforce x 100%

Question 37

# Define Labour Retention Give the formula

Answer 37

Is the proportion of employees who remain at the firm over a year Labour Retention = Number of employees who remain at the firm / Original Workforce x 100%

Question 38

Define Absenteeism

Answer 38

Is the number of days missed by employees over the course of a year Absenteeism = Number of days missed / Total number of working days x 100%

Question 39

# Define Redundancy What are the features of redundancy (3)

Answer 39

Redundancy occurs where a job disappears Features: Done due to the business needing to cut costs, close down or relocate or because the worker is no longer needed.

Question 40

# Define Dismissal Define Unfair Dismissal

Answer 40

Dismissal occurs where an employee is not operating effectively Unfair dismissal occurs where the employer has not followed the fair dismissal process. May occur due to age, gender, race, religion or disability.

Question 41

# Define the Individual Approach Define Collective Bargaining

Answer 41

Individual Approach occurs where individual workers represent themselves in negotiations with employers Collective Bargaining occurs where workers are represented by a trade union when negotiating with employers

Question 42

Explain the Advantages (3) and Disadvantages (2) of a trade union for a business

Answer 42

``` A: Increased employee motivation Less likely to go through unfair dismissal process Faster negotiations Increased labour retention ``` D: Weaker negotiating power Potential for strikes (absenteeism)

Question 43

# Define Recruitment Why would it be needed (3)

Answer 43

Recruitment is the process of filling a job vacancy. May be needed due to: Existing staff leaving, Require new skills, Business Growth

Question 44

Define External Recruitment

Answer 44

External Recruitment involves filling a job vacancy with somebody who does not already work for the firm.

Question 45

# Define Internal Recruitment Advantages and disadvantages

Answer 45

Internal Recruitment involves filling a job vacancy with somebody who already works for the business. - Advantages: Quicker and cheaper than external recruitment Chance of promotion increases employee motivation Already familiar to work environment - Disadvantages: Limits the potential number of applicants Failure to bring new ideas to the firm Vacancy still needs filling

Question 46

# Define Training Advantages and disadvantages

Answer 46

Training is the process of enhancing existing skills or developing new ones - Advantages: Develop new skills, Increased motivation - Disadvantages: Costly and time consuming, Disrupts normal operations

Question 47

Define Induction Training

Answer 47

Induction training involves the employee becoming familiar with their new working environment and fellow employees

Question 48

# Define On the job training Advantages and disadvantages

Answer 48

On the Job training occurs where employees receive training whilst remaining at the workplace. - Advantages: Cheaper and less time consuming Become more familiar to the businesses practices - Disadvantages: No new ideas brought to the firm Less likely to be done properly Reduces other employees productivity

Question 49

Define Off the job training

Answer 49

Off the job training occurs where employees are trained off the business premises by another firm

Question 50

Define Motivation

Answer 50

is the ways in which businesses can encourage staff

Question 51

State the effects of increased motivation (6)

Answer 51

Increased Productivity and Lower Unit costs Improved Customer service Higher sales Improved Quality Improved Brand image and Customer loyalty Reduced Labour turnover and Absenteeism

Question 52

Explain Taylors theory of motivation

Answer 52

Explained that people only work in order to maximise their own income Used today for commission and piece rate.

Question 53

Explain Mayo’s theory of motivation

Answer 53

Explained there was other factors affecting motivation other than money Non monetary factors can motivate people

Question 54

Explain Maslows theory of motivation

Answer 54

Explains that humans have a fixed set of needs, with the most basic needs at the bottom and higher level needs at the top Basic needs - Pay Safety needs - good working conditions and job security Social needs - teamwork Esteem needs - recognition and responsibility Self actualisation- ability to develop new skills

Question 55

Explain Herzbergs two factor theory pf motivation

Answer 55

Believed that motivation is doing something because you want to do it. Involves Hygiene Factors (factors that don’t motivate but can demotivate if not met) and motivators

Question 56

Explain Piecework as a monetary method of motivation Advantages and disadvantages

Answer 56

paying each employee every time they repeat a task A: High Productivity, Cost effective D: May lead to poor quality

Question 57

Explain Commission as a monetary method of motivation Advantages and disadvantages

Answer 57

paying staff a % of sales revenue on top of a basic wage A: High sales D: Poor customer service

Question 58

Explain a Bonus as a monetary method of motivation Advantages and disadvantages

Answer 58

paying a lump sum as a additional reward to employees A: Incentivises high productivity D: Worsen relations between employees

Question 59

Explain profit sharing as a monetary method of motivation Advantages and disadvantages

Answer 59

Allocating a proportion of profits to be shared amongst employees A: Aligns employee objectives with businesses objectives D: some employees may feel they deserve more than other employees

Question 60

Explain delegation as a non-monetary method of motivation Advantages and disadvantages

Answer 60

Passing decision-making power down the structure to a subordinate A: meets esteem needs, innovation D: longer decision making , may not have the experience of skill to make a decision

Question 61

Explain team working as a non-monetary method of motivation Advantages and disadvantages

Answer 61

Allowing employees to work in a group A: meets social needs, mayos human relations D: productivity of highly productive individuals may be brought down by the team

Question 62

Explain flexible working as a non-monetary method of motivation Advantages and disadvantages

Answer 62

Working conditions designed to help employees balance home and work life A: higher staff retention, meet basic needs, cost-effective D: harder to communicate and coordinate for managers, lower productivity, potential loss of personal relations with customers

Question 63

Explain job enrichment as a non-monetary method of motivation Advantages and disadvantages

Answer 63

Giving extra responsibility to staff A: meet self actualisation needs D: Some employees may not want extra responsibility

Question 64

Explain job rotation as a non-monetary method of motivation Advantages and disadvantages

Answer 64

Involves moving staff between different tasks A: reduced boredom, self actualisation, minimises absenteeism issues D : prevents specialisation