PPQ Understanding Business Flashcards
Describe 2 other (than public) sectors of the economy.
Private Sector – organisations owned and run by private individuals whose main concern is to make a profit.
Third/Voluntary sector – not for profit organisations and charities operate within this sector.
Describe the following sectors in which Santander UK plc operates. (2)
sector of industry
Tertiary sector – provides a service
Quaternary sector – provides information/knowledge-based services
Sector of economy
Private sector - owned by private individuals/shareholders/profit making
Describe the 4 sectors of industry. (4)
primary − extract raw materials from their natural environment
secondary − manufacture products from raw materials
tertiary − provide a service
quaternary − involved in hi-tech research and information services
Describe the advantages of being a social enterprise. (3
Help tackle social problems it has chosen
Some funding/grants/support is only available to social enterprises
Publicity for the social issue promotes the business
Attract customers who appreciate the good causes they help
Attract good quality staff who want to help the social cause
Can make use of an asset lock
Can sell shares to raise finance if they are a limited company
Award 1 mark for each valid description point.
Award 1 mark for each developed point.
Up to 2 marks may be awarded for discussing any one use.
Describe the benefits to BT of being a multinational company. (5)
Increased sales revenue/market share/increased profitability.
Access to a wider market.
Increased brand awareness.
Can specialise in different countries.
Decreased cost of production.
Lower wage rates.
Greater economies of scale.
Availability of skilled workers.
Access to cheaper suppliers.
Take advantage of other countries’ Government incentives eg tax
breaks, grants.
Lower rates of corporation tax in different countries.
Legislation in other countries may be more relaxed.
Avoid barriers to trade/quotas.
Avoid tariffs.
Distinguish between the features of NHS Scotland and a public limited company (plc) in terms of ownership and control. (2)
The NHS is owned by the Government whereas a plc is owned by shareholders
The NHS is controlled by the Scottish Parliament/Scottish Government/Cabinet Minister for Health/Scottish Government Directorate for Health and Social Care/Regional and Special Boards whereas a plc is controlled by a Board of DirectorsfF
Describe the objectives of third sector organisations. (3)
Support a specific cause.
Provide a service.
To continue operating/survival.
Raise awareness and promote the cause.
Maximise its donations.
Increase the number of volunteers available.
To advance education.
To advance religion.
To better a community.
To operate ethically/be socially responsible.
To make a surplus/profit to reinvest for the cause.
Explain the methods NHS Scotland may use to demonstrate they are socially responsible. (4)
Using energy and water efficiently – save on energy costs
Encouraging waste reduction – to reduce landfill
To improve reputation
Reusing materials – reducing purchasing costs
Recycling materials – meeting government targets
Use of sustainable public transport – cuts down carbon footprint/reduces carbon footprint
Encourage the use of less packaging (pharmacies and medication) – reduce waste
Use hybrid/electric ambulances – to create a healthier environment
Source from ethical supplies/contractors – to encourage sustainability
Staff welfare measures – to retain staff
To attract quality staff
Describe an objective for each of the following functional areas of Police Scotland: Human Resources, Finance, Marketing (3)
Human Resources
* reduce staff turnover
* reduce staff stress/absenteeism
* reduce staff grievances
* reduce disciplinary cases
* increase recruitment applicant numbers
* provide training to police officers
* reduce staffing expenditure (watch for repetition – 1 max)
Finance
* spend taxpayer’s money wisely
* stay within budget
* reduce expenditure (watch for repetition – 1 max)
Marketing
* improve reputation
* better promote safety in society
* increase followers/presence on social media
* increase public awareness of the police role in society
Describe the ways business can demonstrate good Corporate Social Responsibility (CSR). (5)
use renewable energy (such as solar/wind energy)
use sustainable raw materials
use fair trade products
use alternatives to testing on animals
give/donate to charities
set up their own charitable arm
offer products/services for free to good causes
encouraging staff to undertake voluntary work during working hours
use less packaging on goods
recycle packaging/materials
switch to bio-fuels in production
Also accept broader ‘ethical’ examples:
pay fair wages (beyond the minimum/living wage)
offer fair working conditions for staff
ensure fair and proper (ethical) marketing
set/offer fair prices
avoid deforestation
avoid exploiting child labour
4 Methods of growth and different ways to achieve growth
and different ways to fund growth
(organic, horizontal, forwards vertical, backwards vertical, lateral, conglomerate, diversification)
different ways to achieve growth (mergers, acquisitions, takeovers, franchising, becoming a multinational, product development, advertising, increasing staffing)
different ways to fund growth (retained profits, divestment, deintegration, asset stripping, demerger, buy-in, buy-out, outsourcing)
Discuss the methods to achieve growth used by Sainsbury’s in the information provided. (6)
Organic/internal growth
Growth of a business from its own internally generated resources (1 mark for definition).
Sainsbury’s is growing by increasing the number of its state-of-the-art new supermarkets (1 mark for definition).
Advantages
Less risky than taking over other businesses.
Can be financed through internal funds, eg retained profits.
Builds on a business’s strengths, eg brands, customers.
Disadvantages
Growth may be dependent on the growth of the overall market.
Slower method of growth — shareholders may prefer a more rapid growth.
Diversification/takeover
Sainsbury’s buying a majority stake in Anobii e-books (1 mark for definition).
Sainsbury’s joining with Lloyds Banking Group to form Sainsbury’s Bank (1 mark for definition).
Advantages (can apply to diversification or takeover)
Reduces the risk of business failure.
Makes a larger and more financially secure business.
Disadvantages (can apply to diversification or takeover)
Requires allocation of significant financial and human resources.
Risk of harming the main company business.
Accept any other suitable response within each of the above headings.
Award 1 mark for each valid discussion point. Award 1 mark for a development point.
Only accept organic/internal growth and diversification/takeover as suitable growth methods.
At least two methods must be discussed to gain full marks.
Up to 5 marks can be awarded for discussing any one of the above methods.
Marks can be awarded for:
a definition of the growth method which may include an example highlighted from the case study (maximum 1 mark each)
advantages and/or disadvantages of the methods
Google’s development of its new headquarters is an example of organic (internal) growth. Describe other methods of growth available to Google. (4)
Horizontal integration
Google could acquire (takeover) or merge with a business in the same sector of industry as them
Vertical integration
Google could acquire (takeover) or merge with a business in an earlier (backward) or Later (forward) sector of industry as them
Conglomerate integration/diversification
Google could acquire (takeover) or merge with a business in a completely different market as them
Outsourcing
Google could contract out some of their procedures (eg catering, admin etc)
To allow them to concentrate on core activities
Divestment_
Google could sell off parts of their business to raise money to fund external growth eg takeover
Management buy-in…
Merger…_
Takeover…_
Asset stripping…_
Explain the advantages of internal (organic) growth. (4)
The business is not integrating with another business. This means that control is not lost.
Launch new products/services means businesses can target different markets. This means that there is an increase in overall sales.
Exporting existing products abroad widens their market
Open new physical branches means they can reach new markets by opening up in new locations
Expand existing premises to cater for more products/staff and make more sales
Selling online the business can trade 24/7 around the world
Hire more staff will bring in new ideas to the business to develop new products/increase production etc
Increase production capacity by investing in new capital and technology to make more products themselves
Explain the advantages of BT taking over EE, as detailed in the case study. (4)
Eliminates one of BT’s competitors − so BT can raise prices.
Inherit EE’s 31 million customers − which will increase BT’s market share.
To accelerate its growth − by moving into a new market by purchasing an established firm.
Allows BT to achieve greater economies of scale − which may lower BT’s costs.
BT will acquire the assets of EE eg premises, networks, transmitters − which are valuable and will contribute to BT’s financial position.
As EE was one of the leading mobile network operators − this gives BT a more dominant position in the market.
Which will reduce its risk of failure.
Largest 4G customer base in Europe − which provides a platform to European markets.
Provides innovative and seamless communication services − which will lead to better customer satisfaction.
Discuss the methods of growth that can be used by organisations. (8)
Organic/internal growth:
open new outlets
operate in more markets and/or countries
introduce new products
less risky than a takeover
can be financed internally
may be limited by the size of the market
Backward vertical
when the business takes over its supplier/source of goods and materials
this guarantees the quality and quantity of inputs
it may limit supplies to competitors
cuts out the middleman/adds to profits
Forward vertical
when the business takes over a customer
this guarantees an outlet for its products
cuts out the middleman/adds to profits
Horizontal integration
when two businesses at the same stage in the production process join together
may remove a competitor
the business may dominate the market
Diversification/conglomeration
where a business moves into an entirely different market
spreads risk
new customers may be attracted to the original product
Lateral
where two firms merge which are in a related industry but are not in direct competition (for example, a hairdresser and a beauty therapist).
Explain the costs and benefits to organisations, such as NHS Scotland, of outsourcing. (4)
COSTS
Private firm could increase costs – can create cash-flow problems
Loss of control over private firms’ activities - may result in quality issues
Loss of control over private firms’ activities – may result in confidentiality issues
Locked into expensive contracts – puts pressure on NHS’s budget
Few competitors – limits the NHS’s choice to find suitable new suppliers
BENEFITS
Fewer employees required - may lead to cost savings
Don’t need to pay as much for pensions/NI contributions/sick pay
Allows organisation to focus on core activities - therefore the core service can be improved
Only pay for the service when required - so can stay within budget
Range of equipment and services - leads to better healthcare for patients
Specialist equipment - saves the NHS on purchasing assets
Specialist labour - can cover activities where the NHS has a shortage for example GPs
Explain the effects of outsourcing on an organisation. (5)
specialists can be used to do the work - which should mean better quality
reduces staff costs in the area that has been outsourced − which may result in increased profits
outsourced companies will have specialist equipment − which would mean the organisation can sell their equipment
do not need to purchase specialist equipment − which will reduce up-front costs
the specialist company can gain economies of scale − which will reduce unit costs/allow them to quote a cheaper price
the service needs only to be paid for when required − which means organisations do not need to pay for machinery/staff that are sitting idle
organisations can concentrate on core activities − which should result in the organisation producing a better core product/service
organisations can lose control over outsourced work − therefore communication needs to be very clear or mistakes can arise
loss of confidentiality − which may mean the organisation has data protection issues to consider
Describe the possible methods of growth for a public limited company (plc). (6) 2023 q2b
Horizontal Integration
when two firms at the same stage of production combine
eliminate competition/increase market share
Backwards Vertical Integration
when one firm combines with another at an earlier stage of production, for example combines with a supplier
greater control of inventory supplies
may reduce costs of supplies
Forwards Vertical Integration
when one firm combines with another at a later stage of production, for example combines with a customer
can control promotion and pricing
Conglomerate Integration
firms in completely different markets combine
reduces risk by providing different income streams
Organic Growth
hiring more staff
opening more retail outlets/building new factories
launching new products
Diversification
products are launched in new markets
Lateral Integration –
joining with a business in the same market that does not offer the same product/a complimentary busine
Compare the features of NHS Scotland’s tall/hierarchical structure, as shown in Exhibit 1, to a flat structure. (2)
Tall structure has….
-Many layers of management
-Long chain of command
-More promotion opportunities
-May have a narrow span of control
-Slower to respond to changes
-Management may be more autocratic
A flat structure has…
-fewer layers of management
-shorter chain of command
-fewer promotion opportunities
-May have a wide span of control
-Faster communication
-Employees may feel more empowered
Describe the effects of widening the span of control of a manager (5)
Managers are in charge of more staff
Managers can be placed under more stress
Decision making can be slower due to a larger workload
Could result in less managerial promotions
Can mean managers have very little time to speed d with each employeeto discuss work
Staff could become demotivated
It can be motivational for managers as they have more responsibility
Managers will have less time for planning
May result in poor decisions
Managers can delegate to staff with appropriate skills
Subordinates may resent additional responsibility
Delegation can motivate/empower staff
Discuss the use of geographical grouping. (3)
Advantages
Each division can meet the needs of local markets eg different tastes or fashions in different towns or countries
The business can react to changing external (PESTEC) factors quickly
Easy to identify a failing division
Can hold divisional managers accountable
Can communicate better with the local area eg different languages
Disadvantages
Duplication of resources, such as administration staff or IT equipment across each division
Divisions may compete against each other
A new division must be established if a new area is targeted
Justify the decision to group NHS Scotland into regional NHS Boards, shown in Exhibit 2. (2)
Can better cater for the patients’ needs in each area
More responsive to external changes in the area
Easier for the government/managers to identify issues with individual boards
Can hold area managers accountable
Regional Boards are empowered
So can make quicker decisions
Compare functional grouping with customer grouping. (4)
Functional grouping organises staff with similar skills and knowledge together whereas customer grouping structures staff around a targeted type of customer/client/supplier.
Functional grouping caters for the whole organisation whereas each customer group will focus on its customers’ needs.
It is easier to compare performance for each customer grouping whereas function grouping will show results for the entire organisation.
Functional grouping may be cheaper than customer grouping as there is less duplication of resources.
Customer groups are more responsive to changing customer needs whereas functional groups can lose sight of market changes/may be slow to react.
Both groups can compete with each other inside the organisation.
Both groups allow staff to build expertise/specialise.
Describe a matrix structure. (3)
Employees from different functional areas work together on a project
Once complete the employees return to their functional department
Different employees can be a project leader at different times
Allows employees to develop new skills on different projects
May motivate staff
Employees may have to report to two different managers
Explain one cost and one benefit of Police Scotland operating a tall organisational structure. (2)
Benefits
* many levels of management - may mean better supervision
* possibly more promotion opportunities – reducing staff turnover
* can allow for more specialisation – improved quality of work
Cost
* increased management salaries - due to many levels of management
* may slow communication - due to a long chain of command
* organisation may be slow to react to changes - due to the length of hierarchy
Distinguish between a tactical decision and an operational decision. (3)
Tactical decisions are made to achieve the strategic objectives whereas an operational decision is made to ensure smooth running of the business on a daily basis
Tactical decisions are normally made by middle managers whereas operational decisions can be made by any level of management (most likely to be lower level)
Tactical decisions are more likely to be medium term whereas operational are day-to-day
Tactical decisions have a medium level of risk however operational decisions have little or no risk
Distinguish between a strategic decision and a tactical decision (2)
strategic decisions have…
-long term decisions
-set out the objectives
-made by senior management
-high risk
Tactical decisions have…
-medium - term decision
-taken to achieve objectives
-made by middle management.
-Medium risk
Compare operational and strategic decisions. (3)
Strategic have…
-long term decisions
-set out the objectives
-made by senior management
-high risk
Operational have…
-short term / day to day decision
-routine decisions
-made by low level supervisors / all employees
-are low risk
Describe the ways Ryanair could measure the success of its decision to improve customer satisfaction (4)
-Conduct field research
-Gather feedback from staff
-Compare passenger figures
-Compare revenue figures
-Compare profit figures
-Compare using ratio analysis
-Review the number of complaints
-Compare share price
-Compare market share
-Evaluate external media and journalism reports, such as the Which? website, TripAdvisor etc
Explain the role of a manager in an organisation. (5)
A manager plans the objectives - which means they have to decide what has to be done in order to reach the objectives
A manager organises resources - therefore ensuring the organisation is successful in achieving the objectives
A manager commands by giving instructions – this reduces confusion amongst staff
A manager coordinates to make sure everyone is working towards the same goal - which means the task is done more efficiently
A manager controls by evaluating what has been done and checks it against what was expected - therefore he/she can put different plans in place to rectify the situation
Manager delegates responsibility to carry out a task to a subordinate – which gives the manager more time to focus on other work
A manager motivates staff and inspires them - therefore the objectives may be achieved by staff working harder
Describe the ways in which a manager can measure the success of a decision (4)
Research customer’s opinions using surveys
Gather feedback from staff at meetings
Assess the situation to see if the problem has been solved
Compare the profits/sales figures for an increase
Assess using other financial information for example ratio analysis
Compare absenteeism/staff turnover levels for a reduction
Check if targets have been met
Assess key performance measures for staff
Review the number of complaints made
Customer reviews/press coverage
Describe 3 internal constraints that can make decision making difficult. (3)
the quality and quantity of information available to the manager
the amount of training/experience the manager has had in decision making
the ability and skill of the manager to make decisions
the level of risk the manager is willing to take
lack of finance to carry out the decision
the time available to make the decision
how willing the staff are to cooperate with the decision
lack of equipment/technology to implement the decision
existing company policy may restrict which decisions a manager is allowed to make
a senior management veto of what the manager decides.
Describe the role of the Chief Constable in the management of Police Scotland. (3)
- planning – setting targets for policing to meet Scottish Government aims
- organising – booking regular meetings with various departments o effective personal organisation such as using an e-diary or todo-list to prioritise work and manage time
- controlling – ensuring policing resources are spent within budget
- coordinating – carry out workforce planning to ensure there are enough police officers and support staff in the right place to do the job
- commanding – showing assertive and strong leadership to make decisions
- delegating – giving work to other members of the Senior Management Team
- motivating – rewarding police officers for excellent performance
Response must include POCCCDM labels to gain marks
Describe the ways a manager can assess the effectiveness of decisions. (4)
check to see if targets have been achieved
check to see if profits have increased
check sales levels to see if they have improved
issue questionnaires to customers for their views
check to see if the business reputation has improved
evaluate decision with the staff for their views on its success
monitor staff morale following decisions
monitor staff absence rates following decisions
Using the case study, explain the disadvantages of Santander UK plc’s decision to close many of its branches. (3)
over 800 job losses – increasing unemployment in the UK
Government may have to pay more benefits to those unemployed
may result in financial hardship for employees who cannot find a new job
may lead to redundancy payments
could lead to bad publicity for Santander
staff may be fearful of redundancy which lowers motivation
trade unions consulted – Santander may have to agree to costly terms
time consuming to carry out
a third of the UK still does not bank online – Santander may lose out on customers who are technophobes/do not have internet access/security conscious
lower income for Santander from its branches due to closures
consumers still need access to cash - inconvenience to customers who may need to travel more to a branch
customers may switch to a competitor with a branch local to them
Explain the benefits of Google’s corporate culture to the organisation and its employees. (4)
Google use flexible working patterns which means staff work when is best suited to them/ when they are most productive.
Staff can work from home/where they want which might motivate them to be more productive.
Open plan/relaxed office layout encourages collaboration which means better communication and idea sharing
This will also lead to better decisions being made
Perks such as pool tables, bowling alleys, gyms etc will mean staff are motivated and will work to a better standard
This will also mean staff turnover will also be low meaning quality trained staff aren’t lost to competition
Perks will also attract the best staff to Google meaning they have an advantage over the competition
Roof gardens, coffee shops etc will encourage staff to communicate with each other in a relaxed informal way, leading to better decision making
Casual dress code will mean there is a relaxed environment in which to work in/will mean staff want to come to the office
Strong corporate identity through corporate colours/language and jargon etc which will mean employees feel part of the organisation
Use of relaxed and informal language means staff feel comfortable working there and perform well
Explain the benefits to an organisation of developing strong corporate culture (3)
Through uniforms staff will form an identity with the organisation which should result in lower staff turnover/absences
Increased staff motivation because they feel part of the organisation/associate strongly with the culture
A single corporate identity is seen by customers which means they will then associate it with that organisation’s brands/ethics/logos etc
Easily be recognised worldwide meaning customers will feel comfortable with products wherever they are
Values/beliefs/perks can attract quality staff which results in a better quality service
Customer satisfaction can improve because the customers begin to associate with the brands/logos/ethics they like
Can attract new customers as they agree with the aims of the organisation
Customers may become loyal…
Staff can move between branches/departments more easily as they will all be using the same policies and practices
Workspace design/layout… Open door policy…
Describe, using evidence from the information provided, ethical and environmental factors Sainsbury’s has taken into account. (5)
Suppliers’ products ensure sustainability of raw materials.
Sainsbury’s commitment to reducing unhealthy food and providing nutritional information.
Suppliers’ products don’t have a large carbon footprint (1 mark) and support renewable energies (1 development mark).
Sainsbury’s commitment to making a positive difference to the communities in which it operates.
Suppliers’ products are fair trade (1 mark) meaning suppliers get a fair price for products and are likely to stay in business (1 development mark).
Sainsbury’s recycling partnership with Oxfam.
Suppliers ensure high standards of animal welfare.
Explain the impact on Sainsbury’s of the external factors highlighted in the information provided. (6)
Rising inflation means goods/services cost more, so Sainsbury’s plans to offer more great food of quality and value.
Low interest rates mean consumers are less likely to save and so spend more in shops like Sainsbury’s (1 mark). For example, Sainsbury’s sales have increased by 4·5% (1 mark for development for using Source A).
Falling unemployment means consumers may have more wages/disposable income to spend in shops like Sainsbury’s.
Rising living costs, however, mean that consumers may have less disposable income to spend in Sainsbury’s.
Customers are being more price conscious so Sainsbury’s is offering more promotional offers/deals.
Consumers are making fewer but more considered spending choices so are buying higher quality goods such as fair trade products provided by
Sainsbury’s.
Competitive factors — Sainsbury’s must be constantly aware of these, eg from Asda and Tesco, to maintain or increase its current market share of 16·8% (Exhibit 2).
Describe the ways in which Google demonstrates positive Corporate Social Responsibility (CSR) as shown in the case study. (3)
Google have a charitable arm called Google.org which promotes renewable energy
Funding environmental research proves Google are willing to pay to help the environment
Google use solar panels at the Googleplex to reduce its carbon footprint
Google focus on air quality/letting less harmful chemicals into the environment
Google offer free EV charging stations for employees vehicles to reduce emissions
Google treat their staff well eg_
Publicity in Fortune: Best Company To Work For
Perks
Describe the impact of competition policy on an organisation. (2)
Cannot collude with other organisations to fix prices eg cartel
Cannot fix the bid for tendering on projects with other firms
Cannot use market power to pay unfairly low prices to suppliers
Prevents monopolies occurring
Block mergers and take-overs that are deemed anti-competitive
Enforcing the selling of divisions/branches/premises eg divestment
May be forced to change prices
Other than competition, explain the impact of external factors on an organisation. (5)
Political
Legislation and regulations will affect an organisation in that they need to comply with the laws
Economic
Factors such as inflation, recession/boom periods, interest rates will affect organisations in a number of ways ie consumers not spending as much on luxury items/more expensive to borrow money
Social
Changes in trends and fashions mean that organisations must continually carry out market research
Technological
As technology changes organisations must keep up-to-date and this will involve a large financial cost
Environmental
Organisations now attempt to be socially responsible and environmentally friendly to possibly comply with legislation/satisfy consumer groups
Weather/flooding can mean a loss in sales if organisation cannot open due to flooding
Explain the impact of environmental factors on an organisation. (3)
Weather, such as heavy snowfall, can result in suppliers not being able to deliver goods on time.
Can delay production/sales.
Climate change may lead to changes in demand for products eg warmer coats, therefore, the firm may need to change the products they offer.
Seasonal changes can lead to changes in customer demand/shopping habits.
A natural disaster could force the company to close for a period of time which means sales/profits are reduced.
Bio-fuels will reduce a firm’s carbon footprint which will improve its image.
However eco-friendly chemicals are significantly more expensive.
Describe the interdependence of Sainsbury’s stakeholders identified in the information provided. (3)
Sainsbury’s (owners) need employees to operate stores and employees require Sainsbury’s to provide secure jobs.
Suppliers need Sainsbury’s to buy their stock and Sainsbury’s needs suppliers to provide good-quality products.
Employees need customers to give money to Sainsbury’s in order to have job security and customers need good-quality service from employees.
Employees need owners for wages/training/career development and owners need employees for productivity/good customer service.
Owners need customers to give them profits/market share and customers need owners for quality services/products.
Describe examples of conflict that may arise between different groups of stakeholders (2)
Employees are likely to want higher wages than the owners/managers are willing to pay
Owners/managers may need to reorganise the business but employees may feel this gives them extra responsibility without training or extra reward
Owners want to maintain control of their business but managers can become too powerful and influential through their decision making
Managers may focus on their objectives for financial reward which will conflict with owners desire for maximum profit
Customers want delivery of goods as soon as possible but the managers cannot meet customer expectation because of the cost
Managers want to delay payment for goods bought to improve cash flow but suppliers want their money as soon as possible to avoid cash flow issues of their own
Describe potential conflicts between any of the BT stakeholders mentioned in the case study. (4)
Shareholders want high dividends whereas customers want low prices.
Shareholders want high profits whereas employees want high wages.
Shareholders want high profits whereas government want all legislation followed which could increase costs.
Shareholders want a low rate of tax whereas the government may wish to increase it.
Shareholders will be looking for a return on their investment whereas managers may want to reinvest profits for product development.
Managers want to delay payment of suppliers whereas suppliers want prompt payment.
Employees want a low rate of income tax whereas government may wish to increase it.
Describe examples of conflict that may arise between different groups of stakeholders. (2)
employees are likely to want higher wages than the owners/managers are willing to pay
managers want to delay payment for goods bought to improve cash flow, but suppliers want their money as soon as possible
customers want delivery of goods as soon as possible, but the managers cannot meet customer expectations
owners/managers may need to reorganise the business, but employees may feel this gives them extra responsibility without training or extra reward
owners want to maintain control of their business, but managers can become too powerful and influential through their decision making
managers may focus on their objectives for financial reward, which may conflict with owners’ desire for maximum profit.
Describe the following: (2) 2023 4c
conflict of interest between employees and managers
interdependence between employees and managers
conflict of interest between employees and managers
managers may want to cut wages to cut costs whereas employees may want wage rises
managers may want to increase workload to increase efficiency whereas employees may want their workload reduced
interdependence between employees and managers
both employees and managers will need the business to succeed to keep their jobs secure
employees need managers to set them tasks so that they can get paid, whereas managers need employees to carry out the tasks
Explain the advantages of franchising for a franchiser. (3)
Can increase market share without investing further capital
Is paid a percentage of profits or sales or a royalty
Can control the way the business is run.
Explain 3 reasons why an organisation would become a private limited company (3)
Has limited liability to shareholders/owners which would reduce the risk of personal loss to the shareholders
Becomes larger organisation and should attract finance easier
Allows for economies of scale
Less risk of liquidation
Control is still not lost to complete outsiders
Experience and skills can be gained from shareholders
Explain the advantages and disadvantages of operating as a mulitnational. (5)
Advantages
An organisation may be given grants from governments to locate in that country and the grants will not require to be paid back improving their financial position
Organisations will become larger which may result in them being safer from takeovers
Can allow organisations to increase their sales which in turn should increase their overall profits
Will allow organisations to take advantage of economies of scale and reduce unit costs of products
Could allow organisations to employ cheaper staff which will result in greater profitability
May help avoid legal restrictions in the organisation’s own country which could allow them to sell/produce their products abroad
Could allow for tax advantages which will increase profitability
Will mean the organisation can avoid restrictions on imports into a country which will help overall sales
Disadvantages
Legislation may be different in other countries which may require the organisation to alter its product/service
Legislation may exist on how a product/service is marketed and may result in some marketing techniques having to be changed
Cultural differences will mean that organisations have to be sensitive to different countries cultures
Different languages will exist and this may mean that organisations have to employ specialist linguists to work with the organisation
Discuss the effects of becoming part of a franchise (5)
Using an established name/brand
Reduces the risk of failure in the marketplace
Franchiser will provide training
Franchiser will advertise nationally
Business idea is already successful
Product innovation is shared
Royalties are paid to the franchiser from profits
Franchiser can demand exactly how a business operates
Bad publicity can affect the whole franchise
Explain advantages and disadvantages of becoming a public limited company (5)
Shares can be sold on the stock exchange meaning large amounts of finance can be raised.
PLCs often dominate their market meaning they can force smaller organisations out of business dictate market prices.
Lenders are more likely to give money as they have greater confidence it will be paid back.
Investors will have limited liability meaning PLCs will find it easier to attract shareholders.
Initial set-up costs will be high resulting in poorer profit results for the first few years.
There is a large amount of legislation which must be complied with or the company may be fined have legal action taken against them.
PLCs have no control over who buys shares which might mean investors can plan a hostile takeover.
PLCs are required by law to publish annual accounts which will be costly to produce.
Describe the main characteristics of a multi-national corporation (4)
Will involve operations in several countries
Has a distinct home base country
Has a global brand
Can dominate markets across many countries
Can have budgets that are larger than many individual countries
Can greatly influence local economies
Cultural variations
Discuss the advantages and disadvantages of running a franchise for the franchisee. (5)
Advantages
the brand name is already established
franchiser will advertise nationally
franchiser may provide training
therefore staff are skilled and competent
Disadvantages
the cost to buy into a franchise agreement is often expensive
which may result in the franchisee having to borrow finance/ incur debt
after some time the franchiser may not renew the contract
which will leave the franchise without a business
royalty fees are paid regularly
which lowers profit figures
store layout, prices and promotion etc are dictated
creativity can be stifled
Describe 2 objectives of firms operating in a highly competitive market such as the mobile phone industry.(2)
to increase profits
to dominate the market
to eliminate a competitor
to be the most innovative (develop product)
to survive
to grow
Compare the objectives of a plc compared to those of a public sector organisation. (5)
Plc
To maximise profits
To improve image
To improve social responsibility
To increase market share
To grow
Public Sector Organisation
They may be required to operate within a budget
To provide a service
Describe 2 strategic objectives of a public sector organisation (2)
To provide an efficient service.
To make effective use of funds.
To improve society.
To serve the public interest.
To stick to agreed budgets.
Compare the objectives of a private sector organisation with those of a public sector organisation (4)
Private sector organisations’ objectives will focus on profit maximisation whereas public sector will require to operate within a specific budget
Private sector will focus on sales maximisation but public sector organisations will focus on provision of a specific product or service
Private sector organisations will be responsive to shareholders’ opinions however public sector will have local or national government priorities and objectives
Increase market share/will have little or no concern with market share
To expand globally/operate on a local or national basis only
Both will look to provide a quality service
Both will look to be socially responsible
Both will try to be as efficient as possible
Describe the possible objectives of a private limited company (4)
Profit maximisation
Sales maximisation
Survival – to continue to be in business, especially important in a recession
Provision of a service
Growth – to have more outlets, staff and higher turnover
Socially responsible – to have a good image in the eyes of consumers or local communities
Describe the possible objectives of a public sector organisation such as a local council. (4)
Operate within a specific budget
Provision of a service
Meet local or national government priorities
Be as efficient as possible/quality service
Social responsibility
Many companies selling branded goods (e.g. Levi and Pepsi-Cola) are moving into new markets such as China. Levi and Pepsi-Cola’s move into a new market is an example of growth. Describe other methods of growth. (6)
Horizontal integration
Firms producing the same type of product/service join together
Firms can then dominate the market
Can obtain cheaper supplies due to bulk buying
Can benefit from lower administration costs
Vertical Integration
Firms at different stages in the same industry join together eg brewer and pub
Backward vertical
Business takes over supplier – guaranteeing stock
Stock is cheaper and profits higher
Forward Vertical
Business takes over a customer
Control of distribution is possible
Diversification (conglomerate)
Firms in different markets merge
Reduces risk of failure
Explain reasons why a competitor might wish to take over a firm which is not making a great deal of profit (4)
To gain their assets (premises)
To gain a brand name
To turn it into a profitable firm
To obtain their customers
To remove the competitor from the market (they may take steps in the future to improve)
Discuss the ways in which divestment and demerger can assist the growth of an organisation (4)
Divestment allows an organisation to sell off minor areas of their business and concentrate on the core activities of the organisation.
The areas sold off are often the less profitable areas.
This increases funds available for growth in the core activities.
The actual funds from the sale can be used to expand the core activities.
De-merger allows an organisation to split into two separate organisations to raise cash for investment.
The organisation can then concentrate on its core activities.
Cost cutting should make it more efficient and therefore able to expand.
Discuss different methods of growth (5)
Horizontal Integration − firms producing the same product/service combine together.
Reduces admin costs.
Allows for economies of scale.
Can allow firms to estimate competition or be more competitive.
Vertical Integration − firms at different stages in the production process in an industry combine together.
Forward vertical integration is when a business takes over a customer.
Backward vertical integration is when a business takes over a supplier.
Allows firms to cut out middle-men and increase profits.
Firms can then control supply and distribution of the product.
Conglomerate − firms in difficult industries combine.
Reduces the risk of failure.
Makes for a larger and possible more financially secure business.
Internal Growth − firms open more outlets.
Increase number of products or services to customers.
Describe how both horizontal and vertical integration could allow an organisation to become even larger and more profitable (5)
Horizontal integration
Can use economies of scale and reduce unit cost of products.
Can dominate the market as a larger single organisation.
May allow for higher prices to be charged as competition is reduced.
Reduction in costs – max 1.
Vertical integration
Profits are increased by cutting out the ‘middle men’.
Stock can be cheaper due to backward integration.
Guaranteed source of supplies and prices of stock.
Reduction in costs – max 1.
Explain how different methods of growth can lead to increased sales or profits. (5)
Horizontal integration – firms producing the same products combine together. This allows for greater economies of scale which allows for lower unit costs and increased profits
By becoming larger they should become better known in the market and this should lead to brand loyalty and increased sales
They might dominate the market due to the greater size of the organisation and can then set prices and encourage customers to purchase from them through large promotional activities
By removing competitors they will increase sales
Vertical integration – firms at different stages in the production process combine together. This can cut out middle men and allow the organisation to retain all profits made in the chain themselves
Backward vertical – when a firm combines with a supplier which ensures that there is constant and consistent supplies of raw materials at appropriate prices
Forward vertical – when a firm combines with a customer which ensures that sales are constant and can increase profits
Conglomerate – when a firm combines with another firm in a completely different market. This means that profits can be made from a variety of markets and sales do not rely on just one industry
Internal growth
Discuss the effects of outsourcing on an organisation (5)
Specialists can be used to do the work meaning the work should be of a high standard
Could increase costs to provide the specialisation
However it might reduce staff costs in the area that has been outsourced as the organisation does not need to pay employees continuously
Outsourced companies will have specialist equipment again allowing for a high degree of specialisation and a better quality product.
The service needs only to be paid for when required
Organisations can concentrate on core activities
Organisations can lose control over outsourced work
Loss of confidentiality
Cheaper/dearer to outsource the work
Describe the advantages and disadvantages of a centralised organisational structure (6)
Advantages
Experienced decision makers
Decisions made for the organisation as a whole
Decisions affect all branches equally
Less duplication of resources
Disadvantages
Less responsive to changes in the market
Local needs are not taken into account
Does not develop staff (eg allow branch managers to make decisions)
Decision-making may be a slower process
Describe what is meant by a “matrix structure” (2)
Teams from different functional areas are formed (1 mark)
with each member having specialist skills and responsibility for their own area of expertise (1 mark)
Explain the advantages and disadvantages or an entrepreneurial structure. (4)
Advantages
Decisions are made by experienced managers of the organisation.
Decisions are made quickly as managers do not consult staff.
Staff know who they are accountable to.
Disadvantages
Is difficult to use in larger businesses.
Top managers carry a heavy workload/burden.
Does not allow for initiative from staff.
Demotivated staff as they are not included in decision making.
Describe the main features of a matrix structure (3)
Normally set up to carry out a specific project
Will consist of different specialists from functional areas
Each team will have a project leader
Can be motivational to the staff concerned
Is a good method of solving complex problems
Gives staff increased experience in different situations
Is a relatively costly structure if many different teams are required
Can be difficult to co-ordinate staff from different areas
Each staff can have two managers, the project manager and their own functional manager which can cause confusion and conflict
Describe the main characteristics of an entrepreneurial structure (3)
One senior member of staff makes all the important decisions. (Accept a few or core members)
Decisions are therefore made quickly.
Staff are very rarely consulted on decision making.
Stifles staff initiative as they are not consulted.
Is mainly used in smaller organisations.
Employees know who they are accountable to.
May place over-reliance on key members of staff.
Distinguish between a centralisated structure and a decentralised structure (3)
In a decentralised structure decision making is delegated to departments whereas in a centralised structure it is made by head office.
In a decentralised structure staff are more motivated due to empowerment whereas in a centralised structure staff can be de-motivated due to not being consulted.
In a decentralised structure senior directors have less responsibility whereas in a centralised structure senior directors carry all the burden of decision making.
Decentralised is often seen as being used in a flatter structure where as centralised tends to exist in hierarchical structure.
It is harder to promote a corporate image in a decentralised structure than in a centralised structure.
In a decentralised structure decisions can be made which only benefit one department but in a centralised structure decisions will be made to suit the whole organisation.
Companies operating in different geographical areas may choose to group their activities by territory. Describe an advantage and a disadvantage of doing so. (2
Allows organisation to cater for the differing needs of customers in different locations
Can identify poorly performing regions
Expensive as functions (marketing, finance, administration) exist in all the divisions = duplication of resources
Discuss 2 other types of activity grouping. (4)
Function
Staff are grouped together in departments according to skill and expertise
Each functional area employs specialists
Staff know who to go to when they need a job done
Organisations may become too large to be managed effectively
Unresponsive to change
Individual departments become more concerned about their own interests rather than those of the whole organisation
Product
Product/service groups where each deals with a different product or service
Organisations with different products can concentrate on them individually
Expertise can develop regarding the product
Easier for management to identify which areas of the business are less successful
Unnecessary duplication
Divisions may be competing with each other
Customer
Divisions dealing with different types of customer eg overseas/home, business/personal
Product/service suited to the customer
Customer loyalty builds up because of personal service
Additional staffing required (costly)
Duplication of procedures
Technology
Business activities are grouped according to technological or production process
Only suitable for large organisations which have different products and/or production processes
Describe the advantages and disadvantages of product/service grouping (5)
Advantages
Expertise can develop in dealing with each product or service
Managers can easily identify how the different products or services are performing.
Each decision can be more responsive to changes in the field.
Disadvantages
Duplication of staff and resources across the different products
Divisions may find themselves competing against each other.
Distinguish between the following 3 types of organisational groupings: product/service grouping, customer grouping, technological grouping. (9)
Product/Service Grouping
Products or services are grouped together in divisions or departments within a different product range.
This allows for each separate division to be more responsive to customers requirements and trends in its area.
Specialism can be developed in each division.
It is easier to identify parts of the organisation that are under performing.
Duplication of resources and personnel across each division.
Can cause competition within each division of the one organisation.
Customer Grouping
The organisation is grouped around different customer types.
This allows each division to offer a unique service to each segment or customer type.
Builds up strong customer loyalty due to the personal service given to each type of customer.
There are high staff costs.
Duplication of functional departments exists.
Technological Grouping
Manufacturing companies can group their business around the technological or production process that exists.
Specialism can occur within each process.
Can reduce wastage and costs.
Only an option for very large organisations who have different products with similar production processes.
Describe the advantages and disadvantages of functional grouping (5)
Advantages
Allows for specialisation in each functional area
There is a clear structure to the organisation
Clear lines of authority exist
Staff can seek support from colleagues if required
No duplication of resources
Disadvantages
Organisational aims can be lost due to departments pursuing their own aims
Can be unresponsive to change in the market
Can produce large and unwieldy organisations
Max of 4 for advantage or disadvantage.
Accept advantages and disadvantages for both the employee and the organisation
Discuss the advantages and disadvantages of customer grouping (4)
Advantages
Service and product is tailor-made to customer needs
Promotions can be directed towards specific customer groups
Customer loyalty is built up due to personal service
Quick response to change
Disadvantages
Is an expensive system, due to high staff costs
New staff are required if new customer group is formed
Duplication of resources
Competition between departments (either advantage or disadvantage depending on explanation)
Compare the use of functional grouping with product grouping (5)
Staff with similar expertise work together in functional grouping but in product grouping staff are organised around a specific product or service and will have different areas of expertise.
The organisation will have functional departments which service the whole organisation whereas in product grouping each functional area will be responsible for a specific product or service only.
In both methods departments can be more concerned with their own results than the organisation as a whole.
Also departments may compete against each other in both forms of grouping.
In product grouping it is easier to identify areas that are performing well whereas in functional grouping results tend to be for the organisation as a whole.
In product grouping each department is more responsive to change but in functional grouping the organisation can become very large and unresponsive.
In functional grouping staff will know exactly who to turn to but in product grouping this may not be the case.
In functional grouping the organisation will have a clear structure but in product grouping the structure may be less clear and line relationships less clear.
Discuss the use of customer grouping for an organisation (4)
Customer loyalty can be easily built up
There is a high level of customer care given
The organisation can respond to the needs of customers quickly
Can be expensive due to high staffing costs to meet customer needs
New staff are needed if there is a new customer grouping or product created
Competition between customer groupings/departments can exist
Explain the benefits of delayering to an organisation (3)
Saves money on expensive managerial salaries or employee wages.
Leads to better communication due to less layers for information to pass through.
Employees are more motivated as they are empowered to make decisions.
Can respond quicker to market changes.
May improve productivity.
Decision making is faster due to fewer layers.
Distinguish between delayering and downsizing (3)
Delayering involves removing a whole level of management to flatten an organisation’s structure.
Downsizing involves closing specific areas of the organisation to cut costs.
Purpose.
Span of control.
Communication.
Efficiency.
Cost.
Competitiveness.
Empowerment. (3)
Describe the advantages and disadvantages of a wide span on control. (5)
Advantages
Staff are empowered to make their own decisions and to carry out their own tasks without interference by managers.
Less managers are required and wages are saved.
Less levels of communication for decisions to pass through.
High quality staff should exist.
Disadvantages
Managers may make snap decisions as they are looking after too many employees.
Managers time will be at a premium.
Managers will have less time for planning.
Subordinates may make decisions they are not trained to make.
Discuss the effects of widening the span of control (7)
Will also mean more empowerment is possible – can give for both employee and management (1 mark each)
Allows for delegation to staff as they should be reasonably skilled
Managers time to deal with staff problems will be at a premium
Can place managers under stress
Can mean workers rarely have time to meet with their line manager to discuss ideas
Subordinates may resent having to make all the decisions
Managers will have less time for planning
Can result in poor decisions – both employee and organisation (1 mark each)
Managers are in charge of more staff
Can be motivational to managers as can be seen as greater power
Explain the effects of delayering on an organisation (4)
Cuts out a complete level of management within the organisation which will reduce the salaries paid out by the organisation
Managers have an increased span of control which may result in increased workload for the manager
increased stress for the manager
staff having to wait to meet with a manager
less time for planning
Communication should be improved and quicker to pass on which means the organisation will be more responsive to changes in the marketplace
Empowers the staff which can lead to increased motivation
Fewer promotion opportunities for staff which could lead to them leaving the organisation to gain promotion
Describe different types of organisational relationships that can exist within a business (4
Line – the relationship that exists between a manager and their subordinates
Lateral – this exists between staff on the same managerial level within an organisation
Functional – this is a specialist relationship where an expert has the responsibility to manage the function for the whole organisation
Staff – this is an advisory relationship to staff within an organisation
Informal – exists between an level of management or staff outwith the normal working arrangements/conditions
Describe factors that influence the formal structure of an organisation (3)
The size of the organisation, larger organisations tend to be more formal and smaller organisations tend to be less formal
Technology used – the impact of modern technology can influence how organisations structure their activities, i.e. easier to communicate over larger distances
Staff knowledge and skills, if staff are highly skilled a less formal structure can exist
The market
Products they sell
Finance available
Describe the effects of increasing a manger’s span of control (5)
Will mean more empowerment is possible – can give for both employee and management (1 mark each)
Allows for delegation to staff as they should be reasonably skilled
Managers’ time to deal with staff problems will be at a premium
Can place managers under stress
Can mean workers rarely have time to meet with their line manager to discuss ideas
Subordinates may resent having to make decisions
Managers will have less time for planning
Can result in poor decisions – both employee and org (1 mark each)
Managers are in charge of more staff
Can be motivational to managers as can be seen as greater power
Give one example each of a strategic, tactical and operational decision taken by an organisation.(3) 2005 (2
Strategic – to expand, grow, increase (any long term decision)
Tactical – merge with another organisation, increase selling price, reduce costs
Operational – change staff rota
Describe, using examples, the 3 types of decisions taken by organisations in order to achieve their objectives (6)
A strategic decision is a long-term decision made by senior management which affects the aims of the organisation, eg to increase market share by 5%.
A tactical decision is one which is made to achieve the strategic decision and made by middle management, eg to employ additional staff.
An operational decision is a day-to-day, routine decision made by lower level managers, eg to order supplies.
Distinguish between a strategic and tactical decision and give an example of each (5)
Strategic decision made by senior management. Tactical decisions are made by middle managers.
Strategic Is longer term. Tactical are medium term.
Strategic sets main aims and objectives of an organisation. Tactical assist in the achievement of strategic objectives.
Eg, Strategic =move into a new market segment, open retail outlets in other countries.
Eg, Tacticalproducts to be developed for new market, suitable locations for retail outlets.
Describe 3 tactical decisions that could lead to growth (3)
Open new branches.
Offer internet shopping.
Target new market segments.
Launch a new range of products.
Vertical integration.
Horizontal integration.
Justify why strategic decisions are made by senior managers (3)
They are long term and only senior managers would make decisions
They have far reaching or lengthy consequences
They shape the objectives/direction of the organisation
They have a high financial risk
Require a knowledge of the whole organisation and its policies
Describe 2 other (than operational) types of decisions and give an example of each (4)
Tactical decision is medium term/is made by middle level managers/has a slightly increased risk
Any appropriate example
Strategic decision is long term/made by senior managers/has a greater risk
Any appropriate example
Tactical decision is medium term/is made by middle level managers/has a slightly increased risk
Any appropriate example
Strategic decision is long term/made by senior managers/has a greater risk
Any appropriate example
Distinguish between a strategic decision and a tactical one (3)
Strategic decision is long term whereas a tactical decision is medium term.
Strategic decision is made by directors/senior managers, but a tactical decision is made by heads of department or middle managers.
Strategic decisions carry high levels of financial risk whereas tactical decisions carry less of a financial risk.
Strategic decisions shape the main objectives of an organisation whereas the tactical decisions help to put the strategic decisions into place.
Describe 3 main types of decision that an organisation could make (3)
Operational
Day-to-day decisions
All staff including lower level managers
Low financial risk decision
Tactical
Medium term
Made by middle managers
Are taken to achieve strategic decisions
Strategic
Long term decisions
Shaping the objectives of an organisation
Taken only by very senior managers
Carry a large financial risk
Distinguish between a tactical decision and an operational decision (3)
A tactical decision is made by middle managers whereas an operational decision can be made by anyone in the organisation normally lower level managers.
A tactical decision is a medium term decision whereas an operational decision is made daily or short term
A tactical decision carries a medium amount of financial risk but an operational decision carries virtually no financial risk
A tactical decision is made to help implement the strategic objectives whereas an operational decision is made to help the smooth running on a daily basis
Distinguish between centralised and de-centralised decision making (5)
In a decentralised structure decision making is delegated to departments whereas in a centralised structure decision making lies with senior managers
A decentralised structure relieves senior managers of a lot of the daily tasks but in a centralised structure managers carry the whole burden of decision making
In a decentralised structure subordinates are given responsibility to make decisions which is motivational whereas in a centralised structure subordinates are less motivated as decision making is made only by senior managers
In a decentralised structure decision making is faster than in a centralised structure as local managers do not have to consult national managers prior to making a decision
In a centralised structure procedures tend to be standardised throughout the organisation but in a decentralised structure procedures will be decided by local managers
In a centralised structure decisions are taken for the organisation as a whole whereas in a decentralised structure decisions take into account local arrangements/customers
In a centralised structure a high degree of corporate identity exists whereas in a decentralised structure corporate culture is harder to impose
Explain the role of a manager in effective decision making (5)
Plan the objectives of the organisation, this can be either long term or short term in order that the organisation has a vision/direction
Organise the staff and resources required to carry out the decision
Control staff who the decision affects/ impacts in order to get the best work possible/meet targets
Command – inform the staff of decisions that have been made/consult with staff to improve the decision
Co-ordinate the activities and ensure timescales/targets met
Delegate decision making to junior staff to give them experience/empower them
Empowerment to make decisions will motivate staff and improve their performance
Explain the purpose of a SWOT analysis (4)
Analyses the internal areas of an organisation to indicate where they are performing well
Analyses the internal areas of an organisation to indicate where they are weak and need to improve
Examines external areas that could be used to improve performance or profitability in the future
Examines possible threats that can exist externally which means an organisation is being proactive and ready for any eventuality
Gives more/better information and so results in better decisions
Saves rash decisions
Explain the factors which might influence the quality of a decision (4)
The ability of the manager making the decision
The staff’s ability to use decision-making techniques
Quantity and quality of information available to the decision maker
Level of risk the decision maker is willing to take
Personal interest of the decision maker
Describe how a Director would know that a decision taken was effective.(3)
Evaluate decision – issue questionnaires etc
Feedback from staff and customers – is it positive?
Is the problem solved eg
Have sales/profits increased?
Has staff morale improved?
Has staff turnover/absenteeism improved?
Describe the internal constraints the can make decision making difficult (6)
Financial constraints may mean that the organisation cannot choose the best solution to a problem.
Company policy may restrict the decisions made or options available.
Staff can resist change and attempt to sabotage decisions if they disagree with them.
Lack of technology can mean that decisions taken may fail.
Managers may have limited ideas.
May be unable to handle stressful/complex situations.
Lack of opportunity to consult may mean that decisions are poor.
Managers may be indecisive and make poor decisions.
Overpowering Managing Directors may overturn or veto decisions being made.
Time constraint.
Describe how a manager could evaluate the effectiveness of a decision (4)
Have the objectives been reached (ie problem solving)?
Is the organisation operating effectively?
Is there an increase in sales/profits?
Has staff turnover/absenteeism decreased?
Has staff morale improved?
They may issue questionnaires/interview staff/observe.
Explain the factors that could affect the quality of a decision made by a manager (4)
The ability and skill of the manager – if the manager has not had proper training or not skilled enough to make decisions then a poor decision may be made
The appropriate use of decision making models
The quality of the information used to make the decision
The level of risk taken
The managers own interests
The finance available to implement the decision
The time available to make the decision
Describe the factors that would result in a quality decision being made (4)
Managers that have the ability and experience to make good decisions from past experience
Managers who are properly trained to make good decisions
The quality of the information available on which to base the decision (max 1 for any characteristic of information)
Use of decision-making models – accept any stage(s) but must be qualified as to how it makes a quality decision
How much risk the managers/decision makers will take when making decisions
Motivation of staff to properly implement the decision
Finance
Technology
(No ID marks are given.)
Finance may be restricted which might mean the organisation cannot afford to implement the best decision.
Staff may not agree with the decision and resist the change making it less effective.
The organisation may have policies in place that are restrictive and the decisions may need to be altered to suit policies.
The decision may be constrained by the lack of technology and mean that new technology needs to be purchased or decisions shelved.
Managers may not have the appropriate skills or initiative to make the best decisions and may be unable to cope with complex decisions or situations resulting in a poor decision being made
Quality of information
Level of risk willing to take.
Explain internal constraints that make decision making difficult (4)
Finance may be restricted which might mean the organisation cannot afford to implement the decision.
Staff may be resistant to change meaning decision making is difficult
The organisation may have policies in place that are restrictive
The decision may be constrained by the lack of technology and mean that new technology needs to be purchased or decisions shelved.
Managers may not have the appropriate skills or initiative to make the best decisions
Managers may be unable to cope with complex decisions
quality of information
level of risk willing to take.
Staffing levels
Staff skills to implement
Describe the internal factors that could result in a quality decision being made (4)
Managers that have the ability and experience
Managers who are properly trained
The quality of the information available (max 1 for any characteristic of information)
Use of decision making models – accept any stage(s) but must be qualified as to how it makes a quality decision
How much risk the managers / decision makers will take
Motivation of staff to properly implement the decision
Finance available
Technology available
Enough time/time available
Describe features of strategic decisions.
sets the objectives of an organisation
long term decisions
made only by top level managers/owners
are high risk decisions
tend to be proactive
allows them to stay ahead of competition
affect the entire company and all stakeholders
Describe the benefits to an organisation of having a strong corporate culture (3)
Employees feel part of the organisation.
Is motivational to staff.
Improves employee relationships.
Increases employee loyalty.
Gives customers a sense of quality/efficiency.
May attract new workers.
Improves the business image.
Describe different methods organisations can use to develop a corporate culture (4)
Implementing the ideals and beliefs of the owner By use of symbols or logos that customers recognise
Staff uniforms consistent throughout the organisation
Uniformity of layout of offices/branches
Use of a phrase or motto that can be recognised by customers/ used in marketing
How staff interacts with customers
Merchandising of products linked to the organisation
Describe factors an organisation should consider when trying to encourage a positive corporate culture
The organisation needs to take into account the ideas/principles of the owners.
They need to design appropriate logos, motifs and uniforms.
They need to consider a corporate design for shops and outlets.
They have to make staff aware of the corporate culture and image this can be expensive may involve staff training costs.
Will have large cost implications for changing logos, uniforms etc throughout an organisation.
May require the organisation to hold launch events or press conferences.
Clearly defined policies and procedures.
Empowerment/employee views
Describe 3 forms of legislation which would affect the running of an organisation (6)
Health and Safety at Work Act 1974
States employees’ and employers’ duties with regard to health and safety
Employers have a duty to take responsible care of their own health and safety as well as that of their employees
Office, Shops and Railway Premises Act 1963
States regulations which must be met by employers regarding working temperatures, toilet and washing facilities, first aid, space
requirements, cleanliness
Equal Pay Act 1970
States that all employees should receive the same pay when work of equal value is undertaken
Employment Rights Act 1996
States duties and rights of employer and employee
Includes the right to a written Contract of Employment within 2 months of starting work
The right to an itemised pay slip
Rights of employees regarding Sunday working
Rights of employees regarding maternity and termination of employment
Data Protection Act 1998
Data must be obtained fairly and lawfully
The organisation must register the purpose for which the information is held
They must keep records for no longer than necessary
The information must be up to date and accurate
Employees have a right to request to see information held about them and have it changed if incorrect
The information should not be used for any other purpose than that for which it was collected
They must take appropriate security measures to keep the information safe
Freedom of Information Act
Correct identification of Act = one mark per Act (date not required)
Equality Act 2010
Legislation is one example of a political external influence. Describe 3 other examples of external influence on an organisation. (3)
Economic
Businesses are less likely to borrow money when interest rates are high and their costs are rising.
High unemployment means consumers may stop purchasing the product or service.
Socio-cultural
Changes in life-style and attitudes affect demand
Change in working patterns eg increased number of women working has led to an increase in demand for childcare facilities, house-cleaning companies etc
Consumers are increasingly conscious of ethical issues and organisations are required to make their products meet these concerns.
Technological
Machines/technology may change or improve the production process
Less workers may be needed
Need to update technology which has cost implications
Demand for new technology products by consumers
Competitors
Environment
Describe external factors that could influence the effectivness of a marketing campaign (6)
Political factors − terrorism, government legislation.
Economic factors − inflation, exchange rates affecting tourism, recession.
Social factors − changes in population distribution, ie, ageing population, smaller families, women into work.
Technological factors − e-commerce, use of e-mail and internet for marketing.
Environmental factors − changing weather patterns, storms, more rain.
Competitive factors − competition from European and other UK resorts.
Describe the changing patterns of employment that have occurred in the UK during the past 20 years (4) 2007 (1) q6a
Decline in full time workers with move to more part-time and short term contracts.
Firms now have core workers and outsource or sub-contractors for non core activities.
Increase in service/tertiary sector employment and decline in traditional manufacturing industries.
Increase in women in full or part-time employment.
More women in managerial posts.
Increase in number of older workers due to aging population and changes in pension laws.
Homeworking/Teleworking.
Smaller firms.
Career changes more common.
More people are self employed.
Changing in patterns of working hours, eg, annualised hours, flexi-time.
People choosing to work abroad.
Explain 3 economic factors that can affect the profitability of a business (3)
Inflation – increased prices or cost.
Exchange rates – value of one currency compared to another.
Interest rates – cost of taking out a loan.
Recession – a slow down in the economy/fall in demand.
Boom period – an upturn in the economy/increase in demand.
Unemployment – fewer people working.
Describe 4 other (economic) external influences that can affect the success or failure of a business (4)
Political factors – laws from both UK and EU affect organisations in a variety of ways.
Social factors – society is continually changing and organisations must adapt to changing demographic trends as well as cultural trends.
Technological factors – technology is continually advancing and organisations must keep up-to-date with new developments in technology.
Environmental factors – weather changes in recent years have caused problems, also in recent years environmental issues have become increasingly important.
Competition – the way competitors act will impact on how an organisation needs to alter the way it operates.
Explain how external factors may affect an organisation (6)
Political – legislation and regulations will affect an organisation in that they need to comply with the laws of the country they operate in.
Economic – factors such as inflation, recession/boom periods, interest rates will affect organisations in a number of ways.
Social – changes in trends and fashions mean that organisations must continually carry out market research to see what products will sell or new products are desired.
Technological – as technology changes organisations must keep up-to- date and this will involve a large financial cost.
Environmental – organisations now need to attempt to be socially responsible and environmentally friendly both to comply with legislation and satisfy consumer groups.
Competitive – organisations must continually monitor their competitors prices and alter theirs accordingly.
Explain the effects that 3 political factors could have on an organisation. (A different effect should be used each time) (3)
Legislation − any appropriate law with an appropriate effect, ie, new laws on sale of alcohol have to be complied with or face a fine from the government. Taxation rates may change which will affect the profitability of an organisation.
Level of NHS funding may affect the number of or the prices charged by private hospitals.
Government initiatives in education have meant that private public partnerships have allowed companies to bid to build new schools.
Credit any relevant government policy with an appropriate explanation of the affect on the organisation, ie, giving loans to banks to help with credit crunch in 2009.
Describe 4 external factors (other than political) that could have an impact on an organisation (4
Economic factors such as a recession interest rates inflation.
Social factors such as changes in trends and fashion changes in patterns of employment.
The introduction of new technology that is continually changing.
Competitive factors such as the prices charged by a similar organisation.
Environmental factors such as the weather/flooding.
Explain the impact that recent trends in retailing have had on organisations (4)
Increase in customers shopping at large retail parks have meant that organisations are moving from high street stores to retail parks.
Increase in large superstores have meant many small local shops going out to business.
Vast use of e-commerce has meant organisations now must have websites with access to online purchasing.
Changes to opening hours means many organisations have to pay overtime to staff to work on Sundays and late evenings.
Large supermarkets selling a wide range of products has meant customers needs can be catered for under the one roof.
Increase in discount stores selling products at discounted prices has meant competitor organisations have had to reduce prices in order to keep customers.
Explain the impact of 3 environmental factors on an organisation. (3)
Weather – floods or severe weather can cause organisations to lose stock
lose customers
have high insurance claims/premiums
halt production
delay supplies
Recycling – can cause organisations to incur higher costs to dispose of waste and this will lower profits
Needs 3 different factors eg not 3 weather
Accept availability of natural resources if well explained
Emission reductions – this can cause organisations to alter their production methods to ensure they are complying with carbon emission levels
If they use renewable energy this will save energy costs in the long run
Actions of pressure groups such as Greenpeace may cause the business to lose customers due to protests outside the organisation
Natural disaster . Ash die-back …
Watch for repetition for impact
Describe the following: (2) 2023 q4c
conflict of interest between employees and managers
managers may want to cut wages to cut costs whereas employees may want wage rises
managers may want to increase workload to increase efficiency whereas employees may want their workload reduced
Describe the following: (2) 2023 q4c
interdependence between employees and managers
both employees and managers will need the business to succeed to keep their jobs secure
employees need managers to set them tasks so that they can get paid, whereas managers need employees to carry out the tasks
Methods of funding growth
Retained profit - a business can decide not to distribute profit to its shareholders and use it to reinvest into the business.
Divestment – where a business sells off an asset to raise finances to grow.
Deintegration - selling off a part of a business that had previously been integrated.
Asset stripping - when a business is purchased for the value of its assets which are then sold for profit.
Buy-in - when managers not employed by the firm purchase the business as they believe they can run it more profitably.
Buy-out - when managers or employees who are currently employed by the business purchase the business from the owners.
Outsourcing – where when a firm hires another business to perform some of its activities.
