Key principles

Question 1

Importance of profit

Answer 1

• Return on investment
• Reward for risk
• Source of finance
• Measure business success
• Motivating factor

Question 2

Unincorporated

Answer 2

Sole trader
Partnership
No legal difference
Owner has unlimited liability

Question 3

Incorporated

Answer 3

Ltd + Plc
Legal difference
Owners have limited liability

Question 4

Ltd key points

Answer 4

Shares cannot be traded publicly
Quick and cheap
More control - few shareholders

Question 5

Plc key points

Answer 5

On stock market
Less control
More detailed disclosure of information
Costly to administer
Better access to capital
More prestigious profile

Question 6

PESTLE

Answer 6

Political
Economic
Social
Technological
Legal
Environmental

Question 7

PESTLE - P

Answer 7

Competition policy
Industry regulation
Govt. spending & tax policies
Business policy & incentives

Question 8

PESTLE - E

Answer 8

Interest rates
Consumer spending & income
Exchange rates
Economic growth (GDP)

Question 9

PESTLE - S

Answer 9

Demographic change
Impact of pressure groups
Consumer tastes & fashions
Changing lifestyles

Question 10

PESTLE - T

Answer 10

Disruptive technologies
Adoption of mobile technology
New production processes
Big data and dynamic pricing

Question 11

PESTLE - L

Answer 11

Employment Law
Minimum / Living Wage
Health & Safety Laws
Environmental legislation

Question 12

PESTLE - E

Answer 12

Sustainability
Tax practices
Ethical sourcing (supply chain)
Pollution & carbon emissions

Question 13

Ageing population

Answer 13

Greater demand for services that support older people.
Increasing disposable incomes, resulting in higher demand.

Question 14

Blake Mouton Grid

Answer 14

Different leadership styles.

Concern for people high: Country Club, Team Leader
Concern for people low: Impoverished, Produce or Perish

Concern for task high: Produce or Perish, Team Leader
Concern of task low: Impoverished, Country Club.

Question 15

Tannenbaum and Schmidt Continuum of Leadership

Answer 15

Decreasing authority of leader, increasing area of freedom for employees.

Tells, Sells, Consults, Shares, Delegates

Question 16

Influences on decision making.

Answer 16

Business Objectives
Organisational Structure
Attitude to risk
Availability and Reliability of Data
External Environment
Intuition - Experience

Question 17

Stakeholders

Answer 17

Shareholders
Managers
Employees
Customers
Suppliers
Community
Government

Question 18

Stakeholder mapping

Answer 18

Helps manage stakeholders.
Sorts them according to level of power and level of interest.
Difficult to meet needs of stakeholder so will need to prioritise.
Stakeholder conflict

Question 19

Primary Market Research

Answer 19

First-hand data for specific purpose.
Focus group, interviews, surveys.

+
Directly focused
More up-to-date
Detailed

-
Time-consuming and often costly.
Risk of bias.

Question 20

Secondary Market research

Answer 20

Organisations
Government
Competitors
Media

Question 21

Income Elasticity of Demand

Answer 21

Measures the extent to which the demand for a product is affected by a change in income.

%Change in demand
/
%Change in demand.

More than 1:
Incomes grows, demand increases.
Holidays, Branded Goods.

Below 1:
Incomes grows, no change in demand (necessity)
Staple groceries

Question 22

Price Elasticity of Demand PED

Answer 22

Measures responsiveness of demand to change from a change in price.
Price elastic, Price inelastic

Question 23

Niche market advantages

Answer 23

Less competition
Clear focus
Build up specialist skill + knowledge
Charge a higher price, higher margins
Loyal customers

Question 24

Niche market disadvantages

Answer 24

Lack of ‘economies of scale’
Risk of over-dependence
Likely to attract competition

Question 25

Marketing Mix

Answer 25

7ps Product, Price, Place, Promotion, People, Process, Physical

Question 26

Boston Matrix

Answer 26

Categories products based on Market Share and Market Growth. Stars - High Growth + High share, likely become Cash Cow if they keep market share. Cash Cows - Low Growth + High Share, mature successful products, continued profit. Question Marks - High Growth + Low Share, have potential, need substantial investment. Should invest? Dogs - Low Growth + Low Share, usually sold or closed.

Question 27

Product life cycle

Answer 27

Development, Introduction, Growth, Maturity, Decline.

Question 28

Price Skimming

Answer 28

High price before competition. People willing to pay more for latest tech. Short-term

Question 29

Penetration Pricing

Answer 29

Low entry price, increase market share.

Question 30

Dynamic Pricing

Answer 30

Sets flexible prices based on current market demands.

Question 31

Dynamic Pricing

Answer 31

Sets flexible prices based on current market demands.

Question 32

Ways in improve productivity

Answer 32

Training Improved Motivation Better equipment Improved Organisation

Question 33

Ways to improve labour productivity

Answer 33

Measure performance and set targets. Invest capital equipment Invest in employee training

Question 34

Just-in-time

Answer 34

Enables a firm to produce only what is required. Stock levels can be kept to a minimum. Sophisticated scheduling Delivered only when needed.

Question 35

Causes of cash flow problems

Answer 35

Low profits Over-investment Too much stock Too much credit Seasonal Demand

Question 36

Hard HR

Answer 36

Treats employees as just another resource.

Question 37

Soft HR

Answer 37

Treats employees as the most important resource and a source of competitive advantage.

Question 38

hackman and Oldman's job characteristics model

Answer 38

Task Variety (Meaningfulness) Task Identity Task Significance Autonomy (Responsibility) Feedback (Knowledge of results) Leads to motivation and satisfaction with job and therefore to efficient performance.