Paper 2 Definitions Flashcards
Describe two features of a partnership.
- up to 20 partners depending on the country of operation
- limited or no requirement for published accounts depending on country of operation
- unlimited liability for partners
- a written agreement / deed of partnership to be drawn to decide on responsibilities / profit and loss sharing / conflict resolution
- responsibilities are shared as well as risk and profit
benefits and costs of preparing a contingency plan
Possible benefits could include:
A contingency plan enables SP to be proactive with regards to possible changes in the environment and to avoid crisis management. This planning enables Trent to cope with some negative effects in various countries and to reduce the risk of the unknown especially given the concern with regards to the earthquake / natural problem.
- It allows SP to reassure clients that their safety is crucial and that the company is planning ahead as far as possible to cover any possible problem.
- The contingency plan could be used in SP’s marketing materials to illustrate to new clients that SP provides the best service available to protect their USP.
- The contingency plan will allow SP to continue to charge high fees given the added value the contingency plan would add to the service the company offers.
Possible costs could include:
- Opportunity costs of researching and preparing the contingency plan, in addition to any other financial costs such as hiring suitable consultants to advise SP.
decision tree
The decision tree will allow SP to:
visually represent all possible offshoring options
quantify the outcomes of each option in terms of expected values compared to cost
incorporate the probabilities of the outcomes
decide on an appropriate course of action based on quantitative factors only.
Given the substantial non-financial factors in the stimulus (such as the level of earthquake risk) surrounding the contingency plan, the lack of non-financial considerations of the decision tree calculations reduces the value of the decision tree to SP as a decision-making tool.
subcontracting
Possible disadvantages could include:
- Direct financial costs like setting up the contract/relationship.
- There might be issues of quality and hence the delivery of the service. SP’s USP may be seriously eroded. SP may lose control of the whole quality of the bodyguard and the delivery of the service. It is mentioned in the stimulus material that quality of the service is vital to SP. One may say that SP outsources its core activity.
- Uncertainty about how the new external agency could impact on SP’s perception in the eyes of their customers. This is important given the importance of word-of-mouth promotion and the need to maintain the quality of customer service. One customer has already threatened not to use the service of SP.
- Costs of monitoring and maintaining the new subcontracting relationship.
- There could be considerable cultural issues to take into account when trusting and transferring these key functions to an external agency as it would appear that SP have limited experience of working within Asia.
- There will be time delays in establishing a new working relationship.
However / possible balance:
- SP need to move quickly as the business is missing out on potential profits. Subcontracting to a specialist might enable SP to respond more quickly.
- It is stated that this option is cheaper (set-up cost) than offshoring.
- Perceived as “less risky” compared to offshoring as the decision can be more easily reversed in case the expected new level of demand in Asia is not sustained and thus is a much cheaper option than setting up an overseas branch.
Identify two features of an own label brand.
Features could include:
A product created for a retailer by a supplier/manufacturer to be sold under the retailers own name or label.
The own label branded product is commonly sold at a price by the retailer which is below the suppliers/manufacturers own branded price. For example, the supermarkets own brand of gluten-free bread may be cheaper than that of the suppliers’ brand.
Define the term economies of scale.
Economies of scale are defined as a cost saving which a business experiences when the long run unit costs or production costs fall as a business engages in larger-scale production. They can include managerial, financial and marketing.
target market
A target market is a chosen market by a business after carrying out market research to identify a particular segment of a total population (classified by age, gender, income level, lifestyle) and focus its marketing effort on that segment. In the stimulus the $1.99 toy shop is aiming its products at the lower income segment.
stock turnover
Stock turnover is the measurement of the speed with which a business sells out its stock. A ratio can be used to measure the above. Stock turnover is an efficiency ratio which measures how many times the current level of stock in a store is “sold” or turned over. It is usually measured in the number of trading days it takes to sell stock.
appraisal
Is the process of evaluating the effectiveness / performance of a process or as in this case, the employees. In the process the goals and outcome are compared.
strike action
Strike action is considered to be a “weapon of last resort” when negotiations between employee representatives and employers fail to come up with a solution to conflict resolution.
It involves employees collectively walking out of the job and refusing to continue working until a new offer in the negotiation process has been made.
In many countries, employees have to vote for strike action.
public-private partnership
Possible advantages could include:
- Clearly as a new innovative school with a flexible approach to teaching/learning the public-private partnership will ensure that sufficient finance will be available to get the school up and running. The private sector investors can supplement the state funding to ensure that up-to-date technology is purchased. This will enable Julian to implement the innovative teaching method.
- The private sector alone may be unwilling to fully fund the development of the school given the degree of risk involved with this project.
- A synergy can be created between the business knowledge of the managers and the government educational aims. A highly innovative school can be led by Julian with educational objectives set by the government.
Possible disadvantages could include:
- There might be some conflict of interest between the managers who might see themselves as representing the interest of the private sector and the government.
- Although an agreement has been made and there are two appointed managers, it might be difficult for some stakeholders to know exactly who is in charge and whose objectives should be perused, the public or the private sectors. Should MHS be a non-profit organization, or should profit be the main objective?
- Who is responsible if the school begins to fail?
- Given cuts in public spending, Charles, the finance director may have to seek new sources of finance to maintain the partnership given that 60 % of the funding for MHS comes from the public sector. The uncertainty of the flow of future finance might somewhat reduce the effectiveness of both managers in terms of future planning.
Analyse the importance of the informal organsation.
The informal organization could refer to a number of different aspects highlighted in the stimulus:
- communication
- decision-making
- leadership and management.
The importance of the informal organization:
It allows Julian to be flexible and work closely with the students who have been specifically chosen to make this school innovative and flexible. The informal organization may speed up the process of change or the decision itself in a new school environment. A flexible and innovative decision-making environment would require a culture to match which would probably be informal.
Some students may feel empowered by this informal communication and by being part of the decision-making system and this may lead to increased motivation. However, the stimulus material gives indication that this was not the case given the falling number of applicants.
The informal meeting with the student may enable Julian to tap on the creativity and the enthusiasm of some students. The decision-making process is likely to improve and be in line with the essence of the schools’ flexibility and innovation.
However / possible balance:
The staff are clearly excluded from the informal communication process and ironically has to resort to speaking to Charles informally without Julian knowing. The informal organization lies at the heart of the conflict.
Evidence that the informal system is undermining teaching staff confidence especially with respect to appraisal and the lack of contracts even though rewards packages are generous.
There is evidence that some students may not be turning up for class or handing in work hence the organization may be seen as possibly too informal.
Discuss two approaches to conflict resolution
- a discussion and negotiation
- arbitration and conciliation
- restructure the organisation
Given the nature of the problem, it appears that negotiation / consultation with the employees is the best method especially in the long run.
market share
Market share is defined as the sales of an individual business expressed as a
percentage of total industry sales.
Market share=
total revenue the business generates/
total revenue the whole industry generates x 100
extension strategy.
An extension strategy is used by businesses to try and inject new life
(in terms of increased sales revenue thereby prolonging the product
life cycle) into products when they have reached the saturation point.
Extension strategies may include product enhancements or upgrades,
new pricing methods or new short-term promotions.
