AS lvls essay

Question 1

Benefits to a business of holding high levels of inventory [8]

Answer 1

• When inventory alot usually buy bulk which is cheaper. Businesses can use this to reduce or make prices same. Businesses can also use the money for other things such as buying fixed assets or expansion.
• Can meet fluctuations in demand bcs can increase production and higher cust satisfaction and loyalty.

Question 2

Benefits of using internal sources of finance for business growth [8]

Answer 2

• No approval needed (different from bank loans & overdraft where approval from banks are needed)
• No legal obligations needed (bcs no consultation of third parties needed which makes it easier for the business)
• Most dependable & permanent resource than external sources (because does not rely on preference of creditors, market conditions, etc.)

Question 3

Disadvantages of internal sources of finance:

Answer 3

• Uncertainty (Bcs internal sources of finance rely on how much profit a business is making, is not recommended for businesses with low revenue and profit)
• Decreased earnings from profit to shareholders making them unsatisfied
• Reduces liquidity

Question 4

Different types of flexibility & how it can increase sales?

Answer 4

• Ability to change levels of production
• Hold high stocks
• Range of products

Question 5

Why does flexibility of operations not enough to increase sales?

Answer 5

Amount of sales can be affected by other things such as:
- Service from employees
- Prices of products
- Quality of products

Question 6

Advantages of bank overdaft:

Answer 6

• Flexibility (It gives a business the flexibility to borrow and pay back throughout the year, when needed, instead of repaying a fixed sum for a loan every month)
• Quick Access (Overdrafts can be set up relatively quickly, providing businesses with immediate access to funds in times of need)
• Control (Businesses have control over how much they borrow and when they repay the overdraft, providing them with greater financial autonomy)

Question 7

Disadvantages of bank overdraft:

Answer 7

• Interest Rates (Overdrafts often come with higher interest rates compared to other forms of financing, making them expensive if not managed properly)
• Risk of Withdrawal (Banks can withdraw overdraft facilities at any time if they think is too risky, which could leave the business in a vulnerable position if they are not prepared)
• For short term cashflow issues only

Question 8

why a business might use a price skimming strategy? (short ans)

Answer 8

Make a good image of the product therefore increasing sales.

Question 9

Benefits to a business of market segmentation.

Answer 9

• Target only segments that have high demand to maximise profits
• Products/services can be designed/developed to satisfy very specific
  needs of a group of consumers

Question 10

Benefits of effective SCM:

Answer 10

Lower cost because the process is more efficient; fewer mistakes being made; greater co-ordination of what is
delivered, when and in what order; better quality supplies; less time between orders and delivery.

Question 11

Disadvantage of inefficient SCM

Answer 11

Poor SCM can cause delays; increased costs; poor quality; customers receiving only part of their order or receiving the
wrong products and therefore dissatisfied customers.

Question 12

Advantages of mass customisation

Answer 12

-

Question 13

Benefits of performance related pay:

Answer 13

• Can make workers work hard to achieve or meet the targets.
• Make workers feel rewarded for their hard work.

Question 14

Disadvantage of prp

Answer 14

• Requires frequent target setting and appraisal interviews.
• If bonus is low, it can be demotivating
• Managers might show favouritism to some employees by giving more bonus to them

Question 15

Disadvantage of bonus payments

Answer 15

• can cause resentment if bonus payments are not received or is too low
• Managers might show favouritism to some employees by giving more bonus.

Question 16

Ways to improve liquidity:

Answer 16

Increase current assets:
- Sell fixed assets – for cash.
- Take out a long-term loan – to increase cash.
- Sell inventory – to increase cash (can improve liquidity if measured
using the acid test).

Question 17

Benefits of unique selling point

Answer 17

• Gain more sales than competitors(because products are more unique which also increases the businesses’ market share because they gain more sales than competitors).
• More customer loyalty (from repeating orders)

Question 18

Advantages of batch production

Answer 18

• Faster production with lower unit costs than job production(the repetitive nature increases accurracy & speed which leads to faster production that enhances productivity &lower unit costs)
• Some flexibility (each batch can be made with specific customer demands)
• Efficient use of equipment (batch heavily relies on machinery which avoids machines being underutilized leading to greater output).

Question 19

Disadvantages of batch production:

Answer 19

• Not really good for small companies with little production(batch production heavily relies on many capital/machinery and is usually used to produce large amounts of products.
• High levels of inventory needed(because production by using batch will be very large, high levels of inventory will be needed which can be costly.

Question 20

Disadvantages of decreased staff morale and welfare:

Answer 20

• Increased labour turnover(
• Decreased efficiency ( less products being produced – companies cannot match the demands of the growing online market and lose market share.

Question 21

Advantages of joint venture:

Answer 21

-

Question 22

Disadvantages of joint venture:

Answer 22

• Errors and mistakes and problems might make companies blame eachother which leads to conflict.
• Business failure of one of the partners would put the project at risk

Question 23

Mention a specific primary research and its benefits and disadvantages:

Answer 23

Focus groups - discussions with potential or existing consumers, with the aim of gaining qualitative data.
ADV:
Accurate data since it is instantly from the customers and can have one on one conversations about the product and their opinions
DISADV:
Requires a trained moderator

Question 24

Mention secondary research, its adv and disadv:

Answer 24

Internet
ADV: Very easy and simple to find, no costs needed
DISADV: may not be accurate

Question 25

Benefits of sustainability of operations:

Answer 25

-

Question 26

What are some expensive sources of finance?

Answer 26

• Bank overdraft
• Hire purchase
  The interest rates can be very high

Question 27

Internal sources of finance includes:

Answer 27

• Sale of unwanted assets
• Retained earnings

Question 28

External sources of finance:

Answer 28

• Bank overdraft
• Hire purchase
• Long term bank loans