AS商业笔记精

U1-1 Enterprise
2022年9月20日 20:40
Business: is any organization that uses resources to meet the needs of customers by
providing a product or service that they demand.
-purpose: creating& adding value to resources, making it more desirable.

use scarce resources-allow us to enjoy a very much higher standard of living
than would be possible if we remained entirely self-sufficient.
-do: identify the needs of consumers or other firms->purchase resources (factor

of production) in order to produce goods & services with aim of making profits.
*Business activity exists to produce consumer goods or services that meet the
needs of customers.
#what resource do businesses need?
Rent-interest-wage-profit
creating value: increasing the difference between the

cost of purchasing brough-in materials and the price the finished goods are sold
for.
Added value: the difference between the cost of purchasing bought-in materials
and the price the finished goods are sold for.
*all business aim to create value by selling goods and services for a higher
price than the cost of brough-in materials.=>Creating value=>increasing the
difference
分区 AS business 的第 1 页
difference
*if prepared to pay is higher than cost=>adding value is successful
#value created is not same as profit!!!

Other cost has to be paid, such as labor and rent.
However, if a business add value without rise cost, it increase profit
The role of entrepreneur

-intrapreneur: a business employee who takes direct responsibility for
turning an idea into a profitable new product.
Entrepreneur: someone who takes the financial risk of starting and managing a
new venture.
! Entrepreneurs have:
Characteristics of successful entrepreneur:
Major challenges faced by entrepreneurs:

1. Identify successful business opportunity: able to identify a
market need that will offer sufficient demand for their product
to allow business to be profitable.
-original idea comes from:
——own skills or hobbies
——previous employment experience
——franchising conferences and exhibitions
——small-budget market research
2 .Lack of finance or working capital – often difficult to encourage

people or banks to invest in new business ideas.
-lack of sufficient own finance: limited personal savings
-lack of awareness of financial support and grant available.
-lack of any trading record: a trading record would tend to give a bank
confidence when deciding to lend money or not.
-a poorly produced plan that fails to convince potential investors.
3. Determining a location
-need to minimize fixed cost->increase business's chances of survival
(operating from home) drawbacks:
[not be close to the area with the biggest market potential
[lacks status
[cause family tensions
[difficult to separate private life from working
4. Competition-a newly created business will often experience

competition from older, establish businesses with more
resources and more market knowledge.
5. Building a customer base- The longterm strength of the business

will depend on encouraging customers to return to purchase
products again and again.
Better service might include:
Why businesses fail?
1【补】step taken by business
3【补】
■leadership skills
■ cash handling and cash management skills
■ planning and coordinating skills
■ decision-making skills
■ communication skills
■ marketing, promotion and selling skills.
5【补】
The dynamic business environment
-dynamism in business refers to the flexibility or constant changes that occurs in
a business setting
-make setting up a new business risky
-new competitors
-legal changes, e,g. outlawing the product altogether
-economic changes that leave customers with much less money to spend
-technological changes that makes the method used by the new business old-fashioned
and expensive
Impact of enterprise on a country's economy
Social enterprise:
mainly social objectives: reinvest most of its profits into benefiting society
rather than maximizing returns to owners.
-features:
[ directly produce goods& services
[social aims( use ethical ways of achieving them)
[need to make a surplus or profit as they cannot rely on donations
#make its money in socially responsible ways and uses most of any surplus
made to benefit society.
#compete with other businesses in the same market.
Differences between businesses:
-local businesses: small& well define parts of a country
owners do not aim to expand
-National businesses: have branches or operations across a country
no attempt to sell internationally
-International business: sell more than one country->done by using foreign
agent or online selling.
-Multinational business: operate in more than one country->they have
established base for either producing or selling products outside their own
domestic economy.
U1-2 Business structure
2022年9月21日 16:47
Classification of business activity
Economic systems
Economic systems
*Almost every country in the world operate a mix economy
*usually, private sector dominate in a mixed economy
*In economies that are closest to a free market system have very small
public sector.
*The countries with central planning command economies (economic
resources are owner, planned and controlled by the state) will have very
few businesses in the private sector.
Changed in business activity

#industrialisation: the growing importance(importance measured by
employment level or output level) of the secondary sector manufacturing
industries in developing countries.
Benefits:
1)output-standard of living
2)output-export
3)job opportunity
4)tax revenue
5)value is added
Problems:
1)countryside-town-housing& social problems
2)raw material-import cost
3)environment pollution
#Deindustrialisation: movement from the secondary sector to the tertiary sector.

Cause:
1)income-living standard-spend much on service
2)manufacturing businesses-competition-efficient-cheaper
3)imports-deindustrialization
Consequence:
1)job losses on the primary& secondary sector
2)Movement of people towards town& cities
3)job opportunity
4)Increased need for retraining program( to allow workers to find job in area)
The legal structure of business organizations-the private sector
#sole trader:
The sole proprietor has unlimited liability- this means the business owner has a
full legal responsibility for the debt of the business.
#partnership:
-does not create a separate legal unit

-a grouping of individuals
Limited companies:
1.limited liability:
2.legal personality:
-A company is recognized in law as having a legal identity separate from that of
its owners.
-This does not take all legal responsibilities away from the managers and
owners.
3.Continuity
-contributes through the inheritance of shares.
Private limited company
"limited" or "LTD" ("PRE” in some countires)- legal form

Shares-owned by the original sole trader, relatives, friends and employees.
Public limited companies
('plc' or 'inc')
-very substantial funds for expansion
-Advertise their shares for sales and have them quoted on the stock exchange.
Legal formalities in setting up a company
公司章程：公司名字，授权，地址，目标
内部运转机制
内部运转机制
Other forms of business organization

#Cooperatives :
-especially in agriculture and retailing
*features:
-all members can contribute to the running of the business.
-all members have one vote on important meetings
-Profit are shared equally among members.
#Franchise
特许经营：使用现有成功企业的名称，标志和交易系统的企业
U1-3 Size of business
2022年9月20日 20:42
Measuring business size:

-why?
=government=assist small
=Investors=compare[close competitors]rate of growth
=Customers=large firms
-Problems
*different way-different result
*no internationally agreed definition
Different measure of size:
# profit cannot be a measurement; it only means the company's performance
Small firms:
Other aid- particular problem:
1. Lack of specialist management expertise
2. Little security to offer banks in exchange-reluctant to sell goods on credit
3. Limited product range
4. Difficulty in finding suitable and reasonably priced premises.
small and large business
Family business
*family-owned business are those that are actively owned and managed by at least two
number of the same family.
number of the same family.
Business growth
Reasons:
1. Increased profits
2. Increased market share-higher market profile and greater bargaining power
3. Increased economies of scale
4. Increased power and status-the opportunities to gain publicity or influence government
policy will increase.
5. Reduce risk of being a takeover target-a large company may become too large a target
a potential 'predator' company.
Internal( organic) growth
e.g a retailing business opening more shops in towns and cities where it previously had
none.
#advantages:
• it can be financed through internal funds e.g. returned profits
• less risky than taking over business
• allows business to grow at more sensible rate
• builds on a business's strength
#disadvantages:
• slow growth and the shareholders may prefer more rapid growth
• growth achieved may be dependent on the growth of the overall market
• harder to build market share if the business is already a market leader
• the business can be affected by liquidity problem(cash problem)
• the business can be affected by liquidity problem(cash problem)
• Work quite slow
• avoid excessively fast growing-inadequate capital and management problems associate with bring
two businesses together that often have different attitudes and cultures.
External Growth
#horzontal integration:
#Vertical integration:
#backward vertical integration:
#conglomerate diversification merger:
Advantage:
^reduces rick of losses
^profit margins can be increased due to other businesses
^market share can be increased
Disadvantages:
^risk of failure might increase due to lack of experience in the new market
^entry problems might occur
^if the business is new then it's difficult to lower down the prices as compared to
established firms.
Why a merger/takeover may achieve objectives

-share research facilities& pool ideas
-economies of skills
-save on marketing costing& distribution costs by using the same outlets and sales teams.
-rationalization of property and other assets will reduce duplication and cost.
Why a merger/takeover may not achieve objectives?

Why a merger/takeover may not achieve objectives?
- Diseconomy of scale
- Different business and management culture. e.g. the approach each company takes to
environmental issues may be so different that the two sets of managers and workers
may find it very different to work effectively and cooperatively together.
- little benefit from combined research departments or marketing/distribution facilities if
the original businesses produced different product.
- The rate of growth is too rapid for director to manage effectively.
Joint ventures and strategic alliances as method of external growth

*Strategic Alliance: agreement between two organization to commit resources to achieving
a specific objective while remaining independent.
*A strategic alliance is a form of external growth that does not involve complete integration
or changes in ownership.(通过与其他企业、组织或个人建立长期合作关系进入新的业务领域。结成长
期合作关系的各方一般互不拥有，而是成立一个新的商业实体（如合资企业）来经营新的业务…)
*can be made between a wide variety of businesses.
U1-4 Business objective
2022年9月22日 9:48
The importance of objective:

=A business aim helps to direct, control and review the success of a business activity.
If no objectives:
-no sense of direction or focus for the management team or employees
-do not know what to achieve
-no way of assessing success or failure
-investors will not be keen to invest in the business as it is unlikely to have a clear future
"SMART":
S-specific: focus on what the business does and should apply directly to that business.
M-measurable: objectives that have a quantitative value are likely to prove to be more effective
targets for directors and staff to work towards.
A-Achievable: objectives set too high will demotivate
R-realistic and relevant: compared with the resources of the company and should be expressed in
terms relevant to the people who have to carry out.
T-Time-specific: A time limit should be set when an objective Is established.
T-Time-specific: A time limit should be set when an objective Is established.
Objectives of Private sector Business:
-profit maximizing( producing at the level of output where has greatest positive profits
Limits:
1. Focus on short-term profit may encourage competitors to enter
2. Seek to gain higher share
3. Owner more concern about leisure time
4. Most business analysts performance though capital employed
5. Shareholder prioritize other objectives
6. Difficult to assess where is the point best profiting.
-Profit satisficing
Means aiming to achieve enough profit to keep the owner satisfied.
=In contrast to profit maximization
-survival
Once the business has become firmly established, then other longer-term objective can be
established.
-increasing market share
Indicate that the business's marketing strategies are proving more successful than those of its competitors.
Benefits:
1. Keen to stock and promote the best-selling brand
2. Be supplied to retailers at a low discount rate-keen to stock them-give producer a higher
profit margin
3. Effective promotional campaigns
-increasing shareholder value
Pursuing strategies to increase return to shareholders
-corporate social responsibility(CSR)
Influential pressure groups are forcing businesses to reconsider their approach to decision-making
*pressure groups: organization created by people with a common interest or aim, who put
pressure on businesses and government to change policies so that an objective is reached.
-growth
Limits:
1. Expansion is too rapid lead to cash flow problems.
2. Be achieved at the expense of lower profit margins.
3. Larger business can experience diseconomies of scale
4. Using profits to finance growth can lead to lower short-term returns to shareholders.
5. Growth into new business areas and activities-loss of focus and direction for the whole
organization
-maximizing short term revenue
=benefit managers and workers when salaries and bonuses are dependent on sales revenue levels
Objectives of public sector

-to provide an efficient reliable service to the public
-to encourage economic and social development
-to create employment or prevent major job losses if the industry is making a financial loss
-to meet financial targets set by the government
-to achieve high environment standards.
Objectives of social enterprise
#summary: factors that determine business objective

-business culture:
Aims, mission statements, objectives, and strategies.
# Business aims
=very long-term goals that a business hopes to achieve.
=The core central business's activity is expressed in its business aims.
*common:
-embracing-designed to provide guidance to the whole organization
#mission statement
$evaluation of mission statement

Pro:
- Inform group outside what the central aim and vision are
- Motivate employees
- Include moral statements or values-help guide and direct individual employees' behavior
- Establish what the firm is about, for the benefit of other group
Con:
- Too vague and too general
- Just to make stakeholder groups feel good
- Virtually impossible to analysis or disagree with.
- Lacking in specific details
#corporate objectives
=specific & measurable
Relation between mission, objectives, strategy and tactics

Relation between mission, objectives, strategy and tactics
Annual(company)report: a document that gives details of a company's activities over the year,
including its financial accounts.
Business strategy: a long term plan of action for a business, designed to achieve a particular
objective.
Tactic: a short-term action a part of an overall strategy.
Aims and objectives provide the focus for business strategies
Once a strategy has been decided, then small-scale tactical decisions must be taken
The role of objectives in the stages of business decision-making
1. Set objectives
2. Assess the problem or situation
3. Gather data about the problem and possible solutions.
4. Consider all decision options
5. Make the strategic decision
6. Plan and implement the decision
7. Review its success against the original objectives.
How objectives might change over time
>Newly formed business-satisfied the survival objective-pursue goals of growth or increased profit.
>Competitive and economic environment change-force the business to switch from growth to
survival as its main aim.
>short-term goals fit to long-term goals
Translation of objectives into targets and budget

Target: a short-term goal that must be reached before an overall objective can be achieved.
*senior management is to convert the overall objectives of the business into targets for individual
departments, groups, and individuals.
Budget: a detailed financial plan for the future.
! Communicating objectives!
Benefits:
1. Employees and managers have a greater understanding of both individual and company-wide
goals
2. Employee understand the overall plan and how their individual goals fit into the company's
objectives
3. Shared the responsibility for target and objectives by interlinking their goals with those of
others.
4. Managers stay in touch with employee's progress more easily.
#if failed to communicate:
#if failed to communicate:
-resistance to change & potential industrial action
Ethical influence on business objectives and activities
Evaluating ethical decisions
In short-term:
- Can add to business cost
- Not taking bribes to secure business contracts can mean failing to secure significant sales.不受
贿以获得商业合同可能意味着无法获得大量销售。
U1-5 Stakeholders in a business
2022年10月10日 13:49
The main stakeholders of a business are:

-owners
-customers
-suppliers
-employees, including managers and their families
-local communities
-government and government agencies
-special interest groups ( such as pressure groups that want to change a
business's policy towards pollution)
-lenders
External stakeholders: individuals or groups who are separate from the business
but are affected by or interested in its operation.
Internal stakeholders: individual or groups who work within the business, or
own it, and are affected by the operations of the business.
#Most of the groups are external stakeholders. Owners, managers and other employees are
referred to as internal stakeholders.
Stakeholders' role rights and responsibilities.
Importance and influence of stakeholders on business activities.
*the shareholders are the owner of the company and the company has a legal binding duty to
put their needs first- to take actions and to make decisions that will increase shareholder
value.
Business accountability to stakeholders and how stakeholders aims
impact business decisions
#Responsibility to customers
- satisfy consumer needs - stay in the business in long-term
- quality, design, durability, customer service should consider customers'
aims
- not to break the law concerning consumer protection and accurate
advertising.
*Benefit: consumer loyalty; repeat purchase; good publicity; good customer
feedback.
#responsibilities to suppliers
- the quality of a product
- be found and given clear guidance on what is required.
- the purchasing department should take decisions that satisfied suppliers'
aim and requirements.
*benefits: supplier loyalty, the likelihood of securing reasonable credits terms
and a preparedness to meet deadlines and special order requests.
#responsibilities to employees
- laws outlines the business responsibilities to workers.
- providing training opportunities& job security
- above minimum wage
- offering good working conditions
- involving employees in some of the decision making.
*benefits: employee loyalty, low labor overturn, ease of recruiting workers,
employee suggestions for improving efficiency& customer service; improved
motivation; and more efficient communication.
#responsibilities to local community
- Offering secure employment
- Using local suppliers
- Reducing the transport impact
- Keeping other adverse environmental effects to a minimum.
Benefits: local councils more liking to give permissions, giving contracts,
community accept some of the negative effects.
#responsibilities to government
- Meet their legal laws
- Pay tax on time
- Complete government statical
- Seek export markets
*benefits: developing good relationship-more likely to be granted; more likely
to receive valuable government contract; subsidies; more awarded license.
Conflicts arising from different stakeholder aims
Impact on stakeholders of changing business objectives.
U2-10 Human resource management
2022年9月25日 20:01
Human resource management: purpose and role

#Aims to recruit capable, flexible and committed people.
*if managed effectively, the business is more likely to achieve its overall
objectives.
Human resources management(HMR): the strategic approach to the effective

management of employees so that they help the business gain a competitive
advantages.
It focus on:
- Workforce planning( how many employees, what skill, are needed in the
future)
- Recruitment& selection
- Developing employees by appraising and training them.
- Preparing contract
- Dismal and redundancy of employees
- Taking responsibility
- Monitoring and improving employee morale and welfare
- Introducing and managing payment
- Measuring and monitoring employee performance
Working force
Workforce planning: forecasting the numbers of workers and the skills that will
be required by the organization to achieve its objectives.
Workforce audit: a check on the skill and qualifications of all existing
workers/management
Number of employees required depend on

1. Forecast demand for the products-influenced by market and external
conditions, seasonal factors, competitors' action, trends in consumer
tastes.-help to establish labor needs.
2. The productivity level
3. The objectives of the business: plans to expand?;increase customer
customer-service levels?
4. Changes in the law regarding workers' right
5. The labor turnover and absenteeism rate: higher the rate-greater needs
to be replaced.
The skills of the workers required

Depend on:
Depend on:
- Pace of technology change in the industry
- Need for flexible or multi-skilled workers
Labor turnover
- Measures the rate at which employees are leaving an organization.
Number of employees leaving in 1 year/ average number of people employed×
100
#High labor overturn
*cost
- Recruiting, Selecting , and training new staff
- Poor output level & customer services due to staff vacancies
- Difficult to establish customer loyalty due to lack of regular, familiar
contact
- Difficult to establish team spirit
*potential benefits
- Low-skilled and less-productive staff might leave
- New ideas and practice
- Help business to plan to reduce employee numbers
!! High labor overturn is more likely in areas of low unemployment, as there
may be better paid and more attractive jobs available locally.
!! It is also true that some industries have a higher overturn rates than others.-
many learners, part-time find job in fast-food restaurant-over100%
!! In other organizations, labor turnover rates can be very low- law practice
and in scientific research.
Recruiting and selecting employees

Will be necessary when:
@ the business is expanding and needs a bigger workforce
@employees leave and need to be replaced
Recruitment: the process of identifying the need for a new employee, defining
the job to be filled and the type of person needed to fill it, and attracting suitable
candidates for the job.
Selection: the series of the steps by which candidates are interviewed, tested and
screened to choose the most suitable person for a vacant post.
Recruitment agency: a business that offers the service of recruiting applicants
for vacant post.
#recruitment and selection:

-Job description: a detailed list of the key points about the jobs to be filled,
starting all its key tasks and responsibilities.
-information for vacant job:
[Job title]
[details of the tacks to be performed]
[details of the tacks to be performed]
[responsibility involved]
[place in the hierarchical structure]
[working conditions]
[how the job will be assesses and how performance will be measured]
-Person specification: a detailed list of the qualities, skills and qualifications

that a successful applicant will need to have
*based on the job description-cause these factors can only be identified once
the nature and complexity of the job have been determined.
Pro:
To give an outline of the type of person the business is looking for to fill a
position. To make applicants aware of the skills they should have if they apply
for the job. To state which skills are essential and which are merely desirable.
The recruitment period could be significantly shortened. Recruitment costs
would be reduced.
-preparing a job advertisement

--need to reflect the requirements of the job and the person specification
->application form :- most common way
A set of questions answered by a job applicant to give a potential employer
information about the applicant, such as educational background and work
experience
-Making a shortlist for applicants:

Based on their personal details and work experience, often contained in a CV or
resume.
*curriculum vitae: a detailed document highlighting all of a person's
professional and academic achievements, work experience and awards.
*resume: a less detailed document thana CV, which itemizes work experience,
educational background and special skills relevant to the job being applied for.
*Reference: comment form a trusted person about an applicant's character or
previous work performance.
-Selecting between the applicants

=interviews
# Assessment : achievements, intelligence, skills, interests, personal manner
and personal circumstance.
=aptitude tests
Ability in a specific test
=psychometric task
Test characters-attitudes and personality by using role plays, questions and
problem-solving situation.
#Assessment centers: a place where a range of test is used to judge job
applicants on their potential ability to perform a particular role.
#internal recruitment: when a business aims to fill a vacancy from within its
existing workforce.
#external recruitment: when a business aims to fill a vacancy with a suitable
#external recruitment: when a business aims to fill a vacancy with a suitable
applicant from outside of the business, such as an employee of another
organization.
Pros of internal recruitment:

- Already be known to the selecting team.
- Know internal method- no need for training.
- Culture of the business will be well understood by applicants
- Quicker
- Cheaper(external advertising& recruitment agency.
- Internal staff a career structure and a chance to progress.
- New-have not get used to new style of management.
Pros of external recruitment:
- Bring new ideas-help to focus on future
- Wider choice of potential applicants
- Avoids resentment
- Standard of applicants could be higher.
Employment contracts
Definition: a legal document that sets out the terms and conditions governing a
worker's job.
#features:
- Responsibilities and main task
- Permanent or temporary
- Working hours & flexibility expected
- Holiday entitlement & other benefits
- The number of days' notice
Redundancy and dismissal of employees

Redundancy: when a job is no longer required, the employee doing this job
becomes unnecessary through no fault of their own.
Dismissal: being dismissed or fired from a job due to incompetence or breach
of discipline.
Unfair: ending a worker's employment contract for a reason that the law
regards being unfair.
Dismissal if fair:
1. Inability to do the job
2. Negative attitude
3. Disregard of required health and safety procedures.
4. deliberate a destruction of an employer's property
5. Bully other employees
Unfair:
1. Pregnancy
2. A discriminatory reason
3. Being a member of a union.
#Employee morale and welfare
Employee morale: overall outlook, attitude and level satisfaction of employees
when at work.
*If employee morale is high, productivity often increases and labor turnover is
low
Employee welfare: employees' health, safety and level of morale when at work.
- Work-life balance
Definition: a situation in which employees are able to allocate the right
amount of time and effort to work and to their personal life outside work.
Change more rapid:
[customers expect to have goods and services available outside traditional
working hours.]
[Organizations wants to match their business needs with the way their
employees want to work]
[Globalization has led to much greater levels of competition, so efficiency
and flexible are important for a business to remain competition.]
Method to control balance:
[flexible working]
[teleworking-working from home]
[Job-sharing: allows two people to fill one full-time vacancy although each
worker will only receive a proportion of the full-time pay]
[sabbatical period: an extended period of leave from work of up to 12
months.]
- Impact of diversity and equality in the workplace

Equality policy: practices and processes aimed at achieving a fair
organization where everyone is treated in the same way without prejudice
and has the opportunity to fulfil their potential.
Diversity policy: practice and processes aimed at creating a mixed
workforce and placing a positive value on diversity in the workplace.
Promoting equality impact:

1.creating an environment with high employee morale and motivation.
2.developing a good reputation and the ability to recruit top talent based
on fairness.
3.measuring employee performance by their achievement, not by any
discriminatory factor.
Promoting diversity impacts:
1.bigger market share-attracted by diverse sales force
2.selection based on merits not on discrimination
3.increasing creativity
4.achieving culture awareness
5.promoting diverse language skills
#Training and developing employees
Training: work-related education to increase workforce skills and efficiency.
Types of training
- Induction training: introductory training program to familiarize new
recruits with the systems used in the business and the layout of the
business site.
- On the job training: instruction at the place of work on how a job should
be carried.
- Off the job training: training undertaken away from the place of work.
Impact of training on a business and its employees:

=training can be expensive
=lead to well-qualified employees-better paid job
#Poaching: when one business seeks to employ well-trained workers from

another business.
- Discouraged some businesses from setting up expensive training program
*link:
1. poorly trained workers-unsatisfied customer service-accident: health,
safety-food
2. Increase the level of employee satisfaction and motivation-sense of
achievement-×trained: broad and demotivated. The multi-skilling of
workers - great benefit to a business - especially-rapid economic&
technology change.
Multi-skilling: the training of an employee in several skills to allow for greater
flexibility within the business.
Development and appraisal of employees:

(continuous process)
Includes:
1. Form of new challenges and opportunities
2. additional training courses
3. Promotion with additional delegated authority
4. Chances for job enrichment
Sense of self-fulfillment- HR establish career plan- feel relevant and realistic-
individual's progress and improvement be geared to the needs of the company.
#employee appraisal: The process of assessing the effectiveness of an employee

judged against pre-set objectives.
Employee development to encourage intrapreneurship:

- Encouraged to be independent thinkers and creative
- Given opportunity to mix and workers with other skilled employees from
different department
different department
- Empowered with the authority and resources they need to introduce
innovations
- Assured that some failure is expected and acceptable
- Encouraged to start with small ideas and innovations
Management and workforce relations

Benefits of cooperation between management and the workforce
- Fewer days are lost through strikes and other forms of industrial action.
- It will be easier for management to introduce change in the work place.
- Contribution be recognized- pay levels and other benefits might reflect this.
- Agreement on more efficient operations will increase the competitiveness.
- Workers' practical insight into the way the business operate can contribute
to more successful decisions.
Why do workers join trade unions:
Collective bargaining: the process of negotiating terms of employment

between an employer and a group of workers who are usually represented by
a trade union official
Trade union recognition: when an employee formally agrees to conduct
negotiations on pay and working conditions with a trade union rather than
bargain individually with each worker.
Benefits of collective bargaining:
- Save time and prevent workers from feeling that one individual has obtain
better pay and conditions than others
- Useful channel
- Impose discipline on members who plan to take hasty industrial action that
could disrupt a business
- The growth of responsible , partnership unionism has given employers a
valuable forum for discussing issues of common interest and making new
workplace agreement.
Disputes between trade union and management hu

Forms of industrial action
- Continue collective bargaining
- Go slow
- Work-to-slow
- Overtime bans
- Strike action
Method to try to resolve an industrial dispute:

- Negotiations
- Public relations campaign
- Threats of redundancies
- Changes of contract
- Lock-outs
- closure
U2-11 Motivation
2022年10月24日 13:07
Motivation
Well-motivated workers benefits the business
Human needs
Satisfying human needs at work:
- Social connection: by working in groups or teams
- Challenge: by providing different work tasks and chance of promotion
- Significance: by praising and recognizing performance
- Certainty: by providing employment contracts and some job security.
Motivation theories
Content theories of motivation:
- those human need that energize and direct human behavior.
- How managers can create conditions that allow workers to satisfied these
needs.
Taylor and scientific management

Scientific management: establishing an idea or a hypothesis, studying and
recording performance at work, altering working methods and re-recording.
20-century manufacturing plants:

- Most workers are untrained and non-specialized
- Poorly led by supervisors and managers who had little training.
- Rarely any formal selection or appraisal system of employees
- Most workers were recruited on a daily basis with no security of
employment.
Taylor's scientific approach to improving worker output or productivity

Taylor's scientific approach to improving worker output or productivity
#people are motivate by money alone-formed the basis of Taylor's main

motivational suggestion: wage levels based on output.-the amount paid should
be directly linked to output through a system called piece rate.
*piece rate: payment for a worker for each unit produced.
Result of Taylor's work
Mayo and human relations theories

He initially assumed that working conditions had a significant effect on
workers' productivity
Evaluation of mayo's research for today's business
- Giving workers more of a role in business decision-making.-worker
participation
- Human Resource have been established to try to put Hawthorne effect into
practice.
- Team or groups working is applied in many types of modern business
organization-great opportunity to benefit from the effect
- Individual goals-opened up new fields of research for industrial
psychologist
Maslow and human needs

The importance of his work to business managers is this:
- Our needs determine our action- we will always try to satisfied.
- If work can be organized so that some or all needs of employees can be
satisfied at work, then they will become more productive and satisfied.
#limitations of Maslow's approach
- Not everyone has the same needs
- Difficult to identify the degree to which each need has been met and
which level a worker is on.
- Money also play a role in satisfying the other levels of needs. High
incomes can increase status and esteem.
- Self-actualization is never permanently achieved. Job must continually
offer challenges and opportunity for fulfillment, otherwise regression will
occur.
Herzberg and the two factor theory

Aims to discover
#The consequence of Herzberg's two-factor theory
=higher paid-help to remove dissatisfaction about work-will not lead to
effective motivation-Movement- movement does not mean that someone wants
to do the job well, require motivation.
=offer higher pay, improve working conditions and lass heavy-handed
supervision of work.-quickly taken for granted
=motivators-prepared to work willingly-always give their best-be provided by
adopting the principles of job enrichment.
- Complete units of work

- Feedback on performance
- A range of task
#Evaluation of Herzberg's work for today's businesses

- Teamwork is now much more widespread
- Workers tend to be made much more responsible for the quality of their
own work
own work
- More firms are continually looking for ways to improve effective
communication, and group meetings improve effective communication are
often favored.
(拍照放）
McClelland and motivational needs theory

Achievement motivation:
Authority motivation:
Affiliation motivation:
Process theory
=emphasis how and why people choose certain behaviors in order to meet their
personal goals and the thought processes that influence behavior.
Based on the following three beliefs:

Based on the following three beliefs:
1. Valence-the depth of the desire of an employee for an extrinsic reward
2. Expectancy-the degree to which people believe that putting effort into
work will lead to a given level or performance.
3. Instrumentality-the confidence of employees that they will actually get
what they desire, even if it has been promised by the manager.
Motivation methods in practice

Financial motivators:
1. Time-based wage rate: a payment per hour is set
Pros:
-It offers some security over pay level
-different rates can be offered to different types of workers.
Cons:
-no incentive to increase output as pay level is not directly linked to output.
-Labor cost per unit will depend on output, which may vary.
Often used in:
-The output of non-managerial jobs is not easy to measure.
-Focus on quality is more important than quantity
2. Piece rate:
*The piece rate can be adjusted to reflect the difficulty of the job and the
standard time needed to complete it.
*Partial piece rate: Combined with a low basic wage and then piece rate is paid
if output rises above a set level.
if output rises above a set level.
Often used in situation where:

- The output of each worker is easy to identify and measure.
- There is a need to keep unit costs as low as possible.
3. Salary:
- status and security of income are important motivators in managerial or
non-manual jobs.
- Overtime pay for extra hours is not expected.
Pros:
- It creates the incentive to increase sales.
- It may be in addition to a basic salary so it could offer some security of pay
too.
Cons:
- it discourages teamwork amongst sales employees.
- It may lead to pressurized selling which damages customer relationships.
4. Bonus payment:
Pros:
- It is paid to individuals for outstanding work or to teams for reaching
targets.
- It creates the incentive for employees to do well.
- It is in addition to basic salary, so it offers some security too.
Cons:
- It can cause resentment if the bonus is not received.
- It damages team spirits if some members receive a bonus and others do not.
- It reduces motivation if no bonus are paid.
Often used in situations where:
- The business wants to make one-off payments which are not part of an
- The business wants to make one-off payments which are not part of an
employment contract.
- The business wants to reward employees for good performance
5. Performance-related pay:
- Regular target setting, establishing specific objectives for the individual

- Annual appraisals of the workers' performance against the pre-set targets
- Paying each worker a bonus when targets have been exceeded.
Often used in situations where:

- Managers want to encourage target setting and target achievement
- Employee performance cannot be measured in terms of output produced or
sales achieved.
6. Profit sharing
Pros:
- It aims to increase the commitment of the workforce to make the business
profitable.
- It might lead to suggestions for cost cutting and ways to reduce sales.
Cons:
- I might be only be a very small proportion of total profits so is not
motivating.
- Shareholders might object as it could reduce profit for them.
- It reduces profits retained for expansion.

Managers wants to increase employee focus on business profits to encourage
cost-cutting and revenue-increasing ideas.
7. Share-ownership schemes
A scheme that gives employees shares in the company they work for or allows
A scheme that gives employees shares in the company they work for or allows
them to buy those shares in discount.
Pros:
^ it encourages an increase sense of belonging and commitment

^Workers are more likely to participate in decision-making aimed at business
success.
Cons:
- It may be a very small number of shares so is not motivating
- Shares might just be sold so there is no long-term commitment
- Managers often receive more shares so the workforce may feel resentment
towards the managers.
- Senior managers need to increase their commitment to the success of the
business
- The business wants to encourage loyalty ad participation from all
employees.
8. Fringe benefits
Non-financial motivators:
1. Job rotation
Pros:
- Rotation may relieve the boredom of doing one task
- give the worker multiskills, which makes the workforce more
flexible
- Workers are more able to cover for a colleague's absence.
Cons:
- decrease empowerment or responsibility for the work being
performed.
- Job rotation is more limited in scope than job enrichment
- it does not necessarily give a worker a complete unit of work
to perform, but just a series of separate tasks.
2. Job enlargement
2. Job enlargement
3. Job enrichment
Cons:
- Lack of employee training——lower productivity
- See to do more work——planned carefully
- Not able to cope with——frustration & demotivation
- Managers reduce control—— find it difficult
4. Job resign
- 11.3: easier to redesign
11.4: These jobs can lead to improved recognition by management of the work
undertaken by workers and can increase worker's chances of gaining promotion as a
result of the wider skills gained.
• Enhances the Quality of Work-Life: Job redesigning motivates the

employees and enhances the quality of their work life. It
increases their on-the-job productivity and encourages them to
perform better.
• Increases Organization’s and Employees’ Productivity: Altering
their job functions and duties makes employees much comfortable
their job functions and duties makes employees much comfortable
and adds to their satisfaction level. The unambiguous job
responsibilities and tasks motivate them to work harder and give
their best output. Not only this, it also results in increased
productivity of an organization.
• Brings the Sense of Belongingness in Employees: Redesigning job
and allowing employees to do what they are good at creates a
sense of belongingness in them towards the organization. It is
an effective strategy to retain the talent in the organization
and encouraging them to carry out their responsibilities in a
better fashion.
• Creates a Right Person-Job Fit: Job Redesigning plays an
important role in creating a right person-job fit while
harnessing the full potential of employees. It helps
organization as well as employees in achieving their targets or
goals.
5. Training and development

Development: the gaining of new or advanced skills and knowledge as well as opportunities
to apply what Is gained.
Pros:
- Increase the productivity and flexibility
- Increase the status of workers and give them access to more challenging
- Reach their full potential- increase the opportunities for self-actualization
- Important incentives to stay with the business.
Cons:
6. Opportunity for promotion and increased status

Employee promotion: the advancement of an employee within a business to a
higher level of responsibility and status.
Employee status: the level of recognition offered by an employer to worker in
terms of pay, level of responsibility and benefits.
Employee participation in management and the control of business activity
Employee participation: active encouragement of employees to become

involved in decision-making within an organization
Teamworking
Empowerment
The giving of skills, resources, authority and opportunity to employees so that
they can take decisions and be accountable for their work.
Pros:
- Quicker problem solving( response immediately - more relevant experience
- Higher motivation and morale
- Higher involvement and commitment( two way communication- reduce labor
turnover
- Managers focus on bigger issues
Cons:
- Lack of experience
- Reduce supervision and control- poor management
- Lack of coordination
- Some workers be reluctant to accept the accountability
Quality circles
Quality circles
Pros:
- Have hand on experience- suggest the best solution
- Results are present- apply in whole organization
- Effective method - allowing participation- Herzberg's ideas
Cons:
- Time- consuming
- Not all workers want to be involved
- Managers ignore to often- discouraged.
U2-12 Management
2022年11月7日 13:08
Manager: the person responsible for setting objectives, organizing resources

and motivating workers so that the objectives of the business are met.
Traditional manager function:

- Planning - a direction for the future business
- Organizing - the people and other resources needed
- Directing - leading and motivating people
- Controlling - ensuring that plan is being followed
The role and managers : Fayol and Mintzberg

Management: the organization and coordination of activities in order to achieve
the define objectives of the business.
Fayol: the functions of management

focus on the relationship between employees and managers
1. Planning: think ahead- senior manager establish(overall objectives), less
senior managers follow(tactical objectives)
2. Organizing resources to meet objectives: recruited carefully an
encouraged- clear division of task- functional department work towards the
common objectives
3. Commanding, directing and motivating employees: guiding, leading and
overseeing employees- objectives are met- development, all abilities at
work- show initiative
4. Coordinating activities: consistency and coordination between different
parts- goals welded together- common sense of purpose- practical level-
two divisions do the same thing- wasteful duplication of effort
5. Controlling and measuring performance against targets: clear objectives for
each section- responsibility to evaluate- provides feedback
Mintzberg: management roles

- Interpersonal roles- dealing with and motivating employees
- Informational roles- acting as a source, receiver and transmitter
- Decisional roles- taking decisions and allocating resources to meet the
organization's object
The contribution of managers to business performance
The key indicators that managers are having a positive impact on business
performance are:
- The business regularly meets its objectives
- High levels of customer satisfaction
- High motivation and low turnover
- Respected brand image
- High regard from external stakeholders
- Excellent communication
Management styles
Main management position:
- CEO: highest ranking - making major corporation decisions, managing
overall operations, managing company resources
- Director: elected member - determining and implementing the company's
policy, report to the CEO.
- Manager: any individual - direct, motivate and discipline the employees in
their section or department.
- Supervisors: appointed by managers - leading and controlling a team.
Autocratic management
Autocratic management
Autocratic managers take decisions on their own, with no discussion- workers

becomes used to it- depend on guidelines- no initiative
= motivation low- no feedback
Pros:
- Police and arms, immediate response
Democratic management
Encourage discussion with workers- communication is two-way.

Workers have the opportunities to start ad respond
Pros:
- Better final decisions- much to contribute and can offer valuable work-
Herzberg- improve workers' motivation
- Responsibility for objectives and strategy- more committed to ensuring that the
decisions are put into effect successfully
Cons:
- Slow process- unsuitable in certain situations
Paternalistic management
Listen, explain issues and consult with workers, but do not allow them to take
decision.
Pros:
- Suitable in a business with unskilled, untrained or newly appointed
- Suitable in a business with unskilled, untrained or newly appointed
workers.
Demotivate experienced workers who would like to be given responsibility of
decision-making and opportunities for participation.
Laissez-faire management
Allows workers to carry out tasks and take decisions themselves within very
broad limits.
_extreme version of democratic management
Pros:
- Research or design teams
Cons:
- Lack of confidence- poor decision and poor motivation
McGregor's Theory X and Theory Y
Theory X: The view that some managers believe that employees are lazy, fear-
motivated and in need of constant direction.
Theory Y: The view that some managers believe employees are internally
motivated, enjoy their work and are prepared to take on additional
responsibilities.
Theory X managers believe that workers:

- Dislike work
- Will avoid responsibility
- Are not creative
Theory Y managers believe that workers:
- Can drive as much enjoyment from work as from rest and play
- Will accept responsibility
- Will accept responsibility
- Are creative
The best management style depends on many factors:

- Training and experience; degree of responsibility
- Time available
- Attitude of managers; management culture
- Importance of the issue
U3-17 The natural of marketing
2022年11月15日 14:50
Role of marketing
Market involved a number of management:

- Market research
- Product design and packaging design
- Pricing, advertising and distribution
- Customer service
Marketing objectives and corporate objectives
To be effective marketing objective should

- Be linked to corporate objectives and be focused on helping the business
achieve those overall targets
Why are marketing objectives important

- Provide a sense of focused direction for the marketing department and help
the business to achieve its overall corporate objectives.
- Business success can be measured against the targets set by the objectives
- Marketing objectives can be broken down into regional and product sales
targets.
targets.
- Marketing objectives form the basis of marketing strategy. Marketing
objectives will impact on the marketing strategies adopted. It is necessary
to have a clear vision of the business's objectives in order to discuss how
marketing decisions can help to achieve them. Examples of marketing
strategics include:
Coordination of marketing with other departments

Finance
- Uses the Sales forecasts of the market department to help construct cash
flow forecast and operational budgets
- Ensure necessary capital is available to pay
Human resources
- Uses sales forecast to prepare a workforce plan
- Ensure the recruitment and selection of qualified and experienced workers
are sufficient
Operations
- Market research-new product development
- Uses sales forecast to plan the capacity needed
17.2 Demand and supply
Equilibrium price: the price level at which demand is equal to supply
17.3 markets
Market segment: a subgroup of a whole market in which consumers have
similar characteristic.
Industrial markets and consumer markets:

Industrial market: the selling of products by businesses to other businesses,
also known as business to business or B2B.
Consumer market: the selling of products by businesses to the final end user,
also known as business to consumer or B2C.
Local, national and international markets
Local - operate in local market
National - greater potential to increase sales - banks, supermarket chains.
International - greatest sales potential - expanding into foreign markets is a
significant strategic decision because the change in tastes, cultures, and laws.
• An international market means that a business will target consumers at
home and overseas which might give access to more customers. • Can allow
economies of scale to be gained allowing costs per item/service to be reduced
leading to more profit. • Larger scale activity than a local/national market
might allow a business to offer variations to meet the needs of different
consumers thus spreading risk. • Overseas markets might result in new ideas
for the business. Opportunity to diversify. • Might avoid competing in a
saturated national market.
Customer orientation and product orientation

Customer orientation: an outward-looking approach that bases product
decision on consumer demand, as established by market research.
Product orientation: an inward-looking approach that focuses on making
products that can be made - or have been made for a long time - and then
trying to sell them.
Pros of Customer orientation:

1. The chances of newly developed products failing in the market are
reduced
2. Products have a longer life span and be more profitable.
3. Market research never ends- constant feedback.
Why product orientation exist:
1. Always find consumers to purchase them
2. Concentrate their efforts on efficiently producing high-quality goods.-
they believe quality will be valued above market fashion.
Market share and market growth

Market size: the total value of sales of all producer within a market in a given
time period.
- marketing manager to assess whether a market is worth entering or not.
- Business to calculate its own share of the market
- Growth or decline of the market over time can be identified.
Market growth
Market growth: the percentage change in the total size of a market over a
period of time.
Market growth depend on:
- Economic growth
- Changes in consumer incomes
- Changes in consumer incomes
- Development of new market and products
- Changes in consumer tastes
- Technological change
- Whether the market is saturated because most consumers already own
the product
Implications of a change in market growth
Market share:
Sales of the business in time period/total market sales in time period
Brand leader: the brand with the highest share of the market.
Implication of an increase in market share[ high]:
1. Sales are rising faster
2. Retailers will be keen to stock and promote the best-selling brands.
3. Reduce discount rate to retailers- higher profitability.
4. Advertising and other promotional material, consumers are often keen to
buy the most popular brands.
17.4 consumer marketing and industrial marketing

Consumer products: goods or services sold to end users.
Industrial products: goods or services sold to business.
Consumer products are often classified into:
1. Convenience products-purchased frequently- e.g. sweets and soft drinks
2. Shopping products- usually required some planning and research by
consumers before purchased- washing machines
3. Specialty products-brought infrequently, often expensive and with strong
brand loyalty. e.g. cars and designer clothing
Industrial products are often classified into:
1. Materials and components- needed for production to take place e.g. steel
2. Capital items-equipment, machinery and vehicles e.g. lathes, IT system
3. Services and suppliers - business services and utilities e.g. power supplies.
Difference between selling businesses rather than consumers are:

- Industrial products
- Industrial products
- More complex
- Industrial buyers have more market power and are better informed
- Industrial buyers rarely buy on impulse
- Mass media advertising and sales promotion techniques are not use in
industrial
- Mass marketing is common in consumer markets
17.5 Mass marketing and niche marketing

Mass marketing: selling standardized products or ranges of products in the
same way to the whole market.
Niche marketing: identifying and exploiting a small segment of a larger market
by developing differentiated products to suit that segment.
Mass market:
- Made up of customers who are willing to purchase a standardized product
(undifferentiated product)
- High sales
- Low price
Niche market
- Buy differentiated products
- Size of a niche market is often small
- Market research
Market segmentation
The identification of different groups of customers with common needs within a
market and the marketing of different products or services to those
customer groups.
Aim- different products are targeted at different segment
Methods of market segmentation

Aims-to build a picture of the typical consumer and their key characteristics.
Consumer profile: a quantified picture of a business's consumers, showing data
about their age groups, income level, location, gender and social class.
1. Geographic difference: tastes often vary between different geographic

areas-offer different products and market them in location-specific ways-
ways in which products are promoted also different.
2. Demographic differences: demographic is the study of population data
and trends, and demographic factors, such as age, gender, income, family
size, social class and ethnic background, can all be used to segment the
market.
3. Psychographic factors: these are factors to do with difference between
people's lifestyles(people's opinions, interest, and choice of leisure
activities) personalities(difficult to measure or define) , values and
attitudes.
Advantages and disadvantages of market segment
17.7 customer relationship marketing
Customer relationship marketing: using marketing activities to build and
establish good customer relationships so that the loyalty of existing
customers can be maintained.
Aims- to ensure that customers buy from the business in the future.
#Also means fewer customers buying products from competitors.
CRM-communication- gain information-income, product preference, buying

habits and so on- marketing tactics can then be adapted to meet the customer's
need.
Developing effective long-term relationship[ways]:
- Targeted marketing- the products and services they have indicated.
- Customer service and support- after sales service and effective call centers
- Communicate regularly with customers-updates on new products
- Using social media- track and communicate with customers
Cost and benefits of CRM
U3-18 Market research
2022年11月28日 13:49
18.1
Market research: the process of collecting, recording and analyzing data
about customers, competitors and the market.
Used to measure customers reaction to:
- New products
- Different price levels
- Alternative forms of promotion
- New types of packaging
- Online distribution
The purpose of market research

- Identify the main feature of the market
1. Overall size
2. Growth
3. Competitors
- Reduce the risk of new product launches
- Identify consumer characteristics- can be targeted at the appropriate

market sector
- Explain patterns in sales of existing products and make trends
- Predict future demand changes - overproduce or underproduce a product
- Assess the most popular designs, promotions, styles and packaging for a
product - consumer responses can then be incorporated into the final
product.
18.2 primary research and secondary research

Primary research: the collection of first hand data that is directly related to
the needs of the business.
the needs of the business.
Secondary research: the use of existing data that was originally collected for
another purpose.
The difference between primary and secondary research

Undertake secondary research first:
- Lower cost
- Assess the main features of a market
Usefulness of secondary research data

1. It can provide information about population, economy, the market
conditions
2. Key areas of market information that primary research need to focus on
3. Used as a baseline to compare
4. Large samples increases accuracy and reliability
5. Accessed via the internet
6. Might be the only option
7. Analyzed carefully - big data
8. Checked against another for accuracy
Limitations:
1. Out of date
2. Not for Specific needs
3. Not available - expensive
4. Not specific - only potential
5. Big data - Not easy to analyze
Usefulness of primary research data

1. Completely new markets
2.
2. Specific purpose of the business
3. To gather qualitative data which supports quantitative data
4. Specific changes
5. Particular target groups
6. Up- to -date data
7. Different method to check accuracy
Qualitative data: non-numerical data, which provides insight into the detailed
motivations of consumers and helps to explain their buying behavior or
opinions.
Quantitative data: numerical results from research that can be statistically
analyzed.
Limitations:
1. The sufficiently large and representative sample greatly influences the
accuracy of data.
Finance detailed research
2. Newly formed -no customers- data form
3. Time-consuming
18.3 sampling
The process of selecting a group of respondents from a larger population
Needs: because that market is so extensive that contacting everyone in it would
be too expensive that contacting everyone in it would be too expensive or time-
consuming or because it is impossible to identify everyone In that market.
Sample: a group of people taking part in a market research survey selected to
be representative of the overall target market.
Limitation of sampling
- Sample may be too small
- Risk of sampling bias: when a sample is not a good representation of the
whole population, because it is chosen in ways which give some people a
greater chance of being selected.
- Researchers may not use the most appropriate methods of sampling.
18.4 Market research data

Three issues need to be considered:
1. Reliability of data collected
3 reasons why primary data may be unreliable:
- Sampling bias
- Questionnaire bias
- Other forms of bias-not answering in a truthful way
2. Analysis of data
quantitative
quantitative
Key features of the data:
- Averages: tell us something about the central tendency of data
- Measures of dispersion or spread of data

Range: the difference between the highest and lowest value.
Qualitative
Aims to understand why consumer behave in a certain way or how consumers
might react to launch of new product.
Coding: the process of labeling and organizing qualitative data to identify the
main themes and the links between them. m
3. Interpretation of information presented in tables, charts and
graphs
- Tables
- Pie graphs
- Line graphs
- Bar charts
U3-19 The marketing mix - product and price
2022年12月1日 10:54
19.1 The elements of the marketing mix

Marketing mix: The four key decisions on product, price, promotion and place
that must be taken to enable the effective marketing of a product.
# is a range of tactical decisions for marketing a product.
4Ps:
1. Products: consumers require the right product.
2. Price
3. Promotion: must be effective
4. Place: refers to how the product is distributed to the consumer through
distribution channels.
19.2 product: why is this a key part of the marketing mix?

Goods: products which have a physical existence, such as washing machines
and chocolate bars
Services: products which have no physical existence, but satisfy consumer
needs in other ways, such as hairdressing, car repairs, childminding and
banking.
Brand: an identifying symbol, name, image or trademark that distinguishes a
product from its competitors.
Intangible attributes: the measurable features of a product, which cannot be
measured or compared easily.
Tangible attributes: the measurable features of a products, which can be
compared with other products.
The importance of new product development

New product development: the design, creation and marketing of new goods
and services.
- Changing consumer tastes and preferences
- Increasing competition
- Technological advancement
- New opportunities for growth
- Risk diversification
- Improved brand image
- Use of excess capacity
For new products to succeed:
- Have desirable features that consumers are prepared to pay for
- Be sufficiently different from other products to make it stand out and offer
a unique selling point
- Be marketed effectively to consumers, who need to be informed about it.
Unique selling point: the special feature of a product that makes it different
from competitors' products.
Product differentiation and unique selling points (USP)
Product differentiation: the unique of a product and competitors' products.
Pros:
Pros:
- Promotion that focuses on the differentiating feature
- Opportunities to charge higher price
- Free publicity from media reporting on USP
- Higher sales
- More willing to be identified with the brand
Product positioning: consumers' view of a product or service as compared to its

competitors.
19.3 product portfolio analysis

- Products life cycle
- Boston matrix analysis
Product portfolio analysis: analyzing the range of existing products of a
business to help allocate resources effectively between them.
Product life cycle: the pattern of sales for a product from launch to withdrawal
from the market.
Significant of each stage in the product life cycle:

- Introduction: when the products has just been launched after
development and testing. Sales are quite low and may increase only
quite slowly. Exceptions: a newly launched music download by a global
rock star.
- Growth: if the product is effectively promoted and will received by
customers-sales should grow. The slowing down of sales growth may take
customers-sales should grow. The slowing down of sales growth may take
days and leads into the next stage.
*The reason for growth slowing or sales falling include increasing competition,
technological changes making the product less appealing, changes in consumer
tastes and saturation of the market.
- Maturity or saturation: sales fail to grow, but they do not decline
significantly. The saturation of the consumer durables( a manufacture
product that can be re-used and is expected to have a reasonably long
life.)market is caused by most consumers having already bought the
particular product they want.
- Decline: sales will decline steadily. Either no extension strategy( a
marketing plan to extend the maturity stage of the product before a
completely new one is launched) has been tried or it has not worked, or
else the product Is so obsolete that the only option is replacement. Newer
products from competitors are the most likely cause of declining sales and
profits.
Extension strategies:
These strategies aim to lengthen the life of an existing product before the
market demands completely new product.
Impact of the product life cycle on marketing decisions

2 specific marketing use:
1. Assisting with planning marketing-mix decision and achieving a balanced
product portfolio.
2. Assisting with marketing-mix decisions
- At which stage of the cycle would you advise a business to lower the price
of its product.
- In which stage is advertising likely to be most important.
- When should variations be made to the product?
图片
Identifying the need for a balanced product portfolio

图片
Limitations of using the product life cycle for marketing decisions

Based on past or current data and cannot be used to predict the future.
The usefulness of the product life cycle analysis is increased if it is analyzed
together with the Boston matrix.
Boston matrix: a method of analyzing the product portfolio of a business in
terms of market share and market growth.
Boston matrix analysis

Boston matrix analysis
• It high light the position of the products of a business when measured by
market share and market growth.
• Allows an analysis, not only of the existing product portfolio, but also of
what future marketing strategies could take next.
• The size of each circle on the matrix represents the total revenue earned by
each product.
Four sectors created by the matrix can be analyzed-:

1. Low market growth, high market share: product A : cash cow
- Well-established product in a mature market; profitable and creates a
high positive cash flow; sales are relatively high and promotional costs are
low, as a result of high consumer awareness; the cash from this product can
be milked and injected into some of the other products in the portfolio;
business will wants to maintain cash cows for as long as possible
2. High market growth, high market share: product B: star
- a successful product in an expanding market; business keen to
maintain the market position of this product in what may be a fast-
changing market; promotion cost high, income high.
3. High market growth, low market share: product C: question mark
- Consumes resources but generates little return;(if it is a newly
launched product it is going to need heavy promotion costs to help become
established); the future of an question mark may be uncertain, so quick
decision may need to be taken if sales do not improve.
4. Low market growth, low market share: product D :dog
- It may need to be replaced shortly with a new product development; The
business could decide to withdraw from this market sector altogether and
position itself into faster-growing sectors.
Impact of Boston matrix analysis on marketing decisions

Marketing decisions:
• Building- supporting question mark products with addition advertising or
further distribution outlets.
• Holding- continuing support for star products so that they maintain their
good market position.
• Milking- taking the positive cash flow from established products and
investing it on other products in the portfolio.
• Divesting- identifying the worst-performing dogs and stopping the
production and supply of these products.
Limitations of using the Boston matrix for marketing decisions

• Cannot tell a manager what will happen next with any product.( detailed
and continuous market research will help.
• Only a planning tool and it has been criticized for simplifying the complex
set of factors that determine product success.
• It assumes that higher rates of profit are directly related to high market
shares.
shares.
19.4 price is a key part if the marketing mix

The price level set for a product will also:
- Impact the level of value added
- Affect the revenue and profit
- Help to establish the psychological brand image of a product.
The pricing decision: how do managers determine the appropriate price?

• Cost of production
• Competitive conditions in the market
• Competitors' prices
• Business and marketing objectives
• Price elasticity of demand
• Whether it is a new or an existing product
Pricing methods
1. Cost-based methods of pricing

Mark-up pricing
-add a percentage mark-up to the unit cost of each item bought from the
producer or wholesaler.(retailers)
Depend on: strength of demand; number of competitors; stage of product's life
cycle.
Mark-up pricing: adding a fixed mark-up for profit to the unit cost of buying in
a product.
Cost-plus pricing
Cost-plus pricing: setting a price by calculating a total unit cost for the
product and then adding a fixed profit mark-up.
(manufacturers) The business calculates or estimates the total cost per unit. The
price is then this cost plus a fixed profit mark-up
Contribution-cost(or marginal-cost) pricing

Contribution-cost pricing: setting prices based on the variable costs of
making a product, in order to make a contribution towards fixed costs and
profit.
If enough units are sold, the total contribution will be enough to cover the fixed
costs and to return a profit.
Consider market competition
Loss leaders
(retailers)
Setting of very low prices for some products, possibly even below variable
costs- to attract consumers who will then, also buy other products that do make
a positive contribution- encourage the purchase of closely related
a positive contribution- encourage the purchase of closely related
complementary.
2. Competition-based methods of pricing

Competitive pricing: making pricing decision based on the price set by
competitors.
Reasons:
1. One dominant business in the market which is the price leader-difficult to
charge higher price- impossible to charge a lower price(price leader
minimize costs)
2. Selling similar products- avoid a price war which would reduce profit for
all the businesses.
Method:
1. Price discrimination: charging different groups of consumers different
prices for the same good or service.
2. Dynamic pricing: offering products at a price that changes according to the
level of demand and the customer's ability to pay.
图片
3. Pricing methods for new products

• Penetration pricing: setting a relatively low price to achieve a high volume
of sales.
^ They are attempting to use mass marketing and gain a large market share-
then slowing increased the price during the growth stage of product life cycle-
increase the profit margin on the product.
• Market skimming: setting a high price for a new product when a firm has
a unique or highly differentiated product with low price elasticity of
demand.
^To maximize short-term profits before competitors enter the market with a
similar product.
^Create an exclusive image for the new product.
Psychological pricing: setting a price level which matches consumers' views

about a product's perceived value.
1. Just below key price levels in order to make the price appear much lower
than it is.
2. The use of market research to make sure that the price level meets
consumer view about the perceived value of the product.
Pricing decisions: an evaluation

- Apply different methods to its portfolio of products depending on the
costs of production and competitive conditions within the market.
- To test the impact of different levels of price on potential demand.
- Good value means that all aspects of the marketing mix are combined and
integrated together, so that consumers accept the overall position of the
product and agree that its image justifies the price charged for it.
product and agree that its image justifies the price charged for it.
- When consumers assess whether a product offers good value, price is the
only factor.
U3-20 The marketing mix - promotion and place
2022年12月14日 17:05
20.1 promotion method

Promotion: the use of advertising, sales promotion, personal selling, direct
email, trade fairs, sponsorship and public relations to inform consumers and
persuade them to buy.
Advertising: paid for communication to inform and persuade consumers, using
media such as TV, newspapers and cinema.
Direct promotion: a range of promotional activities aimed directly at target
customers. It is also known as direct marketing.
Sales promotion: incentives such as special offers or special deals directed
consumers or retailers to achieve short-term sales increases and repeat
purchases by consumers.
Promotion mix: the combination of promotional techniques that a firm uses to
sell a product.
Promotion objectives:
- Increasing sales, consumer awareness
- Consumer recall of an existing product and its distinctive qualities
- Increasing purchases by existing consumers or attracting new consumer to
the brand.
- The superior specification or qualities of a product
- Reinforcing the brand image or personality of the product.
- Correcting misleading reports
- Improving the public image of the business
- Encouraging retailers to hold inventories of the product and actively
promote products to the final consumer.
The promotion mix:
# unlikely that one method of promotion will be sufficient- they include all of
the marketing tools.
Advertising promotion
Two types:
• Informative advertising - give information about a product to potential
purchasers - include price, technical specifications, main features or
places. - effective in: new product, substantial change in price, design or
specification.
• Persuasive advertising - create a distinct image or brand identity for the
product - not contain any details
Advertising agencies
Promotional plan:
• Research the market, establish consumer tastes and preferences, and
identify the typical consumer profile.
• Advise on the most cost-effective forms of advertising media to be used.
• Use their own creative designers to design adverts appropriate for each
medium.
• Film or print the adverts to be in the campaign
• Monitor public reaction to the campaign and feed this data back to the
client.
Advertising methods:
1. Print advertising
2. Broadcast advertising
3. Outdoor advertising
4. Product placement advertising
5. Sponsorship
6. Digital advertising
Advertising methods: which one to use?

Depends on:
• Cost
• The consumer profile of the target audience - age, income levels, interests
• The message and image to be communicated
• Other aspects of the marketing mix
• Legal constraints
Sales promotion methods

Aims to achieve short-term increase in sales
Include:
Include:
- Price offers - temporary reduction in price
- Loyalty reward programs
- Money-off coupons - redeemed when the consumer buys the product
- Point-of-sale displays in shop
- BOGOF - buy one, get one free
- Games and competitions on packaging
Directed at:
- The final consumer, to encourage purchase(pull strategy)
- The distribution channel(push strategy)
图片
Direct promotion methods

• Direct email:
- Low cost and well-defined areas
- Easy to evaluate the success of a campaign
Limitations:
- many consumers now prefer digital communication\
- view as junk mail and quickly thrown away
• Telemarketing:
- Outsourced to an agency
- Lower cost than personal selling
- Easy to monitor response
Limitations:
- object to cold callings
- easy to reject a telemarketing message
• Personal selling:
- Sales success rate are often high with skilled direct-sales employees
- It is often used for expensive industrial products
- Effective with expensive and complex products that require specialist
knowledge
limitations:
- complain about being pressured into buying
- sales employees need to be well trained
- high-cost method of promotion and selling
Developments in digital promotion

Digital promotion: the promotion of products using digital technologies, mainly
on the internet but also including mobile phones.
Method of digital promotion

- Social media marketing
- Email marketing
- Online advertising
- Smartphone marketing
- Smartphone marketing
- Search engine optimization
- Viral marketing
Benefits of digital promotion

• Worldwide coverage: new market, trade globally, increasing potential
market size
• Relatively low cost
Easy to track and measure results: easy to establish how effective; detailed
information how customers use and respond.
• Personalization: feel only they are being sent a special offer
• Social media communication builds customer loyalty: create a reputation
for being easy to conserve with
• Content marketing: varied content gain social currency
• Website convenience increases sales
Limitations of digital promotion

• Time-consuming
• Skills and training
• Global competition
• Complaints and feedback: negative feedback visible
Extension: measuring success of promotions

• Sales performance before and after the promotion campaign
• Consumer awareness data
• Consumer panels
• Response rates to advertisements
• Social media feedback
The role of packaging in promotion

- Protect and contain the product
- Give information
- Support the brand image of the product created by promotional campaigns
- Make the product attractive and help consumer to recognize it.
The role of branding in promotion

Aims:
- Aiding consumer recognition
- Making the product distinctive from competitors
- Giving the product an identity or personality that consumer can related to
Benefits:
- Increases the chances of brand recall by consumers
- Clearly differentiates the product from others
- Allows for the establishment of a family of closely associated products
with the same brand
- It reduce the responsiveness of consumer demand to a price increase
- It increases consumer loyalty to brands, which is a major marketing
- It increases consumer loyalty to brands, which is a major marketing
benefit.
-
20.2 place: an important part of the marketing
mix
Channel of distribution: the chain of intermediaries a product passes through
from producer to final consumer.
Place decisions are about how products should pass from manufacture to final
customer
Channels of distribution
• Direct selling: no intermediaries- producer keep complete control over the
marketing mix- goods are brought infrequently but in large quantity- e.g.
manufacturers, airline tickets.
• Single-intermediary channel: big retailers have great purchasing power-
used for consumer goods and where goods can easily be transported to the
whole country but could also be used by an agent selling industrial
products to business.
• Two-intermediaries channel: until recent development in retailing and e-
commerce.
Online marketing: selling and marketing activities that use the internet, email
and mobile communications to encourage direct sales via electronic
commerce.
Choice of distribution channel:

- Benefit from easy access to products, allows them to see and try
products before they buy.
- Manufacturers need outlets for their products that give a wide
geographical market coverage.
- Retailers, add on mark-up to cover their costs and make a profit-
charge a lower price.
Digital and physical distribution
• Digital distribution: the delivery or distribution of digital media content such
as audio, video, TV programmers, films, software and video games.
• Physical distribution: the activities that combine to achieve the efficient

movement of finished products from the end of the production operation to
the consumer.
• Integrated marketing mix: the key marketing decisions complement each

other and work together to give customers a consistent message about the
product.
U4-23 The nature of operations
2023年1月3日 14:49
23.1 The production process

Factors of production:
• Land
• Labor
• Capital
• Enterprise
Intellectual capital: the intangible capital of a business that includes human
capital(well-trained and skilled employees), structure capital(databases and
information systems) and relationship capital(good links with suppliers and
customers).
Transformational process: an activity or group of activities that transforms one
or more inputs, adds value to them, and produces outputs for customers.
Contribution of operations to added value

Managing:
- Efficiency of production: keeping costs as low as possible will help to give
competitive advantage
- Quality: the goods or services must be suitable for the purpose intended
- Flexibility and innovation: the need to develop and adapt to new
processes and new products.
Other factors:
- The design of the product
- The efficiency of operations: reducing wastes; increasing productivity
- Branding to encourage consumers to pay more for the product than the
cost of the inputs
Operations makes a considerable contribution to adding value by:
- Reducing production costs through increased efficiency
- Producing quality goods that meet customer expectations
- Ensuring production Is flexible so that changing consumer tastes can be
satisfied
23.2 efficiency, effectiveness, productiveness

productivity and sustainability
Productivity: the ratio of outputs to inputs during production
Level of production: the number of units produced during a time period.
Production: the process that transforms inputs into inputs.
Measuring labor productivity:
Labor productivity=total output in a given time period/total workers employed
Raising productivity:
- Improve the training of employees to raise skill levels
- Improve worker motivation: financial and non-financial method
- Purchase technologically advanced equipment
- Purchase technologically advanced equipment
- More effective management
Raising productivity does not guarantee success

- Product is not popular
- Increase productivity-demands for higher wage
- Workers may resist measures to raise productivity-industrial dispute
- The quality of the management
- Difference between efficiency, productivity and effectiveness
The importance of efficiency and effectiveness

Efficiency: producing output at the highest ratio of output to input
Effectiveness: meeting the objectives of the business by using inputs
productively to meet customers' needs.
Efficiency is measured by productivity, but effectiveness is achieved only if the
customer's needs are met.
The importance of sustainability of operations

Sustainability of operations: business operations that can be maintained in the
long term, for example, by protecting the environment and not damaging the
quality of life for the future generations.
Why are businesses making operations more sustainable
• Business must comply with sticker laws on environmental issues
• Pressure-group activity exposes the most environmentally damaging
business and operations
• Businesses needs to fulfil senior managers' commitments on corporate
responsibility
• Sustainable operations gain positive publicity, which is good for public
relations
• More sales are likely as consumers prefer greener and more sustainable
products.
Impact on businesses of measures to increase

sustainability
23.3 labor intensive and capital intensive operations

Labor intensive: involving a high level of labor input compared with capital
Labor intensive: involving a high level of labor input compared with capital
equipment
Capital intensive: involving a high quantity of capital equipment compared
with labor input.
Labor intensive production

Pros:
• Interesting and varied work
• Low machine costs
• One-off design meet customer requirements such as exclusive furniture.
Cons:
• Low output level
• Skilled, high-paid workers required
• Product quality depends greatly on the skill and experience of each
worker
Capital intensive production:
Pros:
• Economies of scale
• Consistent quality
• Low unit costs of production
• The ability to supply the mass market
Cons:
• High fixed costs
• Cost of financing the equipment
• High maintenance costs and the need for skilled workers to do repairs
• The quick pace of technology change
Approach depends on:
- The nature of the product and its brand image
- The relative cost of labor and capital
- Business size and access to finance
23.4 operations (production)method

1. Job production: the production of a one-off item specially designed for the
customer
2. Batch production: the production of a limited number of identical
products-each item in the batch passes through one stage of production
before passing on to the next stage.
3. Flow production: the production of items in a continually moving process
4. Mass customization: the use of flexible computer-aided technology on
production lines to make products that meet individual customers'
requirements for customized products.
Job production:
- Products may be small or large and are often unique
- Each individual product has to be completed before the next product is
- Each individual product has to be completed before the next product is
started.
- Usually labor intensive
Batch production:
- Products In the batch go through the whole production process together.
The production process involves a number of stages
- Every unit in batch goes through each production stage before the whole
batch moves on to the next stage.
- Allows firm use division of labor and some economies of scale
- Have high level of work-in-progress inventory at each stage of the
production process.
Flow production:
- Capable of producing large quantities of output in a relatively short time
- Labor cost are low
- The constant output rate should make the planning of inputs relatively
simple. Inventory control easier and minimizes inventory levels.
- High initial set-up cost of high-technology production line equipment.
- Boring, demotivating and repetitive.
Mass customization:
- Customers demand competitive prices and product variations or
customization.
- Focused on differentiated marketing which allowed for higher added
value.
Requires:
• Advanced and flexible capital equipment
• Skilled and well-trained workers to operate this machinery
• Product design that have many standardize parts and but some
interchangeable ones.
• Suppliers able to supply variations on parts and components.
Choosing between the operations methods:

• Size of market
• The capital available
• Other resources
• Customers demand products adapted to specific requirements
Problems of changing operations methods
From job to batch:
- The cost of equipment needed to handle large numbers in each batch may
be too high
- Additional working capital is needed to finance work-in-progress
inventory
- There is a risk of worker demotivation as there is less need for an
individual's craft skills.
From job or batch to flow
- The cost of capital equipment need for flow production may be too high.
- Employee training needs to be flexible and multiskilled. If this approach is
not adopted, then workers may end up on one boring repetitive task and
become demotivated.
- Accurate estimates of future demand are needed to ensure that output
matches demand.
U4-24 Inventory management
2023年2月7日 15:07
24.1 Managing inventory

Reasons for holding inventory
1. Raw materials and components: The business can meet increase In demand
by increasing the rate of production quickly.
2. Work to progress: Main form of inventory held. The value of work in
progress depends on the length of time needed to complete production and
on the method of production. Batch production tends to have high work-in-
progress levels.
3. Finished goods: can be displayed to potential customers and increase the
chances of sales. Also, to cope with sudden unpredicted increase in
demand. To meet anticipated increase in demand.
Inventory management: The process of ordering, storing and using a company's

inventory.
Without inventory management:

- Insufficient inventories to meet changes
- Out of date inventories might be held.
- Wastage caused by mishandling or incorrect storage conditions.
- High inventory levels have high costs and opportunity costs.
- Late deliveries, low discounts from suppliers.
Cost of holding inventory

• Opportunity cost: working capital ties up in goods in storage could be put
to other uses. [During periods of high interest rates, the opportunity cost of
inventory holding increases.]
• Storage costs
• Risk of wastage and obsolescence: lower the value of inventory.
[outdating; damaged while held in storage or moved.]
Benefits of holding inventory

• Reduces risks of lost sales
• Allows for continuous production
• Avoids the need for special orders from suppliers
• Large order of new supplies reduce cost
Optimum order size

Economic order quantity: the optimum or least-cost quantity of stock to re-
order taking into account delivery costs and stock-holding cost.
Inventory control charts
->help an inventory manager to determine the appropriate order time and
order quantity.
-> allow an analysis of what would happen to inventory levels if an unusual
event occurred.
Key features:
• Buffer inventories [ minimum inventory level that should be held to
ensure that continuous production is possible should delivery delays occur
or output increase ] The greater the degree of uncertainty about delivery
times or production levels, the higher the buffer level. The greater the
cost involved in shutting production down and restarting, the greater the
potential cost savings from holding high buffer levels.
• Maximum inventory level: limited by space or by the financial costs of
holding even higher inventories. [ = economic order quantity +buffer
level ]
• Re-order quantity: [ number of units ordered each time ] This will be
influenced by the economic order quantity.
• Lead time: [ the time between ordering new supplies and their delivery. ]
The longer this period of time, the higher will be the re-order inventory
level and buffer level.
• Re-order level: [The level of inventory that triggers a new order to be sent
to suppliers. This depends on how long it takes suppliers to deliver new
supplies and the rate of usage of inventory.
Importance of supply chain management

Supply chain: the network of all business and activities involved in creating a
product for sale, starting with the delivery of raw materials and finishing with
product for sale, starting with the delivery of raw materials and finishing with
the delivery of the finished product.
Supply chain management: handling the entire production flow of a
product( from raw materials to finished product) to minimize costs but improve
customer service.
Supply chain management aims to reduce the time that takes to convert raw
materials into completed products available by sale by:
- Establishing excellent communications with supplier companies.
- Cutting the time taken to deliver all materials required for production by
improving transport systems.
- Speeding up the new product development process to improve the
competitiveness of the business.
- Speeding up the production process with technology and flexible
workforces
- Minimizing waste at all production stages to cut costs.
Benefits of effective supply chain management

• Improves customer service: deliver quickly
• Reduce operating costs: purchasing costs, inventory costs, production
costs fall.
• Improves profitability: By reducing waste time…
24.2 just-in-time inventory management

Definition: aims to avoid holding inventories by requiring supplies to arrive just
as they are needed in production and completed products are produced to order.
# aims to achieve zero buffer inventories
Just-in-case inventory management: aims to reduce the risk of running out of
inventory to the minimum by holding high buffer inventory levels.
Conditions for JIT to operate successfully
- Excellent supplier relationships
- Production employees must be multi-skilled and flexible
- Equipment and machinery must be flexible
- Accurate demand forecasts
- IT equipment Is needed for JIT
- Excellent employee-employer relationships
- Quality must be everyone's priority
U4-25 capacity utilization and outsourcing
2023年2月7日 20:29
25.1
Maximum capacity: the highest level of sustained output that can be achieved.
Rate of capacity utilization: current output level/maximum output level*100
Capacity utilization: the proportion of maximum output capacity currently being achieved
Outsourcing: using another business ( a third party ) to undertake a part of production
process rather than doing it within the business using the firm's own employees.
Capacity utilization: the impact on average fixed costs

Higher capacity utilization, lower average fixed costs.
Lower capacity utilization, higher average fixed costs.
Potential drawbacks at full capacity
1. Employees may feel under pressure and could raise stress levels. Operations
managers cannot afford to make any production scheduling mistakes, as there is no
slack time to make up for lost output.
2. Regular customers- to increase their orders will have to be turned away or kept
waiting for long periods-use other suppliers- danger that they might be lost as long-
term clients.
3. Machinery working continuously and there may be insufficient time for maintenance
and repairs-store up trouble in the form of increased unreliability in the future.
Operating at over maximum capacity
# to achieve higher output levels for very short time periods.
#could be done by using machined beyond their safe working limits and by asking labor to
work longer than the contractually permitted hours.
- This could result both in machines breaking down, and in workers being too stressed
sustain high levels of output in future.
Operating at under maximum capacity
Excess capacity: this exists when the current levels of output are less than the full-
capacity output of a business; also known as spare capacity.
Short term excess capacity
Maybe caused by low seasonal demand
Options for improving:
• Maintaining high output levels.
• Adopting a more flexible production system, allowing other products to be made
that could be sold at other times of the year.
• Insisting on flexible employment contracts so that, during periods of low demand
and excess capacity, workers work fewer hours to reduce capacity and costs.
Long term excess capacity
图片
Capacity shortage
When demand for a business's products exceeds production capacity
Should the business:
Should the business:
• Increase its scale of operation by acquiring more production resources?
• Keep existing capacity but outsource or subcontract more work to other business?
• Keep working at full capacity and not expand, perhaps because of the danger that
demand fall back might fall back in the near future.
图片
25.2 outsourcing
Reasons:
- Reduction and control of operating cost
- Increased flexibility
- Improved company focus
- Access to quality service or resources
- Freeing up internal resources
Drawbacks:
- Loss of jobs within the business
- Quality issue
- Customer resistance
- Security
- Corporate social responsibility
Outsourcing evaluation
Business process outsourcing: a form of outsourcing that uses specialist contractors to
take responsibility for certain business functions, such as human resources and finance.
U5-29 Business finance
2023年2月13日 13:02
29.1 the need for business finance

Why businesses need finance:
- Start-up capital: the capital needed by an entrepreneur to set up a business
- Working capital: the capital needed to pay for raw materials, day to day
running costs and credit offered to customers. Working capital = current
assets - current liabilities
- When business grow- buy more assets, higher working capital needs. For
research and development.
- Growth - taking over other businesses
- Special situations- decline in sales- addition finance - pay its debt.
-
Short-term finance: money required for short periods of time of up to one year.
Long-term finance: money required for more than one year.
The difference between cash and profit

Profit: the value of goods sold less costs
Cash: the value of assets that can be converted into cash immediately.
Liquidity: the ability of a business to pay its short-term debts.
Administration, bankruptcy and liquidation

Administration: when administrator manage a business that is unable to pay its
debts with the intention of selling it as a going concern.
Bankruptcy: the legal procedure for liquidating a business( or property owned
by a sole trader) which cannot fully pay its debts out of its current assets.
Liquidation: when a business ceases trading and its assets are sold for cash to
pay suppliers and other creditors.
The aim of liquidation is to raise as much as possible to pay back those people
and companies the bankrupt business owes money to.
29.2 working capital

Without sufficient working capital:
- Raise finance quickly
- May be forced into liquidation or administration by its creditors.
- High level of working capital - high opportunity costs -earn higher returns
elsewhere in the business, possibly by being invested in fixed assets.
- The working capital requirement depend on length of its working capital circle.
The longer the time period from buying materials and paying for them to
receiving payment from customers, the greater the working capital needs of the
business.
图片
Current assets: assets that either are cash or likely to be turned into cash
within 12 month (inventory and trade receivables or debtors).
within 12 month (inventory and trade receivables or debtors).
Current liabilities: debts that usually have to be paid within one year.
Where does the capital come from?

1. Current liabilities
2. Overdraft: An overdraft occurs when there isn't enough money in an
account to cover a transaction or withdrawal, but the bank allows the
transaction anyway.
3. Trade payables: Trade payables are a short term liability of the
company and are placed under the current liabilities of the balance sheet
of the company.
Managing working capital

Inventory can be managed in the following ways:
• Keeping smaller inventory level
• Using computer system- to order inventory as required
• Efficient inventory control - reduce losses
• Producing only when orders have been received
• As quickly as possible to speed up payments from them
Trade payables can be managed by:
• Delaying payments to suppliers to increase the credit period
• Only buying goods from suppliers who will offer credit
Trade receivables can be managed by:
• Only selling products for cash and not on credit
• Reducing the credit period offered to customers
Capital expenditure: the purchase of non-current assets that are expected to

last for more than one year, such as building and machinery
Revenue expenditure: spending on all costs and assets other than non-current
assets, which includes wages, salaries and inventory of materials.
29.3 Source of finance

Business ownership and sources of finance
Finance for limited companies:
- Internal source: raising finance from the business's own assets or from
profits left in the business (retained earnings)
• Retained profits: profits after tax retained in a company rather than paid out
to shareholders as dividends.
• Sale of unwanted assets
• Reductions in working capital
• Sale and leaseback of non-current assets: sell non-current assets that they
still intend to use, but which they do not need to own. Non-current assets:
assets kept and used by the business for more than one year.
# Evaluation if internal sources of finance:
Has no direct cost to the business, does not increase the liabilities or debts of the
Has no direct cost to the business, does not increase the liabilities or debts of the
business, and there is no risk of loss of control by the original owners as no
shares are sold. But slow down business growth.
- External source: raising finance from sources outside the business, for
example banks.
Long term:
• Hire purchase: a company purchases an asset and agrees to pay fixed
repayments over an agrees time period.
The asset belongs to the purchasing company once the final payment.
Avoids making a large initial cash payment to buy the asset. The interest
rate can be higher than for a bank loan.
• Leasing: lease is a contract outlining the terms under which one party
agrees to rent an asset—in this case, property—owned by another party.
Avoid the cash purchase of the asset. The risk of using unreliable or
outdated equipment is reduced, reduces the inconvenience of having to
repair. But high cost.
• Share capital: Share capital is the money a company raises by issuing
common or preferred stock. Permanent finance raised by companies
through the sales of shares.
• Debentures: A debenture is a type of bond or other debt instrument that is
unsecured by collateral.
• Bank loans : loans that do not have to be repaid for at least one year.
Offered either a variable or a fixed interest rate.
Fixed rates provide more certainty , but they can turn out to be expensive if
the loan is agreed at a time of high interest rate. The right to sell an asset is
given to the bank if the company cannot repay the debt.
• Business mortgage: long-term loans to companies purchasing a property
for business premises, with the property for business premises, with the
property acting as collateral security on the loan.
• Government grant: given to small businesses or those expanding in
developing regions of the country. Often condition attached, such as
location and the number of jobs to be created, but if conditions are met,
grants do not have to be repaid.
• Venture capital: Venture capital (VC) is a form of private equity and a type
of financing that investors provide to startup companies and small
businesses that are believed to have long-term growth potential.
Short term:
• Bank overdraft: allows the business to overdraw on its account at the bank
by making payments up to a greater value than the balance in the account.
High interest rate.
• Trade credit: Trade credit is a business-to-business (B2B) agreement in
which a customer can purchase goods without paying cash up front, and
paying the supplier at a later scheduled date. Drawbacks: discount for
quick payment are often lost if the business takes too long to pay its
suppliers.
• Debt factoring: sell these claims on trade receivables to a debt factor. Debt
factoring company's profits are made by discounting the debts and not
paying their full value.
图片
图片
Finance for unincorporated business

Obtain from:
• Bank overdraft & bank loans, including Microfinance:
Microfinance: providing financial services for poor and low-income customers
who do not have access to the banking services, such as loans and overdraft,
offered by traditional commercial banks.
There is evidence that entrepreneurship is greater in regions with microfinance
schemes in operation - and that average incomes are rising because of more
successful business.
One possible drawback to microfinance is that interest rates can be quite high
as the administration cost of many small loans are considerable.
• Crowd funding:
Crowd funding: the use of small amount of capital from a large number of
individuals to finance a new business venture.
In the venture that are successful, the crowd funding will receive either: their
initial capital back plus interest - this is sometimes known as peer-to-peer
lending or an equity stake in the business and a share in profits when these are
eventually made.
Drawbacks: 1. needs to keep accurate records of thousands of investors to pay
back. 2. share it on the internet means that it could be copies by others before
the entrepreneur has had a chance to start the business up.
• Credits from suppliers
• Loans from family and friends
• Owners' investment
• Taking on partners with capital to invest.
29.4 Factor affecting the source of finance

图片
U5-30 Forecasting ad managing cash flows
2023年2月23日 9:52
30.1 Cash flow forecasts: meaning and purpose

Cash flow: the sum of cash payments to a business less the sum of cash
payment from the business
Why important:
- New start-ups are often offered much shorter credit to pay suppliers.
- Banks and other lenders need to see evidence of a cash flow forecast
before making any finance available.
- Finance is often very tight at start-up, so accurate planning is significant
for new business.
Insolvent: when a business cannot meet its short-term debts.
Cash flow forecast: an estimate of the future cash inflows and outflows of a
business.
Cash inflow: cash payment into a business
Cash outflow: cash payment out of a business.
Interpretation of cash flows forecast

Cash inflows:
• Owner's own capital injection: easy to forecast & under direct control
• Bank loan payments: easy to forecast - have been agreed with the bank in
advance, in terms of both amount and timing
• Customers' cash purchases: difficult to forecast since depend on sales.
• Trade receivables payment: difficult to forecast - depend on two
unknowns - what proportion of sales will be on credit & when will trade
receivables actually pay.
Cash outflows
• Lease payment for premises: easy to forecast as it will be in the estate
agent's details of the property
• Annual rent payment: easy to forecast - be fixed and agreed for a certain
time period
• Electricity, gas, water and telephone bills: difficult to forecast - vary with
many factors.
• Wage payment: these forecast will be based largely on demand forecast -
vary from week to week if demand fluctuates and if staff on flexible
contracts.
• Cost of materials and payment to suppliers: vary with the level of output
or sales.
The structure of cash flow forecast

• Cash inflows
• Cash inflows
• Cash outflows
• Net cash flow and opening and closing balance: This shows the net cash
flow for the period and the cash balance at the start and end of the period
# Net cash flow: estimated difference between cash inflows and cash outflows
for the period
! Closing cash balance = opening cash balance + [cash inflows - cash outflows]
! All accounting figures in brackets like this () indict=ate negative values
Benefit of cash flowing forecasting

- Negative closing cash flows - means that plans can be made to sources
additional finances
- Indicate period of time when negative net cash shows are excessive - plan
to improve cash flows
- Essential to all business plans
Limitations of cash flow forecasting

- Mistakes
- Unexpected cost increases lead to major inaccuracies in forecasting
- Incorrect assumption
Causes of cash flow problem

1. Lack of planning:
financial planning can be used to predict potential cash flow problems so
that business managers can take action to overcome them in plenty of
time
2. Poor credit control:
Credit control: monitoring of debts to endure that credit periods are not
exceeded.
Trade receivables will not be chased for payment and potential bad debt
will not be identified.
Bad debt: unpaid customers' bills that are now very unlikely to ever be
paid.
3. Allowing customers too long to pay debts
Many businesses have to offer trade credit to customers in order to be
competitive. Allowing customers too long to pay means reducing short-
term cash inflows.
4. Expanding too rapid
Overtrading: expanding a business rapidly without obtaining all of the
necessary finance, resulting in a cash flow shortage.
Pay for the expansion and for increased wages and materials months
before it receives cash from additional sales.
5. Unexpected event
Unforeseen increase in cost could lead to negative net cash flows. Factors
such as breakdown of delivery truck that must be replaced or a
such as breakdown of delivery truck that must be replaced or a
competitor lowering prices unexpectedly will make the original cash flow
forecast inaccurate.
Methods of improving cash flowing

• Increase cash inflows
• Reduce cash outflows
图片
Improving cash flow by managing trade receivables

• Not extending credit to customers or asking customers to pay more
quickly.
Evaluation: Many customers now expect credit and will go elsewhere if it
is not offered. The marketing department might argue for an increase in
credit terms to customers at the same time as the finance department is
trying to cut down on them
• Selling claims on trade receivables to specialist financial institutions
called debt factors
Evaluation: This will involve a cost, however, as the debt factor will not
pay 100% of the value. They must make a profit for themselves.
• Finding out whether new customers are creditworthy: can be done by
requiring references, either from traders or from the bank, or by , using
the services of a credit enquiry agency.
• Offering a discount to customers who pay promptly. Although cash might
be paid quickly, discounts reduce the profit margin on a sale.
Improving cash flow by managing trade payables

• Purchasing more supplies on credit and not cash: If a business has a good
credit rating, this might be easy
Evaluation: discount from suppliers for quick cash payment might be
stopped.
• Extend the period of time taken to pay: the larger a business is, the easier
it is to insist on longer credit period.
Evaluation: slow payment by larger businesses is often a great burden for
the small business that supply them. Suppliers may be reluctant to supply
products or to offer a good service if they consider that a business is a late
payer.
U5-31 Costs
2023年2月27日 13:04
31.1 The need for accurate cost information

• Calculation for profit or loss: key factor in the profit equation
• Pricing decisions
• Measuring performance: allows comparisons to be made with past periods
of time. The efficiency of a department or the profitability of a product
may be measured and assessed over time.
• Setting budgets: set budgets and plans. Act as targets for departments to
work towards.
• Resource use: comparing cost data can help in decisions about resource
use.
• Making choices: comparing the costs.
Type of costs
- Direct cost: These costs can be clearly identified with each unit of
production and can be allocated to a cost center.
Cost center: the section of a business, such as a department or a product,
that incurs the costs.
- Indirect costs: costs that cannot be identified with a unit of production or
allocated accurately to a cost center.
Fixed and variable costs: how are costs affected by the level of output
- Fixed cost
- Variable costs
- Total cost
Problems in classifying costs
Problems in classifying costs
31.2 Approaches to costing

Costing methods: a major problem
Indirect cost shared between all of the items produced by a business. This
uncertainty causes potential problems when pricing products, when deciding
whether to continue producing them, and when deciding whether to accept a
new order for the product.
Important concept
Cost centers:
Different businesses will use different cost centers as appropriate to their own
needs.
Profit center: a section of a business to which both costs and revenues can be
allocated, so profit can be calculated.
The benefits of using cost and profit centers are:

• Managers and employees have targets to work towards
• These targets can be used to compare with actual performance
• The individual performance of decisions and their managers can be
assessed and compared
• Work can be monitored and decision made about the future.
Overheads
• Production overheads: factory rent and rates
• Production overheads: factory rent and rates
• Selling and distribution overheads: packing and distribution cost
• Administration overheads: office rent and executive salaries
• Finance overheads: interest on loans.
Average cost:
Total cost divided by the number of units produced.
Formular: total cost of producing this product/number of unit produced
Full costing technique

Full costing: a method of costing in which all indirect and direct costs are
allocated to the products, services or divisions of a business.
Stage In full costing:
1. Identify and add up all of the direct costs
2. Calculate the total overheads of the business for a given time period
3. Add the total direct cost
4. Total cost divided by output
Uses of full cost
1. Relevant for single-product business, no uncertainty about the share of
overheads
2. No cost are left out of the calculation
3. Basis for pricing decisions, used for cost-plus pricing
4. Compared from one time period to anther to assess performance
Limitations of full cost
1. There Is no attempt to allocate each overhead cost of actual expenditure
2. Inappropriate methods- inconsistencies between departments and
products.
3. Risky to use cost method to make decisions- misleading
4. To allocate overheads on the same basis over time as otherwise sensible
year-on year comparisons cannot be made
5. Full unit cost useless if output fall
Contribution costing: costing method that allocates only directly costs

centers and profits centers, not overhead costs.
31.3 uses of cost information

# Average cost is often used to help set price.
# Total cost data is essential when calculating profit or loss
Contribution costing and decisions on stopping selling a product

# Contribution costing shows managers which product is making the greatest
or least contribution to overheads and profits.
Contribution costing and special order decisions

Contribution costing and special order decisions
# Assist managers in deciding whether to accept an order at a price below the
full cost of the product.
Offer a price below full unit cost:

- Existing customers may realize lower prices are being offered, demand the
same price - price just above marginal cost, overall loss being made
- High price is a key feature of the brand - lower prices could destroy a
hard-won image.
- No excess capacity, sales based on contribution cost may be reducing
sales based on the full cost
- Lower priced goods may be resold into the higher priced market by
customers
Situations when contribution costing would be used

- Avoids inaccuracies and arbitrary indirect cost allocations - setting prices
that just cover the direct cost.
- Used in decision making over whether to close a cost/profit center
- Excess capacity is more likely to be effectively used, used in decision
making on special order decisions
Situations when contribution costing would not be used

- Much higher indirect costs than others (single-product firms have to cover
the fixed costs with its revenue)
- Business expansion or developing new products- all costs f these
development will need to be considered
- Qualitative factors may be important
31.4 Break-even analysis

Break-even analysis: uses costs and revenue data to determine the break-even
point of production
Margin of safety: the amount by which the current output level exceeds the
break-even level of output.
The break-even equation

Break-even level of output = fixed cost/ contribution per unit
Contribution per unit: the price of a product less the direct costs of
producing it.
The graphical method:

- Fixed cost
- Total cost
- Revenue
Use of Break-even technique

• A marketing decision - the impact of a price increase which makes the
• A marketing decision - the impact of a price increase which makes the
sales revenue line steeper
• An operations management decision - the purchase of new equipment
which raises fixed costs but reduces variable costs, resulting in reduced
total costs
• A location decision - which location to select
The benefits of break-even analysis

^ charts are relatively easy to construct and interpret
^ analysis provides useful guild lines
^ comparisons can be made [ in different options and situations]
^ the equation produces a precise result
^ assist when making decisions
The limitations of break-even analysis

^ the assumption that costs and revenues are always represented by straight
lines is unrealistic
^ the revenue line can be influence by the price reductions needed to sell a high
level of output
^ Not all cost can be easily classified into fixed and variable costs
^ makes no allowance for inventory level [ assumed all units are sold]
^ unlikely that fixed cost will remain unchanged at different level of maximum
capacity
^ New business will be based on forecasts and could be inaccurate
U5-32 Budgets
2023年3月28日 14:31
32.1
Budgeting: planning future activities by establishing performance targets,
especially financial ones.
If no plans are made:
- Without a direction or purpose
- Unable to allocate the scarce resources
- Demotivated employees
- Unable to measure its progress by measuring the plans
The measurement of performance

Assessing actual performance against pre-set targets is the best way of
measuring performance
Non-financial targets can be established as well as financial ones;
Non-financial targets include customer loyalty, customer service levels and
labor productivity
Financial targets: revenue, cost, profit
Benefits of using budget:

• Planning: consider future plans carefully so that realistic targets can be set.
• Allocating resources: an effective way to ensure that the business does not
spend more resources than it has access to.
• Setting targets: work better if they have a realistic target to aim for -
budget holder
• Coordination: allocation of resources to different department - to work
effectively together If targets are to be achieved.
• Controlling and monitoring a business: checks
• Measuring and assessing performance: variance analysis is used to
compare actual performance with the original budget.
# Budget holder: the individual responsible for the initial setting and
achievement of a budget.
# Variance analysis: calculation of the differences between budgets and
actual figures, and analysis of the reasons for such differences.
Potential drawbacks of using budgets:

• Lack of flexibility: external environment - demotivate
• Focus on the short term: E.g. cutting the size of the work force to stay
within the labor budget may restrict the ability of the business to increase
output.
• Unnecessary spending: If managers have underspent their budgets just
before the end of the budgeting period…
• Training on budgets: delegated responsibility for budgets will need
extensive training in this role.
extensive training in this role.
• Budgets for new projects: often inaccurate
Key features of effective budgeting:

(a plan that businesses aim to fulfil)
(established for any part of an organization as long as the outcome of its
operation Is measurable)
(coordination is essential)
(budget setting should involve participation - delegated budgets: budgets for
which junior managers have been given some authority for setting and
achieving)
(review the performance of each manager controlling a cost or profit center)
Setting and using budget:

1. Incremental budgeting: uses last year's budget as a basis, and an
adjustment Is made for the coming year
2. Zero budgeting: sets budgets to zero each year and budget holders have
to argue their case for target levels and to receive any finance.
3. Flexible budgeting: cost budget for each expense are allowed to vary if
sales or output vary from budgeted levels
32.2 Variance analysis

• Measures differences from the planned performance of each department
over a given period
• Finding out the reasons for variances can help set more realistic budgets in
the future.
• Finding out the reasons for variances can help business take better
decisions.
• The performance of each individual cost center and profit center may be
appraised in an accurate and objective way.

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U1-1 Enterprise

-purpose: creating& adding value to resources, making it more desirable.

-do: identify the needs of consumers or other firms->purchase resources (factor

#what resource do businesses need?

creating value: increasing the difference between the

#value created is not same as profit!!!

The role of entrepreneur

Major challenges faced by entrepreneurs:

2 .Lack of finance or working capital – often difficult to encourage

4. Competition-a newly created business will often experience

5. Building a customer base- The longterm strength of the business

Why businesses fail?

1【补】step taken by business

Impact of enterprise on a country's economy

Classification of business activity

Changed in business activity

#Deindustrialisation: movement from the secondary sector to the tertiary sector.

-does not create a separate legal unit

Private limited company

"limited" or "LTD" ("PRE” in some countires)- legal form

Legal formalities in setting up a company

Other forms of business organization

Measuring business size:

Different measure of size:

# profit cannot be a measurement; it only means the company's performance

small and large business

Internal( organic) growth

#backward vertical integration:

Why a merger/takeover may achieve objectives

Why a merger/takeover may not achieve objectives?

Joint ventures and strategic alliances as method of external growth

*can be made between a wide variety of businesses.

The importance of objective:

Objectives of Private sector Business:

Objectives of public sector

Objectives of social enterprise

#summary: factors that determine business objective

$evaluation of mission statement

Relation between mission, objectives, strategy and tactics

The role of objectives in the stages of business decision-making

Translation of objectives into targets and budget

Ethical influence on business objectives and activities

Evaluating ethical decisions

The main stakeholders of a business are:

Stakeholders' role rights and responsibilities.

Conflicts arising from different stakeholder aims

Human resource management: purpose and role

Human resources management(HMR): the strategic approach to the effective

Number of employees required depend on

The skills of the workers required

Recruiting and selecting employees

#recruitment and selection:

-Person specification: a detailed list of the qualities, skills and qualifications

-preparing a job advertisement

-Making a shortlist for applicants:

-Selecting between the applicants

Pros of internal recruitment:

Redundancy and dismissal of employees

- Impact of diversity and equality in the workplace

Promoting equality impact:

Impact of training on a business and its employees:

#Poaching: when one business seeks to employ well-trained workers from

Development and appraisal of employees:

#employee appraisal: The process of assessing the effectiveness of an employee

AS商业笔记精

AS商业笔记精