Business

Business management
Revision notes
BUSINESS MANAGEMENT !1
The Exam Techniques
Even if you know syllabus content 100% you may not score high!
The SECRET is to :
1. Know how to structure your answer to win points fast in limited time
2. Actually answer what the Question asked
3. Write legibly
The magic formula
State ( 1 line max). Explain / justify in relation to story
= 2 points for SL
= 1 points for HL
HL
State (4 points) = SSSS

Explain (4points) = SE SE SE SE
Analysis (4 points) = +SE + SE - SE - SE
Evaluate (4 points) = Analysis + conclusion
Calculations
Do a word equation
put the numbers directly under the words
Keep = signs in a startling down the page
Dos and donts
1. Plan how to win the points before you answer! Then cross out and answer directly
underneath.
2. Use side headings (except for definitions)
3. Write in Full sentence bullet points (Sentences should not start with: To...)
4. SE is 2-3 sentences only. Write more and you will run out of time
5. Watch the TIME. 1m 30 secs per point . Unfinished answers lose almost all points (even
if you wrote lots).
6. Avoid broad generalizations eg businesses want to make profit. Some may not eg charities
7. Layout do not try to save paper
Start a new side of the paper for a new part of Q. Start a new page for each new Q.
Leave a line between the S or SE points you make
8. Do not use:
Good, bad, happy, unhappy, sad ... or any emotion words. I (unless asked for your personal
opinion)
dont, cant, isnt, wont, wouldnt, get, got
To... (at the start of an answer)
Slang eg go bust, get sacked.
9. Use WILL with extreme caution: use MAY instead
10. Write big enough to read. Unreadable => NO POINTS!
11. ANSWER WHAT THE Q IS ASKING!!!!
Read the Q at least 3 times and circle key words before planning.
About 50% of responses do not answer the Q asked!
AO1 = Demonstrate knowledge and understanding (students need to learn and
comprehend the meaning of information) Marks of 4 and 5
o Define
o Describe
o Outline
o State
!
Knowledge is static but

Understanding can be transferred to a variety of situations
AO2 = Demonstrate application and analysis (use knowledge and skills to break
down ideas into simpler parts and show how these parts relate) Marks of 5 and 6
o Analyze
o Apply
o Comment
o Demonstrate
o Distinguish
o Explain
o Interpret
o Suggest
AO3 = Demonstrate synthesis and evaluation (arrange component ideas into a new
whole and make judgements based on evidence or set of criteria) Marks of 6 and 7
o Compare
o Compare and contrast
o Contrast
o Discuss
o Evaluate
o Examine
o Justify
o Recommend
o To what extent
AO4 = Demonstrate a variety of appropriate skills (know how to select and use
subject-specific skills and techniques) Quantitative Skills, primarily
o Annotate
o Calculate
o Complete
o Construct
o Determine
o Draw
o Identify
o Label
o Plot
o Prepare
Chapter 1 Business
organization & environment
1.1 Introduction To Business Management
Business = A decision-making organization involved in the process of using inputs to

produce goods or services
Main business functions AO2
Human resources = Managing the personnel of the organization

Finance and accounts = Managing the organizations money
Marketing = Identifying and satisfying the needs and wants of customers
Operation = Converting raw materials and components to finished goods
The business sectors AO2
Primary sector = The extraction, harvesting and conversion of natural resources
Industrialisation
Secondary sector = Manufacturing or construction

Tertiary sector = Service
Quaternary sector = Knowledge based service
Sectoral change = A shift in the relative share of national output and employment that is
attributed to each business sector over time
Higher household incomes

More leisure time
Greater focus on customer services
More support service
Starting up a business AO2
Entrepreneur = An individual who plans, organizes and manages a business, taking on

financial risks in doing so.
Owners and/or operator of organization
Takes substantial risks
Visionary
Rewarded with profit
Responsibility for workforce (labour)
Failure incurs personal costs
Intrapreneur = An employee who thinks and acts as an entrepreneur within a section of the
organization
Employees of organization
Takes medium to high risks
Innovative
Rewarded with pay and remuneration
Accountability to the owner / operator
Failure is absorbed by the organization
Reasons for starting up a business
Growth, Earnings, Transference and inheritance, Challenge, Autonomy, Security, Hobbies
Process of starting up a business:Personal desire, achieve success, more extravagant life
1. Write a business plan
2. Obtain start-up capital
3. Obtain business registration
4. Open a business bank account
5. Marketing
Problems new businesses have: Lack of cash, poor cost control, management incompetence
Lack of finance, Cash flow problems, Marketing problems, Unestablished customer base,
People management problems, Legalities, Production problems, High production costs, Poor
location, External factors
Business plan AO2
1.2 Types Of Organizations
private VS. public sectors AO2
Private sector = Organizations owned and controlled by private individuals and business
Public sector = Organizations operate under government control
State-owned enterprises: Wholly owned by the government
For-profit organizations AO3
Sole trader = An individual who runs and owns a personal business (Unincorporated)
+Few legal formalities +Every profit + Be your own boss +Personalized service +Privacy
- Unlimited liability - Limited sources of finance - High risks - Workload & stress - Limited
economic of scale - Lack of continuity
Partnership = profit=seeking business owned by two or more people

Deed of partnership: A contract between partners
+Financial strength +Specialization & division of labour + Financial privacy +Productivity
- Unlimited liability - Lack of continuity - Slow decision making - Potential disagreement
Company (corporations) = Business owned by shareholders

Private limited: A company that cant raise share capital from the general public
Public limited: A company able to sell its share via stock exchange
+Greater source finance +Limited liability +Continuity +Economies of scale +Tax benefit
-Communication problems - Compliance cost - Data must made public - Bureaucracy -Loss
of control
For-profit social enterprises AO3
Social enterprises = Revenue-generating businesses with social objectives
Cooperatives = Owned and run by their members (Consumer, worker, producer)

-Incentives to work - Decision-making power motivates - Social benefits - Public support
- Low salaries demotivate - Limited sources of finance - Slow decision making - Less
promotional opportunities as flat structure
Microfinance provider = A type of financial service aimed at those that are generally
excluded from traditional sources of finance
+Accessibility +Job creation +Social wellbeing
-Making money from the poor - Limited finance - Still not for everyone
Public-private partnership = When the government works together with the private
sector to jointly provide certain product
Non-profit social enterprises AO3
Non-profit social enterprise = Business run in a commercial-like manner but profit is not
the main goal, instead, they use their surplus revenue to achieve social goals
Non-Governmental organization = Non-profit social enterprise that operates in the

private sector
Charities = A non-profit social enterprise that provides voluntary support for good cause
+Social benefits + Text exemption +Text incentives for donors + Limited liability +Public
trust
-Bureaucracy - Demotivates - Charity fraud - Inefficiencies - Limited sources of finance

1.3 Organizational Objectives
An organizations Vision Statement:
Outlines where an organization wants to be in the distant future.
Describes what the future will look like for key stakeholders of the
organization (employees, customers, community).
An organizations Mission Statement:

Explains why an organization exists (current business activities)
Can be understood by all
Explains the organizations core values
Does not have a specific time frame and is qualitative rather than quantitative
Is however, clearly defined and realistically achievable
Provides a sense of direction, guides decision-making and unifies all people within
the organization in order to work towards a common goal.
Limited enough to exclude certain ventures and distinguishes it from other
organizations
Phrased in a way to motivate employees and spark interest in people outside the
organization.
Vision Statement vs. Mission Statement
What do we want to become? Why are we here?

Very long term Medium to long term
Rarely updated Updated more often
Imagines what could be possible Indicates targets
Outlines the beliefs and guiding
principles about how operations will
be run
Not all organizations have both Vision and Mission Statements.
Benefits Limitations
Guides decision-making Perceived as PR stunt (true mission
Motivates employees of all organizations is to make profit)
Communicates the organizations Can be time consuming to find
values to stakeholders something that applies to the entire
organization

Relationship between Aims, Objectives, Strategies and Tactics (AO3):
Vision
Mission
Strategy
Tactics
Objectives Aims
Aims and Objectives:

Measure and control an organizations plans by setting boundaries for business
activity. Are used to evaluate whether the organization has been successful.
Motivate workforce to work towards a common goal.
Encourage managers to think strategically and plan for the future.
Foundation for decision-making by providing a clear sense of purpose for employees
and departments.
Aims Objectives
What the business wants to achieve Specific goals necessary to meet
Doesnt have to be time-specific aims
Vague, abstract goal Time-specific (by 2015, per year,
Set by senior management (CEO, etc.)
Board of Directors, etc.) Specific and measurable
Set by managers and subordinates
(Project / Department Managers,
employees)

Objectives are either Strategic (long term goals) or Tactical (short term (< 12 months)
goals):
Strategic objectives (organizational objectives) will take an organization further and

require greater resources (growth, profit, market position, image) than tactical objectives,
which are used to guide day-to-day operations (market share, staff turnover, sales, cost
reduction).
Strategy occurs at different levels:
Operational Strategies: day-to-day methods to achieve tactical objectives

Generic Strategies: give the entire business ways to gain competitive advantage
Corporate Strategies: used to achieve strategic objectives (long term goals)
Objectives are not static and they are not the same for each organization. They can change
due to internal and external factors:
Internal Factors External Factors
Corporate culture that encourages State of the economy

innovation Government restraints
Change in legal structure (public (environmental laws, anti-monopoly
limited company becomes more laws, etc.)
concerned with short term profit) Pressure groups (Occupy Wall Street)
Private vs Public sector New technologies (e-commerce,
Age of business (survival vs growth) product innovations)
Finance (cannot grow without funds)
Risk Profile of managers
Crisis Management may require
change
Ethical Objectives: A mid to long term goal set by a business and that is good for society
(reducing pollution, paying decent wages, safe working conditions, recycling, fair trade, etc.)
Ethics (social responsibility): the moral principles that guide decision-making and strategy.
What is moral depends on how society views it. Because societys views change over time,
what is considered ethical or socially responsible will also change.
Examples of how ethics change over time:

Worker conditions at home and in LEDC
(Triangle Factory Fire, Bangladesh fire)
Marketing cigarettes and alcohol (neutral packaging, advertising ban)

Advertising aimed at children (cereal ads during cartoons)
Dumping industrial waste (Love Canal)
Bribery and corruption (can differ by country)
Encouraging childhood obesity (Happy Meal, McDo salads and fruit)
Seatbelts, DUI
Pressure to act ethically comes from inside (internal) an organization (employees,

shareholders) and from outside (external) an organization (customers, government
legislation, competition)
Unethical Illegal:
Merrill Lynch CEO spending >$1M to redecorate his office and giving out $3B in
bonuses after taking a government bailout of $25B.
Not having a recycling program
Refusing to take responsibility for using exploitative subcontractors
Using less nutritional ingredients in low-priced food

Corporate Social Responsibility (CSR): the obligations a business sets for itself to act
ethically towards their stakeholders (employees, customers, shareholders, local community,
government). There are 3 ways to view CSR:
1. Self-interest: Government, not businesses are responsible for taking care of society.
2. Altruistic: Businesses do what they can because it is right and dont care about the
impact on profits.
3. Strategic: Business will adapt CSR policies if they help them become more
profitable. Use CSR as a method of long term growth
Ethical Code of Practice: Established by top management to let all stakeholders know
what is acceptable and unacceptable behavior. Provides a framework for consistency and
uniformity amongst a variety of cultures. Needed because people have different moral
principles based on:
Integrity
Sympathy
Empathy
Loyalty
Guilt
Justice
Advantages and Disadvantages to Ethical Behavior
Advantages Disadvantages

Improved corporate image (bad Compliance costs are high (organic >
publicity when unethical) OGM, proper disposal of industrial
Increases consumer loyalty waste)
Cuts certain costs (legal fees, waste, Lowers profits in the short term (if
training) selling price cannot be increased)
Improves staff morale and Stakeholder conflict (profit vs higher
motivation (increases productivity wages)
and employee loyalty) Ethics and CSR are subjective and
change with country and over time
Because attitudes towards CSR change over time and from country to country, periodic
review of CSR policies are necessary
A businesss decision to act in a CSR way depends on:

Stakeholder involvement
Corporate Culture
Societal expectations
Media exposure
Experience (once burned, twice shy)
Compliance costs
Laws, regulations and fines Chapter 2 Human resources

SWOT Analysis: A decision-making tool that is simple and useful.
Looks at Internal Factors (Strengths and Weaknesses) and External Factors
(Opportunities and Threats) that affect the current and future situation of a product,
brand, business, situation, proposal or decision
Audits an organization and its environment
First stage of planning and helps managers focus on key issues
Internal External
+++ S O
---- W T
Aim of performing a SWOT Analysis is to:
Improve upon weaknesses

Exploit strengths
Take advantage of opportunities
Diminish impact of threats
!
Outcome should be an increase in value for customers and improve the organizations
competitive advantage
Generic SWOT factors: These will differ from one organization to another
Strengths:
Specialist market experience
New innovative product or service
Location of business
Quality processes and procedures
Any aspect of organization that adds value
Weaknesses:
Lack of market experience
Undifferentiated products or services
Location
Poor quality goods or services
Damaged reputation

Opportunities:
A developing market (internet)
Mergers, Joint Ventures, Strategic Alliances
New International market, new market segment
Market segment vacated by ineffective competitor
Economy
Legislation
Any relevant factor from a STEEPLE Analysis
Threats:
New competitor
Price wars
Competitive innovation
Competitors have access to superior distribution channels
Taxation
Economy
Legislation
Any relevant factor from a STEEPLE Analysis
For Exams, you may present SWOT as clearly labelled bullet points, but only if the phrases
are clear and unambiguous.
Advantages and Disadvantages to SWOT Analysis
Simple and quick to do Too simplistic to demand detailed
Has a wide range of applications analysis
(decision, product, brand, business, Quickly out-dated - static model
proposal, situation) when the environment is constantly
Helps set strategy changing
Encourages foresight and proactive Limited use if managers are not
steps objective about weaknesses
Reduces the risk of decision-making Needs to be used in conjunction with
through objective and logical thought other strategic tools
processes

1.4 Stakeholders
Stakeholder = Any person or organization with a direct interest in, and is affected by, the
activities and performance of a business.
Internal Stakeholders = Members of the organization: employees, managers,

directors, shareholders
External Stakeholders = Are not a part of the business, but have a direct interest or
involvement in the organization
(customers, suppliers, competitors, government, pressure groups local community,
labour unions, NGOs, etc.)
In a nutshell, just because everyone has a stake in a business, doesnt mean they all want the
same thing from the business. This can lead to conflict. At the same time, just because
various stakeholders are so different doesnt mean that the benefits they gain from a
businesss actions are mutually exclusive. A managers role is to manage stakeholder conflict.
Stakeholder Mapping (Useful business tool)
Level of Interest
Low High
Minimum
Low Keep Informed
Level of Effort
Power Maximum
High Keep Satisfied
Effort
Look for the win-win situation
NB: not all stakeholders will fall in the same quadrant for every issue confronting an
organization
How managers deal with conflict will depend on their leadership style, the organizational
culture and the organizational objectives of the business.
The Triple Bottom Line (3 Ps People, Planet, Profit)

1.5 External Environment
Social Technological Economic Environmental Political Legal
Ethical
Formerly known as PEST Analysis:

Political (included Legal)
Economic
Social (included Ethical and Environmental)
Technological
STEEPLE Analysis categorizes external factors from the business environment. These factors
can represent opportunities and threats to an organization and can be transposed onto a
SWOT Analysis. For this reason, a SWOT is always preformed after a PEST Analysis.
Generic Examples of STEEPLE: (an opportunity to one organization may be a threat to

another)
Social: Demographics, Population growth, Level of Education, Attitudes towards women,

welfare, healthcare, Language , Culture
Technological progress: Advances in Technology, Innovative work processes, Access to new

technologies
Economical: Inflation, Unemployment, Business Cycle, International Trade, Economic

growth, Consumer / Business Confidence Levels, Competitors
Environmental: Attitudes towards recycling, pollution, global warming, Weather, Natural

disasters, Epidemics
Political: Taxation (fiscal policy), Interest rates (monetary policy), Transfer of capital and
labor, Stability of political system
Legal: Legislation (current and pending) concerning workers, consumers, social and
environmental protection, Industry laws regarding competition, licensing, etc.
Ethical:
Attitudes towards CSR, what is considered moral and ethical

STEEPLE is a business tool that aids in decision-making:
Keeps a business focused on CHANGE in the external environment,
Helps business better prepare for dealing with different CULTURES
Helps weigh costs and benefits of a STRATEGIC decision

Identifies threats and opportunities to GLOBALIZATION

1.6 Growth And Evolution
Economies of scale = a lower average cost of production resulting from an increase in the
size of the business
Internal Economies of Scale:

Purchasing: buying in bulk
Managerial: having managers who specialize in one are of the business
Specialization: refers to division of labour of the workforce (not management)
Financial: the bigger you become the more likely banks will lend to you and attract
you with low interest rates
Technical: results from being able to buy mass production machinery which has a
lower Average Cost of Production, if you can produce and sell mass amounts.
Marketing: being able to use the same ad campaign for multiple markets
Risk-bearing: being able to spread risk across different markets (ex: conglomerates)
External Economies of Scale: cost-reductions that benefit the business but come from
outside of the business (available to large and small businesses)
Technological progress (like the internet)
Improved transportation networks
Abundance of skilled labor
Regional Specialization (also know as Clusters)
Internal Diseconomies of Scale:

Lack of control & poor communication
Poorer working relationships
Workers become bored with specialized tasks
Increased bureaucracy makes decision-making slower
Complacency (thinking you dont need to change because you are already on top)
External Diseconomies of Scale:

Increased real estate prices (look at what has happened to Silicon Valley, San Francisco
real-estate prices since the success of new technology firms)
Higher wages and financial rewards may be needed to attract and keep the best
employees
Traffic congestion leads to workers arriving late, late deliveries which decrease
productivity and increase Average Cost of Production (AC)

The Merits of Small versus Large Organizations (AO3)
Market share, Total Revenue, Number of Employees, Profit, Capital Employed

Disadvantages to being SMALL:
Factor Disadvantage
Low Brand If you are small, few people know your brand and new customers tend
Recognition to buy from names they recognize
Low Brand If you are small, you probably have not been around long enough to
Reputation build a reputation as a business that can be trusted. Other businesses
may hesitate to deal with you
No Value-Added The fewer employees you have the less possibility you have of
Services expanding your hours of operation because of legal work week
restrictions
Higher Price Because you cannot benefit from most economies of scale, consumer
price needs to be high to cover all costs and generate profit
Less Choice Customers are given less choice and business is stuck with few
products if the market goes cold
Low Customer Because of all of the above, customers will be more likely to switch to
Loyalty competitors

Disadvantages to being BIG:
Factor Disadvantage
Costs Difficult to Control Growth requires additional investment,
becoming bigger = less direct oversight of
costs
Financial Risk Because the investment is so much greater in
bi businesses, the potential loss is also
greater
Government Aid Big businesses rarely get grants and
subsidies
Unlikely to Get Monopoly Power Big businesses are closely monitored to
make sure they dont risk turning into
monopolies
Impersonal Service Difficult for big firms to know the customers
Inflexible The bigger the firm, the more bureaucracy
Missed Opportunities Large businesses are not very interested in
small markets with a relatively low return on
investment, but small markets can turn into
big ones and the big firm will not have First-
Mover-Advantage
Communication and Decision-making Decision-making is slower because of more
levels of hierarchy and communication is
more difficult

The difference between Internal and External Growth (AO2)
Internal Growth: Also known as organic growth, is when a business uses its own resources to
increase its scale of operations and revenue. Internal growth is financed by retained profits,
borrowing and issuing new shares.
Internal Growth can occur due to:
Change in price:
a price increase in a market with few competitors will increase revenue
a price decrease in a highly competitive market will increase revenue
Promotions (advertising, temporary promotional activity, favorable credit terms)

Launching new and improved products
Increasing the distribution network (the number of places selling the product)
Capital Expenditure (buying more efficient and productive equipment
Training and development of employees
External Growth: also known as inorganic growth comes from using resources outside of the
organization.
External Growth can occur through:
Mergers and Acquisitions (M&A): when two businesses become one through mutual
agreement (merger) or when one buys the other (takeover / acquisition). Takeovers
can be hostile or friendly.
Chain of Production and Types of Integration
Mining
!
Steel Producer
!
Jaguar Mercedes Dacia
!
Car Dealership Insurance Firm
!
Consumer

Horizontal Integration: Jaguar buys / mergers with Mercedes
Vertical Integration: Jaguar buys / merges with Car Dealership, Steel Producer or Mining
Lateral Integration: Jaguar buys / merges with Dacia
Conglomerate M&A: Jaguar buys / merges with Insurance Firm
Joint Ventures: when two or more businesses set up a separate legal entity to run a
business project. Example: Sony / Ericsson Sony / Ericsson / SonyEricsson
Strategic Alliances: when two or more businesses cooperate on a business venture

without forming a separate legal entity. Example: SkyTeam all of the airlines
operating as part of the SkyTeam operate independently but they cooperate when
checking in passengers, sharing flights.
Franchising: when a business (franchisor) allows another business (franchisee) to use its
name, logo, brands, trademarks and operating procedures in exchange for a licensing fee and
royalty payment. Examples: most fast-food restaurants
Reasons for the Growth of Multinational Companies (MNCs) AO3
Multinational Company (MNC): a firm that operates in two or more countries
Reasons to become a MNC:
Increase the customer base difficult to meet the needs of diverse customers
Lower production costs leads to redundancies at home, accusations of unfair trade

practices in host country
Make the most of host country advantages (tax incentives, infrastructure, labour pool)
creates dissatisfaction with home government that sees its tax base lowered
Avoid protectionist policies (tariffs tax on imports, quotas import quantity limits, restrictive
trade practices that dont apply to domestic firms) makes host country competitors jealous
Spread risks it is rare that all world economies are at the same phase of the business cycle at
the same time costly in terms of time and resources
The Impact of MNCs on Host Countries (AO3)

MNCs create jobs MNCs can increase unemployment if

they lead to host-country firm
MNCs boost GDP closures
MNCs bring new skills and Profits are repatriated to home

technology country
to host countries
MNCs have little incentive to stay
MNCs give host firms incentive to once cost advantages no longer exist
work harder
Bad publicity when large MNCs are
seen as being more powerful than
host country
Domestic firms may become open to

takeover bids from MNCs

Chapter 2 Human resources

2.1Functions And Evolution Of Human
Resource Management
Human resource management = Using and developing people within a business to meet
its organizational objectives
Workforce panning
Recruitment
Training
Appraisal
Remuneration
Disciplinary procedures
Welfare of employees
Increase productivity, quality, come up with new ideas, better customer services
Human resource panning AO1
Human resource panning = Anticipating and meeting current and future staff needs
Short-term: Existing and upcoming demands
Long-term: Foreseeable future demands
By looking at:
Historical trends
Sales & income levels
Labour turnover rates
Staff workload and flexibility
Demographic changes
Labour turnover AO2

Labour turnover = The percentage of the workforce that leaves the organization in a given
time period
Labour turnover = Number of staff leaving / Total number of staff * 100%
People leave because: Challenge, Location, Advancement, Money, Pride, (job) Security
Acceptable high: Low wages & unskilled workers
Low: Right people for the work and they are motivated
High: Incompetent workers or lack of job satisfaction High cost
Staff retention: staffs who stayed
External & internal factors
Demographic = The characteristics and trends of population
Include: Net birth rate, Net migration rate, Retirement age, Women
Aging population More dependent population, Less labour mobility, Changes in

consumption / Employment patterns
Labour mobility = The flexibility of changing ones job and location
High= Higher supply of labour

Geographical: - Family & friends - Relocation costs - Fear of unknown - Cost of living
- Language & culture
Occupational:
New communicational technologies: Recruitment, Meeting, Appraisal, Flexibility,

Online training

Steps of recruitment AO2
1. Job analysis, to determine the firms need

2. Produce job description and person specification
3. Advertise
4. Check applications
5. Interview
6. Aptitude testing
7. Check references
8. Send offer
9. Sign the contract
10. Induction of new recruit
Internal recruitment = hiring people already work in the business

+ Lower cost +Less time + Less risk + Motivational
- Fewer applicants - Old ideas +Time-consuming + Internal politics
External recruitment = The process of hiring people from outside of the business
Through newspaper, trade publication, internet, employment agencies
Types of training AO2
Training = The process of providing opportunities for workers to acquire employment-

related skills and knowledge
To: Enhance the efficiency, Improve the quality of work, Career & personal development
Types of appraisal AO2

Steps of dismissal AO1
Affects of work patterns AO2
Strategies AO3

2.2 Organizational Structure
Accountability - Whos responsible for what job
Responsibility - Whos in charge of whom
Terminologies - AO1s
Delegation = The passing on of control and authority to others
passes Accountability holds Responsibility
+ Manager saves time + Motivates employees
Span of control = The number of people who are directly accountable to a manager
Wide span of control: + Fewer layers + Control cost + communication between levels
Narrow span of control + communication within team + Productivity +Team spirit
Degree of control: MOST

- Manager
- Organizational culture
- Subordinates
- Task
Levels of hierarchy = Organizational structure based on a ranking system
+Clear lines of communication + Sense of belonging
- Isolation - Inflexible
Chain of command = Formal line of authority with orders are passed down
Delayering = Remove levels of hierarchy
+Reduce costs + Faster communication +Delegation and empowerment

- Anxiety and insecurity - Overload staff - Longer decision making
Bureaucracy = Official administrative and formal rules

(Paperwork, too many committees, long chain of command, duplicate and overlapping roles)
Is governed by :
Continuity
Rules and regulations
Hierarchical structures
Accountability
- Prevent creativity and risk-taking - Inflexible - Slow decision-making
Centralized structure = Decision made by small groups (Senior management team)
+Fast decision-making +Better control +Better sense of direction +Efficiency
- Pressure to senior staff - Inflexibility - Delay in decision-making - Demotivating
Decentralized structure = Decision-making authority and responsibility is shared

+Opinions of employees +Fast decision-making + Improve morale +Teamwor
+accountability
-Costly - Inefficiencies - More mistakes - Loss control - Communication issues
Depends on:
The site of the organization
The scale of importance
The level of risk
The organizational culture

Types of organizational chart -AO2, AO4
Tall structure = Narrow spans of control
+Quick communication + Easy to manage + Specialization + Chances of promotion
Flat structure = Wide spans of control
+Delegation +Communication between different layers +Cheaper + Close between layers
Organization by product
Organization by functions
Organization by region
Project-based organization = Human resources based on a particular projects, temporary

(Construction, software engineering, entertainment, aerospace, oil exploration)
+Flexibility +Productivity +Efficiency +Motivational
- Discontinuity - Isolation - Inefficiencies - Conflicting interest and priorities
Uses the matrix structure
Shamrock organization = by Charles Handy
- Core staff +Well motivated +highly productive - Must well paid and remunerate
- Peripheral workers + Flexible - Decreases morale
- Out sourced workers +Experts - Expensive

Communication = The transfer of information from one party to another
(Instruct, clarify, interpret, notify, warn, receive feedback, review, inform)
Electronic mail
+Fast +Accessible everywhere - High set-up cost - Unsecure - System breakdown
Mobile devices
Video-conferencing
+Cut travel cost +Quicker +Recording - Time differences
The best structure depends on:
The size - Larger firms require more formal structures.

Employee competencies - Organizations with highly skilled workers can adopt relatively
flat, informal or project-based structures, whereas those with unskilled workers require a more
formal and rigorous structure.
Management attitudes - Managers who are able to trust their staff and are willing to
relinquish decision-making power are more likely to implement flatter and flexible work
structures.
The culture - Innovative firms that are accustomed to change, for example, might opt for
more flexible, project-based structures.

2.3 Leadership And Management
Functions of management
Planning
Commending
Controlling
Coordinating
Organizing
Leadership styles
- Decisions
Autocratic = 1 person holds all
+Quick decision making +During crises +Unskilled workers
- Top-down - Demotivate - High labour turnover
Paternalistic = Fatherly, protect employee
Lead to : - Leads by guidance and control ( less capable worker)
+ Nurtures and develops (highly capable worker)
Works in - India, Japan (leaders are out of gratitude)

Doesnt work when - No dictates on the interest of themselves.
Democratic = Consider workers in decision-making
+ Better morale + Job satisfaction +Improve decisions
- Delay decision-making - Not for large workforce

Laissez- faire = Subordinates make their own decision
Businesses where creativity is the key (Computer software, advertising agencies)
+High motivation +Satisfied workers
- Slow decision-making - Relies on teamwork and employees good will
Situational leadership = The right style for the right situation
CLOTS
- Culture
- Leader
- Organizational structure
- Task
- Subordinates
Depends on : The manager, The employees, time frame, task, degree of importance

2.4 Motivation
Motivation = The desire, effort and passion to achieve something
+Higher morale & job satisfaction +Better industrial relation +Lower absenteeism +Lower
staff turnover +Corporate image + Higher profitability
The motivation theories - AO3
Taylor (Principles of scientific management) = Employees are motivate by money (Model T

cars , McDonalds) For : Physical outputs
(India, Vietnam, Indonesia)
Division of labour Specialization Efficiency

Differentiated piecework: Paid more if they exceed a standard level
- Ignores non-physical/financial /human factors Job dissatisfaction
Maslow (Hierarchy) = Must satisfied the basic needs to move to the next level
1. Physiological (basic) needs : Survive

2. Security (safety) needs: safe &stable
3. Social (love and belonging) needs: Desire to be accepted
4. Esteem (ego) needs: Recognition & self-respect
5. Self-Actualization: Be the best they can

- Hard to measure - People are different - No explanation after self-actualization

Herzberg (Hygiene factors & Motivators) = satisfaction & dissatisfaction
Hygiene (maintenance) factors: Do not motivate, keep to prevent dissatisfaction (Basic needs)
Organizational policies, Relationship, Payment, Status, Job security, Physical security,

Supervision, Working condition
Motivators factors: psychological growth increase satisfaction& performance

Job enlargement: Interesting task, work itself
Job enrichment: Achievement, advancement personal growth
Job empowerment: Chances of promotion, recognition, responsibility
+Individuals are unique - Does not apply to low-skilled jobs
Adams (Equity theory) = Efforts should be proportional to rewards
Equity norms
Social comparison
Cognitive distortion workers demotivated
Balanced ratio Job satisfaction, greater productivity, relationship at work
Unbalanced ratio Absenteeism, reassignment

- Faireness is subjective
Pink (Derive theory) = Extrinsic factors no longer works

Autonomy: Self-sufficient to direct our own lives
(Choose what to do, when to do it how they do it with whom)
Mastery: Self-improvement to learn and create new things
Purpose: Self-esteem and drive to do better by ourselves
Type X (Extrinsic) < Type I (intrinsic)

Baseline still needs to be meet

The financial rewards - AO2
Salary = Annually fixed amount paid on a monthly basis

When output or productivity is hard to measure
+Improve cash flow + Safer than cash
- Difficult to reward the productive ones - Less incentive to work longer&harder
Wages = Reward for labour services, by hours our quantity
+Simple - Not rewarded for their effort but time
Commission = A percentage of shales

When financial rewards motivate people to sell
- No job security - Monotonous
Profit-Related pay = linking pay to the level of profits

(Annual bonus)
+Loyalty & team spirit +Increase efficiency limit conflict +Working together
- Little amount - Everyone gets the same
Performance-related pay = Reward employees who meet certain goals

Pay raise, Performance bonus, Gratuity
+Incentives to work better +Fair
- Unachievable - Pressure - Not for all profession - Discourage teamwork
Employee share ownership schemes = Give employees shares in the company or sell at
a discount
+Employees have more direct interest
Fringe payment (perks) = Other benefits except wage or salary

(Health insurance, housing allowance, gym membership, paid holiday)
+Loyalty - High cost
The non-financial rewards - AO2
Job enrichment (vertical loading) = More challenging jobs with more responsibility
Autonomy, Authority, Psychological growth, Sense of achievement
- Training cost - Employee workload low productivity
Job rotation = Job enlargement involves worker with the same level
Provide variety avoid boredom, ease to cover for the absent

- Training cost - Employee workload
Job enlargement (horizontal loading) = Broadening the number of tasks with the same
nature
To avoid boredom and demotivation
- More workload with the same pay
Empowerment = Develop potential workers by giving them authority
Autonomy, sense of pride

Through: Delegation, Worker participation, Continuous professional development
Purpose = The opportunity to make a difference
Teamwork = Work with others
+Social needs + Belonging + Reduce absenteeism, labour turn over, increase productivity
+ Flexibility & multiskilling productivity

2.5 Organizational Culture H L
Organizational culture AO1 = The norm within an organization based on the believe,
value of the manager and the employees
Elements of organizational culture AO2
NORMS
Nature of the business
Organizational structure
Rewards
Management styles
Sanctions
Cultural intelligence /cultural quotient = The ability of blending into an organization
Strong organizational culture United staff
+Sense of belonging +Cohesiveness + Reduce misunderstanding + Minimize culture gap
Types of organizational culture AO2

Edgar H.Schein
Artefacts = The superficial and behavioral aspect of an organization (Dress code, how
people interact)
Espoused value = The values the staffs supposed to committed to (Mission, slogans)
Shared basic assumptions = The unseen, demonstrated through behavior

Charles Handy
Power cultures = Centralized power

Rule cultures = Highly structured organization
Task cultures = Getting result from the work done
Person cultures = People are the only thing thats important
Deal and Kennedy
Tough-guy macho = Stressful, high risk

(Police force, stock exchange, surgeries)
Work-hard, play-hard = Stressful, pace
of work. (Restaurants, hotels)
Bet-the-company = Stressful, high risk
and uncertainties (Oil exploration,
pharmaceutical industries)
Process culture = Bureaucratic, focusing on how things are done rather than focusing on
what should be done (Government, insurance companies)
Kotter and Heskett
Adaptive cultures = Receptive to change (Google)

Inert cultures = Resistant to change
Goffee and Jones
Sociability = The extent which people care about others people
Solidarity = The degree of unity harmony and efficiency

Geert Hofstede (International culture organizational culture )
Power distance
Individualism VS. collectivism
Masculinity VS. femininity
Uncertainty avoidance
Long-term VS. Short-term orientation
Cultural clashes AO3
Cultural clash = Conflict between two or more organizational cultures

Conflict: Disagreement results from difference in the attitudes, beliefs, values or need
Reasons:
Growth
Mergers & acquisition
Change in leadership
Consequences :
Misunderstandings & miscommunication
Unhappy staff
Compromises
Resistance to change
Training cost
National culture clash

Individuals and organization
Leader to influence an organization: MOVER
Mentor
Outreach (Communicating)
Vision
Engaging
Role modelling
Organization impact individuals

2.6 Employer And Employee Relationship
HL
Employee / employer representatives AO2
Trade union (labour union) = Employee representatives protect for their rights and well fare
Protect the interest of its members ( Increase pay, working cognition)
+More power + Quicker & cheaper for the employer
Employer representatives = Represent the management in a collective bargaining

Staff association: Trade union operates only within the organization
Negotiation outcome depends on:

Skill of the negotiators
Number of members
State of the economy
Demand of labour
Degree of substitution
Public & Media
Government involvement
Industrial methods AO3
Employees Employers
Collective bargaining Collective bargaining
Go-slow Threats of redundancies

Work-to-rule Changes of contract
Overtime bans Closure
Strike action Lock-out

Sources of conflict AO2
Conflict = A situation of friction or differ goals between two more parties
Disagreement, incompatibilities resulted from lack of cooperation or misunderstanding

OF Ones needs and wants, perceptions, values, power, feelings and emotions
- Low productivity - Low morale - Unethical behavior
+Face the real problems + Win-win +Better working relationship

Conflict resolution AO3
Conflict resolution = The course of action to resolve conflict

Successful if reach Win-win
Conciliation = Use an external mediator to solve a dispute
Negotiation Compromise Win-win solution
Arbitration = Use and external mediator to save a conflict and decide on an appropriate out
come
Pendulum arbitration
Industrial democracy = Employees has the authority and responsibility of decision-

making.
+Productivity + Less industrial action +high morale
No-strike agreements = Agree to not use strike as industrial action, improve unions image
Single-union agreement = Organization negotiate with a sole labour union

The possible outcomes:
High concern for ones self Compete (win-only outcome)
High concern for others Surrendering (win for the other party)
Low or no concern for the outcome of either party Avoidance
High concern for the outcome of both parties Collaboration
Moderate concern for the outcome of both parties Compromise
Resistance to change AO2
Self-interest
Familiarity
Misinformation
Disagree on the purpose of change
Reduce resistance and impact of change AO3
1. Education and communication

2. Participation and involvement
3. Facilitation and support
4. Negotiation and agreement
5. Manipulation and co-coption
6. Explicit and implicit coercion

Chapiter 3 Finance

3.1 Sources Of Finance

Role of finance AO2
Capital expenditure = The finance spent on fixed assets that has a long term function can
be provide as collateral
(Land, building, equipment, machinery, vehicles)
Revenue expenditure = Payments for the daily running of a business

(Wages, raw materials, rent, electricity)
Internal sources of finance AO2
Personal funds = Main source of finance for sole traders
Retained profit = Purchasing fixed assets / contingency fund + No interest charge
Sale of assets = dormant (unused) assets
External sources of finance AO2
Share capital = Main source of finance for limited liability companies

+ Huge amount of finance - Loss of control
Loan capital = Mid to long term SOF from commercial lenders - Interest charge
(Mortgage, business development loan, debentures)
Overdrafts = Take out more money than it has in its back for a short term
+Flexibility - High interest charge
Trade credit = Buy now pay later, given by creditors

+Improve cash flow
Grants = Governmental financial gifts to support a business activity - Hard to obtain

Subsidies = Same as grants and do benefits to society by reduce their COP
(To farmers, education and health services)
Debt factoring = Raise 80% - 85% funds based on what was owed by the debtor
+Get the money now
Leasing = Save money from mid to long term +Cash flow
Venture capital = High-risk capital invested by venture capital firms in the form of loan or
share
Time limits AO1
Short term = 1 year

1 year < Medium term < 5 years
Long term > 5 years

3.2 Costs And Revenue
Fixed cost = Costs to pay regardless its sales

(Rent, bank interest, ads, market research,
management salaries, security)
Variable costs = Is proportional with the level of

output
Semi-variable costs = Change only when production sales reach a certain level
Direct costs = Costs can be traced back to a specific product
Indirect costs (Overhead) = Those can not be traced back to a specific product
Revenue = Money coming into business
Sales revenue = Price * Quantity sold
Revenue streams = Revenues other than sales revenue
Advertising, transaction fees, franchise, sponsorship, subscription fee, merchandise,

dividends, donations, interest earning, subventions

3.3 Break-Even Analysis

3.4 Final Accounts
ABC Ltd
Profit and loss account for ABC Ltd for the year ended 31 May
20**
$m
Sales revenue 700
Cost of goods sold 350

Gross profit 350
Expenses 200
____
Net profit before interest and tax 150
Interest 10
Net profit before tax 140
Tax 25
_____
Net profit after interest and tax 115
Dividends 35
_____
Retained profit 80

Depreciation = The fall in value of a fixed asset
Wear and tear

Obsolescence
To : Value the business more accurately, asses the value of fixed assets, plan for replacement
The straight line method
Annual depreciation = Purchase cost - residual value / Lifespan

Residual value: Value of the fixed value at the end of its life spam
Reducing balance method
Net book value = Historical cost - Accumulated depreciation
(more realistic)

3.5 Profitability And Ration Analysis
Ratio analysis = Quantitative management tools for assessing a firms financial

performance
To: Exam a firms financial position, performance, help decision making
Through: Historical comparison & Inter-firm comparison
Profitability and efficiency ratios AO2 AO4

&
Possible strategies to improve AO3
Profitability ratios = How well a firm has performed in financial terms
Gross profit margin = Gross profit / Sales revenue * 100%
Net profit margin = Net profit / Sales revenue * 100%
Efficiency ratios = How well a firms resources have been used
Return on capital employed = Net profit before interest and tax / Capital
employed *100%
Capital employed = loan capital + share capital + retained profit
Benchmark : 20%
Improve by: Raising revenue(Change price, marketing strategies, other revenue

streams / reducing direct cost( Cut direct material / labour cost)
For NPM can also reduce expenses

Liquidity ratios AO2 AO4
&
Possible strategies to improve AO3
Liquidity ratios = The ability to pay its shout term liabilities
Current ratio = Current assets / Current liabilities

Benchmark: 1.5 - 2.0
Too low Cash flow problem, Too high Not making use of its available finance
/ too much stock
Improve by: Current assets , Current liabilities
Acid-test ratio = (Current assets - Stock) / Current liabilities

Benchmark: > 1:1

Uses: Likelihood of getting raise, bonuses. for lenders to asses, shareholders to exam
Limitation: History doesnt represent the future, theres external changes, different from one
business to another

3.6 Efficiency Ratio H L
Efficiency ratio = How well a firms resources have been used
Stock turnover ratio = The speed at which a firm sells its stock
Times = Cost of goods sold / Average stock
Days = (Average stock / Cost of goods sold) * 365

To improve: Reduce the stock level ( Replenish the inventories regularly, get rid of the
unpopular product)
Debtor days = The number of days a business need to collect money from debtors
= (Debtors / Sales revenue) * 365
Low + Improve cash flow - Uncompetitive creditor
Benchmark: 30-60 Days

To improve: Late surcharges, incentives to pay earlier, refuse contact with late clients,
legal action
Creditor days = The number of days it takes for a business to pay its creditors
= (Creditors / COGS) * 365
Benchmark: 30-60 Days
High + Improve cash flow - May get penalty

To improve: improve efficiency ratios, closer customer supplier relationship, Just-in
time, credit control.
Gearing ratio = Asses firms longterm liquidity position

= (Long-term liabilities / Capital employed) * 100%
Highly geared: Gearing ratio > 50%
- Too exposed to the changing interest rate - Unattractive to other lenders
Depends on: Size, interest rate, profitability

3.7 Cash Flow
Profit vs. cash flow AO2
Cash = Money received from sales, a current asset pay for daily costs, if no bankrupt
Profit = Revenue - costs ( Sales beyond the break even point)
The working capital cycle AO2
Working capital = Cash available for the daily running of a business

= Current asset - current liabilities
Liquidity: how easily an asset can be turned into cash
Lack in rowing capital Insolvency ( Current liabilities > working capital) Force to sell
Working capital cycle = The time between cash payment to the creditor and cash received
from debtors
Cash flow forecasts AO2 AO4
Cash flow problems: Overtrading, over borrowing, overstocking, poor credit control,
unforeseen changes

Investment, profit and cash flow AO2
Investment requires cash

Poor cash flow can lead to missed investment opportunities
Strategies AO3
Reduce cash out flows: Seek for better credit terms. alternative suppliers, better stock
control, reduce expenses, leasing
Improve cash inflows : Credit control, cash payment only, change price, improve product
portfolio
Alternative sources of finance : Overdrafts, Sell assets, debt factoring, government help
Limitations: predictions are not always accurate

3.8 Investment Appraisal
Investment = The purchase of an asset hope getting financial benefit in the future
Investment appraisal = The quantitative techniques to calculate the financial coasts &
benefit of an investment
Payback period = The time needed for an investment to cover its initial cost
= Initial investment cost / Contribution per month
+ Quick and simple + Assess liquidity position + Assess the payback +Compare to
choose best
- Inaccurate - Time rather than profit - Encourage short-termism
- Dont apply for all - Errors
Average rate of return = Average profit

= (Total profit during profits lifespan / number of years of
profit) / initial investment
+ easy to compare - Ignores the time - Might have errors
Net present value HL = Sum of present values each year - Cost of investment
Present value = Future receiving * discount factor

Discounting = The opposite of calculating compound interest

Worth pursuing if positive

3.9 Budgets H L
The importance of budgets AO2
Budget = A financial pan of expected revenue and expenditure of an organization
Planning and guidance (How much to spend? Contingency funds?)

Coordination
Control
Motivational ( Herzberg, job empowerment)
Improve efficiency
Setting budgets
The available finance
Historical data
Organizational objectives
Benchmarking
Limitations (Unforeseen changes, overestimate lead to wast and complacency, unrealistic,

not for seasonal businesses, time consuming, ignores qualitative factors, inflexible)
Cost & profit centre AO1

Role of profit and cost centers AO2
Variance AO2 AO4
Variance = Actual outcome - Budgeted outcome

Chapter 4 Marketing

4.1 The Role Of Marketing
Marketing = Making customers want to buy a product by meeting their needs and want
=The management process involved in identifying, anticipating and satisfying
consumer requirement profitably
The right product of the correct price distribute in the correct place using effective
promotion
Its relationship with other functions:

Operation: Prepare production schedules, R&D
Finance: Set budget
Human resource: Identify staff needs
Marketing goods and service AO2
Intangibility
Inseparability (Consumed as purchase)
Heterogeneity (Different every times)
Perishability ( Can not be stored)
Product/Price/Promotional/Place strategy
Orientations AO2
Market orientation = Outward looking businesses that focus on making product that can
sell
Meet customers needs and wants Market research
Greater flexibility +Lower risks

- Market researches are expensive - No guarantee
Product orientation = Inward looking businesses that focus on selling product they can
make ( High-tech)
+High quality - Ignores market needs High risk
Depends on: The market, organizational culture, barriers to entry

Marketing AO2
Commercial marketing = Use marketing strategies to meet customers needs and wants in
a profitable way without considering the ethics
Purpose: Sell products for a profit
Benefits: Satisfy individual needs and wants to generate profit
Users: Mainly private sector businesses
Social marketing = Bring social changes using the concepts from commercial marketing
+Enhance corporate image
Purpose: Influence social change
Benefits: Satisfies the needs and desires of the general public to make social benefits
Users: Non-profit organizations & Government organizations
The Market AO1
Market = A place or process where customers and suppliers trade

Consumer markets: Markets catered for private individuals
Industrial (Product) markets: Markets catered for organizations
Characteristics of a market:
Market size = Measured by sales revenue
Customer base = Another way to measure the market size
Barriers to entry = How hard is it to enter
Competition = Rivalry
Geographic characteristics = Markets focused on a specific area
Demographic characteristics = Consumers gender, age, ethnicity, religion
Market growth rate = Increase in the size of the market over a period time
Seasonal and cyclical characteristics = Seasonal factors

Market share AO4
Market share = (Firms sales revenue / Industrys sales revenue) * 100%

To increasePromote their brand, innovative product, motivated workforce, property rights,
More channels of distribution
Market leaders = Businesses has the highest market share

+Economies of scale
Market concentration = The degree of competition within a market

Concentration ratio = The total market share of the market leaders
- Present only the history
Marketing objectives AO3
For profit organizations: Non profit organizations:

Increase sales revenue Membership& new donors
Higher market share Generate awareness of its cause
Increase market leadership Brand recognition
Improve product & brand awareness Positive attentions
New products Demonstrate the value
Brand perception
Evolution of marketing strategies AO3
Changing consumer tastes

Shorter product life cycles
Internet and mobile technologies
Competitive rivalry
Globalization

4.2 Marketing Planning
Marketing plan = A document outlines a firms marketing objectives and the marketing
strategies use to achieve those objectives
Marketing audit: A SWOT review of firms current marketing position
Elements of a marketing plan:

1.SMART marketing objective
2. Method of market research
3. Strengths and weaknesses of the competitors
4.The market mix
5.Budget
6. Potential problems and solutions
Market planning = The systematic process of devision marketing objectives and approbate
market strategies to achieve these goals
Marketing audit
Marketing objectives
Marketing strategies
Monitoring and review
Evaluation
+Improve chances of success + Set clearer objectives + Better control of the organization
- Time consuming - Inflexible

The marketing mix AO2
Marketing mix = The combination of various elements needed for a product to success
Product, Price, Promotion, Place
Product = Physical good or intangible service to meet customers need and wants
Producer products: Sold to another businesses for further productions
Consumer products: Sold to the end user can be convenience, consumer durable or
speciality products
Price = The amount customer pays for the product

Depends on: Demand, Rivalry, Aims, Supply, Time, Image, Cost of production
Place = The methods of distribution

Promotion = The strategies used to attract customers
Marketing mix and marketing objectives AO3
Marketing objectives= Target the marketing department want to achieve

+Sense of purposes, direction, motivation +Measurable
It includes: Market share, market leadership, product positioning, consumer satisfaction,
market standing
The strategies:
Market development = Selling existed product in new market
Product development = Selling new product in existing market
Diversification = Selling new product in a new market
Product innovation = Making an original product onto the market
The constrains: Finance, costs of production, size and state of the firm, social issues, time
lags, competitors, state of the economy, political environment

Targeting & market segments AO2 AO4
Market segments = A group of customers with similar needs and wants due to their
similar characteristics
Easy to analyse and target +Understanding of customers +Higher sales +Growth

opportunities +Differentiation
Demographic: Age, gender, race &ethnicity, marriage status, religion, language,

income and socio-economic class
Geographic: Location, climate
Psychographic: Hobbies and interest, values, religion, status, culture
DAMAS: Differential, Actionable, Measurable, Accessible, Substantial

(Business must be able to measure the purchasing power of each segment thats unique and
big enough to generate profit at the same time, and able to provide suitable products in a cost
effective way)
Targeting = Each market segment has its specific market mix

Niche marketing = Targeting a specific market segment
+Better focused +Less compilation Higher charge +Specialized
- Limited customer base - No economies of scale High COP - Attract competitor
Mass marketing = Targeting to maximize its sales revenue

+Economies of scale+ No need to change strategies + Greater customer base
- Not suitable for all - Lack of focus - High competition
Consumer profiles = The demographic and psychographic characteristics of customers

from different markets

Perception map AO2 AO4
Product position (perception) map = a visual tool that shows customers perceptions to a
product in relation to others
+Identifies gaps in its portfolio

+Simple & quick
Positioning:
1. Competitive advantages
2. Decides on the aspects
3. Using appropriate market mix
Strategies: Cost leadership, Differentiation, focus
Unique selling point AO2
Unique selling point = Any aspect of a business that make it different from its competitors
( Why do customers choose it over others)
Such as:
Only one that supplies a certain product
` The first business provides a certain product
The reputation for being the best / cheapest
Popular slogan
Differentiation = Distinguish a business or its product from its competitors

Product - Distinct features, Price - Different pricing strategies, Promotion - Logo,
slogans, branding, Place - , People - Quality of service , Processes - Convenience ,
Physical environment , Packaging
+Price advantage + Brand recognition & loyalty +Distribution advantages
- Expensive - Economies of scale - Too much cause customers confusion

4.3 Sales Forecast H L
Sales forecasting = A quantitative prediction of a firms level of sales in a given time
period
+Identifying problems - Not accurate
Sales forecasting techniques:
Extrapolation = Using past data and extending the trend to

the future, when there is a strong relationship between two sets
of numbers
Market research = Identify the buying habits of consumers

Time series analysis = Predict the sales level based on
seasonal variation, cyclical variation and random variation
Depends on : How accurate the forecasts need to be, how far forecasts need to be, cost of
collecting information, the stage of products life cycle
The statistical techniques:
Mean = The sum of all items / the number of items

Median = The number in the middle when all numbers are sorted in numerical order
Mode = The most frequent number
Range = The difference between the highest and the lowest number
Standard deviation = The difference of a variable form the mean
Moving averages = Identify changes within the trend due to seasonal cyclical and random
variation
Three part moving average :
( m1+ m2 + mc3) / 3
(m2 + m3 + m4) / 3

Four part moving average:
(m1 + m2 + m3 + m4) / 4 = D1
(m2 + m3 + m4 + m5) / 4 = D2
( D1 + D2) / 2 = Centred trend
mn - centred trend = Variation

Benefit of sales forecasting Limitations of sales forecasting
Improved working capital and cash flow Ignores qualitative factors

Improve stock control Inaccuracy
Improve productivity External influences
Get external sources of finance
Improve budgeting

4.4 Market Research
Why and how AO2
Market research = Marketing activities designed to discover the opinions, beliefs and
preferences of customers
Ad hoc research: Focus on one specific marketing problems
Continuous research: Take place on a regular basis
Purposes: Give businesses up-to-date information, Improve marketing strategies, Assesses
customers reaction, Understanding their rivals, Predict the future
+Reduce risk Forecast future market trends
Primary research AO2
Primary research = Gathering new first-hand data

+Relevance +Up today +Confidential & unique
- Time consuming - Costly - Validity
Survey = A document to collect data for s specific purpose by asking questions
` (Self-completed, personal, telephone , online, postal survey)
+ Easy and simple - Time consuming
Should: Avoid bias, easy to understand, close and open-ended question, test before
using, relevant data only
Interviews = One-to-one discussion in order to gather information, beliefs attitude

and feelings can also be considered - Non relevant information - Time consuming
Focus groups = Learn the attitudes and behavior of respondents through small
discussion groups formed by customers with similar consumer profile
- Costly - Not every one takes part
Consumer panels: Using a fix group for focus group discussions (specialists)
Observation = Watching how people behave in different situations +Records actual

behavior - Does not answer why

Secondary research AO2
Secondary research = Collect data thats already exits

+Cheaper & faster + Insight to change + Huge database +Based on large samples
- Might be out dated - Not specific - Partial information - Available to all
Market analyses = The characteristics and trends for a product

Through: Market research firms, competitors, trade publications
Academic journals = Periodical publications from educational and research

institutions
Government publications = Population census, social trends, labour market

development, trade statistics, unemployment, inflations
Media articles = Newspapers, business journals, TV documentaries , books, the

world wide web
The internet
Ethical considerations AO3
Unethical market research :
Damage = Secure the information

Deceitful = Interpret the information correctly
Deceptive = Not using misleading methods
Disclosure = Confidential
Detachment = No biases

Qualitative VS. quantitative AO2
Qualitative market research = Non-numerical answer, seek for the behavior attitude and
perception (Focus groups & in-depth interviews)
+Explores why + Rich information + Less expensive - More honest
- Small sample - Time consuming - Training cost - Bias
Quantitative market research = Factual and measurable informations ( Surveys)
Methods of sampling AO2
Population = All potential customers of a market

Sampling = Selecting a small group that represents the population for primary research
Quota sampling = Certain numbers of people selected from different market

segment
+ Representative - How random?
Random sampling = Randomly selected from the whole population
+Easy to obtain minimize basis - Might select non-target people

Stratified sampling = Like quota sampling, but choose people form each segment
proportionally to the portion of the segment (Modle the entire population)
+Representative - Difficult to select strata - Expensive
Cluster sampling = Select several geographic areas (clusters), and interview

random people + Quicker, easier, cheaper - Bias & sampling error
Snowballing = Carried out with individual people then suggest other people
+ Cheap and quick + Large sample - Biased

Convenience sampling = Use the most easy subject as sample
Easy quick - Exclude a large population

Result from data collection AO2
Non-sampling errors = Human error, misrecording, misprocessing, Dishonest answers

Sampling errors = Errors in the sample design: Too small, non representative,
inappropriate method, bias
Data representations:
Frequencies Bar charts
Pie charts Percentage
Time-series Line graphs
Trends over time Histograms
Limitations of data collection:
Garbage-In-Garage-Out = Inaccurate input generates poor quality output
Bias Inaccurate information
Expensive

4.5 The Four Ps - Product
Product = Any good or service that meets the need and wants of customers
Consumer product: Purchased by private individuals
Producer product: Purchased for commercial use
Product life cycle AO4
Product life cycles = The different stages a product will go through from its initial design
until its decline
1.R&D = Designing & testing

Prototype: trial product
Test marketing: Trailing product with
sample customers
+Less risk - Expensive - Un confidential
2. Lunch = First enter to the market

Low sales (Unawared customers) & High cost
Unprofitable Cash flow issues
3. Growth stage = Sales revenue increasing

Wider distribution channels, raising brand awareness, attract rivals
Start gaining profiteconomies of scale, improved cash flow, review the marketing mix
4. Maturity = Sales revenue raising but slower

Big market share, huge competition Saturation
5. Decline stage = Fall in sales and profit

Lower customer demand, change in fashion

Extension strategies AO3
Price reduction, Redesigning, repackaging, New markets, Brand extension , Product

differentiation

PLC and investment, profit and cash flow AO2
Boston Consulting group matrix AO3, AO4
The Boston Consulting Group matrix = Marketing planning too for balancing product
portfolio
Question marks = High growth market with low

markets share
Main user of cash, bad marketing or poor quality
Stars = High growth markets with high market share

Cash generator
Cash cows =Low growth market with high market share
High cash generator Extension strategies
Dogs = Low market share in a low growth market

Dont generate much cash
Rising star: Question mark Stars

Branding AO2 AO3
Branding = A name thats recognizable with a product of a particular business

+Legal instrument + Risk reducer +Image enhancer +Revenue generator
A brand is more important than a product: Intangibility, uniqueness, timeless
Successful branding = Price advantages, Recognition and loyalty, Distribution advantages
Brand awareness = The extent to which people can recognize a particular brand
Brand awareness Sales revenue, More competitive Higher market share
Brand development = The marketing process of improving and enlarging the brand name
in order to boost sales revenue and market share
+Extend products life cycle
Brand loyalty = Opposite from brand switching, When customers buy the same brand of a
product repetitively
+Increase market share + Higher price +Reduces brand switching
+Extend product life cycle
Brand value = The extra amount the customers are willing to pay for a brand thats above
the
+ Higher market share +Higher price + Higher barriers to entry
Packaging AO3
Packaging = Ways the product is presented
It affects: Customers perception of a product, Product differentiation, Protection, Provide

information, Ease the distribution, Impluse buying, Promote
- High cost - Excessive packaging environmental damage

4.5 The Four Ps - Price
Price = The amount paid by customers while purchasing
Affects: Sales revenue & corporate image
Cost-plus pricing = Adding a percentage or a certain amount to the cost per unit as
selling price +Easy to calculate - Ignores customers opinion
Penetration pricing = Set a low price to establish a new product in the industry
( Brand recognition & Market share) Mass market - Inferior customer perception
Price skimming = High price at the beginning then lower the price as increasing
competitions (Innovative products) + Good product image
Psychological pricing = Rounding numbers down
Loss leader = Sell a product below its COGS to attract customers +Brand
switching
Price discrimination = The same product usually service is sold to different

customers at different prices
Three conditions: The business must have market power, customers have different
willingness to pay, can not be resold
Price leadership = Set the price base on the price of the market leader
Predatory pricing = Temporarily reduce the price wanting to force out the rivals

4.5 The Four Ps - Promotion
Promotion = methods of communicating massages to the market with the intention of
selling.
Objectives of promotion : To inform, to persuade, to remain
Aspects of promotion AO2
Above the line promotion = Any form of paid-for promotional method trough
independent mass media sources to promote a business its brands or its products.
+Reaches large audience - Expensive - Might not appeal to audience
TV advertising Global spread +Specific + Vivid - Huge cost
Radio advertising +Cheaper + Larger audience - No visual impact - Less attention
Cinema +Specifically targeted +Difficult to ignore - Limited audience
Newspaper advertising +Cheaper +Larger audience +Can be referred back
+ Specifically targeted +Short selling cycle
Magazines + High quality photo +Specifically targeted - Static
Outdoor advertising +High exposure - Hard to target
Below the line promotion = The use of non-mass media promotional activities, allowing
the business to have direct control
Branding
Slogans: MAID(memorable, advantages, image, desire)
Logos
Packaging
Word-of-mouth promotion +No cost +More effective - Business cant control
Direct marketing +No need to pay intermediaries +100% control
- Producing & distributing cost - Ignored by customers
Direct mail - Ignored by customers - Not specifically targeted
Sales promotion +Boost sales temporarily +Brand switching - Reduce profit
Point of sales (The location people buy the product) promotion
Publicity (Getting media coverage without paying for it)
Sponsorship(A business providing financial funds and resources to support and
event in return for publicity

Promotional mix = A set of tools that a business can use to communicate effectively the
benefits of its product to its customers
AIDA: Attention, Interest, Desire, Action
When devising a promotional mix, marketers should consider:

Cost, Product, Product life cycle, Legislation
1. Advertising = Shape and develop awareness, perception, knowledge and attitudes
2. Personal selling = Thee promotional techniques that rely on sales representatives

directly helping customers to buy
3. Public relations = Business actives aimed at establishing and protecting the

desired image of an organization
4. Sales promotion = Provide short-term incentives designed to stimulate demand

for a product

The impact of technology AO3
Viral marketing = Word-of-mouth using the internet

Social media marketing = The practice of gaining internet traffic through social media
+Inexpensive +Trustworthy - Business can not control
Social networking = Any platform used mainly by individuals to build social relationship
between people
Guerrilla marketing AO3
Guerrilla marketing = Achieving conventional marketing goals using unconventional

methods
+ATL promotions doesnt always work +viral marketing +Inexpensive +Innovative
+Investigate future customers need and wants
-Doesnt always reach the right target - Intrusive - May be controversial & unethical
- Opportunity cost - Doesnt always work
Successful = Creativity + Simple +flexible + Inexpensive +Specifically targeted

4.5 The Four Ps - Place
Place = The distribution of products, how products get form the producer to the consumer\
Channel of distribution = The means used to get a product to the consumer
Zero-level channel = Producer Consumer
One level channel = Producer Retailers Consumer
Producer Distributors Consumer
Producer Agents Consumer
Two-level channel = Producer Wholesalers Retailers Consumers
Wholesalers = Businesses that purchase large quantities, separate it and sold to the retailers
+Storage cost, save storage place for manufacturer and retailers
+Retailers can buy smaller quantities
+Save the transaction fee for the producer
+Producer dont have to deal with distribution
-Manufacturer doesnt have control over wholesalers
Distributors = Independent and specialist businesses that trade in the products of only a
few manufactures
Agents = Negotiators who act on behalf of buyers and vendor of a product
Retailers = The sellers of products to the final consumer

Independent retailers, Multiple retailers, Supermarkets, Hypermarket, Department store
Speciality channels of distribution = Any distribution without intermediaries

+Save profit +Businesses have control over distribution +e-commerce
Telemarketing
E-commerce
Vending machines
Mail order & direct mail

4.6 The Extended Marketing Mix H L
People
Appearance & body language: Uniforms, formal clothes
Aptitudes & attitudes: Proactive, product knowledge
Feedback
Process = The way a service is provided

Payment methods
Waiting time
Customer services
After-sales care
Delivery processes
Physical evidences = The tangible aspects of a service

4.7 International Marketing H L
International marketing = The marketing of a firms product in a foreign country
Through:
Exporting = A business sells its products directly to an overseas buyer
Direct investment = A business setting up overseas production or distribution
facilities
E-commerce = Trade via the internet
Joint ventures = Two or more companies invest in a shared business project
Strategic alliances = Similar to a joint venture but without forming a separate legal
entity
Franchising = A business allowing others to trade under its name in return for a fee
and a loyalty payment
Licensing = When another firm buys the right to produce that goods of the licensor
Mergers = When two businesses agree to integrate into a single organization
Acquisitions = When one business buys out another by purchasing a majority stake
in the target company
Operational & strategic implication:

Language & cultural difference, legal differences, political environment, economic
environment, infrastructure
Opportunities: Increased customer base economic of scale , increased brand

recognition, spread risks, extend the PLC Gain more profit
Threats:
Legal issues: Different legal system, copyright, trademark, patent, consumer protection laws
Political issues: Political stable affects business risk of operating
Social & demographic issues: Different approach to pricing, product, place, promotion
Economic issues:

Culture & international marketing
Cultural exports = The commercial transfer of ideas and visuals from one country to
another
Language
Ethics
International business etiquette = The mannerism and customs by which business is
conducted in different countries
Globalization & international marketing

Global marketing = Selling the same product using the same marketing approach
throughout the world

4.8 E-Commerce
E-commerce = The trading of products via the internet, electronic systems and computer
networks
Global reach, 24/7 accessibility, access to information, consumer reviews, impersonal

interaction, barrier to entry
E-commerce & the 4 Ps
Price: Increase price transparency, cut intermediaries

Place: Shorter channel of distributions
Product: No need for display, grater customer base, less packaging, more detailed information
Promotion: Viral marketing, pop-up adds
Types of e-commerce
Business to business = Catered for the needs of another business

Business to consumer = e-commerce directly catered for the end-user
Consumer to consumer = e-commerce platform that enables customers to trade with each
other
Benefits of e-commerce
Another source of revenue, Another channel of distribution, flexibility, reduced packaging,

less overheads, less operating costs, customers have more choices
The costs of e-commerce
High set-up costs, Finance charges form credit card companies, Fraudulent trade, Spam,
Unsuitable for some businesses, relied on advanced technologies, Loading time, Hacks,
Currency flow problems, Unemployment

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Business management

The magic formula

State ( 1 line max). Explain / justify in relation to story

State (4 points) = SSSS

2. Use side headings (except for definitions)

if you wrote lots).

7. Layout do not try to save paper

Leave a line between the S or SE points you make

dont, cant, isnt, wont, wouldnt, get, got

To... (at the start of an answer)

Slang eg go bust, get sacked.

9. Use WILL with extreme caution: use MAY instead

10. Write big enough to read. Unreadable => NO POINTS!

11. ANSWER WHAT THE Q IS ASKING!!!!

About 50% of responses do not answer the Q asked!

Knowledge is static but

Business = A decision-making organization involved in the process of using inputs to

Main business functions AO2

Human resources = Managing the personnel of the organization

The business sectors AO2

Primary sector = The extraction, harvesting and conversion of natural resources

Secondary sector = Manufacturing or construction

Higher household incomes

Entrepreneur = An individual who plans, organizes and manages a business, taking on

Reasons for starting up a business

Growth, Earnings, Transference and inheritance, Challenge, Autonomy, Security, Hobbies

Process of starting up a business:Personal desire, achieve success, more extravagant life

1. Write a business plan

2. Obtain start-up capital

3. Obtain business registration

4. Open a business bank account

For-profit organizations AO3

Partnership = profit=seeking business owned by two or more people

Company (corporations) = Business owned by shareholders

Social enterprises = Revenue-generating businesses with social objectives

Cooperatives = Owned and run by their members (Consumer, worker, producer)

Non-profit social enterprises AO3

Non-Governmental organization = Non-profit social enterprise that operates in the

BUSINESS MANAGEMENT !10

An organizations Mission Statement:

Vision Statement vs. Mission Statement

What do we want to become? Why are we here?

Not all organizations have both Vision and Mission Statements.

BUSINESS MANAGEMENT !11

Aims and Objectives:

BUSINESS MANAGEMENT !12

Strategic objectives (organizational objectives) will take an organization further and

Strategy occurs at different levels:

Operational Strategies: day-to-day methods to achieve tactical objectives

Internal Factors External Factors

Corporate culture that encourages State of the economy

Examples of how ethics change over time:

BUSINESS MANAGEMENT !13

Pressure to act ethically comes from inside (internal) an organization (employees,

Advantages and Disadvantages to Ethical Behavior

BUSINESS MANAGEMENT !14

A businesss decision to act in a CSR way depends on:

BUSINESS MANAGEMENT !15

Aim of performing a SWOT Analysis is to:

Improve upon weaknesses

BUSINESS MANAGEMENT !16

Advantages and Disadvantages to SWOT Analysis

BUSINESS MANAGEMENT !17

Internal Stakeholders = Members of the organization: employees, managers,