National 5 Course Notes Flashcards

Question

what is CAPITAL in the factors of production?

Answer 1

Capital describes MONEY and all of the EQUIPMENT it can be used to buy. Capital has to be paid for through INTEREST (extra money paid from borrowing or lost through spending). Capital is a MAN MADE resource.

Answer 2

Enterprise covers all of the IDEAS for goods and services a business has and the ORGANISATION OF RESOURCES undertaken by it in order to make these ideas turn into real goods and services. Enterprise earns PROFITS.

Answer 3

Land is the Earth and all of the NATURAL RESOURCES in it or on it (eg oil, wood, animals, crops, etc). Land is paid for through RENT (money paid for the use of the land).

Answer 4

The second factor of production is labor. Labor is the effort that people contribute to the production of goods and services. Labor resources include the work done by the waiter who brings your food at a local restaurant as well as the engineer who designed the bus that transports you to school.

Answer 5

Land is the Earth and all of the NATURAL RESOURCES in it or on it (eg oil, wood, animals, crops, etc). Land is paid for through RENT (money paid for the use of the land).

Answer 6

The process stage is the most important stage of production because it creates WEALTH. Wealth is the value of goods or services available. At the process stage, a business transforms the raw materials into the good or service that it is producing. It does this through the use of the factors of production. For example, a business making cars will use capital and labour to build the body of the car, add the engine and mechanics, add the seats and windows, etc.

Answer 7

Production creates wealth because the TOTAL VALUE of the good or service produced should be more than the cost of the raw materials and factors of production used to make it. This increase in wealth from production is known as VALUE ADDED, and is can be calculated as follows.

Answer 8

For example, when a chip shop buys £1 of potatoes and produces £5 of chips, the value added (and increase in overall wealth) from production is £4 (£5 – £1). Production should always aim to create wealth because if it doesn’t then it has been a waste of the money spent on raw materials and factors of production it used.

Answer 9

At the output stage, a business will have created the final good or service that it wants to provide. For example, a business making cars will now have the finished working car. However, for many goods and services, the output stage for one business is the start of the input stage for another. This is because production and wealth creation for these goods and services has to be repeated in several different “linked” businesses before they are finally ready. This is because most businesses do not have the skills or materials to carry out every process required to completely create a good or service. When this is the case, all of the businesses whose production processes are "linked” together to make one good or service are said to form a PRODUCTION CHAIN.

Answer 10

start chain = farmer inputs = seeds process=farming output = wheat

Answer 11

In every ECONOMY (an area where goods and services are produced and used) there are CONSUMERS. These are people who buy goods and services to satisfy the following.

Answer 12

These are BASIC goods and services that we must have if we are going to be able to SURVIVE.

Answer 13

* FOOD * CLOTHING * SHELTER

Answer 14

These are goods and services that we DO NOT need to have to survive – they are only wanted by us because they would make our lives easier or provide pleasure. They are sometimes called LUXURIES. Consumers’ wants are usually thought to be UNLIMITED because when someone satisfies one want, then they will start to think of another one which they believe will make them even happier.

Answer 15

* Holidays * Jewellery * Fancy Clothes * Car

Answer 16

This process of consumers creating or buying and then using up goods and services to satisfy their needs and wants is called CONSUMPTION. It is possible that consumers could produce all of the goods and services that they need for themselves. In some developing economies this has to be the case because consumers do not have any other choice. This is because there may be only a limited amount of goods and services available and/or they do not have the money to make purchases. However, most economies usually prefer to satisfy consumers’ needs and wants though having businesses provide goods and services for the following positive reasons.

Answer 17

they prefer it because of the following positive reasons : EFFICIENCY ECONOMIC BENEFITS SOCIAL BENEFITS SOCIAL COST OPPORTUNITY COST

Answer 18

Almost every business SPECIALISES in providing certain goods and services. This means that the business does what it is best at. Specialisation means that businesses can be EFFICIENT. This means that they use minimum inputs for maximum outputs and so can produce their goods and services quickly, with little wastage and to a good standard because “practice makes perfect” for them! For the economy this EFFICIENCY means that more goods and services can be made with the limited factors of production it has available.

Answer 19

Economic benefits are MONEY based advantages that occur for a business itself or the people living and working around it. They happen due to the efficiency from using businesses to produce goods and services instead of self sufficient individuals. Examples of economic benefits that can arise include: * MORE EMPLOYMENT * MORE WAGES FOR STAFF TO USE TO BUY GOODS AND SERVICES * MORE WEALTH FOR BUSINESS OWNERS * MORE TAXES FOR GOVERNMENT TO PROVIDE SERVICES WITH * MORE GOODS AND SERVICES TO CHOOSE FROM

Answer 20

Social benefits are things that IMPROVE the QUALITY OF LIFE for the people living and working around a business because it is producing there. Examples of social benefits include: * INCREASED SATISFACTION OF THEIR NEEDS/WANTS * MORE LEISURE TIME BECAUSE WE DON’T HAVE TO DO EVERYTHING FOR OURSELVES * POSITIVE ACTION TO IMPROVE WORKING CONDITIONS (eg Fairtrade businesses) * BETTER FACILITIES (eg schools, roads to support businesses)

Answer 21

SOCIAL COST OPPORTUNITY COST These externalities mean that economies should keep an eye on the activities of the businesses in them to make sure that they have more benefits than costs for the economy and the people in it.

Answer 22

Social costs are things that WORSEN the QUALITY OF LIFE for the people living and working around a business because it is producing there. Examples of social costs include: * NOISE POLLUTION * WATER AND AIR POLLUTION * TRAFFIC CONGESTION * OVERCROWDING DUE TO LOTS OF PEOPLE MOVING NEAR THE BUSINESS

Answer 23

OPPORTUNITY COST exists when you have to make a choice. It measures the amount of extra “benefit” that you lose out on when you sacrifice one thing in order to get something that you desire more. For example, imagine you were thirsty and only had enough money for a bottle of water or a carton of fruit juice. You decide to buy the water rather than the fruit juice. This decision has an opportunity cost because choosing only the water means you have lost out on the extra benefit from getting the fruit juice too. This idea means that businesses that make bad production decisions will create a negative “opportunity cost” for society. This is because they will have wasted valuable limited resources and so society will have lost the benefit these resources could have provided if they had been used in a better way.

Answer 24

A business cycle is the process of businesses using the factors of production to produce goods and services that will satisfy the needs and wants of consumers.

Answer 25

Consumers have NEEDS and (NEW and UNLIMITED) WANTS. Businesses identify consumers NEEDS and WANTS and decide to make GOODS and SERVICES to satisfy them. Businesses employ the FACTORS OF PRODUCTION to PRODUCE the desired goods and services and increase WEALTH. Wages from employment allow consumers to CONSUME goods and services.

Answer 26

* FIND OUT WHAT CONSUMERS WANT * DESIGN GOODS AND SERVICES THAT WILL PROPERLY MEET CONSUMERS NEEDS AND WANTS * PRODUCE THE GOODS AND SERVICES DESIRED BY CONSUMERS TO A PROPER STANDARD * TREAT CONSUMERS IN A POSITIVE WAY WHEN THEY ARE BUYING FROM THE BUSINESS * MANAGE THE MONEY OF THE BUSINESS SO THAT IT CAN CONTINUE TO SATISFY CONSUMERS

Answer 27

The main way that many businesses try to achieve these things is by employing different teams of specialised workers (known as FUNCTIONAL DEPARTMENTS or AREAS) to each take on some of these jobs. However, in some small and medium sized businesses, there are not always specific departments for each of these jobs and so it can sometimes be certain individuals who become responsible for them.

Answer 28

1 MARKETING 2 OPERATIONS 3 HUMAN RESOURCE MANAGEMENT (HRM) 4 FINANCE

Answer 29

The marketing function is responsible for finding out what consumers want and then designing goods and services that will properly meet their needs and wants. This will be achieved through activities such as: * Carrying out MARKET RESEARCH (info on customers and competitors) * Designing appropriate features for the PRODUCT to be sold * Deciding on a PRICE that consumers will pay * Deciding the best PLACE to sell to product to consumers * Deciding how to PROMOTE the product to let consumers know about it

Answer 30

The operations function is responsible for producing the product that marketing has designed to a proper standard for consumers. This will be achieved through activities such as: * Organising QUALITY raw materials and factors of production * Completing the PROCESS stage of production to high standards * Making enough finished goods and services to meet consumers DEMAND * Getting finished goods and services DELIVERED to consumers on time

Answer 31

The HRM function is responsible for making sure that staff effectively help operations produce goods and services to a proper standard for consumers. They also have to ensure that members of staff treat consumers in a positive way when they are buying from the business. This will be achieved through activities such as: * RECRUITING AND SELECTING well qualified staff * MONITORING and SUPPORTING the work of staff * Providing staff with TRAINING to improve their operations skills * Providing staff with CUSTOMER SERVICES TRAINING * Ensuring staff follow CUSTOMER SERVICES POLICY properly * DISCIPLINING staff who cause problems for other worker and consumers

Answer 32

The finance function is responsible for providing and managing the money that marketing, operations and HRM need for their work. This will ensure that not too much is spent and so the business can afford pay its’ bills and so continue providing for consumers. This will be achieved through activities such as: * RECORDING FINANCIAL (money) TRANSACTIONS * PAYING BILLS and WAGES * Creating documents to MANAGE CASHFLOW (money in and out) * Creating documents to TRACK PROFITS * Creating documents to TRACK BUSINESS VALUE

Answer 33

Although all businesses are involved in satisfying consumers’ needs and wants through the business cycle, there are different types of business. The main factors which make businesses different from each other can be seen below. * BUSINESS SIZE * ECONOMIC SECTOR (business ownership and purpose) * OBJECTIVES * SECTOR OF INDUSTRY (business output) Many businesses formally record information about their specific differences in a document called a MISSION STATEMENT. This is to make sure that all people involved with the business understand how it is organised and are encouraged to think POSITIVELY about it because they know how it is likely to affect them. Information about the differences between businesses is very important because they will affect the way it is MANAGED and run. For example, a business set up to make money for the owner would not usually decide to provide products for free because this would lose money instead of making more.

Answer 34

These businesses are made up of between 1 and 50 workers.

Answer 35

These businesses employ between 50 and 250 workers.

Answer 36

These businesses employ more than 250 workers.

Answer 37

PUBLIC SECTOR, PRIVATE SECTOR and THIRD SECTOR.

Answer 38

PUBLIC SECTOR ORGANISATIONS The main features of Public Sector organisations are as follows. * They are set up and owned by different levels of GOVERNMENT on behalf of the public who have elected them. * They are run by paid workers and managers and have their progress checked by members of the Government. * They are set up to provide goods and services that should improve the quality of life for any member of the public that uses them. * Examples of the goods and services that are provided by public sector organisations include the HEALTHCARE, EMERGENCY SERVICES, EDUCATION, DEFENCE, ROADS AND TRANSPORT and the WELFARE STATE. * Most public sector goods and services are free (or only cost a small payment). Public goods and services are usually free because the money the Government needs to provide them is collected through the following TAXES. Tax Payer Example Taxes INDIVIDUAL * INCOME TAX (money paid from wages earned) * COUNCIL TAX (money paid for the use of Local Council Services) * STAMP DUTY (tax on buying a house) BUSINESS * CORPORATION TAX/INCOME TAX (money paid on business profits) * VALUE ADDED TAX [VAT] (money paid on most goods you buy) * DUTIES (extra taxes above VAT on specific items – eg alcohol) U1.1 – Understanding Business: Business Activity © BEST Ltd Licensed to: Blairgowrie High School 17 The main levels and types of small to medium sized UK public sector organisations that provide these goods and services can be seen below. a DEVOLVED GOVERNMENT In Scotland, Wales and Northern Ireland, some Government policies and public services are different from those in England. This is because the UK wide Central Government has set up a Devolved Government for these areas which has powers to make decisions for their own areas on certain things known as DEVOLVED MATTERS. In Scotland, the devolved Scottish Government can develop and implement policy on devolved matters such as health, education, justice, business, rural affairs and transport. The work of the devolved Scottish Government is managed by the First Minister, the Scottish Cabinet and Parliament. b LOCAL AUTHORITIES Local Authorities are responsible for supporting central and devolved Government policies about the delivery of public goods and services by managing their day-to-day delivery at a local level. Examples of Local Authority services include local refuse collections, Sports Centres and Libraries. The work of Local Authorities will be managed by elected LOCAL COUNCILLORS.

Answer 39

Private Sector organisations are set up and owned by the individuals who have invested their own personal money (known as CAPITAL) in them. They are set up to provide goods and services only to consumers who can afford to pay for them. This is so that these businesses can make extra money (called PROFIT) for the private benefit of their owners.

Answer 40

SOLE TRADER PARTNERSHIP PRIVATE LIMITED COMPANY

Answer 41

A sole trader is a self-employed person who owns and runs their own business as an individual.

Answer 42

The main FEATURES of a sole trader are as follows. * Sole traders only have ONE owner who invested and organised all of the start up capital for the organisation. * In a sole trader, the single owner has the authority (power) to make all decisions themselves. * Sole traders usually only sell to consumers in a fairly small LOCAL area. * Sole traders usually only employ a few workers and sometimes only consist of the owner alone.

Answer 43

The main ADVANTAGES of being a sole trader are as follows. * Quick decisions can be made in the business because they are all made by the single owner without interference. This can allow the business to respond to situations that might need dealt with quickly, eg chance to invest in an idea. * There are few laws or rules that have to be followed when setting up a sole trader. This means sole trader businesses can be easier for people with little business experience to set up and operate. * All of the profits from the business can be kept by the single owner. This means that a successful sole trader can make the owner lots of money quickly. Money taken out of the business by the owner is known as DRAWINGS. * Sole traders do not have to share information about their business with anyone (except the Government for paying taxes). This means they can keep their information about performance and profits private.

Answer 44

The main DISADVANTAGES of being a sole trader are as follows. * The single owner has UNLIMITED LIABILITY for any money owed by the business. This means that if the business runs out of money, the debt is NOT limited to the money in the business and so the sole trader will have to pay the rest of the debt using their own money and from the sale of their assets (valuable things, eg house). * All losses in the business will have to be accepted by the owner alone which could mean the end up with far less money than they once had. * There may be no-one else to share the decision making and work of the business and so this can be stressful for the owner. * The skills of the owner might limit what the business is able to do.

Answer 45

A partnership is a type of business that has between 2 and 20 owners. Owners of a partnership are referred to as partners. Partnerships tend to be found in professional practices such as solicitors, accountants and dentists.

Answer 46

* A partnership usually has between 2-20 owners who have each invested some of the start up capital for the organisation. Each of these owners is called a PARTNER. * In the case of PROFESSIONAL PARTNERSHIPS (eg accounting and legal partnerships) there is no limit to the maximum number of owners. * In a partnership, each of the different partners will have a say in the decision making of the business. The specific amount of control each partner has over decision making will be set out in a PARTNERSHIP AGREEMENT. * A Partnership Agreement is a legal document that all partners sign when the partnership is created. This document sets out all of the partnership’s rules about work to be done and the sharing rights for decisions, profits and losses. Usually the partnership agreement will set out these rights based on the amount of money invested (eg a partner who invests 50% of the capital will normally get 50% of the decision making votes). * Partnerships usually only sell to consumers in a fairly small LOCAL area. However, they can become big enough to have several premises and so sell to a NATIONAL (countrywide) market. * Partnerships may only employ a few extra workers in addition to the partners and sometimes only consist of the partners alone.

Answer 47

The main ADVANTAGES of a partnership are as follows. * Any losses in the business will be shared between all the partners. This means each individual owner will take a smaller personal loss in a bad year. * The decision making and work of the business can be shared between the partners which means less stress for each owner. * The skills of the different partners can allow the business to expand and make more profit. * There is more money available in the business because it has several partners investing. This can allow the business to provide better goods and services. * Partners do not have to share information about their business with anyone (except the Government for paying taxes). This means they can keep their information about performance and profits private.

Answer 48

The main DISADVANTAGES of a partnership are as follows. * The partners have UNLIMITED LIABILITY1 for any money owed by the business. This means that if the business runs out of money, the debt is NOT limited to the money in the business and so the partners will each have to pay the rest of the debt using their own money and from the sale of their assets (valuable things, eg house). * It can be hard to make quick and easy decisions in the business because there has to be agreement between all the partners before something can be done. This can mean the business can find it hard to respond to situations that might need dealt with quickly. * The profits from the business are shared between all the partners. This means that each owner can take less money from the business (DRAWINGS) than they would have done if they were working on their own.

Answer 49

Some partners are known as LIMITED PARTNERS – this means they do not get a say in decision making but they DO NOT have unlimited liability and so will only lose the money they have invested in the business if things go badly.

Answer 50

A private limited company has limited liability. This means that the business is seen as a separate legal entity from its shareholders. Therefore, shareholders are not legally responsible for paying the debts of the business. They only risk losing the capital they invested into the business if it fails. A private limited company is controlled by a board of directors. This is a group appointed by the shareholders who oversee the running of the business.

Answer 51

The main FEATURES of this type of private sector business are as follows. * A private limited company usually has at least 2 owners who have each invested some of the start up capital for the organisation. Each of these owners is called a SHAREHOLDER – this is because they each have a SHARE of the business. * Shareholders will receive proof of their ownership through a SHARE CERTIFICATE. A share certificate is a legal document which shows that a person owns part of a company. * In a private limited company, shares can only be bought PRIVATELY from existing shareholders. * Private limited companies must create MEMORANDUM AND ARTICLES OF ASSOCIATION when they are created to outline all of the rules of the company and information about how many shares will be available in it. * Each share will entitle its’ owner to a share of any profits in a good year. This extra money for the owner is known as a DIVIDEND. Dividends are usually given out as a percentage of the original cost of a share. For example, a shareholder with £1 shares in a business may get a 3% dividend at the end of the year – this means they will get 3p profit back on each share. * Decision making in a limited company is made by group of senior managers known as the BOARD OF DIRECTORS. * In a private limited company, the Board of Directors may be the shareholders who take these jobs for themselves or they can be separate people who are employed by the shareholders. Shareholders might decide to employ Directors because they may be unable to manage the day to day running of the business due to other commitments. * Private limited companies may only sell to consumers in a fairly small LOCAL area. However, they can become big enough to have several premises and so sell to a NATIONAL (countrywide) market. * Private limited companies may employ the shareholders as the Board of Directors and extra workers to carry out day to day tasks. However, they can consist entirely of non owners who have been employed by the shareholders to operate the company. * Private limited companies must register and update details about their Directors, Secretary, Shareholders and profits with COMPANIES HOUSE. This is a Government body which keeps track of all companies in the UK and makes sure that they are following legal rules about the running of companies. Companies House provides each company with its’ own unique COMPANY NUMBER to help manage this process. If private companies do not follow the rules of Companies House then they will be fined and can be forced to stop working.

Answer 52

The main ADVANTAGES of being a private limited company are as follows. * The shareholders have LIMITED LIABILITY for any money owed by the business. This means that if the business runs out of money, the debt IS limited to the money in the business and so the shareholders can ONLY lose the money they have invested in the business. * There can be lots of money available in the business because it can have lots of shareholders investing. This can allow the business to provide better goods and services. * The decision making and work of the business can be shared between the Board of Directors which means less stress for each individual. * The different skills of the Board of Directors can allow the business to expand and make more profit. * Any losses in the business will be shared between all the shareholders. This means each individual owners will take a smaller personal loss if the business fails.

Answer 53

The main DISADVANTAGES of being a private limited company are as follows. * Private Limited companies have to follow the legal rules in the COMPANIES ACTS. For example, they must include the term “Ltd” after their name in all documents so that people know that there is limited liability and so they may not get all debts repaid. This can mean that limited companies can be complicated and difficult for people with little business experience to set up and operate. * Private Limited companies have to share some information about their business by registering it annually with Companies House. This means they cannot keep all their information about performance and profits private. * It can be hard to make quick and easy decisions in the business because there has to be agreement between the Board of Directors before something can be done. This can mean the business can find it hard to respond to situations that might need dealt with quickly. * The profits from the business are shared between all the shareholders as dividends. This means that each owner makes less money than they would have done if they were working on their own.

Answer 54

The Third Sector consists of non-governmental organisations which have been set up to provide goods and services to benefit specific groups that they feel need special assistance. The main types of small to medium sized third sector businesses (ie organisations with LESS THAN 250 employees) in the UK

Answer 55

CHARITY The main FEATURES of Scottish charities are as follows. * Charities are organisations which have been set up for the sole purpose of PROVIDING PUBLIC BENEFIT in Scotland (or elsewhere) though one or more of the following recognised CHARITABLE PURPOSES2 . o THE PREVENTION OR RELIEF OF POVERTY o THE ADVANCEMENT OF EDUCATION o THE ADVANCEMENT OF RELIGION o THE ADVANCEMENT OF HEALTH o THE SAVING OF LIVES o THE ADVANCEMENT OF CITIZENSHIP OR COMMUNITY DEVELOPMENT o THE ADVANCEMENT OF THE ARTS, HERITAGE, CULTURE OR SCIENCE o THE ADVANCEMENT OF PUBLIC PARTICIPATION IN SPORT o THE PROVISION OF RECREATIONAL FACILITIES o THE ADVANCEMENT OF HUMAN RIGHTS, CONFLICT RESOLUTION OR RECONCILIATION o THE PROMOTION OF RELIGIOUS OR RACIAL HARMONY o THE PROMOTION OF EQUALITY AND DIVERSITY o THE ADVANCEMENT OF ENVIRONMENTAL PROTECTION OR IMPROVEMENT o RELIEF OF AGE, ILL-HEALTH, DISABILITY, FINANCIAL BASED HARDSHIP o THE ADVANCEMENT OF ANIMAL WELFARE * Charities DO NOT make their money by trading and earning profits – they encourage the public to give them money to pay for their work through the use of advertising campaigns, fundraising events, etc. This money which is given by the public is known as a DONATION. * Charities can also raise some money for their work by setting up a separate special CHARITABLE TRADING ARM. This is a part of the Charity which raises money through paid for activities such as restaurants and shops but gives it all back to the main part of the Charity as a donation. * In Scotland, official charities are registered with the Government’s OFFICE OF THE SCOTTISH CHARITY REGULATOR (OSCR) and are given special CHARITABLE STATUS. * Charitable status means the charity does not have to pay as many taxes on the money that it brings in. This is so that it can maximise the money it has to support its’ cause. * Once registered with OSCR, charities must meet a number of legal responsibilities set out in charity law, including reporting to them on an annual basis. * The work and status of a charity can be tracked with the OSCR through a unique CHARITY REGISTRATION number. This can help prevent people pretending to be a charity and so cheating the public out of money they intended to go to a “real” good cause. * Charities will have volunteer and paid employees who are managed by a group of managers know as TRUSTEES. Examples of charities operating in Scotland include, overseas support charities (such as SCIAF and Mary’s Meals), scout groups, cancer support charities, churches, nurseries and private schools.

Answer 56

Social enterprises are businesses which trade for a social or environmental purpose. Social enterprises primarily have a social or environmental aim. For example, Social Bite use any profits generated from their cafes to invest into projects which aim to relieve homelessness within Scotland. Many social enterprises will have a combination of both paid employees and volunteers working for them.

Answer 57

The main FEATURES of Scottish social enterprise organisations are as follows. * Social Enterprises legally cannot be part of a public sector organisation. * Social Enterprises are different from public sector organisations because they have been set up to openly generate funds in order to benefit only a SPECIFIC social, environmental or cultural issue. * Social Enterprises are different from charities because they aim to generate their funds through GRANTS (money from agencies that doesn’t need paid back) and PROFIT MAKING trading activities. * Social Enterprises are different from private sector businesses because they have an ASSET LOCK on both their profits and assets. This means that Social Enterprises MUST use all of their profits and money from the sale of assets (if it is closed down) for the purpose of its social mission. * Social Enterprises must be run in an ETHICAL manner which reflects their aim to be of benefit to society. This will be seen though actions such as offering their staff satisfactory wages, terms and conditions, and clear environmental policies. * Social Enterprises will have volunteer and paid employees who are managed by a BOARD OF DIRECTORS.

Answer 58

social firms = These Social Economy organisations are set up to specifically create NEW JOBS for severely disadvantaged people in the labour market (eg individuals with learning difficulties). CO-OPERATIVES = A co-operative is a group of people (known as MEMBERS) who want to work together in a jointly owned social enterprise organisation in order to help them meet their common needs. Examples of co-operatives include the Cooperative grocery store, insurance company and travel firms. INTERMEDIATE LABOUR MARKET COMPANIES = These Social Economy organisations provide TRAINING and WORK EXPERIENCE for the long term unemployed and other disadvantaged groups. The aim is to assist these groups to re-enter the labour market through the provision of this paid work together with high quality training, personal development and active job-seeking. COMMUNITY BUSINESS = These are social enterprise organisations that are set up in a particular geographical area and focus on PROVIDING GOODS AND SERVICES to that area. They are trading organisations which are set up, owned and controlled by the local community and which aim to be a focus for local development and create self supporting jobs for local people. CREDIT UNION = Credit unions are finance co-operatives that help people to SAVE and BORROW money at reasonable rates.

Answer 59

Public sector businesses are usually set up to achieve the objective of providing a PUBLIC SERVICE. This means that they provide their goods and services in order to improve the quality of life for any member of the public who needs or wants to use them.

Answer 60

Private sector businesses are usually set up to achieve the objective of MAXIMISING PROFITS for their owners. This means that they only intend to provide their goods and services to consumers who can afford to pay a price for them which will make extra money for the business.

Answer 61

Third sector businesses are usually set up to achieve the objective of SOCIAL RESPONSIBILITY. This means that they undertake activities which will improve the quality of life for particular members of society that they think need extra help.

Answer 62

Enterprise involves all of the following activities. * COMING UP WITH IDEAS FOR NEW PRODUCTS (INNOVATION) * ORGANISING THE RESOURCES NEEDED FOR PRODUCTION * COMPLETING PRODUCTION AND ACTUALLY PROVIDING THE PRODUCT * ACCEPTING THE RISK THAT THIS NEW PRODUCT COULD FAIL People who are willing to be enterprising are called ENTREPRENEURS. Examples of famous Scottish entrepreneurs include Michelle Moone and Tom Hunter. Successful entrepreneurs usually have the following skills and qualities. * CREATIVITY * FLEXIBILITY * UNDERSTAND WHEN AND HOW TO USE INITIATIVE AND INNOVATION * A POSITIVE ATTITUDE TO CHANGE * BEING ABLE TO EVALUATE RISK TO HELP MAKE GOOD DECISIONS * HAVE THE ABILITY TO PERSUADE OTHERS TO HELP THEM IN THEIR VENTURE It is particularly important that a country has entrepreneurs in all sorts of organisations who will help them develop new products for the following reasons. * THERE WOULD BE NO NEW GOODS OR SERVICES WITHOUT ENTERPRISE * SOCIETY WOULD FAIL TO ADVANCE WITHOUT NEW GOODS AND SERVICES * WITHOUT ENTERPRISE SOME NEEDS AND WANTS WILL BE UNSATISFIED * SATISFACTION FOR SUCCESSFUL ENTREPRENEURS CAN ENCOURAGE FURTHER BENEFICIAL ENTERPRISING ACTIVITIES

Answer 63

* Central Govt * Devolved Govt * Local Govt

Answer 64

* Sole Trader * Partnership * Private Limited Company

Answer 65

* Charity * Social Enterprises

Answer 66

There are 3 different industrial sectors – PRIMARY SECTOR, SECONDARY SECTOR and TERTIARY SECTOR.

Answer 67

Primary sector industry involves extracting raw materials from the environment or growing raw materials, e.g. mining and farming.

Answer 68

Secondary sector industry involves manufacturing products, e.g. factories and house building.

Answer 69

Tertiary sector industry involves any business which provides a service, e.g. gyms and hotels.

Answer 70

PRIMARY SECTOR BUSINESSES Primary sector organisations are responsible for EXTRACTING (getting) from the Earth the RAW MATERIALS (eg WOOD, OIL, COAL, etc) needed for the input stage of production.

Answer 71

SECONDARY SECTOR BUSINESSES Secondary sector organisations are responsible for MANUFACTURING GOODS using the RAW MATERIALS from the PRIMARY sector.

Answer 72

TERTIARY SECTOR BUSINESSES Tertiary sector organisations are responsible for PROVIDING SERVICES. This includes sales for the GOODS from the SECONDARY sector).

Answer 73

Examples of primary sector businesses include: * FARMERS * OIL WORKERS * FISHERMEN * FORESTRY WORKERS

Answer 74

Examples of secondary sector businesses include: * CAR MANUFACTURER * FURNITURE MAKER * NEWSPAPER * COMPUTER MANUFACTURER

Answer 75

Examples of tertiary sector businesses include: * SALESPEOPLE * HAIRDRESSERS * BANKS * LAWYERS

Answer 76

PUBLIC SECTOR Public sector businesses are usually set up to achieve the objective of providing a PUBLIC SERVICE. This means that they provide their goods and services in order to improve the quality of life for any member of the public who needs or wants to use them.

Answer 77

PRIVATE SECTOR Private sector businesses are usually set up to achieve the objective of MAXIMISING PROFITS for their owners. This means that they only intend to provide their goods and services to consumers who can afford to pay a price for them which will make extra money for the business.

Answer 78

THIRD SECTOR Third sector businesses are usually set up to achieve the objective of SOCIAL RESPONSIBILITY. This means that they undertake activities which will improve the quality of life for particular members of society that they think need extra help.

Answer 79

DECISIONS are choices that have to be made about what to do when you are faced with several different options and cannot do them all. For example, if you only had enough money for either a Snickers or a Mars bar, you would have to make a decision about which one to buy as you cannot have both. Businesses have to make different decisions about the following issues so that they can continue and succeed. * WHICH BUSINESS TYPE THEY WILL BE IN THEIR ECONOMIC SECTOR * WHICH OBJECTIVES THEY WILL PURSUE * WHICH INDUSTRIAL SECTOR THEY WILL OPERATE IN * HOW BIG THE BUSINESS WILL BE * HOW TO PRODUCE THEIR GOODS AND SERVICES * HOW TO MAXIMISE BENEFITS AND MINIMISE EXTERNALITIES * HOW TO SATISFY THE NEEDS AND UNLIMITED WANTS OF CONSUMERS The KEY (main) factors which can create the need to make such decisions and also influence their results are: * INTERNAL STAKEHOLDERS * EXTERNAL STAKEHOLDERS * INTERNAL ENVIRONMENTAL FACTORS * EXTERNAL ENVIRONMENTAL FACTORS This process of making decisions that will help a business progress in response to key factors is what BUSINESS MANAGEMENT actually is.

Answer 80

INTERNAL STAKEHOLDERS are people INSIDE OF A BUSINESS who are interested in influencing its’ activities because they affect them in some way.

Answer 81

OWNERS MANAGER STAFF

Answer 82

The owners of an organisation are interested in making sure that it ACHIEVES THE OBJECTIVE that they set it up for.

Answer 83

The managers of a business are interested in making it successful so that they can KEEP THEIR JOBS and maybe get BETTER CONDITIONS (eg wages).

Answer 84

The workers of a business are interested in helping to make it successful so that they can KEEP THEIR JOBS and maybe get BETTER CONDITIONS (eg wages).

Answer 85

* Owners influence the activities of a business by being able to MAKE DECISIONS that managers and staff have to work to achieve. * Owners have a HIGH level of influence because no one else in the business has the authority to overrule their decisions.

Answer 86

* Managers influence the activities of a business by MAKING DECISIONS to help it achieve the objectives the owners have set. * The level of influence of a manager VARIES with their level of AUTHORITY. For example, top managers can overrule decisions of managers below them in the organisation.

Answer 87

* Staff can positively influence the activities of a business by WORKING HARD to support the decisions of owners and managers in * Staff can negatively influence the activities of a business by INDUSTRIAL ACTION (such as a STRIKE). * The level of influence of staff VARIES with NUMBER of them involved in an action. For example, all staff having a strike will have more impact than only 1 worker.

Answer 88

EXTERNAL STAKEHOLDERS are people OUTSIDE OF A BUSINESS who are interested in influencing its’ activities because they affect them in some way.

Answer 89

GOVERNMENT BANKS CUSTOMERS SUPPLIERS SOCIETY

Answer 90

Government wants to make sure that businesses are paying all of their TAXES and that they are following all relevant LAWS.

Answer 91

Banks want to make sure that businesses are BORROWING from them (so that they can make money from INTEREST). They will also want to make sure that businesses can keep up with REPAYMENTS so that they do not lose money.

Answer 92

Customers want businesses to continue to provide (new) goods and services that will SATISFY THEIR NEEDS AND WANTS.

Answer 93

Suppliers want to make sure that businesses are BUYING from them. They will also want to make sure that businesses can keep up with REPAYMENTS for things that they have bought but not yet paid for.

Answer 94

Society is all of the people around a business – they are not necessarily customers. Society will want businesses to minimise their costs by PREVENTING EXTERNALITIES and be SOCIALLY RESPONSIBLE.

Answer 95

* Government influence the activities of a business by MAKING LAWS which change the way that they have to operate. * Government influence the activities of a business by EXECUTIVE AGENCIES which change the way they have to operate. * Government influence the activities of a business by changing TAX RATES which will affect the amount of money that it has. * Government has a HIGH level of influence because businesses will end up in court facing penalties if they do not do as they are told in laws, etc.

Answer 96

* Banks positively influence the activities of a business by LENDING enough money at reasonable RATES OF INTEREST to allow them to do things that will increase consumer satisfaction. * Banks negatively influence the activities of a business by NOT LENDING enough money or charging high RATES OF INTEREST. * The level of influence of a bank VARIES with the AMOUNT OF MONEY they are lending because small loans will have little impact.

Answer 97

* Customers can positively influence the ability of a business to achieve its’ objectives by USING MORE OF THEIR GOODS AND SERVICES. * Customers can negatively influence the ability of a business to achieve its’ objectives by NOT USING THEIR GOODS AND SERVICES. * The level of influence that a customer has VARIES with the amount that they are SPENDING.

Answer 98

* Suppliers positively influence the activities of a business by PROVIDING the RESOURCES they need for production. * Suppliers negatively influence the activities of a business by NOT PROVIDING the RESOURCES they need for production. * The level of influence of a supplier VARIES with the AMOUNT OF PRODUCTS that they are supplying.

Answer 99

* Society can positively influence the activities of a business by supporting them though the work of PRESSURE GROUPS and in the MEDIA. * Society can negatively influence the activities of a business by campaigning against them as PRESSURE GROUPS and in the MEDIA. * The level of influence of society VARIES with the AMOUNT OF PEOPLE that make up the pressure group or use the media.

Answer 100

INTERNAL ENVIRONMENTAL FACTORS are things INSIDE OF A BUSINESS that affect the way that it operates. The main internal environmental factors which influence business decisions are mainly to do with the resources needed for production.

Answer 101

1) FINANCE AVAILABLE When a business has LOTS of finance (money) then it can make decisions that will help it survive by maximising consumer satisfaction and minimising externalities. Examples of these positive decisions which can be taken when plenty of finance is available can be seen below. * CHOOSING TO CARRY OUT MARKET RESEARCH TO HELP DESIGN APPROPRIATE PRODUCTS * DECIDING TO OFFER LOW PRICES TO ENCOURAGE CONSUMERS TO BUY * DECIDING TO USE EXPENSIVE AND POPULAR LOCATIONS TO SELL PRODUCTS * DECIDING TO RUN PROMOTIONS TO LET CONSUMERS KNOW ABOUT PRODUCTS * CHOOSING TO USE QUALITY RAW MATERIALS AND FACTORS OF PRODUCTION * DECIDING TO TRAIN STAFF TO IMPROVE THEIR SKILLS On the other hand, if a business DOES NOT have lots of finance available then it will have to make the following less helpful decisions about its’ activities. * DECIDING TO USE CHEAP AND UNPOPULAR LOCATIONS TO SELL PRODUCTS * DECIDING TO RUN FEW PROMOTIONS TO LET CONSUMERS KNOW ABOUT PRODUCTS * CHOOSING TO USE LOW QUALITY RAW MATERIALS AND FACTORS OF PRODUCTION These decisions can have a very negative affect on the success of the organisation because they can mean that it will have problems trying to maximise consumer satisfaction and continue to create wealth. This situation is negative for a business because these problems can result in FAILURE. This means that the organisation runs out of finance all together and so will have to close down. INTERNAL ENVIRONMENTAL FACTORS are things INSIDE OF A BUSINESS that affect the way that it operates. 2) LABOUR AVAILABLE Having LOTS of skilled and committed labour (staff) in a business will bring the following benefits for it. * STAFF WILL MAKE HIGH QUALITY DECISIONS FOR THE BENEFIT OF THE BUSINESS * STAFF WILL BE ENTERPRISING AND DEVELOP NEW PRODUCTS * STAFF WILL WORK TO A HIGH STANDARD AND PRODUCE HIGH QUALITY PRODUCTS * STAFF WILL WORK QUICKLY AND MAKE PRODUCTS IN TIME FOR CONSUMERS * STAFF WILL BE FLEXIBLE AND SO HELP TO PRODUCE LOTS OF TYPES OF PRODUCT * STAFF WILL TREAT CONSUMERS WELL AND OFFER HIGH LEVELS OF CONSUMER SATISFACTION On the other hand, if a business does not have a skilled and committed labour force then the opposite of the above will be true. In addition, if the labour force becomes unhappy with decisions made about their treatment in the organisation then they may take action which negatively affects it by reducing production. These actions are known as INDUSTRIAL ACTION. Examples of industrial action include the following. * STRIKE (this means staff refuse to come to work at all and production goes down) * WORK TO RULE (this means they only do what their contract says) * PICKETING (employees trying to persuade others to join their strike) * GO SLOW (staff do their job a slowly as the can get away with to lower production) 3) CAPITAL AVAILABLE Having LOTS of efficient capital (equipment) in a business is known as MECHANISATION or CAPITALISATION1 . This can bring the following benefits for it. * PRODUCTS WILL BE MADE TO A HIGH STANDARD BY THE MACHINERY * PRODUCTS WILL BE QUICKLY FOR CONSUMERS BY THE MACHINERY * COSTS CAN BE CUT BY REPLACING STAFF WITH MACHINES THAT DON’T NEED PAID * MACHINERY CAN IMPROVE CONSUMER SERVICE (eg support websites) However, a business must be aware that the use of lots of capital may raise the following issues. * MACHINERY CAN BE EXPENSIVE TO BUY WHICH MIGHT LIMIT ACCESS TO IT * MACHINERY WILL HAVE MAINTENANCE COSTS * MACHINERY CAN BREAK DOWN AND STOP PRODUCTION * MACHINERY CANNOT BE ENTERPRISING AND COME UP WITH NEW IDEAS * CONSUMERS MAY NOT LIKE USING MACHINES (eg automated help lines) * STAFF MAY NOT BE HAPPY BEING REPLACED BY MACHINES AND TAKE INDUSTRIAL ACTION

Answer 102

The main external environmental factors which influence business decisions are 1 POLITICAL FACTORS 2 ECONOMIC FACTORS 3 SOCIAL FACTORS 4 TECHNOLOGICAL FACTORS 5 ENVIRONMENTAL FACTORS 6 COMPETITIVE FACTORS EXTERNAL ENVIRONMENTAL FACTORS are things OUTSIDE OF A BUSINESS that affect the way that it operates.

Answer 103

POLITICAL FACTORS Central, Devolved and Local Government can affect organisational activities through the following. * LEGISLATION (laws that set out rules that businesses must follow) * TAXATION (money that a business must pay to Government) * GOVERNMENT AGENCIES (rulings on organisational activities) * GRANTS (money that Government may pay to support businesses) These kinds of Government actions can result in the following BENEFITS for businesses. * INCREASED FINANCE FROM NEW GRANTS * MORE MONEY FOR THE ORGANISATION TO SPEND DUE TO DECREASED TAXES * MORE MONEY FOR CONSUMERS TO BUY PRODUCTS DUE TO DECREASED TAXES * INVESTMENT IN ROADS, etc However, these types of Government activity can also cause the following PROBLEMS for businesses that do not adapt to them. * LOST FINANCE FROM DECREASES IN GRANTS * LEGAL ACTION FROM THE USE OF CERTAIN ADVERTS BANNED BY LAW * LEGAL ACTION FROM IMPROPER SALE OF PRODUCTS REGULATED BY LAW (eg alcohol) * LEGAL ACTION FROM BREAKING SAFETY STANDARDS SET BY LAW * LEGAL ACTION FROM NOT PAYING WAGE LEVELS SET BY LAW * LESS MONEY FOR THE ORGANISATION TO SPEND DUE TO INCREASED TAXES * FEWER CONSUMERS USING THE BUSINESSES PRODUCTS DUE TO INCREASED TAXES * CHANGES TO WORKING DUE TO GOVERNMENT AGENCY ACTIVITIES

Answer 104

ECONOMIC FACTORS An economy is made up of all the flows of money and products within an area. For example, A LOCAL ECONOMY would be made up of a town while a NATIONAL ECONOMY covers a whole country. The level of activity in most modern economies varies over time. When the level of economic activity is increasing then it is known as a BOOM, and when it is decreasing then it is known as a RECESSION. These increases and decreases in the flows of money and products over time make up what is known as the ECONOMIC CYCLE. A simple economic cycle can be seen below. U1.2 – Understanding Business: Influences on Business Activity © BEST Ltd Licensed to: Blairgowrie High School 11 Economies usually follow the economic cycle of boom and recession due to INFLATION. Inflation is a GENERAL rise in prices. Inflation creates the economic cycle as follows. When an economy is experiencing a BOOM then the following happens to businesses. * LOW LEVELS OF UNEMPLOYMENT * HIGH DEMAND FOR GOODS AND SERVICES * HIGH LEVEL OF PRODUCTION * HIGHER PRICES DUE TO INFLATION * EASY TO GROW DUE TO HIGH DEMAND * EXTRA COSTS DUE TO INFLATION When the economy is experiencing a RECESSION then the following happens to businesses. * HIGH LEVELS OF UNEMPLOYMENT * LOW DEMAND FOR GOODS AND SERVICES * LOW LEVEL OF PRODUCTION * LOW PRICES DUE TO INFLATION * LESS COSTS DUE TO INFLATION * DIFFICULT TO GROW OR SURVIVE DUE TO LOW DEMAND

Answer 105

SOCIAL FACTORS The term SOCIETY means all of the people in the economy that a business is working in. Society has constantly changing ideas about what they want, and what businesses should and should not do. These changes and examples of how they can affect businesses can be seen below. * DEMOGRAPHIC CHANGES These are changes in the number and age of the people in society. Examples of how these changes can impact on a business can be seen below. o Growing number of older people has resulted in older workers and targeted products o Growing number of older people has resulted in new related products (eg stair lifts) o Smaller families have resulted in smaller cars and houses o Older mothers have more money and so maternity markets are more profitable * SOCIO-CULTURAL CHANGES These are changes in the opinions and lifestyle of people in society. Examples of how these changes can impact on a business can be seen below. o Pressure groups causing bad publicity and problems o Falling sales of undesirable products (eg fur coats, unhealthy food) o Falling sales for businesses that test products on animals o Falling sales for businesses that pay workers (in the third world) very poorly o Falling sales for businesses that treat workers (in the third world) very poorly o Changes in diet resulting in new markets (eg new health food markets) o More people work and so convenience food markets are increasing o More car usage increasing the use of out of town businesses

Answer 106

TECHNOLOGICAL FACTORS The term TECHNOLOGY refers to all of the consumer and capital goods available and used in a society. Technology is constantly changing through enterprising activities. For example, many businesses now use robotics to build goods rather than only workers, and many consumers now watch BLU RAY instead of DVD. This means that the use of NEW TECHNOLOGY can result in the following positive changes for businesses. * LOWER PRODUCTION COSTS AND PRICES * INCREASING QUALITY STANDARDS FOR PRODUCTS * NEW UNIQUE PRODUCTS * RISING SALES (from unique products, higher prices and lowered quality) * INCREASED FINANCE (from falling sales) However, the use of new technology can often be expensive due to PURCHASE, SET UP and RUNNING COSTS. This means that not all businesses can afford to use it and so may face the following problems. * HIGHER PRODUCTION COSTS AND PRICES FOR PRODUCTS * FALLING QUALITY STANDARDS FOR PRODUCTS * FALLING SALES (from higher prices and lowered quality) * LACK OF FINANCE (from falling sales)

Answer 107

ENVIRONMENTAL FACTORS The ENVIRONMENT is about the world around us, and environmental factors can result in positive changes for businesses - for example, the discovery of new resources can create new markets to work in. However, sometimes the opposite is true and environmental factors have a negative effect on businesses. Examples of this situation would include the following. * DELAYS AND DAMAGE TO PRODUCTION CAUSED BY BAD WEATHER * DELAYS AND DAMAGE TO PRODUCTION CAUSED BY NATURAL DISASTERS (eg floods) * INCREASING COSTS TO MINIMISE EXTERNALITIES (eg noise or chemical pollution) * EXTRA COSTS OF MEETING NEW ENVIRONMENTALLY FRIENDLY LAWS AND POLICIES * PRESSURE GROUPS CREATING BAD PUBLICITY ABOUT CHEMICAL OR NOISE POLLUTION * FALLING SALES FOR BUSINESSES THAT CAUSE CHEMICAL POLLUTION TO THE ENVIRONMENT * FALLING SALES FOR BUSINESSES THAT CAUSE NOISE POLLUTION TO THE ENVIRONMENT

Answer 108

COMPETITIVE FACTORS A MARKET exists when buyers and sellers can come together to buy and sell goods and services. Markets can exist in different ways. For example, * DIRECT MARKETS - buyers and seller deal with each other (often face to face) * INDIRECT MARKETS - someone else makes the deal between buyer and seller (eg estate agent) Markets can also be different sizes. For example, a LOCAL MARKET would be a shopping centre while a NATIONAL MARKET would cover a whole country. Almost all markets that businesses operate in today are COMPETITIVE. This means that there are different businesses all trying to outdo each other to get consumers to use their products. Actions that businesses take to outdo each other in these markets are known as their COMPETITIVE ADVANTAGES. Competitive advantages of one organisation in a market can be a challenge for other businesses in the same market due to the POOR SALES and CASHFLOW that they can cause in the following ways. * NEW COMPETITOR PRODUCTS * LOWER COMPETITOR PRICES * BETTER QUALITY COMPETITOR PRODUCTS * BETTER COMPETITOR ADVERTISING AND PROMOTION

Answer 109

Several factors exist which can affect the operation of any organisation. Factors that come from the external environment are often outwith the control of the organisation. Changes in the external environment are often referred to by the acronym PESTEC: P - political; E - economic; S - sociological; T - technological; E - environmental; C - competitive. Political factors Political factors that could affect the operation of a business include the implementation of government policies. For example, the government controls taxation in the UK. New legislation is published continually, and businesses must ensure that they are aware of, and complying with, all legislation that affects them. For example, in March 2013, the budget statement announced new packaging targets for 2013-2017. These targets ensure the businesses cut their packaging and waste. This will allow the UK to meet EU targets, but places an extra financial burden on business. Economic factors Economic factors affecting the operation of businesses may take several forms. One economic factor, which is completely outside the control of any organisation, is the state of the economy. The Bank of England sets the interest rates for the UK. An increase in interest rate will directly affect any business with loans to repay, as the amount borrowed will increase. Large businesses may trade internationally. Fluctuating exchange rates between countries will affect the price of raw materials or the profit margin on goods sold. Socio-cultural factors Socio-cultural factors acknowledge changes in the needs and wants of the population. Tastes change quickly and consumers are rarely loyal to one particular brand or product. They tend to be influenced to a much greater extent by special offers or new features. Changes in demographics also have an impact and this must be taken into account by organisations. The changing pattern of employment affects business. For example, the increase in the number of households where both adults work has driven the increase in online supermarket shopping, as families choose to spend more time together and less time buying weekly shopping. The supermarket chain Sainsbury's was one of the last to make the move to online sales, and blamed its poor financial performance on the late decision to do so. Another social-cultural factor that may impact on an organisation is pressure groups. Pressure groups can exert a negative influence on organisations to the extent that the organisation may have to alter its plans. An example of an environmental pressure group is Greenpeace. Technological factors Technological factors are relevant today as most organisations rely heavily on the use of information technology in their everyday operation. Information technology has evolved and the pace of change is very fast. The pace of change is such that hardware and software that was up-to-date just last year is now already out-of-date. This means that there is a great financial cost for businesses. Money which did not require to be spent a decade ago is now dominating the buying decisions of many businesses. Maintaining a competitive advantage is essential to every organisation. Environmental factors Environmental factors are not usually controllable by organisations. The weather is an example that may have an impact of business. Localised flooding or rail delays due to snow can delay or halt the production process as businesses fail to receive stock. Competitive factors All businesses face competition and this, in turn, influences the way in which they operate. Sometimes this may mean changes to the way in which their products and services are marketed. In other cases it may mean completely redesigning their product range or changing the way in which they market and sell. Apple and Samsung have been embroiled in a number of lawsuits over the design of their smart phones and computers, with both sides citing the other as copying their intellectual property. Disagreements such as this are very costly and time consuming. Businesses today must be more ethically aware, as consumers view this with increasing importance when choosing where to purchase. With information available everywhere, consumers have never been so knowledgeable. The Internet allows consumers a huge choice of business to purchase from, therefore all businesses must ensure that they are ethically competitive. This means they must think about where they source raw materials, how much they pay workers and how much of a carbon footprint they leave behind. Customers will go elsewhere if they think a competitor is more ethically aware.

Answer 110

A MARKET for a good or service exists when CONSUMERS (people who have money and want products) and SELLERS (people who have things to sell for money) are in contact with each other and are able to buy and sell it.

Answer 111

DIRECT MARKETS INDIRECT MARKETS LOCAL NATIONAL GLOBAL

Answer 112

Here consumers and sellers are in FACE TO FACE contact. Examples include: * SHOPS * CAR BOOT SALES * AUCTIONS

Answer 113

Here buyers and sellers are NOT in FACE TO FACE contact. Examples include: * ESTATE AGENTS (market method – another person) * MAIL ORDER PURCHASES (market method – post) * INTERNET PURCHASES (market method – computer)

Answer 114

Here the market involves consumers and sellers in a small area IMMEDIATELY AROUND a business. This is common size of market for SMALL TO MEDIUM SIZED businesses.

Answer 115

Here the market involves consumers and sellers within a COUNTRY. This is common size of market for SMALL TO MEDIUM SIZED businesses.

Answer 116

Here the market involves buyers and sellers all around the WORLD. This is used to be an unusual size of market for SMALL TO MEDIUM SIZED businesses. However, the use of the INTERNET for advertising and selling products has made this market a more realistic option for some of these businesses.

Answer 117

The role of MARKETING in a business is to: * IDENTIFY the CURRENT goods and services that consumers want; * ANTICIPATE the goods and services that consumers will want in the FUTURE; * create products to SATISFY these current and future wants.

Answer 118

The main activities that are involved in this work by marketing staff are as follows. * MARKET RESEARCH * MARKET SEGMENTATION * MARKETING MIX DECISIONS * PRODUCT DEVELOPMENT * PRICING * PLACEMENT * PROMOTION This Marketing work is very important to any kind of business in an economy (ie PRIVATE, PUBLIC or THIRD sector), because if it is done properly then it can bring the following benefits. * SURVIVAL (all businesses need to satisfy their consumers or they will fail) * POSITIVE BUSINESS IMAGE (from advertising and promotions) * INCREASED CONSUMER SATISFACTION (from provision of goods and services they want) * INCREASED USE OF THE BUSINESS BY CONSUMERS (CONSUMER LOYALTY) * INCREASED PROFITS, BUDGETS OR DONATIONS (from consumer loyalty) This is even the case for businesses which are very well known and have high levels of demand for their products (eg Coca Cola). This is because effective marketing will allow them to gain more of the above benefits as it prevents people forgetting about them and beginning to use another business instead.

Answer 119

MARKET RESEARCH is the process of GATHERING, RECORDING and ANALYSING INFORMATION about a MARKET.

Answer 120

The types of information that Market Research is usually concerned with includes the following. * TYPES OF CONSUMERS * CURRENT AND FUTURE CONSUMER WANTS * CONSUMER OPINION OF A BUSINESS AND ITS COMPETITORS * ACTIONS OF COMPETITORS WITHIN A MARKET Market research is an important marketing activity, because it means that a business should have information that will help it make BETTER QUALITY MARKETING DECISIONS. This, in turn, means the business is more likely to be successful by achieving its objectives and satisfying consumers.

Answer 121

Market research is usually carried out in small to medium sized businesses through the following series of steps.

Answer 122

Information Description QUANTATITIVE This is information which is based on FACTS AND FIGURES rather than opinions. This information is obviously very specific and so can be helpful in finding out HOW things in a market are changing, but it does not usually provide reasons why this is happening. Examples of quantitative information would include sales figures, profit amounts, stock levels and staff wage costs. QUALITATIVE This is information which is based on OPINIONS rather than definite facts or figures. This information is helpful in finding out WHY things are changing in a market are changing. An example of qualitative information would be suggestions about how to improve quality at a staff meeting.

Answer 123

* TYPES OF CONSUMERS * CURRENT AND FUTURE CONSUMER WANTS * CONSUMER OPINION OF A BUSINESS AND ITS COMPETITORS * ACTIONS OF COMPETITORS WITHIN A MARKET Market research is an important marketing activity, because it means that a business should have information that will help it make BETTER QUALITY MARKETING DECISIONS. This, in turn, means the business is more likely to be successful by achieving its objectives and satisfying consumers.

Answer 124

MARKET RESEARCH is the process of GATHERING, RECORDING and ANALYSING INFORMATION about a MARKET.

Answer 125

DESK RESEARCH FIELD RESEARCH

Answer 126

DESK RESEARCH involves finding and REUSING EXISTING information about a market for your sINTERNAL SOURCES These are sources of market research information from INSIDE of the business. They often focus on information about the business itself. Examples include: * SALES FIGURES * PROFIT FIGURES * PRODUCTION FIGURES * STOCK LEVELS EXTERNAL SOURCES These are sources of market research information from OUTSIDE of the business. They provide information about what people outside of the business think about it and the market in general. * GOVERNMENT STATISTICS AND REPORTS ABOUT A MARKET * INDUSTRY AND TRADE STATISTICS AND REPORTS ABOUT A MARKET * INTERNET STATISTICS AND REPORTS ABOUT A MARKET U2.1 – Management of Marketing and Operations: Marketing The main STRENGTHS of desk research include the following. * Desk research is RELATIVELY CHEAP to collect as time and money does not have to be spent collecting new information. * Desk research is RELATIVELY EASY to collect as time and effort does not have to be spent creating effective ways to collect new information. * Desk research provides market research information RELATIVELY QUICKLY as it is already available and so time does not have to be spent collecting new information. * The speed with which (especially internet based) desk research can provides market research information means that it will TIMELY (in time) for decisions which need to be take quickly. * The speed with which (especially internet based) desk research can provide information means that it can provide access to a wide range of both INTERNAL (information from inside of the business) and EXTERNAL (information from outside of the business) market research. This can help make sure that decisions are well thought out by using a FULL picture of the market. The main WEAKNESSES of desk research include the following. * Desk research uses information that already exists and so this information may only be able to provide BROAD rather than specific market research information – this may not be very helpful for decision making. For example desk research may show that sales are falling – but not be able to explain why. * Desk research only uses information that already exists and so this information may be less than useful because it has become OUT OF DATE. * Desk research only uses information that already exists and so you may not know if it is INACCURATE because you did not carry it out. * Desk research only uses information that already exists and so if nothing is available on a topic (eg a new market) then it will be unable to provide any market research.pecific purpose. This “reused” information from desk research is known as SECONDARY INFORMATION. This type of research therefore DOES NOT usually involve direct contact with consumers (as it can be done by sitting at a desk!).

Answer 127

FIELD RESEARCH FIELD RESEARCH involves gathering NEW information about a market for your own specific purpose. This information that field research creates is known as PRIMARY INFORMATION. This type of research therefore DOES usually require direct contact with consumers. Source Description PERSONAL INTERVIEW Here the business uses a face-to-face discussion to ask consumers questions about what they think about the business and its’ market. This is good because it allows a 2 way conversation about issues and so can clear up any misunderstandings and get extra detail to answers. This means the information it provides will be of high quality. The main drawback of this method is that consumers may not have the time to talk of be unhappy to do so - this can mean it is hard to collect research this way. It also takes time for staff to do it which costs money for wages. COMMENT CARDS Here the business uses a card (which is usually available at tills or service desks) to gather comments from consumers about the business and its’ market. This is good because it does not require a lot of staff time and wages to collect the information. Consumers can also use it at any time so it allows a business to collect ongoing research easily. The main drawback of this method is that it is not a 2 way method of communication and so it can be hard to clear up any misunderstandings or get extra detail to issues. ONLINE SURVEY Here the business uses an internet website to ask consumers questions about what they think about the business and its’ market. Consumers can be directed to this website from information on e—mails, receipts or the business website. This is good because it does not require a lot of staff time and wages because computers collect or analyse the information. Consumers may be more willing to provide information because it is quick and they can answer at a time which suits them The main drawback of this method is that it is not a 2 way method of communication and so it can be hard to clear up any misunderstandings or get extra detail to issues. The main STRENGTHS of field research include the following. * Field research is valuable for decision making because it creates new information which will be SPECIFIC to your market research needs. * Field research is reliable for decision making because it is ACCURATE as it creates new information from work that you have done. * Field research is reliable for decision making because it is UP TO DATE as it creates new information from work that you have just done. The main WEAKNESSES of field research include the following. * Field research can be RELATIVELY EXPENSIVE to collect as time and money has to be spent on staff and technology to gather the new information. * Field research can take time to collect and so sometimes it may NOT produce TIMELY information when decisions need to be taken quickly. * The amount of time which field research can take to provide information can mean that it MAY NOT provide a wide range of INTERNAL (information from inside of the business) and EXTERNAL (information from outside of the business) market research. This can mean that decisions are NOT well thought out because there is not a full picture of the market.

Answer 128

Due to the importance of the marketing decisions that are based on market research, small to medium sized businesses must be careful to choose market research that will provide them with the best possible information. To help decide which methods of market research are best for a situation, a business should consider the following. 1 THE TYPE OF INFORMATION NEEDED (eg information about basic changes simply requires DESK research, but data about the reasons why consumer spending habits have changed will require FIELD research) 2 THE MARKET THAT THE BUSINESS IS IN (eg fast changing markets require information to be gathered frequently and quickly and so on line DESK research will be useful) 3 THE TIME AVAILABLE FOR THE RESEARCH TO BE CARRIED OUT (eg when plenty of time is available high quality FIELD research can be used, but when time is short DESK research may have to do) 4 THE FINANCE AVAILABLE FOR CONDUCTING THE RESEARCH; (eg when plenty of money is available high quality FIELD research can be used, but when money is short DESK research may have to do) 5 THE OTHER RESOURCES AVAILABLE FOR CONDUCTING THE RESEARCH (eg when trained staff, effective questionnaires, etc, are available, then high quality FIELD research should be used, when these resources are not available, then DESK research may have to do)

Answer 129

Although market research helps businesses make sensible marketing decisions, it does not guarantee marketing success. This is because, despite the best efforts of staff, market research might provide poor quality information. This can occur due to market research not having the following qualities of HIGH QUALITY INFORMATION.

Answer 130

MARKET SEGMENTATION involves using market research information to split the consumers in your market into SEPARATE and IDENTIFIABLE groups (also known as SEGMENTS) with SPECIFIC WANTS.

Answer 131

1 AGE (eg children want different products when compared to adults) 2 GENDER (eg men want different products when compared to women) 3 INCOME (eg people with high incomes may want several holidays per year compared to people with lower incomes) 4 RELIGION (eg some people may or may not use products due to their faith – eg muslim people do not usually use non halal meats) 5 FAMILY CHARACTERISTICS (eg families with many children may need 7 seat cars while couples only need a 2 seat car) 6 LOCATION (eg people in the countryside may rent more DVDs than city dwellers as it harder for them to get to the cinema) 7 LIFESTYLE AND PREFERENCES (eg skiers will want ski equipment while footballers will not)

Answer 132

An example of segmentation can be seen from Coca Cola who have identified the following different segments and made different products for their needs - health conscious men (Coke Zero), health conscious women (Diet Coke), soft drinkers (Coca Cola) and children (Caffeine Free Diet Coke)

Answer 133

When small to medium sized businesses know about the various segments within their market, then they can try and meet the different wants of each segment by dealing with each of them in a separate suitable way. This is known as TARGET MARKETING.

Answer 134

Target marketing can bring the following BENEFITS to a business. * IMPROVED CONSUMER SATISFACTION (as specific wants are being met) * IMPROVED CONSUMER LOYALTY (as specific wants are being met) * NEW SALES OPPORTUNITIES (as new segments can start to be sold to) * IMPROVED SERVICE, ASSISTANCE OR PROFITS (due to increased satisfaction, loyalty and opportunities) * IMPROVED MARKET SHARE (this is an increase in the amount of the market the business is dealing with) * DECREASED WASTAGE IN PRODUCTION (as targeted products should satisfy wants and so not go unsold) * LESS CHANCE OF FAILURE (from increased usage, increasing market share and less wastage) However, target marketing can also create the following ISSUES for to a business. * INCREASED COST (having lots of different products to satisfy consumers can be costly) * COMPLICATED TO MANAGE (many different products can be hard for businesses to keep organised)

Answer 135

Once a business is clear from market research what its’ different market segments want, it will have to make decisions about the MARKETING MIX. The marketing mix for small to medium businesses is usually made up of the specific COMBINATION of separate decisions about PRODUCT, PRICE, PLACEMENT and PROMOTION that they think will satisfy the needs of a market or segment. This marketing mix is also known as THE 4P’S as the 4 decisions that make it up all start with the letter “p”. Although the individual decisions about PRODUCT, PRICE, PLACEMENT and PROMOTION are important in their own right, care must always be taken when making them NOT to damage the overall balance of the marketing mix. This is because it is the overall marketing mix of the “4Ps” together for any product that makes consumers use it rather than any single “P” alone. For example, a business may want to increase the price at which sells packets of crisps as a sensible profit making decision in the PRICE element of the marketing mix. However, although this seems a good idea on its own, it may damage the OVERALL MARKETING MIX and lower sales because consumers will not usually pay more for a product they were used to get more cheaply. The marketing mix for any product should be DYNAMIC. This means that the decisions about what the 4P’s are should be checked and changed over time in order to make sure that they are kept up to date with consumers wants. For example, if a business noticed that consumers are not buying their crisps as much as they used to then they may decide to change the MARKETING MIX by creating new adverts to better PROMOTE its’ crisps.

Answer 136

PRODUCT PLACE PRICE PROMOTION

Answer 137

DEVELOPING NEW PRODUCTS BRANDING PRODUCT LIFE CYCLE

Answer 138

BRANDING When a new product is being innovated, a USP feature that a business is likely to try and build into it is a BRAND. A brand is an IDENTITY for a product or business that will allow consumers to DISTINGUISH it easily from other similar products or businesses. Brands usually also help attract consumers because they develop an “image” for the product that consumers want to have for themselves by using the branded product. Brands are usually developed through the use of the following. * CATCHY AND MEMORABLE NAMES (eg Nike) * SPECIFIC SLOGANS OR JINGLES (eg “Just do it”) * SPECIFIC DESIGNS (eg the design for the Nike Airmax) * SPECIFIC SYMBOLS OR LOGOS(eg the Nike “swoosh” or “tick” design) Branding is pursued as a USP by many businesses due to the following BENEFITS. * CONSUMERS USUALLY THINK BRANDED PRODUCTS ARE BETTER QUALITY OR MORE RELIABLE AND IF THEY ACTUALLY ARE CONSUMERS WILL BE HAPPY WITH THE BRAND * HAPPY CONSUMERS MAY BECOME LOYAL AND WANT TO KEEP USING THE BRAND * CONSUMER HAPPINESS AND LOYALTY CAN MEAN BUSINESSES CAN CHARGE HIGHER PRICES THAN NON BRANDED PRODUCTS * NEW PRODUCTS CAN BE EASIER TO LAUNCH AS LOYALTY MEANS PEOPLE TRUST THE BRAND AND SO ARE MORE LIKELY TO TRY THE NEW PRODUCT * GENERAL BRAND ADVERTISING CAN BE COST EFFECTIVE PROMOTION FOR ALL PRODUCTS However, despite the benefits, businesses should also be aware of the following possible brand PROBLEMS. * NEW BRAND PRODUCTS NEED LOTS OF RESEARCH AND DEVELOPMENT MONEY IF THEY ARE TO MAINTAIN THE BRAND’S REPUTATION * ANY BRAND PRODUCTS WHICH FALL BELOW EXPECTED STANDARDS CAN DAMAGE THE REPUTATION OF ALL BRANDED ITEMS * CONSUMER LOYALTY CAN BE LOST IF CONSUMERS FEEL THEY ARE PAYING HIGHER PRICES SIMPLY FOR A “NAME” ALONE RATHER THAN BETTER QUALITY

Answer 139

PRODUCT LIFECYCLE The PRODUCT LIFECYCLE is a series of stages that a product goes through from when a business first creates and sells it until the time nobody wants it any more. Knowing the lifecycle for products is useful for a business because it helps it to avoid wasting money trying to provide products that consumers no longer want. During each stage of the lifecycle, sales and profits will vary as follows.

Answer 140

The price set at any point in time must help a business achieve its objectives. This means that the different economic sectors businesses will often set different prices as follows.

Answer 141

the actual good or service being sold by a business

Answer 142

how much money the business charges the customer to spend on their good or service

Answer 143

where a business makes thier good or service available for the customer to buy

Answer 144

the way in which a business raises awareness of their product or service and persuades customers to buy it.

Answer 145

PUBLIC PRIVATE THIRD

Answer 146

Public sector businesses are usually set up to achieve the objective of providing a PUBLIC SERVICE. This means that they price their goods and services at or even below (if they are free) the PRICE FLOOR in order to maximise the number of people who can afford to use them.

Answer 147

Private sector businesses are usually set up to achieve the objective of MAXIMISING PROFITS for their owners. This means that they price their goods and services at or even below (if they are free) the PRICE CEILING in order to maximise the profit from each sale.

Answer 148

Third sector businesses are usually set up to achieve the objective of SOCIAL RESPONSIBILITY. This means that they price their goods and services BELOW the PRICE FLOOR as they are given for free to specific people who might not otherwise been able to afford them.

Answer 149

UNCOMPETITIVE MARKET COMPETITIVE MARKET HIGHLY COMPETITIVE MARKET

Answer 150

This market structure may mean that there is only one business selling this product to the market. This would be known as a MONOPOLY market (as “mono” means “one”). This means the business here can charge prices at the PRICE CEILING because consumers will have to pay their prices or simply do without as there is no-one else to buy from instead. Prices will stay like this unless other businesses enter the market at a lower price and so start to give consumers a choice.

Answer 151

This market structure usually means that there are a few businesses selling similar products to the market and they are all getting enough consumers to survive. Here businesses will charge similar prices to each other. This is because if a business charges a higher price than its’ competitors then it will lose sales as consumers go to them instead, and if it charges a lower price than competitors then it loses profit it could have otherwise had. Therefore, in this market, the prices charged are likely to be in BETWEEN the FLOOR and CEILING and are known as the MARKET PRICE. Prices are likely to stay like this for a long time.

Answer 152

This market structure usually means that there are a few businesses selling similar products to the market and there are NOT enough consumers for them all to survive. Here businesses will try to charge a price lower than their competitors in order to survive by putting them out of business and taking their consumers. Therefore, in this market, the prices charged are likely to be in at or below the PRICE FLOOR. Prices are likely to rise over time as some businesses close and the remaining ones form a competitive market.

Answer 153

different types of products being sold and how they affected : Ordinary products have many competitors and not many USPs. They will usually be sold at prices close to the MARKET PRICE. This is because if businesses try to sell them for more consumers will simply refuse to buy them and buy similar products from a competitor instead. Branded products will be able to charge between the MARKET PRICE and PRICE CEILING. This is due to consumers being willing to pay higher than normal prices for brands because they feel that they are better quality than “ordinary” products. Unique products will be able to charge prices close the PRICE CEILING. This is due to their monopoly position in their market which means that buyers simply have to pay their high prices or just do without. New products will usually be sold at the appropriate price for their product type, eg unique products at the price ceiling, etc. However, sometimes businesses will sell them for a short time at prices close to the PRICE FLOOR in order to break consumer loyalty to other products and so allow them to break into the market.

Answer 154

The PLACEMENT element of the marketing mix involves trying to provide goods and services IN THE RIGHT PLACE and AT THE RIGHT TIME for consumers. The placement element of the marketing mix is very important as without it the business would fail because consumers would not be able to gain access to its’ goods or services at a time or place that suits them. The main areas of activity in the placement element of the marketing mix for small to medium sized businesses can be seen below.

Answer 155

BUSINESS LOCATION A business has to make decisions about where to LOCATE (open and run) some or all of the following. * FACTORY (for production and storage) * OFFICES (for management) * SHOPS (for providing products)

Answer 156

BUSINESS TYPE Different types of business will require different types of premises. For example, a sole trader may only require a single shop (due to their small market and low number of staff) while a Government Agency may have many large locations (to make sure they can provide a public service to all areas of the country). MARKET DEMAND Businesses must make sure that the location that they choose has consumers in that area who want their goods and services. This is because if there is no market where a business sets up then it will not be used and so failure will occur. COMPETITORS Although businesses will want to be close to their market, they will usually want to locate away from their competitors (other businesses that do the same as them). This is because a business would not want competitors in their area doing things that take away their customers. RAW MATERIALS USED A business has to make sure that the location it chooses can provide the RAW MATERIALS that it USES efficiently. Examples of how the raw materials used can affect location can be seen below. * Some businesses use RAW MATERIALS that are PERISHABLE (become wasted quickly). An example is food. These businesses will want to locate CLOSE to their SUPPLIERS to shorten transport times. This is to minimise the chance materials will be wasted in transport and maximise the time the business has to use them to produce their product. * Some businesses are known as BULK REDUCING BUSINESSES. This means that they use BULK (large) amounts of raw materials to make SMALLER finished products. An example is a power station which takes in thousands of tons of coal to produce the service of electricity provision. These businesses will want to locate CLOSE to their SUPPLIERS rather than their consumers. This is because the delivery costs of the small finished products will be low and doing this will minimise the high transport costs of moving the bulk raw materials. AVAILABILITY OF RESOURCES A business has to make sure that the location it chooses can provide the resources that it needs to produce its’ goods and services. Examples of how the availability of resources can affect location can be seen below. * Businesses can only locate where there are available PREMISES, and so they simply cannot operate in locations where there are none available. For example, a business cannot open a shop in a High Street when there are no empty premises for them to start using. * Businesses need enough suitably skilled LABOUR to operate. This means that locations WITH suitable labour WILL be attractive to businesses. This is because of easy recruitment and perhaps lower wages (due to low staff transport costs as they are close to their workplace). On the other hand, locations WITHOUT suitable labour WILL NOT be attractive to businesses. This is because of problems with recruitment and higher wages (due to high staff transport costs as they are NOT close their work). RESOURCE COSTS In addition to checking that resources are available, a business has to make sure that it has the finance available to pay for them too. This is because different resources cost different amounts to employ. Examples of this situation include the following. * The location and size of premises will affect their rental or purchase costs. * Staff wages vary with the skills and qualifications of workers. PRODUCT TYPE Business location will be affected by the PRODUCT that the business PRODUCES. Examples of this can be seen below. * Some businesses make FINISHED GOODS that are PERISHABLE (become wasted quickly) –eg a sandwich maker. These businesses will want to locate CLOSE to their CONSUMERS rather than suppliers to minimise the chance goods will be wasted in transport and maximise the time they can be sold for. * Some businesses are known as BULK INCREASING BUSINESSES. This means that they use SMALL amounts of raw materials to make BULK (large) finished products. An example is a soft drink maker who will take in 1 tanker of soft drink flavour and make 20 tankers of the final drink by adding water to it. These businesses will want to locate CLOSE to their CONSUMERS rather than their suppliers. This is because the delivery costs of small amounts of raw materials will be small and doing this will minimise the high transport costs of moving the finished bulk goods. * Some businesses are known as COMPONENT businesses – this means that they rely on selling their products to other businesses. For example, computer chip manufacturers depend on computer manufacturers to buy their chips. These businesses will want to locate CLOSE to their CONSUMERS to minimise transport costs. INFRASTRUCTURE Infrastructure is all of the following things that support business activity in an area. * SERVICES (eg housing, colleges, etc) * UTILITIES (ie electricity, water, etc) * LINKS (ie road, water, air and rail facilities) Businesses will want to locate in areas with a STRONG INFRASTRUCTURE to lower transport costs, lower staff costs and speed up deliveries. GOVERNMENT LEGISLATION Some businesses are only allowed to locate in certain areas because of Government rules or laws about HEALTH AND SAFETY. For example chemical plants and power stations have to be set up away from populated areas to minimise the damage that would be caused to the public if there was an accident. PLANNING REGULATIONS from Government can also impact on what a business can do with its’ premises. For example the Government can refuse permission for a business to extend a factory if it feels this will harm the local area through congestion, pollution, etc. REGIONAL POLICY REGIONAL POLICIES are things that are done by the European and UK Governments to try to make sure that all regions of Europe and the UK are fairly treated and equal in terms of employment, wealth and living standards. Regional Policies can affect business location because they can encourage businesses to set up in “poorer” areas by offering incentives such as the following. * GRANTS (money which doesn’t have to be paid back) * HELP WITH PAYING RENT AND RATES COSTS * HELP FINDING SUITABLE PREMISES * HELP WITH PLANNING PERMISSION * HELP WITH THE COSTS OF FINDING AND TRAINING STAFF * DEVELOPMENT OF THE INFRASTRUCTURE IN THESE AREAS * BUSINESS ADVICE INFORMATION TECHNOLOGY Some businesses can use Information Technology (IT) such as internet websites to advertise/sell their products or allow customers to contact them. This can be the case because the product that they provide can be delivered though IT (eg music/video streaming or downloads) or can be ordered online and delivered by post. This can affect where a business locates because these businesses do not need premises in convenient places for customers to visit and so can set up in cheaper locations that consumers don’t usually go to. For example, many credit cards call centres that are set up in cheap rent areas away from expensive and busy high streets because customers can simply phone up to do business with them.

Answer 157

MORE SALES reasons why : * LOCATION IS CLOSE TO EXISTING CUSTOMERS FOR EASY ACCESS * LOCATION IS CLOSE TO NEW CUSTOMERS FOR EASY ACCESS * LOCATION DOES NOT HAVE A LOT OF COMPETITION IN THE AREA * LOCATION OFFERS “QUALITY” PREMISES THAT ATTRACT CUSTOMERS LOWER COSTS reasons why : * LOCATION COULD BE CLOSER TO SUPPLIERS AND LOWER TRANSPORT COSTS * LOCATION COULD BE CLOSE TO CHEAPER WORKERS * LOCATION COULD OFFER LOWER RENTS * LOCATION COULD OFFER LOWER PURCHASE COSTS

Answer 158

This part of placement element of the marketing mix is concerned with deciding on the best METHOD OF DISTRIBUTION to use. A method of distribution is a way of transporting goods to premises so that to they are available in time for consumers to use them.

Answer 159

ROAD AIR WATER PIPELINE

Answer 160

Road based methods of distribution use the road network to deliver goods and services. Examples of road based methods of distribution include tankers, transporters, refrigerated vehicles, trucks, and vans.

Answer 161

Rail based methods of distribution use the railway network to deliver goods and services. Examples of rail based methods of distribution involve trains using flatbed, storage, refrigerated and tanker carriages.

Answer 162

Air based methods of distribution use aircraft and helicopters to deliver goods and services. Examples of air based methods of distribution include freight and refrigerated aircraft.

Answer 163

Water based methods of distribution use the sea and canals to deliver goods and services. Examples of water based methods of distribution involve supertankers, refrigerated ships, cargo container ships and barges.

Answer 164

Pipeline based methods of distribution use the pipes and cables to deliver services. Examples of pipeline based methods of distribution involve phonelines, internet connections, gas, water and electricity.

Answer 165

* Road vehicles are FLEXIBLE as almost everywhere can be reached by road and many different vehicles are available to suit transport of all types of goods and services.

Answer 166

Trains can deliver quickly as there are usually LESS DELAYS on train tracks when compared to roads. * Trains can result in QUICK DELIVERIES as they can deliver massive amounts of products at once. * Trains can be fairly CHEAP method of delivering large amounts (when compared to road transport) due to their speed and bulk.

Answer 167

* Aircraft can transport products long distances VERY QUICKLY. * Aircraft can UNIQUELY reach places which other transport methods may not be able to – eg helicopters are used for mountain rescue as no other vehicle can reach here.

Answer 168

* Ships can deliver massive amounts of products at once which makes them fairly CHEAP. * Ships are FLEXIBLE as they can use the oceans to deliver any type of goods to all around the world.

Answer 169

* Pipelines are FLEXIBLE as they can be put almost anywhere. * Pipelines are fairly CHEAP as once they are set up they do not cost money each time they are used.

Answer 170

* Road vehicles can have HIGH FUEL COSTS. * Road vehicles can result in SLOW DELIVERY as they may have to make several trips due to their relatively small size. * Road vehicles can result in SLOW DELIVERY as can be caught in traffic jams.

Answer 171

* Trains are not very FLEXIBLE as they can only deliver to places where there are train tracks.

Answer 172

* Aircraft have HIGH FUEL COSTS. * Aircraft are usually not very FLEXIBLE as they can normally only deliver business products to places where there is an airport. * Poor weather might stop aircraft flying and DELAY deliveries.

Answer 173

* Ships can be quite SLOW when compared to other methods – especially if there is bad weather. * Ships can only deliver to LIMITED places as they need a dock to drop off goods.

Answer 174

* Pipeline can only deliver a LIMITED range of services and so can’t be used for all deliveries. * If a pipeline is damaged it can be COSTLY to repair and will stop all deliveries until it is repaired.

Answer 175

Here the methods of distribution used ARE owned by the business itself. This is good for STRONG CONTROL (of delivery times, quality and reputation) and LOWERING RUNNING COSTS in the long run. However, initial SETUP COSTS can be very HIGH.

Answer 176

Here the methods of distribution used are provided by a different organisation and so ARE NOT owned and paid for by the business itself. This is PREVENTS LARGE amounts of spending on SET UP COSTS to purchase delivery equipment. However, there can be a LOSS of CONTROL (of delivery times, quality and reputation) and INCREASED RUNNING COSTS in the long run (due to continued payments).

Answer 177

MARKET STRUCTURE The method used must be suitable for the market the business is selling to. For example, goods needed on an island market will have to use sea or air as part of the method used. PRODUCT TYPE Different products must be transported in different ways. For example, some products are PERISHABLE (which means that they will go off quickly) and so will have to use specialised methods (such as refrigerated transport) or quick methods of distribution (such as air). METHOD COST The method used will depend on the amount of FINANCE AVAILABLE and the costs of the method. For example trains may be used instead of lorry due to lower costs. INFRASTRUCTURE The method used will depend on the INFRASTRUCTURE options available. For example planes may not be used because there is no available airport.

Answer 178

INFORMATIVE ADVERTISING PERSUASIVE ADVERTISING

Answer 179

This type of advertising aims to simply INFORM people about important facts and events that they should know.

Answer 180

This type of advertising aims to PERSUADE people to change their consumption by HIGHLIGHTING or REMINDING them about the USP’s and branding of a product.

Answer 181

* Health adverts (eg flu jabs) * Product recall adverts

Answer 182

* Adverts for business products

Answer 183

BROADCAST ADVERTS PRINTED ADVERTS OUTDOOR ADVERTS ELECTRONIC ADVERTS

Answer 184

* Local TV * Local Radio * Local Cinema * Internet

Answer 185

Broadcast adverts can be very effective for the following reasons. * ATTENTION GRABBING DUE TO VISUAL/SOUND NATURE * REMEMBERED DUE TO VISUAL/SOUND NATURE * TARGETS SPECIFIC LOCAL MARKETS (called MICRO REGIONS) * TARGETS SPECIFIC SEGMENTS (through viewing/listening info) However, broadcast media can have the following drawbacks. * CAN BE VERY EXPENSIVE * CONSUMERS SOMETIMES IGNORE OR SKIP ADVERTS

Answer 186

* Local Paper * National Paper * Flyers given out * Leaflets to houses * Letters to houses

Answer 187

Printed media can be very effective for the following reasons. * HOLDING CONSUMERS ATTENTION AS THEY CAN BE SEEN AGAIN * PERSUADING CONSUMERS AS THEY “BELIEVE WHAT THEY READ” * TARGETING SPECIFIC SEGMENTS THROUGH LOCAL PAPERS * TAPPING INTO LOYALTY FOR A NEWSPAPER However, printed media can be EXPENSIVE if used to cover a large number of segments as a variety of media would have to be used to reach them all.

Answer 188

* Posters on buses * Posters on taxis * Bus shelter posters * Billboard posters * Street posters

Answer 189

Outdoor media can be very effective for the following reasons. * ATTENTION GRABBING DUE TO HIGH VISUAL IMPACT * REMEMBERED DUE TO HIGH VISUAL IMPACT * REMEMBERED DUE TO FREQUENT CONTACT * TARGET SPECIFIC LOCAL MARKETS (called MICRO REGIONS) However, outdoor media can have the following drawbacks: * CAN BE EXPENSIVE FOR SOME BUSY LOCATIONS * CAN BECOME PART OF THE BACKGROUND AND GO UNNOTICED

Answer 190

* Info on Websites * Internet Pop Ups * Internet Adverts * Targeted e-mails * Bluetooth message * Facebook * Twitter

Answer 191

Electronic media has all of the strengths of broadcast media with the following additional benefits. * 24 HOUR WORLD WIDE ADVERTISING * LOW COST WORLD WIDE ADVERTISING * CAN INVOLVE CONSUMERS IN ADVERT (eg viral ads) * CAN DIRECT TO WEBSITES TO ALLOW IMMEDIATE PURCHASES However, electronic media can IRRITATE consumers if it was not wanted or expected (eg spam e-mail and web popups).

Answer 192

PROMOTIONAL ACTIVITIES The aim of the promotional activities is to ENCOURAGE consumers to buy or use the products of a business by giving them a special offer. The main methods of promotion that a business can use are: * BUY ONE GET ONE FREE (also known as BOGOF) * SPECIAL OFFERS (eg one child free for each adult) * DISCOUNTS (money off – eg 1⁄2 price sale) * MONEY OFF VOUCHERS * FREE GIFTS * COMPETITIONS * FREE SAMPLES/TASTINGS

Answer 193

Internal factors are factors within a business that can be controlled by the organisation. The three main internal factors are: human resources. finance. current technology.

Answer 194

FINANCE HUMAN RESOURCES CAPITAL

Answer 195

External factors are things outside a business that will have an impact on its success. Their impact can be positive or negative. A business cannot control external factors.

Answer 196

POLITICAL ISSUES ECONOMIC ISSUES SOCIAL ISSUES TECHNOLOGY ISSUES ENVIRONMENT ISSUES COMPETITIVE ISSUES

Answer 197

The role of OPERATIONS in a business is to PRODUCE goods and services to a SUITABLE STANDARD as EFFICIENTLY (minimum in – maximum out) as possible.

Answer 198

INPUT PROCESS OUTPUT

Answer 199

(raw materials necessary for creating a good or service are gathered)

Answer 200

(resources are used to create a new good or service from raw materials)

Answer 201

(new finished goods and services are available for consumption)

Answer 202

* STOCK CONTROL (INPUT ISSUE) * CHOOSING SUPPLIERS (INPUT ISSUES) * FACTORS OF PRODUCTION (PROCESS ISSUE) * QUALITY ISSUES (PROCESS ISSUE) * ETHICAL PRODUCTION (PROCESS ISSUE) * CUSTOMER SERVICE (OUTPUT ISSUE) * DISTRIBUTION (OUTPUT ISSUE)

Answer 203

* SURVIVAL (all businesses need to produce goods and services for their consumers or they will fail) * INCREASE IN PRODUCT QUALITY (due to better qualified and motivated staff and systems) * DECREASED COSTS (due to less wastage and better systems) * OPPORTUNITY TO DECREASE PRICES FOR CONSUMERS (due to lowered costs) * POSITIVE BUSINESS IMAGE (from high quality products and any lowered prices) * INCREASED CONSUMER SATISFACTION (from provision of suitable products perhaps at low prices) * INCREASED USE OF THE BUSINESS BY CONSUMERS (CONSUMER LOYALTY) * INCREASED PROFITS, BUDGETS OR DONATIONS (from consumer loyalty)

Answer 204

STOCK MANAGEMENT is all about trying to make sure that the business has a STOCK LEVEL that prevents OVERSTOCKING PROBLEMS and UNDERSTOCKING PROBLEMS.

Answer 205

* RAW MATERIALS (basic parts still to be used in production); * WORK IN PROGRESS [WIP] (products that have been started but not yet finished); * FINISHED GOODS (products that are complete and ready to be sold to consumers).

Answer 206

* PRODUCTION CAN ALWAYS BE CARRIED OUT AS STOCKS ARE CONSTANTLY AVAILABLE * CONSUMERS WILL ALWAYS BE ABLE TO BUY PRODUCTS AS STOCKS ARE AVAILABLE * SALES AND USAGE ARE MAXIMISED AS CONSUMERS CAN ALWAYS ACCESS STOCKS OF PRODUCTS

Answer 207

Overstocking means that a business has bought in MORE stock than it regularly needs

Answer 208

and so will face the following problems due to extra unnecessary stock. * HIGH LABOUR COSTS FOR SECURITY STAFF TO PREVENT THEFT OF STOCK * HIGH LABOUR COSTS FOR WAREHOUSE STAFF TO MANAGE STOCKS * HIGH STORAGE COSTS FOR LARGE PREMISES TO STORE STOCK * HIGH COSTS OF INSURANCE FOR LARGE AMOUNTS OF STOCK * LESS CHANCE OF WASTAGE OR THEFT BEING NOTICED AND DEALT WITH * RISK OF LOSING MONEY ON STOCK THAT BECOMES OBSOLETE

Answer 209

Understocking means that a business has NOT bought in enough stock to continue with its ordinary activities

Answer 210

* LARGE NUMBERS OF SMALL STOCK ORDERS WILL HAVE TO BE MADE * SMALL ORDERS CAN RAISE COSTS AS BULK BUYING DISCOUNTS ARE LOST * PRODUCTION MAY HAVE TO STOP * STOCKOUTS MAY OCCUR (this means there is no stock for consumers) * SALES AND USAGE OF THE BUSINESS ARE DECREASED BY STOCKOUTS * REPUTATION OF BUSINESS MAY BE DAMAGED BY STOCKOUTS * CONSUMER LOYALTY MAY BE DECREASES BY STOCKOUTS

Answer 211

product demand seasonal factors finance available stock type lead time

Answer 212

Businesses have to make sure that their stock level is set high enough to prevent stockouts and so meet the expected demand of consumers. This means if a product is very popular then stock levels should be high and if sales are low then stocks should be low too.

Answer 213

Product demand will change at different times of the year – for example, demand for shorts will be high in Summer and lower in Winter. This means that businesses have to make sure that their stock level is set high during periods of high demand (to prevent stock outs) and then lowered when demand falls (to prevent overstocking).

Answer 214

Holding stock costs money to buy it and for insurance, premises and staff to manage and keep it secure. This means that a business can only hold as much stock as they can afford to pay for.

Answer 215

Some stock will not last very long before it becomes useless. This could be due to stock becoming OBSOLETE (ie a lack of interest from consumers as it is out of date) or because it is PERISHABLE (ie becomes wasted quickly - eg food going out of date). This means that businesses who use stock which can easily become obsolete or perish should try to minimise stock levels to prevent any wastage.

Answer 216

Almost all stock can take a little time to deliver from suppliers – this time is known as LEAD TIME. Businesses which have a long lead time should maximise stock levels to prevent stockouts while waiting for another delivery to be made.

Answer 217

* COMPUTERS CAN ACCURATELY CALCULATE STOCK FIGURES QUICKLY * COMPUTERS MAY BE ABLE TO REPLACE STAFF IN STOCK CONTROL WHICH SAVES ON WAGES * COMPUTERS CAN AUTOMATICALLY REMIND STAFF WHEN THE REORDER LEVEL HAS BEEN REACHED * REMINDING STAFF OF WHEN TO REORDER SHOULD LOWER THE CHANCE OF RUNNING OUT OF STOCK * COMPUTERS CAN AUTOMATICALLY REORDER STOCK TO PREVENT ANY CHANCE OF STAFF FORGETTING However, computerised stock control does have to be protected from the potential PROBLEM of computers being hacked or overridden to hide theft or wastage.

Answer 218

PRICE A business will usually want to use a supplier that sells at a low price. This is to MINIMISE COSTS for the business. This is also important because a business can only buy from suppliers that it has the FINANCE to be able to afford. QUALITY A business will want to use a supplier that provides stock of a suitable level of QUALITY. This is to make sure that you use quality materials to make products of a high enough QUALITY to keep consumers happy. CONTINUITY A business will want to use a supplier that can CONTINUE to supply to them. This is to MINIMISE THE INCONVENIENCE of changing suppliers which could cause delays to production, losing discounts, etc. RELIABILITY A business will want to use a supplier that is RELIABLE. This means that they can always supply them with the correct amount stock, when they expect to receive it and to the same standards every time. This is to MINIMISE THE INCONVENIENCE of unexpected poor quality, lack of stock, delays, etc. LOCATION A business will usually want to use a supplier that is CLOSE TO THEM. This MINIMISES COSTS by reducing delivery charges.

Answer 219

CAPITAL ENTERPRISE LAND LABOUR

Answer 220

Capital describes MONEY and all of the EQUIPMENT it can be used to buy. Capital has to be paid for through INTEREST (extra money paid from borrowing or lost through spending). Capital is a MAN MADE resource.

Answer 221

Enterprise covers all of the IDEAS for goods and services a business has and the ORGANISATION OF RESOURCES undertaken by MANAGERS to make these ideas turn into real goods and services. Enterprise earns PROFITS.

Answer 222

Land is the Earth and all of the NATURAL RESOURCES in it or on it (eg oil, wood, animals, crops, etc). Land is paid for through RENT (money paid for the use of the land).

Answer 223

Labour is all of the work that is done by PEOPLE (aka the HUMAN RESOURCE). Labour is paid for by WAGES.

Answer 224

1 JOB PRODUCTION 2 BATCH PRODUCTION 3 FLOW PRODUCTION

Answer 225

Job production concentrates on producing one product from start to finish. Once one product is complete, another can begin. It is highly specialised and very labour intensive.

Answer 226

* Each product is made ONE AT A TIME as a single separate piece of work (or JOB). * Each product made will be UNIQUE because it has been designed to meet specific standards that the customer has set. * Lots of (normally skilled) labour is usually used - this means it is known as a LABOUR INTENSIVE method of production.

Answer 227

* Job production should provide a variety of work for staff to complete which should INCREASE their MOTIVATION, SKILLS and PRODUCT QUALITY. * Job production should provide a very HIGH LEVEL of CUSTOMER SATISFACTION because it provides a high quality and unique product that meets their specific needs. * Job production should result in HIGH PRICES (and profits) because customers will pay a lot for high quality products that meet their specific needs. * Staff can think for themselves – this means that they suggest changes which would help improve quality, production or consumer satisfaction. This can mean that production may become MORE EFFICIENT.

Answer 228

* Job production can be EXPENSIVE to run because skilled staff will often expect HIGH WAGES. * Job production can be EXPENSIVE to run because as each product is unique there will be FEW ECONOMIES OF SCALE. An ECONOMY OF SCALE a DECREASE in the cost of EACH UNIT made due the large number (or SCALE) of products made by a business. * Job production can take a long time to complete (especially on big jobs) which can cause CASHFLOW PROBLEMS while waiting for payment. * Job production usually results in LOW LEVELS OF OUTPUT – this limits the amount of sales a business can make.

Answer 229

Batch production enables items to be created stage by stage in bulk (‘a batch’). Generalist equipment is used to produce quantities of a product to meet a specific demand. The production process is stopped on the completion of each batch. A new batch, usually of a different product, is then produced using the same generalist equipment and workforce. The workforce is usually divided into a group designated to work on a particular stage of the process. Batch production is commonly used in food production.

Answer 230

* A group of products (known as BATCH) is made TOGETHER at the same time. * Each product WITHIN a batch is IDENTICAL. * Separate batches can be SLIGHTLY DIFFERENT from each other. * Although there can be some variation between batches, all products made will be BROADLY SIMILAR. * Often uses lots of capital equipment - this means it is known as a CAPITAL INTENSIVE method of production.

Answer 231

* The slight variations that can be made between batches provides a business with SOME FLEXIBILITY and the ability to make a RANGE OF PRODUCTS. This means a business can INCREASE SALES by satisfying the needs and wants of a variety of consumers. * The use of CAPITAL can allow a relatively LARGE NUMBER OF PRODUCTS to be QUICKLY. This can allow a business to easily make HIGH SALES. * The use of CAPITAL can allow a relatively LARGE NUMBER OF PRODUCTS to be made without paying for lots of workers. This can LOWER PRODUCTION COSTS. * The use of CAPITAL often means that many staff used do not carry out complex work as machines do it for them. This can mean staff will be fairly CHEAP to employ as they will need few skills. This can LOWER PRODUCTION COSTS. * The use of CAPITAL can mean QUALITY could IMPROVE. This is because machines are often more accurate than humans as they do not get tired or distracted.

Answer 232

* The simple similar processes batch production often needs staff to do can be BORING and so DECREASE their MOTIVATION, SKILLS and PRODUCT QUALITY. * Any mistakes can be very COSTLY as a whole batch of products could be damaged or wasted at once. * Any changes in batch types will result in DELAYS (to reset machines, etc) which can DECREASE PRODUCTION.

Answer 233

Flow production is also known as continuous production. It enables a product to be created in a series of stages on an assembly line: A series of workers and machines in a factory by which a succession of similar items is progressively assembled. It is defined by the continuous movement of items through the production process. Large numbers of the same goods are produced continuously in this production process. There is often an opportunity for a high level of automation on a flow production assembly line.

Answer 234

* A constant FLOW of IDENTICAL products is made through a series of step-by-step linked activities. * Uses lots of capital - this means it is known as a CAPITAL INTENSIVE method of production. * There will be HIGH LEVELS OF OUTPUT. * There is NO FLEXIBILITY in the products made – they are all the same from this process.

Answer 235

* The use of CAPITAL allows a LARGE NUMBER OF PRODUCTS to be QUICKLY. This can allow a business to make HIGH SALES. * The use of CAPITAL can mean QUALITY could IMPROVE. This is because machines are often more accurate than humans as they do not get tired or distracted. * The use of CAPITAL allows a LARGE NUMBER OF PRODUCTS to be made without paying for many of workers. This can LOWER PRODUCTION COSTS. * The use of CAPITAL means that any staff used may do not need to carry out complex work as the machines do it for them. This can mean staff will be fairly CHEAP to employ as they will need few skills. This can LOWER PRODUCTION COSTS. * High levels of production can mean use of ECONOMIES OF SCALE which can LOWER COSTS. * Lowered costs can mean LOWERED PRICES for the CONSUMER. This can mean INCREASED SALES and profits of the business as more people can now afford to buy from them.

Answer 236

* Flow production may result in a LOW LEVEL of CUSTOMER SATISFACTION because it does not have any flexibility to provide unique products that meet specific customer needs. * The simple similar processes flow production needs staff to do can be BORING and so DECREASE their MOTIVATION, SKILLS and PRODUCT QUALITY. * Any problem in one part of the system can cause DELAYS later on in the flow that DECREASE PRODUCTION. * Any drops in demand can mean that a business ends up WASTING MONEY as a number of the products they have quickly made are no longer wanted and so go unsold. * The capital needed can be very expensive to buy and set up. This means that businesses will have to use lots of finance which could mean that they end up with HIGH DEBTS and a LACK OF CASH.

Answer 237

Examples of products made using job production would include custom jewellery, roads, and buildings.

Answer 238

Examples of products made using batch production would include different flavours of pizza, soup, etc.

Answer 239

Examples of products made using batch production would include different flavours of pizza, soup, etc.

Answer 240

AVAILABILITY If a resource is not available, then it simply cannot be used. For example in the third world, there is little capital and so most production is labour intensive job production. FINANCE Businesses will require large amounts of finance to install the equipment often used for batch and flow production – if this is not available these systems could not be used. FLEXIBILITY If production requires flexibility in the products it produces then a business is likely to use job production as it is skilled and trained staff can alter what they can do more easily than machines. QUALITY If a business requires high quality production then it may choose to use job production to maximise the accuracy of the work done. PRODUCT TYPE If a product is to be a “one off” (eg custom jewellery) then this suits job production due to the high skill levels and flexibility of staff. On the other hand, “standardised” products (eg vacuum cleaners) can be made using flow production as variety and flexibility are not needed. MARKET SIZE If the market for a product is large then this suits batch and flow production due to their high production levels. On the other hand, products with a small market can be made using job production as very high levels of output are not required.

Answer 241

The process issue of PRODUCT QUALITY deals with making sure that the products produced DO WHAT CONSUMERS EXPECT and are RELIABLE (relative to the PRICE they are sold for). Quality is an important issue for businesses because if finished products do not meet the expectations of consumers then they will stop using a business. The business could also face court action and fines if they have broken any of the following laws.

Answer 242

This law states that products which are sold must be of MERCHANTABLE QUALITY (ie they are not defective or damaged).

Answer 243

This law prevents businesses advertising or describing their products FALSELY (ie in a way that is not true).

Answer 244

This law prevents businesses from selling products that are UNDERWEIGHT or SHORT MEASURED (ie weigh less than there should be).

Answer 245

This law sets minimum standard for what must be contained in foods and makes it illegal to sell food that is “unfit for human consumption”.

Answer 246

The process issue of ETHICAL AND ENVIRONMENTAL OPERATIONS deals with making sure that the production process is FAIR and MINIMISES NEGATIVE IMPACTS.

Answer 247

Businesses will usually want to consider the following issues when carrying out the process stage of production. * TRAINING STAFF TO MINIMISE MISTAKES AND WASTAGE (this will cut down on wasted raw materials and environmental damage) * MAINTAINING MACHINES TO MINIMISE MISTAKES AND WASTAGE (this will cut down on wasted raw materials and environmental damage) * CUTTING DOWN ON THE AMOUNT OF PRODUCT PACKAGING (eg some coffee makers now sell bagged refills for glass jars) * GIVING CONSUMERS ADVICE ABOUT HOW TO RECYCLE (eg most instruction manuals give advice about how to recycle the product) * CREATING RECYCLING SCHEMES FOR CONSUMERS TO USE (eg printer companies offering to recycle cartridges for consumers) * MINIMISING POLLUTION FROM PRODUCTION PROCESSES (eg using solar power to operate machinery) * DEALING PROPERLY WITH ANY POLLUTION FROM PRODUCTION PROCESSES (eg cleaning water used in production to prevent chemicals entering rivers) * OFFERING SUPPORT TO STAFF WHO ARE REPLACED BY MACHINES (eg offering retraining courses and redundancy to staff who are replaced by capital) This will be the case for the following reasons: * CREATE A POSITIVE IMPRESSION FOR CONSUMERS * MINIMISE COSTS OF PRODUCING PRODUCTS

Answer 248

The success of any operations activities undertaken by a business will be affected by internal factors : finance, human resources,capital external factors : political issius, economic issues, social issius, technology issues, environment issues, competitive issius . Therefore, a business should monitor each of these factors carefully and adjust their operations activities to deal with them in order to make sure that its’ operations are as successful as possible.

Answer 249

The role of HUMAN RESOURCE MANAGEMENT (HRM) in a business is to manage the WORKFORCE so that a business has enough suitable staff to carry out all necessary tasks in an EFFECTIVE and EFFICIENT way.

Answer 250

The main activities that are involved in this work by HRM staff are as follows. * STAFF RECRUITMENT * STAFF SELECTION * STAFF TRAINING * STAFF MOTIVATION AND RETENTION * COMPLIANCE WITH LEGISLATION

Answer 251

* INCREASE IN THE MOTIVATION OF STAFF (as they are happy at their work) * INCREASE IN STAFF RETENTION RATES (amount of staff that want to stay with the business) * INCREASE IN AMOUNT OF WORK BEING COMPLETED (due to motivated and long serving staff) * BETTER QUALITY OF WORK (as staff are motivated and well skilled from long service) * POSITIVE BUSINESS IMAGE (from high quality products and positive treatment of staff) * INCREASED CONSUMER SATISFACTION (from provision of quality products and positive image) * INCREASED USE OF THE BUSINESS BY CONSUMERS (CONSUMER LOYALTY) * INCREASED PROFITS, BUDGETS OR DONATIONS (from consumer loyalty) * LESS CHANCE OF RUNNING OUT OF MONEY AND FAILING * DECREASED COSTS (due to less wastage and better systems) * PREVENTION OF NEGATIVE INDUSTRIAL ACTION (where staff take action to negatively affect the business)

Answer 252

Different types of businesses will require different types of workers. This means that there are various types of staff that HRM may have to manage.

Answer 253

MANUAL WORKER BLUE COLLAR WORKER WHITE COLLAR WORKER PROFESSIONAL WORKER

Answer 254

Manual workers usually do PHYSICAL jobs which will not require many skills. These staff are also known as UNSKILLED workers. Examples of this type of worker include: * LABOURERS (eg fruit pickers) * PACKERS IN A FACTORY

Answer 255

Blue collar workers usually do PHYSICAL jobs which require SOME specific skills to complete what can often REPETITIVE tasks. These workers are also known as SEMI SKILLED workers, and examples of this type of worker include: * BRICKLAYERS * MACHINE OPERATORS * JOINERS

Answer 256

White collar workers usually do NON-PHYSICAL jobs which require SEVERAL skills and qualifications. These workers are also known as SKILLED workers, and examples of this type of worker include: * OFFICE WORKERS * BANK WORKERS

Answer 257

Professional workers require MANY skills and qualifications, and their jobs will involve DECISION MAKING and RESPONSIBILITY. Examples of this type of worker include: * ACCOUNTANTS * LAWYERS * DOCTORS

Answer 258

The RECRUITMENT part of HRM’s work involves trying to encourage suitable people to apply for any VACANCIES (jobs that they need workers for) that the business has.

Answer 259

1 CARRY OUT A JOB ANALYSIS 2 PREPARE A JOB DESCRIPTION 3 PREPARE A PERSON SPECIFICATION 4 PREPARE JOB ADVERTISEMENT(S)

Answer 260

Job sharing involves (usually 2) people sharing the hours and responsibility for one full time job in the business. This means that they will also share the wages for the job on a PRO RATA basis – this means based on the share they do. For example if a member of staff only worked 40% of the week, they would only get 40% of the full time salary. Job sharing can help motivate and retain staff because it can mean that good staff do not have to leave the business because they do not want to work full time (perhaps due to changing family circumstances – eg having a baby) and are happy when they are there because they have hours that suit them. However, the use of job sharing can mean that less work is completed because the job sharers need time to communicate with each other about what needs done when they are not there.

Answer 261

Flexitime means that staff will have to work their contracted number of hours but will have some control about exactly when these hours will be. This is because as long as the staff are in at CORE TIME (the busiest hours when they must be available) they can be flexible about when they start and finish as long as all their hours are worked in total. Eg staff could come in 1 hour later than usual and make the time up by working 1 hour later. Flexitime can help motivate and retain staff because it can mean that as staff can fit their working day around personal appointments and commitments (eg dropping children at school) they will work well when present. It can also save the business money because staff will not need paid if they use flexitime instead of taking time off to go to appointments. However, the use of flexitime can mean that the business has to spend extra time and money to keep track of staff in order to make sure that they are working the amount of hours that they should. It can also make communications harder as staff may not all be in at the same time.

Answer 262

Teleworking means that staff will be able to use IT technology to complete their work without coming into the business premises. This means that they can work and communicate with their business from other places, eg home, other branches, etc. Examples of IT equipment which can be used for teleworking can be seen below. * (LAPTOP) COMPUTERS WITH WEB BROWSER AND E-MAIL SOFTWARE * FAX (sends and receives any image on paper via telephone) * MOBILE PHONE WITH WEB BROWSER AND E-MAIL SOFTWARE * VIDEOCONFERENCE (2 way video calling between IT) Teleworking can help motivate and retain staff because it can mean staff will be more satisfied with their due to variety in their working locations. It can also save the business money because they may not need to spend as much on working space as staff will not be there all of the time. However, the use of teleworking can mean that the business has to spend extra money on buying and maintaining the equipment that staff will need. It can also make it difficult to keep track of how hard staff are working as they are not always present for managers to supervise their work.

Answer 263

Condensed hours means that staff will have to work their contracted number of hours but will able to do them over fewer days than usual. For example, staff could work their 35 hours contracted time over 3 days rather than 5 by doing more work on each of these days. Condensed hours can help motivate and retain staff because it can mean that as staff can fit their working life around personal commitments (eg freeing up time to watch their children) they will work well when present. However, the use of condensed hours can mean that the business may find communication harder as staff may not all be in at the same time.

Answer 264

STRIKE PICKETING GO SLOW WORK TO RULE OVERTIME BAN

Answer 265

LEGISLATION IMPLEMENTATION AND COMPLIANCE is all about trying to make sure that the business is following all of the LAWS that affect how staff must be treated.

Answer 266

MORTGAGE This is a specific type of loan to buy PROPERTY, eg factory. Mortgages must be repaid with INTEREST. Mortgages are SECURED loans – this means that the debt is linked to the property bought and it can be taken and sold to get any unpaid money back. However, despite this, mortgages are NOT equity finance. LONG TERM (10+ years) * ALL BUSINESSES

Answer 267

If a business owns an asset by paying for them in full (eg premises), then it could sell the asset and then rent it back. This allows the business to still use the asset but raise finance by releasing the cash tied up in it. LONG TERM (10+ years) * ALL BUSINESSES

Answer 268

Here part of the business is sold to a VENTURE CAPITALIST. This is an outside party who invests in businesses to make money though DIVIDENDS and then selling their share later for profit. This is EQUITY capital. LONG TERM (10+ years) AVAILABLE TO * SOLE TRADER * PARTNERSHIP * PRIVATE COMPANY

Answer 269

This is money that is given which has to be repaid with INTEREST. Loans are NOT equity finance. Loans can be SECURED which means they asset they are used to buy can be taken if repayments are not made. MEDIUM TERM (1-10 years) * ALL BUSINESSES

Answer 270

HIRE PURCHASE Here the business buys an asset (eg van) by paying the purchase price and interest over a period of time. The business looks after and uses the asset while it is paying for it and will own it after the final payment. This means that the business does not need all the money for the asset at once and can use it to create revenue to make its’ repayments. MEDIUM TERM (1-10 years) * ALL BUSINESSES

Answer 271

Here the business uses an asset (eg van) by making a rental payment. Here even though the business is paying for the use of the asset, it will NEVER own it. However, rented assets will be repaired and upgraded by their owner rather than the business itself which can save money and allow easy access to updated assets. MEDIUM TERM (1-10 years) * ALL BUSINESSES

Answer 272

Here the business receives a sum of money that DOES NOT have to be repaid. This is often from a Government or charitable body (eg Prince’s Trust) which is looking to support businesses is particular areas or markets. MEDIUM TERM (1-10 years) * ALL BUSINESSES

Answer 273

This is a small loan that allows a business to spend more money than it has in its bank account. Overdrafts are automatically repaid as soon as money is paid into the bank and so a business will not be able to choose how much to repay at any time. SHORT TERM (<1 year) * ALL BUSINESSES

Answer 274

Here the business sells debts people owe it to a collection company. This gives the business most of the money that it is owed all at once. The collection company is happy to do this as they will make a profit by charging interest on the debts due. SHORT TERM (<1 year) * ALL BUSINESSES

Answer 275

TRADE CREDIT Here the business tries to get people who owe money to pay quickly while the business itself takes as much CREDIT as it can get. This can provide some cash as money is coming in from people paying but it not having to be spent on repayments straight away. SHORT TERM (<1 year) * ALL BUSINESSES

Answer 276

The CASHFLOW of a business refers to how the amount of cash available to the business is affected by the money coming into it (from finance and sales) and the money going out of it (as payments). This part of Finance’s work is critical in all businesses. This is because businesses need cashflow to be POSITIVE (which means more cash is coming on than is going out) in order to increase the overall amount of money that they have and so minimise the chance of going bust. This work requires careful management as there are many reasons why a business could easily get into a situation which causes cashflow to become NEGATIVE and so increase the likelihood of business failure as it can no longer pay its’ bills.

Answer 277

A fixed cost is one that DOES NOT usually change with the amount of products that a business makes. Examples of fixed costs include the following. * RENT * RATES (this is a land tax to the Government based on the size of premises)

Answer 278

A variable cost is one that DOES change with the amount of products that a business makes. Examples of variable costs include the following. * WAGES (as more things are made more staff will be needed) * RAW MATERIALS (as more things are made more parts will be needed)

Answer 279

Total costs are the overall amount of fixed and variable costs that a business is paying for production.

Answer 280

Revenue is the amount of money that a business is making from selling goods and services.

National 5 Course Notes Flashcards

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