Unit 9 (5.4, 1.6, 2.2)

Question 1

Location

Answer 1

Geographical place where the business is actually located

• Hairdressers located in the town centre high street
• Supermarket located om the edge of town in a retail park
• Car factory located outside of town
• Online business run out of a garage

Question 2

Quantitative factors that determine where the business is located

Answer 2

Cost of rent/morgage

• High street versus out of town

Labor 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 vs out of town

• Factory’s costs of transporting product to retailers

Distance to inputs

• E.g. oil refinery, strele manufacturer

Question 3

Qualitative factors that determine where the business is located

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 horus
• E.g. environmental laws

Where is the competition?

Room for expand premises

Question 4

Offshoring

Answer 4

Transferring part of the business to another country

• E.g. transferring production to China
• E.g. transferring call center to India

Question 5

Pros of Offshoring

Answer 5

• Potentially access cheaper labor costs
• Avoid tariffs
• Access to specialized labor
• Timezone benefits

Question 6

Cons of Offshoring

Answer 6

• Lose some control
• Culture/language barriers
• Possibility of negative publicity
• Possibility of lower quality

Question 7

Reshoring/Inshoring

Answer 7

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

Question 8

Possible reasons for Inshoring

Answer 8

Higher transportation costs (e.g. higher oil prices)

Political reasons - pressure to move jobs home

No longer have the same cost-benefit

• Labor costs are now higher

Question 9

Outsourcing/Subcontracting

Answer 9

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

Question 10

Pros of Outsourcing

Answer 10

• 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

Question 11

Cons of Outsourcing

Answer 11

• 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 12

Insourcing

Answer 12

Transferring part of the business that was previously outsourced to an external firm back to the business

Question 13

Possible reasons for Insourcing

Answer 13

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

Question 14

Organizational Structure

Answer 14

The system of relationships between individuals in an organization, which determines:

• Communication
• Work
• Responsibility
• Decision-making

Question 15

Levels of Hierarchy

Answer 15

The number of levels within an organization.

Employees at the same level having the same authority responsibilities.

• Tall - Many Levels
• Flat - Few Levels

Question 16

Span of control

Answer 16

The number of employees that a manager directly oversees

• Tall - Low span of control
• Flat - High span of control

Question 17

Chain of command

Answer 17

The route that information and responsibilities move up and down the structure

• Tall - Long chain of command
• Flat - Short chain of command

Question 18

Tall/Vertical

Answer 18

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

Question 19

Flat/Horizontal

Answer 19

• Less managers required = less costs
• Quicker communication and decision-making
• More delegation and responsibility
• High trust environment
• Empowered - closer to the top

Question 20

Delegation

Answer 20

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

Question 21

Bureaucracy

Answer 21

An administrative system which defines how things are run in the organization

• Paperwork
• Rules and employee handbooks

Question 22

Organizational Chart - By Function

Answer 22

• Organized by their functions (Marketing, Finance, HR)

Pros:

• Employees now specialize in one function

Cons:

• Managers might only consider their function in decision making, not the entire organization

Question 23

Organizational Chart - By Product

Answer 23

• Organization by each product
• Departments can specialize in one product
• Marketing team just for iPhones
• Finance team just for Apple Watch
• Possible lack of coordination (e.g. research the same thing)

Question 24

Organizational Chart - By Region

Answer 24

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

Question 25

Delayering

Answer 25

* Taking away a level of hierarchy in the organizational structure * Makes the organization flatter

Question 26

Pros of Delayering

Answer 26

* Reduces costs - Two manager salaries * Quicker communication * More power to lower levels

Question 27

Cons of Delayering

Answer 27

* Fewer opportunities for promotion * Employees have more work * Same work for fewer employers * Higher span of control for CEO * Redundancy costs

Question 28

Centralization

Answer 28

**When a business’s key decisions are made in HQ - or at the center of the business** Determines working hours * HQ determines for all departments - e.g. sales and HR departments the same Marketing Campaigns * HQ in Germany determines the rest of the world

Question 29

Cons of Centralization

Answer 29

* Employee demotivation - little decision-making power * Pressure of decision - making at the HQ * Lack of flexibility

Question 29

Pros of Centralization

Answer 29

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

Question 30

Decentralization

Answer 30

When a business key decision are passed down to middle and junior managers within the business or other countries * Passing down decisions making

Question 31

Pros of Decentralization

Answer 31

* Decisions more tailored to the local culture * Empower other parts of the business - improved morale and teamwork

Question 31

Cons of Decentralization

Answer 31

* Lack of consistency across the business * Decisions may not be made with the whole business in mind

Question 32

Matrix Structure (HL)

Answer 32

* Project-based * Structure that creates temporary teams for a specific subject E.g. Project 1 requires a: Business Analyst, Developer, Tester

Question 33

Handy’s Shamrock Organization (HL)

Answer 33

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

Question 34

Multinational Company

Answer 34

Operates in many countries, with the HQ located in home country and other operations in another country

Question 35

Host Country

Answer 35

The country that the business is moving into

Question 36

Positive Impacts on the Host country

Answer 36

* Creates more jobs in the host country * Training opportunities for these local employees * MNCs might buy other inputs locally * Boosts the economy * More production (GDP), taxes paid for the government (corporation tax) * Increased consumer choice * Enhanced competition for local businesses * An incentive to improve in efficiency for local businesses

Question 37

Negative Impacts on the Host Country

Answer 37

* Potential bankruptcy of local businesses who can’t compete (sunrise/sunset industry) * Depletion of non-renewable resources in the host country * Potential of negative impact on environment * Erosion of local culture

Question 38

Factors determining whether the impact will be positive or negative

Answer 38

* Respect given to the local culture * Whether corporation tax is paid in the country * Whether they hire local employees or bring employees from the HQ * Labor conditions they use * Can local businesses survive and thrive?