Topic ● Definition/formula Application Pros/cons

Leadership styles Leadership styles are the different Autocratic Leadership Autocratic Leadership:
approaches to dealing with people ● Used at situations like a ● Pros:
and making decision when in a crisis since it is an - Quick decision
position of authority -- autocratic, emergency making
democratic or laissez-faire ● Faces constant change
● Tasks with a deadline ● Cons:
Autocratic Leadership is where the ● Requires error free - No opportunity for
manager expects to be in charge of performance employee input
the business and the have their into key decisions,
orders followed Democratic Leadership: which can be
● When it requires demotivating
Democratic leadership gets other multiple ideas/ team
employees involved in the decision discussion Democratic Leadership:
making process ● Fostering high levels of ● Pros:
employee engagement - Better decision
Laissez-faire Leadership makes and workplace could result with
the broad objectives of the business satisfaction employees and
known to employees, but then they Laissez-faire Leadership using their
are left to make their own decision ● Allows for faster experience and
and organise their work. decision making ideas - as well as
● Best suitable for those being a motivating
who are self motivated factor
and focused
● Cons:
- Unpopular
decision, such as
making workers
redundant could
not effectively be
made using this
style of leadership

Laissez-faire Leadership:

Legal structure Private Limited Company Application:
● Private Limited ● Business owned by
Company shareholders but they cannot
sell shares to the public
● Is an incorporated business
- Company exists
separately from the
wonders and will
continue to exist if
one of the wonders
should die
- A company can make
contracts/legal
agreements
- Company accounts
are kept separate
from the account of
the owners
● Limited liability
Pros:
● Selling shares to friends
and family
● Continuity remains in
the business
Cons:
● Pros:
- Encourages
employees to show
creativity and
responsibility
● Cons:
- Unlikely to be
appropriate in
organisations where a
consistent and clear
decision-making structure
is needed, for example, in
providing customer
service
● Shares can be sold to a
large number of people
(Friends and family)
(Possibility of expanding)
● Limited liability
(shareholders are only
liable to their original
investment in the shares if
debts aren’t paid)
● Owners able to keep
control of the business as
long as they do not sell to
many shares to other
people
● There are significant legal
matters which have to be
dealt with before a
 company can be formed
(too many paperwork)
● Shares in private limited
company cannot be sold
to anyone without the
agreement of other
shareholders (can make
some people reluctant
because they may not be
able to sell their shares
quickly if they require their
investment back)
● Accounts of business are
less secret (must be sent
to Registrar of Companies
and members of the
public)

Economic indicators GDP (Gross Domestic Product) Economy GDP

● GDP - The total value of output of ● When GDP rises (Growth)
● Inflation goods and services in a - Unemployment is
● Exchange rate country in one year generally falling
● Unemployment and the country is
Inflation enjoying high living
- Occurs when there is a rise standards
in average prices over a - Most businesses
period of time will do well at this
time.
Exchange rate
- The price of one currency in ● When GDP is at its peak
terms of another (Boom)
- Caused by too
Unemployment much spending.
- When people want to work Prices rise quickly
but cannot find a job and there are
shortages of skilled
 workers.
- Business costs are
rising and
businesses are
uncertain about
future

● When GDP is falling

(Recession)
- This is caused by
too little spending.
Most businesses
will experience
falling demand and
profits
- Workers may lose
their jobs

● When GDP is at it’s lowest

(Slump)
- Long term
recession
- Unemployment
reaches very high
levels and prices
may fall
- Many business will
fail to survive this
period

Rapid inflation
- Real incomes decrease
(workers will not buy as
many goods)
- Workers may demand
higher wages so that real
 incomes increase
- People buy foreign
products (Local products
are more expensive due to
increase in price)
- Jobs are lost in the
country
- Business cant expand and
create jobs in the future
(Living standards fall)

Appreciation
- Raise the price of exports
(People in America have
to spend more on
European products)
- Import prices fall and
demand for them might
rise

Depreciation
- Makes exports cheaper
(People in the foreign
country do not have to
spend as many dollars
buying euros to buy the
exports from Europe
- Imports are more
expensive and do the
opposite ( Imports into
europe now cost more to
buy from America)

Problems unemployment
causes:

Growth Internal Growth:
● Internal - Occurs when a business
● External expands its existing
operations
External Growth
- When a business takes over
or merges with another
business.
● Horizontal merger (when one
firm merges with or takes
over another one in the same
industry at the same stage of
production)
● Vertical Merger
- Forward vertical
integration (When one
business merges with
or takes over a stage
of production above
its stage of production
in the same industry)
- Backward vertical
Internal Growth: Horizontal Integration
- A restaurant wonder
could open other
restaurants in other
towns
External Growth
- Horizontal merger
(Mcdonalds merging
with or takes over
Burger King)
- Forward vertical merger
(A factory that produces Forward Vertical Integration
clothes merges with
Zara)
- Backward vertical
merger (A place that
collects cotton merges
with or takes over a
factory that makes
shirts)
- Conglomerate merger
(Ikea merging or taking
over Tesla)
● Unemployed people do
not produce any goods/
services (GDP decreases)
● Government pays
unemployment benefit to
those without jobs.
(Increase in government
spending)
● Pros:
- Reduces
competitors in
industry
- Opportunities for
economies of scale
- Combined
business will have
a bigger share of
the total market
● Pros:
- Gives an assured
outlet
- Profit margin made
by the retailer is
absorbed by the
expanded
business
- Retailer could be
prevented from
selling competing
products
 integration - Information about
● Conglomerate Integration consumer needs
(when one business merges and preferences
with or takes over a business can be obtained by
from a complete different the manufacturer
industry)
Backward Vertical Integration
● Pros:
- Gives an assured
supply of materials
- Profit margin of
supplier is
absorbed by the
expanded
business
- Supplier could be
prevented from
supplying other
manufacturers
- Cost of raw
materials can be
controlled

Conglomerate Integration
● Pros:
- Business now has
activities in more
than one industry
(diversified and
spread its risks)
- There might be a
transfer of ideas
between the
business
Elements of marketing mix Marketing mix Significance of packaging: Developing New products
● Product - A term which is used to ● Protects product ● Pros:
● Price describe all the activities ● Provides product - Unique Selling
● Promotion which go into marketing a information Point will mean the
● Place product or service. ● Help consumers business will be
recognise the product the first into the
Product ● Keep the product fresh market with the
- Applies to the good or new product
service itself --- its design, Extend product life cycle - Diversification for
features and quality. ● Introduce new variations business (wide
● Sell into new markets range of products)
Price ● Make smalls changes to - Expand into new
- The price at which the the product’s design markets
product is sold to the ● Use a new advertising - Expand into
customer is a key part of the campaign existing markets
marketing mix. Price should ● Introduce a new,
cover costs improved version ● Cons:
● Sell through different - Market research
Place retail outlets expensive
- Refers to the channels of - Trial products
distribution that are selected produces waste
What affects place - Lack of sales (if
Promotion decisions? audience is wrong)
- How the product is - Loss of company
advertised and promoted. ● The type of product it is image if new
- Includes discounts that may ● The technicality of the products fails to
be offered or any other types product meet customer
of sales promotion ● How often the product is needs
(money-off vouchers or free purchased
gifts) ● The price of the product Pricing methods:
● The durability of the 1. Market skimming: Setting
product a high price for a new
● Location of customers: product that is unique
● Where competitors sell ● Advantages:
- High profit
- Recovers
 their product: cost of
research
Types of Promotion: ● Disadvantages:
1. Advertising - People may
2. Sales promotion prefer
3. Below-the-line competitors
promotion due to
4. Personal selling lower
5. Direct mail pricing
6. Sponsorship 2. Penetration pricing: low
pricing for a new product
● Advantages
- Attracts
customers
and
increase
market
share
quickly
● Disadvantages
- Lower
revenue
- Cannot
recover
developme
nt costs
quickly
3. Competitive pricing:
setting a price similar to
competitors
● Advantages
- Can
compete on
matters
(service
and quality)
 ● Disadvantages
- Need to
find ways to
attract
sales
4. Cost plus pricing: adding
fixed price to cost of
production
● Advantages
- Quick and easy to
work out the price
- Make sure price
covers the cost
● Disadvantages:
- Price may be
higher than
competitors
5. Loss leader
pricing/promotional
pricing: setting price below
cost of production
Advantages:
- Sell
unwanted
stock
- Increasing
short term
sales

Disadvantages:
- Revenue is lower (Profits
lower)

Distribution Channels:
1. Manufacturer to
 Consumer
● Advantages
- All profit is
earned
- producer
controls all
part of the
marketing
mix
- Quickest
method
● Disadvantages
- High
delivery
costs
- High
storage
costs
- All
promotional
and
activities
must be
carried out
by producer
2. Manufacturer to Retailer to
Consumers: Advantages:
- Cost of inventory is
covered by retailer
- Retailer promotes
- Retailers are
conveniently
located for
consumers
-
Disadvantages:
- Not all profit is received
- Producer loses control on
marketing mix
- Producer must pay
delivery fee to retailers
- Retailers sell competitors’
products

3. Manufacturer to
Wholesaler to Retailer to
Consumer
● Advantages
- Wholesaler
s will
advertise
- Wholesaler
s pay for
transport
and storage
costs
● Disadvantages
- More profit
is taken
- Loses more
control on
marketing
mix
4. Manufacturer to Agent to
Wholesaler to Retailer to
Consumer
● Advantages
- Agent is
knowledge
able
● Disadvantages
- More profit
 is taken
away

Methods of production Job production Job Production Job Production

● Job - Is where a single product is - Suitable for personal ● Advantages:
● Batch made at a time services or ‘one-off’ - The product meets
● Flow products the exact
Batch production - Often used for high requirements of
- Is where a quantity of one quality goods and the customer
product is made, then a services - Workers often
quantity of another item will have more varied
be produced Batch Production job (No monotony)
- Suitable for anything - Flexible and may
Flow production produced in small charge a high price
- Is where large quantities of a groups for custom
product are produced in a
continuous process (mass Flow production: ● Disadvantages:
production) - Good for mass - High cost of
producing many production (Labour
products when firm is intensive and using
big skilled labour, good
quality materials)
- Time lengthy
- Specially made to
order (any
corrections is
expensive to
correct)

Batch Production
● Advantages:
- Flexible way
- Gives variety to
jobs
- Allows more
variety of products
 (consumer choice)
● Disadvantages:
- Expensive (semi
finished products
will need moving
about to the next
production stage,
inventory costs)
- Machines have to
be reset (delay in
production and
output is lost)

Flow Production
● Advantages:
- High output
- Low average costs
- High sales
- Capital intensive
(Little workers
needed and works
24 hours a day)
- Purchasing
economies of scale
- No need to move
goods (saved time)
● Disadvantages:
- Very boring system
(Little job
satisfaction -> low
motivation)
- High inventory
costs

Measuring business Profitability Profitability Ratio:

performance using ratios - The measurement of the
● Profitability profit made relative to either Return on Capital Employed
● Liquidity the value of sales achieved (ROCE):
or the capital invest in the
business

Liquidity
- The ability of a business to
pay back its short term debts.

This is how much the business

was able to get back from the
capital it had employed.

An outcome of 20%, for

example, implies that for every
$1 of capital in had employed in
the business, $0.20 is earned
as net profit

Gross Profit Margin:

Net Profit Margin:

Liquidity Ratio:
Current ratio:
 - calculates how many
current assets are there
in proportion to every
current liability, so the
higher the current ratio
the better (a value
above 1 is favourable).

Acid Test Ratio:

- This ratio doesn’t

consider inventory to be
a liquid asset, since it
will take time for it to be
sold and made into cash