Today

Question 1

Delayering

Answer 1

This is removing one or more layers of hierarchy from the organisational structure.

Question 2

Benefits of Delayaring

Answer 2

• Provides an opportunity to better delegation, empowerment and motivation as the number of managers may be reduced and more authority is passed down the hierarchy
• Communication is faster within a business since it has to pass through less layers
• Reduced cost due to less managers being needed
• Can encourage innovation
• Better costumer service or understanding of what the costumer wants or needs since it brings the manager in closer contact to the costumers

Question 3

Disadvantages of delayering

Answer 3

• Not all organisations suit flatter organisation structures - mass production industries with low-skilled employees may not adapt easily
• It can cause a negative impact on motivation due to jobs being loss
• A period of disruption could happen while changes happen and people are given new roles and responsibilities
• Could result in managers and staff with valuable experience and skill may be lost

Question 4

External sources of finance

Answer 4

• Debt factoring: this is a company which will buy a % of the debt. It is a short term source of finance.
• Overdraft: Allows a business to spend when they are out of money. (Larger the business larger the amount of money u can spend).
• Share Capital: Selling shares to people for a large amount.
• Bank Loan: Large sum of money a business can request from the bank (has to be paid back).
• Venture Capital: Inviting other business owners into business. Can be done through selling share to other owners or venture capital loans (venture capitals willing to loan money to a business that a bank might not).

Question 5

Internal sources of finance

Answer 5

• Retained Profit: Percentage of profit kept within the business for the purpose of being used to grow the business. Share holders might sell business if there is too much retained profit.

Question 6

Income Elasticity of Demand

Answer 6

• the level of responsiveness of a products demand to changes in the costumers income
• e.g. if a costumer earns more by 10% expensive soup demand could increase by 15%

Question 7

Income elasticity of demand meaning of numbers

Answer 7

• greater then +1 = income elastic (these are usually luxury goods e.g. luxury clothing)
• greater then 0 but lower then +1 = income inelastic (these goods are usually good which are necessities).
• Lower then 0 (starts with a - symbol): products that decrease in demand as income rises.

Question 8

Price elasticity of demand

Answer 8

How responsive demand is to changes in price

Question 9

Difference between elastic and inelastic

Answer 9

• Elastic: This is when the product has high responsiveness to the price change.
  E.g. A happy meals demand increase in price by 10% causing a decrease of demand by 13% making it elastic.
• Inelastic: This is when a product is very responsive to the change in price.
  E.g. A Rolex watch increase in price by 5% causing a decrease in demand by 3% makes it inelastic.