Business paper2

• When it comes to big topics 4, 6, 9 and 12 more questions, the speaker has picked out what they think are likely to be the most common areas that are going to appear when it comes to analysed or discussed questions
• The speaker will not be looking specifically at justify and evaluate questions in this session
• Key areas the speaker has picked out

  • Organic vs inorganic growth
  • PLCs, MNCs
  • Sources of finance
  • Globalisation
  • Business objectives, ethics and pressure
  • Design mix
  • Production methods and stock control
  • Quality assurance vs quality control
  • Motivation and productivity
  • Organisational structures
• Organic growth


  Growth using the business's own resources
• Inorganic growth


  Growth through mergers, takeovers
• Benefit of organic growth

  • Can expand using the business's own resources
  • Growth is easier to manage than a takeover
  • The business's own culture can be maintained
• Drawback of inorganic growth

  • Can create diseconomies of scale
  • Coordination and communication problems
  • Average costs may rise, reducing unit contribution and profits
• Benefit of inorganic growth

  • Can create economies of scale
  • Can access the best staff or resources
  • Profits may rise further as average costs fall
• Public limited company (PLC)


  A company whose shares are traded on a stock exchange
• Multinational corporation (MNC)


  A company that operates in multiple countries
• Benefits of becoming a PLC

  • Ability to raise greater finance by selling shares publicly
  • Can exploit greater economies of scale
  • Profit margins may rise
  • Can increase market share
• Drawbacks of becoming a PLC

  • Financial results must be released to the market
  • Share price may fall if results are poor
  • Company may become vulnerable to hostile takeover
  • Original owners may lose complete control
• Benefit of being an MNC

  • Ability to sell products in foreign markets
  • Reduces risk to home markets
• Drawbacks of being an MNC

  • More difficult to monitor supply chain
  • Goods may be produced overseas leading to exploitation of workers
  • Increased costs of auditing suppliers
  • Can become problematic to be ethical
• Internal finance


  Sources of finance from within the business, e.g. retained profits, selling assets
• External finance


  Sources of finance from outside the business, e.g. loans, share capital
• Benefits of using internal finance

  • No interest costs
  • No loss of control
  • More effective use of own resources
  • Can generate greater profits
  • Can expand the business
• Drawbacks of using internal finance


  • May have insufficient retained profits available
  • Need to use external debt or equity finance
• Debt finance


  Loans, mortgages
• Equity finance


  Share capital
• Drawback of using equity finance

  • Owners lose some decision-making authority as new shareholders gain influence
• Recession


  Businesses may reduce expenses, close unprofitable stores, lay off employees, focus on survival and breaking even
• Globalisation is the degree to which the world is becoming more connected through trade, trade agreements, transportation networks and technology
• Imports


  Goods coming from overseas markets, paid for by the receiving country
• Exports


  Goods sent from one country to be sold in another country
• Globalisation has affected business location, with high value-added activities like design happening in one country and assembly happening in another
• Globalization


  The degree to which the world is becoming more connected or interconnected through trade agreements, transportation networks, and technology
• Imports


  Goods coming from overseas markets where money is paid to those countries
• Exports


  Goods that are sent abroad to overseas countries
• Business location has been affected by globalization, with high value-added elements like design happening in one country and assembly happening in another
• Tariffs


  A tax paid on goods coming into a trading bloc like the EU, making EU businesses more competitive
• Benefit of globalization for business

  • Ability to sell goods in overseas markets, leading to increased sales and higher profits
• Ethics


  Doing what is morally right, important for large firms to avoid negative publicity
• Examples of ethics


  • Green audits, ensuring workers in supply chain are treated well, avoiding use of questionable ingredients
• Benefits of good ethics include better brand image and avoiding pressure group activity
• Pressure groups


  Organizations like Greenpeace that can impact businesses through boycotts, media campaigns, lobbying, etc.
• Pressure group activity


  Can encourage customer boycotts, leading to lower sales and profits
• Business undertaking a green audit

  Leads to improved environmental responsibility and better brand image, avoiding pressure group activity
• Design mix


  The balance between function, aesthetics, and cost in product design
• Benefit of using the design mix

  Ensures the business considers the functionality of the product, leading to a more successful product