Understanding Business

Question 1

Name and describe the sectors of industry

Answer 1

Primary - businesses concerned with extracting natural resources from the earth e.g., farming, mining, oil, fishing.

Secondary - businesses that are in the manufacturing industry. These businesses use the materials extracted by the primary sector businesses and turn them into products e.g., turning crops into cereal, turning wood into furniture.

Tertiary - businesses that produce a service e.g., banking, hairdressing, tourism, entertainment.

Quaternary - businesses which provide information services e.g., ICT, research and development, app development, market research organisations.

Question 2

Compare a public sector organisation with a public limited company

Answer 2

A public sector organisation is owned by the government whereas a public limited company is owned by a minimum of 2 shareholders.

A public sector organisation is controlled by the government whereas a public limited company is controlled by a board of directors.

A public sector organisation is financed by taxes paid by the public whereas a public limited company is financed by shareholders investments and new shareholders.

Question 3

Describe the objective corporate social responsibility

Answer 3

When a business aims to act in an ethical way so that they benefit society or the environment e.g., good pay and working conditions, recycling, reducing packaging, charity donations. Generates a good business image, attracts customers.

Question 4

Describe the objective growth

Answer 4

To make the business larger (not all businesses will aim for this as it can be seen to lose the ‘personal touch’ element) but it has many advantages.

Question 5

Describe the objective satisficing

Answer 5

Aiming for a satisfactory result rather than the ‘best possible’ result, allows survival rather than profit maximisation. This allows a satisfactory level of profit which satisfies shareholders, suppliers and employees.

Question 6

Describe the objective managerial objectives

Answer 6

When managers set objectives, they believe will improve the status of the company e.g., expand into new markets.

Question 7

Describe the objective working within a budget

Answer 7

Sticking to annual budget and not overspend (particularly for public sector organisations).

Question 8

Describe what outsourcing is

Answer 8

Outsourcing is when an organisation employs an outside business to carry out certain activities e.g., marketing, accounting, printing etc. This outside business will usually be a specialist. Can allow concentration on core activities.

Question 9

Describe the advantages of outsourcing

Answer 9

The core activities of the business take ‘central stage’

The work is undertaken by another business, which will offer more skill and expertise.

Recruitment and training costs are reduced as there is no need to hire individuals to do the work being outsourced.

In certain cases, the organisation does not have to invest in expensive technology such as IT and photocopiers.

Question 10

Describe the disadvantages of outsourcing

Answer 10

There could be a risk of losing sensitive data and resulting in a breach of confidentiality.

Management might lose control of those activities which are outsourced.

The outsourcing providers could work with many customers and they, therefore, might not give 100 percent attention to any one customer.

The outsourcing provider might have difficulty meeting delivery time frames and could produce poor quality work, which could reflect badly on the organisation.

Question 11

Describe the impact that the political factor may have on an organisation

Answer 11

Changes to laws could effect a business because if the business doesn’t adhere to these changes, they would gain a negative image and lose sales.

Changes to tax rates could effect the business because if taxes were to increase, consumers will have less money to spend which results in less sales for the business.

Changes to VAT rates could effect a business because changes to VAT rates could lead to a lose in sales and customers due to products being more expensive.

Question 12

Describe the impact that the economic factor may have on an organisation

Answer 12

Having an increase in prices can lead to a lose in sales from those who cannot t afford to keep up with the inflated prices.

Businesses may need to make staff redundant to survive. Prices can be decreased to encourage sales but profits will fall. Unemployment is high and so demand falls.

Businesses may find it hard to recruit new employees if the business has gained negative publicity from previous redundancies.

Question 13

Describe the impact that the competitive factor may have on an organisation

Answer 13

Competition could undercut prices. To keep up, businesses may have to also reduce prices and reduce profit levels or lose customers to the competition.

The competition can launch new products and to keep up, businesses will have to spend money on researching and developing products of their own.

Question 14

Describe the flat structure

Answer 14

The flat structure only has a few levels of management.

Has a short chain of command.

Managers have a wider span of control.

Managers are directly responsible for more employees.

Question 15

Describe the advantages of the flat structure

Answer 15

Information flows quickly.

Consulting staff on decisions takes less time.

Business is more able to respond to market changes.

Customers needs are quickly identified and dealt with.

Question 16

Describe the disadvantages of the flat structure

Answer 16

Removal of management levels means there is less control throughout the business.

Mistakes are easier to make.

Question 17

Describe the tall structure

Answer 17

Many layers of management

Long chain of command.

Each manager has a narrow span of control.

Information and decisions need to go through each level.

Question 18

Describe the advantages of the tall structure

Answer 18

Great deal of control and supervision.

Clearly defined roles and procedure to follow.

All members of staff are supervised.

Staff have the chance to become experts in their roles.

Question 19

Describe the disadvantages of the tall structure

Answer 19

Decision making can take a long time as every level must be consulted.

Communication can be slow therefore customers needs can take a while to meet.

Not being able to adapt to changes in market quickly can make business vulnerable.

Question 20

Describe what delayring is

Answer 20

This is the removal of levels of management e.g., changing from a tall to a flat structure.

Although this means managers can lose their jobs, communication and decision making would be faster, reduces costs of salaries and increases staff empowerment.

Question 21

Name and describe the factors affecting the quality of decisions

Answer 21

Staff - managers ability/experience, hoe much risk they are willing to take, staffs resistance to change.

Finance - whether finance is available to address the weakness or for growth, financial constraints may mean that the best solution for the problem cannot be used.

Technology - spreadsheets can improve accuracy, email can be used to communicate decisions and gather opinions on them, video conferencing can reduce the need for travel allowing decision making meetings to take place more easily.

Question 22

State the ways to measure the success of decisions

Answer 22

Profit levels
Sale levels
Staff absence levels
Feedback from customers and staff
Researching review sites

Managers must therefore continually review and evaluate the decisions they make at ALL levels. This will make sure that organisational performance is always improving.

Question 23

Name and describe the roles of a manager

Answer 23

Plan - looking ahead, seeing potential opportunities or problems and devising solutions, setting targets and setting aims and strategies.

Organise - arranging the resources of the organisation to be there when people need them and acquiring additional resources if required e.g., staff.

Command - issuing instructions, motivating staff and displaying leadership.

Co-ordinate - making sure everyone is working towards the same goals, that all the work being done fits together and people are not duplicating work or working against each other.

Control - looking at what is being done, checking it against what was expected and making any necessary adjustments. This is the monitoring and evaluating role of management.

Delegate - giving subordinates the authority to carry out tasks. This helps with motivation and reduces the managers work-load. The overall responsibility will still lie with the manager who delegated the authority.

Motivate - encourage workers by helping them to enjoy their tasks through team working, participating in decision making and by giving them some responsibility.

Question 24

Describe the impact that the social factor may have on an organisation

Answer 24

Uk ageing population - market research required might be expensive and time consuming.

More woman with professional careers - need to go on maternity leave so training and employing new staff is expensive and time consuming.

Evolving Work life balance - organisations have to provide and pay for more staff to operate these hours.

Changing fashion trends - business could have less sales as customers don’t want the product anymore.

Question 25

Describe the impact that the technological factor may have on an organisation

Answer 25

If the business does not have an online store then customers may be put off if there is no stores near them leading to a decrease in sales and profit.

If the business does use social media then customers might not have any way of finding out any deals or upgrades the business is offering.

Upgrading technology can be expensive for the business.

Question 26

Describe the impact that the environmental factor may have on an organisation

Answer 26

Weather - if weather is to severe it can damage the business forcing them to close which lead to the business having no sales and then needing to pay for the damage done to the workplace.

Recycling - if a business does not recycle the business can gain a negative reputation.

Carbon footprint - expensive initially to use renewable energy. Can lose the business customers off the business is emitting carbons.