Unit 1 - Business Nature and environment - Peacewick potential questions

Question 1

1. Explain why PU is classified as both a tertiary and quaternary sector business

Answer 1

Tertiary: Because it provides education as a service

Quaternary: Since PU is Involved in research (IT faculty)

Question 2

2. Which of PU’s functional departments have been recently affected? Explain why?

Answer 2

Technology and equipment: Lecturers and students did not have the skills as well as the necessary IT equipment for online lectures. Many lecturers lacked the IT skills to give online lectures.

Human resource management: Staff turnover in the faculty of history is high. Many of the faculty resigned, in addition-, Adriana has to deal with cases of alleged bullying by Jim Summerfield, head of the faculty. In addition, Patricia Hughes, a formal lecturer, is taking PU to court because of what she believes is an unfair dismissal.

Finance: The finance department has had to and must continue to identify methods to improve profit, for instance by reducing outflows by deciding to cut down on certain costs (e.g. possibly cutting costs on unused equipment, budget for international conferences. etc.). Moreover, they will likely have to consider new pay structures for the employees.

Question 3

3. What is the legal structure of Peacewick University?

Answer 3

Peacewick University is an Non-profit business (use their surplus revenue over cost to finance their objective or mission)

Question 4

4. Identify PU’s stakeholders

Answer 4

Representatives of the community

Employees

Government

Students

Managers part-time

Other universities (competitors)

Question 5

5. Outline the impacts of the catastrophic accident on the stakeholders.

Answer 5

Stakeholders are people or organisations that have direct interest with the activities of the business.

It negatively impacted all of the stakeholders, for instance students. Some international students had to return back to their home country for education.

Students demotivated due to the shift to online lessons.
It negatively impacted employees as many of them were dismissed due to this accident (10% staff redundancies)

It impacted the government as they had to give money to the business to keep it functioning (medical research)

Management - crisis management of accidents, probably working longer hours, dealing with high stress situations, conflict in the workplace, damages, repairs, costs, budget variations.

Employees - likely demotivated because of closure, loss of students, online teaching, redundancies all creating low morale. Generally a stressful situation, lecturers are usually looked to by students for support, guidance and leadership.

Competitors: Eventually a positive effect on competitors who are not affected by the catastrophic accident, as they will see a potential increase of applicants.

Question 6

6. Outline 2 potential advantages of government grants for PU

Answer 6

A government grant is a financial award (Transfer payment) given by a federal, state, or local government authority for a beneficial project

A potential advantage for PU receiving government grants is that they do not have to be paid back to the government and thus have no interest associated with them. This will allow PU to fund endeavors without worrying about payback.

Another potential advantage for PU receiving government grants is that it will help them to mitigate the cash flow crisis they are currently facing and perhaps allow them to develop a new revenue stream in the field of medicine.

Question 7

7. Outline two impacts of the chemical accident on PU’s stakeholders.

Answer 7

Stakeholders are individuals or organisations who are interested in the -outcomes of an organisation, in this case in PU’s well being. Stakeholders can either be external (customers, suppliers, competitors…) or internal, employees managers and directors.

Two impacts of the chemical accident on PU’s stakeholders, with the chemical accident PU had to cut down costs, one of the ways this was done was through the dismissal of staff. 10% of teaching staff and support staff were made redundant. In addition to this, 20% of staff were moved to part-time employment. This could lead to demotivation in their jobs as they have a lack of job security with the uncertainty of their situation.

Question 8

8. Outline two advantages and disadvantages of PU being a not-for-profit non-governmental organisation [NGO].

Answer 8

Advantage 1: Tax exemption Unlike many for-profit businesses, nonprofits are exempted from taxes, which is a huge relief for an organisation that relies mainly on donations and grants.

Advantage 2: Many employees who work for nonprofits have a personal interest in and commitment to the organisation’s cause. This results in higher productivity and more motivated employees.

Advantage 3:PU’s founders, officers and workers are not personally liable for the organisation’s debts, including fines and lawsuits. In other words, founders have limited liability.

Disadvantage 1: Public relation, NGOs will have to improve their public reputation since all their sources of finance come from the public. For example, PU has a good public reputation in its faculty of IT, where one of the world’s largest software companies are willing to provide them funding for further research.

Disadvantage 2: Social pressure, NGO’s usually have a lot of pressure from political activists and others. For example, PU was pressured by political activists to remove Di Jones (the director of a multinational computer who was funding research in PU) because of her family history.

Disadvantage 3: PU has limited sources of finance as a NPO (as compared to a for-profit organisation), and their main source of finance (student fees) has taken a major hit, with international students leaving and lower expected admission rates.

Question 9

9. What would be the benefits of PU having/following ethical objectives?

Answer 9

Having ethical objectives is important as it helps the business gain a better public image in the eyes of the stakeholders. This results in the business being more likeable in the eyes of the stakeholder which could lead to positive Word of Mouth promotion.

Some helpful points:
Attracts investors (good reputation)
helps to build employees, investors and customers’ loyalty
creates a positive company image
increases employees’ motivation.
helps to attract potential candidates for employees
Has a close link to PU’s commitment to v

Question 10

10. Outline advantages of being committed to CSR

Answer 10

CSR increases employee engagement.

CSR improves bottom-line financials.

CSR supports local and global communities.

Increases investment opportunities.

Presents press opportunities.

Increases customer retention and loyalty.

Question 11

11. Outline the effects of the external environments on an organisation

Answer 11

External environment factors are elements that exist outside of a company’s internal environment that can affect a company’s operations. These outside forces can help the business or present challenges to its current processes. Managers often keep track of external environment factors so they can recognize and resolve the issues the factors cause and make appropriate CSR changes.

External environment factors are important because they can cause direct and indirect effects on business operations, personnel and revenue. The external environment of a company changes constantly in ways beyond the company’s control, but executives and managers can track these changes and minimize their consequences. Choosing to monitor the dynamic nature of external environment factors allows businesses to protect themselves against predictable events and mitigate the effects of unexpected changes.

Question 12

12. With reference to PU, explain the purpose of the business plan. [6 marks]

Answer 12

A business plan is a formal document that describes the business, sets out its objectives and strategy, identifies its market and provides its financial forecasts.

A business plan is implemented in order to show the businesses strategies and goals moving forward. This is due to the fact as it provides insight on the next steps that should be taken by the business to ensure a successful future. It is an important planning tool for successful management of a new business as well as providing important information for different stakeholders.

PU’s business plan involved building a new lecture theatre, a new building for the music faculty, installation of renewable energy sources and improved pay structures for lecturers. This was all backed by a projected increase in the number of students attending PU. As all these ventures would require capital investment, having a positive projection in the business plan can be used to reassure any lenders such as the bank that PU looks for the finance.

Furthermore, A business plan can be used by any stakeholders of PU, the board of trustees, to evaluate the future performance of the organisation and also evaluate whether their investment in the organization has been put to good use. During the recovery period of the organisation, the business plan will aid in setting firm objectives which could be corroborated with quantifiable figures. This would instill confidence in potential investors and also aid in PU reaching its mission/vision.

Question 13

13. With reference to PU, what ethical choices should PU consider in order to improve their CSR?

Answer 13

Revise employment contracts

Fire the head of faculty for history

Remove funding company that is exploiting LDCs

Increase use of renewable energy and solar panel

Question 14

14. With reference to PU, explain two advantages and one disadvantage of mission statement [6 marks]

Answer 14

PU having a mission statement informs the stakeholders of the common purpose of PU’s existence and values. These are “inclusivity, social responsibility, excellence, etc.” Adhering to this mission statement can help set organisational objectives, especially as PU is faced with many important business decisions to make their future. This could additionally gain additional support and acceptance from various stakeholders like students, governments, as well as private investors.

PU’s focus in the mission about inclusion, social responsibility, etc. could be a motivating force for both employees and managers who will appreciate working in this environment. This could also attract new staff, which PU is in need of due to their many issues, and existing staff will appreciate this culture evident within this mission statement.

However, it can be difficult to judge whether PU is meeting this mission statement. This is evidenced by the fact that Di Jones has caused political controversy, the student politics society is bringing in a guest speaker accused of antisemetic views, and one of the universities founders is exploiting LEDCs. All of this may discourage potential support from stakeholder groups and many will argue that hypocrisy is present between the mission statement and what has occurred at the university.

Question 15

16. How is PU meeting its sustainability goals due to the accident?

Answer 15

As there are now less students due to the accident, this is helping them meet their sustainability goals. For example, as there are now less students, the University is decreasing their carbon footprint through using less water, energy, and electricity. In turn, this is helping them decrease their carbon footprint making them a more sustainable business.

Question 16

17. What is an economic recession?

Answer 16

A recession is a significant decline in economic activity that lasts for months or even years. Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time. Recessions are considered an unavoidable part of the business cycle—or the regular cadence of expansion and contraction that occurs in a nation’s economy.

Question 17

18. With reference to PU, explain two elements of their Business Plan.

Answer 17

Installation of renewable energy sources - this was part of their original business plan as it will help give the business a good public image by using renewable energy sources. This was also put in place by the business as CSR is an important aspect of the business structure. So, through the use of renewable energy sources PU can achieve their CSR commitments.

New building for the faculty of music - This is part of their business plan as it will help create more resources and spaces for the staff which may boost their motivation. It is part of their business plan as it is a goal the business was hoping to achieve in the near future.

Question 18

19. With reference to PU identify and explain 2 differences in for profit and non- profit organization.

Answer 18

A non-profit organisation or a “not-for-profit” business like PU is to provide a service or benefit to the community with no intention of earning a profit. This is supported by PU’s mission statement which is based on “social responsibility”. On the other hand, a for profit organisation is one that operates with the sole intention of creating profit.

For-profit organisations tend to fund themselves for business projects and operations through their own profits and revenues. On the other hand, a non-profit is more likely to receive funding in the form of grants through the government for students and employees.

Any surplus revenue received by PU is simply reinvested into the business, rather than being enjoyed by shareholders or as bonuses by executives and managers

Question 19

With reference to PU identify and explain 2 differences in for profit and non- profit organization.

Answer 19

A business plan would typically include financial forecasts, predicting future student numbers and fees.

Using this information, PU would have been able to plan if they could afford to improve the pay structures of lecturers and install new renewable sources; increasing the likelihood of success.

A business plan would also include the aims and objectives of the business and strategies they will want to implement.

In PU´s case, the aim is to build a new lecture theatre due to the planned rise in student numbers. PU could anticipate the costs of this and have a goal to work towards. This could also be motivational for employees.

Question 20

With reference to PU, explain the interests of two stakeholders [4]

Answer 20

Students of PU will have an interest in receiving a high-quality education in their subject area, as they are paying fees for this service. As a result of the contamination, some students will feel like they are not receiving this due to having online lessons and no accommodation and so will be dissatisfied.

Lecturers at PU will have an interest in fair pay and job security. Some lecturers at PU have been made redundant and some have had to switch to part time employment. This will concern current lecturers who may now fear for their jobs, especially with continuing cash flow problems, which could impact their motivation and quality of lessons.

Question 21

20. With reference to PU, explain the effects on two stakeholders of the accident at the chemical plant [4]

Answer 21

One effect was on the students at the , some student’s accommodation was damaged, meaning that some students would have needed to move back home, especially some international students. This would have been time-consuming and led to additional travel costs which may have been unaffordable for some students.

Another effect was on the lecturers at the university, they had to switch to teaching online, due to issues with training and equipment, some lecturers would not have been able to deliver effective lessons, this would have negatively impacted their motivation as they may have felt unable to teach well as not all hygiene factors would have been in place/Maslow’s needs not being met such as love and belonging due to lack of face-to-face contact. Decrease in the quality of lessons.

Question 22

21. With reference to PU, describe two possible stakeholder conflicts that may occur [4]

Answer 22

There may be a possible conflict between the students and the university itself, the university is wanting to still have quality experience for the students but due to the contamination and damage, students had to attend lessons online, for some students this meant that they had to also move back to their home country.

This would result in not only increased costs for the students, but they may suffer a fall in the quality of their teaching, this was evidenced by some dissatisfied students and some demanding compensation. Another conflict may be between Adriana/the university and the trustees.

One of the new trustees, Di Jones, is facing pressure from activists to be removed from her role due to her family using slaves in the past. Adriana may be forced into a position to remove her due to this pressure and fear for the reputation of the university, however the trustees may not approve this as it can be argued that her family history is not Di Jones fault. This could lead to a breakdown in the relationship.

Question 23

22. Explain the impact of online teaching on two stakeholders [4 marks]

Answer 23

Impact on Students: One of the biggest impacts of online learning for a student will be struggling with focusing on the screen for long periods of time, because of which the quality of the education the students receives through online learning would be comparatively below the particular standards otherwise compared to the normal learning.

Impact on Teachers: For the teachers online teaching may result in an increase in the workload, as online classes limit the interactions hence increasing the workload of the teachers which as a result might result in demotivated teachers.

Question 24

23. With reference to PU explain an advantage and disadvantage of Internal Growth [4]

Answer 24

Internal growth is when a business grows using its own resources to increase in size. An example of this for PU would be if they were to open a new campus in country B. This would lead to increased revenue opportunities for PU through increased fees, as well as expanding brand awareness of the university; this could lead to improved facilities to enhance the student experience. However, internal growth can be a slow method of growth and expensive. PU already has cash-flow problems and is losing students so a move to another country seems risky at this point in time as they may not have sufficient funding to afford this option unless they access sources of finance. On the other hand, internal growth ensures greater control and coordination (than external growth) as there is no merging of separate organizations, which implies that the control is not diluted to other external authorities.

Question 25

24. With reference to PU, explain two features of being a not-for-profit business [4]

Answer 25

PU is a not-for-profit business as their aim is not to make a profit for shareholders but rather to invest in the university such as in new research and to improve facilities. Non-profits like PU also have a board of trustees, who discuss strategy and resource allocation to ensure that the fees generated are used in an appropriate manner, PU have different community representatives, so everyone’s view is considered.

Question 26

25. Describe two STEEPLE factors that have impacted PU [4] /two ways PU have impacted by changes in the external environment

Answer 26

One factor would be economic factors, the country PU are based in is currently in a recession which is predicted to continue for years to come. A recession is when an economy has two consecutive negative quarters of GDP growth. In a recession, consumers may be less willing to spend their money, this may impact student numbers at PU as potential falling incomes could reduce demand both now and, in the future, a real issue given already falling numbers.

Another factor would be political factors, after the accident and explosion, the government has stepped in to provide government grants and IT equipment to some of PUs students. This would have meant that more students could access the online lessons that they are providing and students seemed to be happier with the course as a result. They could be used in the future to support students with their work, even after lessons return to normal.

Question 27

26. Why is CSR important for Peacewick ?

Answer 27

Differentiate them from other universities and act as a USP, something which is very important for PU given that student numbers are decreasing. This could ultimately increase numbers if promoted effectively.

However, PU have faced some ethical issues that may affect their CSR. For example, the accusation of a company that funds medical research for the university overpricing medicines in LDCs and selling unapproved medicines. This could have a knock-on negative impact on the research that PU are doing, as many stakeholders may be unhappy about this as this goes against their mission statement and articles, this could lead to a fall in the brand image of the university. As a result, there may be possibly less funding for research, as other companies may not want to be associated with PU, in case people believe that this occurs in all projects.

PU will be meeting its moral objectives as a firm by completing CSR. Additionally, growing importance and focus on organisations which are ethical and sustainable implies that with greater efforts in CSR, PU can improve its brand image thereby, making it more appealing to students all over the world.

Question 28

27. Explain the opportunities and threats PU may face when opening a campus in Country B [6]

Answer 28

One opportunity of opening a campus in country B could be an increase in revenue fees in another country, as well as expanding brand awareness of the university, this could lead to improvements that ultimately enhance the student experience.

Despite recent issues, PU still has a strong reputation and with targeted promotion could quickly increase student numbers in a new area and help them to spread risk.

A possible threat could be that it would be difficult to enter a new country where there would be lots of existing established universities.

Students may not want to take the risk of joining a university with no evidence of strong results in that country so high costs of promotion will likely be required, which may be problematic, given that PU has cash flow issues.

Furthermore, there may be economic uncertainty, whereas it is unknown if there is also a recession in country B, this could be a potential issue which would affect the income of students/parents and reduce demand for their courses.

Question 29

28. Explain the role of ethics for PU [6]

Answer 29

Ethics are moral guidelines that guide decision making and strategy. PU could be argued to be ethical due to their work on ecological sustainability, for example all their electricity is coming from solar panels, and they aim to ensure the future refurbishments are much more sustainable. As well as long term cost savings that PU can benefit from because of this, this could help to differentiate them from other universities and act as a USP, something which is very important for PU given that student numbers are decreasing. This could ultimately increase numbers if promoted effectively. However, PU have faced some ethical issues, for example the accusation of a company that funds medical research for the university overpricing medicines in LDCs and selling unapproved medicines. This could have a knock-on negative impact on the research that PU are doing as many stakeholders may be unhappy about this as this goes against their mission statement and articles, this could lead to a fall in the brand image of the university. As a result, there may be less funding for research as other companies may not want to be associated with PU, in case people believe that this occurs in all projects.

Question 30

29. Explain the role and impact of globalisation on the growth and evolution of PU [6]

Answer 30

Globalisation has benefited PU as they have been able to attract many international students to the university who pay more compared to other students. This had allowed PU to invest further in research and facilities and differentiate themselves from competitors. However due to the damage caused by the contamination the loss of these students really impacts growth for PU as without these fees, they may not be able to afford any future growth such as the planned new campus. In addition, globalisation could have allowed PU to attract a wider range of lecturers with different skill sets. PU are also wanting to open a new campus in country B, this could lead to an increase in revenue fees in another country, as well as expanding brand awareness of the university, this could result in improved facilities to enhance the student experience. Despite recent issues, PU still has a strong reputation and with targeted promotion could quickly increase student numbers in a new area and help them to spread risk. However, depending on where this country is, they may be influenced by issues such as exchange rates with fees and cultural and linguistic differences which need to be considered within the teaching.

Question 31

31. Explain two reasons why PU would construct a business plan

Answer 31

The plan could be a necessary supporting document shared with potential investors or loan-givers in order to obtain the capital needed to start the project.

Plan and evaluate in advance, the risks associated with expansion (by evaluating the threats through a SWOT analysis or STEEPLE)

Question 32

32. With reference to PU, explain the importance of CSR

Answer 32

Corporate social responsibility is the duty that the firm has to the internal and external stakeholders (including the environment) to operate in ways beneficial for society. Being a not for profit organisation, PU doesn’t distribute its profits towards shareholders. Rather, it reinvests it into the university to pursue its mission and vision statement (which for PU is most likely going to involve some sort of community or society benefits). By doing this, PU is positioning itself as a social enterprise, having the characteristics of caring for the society and environment as well. If CSR is ignored, their reputation would plummet and key stakeholders such as the government or the chemical/ technological companies aiding PU will no longer want to be associated with their practices. PU may not be qualified to receive government grants or subsidies, and its bad reputation would affect its main source of revenue which is student tuition fees. Their competition would have an edge over them as their image could be better to be associated with than PU. This would also affect other revenue streams such as donations to PU which are heavily reliant on PU’s positioning as a social enterprise and its operations being beneficial to the members of society.

Question 33

33. Describe two changes in the external environment that have affected PU. [4 marks]

Answer 33

The economic recession caused PU to make about 10% of its staff redundant and 20% part-time employees in order to reduce costs. It has also caused a decrease in applicant numbers which has caused a decrease in local revenue. Additionally, one can attribute PU’s below satisfactory cash flow position to the economic recession as it slows down business activity. Together with the chemical plant disaster, PU became unable to meet its 2021/2022 business plan aims and objectives.

The chemical plant caused PU to have to stop on-site teaching until its effects had been minimised. It caused teachers to have to resort to tele-working which affected the quality of PU’s teaching service. Additionally, it put pressure on PU to provide teachers and students with the necessary IT equipment to facilitate off-site teaching and learning which could further worsen their cash flow position as they lack the necessary funds to cater to all students and staff.

Question 34

34. With reference to PU, explain two roles of the mission statement

Answer 34

Answer: A mission statement refers to the declaration of an organisation’s overall purpose. It forms the foundation for setting goals and objectives for the business. It tends to outline the values of the business, i.e. its beliefs and guiding principles that set the framework for how managers and employees operate on a daily basis.

The purpose of PU is to provide quality education to its students across a variety of subjects ranging from History to IT. They also wish to expand to a new country and open a second campus where they will continue to provide the best-in-class research and teaching facilities.

PU’s organisational values that determine its mission statement are inclusivity, excellence, perseverance, commitment, resilience, ambition, and creativity. They function in accordance with these values & beliefs and encourage their students to instill the same.

Question 35

Advantages of NPO

Answer 35

limited liability so the owners have a separate identity from the university

• Can be exempt from taxes , which reduces overall costs
• Board of Trustees (12) can maintain high amount of control

Question 36

Disadvantages of NPO

Answer 36

Limited funding as making a profit isn’t the main goal for the business, which could lead to cash flow problems (57)

• Limited funding also means less money available to promote staff and increase their salaries, this means that motivational theories such as Pink are unable to be employed to increase staff morale.

Potential Question: Would Peacewick University benefit from becoming a private/public limited company?