3911busi2 tcm4-124375

%XVLQHVV0DQDJHPHQW
,QWHUPHGLDWH
6WXGHQW$FWLYLWLHV

Autumn 1998
HIGHER STILL
%XVLQHVV
0DQDJHPHQW
,QWHUPHGLDWH
6WXGHQW$FWLYLWLHV
6XSSRUW0DWHULDOV
*+,-./
BUSINESS MANAGEMENT - INTERMEDIATE 2
CONTENTS
Introduction
Page 3
Business in contemporary society

Activities A1 - A22
Page 9
Business information
Activities B1 - B4
Page 68
Decision Making
Activities C1 - C7
Page 80
Internal organisation
Activities D1 D6
Page 94
Marketing
Activities E1 - E9
Page 109
Financial management
Activities F1 - F6
Page 133
Human resources
Activities G1 - G9
Page 152
Operations
Activities H1 - H8
Page 178
Information Technology in Business

Activities I1 - I10
Page 204
Appendix 1
Page 231
Business Management Support Materials: Student Activities (Int 2)
BUSINESS MANAGEMENT - INTERMEDIATE 2
Introduction
The aim of this pack is to provide exemplar student activities to assists in the delivery
of the Business Management course at Intermediate 2 and to help prepare students for
both the internal and external assessment.
This introduction explains the nature of the exemplar activities and gives some brief
advice on how they might be used. It is followed by a summary of the exemplar
activities which relates them to the course content. To assist in course planning, a
second list which cross-references the course content with the activities is given in
Appendix 1.
The activities have been grouped into 9 sections (labelled A - I) each of which relates
to a major area of course content.
The activities have been described using the following terms:
Questions - these are conventional questions which require answers from students.
In most cases they are designed to be completed individually. Suggested
solutions are provided.
Exercises - in broad terms, these are tasks for students. In some cases, they result
in specific answers (which are provided) but in others no one single approach is
appropriate (e.g. an investigation).
Group activities - these are exercises designed to be carried out by groups of

students. In one case (activity H8), the exercise is a game and has been described
as this.
Mini-case studies - these contain short stimulus material in case study format and
some accompanying questions and/or exercises.
Case studies - these have more substantial stimulus material but also are
accompanied by questions and/or exercises.
Case study exercises - some of the IT activities consist of practical exercises built
around a case study (e.g. database work).
The above classifications are intended as a guide to the type of activity.

The activities have been designed to be used in a variety of different ways Thus, the
questions may be suitable in the early stages of a topic where students could be
referred to text-book or hand-out material as a possible source of suitable answers
Alternatively, they could be used for revision purposes prior to internal or external
assessment. Case studies may be valuable at the later stages of a topic as a way of
integrating the various aspects involved within it. If desired, it would be possible to
use the case studies and questions as the basis for homework. Some of the exercises
could be used as a way of managing different learning sets if a teaching group

consisted of students following a course at more than one level.
This pack will be provided on CD ROM to enable users to customise activities to suit
their individual client group requirements.
Summary of Activities
The following lists the exemplar activities contained in this pack. It is based on the
main headings which appear in the section on Course Content in the Arrangements
document. Each exemplar activity has an identification reference and the table also
gives details on the specific area of content and an indication of the nature of the item.
In a number of cases, the material covers more than one aspect of the course content.
Where possible, this has been shown. Overall, however, the classification should be
treated as a broad general guide to the subject matter of each item.
Business Enterprise (Int 2)
Business activity in contemporary society
Activity Content area
A1
Business cycle
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
A12
A13
Sectors of activity
Types of business organisation
Types of business organisation
Methods of obtaining finance
Objectives
The role of the entrepreneur
The role of the entrepreneur
Stakeholders
Stakeholders/Objectives
Objectives/The role of the
entrepreneur
Objectives/The role of the
entrepreneur/Types of business
organisations
Changes in the business environment
A14
A15
A16
A17
A18
A19
A20
A21
A22
B1
Sources of business information
B2
Types of information
B3
B4
Uses of business information
Nature of item
Questions, exercises and group
activities
Questions
Questions and exercises
Case study
Case study
Mini-case studies
Questions and group activity
Questions and group activity
Case study
Case study
Case study
Case study
Questions and exercise

Questions and exercise
Exercise
Case study
Mini-case study
Mini-case study
Mini-case study
Case study

Exercises
Exercises
Exercises
Decision Making
C1
Types of decision
C2
Decision making process
C3
Types of decision/Decision making
process
C4
C5
C6
C7
Exercise and case study

Exercise
Exercise
Mini-case study
Mini-case study
Case study
Business Decision Areas (Int 2)

D1
Structure of organisations/Factors
affecting internal structure of
organisations
D2
Structure of organisations
D3
D4
D5
Structure of organisations/Factors
affecting internal structure of
organisations
D6
Factors affecting internal structure of
organisations
Marketing
E1
The marketing concept/The marketing
mix
E2
The marketing concept/The marketing
mix
E3
The marketing mix
E4
The marketing mix
E5
The marketing mix
E6
Market research
E7
Market research
E8
The marketing mix/Market research
E9
The marketing concept/ The marketing
mix/Market research
F1
The role of the finance
function/Financial information
F2
function/Financial information
F3
Financial information
F4
Financial information/Uses of
financial information
F5
Uses of financial information/Users of
Questions
Case study and questions

Mini case study
Mini-case study
Exercises and group activities
Case study
Group activity
Questions
Questions and group activities
Case study
Case study
Exercise
Case study
A-Z of Marketing
A-Z of Finance
Questions
Case study
Case study
Case study
F6
Uses of financial information/Users of

Human resources
G1
Elements of Human Resource
Management
G2
Management
G3
Management/Employee relations
G4
Management
G5
Management
G6
Management
G7
Employee relations
G8
Employee relations
G9
Employee relations
Operations
H1
Elements of the operations
function/Quality
H2
function/Types of production/Quality
H3
Types of production
H4
Elements of the operations function
H5
Elements of the operations function
H6
function/Quality
H7
function/Quality
H8
function/Types of production/Quality
I1
Types of IT
I2
Types of IT/Uses of IT
I3
Uses of IT
I4
Uses of IT
I5
Uses of IT
I6
Uses of IT
I7
Uses of IT
I8
Uses of IT
I9
Uses of IT /Benefits and costs of IT
I10
Benefits and costs of IT
Case study

Questions
A-Z of Human Resource
Management
Mini-case study
Mini-case study
Mini-case study
A-Z of Industrial Relations
Case study
Mini-case study
A-Z of Operations
Questions
Mini-case study
Case study
Case study
Case study
Case study
Game
A-Z of Information Technology

Exercise and questions
Exercise
Exercises
Exercises
Cases study exercise
Case study exercise
Mini-case study
Exercises
Mini-case study
BUSINESS ENTERPRISE (INT 2)

BUSINESS ACTIVITY IN CONTEMPORARY SOCIETY
A1 - The Business Cycle
Briefly explain what is meant by each of the following terms:
Wealth Creation
Production
Consumption
Goods
Services
Wants
(a) Carry out a survey to find out how fellow students spend their pocket
money/wages. Design a simple questionnaire to do this.
(b) Prepare a report to show any similarities on how students spend their pocket
money/wages.
Copy out table below and classify the following as either a good or a service.
Description
Garden furniture
CD player
Hairdresser
Kettle
Car
Pizza delivery
Insurance consultant
Computer
Chocolate bar
Good
Service
Re-write the following passage completing the blanks. A WORDBANK has

been provided at the bottom of the passage.
BUSINESS ACTIVITY
The success of any _________________ activity depends on certain factors. To be
successful firms must ______________ products that _________________want to
buy.
The firms must satisfy these ___________ but they depend on what people already
have. Wants may be _________ like food, a CD player or a sports car. or
_______________ such as health care or entertainment. Peoples wants are
____________. Consumers constantly aim for a ___________ quality of life. They
are prepared to pay for better housing, better health care, and ____________ goods
such as cars and exotic holidays.
WORDBANK
unlimited; better; supply; business; services; limited; wants; consumers; goods
GROUP WORK
In groups of 3 or 4, collect magazines and newspaper cuttings to create a poster

which shows a mixture of goods and services.
In small groups (3 or 4) map an area of your local town centre, industrial estate
or local shopping centre. As a group collect the following information:
a map of the area visited showing location of firms;
the names of the organisations operating within the area;
whether the organisation provides goods or services.
(i)
Produce a report to show whether the majority of organisations provide

goods or services.
(ii) Comment briefly on your findings.
(iii) Present your findings to your fellow students.
10

A1 - The Business Cycle - Suggested Solution
Wealth Creation - the process of an economy generating value added and

profits through buying and selling
Production - Goods or services provided for consumers
Consumption - the using up of goods or services
Goods - physical products such as cars, washing machines, chocolate bars etc
Services - non-physical products such as hairdressing, insurance, dentistry etc
Wants - goods and services that people wish to have i.e. goods and services
Copy out table below and classify the following as either a good or a service.
Description
Garden furniture
CD player
Hairdressing
Kettle
Car
Pizza delivery
Insurance consultantcy
Computer
Chocolate bar
Good
*
*
Service
*
*
*
*
*
*
*
The success of any business activity depends on certain factors. To be

successful firms must supply products that consumers want to buy. The firms
must satisfy these wants, but they depend on what people already have. Wants
may be goods like food, a CD player or a sports car or services like health care
and entertainment. Peoples wants are unlimited. Consumers constantly aim
for a better quality of life. They are prepared to pay for better housing, better
health care, and luxury goods such as cars and exotic holidays.
11

A2 - Sectors Of Activity
Explain the difference between primary, secondary and tertiary industry and
provide 3 examples of each.
(a) Using the local Yellow Pages or Business Profiles, identify a company
within each of the following sectors of activity:
Primary;
Secondary;
Tertiary.
(b) Use the same examples and further classify them as Local, National and
Multi-national companies.
Classify the following activities under the headings - PRIMARY,

SECONDARY and TERTIARY:
Airline company
Aromatherapist
Food manufacturer
Mining company
Local bank
Turkey farm
Plumber
Local quarry
Local radio station
National building company
Car manufacturer
Estate agent
Dairy farmer
12

A2 - Sectors Of Activity - Suggested Solution
Primary
Secondary
Tertiary
extractive industries
manufacturing and construction industries
provision of services
Suitable examples include

PRIMARY
Extractive industries
farming
mining
oil drilling
quarrying
farming
3
SECONDARY
Manufacturing industries
furniture production
car production
food processing
computer manufacturers
house building
TERTIARY
Service sector
insurance provision
banking service
electrician
fire service
hairdressing
Airline company - eg British Airways, TERTIARY

Aromatherapist - TERTIARY
Food manufacturer - SECONDARY
Mining company - PRIMARY
Local bank - TERTIARY
Turkey farm - PRIMARY
Plumber - TERTIARY
Local quarry - PRIMARY
Local radio station - TERTIARY
National building company - SECONDARY
Car manufacturer - SECONDARY
Estate agent - TERTIARY
Dairy farmer - PRIMARY
13

A3 - Types of Business Organisation
There has been a continuing increase in the number of self-employed people in

the UK since the 1970s. What factors have contributed to this?
State 3 advantages and 3 disadvantages of the sole trader as a form of business

organisation.
Scottish Gas is a private sector business.

What does this mean?
Draft a table to show the differences between a public corporation and public
company.
Give examples of goods or services provided and funded by:

(a) Central government;
(b) Local authorities.
Describe the features a charity.

Give an example of a UK charity.
What arguments have been put forward for keeping the Royal Mail in the public
sector?
Libraries, local swimming pools and the fire brigade are normally provided by
local government. List reasons for and against these services being provided by
the private sector.
Write a short business feature for your local newspaper on the differences
between private and public limited companies.
14
10
(a) Give examples of voluntary organisations.

(b) Prepare a short presentation to your fellow students on a voluntary group of
which you are a member of (eg Army Cadet Corp, Air Training Corp, local
youth club or badminton club).
The presentation should be informal. It should provide your fellow students
with information such as:
(i)
(ii)
(iii)
(iv)
(v)
the aims of the organisation;

the type of activities carried out by the organisation;
the number of membership at present;
how revenue is raised;
any other information you consider of interest/importance to the group.
15

A3 - Types of Business Organisation - Suggested solution
Unemployment - people find it difficult to find another job or are considered too old
Independence - desire to be your own boss
Good redundancy packages offer opportunities
Opportunity to extend a hobby into a business
SOLE TRADER - any three
THREE advantages
THREE disadvantages
Easy to set up
Less capital required
Speedy decisions can be made
Special services can be offered
Profits do not have to be shared
Having unlimited liability

Finance difficult to raise
Small scale discounts
No one to cover illness, holidays, days off
Prices are higher than larger organisations
It has to compete in the market place against similar companies. It is not

government funded. It is owned by its shareholders and its capital comes from
shareholders.
4
PUBLIC CORPORATION
Set up by Act of Parliament
Owned by the government
Run by chairperson and managers
appointed by the government
Aims to provide a public service as well as
having commercial goals
PUBLIC COMPANY
Set up by issuing prospectus inviting public
to buy shares in the company
Owned by shareholders
Run by management team chosen by
directors representing shareholders
Commercial goals
16
5(a) Goods/services provided by Central government:

National Health Service
Defence
The Bank of England
BBC
Royal Mail
5(b)
Goods/services provided by Local Authority

Sports facilities
Swimming pools/recreation
Education
Fire services
Library service
Roads
Parks
Refuse collection
FEATURES OF A CHARITY
Most charities are registered under Charities Act 1992.
They do not exist to make a profit in the true sense of the word, their aim is to
raise money for their own particular cause.
They have TRUST status and are run by professional staff - PR staff and fundraising directors.
They sometimes advertise in the national press.
EXAMPLE OF A UK CHARITY
British Heart Foundation
Cancer Research Campaign
Oxfam
Etc
To ensure an adequate service is available to all customers

To offer service at reasonable cost to consumers
To prevent exploitation of consumers
To avoid wasteful duplication and confusion
To protect jobs.
17
Libraries/swimming pools
FOR
AGAINST
More services offered
Could close down if under-utilised
Cut local authority costs
Loss of benefit to community
Fire Brigade
FOR
More efficient
AGAINST
Higher costs to the community
Better equipment and

training
In rural areas private firms might not be prepared to

provide service except at a very high cost.
18

A4 - Types of Business Organisation
Read the following case study and then answer the questions below:
CASE STUDY
EAS-IT Ltd
Edward, Alex and Susan went into business 2 years ago. They had all graduated from
college together with good Business Studies qualifications. They had often talked
about running their own business whilst at college and had felt confident enough to
open up an agency together offering information technology support to local
businesses. The trio had toyed with the idea of forming a partnership, but decided it
was to their advantage to form a private limited company. They considered the
limited liability aspect of the organisation important in case the company ran into
financial difficulties. They each bought shares to the value of 5000. The newlyformed company was called EAS-IT Ltd.
EAS-IT Ltd advertised in business magazines, a local newspaper and sent out a large
mailing to local businesses to inform them of the new services they were offering.
The business did very well.
Lately, due to cutbacks in many of its client companies, the business has been
struggling. The partners knew something would have to be done quite soon to prevent
the business failing. Edward and Susan wanted to spend more money on advertising
the business by sending out special promotion leaflets to companies and putting larger
adverts in the local paper. Alex said that they could not afford this. Alex suggested
they consider diversifying into other areas. He had read about the increase in call
centre businesses in Scotland. The company, however would need additional capital
to finance the new venture.
QUESTIONS
1
What does it mean to say that EAS-IT Ltd was a limited company
What is given as the main advantage for EAS-IT becoming a private limited
company?
What would be the extent of the liability of the shareholders in EAS-IT?
State THREE reasons why a small business might go bankrupt.
19
There are two different types of limited companies. EAS-IT Ltd is a private
limited company. What is the name given to the other type?
What is meant by diversifying?
How might the business raise the additional capital needed?
20

A4 - Types of Business Organisation - Suggested solution
EAS-IT LTD
1
Limited company - a company operating in the private sector. The shares are
not quoted on the stock exchange. The company has limited liability, which
means shareholders only risk the amount they have invested in the company
rather than their own personal wealth.
In case they ran into financial difficulties - limited liability.
15,000 (3 x 5, 000 shares)
Reasons why a small business might go bankrupt (any three):

Lack of expertise
Shortage of finance
Decline in market
Too much money taken out of the business
Public Limited Company
Diversifying - offering more than one product to spread risks
The owners putting in more capital

Bank loan
Venture capital
21
BUSINESS ENTERPRISE (INT2)

PUPIL ACTIVITIES
A5 - Methods of Obtaining Finance
1. Describe each of the following methods of obtaining finance:
Loan
Overdraft
Mortgage
Retained Profits
Issuing Shares
Trade Credit
Factoring
Leasing
Selling an Asset
Grants
2. For each of the methods explained in question one state which is internal or
external and which is short or long term. Lay out your answer as follows.
Source of Finance
Loan
Overdraft
Mortgage
Retained Profits
Issuing Shares
Internal or External
External
Short or Long Term

Long term
3. Why might a small business prefer to have an overdraft rather than a short term
bank loan?
4. What is a share issue and when might it be used as a method of raising finance?
5. State two main sources of finance for a public corporation
22
6. In groups discuss which of the following methods of raising finance are most
appropriate for soletraders, private limited companies, public limited companies
and charities. To assist your discussion copy out the following table and place a
tick or ticks opposite each type of organisation.
Type of
Organisation
Soletrader
Private
Limited Co
Public
Limited Co
Charity
Overdraft
Bank
Loan
Mortgage
Share
Issue
Trade
Credit
Factoring
Grants
Appoint a group leader who will lead the discussion and who will be prepared to
justify the decisions made by the group.
7. Andy and Katie are partners who have established a small manufacturing business.
To begin production they need to buy a machine and raw materials. Katie is
negotiating a bank loan to buy the machine and Andy is arranging a bank overdraft
to finance the purchase of raw materials.
i
Explain why each method of finance is appropriate in this situation.
ii Identify one alternative method of finance for the machine and one alternative
for the raw materials. In each case:
state why it is a suitable alternative method

suggest one disadvantage it has as a method of finance.
23

BUSINESS ACTIVITIES IN A CONTEMPORARY SOCIETY
A5 - Methods Of Obtaining Finance - Suggested solution
1. Loan - borrowing money which then has to be repaid over a period of time with
interest, usually with fixed payments.
Overdraft - borrowing money from a bank by taking out more money than is
available in your account. Interest is charged on the amount that you borrow.
Mortgage - a loan usually secured upon a property.
Retained Profits - profit that is kept by a company to be used at some point in the
future and not issued to shareholders.
Issuing Shares - money introduced to the business by selling shares.
Trade Credit - a source of finance where businesses use goods before paying for
them.
Factoring - a specialist business collecting unpaid debts for which it charges a fee.
Leasing - renting equipment or premises.
Selling an Asset - money raised by selling off assets the business no longer
requires.
Grants - financial help given by the government or local authorities for a specific
reason. This money does not have to be repaid.
2.
Source of Finance
Loan
Overdraft
Mortgage
Retained Profits
Issuing Shares
Trade Credit
Factoring
Leasing
Selling Assets
Grants
Internal/External
External
External
External
Internal
External
External
External
External
Internal
External
Short/Long Term
Long Term
Short Term
Long Term
Short Term
Long Term
Short Term
Short Term
Short Term
Short Term
Short Term
3. A small business might prefer to have an overdraft than a bank loan because an
overdraft is easier to obtain and is more flexible. The business can increase their
overdraft limit as they require to do so, on the other hand, they can repay the money
borrowed immediately if they have the means to do so. A bank loan is a longer term
commitment repaying fixed monthly instalments over a period of time. If a business
has surplus cash at any time it is unable to use it to reduce the value of the loan. For
small businesses, the bank may expect the business to put up some form of collateral.
This means that if the business is unable to meet loan repayments the bank could sell
assets of the business. For many small businesses this may include the homes of the
owners of the business.
24
4. A share issue is when the owner decides to sell off the business in small parts
(shares) to the public. The shares are given a monetary value, for example Marks
and Spencers share are worth 4.50 each. Large amounts of money can be raised
through issuing shares and most businesses decide to do this as a means of raising
money for growth.
5. Possible sources may be direct government funding; revenue from a licence fee
(e.g. BBC); funding through a scheme involving the private sector e.g. PFI
7.
i
Overdraft - the partners do not know how much money they will need for raw
materials and an overdraft is flexible. Interest is only payable on the actual
amount of the overdraft, so they do not need to pay interest on an amount they
do not need.
Loan - the loan will be for a fixed sum, at a fixed rate of interest for a fixed
period of time. It is appropriate in this situation because the partners know the
amount they will need and will be able to calculate accurately if they can
afford the loan.
ii The raw materials could be bought using trade credit.

Trade credit is often used for buying materials, and may even enable the
partners to manufacture and sell the products before having to pay for them.
The main disadvantage is that it is not easy to obtain trade credit as a new firm
and they may lose out on discounts from suppliers for paying in cash.
Leasing arrangements could be made for the machine. Also accept buying on
credit or hire purchase.
It may be possible to lease the machine and avoid a large financial outlay. The
main disadvantage is that leasing can mean the partners will face a continuing
regular cost for a machine that they will never own.
25
6.
Type of Organisation
Sole Trader
Private Limited Company
Charity
Overdraft
9
9
9
9
Bank loan
9
9
9
9
Mortgage
9
9
9
Share Issue
9
9
Trade Credit
9
9
9
9
Factoring
9
9
Grants
9
9
9
9
26
BUSINESS ENTERPRISE (INT2)

CASE STUDY
EMMA CHANG
Emma Chang is 28 years old and has worked for a well-known American Bar Diner as a
restaurant manager for 4 years. She works extremely long and unsociable hours and has
now decided to leave the company and put all her skills, expertise and dedication into her
own business. She would like to open up her own delicatessen/caf.
Emma is currently in the process of looking at sites, deciding upon furniture, fittings and
decoration for her premises and making decisions about what stock she would like to sell
in her deli. She has some savings put aside for her new venture. However, she is aware
that once she knows how much money she needs to set up her business she must decide
how she will finance it.
TO DO
Write a report to be read by Emma explaining how small businesses can raise finance and
recommend the most appropriate forms of finance for her. Your report should cover the
following:
The forms of finance that are available to small businesses.

The most appropriate forms of finance for Emma in relation to premises, decoration,
furniture and fittings and stock.
The main advantages and disadvantages of the forms of finance you have
recommended to Emma.
27

BUSINESS ACTIVITY IN A CONTEMPORARY SOCIETY
A6 - Methods Of Obtaining Finance - Suggested solution
EMMA CHANG
Forms of finance available to small businesses:
Overdrafts - An overdraft is a form of loan from the bank which allows you to take
more money out of your bank account than you have in it. A maximum figure is
usually set by the bank, this is known as an overdraft limit. Interest is charged on
the amount borrowed. Overdrafts are very often used by small business because they
are easy to arrange and very flexible.
Loan - A loan is a form of borrowing where a fixed sum of money is borrowed and
then repaid over a fixed period of time. The interest rate charged on the loan is also
fixed. Loans are often used by small businesses because they are easy to obtain and
make it easy for the business to plan ahead because they know what their
repayments are going to be.
Leasing - Leasing is like renting - a fixed amount is paid each month - small
businesses will usually lease equipment or buildings. Depending on the type of
leasing contract, the business may not have to worry about breakdowns as the leasing
company will maintain the equipment. Also the business may benefit from keeping
up to date with new technology as the leasing company replace out-of-date
equipment. The business will never own the equipment they are leasing.
Factoring - Factoring means that a financial company, the factor, agrees to collect
debts (invoices) on behalf of the business. This helps the cash flow in a small
business which may not have been able to chase up all the debts due to them. The
factor charges for this service.
Trade Credit - Trade Credit is a source of finance available to small businesses

which involves the business using the goods and paying for them at a later date. It is
sometimes difficult for new businesses to obtain credit.
Grants - Grants are issued by various branches of the government as an incentive to

businesses. The money received does not have to be repaid, however, there are
conditions attached that must be met by the business.
Owners Capital - This is money put into the business by the owner usually in the
form of savings. Most small business will have some form of owners capital
invested. The more owners capital the business has, the less amount of finance they
will have to borrow and pay interest on.
28
In addition to her own savings Emma will need other forms of finance to set up her
business. (The answers below are not the only correct ones. Accept any source of finance
that is appropriate as long as it is justified.)
To finance her premises leasing would be the most appropriate method. No large
initial outlay is required and her monthly payments will be fixed making it easy to
plan ahead.
Advantages
no large initial outlay of cash

premises will be maintained
fixed amount payable monthly makes it easy to plan ahead.
Disadvantages
Emma will never own the property

it is more expensive in the long run than buying outright.
To finance her decoration and fixtures and fittings, a bank loan would be the most
appropriate form of finance. Emma will know how much of a loan she will require
and will be able to calculate accurately if she will be able to meet the repayments.
Advantages
easily obtainable
fixed repayments over a fixed period of time make it easy to plan ahead
Disadvantages
cannot pay off part of the loan if the business has surplus cash
Emma may lose her home and personal possessions if she cannot meet the
repayments.
To finance the purchase of her stock Emma should use a bank overdraft. It is easy to
arrange and is flexible. Emma will not know how much money she will require for
stock each month and therefore will require a flexible source of finance.
Advantages
easy to arrange
flexible, overdraft limit can easily be increased or reduced if required
the overdraft can be repaid at any time by the business if it has available cash.
Disadvantages
interest charged can be quite high.
29

In each of the following situations set out the options for obtaining finance that are
available to the business organisation and state the type of finance that you would
recommend. Justify your recommendations.
i
Ashok Roy runs his own printing business, designing and producing stationery for
businesses in his home town. In recent months, his business account has become
heavily overdrawn. It currently has a deficit of 5,500. Ashoks customers (his
debtors) are increasingly delaying payment of their accounts. He has provided
evidence that he has 7,000 worth of outstanding invoices, but he needs help
because his creditors want him to settle his bills quickly.
ii Patterson and Wilson are partners in a long established firm of solicitors. The
partners are seeking to purchase high specification information technology to
improve both the image and the efficiency of the firm. The expected cost of the
equipment is 23,500.
iii The Renfrew Cannery Company Ltd is planning to build an extension to its
factory. The extension to the factory is expected to cost 250,000 with a further
100,000 necessary for fixtures and fittings. The company has enjoyed a
prosperous period recently and will be able to contribute 40,000 from its own
reserves.
30

A7 - Methods of Obtaining Finance - Suggested solution
Options available for Ashok Roy:
increase his overdraft

use a factoring company
invest more capital into the business from personal savings
Ashok should use a factoring company to collect his 7,000 worth of outstanding
invoices. This will improve his cash flow instantly and allow him to pay his creditors.
He should consider using the factoring company on a long term basis or chase up his
debtors himself so that his overdraft does not become so high in the future.
ii Options available to Patterson and Wilson:
bank loan
leasing
hire purchase
Patterson and Wilson should take out a bank loan to purchase their information
technology. They will know how much it will cost and will be able to spread out the
payments over a fixed period of time. As they are a long established firm they will
have no difficulty in obtaining the loan. Banks offer a lower rate of interest that a
hire purchase company and by buying outright they may be able to sell the assets at a
future date when they need to be replaced.
iii
Options available to the Renfrew Cannery Company Ltd
mortgage loan
issuing shares
Accept either of the above answers if they are appropriately justified.
31

A8 - Objectives
1. Explain each of the following terms:
profit maximisation
survival
social responsibility
provision of a service.
2. For each of the following types of business organisations, state what their 2 main
objectives would be:
Sole Trader
Private Limited Company
Charity
Public Corporation
Government Funded Service Provider
Local Authority Funded Service Provider
3. Using an example of each of the organisations in question 2, draw up a table (see

below) which shows the type of business organisation, a real life example (you may
wish to use the Yellow Pages to help), their main objective and how they might
attempt to achieve that objective.
Type of business
organisation
Sole Trader
Example
Objective
How objective will be

achieved
Private Limited
Company
Public Limited
Company
Charity
Public
Corporation
Government
Funded Service
Provider
Local Authority
Funded Service
Provider
32
4. For what reasons might growth be an objective of a business organisation?

Give 3 examples of how a Public Limited Company might attempt to grow.
5. In groups, use the Yellow Pages to pick out 4 local firms and explain how each of
them could show greater social responsibility.
6. In groups of 4, decide upon a business venture you would like to set up. Briefly
explain what your business will be, what type of ownership it will have, what the
objectives of the business will be and how they will be achieved.
Set your answer out under the following headings:
Description of Business
Type of Ownership
Objectives
How to Achieve Objectives
33
BUSINESS ENTERPRISE - INT 2

A8 - Objectives - Suggested solution
1. Profit maximisation - achieving the highest profit possible.

Survival - breaking even in order for the business to survive and continue trading.
Social Responsibility - showing responsibility to people involved in the business
activity such as customers, employees, the local community.
Provision of a service - making sure that the service provided meets the requirements
of customers or clients. Applies to publicly funded organisations such as NHS trusts,
local authorities (e.g. education, social work).
2. Sole Trader - survival, profit maximisation
Private Limited Company - profit maximisation, gaining a good reputation
Public Limited Company - profit maximisation, showing social responsibility, growth
Charity - survival, raising money
Public Corporation - providing a service, growth, showing social responsibility
Government Funded Service Provider - providing a service, meeting the needs of the
community
Local Authority Funded Service Provider - providing a service, meeting the needs of
the local community
3.
Type of Business
Organisation
Sole Trader
Example
Objective
Carols
Hairdressing
Survival
Private Limited
Company
Public Limited
Company
Charity
Heath Paper
Mills Ltd
Marks and
Spencer Plc
Oxfam
Profit
Maximisation
Profit
Maximisation
Survival
Public Corporation
Royal Mail
Providing a
high quality
service
How objective might be

achieved
Breaking even making sure
total costs at least equal
total revenue
Increase sales, increase
profit margin, reduce costs
Increase sales, increase
profit margin, reduce costs
Increase sales and
donations
Constantly improving
service to meet needs of
customers
34
4. Growth may be an objective because the organisation may wish to get the largest share
of the market; it may wish to protect itself against a take-over or it may wish to get
more revenue so as to have more funds for investment etc.
A Public Limited Company might attempt to maximise its growth in the following
ways:
expand the product range

selling into more areas of the country or the world
increasing selling price of products.
35

A9 - The Role of the Entrepreneur
1. Give an example of each of the four factors of production that would be employed in
the following businesses:
Vidal Sassoon (Hairdresser)

Tesco
Levi Jeans Factory
Virgin Airlines
2. Describe the role of an entrepreneur in a business organisation.

3. Describe the role of an entrepreneur in a small business organisation compared with
that of managers in a large PLC.
4. Name 3 famous entrepreneurs and their main business activities.
GROUP WORK
5. In groups of 3 or 4, find out a much as you can about one of the entrepreneurs you
have named in question 5. You could refer to newspaper or magazine cuttings or
sources like the Internet. Prepare a short report which shows how this person has the
characteristics of an entrepreneur. These characteristics are - risk taker, decisionmaker and controller of the factors of production.
36

A9 - The Role of the Entrepreneur - Suggested solution
1.
Business
Vidal
Sassoon
(hairdresser)
Tesco
Levi Jean
Factory
Virgin
Airlines
Land
Sites on which
shops are
located
Sites on which
shops are
located
Site on which
factory is
located
Airfield
Labour
Hairdressers
Capital
Sinks, mirrors,
scissors
Enterprise
Vidal Sassoon
Till operators,
shelf stackers
Tills, shelving
Machinists,
managers
Factory
equipment
Pilots, air
hostesses
Aeroplanes
Senior
managers in
company
Senior
mangers in
company
Richard
Branson
2. An entrepreneur is the person who develops a business idea and combines the factors
of production to achieve the objectives of that business. Entrepreneurs are risk takers
because they often use personal money to set up the business.
3. The entrepreneur of a small business will also be the owner of that business. Their
role will be to combine the factors of production to make the business as profitable as
possible. Managers in a large organisation are employed by the owners (shareholders)
to plan, organise and control the workers of the organisation whilst trying meet the
objectives of the business. Mangers in large PLCs are often specialists in their area
of work. They often prefer to pay themselves large salaries and have flexible working
hours than maximise profit for the company.
4. Richard Branson - Virgin Record Shops, Virgin Airlines, Virgin Coke
Tom Farmer - Kwik-Fit
Brian Soutar, Anne Gloag - Stagecoach
Anita Roddick - Body shop
Bill Gates - Microsoft
37

A10 - The Role of the Entrepreneur
CASE STUDY
GEORGE MITCHELL - ENTREPRENEUR
George Mitchell decided to leave his job as a supervisor with a national, well-known
bedding manufacturer. Although he enjoyed his job with the organisation, he had always
had a desire to run his own business. The opportunity came when the company decided it
would have to restructure to cut costs. The workforce were offered voluntary redundancy
packages.
George had been with the company since he left school at 17 (almost 20 years ago). He
would qualify for a good redundancy package. He had been making his own homecrafted furniture for years and the furniture was in high demand from friends and
neighbours. He had built up a good reputation in his area for producing high-quality
furniture of unusual designs. He was very creative and had an eye for good shape and
design. He attended evening classes at the local college and had almost completed a parttime degree course in Art and Design. He had some new ideas of his own which he
wanted to market. With his background in organisation, a small but loyal customer base
and his financial remuneration, George decided it was time to branch out on his own. He
knew it would be a big step, but he also knew he would obtain help from different
agencies.
QUESTIONS
1
Why can George be described as an entrepreneur?
What risks will George be required to take as an entrepreneur?
What will Georges roles in the business be at the beginning?
What factors of production will George need to combine to ensure success?
If the business is very successful, how might Georges roles change?
What agencies might be able to help him.
38

A10 - The Role of the Entrepreneur - Suggested solution
CASE STUDY - GEORGE MITCHELL - ENTREPRENEUR

1
George is willing to take a chance on running his own business. He must bring
together all other factors of production.
Risks - correct market targeted, finance needed to set-up business, premises and
supplies
Georges role will be carrying out all aspects of management - administration,

marketing, finance, operations.
The four factors of production include: land, labour, capital and enterprise.
George will have to delegate management tasks to specialist managers eg finance,

operations and marketing.
Scottish Enterprise
Local Authority Grants
European Funds
Etc
39

A11 - Stakeholders
1. Complete the following table, stating whether each of the stakeholders are internal or
external to a business organisation and what interest each has in the activities of a
business. The first example has been completed for you.
Stakeholder
Internal/External
Interest in Organisation
Shareholder
Internal
Receiving a share of profit through

dividends
Owner
Employee
Customer
Supplier
Community
Government
2. What conflict of interests might arise between different stakeholders in a large
business organisation?
3. Complete the table below. It lists a number of organisations which are funded from
public sources. You should identify three possible stakeholders in each organisation.
Try to be as precise as you can when giving examples.
Organisation
Stakeholder 1
Stakeholder 2
Stakeholder 3
Scottish
Qualifications
Authority
BBC
Schoolteachers
Students taking
SQA awards in
schools and colleges
Employers who
wish to employ
school leavers
East of Scotland
Water
Local Authority
Social Services
Department
Commission for
Racial Equality
(CRE)
40

A11 - Stakeholders - Suggested solution
1.
Stakeholder
Internal/External
Interest in Organisation
Shareholder
Internal
Owner
Employee
Customer
Supplier
Internal
Internal
External
External
Community
Government
External
External
Receiving a share of profit through

dividends
Making a profit
Secure job, good level of pay
Buying good quality goods and services
Receiving prompt payment for goods
supplied
Providing a service, providing jobs
Providing jobs, paying tax
2. There are many areas of conflict that may arise between different stakeholders in an
organisation. Some are listed below:
Owners and workers - owners want the business to make as much profit as possible.
Whereas workers are concerned with gaining the highest possible wage and having
good working conditions, both of which will reduce the amount of profit the business
makes.
Owners and managers - when a management team become powerful and influential
they begin to pursue their own interests rather than those of the owners. This might
involve paying themselves very high salaries and working whatever hours they want
whilst achieving satisfactory levels of profit. This would not be in the interests of the
owners as profits are not being maximised.
Customers and owners - owners are constantly trying to maximise their profits,
whereas customers want good quality products at the lowest price possible with added
extras such as delivery and after-sales service.
41
3.
Organisation
Stakeholder 1
Stakeholder 2
Stakeholder 3
Scottish
Qualifications
Authority
Schoolteachers
Employers who
wish to employ
school leavers
BBC
East of Scotland
Water
Local Authority
Social Services
Department
Commission for
Racial Equality
(CRE)
Licence payers
Householders in this
area
Care homes for old
people
Students taking
SQA awards in
schools and
Colleges
Programme makers
Local Authorities in
this area
Family members of
clients
Members of
minority groups
Community as a
whole
Employers
Government
Employees
Council tax payers
42

A12 - Stakeholders/Objectives
CASE STUDY
SOCIAL RESPONSIBILITY - WHO CARES MOST?
Social responsibility is of as much concern to the small firm as to the large, although the
approaches and the issues involved may differ considerably. Many large firms spend
considerable amounts of money and manpower in order to show they are being socially
responsible. Most of what is being done is well publicised - large firms are very skilful at
capitalising on public relations benefits.
Very often it is the local entrepreneur who is taking on issues of ethics or social
responsibility in his/her day-to-day operations. Many entrepreneurs of small scale
businesses serve on the councils of Universities, NHS trusts, or Enterprise Agencies and
many are involved in environmental movements. Small firm owners are playing their part
in their community - to some degree out of a sense of duty and to some degree out of a
sense of personal commitment to that community. What small businesses are not good at,
is blowing their own trumpets, and we therefore tend to assume that it is the IBMs and the
Tescos who are more involved.
QUESTIONS
1. What is meant by social responsibility?
2. How might a small firm benefit from showing social responsibility to the local
community?
3. Why might small firms be more inclined to show social responsibility than large ones?
4. Name a local small business and a local large business and give an example of how
each of them shows social responsibility.
5. How might an objective such as showing social responsibility, conflict with other
objectives a small firm might have?
6. How might a recession affect the degree of social responsibility firms might show?
7. Do you think that social responsibility will be more important to publicly funded
organisations than to ones in the private sector? Give reasons for your answer.
43

A12 - Stakeholders/Objectives - Suggested solution
1. Social responsibility means showing a sense of responsibility to all those involved in

the business activity from employees to the local community. For example, creating
jobs or reducing emissions from factories.
2. The local community is made up of customers and employees. Therefore, if a business
shows consideration to employees it may improve motivation, absenteeism and
loyalty, which in turn could improve the performance of the business. By showing
consideration to customers they are likely to return as they will feel valued. A
favourable image will impress customers and increase demand.
3. The passage suggests that small firms show greater social responsibility. Small
businesses feel a sense of duty and personal commitment to the local community.
Small businesses are selling their goods directly to the local area and as they are part
of the local area themselves, they will see what the area requires and see the benefit of
their work.
5. Showing greater social responsibility can be costly. This could conflict with the main
objective of most businesses - profit maximisation. Social responsibility may often be
a fairly low priority objective.
6. During a recession the degree of social responsibility shown by businesses may
decrease. Because the recession makes trading difficult, many firms need to cut costs
just to enable them to survive. This may mean that budgets for the local community
may be cut or eradicated as such projects do not necessarily mean an increase in
profits.
7. In principle, social responsibility may be more important to publicly funded
organisations than private sector organisations. This is because publicly funded bodies
receive money from the state and thus should act in the interests of the community as
a whole. They have to take a greater range of interests into account when deciding
what to do. In practice, though, these interests conflict and acting in the interests of
one group may be contrary to the interests of another e.g. a local authority may have to
close leisure facilities because of a lack of finance.
44

A13 - Objectives / The role of the entrepreneur
CASE STUDY
FROM DAVID TO GOLIATH, OPTICIAN EYES TOP SLOT
(Adapted from Scotland on Sunday, 22 Feb 1998)
David Moulsdale, a 28 year old entrepreneur, is in negotiations that could see his Optical
Express empire become the number one chain of opticians in the UK, 9 years after
opening his first store in Leith. Last year David acquired struggling London based
company Specialeyes and doubled the size of his own company. He is now aiming to take
Optical Express from number 5 in the market to the top slot, with a potential deal with
either Dolland & Aitchison or Specsavers.
David, who is a qualified dispensing optician, retains 100% ownership of Optical Express
has said that the merged company made profits of 2m last year. Specialeyes was a listed
company but David decided to make it private, because he said it gave him greater
flexibility to change the business without having to answer to analysts and shareholders.
When asked about the future of Optical Express, David said We would like to become
the number one optical retailer in the UK and then expand throughout Europe, possibly
through a stock market flotation.
QUESTIONS
1. Why is the title From David to Goliath an appropriate one?
2. David is described as an entrepreneur in the passage. What is an entrepreneur and
what are the main features of an entrepreneur?
3. What would have been the objectives of Optical Express 9 years ago when the first
shop opened?
4. What do you think is Davids main objective for Optical Express at the time of the
article? Explain your answer with references to the article.
5. Explain what is meant by a stock market flotation and why might it be appropriate
for expansion into Europe?
45

A13 - Objectives / The role of the entrepreneur - Suggested solution
1. Goliath is a giant. When David opened his first business he was only a small
organisation. He is now the owner of a huge company that made profits of 2m last
year, his current situation can be compared to that of a giant.
2. An entrepreneur is someone who has a business idea and is willing to take a risk and
set up the business using their own money. The main features of an entrepreneur are:
having a business idea

taking a risk by investing their own money in the business
combining the factors of production to make a successful business
3. When any new business starts trading the main objective is usually survival as many
new businesses fail in the first 6 months. Survival would have been Davids main
objective when he opened his first shop 9 years ago. However, he would also have
been keen to make a profit and gain a good reputation as well.
4. At the time of the article Davids main objective for Optical Express is growth. He
states in the article we would like to become the number one optical retailer in the
UK and then expand throughout Europe . It is clear from this statement that
expansion of the company is his number one priority.
5. A stock market floatation is where a company issues shares for sale to the general
public. The shares can be bought and sold on the stock market. This is an appropriate
method for raising finance to help expansion into Europe as huge amounts of money
can be raised interest free.
46

A14 - Objectives
CASE STUDY
THE PICTURE HOUSE
The Picture House is a cinema owned by Adam Moffat. It has been in his family since
the 1950s. It is the only cinema in the large busy town of Darleton, however, there are
other cinemas in the local area.
Adam adapted to change in the 1960s and 1970s when cinemas were no longer very
popular and changed the business into a Bingo Hall. The 1980s saw a revival of interest
in the cinema and Adam returned to running the business as a cinema and is now making
a steady profit each year.
He is looking to retire and his two sons, Matthew and Michael, are keen to take over the
business. They have plans to expand and modernise the building and make it into a
multiplex cinema with 10 screens. Before they do this, however, they decide they must set
up the business as a private limited company to protect their own possessions.
QUESTIONS
1. The cinema was originally owned by Adam Moffat as a sole trader. What were the
advantages and disadvantages to Adam of being a sole trader?
2. What would Adams objectives have been in the 1950s when The Picture House
first opened?
3. What steps will Matthew and Michael have to take to make the business a private
limited company?
4. Adam, Matthew and Michael could be all described as entrepreneurs. In what ways
have they acted as entrepreneurs?
5. Suggest likely objectives Matthew and Michael might have for the future of The
Picture House.
6. Describe appropriate methods of raising finance that are available to Matthew and
Michael for the expansion and modernisation of the cinema.
7. List the main stakeholders of The Picture House after the expansion goes ahead and
explain the interest they would have in the business.
47

A14 - Objectives - Suggested solutions
1. Advantages
Easy to set up
Owner retains overall control
Only requires a small amount of capital
Profits do not have to be shared.
Disadvantages
Unlimited liability endangers personal possessions.

Although they can choose the hours they work many sole traders have to work
very long hours as they have to do all jobs such as the accounts and advertising of
the business.
There is no-one to run the business during periods of ill health or holidays.
Difficult to expand.
2. When The Picture House first opened Adams main objectives were likely to have
been survival followed by profit maximisation and gaining a good reputation.
3. The founders of the company, Matthew and Michael, would have to register with the
Registrar of Companies and then submit a Memorandum of Association and an
Articles of Association. Once they have received a Certificate of Incorporation they
can begin trading as a Private Limited Company.
They have acted as entrepreneurs by making decisions (e.g. Adam changed the cinema
to a Bingo Hall and back again; Matthew and Michael wish to make it a multiplex)
and by taking risks (e.g. Adam took a risk going back to a cinema and Matthew and
Michaels ideas may not work because of the competition).
5. Likely objectives Matthew and Michael might have for the future of The Picture
House are growth, profit maximisation, sales maximisation and social responsibility.
6. Appropriate methods for raising finance for the cinema are:
Bank loan - borrowing a sum of money from the bank and paying back fixed
repayments over a fixed period of time. The interest rate will also remain fixed.
Mortgage Loan - a type of bank loan used to buy property. Some form of security
would have to be used as collateral for the loan.
48
Issuing Shares - selling shares would raise large amounts of interest free money, but
would mean losing some control and sharing profits.
7. Main stakeholders after expansion goes ahead:
Shareholders - want to receive a share of profit through dividends.
Employees - want to have job security.
Customers - want to receive a good service ie, the latest releases of films.
Suppliers - want to be paid promptly.
Government - payment of tax.
Local Community - want cinema to provide a service and create jobs for the area.
49

A15 - Changes in the business environment
QUESTIONS
1
What are the features of a multinational company?
Give THREE examples of multinational companies.
What is meant by the public sector?
Name 4 organisations which used to be in the public sector but are now in the
private sector.
Some public services must be put out to tender. What does this mean? Can you
give examples.
TASK
Place the following organisations under the correct sector heading. Draw up a table
similar to the table below.
Tesco
Local library
Bank of Scotland
Unilever
PUBLIC SECTOR
BP
Police
Ford Motor Co
Royal Mail
Midlothian Council
Dixons
BBC
Stirling Royal Infirmary
PRIVATE SECTOR
50

A15 - Changes in the business environment - Suggested solution
Features of a multinational company:

Operates factories and other facilities all over the world with total control.
The governments of the countries in which they operate have very little say in how
they are run, or how dividends are allocated. Tends towards global branding
today.
Any THREE examples of multinational companies for example:

Nike
McDonalds
Coca Cola
Public sector - made up of organisations accountable to either central or local

government.
Any four organisations for example:

British Telecom
British Gas
British Rail
Britoil
Area Electricity Boards
British Airways
British Aerospace
The term put out to tender means that the contract for provision of goods or
services have to be offered to firms to compete for on a competitive basis.
Examples include: school/college cleaning contract, school/college canteen
provision and local council maintenance.
TASK
PUBLIC SECTOR
Local library
Police
Midlothian Council
Stirling Royal Infirmary
Royal Mail
BBC
PRIVATE SECTOR
Tesco
BP Service Station
Ford Motor Co
Unilever
Dixons
Bank of Scotland
51

A16 - Changes In The Business Environment
QUESTIONS
1
Why may there be fear amongst employees when firms such as General Accident
and Commercial Union make an announcement that they are merging?
Downsizing means shedding employees from an organisation.

(a) What are the main reasons for companies downsizing?
(b) Provide examples of companies who have made a decision to downsize their
organisation.
Downsizing often leads to de-layering. What is meant by the expression delayering?
List 4 external factors that can affect business activity.
In July 1988 the UK banned the use of cattle carcasses in the preparation of cattle
feed, and in foods for human consumption. Scottish farmers have been
experiencing economic hardship because of the BSE crisis. In a brief report
explain:
(a) The internal and external factors which have contributed to the farmers
situation.
(b) How farmers have reacted to the situation.
52

A16 - Changes in the Business Environment - Suggested solution
Job losses
Job re-organisation/change
Extra workload
(a) Efficiency - can employ fewer workers to produce same amount, more
productive
(b) Scottish Widows
Royal Bank of Scotland
any other examples
De-layering means removing layers of management and workers in a hierarchy so

fewer workers in chain of command.
External factors:
5 (a)
Government
economic climate
changing consumer tastes
competition
pressure groups
INTERNAL
EXTERNAL
Source of income
cut
Consumers fears - less beef bought
Single product
EC ban - UK beef not allowed to be

exported
Cattle prices being sold

at less than market value
Government order for animals to be

destroyed
any other relevant answers

(b) Lobbying/protesting parliament - forming pressure group
(c) Selling their land
(d) Bankruptcy
53

TASK
Contact your local authority and ask for a list of the services it provides. Find out:
the total amount spent on local services;
which service had the highest amount spent on it;
which services are provided by the council and which services are contracted out to the
private sector.
Present your information in the form of a table.
54

A18 - Types of Business Organisations
CASE STUDY
THE SHELL TRANSPORT AND TRADING COMPANY PLC
The Shell Transport and Trading Company PLC derives its income derives from 40%
interest in the companies known collectively as the Royal Dutch/Shell Group of
Companies; the other 60% is owned by Royal Dutch Petroleum company, a Netherlands
Company of the Group.
Shell operates in over 125 countries, divided into sectors - Europe, Eastern Hemisphere,
Western Hemisphere and USA. Its operations include: exploration, production of oil and
gas, refining, marketing of oil products/chemicals, natural gas, manufacturing of
chemicals and other business interests.
Summarised data -1995

Sales proceeds - m
Oil and Gas
Chemicals
Coal
Others
84,957
9,740
393
359
Employees (Average numbers by area of operations) 000s

Europe
Eastern Hemisphere
USA
Western Hemisphere
42
26
23
13
55
Shell Transport and Trading Company plc in their annual report have stated a need for the
company group to consult, inform and communicate better with the public. They have
stated an obligation to explain complex issues and always try to balance human,
environmental and economic considerations. The challenge within the company is to
increase profitability. The onus is on everyone in the company to ask how they can do
better.
QUESTIONS
1
Shell has operations in over 125 countries. Shell is an example of what kind of
business organisation?
Where does Shells main source of revenue come from?
What area employs the largest number of employees?
State the main objectives of Shell
State the possible advantages and disadvantages of a company operating in over 125
countries.
Explain why a company such as Shell need to:

(a) explain themselves to the public;
(b) balance human, environmental and economic considerations.
Explain how an organisation can ensure their employees reach their full potential.
Why is the need to respond to change so important to the survival of any

organisation?
56

A18 - Types of Business Organisation Suggested solution
THE SHELL TRANSPORT AND TRADING COMPANY PLC

1
Multi-national
Oil and gas
Europe
Objectives of Shell plc:

To survive
To maximise profits/enhance shareholders earnings
To increase market share
To expand product range
To be a market leader
ADVANTAGES
DISADVANTAGES
Economies of scale
Geographic spread makes

communication more difficult
More cost effective labour and production

Bigger company can lead to
better production
Political unrest in some countries

Exchange rate fluctuation
6(a)
Companies today must be seen to be open their operations. They should be

willing to inform all interested parties and be prepared to be ethical in all dealings.
6(b)
Shell and similar companies have many different stakeholders. Their various
objectives may not be the same and may conflict all. They vary in importance
(e.g. shareholders may be seen as of particular significance). Making a profit for
them is an economic consideration but Shell must look after employees (human)
and prevent major disasters (e.g. oil spillage in Alaska, Brent Spar) to show that
they are environmentally friendly.
57
By training and development programmes

By regular appraisal of performance
By setting targets for performance
Encouraging employees
By providing good remuneration and other rewards
Because if firms do not do so they may fail to meet the changing wishes of
consumers. Other firms may come up with new ideas and new products which
give them an advantage. The overall environment changes e.g. as well as
consumer tastes, attitudes etc., there may be changes due to government decisions,
different economic circumstances etc. If firms do not keep up to date they may fail
to earn sufficient profits and be unable to stay in business.
Firms must respond to changes internally or externally - equipment and working
methods must be capable of changing to ensure quality and quantity to meet
demand and ensure sales growth. New technology will mean training programmes
for employees. Consumers tastes change so new product development or
diversification might be required. The search for new markets means an
organisation must be willing to respond to a different type of consumer.
58

A19 - Changes in the Business Environment
MINI-CASE STUDY
A local wine merchant has been given the opportunity of acquiring a small vineyard in
France. Elizabeth Thomson knows the vineyard well. It is a family-run business, with an
existing reputation for supplying good quality wine at the right price and always on time.
The business presently supplies her three wine shops. Elizabeth has been not yet been
given a copy of the accounts, but her accountant has informed her that the vineyard has
shown reasonable profits for the last three years. The owner of the vineyard is due to
retire soon and has no children to pass the vineyard onto. A decision must be given soon.
QUESTIONS
1
What would be the name given to this type of integration?
Give 3 reasons why firms join together.
What are the disadvantages of firms merging?
Should the wine merchant buy the vineyard? Justify your answer.
59

Backward vertical integration.
To increase in size
Economies of scale
To increase profits
To increase market share
To spread risks
More investment opportunities
Bigger - more bureaucratic

Communication might become more difficult
Organisation of resources could become more difficult
If firms expand into unrelated industries where they have no expertise
diseconomies could set in.
Yes, it would mean more control for the wine merchant over the quantity, price
and quality of the wine supply.
60

Read the following case study and then answer the questions below.
MINI-CASE STUDY
WHY FRENCH FIRMS ARE COMING TO BRITAIN
The reduced employment costs, lower taxes and effective transport links with Europe (the
Eurostar train service put Paris and Brussels within just 2 hours of Kent), not to mention
the absence of red tape, are among the major factors in the increasing number of French
firms locating to Britain.
Employing a worker on a salary of 10,000 in France can cost 4,800 in payroll taxes,
compared to basic national insurance contributions of just 700 on the same annual salary
in the UK.
High social security charges, corporation levy and local business taxes often make hiring
of staff in France too expensive for smaller firms. Britains flexible working practices
also make it more attractive to French employers. The corporate tax on small business in
Britain is 12% lower than in France. The top-rate personal tax in France is almost 57%,
while Britains lower living costs, cheaper telephone rates and the brighter long-term
prospects of the UK electronics industry are an extra inducement for such companies to
slip across the channel.
QUESTIONS
1
What factors may have contributed to the decision of the many French companies to
locate in the UK?
Why is the Eurostar connection important to France?
What is meant by the absence of red tape?
(a) What might a French firms decision to locate in the UK mean for its French
workforce?
(b) What might the firms decision mean for UK workers?
Why is it important for firms to respond to internal and external pressures?
61

Lower employment costs in UK

Lower taxes
Effective transport links
Absence of red tape
The travelling time is just 2 hours from Kent to Brussels or Paris - therefore
transport costs are lower and personal communications are easier.
The absence of red tape means less bureaucracy.
(a) Loss of jobs, less opportunities (training etc).

(b) More jobs, more opportunities for UK employees.
Internal pressure - organisations need to pay heed to their employees, managers,

directors and shareholders and work together to ensure survival they meet their
objectives.
External pressure - organisations need their customers, and suppliers to ensure
survival. They must also pay heed to their competitors, government and pressure
groups.
62

MINI-CASE STUDY
EFFICIENCY OR CORPORATE ANOREXIA?
Over the past decade the trend for UK companies has been to downsize and de-layer. The
enthusiasm that organisations have for downsizing is not without its consequences. There
has been a rush to slim organisations down to a lean and fitter form as a way toward
greater efficiency. It has been suggested however, that this is not the best move for many
organisations. For a start it is not always necessary for survival. It can cause job
insecurity amongst the remaining workforce (whos next?). It can destroy company
loyalty. Staff morale can be lowered with the possibility of less staff doing more work?
There is a belief that the stripping away of layers of management can leave companies
with a corporate anorexia, from which they may never recover. Layers of management
are being disposed of and the valuable skills they have will never be replaced.
QUESTIONS
1
What does the passage suggest the trend has been for UK companies in the past
decade?
Why do firms see the need to remove excess layers of management?
For remaining staff, what disadvantages are there in downsizing?
Explain the term corporate anorexia.
Can you give examples of firms which have recently downsized or de-layered.
63

To downsize/de-layer.
Efficiency, to remain competitive, keep costs down, workers to be more

effective.
Job insecurity, additional workload, inability to cope with new/additional tasks.
Slimmed down to a such a point that the general well-being (effectiveness) of the
organisation is endangered.
British Airways, Royal Bank of Scotland
64

A22 - Changes in the Business Environment
CASE STUDY
GLAXO WELLCOME - SMITHKLINE BEECHAM - THE MERGER THAT
NEVER WAS?
In February 1998, Glaxo Wellcome and SmithKline Beecham, announced their intention
to merge. It was to have been the merger to beat all mergers. The newly formed company
Glaxo-SmithKline would have been the largest drugs company in the world with a sales
turnover of 20 billion, beating their nearest rivals - Merck, USA (13 billion) and
Novartis, Switzerland (10 billion). The merger would according to Glaxo Wellcome
PLC and SmithKline Beecham PLC create the worlds largest Research and
Development organization in the global healthcare industry.
EXTRACT - Profile on proposed new company - Glaxo-SmithKline
Market Value - 125 billion

Total Market Share Worldwide - 7%
Annual Revenue - 20 billion
Shareholding:
Glaxo Wellcome 59.5%
SmithKline 40.5%
Executive Chairman - Sir Richard

Sykes (formerly Glaxo Chairman)
Chief Executive and Chairman of
Executive Management Committee
Jan Leschly - (formerly SmithKline
Chief Executive).
Source:
The Herald (3 February 1998) and SmithKline Beecham (Web site: http//www.sb.com/ (SBH GLX) co)
65
The justification for the merger was that while companies may have a steady stream of
minor drugs coming forward, it is the block-busters which really drive profits and these
are becoming harder to find. In addition, local authorities, NHS Trusts and hospitals are
always trying to squeeze healthcare costs. There is pressure on pharmaceutical companies
to keep their prices down.
By combining the two companies they could have eliminated 25% of duplicated costs.
Another factor was the escalating cost of getting a new drug to the market given the
tough regulatory climate.
The analysts were impressed with the cost savings that Glaxo-Smith Kline would have
achieved, with some putting the total at 1500m, so long, of course, as at least a tenth of
the workforce lost their jobs. In Britain, Glaxo had already had a major pruning exercise
when it axed 1700 jobs after the Wellcome purchase (a previous merger). Union Leaders
stated that employees were shellshocked by the news and 2000 were expected to attend
a meeting to discuss potential job losses which could result from the present merger.
Analysts predicted 20,000 job cuts worldwide, or nearly one-fifth of the combined
companies workforce, with many of the cuts coming in Britain. Roger Lyons, General
Secretary of the Manufacturing, Science and Finance Union, which represents workers
from both Glaxo and SmithKline had pointed out that Now thousands more British
science-based jobs are at risk in 2 major and highly-profitable companies. Share prices
for both companies shot up on the day the merger was announced, but fell dramatically
when it was announced on 23 February that the merger was off. It seemed that at the last
minute Glaxo not only tried to change the terms of their agreement, but wanted their
people to dominate the board.
QUESTIONS
1
What kind of merger (vertical, horizontal, etc) was proposed between Glaxo
Wellcome and Smith-Kline Beecham?
The proposed merger was not welcomed by all the company stakeholders. One
group in particular would be severely affected by the merger.
(a) Which stakeholders did not welcome the merger.
(b) Explain why the decision not to merge would have been welcomed by them?
Explain the sharp rise and subsequent fall of the shares in response to the
announcements.
Does being big really mean being better? Briefly describe the disadvantages
associated with large multi-national companies.
The proposed merger between Glaxo Wellcome and SmithKline Beecham fell
through. What were the reasons given for this?
Carry out research to find companies who may be considering merging. Use
newspapers, business journals and Internet websites.
66

Horizontal merger
(a) The employees of the combined companies

(b) Analysts predicted that the merger would cost 20,000 job cuts worldwide.
The shares rose sharply because the market welcomed the merger. Shareholders
and management viewed the new company as a more efficient organisation. The
fall in shares was a reflection of the markets disappointment in the decision of the
companies not to merger.
DISADVANTAGES - For the host nation - they can interfere in the politics of the
country, they can destroy local culture, they can remove the countrys foreign
exchange, they can make development harder for local businesses.
For the donor nation - they export skills and knowledge. They lose industries to
other countries.
Reasons - Glaxo tried to change the terms of the agreement and disagreement at
strategic level (ie who would be in control at board level).
Research - eg Kwik-Fit and Autoscreens, Volkswagen and Vickers (Rolls Royce).
67

BUSINESS INFORMATION
B1 - Sources of Business Information
Explain each of the following terms:
Primary data
Secondary data
2 The following is a list of sources of information that might be used by Mars, state
which are internal or external and which are primary or secondary sources. Lay your
answer out as a table.
Source
Mars sales figures from last year
Internal/
External
Internal
Primary/
Secondary
Secondary
Comments from a consumer panel

Government statistics
Newspaper article
Mars published accounts
Staff newsletter
Responses from postal questionnaires
Report prepared by Mintel - a market
research organisation
A report written by Operations Manager at
Mars
Television report on the eating habits of
young people
68
3. The table below contains the same sources of information s for the table in question 2.
Assume that Mars is thinking about introducing a new kind of chocolate type snack
food. Complete the table to show the costs and benefits of each source of information
for Mars in helping them to decide whether or not to do this.
Source
Costs
Readily available
but relate to past
sales not future
trends.
Benefits
Shows how well or
badly existing
products are doing and
may help to identify
where action is
needed.

Newspaper article
Staff newsletter
A report written by Operations
Manager at Mars
Television report on the eating habits
of young people
4. Baxton Leisurewear is a partnership run by two brothers which specialises in selling

equipment and clothing for outdoor activities such as climbing and caving. Due to
increased competition in their area they are considering diversifying into other leisure
areas, in particular offering mountain bikes for hire. Both partners are aware that this
new venture will require an input of capital and any decision to pursue it cannot be
made lightly.
a) What secondary sources of information are available to the partners to help them
make the right decision? What are the benefits of using this type of information?
b) What primary research would you recommend they carry out? What would be the
costs and benefits of using this type of information?
69
5. Glenside High School is the only secondary school in a medium sized town in Central
Scotland. Over the years it has built up a reputation for holding an excellent
Christmas musical show which has attracted a large audience from all types of people
in the town. Last Christmas, however, attendances were well down and the school is
anxious to make sure that this year attendances go back up again. The following
table lists some of the sources of information open to the school. Complete the
remaining two columns to show the benefits and costs associated with each source.
Source of information
Questionnaire survey of
school pupils carried out by
S5 Business Management
pupils
Benefits
Costs
Will get a good idea of what Will take time to devise

will appeal to pupils and
questions and ask them;
what was wrong last year
information given may not
be accurate
Interviews with school

pupils conducted by staff in
the Music Department
people in the town done by
students at the local College
as part of a project
Mintel statistics on cinema
and theatre attendance in
Scotland
Records of all other events
held in the town at the same
time as last years show
Review of last years show
in the local paper
Attendance figures at the
show over the last 10 years
Can you think of any other sources of information that could be used in this case?
70

B1 - Sources of Business Information - Suggested solution
1. Primary Data - this is information which has been gathered through direct
investigations such as observations and surveys.
Secondary Data - this is information which already exists such as accounts, sales
records, government statistics, newspaper articles.
2.
Source
Mars sales figures for last year
Newspaper article
Staff newsletter
Responses from a postal questionnaires
Report prepared by Mintel - a market research
organisation
A report written by Operations Manager at Mars
Television report on the eating habits of young people
Internal/
External
Internal
External
External
External
Internal
Internal
External
External
Primary/
Secondary
Secondary
Primary
Secondary
Secondary
Secondary
Secondary
Primary
Secondary
Internal
External
Secondary
Primary and
Secondary
71
3.
Source
Costs
Mars sales figures from last Readily available but
year
relate to past sales not
future trends.
Comments from a
consumer panel
Newspaper article
Staff newsletter
Responses from postal

questionnaires
Report prepared by Mintel

- a market research
organisation
A report written by
Operations Manager at
Mars
Television report on the
eating habits of young
people
Benefits
Shows how well or badly
existing products are doing
and may help to identify
where action is needed.
High - direct consumer
input into decision making
High - panel needs to

be set up, questions
devised etc.
Low - easily available Of limited use because too
general
Low - easily available May give some insight but
also very general
Low - must be
Of little value in deciding
produced by law
what kind of product to
make but may highlight
need for new products e.g. if
profits are falling
Small because
Almost no value unless
produced anyway
opinions of staff on new
product can be asked for
Expensive - need to
May be very useful as gives
devise questionnaire
consumers views
and may not get a
good response
Relatively cheap to
Gives good information on
buy
general market trends
Relatively cheap
Gives operations rather than

marketing information.
Cheap and may give

useful background.
Too general and available to

all firms in market.
72
4. a)
Newspaper articles on how leisure time is spent

Past sales figures for Baxton Leisurewear and any competitors
Government statistics on leisure time
Relevant reports produced by market research organisations
The benefits of using secondary data are that it is cheaper and it is easy to obtain as it
already exists.
b) Baxton Leisurewear should carry out a survey in their local area through a
questionnaire. This could either be by post, face to face or by telephone.
Primary research would be very beneficial to Baxton Leisurewear because they would
be the only organisation with access to the information collected and therefore they
could use it to gain advantages over rival firms. Primary research results in high
quality, accurate information. The main cost of primary research are that it is very
expensive and time consuming.
73
5.
Source of information
Benefits
Costs
school pupils carried out by
S5 Business Management
pupils
Will get a good idea of what Will take time to devise

will appeal to pupils and
questions and ask them;
what was wrong last year
information given may not
be accurate
Interviews with school

pupils conducted by staff in
the Music Department
Will get good idea of views

of pupils but not of wider
audience.
people in the town done by
students at the local College
as part of a project
Will find out what wider

audience thinks.
Mintel statistics on cinema

and theatre attendance in
Scotland
May be difficult to get as

are expensive and not in
likely to be in local library.
Give general trends but not

specific enough.
Records of all other events

held in the town at the same
time as last years show
Relatively easy to find ( e.g.

from old papers).
Give general background

but will not explain why
attendance fell.
Review of last years show

in the local paper
Relatively easy to find.
Attendance figures at the

show over the last 10 years
May be time consuming to

gather and accurate records
may not exist.
Also gives idea of how well

show was received but may
not explain poor attendance.
Will show trends and may
help to place last year in
context.
Time consuming and music

dept. may be biased. Pupils
may not give their real
views to teachers.
Will take time to brief
students. Results may be
biased.
Other sources of information may include

asking people who were in the show last year what they thought
asking those who attended what they thought
etc.
Both of the above may be subjective and hard to analyse.
74

B2 - Types of information
TASK
Two of the most widely recognised global logos are Coca-Cola and McDonalds. Test
yourself - create a poster or desktop publish an advert for Coca-Cola or McDonalds. You
must do it from memory, no looking at logo or colours.
GROUP WORK
Work in groups of three or four.
TASK
Make a promotional video or poster for the Business Management Course. Your
presentation should include a combination of oral, pictorial, graphical and numerical
information.
Show the completed video/poster to the other groups.
75

B3 - Types of information
1. Re-write the following sentences completing the blanks. A wordbank has been
provided.
a)
When two or more people talk together this is known as ____________ or verbal
communication.
b)
This kind of information can be stored in filing cabinets or input onto computer
discs as a permanent record. Some people however, still prefer ______________
information.
c)
Used for customer information in promotional material ______________ are

extremely useful.
d)
This can be created by computer and is used to can show statistical information.
Branches may include a _____________ in their sales report to head office.
e)
More and more ______________information is available because of computers.

This is where computers are strongest.
WORDBANK
Pictures, oral, graph, numerical, written
76

B3 - Types of information - Suggested solutions
1. Wordbank
a)
Oral
b)
Written
c)
Pictures
d)
Graph
e)
Numerical
77

B4 - Uses of Business Information
1. The following is a list of sources of information that might be used by Mars. State the
possible uses that each source may have: Lay your answer out as a table.
Source
Possible uses of information
Measuring performance; decision

making

Newspaper article
Summary of staff appraisal reviews
A report written by the Operations Manager
at Mars
young people
2. Information in business is used for four main purposes. They are:
monitoring and control

decision making
measuring performance
identifying new business opportunities
For each of these, think of as many different kinds of business information that you can.
TASK
Arrange for a visiting speaker to come from a local charity or voluntary organisation. Ask
them to bring some examples of the information that they use in the organisation and to
explain what they use it for e.g. the Citizens Advice Bureau could comment on its
number of clients; Greenpeace could comment on its number of members, amount of
money donated etc.
78

B4 - Uses of Business Information - Suggested solution
1.
Source
Possible uses of information
Measuring performance; decision

making
New business opportunities;
measuring performance,
Decision making
New business opportunities,;
measuring performance
Measuring performance;
monitoring and control
Monitoring and control
Measuring performance; new
business opportunities,
New business opportunities,
decision making
Decision making, monitoring and
control, measuring performance
Decision making

Newspaper article
Summary of staff appraisal reviews
A report written by the Operations Manager
at Mars
young people
2. Any reasonable suggestions are acceptable. They could include:
monitoring and control - output figures, labour turnover, cost data

decision making - trends in sales, research on new technology, profit forecasts
measuring performance - profit and loss account, balance sheet, sales figures
identifying new business opportunities - market research, consumer surveys.
79

DECISION MAKING
C1 - Types of decision
TASK
Classify the following decisions as either STRATEGIC, TACTICAL or OPERATIONAL.
1
2
3
4
5
6
7
8
9
10
Decision to offer free car parking to customers.

Decision to convert from a private limited company to a public limited company.
Decision to produce a rush order on one particular machine.
Decision to merge with a similar company.
Decision to work extra overtime in the factory.
Decision to change product range.
Ensuring Health and Safety at Work regulations are followed.
Designing a training programme for new staff in the Bathgate factory.
Factory decision to increase production on particular product line.
The decision to employ more staff.
Read the following case study and identify as many examples as you can of strategic,
tactical and operational decisions
CASE STUDY
In the late 1970s, Peter and Margaret Nowak set up a fish farm and smokery beside a
river in the Borders. Initially, they supplied products to trade customers such as local
hotels and shops. The fish farm was also alongside a busy road and in 1982, they opened
a small shop to cater for tourists and other personal customers. The shop was a great
success and, in 1984, they began to sell other food products bought in from outside
suppliers.
This also did well and, during 1986, they decided to put up a separate building which
would house the shop and also include a tea room. At first, Peter and Margaret found it
difficult to decide the hours of opening of the shop and tea room and they tried out several
different opening and closing times. Eventually, they decided to open at 9.30 am and
close at 6.00 pm in the summer. During the winter they opened from 10.00 am to 4.00
pm and closed completely during January and February.
Peters main hobby was gardening and, to make the new building look attractive, he built
a garden around it, including some water features which he designed himself. Visitors
commented on these and he began to stock some of the materials for water gardens in the
shop.
80
In 1996, Peter and Margarets son, James, joined the business. He had been trained in
garden design and had specialised in water features. He persuaded his parents to set up a
subsidiary company, Water Gardens Limited, which would design and install water
features for other people. Originally, James was based at the fish farm and employed 2
people to assist him in the work. Most of the work they got was in the Edinburgh area,
and in 1998, he moved to premises on an industrial estate on the outskirts of the city.
The volume of business meant he had to increase the labour force from 2 to 4 to cope with
the extra work. He organised his work force so that they operated in two teams of two
people. He also began to consider whether or not he should specialise in waterfalls as
most customers seemed to want these.
81

DECISION MAKING
C1 - Types of decision - Suggested solution
CLASSIFICATION
1
2
3
4
5
6
7
8
9
10
Tactical
Strategic
Operational
Strategic
Operational
Strategic
Operational
Tactical
Operational
Tactical
Case Study
Strategic - set up fish farm; open shop; open tea room; form Water Gardens Limited
Tactical - sell other food products; stock water products; move to Edinburgh; increase
labour force; new building
Operational - decide opening hours; working in teams of two
82

DECISION MAKING
C2 - Types of decision
TASK
1
Shareholders, managers and employees involved in the same business might all
have very different objectives:
(a) Give examples of these different objectives;
(b) Explain how these different objectives can cause conflict.
The table below shows the various groups of people in a public limited company,
their function in the company and their reward. It is not correct.
Re-write the table, correctly matching up the group, function and reward.
GROUP
Manager
Employee
Shareholder
Directors
FUNCTION
Represent owners interest
Take no active role in the business
Provide expertise
Provide labour
REWARD
Dividend
Wage
Bonus share issues
Salary
A number of scenarios are given below.

In each case explain why there is a conflict of interests.
a)
David Adam works as an engineer with a large electronics company in Barrhead.

He would like a 10% increase in his salary. The company has just announced a
drop in output because of the strong pound.
b)
At the monthly departmental meeting Ann King announced that she required a
budget of 100,000 within the next three months in order to launch 2 new products
in time for the Christmas market. Paul Davis pointed out that in order to survive,
the company needs to trim its budget by 10% all round.
c)
Happy Print plc produces specialist products for local small businesses. The staff
are highly skilled. The production manager wants to install new computerised
printing equipment.
83

DECISION MAKING
C2 - Types of decision - Suggested solution
1(a)
Shareholders objective is to maximise profit

The managing directors objective is to cut costs
The employees objective is to improve their pay and conditions
1(b)
Confict can arise when - managing director does not agree to pay rise demanded
by employees. Conflict can also arise if company decides not to pay as good a
dividend as previous year.
2
GROUP
Manager
Employee
Shareholder
Directors
3
a)
FUNCTION
Provide expertise
Provide labour
Take no active role in the business
Represent owners interest
REWARD
Salary
Wage
Dividend
Bonus share issues
The company will not be able to give David 10% increase in his salary. The drop
in output will mean loss of revenue. Competition will be fiercer and the company
will have to ensure it keeps its costs down, including wage costs.
b)
The launch of the two new products in time for Christmas is no doubt very
important. If successful it would ensure firms survival. There is an argument
here for not cutting the budget. Paul has the problem of financing the 10% not cut
from the marketing budget from somewhere else.
c)
The installation of the new computerised printing equipment will no doubt save
costs in the long run. Training for staff will simply be in the use of the machine.
This will save costs in training. Employees will be worried about redundancies or
having to undergo training for the new equipment. Morale might be low and the
relationship between management and employees might not be very good.
84

DECISION MAKING
C3 - Types of decision / Decision making process
TASK
You may have had the opportunity to set up and run a mini-enterprise business in school
or college.
Write a short report identifying the roles which each member of the company played.
Explain the specific duties and responsibilities of each role.
Include in your report any disagreements that the group may have had.
85

DECISION MAKING
C4 - Decision making process
TASK
Produce a report to explain the role of stakeholders in business organisations. Your report
should focus on at least two different types of organisations.
Your report should be word processed.
Information for your report can be collected from your school library, newspapers,
journals, company reports, Times 100 CD, The Internet, etc.
86

DECISION MAKING
Read the following case study and answer the questions below.
CASE STUDY
DANGER OF DOUNREAY
Dounreay is a nuclear re-processing plant situated in the north east of Scotland. There has
been considerable adverse media reports in recent years regarding the age and condition
of the plant and its ability to carry out the re-processing of spent nuclear fuel safely and
efficiently.
Greenpeace is an organisation who sees its role as protector of the global environment. It
has actively campaigns against Dounreays existance. It (Greenpeace) has repeatedly
expressed concerns over the safety of Dounreay as a nuclear re-processing plant.
In one incident a sub contractor cut the main power supply to the nuclear plant's fuel cycle
area. The accident exposed a fundamental design flaw - that there is only one main power
source to the plant. Therefore, in the case of such incidents, the emergency safety system
also fails and the risk of a nuclear accident is seriously increased. Greenpeace insist that
these incidents highlight the unsuitability of Dounreay as a destination for such dangerous
materials as spent fuel and highly enriched uranium.
QUESTIONS
1
What is Greenpeace?
Why does Greenpeace see the need to campaign against the governments decision
to re-cycle the worlds nuclear waste in Scotland?
What evidence is there in the passage that Greenpeace is right?
How can activity by a group such as Greenpeace affect the production/sale of a

firms product?
Name two other pressure groups which operate in the UK.
How might a business or in this case a government respond to negative publicity

generated by groups such as Greenpeace?
Find out the current situation regarding Dounreay.
87

DECISION MAKING
C5 - Decision making process - Suggested solution
Greenpeace is an international pressure group
To protect the environment.

Views Dounreay plant as too old and dangerous
The accident at the plant
Negative publicity can dissuade consumers resulting in loss of sales revenue and
damaged image. By direct action or threat of it, or campaigning, they influence
how products are tested or made, etc.
Animal Rights Movement

Friends of the Earth
Agree to carry out survey/enquiry, publicise safety efforts, obtain and publish data
on safety of the plant, encourage visitors eg. Sellafield
Students can find information from newspapers, magazines, website etc
88

DECISION MAKING
CASE STUDY
STAKEHOLDERS
In the past a company was assumed to have only one important group of stakeholders - its
shareholders. Now, it is widely recognised that there are various groups whose interest
are affected by the way the company operates - customers, suppliers, local communities
and focus groups.
Over the long term, shareholder interest will be best served by a company that looks after
the interest of all its stakeholders. For example an organisation can declare its intention to
commit its business to social and environmental change, to campaigning for the protection
of the environment and human and civil rights against animal testing. It can involve all
stakeholder consultation
QUESTIONS
1
Who are the groups now widely recognised as stakeholders in organisations?
Who are the main stakeholders in the following organisations:

(a) Safeway
(b) NHS hospital
(c) your school/college
(a) What is a mission statement?

(b) Why do firms now see the need to provide a mission statement.
Find out if your school/college has a mission statement and if so obtain a copy.
Why would an organisation commit its business to social and environmental

change?
How important do you think it is to consult with all stakeholders?
89

DECISION MAKING
C6 - Decision making process - Suggested solution
Customers
Suppliers
Local communities
Focus groups
Shareholders
2 a)
SAFEWAY
Employees
Customers
Suppliers
Local community
b)
NHS
Employees
Patients
Visitors
Local community
Government
c)
SCHOOL/COLLEGE
Students
Staff
Local community
Local Authority
Mission Statement - document setting out the aims of the organisation - the
common purpose to direct and stimulate. Firms see the mission statement as a
focus. It is also seen as a PR exercise.
Firms may do this from a sense of a commitment to ethical business. If they do

not do this, they may get bad publicity and lose sales.
It is important to consult with stakeholders. Easier in smaller organisations, but

difficult in large organisations - AGM a possibility.
90

DECISION MAKING
CASE STUDY
SIEMENS - THE MAKING OF AN IMPORTANT DECISION
In the early summer of 1997, the Queen performed the official opening ceremony for a
new semi-conductor plant on North Tyneside owned by the German company, Siemens.
The British Government had contributed around 50 million towards the building of the
factory, which employed over 1,000 people.
In July, 1998, Heinrich von Pierer, the chief executive of Siemens made a public
announcement saying that the company was likely to lose about DM 1 billion on its semiconductor manufacturing business throughout the world. Top management in Siemens
were looking at ways of cutting capacity in the company. In late July 1998, management
at the factory on Tyneside held a meeting to tell workers that the plant would be closing.
Ross Forbes, head of external relations said, It was a very gloomy meeting.
Heinrich von Pierer gave the following reasons why top management had made the
decision:
market conditions were very bad - Korean manufacturers had taken 40% of the market
for the chips made at Tyneside. Because of the crisis in Korea companies there were
deliberately cutting prices in order to get export orders.
the world market price for semi-conductors produced by the plant had collapsed. It
was $60 in 1995 when the decision to build the plant had been taken. Now it was less
than $2.
a company from Taiwan had pulled out of a deal with Siemens. Under this
arrangement, they would have bought half the production of the Tyneside plant.
the cost base of the plant on Tyneside was higher than that of Siemens other plants in
Germany, France and the USA. The British factory had, however, met all the
efficiency and quality targets which it had been set.
There were several reactions to the decision:
the government and the company have set up a task force to try to save the factory the chances of doing so are low. The Trade and Industry Secretary, Peter Mandelson,
met immediately with company executives and senior national union officials.
union leaders are worried that the closure will also hit suppliers of the plant. This
could mean that total job losses could be as high as 3,000.
91
Shadow Trade Secretary, John Redwood, said the decision to close was another
example of the terrible damage this governments economic policies are inflicting on
manufacturers confidence on jobs.
local MP, Jim Cousins said, Im absolutely devastated. Siemens was the jewel in the
crown of Tynesides new industrial future.
telephone hotlines were set up by the company for workers to contact them about
redundancy arrangements.
Siemens stated that they were prepared in principle to repay the 50m of government
aid that they had received.
QUESTIONS
All these are about the decision to close the factory
1
What do you think the objectives of Siemens might be?
What role did top management in Siemens have in the decision. What role do you
think was played by management at the factory on Tyneside?
Identify the main stakeholders involved in this decision.
What influence did each of these stakeholders have on this decision?
How did this decision fit in with Siemens objectives?
92

DECISION MAKING
SIEMENS - THE MAKING OF AN IMPORTANT DECISION

1
Profit maximisation; growth (e.g. the building of the factory in the first place);
market share
Top management, especially, the chief executive, seem to have made the decision
by considering the situation of the company as a whole and the factory at Tyneside.
They took into account conditions in the world as a whole. It was a global tactical
decision i.e. it was about how Siemens overall strategy in the semi-conductor
market should be carried out.
The role of management at the plant itself seems to have been to accept the decision
that was made. Their main role is to take operational decision (e.g. about efficiency
and quality.
Siemens top management e.g. Heinrich von Pierer

Management at the Tyneside factory
UK Government
Local politicians e.g. Jim Cousins
Other politicians e.g., John Redwood
Trade unions - nationally and locally
Employees (and their families)
Suppliers and their employees
Tyneside - its industrial future is threatened
Siemens top management seemed to have the most influence as they made the
decision. Effectively, no-one else has had any great say.
The British Government may have some influence through the task force and its 50
grant. It seems that there may be little they can do.
National trade union leaders are on the task force and may have some influence
through it. It is unlikely to be large.
Management at the plant are also likely to be on the task force but their influence is
also likely to be small.
All others may be able to have some slight influence in how the decision is actually
carried out (as may local management, UK Government) but little say otherwise.
It seems to fit with profit maximisation. Their aim of growth has not been realised
nor that of market share.
93
BUSINESS DECISION AREAS (INT 2)

INTERNAL ORGANISATION
D1 - Structure of organisations
QUESTIONS
1
Factors that may affect businesses include - size, technology, market and
product. Write a brief explanation of each of the terms to show you understand
what they mean.
Explain the difference between the public and private sector of business. Compare
them in terms of:
ownership and control

competition
motives
finance
Explain the difference between an Executive and a Non-executive director.
Explain the following terms:

(a) hierarchy
(b) span of control
(c) chain of command
(d) flat structure
(e) tall structure
(f) formal structure
(g) informal structure
(a) What is an organisation chart?

(b) What purpose does it serve?
Most businesses are organised by function. What does this mean?
Name four main functional areas in an organisation.
Name five departments found in most large manufacturing companies.
What other two ways can businesses be organised internally?
94

D1 - Structure of organisations - Suggested solution
Size - how large the organisation is. Can be measured in terms of turnover,
number of employees, value of assets, etc.
Technology - the processes, systems, methods and materials used by the
organisation e.g. steel made in mini-rolling mills; telephone banking; use of
ATMs in banking; different types of models on production lines because of
computer controlled systems; use of plastic etc in car production; hanger
systems for manufacturing clothes.
Market - where the firm sells and interacts with its customers e.g. the market for
cars is represented by the number of cars bought by consumers.
Product - the good or service provided by an organisation.
Ownership and control - private sector is owned by shareholders, although senior

managers may control much of the firms activities; public sector is not directly
owned by anyone, although it is operated on behalf of all citizens. Controlled by
political representatives and appointed officials.
Competition - private sector firms compete with other firms in same markets.
Public sector organisations may have little direct competition (e.g. education
departments) but may have to put some activities out to tender e.g cleaning. Some
civil service operations are being run on more commercial lines e.g. Agencies;
contracting out of work like IT etc.
Motives - private sector organisations are generally motivated by profit while
public sector organisations may have a tradition of serving the public.
Finance - private organisations get finance from private sources like shareholders,
stock exchange etc, whereas public sector organisations are primarily financed by
state funds e.g. from taxation.
Executive director has day to day involvement with the running of a company. A
non-executive director does not have day to day contact and attends board
meetings only.
(a) hierarchy - a structure showing different levels of authority in a business

organisation.
(b) span of control - the number of people who work under the control of a
supervisor or manager.
(c) chain of command - the path (chain) down which orders are passed - from
board of directors to shop floor workers.
(d) flat structure - an organisation with few different layers between top and
bottom levels.
95
(e) tall structure - an organisation with many different layers between top and
bottom levels.
(f) formal structure - the official structure of the organisation as shown in the
organisation chart i.e. how the organisation is supposed to work.
(g) informal structure - how the structure actually works in practice e.g. official
chain of command may be by-passed; informal groups may spring up.
5
(a) An organisation chart is a diagram showing the roles of individuals in an

organisation.
(b) Purpose - to show how departments link together and the main lines of
authority.
Function refers to the main things that an organisation has to do in order to

ensure that its product or service is provided and made available to consumers .
Any four functional areas - Finance, Marketing, Administration, Human

Resources, Operations.
Departments usually match functional areas - any five can be given e.g. finance,
operations, human resources, research and development, quality, marketing.
Any two from - geographically, by product or service, matrix etc.
96

INTERNAL ORGANISATION:
D2 - Structure of Organisations
1. Draw an organisation chart for Glentorran plc a whiskey distillery based in the
Highlands. Glentorran plc has 36 workers which consist of:
a board of directors
a managing director
four managers covering the 4 main functional areas
two assistant managers for each functional area
three workers reporting to each assistant manager
2. Explain what is meant by the term middle management and give an example of a
middle manager at Glentorran plc.
3. Draw a simple diagram to show the chain of command at Glentorran plc. What
problems can arise if a chain of command is too long?
4. In any public limited company, who has authority over the managing director?
5. What is the span of control of each of the managers at Glentorran plc? What factors
might have to be taken into account when determining the span of control of a
manager?
6. Almost all organisations organise their workers into formal groups, what are the
advantages to the organisation of doing this?
7. Give an example of an informal group that might form at Glentorran plc.
97

D2 - Structure of Organisations - Suggested solution
1.
Glentorran PLC
Organisation Chart
BOARD OF
DIRECTORS
MANAGING
DIRECTOR
FINANCE
MANAGER
HUMAN RESOURCE
MANAGER
OPERATIONS
MANAGER
MARKETING
MANAGER
ASST ASST
MGR MGR
ASST ASST
MGR MGR
ASST ASST
MGR MGR
ASST ASST
MGR MGR
3
wkrs
3
wkrs
3
wkrs
3
wkrs
3
wkrs
3
wkrs
3
wkrs
3
wkrs
2. Middle management is the layer of workers or managers between senior managers at

the top of the organisation and junior managers and workers at the bottom. The
Assistant Managers at Glentorran plc would be classed as middle managers.
3.
Board of Directors
Managing Director
Manager
Assistant Manager
Worker
If a chain of command is too long it can be difficult to communicate from the top of
the hierarchy down to the bottom without messages becoming distorted. It can also be
98
difficult to change an organisational structure if there are many layers. Any ideas that
are discussed on the shop floor are unlikely to pass up the hierarchy if there is a long
chain of command.
4. The board of directors.
5. Each of the mangers at Glentorran plc has a span of control of 2.

Factors to be taken into account when determining the span of control of a manger:
The complexity of work being undertaken. More complex tasks will require a
small span of control and closer supervision. A larger span of control can be used
if the work is not complex and workers are particularly good at their jobs.
Amount of time required for communicating with subordinates. The span of

control can be larger if little time needs to be spent communicating with
subordinates or if the supervisor is particularly effective at monitoring and
communicating with workers.
The ability of the supervisor to delegate work. The more the supervisor can
delegate work to subordinates the more time the supervisor has available for
monitoring them and therefore the greater can be the span of control.
6. The advantages of formal groups:
Workers can specialise.
The workers are clear on their position within the organisation of the business
which helps communication.
Workers can act as a team and receive support from others. They will also have
their work supervised.
A group of friends who play golf together.
A group of workers who eat lunch together.
7.
99

TASK
KWIK SAVE is a national chain of discount grocery stores. Their stores are organised
internally as follows:
Board of Directors
|
Directors
|
Regional Manager
|
Area Manager
|
Store Manager
|
Assistant Store Manager
|
Supervisor
|
Staff
QUESTIONS
1
Who is at the top of the chain of command at KWIK SAVE?
Who is at the bottom of the chain of command at KWIK SAVE?
A store manager issues order to?
KWIK SAVE decides that it wishes to reduce the chain of command in the
organisation by cutting out one of the layers of management. It decides to abolish
the post of assistant store manager.
(a) Explain what might be the advantages of this for KWIK SAVE.
(b) What might be the disadvantages?
100

Board of Directors
Staff
Assistant Store Manager
4(a)
Advantages - Better communication/decision making might be faster, more

responsibility for remaining staff, reduced costs.
4(b)
Disadvantages - supervisors and staff not trained or capable of taking the

decisions that the assistant manager currently making, resulting in poorer decision
making. Low morale might be the result.
101

Read over the passage about charities and then answer the questions which follow:
MINI-CASE STUDY
CHARITIES
Charities exist to help others and operate in the voluntary sector of business. Charitable
organisations make profits but these are used to help their own particular causes - it is not
profit in the true sense of the word.
There are over 170,000 charities in the UK, all of which have trust status.
Most charities have to be registered with the Charity Commissioners, who, under the
Charities Act 1992, have general powers of supervision over their administration and
the power of investigation of any charity.
If a charity went bankrupt because of incompetence or fraud, the trustees would be held
legally and financially liable.
QUESTIONS
1
Explain the words and phrases which appear in bold in the above passage.
Give three examples of well-known charities in Scotland.
Using the following information, construct an organisation chart for a large

charity.
The charity is controlled by the Trustees who have the legal responsibility to
manage it properly. They are at the top of the organisation chart. The Chief
Executive reports to the Trustees and is responsible for co-ordinating the work of
the Executive Directors. All Salaried Staff report to the Executive Directors and
they in turn are responsible for the Voluntary Workers. The Voluntary Workers
are at the lowest level of the organisation chart.
102

Voluntary Sector - this is part of the private sector, it includes charities which do
not seek to make profits in the true sense of the word. Their main aim is helping
other people and promoting special causes.
Trust Status - A relationship whereby a person called a trustee is responsible for
holding funds or other assets which have been given for the benefit of other
people.
Registered - Having a formal (legal) entry in the Register of Charities.
Have general powers of supervision - Authority to ensure accounting and
administration for the charity concerned is carried out in a proper manner, ie
accurate records are kept, just like any company. It means there is the power to
investigate any suspected fraud.
Bankrupt - situation whereby liabilities cannot be met (insolvency).
Legally and financially liable - Trustees would be held responsible and maybe
face criminal charges for any purposes other than charitable. They may have to
reimburse missing funds.
Capability Scotland
National Asthma Campaign Scotland
Scottish Association for the Deaf
3
Trustees
|
Chief Executive
|
Executive Directors
|
Salaried Staff
|
Voluntary Workers
103

TASK 1
Group Activity
You have been asked to organise a Live Bands Night at your local school or college.
As a team carry out the following:
make up a list of your aims and objectives for organising the event
draw up a to-do list of all tasks to be completed before and during the event
decide who will do what and present this as an organisation chart
make up a list of possible problems which might arise and provide possible solutions,
which could be implemented.
TASK 2
Organisation by function is reported to be the most common form of internal
organisation in private sector companies.
Private Sector Companies
Working in pairs, contact TWO local companies in your area operating in the private
sector to find out the internal organisation of their company. Report your findings to the
other students. Discuss whether you agree with the above statement.
TASK 3
Public Sector
Working in pairs, contact your local council offices for information on:
how they are structured internally
what goods and services they provide.
Write a brief report on your findings.
104
TASK 4
Charities
Working in pairs, contact either a local or national charity operating in your area.
Find out:
how the charity is organised - all job titles
the amount of money it has raised in the last few years
the ways in which the money was raised.
1
Prepare a short word processed report.
Prepare and deliver a short presentation on your findings to the rest of the students.
105

D6 - Factors affecting internal structure of organisations
Read the case study then answer questions which follow:
CASE STUDY
RE-ENGINEERING
Cigna is an insurance company based in the in the USA. It has a UK subsidiary which
specializes in offering group health insurance. So it is a competitor to BUPA, for
instance.
In 1991, the UK subsidiary made a radical change to the way it organised its workers. It
re-engineered its production processes. Up to that time, it had used a functional
hierarchy to organise production, with the company organised on a departmental basis. It
took 17 days for the company to give an insurance quotation to a prospective customer.
This was because the paperwork kept on being passed between six different departments.
Staff processing claims used to process 35-40 claims a day.
The new organisation is based on just two functions: pre-sales and post-sales. Pre-sales is
involved with getting new customers. Post-sales is involved with dealing claims of
existing customers. In post-sales, teams have been created. For instance, a team might be
made up of two workers from administration, two from claims and two from accounts.
By making them sit together, instead of isolating workers in separate departments, the
output of workers has risen. They now process 75-90 claims a day. In pre-sales, team
working has meant that a quote can be given in two days, not 15.
Many workers at first didnt like the changes. Senior Managers, for instance, at first felt
very threatened because decisions they were used to making every day were being taken
by much more junior staff. However, most workers soon preferred working in teams
because they were able to have much more control over how they worked.
QUESTIONS
1
Explain how Cigna was organised before 1991.
Why did it take so long to process claims?
Describe the new organisation.
106
How do you think the new organisation might have affected:

(a) the chain of command;
(b) the roles of workers;
(c) how the formal groups were made up?
Draw up a list of points which you as the managing director of Cigna UK, might
use to persuade senior managers to adopt the changes described.
107

D6 - Factors affecting internal structure of organisations - Suggested solution
Before 1991, the company had used a functional hierarchy to organise production.
Six departments were responsible for different areas. The article implied there
was an administration department, an accounts department and a claims
department.
It took so long to process claims because they were passed from department to
department.
The previous departments have been replaced by an organisation based on two

functions: pre-sales and post-sales. Teams of workers from the previous
departments now work together to prevent the passing of work from department to
department.
4(a)
The chain of command was shortened. It states that one of the effects of this was
that senior managers felt very threatened because decisions they were used to
making every day were being taken by much more junior staff.
4(b)
The roles of workers have changed. There is more decision making being pushed
down the hierarchy. Perhaps workers will be performing more tasks within their
teams than they did previously.
4(c)
Workers now worked in teams whereas before they had worked with colleagues
from their own departments. The teams were made up of a variety of specialists
from the former departments.
Point out to senior managers that they only have a job with the company
because the company is competitive.
To remain competitive, the company has to be continually seeking to cut costs
and provide a better service to customers.
Working in teams achieves both objectives.
By processing work faster, labour productivity increases whilst customers
receive a faster response.
Job satisfaction is likely to increase as decision making is pushed down the
hierarchy.
Workers are likely to feel more responsible for what they do.
They will have greater control on how they organise their work.
The workers will be nearer the customer which should help the company to
satisfy the consumers needs.
Senior management will only be able to gain promotion if they are prepared to
accept change when change is needed.
108

MARKETING
E1 - The marketing concept / The marketing mix
GROUP EXERCISE
Carry out this exercise in groups of 3 or 4.
TASK
Your group is required to set up a small business in school. Brainstorm within your group
to decide what product or service you intend to offer Formalise your decision in a simple
BUSINESS PLAN to show:
The name of the business

What type of business you intend setting up
What product/service you intend selling
Who your likely customers will be
What market research you intend carrying out
When the product/service will be available.
109

MARKETING
QUESTIONS
1
Define the term marketing.
What are the objectives of marketing?
An organisation which is market-led will have several advantages over one which
is product-led. State TWO of these advantages.
Explain why it is necessary to advertise and promote a new product.
Explain the term market leader.
Why can profits for a product which is a market leader in its maturity stage, be
very high?
Why is it important for organisations today to know at which segment of the

market to target its products?
What is meant by market share and market growth?
What is the difference between a wholesaler and a retailer?
10
Name each component which makes up the Marketing Mix.
11
Why do shops hold SALES?
12
Explain, with examples, what is meant by competitive pricing.
13
Mobile phone suppliers have used price skimming strategies. Explain what this
means and give another example.
14
Give TWO examples of products made by the following organisations:

Unilever
Mars
Cadburys
Ford Motor Co.
15
What is the purpose of packaging products?
16
What are the FOUR marketing tools used by the public sector?
110
17
Describe how the consumer is protected from public sector exploitation.
18
What is the difference between branded goods and generic goods?
19
State TWO examples of services bought by the PUBLIC SECTOR from the
PRIVATE SECTOR.
20
Give THREE examples of famous person/s used by companies to promote their

products.
111

MARKETING
Marketing - any reasonable definition - marketing is the management process

involved in identifying, anticipating and satisfying consumer requirements
profitably.
Objectives of Marketing
To target new markets or market segments
To maintain or increase market share
To develop a portfolio of products
To increase profitability and revenue
To improve the image of the product
Market led organisation - can respond more quickly to changes in the market.
It will be more able to anticipate market changes (research).
It will be in a stronger position to challenge competition.
Product led organisation will not conduct any market research for its product.
Advertising and promotion necessary to ensure customers are aware of its

existence - its qualities, price, features etc.
Firm with dominant position in the market place.
The initial development and launch costs will have been recovered by the time the
product life cycle reaches maturity stage. A product with a strong market position
will still be position to charge high prices, which will generate high profits.
More competition nowadays in the market place. Businesses have to identify their
market segment so promotions etc will reach them.
Market share is the proportion of total sales in a market taken by one product or
the products of one organisation.
Market growth is the rate at which a market as a whole is increasing, eg by 5% per
year.
Difference between a wholesaler and retailer -wholesalers sell to retailers who

buy in large quantities. Retailers sell to consumers in smaller quantities.
10
Price, product, place, promotion.
11
To encourage customers to buy what they would not have purchased at the full
price. Can encourage customers who would not normally shop there.
112
12
Competitive pricing/competition based pricing - When rival companies charge

similar prices for similar products. Examples: petrol companies, record shops,
newspapers.
13
Price skimming - firms charging high prices for new products, which some
consumers are prepared to pay in order to have it first. Example - new release
video games and consoles.
14
Unilever - Chicken tonight, Persil, Surf, Magnum, Organics.

Mars - Maltesers, Snickers, Topics.
Cadburys - Dairy milk, Fruit & Nut, Marble, Milk Tray.
Ford - Fiesta, Ka, Mondeo, Escort.
15
Products are packaged for two reasons:

1 To protect the product during transit etc
2 To promote the product ie to appear attractive, promote an image etc
16
Price - price discrimination

Product - special market
Promotion - informative advertising
Place - direct to consumer
17
Legislation such as Sale of Goods Act (1979), Local Offices of Fair Trading, and
watchdog bodies such as OFGAS and OFTEL.
18
Branded goods - heavily marketed by companies to appear different and

consumers perceive these goods to be different.
Generic goods - very little marketing effort by companies and perceived by
consumers to have no differences between them.
19
Examples - Office supplies and cleaning services.
20
Examples - eg Ronaldo, Brazil Football player - (Nike), Spice Girls - (Pepsi),

Football teams - eg Scotland - (Umbro).
113

MARKETING
E3 - The marketing mix
GROUPWORK
Collect information about a range of products at different stages of the PRODUCT LIFE
CYCLE.
QUESTIONS
1
How many of the products are in the maturity stage of the product life cycle?
Have any of the mature products been improved?
How many of the products are new to the market?
Do you think the new products will make it to the maturity stage?
How many of the products are in decline? Explain why these products are in
decline.
GROUPWORK
Collect a range of adverts. In groups discuss
What image the advert is trying to portray?
What the main objective of the advert is?
Which advert has the most impact?
GROUPWORK
Work in groups of three or four. Your company produces a fizzy drink which used to be
popular, but there had been technical problems, which led to some batches being
contaminated. Sales have fallen as a result of the bad publicity. As a group
BRAINSTORM the problem and produce as many ideas as possible in order to provide
solutions.
Present your solutions in the form of a memo to the managing director.
114

MARKETING
E4 The marketing mix
Read the following case study and answer questions which follow:
CASE STUDY
PRODUCT BRANDING
A BRAND is the name given by a producer to one or more of its products. Branding is an
extremely important element within the marketing mix. It is the means by which
companies differentiate their products from each other. For companies today it is an
important intangible asset. Choosing a brand name is an important part of a companys
marketing strategy. Examples of well-known brands include Sony, Ford, Cadburys and
IBM. Strong branding means that firms can charge a premium price for the product.
Many producers seek to protect their brands from misuse, abuse and imitators by
employing legal experts. Brands were originally intended as a simple graph to help
customers identify the product, but have evolved to the point where firms whose brands
are associated with quality in consumers minds can charge more for their product. It also
helps the firm to maintain customer loyalty.
Brands can be grouped into:
Company: eg Nike
Product: eg cornflakes
Own Brand: eg Tesco
Building a brand image is an integral part of the marketing plan. Regular monitoring of
the image is also important for the organisation. A successful brand will mean much
more sales for the company. The use of image design, updating image and additional
promotion is required to maintain a powerful brand.
Organisations are now developing global branding. This will allow manufacturers to
produce single product lines for sale on a massive scale throughout the world. Example
of existing global brands include McDonalds and Coca Cola. Some products are being renamed with a global brand. For example Opal Fruits have been given the new global
name Starburst. It would appear that global branding is set to become more and more
important.
115
QUESTIONS
1
Explain what is meant by the marketing mix?
(a) What is meant by Branding?

(b) What part of the marketing mix includes branding?
What does the phrase firms can charge a premium price for the product mean?.
Suggest TWO reasons why consumers are prepared to pay premium prices for
branded products.
What were the reasons given for employing legal experts?
Give THREE examples of products in each of:

(a) Walls ice cream
(b) Ford Motor Co
(c) Cadburys Chocolate
Explain why own brands compete successfully against branded products.
Popular brands are advertised with catchlines. For example a mars a day helps
you work, rest and play. Can you provide an example of a famous catchline?
116

MARKETING
E4 The marketing mix Suggested solution
PRODUCT BRANDING
The combination of product, price, place and promotion.
(a) Branding - naming a product or service related to a particular business.

(b) Branding - product.
Firms can charge a price higher than normal market prices.
Better quality than rival products.

Better image.
Unique - limited supply.
To protect product from impostors/imitators. To protect copyright.
(a) Solero, Magnum, Mars

(b) Mondeo, Escort, Fiesta
(c) Dairy Milk, Milk Tray, Chocolate Buttons
Similar packaging
Lower prices
Similar quality (eg Sainsbury Cola)
Just do it - Nike
117

MARKETING
Read the following Case Study and answer questions which follow:
CASE STUDY
COCA COLA IN CHINA
Coca Cola (Coke) is recognised as the worlds number one soft drink producer. Coke
dominates just about every country in the world. The companys aim is to replace wine,
tea and coffee drunk as the main beverage in most countries with Coke.
China is a prime target for the soft drinks giant. This is not a new market for Coca Cola.
The company had been operating there since the 1920s, but was forced out when the
communist regime banned all capitalist activities in the country. The company returned to
China in 1978 after the death of Chairman Mao.
There are 1 billion tea drinkers in China. At the moment the population drink less than 7
Cokes per person per year. The comparison can be made with an average American who
consumes 840 Cokes per year.
The problem Coca Cola faces in China is one of a tea culture, and according to Coca
Cola, if the population is drinking tea, it is not drinking Coke. Tea is deeply rooted in the
culture and is integrated with Chinese art, calligraphy and opera. In an intensive
marketing strategy, Coca Cola is building 23 bottling plants across China. The company
are aware that in reaching for the China market they are facing the same problems that the
British System faced when trying to persuade the British working class to become tea
drinkers. The domestic pattern there was that once the campaign was successful tea
spread throughout the whole society as the number one drink.
In China the Coca Cola company is applying the same marketing techniques banned
during the Cultural Revolution. They are targeting the young. There are over 400 million
young people in China. Traditionally Cokes appeal is to youth everywhere. Coke
adverts promote the idea that young people everywhere speak the same language. China
is no different. It represents a very large market for Coca Cola. For young Chinese
people Coke represents the American Dream. They are influenced by the style of the
west. The consumer freedom, previously denied in the country.
Coca Cola has no doubt it will eventually penetrate the market in China. They will have
to be prepared to battle hard against the existing tea culture with aggressive marketing
campaigns. They will also have to be prepared to fight the competition from other
companies who are equally aware of the gains to be made from a market the size of
China. The Coca Cola company remains confident that its destiny is to inherit the earth!
118
QUESTIONS
1
Explain the meaning of the phrases in italics.
Draw the product life cycles for:

(a) Coca Cola UK market
(b) Coca Cola China market
Explain what elements of the marketing mix will be most important in their
aggressive marketing campaigns.
Why does it make sense for Coca Cola company to target young people in China?
Do you believe, as Coca Cola does, that it is easier to sell a product to a 12 year
old than a 40 year old? Justify your answer.
State Coca Colas main rival in the soft drinks industry?
Do you think Coca Cola will succeed in its campaign to convert China from a tea
drinking nation to a Coke drinking one? Explain your answer.
119

MARKETING
E5 The marketing mix - Suggested solution
Prime Target - the main market the company is aiming its product at.
Tea culture - tea is the main drink for any social occasion.
Marketing strategy - a marketing plan involving price, place, promotion and
product.
American Dream - An image of prosperity and being able to achieve anything in a
land of plenty.
Penetrate the market - break into a market previously denied.
The Coca Cola company remains confident that its destiny is to inherit the earth. The company is confident that the only drink consumers will eventually demand
anywhere in the world will be Coca Cola.
Product life cycle - UK market will be at the mature stage. China market will be
at the introductory stage.
Marketing Mix - Product and Promotion will be important. However Place and
Price has to be considered when rival companies such as Pepsi are involved.
Cokes appeal is to a younger market.

Young people are always willing to try new products.
Young people in China are influenced by the social practice in the West eg the
USA..
Pepsi Cola Company.
Accept yes or no with appropriate justification.
120

MARKETING
E6 - Market Research
QUESTIONS
1
Explain the term MARKET RESEARCH.
What is meant by the term TARGET MARKET?
Explain the difference between desk research and field research.
Give three examples of

(a) desk research;
(b) field research.

Sample
Sample size
Socio-economic group
Market size
Market share
A well-known Scottish food manufacturer wants to find out if a new product line
is going to sell well in the UK. How could this be done without the firm having to
go to the expense of launching the product nationally?
How can a random sample of people be carried out in the Aberdeen area.
The following STAGES OF MARKET RESEARCH are not in the correct order.
Re-write in the correct order.
STAGES OF MARKET RESEARCH

1. Gather and analyse data collected from research
2. Decide on most appropriate research method
3. Decide on purpose of market research - what information needs to be obtained
4. Carry out market research using appropriate method
5. Form conclusions and put forward recommendations
6. Present findings in a report
121
Consumer research. Copy out and complete table below to show the most likely
purchasers of the various products. The first one has been done for you.
Detail
Pint of beer in a pub
The Financial Times newspaper
Cardigan from M & S
Tommy Hilfiger Sweater
Jeans from Gap
Porsche sports car
Months holiday in Spain in
February
New style roller blades
Can of Irn Bru
Age group
18-30
Sex
M
C
122

MARKETING
E6 - Market Research - Suggested solution
MARKET RESEARCH - the process of gathering primary and secondary data on

consumers buying habits and lifestyle to enable marketing and production
decisions to be made in a more scientific way.
TARGET MARKET - the particular segment of consumers a firm wishes to sell

to. The target market will be identified after the firm has carried out extensive
market research.
DESK RESEARCH
FIELD RESEARCH
finding out information from previously

published source
gathering new information by

collecting it at source.
4(a)
Desk research - journals, trade magazines, published government statistics,

quality newspapers and magazine (on CD-ROM), on-line databases
4(b)
Field research - questionnaires, test marketing, consumer panels, street survey,

telephone survey, interview.
Sample: a group of respondents to a market research exercise selected to be

representative of the target market.
Sample size: the number of respondents to a research survey.
Socio-economic group: the occupational category that shows the social class to
which each household belongs. The grading is from A-E.
Market size: the total sales of all the producers within a market-place, measured
by volume (units sold) or by value (revenue generated).
Market share: the percentage of all the sales within a market that are held by one
brand or company.
Scottish food manufacturer

Stage 1
Stage 2
Stage 3
Stage 4
Test small sample in Research and Development department of

organisation
Test using consumer panel
Launch product in small test market, eg Glasgow area
Launch nationally
123
A street survey could be carried out

A postal survey could be carried out
STAGES OF MARKET RESEARCH
Decide on purpose of market research - what information needs to be obtained
Decide on most appropriate research method
Carry out market research using appropriate method
Gather and analyse data collected from research
Form conclusions and put forward recommendations
Present findings in a report
Market Research
Detail
Pint of beer in a pub
The Financial Times newspaper
Cardigan from M & S
Tommy Hilfiger Sweater
Jeans from Gap
Porsche sports car
Months holiday in Spain in
February
New style roller blades
Can of Irn Bru
Age group
18-30
30+
35+
17-20
20+
40+
55+
Sex
M
M
F
M
M/F
M
M/F
C
A and B
A and B
C
B and C
A
B
14-17
12-18
M/F
M/F
B,C,D
C and D
124

MARKETING
E7 - Market Research
TASK
Read the following paragraph and answer the questions which follow:
MARKET RESEARCH
Ian Sinclair, a young engineer, has designed a new accessory for car drivers with back
problems. It is a shaped attachment, which can be fitted onto the drivers seat of most
cars. Ian wants to find out if any of the customers who have their car serviced at three
local garages might be interested in buying his product. He has constructed the following
questionnaire.
THE PERFECT BACK UP

1 What age group are you in?
0-15
36-45
16-25
4 Do you ever suffer from backache?
26-35
55+
5 Would you purchase a car seat

specially designed for back-sufferers?
46-55
Yes/No
2 How much do you earn?
6 What are your interests?
3 What sort of car do you drive?

Small
Medium
Music
Cinema
Sport
Large
QUESTIONS
(a) Why is the questionnaire unlikely to provide Ian with the data he wants?
(b) Re-design the questionnaire to provide the right sort of data Ian needs.
125

MARKETING
E7 - Market Research - Suggested solution
(a)
Questions 1 + 2 - Age and Earnings not necessary.

Question 3 make of car might have been more useful
Question 6 not relevant
(b)
Introduction - what the survey is about and how long it might take to complete.
Questions should be relevant to product.
Thank you to participants at end of questionnaire.
126

MARKETING
Read the following case study and answer questions which follow:
CASE STUDY
SUPERMARKET LOYALTY CARDS
In the 1990s there has been an increase in the competition between leading supermarkets
such as Tesco, Safeway and Asda to attract and retain new customers. There is a growing
trend towards developing a relationship between supermarkets and customers. This is
known as one to one marketing.
One of the main ways supermarkets have chosen to build the supermarket/customer
relationship is through the introduction of bonus loyalty cards for customers. This is a
credit card size, magnetic stripe loyalty card, which is swiped at the check-out. Points
are awarded in relation to amount spent. The rewards vary from supermarket to
supermarket but include:
TESCO CLUBCARD
Reward: 1% plus product
offers
SAFEWAY ABC CARD

offers
ASDA CLUBCARD
offers
The loyalty card holds information such as customers name, address, store location, time
and frequency of purchases. The information fed back at the check out allows the store to
build up a consumer profile through the use of powerful and sophisticated databases. This
information means that customers can be targeted through direct mail about special
promotions and new products available in the store.
The cost of launching the loyalty schemes for the supermarkets was expensive somewhere in the region of 7 - 10M. Without EPOS equipment in supermarkets it
would not have been possible to operate the loyalty schemes.
The use of these loyalty cards has allowed supermarkets to differentiate themselves from
their competitors and encourage customers to stay loyal. Supermarkets have the
advantage of learning more about their customers buying behaviour, which in turn assists
their marketing programme.
There is a belief that management decision making has also improved through increased
information about such things as market segments and consumer tastes, which means that
supermarkets have achieved some of their objectives.
The costs of introducing and maintaining the schemes are high and it has yet to be proved
that customers remain loyal.
127
QUESTIONS
1
Explain why supermarkets are using loyalty cards.
How are loyalty cards used by supermarkets to learn more about their customers
buying habits?
State, why supermarkets, in the compilation of a their customer database may find
the database fields to be useful?
(a) Store location
(b) Time
(c) Frequency of purchase
Give TWO other fields that supermarkets might include in their customer
database.
Do you agree with the statement There is a growing trend towards developing a
relationship between supermarkets and customers. Justify your answer.
Explain what EPOS stands for and how the equipment operates.
The information obtained from customers are held on large database files. Do you
consider this an invasion of privacy? Justify your answer.
How has the introduction of loyalty schemes improved management decision

making?
What rewards have you (or someone you know) had from using a loyalty card.
State the company and the rewards gained.
10
Find out if your local supermarket considers the cost of operating the loyalty
scheme as a necessary marketing expense.
128

MARKETING
E8 The marketing mix - Suggested solution
SUPERMARKET LOYALTY CARDS

1
Increasing competition between supermarkets. To help attract customers.
Loyalty cards record information gleaned from customer and shopping purchased
onto large powerful databases.
Store location - management can measure how many people shop at that particular
store and make comparisons eg possible closures.
Time - this can be useful to make a decision about opening and closing times of
store and the effective use of staff.
Frequency of purchase - useful for ordering stock for supermarket. It would also
help with decisions about shelf positioning and promotional offers.
Vegetarian
Value of purchases
EPOS - Electronic Point Of Sale Computer terminal at supermarket checkout. Linked to stock control and
information databases. Purchases are scanned and information taken into system.
FOR:
Customers gain benefits from more efficient system of stock control.

Promotional offers sent to correct target segment - no one missed out.
Databases are used in other areas, so why not supermarkets.
AGAINST: Organisations exchange/sell information. Who else has your details?

Junk mail
8
Increased information about market segments and consumer tastes.
129

MARKETING
E9 - The marketing concept
AN A-Z OF MARKETING
Supply the missing word/s to complete each sentence. Write out the sentence.
A .means presenting or promoting a good or service to the public.

B . shows coded information on packaging.
C.. these are inexpensive goods that are purchased frequently.
D . - how much will be bought of a product at any given price.
E the values and principles which govern the business world.
F .. the right to market a particular brand of goods or services.
G organising a business so as to operate and trade in a standardised way
throughout the world.
H .. - the classification of needs and wants presented by Maslow.
I - the way in which a product may be perceived.
J .. .. is when companies join together to sell more products.
K .. is the symbol to show that a certain quality has been attained.
L . - the time at which a product is exposed to the full market.
M . management process involving the identification, anticipation and
satisfying of consumer requirements profitably.
N - basic products such as food, drink, shelter, and warmth.
O. the next best alternative which is sacrificed.
P .. is initially charging a low price in order to establish a good
position in the market.
Q . designed to find information to suit specific task.
130
R .. is trying to find out the wishes of your potential customers.

S research is looking at existing source of information.
T . - is trying out products in a small section of overall market.
U ..-.. - these goods are likely to be better quality than mass produced goods.
V .. . - the difference between the price paid for an input and its selling price.
W - a channel of distribution, which stores goods in bulk before selling them
in smaller quantities.
131
BUSINESS DECISION AREAS

MARKETING
E9 - The marketing concept - Suggested solution
AN A-Z OF MARKETING
A- Advertising
B- Bar coding
C- Consumer goods
D- Demand
E- Ethics
F- Franchising
G- Globalisation
H- Hierarchy
I- Image
J- Joint Venture
K- Kitemark
L- Launch
M- Marketing
N- Needs
O- Opportunity Cost
P- Penetration Pricing
Q- Questionnaire
R- Research
S- Secondary
T- Test Marketing
U- Up-market
V- Value Added
W- Warehouse
132

FINANCE
F1 - The role of finance
A-Z OF FINANCE
Supply the missing word/s to complete each sentence. Write out the sentence.
A are anything a business owns.
A B . is a statement showing the assets and liabilities of a
business.
C.. are the businesses and individuals to which a business owes money.
D is the reduction in value of assets over a period of time.
E. is the monetary value of a business which belongs to the owner, in a
company this would be the value of their ordinary shares.
F .. are anything a business owns that will last for a number of
years.
G. is the ratio of long term borrowings of a company to its share capital.
H.. . Spreading the payments of a purchase over a period of time. The
goods remain the property of the finance company until the final payment is made.
I.. is money the business receives in the form of sales revenue etc.
L.. is the ability of a business to pay its debts in the short term.
M.. . is the difference between the buying and selling price of a firms product.
N . is calculated by deducting any expenses, that a business incurs, from
the Gross Profit.
O.. is another name for the expenses of a business other than materials or
labour.
P.. .. are shares in a limited company where the shareholders
receive a fixed amount in dividends each year.
R is the amount of profit which is kept back by a business
for future investment.
133
A S. is the software that would be used to produce financial statements

such as cash budgets or balance sheets.
T.. is the money value of the sales of a business.
U.. .. is the cost of one unit of production or of a single item.
V.
... are costs of the business which change in relation to output.
W.. .. is the difference between the current assets and

current liabilities of a business.
134

FINANCE
F1 - The role of finance - Suggested solution
A-Z OF FINANCE
Assets
Balance Sheet
Creditors
Depreciation
Equity
Fixed Assets
Gearing
Hire Purchase
Income
Liquidity
Mark-up
Net Profit
Overheads
Preference Shares
Retained Profit
Spreadsheet
Turnover
Unit Cost
Variable Costs
Working Capital
135

FINANCE
F2 - The role of finance
Working Capital
Current Liabilities
Liquidity
Gross Profit
2. A Financial Accountant reports to the Finance Director in Snax plc. The Assistant
Finance Manager reports to the Financial Accountant and has control over the Budget
Manager and the Chief Cashier. Two Accounts Assistants report to the Budget
Manager, and the Chief Cashier has responsibility for 3 Accounts Assistants and 2
Payroll Clerks.
Draw the organisation chart for the Finance Department of Snax plc.
3. Name 3:
Current Assets
Expenses a caf owner would incur
Items, an office furniture manufacturer would hold in stock
Users of financial information
Responsibilities of the finance department
4. Why do firms use ratio analysis?

5. Identify the ratios used to assess profitability, liquidity and efficiency.
6. What are the limitations of ratio analysis?
7. Using your answer to question 3 - Name 3 users of financial information - give the
reasons for their interest in the financial information presented by a firm.
8. What is the purpose of:
A Balance Sheet;
A Cash Flow Statement;
A Profit and Loss Account?
136

FINANCE
F2 - The role of finance - Suggested solution
1. Working Capital - the difference between Current Assets and Current Liabilities.
The funds available to meet immediate expenditure.
Current Liabilities - amounts owing that are expected to be repaid within one year.
Liquidity - the ease with which assets can be converted into cash.
Gross Profit - the difference between the sales of a business and what it cost to buy
(or make) those sales.
2. Organisation Chart - Snax plc - Finance Department
FINANCE DIRECTOR
FINANCIAL ACCOUNTANT
FINANCE MANAGER
BUDGET MANAGER
ACCS ACCS
ASST ASST
CHIEF CASHIER
ACCS ACCS ACCS PAYROLL PAYROLL

ASST ASST ASST CLERK
CLERK
3. Current Assets - stock, debtors, cash/bank, prepayments

Expenses - telephone, heat and light, advertising, rent, depreciation
Stock Items - wood, glue, packaging, nails
Users - employees, managers, shareholders, owners, government, creditors
Responsibilities - recording financial transactions, payments of accounts, preparation
of final accounts, payment of wages and salaries
4. Ratio analysis is used by firms to find out how they have performed over a period of
time or in comparison to other businesses in a similar line. Final accounts are not very
informative on their own - ratio analysis provides a relatively simple way of
interpreting these figures to help monitor the performance of a business.
5. Profitability - Return on capital employed, Net profit margin, Gross profit margin
Liquidity - Current ratio, Acid test ratio
Efficiency - Rate of stock turnover, Debtors collection time, Creditors collection time
137
6. Limitations of Ratio Analysis
must compare like with like eg size, product range, objectives of business
accounting procedures used may be different eg stock valuation, methods of
depreciation
ratio analysis is based on historic information and does not take into account other
factors within a business eg quality of staff or location of the business which may
be very positive aspects which effect performance
ratio analysis does not take into account general business conditions and the
economic environment
7. Employees - will want to know how well the business is doing and whether their job
is secure
Managers - need information on the performance of the business in order to make
informed decisions
Shareholders - will want to know how well the business is doing to see how much
they will receive in dividends
Owners - will want to know how profitable their business is
Government - need to know how businesses are performing for taxation purposes
Creditors - will want to know if the business is able to pay their debts
8. The purpose of the Balance Sheet is to show the net worth of the business through its
assets and liabilities.
The purpose of a Cash Flow Statement is to forecast the likely receipts and payments
of the business over a period of time to know exactly how much money will be
available each month. It helps to identify any times that there may be a shortage of
cash in the future.
The purpose of a Profit and Loss Account is to calculate how much profit the business
has made after the deduction of all expenses.
138

FINANCE
F3 - Financial information
FIONAS FLOWER SHOP

From the following information produce the Cash Flow Statement for Fionas Flower
Shop for January to March.
Fiona had 50,000 start up capital with which she would like to purchase a van
worth 15,000 and equipment worth 20,000 in January.
At 1st January Fiona had 1,900 in her bank account.
Fiona anticipated that her sales would be 8,500, 10,000 and 10,200
respectfully for January, February and March.
Her estimated stock purchases for January to March were 5,500, 6,000, and
6,200.
Other expenses that would be incurred are estimated as follows:

Rent 5,000 per month
Wages 1,100 per month
Heat and Light 300 per month
Van Running Expenses 500 per month
If possible present this using a spreadsheet.
139

FINANCE
F3 - Financial information - Suggested solution
FIONAS FLOWER SHOP
Fiona's Flower Shop

Cash Flow Statement
January - March
Opening Balance
Receipts
Sales
Start-up Capital
Payments
Purchases
Rent
Wages
Heat and Light
Van Running Costs
Equipment
Van
Closing Balance
Jan
1,900
Feb
13,000
March
10,100
8,500
50,000
60,400
10,000
0
23,000
10,200
0
20,300
5,500
5,000
1,100
300
500
20,000
15,000
47,400
6,000
5,000
1,100
300
500
0
0
12,900
6,200
5,000
1,100
300
500
0
0
13,100
13,000
10,100
7,200
140

FINANCE
F4 - Financial information
TRAX (UK) LIMITED

Trax (UK) Limited is a private company manufacturing trainers and leisure footwear.
Study the following figures relating to the Trading, Profit and Loss Accounts for 1997 and
1998.
Trading Profit and Loss Accounts for year ended 31 Dec
1997
1998
Sales
200,000
250,000
Cost of Sales
120,000
Gross Profit
Expenses
(i)
(ii)
100,000
45,000
Net Profit
(iii)
(iv)
50,000
a) Using the information provided, calculate the figures missing from boxes (i) to
(iv).
b) Using your answers from question (a), calculate the companys Gross Profit and
Net Profit Ratio as a percentage of Sales for 1997 and 1998. Comment on any
changes that took place.
c) The companys sales increased in 1998. State 3 reasons which might explain why
this has happened.
An extract from Trax (UK) Ltds Balance Sheet is shown below.
Balance Sheet (extract) as at 31 December
Ordinary Share Capital

Reserves
1997
1998
000s
000s
120
150
30
60
141
d) Trax (UK) Ltds capital employed has changed between 1997 and 1998. Explain
what is meant by capital employed and explain the change that took place.
e) Calculate the Return on Capital Employed in 1998.
f) Explain the importance of the Return on Capital Employed ratio to a shareholder
in the company.
142

FINANCE
F4 - Financial information - Suggested solution
TRAX (UK) LIMITED
a) 150,000
80,000
50,000
35,000
b)
Gross Profit %
Net Profit %
1997
40%
17.5%
1998
40%
20%
c) Better advertising
Expanded product range
Reduced competition - a competitor may have closed down
d) Capital employed is a term used to describe the long-term capital (share capital,
reserves, long term loans) used by a company to resource its activities.
The capital employed of Trax has increased from 150,000 in 1997 to 210,000 in
1998. This change has resulted from an issue of ordinary shares to the value of
30,000 and an increase in reserves of 30,000 probably due to retained profit.
e) 23.8%
f) To the shareholder, the return on capital employed indicates the profitability of

investing in the company. A high return on capital employed (such as 23.8% as for
Trax) suggests that the company is a potentially good investment and is likely to pay
out high dividends. The return on capital employed figure should always be higher
than the current interest rate, otherwise it would be more profitable for shareholders to
put their investments into a bank account.
143

FINANCE
F5 - Uses of financial information
CASE STUDY
DONATELLOS
Donatellos is a one man business which sells sandwiches to firms on a local industrial
estate. Most of Donatellos customers pay in cash but he has a few credit customers who
settle their accounts monthly. He rents a small factory unit, where he prepares the
sandwiches, and then he delivers by van. Below is shown his Trading, Profit and Loss
and Balance Sheet for the quarter to 31 August 1998.
Donatello's
Balance Sheet as at 31 Aug 1998
Donatello's
Trading, Profit and Loss account
for the quarter ending
31 August 1998
FIXED ASSETS
Motor Vehicle
Equipment
Sales
Less Cost of Sales
Gross Profit
4,600
2,350
2,250
Less Expenses:
Stationery
Advertising
Telephone
Electricity
Delivery Expenses
Rent
75
50
130
135
500
600 1,490
NET PROFIT
760
CURRENT ASSETS
Stock
Debtors
Bank
Cash
CURRENT LIABILITIES
Creditors
WORKING CAPITAL
NET ASSETS
FINANCED BY:
Capital
Add Net Profit
6,500
5,600
12,100
1,500
1,050
333
110
2,993
883
2,110
14,210
13,800
760
14,560
350
14,210
Less Drawings
144
Questions
1. Using the relevant data from the above final accounts and the additional information
given below, you are required to calculate the following ratios for Donatellos.
Gross Profit as a Percentage of Sales
Net Profit as a Percentage of Sales
Current Ratio
Acid Test Ratio
Rate of Stock Turnover
To complete this task you will need to use the additional information below:
Donatellos opening stock at 1 June 1998 was 620.
2. The following table shows the financial figures from Maxis, another small business
selling sandwiches to local firms. Interpret the data for Maxis in the same way as
you did for Donatellos in question 1.
As at 31 August 1998
Sales
Cost of Goods Sold
Gross Profit
Net Profit
Current Assets (including stock)
Current Liabilities
Opening Stock
Closing Stock
5,560
2.541
3,109
509
3,872
1,712
2,500
1,750
3. Prepare a report for Donatello which contains the following:
a table comparing the results of his ratios with those of Maxis;

an explanation of the performance of both businesses with reference to ratios
calculated;
an explanation of who may use this information and why.
145

FINANCE
F5 - Uses of financial information - Suggested solution
CASE STUDY DONATELLOS - SOLUTION
Gross Profit Margin

Net Profit Margin
Current Ratio
Acid Test Ratio
Rate of Stock Turnover
Donatellos
Maxis
49%
16.5%
3.4:1
1.7:1
2.2 times
56%
9%
2.26:1
0.8:1
1.2 times
Performance of Businesses
Maxis has a slightly higher Gross Profit Margin which means they are either buying
in their stock more cheaply than Donatellos or selling their products at a higher price.
Donatellos Gross Profit Margin is also good.
The Net Profit Margin shows that Donatellos have better control over their expenses
than Maxis who have a low Net Profit Margin in comparison to their excellent Gross
Profit Margin.
Maxis have an excellent Current Ratio and Acid Test Ratio, very near to the ideal.
This means that they are able to pay their immediate debts and still have some money
left over. Maxis, however, have too much money tied up in debtors and stock which
means they may have difficulty turning this money into cash to pay their immediate
debts. Their money would be able to work better for the business if it was in a more
liquid form.
The Rate of Stock Turnover shows us that Donatellos are selling more goods on a
day to day basis than Maxis and are therefore in the better position.
Overall, Maxis position is very good apart from their inability to control their
expenses. They have an excellent Gross Profit Margin, however, they may be buying
in goods too cheaply and jeopardising quality which would explain their low Rate of
Stock Turnover figure.
Donatellos are in a reasonably healthy position. Both their Gross Profit and Net
Profit margins are good. The main area of concern for Maxis is their low Current
Ratio which may cause them cash flow problems in the future, they must be able to
collect their money due from debtors before the figure gets too high.
146
Users of the Information
The owners of each business will be interested to see how profitable their business is.
The Government will need to see this information in order to asses payment of tax.
Creditors will be interested to see if the business will be able to pay its debts.
Employees of each business may be interested to see how well the business is
performing, they be entitled to a pay rise or simply need to know how secure their jobs
are.
If either business has taken out a bank loan the bank will want to see the figures to
make sure that future payments can be met. The bank may also be interested in the
figures if either business is considering taking out a bank loan in the near future.
147

FINANCE
F6 - Uses of financial information
CASE STUDY
COMRIE CARRIERS LTD
From the information provided you are to produce the Cash Flow Statement for Comrie
Carriers Ltd for the 6 months, January to June. You should produce the statement using a
suitable spreadsheet package.
1. The predicted revenue for the 6 months is (in 000s):
JAN
60
FEB
70
MAR APR
70
50
MAY JUNE
50
60
2. The company receives additional payments when a large national carrier hires drivers
and lorries from time to time. On average the payments are 5,000 per month.
3. In April 40,000 new capital is introduced to help purchase a new lorry.
4. The monthly wage bill is 16,000.
5. Nazir Mohammed (the major shareholder) draws 3,000 from the business each
month.
6. Corporation tax of 26,000 is to be paid to the Inland Revenue in June.
7. Accountancy fees of 8,000 are paid in January.
8. The lease on the premises is 4,000 per month but payable every 3 months in advance
starting in January.
9. Fuel is purchased every 2 months starting in February and costs 22,000 each time.
10. A monthly allowance of 3,000 is made for spare parts and tools.
11. The company expects to pay net quarterly VAT payments of 41,000 in March and
37,000 in June.
12. The annual insurance premium is paid in April and is expected to be 20,000.
148
13. The quarterly telephone bills are expected to be 1,000 in March and 1,500 in June.
14. A monthly allowance of 5,000 covers electricity, advertising and miscellaneous
items.
15. The company plans to purchase a new lorry in April for 80,000.
16. The opening bank balance is -9,000.
QUESTIONS
a) In what months will Comrie Carriers experience cash flow problems?
b) Are there are reasons as to why their payments are particularly high in the months
highlighted in question 1?
c) Suggest a source of finance Comrie Carriers could obtain to improve their cash flow
situation in these months and give reasons why it is an appropriate one.
149
F6 - USES OF FINANCIAL INFORMATION - SUGGESTED SOLUTION

Comrie Carriers Ltd
Cash Flow
Statement
Opening Balance
Receipts
Sales
New Capital
Other Income
Payments
Wages
Drawings
Tax
Accountancy fees
Lease
Fuel
Spare parts
VAT
Insurance
Telephone
Misc
Lorry
Closing Balance
Jan
Feb
Mar
Apr
May
June
(9,000) 17,000 43,000 49,000
(9,000) 19,000
60,000
0
5,000
56,000
70,000 70,000 50,000

0
0 40,000
5,000
5,000
5,000
92,000 118,000 144,000
50,000
0
5,000
46,000
16,000
3,000
0
8,000
4,000
0
3,000
0
0
0
5,000
0
39,000
16,000
3,000
0
0
0
22,000
3,000
0
0
0
5,000
0
49,000
16,000 16,000
3,000
3,000
0
0
0
0
0
4,000
0 22,000
3,000
3,000
41,000
0
0 20,000
1,000
0
5,000
5,000
0 80,000
69,000 153,000
16,000 16,000
3,000
3,000
0 26,000
0
0
0
0
0 22,000
3,000
3,000
0 37,000
0
0
0
1,500
5,000
5,000
0
0
27,000 113,500
17,000
43,000
49,000
19,000 (29,500)
(9,000)
60,000
0
5,000
84,000
150

FINANCE
F6 - Uses of financial information - Suggested solution
CASE STUDY COMRIE CARRIERS LTD
1. April and June

2. In April a one off payment of 20,000 for insurance is to be paid and in June a tax bill
of 26,000 and a VAT bill of 37,000 is to be paid.
3. Comrie Carriers could obtain a bank overdraft for these two months to help their cash
flow situation. An overdraft allows you to spend more money that you actually have
in your bank account with prior agreement with the bank. It is the most appropriate
method of finance to use in this situation because the cash flow problem is only short
term as the large payments in April and June are only one off. A bank overdraft
should only be used as a short term solution to cash flow problems as it can become
very expensive if used regularly.
151

HUMAN RESOURCES
G1 - Elements of Human Resource Management
QUESTIONS
1
List FIVE factors which are the responsibility of the Human Resources department
of a large organisation.
Write a brief explanation of the following terms:

Contract of Employment
Recruitment and Selection
Training and Development
Staff Welfare
Health and Safety at Work
You are employed as a Junior Clerical Assistant in the Personnel Department of a

large manufacturing organisation. As part of your induction you are required to
become familiar with the department structure. Prepare an organisation chart of the
Personnel Department to show you understand the lines of authority within the
department.
A Personnel Manager is in charge of the department.
The following assistants report to the Personnel Manager:
Assistant Manager - Training
Assistant Manager - Health and Safety
Assistant Manager - Industrial Relations
A Company Secretary reports to the Personnel Manager.
There are 2 Clerical Assistants, both report to the Assistant Manager - Training.
The Assistant Manager for Health and Safety has responsibility for a Clerical
Officer and a Nurse.
The Assistant Manager - Industrial Relations has a Factory Officer. You report to
the Factory Officer.
What is meant by INTERNAL recruitment?

(a) Give 3 advantages of companies recruiting internally.
(b) Give 3 disadvantages of companies recruiting internally?
152
What is meant by EXTERNAL recruitment?

State THREE different ways an organisation could recruit externally.
Collect a variety of job advertisements from your local newspaper. Produce a table
to show similarities between the advertisements.
Produce a brief report on your findings.
Assume you are applying for a job or a university place and have received an
application form. Write a brief paragraph - use your Personal Statement and Other
Achievements sections in your Record of Achievements Folder - stating why you
are an ideal candidate.
Look in Yellow Pages to find the names and addresses of local employment
agencies. Contact them to find out what procedures they use for registration.
Find out if your school/college has an induction programme for new staff.
Write a short summary of what is involved.
153

HUMAN RESOURCES
G1 - Elements of Human Resource Management - Suggested solution
Select any 5 from:

Recruitment
Selection
Training
Staff Development
Health and Safety at Work
Disciplinary Procedures
Staff Welfare
Appraisal
Industrial Relations
2
Contract of Employment:
a legal document signed by the employer and

employee, which sets out the conditions under
which employees will work - rates of pay and
holiday entitlements.
Recruitment and Selection:
choosing and appointing the best employees to

work in an organisation.
Training and Development:
providing employees with new skills, knowledge

and experiences so that they can carry out their
jobs efficiently.
Staff Welfare:
ensuring the health and well-being of all

employees in an organisation.
Health and Safety at Work:the obligation by employers and employees to ensure that
working conditions conform to legal requirements.
154

HUMAN RESOURCES
G1 Elements of Human Resource Management Suggested solution
QUESTION 3
PERSONNEL DEPARTMENT
PERSONNEL MANAGER
Company Secretary
Assistant Manager
(Health and Safety)
Assistant Manager
(Training)
Assistant Manager
(Industrial Relations)
Factory Officer
Clerical Assistant
Clerical Assistant
Clerical Officer
Nurse
Student
155
INTERNAL recruitment - means filling a vacancy from within the

organisation.
(a) ADVANTAGES (ANY THREE)
(b)
gives employees opportunities to develop their career

shorter induction courses needed
employers know employees abilities
may be quicker and less expensive
DISADVANTAGES (ANY THREE)

no new ideas are brought into the organisation from outside
there is no buzz that follows when a new person joins the organisation
appointing from within the organisation may cause jealousy and resentment
from other staff
EXTERNAL recruitment - means filling a vacancy from outwith the organisation.

Any three:
(a)
(b)
(c)
(d)
Placing an advert in newspaper

Advertising at local job centre
Using commercial recruitment agency
Word of mouth
156

HUMAN RESOURCES
1
Why do firms normally ask job applicants to supply references?
A Contract of Employment must be drawn up in accordance with the Employment

Protection Act, 1978, and the Contract of Employment Act, 1972.
(a) When should a written contract be given to a new employee
(b) Under the Contract of Employment Act, 1972, what items must be contained in
the contract?

(a) on-the-job training;
(b) off-the-job training.
What contribution can training make to an organisation?
Why might a company be interested in using a computerised open-learning package

for training its employees?
Match up the phrases with one of the following forms of discrimination. The
first one has been done for you.
A
B
C
D
E
F
Direct Racial Discrimination

Discrimination against disabled people
Direct Sex Discrimination
Indirect Sex Discrimination
Discrimination against older workers
Direct marriage discrimination
DESCRIPTION
Only females need apply
Age limit 35 years
white person required
No access for wheelchairs
Single people only need apply
Applicants must be over 6 feet tall
157

HUMAN RESOURCES
To obtain more information on the candidate from current employer or someone

who knows them well enough to comment on their abilities, character etc.
2(a)
A contract should be given within 13 weeks of commencing employment.
2(b)
The contract should contain:
Job title
Date of commencement of employment
Hours of work
Rate and method of pay
Holiday entitlements
Period of notice if employment terminated
Pension scheme arrangements
Trade Union rights
Disciplinary procedures
3(a)
on-the-job training - employee learns by practical experience in the workplace

and working alongside experienced workers.
3(b)
off-the-job training - involves employee being trained away from workplace:

Training Areas/Workshop
College
New skills/confidence for employees

Employees more effective
Overall organisation more efficient
Open-learning package will allow employees:

to work at their own pace
learn at times to suit them
have ongoing feedback and evaluation
make the learning process more interesting/more interactive.
158
6
DESCRIPTION
Only females need apply
Age limit 35 years
white person required
No access for wheelchairs
Single people only need apply
Applicants must be over 6 feet tall
C
E
A
B
F
D
159

HUMAN RESOURCES
AN A-Z OF HUMAN RESOURCES

Supply the missing word/s to complete the sentence. Write out the sentence.
A .. is the system of monitoring an employees performance in order to identify

strengths and weaknesses.
B is an addition to wages to encourage extra effort from employees.
C - this is an agreement between an organisation and other bodies.
D . may motivate the subordinates and at the same time free the leader to do
other tasks.
E is a method used by organisations to compare the values of different jobs.
F is the title often given to a first line supervisor in a manufacturing
environment.
G are personal targets set.
H . . is the Act that ensures employers and employees
maintain a safe working environment.
I .. is an introductory training for all new employees.
J . is a written statement of a particular job.
K . of human behaviour at work is essential for a Human Resources
Manager.
L is the term used for the employees in an organisation.
M .. is the ability of employees to switch easily from one operation to
another.
N .. .. are sometimes called fringe benefits and are used to motivate
employees.
O.. is the Act relating to temperature and sanitary facilities in offices and shops.
160
P .. is a way or rewarding employees depending upon how much

they produce.
R describes the situation when a job no longer exists.
S .. is the process of choosing a suitable candidate for a job in an organisation.
T .... aims to improve employees skills and attitudes.
U .. .. is union activity which is spontaneous and does not have the backing of
the union head office.
V .. is the first stage of fair dismissal.
W .. .. is the final stage prior to being fairly dismissed.
Y appraisals are a common feature of employee development programmes.
161

HUMAN RESOURCES
AN A-Z OF HUMAN RESOURCES

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
R
S
T
U
V
W
Y
Appraisal
Bonus
Contract
Delegation
Evaluation
Foreman
Goals
Health and Safety at Work Act
Induction
Job Description
Knowledge
Labour
Multi-skilled
Non financial rewards
Offices Shops and Railway Premises Act
Piece rate
Redundant
Selection
Training
Unofficial action
Verbal warning
Written warning
Yearly
162

HUMAN RESOURCES
PUPIL ACTIVITIES
Read over the following case study and answer the questions which follow:
CASE STUDY
A NEW JOB FOR GARY
This was Garys first day at his new job. He had seen the advert for an apprentice
mechanic in the local newspaper last month and decided that this was what he wanted to
do. He loved cars and decided this was the ideal career for him. He sent in an application
form and a CV. He had prepared well for the interview and had shown enthusiasm for the
job. He was delighted to be offered the position although there were 4 other candidates
competing for it. Now, he just could not wait to get his hands on the cars.
Mr McManus, the Foreman informed Gary that he would not be allowed to service the
cars until he had been trained. He would spend time watching the qualified mechanics,
finding out the names of all the different parts of the car and engines, and attending a
day-release course for car mechanics at the local college 2 days every week. He would
also have learn the main laws covering health and safety at work. Mr McManus informed
him that he would be issued with the company safety policy along with his contract of
employment.
QUESTIONS
1
Why is it important to prepare well for an interview?
What is a CV?
What kind of training will Gary be doing at the garage?
Why is it necessary for Gary to attend college?
Why is it important that Gary be familiar with the laws governing health and safety
at work.
Assist Gary by preparing a list of current legislation affecting health and safety at
work.
163

HUMAN RESOURCES
PUPIL ACTIVITIES
To set a good impression and have a better chance of obtaining the job.
A document presenting a job applicants qualifications, experience and interests.

It should provide enough detail to enable organisation to assess applicants
suitability for the post as well as names and addresses of referees.
On the job training which means he will have apprenticeship training - practical
and working alongside an experienced mechanic.
To attend courses about theory of car maintenance.

To gain formal industry recognised qualifications.
To advance career.
Employees have a responsibility to ensure their own, as well as other peoples

health and safety in the workplace. Gary must comply with companys rules and
regulations and report any accidents, incidents.
Health and Safety regulations:

The Factories Act 1961 - This act applies to a wide range of premises including
garages. It covers toilet and washing facilities.
The Office Shops and Railway Premises Act 1963 - Particularly important for
offices and shops. It covers temperature, ventilation, toilet and washing facilities.
The Health and Safety at Work Act 1974 - This Act places responsibility to
maintain safe conditions at work.
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations,
1985 (RIDDOR) - These regulations require any injuries resulting from accidents
at work be reported to the authorities within seven days.
Control of Substances Hazardous to Health Regulations, 1988 (COSHH) This Act requires that workers dealing with hazardous substances must be given
detailed information and training.
164
Noise at Work Regulations, 1989 - Employers must reduce the risk of hearing
damage to employees to the lowest practical level. Ear protectors must be
provided where noise level is extremely high.
165

HUMAN RESOURCES
The following is an extract from a company handbook.
Vesco Plastics
New employees, who are recruited for specific technical skills - for example
accountants, engineers or research scientists - must be academically and technically
qualified with good first degrees, professional qualifications or research experience.
The company, however, places great emphasis on personal qualities, which are just
as important as specific qualifications.
QUESTIONS
1
2
What are Vesco Plastics looking for in new technical employees?

(a) What other qualities does Vesco Plastics consider to be of extreme
importance?
(b) Why would these qualities be considered just as important as specific
qualifications.
(c) List TWO of these qualities.
How might a company such as Vesco Plastics encourage their employees selfdevelopment?
How does your school/college encourage Personal Development?
166

HUMAN RESOURCES
Academically, technically qualified with good first degrees, professional

qualifications or research experience.
2(a)
Personal qualities, eg punctuality.
2(b)
Employees have to be flexible and work with different groups/teams on particular

projects. They have to be tolerant and get along with other people in the
organisation.
2(c)
Good communicator and good listener.
They could offer in-service training such as outward bound/teamwork courses.
Pupils are required to provide their own evidence.
167

HUMAN RESOURCES
G6 - Elements of Human Relations Management
Read the following extract from a conversation between a female employee and her boss
at work. Answer questions which follow.
CONVERSATION
Mrs Wallace Come in Claire and have a seat. Now, what can I do for you?
Claire I have just found out that Colin is being paid more than me for doing the same
job.
Mrs Wallace How did you find out about that, I wonder. Well if you must know his
circumstances are slightly different than yours.
Claire I dont understand. Our job descriptions are exactly the same. We come in at
the same time, leave at the same time and in between do exactly the same job. Can you
explain what you mean Mr Wallace?
Mrs Wallace Youre a married woman Claire, you have no children and your husband
has a very-well paid job. You dont really need to work. Just a bit of pin money eh?
Poor Colin is separated from his wife and has to support her and the two children. He has
two homes to run. I couldnt afford to give both of you a pay increase at this time, so I
decided that Colin needed the rise more than you. Dont you agree?
Claire I certainly do not agree.
QUESTIONS
1
What is a job description?
Claire and Colin have very different personal circumstances. Should this affect
their rate of pay? Explain your answer.
Employers are not allowed to discriminate. Explain what this means?
Was Claire right to object. Explain your answer.
What action can she take now?
168

HUMAN RESOURCES
G6 - Elements of Human Relations Management - Suggested solution
Job Description - detailed description of nature of job, precise tasks and

responsibilities involved.
No - circumstances should not affect their pay. Their is a legal entitlement to

equal pay if employees are doing the same work - Equal Pay Act 1970.
Employers are not allowed under current legislation - Sex Discrimination Act
1975, Race Relations Act 1976 and Disabled Persons Act (s) to discriminate on
the grounds of sex, race or disability.
Claire was right to object. She was being discriminated against. She was being
paid less than her male colleague for doing the same job.
If she is a member of a trade union, she should report pass on the details to her
shop steward. If she is not a member of a trade union she should contact the Equal
Opportunities Commission for advice or take her case to an Industrial Tribunal.
169

HUMAN RESOURCES
G7 - Employee relations
AN A-Z OF INDUSTRIAL RELATIONS

A - an acronym for a body which seeks to resolve conflict in the workplace.

B . - .. an employee engaged mainly in manual work.
C.. determining conditions of work and terms of employment
through negotiation.
D ... - a breakdown in relationship between employers and employees.
E .... - a situation where employees have the same chances.
F .. is one that can respond quickly to changes in the requirements of the
organisation.
G - a reduction of output by workers whilst still carrying on their tasks.
H levels of absenteeism suggest that morale amongst the workforce is low.
I . the relationship between firms and their employees.
J ... - a discussion between management and employee representatives.
L .. - a situation in which employees are physically prevented from entering the
premises.
M .. - an independent outsider who proposes the basis for settlement of
disputes.
N .. - communication between representatives of employers and employees.
O... - industrial action approved by the head office of a trade union.
P - an attempt by trade union members to dissuade others from working during
and industrial dispute.
Q . - a discussion group that meets regularly to identify problems.
170
R .. is where an employer agrees to deal officially with a trade union.

S .. is an agreement by an employer to recognise and negotiate with
one union only.
U .... .. - union activities which do not have the backing of a trade union
head office.
W is the name given to payment in return for labour.
171

HUMAN RESOURCES
PUPIL ACTIVITIES
G7 - Employee relations - Suggested solution
AN A-Z OF INDUSTRIAL RELATIONS
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
U
W
ACAS
Blue-collar worker
Collective Bargaining
Dispute
Equal Opportunities
Flexible workforce
Go-slow
High
Industrial Relations
Joint consultation
Kite mark
Lock-out
Mediator
Negotiation
Official Strike
Picketing
Quality Circle
Recognition
Single-union agreement
Unofficial strike
Wages
172

HUMAN RESOURCES
G8 - Employee Relations
CASE STUDY
UNISON
Mark Ramirez has just commenced employment as a junior administrative officer with
Grampian Health Authority. Mark feels he would benefit by being a member of a trade
union. The union he is considering joining is UNISON.
UNISON is the largest union in the United Kingdom representing 1.4 million members
(over two thirds of them are women) in the public services and essential industries. It
represents its members through collective bargaining. Its membership comes from areas
such as health care, higher education, electricity industry, gas industry, water authorities,
public transport, police authorities and the voluntary sector. It was formed in 1993 from a
merger of three other unions - COHSE, NALGO and NUPE.
UNISON is at the forefront of campaigns to defend public services and essential
industries and to protect the people who work and rely on them against the effects of
further cuts and privatisation. UNISON is putting womens issues at the top of their
campaign lists.
UNISON is fighting for higher standards of health and safety, better working conditions, a
shorter working week on a par with fellow unionists in Europe. In addition to representing
Mark, it offers additional benefits such as 24-hour legal help, educational courses and
loan and mortgage facilities.
QUESTIONS
1
Unison was formed out of a merger of three unions. What advantage does the new
union have as the largest public sector trade union in the UK.
What does the term collective bargaining mean?
Why do you think UNISON are putting womens issues at the top of their agenda?
(a)
What additional benefits does UNISON offer its members?
(b)
Explain why trade unions today offer these additional services?
173

HUMAN RESOURCES
G8 - Employee Relations - Suggested solution
UNISON
Advantages of economies of scale

More members so therefore more influence
More resources to carry out promotional campaigns etc
Less groups for employers to negotiate with.
Can offer a bigger and better service.
Collective Bargaining - this is when one or more trade unions negotiate with
employers on behalf of employees within an organisation or plant regarding pay
and conditions.
Women are becoming more important in the workplace. Unions recognise the
need to fight for women on issues such as equal rights, equal pay, sex
discrimination and/or sexual harassment.
Generate more income which in turn will benefit members.

Unions know they are in good market position to promote additional
complementary services - members will trust their advice etc.
174

HUMAN RESOURCES
G9 - Employee Relations
Read over the case study on trade unions and carry out task which follows:
CASE STUDY
TRADE UNIONS
Tayside Engineering Co Ltd in Dundee employs 245 workers supplying products for a
larger company. The company operates a non-union policy at present, but there has been
a growing interest amongst the employees in joining a trade union. The employees are
considering joining a craft union such as Amalgamated Electrical Engineering Union
(AEEU).
The firm is a small family run business and the owners are unfamiliar with this new
situation regarding trade unions in the workplace.
TASK
As Human Resources Manager you have been asked to write a formal report on trade
unions for the Managing Director of Tayside Engineering Co Ltd. Your report should
provide answers to the following questions.
1
What is the purpose of a trade union.
What is the difference between a trade union and an employers association.
What would be the advantages of trade unions to:

employers;
employees.
What would be the role of the shop steward in the collective bargaining process.
What THREE types of industrial action might a trade union take.
Name TWO other trade unions which operate in the UK today.
Should management allow a trade union to represent the workers in Tayside

Engineering Co Ltd? Justify your answer.
175

HUMAN RESOURCES
G9 - Employee Relations - Suggested solution
Role of Trade Unions:

Represent its members in dealing with employers.
Obtaining satisfactory rates of pay and conditions for its members
Negotiating pay and conditions
Negotiating grievance procedures
Obtaining job security
The difference between Trade Unions and Employers Association

TRADE UNIONS
Representing workers interests
within a sector of industry.
EMPLOYERS ASSOCIATION
Representing views and interests
of the companies within a sector of
industry.
Financed by members subscription
Financed by members subscription.
Advantages of Trade Unions to employers

Easier to negotiate pay and conditions at work with one group rather than
individual workers - (communication better and less-time consuming).
Once agreement has been reached, unions will ensure it is applied.
Unions are prepared to take a more realistic long-term view.
Advantages of Trade Unions to employees
Advantage of being part of a large group for negotiation purposes (collective
bargaining)
Protection at work (unfair dismissal, victimisation etc)
Access to free legal assistance
Financial advice
The role of the shop steward - elected trade union official who represents workers
interests in an organisation.
176
Any THREE types of industrial action:

Strike
Overtime ban
Go-slow
Work-to-rule
Boycott
UNISON
TGWU
etc
Accept yes/no answer - with appropriate justification.
177

OPERATIONS
H1 - Elements of the operations function
A-Z OF OPERATIONS
A.. is a production system in which operations are controlled by computer.
B.. is a method of production where a series of items are
produced and periodically the type of product made is altered.
C.. is where a high percentage of machines are used in
production as opposed to people.
D .. involves breaking down the work of an organisation into a
series of tasks which allows specialisation of workers.
E are the benefits a business gains from growth.
F. . is a method of production where each worker does the same
job as the goods flow past on a conveyor belt.
G is the expansion of a business organisation.
H.. happens when a company takes over another which
produces similar goods at the same stage of production.
I.. is a list of items in stock.
J is a method of stock control which involves getting stocks to arrive just
before they are required for use in the production process.
K .. is a trademark which signifies quality.
L. . is the time between the order and delivery of goods.
M. .. is someone who is employed on the shop floor of an
organisation doing physical rather than mental work.
N. is the discussion of terms and conditions of employment by employers
and employees, with a view to reaching a mutually acceptable outcome.
O is the name given to the process of transforming inputs into finished
goods.
178
P.. is the rate of output of a worker or machine.

Q.. . is any technique for helping to maintain the desired standard
of a product.
R .. is the level of stock held when new orders will be placed.
S is the amount of time a product has before it starts to deteriorate.
T. is the gaining of control by one organisation over another.
U. . is the cost of one unit of production.
V.. . is the joining of two firms at different stages of
production.
W.. . is a set of techniques which analyse a given area of work to see
whether performance can be made more efficient.
Z.. .. is the objective of a policy of total quality. It is to have every single
item produced and delivered to the customer completely perfect.
179

OPERATIONS
H1 - Elements of the operations function - Suggested solution
A-Z OF OPERATIONS
Automation
Batch Production
Capital Intensive
Division of Labour
Economies of Scale
Flow Production
Growth
Horizontal Integration
Inventory
Just In Time
Kitemark
Lead Time
Manual Worker
Negotiation
Operations
Productivity
Quality Control
Re-order Quantity
Shelf Life
Takeover
Unit Cost
Vertical Integration
Work Study
Zero Defects
180

OPERATIONS
Automation
JIT
Benchmarking
Total Quality Management
Lead Time
Economies of Scale
2. Match the following terms with the correct definition, from the list given below.
STOCKS, JOB PRODUCTION, BATCH PRODUCTION, FLOW PRODUCTION
a) Making a single item, usually to according to a customers specification
b) The continuous production of a large quantity of items on a production line,
where each worker does the same job as the goods flow past on a conveyor belt.
c) Materials that a business holds either to be used in the production process or
finished goods waiting to be sent to customers.
d) Making a number of items and periodically altering the type of product being
made.
3. Why is it important for a business not to carry excess stocks?
4. What are the possible costs to a business of understocking?
5. Describe the advantages and disadvantages of Just In Time stock control.
6. In groups discuss the features a consumer might consider as important when deciding
to purchase the following products:
a pair of trainers
a television
a shampoo
a chocolate bar
181
7. Identify 2 firms in the following product or service areas that have a reputation for
supplying high quality goods or services:
food retailing
car production
clothing
hotel accommodation
audio equipment
8. Describe the advantages and disadvantages of Job, Batch and Flow production, stating
3 products which may be produced by each method. Set out your answer out in table
format as show below.
TYPE OF
PRODUCTION
JOB
ADVANTAGES
DISADVANTAGES
PRODUCTS
BATCH
FLOW
9. Describe the purpose and main features of Total Quality Management.

10. What are the costs of quality control?
182

OPERATIONS
1. Automation - a production system in which operations are controlled by a computer.

JIT - Just In Time is a production system where stocks are ordered to arrive just in
time for use in production.
Benchmarking - imitating the standard set by an established quality leader.
Total Quality Management - a method for a business to focus on quality by making an
important aim of every department and worker.
Lead Time - the time between the order and delivery of goods.
Economies of Scale - the fall in cost of production per unit as output increases.
2. Stocks - c
Job Production - a
Batch Production - d
Flow Production - b
3. It is important for businesses not to carry excess stock for the following reasons:
Storage, insurance, heating and lighting costs will be high if too much stock is
held.
Large stock levels will take up space that could be used more productively.
Stock costs money to hold. Money tied up in stock could be used to buy fixed
assets, for example.
Stock can deteriorate over time. If large stocks are held, certain items may go off
if they are not used in time.
4. Costs to a business of understocking:
The business may not be able to cope with an unexpected order if stocks are too
low. This will result in lost custom and sales.
If deliveries are delayed production may have to be stopped. This may result in
idle machinery which is very costly.
If low stocks are usually held it may mean that a firm has to place orders more
often . This may raise ordering costs and the firm may lose out on discounts for
bulk buying.
183
5. Advantages of JIT
Improves cash flow as large amounts of money is not tied up in stock.

Reduces waste.
Costs of stock holding, such as insurance, and lighting are reduced.
Links with suppliers are improved.
The motivation of workers is improved, they are given more responsibility.
Disadvantages of JIT
A lot of faith is placed in the reliability of suppliers.

Increased ordering costs.
Difficult to cope with an unexpected increase in demand.
Possibility of letting customers down and losing a good reputation.
8.
TYPE OF
PRODUCTION
JOB
ADVANTAGES
BATCH
FLOW
DISADVANTAGES
Quality of work
is high
Workers well
motivated
Allows customers
to order exactly
what they want
Allows workers
to specialise and
use specialist
equipment
Cost per unit
lower than job
production
Different batches
of different
products can be
made
Large numbers
can be produced
at low cost
The product
being produced
can be complex
as so many
machines and
workers can be
involved
Expensive
Workers tend to be
skilled workers
Work tends to be
very labour
intensive, not many
opportunities for
automation
Specialisation
means workers
doing repetitive jobs
Machinery has to be
reset and cleaned
between batches.
This can take time.
More goods have to
be stored, costing
money
PRODUCTS
Large amounts of
capital equipment
are required to start

with
Jobs on the
assembly line are
very monotonous
A breakdown of any
part of the assembly
line can lead to a
complete shut
down.
Designer
Wedding
Dress
Customised
Car
House
Extension
Rolls in a
bakers shop
Chocolate
bars
Burgers in
MacDonalds
Cars
Tins of
beans
Newspapers
184
9. The purpose of Total Quality Management is to prevent errors such as poor quality
products from happening. The features of TQM are:
Quality has to be the responsibility of every department and every worker from the
managing director to the office cleaner.
Teamwork. TQM stresses that teamwork is the most effective may of solving
problems.
Monitoring the process. TQM relies on monitoring the business process to help
find possible solutions.
The systems used have to be controlled. Quality can only guaranteed if materials,
tasks and equipment are used in the same way every time.
10.
The cost of setting up and designing a quality control system. This could include
the time involved in deciding upon a system and the training of the staff to use it.
The cost of monitoring the system. This could be the cost of a supervisor or the
cost of information technology.
The cost of improving the actual quality of products. It may involve the cost of
new machinery or the cost of training staff in new working practices.
185

OPERATIONS
H3 - Types of production
CASE STUDY
VACS LTD
Vacs Ltd is a company that manufactures a range of vacuum cleaners from one factory.
The table below shows a range of possible production for the Sucker vacuum cleaner.
Expected Yearly Sales
(000)
10
20
30
40
Cost Price
()
65
55
50
55
Selling Price
()
80
70
65
65
QUESTIONS
1. The company uses batch production at this factory . Explain this method of
production and state why it is likely to be the most appropriate for Vacs Ltd to use.
2. Use the information in the table to show how Vacs Ltd gains from economies of
scale.
3. Identify and explain two economies of scale from which Vacs Ltd might benefit.
4. The directors of Vacs Ltd have decided to make and sell 30,000 Sucker vacuum
cleaners. Explain why they have not decided to make and sell 40,000 units a year.
186

OPERATIONS
H3 - Types of production - Suggested solution
1. Batch production involves making a batch of products and periodically altering the
type of product being made. This is the most appropriate method of production for
Vacs Ltd because they produce a range of vacuum cleaners from one factory which
will involve producing a batch of one vacuum cleaner, altering the product slightly
and producing a batch of the new product.
2. The table suggests that as production increases from 10,000 to 20,000 units, the cost
per vacuum cleaner falls from 65 to 55 per cleaner. This trend continues to 30,000
units where the unit cost falls to 50.
3. Purchasing economies can occur when a firm increases its output. The company will
find that they receive better bulk buying discounts and more favourable credit terms
from their suppliers as they buy more.
Marketing economies can also occur when a firm increases its output. The company
needs to advertise and promote their vacuum cleaners. If they spread these costs
across a greater number of cleaners, they will reduce the unit cost of marketing.
4. The lowest unit cost exists at 30,000 units. Above this level of output the company
seems to be experiencing diseconomies of scale as units costs begin to rise.
Profit at 30,000 units = 30,000 x 15 (65-50) = 450,000
Profit at 40,000 units = 40,000 x 10 (65-55) = 400,000
The company makes a higher profit at an output of 30,000 units.
187

OPERATIONS
Read over the case study below and answer the questions which follow:
CASE STUDY
CHOCO PLC
Choco plc is a chocolate manufacturer based in Glasgow. They mass produce boxes of
chocolates using automated machinery. There is still, however, a high demand for
Chocos original line of hand-made luxury chocolates and because of this, production of
selection boxes stops every Friday, when the automated machinery is switched off and the
production staff concentrate on producing hand-made chocolates.
Below is a current list of items held in stock at Chocos factory.
Max
Stock
Level
Min
Stock
Level
Stock
In
Hand
800
400
450
400
400
400
400
400
200
200
200
200
200
150
200
250
220
300
600
300
350
8
8
8
4
4
4
3
5
9
40
20
20
20
10
10
15
25
12
Perishable Items
(Quantities in cartons)
Selection Boxes
Chocolate Coating
Fillings:
Strawberry
Coffee
Vanilla
Mint
Coconut
Hand-Made Luxury Chocolates
Chocolate Paste
Essences:
Rum
Cherry
Mint
Decorations:
Chocolate Hundreds & Thousands
Mint Sprigs
Edible Cherries
188
Non-perishable Items
Foil wrapping (sheets):
Pink
Gold
Green
Red
2000
2000
2000
2000
500
500
500
500
800
350
2200
1200
Boxes (000s)
900
300
250
Ribbons (000s)
900
300
400
Lining Trays (000s)
1800
600
2000
To Do
You are a consultant and have been brought in by the Managing Director of Choco plc to
help improve their current stock control system. Study the above stock figures and write a
report to cover the following areas:
an explanation of the terms maximum and minimum stock levels;

a detailed description of any problems that Choco plc might encounter as a result of
current stock levels;
recommendations on how to improve upon the current manual stock control system.
189

OPERATIONS
CASE STUDY CHOCO PLC

1. Maximum Stock Level - the level above which stocks should never rise.
Minimum Stock Level - the level below which stocks should never fall.
2. Current stock levels that are above maximum stock levels:
Mint essence
Mint Sprigs
Green foil wrapping sheets
Lining Trays
The problems that Choco might encounter because of the above overstocking:
Cash flow problems could occur because too much money is tied up in stock.
This money could be used to pay bills or suppliers or used to reduce an overdraft.
Perishable items - mint essence, mint sprigs - could deteriorate over time and go
off.
Current stock levels that are below minimum stock levels:
Strawberry filling
Rum essence
Gold foil wrapping sheets
Boxes
The problems that Choco might encounter because of the above understocking:
If an unexpected order comes in, Choco may not be able to cope with it. This will
result in lost sales and custom.
If an item completely runs out production may have too be stopped. This can be
very costly.
3. Choco Plc should consider changing to a computerised stock control system to ensure
that their stock levels always remain between the maximum and the minimum. A
computerised system will keep accurate and up-to-date records of what stock levels
are and can place an order automatically when the re-order level is reached. A
computerised stock system will generate large amounts of information to help the
managers at Choco make decisions about which lines are most popular, and they
should stock more of, and which lines should be discontinued because they are slow
sellers.
190

OPERATIONS
CASE STUDY
COMPUTERISED STOCK CONTROL AT SUPASAVE
EPOS (Electronic Point of Sale) is the stock control system that has been in use for about 3
years in all Supasave supermarkets. The EPOS system uses bar codes on all products and
scanners at the check-outs to keep accurate and up to date stock details of each Supasave store.
The installation of this system has proved advantageous; the financial performance of the
business has improved and there has been an increase in net profit margins.
The EPOS system helped to reduce costs and increase sales in the following ways:
There was no need for staff to label items when they stocked the shelves.
There was no need for staff to count stock as the system allowed automatic stock
replenishment.
There was no need to store as much stock in the storeroom as the shelves were mainly
filled directly from delivery lorries.
Mistakes made at the check-outs were eliminated thereby increasing sales.
The EPOS system generated a lot of information about the stock levels of individual stores and
assisted Supasave in making decisions about which products to stock. The information
highlighted products which were slow sellers, took up lots of shelf space, had high transport
costs and low gross profit margins. The system was able to provide information on the effect
of price changes. This led Supasave to adopt a variable pricing policy after they discovered
that customers have different tolerance levels to price increases in various products at different
times of the day. The information provided by EPOS helped Supasave to set prices which
avoided unsold stock at the end of each day.
QUESTIONS
1. Explain the term automatic stock replenishment as used in the passage.
2. Explain how EPOS improved stock control at Supasave.
3. In what way did Supasave use Just in Time stock control?
4. Why was there an elimination of mistakes at the check-outs with the introduction of the
EPOS system?
5. What are the advantages to any business in using a computerised stock control system?
191

OPERATIONS
CASE STUDY COMPUTERISED STOCK CONTROL AT SUPASAVE

1. Automatic stock replenishment means that as products are sold and scanned at the
check-out, a running balance of how many are left in stock is calculated automatically.
When this stock level reaches the re-order level, an order for more of that product to
be delivered happens automatically.
2. One of the major advantages of the Epos system is the amount of information that can
be generated about stock levels and stock lines. At any point in time the system can
tell decision makers how much there is in stock of a certain item and how much has
been sold so far that day. This information helps managers to decide what lines to
stock and which lines to discontinue. The EPOS system also means that manual stock
counts by staff are no longer required and the stock room of each Supasave store could
be smaller as shelves were filled directly from delivery lorries.
3. Supasave use Just in Time stock control as they no longer store large amounts of stock
in storerooms, they now fill the shelves directly from lorries. Goods are only ordered
if there is a need for the stock to be replenished and therefore eliminates the storage of
stock. This should create more space on the shop floor for products to be displayed.
4. Instead of each check-out operator keying in the price of each product sold, the price
of each product would be entered into the system centrally. The check-out operators
scan each item and the cost is automatically entered into the till therefore reducing the
number of mistakes made.
5.
Up to date stock levels can be found instantly.

Stock can be reordered automatically when the re-order level is reached.
Large amounts of information can be generated that is useful for decision making
purposes.
Less theft of stock should take place as it will be obvious from carrying out stock
checks if pilfering is taking place.
192

OPERATIONS
CASE STUDY
ROLLING STOCK AND RAILWAY CARRIAGE COMPANY
Rolling Stock and Railway Carriage Company is a small railway carriage manufacturing
company based in the West of Scotland. The company designs and makes commercial
railway carriages for both national and international clients. Each carriage takes around
15 days to complete using a production line process. Although the Railway Carriage
Company assemble the carriages, many of the parts are bought in from international
suppliers.
The Railway Carriage Company has just received an order from a client in Germany to
produce 40 railway carriages. The company is currently deciding on how to raise the 2
million required to purchase all the materials they need immediately. At the same time, a
call has come through to the Managing Director from a dissatisfied client who recently
purchased 5 railway carriages. The client has complained that one of the carriages was
unsafe and should never have been allowed out of the factory. The client demanded to
know what quality checks were made at the factory prior to despatch. Mr Baird, the
Managing Director, did not admit that few checks were made on the carriages as this
problem had never risen before.
QUESTIONS
1. Describe and explain a different method of production that would not involve such a
large initial outlay of capital, and explain how it could save The Railway Carriage
Company money.
2. Consider what quality system could be adopted to prevent a recurrence of the
problems that led to a carriage being returned. Describe the quality system, give
reasons for suggesting it and explain how it will enhance customer satisfaction.
193

OPERATIONS
ROLLING STOCK AND RAILWAY CARRIAGE COMPANY

1. The Railway Carriage Co could use Just in Time as a method of production. Just in
Time is a system where stocks are delivered only when they are needed by the
production process. Instead of purchasing all the materials they need for the 40
railway carriages for Germany immediately, they could have the stocks delivered as
they require them. This will mean the Railway Carriage Co. will not need to find 2
million immediately but will be able to spread their payments as they require the
stock. The company will save money by reducing stocks and on warehousing costs.
2. The Railway Carriage Company could introduce a Total Quality Management system
to ensure there would not be a recurrence of the problems that led to a railway
carriage being unsafe. A TQM system involves everyone in the organisation being
responsible for quality, from the managing director to the factory cleaner. It usually
involves working in teams, as this is the most effective way of solving problems. The
workers in each team should support and help one another to decide upon systems that
allow high quality products to be produced. The TQM system must be monitored and
controlled so that the same standard of products are guaranteed each time.
Customer satisfaction will be enhanced because TQM will mean that errors will be
prevented and quality of products will be high and consistent.
194

OPERATIONS
CASE STUDY
TOYOTA
The Japanese car manufacturer, Toyota, began production in 1937. Since then, it has
become one of major car makers in the world. Part of its success is because it has
developed new methods of production. These have revolutionised manufacturing industry
as a whole and not just the car industry.
The main principles behind Toyotas production methods are:
Kanban - this is a method of just in time production which was pioneered by Toyota. A
kanban is a printed card, usually with a bar code, that is attached to each item or box of
items that flow through the production process. The item or items are used in the next
stage of the production process. Once the box is empty or the item is used, the kanban is
taken to a central place. The bar code is read by a computer and this leads to a request
for replacement stock. For outside suppliers, this is effectively a request to purchase
goods. The kanban system means that stock levels are kept low and parts only get to the
production line when they are needed. Effectively, this system means that operators are
responsible for ordering parts and for managing the levels of stock.
Levelled production - for the system to run smoothly, it is essential that there should not
be excessive demands for particular items of stock. To solve this problem, Toyota
operate a system of levelled production. This means that different vehicle specifications
are distributed evenly on the production line throughout a day.
Takt time - this is the amount of time that employees have to complete their tasks on the
production line. Each activity is divided into standard tasks but the time allowed for each
can vary from day to day. It is determined by customer demand. Thus, if a plant had
orders for 400 cars a day and worked two shifts of 460 minutes each, there would be 920
minutes to produce the 400 cars. The takt time would be 2.3 minutes (920/400) i.e. each
standard task would have to be completed in this time. This system requires a very
flexible labour force.
Jidoka - this involves stopping the production line whenever a fault occurs. All machines
on the line have electronic sensors which enable them to spot faults and stop the line. If
workers notice a fault, they can pull an overhead cable to attract the attention of their team
leader. This, again, gives responsibility to the workers on the line. In this way, problems
are solved as they occur and do not have to be identified and corrected at a later stage.
195
Kaizen - this means continuously improving the way that work is done. Every worker at
Toyota is encouraged to make suggestions for improvement. Everyone is a member of a
quality circle. Quality circles are small groups of workers in an area and they meet to
discuss problems and find solutions.
Exercise
From the information above, discuss and note how Toyota illustrates the following
elements of the operations function:
purchasing
the use of labour
the volume of production
automation
stock control
quality control
196

OPERATIONS
CASE STUDY TOYOTA - SOLUTION

The above gives some possible responses to the discussion questions but also notes some
follow-up issues which could be raised in response to what students say.
purchasing - Toyata only purchase stock when required (kanban). Students could go
on to discuss the type of arrangements that the company may have with suppliers e.g.
suppliers must respond quickly, there must be agreed specifications for parts,
suppliers may have to be close to the Toyota plant to make sure they can deliver
quickly
the use of labour - labour must be flexible (e.g. takt time) but also must act
responsibly e.g. in ordering stock and managing stock levels through the kanban
system; spotting defects (jikoda), quality circles. Worker involvement may help
maintain motivation among the work force. Students could be asked to consider how
they would like this system.
volume of production - this is determined by customer demand, which drives the

system (levelled production and kanban). Students could go on to link this to product
and market orientation.
automation - this seems to be very sophisticated e.g. machines with sensors to stop
the line (jikoda). The founder of Toyota invented an automatic loom which stopped
immediately whenever a thread snapped and this is where the idea came from.
stock control - a just-in-time system based on the kanban. This depends on demand
also. Students could be asked to think about the effects on suppliers and others e.g. in
Japan (and elsewhere), traffic congestion is sometimes caused by lorries driving
around outside factories so that they will be ready to deliver materials when they are
required.
quality control - this involves workers (e.g. kaizen, quality circles, jikoda) and the
whole system is based on identifying and correcting faults as quickly as possible. It is
part of the philosophy of the company. Students might be encouraged to think about
how quality is managed in their school or College e.g. what input do they have?
197

OPERATIONS
PRODUCTION GAME
Teachers Notes
The purpose of this game is for 3 groups of students to make as many cars as possible
within an allocated time each using a different method of production. The students must
not be told which method of production they are using - they should be able to suggest
this by the end of the game. A member of each group will keep going on strike, this
should assist in highlighting the advantages and disadvantages of each method of
production.
The class should be split into 3 groups as follows:
Group 1 (flow) - 7 people
Group 2 (job) - rest of class
Group 3 (batch) - 7 people
One person in each group should be nominated to be the production controller.
Materials (glue, scissors, colouring pens, copies of cars) and instructions should be given
out and the game explained.
The Game
Following the instructions given, each group has to make as many cars as possible within
an allocated time (approx. 30-40 minutes).
The quality of the cars is very important, cars will be rejected if they are not up to
standard (no dotted lines should show).
Explain the job of the production controller. His/her role is to supervise the production
team, check the quality of his/her teams products and oversee the whole production
process. They must complete the questionnaire before the end of the game and be ready
to discuss their observations with their team and the rest of the class.
Each team should be given 5 minutes to organise their production team and make sure
that they know what they are doing (a quick explanation of how to make the cars by the
teacher would be helpful). It must be made clear to groups 1 and 3 that the jobs must be
carried out in order and each job must be completed before the next person can begin
their job.
198
Once the teams have begun production, the teacher decides when a member of each team
goes on strike and for how long.
Once the allocated time is up, the team with the most completed cars is the winner remember to check for quality!
After the game is completed there must be time for discussion to ascertain which group
was using which method of production, what the characteristics of each method were,
what effect the strike had on production and what the advantages and disadvantages of
each method were.
199
Group 1 Instructions
In your group you are to produce a car. Divide up the following jobs:
a) Cut rough parts
b) Cut out neatly
c) Glue roof tabs to underside of body panel
Glue door onto body panel
d) Glue wheel arches and chassis onto body panel
e) Glue wheels on to completed car body
f) Colour the car red
The jobs must be carried out in order. Each person must finish an item before the next
person can start their job. Those who are doing job (d) keep going on strike. They want a
different glue to use. What happens to production?
Your group is to produce cars, but you are to do all the jobs. Each person will be given
individual instructions (take one piece of paper from the instructions envelope), once
these have been followed, a new set of instructions should be selected. One of your group
goes on strike. He/she has not got the same paper and it is more difficult to cut out. What
happens to production?
In your group you are to produce a car. Divide up the following jobs:
a) Cut rough parts
b) Cut out neatly
c) Glue roof tabs to underside of body panel
Glue door onto body panel
d) Glue wheel arches and chassis onto body panel
e) Glue wheels on to completed car body
f) Colour the cars as follows: first 5 red, second 5 blue, third 5 green, forth 5 yellow,
fifth 5 black, sixth 5 purple, seventh 5 orange.
The jobs must be carried out in order. Each person must produce 5 items before the next
person can start their job. Those who are doing job (d) keep going on strike. They want
different glue to use. What happens to production?
200
You are the Production Controller. Your role is to supervise your production team,
check the quality of your teams products and oversee the whole production process. You
must complete the following questionnaire before the end of the game, noting your
observations. At the end of the game you should be ready to discuss your observations
with your team and the rest of the class.
1. How is the production process organised?
2. What happens to production when a strike occurs?
3. What is the standard of product quality from this team?
4. What method of production do you think this is?
201
The following instructions should be cut up, put in an envelope and given to group 2 - job
production.
You must produce 3 green cars which have

red doors
You must produce 4 blue cars that have red

doors
You must produce 4 blue cars
You must produce 4 plain cars
You must produce 5 black cars
You must produce 3 green cars
You must produce 4 red cars
You must produce 5 yellow cars
You must produce 5 red cars with Dunlop

Speed tyres
You must produce 4 blue cars with

Dunlop Speed tyres
You must produce 5 green cars with

Dunlop Speed tyres
You must produce one black car with

Dunlop Speed tyres
You must produce 5 black cars with Turbo

Speed written in red on the door
You must produce 5 green cars with

Turbo Speed written in black on the door
You must produce 4 red cars with Turbo

Speed written in blue on the door
You must produce 2 blue cars with Turbo

Speed written in red on the door
You must produce 4 green cars with GTI

written in red on the door
You must produce 3 yellow cars with

GTI written in blue on the door
202
CUTTING DIRECTIONS
Assembly instructions (sequence)
1st glue roof tab to underside of body panel
2nd glue door onto body panel
3rd glue wheel arches and chassis onto body panel
4th glue wheels onto completed car body
Painting Directions
Colour all main body parts so that no white paper shows.
203

INFORMATION TECHNOLOGY IN BUSINESS
I1 - Types of IT
AN A-Z OF INFORMATION TECHNOLOGY

A. means workers no longer have to operate machines.

B .. of new technology include; increased output, increased productivity, better
quality and more variety.
C .. .. allows manufacturers to design a product on computer
screens.
D . . a software program which allows a combination of text and
pictures to be produced.
E .. . - this type of correspondence is used in most offices today.
F .. the process of transferring text or graphics electronically 24 hours a day anywhere
in the world.
G . is an acronym coined to imply the quality of the output depends on the quality
of the input.
H is printed copy from data stored on a computer.
I .. is the combination of the technology of the computer with
that of communication.
J is the procedure used in word processing to line up the right hand
margin so that all lines are of equal type.
K . .. is the new term for employees involved in the communication of
information.
L .. . . is a configuration of personal computers linked together.
M . is a device that allows computers and telephones to communicate.
N .. is the means of linking people together by electronic means.
O- .. is direct access to information.
204
P .. .. is a microcomputer used by an individual.

Q . is the term used as a way of measuring how good or bad the output is.
R is a machine which can be programmed and controlled by computers to
function like workers.
S . is a software package that allows rapid calculation to be made.
T is the use of telecommunications whereby people work from home.
U . - .. computer packages are developed to ensure the user achieves success.
V .. is electronic communication involving audio and visual.
W . is the location of computer/word processing operator.
Y . is a well-known search engine on the Internet.
Z . PC file compression format, can be used to reduce the file size for storage on floppy
disc.
205

I1 - Types of IT - Suggested solution
AN A-Z OF INFORMATION TECHNOLOGY
A
B
C
D
E
F
G
out)
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
Y
Z
Automation
Benefits
Computer Aided Design
Desktop publishing
Electronic Mail
Fax
GIGO (garbage in/garbage
Hard copy
Information technology
Justification
Knowledge Worker
Local Area Networks
Modem
Networking
On-line
Personal Computer
Quality
Robot
Spreadsheet
Teleworking
User-friendly
Videoconferencing
Workstation
Yahoo
Zip
206

PUPIL ACTIVITIES
I2 - Types of IT
The following include examples of types of IT and their uses. They are not in the correct
order. Match the description to the correct facility.
Video-conferencing
Company needs to transfer 100,000 pages of text,

which can be accessed very quickly and save user time
searching through volumes of files.
E-mail
System used by company to receive messages when

office is closed.
Fax
Software package used for storing employee and

customers records. Can be easily updated and
searched.
Telephone answering machine
New interactive training programme available for all

employees to enable them to learn a new language at
their own pace.
Desk-top publishing
Software package used for calculating employees

salaries and for carrying out calculations based on
future plans.
Database
Software package which allows manipulation of text

and graphics in order to create newsletters and
advertising material.
Spreadsheet package
Company needs to transmit information containing

text and complicated graphs.
Multi-media package
Team leader wants to transmit new shift rota to

employees who have electronic mailboxes.
CD ROM
Senior management from three main branches want to

hold a face-to-face meeting but not have to travel.
207

PUPIL ACTIVITIES
I2 - Types of IT - Suggested solution
Video-conferencing
Senior management from three main branches want to

hold a face-to-face meeting but not have to travel.
E-mail
Team leader wants to transmit new shift rota to

employees who have electronic mailboxes.
Fax
Company needs to transmit information containing

text and complicated graphs.
Database
Software package used for storing employee and

customers records. Can be easily updated and
searched.
Telephone answering machine
System used by company to receive messages when

office is closed.
Desk-top publishing
Software package which allows manipulation of text

and graphics in order to create newsletters and
advertising material.
Spreadsheet package
Software package used for calculating employees

salaries and for carrying out calculations based on
future plans.
Multi-media package
New interactive training programme available for all

employees to enable them to learn a new language at
their own pace.
CD ROM
Company needs to transfer 100,000 pages of text,

which can be accessed very quickly and save user time
searching through volumes of files.
208

PUPIL ACTIVITIES
I3 - Uses of IT
QUESTIONS
1
Suggest reasons why all managers now view information technology as an

invaluable tool in decision-making, planning and control.
How can small businesses benefit from using information technology?
Briefly explain how each of the following departments in an organisation can

benefit from IT:
(a) finance
(b) marketing
(c) human resources
How can IT help an organisation beat its competition?
209

I3 - Uses of IT - Suggested solution
Decision making - Computers provide better quality information, faster, more

reliable, and allows more informed decisions to be made.
Planning - Computers allow what if scenarios, modelling, budgets, forecasting
etc.
Control - Computers ensure budgets are generated when required. It allows
information to be provided to suit end user. Cashflows. Debtor control and
creditor control. Stock control.
BENEFITS TO SMALL BUSINESSES

Use of PCs and appropriate software allows:
Spreadsheets for accounting purposes (ledger, stock control and payroll),
budgeting and cashflow.
Databases for record keeping (customers, suppliers and staff)
Desk-top publishing will allow owner to create information sheets, notices and
publicity material to a high quality.
The cost savings from using IT will allow small business to remain competitive.
Savings will include labour and outside agencies.
BENEFITS TO FINANCE
Computerised accounts, spreadsheets, billing, debtor and creditor control, payroll.
Cashflow analysis and what if projections.
BENEFITS TO MARKETING
Research and design, desk-top publishing, video-conferencing, e-mail, customer
databases and Internet.
HUMAN RESOURCES
Staff databases, DTP (staff notices and handbooks), e-mail, Internet (vacancies),
CD-ROM (multi-media) training packages.
210
IT allows firms to stay ahead. Up-to-date IT means quicker access to information

either internal (sales figures etc) or external (market prices, exchange rates).
Shared information (wide area networks and local area networks) allow
information to be dispersed quicker, easier and cheaper.
211

I4 - Uses of IT
Read over the following case study. Fill in the missing blanks with appropriate words
from the wordbank below:
CASE STUDY
M & M is a small market research company. It cannot afford to hire additional staff as
this would increase their already high overheads. A decision has been made by the
company to link up with a specialist . agency. The DP agency uses
. principles; this helps keep overheads to a minimum.
.. are installed in the homes of skilled .. .. . The
operators use .. as a means of communicating and all have a connection to the
for facilities such as downloading up-to-date information, newsgroups and email.
It its day-to-day running the researchers use . .. . for all

reports, .. for recording detailed information on companies and . for
sales forecasting and graphs. The information from databases, spreadsheets and graphs
are .. into word processed reports. Some reports are updated monthly, and as
the figures on the spreadsheets are updated, the graphs in the report are automatically
redrawn.
212
presentations are a speciality of M & M.

Figures from the spreadsheets are exported into a specialist ...package from
which slides are automatically prepared at a fraction of the cost a graphics artist would
charge. In fact M & M use a desk-top publishing package for all promotional materials.
WORDBANK
cottage industry, data preparation operators, integrated, business presentation,
data processing, Desk top published, Personal computers, Internet, databases
FAX, word processing packages, spreadsheets.
213

CASE STUDY
M & M is a small market research company. It cannot afford to hire additional staff as
this would increase their already high overheads. A decision has been made by the
company to link up with a specialist data processing agency. The DP agency uses
cottage industry principles; this helps keep overheads to a minimum. Personal
computers are installed in the homes of skilled data preparation operators. The
operators use Internet as a means of communicating and all have a connection to the
FAX for facilities such as downloading up-to-date information, newsgroups and e-mail.
It its day-to-day running the researchers use word processing packages for all reports,
databases for recording detailed information on companies and spreadsheets for sales
forecasting and graphs. The information from databases, spreadsheets and graphs are
integrated into word processed reports. Some reports are updated monthly, and as the
figures on the spreadsheets are updated, the graphs in the report are automatically
redrawn.
Desk top published presentations are a speciality of M & M. Figures from the
spreadsheets are exported into a specialist business presentationpackage from which
slides are automatically prepared at a fraction of the cost a graphics artist would charge.
In fact M & M use a desk-top publishing package for all promotional materials.
214

I5 - Uses of IT
TASK 1
1(a)
Compile a list of all the subjects studied by your friends. Create a database
containing the following fields:
Field 1 Surname
Field 2 First name
Field 3 Gender
Field 4 Subject/s studied
Save the completed database.
1(b)
Carry out the following searches on the database:

(i) total number of female students
(ii) subject of your choice
(iii) the subject of your choice and male students
Print out copies of your searches.
TASK 2
Explain how each of the following people might use Information Technology in their
jobs:
checkout operator in a supermarket

an estate agent
a nurse
an RAF flying instructor
an architect
an author of historical novels
a design engineer
a secretary in school/college office
a librarian
TASK 3
Every day we all come into contact with some form of IT (information technology).
Make a list of at least five applications you have used in the last few days, and what you
used them for.
Report back to the class with your list.
215

TASK 2
(a) computerised till (bar-code reader, stock update)
(b) Client database, virtual estate agency
(c) Monitoring equipment (heart etc), computerised patient records
(d) Virtual training systems, computerised flying controls
(e) CAD packages, client database, word processing package, DTP Package
(f) Word processing package, Internet access, CD-ROM
(g) CAD package, word processing package, Spreadsheet package, DTP package
(h) Word processing, spreadsheet package, database package and DTP package
(i) Internet, Word processing package, database package, CD-ROMs
216

I6 - Uses of IT
Read the case study below and complete the tasks which follow.
CASE STUDY
EAGLE PRINT
Eagle Print is a printing business which specialises in printed stationery such as headed
paper, invoices and business cards for local firms. Every 2 or 3 months, Eagle Print run
training sessions for staff who need them in the following areas: induction, print room,
word processing, spreadsheets, and Pro 5 (the accounting package used at Eagle Print).
All staff should be trained in induction and word processing, all production staff should
be trained in the print room, and all staff who work in the finance department should be
trained in spreadsheets and Pro 5.
The following is an extract from Eagle Prints staff records:
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
McLean
David
13 Kirkwood Drive
04/04/65
Finance
Accounts Assistant
Word Processing,
Pro 5, Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Bruce
Steven
18 Fairhill Drive
16/01/58
Purchasing
Buyer
Word Processing,
Spreadsheets,
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Davidson
Fiona
3 Crathie Place
21/12/66
Production
Production Assistant
Print Room,
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Turnbull
Mark
9 Leven Street
14/02/55
Personnel
Personnel Manager
Word Processing,
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Craig
Susan
21/5 Poplar Drive
05/01/77
Finance
Clerk
Spreadsheets,
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Walker
Claire
54 Craig Park
26/09/70
Personnel
Personnel Assistant
Word Processing,
Induction
217
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Lamond
Edward
10 Glasgow Road
25/07/65
Production
Production Manager
Print Room,
Spreadsheets,
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Findlay
Pamela
36 Abbey Road
05/10/54
Personnel
Admin Assistant
Word Processing,
Spreadsheets,
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Grey
Linda
12 Blackford Road
12/08/60
Sales
Sales Executive
Induction,
Word Processing
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Kerr
Ross
21 Leith Street
30/11/78
Production
Printer
Induction,
Print Room
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Wilson
Stuart
78 Main Street
15/06/50
Purchasing
Assistant Buyer
Induction
SURNAME:
FIRST NAME:
ADDRESS:
DATE OF BIRTH:
DEPARTMENT:
POSITION:
TRAINING:
Robinson
Alison
56 Rowan Road
12/12/68
Marketing
Marketing Manager
Induction,
Word Processing
TO DO
1. Create a database on a suitable software package and enter the 12 staff records for
Eagle Print. Save your file. Make sure you create the correct type of field, either text
or date!!
2. Organise your database so that it runs in alphabetical order of surnames.
3. Print out the SURNAME, FIRST NAME and ADDRESS fields only.
4. Make the following changes to your database:
Alison Robinson has got married, her new surname is now Ross.
Edward Lamond has moved, his new address is now 25 Queen Street.
Susan Craig has left, delete her record.
Tony Thatcher is the new Clerk in the Finance department, he lives at 1 Bridge
Street, his date of birth is 16/05/80, he has not yet received any training. Add this
record to your database.
5. Save your updated database.

218
6. Print out SURNAME, FIRST NAME, DEPARTMENT and TRAINING fields

only.
7. From the information printed out in question 6, produce a training schedule for the
staff of Eagle Print for the next training session due to take place next month.
219

CASE STUDY EAGLE PRINT

7.
Training schedule for Eagle Print for next training session:

Employee
David McLean
Fiona Davidson
Edward Lamond
Ross Kerr
Stuart Wilson
Tony Thatcher
Training Required
Spreadsheet
Word Processing
Word Processing
Word Processing
Word Processing
Induction, Pro 5, Spreadsheet, Word Processing
220

I7 - Uses of IT
Read the case study below and complete the tasks which follow.
CASE STUDY
DIRECT INSURANCE
Direct Insurance is a well established insurance company based in Glasgow. Its
customers are widespread across the UK. The company specialises in life insurance (lfe)
but also has departments dealing with household insurance (hse), buildings insurance
(bld), travel insurance (trv) and car insurance (car). Due to the way in which the business
is run (all business is conducted over the telephone), Direct Insurance rely mainly on
advertising their services through mailshots to potential and existing customers.
Below is an extract from their customer database (all customers live in the small town of
Allsford):
SURNAME
FIRST
NAME
ADDRESS
Ferguson
Peter
51 Boswell Gardens
Cochrane
Robertson
Amy
Ian
13 Telford Drive
45 Howard Place
Laird
Molly
10/5 Lady Road
Wallace
Frank
5 Church Street
Woods
Mathieson
Emily
John
26B Queens Gardens

187 Colinton Road
Brogan
Michael
6 Cherry Tree Court
Smith
Duncan
Jones
Rosemary 21 Hamilton Avenue

Ron
9 Atholl Place
Richard
12 Burgess Hill
Cameron
Kenneth
145 Uphall Road
Anderson
Shaw
Andrew
George
68 Station Crescent
10/7 Slateford Road
POLICY
REFERENCE
NUMBER
hse 45120
bld 54522
trv 14552
car 22560
lfe 77441
lfe 22360
car 88950
hse 55210
bld 66230
car 77851
trv 66301
lfe 13320
hse 22140
bld 22695
car 44781
lfe 77410
lfe 11230
lfe 44120
car 11452
hse 44785
bld 32560
lfe 88952
lfe 45621
trv 23651
MAILSHOTS
SENT
trv, car
lfe, car
hse, bld
trv, hse, bld
car
lfe, hse, bld
car
lfe, trv
trv, car
hse, bld
trv
car
car, hse, bld
car
221
TO DO
1. Create a database on a suitable software package and enter the 14 customer records for
Direct Insurance. Save your file.
2. Organise your database so that it runs in alphabetical order of surnames.
3. Print out the SURNAME, FIRST NAME and POLICY REFERENCE NUMBER
fields only.
4. Make the following changes to your database:
Rosemary Smith has changed her name to Rosemary Brown.

George Shaw has cancelled his policies - delete his record.
Frank Wallace has taken out a car insurance policy reference number car 29850.
5. Save your updated database.

6. Print out all fields and all records.
7. From the information contained in your updated database draw up a list of mailshots
that each customer could be sent in next months advertising campaign. Only one
mailshot is sent per customer at any one time.
222

CASE STUDY DIRECT INSURANCE

7.
Possible mailshots to be sent out to existing customers in next months advertising

campaign:
Customer
Mailshot
Peter Ferguson
Amy Cochrane
Ian Robertson
Frank Wallace
Emily Woods
John Mathieson
Rosemary Brown
Ron Duncan
Richard Jones
Kenneth Cameron
Andrew Anderson
Life
Household or buildings
Travel
Travel or life
Travel
Car or travel
Travel or life
Travel
223

PUPIL ACTIVITIES
I8 - Uses of IT
Read over the following case study then carry out task which follows:
CASE STUDY
A local company employed a section of 5 operators to carry out its word processing tasks.
Each operator had a stand-alone personal computer running a word processing system.
Hard copies from the machines were obtained from cheap printers supplied for 4 of the
computers. A good quality laser printer was attached to the computer operated by the
fifth operator. This proved to be a problem. The operators workflow was constantly
disrupted because the other operators frequently required high-quality printouts and would
bring their floppy disks to her work station.
Other problems included:
Operators were losing data

Individual files were being lost
Files were being corrupted during copying
Operators were accessing the same file, making changes and not telling the others
Operators were forgetting to make back-up copies of all files
TASK
Advise the company how new developments in information technology can solve the
problem:
224

PUPIL ACTIVITIES
The company should install a LOCAL AREA NETWORK. All data files could be
created and saved onto a common hard disk on a file server.
An added advantage of the network would be that operators and managers can pass
messages to each other.
Operators can access the same customer file stored on the file server.
To avoid losing data all files could be set up to back-up automatically.
A back-up copy of the hard disk should be held.
Output could be directed remotely to the high quality laser printer, which could be sited in
a place accessible to everyone.
225

I9 - Uses of IT / Benefits and Costs of IT
TASK 1
Whole Class Discussion
Discuss how the role of IT in business has changed or is changing. Include in your
discussion the impact of IT on business, education and society.
Produce a summary of your discussion. Have someone in the group word process it and
give everyone a copy.
TASK 2
Investigation
In groups of 3 or 4, contact a local organisation and find out as much as you can about
how they make use of information technology. Before you start, make sure that each
group is going to look at a different type of organisation.
You could ask questions like:
what IT systems they have

what do they use IT for e.g. keeping records of customers, monitoring production
trends, measuring stocks, keeping financial records, dealing with customers (e.g. by
bringing relevant data on to a screen), communication (e.g. e-mail)
what information do they get from their IT system e.g. on output, sales
what changes have occurred over the last few years as a result of using IT
what benefits IT has brought to the company.
Report your findings back to the group. You could word process them. This means that
everyone can get a copy of the work of each group.
You could discuss the differences between the organisations studied by each group.
226
TASK 3
Visiting Speaker
Invite someone from a local organsiation to come to speak to your class about information
technology. Before they come, think of a list of things you would like them to talk about.
They could include topics such as:
what forms of IT does their organsiation use

what do they use IT for
what are the benefits of it for their organsiation
what are the costs of using IT in their organsiation
227

I10 - Benefits and Costs of Information Technology
Read the case study and then answer the questions which follow:
MINI-CASE STUDY
Congestion on UK roads, particularly in city centres has led to research being carried out
by the Department of Transport into how to discourage drivers from bringing their cars
into the city centres. One of the most recent ideas put forward involves electronic road
charging. This involves vehicles being fitted with meters. These would be activated by
microwave signals emitted by roadside beacons. The meter would deduct payments from
a rechargeable smart card inserted into the device by the driver at the beginning of the
journey. Tariffs have not been decided. Any vehicle entering the zone without a meter
would be photographed. The driver would subsequently be traced and fined.
The government considers there are many advantages of operating this kind of system in
busy cities such as Edinburgh and Glasgow.
QUESTIONS
1
Do you think the introduction of the new road charging will affect the motorists
decision to drive into Edinburgh or Glasgow? Justify your answer.
Suggest benefits that might be gained from the system for:

(a) the motorist
(b) the residents
(c) the government.
Suggest problems that might occur for:

(a) the motorist
(b) the government.
Should there be exemptions from the system? Justify your answer.
228

PUPIL ACTIVITIES
I10 - Benefits and Costs of Information Technology - Suggested solution
Yes - it will probably be seen as inconvenient. The cost of driving in Edinburgh or

Glasgow will also be considered too expensive, and fines for defaulters will also
likely be very hefty.
There will be less congestion. The true cost of driving cars in the city will be
better appreciated. More people will consider public transport as an alternative.
The high cost of maintaining such a system. The administration, fitting of the
devices, the time and cost of pursuing drivers who did not pay.
Disabled drivers and taxi drivers. Disabled workers may have to park near their
place of work in the city centre. They might have difficulties with public
transport. Taxi drivers depend on being in the city centre for the tourists, they
could also be an additional internal transport system within the city boundaries.
229
230
Appendix 1
Summary of Course Content and Relevant Activities
This appendix gives the main headings in the course content and indicate which activities
relate to each part of it. For ease of presentation, each main area of course content has
been given separately It is intended as a guide to assist in planning work for the course
and some activities could be classified in different ways.
Business in contemporary society
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
The business
cycle
Sectors of
activity
Types of business
organisation
Methods of
obtaining finance
Objectives
Role of the
entrepreneur
Stakeholders
Changes in
business
environment
231
A12
A13
A14
A15
A16
A17
A18
A19
A20
A21
A22
The business
cycle
Sectors of activity
Types of business
organisation
Methods of
obtaining finance
Objectives
Role of the
entrepreneur
Stakeholders
Changes in
business
environment
B1
Sources of information
B2
B3
B4
Uses of information in business
Decision making
Types of decision
C1
C2
C3
C4
C5
C6
C7
232
D1
D2
D3
D4
D5
D6
Factors affecting internal

structure of organisations
Marketing
The marketing
concept
The marketing mix
E1
E2
E3
E4
E5
E6
Market research
E7
E8
E9

function
Financial information
F1
F2
F3
F4
F5
F6
Uses of financial
information
Users of financial
information
Human resources
Elements of human
resource management
G1
G2
G3
G4
G5
Employee relations
G6
G7
G8
G9
233
Operations
Elements of
operations function
H1
Types of production
Quality
H2
H3
H4
H5
H6
H7
H8
Types of IT
Uses of IT
I1
I2
I3
I4
I5
I6
I7
I8
I9
Benefits and costs of IT
I10
234

3911busi2 tcm4-124375

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

3911busi2 tcm4-124375

Încărcat de

Drepturi de autor:

Formate disponibile

%XVLQHVV0DQDJHPHQW

BUSINESS MANAGEMENT - INTERMEDIATE 2

Business in contemporary society

Information Technology in Business

Business Management Support Materials: Student Activities (Int 2)

Business Management Support Materials: Student Activities (Int 2)

BUSINESS MANAGEMENT - INTERMEDIATE 2

Group activities - these are exercises designed to be carried out by groups of

The above classifications are intended as a guide to the type of activity.

Business Management Support Materials: Student Activities (Int 2)

could be used as a way of managing different learning sets if a teaching group

Business Management Support Materials: Student Activities (Int 2)

Questions and exercise

Questions and exercises

Business Management Support Materials: Student Activities (Int 2)

Exercise and case study

Business Decision Areas (Int 2)

Case study and questions

Business Management Support Materials: Student Activities (Int 2)

Uses of financial information/Users of

Questions and exercises

A-Z of Information Technology

Business Management Support Materials: Student Activities (Int 2)

Business Management Support Materials: Student Activities (Int 2)

BUSINESS ENTERPRISE (INT 2)

Briefly explain what is meant by each of the following terms:

Business Management Support Materials: Student Activities (Int 2)

Re-write the following passage completing the blanks. A WORDBANK has

In groups of 3 or 4, collect magazines and newspaper cuttings to create a poster

Produce a report to show whether the majority of organisations provide

Business Management Support Materials: Student Activities (Int 2)

BUSINESS ENTERPRISE (INT 2)

Wealth Creation - the process of an economy generating value added and

The success of any business activity depends on certain factors. To be

Business Management Support Materials: Student Activities (Int 2)

BUSINESS ENTERPRISE (INT 2)

Classify the following activities under the headings - PRIMARY,

Business Management Support Materials: Student Activities (Int 2)

BUSINESS ENTERPRISE (INT 2)

Suitable examples include

Airline company - eg British Airways, TERTIARY

Business Management Support Materials: Student Activities (Int 2)

BUSINESS ENTERPRISE (INT 2)

There has been a continuing increase in the number of self-employed people in

State 3 advantages and 3 disadvantages of the sole trader as a form of business

Scottish Gas is a private sector business.

Give examples of goods or services provided and funded by:

Describe the features a charity.

Business Management Support Materials: Student Activities (Int 2)

(a) Give examples of voluntary organisations.

the aims of the organisation;

Business Management Support Materials: Student Activities (Int 2)

BUSINESS ENTERPRISE (INT 2)

SOLE TRADER - any three

Having unlimited liability

It has to compete in the market place against similar companies. It is not

Business Management Support Materials: Student Activities (Int 2)

5(a) Goods/services provided by Central government:

Goods/services provided by Local Authority

To ensure an adequate service is available to all customers

Business Management Support Materials: Student Activities (Int 2)

Loss of benefit to community

Better equipment and