Unit 9

Question 1

Location

Answer 1

Geographical place that the business is located

Question 2

Quantitative Factors that affect the location of a business

Answer 2

• Cost of rent/mortgage
  High street versus out of town

Labour costs
Different parts of the country
Or a different country?

• Government Policies
  Subsidies/grants for locating in a certain area
• Distance to the market/inputs
  Near the market (Customer footfall)
• High street versus out of town
  Factory’s cost of transporting product to retailers
• Distance to inputs
  E.g. Oil refinery, steel manufacturer

Question 3

What are the qualitative factors that affect the location of a business?

Answer 3

• Near to potential employees
  Tech company in Silicon Valley
  Infrastructure
• Access to transport
  Telecommunication - e.g. internet
• Political and legal factors
  E.g. maximum working hours
  E.g. environmental laws
• Where is the competition?
  Room for expand the premises

Question 4

Offshoring

Answer 4

Transferring part of the business to another country
E.g. transferring production to China
E.g. transferring the call centre to India
Either internally or to an external firm

Question 5

Pros and Cons of Offshoring

Answer 5

Pros of offshoring
- Potentially access cheaper labour costs
- Avoid import tariffs
- Access to specialized labour
- Timezone benefits

Cons of offshoring
- Lose some control over the part of the business
- Culture/language differences
- Possibility of negative publicity
- Possibility of lower quality

Question 6

Reshoring or Inshoring, Onshoring. What reasons could there be?

Answer 6

Opposite of offshoring
Transferring part of the business back to the original country, having previously offshored it

E.g. A US business originally transferred production to China and now are bringing it back to the US

Reasons:
- Higher transportation costs (e.g. higher oil prices)
- Political reasons - pressure to move jobs home
- No longer have the same cost benefits

Question 7

Outsourcing/Subcontracting

Answer 7

Transferring part of the business to an external firm rather than doing it within the business

E.g.
Manufacturing
Payroll
Catering and food
Security
Marketing

E.g. a concert organizer outsources security to a business that specializes in providing security

Question 8

Outsourcing pros and cons

Answer 8

Pros
- Potential cost savings, as the outsourced business should have economies of scale

• The outsourced business should have expertise, so higher quality
• Can focus on core activities of the business

Cons
- Loss of control and need to monitor the quality

• Negative publicity (redundancy) from the loss of jobs within the business
• The outsourced business might not know your business well

Question 9

Insourcing and resons for it

Answer 9

• Opposite of outsourcing
• Transferring part of the business that was previous outsourced to an external firm back to the business
• The business now performs the business function themselves

E.g. previously outsourced production to another company but now bring it back “in house”

Possible reasons
- No longer cost efficient
- Worries over quality
- Want more control over production

Example - Apple insourcing chips
Design of the chips - insourced
Production still outsourced

Possible reasons:
Chips specifically designed for Apple products
Supply chain control

Question 10

Multinational Company

Answer 10

A company that operates in more than one country, with the Headquarters (HQ) located in the home country and other operations in another country, e.g.

Question 11

Reasons for a business to expand to another country

Answer 11

• Access to new customers
• Lower costs of production
• Avoid import restrictions

Question 12

Host Country

Answer 12

The host country is the country that the business is moving into

E.g. if Apple were to move their production to Mexico, then Mexico would be the host country

Question 13

Positive impacts of a business moving into on the Host Country

Answer 13

• Creates more jobs in the host country
• Training opportunities for these local employees
• MNC might buy other inputs locally e.g. electricity, glass
  More production (GDP), taxes paid
• Increased consumer choice
• Enhanced competition for local businesses

Question 14

Negative impacts of a business moving into on the Host Country

Answer 14

• Potential bankruptcy of local businesses who can’t compete
• Depletion of non-renewable resources in the host country
• Potential of negative impact on environment
  e.g Exporting pollution
• Erosion of local culture
  E.g. “McDonaldization”

Question 15

Organizational Structure

Answer 15

Relates to the system of relationships between individuals in an organization, which determines
- Communication
- Work
- Responsibility
- Decision-making

Question 16

Flat (Horizontal) vs Tall (Vertical) Organizational Structure

Answer 16

Levels of Hierarchy
- The numbers of levels within an organization, with employees at the same level having the same authority responsibilities

Tall - Many Levels
Flat - Few Levels

Span of control
- The number of employees that a manager directly oversees
Tall - Low span of control
Flat - High span of control

Chain of command
- The route that information and responsibility moves up and down the structure
Tall - Long chain of command
Flat - Short chain of command

Question 17

Tall/vertical organizational structure pros

Answer 17

• Each team is smaller so easier to control
• Better team morale as smaller teams
• More opportunities for promotion
• Clear hierarchy and structure

Question 18

Flat/horizontal organizational structure pros

Answer 18

• Less managers required so less cost
• Quicker communication and decision making
• More delegation and responsibility – high trust environment
• Empowered – closer to the top

Question 19

Delegation

Answer 19

Giving authority and responsibility of a task to another employee, usually to someone in a lower level of hierarchy

Question 20

Bureaucracy

Answer 20

An administrative system which defines how things are run in the organization,
E.g. Paperwork, Rules and employee handbooks

Question 21

Delayering

Answer 21

Taking away a level of hierarchy in the organization structure
Makes the organization Flatter

Question 22

Pros and Cons of Delayering

Answer 22

Pros
- Reduces costs (Two manager salaries)
- Quicker communication
- More power to lower levels

Cons
- Fewer opportunities for promotion
- Employees have more work
- Same work for less employers
- Higher span of control for CEO
- Redundancy costs

Question 23

Centralization

Answer 23

• When a business’ key decisions are made in Headquarters (HQ) - or at the centre of the business, e.g.
• HQ determines for all departments e.g. working hours are the same for sales and HR departments
• Marketing campaigns

Question 24

Centralization pros and cons

Answer 24

Pros
- Quick and easier decision making
- More control and standardization of the brand

Cons
- Employee demotivation
- Pressure of decision making at Head Office
- Lack of flexibility

Question 25

Decentralization

Answer 25

- When a business’ key decisions are passed down to middle and junior-level managers within the business or other countries - Passing down decisions making e.g. Different working hours for sales and HR departments e.g. Japan can localize thet marketing campaign for Japan

Question 26

Decentralization pros and cons

Answer 26

Pros - Decisions more tailored to the local culture - Empower other parts of the business - Improved morale and teamwork Cons - Lack of consistency across the business - Decisions may not be made with the whole business in mind

Question 27

Organization Chart - By Function

Answer 27

By Function - Organized by Marketing, Finance etc - Employees now specialize in one function - Managers might only consider their function in decision making

Question 28

Organization Chart - By Product

Answer 28

Organized by each product Departments can specialize on one product Possible lack of coordination (e.g. research the same thing)

Question 29

Organization Chart - By Region

Answer 29

- Organized geographically by country, region or continent - Easier communication (e.g. similar culture), local knowledge - Possible job duplication, Lack of consistency across areas

Question 30

Matrix Structure (HL)

Answer 30

Project based Structure that creates temporary teams for a specific project E.g. Project 1 requires a Business Analyst Developer Tester Balance, Flexibility BUT Confusion

Question 31

Charles Handy’s Shamrock Organization

Answer 31

1) Core staff Full time, permanent workers E.g. teachers 2) Temporary Workforce Part-time, paid per hour E.g. substitute teachers 3) Outsource (subcontractors) A business hired other business to perform specific tasks E.g. school cleaning

Question 32

SWOT analysis

Answer 32

S = strengths > current, internal W = weaknesses > current, internal O = opportunities > future, external T = threats > future, external Shows both internal factors (strengths and weaknesses) And external factors (opportunities and threats)

Question 33

SWOT pros and cons

Answer 33

Pros - Quick and easy - A good starting point to formulate strategies - Can see the organization’s position in the market Cons - Simplistic - Just a starting point - Requires objectivity with weaknesses