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Fixed Cost: In economics, fixed costs, indirect costs or overheads are business expenses that
are not dependent on the level of goods or services produced by the business.
Variable Cost: Variable costs are costs that change in proportion to the good or service that a
business produces.

DIVIDENDS: Payment to shareholders for investing in the company from the profits of the company.
Advantages and Disadvantages for a company being public limited company:
 Advantages:
 There is limited liability for the shareholders.
 The business has separate legal entity. There is continuity even if any of the shareholders die.
 These businesses can raise large capital sum as there is no limit to the number of shareholders.
 The shares of the business are freely transferable providing more liquidity to its shareholders.

 Disadvantages:
 There are lot of legal formalities required for forming a public limited company. It is costly and
time consuming.
 In order to protect the interest of the ordinary investor there are strict controls and
regulations to comply. These companies have to publish their accounts.
 The original owners may lose control.
 Public Limited companies are huge in size and may face management problems such as slow
decision making and industrial relations problems.

 Methods for raising level of sales:

• lower price so more people can afford to buy [an]
• enter new markets [k] to attract new customers [an]
• improve quality of product, e.g. train workers [k] to encourage interest [an]
• widen range of sizes [k] offer smaller structures to attract different customers [an]
• promotions, e.g. free carpets/curtains [k] therefore more people would be willing
to buy
• advertise [k] to raise awareness [an]
• demonstrations at trade fairs [k] so potential customers can see the products and
able to ask questions [an]
• choose locations where demand is high [k]
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Most important factors for the Human Resources Director to consider

when selecting which workers to make redundant.
• what is the job
• level of experience
• workers’ capabilities and skills
• disciplinary record
• length of service
• cost/salary
• amount of redundancy payments required
• productivity of workers
Justification:
Look at what jobs are not needed anymore and could be replaced by more efficient machinery.
They need to see which workers are most productive so that jobs can be reduced without
lowering productivity. The main thing therefore has to be the overall cost as they do not want to
lose the most profitable workers.

Market Share:
Percentage of the total market sales held by one brand or business.

Market segmentation:
Market segmentation is a marketing strategy that involves dividing a broad target market into subsets
of consumers who have common needs, and then designing and implementing strategies to target their
needs.

Problems that a business might have when trying to enter a new market.
• Lack of knowledge of the market so produce a product that is not wanted.
• Issues of entering a foreign market e.g. language barriers/exchange rates.
• Competitors’ reaction could lead to price war.
• Government laws might restrict what they can sell.
• Customer loyalty might not switch to a new company’s products.
• cost of developing new products leading to high price needing to be charged cash flow
issues.
• Lack of suppliers [k] so unable to find enough materials.
• Identification of suitable places to sell from different products might sold in different places.

Product oriented:
Firm that concentrates upon quality or design of the product, and then tries to find customers to
buy it.
Possible economies of scale the business might benefit from if it expands.
Purchasing, financial, technical, risk bearing, marketing, managerial.
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How important is the right location for the new business help to remain
competitive?
• Close to suppliers – so less costs of transport.
• Close to market – so able to deliver goods more quickly.
• Access to suitably qualified workers – to ensure have best possible workers.
• Where are rival companies – external economies.
• Laws – can they set up
• Cost of site/access to utilities – rent is fixed cost/need to install power etc. will add to
costs – all could lead to lower margin or need to set higher price [an]

They should locate in a place which has low rent and easy access to transport links.
This will keep costs of production low and therefore new business will be able to keep its prices
low and attract more sales. However, location by itself does not mean the business will always
be competitive. Buying from cheap suppliers may also be a better way of keeping costs low.

Appreciation of a country’s currency:

The value of the currency rises and so it buys more of another currency than before.

Problems that an increase in taxes could cause:

 demand/sales may fall.
 suppliers may increase their prices and therefore costs for the company could rise.
 company may have to pay more tax and therefore may decide to put their prices up.
 lower profits which means lower returns for owners/less money to invest for next year.

Advantages of increasing tax:

 More Revenue: Raising taxes results in additional revenue to pay for public programs
and services.
 Health Benefits: Taxing potentially harmful items such as tobacco could discourage
people from using them.

Depreciation of a country’s currency:

Currency depreciation is the loss of value of a country's currency with respect to one or more
foreign reference currencies.

Benefits to a business for training it’s employees:

• Better skills – so more efficient workers
• Workers know what they are doing so likely to make fewer mistakes.
• More flexible so business able to cover absence of other workers.
• Able to offer better customer service – so attract more customers.
• Workers feel more valued so improve the customer service offered.

Private Sector:
When business activities are owned by individuals, not controlled directly by government and
aim to make profit.
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Public Sector:
The part of the economy concerned with providing basic government services.
The composition of the public sector varies by country, but in most countries the public
sector includes such services as the police, military, public roads, public transit, primary
education and healthcare for the poor. The public sector might provide services that non-payer
cannot be excluded from (such as street lighting), services which benefit all of society rather
than just the individual who uses the service (such as public education), and services that
encourage equal opportunity.

Added Value:
The amount by which the value of a product is increased at each stage of its production,
exclusive of initial costs.
Ways in which a business could increase added value:
Branding/packaging/adding extra features to products/improved design.

Chain of Command:
The chain of command is the order in which authority and power in an organization is delegated
from top management. This applies to every employee at every level of the organization from the
top management to the low in ranking.
Qualities to look for in a manager.
o effective communication skills – they will have to manage 12 people
o approachable – as need to deal with a small team of workers
o experienced – so will need to respond to workers’ specific questions
o knowledgeable/patience
o well organized

Do you think that competition always benefits consumers?

Advantages/positive points
• lower prices
• more consumer choice
• more promotional offers and deals
• better customer service
• product innovation
• increased business efficiency leading to lower costs
It also leads to/Disadvantages
• hidden costs such as reduced quality [to cut costs]
• hard sell by putting pressure on customers to buy
• too much choice can be confusing to customer
• product differentiation making comparisons difficult.
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Net profit margin is a measure of the profitability of sales. It calculates the proportion of
sales value that is represented by profit.

Ways in which inflation might effect a company:

Inflation means that price levels in the country are rising and thus the cost of resource
inputs into the business rise. The consequences of this are:
• pressure on profit margins
• can lead to higher prices for company’s goods
• loss of competitiveness internationally
• loss of sales
• Higher costs.

Inflation will push up the costs of production for the company. This means it will have to
raise its prices in order to maintain profit margins, and increased prices usually result in
lower sales.

Market leader is a business that is the dominant business in the market. Market leader
has the greatest market share/sales volume.

Methods that a company could use to improve efficiency.

Efficiency in a factory can be improved in various ways. These include:
• introducing new technology
• better production methods
• training of employees
• introducing lean methods
• higher employee motivation
• Payment by performance.

Market research:
The action or activity of gathering information about consumers' needs and preferences.
By carrying out market research, a business can identify customer needs in a changing and
competitive international environment. This is important for a business to remain competitive in
the future. It is used to try to find out the answers to the following questions:
What feature of the product people like/dislike?
Would the people be willing to buy the particular product?
What price would they be prepared to pay?
What type of customers would by the product?
What is the competition like?
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Primary Research: is the collection and collation of original data. It involves direct meeting with
existing or potential customers.
Types of Primary Research method:
1. Questionnaires – is a set of questions to be answered as a means of collecting data for
market research. Postal, Face to face, or by Telephone
2. Interviews.
3. Consumer panels – are group of people who are ready to provide information about a
particular product.
4. Experiments.
5. Observation – recording, watching or audits
Advantages:

 Researcher can focus on both qualitative and quantitative issues.

 Addresses specific research issues as the researcher controls the search design to fit their needs
 Great control; not only does primary research enable the marketer to focus on specific subjects, it
also enables the researcher to have a higher control over how the information is collected. Taking
this into account, the researcher can decide on such requirements as size of project, time frame and
goal.
Disadvantages:

 Compared to secondary research, primary data may be very expensive in preparing and carrying out
the research. Costs can be incurred in producing the paper for questionnaires or the equipment for
an experiment of some sort.
 In order to be done properly, primary data collection requires the development and execution of a
research plan. It takes longer to undertake primary research than to acquire secondary data.
 Some research projects, while potentially offering information that could prove quite valuable, may
not be within the reach of a researcher.
 By the time the research is complete it may be out of date.
 Low response rate has to be expected.

Secondary research: Market research that's already compiled and organized for you. Examples
of secondary information include reports and studies by government agencies, trade
associations or other businesses within your industry.

What are internal sources of secondary data?

Every department within an organisation will have its own records that represent a
potential source of valuable data. For instance, records of past advertising campaigns
within the marketing department can be compared with copies of invoices held in the sales
department in order to judge their effectiveness and get ideas for future campaigns. Past
sales figures can also be used to spot trends and forecast future figures.
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What are external sources of secondary data?

There are several sources of existing data available from outside of the organisation that
may be of value. These include:

 Commercial market research organizations – including MINTEL, Keynote and Euro

monitor
 The Government – e.g., Monthly Digest of Statistics, Annual Abstract of Statistics,
Social Trends. In addition, there are now a number of government websites, such as
www.statistics.gov.
 Competitors – company reports and websites are easily accessible and contain a
limited amount of information
 Trade Publications
 The general media – to the archives of newspapers such as the Financial Times and
the Guardian and journals such as the Economist are now accessible online, making
them a useful starting point for research

Benefit from spending money on market research:

Market research would make the business more aware of the needs and requirements of its
customers. It would be better informed in making future decisions. It might also be more aware
of competitor’s products. It might also help them to identify new market opportunities. However it
would change the basis on which the company is run. It sells on the basis of technical
innovation. It might also divert capital away from other areas of the business.

Autocratic leadership style:

Autocratic leader is one who dominates their organization. They manage by telling and directing
not by discussion and persuasion.
Democratic leadership style:
Democratic leadership style will get employees in the decision making process.
Information about future plans will be openly discussed before decision will be made.
Laissez-faire leadership style:
This type of leadership style tends to make the broad objectives of the business known to
employees, but then they are left to make their own decisions and organize their own
work.

Private limited company: Ownership is usually just a few people. These are
commonly smaller businesses. Their shares are not traded on the stock exchange.
Their accounts don’t need to be audited, and their financial statements are private.
Public companies - Ownership rights (Shares) are traded on the stock exchange.
Anyone can have part ownership of the company i.e. BT, Microsoft. Their
accounts need to be audited and are of public information.
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Problem that a business might face for exporting:

o tariff barriers
o other import restrictions
o practical problems such as extra transport costs and language difficulties
o lack of knowledge of local market needs
o currency issues
o problems of breaking into established markets/no local contacts/products might
not be fashionable due to local tastes etc
o extra costs incurred.

Labor-intensive companies:
A process or industry that requires a large amount of labor to produce its goods or services. The
degree of labor intensity is typically measured in proportion to the amount of capital required to
produce the goods/services; the higher the proportion of labor costs required, the more labor
intensive the business.
Capital-Intensive companies:
A business process or an industry that requires large amounts of money and other financial resources
to produce a good or service. A business is considered capital intensive based on the ratio of the
capital required to the amount of labor that is required.

Niche Market:
Niche market is a specialized sub-part of a larger market with specific characteristics.

Span of control is the term now used more commonly in business management,
particularly human resource management. Span of control refers to the number of
subordinates a supervisor has.

Organisational structure:
An organizational structure activities such as task allocation, coordination and supervision, which are
directed towards the achievement of organizational aims.

Ways of increasing productivity:

 Introducing new machinery as machines work more faster than labour
 Train Workers to improve their performance
 Improve motivation as it will motivate them to work harder
 Piece rates will motivate workers to produce more to earn more money.
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These are from pastpapers 

Identify why there is high wage in some countries and low in others.

MY ANSWER:
It would be a good idea as the wages of labor are low resulting in a reduction in
cost for the company. Business in other country means a probability of increase in
sales. But there are also some disadvantages. Workers in the other country might
not have the right skills which means that they need training and training means
more cost to the business. Also there can be many other problems such as low
availability of raw materials, language barriers, cost of land etc.
Purpose of Advertising?
 To introduce new product in the market
 To increase sales
 Aware people about the product
 To improve company’s image
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Methods of pricing
1) Cost plus pricing: involves estimating how many of the products will be
produced, then calculating the total cost of producing these products and
finally adding a percentage mark-up profit.
FORMULA: total cost/production x the profit margin %
2) Penetration pricing: penetration pricing is when entering a new market. In
this the prices are set lower than the competitors’ price. The product is sold
at very low price which results in sales revenue to be low.
3) Price skimming: Is where a high price is set up for a new product on market.
The product is usually a new invention or a new development of an old
product.
4) Competitive pricing: involves putting the price in line with your competitors
price or just below that.
5) Promotional pricing: would be used when putting the price of a product low
for a set amount of time.

Methods of promotions that a company can use to increase sales:

Special offer: to attract customers to buy more and get something free. For
example: buy one get one free.
Low price for a product for a certain amount of time: to motivate people to come
and try products
Gifts: to attract customers to come and buy a product and get a free gift
Competitions: people will buy products to get a chance of winning prizes.

Cutting prizes can increase sales?

For: 1) More affordable so increase in demand
2) Increase in sales as there will be more demand

Against: 1) People might think cheap so low quality

2) Profit margin is decreased
3) People might like other products which will reduce sales
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Methods of motivating workers:

Batch Production: Batch production is a technique used in manufacturing, in which the

object in question is created stage by stage over a series of workstations, and different batches
of products are made.
Flow Producton: this is when large quantities of a product are produced in a
continuous process. It is sometimes referred to as mass production because of the
large quantities of a product that is produced.
Job production: This is where products are made specifically on order. Each order
is different and may or may not be repeated.

Lean Production: covers a variety of techniques used by businesses to cut down

on waste and therefore increase efficiency.

Exchange Rates: Is the price of one currency in terms of another for example:
$1=65 Indian rupees. 
Common Currency: is the result of an agreement between countries to use the
same currency for all business and other transactions.
Globalisation: term used to describe the increased worldwide competition
between businesses.

Multinational Companies: are those which have factories, produce goods or

services in more than one country. Sometimes called as Transnational business.
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Channel of distribution: A channel of distribution is the route taken by a product

as it passes from the producer to the customer. Distribution is one element of the
marketing mix. Thus it is important as part of an overall strategy of generating
sales.

Ways of measuring the size of a business.

 number of employees
 value of sales
 capital employed
 value of assets.

How new technology such as office computers might cut the costs of
companies?
New technology such as office computers might be expected to cut office costs in a
number of ways. They might reduce the number of employees needed because of
their labour saving potential. They might speed up activities and hence allow more
work to be completed in a given time period. Thus overheads spread over more
work.

Functions of Annual General Meeting.

AGM is the means by which communications between directors and shareholders
directly occur on a two way basis. Shareholders are informed as to what has
happened and directors are answerable for their actions. Resolutions formally
approved and accounts accepted.
Discussion of strategic issues but not operational ones .The meeting also acts as the
basis for election of company officers [board members but not managers].

Why some companies might fail?

• lack of capital
• competition
• failure to adapt to changes in market
• Customers don’t like their products!
• inefficiently managed.