Theme 2

• A business with limited liability has a legal identity separate to the owners, meaning that, in the case of a lawsuit, the business can be sued instead of the owners.
• Businesses with limited liability can sometimes be called incorporated businesses, with the owners having limited liability.
• If a business has unlimited liability, there is no legal difference between the owners and the business.
• These businesses can also be known as unincorporated businesses.
• Traditional organisations often have hierarchical organisational charts, with several layers of management, which delayering removes.
• Kaizen, a Japanese word, translates to ‘continuous improvement’, represents the Japanese belief that everything can be improved.
• Lean production is a method developed by the Toyota car manufacturer that aims to use few resources in production compared to other methods.
• Just-in-time Production (JIT) involves minimising or eliminating the amount of stock held by a business, reducing all of the costs associated with holding stock.
• Labour intensive production involves using a larger amount of labour compared to capital, while capital intensive production involves employing more machinery compared to labour.
• Downsizing can increase profit and save money, provide a leaner, more competitive operation, remove inefficient parts of the business, and make a profitable business no longer subsidise unprofitable ones.
• Delayering reduces staff, often targeted at specific levels of a business, like managerial posts.
• Capacity utilisation is about how a business uses its resources.
• Relocating a business can lower costs by reducing rent, wages and potentially increasing public transportation access.
• Investing in new technology can increase efficiency by using newer machinery that is quicker, more accurate, able to carry out more tasks and work in more extreme conditions.
• The optimal mix between the two can depend on the nature of the products, the size of the firm, and the relative prices of the two factors.
• Outsourcing can increase efficiency by giving work to outsider specialists who are cheaper or more flexible.
• Standardisation increases efficiency but is inflexible and removes the element of customisation, making design tougher.
• In a business with unlimited liability, everything is carried out in the name of the owner(s).
• Businesses with unlimited liability tend to be small, being owned by one of a few partners, who have unlimited liability.
• The liability of a businesses depends on the legal status of the business.
• The liability can take on one of two forms, which are:
• Business owners that have unlimited liability are financially exposed to their business’ failure.
• If the owner’s, while owing money to external parties, business fails, they would have to personally pay these debts out of their pocket.
• Unemployment is the number of people who are out of work, and during a recession, unemployment rates rise.
• Unpredictability is a feature of sales in some industries.
• Interest rates are charged by banks and other financers for borrowing money, and when interest rates are high, the demand for loans falls, as their cost increases.
• The actions of competitors can have a significant impact on a business, affecting sales forecasts.
• Inflation is the general rise in consumer prices over a time, and when inflation is rising, prices in the economy are also rising.
• Long-term trends in consumer behaviour affect sales forecasts and business strategic responses based on investment and strategic planning.
• The car market has recently witnessed a rise in demand for electric cars over the past few years due to environmental and cost reasons.
• Economic growth is judged by using the GDP of a nation, and when economic growth is rising, sales for most businesses tend to increase, as consumer incomes generally also increase with periods of economic growth, and therefore there is higher spending.
• Businesses use time series data to identify seasonal variations in sales.
• Exchange rates reflect the price of a currency against another, and if the exchange rate rises, it would be cheaper for people in one country to buy internationally, from another country, leading to a fall in demand for national goods.
• The economy, comprised of consumers, businesses and government, is a crucial factor in sales forecasts.
• Fashion is an industry where consumer tastes and preferences can be unpredictable, making accurate sales forecasting difficult.
• Businesses with unlimited liability may find it easier to gain funds, as lenders will be reimbursed if a business defaults.
• In some cases, a business’ sales are not easily identifiable, in which case it may be easier for the business to calculate the sales revenue.
• Contribution is the difference between selling price and variable costs.
• Fixed costs are costs which stay the same at all levels of output in the short run.
• A business requires reliable and accurate cost information to make decisions.