Notesale: Turn your study into money

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Unit 1
Sectors of industry
▫
▫
▫
▫

Primary- involved in exploiting natural resources
Secondary- involved in manufacturing and construction from natural goods
Tertiary- involved in providing a service
Quaternary- involved in providing information and knowledge based services
e
...
ICT, R&D

Sectors of Economy
▫ Private- businesses that aim primarily to maximise profits and includes all
profit-making businesses
▫ Public- Consists of government-owned organisations and agencies which aim
to provide a service to society
▫ Third- consists of organisations that have been set up to provide goods or
services to benefit others
Private
▫
✓
✓
✓
✓




Sole trader- this business is owned and controlled by one person
It is easy to set up: no legal requirements
Only a small amount of capital is needed
Owner keeps all the profit
Owner can make all the descions
Unlimited liability
Lots of competition
Difficult to raise capital

▫ Private limited companies- owned by shareholders and controlled by a board
of directors, not allowed to advertise their shares on the market
✓ Shareholders have limited liability
✓ More finance can be raised from shareholders and lenders
✓ Significant experience from shareholders and directors
 Profits shared amongst more people
 Legal process to set up is complicated
 Shares can’t be sold to the public so it’s more difficult to raise finance

▫
✓
✓
✓




Partnership- owned and controlled by 2-20 people
The partners can responsibility
Partners can specialise
More money can be invested as there are more owners
They have unlimited liability
May have arguments
Profits have to be shared

 If one partner leaves or dies, a new partnership has to be drawn up

▫ Franchises- a franchise is a business agreement that allows one business (the
franchisee) to use another business’ name (the franchiser) and sell the other
business’ products or services
To the Franchiser
✓
✓
✓



Allows the franchiser to increase its market share without investing heavily
Provides a reliable revenue
Risks and uncertainity are shared between the franchiser and the franchisee
The franchiser only receives a share of the profit
Profit dependant on the whole franchise is dependent on individual
franchisees

To the Franchisee
✓ The franchiser may advertise nationally therefore little advertising needs to
be done
✓ The risks of business failure is reduced
✓ The franchiser can carry out training and administration
 Products, selling prices and store layout may be dictated stifling franchisee
initiative
 A royalty payment or percentage of revenue has to be paid to the franchiser

▫
✓
✓
✓
✓




Multinational- very large organisations that operate in more than 2 countries
Government in other countries may offer incentives
Lower wage rates
Higher skilled workers may be available for the same or lower wage costs
Legislation in other countries may be more relaxed
Legislation may be too restrictive to operate competitively
Local currency may be weak
Country may be unstable (politically)

▫ Public Limited Company- They are like private limited companies,
controlled by a board of directors, however unlike a plc they are allowed to
sell their shares publicly
✓ Large amounts of finance can be raised
✓ Plc’s dominate the market
✓ Easy to borrow money from lenders due to their large size
 Set up costs may be high
 Must abide by the “companies act”
 No control over who buys the shares
 Must publish annual accounts

Public
o
o
o
o

Owned and controlled by the government
Set up to provide services to the public
Making a profit is not important, its more about keeping within budget
Financed by taxes from the taxpayer

Third
Non-profit organisations/ voluntary
o Set up to support causes
o Any profits are reinvested
Social enterprises
o Social or environmental aim
o 50% of profit is reinvested
Charities
o
o
✓
✓


Sole purpose is raising money for others
Control of trust is carried out by a board of directors
Exempt from paying some taxes
Low wages costs due to volunteers
Volunteers may leave for paid work

Objectives
▫ Maximise profit- making as much profit as possible
▫ Survival- being able to pay bills and survive in the competitive market
▫ Satisficing- is aiming for an adequate result like aiming for a certain amount
of profit rather than maximising
▫ Provide a quality service- providing good quality products or good quality
service
▫ Increase market share- if they have the most market share they become the
market leader and dominate the competition
▫ Managerial objectives- managers trying to improve their status in the
company
▫ Sales maximisation- making as many sales as possible
▫ Corporate social responsibility (CSR)- aiming to act in an ethical way or any
way that benefits society or the environment
− Ethical and environmental responsibilities: avoiding use of child labour
− Philanthropy: donating to charity
− Economical responsibilities: using fair and competitive marketing
− Legal responsibilities: abiding by laws that govern businesses
✓ Business gains a good reputation for its caring nature
✓ Customers who agree with the aim are likely to use the business

✓ Business can attract high quality staff who believe in the ethics of the
organisation
▫ Growth- extending the business
Growth
✓ Reduces risk of failure as bigger businesses with more products or branches
can spread the risk and avoid ‘putting all their eggs in one basket’
✓ Increase profits as more products to sell or more stores will equal in more
sales
✓ Removes competition as bigger businesses can put smaller businesses out of
business
Internal/Organic Growth- Where firms grow from within, usually by opening more
outlets or hiring additional staff
✓ Not much change- the firm is still making existing products so it is doing
what it already knows is good, and it is less likely to go wrong
✓ Very inexpensive
✓ Diversification- can produce more products and can sell into different
markets, if one market fails then they always have a back up in another
market
Integration (Takeover/merger)- Takeover is when one business usually a larger one
takes over another usually smaller business, this is usually a result of the smaller
business struggling financially
...

Takeover
✓
✓
✓




The buying business gains market share and resources of taken over
business
Risk of failure can be spread
Competition is reduced which will increase sales
Integration can lead to job losses in the taken over businesses the buying
business wants its own management and employees
If the buying business moves its headquarters to its home country this could
have a negative effect on the taken over business's local economy
It can be very expensive to acquire another company

Merger
✓ Market share and resources can be shared, which can spread risk of failure
and increase profits
✓ Each business can bring different areas of expertise to the merger
✓ Unlike a takeover jobs are more likely to be saved
 May lose customers if they don’t like the changes a merger brings e
...
a new
logo
 Marketing campaigns to inform customers of changes can be very expensive
 Bad for customers as less competition means higher prices

Horizontal Integration- when two businesses from the same sector of industry
become one
✓ The new, larger business can dominate the market as competition will be
vastly reduced
✓ Due to reduced competition the larger business can raise prices, increasing
profits
 The merger/takeover might breach EU regulations
 Quality may suffer due to lack of competition
 Customers may have to pay higher prices for the same quality goods
Vertical integration ( forward/backwards)- vertical integration is when two
business from different sectors of industry become one
...
Backwards Vertical integration is when a
business merges/ takes over a business that is at the previous stage in the chain of
production
...
If one market fails, the losses can be
compensated for by the profits of another
✓ It can overcome seasonal fluctuations in their markets and have more
consistent year round sales
✓ The business is larger and therefore more financially secure
 One business may take on another market they know nothing about which
may cause the new business to fail
 Having too many products could cause the business to lose focus on core
activities
 The business may become too large and inefficient to manage

Outsourcing- also known as contracting-out, is when an organisation arranges for
another organisation to carry out certain activities for them, instead of doing it
themselves
✓ Business can concentrate on their core activities, rather than getting bogged
down with other things
✓ Less capital needs to be spent on labour and equipment as outsourced
companies will bring this
✓ High quality will be guaranteed because outsourced company will have
greater expertise and specialist equipment
 The business will have less control over work so quality might fall
 Communication needs to be very clear to make sure exact specifications are
met
 Outsourcing could be expensive as specialists and expertise come at a price
De-merger- when a single business splits into two or more separate components
✓ Each new component can concentrate on it’s core activities and as a reuslt
grow
✓ Each new component has the best possible chance to operate efficiently
 Customers may be put off by the de-merger and abandon the business all
together
 Significant financial costs, like rebranding shop fronts and marketing
campaigns
Divestment-is selling off part of an organisation usually the less profitable ones
Asset stripping- this is taking over a business with intent to sell off its assests for a
profit
Internal Factors
Finance: if finance is not available then they might not be able to pay the bills
which would mean the business has to close, they wouldn’t be able to buy new
technology which means they would gain a poor reputation, or they wouldn’t be
able to develop new products or increase staff wages to motivate staff
...
Products could also be made of a poorer quality
reducing customer satisfaction
...
Must have good networks so that information can be
communicated easily
Corporate culture: a set of values, beliefs and customs that is shared by all the
people in an organisation
Company values: need to be developed by the founder by e
...
having very good
CSR
Corporate colours: give organisations and their employee a strong sense of
corporate identity
Symbols, slogans and mottos: help give organisations an identity that both
customers and staff easily recognise and can also remind staff of their objectives
Uniformity of layout: uniformity of premises make it easier for staff to transfer
between branches and customers feel at ease
✓
✓
✓
✓

Employees feel part of the firm therefore more likely to work harder
Increased motivation therefore less likely to leave
Better employee relations therefore gaining a better reputation
Greater productivity therefore increasing sales as the firm has more to sell

External factors
Political: political factors arise from decisions made and actions taken by the
government
Changes in income tax: if income tax is decreased then that means that customers
will have more money to spend which might increase sales in the business
...
For third sector organisations they might see an increase
in demand if people are struggling to make ends meet e
...
foodbanks
Changes in levels of unemployment: if unemployment levels are low people will
feel more secure in their jobs so are more likely to buy your product
Economic policy:
▫ Government policies that affect the economy
▫ Fiscal policy- concerned with taxation levels and its level of public spending
▫ Monetary Policy- deals with changing interest rates in the UK
Social: social factors concerns the ways in which society changes and the need for
businesses to adapt in the same way
Changes in lifestyles: people working more flexible working arrangements mean
that firms can save money on renting office space if they are working from home
...
Also changing fashion trends means that firms may be left
with stock that has gone out of fashion which means that they will lose out on
profit
...
Also, firms need to make sure they have the newest technology to
ensure that they don’t fall behind competitors or gain a poor reputation
Environmental: environmental factors can arise from the way in which the natural
environment impacts on organisations or the ways that organisations act in an
ethical and environmentally friendly manner
...
g
...
Adverse weather like a storm could close premises, make it
difficult to deliver stock or make it difficult for employees or customers to get to
the store
Competitive: regarding an organisation's competition
New competition entering markets means that you might lose customers to them
...
If a competitor decreases their prices you need to decrease your prices or risk
losing customers
Competitive policy:

▫ Aim of this is to encourage competition in markets
▫ Reasons for wanting competition is prices are kept low for customers,
products and services are high quality and customer service is good
▫ They ensure that cartels, price fixing and bad customer service don’t
happen
▫ Also looks at merger and takeover to make sure they don’t limit competition
Stakeholders
These are groups of people that are affected by the success or failure of your
business
...

Each level has different levels or authority and responsibility
✓
✓
✓




Each staff member knows their role and who to report to
Many levels mean many promotion opportunities which can motivate staff
Narrow span of control
Communications take time to flow down the levels
The organisation can be slow to react to changes in the markets
Narrow span of control

Narrow span of control- when there are a small number of subordinates for each
manager
✓ Managers have more time for planning, supervising and descion making
✓ Managers can support subordinates
 Managers supervise work more closely, putting employees under a lot of
pressure
 Managers have fewer staff to share ideas with
Flat structure: similar to a tall structure with different levels of management but
it has fewer and therefore a shorter chain of command
Information can be communicated quickly
The organisation can respond quickly to external factors (PESTEC)
Wide span of control
Fewer levels means fewer promotions opportunities so quality may fall
because employees aren’t motivated
 Since there are less management levels, staff may be delegated more tasks
which could put them under pressure
 Wide span of control
✓
✓
✓


Wide span of control- when there are a large number of subordinates for each
manager
✓ Managers have to delegate tasks to staff which can raise morale as staff feel
trusted
✓ Staff are empowered to make decisions themselves
 Managers time is at a premium which can lead to snap decisions
 Less time for planning
 Subordinates may have no one to seek help from
De-layering: removing one or more levels of management from a tall structure
✓ Money is saved on paying the salaries of the management level that is
removed
✓ Quicker decision-making and communication are possible as there is a
shorter chain of command

✓ There is a wider span of control
 There are fewer promotion opportunities for staff
 Redundancy payments will cost the organisation a significant amount of
money
 The organisation will lose key members of staff in the restructure
Centralised Management: Decision making and control is kept at the very top of a
centralised management
...
g
...
g
...
g
...
g
...
g
...
Also setting targets and strategizing

Unit 2
Marketing
The role of the marketing department is to anticipate, identify and satisfy the
needs and wants of customers
...
The level to which they try and meet the needs of customers will depend
on whether the business is market led or product led
...
In order to satisfy consumer needs and wants, the

market-led business needs to understand why, what, how and where customers
buy products
Consumer behaviour

Description

Why do they buy?

Need/want, social status,
gift?

What type of purchases?

Routine buying(food)
Impulse buying

How do they buy?

Extensive decision making
(new car)
Cash
Credit card

Where do they buy?

Store credit
Online
retails

Impact on market led
business
Some purchases are basic
needs (food) some are for
self-actualisation (Rolex
watch)
Different marketing
strategies must be used for
each type
...
Might need to
change to contactless to
make it more convenient
Businesses need to adapt
...


Market research
All about anticipating and identifying customer needs and wants
...

Desk research: involves researching and analysing information that has already
been gathered e
...
trade magazines, financial statements
Quick to gather
Does not require trained or paid interviewers or research companies
Already exists so it’s easy to look up
Collected and presented by someone else so it could be biased
Not always a good fit for the exact purpose of your research may have to be
‘shoehorned’ to fit needs
 May have to read through a lot until they find what they need
✓
✓
✓



Field Research: involves gathering brand new information suitable for the
business's exact needs e
...
below
✓
✓
✓


Information will be up to date
Information is fit for your exact purpose
Won’t be biased
Field research requires expensive trained and paid interviewers or expensive
research companies

Sampling: selecting people that the market research can be carried out on
Random- picking people at random

✓
✓



No bias is shown
Saves time in selecting a sample
Sample may not reflect the target market
Can over represent a certain segment

Quota- choosing from a group of people with certain characteristics
✓ Quick and easy as group lists are pre-made
 The exact sample from each group is not randomised, so there could be bias
Stratified random- a sample is selected that represents the target market
✓ Sample represents the target market
✓ No researcher bias as the sample is randomised from the list of people that
fit that characteristic
 Sample chosen could be geographically dispersed adding to the cost
Cluster- the population (every potential customer of a business’ product) is split
into smaller ‘clusters’, often geographically
✓ Saves time compared to researching across wider areas
✓ Cheapest method of sampling
 Risk of the sample not being accurate enough to represent the target
market

Methods of field research
Method
Telephone survey: calling
customers and asking
them questions

Advantages
Easy to target specific
target markets e
...

calling 0141 numbers

Information can be
obtained immediately,
and they can ask people
to clarify their answers
Postal survey: survey sent Easy to target specific
to customers through
customers e
...
in a
post and is returned once location
completed
Customers can complete
it at a suitable time
Online surveys: a website Large geographical areas
or email is used to ask
can be surveyed
questions
Online software can
easily and accurately
gather, collate and
analyse information

Disadvantages
Only short surveys can be
carried out
Customers may find it
intrusive and not want to
respond
Questions must be simple
and easy to get the best
result
Customers usually view
surveys as junk mail
Responses may be too
brief, clarification can’t
be gained
Access to the internet
must be available

Personal interview: a
face to face discussion
where the interviewer
asks questions
Hall tests: a product is
given to people to test
and then they are asked
to respond

Can ask them to clarify
their answers
Can analyse body
language/facial
expressions
Good quality feedback
can be obtained on how
the product could be
improved
Inexpensive and easy to
do

Test marketing: a new
product is launched into
one regional area and the
reaction is monitored
...
There are no
sales yet and the product will actually be making a loss due to the cost of
research and development
▫ Introduction- the product is launched
...
Sales start to
rise rapidly, and profits start to be made
▫ Maturity- the product reaches the highest amount of sales it ever will, and
competitors are introduced
...
Sales begin to fall
and so do profits especially if prices are slashed to increase sales
▫ Decline- products life is nearing an end, it will stop being produced
...
g
...
This means having a range of products
on sale
...
This is good as it appeals to
lots of different market segments
...

This is good as if one market fails it’s okay as they will always have the other ones
...
g
...
g
...
g
...
Can be split into above the line or below the line
Above the line: using mass media to convey messages to customers
✓ Often advertisement is out-sourced to advertisement agencies meaning high
quality
✓ Adverts can reach a very large audience
 The business doesn’t have direct control over which consumers their
products are advertised too
 Above the line is very expensive due to paying for adverts to be produced by
experts and for the mass media to carry them
Examples
Advertising media
TV: advertising products
during commercial breaks
on tv

Advantages
Disadvantages
Colour, sound and
Very expensive,
movement can be used to especially for prime time
appeal to customers
spots
Adverts tend to reach a
large audience

Usually short adverts

Radio: advertising during
commercial breaks on
radio

Magazines: advertising
spaces or full-page
spreads

Billboards: advertising in
public places in the form
of a poster

A more captive audience
as people don’t tend to
channel hop, especially
in cars

No images or pictures
make it hard to
demonstrate

Use of jingles can make it
more memorable
Adverts appear in colour
Competitors often
which improves impact
advertise in the same
places
Target specific market
segments depending on
Often expensive for wellmagazine types
known magazines
Viewed by a large
Often vandalised which
audience in busy areas
gives a bad image
Quality can be affected
by the weather

Below the line: not using mass media to promote products
✓ Businesses have more control over the customers that adverts are aimed at
✓ BTL is more affordable than ATL so is more suitable for smaller businesses
 The impact can often only last for a limited amount of time e
...
a social
media post
 Some customers don’t like these methods as it’s intrusive
Sales promotion
▫
▫
▫
▫

Used
Used
Used
Used

to help launch a new product into a competitive market
as extension strategies at the end of a product’s life cycle
to prise customers away from competitors
to reward existing customers so they stay loyal

Into-the-pipeline: sales promotions that are offered by the manufacturer to
encourage retailers to purchase
Method
Trade credit:
manufacturers allowing
retailers to pay them
back later for goods
Sale or return:
manufacturers give the
option to return goods if
they don’t sell
Bulk-buying discounts:
discounts used to
encourage retailers to
stock up

Advantages
Retailers can purchase
stock and then pay for it
once they have the
money from the sales
It allows retailers to try
new stock without the
risk of being stuck with
unsold stock
Retailers can save on unit
cost of products

Disadvantages
Could lead to bad debt if
they are unable to sell
stock
Products may be
returned in a poor
condition, creating waste
Retailers may overstock
and find they are unable
to sell

Products might go out of
date or fashion
Out-of-the-pipeline: sales promotions are offered by the retailer to encourage
customers to buy
Method
Free gifts: used to tempt
people to buy a product
again or for the first time
Coupons: usually given in
magazines to give
customers money off in
future
Loyalty schemes: allows
customer to collect
points which they can
exchange for discounts

Advantages
Gifts that require
multiple stamps can
encourage people to buy
again (coffee)
Customers feel like they
are getting better value
for money
Encourages repeat
purchases
Information of customer
habits can be gathered

Disadvantages
Difficult to find a gift
that appeals to everyone
Discounts can reduce
profits

Customers can be wary if
they think this will be
difficult or time
consuming to set up

Social media
✓ The target market can be contacted directly as they usually already follow
or like the businesses social media page
✓ Information on new products can be uploaded immediately
✓ Social media is free
 Negative feedback can be given which could put other customers off
 Negative feedback can be given immediately not allowing the business to
release a statement in their defence
Apps
✓ E-commerce can be integrated, increasing sales potential
✓ Users of apps can share their experiences on social media giving the
company free promotion
 Apps require a mobile signal to use limiting its reach
 Limit to the amount of information due to screen sizes
Product endorsement (celebrity)
✓ Will make customers who like the celebrity buy the product as they want to
be just like them
✓ The product is advertised for free every time the person is spotted
using/wearing it
 People might be put off if they don’t like the celebrity
 Can be very expensive
 Bad publicity for the celebrity means bad publicity for the brand

Product placement
✓ Awareness is generated often worldwide
✓ Subliminal advertising- the consumer doesn’t know they are just watching a
film
 Time of exposure can be very short
 Consumers may be put off products if they don’t like the character using
them
Public relations: the act of controlling the image of a business to the public
Method
Press conferences: the media are
invited to a business presentation
where they are given information or
news

Justification
Business can send a message or update
out to a wide audience while keeping
control of what’s reported

Donations to charity

Promotes good CSR aims of the
business and can make them seem
ethical
Businesses can benefit from the success
of who they sponsor

Sponsorship: some businesses will pay
to sponsor an event, team or venue
Factors affecting methods of promotion:

▫ The target market- businesses should promote in places their target market
is likely to be looking
▫ Finance available- ATL methods are only used by businesses with lots of
finance available
People: who is representing the brand
Method
Train staff well
Ensure selection methods are thorough
Monitor staff

Justification
This enables staff to be informed on
the expectations of the business when
dealing with customers
Ensures that people employed are
suitable to represent the business
This ensures that standards are
maintained

Process: how a customer receives a service
Method
Offer live chat
Regularly assess processes such as
queues

Justification
Reduces customer confusion and the
amount of people calling on the phones
Allows businesses to understand where
problems are and allows them to be
addressed

Latest technology

Technology will usually speed up the
process as computers are faster than
humans

Physical Evidence: what customers see that gives them clues about a business
from it’s image
Method
Premises and vehicles that are modern
and clean

Justification
Ensures customers opinion of the shop
isn’t ruined by dirty old fashioned
shops
Settings should convey the ambiance to Ensures customers feel that their needs
match the product or service on offer
are understood before they even buy
the product
Operations
The role of the operations department is to provide the products that the
organisation offers
...


Understocking
 The business may run out of stock and production could stop
 Business will not benefit from bulk buying discounts
 Increase in delivery cost as many small deliveries will have to be made
Inventory management systems: a guide to stock levels in the business
▫ Maximum stock level- the maximum amount of stock that can ever be held
▫ Minimum stock level- the minimum amount of stock that will ever be held
▫ Re-order level- once stock reaches this level, new stock will be ordered in
Computerised stock control
✓
✓



Automatic re-ordering can be set
Databases keep balances of stock which are automatically updated
Systems cost a lot to install and maintain
Time consuming and expensive to train staff

Just in time (JIT): is the process of ordering supplies only when they are either
required for production or when a customer places an order

No wastage of stock-it's all used
No warehouse required
No money is tied up in stock
If deliveries are late, they will experience the consequences of
understocking
 No room for error in production
 Needs good infrastructure
✓
✓
✓


Storage
Centralised: storing stock in one central location
✓
✓
✓



Centralised warehouses can store a massive amount of stock
May be cheaper to store it all in one place rather than lots of smaller ones
Centralised warehouses are usually located near to infrastructure
Specialised staff need to be hired increasing wage costs
Inventory has to be delivered to each division which could cause delays

Decentralised: storing inventory in many locations
✓
✓
✓



Inventory is always close at hand when needed
Smaller warehouses are more responsive to local needs
Smaller amounts of stock result in no consequences of understocking
Can led to theft of stock if security isn’t good
Smaller amounts of stock result in negative consequences of understocking

Logistics management: people responsible for inventory, storage and distribution
Factors affecting methods of distribution:
▫ Legislation- e
...
the amount of time driving can work for
▫ Fuel costs- rises will affect profit if they are not passed onto customers
▫ Environmental pressure- trying to reduce carbon footprint means for
example low-emission trucks could be used
The role of the logistics manager:
▪
▪
▪

Plan- inventory required for production and sales budget
Organising- staff in warehouses and equipment
Commanding- warehouse staff to carry out tasks

Methods of distribution
Method
Road: via road network

Advantages
Generally quick and
efficient
Allows door-to-door
delivery
24/7

Disadvantages
Delays on roads and
adverse conditions can
hold up deliveries
Can be expensive due to
high fuel costs

Rail: via railways

Useful for heavy goods

Air: via airmail

More environmentally
friendly
Ideal for long distances

Sea: via shipping lanes

Quick overseas deliveries

Not door-to-door
Airport is not final
destination, incur high
road costs

Useful for heavy or bulky
products

More expensive
Slower method means
long delivery time

Satellite: services sent
Services direct to
via satellite signal e
...
tv customer location
Utilities infrastructure:
services sent via
underground/overhead
lines e
...
electricity
Mobile networks: via
wireless signals

Not suitable in rural
areas

Services direct to
customer location

Disrupted due to weather
High installation costs
Disrupted due to weather
High installation costs

Being improved all the
time
Extra products can be
purchases increasing the
m-commerce

Rural areas will be
disadvantaged
Disrupted due to weather
Rural areas will be
disadvantaged

Production
Budgeting:
▫
▫

Sales budgets- purpose is to provide targets for sales staff to aim for and to
motivate sales staff to reach targets
Production budgets- purpose is to plan production so that there are enough goods
to meet anticipated sales

Methods of production:
Job production: involves producing unique, one-off products
...
Each batch is
the same
...
Can either be automation or mechanisation
Automation: fully automatic production
✓ CAM produce each product in the exact same way every time, improving
consistency
✓ CAM doesn’t lose concentration
✓ CAM can do jobs that are dangerous to humans
 Huge investment is needed to automate a production line
 Breakdowns can be catastrophic, losing hours of production
 Replacing employees with machines will demotivate retained workers
Mechanisation: labour and machines working together
✓
✓



The human element will increase creativity
Machinery will speed up production
Production can’t be 24/7 as humans require breaks
If machinery breaks down and has to be fixed it leave workers idle

Labour intensive production: involves humans doing most of the work in producing a
product
✓
✓
✓




Labour is less expensive than capital intensive production
Humans can use initiative and creativity
Constant supply of labour
High risk of human error, resulting in waste
Humans need breaks/holidays
Training costs are high

Factors affecting method of production:
▫
▫
▫

Quantity of good- if a large amount is required flow is the best option
Skills of the workforce- if they are higher skilled job would be more beneficial
Finance available- if they have the money they should invest in machinery for flow

Quality:
Important as:

▫
▫

Poor quality goods result in customers returning their purchases
Bad quality can result in losing customers, bad PR and a bad reputation

Methods of quality:
Quality Control: checking quality of goods when they are finishes
✓
✓



Ensures faulty goods aren’t sent to customers
Limits the potential for a bad reputation due to faulty products
Can create a lot of waste as the quality isn’t checked until the end
High costs if the products need to be reworked from scratch

Quality assurance: quality is checked at many different points in production
✓
✓



Less wastage, which decreases cost spent on discarded materials
Easy to identify where faults are happening
Can slow down production
Can increase cost of production e
...
wages

Quality improvement: always wanting to improve the quality
✓
✓



Business stays ahead of competition
Business can react quickly to changing PESTEC
Can have high staff-development costs
Employees can feel under pressure to continually improve

Quality circles: involves a group of employees meeting with a line manager to discuss
problems
✓
✓



Employees will fell motivated as they get a say in decision-making
Management get well-informed suggestions
Employees meet during paid time, loss of production time
High costs as employees are often trained to join a quality circle

Quality standards and symbols: proves that a product has met an agreed industry standard
✓
✓



Awards prove to customers that a product has met agreed standards
Symbols can be used as a promotional tool to gain a competitive edge
Time consuming processes need to be completed to achieve the award
Agreed standards always need to be maintained

Benchmarking: copying the quality of a finished product
✓ If successful, the product will be as good as the best on the market
✓ Saves the business time developing their own approach to ensuring quality
 Can be difficult to gain information about other organisation’s quality methods
Quality Management: incorporates more than one quality assurance method
✓ Quality management should result in zero errors, which drastically reduces waste
✓ Staff are motivated as they are constantly consulted on improving quality
 Requires the commitment of all staff, which could require a stricter selection
process
Mystery shoppers: people are employed to purchase products ask questions or behave in a
certain way and then provide feedback

✓
✓



The mystery shopper is not employed by the business so will show no bias
Mystery shopper can suggest improvements
Staff may take the feedback personally
Businesses need to pay mystery shoppers therefore increasing costs

Ethical and environmental issues:
Ethical issues: being ethical means showing moral considerations for others when making
decisions
✓ Awards can be granted
✓ Businesses with good ethics attract customers
 Decision-making is more time consuming and complex as many possible solutions
may not be appropriate because they are not ethical
Examples
Philanthropy- giving to those in need, through charitable donations for example
Animal welfare- the moral considerations to the treatment of animals
Fairtrade- when suppliers of raw materials receive guaranteed and fair prices for
their goods
✓ Appeals to customers
✓ More positive relationship in the supply chain
 Losing symbol after it being gained is very bad
 More expensive
▫
▫
▫

Environmental issues: being environmentally friendly
✓
✓



Gains a positive reputation
Awards can be granted
Investment into environmentally friendly methods will be expensive
New procedures to become environmentally friendly take time

Examples
▫
▫
▫
▫

Carbon footprint- refers to the impact of using fossil fuels has on the environment
Sustainable raw materials- making sure the raw materials being used aren’t being
depleted
Waste- disposing of waste appropriately e
...
chemicals
Packaging- should be designed to be as environmentally friendly

Unit 3

Management of human resources
The role of the human resources department is to:
▫
▫
▫
▫
▫

Ensure the organisation has the personnel it needs
Train staff
Motivate staff
Ensure positive employee relations
Comply with current employment legislation

Workforce planning: all about deciding how many and what types of workers are required
and when
The number of personnel in a business is constantly changing
...
Organisation analyses the potential demand for its goods/services and decided how
many staff are needed and what skills are required
2
...
Organisation ‘closes the gap’ to ensure it has the workforce it requires
Recruitment: process of generating potential employees to apply for a particular job in
and organisation
Internal or external
internal
Staff noticeboard
Email to all or selected staff
Company newsletter

external
Job centre
Newspaper adverts
Recruitment agencies

Internal
✓
✓
✓




The vacancy can be filled quickly
The employee knows the organisation which saves induction training costs and time
The employee is known to the organisation and can be trusted to do a good job
Applicants are drawn from a very limited pool so the organisation might not hire
the best person for the job
Promoting one employee will just create a vacancy in their old post
Organisation misses out on the chance to bring in fresh ideas or more creativity

External
✓ Fresh, new ideas and skills are brought into the organisation
✓ There is a wider pool of candidates to choose from
✓ Avoids creating further vacancy





Costs for induction training
Such a vast pool or potential candidates means its more time consuming to pick
Don't know the candidate so they might not be suited to the job or worse
untrustworthy

Selection: process of choosing the correct person from the pool of applicants that have
applied for the job
CV’s- a document made by the candidate containing information about experience,
qualifications, skills and qualities
Interviews- a face to face discussion getting applicants to respond to certain questions
about themselves
✓ Find out how they react under pressure
✓ Gives indication of persons personality and character
 Some applicants can train for interviews and just say what they think the
interviewers want to hear
 Interviews are highly stressful
...
g
...
Variety of team building and role-play exercises
✓
✓



Assesses how applicants interact with others
Allows an organisation to really scrutinise applicants over a longer period of time
A venue will need to be hired
Several managers will have to be sent to watch it

References- this is using references, or information from referees to prove that the
candidates are who they say they are
Trial periods- involves the applicant being employed for a short period of time
Training
Means to improve the skills or knowledge of staff within an organisation
✓
✓
✓




It helps to improve the quality of products/services a employees have better skills
Reduces the number of workplace accidents as staff are more aware of procedures
A good training programme can attract high-quality staff
It can be costly to an organisation if outside training centres or trainers are used
It can lead to lost production time
Staff may leave after being trained

Induction training: this is training for new staff
...
If they don’t think
they are getting enough their work rate
will decrease
Non-financial incentives could be offered
e
...
holidays, car
Employees need to feel that their working
conditions are safe
...
They are
told that they are doing well so it
motivates them
Employees who want to progress in their
career respond well to recognition
Empowerment means giving staff the
authority to make their own decisions

Leadership styles
Leadership style
Autocratic: authority and
control is retained by the
leader
...
Manager let employees

Advantages
There are clear
expectations of what needs
to be done
Decisions can be made
quickly
Employees feel motivated
as they have a say in
decision making

disadvantages
There's no opportunity for
delegation or
empowerment demotivating staff
Lack of creativity
Mistakes can be made if
workers are not skilled or
experienced enough to
participate

have a say in the decisionmaking
Laissez-faire: managers
just let staff carry out their
jobs

The manager has the final
say but employees can
contribute, which can
encourage creativity
Employees are highly
empowered to make
decisions

Lack of direction can lead
to objectives not being met

This can create a very
relaxed work environment
Factors affecting leadership styles:
▫
▫
▫

Time available- may be less time to complete a task so a more autocratic decision
is key
Skills of staff- highly skilled and competent staff will need less supervision and
direction, so a democratic approach will work
Group size- democratic styles can lead to confusion if the numbers are too large

Employee relations
Refers to the relationships that exist between management and employees in an
organisation
Methods to promote positive employee relations
Appraisals: an appraisal is a two-way meeting between an employee and another member
of staff to discuss the employee’s performance and to set goals
✓ Positive feedback can be given which motivates the employee
✓ Targets will be set for the employee which will motivate them and gives them a
goal to work towards
 Negative feedback can be given which will demotivate employees
 An employee might set unrealistic goals which puts them under pressure

Informal appraisals: takes place whenever the line manager feels it is necessary
...
Customers may
leave to go to competitors
Bad publicity results in
customers leaving

By employee:
method
Overtime withdrawal
Lock out

description
Management refuses to give
employees extra hours
Locks out employees

close

Branch is closed completely

Impact
Employees lose chance to
earn more money
Don’t get the chance to
work to earn money
Staff are made redundant
or have to relocate

Finance
The finance department ensures that they business has the money it needs to
operate effectively by working out its financial position
...
g

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