TABLE OF CONTENTS

Possible Questions 1

Unit 1.2 Types of organization 4

Unit 1.3 Corporate objective 4

Unit 1.4 Stakeholder 4

Unit 1.5 External environment 5

Unit 1.6 Growth and evolution 5

Unit 1.7 Decision tool (HL only) 6

Unit 2.2 Organisational structure 6

Unit 2.3 Leadership style 6

Unit 2.4 Motivation 7

Unit 2.5 Corporate culture (HL only) 8

Unit 3.1 Sources of Finance 9

Unit 3.3 Break-even Analysis 10

Unit 3.4 Final Accounts 11

Unit 3.7 Cash flow 12

Unit 3.8 Investment appraisal (some material HL only) 13

Unit 4.5 The 4P’s 13

Unit 4.7 International marketing (HL only) 13

Unit 5.1 The role of operation management 14

Unit 5.2 Production method 14

Unit 5.3 Lead Production (HL only) 15

Unit 5.4 Location 16

Unit 5.6 Research and development (HL only) 17

 Possible Questions

Unit 1.2 Types of organization ● Private limited

● Public limited
→ Discuss/Assess the appropriateness of changing from private limited to
public limited
→ Explain the implication of turning from a state-owned organization to a
privately owned organization (nationalized & privatized)

Unit 1.3 Corporate objective ● Vision & Mission statement

● CSR
● Ansoff Matrix
○ Product development → healthcare devices, aluminum water
bottle
Analyze the usefulness of using Product Development strategy to RDM

Unit 1.4 Stakeholder ● Stakeholder conflict

○ Different objective of stakeholders (Employees, Customer)

Unit 1.5 External environment ● PEST

○ Political: Communism collapsed -> state-owned businesses
change into privately owned (privatized)
○ Economic: Stable market economy
○ Technological: best IT infrastructure (implication: high
efficiency, low waste)
○ Social: RDM no longer has the same level of local influence as
it now recruits workers from all over Europe and not Lobjanec

Unit 1.6 Growth and evolution ● MNCs

Unit 1.7 Decision tool (HL only) ● Decision tree

● Force field analysis
○ Forces for change = Driving forces
○ Forces against = Restraining forces

Unit 2.2 Organisational structure ● Tall organization vs Flat organization

○ Delayering
○ Bureaucratic
○ Centralization
○ Decentralization

Unit 2.3 Leadership style ● Autocratic (previously)

● Paternalistic (Kristian)
● Democratic
● Laissez Faire

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 ● Situational leadership
→ Analyze the appropriateness of Jan’s leadership style

Unit 2.4 Motivation ● Herzberg’s theory = hygiene factors and motivators

● Pink’s theory (AMP=Automation Mastery & Purpose)
● Previously employees are motivated through Taylor’s scientific
management (solely motivated by financial reward and punishment)
→ What is the disadvantage of using all highly trained employees?

Unit 2.5 Corporate culture (HL ● Culture Clash

only) Note: Implication of corporate culture if RDM decides to build an additional
production plan

Unit 3.1 Sources of Finance ● External source of finance

○ Loan capital
○ Share capital
Potential Question:
Using the information in the case study, discuss whether RDM should finance
its expansion using share capital or loan capital

Unit 3.3 Break-even Analysis ● Calculation of BEP

Unit 3.4 Final Accounts ● Balance Sheet construction

● Profit and Loss of construction
● Depreciation - straight line and declining balance method ( HL only)

Unit 3.7 Cash flow ● Construct a cash flow forecast

Unit 3.8 Investment appraisal ● Payback period (PBP)

(some material HL only) ● ARR
● NPV (HL only) - with discounted factor table given

Unit 4.5 The 4P’s ● Extension strategy

- Price reduction
- Repackage
● Product life cycle
Apply the Boston Consulting Group (BCG) matrix to RDM’s product portfolio
- Dog: Coal-burning stoves
- Introduction & Decline: Kerosene
- Health care devices
→ Discuss the disadvantage to RDM of having produced only healthcare
devices (line 34): High risk as one product’s decline/maturity would mean a
significant loss of revenue for the business without any other product
compensating it
→ Describe the advantages of mass customization to RDM
● Branding

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 ○ Brand awareness
○ Brand identity

Unit 4.7 International marketing ● Economics trade blocs

(HL only) ○ Tariffs
○ Quotas
○ Embargos

Unit 5.1 The role of operation Define the term Capex

management

Unit 5.2 Production method
Describe the benefits to RDM in using an automated manufacturing process
- Mass production
- Labour intensive
- Flow production
- Just In Time (JIT)
- Mass customization
- Capital intensive

Unit 5.3 Lead Production (HL ● Continuous improvement

only) ● Benchmarking (Standardisation: ISO)

Unit 5.4 Location ● Bulk increasing

● Bulk decreasing
● Location consideration

Unit 5.6 Research and development ● R&D

(HL only)

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Unit 1.2 Types of organization
➔ Private Limited Company
Advantages Disadvantages

● Member's liability is restricted to the ● Audited annual returns and accounts

amount of shares they own.
● Additional capital can easily be raised
by selling shares.
● The private company has a separate
legal existence from that of its owners.
● This type of organisation has a much
higher business status than a sole
trader.
are available for public inspection
● A private limited company is more
expensive and time consuming to set
up than a sole trader
● Professional help will be needed to set
up a private limited company
● There is separation of ownership and
control which means that the owners
no longer make all the decisions
● There are limited opportunities for
economies of scale.

Unit 1.3 Corporate objective

1. Vision: Long term
2. Mission: how to achieve?
3. CSR: Obligation that a company must performed to give positive impact to the
society
4. Ansoff Matrix: To plan and set objectives
a. Product Development: Kerosone
b. Diversification: Healthcare and alumunium bottle

Unit 1.4 Stakeholder

1. Individual who have a direct interest in a business
2. RDM:
a. Employees: Have the interest to protect their rights
b. Customer: Have the interest to purchase best products that fulfill their
needs

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Unit 1.5 External environment
➔ STEEPLE

Unit 1.6 Growth and evolution

➔ Economies of Scale: ​Cost per unit of production decrease. Possible causes:
◆ Purchasing​: bulk buying, discounts, etc
◆ Financial​: lower interest rate, specialist accountant so finances are used
efficiently
◆ Technical​: technological advancements → improve efficiency, improved
techniques → improve efficiency, mass production, large-scale transportation
◆ Etcetera (masih ada 4 but im tired, sleepy and lazy)
➔ Diseconomies of Scale: ​ Cost per unit of production increases. Possible causes:
◆ Shortage of Resources​: cost of land, labor will be inflated due to competition
that acquires these resources
◆ Pollution: ​local councils may impose additional cost to “pay” for the negative
externalities (pollution)

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Unit 1.7 Decision tool (HL only)

Unit 2.2 Organisational structure

Flat (horizontal) organization Tall (vertical) organization

- Managers have wider span of control - Managers have narrower span of

- Decentralised decision making
- Shorter chains of command
- Democratic leadership
- Increased delegation
control
- Centralised decision making
- Long chains of command
- Autocratic leadership
- Limited delegation

Unit 2.3 Leadership style

Democratic Positive
● Involves employees in decision making and keep
them informed
● Give employees the trust to do their own thing
● Effective when used with skilled free-thinking,
and experienced subordinates
Negative
● Slow decision making
● Costly

Paternalistic Positive
● Leader has considerable authority over
employees
● Employees as “family” → great concerns for the
employees of the business
● Employees have a sense of safety → believe
that the business will stand by them.
● Get loyalty from employers and even blind trust.
Negative
● Leader don't have a fully objective, critical eye
when evaluation employees’ performance.
● Employees could take advantage of the leader
due to their loyalty towards the employees.

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Unit 2.4 Motivation

Taylor ● standardization​ of work methods and enforced

adoption o the best ways of working were the
ways to ensure that ​output​ would be
maximized​ in the ​shortest​ possible ​time​.
● E.g. McDonalds, Factories

Maslow’s Hierarchy of ● Once a need is satisfied, it is no longer a

Needs motivator → move up the pyramid, motivated by
the next level.

Herzberg ● Hygiene Factors: ​Do not motivate but need to

be met to prevent dissatisfaction
○ Salary & Wages
○ Security
○ Working conditions
○ Relationship with subordinates
○ Status
○ Relationship with supervisor
○ Personal life
○ Etc
● Motivators:​ psychological growth → increase
satisfaction → motivation
○ The work itself (variety/interesting tasks)
○ Advancements (Opportunities for
promotion)
○ Recognition
○ Responsibility

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Adam’s Equity ● Inputs: affective and cognitive qualities that
employees bring
○ Effort
○ Loyalty
○ Knowledge
○ Skill
○ Time
○ Trust
○ Etc
● Outputs: what employees receive from working
○ Financial compensations (fringe benefits)
○ Job security
○ Praises and recognition
○ Reputation
○ Personal growth
○ Thanks.
○ Etc

Pink ● Autonomy: ​allowing employees to shape their

own lives. Give employees the freedom on:
○ When they work
○ How they work
○ Who they work
○ What they do
● Mastery: ​opportunities for employees to learn,
innovate and create new things. Do work that
matters to them and neither too easy nor too
hard.
● Purpose: ​Feel like they are making a difference
by working; for themselves and the world. Each
person contributes.

Unit 2.5 Corporate culture (HL only)

Blablabla

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Unit 3.1 Sources of Finance
Capital Expenditure (items that will last for more than a year)
- Fixed assets: Machinery, Land, Buildings, Equipment
- Can be used as collateral (financial security pledged for repayment of
bank loans)

Revenue expenditure (day-to-day operation)

- Expenses: rent, wages, raw materials, insurance
- Needs to be covered immediately to keep the business operating
- High revenue expenditure will make it difficult to build sufficient capital for
long-term investment and a sudden crisis situation.

Internal sources of finance : External sources of finance :

1. Personal Funds 1. Share Capital ​is the money raised

2. Retained Profit ​is the profit
remained after a business paid tax
and dividend. Used often for
purchasing fixed assets
3. Sale of assets,​ selling old
machinery and computer
equipment. Relocate to raise
finance through sale of land and
buildings. Extreme cases, they can
raise finance by selling fixed
assets to survive liquidity problem.
from selling shares. Provide huge
amount of finance. It can dilute
ownership and control of business.
2. Loan Capital​ is a long-term source
of finance from banks. Interest
charges, mortgage , business
development loan , debentures
3. Overdrafts ​allows business to
overdraw on its bank account. Can
demand high rate of interest and
more cost effective than bank
loans.
a. Suitable for large cash
outflow.
4. Trade credit ​allows for buy now
and pay later (creditors)
5. Grants ​are non-repayable funds
given by the government to
stimulate economic activity in
regions that face high
unemployment.

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 6. Subsidies ​are repayable funds to
reduce the cost of production and
provide extended benefit to
society. (farmers to stabilize food
prices)
7. Debt factoring
8. Leasing​ is a form of hiring whereby
a contract is agreed between a
leasing company and the customer
to “lease” assets from the lessor.
9. Venture Capital ​is a form of
high-risk capital in the form of
loans or shares invested by
venture capital firms.
10. Business angels​ are wealthy
individuals who choose to invest
their own money in businesses
with high growth potential

Unit 3.3 Break-even Analysis

➔ Limitations:
◆ Only suitable in ​singe product firms
◆ Ignores economies of scale
◆ Ignores discounts and price discrimination
◆ Assume every output is sold
◆ Selling price is constant regardless of units sold
◆ Ignores other factors (competitors, staff motivation)

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Unit 3.4 Final Accounts
BALANCE SHEET for Seetha at 31 December 2016

$000s $000s
Fixed Assets
Building 140000
Machinery 110000
Net Fixed assets 250000

Current assets
Cash 11000
Debtors 21000
Stocks 25000
Total current assets 57000

Current liabilities
Creditors 35000
Total current liabilities 35000

Net current assets (working capital) 22000

Total assets less long-term liabilities 272000

Less Long-term liabillities (Debt) 80000

Net assets 192000

Financed by:
Share capital 145000
Accumulated retained profit 47000

Equity 192000

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Unit 3.7 Cash flow
● Cash flow forecast : ​financial document that shows expected movement of cash
into & out of a business
○ Cash inflows : ​sales revenue, payments by debtors, loans from bank,
interest , sale of fixed assets, (any type of income)
○ Cash outflows : ​cash that leaves business (expenses)
○ Net cash flow : ​difference between cash inflows and outflows. + ,
possible for a firm suffering from - net cash flow to survive temporarily
*asses financial health of the business seeking external finance. Identify periods of
potential liquidity problems, cash deficiency.

CAUSES OF CASH FLOW :

Overstocking, poor credit control, unforeseen changes, overtrading & overborrowing

Strategies -> ​reducing cash outflows, improving cash inflows, alternative sources of
finance

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Unit 3.8 Investment appraisal (some material HL only)
Blablabla

Unit 4.5 The 4P’s

Pricing only*
Cost-plus pricing Adding a percentage amount of profit to the cost per unit of output
to determine selling price.
+ : simplicity and ease of calculation
- :fails to consider market needs / customer value, may lose
sale to competitor who set lower price

Penetration pricing Set low price to establish product in the industry, to gain brand
recognition & market share. Suitable for mass market products,
results in low PM.
- :low price = low quality, gain high volume but not profit

Price skimming For tech products. NPD is $$, so high price is initially set to recoup
costs of R&D, reduced later
*high initial price create prestigious image for product.

Psychological pricing Consideration how pricing affects consumers’ perception value of

products. 9,99 / 14,995 to make prices seem lower (getting bargain)

Loss Leader Selling product below cost value.

*can be used to encourage brand switching to make up for losses
incurred whilst product was priced at loss.

Price discrimination Same product sold at different prices to diff cust.

Unit 4.7 International marketing (HL only)

Tariffs ● The tax imposed on imported goods

● Purpose

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 ○ Increase gov’t revenue (gained from the tax paid by
producers to the government).
○ Protect domestic industry. Because tax on imports →
increase the cost of production for foreign producers →
increase price → consumers would opt to buy from the
domestic industry that’s relatively cheaper.

Quotas ● Legal limit to the quantity of goods that can be imported over a
particular time (usually a year)
● Impact
○

Embargoes ●

Unit 5.1 The role of operation management

Blablabla

Unit 5.2 Production method

➔ JIT:
Advantages Disadvantages

- Less space needed - Risk of running out of stock

- Waste reduction: Faster
turnaround of stock prevents goods
becoming damaged or obsolete
while sitting in storage.
- Smaller investments
- Rely on the timeliness of suppliers
for each order puts you at risk of
delaying your customers’ receipt
of goods.
- understand their sales trends and
variances in close detail.

➔ Job (customized) Production

Advantages Disadvantages

- High mark-up - Expensive

- Clients get what they want - Time-consuming
- Motivated skilled workers - Risk of product failure
- Flexible production method - Reliant on skilled workers

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 ➔ Batch Production
Advantages
- Achieve economies of scale (bulk
buying)
- Customers have more choice →
more market share
- Useful for trialing products
- Help deal unexpected orders
➔ Mass Production
Advantages
- System needs little maintenance
- Can cater large orders →
economies of scale
- Low labor costs → only require
unskilled (or none)
- Respond to an increase in order
very quickly
Unit 5.3 Lead Production (HL only)
Disadvantages
- Lose production time as machines
are recalibrated ​(down time)
- Need large stocks of work
(unexpected orders)
- Batch sizes depend on the
machinery (or labor) capacity.
Disadvantages
- Set-up cost is high
- Breakdowns can stop the whole
assembly line → costly af
- System is inflexible
- Dependent on steady demand
- Demotivating workers as they do
robotic activities
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Unit 5.4 Location

Location and business ● Affects:

activity ○ HR - employees, local labor
○ Marketing - customers, availability of
product
○ Production - recources, competition,
suppliers
○ Finance - cost of land

Factors in choosing the ● Quantitative

location of production
● Qualitative
○ Availability, suitability and cost of land
○ Cost of labor
○ Access to raw materials
○ Distance to raw materials factory, retail
store
○ Etc
○ Management preferences
○ Local knowledge
○ Infrastructure
○ Political stability
○ Ethical issues (pollution)
○ Clustering (similar vs complementary
goods)

Relocating ● Move to a different location

● Possible cause: cheaper rents or more
attractive locations available
● Limitations:
○
○ Cost
○ Loss of geographically immobile
workers
○ Potential loss of customers and
suppliers
○ Etc

Reorganizing production ● Outsourcing​: transfer of internal business

activity to an external firm.
○ Positive​: increase quality, reduce
labor cost, business can focus on core
activities

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 ○ Negative​: redundancies, require
monitoring of subcontractor
○ Difficulty in quality management
● Offshore​: relocate business activity abroad
○ Positive​: reduce cost
○ Negative​: could decrease quality
● Insourcing:​ performing an otherwise
contracted work internally (kebalikan
outsourcing)
○ Positive:​ greater control over
business, Cheaper overall (depends),
Boosts local economy
○ Negative: ​require investment in
training or machineries, employees
may be overworked, less focus on
core business activity.

Unit 5.6 Research and development (HL only)

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