Chapter 3

 Entrepreneur – a person who organizes, operates and takes the risk for a new business venture
 Benefits of being an entrepreneur
 Independence – able to choose how to spend time and money
 Profitable – income might be higher than working for another business
 Characteristics of successful entrepreneurs
 Risk taker – making decisions to produce p/s that people might buy is risky
 Creative – a new biz needs new ideas to stand out from existing firms
 Benefits of keeping business small
 Larger business is difficult to control
 Integration with another biz is more difficult
 Benefits of business plan (contents)
 The target market
- Total market size
- Predicted market growth
- Analysis of competitors
 Financial information
- Sources of capital
- Predicted costs – FC & VC
- Forecast cash flow and working capital

 Takeover – when one business buys out the owners of another business
 Ways a business might grow
 Vertical merger – one biz merges with another in the same industry but different stage
of production
 Conglomerate merger – one biz merges with a biz in a completely different industry
 Reasons for measurement of size of businesses by external group
 Investors – decide which biz to put their savings into
 Competitors – compare their size and importance with other firms
 Reasons for business expansion
 Possibility of higher profits for owners
- Lower average costs
 Larger share of its market
- More influence on suppliers and distributors
 Benefits of expansion by takeover of supplier
 Merger gives an assured supply of important components
 Profit margin of supplier is absorbed by the expanded biz
 Supplier could be prevented from supplying others
 Costs of components and supplies for the manufacturer could be controlled
 Harder to manage than internal growth

 Reasons why businesses fail

 Lack of experience
  Lack of labour
 Reasons why business remains small
 No external hiring
 Business segment

Chapter 6

 Piece rate – an amount paid for each unit of output

 Non-financial benefits
 Training
 Opportunities for promotion
 Reasons why employees leave
 Money – piece rate system
 Security – redundancy
 Ways to improve job satisfaction
 Wages
- Regular basis
- Paid overtime
 Bonus
- Feels recognized
- Incentive
 Piece rate benefits and drawbacks
 Work faster
 More goods produced
 Measure performance
 Neglect quality
 Careful workers paid less
 Machinery malfunction reduces pay

 Bonus – an additional amount of payment above basic pay as a reward for good work
 Reasons why people work
 Esteem needs – feeling important
 Money – pay for necessities and some luxuries
 Maslow’s hierarchy of needs
 Physiological needs – wages high enough to meet weekly bills
 Security needs – job security
 Benefits of having well-motivated employees
 High output per worker – keeps costs low and increase profits
 Low labour turnover – loyal workforce reduces the cost of recruiting
 Bonus benefits and drawbacks
 Do not necessarily have to be paid
 Positive motivating effect
 Workers recognized
 Expectation can lead to disappointment
 Unfair to those who are not paid
  Time rate – the amount paid to an employee for one hour of work
 Ways to determine employees pay
 Piece rate system
 Incentive wage system
 Non-financial methods of motivation
 Training – process of improving worker’s skills
 Promotion – advancement of an employee in an organization
 Motivators or hygiene factors
 Motivation
- Achievement
- Recognition
- Advancement
 Hygiene
- Status
- Security
- Work conditions

Chapter 14

 Distribution channel – the means by which a product is passed from the place of production to
the customer
 Products which might be sold directly to retailers rather than using a wholesaler
 Furniture
 Jewellery
 Reasons why ‘place’ is important
 Distribution channel
 Location of competitors and customers
 Benefits of agents
 Manufacturer may not know the best way to sell in other markets – agents let
manufacturers have some control over the way the product is sold
 Agents are aware of local conditions and can select the most effective selling place
 Benefits of selling through a wholesaler
 Wholesaler can break bulk – divide large quantities to smaller ones for retailers
 Wholesaler saves storage space and costs
 Wholesaler have longer shelf life
 Wholesaler can give credit to retail customers for later payment
 Wholesaler can deliver to retailers – saves transport costs
 Wholesaler can advise retailers and manufacturers

 Wholesaler – a company that breaks bulk and sell to retailers

 Disadvantages of wholesalers
 More expensive than buying straight from manufacturer
 Wholesaler may not have the full range of products to sell
 Benefits of selling through shops rather than mail order and online
  No websites needed
 Face-to-face conduction
 Factors affecting choice of distribution of channel
 Location of customers
- City or rural
- Overseas (online trading)
 Location of competitors
- Same outlets as other manufacturers
- Compete directly for customers

 Advantages of small, specialist retailers

 Focus on one product category
- Develop greater knowledge and expertise
- Satisfy customers’ needs effectively
 Knowledgeable staff
- Employees only need to know about one type of product
- More likely to cater to customers wants
 Benefits and drawbacks of selling directly
 Simple distribution channel
 Suitable for products sold straight from the farm
 Lower price
 Can be sold by mail order catalogue or internet
 Impractical for most products – consumers do not live near to factories
 Unsuitable for products which cannot be easily sent by post
 Expensive to send products by post or courier

Chapter 9

 Internal communication – between members of the same organization

 Benefits of effective internal communication
 Employees feel valued
 Employees more informed
 Barriers to communication
 Problems with medium
- The message may be lost so the receiver does not see it
 Problems with receiver
- They might not be paying attention
 Ways to communicate with individual workers about their pay and working conditions
 Verbal communication
- Information given out quickly and easily
- Opportunity for immediate feedback
 Written communication
- Hard evidence of the message which can be referred
- Essential for complicated details which might be misunderstood
  Benefits and drawbacks of electronic forms of communication
 Quick and cheap to reach large number of people
 Direct feedback is possible
 Cost-effective
 Information overload
 Require stable internet access
 Lack of physical contact

 Communication barriers – factors that stop effective communication of messages

 External groups to communicate with – suppliers and investors
 Type of written communication
 Text messages – quick and convenient communication with others
 Email – written messages can be sent between computing facilities
 Possible causes of communication barriers
 Problems with sender
- Incomprehensible language
- Message is too long and detailed
 Problems with medium
- Message may be lost
- Breakdown of medium
 Advantages and disadvantages of telephoning and email
 Telephone
 Information given out quickly
 Opportunity for immediate feedback
 No reference for future
 Not cost-effective
 Email
 Printouts of messages can be obtained
 Easy and effective
 No face-to-face contact
 Language used can be difficult to understand for some

 Feedback – reply from receiver which shows whether the message has arrived and been
understood
 Advantages of two-way communication
 Clear to sender whether receiver understood the message
- If not, message can be resent or made clearer
- Effective communication as message is understood
 Both are involved in the communication process
- Receiver feels more a part of the process
- Can make contribution to the topic
- Motivates receiver

Chapter 19
 Variable costs – costs which vary directly with the number of items sold or produced
 Ways to reduce break-even level of sales
 Reduce variable cost per unit
 Increase selling prices
 Reasons for lower average costs
 Purchasing economies
- Buy large number of components
- Discounts from buying in bulk
- Reduces unit cost of each item bought
- Advantage over smaller biz which buy in small quantities
 Marketing economies
- Can afford to purchase own vehicles for distributing goods
- Transport costs reduced by using larger vehicles
- Advertising rates lower than size of advertisement
- Same number of staffs can sell more products
 Economies and diseconomies of scale
 Purchasing economies – discount from buying in bulk
 Marketing economies – advertising rates lower than size of advertisement
 Financial economies – raise capital more cheaply
 Managerial economies – afford specialist managers
 Poor communication – difficult to send and receive accurate messages
 Lack of commitment from employees – possible that one worker will never see the top
managers of the business
 Weak coordination – slower decision making

 Fixed costs – costs which do not vary in the short run with the number of items sold or produced
 Reasons a large business being too big can lead to higher average costs
 Poor communication – inaccurate communication leads to serious mistakes which
lowers efficiency
 Lack of commitment – not all workers will see the top managers so they might feel
unvalued; lack of relationships leads to lack of commitment can low efficiency
 Ways in which cost information can help managers
 Cost of operation can be compared to the revenue generated to calculate profit or loss
 Costs of two different locations can be compared
 Break-even level of output = quantity that must be produced/sold for total revenue to equal
total costs
 Average cost per unit = total cost of production divided by total output
 Total costs = fixed and variable costs combined
 Advantages and disadvantages of break-even chart
 Managers can read off from graph the expected profit or loss to be made at any level of
output
 Can show margin of safety
 Constructed assuming all good produced are sold
 Fixed costs only remain constant if the scale of production does not change
Chapter 21

 Factors influencing the location decisions of manufacturing business

 Raw materials – expensive to transport
 Climate
 Reasons to expand and not relocate
 Market
- Locating factory near to market
- Products gain weight
 Raw materials
- Cheaper to locate near site
- Transporting waste in long distances is expensive
- Needs to processed quickly while fresh
 Grants to relocate to an area of high unemployment
 Financial assistance
 Provide jobs
 Wastage of human resources
 Possibly raise country’s economy
 Own a big market share
 Low revenue – poor living standards
 Demand is low
 Smaller chance to expand business

 Competitors – other businesses that can offer similar g/s to your customers
 Advantages of locating in a small town – low rent and fewer competitors
 Ways government influence decision of location of new shops
 Planning regulations – legally restrict biz activities that can be undertaken in certain
areas
 Government grants – encourage them to locate in undeveloped parts of the country
 Effect on profitability of locating in city centres
 Increase
- Popular area
- Tourist attraction
- Wide range of customer base
 Decrease
- Rent and taxes
- Competitors
- Lack of customer parking

 Infrastructure – basic physical systems of a business that involves the production of public goods
 Factors affecting the location of a retailing business
 Shoppers
- Popularity of area
- Expensive goods – high income area
 - Small gift-type goods – tourist attraction area
 Nearby shops
- Regularly visited areas – higher potential of consumers
- Competitors encourages people to visit – increasing business
- Lack of competitors discourages people – limited choice