Notesale: Turn your study into money

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CHAPTER 1: THE CONCEPT OF BUSINESS IN CONTEXT
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Businesses also vary considerably in terms of size: the corner newspaper and
grocery store is a business as is the Japanese car giant – Toyota
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In 2013 12 UK universities operated with income in excess of 500 million
pounds, Oxford and Cambridge each had income > 1 billion pounds
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All universities and colleges must rely increasingly on generating their own
income owing to changes that have taken place in public funding
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We view business as a broad concept,
incorporating profit-making concerns such as manufacturing firms and banks, and
non-profit making and non-profit concerns such as schools, hospitals and charities
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The activities interact with one another, example: operations decisions
influencing the quantity and quality of the goods produced and the services
provided will have implications for the other functional areas
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At the strategic level, we are concerned with those management decisions,
and the influences on those decisions, that determine the direction of business
activities
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Strategies are often a question of reconciling opportunities and constraints
which exist within both the organization and the environment in which it
operates
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It is widely accepted that the structure of a firm is often a product of its
strategy
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The overseas
investment strategies of large multinational corporations have been seen to
have considerable influence on the economic and political affairs of other
nations, especially those in the developing world
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A strategy comprises a set of objectives and methods of achieving those
objectives
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Those issues are often interrelated, for example: the public ownership of
business firms may well mean the pursuit of social as well as business goals,
and publicly-owned firms invariably have bureaucratic structures
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All firms as they increase in size tend to adopt more formalized structures
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We define the
key elements of the organization as the goals of the business and the way they
are formulated, ownership and control, size, structure and organizational
culture
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There are 5 factors that operate at the environmental level:
¨ the economy à we examine the workings of the economy and its interactions
with business activity as well as the nature of competition
¨ the state à includes discussions of government, legal and political issues
¨ technology
¨ labour à the examination of labour focuses on the workings of labour market
¨ cultural and institutional differences à the examination of those issues that
differentiate businesses in different countries and covers historical, cultural,
political and economic differences
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The composition of the labour market reflects changes in technology,
economic and social changes and the policy of governments
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Technological innovations are often motivated both by declining
economic fortunes and by direct state innervations
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The systems approach
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The systems approach Is the view of business involving 2 related
concepts
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What we identify as a business is the sum
total of all these influences and interactions
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Assumes that all organizations are made up of interdependent parts
which can only be understood by reference to the whole
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The development of systems thinking from an organizational
perspective starts with the analogy of the firm as a living organism
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The inputs, processes and outputs must be balances so the firm
can obtain equilibrium
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This is based on the assumption that the social system of the
firm and its technical system interact in a complex way
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The contingency approach
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The contingency approach focuses on the relationship between the
organization and its environment
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The most successful businesses are therefore those
that are organized to take advantage of the prevailing environmental
influences
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It starts with an analysis of the key environmental variables, which
shape the organization
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This approach has been very influential in the area of corporate
strategy, the strategist attempts to match the environmental
opportunities and threats with the organisation’s own strengths and
weaknesses to develop an optimum strategy for the firm in question
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Both the systems and contingency approaches are based on the concept of
an organization interacting with elements in its environment and adapting to
them
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CHAPTER 3: THE ENVIRONEMNT AND BUSINESS: THE ECONOMY AND STATE
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All firms to are, to a greater or lesser extent, constrained by the environment within
which they operate but the activities of business themselves also change the same
environment
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A shift in the economy of a local region, will have implications far beyond that
industry
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Business
are influenced by the prevailing culture and may need to adapt practices accordingly
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WTO and EU
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Businesses in all sectors have to adapt to increased global competition
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PEST analysis
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Political environment: this covers the nature of the political system and how that
influences business
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Another issue here would be the laws
and regulations imposed by supranational bodies such us EU and the WTO
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It also examines issues relating to
economic health, including the size of the economy and indicators such as growth
rates, interest rates and levels of unemployment
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Socio-cultural environment: cultural values of a particular society have an influence
on business strategy and practices
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The skills composition of the
labour force and the relationship between skills and the educational system
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The impact of information and communications
technology
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Ethical environment: this examines the implications of ethical and environmental
issues such as rates of pay, the employment of child labour, the disposal of waste,
how employees, suppliers and customers are treated
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It tends to place influences in compartments
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There is little or no acknowledgement that organizations, their
managers and owners can influence the environment in which they operate
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This model is static in that it focuses on present factors only
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There is an immediate problem of deciding where the environment ends and
business begins and vice versa
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By the same token, business enterprises have to
react to economic development
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Competition can be fierce and many
firms prefer to cooperate rather than compete on issues such as price and
wage rates
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Measurements: GDP, GNP, GNI and PPP
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GDP is the total value of all goods and services produced in a country
in a given year
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GDP is a popular measure and is
often used as the basis of comparison for economies of different
countries
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GNI is the GDP + income received from other countries – income paid
to other countries
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Indeed, it is used by the WB as one of its indicators of poverty
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The global economy has been dominated by the USA, whose economic
output in 2008 was more than 3 times that of its nearest rival – Japan
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Cases have been made at various times for the growth
of the Japanese economy, the rise of the Asian tiger economies, the challenges
offered by the BRIC economies of Brazil, Russia, India and China
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Post-war growth has been significant and in Japan’s case, particular
advances were made from the 1950s
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In addition, the focus on certain
types of manufacture, exports and FDI meant that by the 1990s Japan had
emerged as the world leader in product markets such as home audio,
robotics, fax machines, cameras and video games
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The explanation for the growth of the Japanese economy has been
attributed to a number of factors:
• Japanese manufacturing firms had cost advantages that were derived
initially from a labour force that worked long hours for low wages
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• The Japanese control of imports enabled the same firms to dominate
the home market
• Firms became cash-rich, which enabled them to invest in new methods
and new technologies to reduce the build time of their products
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• Supportive state and banking system, human resources policies, the
core cultural values of Japanese and the close relationship between
suppliers and manufacturers
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In terms of wage rates, Japan had moved from a lowto high-wage economy
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CHINA
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China has been the world’s fastest growing economy since 1980
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It is the world’s largest exporter of manufactured goods and the
second largest importer
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Although, the process of liberalization was
extensive, china remains a mixed economy reflected by the different
types of business organizations: state owned enterprises, private
companies and foreign owned enterprises
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Trade was in turn stimulated by FDI
as foreign owned enterprises contributed 50% OF Chinese exports
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• WTO membership: while china’s growth as a trading nation was
boosted by it operating as a low-cost manufacturer of goods that were
then exported, its acceptance as a WTO member in 2001 gave a
further boost
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• Privatization: the creation of private sector began with joint ventures
between foreign MNCs and Chinese SOEs
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Private enterprises have 50% contribution to the
GDP
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• Chinese government strategies: central government policy has played
a central role in the liberalization of the Chinese economy
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As a result,
Chinese firms became an important link in the global value chains to
foreign multinationals
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• Human capital development: by 2009 there was universal access to
primary education, 78% access to secondary and 2
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There was general support for Chinese to benefit from
overseas university education as well as significant investment at
home
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Potential problems:
Dominance of foreign firms: it Is argued that too much of the high
value-added activities are dominated by foreign firms, which were
responsible for a high proportion of exports in industrial machinery,
computers and computer equipment and electronics
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Domestic consumption
was identified as priority
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• Increasing inequalities: the economic transformation has widened the
gap between rich and poor both in terms of individuals and regions
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Younger
workers have complained about long hours, relative low pay and the
corruption of local officials
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The
absence of a profit motive and lack of employee incentives often
results in low levels of motivation which produces low productivity
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The lack of participation in the global
financial system is not just a concern of the WTO but limits china’s
integration in the global economy
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Market economies:
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Examples: USA, UK, Australia, New
Zealand and Canada
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Examples: Germany, France, Netherlands, Scandinavian countries
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The Asian model (Japanese model): free market, but with a strong state
giving direction where necessary
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In
doing so, they contribute to a nation’s income, capital assets and
economic growth
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• Key issues for business managers are also key economic issues, ex
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• The state as employer: in many countries governments attempt to
hold down wages in the public sector as part of the policy of reducing
public expenditure
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• Legal regulation: the law of contract is used to regulate the market
place
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• Demand management: all governments attempt to influence and
control economic growth, the balance of payments, wage and price
stability and the level of unemployment
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• Training: governments attempt o influence the skills composition of
the work force through education and training policies
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• Marketing: most governments support their own businesses in
exporting goods and services
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Differences both
between and within political parties can result in different approaches
to intervention
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The majority of owners and managers of business have an
ideological attachment to laissez faire
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Businesses are traditionally resistant to state control and are committed to a
laissez-faire economy
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The business community represents an
important source of revenue via taxation and borrowing to enable the state to
fund its activities
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Ways in which business attempts to influence government policy:
• Professional groups such as, doctor’s and lawyer’s associations
representing whole industries all attempt to influence policy

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Industry groups lobby government to secure some kind of advantage
or to protect themselves from what they see as unfair competition
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This is the source of considerable funding to political parties in
the USA and a growing source in the UK as well as other European
countries
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• Individuals also represent an important channel of influence
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THE WORLD TRADE ORGANIZAITON
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It is
concerned with establishment of rules of trade between member states
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The full achievement of its objectives has been thwarted
by trade restrictions by many nations and by the activities pf some
multinationals in moving operations to avoid WTO regulations
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The WTO operates by:
• Establishing rules that govern trading behaviour between nation states
• Attempting to liberalize trade through tariff and quota reduction
• Offering a facility and a legal framework, including a court, for the
settlement of disputes
• Monitoring trade agreements and government policies, especially
those that may contravene the WTO objective of liberalization
• Providing technical assistance and training for developing countries
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28 countries
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The objective of the EU is the maximization of
advantages associated with the free movement of goods, finance and people
and to capitalize on a large internal European market
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It is assumed that the reduction in trade barriers will lead to increased
competition, which will drive more efficient methods of production and result
in better quality products at cheaper prices
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This allows EU
farmers to over-produce and sell products below cost price
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Energy policy: the policy has focused on gas and electricity and aims
for an open market in both industrial and domestic supply
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Technology is broad concept referring to the application of available knowledge and
skills to create and use materials, processes and products
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While there are situations
where the prevailing technology is undoubtedly influential, it is the product of human
endeavour and many managers do have a choice
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However, technology not only refers to the artefacts themselves but also
to the way they are used and the theories governing their application
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Technological developments and change have led to the growth of entirely
new industries such as biotechnology, which in turn has created new product and

process applications in such areas as health care, agriculture, in manufacturing with
biodegradable products, and in waste management
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On a much broader scale we distinguish between societies according to their
sum total of knowledge and skills and the application of these for the benefit of the
society
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A classic view of technology is that it exists as an environmental constraint, which
becomes the dominant feature of all businesses
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Galbraith pointed a picture of markets being dominated by technological
considerations rather than consumer choice
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Woodward viewed technology as determinant of both organization structure and of
possible strategy options
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The
end result is supposedly strategic choice for the individual manager following from an
analysis of relevant variables
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Technology is dominant and managers fail to adapt to it at
their peril
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Technology is believed by some to determine the structure and processes of business,
just as the climate and weather determine agriculture
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Technology is not a determinant of business but rather a product
of the way managers responds to other environmental influences
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The relationship between technology and business is very complex, it involves
interrelationship of other variables as size, management choice, economic and social
change, available finance and culture
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Technology can be a source of competitive advantage:
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Technologies have changed the nature of some industries
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The organizations
that are unable to offer the range of services provided by new technologies are less
able to compete
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In some industries, this has enabled some firms to dominate the market
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The value of technology in this respect depends upon the intellectual
property strategy of the firm and the extent to which such new developments are
protected by copyright and patents
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Technology can be a source of a core competence, the ability to do
something or offer something that competitor cannot
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In service industries technology has provided the opportunity for improved
customer service in the form of information retrieval or round-the-clock response to
customer problems
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The rapid growth of digital and social media technologies has not only
transformed communication in organizations with consumers, it has transformed
the marketing
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Information and communications technology
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Information and communications technology (ICT) refers to the convergence
of technological development in microelectronics, computing, telecommunications,
and lasers
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Developments in
ICT have driven the rapid growth of globalization since 1980
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• Marketing has been transformed as customers use the internet to post
feedback on products and services
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More significantly, it has created the global factory and
enabled manufacturing operations to be linked around the world
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E-commerce generally relates to trading activity involving
information, goods and services
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E-business generally refers to a much broader range of activities,
incorporating all business activities
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The growth of e-commerce and e-business is directly associated with the
development of the internet and company-wide internet systems
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It is predicted that it will revolutionize

business although at present take-up rates are quite low, costs of entry are high
there are unresolved issues related to privacy and security
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Electronic commerce is a
transaction involving goods, services and information in which the parties to do the
transaction do not meet, but interact electronically
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This has led to the growth of internet companies
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Retailers are able to shorten the
supply chain to the customer, thereby reducing costs, as well as gaining access to
the global market
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E-commerce has enabled home access to personal bank accounts and a full
range of banking services
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Some
supermarkets, such as Tesco, use e-commerce as the basis of their sales ordering
system with suppliers
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In the case of Tesco, the
information is transferred automatically to a central computer system, which
automatically rises orders to suppliers, which are then despatched to the
appropriate store
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Barriers:
• Access to internet, there is a considerable variability in the number of
internet users in different countries and those in the population that
have access to computers
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• Many customers prefer more personalized shopping and the
opportunity to talk to shop assistants about issues not directly related
to the product
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The thesis
associates technology with job cuts and rising unemployment, and the greatest
impact of both deskilling and job losses is felt by skilled manual workers
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Optimistic: viewing technology as a liberating device eliminating the need for
human labour in repetitive, dangerous or unpleasant tasks and, in some cases,
freeing people to engage in socially beneficial work
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Technology and job numbers
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It is clear that there have been job losses in manufacturing resulting from the
replacement of jobs by forms of automation
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There are some
positive findings regarding technological change in manufacturing
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In this way, some
employment levels can be maintained
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Variations by the type of job: in general, the demand for unskilled labour has fallen
while that for skilled labour has risen
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Far from causing mass unemployment, this has
led to job shortages in some areas, notably in highly skilled and specialized work
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In many organisations, the numbers of middle and supervisory level managers have
been greatly reduced
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Braverman argued that technological change was reducing the discretion that
individual workers had within their jobs
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He
also claimed that the change had increased the level of control that management
had over employees
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The upskilling hypothesis argues that the skill level of many jobs has been
enhanced by 2 factors: there has been a decline in the need for unskilled and semiskilled manual work and an increase in demand for so-called ‘knowledge’ work;
upskilling is seen in the increased demand for training and retraining
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Some groups gain while others
lose
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For an
educated group in skilled work, their jobs have often been enhanced
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• The global organization of production has brought about a
geographical polarization – low-skilled, labour-intensive work is
located in low-wage economies (India, China, Indonesia), while higherskilled work predominates in the advanced industrial nations
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The trend is common to all developed countries, although the trend
wad marked much earlier in the UK and USA
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The primary sector also includes the mining
and extractive industries – a marked decline in employment is noted in these
industries
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The trend has been worldwide with a 10% fall in manufacturing employment across
all developed countries between 1970-1992
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In all these countries, there has been a major increase in
employment in service sector
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Among the 10 most developed economies, service employment rose from
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There is variation within the services
sector itself, with job losses in areas such as telecommunications linked to
privatization and in the public sector resulting from spending cuts
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The main impact has been a rise in
long-term unemployment among males, mainly those displaced by job losses in
primary industries and in manufacturing
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Unemployment is also linked to
education in developed countries in that those with the lowest educational
qualifications are over-represented amongst the unemployment
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There has been a rise in female unemployment
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Overall, migration figures across the world have been increasing at

an annual rate of 2%, although the biggest growth has been within countries in the
developing world
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Globalization actually leads to a decrease
in labour migration as increased flows of FDI and trade create jobs in most
developing countries
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There
is fear that multinationals have shifted the manufacture of goods and services and
hence labour to lower-cost-countries thereby creating increases in unemployment
in many countries of the developed world
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The free movement of labour is seen to be as important as the free
movement of goods and money, yet mobility remains low
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A number of
obstacles to mobility have been identified
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Such goals normally include job protection, improving pay
and conditions and attempting to influence management decisions
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The membership, power and role of trade unions vary considerably across
the world
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In the USA, overall membership is low
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In Germany, trade unions are supported by a regulatory framework, that
includes the law, relating to co-determination and employee involvement
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In many parts of Asia, trade unions have little power and are often linked to
companies, as in Japan
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Trade union density is used as a measure of
membership
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There are significant variations between countries, although all show decline in
membership
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Trade unions do have influence
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The
union supporter would claim that trade unions act as an important check and
balance in management decision-making, preventing management from acting
unreasonable, and improving quality of the decision made
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It is concentrated with the design, pricing, promotion and accessibility to the
customer of goods, services and ideas
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• Marketing, probably more than any other business activity, attracts strong feelings
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In terms of products and services,
marketing is concerned with design, prices, promotion, the means through which
they are distributed and the interface with the customer
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Advertising is a pervasive feature of modern life, its scope and reach having been
expanded through the developments in digital media technologies
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Identify the differences between business to consumer and business to business
marketing
• Business-to-business marketing embraces any marketing exchange between two or
more organizations
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There is a clear overlap
with purchasing and procurement, but business-to-business marketing is much more
than a buyer-seller relationship and differs from business-to-customer marketing for
the following reasons:
o Business-to-business marketing in the manufacture of products, particularly
with the development of global factories and global supply chains, involves
network of components suppliers
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This
process also involves discussion and negotiation over the design, price,
delivery times and after-sales services to a degree not found in business-tocustomer exchanges
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The business to consumer as a business model differs significantly
from the business-to-business model, which refers to commerce between
two or more businesses
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Identify the elements of marketing
• The marketing mix generally refers to an overall marketing strategy which involves
the manipulation of 4 element
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These 4 factors are popularly referred to as the 4Ps: product, price,
promotion and place
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Decisions about the marketing mix cannot be made without researching
the market in all its aspects and that includes a thorough understanding of buyer
behaviour
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These
elements are people, physical evidence and process
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Including those concerned with product launches and testing
the market response to product proposals
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Effective market research enables managers to make more
objective marketing decisions
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o Management needs to possess accurate information about its current
marketing activities
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Such information can provide useful feedback on sales variations by region
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Such information may be about products brought out by competitors, the
relative prices of goods in shops, how competitors are promoting their
products
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o Market research involves feasibility testing: to assess the market potential of
a new product or service, to assess the consumer reaction to pricing policies
or price changes
o The 4th type of research is a mixture of the previous 3 in that it collects
information to evaluate a product and the way it is priced, promoted,
acquired, perceived and experienced by the consumer after the launch
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The criteria used to form such groups varies and
may include geographical location, social class, occupation, sex, lifestyle and so on
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Segmentation can also be based on consumer behaviour
targeting those who make frequent or repeat purchases
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o True segmentation occurs when genuinely different products are made for
the different market segments
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o An important strategic decision in marketing is the deamination of the most
appropriate segments for the marketing effort
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Positioning involves placing the product in the market so that it meets customer’s
expectations and perceptions in comparison with other products
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o Positioning refers not only to choosing the correct market segment for your
product but also to finding the appropriate niche in the market, to
differentiate it from its competitors on such matters as price and quality
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Advantages:
o It can assist the market penetration by catering more precisely to the needs
of a particular group than competitors
o Knowledge of the most appropriate segments for targeting products and
services can lead to competitive gains
o Products developed for one segment can be adapted to be attractive to other
groups
o Targeting can make more efficient use of a firm’s resources
o Appropriate positioning and repositioning (occurs when the same product is
offered to a different groups) can add value to the product and appeal to a
new market segment and thus broaden its appeal

Explain how these elements from the basis of the marketing mix and articulate how this
operates
• Product:
o Product line: is the total number of variations of the same basic product,
differentiated by quality, cost or extra features
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• Price: a product is price elastic if changes in price influence changes in demand
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A business wishing to make a profit
must use the cost of making a product as an important base point in setting its
prices
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o Sales promotion: free samples, money-back coupons, special offers and
loyalty points and competitions
o Direct marketing: organizations deal directly with the customer without using
intermediaries, forms: direct mail shots, inserts in magazines, telephone
sales, leaflets
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All types of promotional activity
use psychological theory and communication models of human behaviour,
but the nature of the promotion used will depend on number of factors,
including the strategy of the organization, the available budget and the type
of market
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A marketing
channel represents the flow of goods and services and may comprise several stages,
involving intermediaries, such as transporters, agents and retailers
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The emphasis is on how staff
treat customers to give them added value
...


Assess the various approaches to buyer behaviour
• Buyer behaviour involves considerations of why people buy and how they arrive at
the decision to buy
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Rogers attempted to differentiate people according to their response
to innovative products and identified 5 types:
o Innovators
o Early adopters
o The early majority
o The late majority
o Laggards
• The implication for the marketing specialist is to establish the characteristics of these
groups and focus the marketing communication accordingly
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Critically assess the significance of branding, targeting, positioning, market segmentation
and the value of the product life cycle
• Branding involves giving the product a name, logo or symbol to distinguish it from
products offered by competitors or even by the same organization
...
It is used to create awareness and build up customer loyalty to ensure
repeat purchases
...

• The reasons for branding:
o Brands are means of differentiation and attraction
...

o Brands are an attempt to give a product more prominence in the
marketplace and on the shelves of retailers
...

o The creation of a popular brand can also mean market leadership, which
means increased revenue through volume sales/or price leadership
...

• The critics of branding:
o Brands mislead customers by drawing false distinctions between products
and directing investment away from product development and into
packaging and promotion to maintain the myth of product differentiation à
certain brand can charge higher prices
o Branding is also attacked for its encouragement of status consciousness and
the elevation of style and popularity over utility
...
There
are 4 phases:
o Introduction phase: sales are slow as both consumers and distributors
become aware of the product and decide whether to adopt it
...
There are normally high profits for pioneering firms but a growing
market also attracts competitors
...
This is achieved through product
changes, increased promotional activity and price cutting
...

o Decline phase: falling off in sales and, while some firms do well as other leave
the market, survival is often dependent upon successful product
diversification
...
Falling demand may call for price
reduction, attempts to broaden the market by appealing to new segments or
diversifying into other areas of activity
...
When price inflation rises at a faster rate than
wage inflation the demand for certain luxury goods may fall
...

• The state is involved in marketing in a number of ways:
o The state markets its services and provides information on government policy
o Advertising is often used to direct the behaviour of individuals, as in the case
of health information and education, and to encourage the unemployed to
take advantage of training schemes
o The state attempts to regulate the marketing activity of private firms
...

o In terms of product, most governments have decided technical standards to
which products should comply to ensure minimum standards of quality, and
to protect both the consumer and the environment against potentially
dangerous products
...




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