Understanding Business

Question 1

Children 1st is a charity which operates in the Voluntary Sector. Identify and describe the 2 other Sectors of the Economy. (4 Marks)

Answer 1

• Private Sector – organisations owned by private individuals for purpose of making profits.
• Public Sector – organisations run by the government for the purpose of providing essential goods/services to the public. Not profit making/aim to break even.

Question 2

Describe and give an example of the following 3 sectors of activity: (6 Marks) • primary sector • secondary sector • tertiary sector.

Answer 2

1 mark for description – max 3 & 1 mark for example – max 3 Primary sector  Growing or taking resources from the earth Eg – farming, fishing, quarrying, mining Secondary sector  Turning the raw materials into finished goods  Manufacturing the goods Eg – shipbuilding, construction, food manufacture Tertiary sector  Providing intangible items  Providing a service Eg – shops, banks, hotels, window cleaner, beautician

Question 3

(Cameron House is a 5* Hotel Resort on the banks of Loch Lomond, the gateway to the Scottish Highlands. It has won many awards for the quality of service it provides to guests. This includes a hotel, luxury lodges, a golf course, spa and leisure centre, luxury rooms and top quality restaurants serving local produce. It is also a favourite venue for weddings and the hotel is booked most weekends in the year for these events—a Wedding Co-ordinator is employed at the hotel. All wedding client detail records are stored on a database.) From the case study, identify services Cameron House offers to its customers. (3 Marks)

Answer 3

Service to its customers: • hotel • luxury lodges • a golf course • spa and leisure centre • luxury rooms • top quality restaurants • wedding co-ordinator service

Question 4

Give 3 ways in which a business can measure customer satisfaction. (3 Marks)

Answer 4

Ways to measure customer satisfaction: • Feedback forms in rooms / restaurants / suggestion boxes • Good reputation/recommendation • Financial tips received from customers • Repeat business/loyalty • Survey/market research • Increased sales/profits • Reduced complaints • Customer observations • Comments on Trip Advisor/Social media

Question 5

(Although much smaller than many of its better known rivals, The National Caledonian Bank Group plc (NCB) has grown through internal and external growth. The even smaller Scotia Bank became part of the Group after a take-over. NCB was one of the first banks in Scotland to offer full internet banking service to customers. NCB announced job losses from insurance businesses owned by the Group. This included office closures in Oban, Inverness and Elgin as NCB tries to cut costs in the business.) Suggest 2 ways in which NCB can ensure that customers are satisfied with the service the bank provides. (2 Marks)

Answer 5

Ways in which RBS can ensure customers are satisfied with service: • Polite/cheerful/helpful employees. • Reduce queue times. • Longer opening hours. • Answer phone quickly. • Staff Training/Staff bonuses….. linked to better service. • Quality Circles. • Benchmarking. • Customer surveys/questionnaires. • Suggestions boxes in branches. • Good after sales service.

Question 6

(S&K MacDonald homes are a premier house builder located in the Highlands of Scotland. They are committed to caring for the environment and use natural resources such as locally sourced wood, and natural stone cladding in all their homes. They produce quality homes with a focus on customer satisfaction.) Suggest 2 ways in which S&K MacDonald homes can measure customer satisfaction. (2 marks)

Answer 6

Increase in sales. Increase in profits. Increase in market share. customer loyalty. Recommendation. Reduction in customer complaints. Positive PR in press. Customer comment cards. Market research surveys/questionnaires. Interview customers after house purchase. Feedback forum on website.

Question 7

(The BBC and the National Union of Journalists have reached an agreement to resolve a dispute with staff. The two sides met with the conciliation service ACAS and afterwards a conclusion had been reached on how to resolve the dispute. BBC staff had held two days of strikes over the issue.) The BBC is a public sector organisation. Give 2 features of a public sector organisation. (2 Marks)

Answer 7

Features of a public sector organisation: • Owned/run by the government • Non profit making/ break even • Provides (essential) services • Funded through taxation • Large organisation/many employees

Question 8

Give one advantage and one disadvantage of operating as a partnership.(2 Marks)

Answer 8

Advantages of operating as a partnership: • Greater capital invested in business • Easier to obtain finance • Spreads risk for owners • Partners can specialise Disadvantage of partnership: • Unlimited liability • Partners may disagree • Shared profits

Question 9

(NAIRN’S LIMITED Nairn’s Ltd is based in Edinburgh and has been making oatcakes since 1888. The Nairn’s range of food is naturally wholesome and nutritious. Nairn’s now sell their products all over the world becoming a global brand. Rising food prices have increased the cost of the main raw materials by over 10%. Nairn’s have increased new product development and marketing to increase sales to cope with rising costs.) Identify the type of business organisation that Nairn’s Ltd operates. Describe 2 advantages of this type of business organisation. (3 Marks)

Answer 9

Type of business organisation: Nairn’s is a private limited company. Advantages: • Increased capital investment through shares • Less vulnerable to take over as shares not traded on Stock Exchange • Limited liability • Shared decision making/responsibility • Financial affairs can be kept private

Question 10

Henri is a sole trader. Give one advantage and one disadvantage of this type of business organisation. (2 Marks)

Answer 10

Advantages of being a sole trader: Owner makes all the decisions/Faster decision making. Gets to keep all profits. Personal satisfaction. Disadvantages of a sole trader: Stress of working alone/Difficult to take holidays. Difficult to obtain finance. Unlimited liability.

Question 11

Describe how the aims of a charity, such as Children 1st, might differ from those of a business, such as Sony. (2 Marks)

Answer 11

Difference between aims of a charity to aims of a private sector organisation: Children’s 1st aims: • Listen to children. • Support children. • Support families. • Raise funds. • Lobby government to change laws. Business aims: • Maximise sales/profits. • Wide range of products/services. • Increase quality. • Increase market share/be market leader.

Question 12

Compare the features of a sole trader with a public sector organisation. (3 Marks)

Answer 12

• Sole trader is owned by a single person whereas a public sector organisation is owned by the government. • Sole trader is controlled by the owner whereas a public sector organisation is controlled by elected councillors/government departments. • Sole trader is financed from personal savings etc whereas a public sector organisation is financed from public taxes. • Sole trader’s aim is to make a profit whereas a public sector organisation aims to provide a public service. 1 mark per compared point – both sides needed to get one mark (3)

Question 13

Compare the objectives of a private sector organisation with those of a public sector organisation. (3 Marks)

Answer 13

• A private sector organisation wants to maximise profits whereas a public sector organisation wants to work within a budget • A private sector organisation wants to grow whereas a public sector organisation wants to provide a service to its community • A private sector organisation wants to survive whereas a public sector organisation wants to be efficient • Both private and public sector organisations have an objective to be socially responsible 1 mark per compared objective – both parts required to gain the mark If 2 separate lists match up linked objectives

Question 14

The Hunter Foundation is a charitable organisation whereas West Coast Capital is a private partnership. Compare the objectives of a charity with those of a partnership. (2 Marks)

Answer 14

Charities will want to make maximum donations in order to help the cause whereas a partnership will want to make maximum profits for their partners. Charities will want to survive in order to continue to help the needy etc whereas a partnership will want to survive in order to continue making money for themselves. Charities will want to grow in order to help gain more donations and help more people whereas a partnership will want to grow in order to dominate a market. Charities will want to ensure their social image is intact so that people will continue to donate to their cause whereas a partnership will want to keep a good social image to ensure customers will continue to use their services. 1 mark for comparing objectives – both sides required to gain mark

Question 15

Describe internal factors that affect an organisation. (3 Marks)

Answer 15

Lack of new technology to manufacture products more efficiently. • Lack of finance to enhance the business. • Staff being resistant to change. • Staff may need more training in order to be more effective. • Lack of experience in manager in order to carry out the decisions made. • Lack of staff. 1 mark per described internal pressure  

Question 16

Other than “competition”—identify and describe 2 external factors that could affect the success of Sony’s products. (4 Marks)

Answer 16

Other than competition, 2 external factors affecting Sony: • Political – government policies and laws which affect the business, for example Health & Safety, Employment Laws etc. • Economic – the state of the economy, eg Boom/Recession, inflation, interest rates, exchange rates etc. • Social – social trends such as ageing population, migration, health, green issues etc. • Technology – effect of changes in technology on business, increasing use of mobile internet technology, software updates etc. • Environmental – effect of pressures on environmental issues on the business/Weather/Distribution delays. • Accept reference to problems with Suppliers. (no ID mark) ID of factor x 2 – 2 marks Adequate description of factor x 2 – 2 marks Must give PESTEC word for ID mark. Only give description mark for supplier.

Question 17

Explain the effects of external factors on an organisation. (4 Marks)

Answer 17

Political − changes in legislation set by government may mean that organisation has to implement change to the way it carries out process etc which lead to higher costs. Political − changes to the level of taxation to be paid by an organisation may mean that the organisation has less money to do other things. Economic − changes in the level of interest charged by a bank may mean that a loan becomes unaffordable and therefore any plans may need to be put on hold. Economic − changes in the level of inflation may mean that supplies become more expensive and the organisation may have to look further afield for cheaper alternatives. Social − changes in people’s tastes will require an organisation to continually be doing market research and having to change its product range in order to keep up. Technological − advances in technology may mean that an organisation may have to change production methods costing it large sums of money initially. Environmental − UK government push to reduce carbon emissions has resulted in organisations having to change processes which have cost it money. Competitive − if a direct competitor changes their pricing, for example, then an organisations may be forced to do the same otherwise it may lose out on custom.

Question 18

A G Barr plc managed to survive and grow despite facing difficult economic times. Name and describe 3 other external factors that could affect an organisation. (6 Marks)

Answer 18

Political/Government • Government legislation • Government taxation • Interest rates Social • Society’s beliefs and attitudes • Demographics of a country Technological • Advances in technology that may lead to faster production/ communication etc. Environmental • Effects of environmental issues eg changing weather patterns, less carbon emissions Competitive • The habits of competitors eg lowering prices

Question 19

(Bartosz and Dominika Kowalski opened a Polish Deli and cafe. They carried out market research before deciding on a location in a shopping centre. The business has been a great success, even though the UK economy has been affected by a slow down in the Business Cycle.) Other than Bartosz and Dominika, identify 3 stakeholders who may have an interest in their business. (3 Marks)

Answer 19

• Customers • Suppliers • Lenders/Bank • Local Community • Employees • Government • Owners of shopping centre • Shareholder/Owners/Partners

Question 20

Describe how these stakeholders can influence decision making in the business.

Answer 20

•Customers – level of spending influences profits/cater to customer needs • Suppliers – quality of raw materials, delivery times • Lenders/bank – interest rates can rise increasing costs • Local Community – can object to development of shopping centre • Employees – quality of work/industrial action can affect the business • Government – laws influence the operation of the business • Owners of shopping centre – influence rent costs of the business Accept all answers which relate specifically to decisions the business will make as a result of stakeholder influence.

Question 21

Identify 3 different stakeholders and describe the effect of closing a business would have on each of them.

Answer 21

Owners/Shareholders • May lose their investment. • May lose dividends. Employees • Will be made redundant. • May find it difficult to find a new job. Managers • May find it difficult to find a new job. • Loss of status. • Loss of perks/benefits. Customers • Will have to find another organisation to give them the same service. • May have to look further afield. Suppliers • Will lose out on a customer. • May suffer financial difficulty with loss of orders. Lenders • May not get their money back. Government • May need to pay out more on benefits. • May need to set up advice and counselling services to help workers who have been made redundant. • Loss of tax revenue. 1 mark for identifying stakeholders (max 3) 1 mark for description of the effect (max 3) (6) If both managers and employees given – effect on managers must be managerial Allow consequentiality