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 BUSINESS ORGANISATION AND ENVIRONMENT
Business
Factors of production
An organisation that uses resources to provide a product 1
...

or service that meets the needs and wants of customers Includes the land on which business is built and natural
whilst adding value
...
(renewable & non-renewable resources)
2
...
Sometimes referred to as Human Resources
...
​Capital​ - Man-made resources which help to produce
other goods and services
...
​Enterprise​ - the entrepreneur, the person with the
business idea
...

Human resource
Ensure that appropriate people are employed to make the
product or service and that people are suitably rewarded
for it
...


Marketing
Ensure business offers a product or service that is
desirable by customers or business for profitable
operations
...


Finance and Accounts
Ensure that appropriate funds are made available to make
the product or service
...


Operations
Ensure that appropriate processes are used in production in
order to make the product or service and of a desired
quality
...


Interrelationship of departments
1
...
Cooperation
3
...
g
...
g
...


Quaternary sector
A subgroup of the tertiary sector and provides services
that focuses on knowledge e
...
web-based services,
business consulting
...
GDP increases and this raises average standards of
living
2
...
Increase amount of jobs available and therefore lift
people out of poverty
4
...

5
...

Entrepreneurs
An entrepreneur take the other 3 factors of production
(land, labour, capital) and starts a business
...


Problems of development (growth of secondary sector)
1
...
In rural
areas problems for farmers to find workers
...
Import of raw materials may be needed for
manufacturing and this can increase a country’s import
costs
...
Pollution from factories can lead to environmental
problems
...
Much of the growth of manufacturing industry is due to
the expansion of MNCs
...

2
...

4
...

6
...

Risk seeking
Innovative
Organised
Hard working
Creative
Focused and determined

Role of the entrepreneur
Has an idea for a new business
Invested some of their own savings and capital
Accepts responsibility of managing the business
Accepts the possible risks of failure
...

Do not risk their own money and the consequences of
failure are accepted by the organisation they work for
...
Coming up with the idea ​- involves having an idea
of what business you want to start
...
g
...
Sourcing capital ​- Finance can come from various
places (e
...
own savings, bank loans, friends and
families, venture capitalists, grants)
3
...

4
...
Retail in town to be near customers ​but
high rent
...
Web based business can be ran from home as
little space required ​but​ as business grows these type
of businesses will usually opt for prestigious office
in towns as it helps to impress clients
...
Market research
a
...
Target market wasn’t appropriate
c
...
Legal requirements
a
...
Tax obligations were not addressed
...
Finance
a
...
Raising startup capital was difficult
c
...

4
...
Product launch failed and product didn’t inspire
...
Pilot market was inconclusive
5
...
Plan did not convince potential investors
b
...
Organisation
a
...
Organisational structure doesn’t work
c
...

2
...

4
...


Importance of a business plan
1
...

Increases their chances of obtaining finance
...
Forces business to plan ahead and therefore spot
future difficulties ​- Business plans require future
predictions such as cash flow forecast which allow
firms to plan for any shortage they may have in 1st
year of trading
...
Provides targets that the business aim to meet ​Gives focus to businesses

Contents of a business plan
1
...
Description of the business opportunity ​- the target
market of customers identified
...
Marketing and sales strategy ​- details of why the
entrepreneur thinks customers will buy what the
business plans to sell
...
Management team and personnel ​- skills and
experience of the entrepreneur and the staff that will
work for the firm
...
Operations ​- Premises to be used
6
...


1
...

3
...


Users of the business plan
Business managers ​- financial forecasts in the plan can
act as a budget and control benchmarks for the internal
stakeholder such as business managers
...

Employees ​- view the business plan for the business’s
targets and objectives and thus give greater focus to
their work
Suppliers ​- can tell from the parts of the business plan
that are communicated externally if it’s worthwhile
investing in a long-term relationship with the business
...


Public sector
The part of the economy owned and controlled by local or
central government
...
Provide a high quality service ​- better performance
2
...
Aim to maximize social benefits and minimize
social costs ​- public sector is in a better position to
take into account all the external costs and benefits
associated with its actions
...
Managed with social objectives rather than solely with
profit objectives
2
...
e
...

3
...


3

Disadvantages of public sector organisations
1
...
Subsidies from govn can encourage inefficiency
3
...


Private sector
The part of the economy owned and controlled by
individuals, either directly or through share ownership
...

Limited liability (incorporated)
If the company goes bankrupt owing money the
shareholders will only lose the amount they have invested
in the company
...


Important
1
...
Sole trader businesses are
possessions are protected
...

and PLCs to raise capital for expansion and therefore they
are usually bigger companies
...


2
...


4
...
This means that
decisions can be made quickly without any conflict
of interest
...

Easy to set up ​- sole traders are usually small
operations and therefore require very little
paperwork to set up
...


1
...


3
...


2
...

Difficult to raise finance ​-sole traders find it difficult
to raise finances
...

Long working hours ​- sole traders do not earn money
when they are not working; therefore they often have to
work long hours
No holiday pay or paid time off ​- when sole traders do
not work they do not get paid; they do not receive
benefits such as holiday pay or sick pay
...
It includes details of :
● Finance provided by each partner
● Salary entitlement of each partner
● Percentage of profit received by each partner
● Holiday entitlements

4

Advantages of being a partnership
1
...
(2 is better than 1)
2
...
More access to capital ​- There are more partners to
invest in the business
...
Can attract investments ​- Partnerships can attract
investments from sleeping partners(People who
invest but not involved in running the business)

Disadvantages being in a partnership
1
...
Sharing the profit ​- As a partnership has more than
one owner, profits are usually shared out between the
different partners
...
Unlimited liability ​- all partners, with the exception of
sleeping partners, are jointly liable for the debt
...
Conflict of interest ​- Partners may have disagreements
over business decisions
...
Private limited company Ltd (incorporated)
Owned by shareholders who can invite other people to
buy shares so they can raise finance in order to grow
...

Advantages of being a private limited company
1
...

2
...

3
...

4
...


Disadvantages of being a private limited company
1
...
The accounts have to be
audited(checked and agreed) by external accountants,
adding to the running cost of the Ltd
...
Legal restrictions ​- Ltds have more legal restrictions
that unincorporated businesses
...
Public limited company PLC (incorporated)
Can sell shares to anyone on the stock exchange market
and therefore can raise large amounts of finance and grow
very large
...

Advantages of being a public limited company
1
...

2
...

3
...
These specialists improve the
efficiency of the company
...
Releasing financial information ​- Plcs have to publish
an annual report, which details their financial position
...
Dividends ​- Plcs are obliged to pay their shareholders
dividends
...

3
...

4
...


5

Type of business
/ size

ownership

Liability

Sole trader

One owner

Unlimited
liability

High
...


2 or more (but usually less than 20)

Unlimited
liability

Medium​
...
Also, partnerships tend
to be in areas that are ‘safe’ i
...
Limited liability - but
have to be invited to buy shares
therefore usually limited to
acquaintances and family of existing
shareholders
...
​Limited liability
...
Ability to invite extra shareholders
into company to gain extra finances
...


Shareholders
...


Limited
liability

Low
...
Many owners
...


Very small
Partnership

Risk / Risk of failure

Small to medium
Ltd

Medium to large
Plc
Large

Profit social enterprise
A profit making business which makes its money in a
socially responsible way and uses most of its profit to
benefit society
...


Features
● Have social aims and use ethical ways of achieving
those aims
● Directly produce good or services
...

Objectives
● Economic ​- make a profit to reinvest back into the
business and provide some return for the owners
...

● Environmental ​- to protect the environment and to
manage the business in an environmentally responsible
way
...
This enables the women to set up their own
businesses in food production, clothes making and other
industries
...


3 different types of ​profit social enterpris​e:
● Cooperatives
● Microfinance institutions
● Public-private partnerships
...
Co-operatives
Co-operatives are business organisations that are owned
and controlled by a group of people to undertake an
economic activity for their mutual benefit
...


Worker co-operatives
Organisations owned and controlled by their workers, such
as farming co-operatives
...

Can employ workers who are not members
...
Momber-workers are more motivated to work harder
as they are owners of the business
2
...
e
...

3
...
Difficult to raise money as their members have a
limited amount of money
...
High democratic so decision making can be slow and
market opportunities missed as a consequence
...
May be badly run as workers making the decisions may
have very little business experience
...

Customers pay a membership fee which is used to set up
the retail outlet and purchase goods from a wholesaler to
sell
...

●
●
●
●

Worker co-operative features
Workers own all the shares
Managed by its workers
Limited liability
Share any profits

Consumer co-operative features
● Owned by its members
● Members run the organisations
● Each member has one vote regardless of amount of
shares they own
● Limited liability
● Members receive profit
...
Microfinance institutions
Provision of very small loans by specialist finance
businesses to entrepreneurs in developing countries
...

Advantages of micro financing
1
...
Provides loans for entrepreneurial activities who
woul dnot be able to get a bank loan as no collateral
...
Entrepreneur provides employment for others and
this increases incomes in deprived areas
...
Allows people to obtain a loan at a lower rate that if
they borrow from banks
...
Loans mean a lot to one entrepreneur but this doesn't
make much difference to a country’s development
...
Microfinance institutions do charge interest sometimes at quite high rates
...
Public-Private partnership (PPP)
Public-private partnerships is the involvement of the
private sector, in the form of management expertise and /
or financial investment , in public sector projects aimed at
benefiting the public
...
This is
sometimes due to private sectors operating the organisation
more effectively than the government
...

The government pays rent for the usage of the building
...

(PFI - investment by private sector organisations in public
sector projects)

Govn directed, private sector finance and management
Encourages both private sector funding and some private
sector management control of public projects
...
g
...


Advantages of PPP
1
...

2
...
This would mean that costs to the public
sector are lower than if the projects were operated by
government / public sector managers
...
By using private sector business finance, the
government can claim that public services are being
improved, ​without an increase in taxes​ (at least in the
short run as the capital cost is not paid for by the
government)

Disadvantages of PPP
1
...
In effect, workers no longer have
the security of being employed by the public sector
2
...

3
...


Non-profit social enterprises
Businesses whose objectives do not include making a
profit
...
They support disadvantaged groups in
developing countries or lobby for the protection of human
rights
...


1
...
Charities

2 types of ​non-profit enterprise​:

Charities
Organisation that accept donations which financed a
humanitarian or social cause
...
Describes the picture for the preferred
future of the organisation
...
Outlines the overall purpose of organisation
...


Audience of the mission statement
To internal stakeholders, mission statement provide a
mean for accountability by defining key performance
indicators
...


Advantages of using vision and mission statements
1
...
Motivate employees ​- communicate positive values
which employees like to identify with
3
...


Disadvantages of vision and mission statements
1
...
PR excercise ​- make stakeholder groups feel good
about the organisation
3
...


Corporate aim
Comes from the mission statement
...
The core of business’s
activity is expressed in its corporate aims and plans
...
Set criteria ​- gives company a sense of direction to
fulfill the criteria
2
...
Starting point ​- set this first before corporate
objectives

Common corporate aims
1
...
This is closely tied to the
objectives of ‘increasing market share’ and
‘growth’
2
...

3
...

4
...
Maximising shareholder value
6
...
Must be SMART
...
Must be SMART
...

● M​easurable​ - Can the objective be measured to see
whether it has been achieved or not? ​Numbers​ are
useful here – 10% increase in sales is ​easily measured
to see if it has been achieved
● A​chievable​ - Can the objective be achieved (is it
realistic)? When objectives are achievable, they can be
motivational​
...

● R​elevant​ - Is the objective actually of any use?
Businesses can set objectives that are distractions from
the main purpose of the company or, more commonly,
set objectives for specific employees that are not
relevant to the employees' area of responsibility
...


Divisional objectives
Short/medium term goal or target set for a region, usually
specific in nature, which must be achieved for an
organisation to attain its corporate objectives
...

E
...
to decrease cost per unit by 2% in the next 6 months
...


Benefits of using divisional/departmental objectives
1
...
Planning ​- management can plan for adequate
resources to be made available for the
accomplishment of the divisional / departmental
objectives
...


Tactical decisions
● Short to medium term
● reversible , but there still may be costs involved
● Taken by less senior managers and subordinates with
delegated authority
● Impact of tactical decisions is often only on one
department
...


10

Strategic decisions
● Long term
● Difficult to reverse once made - departments will
have committed resources to it
...


Ethical objectives definition
Objectives that when met allow a company to provide
some social or environmental benefit to society (or at
least not hurt society or the environment)
...
g treat employees without discrimination

Limitations of ethical behaviours
1
...
E
...

2
...

Some shareholders are more concerned with short
term profits than its ethical stand, so managers might
be pressured into pursuing goals other than ethical
ones
...
Possibly lower profits ​- an ​ethical dilemma ​for the
business exists when ethical decision-making
involves adopting a less profitable course of action
...


Conflicts between corporate objectives
1
...

2
...
Stakeholder conflicts

●
●
●
●
●

Why firms set ethical objectives
Create customer loyalty
Create a positive image
Establish positive and motivational work environment
Reduce risk of legal action
Long term increase in profits ​if the above are achieved
them profits will increase
...
The business itself ​- businesses may experience the
benefits of implementing ethical objectives, however in
the short run costs are likely to rise
...
Competitor ​- customers may respond if a business
implements ethical objectives with some of their own
3
...

4
...

Stakeholders
People or groups of people who can be affected by,
therefore have an interest in, any action by an organisation
E
...


11

Benefits of adopting CSR policies
1
...
A major competitive advantage : new
customers and loyalty from existing customers
...
Employees standard ​- able to attract the
best-motivated and most efficient employees as many
workers prefer to work for and be associated with
socially aware businesses
...
No bad publicity and pressure groups ​- no socially
irresponsible behaviour from business
...
Better relations between stakeholders
5
...


Drawbacks of adopting CSR policies
1
...
g fitting of anti pollution
equipment, paying suppliers promptly
...
Reluctant to accept lower short-run profits ​
shareholders reluctant to accept
...
Loss of cost and price competitiveness ​- competitors
who do not accept social responsibilities will have
lower costs
4
...

5
...


Changes in corporate responsibilities
● Global concerns over climate change
● Changes in law concerning minimum wage,
protection of the environment
● Increasing publicity from international pressure
groups that use internet to communicate, blog, raise
funds
...
Information can be
obtained through: internal audit (S&W) or market research
(O&T)
...
These could be used as a basis for
developing a competitive advantage
...
g experienced management, product patents, loyal
workforce and good product range
...

E
...


Opportunity
External factors about the potential areas for expansion of
the business and future profits obtained through an
external audit
...
g produce new technologies, export markets expanding
faster than domestic markets, lower rates of interest
increasing consumer demand
...

E
...


Growth strategies (S-O pair)
Allow the strengths of the business to take advantage of
market opportunities
...

E
...


Re-orientation strategies (W-O pair)
Strategies that focus on addressing a weakness in order to
use it to exploit an opportunity in the market
...
g car has high petrol consumption = overcome it
...
A strategy to overcome the weakness in order
to end the threat must be employed
...
Easy to understand ​- simple and allows
understanding of business
2
...
Fast ​- done quickly and therefore possible strategies
can be generated
...

● the market in which the firm is going to operate
Product development

Same market, new product
...
No prioritisation ​- SWOT just lists the S,W,O,T
2
...
Generate too many ideas

Ansoff matrix

Market penetration
Same product, same market
...
Selling same product into new
markets (exporting the product you are already making
etc)

Diversification
New product, new market (greatest risk)
Benefit of using Ansoff matrix
• The Matrix sub-divides the options into four specific
strategies that management could consider for long
term growth
• It indicates the level of risk associated with each
strategy thus encouraging management to focus
carefully on the impact of any decision made

Limitations of using Ansoff matrix
• Ansoff’s Matrix is often criticised for being too
simplistic as it doesn’t taken into consideration the
external environment
• Its main focus tends to be market growth potential
rather than considering the resources required by the
firm to support its chosen strategy
• Only useful if a firm’s objective is growth

13

Summary of Ansoff matrix
Market penetration

Product development

Market development

Same products for existing
customers

New products for existing
customers

New customers for existing
products

New products for new
customers

Minimal risk

Moderate risk

Moderate risk

High risk

Seek to maintain or increase
market share

Innovation to replace
existing products

Entering overseas market

Spreading risks

Intense competition

Product improvements

New distribution channels

Use of subsidiaries and
strategic business planning

Stakeholder concept
The view that businesses and their managers have
responsibilities to a wide range of groups, not just
shareholders
...
E
...

Business’s responsibility to stakeholder

Employees

● Competitive wages and benefits
● Job security
● Good condition of employment

● Legal ​requirements regarding pay(minimum wage)
and conditions(health and safety)
● Training

Managers

●
●
●
●

● Competitive salary and benefits
● Job security
● Opportunity for promotions

Competitive salary and benefits
Job security
Opportunity for promotion
Opportunity for profit sharing or share
purchase scheme

Shareholder ● Competitive annual dividends
s
● Increase in share price over time
● Security of investment
Customers

●
●
●
●

Suppliers

● Payments made on time
● A fair price offered for supplies
● Long term supply contract offered

Government ●
●
●
●

Value for money
Product quality and safety
Good after sales service
Reward for loyalty

Creation of jobs
Payment of taxes
Exports
Adherence to laws (employment laws)

● Business operated according to law by managers
● Annual accounts presented to shareholders
...
g
cartridge for printers)
● A fair rice offered for suppliers (no excess pressure
on smaller or weaker suppliers)
● Prompt payments
● Pay taxes on profit
● Legal ​requirement regarding employment,
consumer and the environment
...
​Owners and
managers fairly safely ignore these stakeholders,
or at least devote limited energy and attention to
satisfying their interest
...
​Owners and managers need to
make this group feel included through
newsletters, events, and other ways of
conveying a sense of belonging
...
​They have the power to influence
other groups
...

(Media, customers)

Most important
...

Business should focus on their needs in
preference to others
...

(owners, managers, government)

Why stakeholder conflict happens
Different stakeholder groups have varying interest in the
business and the business cannot simultaneously meet all
the needs of its stakeholders
...
Type of organisation ​- A partnership might strive for
profit whereas a charity is likely to have different
priorities
...
A limited company will be accountable
to its shareholders (owners), thus giving them priority
...
The aims and objectives of the business​ – For
example, if a firm aims for expansion as part of its
business strategy, then the proportion of profits
returned to shareholders as dividends will be less in
the short term (as profits will be reinvested to finance
expansion)
...
The source and degree of power (influence) of each
stakeholder group​ - Customers will have more
power if the business is selling a product in a mass
market due to plenty of substitutes
...

-

Stakeholder group who can have conflicts
Shareholder vs employees
Managers vs trade unions
Suppliers vs owners
Government vs owners
Managers vs employees

Mutual benefits of stakeholder interests
modern management thinking suggests that there are
mutual benefits in simultaneously meeting the competing
needs of different stakeholders
...
g addressing the needs of
employees and managers leads to a highly motivated and
productive workforce with low rates of absenteeism and
staff turnover
...
Greater output might also lead to
more employment in the local community
...


STEEPLE analysis
Business cycle
An acronym standing for ​S​ocial, ​T​echnological, ​E​conomic, ​refers to the fluctuation in the level of business activity
E​nvironmental, ​P​olitical, ​L​egal and ​E​thical that provides a over time
...

environmental factors that can provide opportunities or
threats to a business and affect a business’ ​objectives and
strategies​
...
It occurs if there is an increase in GDP
for two consecutive quarters

GDP
Gross Domestic Product is the amount of goods and service
produced by an economy in a year
...
e
...
Usually measured
yearly
...
Therefore a higher interest
rate decreases borrowing
...
They are a threat to
businesses trying to operate in foreign markets
...


STEEPLE influences includes
Social :
● Lifestyle & Education, Fashions & taste,
Demographics
Technology :
● ICT, R&D, technology transfer and improvement

16

Economic :
● Economic cycle, exchange rates, interest rates, rate
of unemployment and inflations, rate of economic
growth
Ethical :
● Corruption, transparency, fair trades, codes of
business behaviour
Political :
● Political stability, trade policies, regional policies,
lobbying or electioneering
Legal :
● Regulations, health and safety laws, employment
laws, competition laws
Ecological :
● Global farming, carbon footprints, organic food
●

●
●

Advantages of using STEEPLE
Helps to reduce the impact and effects of potential
threats to an organization as they can be identified and
prepared for (strategies changed)
...

Provides a mechanism that enables an organization to
identify and exploit new opportunities
...
Aging population
○ Patterns of demand will change​ - construction
company may switch from big houses to small
houses with special facilities for elderly
...

2
...
(fast food chains,
supermarkets)
○ Increased in temp, part time and flexible
employment contracts​ - reduces fixed costs on
business of full time and salaried posts and allow
for flexibility when faced with seasonal demand or
uncertainties caused by increasing globalisation
...

● Users access to quality external information is often
restricted because of the cost and time needed to
collate it
...
Competitive advantage
○ Companies can use rapid software simulations
and other IT based systems to bring a product to
make cost-effectively and rapidly
...
Economic growth and recession
○ Economic growth - business may expand as
consumers have the ability to buy more but inferior
good are rejected by consumers
○ Recession leads business to retrenchment, closures
and redundancy
...

○ Flexibility important - able to produce goods that
will sell both in boom and recession
...
Interest rates
○ Interest rates ↑, consumer demand reduced for
products bought on credit (car, house)
○ Interest rates ​↑, ​loans repayment ​↑, decreasing
​
profits
...
Exchange rates
○ Appreciates - imports cheaper and exports more
expensive, will lead to decrease in demand for
domestic firms and may have to retrench
○ Depreciates - imports expensive exports cheaper,
will lead to increase in demand for domestic firms
and expansions
4
...

○ Corporation tax ↑, firms less profit to invest thus
less expansions
...
Unemployment
○ High - consumers less income so less demand for
goods and many people unemployed so wages can
be kept low to reduce a business’s cost
○ Low - consumers more income so more demand for
goods and few people unemployed so wage
demand will be high
...
Inflation
○ High - ↑ wage demand, ↑ costs for business
...

○ Inflation ↑ in home country greater than in foreign
countries then over time domestic firms will lose
price competitiveness to foreign firms
...
Environment control on business activities
○ Strict environmental controls could ↑ business
costs and make country less attractive for new
investment
○ Basis for good publicity
○ E
...
use of sustainable energy, waste disposal ,
reducing packaging
...
Threats from natural environment
○ Unwise to open business in areas most likely to
be affected, especially if business is potentially
dangerous with chemicals
3
...

○ But political factors might be impt if resources
are in politically unstable regions
4
...


18

Political impact on business objectives and strategies
Legal impact on business objectives and strategies
1
...
Improved employee legal protection
○ Govn constantly changing then law will be
○ Increased cost of employing staff - business
changed frequently regarding business activity
...

productivity to pay for the cost of these legal
2
...

○ Hard for business to convince stakeholders that it is 2
...

lead to expensive legal claims
...
Govn attitude to private ownership
○ Design and production of new products will have
○ Govn committed to nationalism and charges high
to put customers’ safety and product quality as
taxes on private businesses, businesses then get
priority
...
Competition laws can restrict unfair competition or
country
...

4
...

○ Expansion in other countries rather than growing
○ Global business operations tend to expand and
in domestic country which can lead to monopoly
locate in countries which encourage free trade
...

Ethics impact on business objective and strategy
1
...
E
...
Rent, insurance
...
E
...
raw material, fuels
Average variable costs
Variable cost / quantity

Total costs
Fixed costs + variable costs
Average total cost
Total costs / quantity

Internal economies of scale
Factors that lead to a decrease in ​unit​ cost as more is
produced for ​one firm
Internal diseconomies of scale
Factors that lead to an increase in ​unit cost of production
as output increases past a ​certain point​ for ​one firm
...


External diseconomies of scale
Factors ​that lead to an increase in ​total​ costs for ​all the
firms in the industry/area​ as an industry increases output
...
Specialist economies of scale
1
...
g marketing), increases
production techniques
...

specialised in use of machinery, which
2
...
But bigger firms can
quality of products produced
...

outputs, thus marketing costs per unit decreases
2
...

○ Firm grows, more workers and more plants thus
3
...
∴
○ Price of machinery costs the same for all firms
...

Bigger firms can divide machines costs by larger
3
...

hierarchical structures, slows down and distorts
4
...
∴market opp are lost
...

structure requires a lot of paperwork which would
5
...

money thus interest rates decrease, thus cost of
borrowing decreases and unit cost decreases
...
Risk spreading
○ Bigger firms have a ​wider range of products in
more markets,​ thus if one product fails bigger firms
can always rely on other successful
products/markets to help them survive
...
Skilled labour
○ Some industries tend to concentrate in the same
area
...

2
...
∴transport costs
decreases and unit cost decrease
3
...

E
...

●
●

Advantages of being a small business
Easier to manage and control
Able to adapt to changing customer’s needs quickly as
owner communicates with customers daily

1
...

3
...

5
...

Size of workforce - number of employees
Profit - value of the firm’s profit per time period
Capital employed - value of assets bought for use in
business
...


●
●

●
●
●

Advantages of being a large business
Economies of scale
May be able to set prices that other firms have to follow
More likely to be able to afford R&D into new products
and processes
...
Owner’s objectives - may wish to keep business small
and easy to manage
2
...

3
...

4
...
Scope for economies of scale - if substantial, as in water
supply, then businesses likely to operate on a larger
scale
Internal growth
Business grow due to increased demand for their goods and
services
...


●
●

1
...

3
...

5
...

2
...


4
...


Mergers and takeovers can be beneficial if the following
are achieved
1
...
Diversification
○ May​ have greater amount of products in a greater
amount of markets, ​∴risk is spread and not “all
eggs in one basket”

grow
Owner may not have expertise in all areas thus
business will not prosper
Not diversified
...
(e
...

May often suffer from divorce between ownership and
control that can lead to conflicting objectives
...


External growth
Mergers ​- 2 companies merge together to form 1 big
company
Takeover / acquisition ​- one business buys another
business and the bought business no longer exists
...

Strategic alliance ​- agreement between firms which
each agrees to commit resources to achieve an agreed
set of objectives
...
The franchisee will be given help and
advice to set up business by franchisor and is
responsible for day to day running of business
...
Horizontal integration - ​process of a company
increasing production of service and goods at the same
part of the supply chain
2
...
Rationalisation
○ When firms merge there will be duplicated roles
∴unnecessary workers can be laid off from the
company which saves the company money
...


●

No real diversification(still in
same chain of production)
No real economies of scale
May have lack of experience
of the new industry which
could lead to costly mistakes
...
Business wants to expand into new market and has little
knowledge of it
...

2
...
Two companies might
intend to develop similar product
...
Backward vertical integration ​- involves purchase or
merger with the suppliers of the supply chain
...
Conglomerate integration ​- merger between firms
that are involved in totaly unrelated business
activities
...


Advantages of joint venture
Risk shared by both organisations
Expertise can be offered by both businesses
Capital is normally invested by both business
...
The main purpose of SA is to gain synergies from
the different strengths of the members of the alliance by

22

●

●
●

●
●

Profits have to be split between both of the parties
involved in the joint venture
...

Advantages of being a franchisor
Do relatively little but collect a certain amount of
money from the franchisee each year
...


●
●

●
●

Disadvantages of being a franchisee
Some of the profits have to be paid to the franchisee
Franchisee is not free to make all of the decisions as
franchisor will want things to be done in a certain
way
...


Globalisation
Growing integration of countries through increased
freedom of global movement of goods, capital , and people
...


Protectionism
Using barriers to decrease free trade, such as tariffs and
quotas, to protect a country's own domestic industry
...
(they also import raw materials and export
finished goods which drives the international trade)

Causes of Globalisation
Benefits of globalization for sinesses
1
...
Greater access to more customers ​- due to decreased
barriers
trade barriers firms can now export their goods more
○ Trade blocs and economic union has lead to
easily
economic integration or independence within
2
...
But balanced out by
business can grow and take advantage of economies of
organisations such as UN and WTO who set out to
scale
...
Greater choice of location ​- firms can move to areas
higher levels of world trade making markets bigger
more suited to their needs and aids with
and thus able to support larger business which can
competitiveness
...

2
...

3
...

Economies of scale obtained from the growth in
size of markets have allowed expansions and
shareholders have demanded higher profits so firms
have expanded beyond national boundaries to take
advantage of the developmental opportunities
available
...


Conclusion

23

1
...
Diseconomies of scale ​- all of them

If a firm can compete on price and quality then it can gain
from globalisation as there will be less tariffs and quotas
and ​∴have greater access to foreign markets
If a firm cannot compete on price and quality, it can't hide
behind tariffs and protectionism barriers as it will lose its
customers to foreign competitions
...
Economies of scale
○ Companies grow across borders in order to
increase in size and therefore decrease unit cost
...
Technical and financial superiority
○ MNCs have developed sophisticated technology
through heavy investments in R&D
...

3
...


Advantage to a country when an MNC appear
1
...

2
...

3
...
Increased choices​ - local market gains from a wider
choice of goods and services introduced by MNCs and
maybe at a lower price than the imported substitutes
...
MNCs may force business out of business ​- MNCs are 1
...
Shut down
business
...

2
...
Some MNCs will exploit workers​ - developing
would suffer a loss of trade and close down
countries no trade union or labour laws, thus MNCs
might pay workers far less, make them work longer
hours, and work in unsafe conditions
3
...

Advantages to a firm being a MNC
1
...

2
...

3
...
Access to cheap labour ​- by locating in developing
countries, MNCs can give employees lower wages rate
and decrease their labour costs
...


Organisational planning
Process of identifying an organisation’s immediate and
long term objectives, and formulating and monitoring
specific strategies to achieve them
...


24

5
...

Project
A specific and temporary activity with a start and end date,
clear goals, defined responsibilities and a budget
...


Four basic elements of a project
1
...
Time​ - each activity will need to be timed so that an
overall project duration can be fixed
...
Money​ - keep within budget and the expected profit
from it should be aimed for
4
...

1
...

3
...

5
...


6Ms
Methods
Machines
Manpower
Materials
Measurement
“Mother nature” - environment
Stages

1
...
Brainstorm main categories of the causes or use the
6Ms
...
Brainstorm detailed reasons under each of the headings
4
...


Advantages of a fishbone diagram
1
...
Encourages employee participation
3
...


Disadvantages of a fishbone diagram
1
...
Cannot effectively illustrate complex problems

Decision tree
A diagram that sets out the options connected with a
decision and the outcomes and economic returns that may
result
...


4 main feature
1
...
Different possible outcomes resulting from these
options
3
...
Economic returns from these outcomes

Advantages of decision tree
1
...
Easy to follow diagram ​- allows for numerical
considerations of risk and economic returns to be
included
3
...

4
...
Considers both possible financial outcome and likely
chances of success or failure
...
Accuracy of data ​- estimated economic return may be
quite accurate when they concern projects where
experience has been gained from past experience
...
Thus scope of inaccuracy of data makes the
results of decision tree analysis a useful guide but no
more
...
Probability of event happening ​- based on past data
but circumstances may change, so inaccurate data
...
The expected values are average returns
assuming that the outcome occurs more than once, but the
average in real life will not be the final result
...


Lewin’s force field analysis
Analytical process used to map the opposing forces within
an environment where change is taking place
...
Outline the proposal for change
2
...
Give an estimated score (1-5)

Advantages of lewin’s model
1
...
Encourages an examination of how to strengthen the
forces supporting the decision and reduce the forces
opposed to it
...
Use of a leadership style that reduces opposition and
resistance to change is highlighted as being more
effective than forcing though unpopular changes in an

Disadvantages of Lewin’s model
1
...
May cause a division in a group between those who
support it and oppose against it
...
Analysis developed entirely on the skill level and
knowledge of the group - so if skill level is low then
analysis not indepth

26

autocratic manner
...


Advantages of Gantt chart
1
...

2
...

3
...

4
...
Easy to update and communicate when key tasks
completed
...
May become complex and difficult to interpret ​- if
project requires many tasks
2
...

3
...

4
...
Thus full
complexity not demonstrated as the main focus is only
time

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