Caie A2 Business 9609 Theory v1

ZNOTES.
ORG
UPDATED TO 2020-22 SYLLABUS
CAIE A2 LEVEL
BUSINESS (9609)
SUMMARIZED NOTES ON THE SYLLABUS
CAIE A2 LEVEL BUSINESS (9609)
Voluntary export restrictions – an export country

agreeing to limit the quantity of exports sold to another
1. Business Structure country
1.1. Local, National and International 1.4. Free trade and Globalisation
businesses Free trade is when countries face no trade barriers while
exchanging goods and services
Local businesses operate in a small part of the country.
Globalisation is the increase in movement of labour,
They do not have expansion objectives
capital and goods and services between countries
National businesses have branches throughout the
Trade blocs and trade organisations help encourage
country but they do not operate in other countries
globalisation
International/multinational businesses operate in more
World trade organisation (WTO) – countries committed to
than one country
reduce trade restrictions
Free-trade blocs – groups of countries who trade without
1.2. International Trade restrictions. Ex. NAFTA, ASEAN, EU
Businesses Benefits of free trade
Pros Cons Wider choice of goods and services

Economies of scale Diseconomies of scale Wider choice of raw materials
Helps developing countries increase the rate of
Access to better information Higher transport costs
industrialisation
Spreads risks Higher competition and risk Low prices, improved quality
Access to wider market Trade barriers Encourages specialisation
Cultural and language Economies of scale
differences Improved living standards
Using agents increases prices
Supply chain issues 1.5. Multinational businesses
Country A business which produces in many countries
Pros Cons
Why become a multinational?
Improved political and social Avoid tariffs
Loss of output and jobs
links Access to cheaper raw materials
Decline in domestic Lower labour costs
Higher GDP, employment
industries due to increased Lower transport costs
and living standards
imports Closer to the market
High competition making it Better control
difficult for new businesses Access to grants and subsidies
Increased chances of Economies of scale
dumping Cheaper rent and site costs
If value of imports exceeds

Problems for multinationals
exports, there’s loss of
foreign exchange Cultural differences
Overdependence on other Legal regulations
countries Coordination & communication problems
Diseconomies of scale
Differences in skill levels of employees, increasing
1.3. Protectionism
training costs
Process of protecting domestic firms from foreign
competition with the use of trade barriers 1.6. Host Country
Tariffs – tax on imports
Quotas – limit on the quantity of imports Benefits Drawbacks
Embargoes – ban of particular imports
WWW.ZNOTES.ORG
Benefits Drawbacks 2.2. Synergy and integration

May not reinvest profits in
Economic growth
the country Synergy means that the whole is greater than sum of
Higher employment Exploitation of labour parts
The new, larger business will be more successful than the
Exploitation of natural
Higher tax revenue two, formerly separate, businesses
resources
Better infrastructure Pollution
Better skills for workers (if
2.3. Types of integration
Drive out domestic firms
invest in training)
1. Horizontal integration
Increased quality Reduction in cultural identity 1. Integration in the same industry and stage of
Increased business production
opportunities 2. Economies of scale
3. Lower competition
\ 4. More power over suppliers
5. Scope for rationalisation
1.7. Privatisation 6. Monopoly, increased investigation
7. Conflicts
It is the process of selling state-owned enterprises to the 2. Vertical forward integration –
private sector 1. Integration in the same industry but forward
Benefits – stage of production
Improved efficiency 2. Control over promotion
Higher revenue for the government 3. A secure outlet for the firm’s products
Higher tax revenue 4. Lack of experience and expertise
Higher quality 5. Uncompetitive behaviour, bad publicity
Higher competition 3. Vertical backward integration –
Minimal government influence 1. Integration in the same industry but a
Wider choice backward stage of production
Higher investment 2. Control over quality, price and delivery time
Drawbacks – 3. Increased research & development
External costs may not be considered 4. Control over competitors supplies
Monopolies may be formed 5. Lack experience and expertise
Exploitation of customers – higher prices 6. Business may become complacent
Strategic industries require government support and 4. Conglomerate integration –
control 1. Integration in a different industry
Reduce opportunities of economies of scale 2. Diversifies risks
3. Share ideas
4. Lack of experience, failure
2. Size of Business 5. Lack of clear focus and direction
2.1. External growth 2.4. Joint ventures and strategic

alliances
Business expansion done through mergers and takeovers
Also known as integration Joint venture is when two businesses come together to
work on one project, sharing capital investment
Reasons for –
Strategic alliances are agreements between firms in
Share research facilities and pool ideas which each agrees to commit resources to achieve an
Economies of scale agreed set of objectives
Save on marketing and distribution costs
Larger customer base 2.5. Problems of rapid growth
Higher market share
Financial
Reasons against – Expensive
Diseconomies of scale Addition fixed and working capital is needed
Conflicts Increased long-term borrowing and lead to negative
cash flow
WWW.ZNOTES.ORG
Use internal sources of finance Provide protection & training from dangerous
Raise finance through issue of shares machines
During takeovers, offer shares rather than cash Give adequate breaks
Managerial
Management unable to cope with controlling large 3.2. Evaluating the impact on business
operations
Lack of coordination and communication on employment and health and safety
Original owner may find it difficult to be a leader and laws
manager
Adapt a new management system and structure Increase costs
Decentralise Supervisory cots
Marketing Higher wage costs
Original marketing strategy may not be appropriate Higher costs from giving holidays
Adopt focused strategies for each product, in each Increased number of workers
country Protective clothing & equipment
Conduct market research Benefits
Loss of control of original owners Workers feel more secure, increasing motivation
Occurs if sole trade/partnership turns public/private Reduce the risk of accidents
Original owners can try to remain as directors Avoid court cases
Ability to attract highly-skilled workers
\n
Good brand image
3. External influences on 3.3. The law, consumer rights and

business activity marketing behaviour
Reasons to protect consumers:
3.1. The impact of the government and Influential advertising is making it difficult for
consumers to make rational decisions
law on business activity Protects becoming more scientific and technological,
difficult to understand
Legal constraints on business activity
More pressurised selling techniques
Laws on employment practices, working conditions
Increased globalisation
Laws on marketing and consumer rights
Laws for consumer protection:
Laws on business competition
Sale of goods act
Laws on location of business
Goods should be fit to sell
The law and employment practices
Suitable for the purpose
Prevent exploitation of workers (minimum wage,
Perform in the way described
working conditions)
Trade descriptions act
Control use of trade union action
No misleading descriptions or claims
Recruitment, employment contracts and termination of
Consumer protection act
employment
Firms providing dangerous or defective products
A written contract of employment must be signed by
are liable for the cost of any damage
the employee and employer
Illegal to quote misleading prices
Minimum wages, working conditions, working hours
are controlled
Laws against unfair dismissal 3.4. Evaluating the impact of consumer
Unfair dismissal:
protection laws on business
Pregnancy
Refusal to work overtime Business costs rise – redesigning ads, improving quality
Joining trade union control
Incorrect dismissal procedure Require a change of strategy and culture
Health and safety laws Reduces chances of legal action
Aim to protect workers from injury and discomfort at Improved brand image
work Increased sales and profits
Equip factories with safety equipment Better brand loyalty
Provide adequate facilities
3.5. The law and business competition
WWW.ZNOTES.ORG
Benefits of free and fair competition to consumers: Consumers main aim is high quality goods
Wider choice May be window dressed
Lower prices
Improve quality, design and performance of the 3.9. The impact of technology on
product
International competition will help strength domestic business activity
economy
Laws on competition: Technology – what does it mean?
Investigate and control monopolies
Limit uncompetitive practices Technology means the use of tools, machines and science
in an industrial context
High-technology machines and processes that are based
3.6. Monopolies on information technology (IT)
They are opening new product markets and making
There is only one supplier with 100% market share
businesses more flexible
Business applications of technology:
How do monopolies develop?
Word processing
Invention of new products Pagemaker and publishing programmes
Mergers and acquisitions Databases
Legal protection CAD
CAM
Existence of barriers to entry
Internet
How are consumers affected by monopolies? Benefits:
Accurate
Benefits: Fewer administrative staff
Lower prices Easier and quicker communication
Increased expenditure on R&D Lower costs
Drawbacks: Flexible
Higher prices Increased productivity & efficiency
Limited choice Add to a firm’s competitive advantage
Less investment due to complacency Wider target market
Lower efficiency
3.10. Applying technology to business –
3.7. Uncompetitive or restrictive limitations
practices
Increased capital costs
1. Refusal to supply a retailer if they don’t agree to Training costs
charge the prices determined by the manufacturer Redundancy costs
2. Full-line forcing – manufacturer forces retailer to stick Reduced job security
the whole range of products Fall in motivation
3. Market sharing agreements and price fixing Breakdowns can halt production
agreements Legal constrains on the use of IT
4. Predatory pricing – firms charge low prices to block Managers fear change
out other firms in the industry
3.11. IT and business decision-making
3.8. Social audits
Provision of huge amount of data to management
A report on the impact a business has on the society – through the use of IT is known as management
stakeholders, environment, community information systems
Benefits: Obtain data quickly
Identifies the social responsibilities met by a business Easy to process and analyse data
Sets targets for improvement Quick decision making
Improves company image Better communication
Increases sales Information overloads can lead to information lost
Drawbacks: Power can be abused
Expensive Reduction in authority and empowerment
Time taking Reduce job enrichment and motivation
WWW.ZNOTES.ORG
innovative
3.12. Introducing technology effectively
technologically skilled
Analyse – the use of IT keep changing jobs frequently
require greater training
Involve – managers and other staff
Having an older workforce:
Evaluate – different systems and programs (cost,
more loyal
efficiency, budget)
Plan – introduction of new system, training greater experience
Monitor – introduction and effectiveness of the system hard-working
demand higher wages
reluctant to change
3.13. Social and demographic
influences on business activity 3.14. Environmental constraints on
An ageing population
business activity
A larger part of the population is over retirement age
Smaller proportion is in lower age range The environment and corporate social
Businesses will have to adapt their goods and services responsibility
to cater to
older people when a firm accepts it legal and moral obligations to
Older population means lesser people in the stakeholders other than investors, it is said to be
workforce, increasing demand for workers, increasing accepting corporate social responsibility
wages
More training may be required Arguments for and against adopting
Businesses will have to be more aware of their environmentally friendly business strategies
employees retiring since they are of an older age
Since there are more dependents, cheaper products For:
may be more popular Marketing and promotional advantage
Changing role of women Better brand reputation
Better education facilities Avoid pressure group activity
Early retirement Avoid legal problems and court fees
Job insecurity Access to skilled employees
Long-term financial benefits
Patterns of employment Against:
Higher costs, increased prices, lost sales
Transfer of labour from secondary to tertiary sector Loss of competitive advantage
Increase in temporary and flexible employment contracts Reduced profits, limiting expansion
Increase in part time employment Not too strict laws regarding environment
Increasing pressure on pensions and healthcare services Economic development > environment – developing
due to an ageing population countries
Increase in student employment (on a part-time basis)
Capital is replacing labour 3.15. Environmental audits
Women returning back from maternity leave
Increase in number of women staying full time Assessing the impact of a business activities on the
Part time workers increase flexibility and lower fixed environment
costs Difficult to measure in monetary terms
But it becomes difficult to manage and encourage team No legal requirements
work Better publicity
Employing more women gives businesses a wider choice Higher sales
of staff and improved motivation amongst workers Better skilled workers
Gives access to higher quality and more qualified
workforce
But costs increase when they take maternity leaves
Social audits
Businesses which are able to quickly adapt to changing
Pollution
environments are able to survive successfully
Health and Safety
Having a younger workforce:
Supply Sourcing
cheaper
Customer Satisfaction
more flexible
Social Contribution
geographically mobile
WWW.ZNOTES.ORG
Accounting and Financial Transparency Long-term balance of payments

Diversity Wealth and income transfers to reduce inequalities
Annual targets to improve social responsibility
There may be conflicts whilst the government is trying to
fulfil these objectives, so the government will have to
Evaluation of environmental and social prioritise
audits \n
Expensive 4.2. Economic growth

Time consuming
Companies accused of using it as a PR activity Measured using GDP
No general rule and compulsion on these policies It is measured in monetary terms
Inflation will increase the value of GDP, which is not true
3.16. Environmental and ethical issues – economic growth
Economic growth occurs as a result of a rise in the real
the role of pressure groups GDP of a country
Negative economic growth (or recession) occurs when
A pressure group is an organization created by people
GDP falls
with a common interest or aim who put pressure on
Benefits of economic growth:
businesses and governments to change policies so that
Increase in average living standards
an objective that seeks to influence elected officials to
Higher employment and consumer incomes
take action or make a change on a specific issue.
Reduction in absolute poverty
More resources available for the government
How do pressure groups affect businesses?
Rising demand
The primary goal of a pressure group is to influence some
Factors leading to economic growth
aspect of the way a business operates, including which
types of products businesses manufacture.
Increases in output resulting from technological changes
Pressure groups can exert influence by finding allies in
and expansion of industry capital
the media, by organizing protest marches, and by running
Increases in economic resources, such as a higher
marketing campaigns to express their concerns.
working population or discovery of new resources
Increases in productivity
How do they operate?
Encourage government to change rules and laws 4.3. The business cycle
Encourage businesses to change policies
Encourage consumers to change purchasing habits Economies grow at different rates over time
Boom –
How they achieve their goals? Very fast economic growth
Rising income and profits
1. Publicity through media coverage Rising inflation
2. Influencing consumer behaviour Shortages of skilled labour, higher wage rates
3. Lobbying of government Increased interest rates
Recession –
Falling demand
4. External Economic Real GDP growth slows down
House and asset prices fall
influences on business Incomes reduce
Profits fall
activity Slump –
A serious and prolonged recession
4.1. Economic objectives of Real GDP falls substantially
House and asset prices fall
governments Recovery and growth –
Real GDP begins to rise
Economic growth Rate of inflation falls
Low price inflation Products become more competitive
Low rate of unemployment Rising demand
Exchange rate stability
WWW.ZNOTES.ORG
Fall in the real value of debt

4.4. Is a recession always bad?
Increase in value of fixed assets
During a recession, output falls, unemployment rises, Increased profit margin as inventory is bought in
advance
incomes and demand fall.
Drawbacks:
Government revenues fall
Higher wage demands
Demand for normal and income elastic goods reduces
Advantages of recession: Consumers become more price sensitive
Capital assets become cheaper Higher rate of interest
Cash flow problems
Demand for inferior goods rises
Uncertainty
Risk of job losses may improve relations
Unreliable forecasts
Lose competitiveness overseas
Reduce chances of receiving discounts and credit
periods from suppliers
Business strategies during inflation
Reduce investment
Lower profit margin
Lower debts and borrowing
Reduce credit period given to customers
4.5. Inflation
Reduce labour costs
Increase in the average price of goods and services
Fall in the value of money 4.7. Deflation
How to measure inflation Fall in the average price of goods and services
Rise in the value of money
Measured using CPI (consumer price index)
It records average changes in goods used by consumers Is deflation beneficial?
Compared with previous months prices
Weights are added to these price changes Consumers delay purchases
Then they are averaged and given an index number Discourage borrowing
Firms unwilling to invest
Causes of inflation Stocked up inventory reduces in value
Cost push inflation – 4.8. Unemployment

Depreciation of the currency
Rising wage rates Members of the working force who are willing and able to
Rising raw material costs work, but cannot find a job
Demand pull inflation –
Higher consumer demand Causes of unemployment
Cyclical unemployment
This occurs during the recession stage
During recession, demand falls, encouraging
businesses to make employees redundant
Using anti-inflationary policies may lead to cyclical
unemployment
If currency appreciates, demand for domestic goods
will fall, leading to cyclical unemployment
Structural unemployment
Exists during rapid growth
4.6. The impact of inflation on business It occurs due to structural changes in an economy,
changing the demand for labour
strategy Causes of structural changes:
Change in consumer tastes and preferences
Benefits:
Increased use of technology, reducing the need to
Increase costs can be passed to consumers
employ workers
WWW.ZNOTES.ORG
Deindustrialisation Cheaper in international markets, increased

Increased need for multi-skilled workers competitiveness
Provide education and training to workers to avoid Lesser price competition in domestic market
structural unemployment Higher cost of imported raw materials
Frictional unemployment
Unemployment when a worker loses their job and are International competitiveness – non price factors
trying to find a new one
May lead to cyclical unemployment Product design and innovation
Provide information about job opportunities, open job Quality of construction and reliability
centres and recruitment agencies, reduce Effective promotion and extensive distribution
unemployment benefits, etc to reduce frictional After-sales service
unemployment Investment in trained staff and modern technology
Costs of unemployment 4.11. Macro-economic policies

Social problems – crime They impact the entire economy
Loss of income and living standards Influence the level of AD and AS
Inefficient economy, can produce much more
Tax revenue used to support unemployed, opportunity Fiscal policy
cost
Reduces demand Decisions regarding govt expenditure and tax rates
Skills may become outdated Revenue > expenditure = surplus
Revenue < expenditure = deficit
4.9. Balance of payments (current During a recession, a government will either raise
government spending or lower tax rates, so that AD rises,
account) increasing output and employment
During a period of economic boom, a government will
Records the value of goods and services traded between either lower government spending or raise tax rates so
one country and the rest of the world that AD falls, lowering inflation, output and employment
Deficit – imports > exports
Problems of a BOP deficit –
Depreciation of the exchange rate 4.12. Monetary policy
Decline in currency reserves
Decisions regarding interest rates, money supply and
Reduced Foreign direct investment (FDI)
exchange rate of a country
Recession, lower interest rates, increase AD
4.10. Exchange rates Higher interest rates will increase costs of production for
businesses, lower demand and appreciate the country’s
The price of one currency in terms of another exchange rate
Exchange rates are determined through the forces of
demand and supply
Exchange rate fluctuations
Demand is greater than supply – appreciation – rise in the

value
Supply is greater than demand – depreciation – fall in the
value
Appreciation of the currency
Cheaper raw materials, increased competitiveness

Reduce inflation
Cheaper imports may substitute domestic goods
Higher competition
Depreciation of the currency
Monetary policy and the exchange rate
WWW.ZNOTES.ORG
Higher interest rates will lead to appreciation of a Market failure occurs when there is inefficiency in the
country’s currency market and some goods are overproduced (demerit
Reasons: goods) or under consumed (merit goods)
Speculation Private costs and benefits are borne by the people
directly involved in production and consumption
4.13. Exchange rate policy External costs and benefits are borne by third parties
Drawbacks of floating exchange rate & benefits of joining

a common currency
Fluctuating prices of imported raw materials
Unstable demand levels
Uncertainty
Difficult to make cost comparison as there is no price
transparency
Increased costs
Advantages of not joining a common currency
Central bank can maintain its status as the interest
setting authority
Joining a common currency will reduce the
independence of each government to control their
own tax rates
Interest rates can be used to achieve other objectives,
rather than focusing on exchange rates
Joining a common currency, conversion costs will be
high
4.17. Income elasticity of demand
4.14. Government policies and business
A numerical measure of responsiveness of demand to a
competitiveness change in income
YED = % change in demand/ % change in price
Supply side policies are ones that aim to increase
Normal goods – it is positive, between 0 to 1. It means as
industrial competitiveness
consumers income increases, demand for these goods
These include:
rises, by a small proportion
Lower rates of income tax – encourage workers to
Luxury goods – it is positive, greater than 1. It means as
earn more as they don’t have to pay a higher % in
consumers income increases, demand for these goods
taxes
rises by a greater proportion
Lower rates of corporation tax – lower tax will
Inferior goods – YED is negative. Demand for these goods
increase profits, increasing funds for investment,
falls as income rises
increasing efficiency and competitiveness
Increasing labour market flexibility and labour
productivity – 5. Further Human Resource
Subsidize training programmes
Increased funding for higher-education Management
Lower rates of income tax
Encouraging immigration of skilled workers
Restricting welfare benefits 5.1. HR department
Deciding employment contracts
4.15. Government intervention in Improving employee performance
industry Managing industrial relations
Subsidies to lower prices Hard HRM

Subsidies to help loss making businesses
Grants to open up in particular locations It focuses on cost cutting
Financial supports for consumers Treats workers as machines
Focuses on short term contracts
4.16. Market failure Includes autocratic leadership and has a tall hierarchy
WWW.ZNOTES.ORG
Gives greater variety

Soft HRM
Ideal for workers willing to pursue other hobbies
It focuses on developing workers Disadvantages to the business:
More employees to manage
Ensures they are motivated and reach self-fulfilment
Effective communication becomes difficult
Treats workers are the most important business
Greater reliance on written communication
resource
Includes democratic leadership and a flat organisational Poor motivation – less involved and committed
structure Difficult to establish teamwork culture
Disadvantages to the workers:
Earning lesser than full time workers
5.2. Core VS Peripheral Workers Maybe paid a lower rate
Reduced security
Groups of workers are divided into core and peripheral Poor working conditions
All full time and permanent employees are considered a
part of the core workforce and Soft HRM is used for them
Temporary, part-time and flexi-time workers are Temporary contracts
considered a part of the peripheral and Hard HRM is used
Reduces overhead costs
for them
Lower job security
This occurs because core workers are considered key for
Negative effect on motivation
business success, and they should be highly trained and
motivation Employee flexibility
The hard HRM used helps save money but only in the
short run 5.5. The Shamrock Organisation
Drawbacks of hard HRM on peripheral workers:
Higher recruitment and training costs Core managerial and technical staff – full time permanent
Demotivated workers (lower job security) contracts, competitive salaries and benefits
Lower productivity and efficiency, higher accidents Outsourced functions
Bad publicity Flexible workers – part time, temporary contracts
\n
5.3. Employment contracts
1. Part time contracts – working for less than 40 hours a
week
2. Temporary contracts – contracts that last for a fixed
time period
3. Permanent contracts – there contract ends only when
the work is dismissed, made redundant or leaves on
their own accord
4. Flexi time contracts – allows employees to be called
when most convenient to employers
5. Outsourcing contracts – using an outside agency to
carry out a particular business function. Helps reduce
overhead costs
6. Zero-hour contracts – workers have no minimum
working hours and are called in and paid for
whenever needed
5.4. Part time and flexi time contract

5.6. Measuring and monitoring
Advantages to the business
Work only when needed, reducing overhead costs employee performance
Give competitive advantage due to good customer
service 1. Labour productivity
More staff available to cover up during absenteeism 1. Output per worker
Ability to assess employee efficiency 2. Total output/total workers
Using teleworking and reducing overheads 3. Higher labour productivity, higher efficiency
Zero-hour contract – lower costs 4. Lower labour costs
Advantages to the workers: 5. Influences business competitiveness
WWW.ZNOTES.ORG
6. Ways to improve labour productivity: Depends on culture, legal structure etc

1. Higher motivation
2. More efficient
3. Reliable capital equipment
4. Increased worker involvement
5. More training
6. Improved internal efficiency
2. Reject rates 5.11. Approaches to labour-
3. Customer complaints management relations
4. Wastage levels
Hard or autocratic management
5.7. Absenteeism rates Take it or leave it approach
Short term contracts
Number of employees absent/total employees * 100 Easy to replace them
Lead to poor customer service Low labour costs
Higher costs No security, low motivation
Indicate poor motivation levels No training
No common objectives
Non existent job enrichment and staff involvement
5.8. Employee performance – strategies
Collective bargaining between trade unions and major
to improve it employers and their associations
Collective bargaining is when unions negotiation wage
Regular appraisal of performance against predefined levels and working conditions for a large section of
targets the industry
Training Very powerful
Quality circles May threaten strikes
Cell production Not always suitable and affordable by small
Financial incentives companies
Advanced technology Causes disruption and loss of output
Management by objectives Resist change – lack of investment and development
Cooperation between labour and management
5.9. Management by objectives (MBO) Involve workers in decision making
Lower conflicts and strikes
Involves breaking down the main corporate aim into Active participation – long term success
departmental and individual targets to motivate workers More competitive and productive workforce
Effective way to delegate authority
Used during theory Y approach 5.12. Workforce planning
Use of annual appraisals
Benefits: Analysing and forecasting the number of workers and
Motivate workers skills the business will require in the future to meet its
Everyone is aware about what to do objectives
Higher productivity Workforce audit is a check on the skills and qualities of
Avoid conflict and remain consistent as everyone is existing employees
working towards the same goal Helps the business plan for future
Drawbacks: Remain flexible
Time consuming
Objectives become outdated quickly Factors affecting number of employees needed:
Does not guarantee success
1. Forecast demand for the firm’s product
5.10. Workforce and management – 2. Staff productivity levels
3. Business objectives
scope for conflict and cooperation 4. Changes in laws
5. Labour turnover and absenteeism rates
Factors affecting skills of workers needed:
1. Pace of technological change

2. Need for flexible and multiskilled workers
WWW.ZNOTES.ORG
5.13. Trade unions and their role in HRM 5.16. Evaluation

Trade union is an organisation whose main objective is to
improve pay and working conditions for their members
Reasons to join a trade union:
Power through solidarity (collective bargaining)
Collective bargaining > individual industrial action
Provide legal support
Puts pressure to meet legal requirements
Union recognition and collective bargaining

6. Organisational structure
It is the internal, formal framework of a business that
Trade unions are not legally recognised everywhere
Easier to negotiate with workers individually as pressure shows the way in which management is organised and
linked together and how authority is passed through the
through collective bargaining isn’t present
However, trade unions save time as negotiations are organisation
It indicates:
quicker
Avoid jealousy amongst workers Overall decision-making responsibility
Formal relationships between people and
Provide additional communication channels
Impose discipline on members departments
The way accountability and authority is passed – chain
of command
5.14. Single-union agreement Span of control
Formal channels of communication
All workers of one organisation will be a part of the same
trade union
Easier to use collective bargaining 6.2. Types of organisational structure
May not represent skilled workers
Hierarchical structure –
No-strike agreements It is one where there are different layers of the
organisation with fewer and fewer people on each higher
Improves brand image
level
Used in exchange for greater involvement in decision Advantages –
making
Everyone knows their spot on the corporate ladder
Chances of promotion
5.15. Employees/trade union and Clear and well-defined role for each individual
Clear chain of command
employers – what action can they take? Disadvantages –
Only one way communication
1. Trade union
Lack of coordination
1. Negotiations
Inflexible
2. Go slow
Change resistance
3. Work to rule
4. Overtime bans
Matrix structure –
5. Strike action
2. Employers
An organisational structure that creates project teams
1. Negotiations
that cut across traditional functional departments
2. Public relations
Task & project focused
3. Threat of redundancies
Organisations require flexible structure (remove
4. Changes in contract
bureaucracy)
5. Closure
Innovative and creative ideas
6. Lock-outs
Advantages –
Better communication and coordination
More innovative and successful ideas
Flexible
Quicker in responding to market changes
Disadvantages –
Less direct control
WWW.ZNOTES.ORG
Conflict of interest It involves keeping all important decision making powers

in the head office
6.3. Key principles of organisational Minimum delegation
Gives a sense of uniformity and consistency
structures Quicker decision making
Prevents conflicts
Levels of hierarchy Decisions are taken with the effect on the entire business
in mind, not just one division
Each level represents a grade Central buying – economies of scale
A flat organisational structure has fewer ranks and levels Experienced decision makers
of hierarchy
A tall organisational structure has many ranks Decentralisation
Problems –
Communication problems It involves passing decision making down the
Narrow span of control organisational structure to empower employees
No sense of belonging Demonstrates trust in employees (motivation)
Enables localisation as they are closer to the target
Chain of command market
Develops and prepares them for more challenging tasks
Route through with authority is passed down in an (internal promotions)
organisation Better motivation (delegation & empowerment)
Includes instructions and information Quicker and more flexible decisions
Tall organisational structure – longer chain of command
Flat organisational structure – shorter chain of command
6.5. Organisational structures – factors
Span of control influencing it
Number of subordinates reporting directly to a manager Entrepreneurial structure
Wide span of control – many subordinations, encourages Organisational structure changes with size and range of
delegation activities.
Narrow span of control – few subordinations, discourages It must be flexible
delegation Factors:
Style of management, culture of managers
Delegation Retrenchment cause by economic recession or
increased competition
Passing authority down the organisational structure Corporate objectives
Encourages motivation Adopting new technologies
Wider span of control, more delegation
Employees are accountable for the work, but the
manager is still responsible for it
6.6. Important links between
Benefits – organisational principles
Senior managers can focus on other important roles
Indicates trust in workers (motivation) The greater the number of levels of hierarchy, the longer
Trains workers for promotions the chain of command
Help achieve self-actualisation Smaller span of control
Drawbacks – Increased delegation
Unsuccessful delegation if training is not given Ineffective communication
Unsuccessful delegation if enough authority is not Poor motivation of junior staff
given Higher business costs
Managers may only delegate boring tasks, Problems associated with a tall structure – is delayering
demotivating them the answer?
Delayering – remove a whole layer of management
6.4. Key principles of organisational Delegation: conflicts that can arise and potential benefits
Indicates trust on the subordinate
structures Increased motivation
Empowerment & self-enrichment
Centralisation Managers may not wish to take risks
Accountability, authority and responsibility
WWW.ZNOTES.ORG
Delegation gives subordinates authority to perform Internal communication is between different people or
tasks groups within the organisation
If done incorrectly, the worker is accountable for the External communication is when the communication
task occurs with outside parties – suppliers, government,
However, the overall responsibility of the task is to the customers, suppliers
manager
Centralisation and decentralisation 7.2. Why is effective communication
Line and staff relationships
Line managers are workers who have direct authority important?
over people, decisions and resources within the
hierarchy Higher staff motivation, labour productivity
Line managers have responsibility for achieving Improve in the number and quality of ideas generated by
specific business objectives the staff
Staff managers are specialists who provide support, Speeder decision making
information and assistance to line managers Quicker response to market changes
They do not have authority over line managers Reduced risks of errors
They perform a supporting role to the line managers, Effective coordination between departments
but do not make decisions
7.3. Communication methods – the
6.7. Informal organisations media used in communicating
The network of personal and social relations developed
Oral communication
between people over time in an organisation is known as
informal organisation One-on-one conversations, interviews, meetings
Power and influence are obtained from membership of Allows two-way communication and feedback
informal groups within a business Improves worker motivation
Conduct of individuals within these groups is governed by Message can be reinforced with body language
norms or normal standards of behaviour Maybe ambiguous
It may be that informal group leader may gain more No written record
power over the formal group leader Costly, time taking
6.8. Organisational structure – the Written communication

future Letters, memos, notices
Can be referred to whenever needed
Businesses will need to have a flexible and fluid
Allows detailed data to be shared
organisational structure No immediate feedback
Move from command structure to team-based problem
solving IT and web-based media
Involves removing horizontal boundaries between
departments Emails, fax
Future success depends on the ability to respond rapidly Quick
to the changing business environment Written record
Need workers to be trained
7. Business Communication Reduces social contact, interpersonal contact is lost

Security issues
Information overload
7.1. Effective communication
Visual communication
The exchange of information and instructions between
groups or people, with feedback. Accompany oral or written
Fey features – Diagrams, pictures, whiteboards
Sender Increased impact, colour and movements
Clear message Useful during training, marketing
Appropriate medium
Receiver 7.4. Communication methods – the
Feedback
media used in communicating
WWW.ZNOTES.ORG
5. Establish trust between receiver and sender

6. Appropriate physical conditions
7.8. Formal communication networks

The official communication channels and routes used in
the organisations
Chain network –
Used in a hierarchical structure
Autocratic leadership
One way communication
Workers feel isolated, demotivated
Vertical network –
Leader communicates with subordinates directly
7.5. Factors influencing choice of No group networks
appropriate media Narrow span of control
Wheel network –
Importance of written record Leader is at the centre
Cost 2 way communication
Advantages to be gained from staff input Poor horizontal communication
Speed Circle network –
Quantity of data to be communicated One person only communicates with 2 other people
Whether or not more than 1 method id necessary Decentralised network
Size and geographical spread No obvious leader
Slow rate of communication
No feedback
7.6. Barriers to effective
Integrated network –
communication Full 2 way communication
Participative style of decision making
Failure in one of the stages of the communication
process
Inappropriate medium
Receiver forgot a part of the long message
Misleading or incomplete message
Excessive use of technical language, jargon
Too much information
Long communication channel
Poor attitudes of either the send or the receiver
Sender is not trusted

Unmotivated workers
\
Intermediaries
Poor opinion or perception
7.9. One-way or two-way
Physical reasons
communication
Noisy factories
One way communication doesn’t allow for feedback
Geographical distance
Doesn’t give the receiver a chance to question the sender
No assurance for the sender that the message has been
7.7. Reducing communication barriers received, understood
Two way communication allows feedback
1. Message is clear and precise Gives a chance for the receiver to contribute
2. Short communication channel More motivating
3. Clear channels of communication Used for democratic leadership
4. Build in feedback to the communication process Time consuming
WWW.ZNOTES.ORG
7.10. Horizontal communication

Vertical communications is when different people from
different levels of hierarchy communicate with each
other
Main method is formal
Horizontal communication occurs along the
organisational structure.
People of the same status but different responsibility
Problems –
Different departments may not understand the
culture, objectives, way of working
Outlook and objectives of departments may conflict 8.2. Purpose and mission
Is it a new business proposal or a launch of a new
7.11. Informal communication
product from an existing business?
Detailed background history about the business
Unofficial channels of communication
Mission and vision statement
8.3. Situational analysis

Answer the question – where are we now?
\ Time-consuming
Needs extensive, detailed market research and
quantitative data
8. Marketing Planning Without situational analysis, inappropriate objectives,
strategies maybe set
Includes:
8.1. Marketing Plan Current product analysis
Target market analysis
A detailed fully researched written report on the
Competitor analysis
marketing objectives and the marketing strategy to be PEST analysis
used to achieve them
Political, Economical, Social, Technological
It includes:
SWOT analysis
Purpose and plan
Strengths, Weaknesses, Opportunities, Threats
Mission of the business
Situational analysis
Marketing objectives, strategies, tactics
8.4. Marketing objectives
Marketing budget
These are targets for the marketing department which
Executive summary & time frame
form a key part of the plan
They must be SMART
Can be expressed in terms of total sales/units/market
share/growth rate
These objectives can be broken down for more specific
targets
They must be clear and measurable
WWW.ZNOTES.ORG
They give a sense of direction \n
8.5. Marketing strategies

This includes information about how the marketing
department aims to achieve their objectives
Includes:
Mass or niche marketing
New marketing or existing ones
High market penetration or limited penetration
Strategy depends on:
Company’s mission and objectives
Situational analysis
Business resources
8.6. Marketing tactics Marketing planning – evaluation
Product – a brief summary of the existing products and Used to convince potential investors
planned changes and activities. Key features, USP, However, marketing plan is just one key aspect of a
branding, packaging and labelling details business plan, needs to be backed up by others
Price – depends on cost, PED, competitors price, market Marketing plans reduce the risk of failure during new
conditions, objectives & strategies product development and entering a new market
Place – details of channels used, range and number of Planning is essential, allows SMART objectives to be set
outlets and how they are liked to the market segment Provide direction and purpose
Promotion – advertising, sales promotion, public relations However, they must be made with integration of all
& personal selling. The image created depends on the departments
other 3P’s
Potential limitations
8.7. Marketing budget Complex

Costly
How much money is required to put the marketing Time consuming
strategy and tactic into effect Dynamic market – quickly outdated
Expected sales performance helps comparison between However, risk of not planning > cost of planning
expenditure and expected sales Inflexibility
It lays out the spending requirements to meet the overall
objectives, with a clear month-by-month timetable for
every activity
8.9. Elasticity
Demand of a product is influenced by:
8.8. Executive summary and timescale Price
Consumer incomes
Reviewing the plan – the marketing strategy Promotional spending
Price of related goods
The results of the marketing plan must be collected and
checked against original objective
Income elasticity of demand
It is an ongoing process
If objectives are being met, consumer reaction analysis
A numerical measure of responsiveness of demand to a
must be done change in income
If not, the strategy must be changed
% change in demand/% change in income
At the end, overall progress must be identified Inferior goods – negative YED, income rises, demand falls
Normal goods – positive YED (<1), income rises, demand
rises
Luxury goods, positive YED (>1), income rises, demand
rises
Promotional elasticity of demand
WWW.ZNOTES.ORG
A numerical measure of responsiveness of demand to a 3. Identify the estimated sales volume and
change in amount spent on promotional market share, break-even point
% change in demand/ % change in promotion spending 5. Product testing
1. Involves checking the technical performance of
1, elastic AED, good to increase spending the product
2. Whether or not customer expectations will be
<1, inelastic AED, shouldn’t increase spending
met
Cross elasticity of demand 3. Develop a prototype
4. Test in typical conditions
Numerical measure of responsiveness of demand of 5. Use focus group opinions
good A following a change in price of good B 6. Adapt the product from results
% change in demand of A/ % change in price of B 6. Test marketing
Substitutes – positive XED, fall in price of B, fall in demand 1. Small market must be a representative of a
of A larger market
Complements – negative XED, rise in price of B, fall in 2. Actual consumer behaviour can be observed
demand of A 3. Consumer feedback can be taken
4. Reduce the risk associated
5. Identify any weaknesses
8.10. Elasticity - evaluation 6. Maybe expensive
7. Competitors can identify a firm’s intentions
Other factors may affect sales, making AED unreliable
and create a copy
Economic conditions affect sales
7. Commercialisation
Competitors actions
1. Full scale launch of the product
Elasticity is calculated based on old data, not entirely
2. Introduction stage of the PLC
reliable to predict future
3. Filled up distribution channels
4. Crucial time in the PLC
8.11. New product development
A new product to succeed it must:
8.13. Research and development
Have desirable features
It is the scientific research and technical development of
Have a USP
new products and processes
Be marketed effectively
Significance of R&D and possible

8.12. Stages of new product
development business strategies
It allows businesses to survive and grow
1. Generating new ideas
Having a USP gives them a chance to charge premium
1. Sources of ideas:
prices
1. Company’s R&D
It is a risky investment
2. Adaption of competitors ideas
No accuracy
3. Market research
No R&D strategy – copy other businesses
4. Employees
Offensive R&D strategy is to lead the rest of the industry
5. Sales people
with innovative products. Aims to gain market share &
6. Group brainstorming
monopoly power
2. Idea screening
Defensive R&D strategy is to learn from initial innovators
1. Eliminate ideas which stand the least chance of
mistakes and weaknesses. Aims to improve original
being commercially successful
products
2. Make sure the idea has a reasonable chance to
succeed before moving forward
3. Concept development and testing Government encouragement for
1. Ask key questions about the features of the research & development
product, cost to make, who are its target
market, how much will consumers pay, etc Provide legal security by allowing them to patent/register
4. Business analysis Provide financial assistance
1. Consider the likely impact of the new product
on costs, sales and profits
2. Set an estimated price for the product
WWW.ZNOTES.ORG
Facilitator collects and coordinates with experts

8.14. Factors that influence the level of
Several questionnaires round maybe done
R&D expenditure by a business Delphi method increases chances of accuracy
Nature of industry
8.18. Consumer surveys
R&D plans of competitors
Business expectations Questions maybe quantitative or qualitative
Risk profile/culture of the business
Better accuracy – sample must be large, represent the
Government policies towards R&D target market
Time-taking
R&D – evaluation Can use an agency, expensive but accurate
New ideas fail due to design defects/manufacturing

8.19. Jury of experts
errors
Products may fail due to:
It uses senior managers who meet and develop forecast
Inadequate market research
based on their knowledge and experience
Poor marketing mix Cheaper
Changes in technology
Quicker
Competitor’s product is more suited
Lacks external viewpoint
Firms still continue as they take the long term view
Long run benefits > short run costs
8.20. Quantitative sales forecasting
8.15. Sales forecasting – potential methods
benefits Correlation – establishing causal relationships
Reduced risks
Relations between sales and other factors maybe
Production department is aware of the number of units identified and used to make predictions
required
Establishing correlation doesn’t indicate cause or effect
Marketing department is aware of the number of units to
Doesn’t consider other factors of change
be distributed
Accurate workforce planning
Time-series analysis
Accurate cash flow forecasts and planning
Forecasts maybe be completely accurate due to the Based on sales data
dynamic business environment
Based on market research – primary and secondary Extrapolation
Existing products – ask expert opinion/use past sales to
forecast future Basing future predictions on past results
Results plotted on a time-series graph, extending the line
8.16. Sales-force composite to identify future trends
Assumes sales patterns are stable
Add individual predictions of future sales of all sales Not accurate
representatives in the business Doesn’t consider other factors
Sales force representativeness are required to keep close
contact with consumers – retails, wholesalers 8.21. Moving averages
Allows them to understand market trends and estimate
future demand Helps identify the underlying factors which are expected
Quick to influence sales:
Cheap Trend
Ignores macro-economic changes/developments Seasonal fluctuations
Sales maybe overestimated Cyclical fluctuations
Random fluctuations
8.17. Delphi method
Long range of qualitative forecasting which obtains
forecasts from a panel of experts
They are anonymous
WWW.ZNOTES.ORG
\n
9.2. International marketing
Selling in foreign markets is risky and expensive
Globalisation – better communication, better transport,
freer trade
Allows them to increase sales and profits
Increased competition
Why sell products in other countries?
Saturated home markets

Four quarter moving total – add sales revenue of 4 Higher profits & sales
quarters Spread risks
Eight quarter moving total – add 2 four quarter totals Legal differences creating opportunities abroad
Quarterly moving average – eight quarter total/8
Seasonal variation – sales revenue – quarterly average
Average seasonal variation = add seasonal variation of
9.3. Why international marketing is
different years in the same quarter divided by number of different
years
1. Political differences
8.22. Moving-average sales forecasting 2. Economic and social differences
3. Legal differences
methods – evaluation 4. Cultural differences
5. Differences in business practice
Useful to identify and apply seasonal variation to
predictions
Reasonably accurate for short-term forecasts in stable
9.4. International markets – different
economic conditions methods of entry
Assists planning for each quarter in the future
Complex 1. Exporting
Less accurate, external environment changes 1. Sell directly to foreign customers
In the long run, qualitative data is more accurate 2. Sell through an agent
Export directly
9. Globalisation and
International Marketing
9.1. Globalisation
Export indirectly
Globalisation occurs when products, labour and capital
are unrestricted by barriers
Barriers to trade are reduced
Increased MNCs gives greater freedom for capital
Freer movement of workers
2. International franchising
1. International franchising means that foreign
franchisees are used to operate a firm’s
activities abroad
2. Either 1 franchise owns all branches in one
country or different franchises for different
regions
3. Joint ventures
4. Licensing
1. Allows another company to produce the firm’s
branded products under the licence
2. There will be strict controls on quality
WWW.ZNOTES.ORG
3. Goods don’t have to be physically exported,

lower transport cost and time 10. Capacity Utilisation
4. Parent firm avoids capital ‘setting costs’
5. Possible lapses om quality Capacity utilisation is the proportion of maximum output
6. Unethical production methods – poor brand capacity currently being achieved
image Capacity utilisation = current output level/max output
5. Direct investment in subsidiaries \n level * 100
This helps determine the operational efficiency of a
business
A firm working at full capacity is said to achieve 100%
capacity utilisation, with 0 spare capacity
10.2. Impact on average fixed costs

9.5. International marketing –
Higher the capacity utilisation, lower the average fixed
alternative strategies costs
100% capacity utilisation –
Globalisation is making differences in tastes, culture are Lowest unit cost possible
becoming less obvious Gives employees a sense of security
This gives companies economies of scale Maybe used to advertise 0 spare capacity, indicating
Otherwise, when businesses adapt a global marketing their high success rates
mix to local needs and conditions is called localisation High workload, pressured
No time for errors, accidents
9.6. Pan-global marketing Customers may have to be turned away
Long waiting
It involves adopting a standardised product across the No time accounted for machinery breakdown,
globe as if the entire world were a single market – selling maintenance
the same goods in the same way everywhere
They adopt common products, brand messages and 10.3. Excess capacity – options
promotional campaigns across the world
Brands with international appeal may become exclusive, Low capacity utilisation = excess (spare) capacity
luxury products image Excess capacity exists when the current levels of demand
are less than the full capacity output of a business
\n
When deciding how to reduce spare capacity, time factor
must be considered
Short term problem?
High levels of stock
More flexible production system
Offer flexible employment contracts
Long term?
Rationalisation
10.4. Excess capacity – evaluating the

9.7. Global localisation options
It involves adapting the marketing mix, differentiated 1. Short term
products to meet national and regional tastes and
cultures
Thinking global – acting local
\n
WWW.ZNOTES.ORG
2. Long term Security

Sending important information to outside businesses
is risky
10.8. Outsourcing evaluation

Increased outsourcing as operational efficiency becomes
important due to increased globalisation, and increased
opportunities
A cost benefit analysis must be done
It depends on whether it’s a core or peripheral activity
10.5. Working at full capacity

11. Lean Production and
Full capacity is when the business produces the
maximum output Quality Management
Decisions about whether or not to expand the scale of
operations must be taken
11.1. Lean Production
This decision depends on the cost, time factor, economic
conditions, etc
It involves producing goods and services with the
minimum of wasted resources while maintaining high
10.6. Capacity shortage quality
Aims to increase efficiency
When demand for a firm’s product is greater than
production capacity
11.2. Types of waste
Cause of excess demand must be analysed
T – transport
10.7. Outsourcing O – overproduction
O – overprocessing
It involves using another business to undertake a part of W – waiting
the production process rather than doing it within the M – movement
business using the firm’s own employees E – excess inventory
It leads to reducing and control of operating costs D – defects
No need to employee specialists
Cheaper to buy in specialist services
11.3. Methods of lean production
Increased flexibility
Fixed costs converted to variable
Simultaneous engineering
Sub-contractors can be used
Improved company focus Product development is organised so that different
The business can focus of their main, core products stages are done at the same time instead of in sequence
instead of diverting attention to peripheral goods and It involves important tasks like essential design, market
services research, costing are done at the same time rather than
Access to quality service or resources in a sequence
Freed-up internal resources New products can be introduced quickly
Loss of jobs
Negative impact on job security, motivation, Cell production
productivity
Splitting flow production into self-contained groups that
Bad publicity
are responsible for whole work units.
Pressure group action
Instead of each worker performing a single task, the
Quality issues
production line is split into units – cells
Internal processes can be monitors using quality
Each cell produces complete units of work
control
Every cell has a team leader, and every worker is
Don’t have that option with outside contractors
multiskilled
Customer resistance
Performance is measured against pre-set targets
Customers may not want to deal with overseas
Benefits –
outsourced operations
Better worker commitment
Increased doubts about quality and reliability
Job rotation
WWW.ZNOTES.ORG
Higher productivity Finance

Teamwork, sense of belonging Purchase of equipment and machinery is expensive
Lean production is impossible without flexible
Flexible specialisms machinery
Small firms, limited resources, difficult to use lean
Having flexible production techniques –
production
Flexible employment contracts
May choose to specialise in niche market
Flexible & adaptable machinery
Management of change
Flexible & multiskilled workers
More worker involvement
Benefits –
Depends on staff flexibility and corporation
Quicker response to changes in consumer demand
Lean production is not suitable –
Wider range of products
Difficult to forecast demand
Reduced inventory
Expensive to restart production
Higher productivity
Uses it to make redundancies
Time based management
Depend on customer service as USP
Cuts out waste time in management
Cost of new tech, retraining is high
11.4. Just-in-time inventory

11.8. Quality
Involves fewer resources being tied up in buffer
Product which meets customer expectations
inventories
A good quality product need not be expensive
Advantages –
11.5. Kaizen – continuous improvement Easy to create loyalty
Reduced costs of complaints, returns
All workers contribute to improving business operations Long PLC
Managers want to keep production up to the mark and Less promotion
look for one-off improvements Ability to charge a premium price
Workers know better than the manager, as they are
actually involved in production
Not just technological investments, series of small
11.9. How to achieve quality
improvements
1. Quality assurance
Conditions necessary –
Management culture encourages worker participation Checking for quality after every production process
Team working
Empowerment 2. Quality control
All employees are involved
Checking for quality once the production process is
Evaluation completed
Stages –
Limitations – Prevention
Some changes can’t be introduced gradually, may Inspection
require radical & expensive solution Correction and improvement
Resistance from senior managers
Tangible costs in the short run
May lead to diminishing returns
11.10. Inspecting for quality
Quality inspection is expensive
11.6. Advantages of lean production Sampling process is used
Weaknesses
Waste of time & resources eliminated Looking for problems, negative culture, resentment
Reduced unit costs among workers
High profits Tedious job, demotivated, inefficient
Easier operation, less crowded Take responsibility of quality away from workers
Lesser risk of damage
Quicker launch of new products
11.11. Quality assurance
11.7. Is lean production & JIT for all Setting agreed quality standards at every stage of
businesses? production
Self-checking by workers
WWW.ZNOTES.ORG
More emphasis on prevention

quality?
Getting it right the first time
Checking of components during delivery, reducing time More competition, good and consistent quality is
waste
necessary to survive
Advantages –
High quality, USP, premium prices
Job enrichment
Increasing consumer incomes, higher demand for good
Increased motivation quality products
Used to trace back quality problems
Reduces need for final inspection
11.16. Benchmarking
11.12. Why is it important for businesses It involves management identifying the best firms in the
to establish quality-assurance industry and then comparing the performance standards
– including quality
systems? Stages –
Identify the aspects of the business to be
Involves staff – teamwork, motivation, sense of belonging
benchmarked
Can check every stage of production
Measure performance in these areas
Reduce costs
Identify the firms in the industry that are considered
Gain accreditation for quality awards
to be the best
Use comparative data from the best firms to establish
11.13. Total quality management (TQM) the main weaknesses in the business
Set standards for improvement
An approach to quality that aims to involve all employees Change processes to achieve the standards set
in quality-improvement Re-measurement
It is a method of quality control where every employee is
given the responsibility of maintaining quality standards Benchmarking – evaluation
at every stage of production rather than giving the entire
responsibility to managers, or a separate quality control Benefits –
department. Faster & cheaper way of solving problems
TQM aims to achieve a zero defects policy where the Area of greatest significance for customers can be
product is made right in the first go. identifies
However, this can only be done when the worker is given Help improve international competitiveness
training. Crossover of ideas while comparisons
TQM can act as a motivator for employees, as worker Workforce involved, motivation
participation and delegation will increase. Limitations –
This will not work for autocratic leaders Depends on obtaining relevant and up-to-date
information
11.14. What are the costs and benefits Merely copying ideas will not help
Costs of comparisons may not be covered
of introducing and managing quality
systems? 11.17. Quality circles
\n Staff involvement in improving quality
Small groups of employees discuss quality problems and
come up with solutions
11.15. How can the competitiveness of a

business be improved by managing
WWW.ZNOTES.ORG
\n Lack of coordination
Community against the product
Errors, wastage
Bad management, customers could not buy the product
Workers aren't motivated, not skilled enough,
incompetent
Economic situations (neg)
Outdated project, quickly changing market
Bad planning- resources aren't sufficient
12.4. Critical path analysis

CPA is a planning technique that identifies all tasks in a
project, puts them in the correct sequence and allows for
the identification of the critical path.
Quality issues – evaluation Activities that must be completed to achieve this shortest
time make the critical path
Quality isn’t an option
Process of identifying critical path –
Necessary for business success
Identify the objective
It satisfies customer requirements
Put the tasks in a sequence and draw a network
Involving staff – motivation
diagram
Adds value
Add durations
Identify the critical path
12. Project Management
12.5. Network diagrams
12.1. Project It is a diagram used in critical path analysis that shows
the logical sequence of activities and the logical
Project
dependence between them – so the critical path can be
A project is a specific and temporary activity with a start identified
and end date, with clear goals set, defined objectives EST (Earliest Start Time) = EST of previous activity +
needed to be completed in a given budget. duration of current activity
Elements of a project – LFT (Latest Finish Time) = LFT in the previous node-
Resources (FOP) duration of current activity
Money Free float shows the length of time an activity can be
Scope delayed without delaying the start of next activity
Time Free float = EST (next activity)-duration- EST (Current
A project must be planned, managed, cost efficient to be activity)
successful Total float = LFT- Duration- EST
Key elements of project management Total float is the amount of time an activity can be
Defining the project, setting goals delayed by without delaying the whole project
Dividing it into smaller activities Total float = 0 the activity is on the critical path and
Controlling and managing it at every stage cannot be delayed
Assigning clear roles
Quality standards issue
12.2. Impact of project failure

Bad publicity
Loss of future contracts
Penalty payments
12.3. Reasons for failure

Not enough information
Lack of finance, legal issues
WWW.ZNOTES.ORG
A section of the business to which both costs and

12.6. Dummy activities
revenues can be allocated, therefore profits can be found
Indicated by a dotted line
Does not consume time or resources 13.4. Why divide operations into cost
Used when –
and profit centres?
A & B start a project, C follows only A but D follows A +
B
Managers and staff will have targets to work towards,
MBO if SMART
12.7. Advantages of CPA Targets can be used to compare with actual data
Individual department performance can be assessed
Used to assist planning and management of complex Work can be monitors, help decision making
projects
Helps calculate accurate delivery dates Problems –
Calculation of EST allows special orders to be managed
Managers may consider their department more
Calculation of LFT helps act as a checklist of measuring
important, not coordinate with other
the success and efficiency
Lead to competition between departments
Knowing the critical path helps understand which
Indirect costs, difficult to accurate
activities to focus on, which can’t be delayed
Performance is affected by other factors – external
Additional resources needed for speeding an activity
performance, economic conditions
could be used from non-critical activities
Reduces total time taken as it encourages simultaneous
development rather than sequential. 13.5. Overheads and Unit Costs
Overheads
12.8. CPA – evaluation Production overheads
Selling and distribution overheads
Doesn’t guarantee project success
Administration overheads
Skilled labour, motivated workers also needed
Finance overheads
Good management
Unit cost
Experienced senior managers
Total cost/number of units
13. Costs 13.6. Full costing techniques

Managers must be aware about the accurate costs of Also known as absorption costing
production to be able to make pricing decisions All fixed and variable costs are allocated to products,
Managers must compare actual costs with budgets and services or divisions of a business
with previous years to identify the most cost effective Unit cost = fixed cost + variable cost / total output
measures Easy to calculate and understand
Relevant for single product businesses
No costs are ignored
13.2. Costing methods – a major
Basis for pricing decisions
problem No attempt to allocate costs to cost/profit centres based
on actual expenditure
Both direct and indirect costs must be included in costing Lead to inconsistency
However, overheads can not be directly allocated to a May be misleading
particular unit of production Must allocate costs on the same basis every year to allow
for comparisons
13.3. Cost and profit centres
13.7. Contribution or marginal costing
Cost centres
Allocates only direct costs to relevant profit/cost centres
A section of a business (department) to which costs can Marginal cost = cost of producing 1 extra unit = variable
be allocated or charged direct costs
Contribution = revenue (selling price) – variable costs
Profit centres (marginal cost)
Contribution is NOT equal to profit
WWW.ZNOTES.ORG
Profit = contribution – fixed costs  Unit contribution = Planning

selling price – marginal cost Effective resource allocation
Setting targets to be achieved
13.8. Should a firm stop making a Coordination
Monitoring and controlling
product? Modifying
Measuring and assessing performance
Marginal costing shows managers which product is
contributing greatest/least towards profits and overheads
Using full costing, any loss making products should be
14.2. Key Features of Budgeting
stopped
Not a forecast
It ignores their contribution towards fixed costs
Budgets are plans that the business wants to fulfil.
Ending production of products making positive
Forecasts are predictions made for the future, given
contributions can lead to fall in profits
certain conditions
Ignores that certain cost centres may incur higher fixed
Can be made for any measurable operation
costs than others
Coordination between departments is essential
Qualitative factors must be considered
Must be made while coordinating with employees who
will be directly responsible to meet the targets
13.9. Should a business accept a Delegated budget involves giving some delegated
contract or a purchase offer at below authority over the setting and achievement of budgets to
junior managers. This will improve worker motivation
full cost?
Profits may increase even if sales are made below the full
14.3. Stages in preparing budgets
unit cost as they will provide a small contribution towards
1. Objectives and strategies for the coming year
the payment of fixed costs which have to be paid either
1. This is based on previous performance,
way
external environment and market research
Problems:
2. Identifying the key or limiting factor
Existing customers may demand lower prices
1. This is sales
Negatively effect brand image
2. No errors and mistakes can be made here
No excess capacity
3. Prepare sales budget
1. Consult all department managers
13.10. Costing – evaluation 4. Prepare subsidiary budgets
1. Cost, labour, admin, cash
Full costing 5. Coordinate the budgets to ensure consistency
6. Prepare a master budget
Useful for single product firms 7. Present to board of directors
Provides a quick guideline to the costs
Inaccurate costing figure, incorrect decisions made
Can not be used to make comparisons
14.4. Setting budgets
Incremental budgets
Contribution or marginal costing
Uses last year’s budget as a basis and an adjustment
Assists decision making is made for the coming year, specifically for inflation
Zero budgeting
Overheads may be ignored completely
Setting budgets to zero each year and budget holder
More than 1 costing method must be considered have to argue their case to receive any finance
Qualitative factors must be considered Time consuming
Provides incentive for managers to defend their work
Flexible budgeting
14. Budgets Cost budgets for each expense are allowed to vary if
sales or production vary from budgeted levels
Planning for future provides a sense of direction and Helps variance calculation
purpose
Budget is a detailed financial plan for the future 14.5. Potential limitations of budgeting
Budgets help measure performance of each
department/division Lack of flexibilities
Purpose of budgets: Focused on short term
WWW.ZNOTES.ORG
May lead to unnecessary spending

Training needs must be met
Setting budgets for new projects – time taking, not
realistic
14.6. Variance analysis

Variance is the difference between budgeted and actual
figures
Important as:
Measures differences from planned and actual 15.3. Amendments to published
Assists in analysing causes of deviations from the
accounts
budget
Help make more accurate budgets 1. Goodwill
Budgeted costs less than actual – adverse 1. It’s the reputation and prestige of a business
Budgeted revenue less than actual – favourable 2. Value of the business above its physical assets
Budgeted costs more than actual – favourable 3. Usually goodwill of a business is written off
Budgeted revenue more than actual – adverse 4. Should not appear as an asset of an existing
company as it can easily be disappeared
5. Appears in the SOFP of a business which
bought the other business, which must be
written off then
2. Valuing intangible assets
1. Goodwill is an intangible asset
2. Patents, copyrights, R&D research are all
intangible assets
14.7. Budgets – evaluation 3. Known as intellectual property
4. Difficult to place a monetary value
Time consuming 5. Only recorded in SOFP during merger/takeover
Fails to reflect changes – inflexible 6. Market value may exceed need book value
Helps assess performance providing an incorrect view to stakeholders
Provides a sense of direction 3. Capital expenditure and revenue expenditure
All businesses undertake some form of financial planning 1. Capital expenditure involves spending on non
current assets which is not recurring and can
be retained for more than 1 year
15. Contents of published 2. Revenue expenditure is the day to day costs
incurred by a business
accounts 3. Capital expenditure is recorded in the SOFP
and revenue expenditure is recorded in the
income statement
15.1. Amending Income Statements
Format must be the same 15.4. Depreciation of assets
Changes in units sold/produced directly affects sales
revenue and variable costs It is the decline in the estimated value of a noon-current
Overheads may change according to sales asset over time
This occurs due to:
Wear and tear
15.2. Amendments to statement of Technological change
financial position Each year’s depreciation is recorded in the income
statement as a cost
NCA are recorded at net book value in the SOFP
Profits are not overstated (prudence)
It is a non-cash expense and has no impact on cash flow
of a business
WWW.ZNOTES.ORG
Compared with the interest cost of borrowing – less than

15.5. Straight line method of
interest, increase borrowings = lower returns
depreciation Can be increased by increasing the profitable and
efficient use of assets
Cost – residual value / expected useful life Not linked with the risks associated
Easy to use and understand
Estimated life expectancy and residual value which may
be wrong
New NCA depreciate more quickly in the beginning years
than in the subsequent years (diminishing return method
to be used)
No recognition of rapid changes in technology
Repairs and maintenance costs are ignored
16.3. Financial efficiency ratios
15.6. Valuation of inventories
Inventory turnover ratio
Inventory maybe raw materials, work in progress and
Cost of goods sold/value of inventories
finished goods
Records the number of times inventory is bought and
They are recorded at the lower of cost and net realisable
resold
value
Measured in times
Net realisable value is the amount for which inventory
Higher the number, more efficient
can be sold minus cost of selling
Day sales in trade receivables ratio

16. Analysis of published Trade receivables/revenue * 365
accounts Measures how long it takes for a business to recover
payments from trade receivables
Shorter, the better as it indicates better control over
16.1. Interpreting company working capital
Can be improved by giving shorter credit periods, cash
performance
discounts, etc
Profitability ratios – compare the gross and operating
profit with sales revenue 16.4. Shareholder or investment ratios
Liquidity ratios – measure of how easily a business can
meet its short term debts Dividend yield ratio
Financial efficiency ratios – indicator of how efficiently the
business is using its resources Measures the rate of return a shareholder gets at the
Shareholder ratios – used by existing/potential investors current share price
to assess the prospects of investment Dividend per share/current share price * 100
Gearing ratio – examine the degree to which the business Dividend per share = total annual dividends/total number
relies on long term debt to fund operations of issued shares
If share price rises due to improved prospects however
dividend remains the same, dividend yield will fall
16.2. Profitability ratios
Dividend yield should be compared with other
investment returns
Return on capital employed
Can be compared with previous years/competitors
Operating profit/capital employed * 100
Capital employed = non-current assets + current assets –
Dividend cover ratio
current liability
Dividend cover ratio – profit for the year/annual
Capital employed = non-current liabilities + shareholders
dividends
equity
This ratio indicates how many times the ordinary share
Compares the company’s profit with the capital which has
dividend can be paid after tax and interest
been invested
Higher the ratio, more dividends can be paid, indicating
Higher the %, the better
higher margin for reinvesting in the business
Used to compare with competitors and previous years
Lower ratio indicates, low retained earnings
Can be compared with other forms of investment – saving
in a bank
WWW.ZNOTES.ORG
Price/earnings ratio (P/E ratio) They do not solve problems but rather just highlight the
issues
P/E ratio – current share price/earnings per share
Earnings per share – profit for the year/number of issued
shares 17. Investment Appraisal
It reflects the confidence the investors have in future
prospects of the business 17.1. What is meant by investment
Higher P/E ratio, investors expect higher earnings growth
The ratio should be compared with business in the SAME appraisal?
industry only
It involves evaluating the profitability or desirability of an
investment project
16.5. Gearing ratio These are quantitative techniques to assess the financial
feasibility
It measures the degree to which the capital of the
It helps managers understand whether future returns will
business is financed from long-term loans
be greater than the costs and by how much
Non-current liabilities/shareholders equity + non-current
Non-financial factors are equally important and should
liabilities * 100
also be considered
The ratio indicates the level of which the company’s
Quantitative methods of appraisal compare the cash
assets are financed from external long-term borrowing
outflows with the expected cash inflows of a project
Above 50% leads to highly geared
Higher the ratio, greater is the risk
Risk arises from 2 reasons: 17.2. Quantitative investment appraisal
Higher the borrowing, more interest must be paid
– what information is necessary?
Interest still has to be paid
Debts have to be paid eventually, affecting liquidity To be able to judge the profitability of a project through
negatively quantitative investment appraisal methods, the following
Low gearing ratio indicates a safe business strategy information is required:
Initial capital cost
16.6. Interest cover ratio Estimated life expectancy
Residual value of the investment
It assesses how many times a firm could pay its annual Forecasted net returns or net cash flows
interest charges out of current operating profit
Interest cover – operating profit/annual interest paid 17.3. Forecasting cash flows in an
Higher the figure, less risky the current borrowings are
uncertain environment
16.7. Ratio analysis – evaluation
We assume cash inflows equal annual revenues
Cash outflows equal annual operating costs
Help take important decisions –
Net cash flow = cash inflow – cash outflow
Whether or not to invest in a business
Net cash flow is compared to the initial investment cost
Whether or not to lend money to a business
External factors may reduce the accuracy of these
Whether profitability is rising or falling
estimates
Whether the management are using resources
efficiently
17.4. Payback period
16.8. Limitations of ratio analysis
Payback period is the length of time it takes for the net
cash inflows to pay back the original capital cost of
One ratio result is not helpful. These results must be
investment
compared with other business and past result
Step 1: list cash inflows
Inter-firm comparisons should only be done with
Step 2: calculate cumulative cash inflows
businesses in the same industry
Step 3: identify the year with last negative cash inflow
Trend analysis doesn’t take into account external factors
Step 4: Use formula: Additional net cash flow/annual cash
which affect business prospects
flow * 12
Different companies can use different methods of valuing
Example:
their assets leading to differences in results
Ratios only take into account quantitative data and ignore
qualitative information
WWW.ZNOTES.ORG
In order to compare projects with different ARR and

payback periods, managers require different appraisal
methods with consider both the size of cash flow and
timing
Discounting is the process of reducing the value of future
cash flows to give them their value in today’s terms
Discounting calculates the present values of future cash
flows so that investment projects can be compared with
each other by considering today’s value of their returns
Year 0 = time period in which the investment was

17.7. Discounting – how is it done?
made
Present value of future money depends on:
Cash flow during this time is negative, indicated by
Interest rates – higher the interest rate today, less
brackets ()
value future cash has in today’s money
Cash flow is positive in year 3, however we need to
note that the entire year 3 is not going to be used to How long in future it is received – longer, lesser value
repay the capital cost as only 50000 is due and year 3
has cash inflow of 150000 17.8. Discounted payback
Using the formula: 50000/150000*12 = 4 months
Payback period = 2 years, 4 months It used discounted cash flows to calculate the payback
Longer the pay back period, more uncertain the period of the capital cost
investment is To get discounted cash flows, you multiple the net cash
Inflation may make future cash flows less in real value flow with the discount factor
Capital has an opportunity cost, if borrowed, interest Then, use discounted cash flow to calculate the payback
must be paid period
17.9. Net present value

Net present value is today’s value of the estimated cash
flows resulting from an investment
Stage 1: multiply discount factors by net cash flows
Step 2: add the discounted cash flows
Step 3: subtract the capital cost to give the NPV
Cash flows in year 0 are NOT discounted
17.5. Accounting rate of return (ARR) If discount rate is greater than the cost of borrowing the
capital cost, the investment will be profitable
ARR measures the annual profitability of an investment
If NPV is greater than 0, the business should go ahead
as a percentage of the initial investment
with the investment
ARR = annual profits (net cash flow)/initial capital cost *
100
ARR = annual profit (net cash flow)/average capital cost *
100
ARR = initial capital cost – residual capital value/2
Step 1: add all positive cash flows
Step 2: subtract initial cost of investment
Step 3: divide by lifespan
17.10. Internal rate of return
Step 4: calculate the % return
Internal rate of return is the rate of discount that yields a
net present value of zero – the higher the IRR, the more
profitable the investment is
This rate must be compared with IRR of other projects,
expected cost of capital, rate of interest, cut-off rate
As the discounted rate increases, NPV reduces until
negative values are reached. Plotting this on a graph can
17.6. Discounting future cash flows help estimate IRR
WWW.ZNOTES.ORG
Objectives
Competition
Factors of production (resources)
Other strengths on the business
17.11. Qualitative factors – investment 18.4. Need for strategic management

decisions are not just about profit
Strategic management includes analysis, choice and
Impact on the environment and the local community implementation
Risks involved with certain projects Change management leads to resistance, a business
Aims and objectives of a business must control this through strategic implementation
Different managers are prepared to accept different Failing to do this will make the business inflexible and
degrees of risk lead to incorrect long-term decisions
17.12. Investment appraisal – evaluation 18.5. Strategy VS Tactic
Users of the information maybe misled into assuming Strategy is long term, tactic is short term
that the results must be certain and definite Strategy can not be reversed
Due to uncertainties, investment appraisal methods Strategy is made by to management, tactic is made by
ONLY act as guides which help managers make their final department heads, subordinates
decision Strategies affect every department, tactics are
Different methods can lead to conflicting results. It department/division specific
depends on the manager’s attitude towards risk
Business objectives must be considered 18.6. Competitive advantage
It is an edge a business has over other businesses
18. What is Strategic Can be achieved through –
Cheaper price
Management? USP (product differentiation)
Quality
18.1. Corporate Strategy Brand loyalty
Same product, cheaper price
A strategy is a plan, used as a basis to create tactics. They Better quality, higher price
are used to help achieve overall objectives. How to achieve this –
Tactics are smaller, short-term plans to achieve strategies Market research
Strategic management involves managing resources Lean production
(factors of production) to achieve your plans and Training
strategies. Process innovation
Strategic management is a long term process. Decisions Technology/automation
are made by board of directions, CEO, CFO (senior
managers)
Organisational structure must be adapted to the strategy
19. Strategic Analysis
to continue efficient production
It is the process of conducting research into the business
environment within which an organisation operates, and
18.2. Stages of strategic management into the organisation itself, to help form future strategies
It involves looking in detail, at the current position and
1. Analyse the present situation
predict changes to the future, ensuring they fit with the
2. Set vision, mission and objectives
long term strategy
3. Prepare strategies
Answers 3 main questions:
4. Integration – coordinating between different
Where is the business now?
departments
How might the business be affected by what is
5. Allocate resources
happening or likely to happen?
6. Monitor, review and evaluate
How could the business respond to these likely
changes?
18.3. Factors considered when choosing \
a strategy?
WWW.ZNOTES.ORG
Vision and mission provide a sense of direction and focus

19.2. SWOT Analysis
and are the basis of developing strategies
SWOT analysis is a form of strategic analysis that
identifies and analyses the main internal strengths and 19.5. Boston Matrix
weaknesses and external opportunities and threats that
will influence the future direction and success of a It is a method of analysing the product portfolio of a
business business in terms of market share and market growth
S – STRENGTHS – Internal factors of a business, which can
be a basis to develop their competitive advantage.
Identified through internal audits
W – WEAKNESSES – Internal negative factors, such as
poor training and motivation
O – OPPORTUNITIES – Potential areas of expansion for
the business to make higher profits. Identified through
external audits
T – THREATS – External factors about the business’s
economic environment, market conditions which may
negatively affect the business performance
Helps managers assess the likely success of future
strategies and their constrains
Not necessary to pursue the most profitable option,
rather focus on developing a USP by exploiting the
strengths and opportunities
Not sufficient to carry out only SWOT
It is subjective Low market growth & high market share – CASH COW (A)
No quantitative data Well established product, mature market
Should be used as ONLY a guide High positive cash flow, profits
Low promotional and marketing costs
19.3. PESTEL Analysis Maintain cash cows for as long as possible
High market growth & high market share – STAR (B)
The strategic analysis of a firm’s macro environment Successful product, expanding market
including political, economic, social and technological Maintain market position
factors High marketing and promotion costs – product
P – Political differentiation
E – Economical High revenue generation
S – Social High market growth & low market share – PROBLEM
T – Technological CHILD (C)
E – Environmental Consumes resources, generates very little return
L – Legal/Legislation Heavy promotion expenditure to help become cash
Helps assess the chance of success of a business strategy cow
PESTEL is complementary to SWOT, not an alternative Uncertain future – quick decisions
Must be constantly updated – dynamic business Low market growth & low market share – DOG (D)
environment Offers very little – sales and cash flow
Replaced/withdrawn from the market
19.4. Business vision/mission Helps identify products which require support, corrective
action through strategies –
statements and strategic analysis Building – problem child products to be turned into
cash cows
Mission statement is a statement of the business’s core Holding – continuing the star product support
purpose and focus, phrased in a way to motivate Milking – using cash flow from cash cows to invest in
employees and to stimulate interest by outside groups other products in the portfolio
Vision statement is a statement of what the organisation Divesting – identifying dogs and stopping their
would like to achieve or accomplish in the long term production
Mission statement should answer – A business should aim for a balanced portfolio, not too
What do we do? many problem children or dogs
For whom do we do it? Relevant when –
What is the benefit? Analysing performance off existing portfolio
WWW.ZNOTES.ORG
Planning action within existing products Helps firms identify whether or not to enter the market –
Planning introduction of new products profitability, competition, whether or not to stay in the
Business success depends on the accuracy of analysis, market
skills and experience of managers Develop strategies to improve competitive position
Can not predict future, tell what will have to future sales Product differentiation
Only a planning tool, very complex Buying out rivals
Assumes high profit and high market share are directly Market segmentation
linked Communicate and collude with competitors
Rapidly changing markets, may not remain the same
19.6. Porter’s Five Force Analysis Complex
Michael Porter identified 5 main forces that models an 19.7. Core competencies
industry
Core competence is an important business capability that
It can be used to build a competitive edge and helps gives a firm competitive advantage
understand the business’s external environment Develop core competencies to gain competitive
advantage as they help develop core products
Core products are products based on a business’s core
competences, but not necessarily for the final consumer
Being good at one product isn’t the same as their core
competence
It depends on integrating multiple technologies and
different product skills which already exist in the business
Doesn’t always require huge R&D expenditure
Barriers to entry 20. Strategic Choice

How easily can new competitors enter the market
Becomes a threat when: Different options available and techniques used to make
Low EOS a choice
Cheap technology needed Factors influencing decisions –
Easy to access distribution channels Resources (capital available, costs)
No patents/legal restrictions Experience and knowledge (core competencies)
Low need for product differentiation This process is done based on the management’s
Power of buyers judgement and skills
Power of customers on the industry It is a subjective process, differs from people to people
Higher power when:
Small, undifferentiated suppliers 20.2. Techniques
Low cost of switching
Limited consumers 1. Ansoff’s matrix
Power of suppliers 2. Force field analysis
High cost of switching 3. Decision tree analysis
High brand image 4. Investment appraisal
Little bargaining power for customers
Threat of substitutes
Substitute products in other industries
20.3. Ansoff matrix
Competitive rivalry
It is used to show the degree of risk associated with the 4
Key, most important part
growth strategies of market penetration, market
Determines the level of competition in an industry
development, product development and diversification
Determined by the other 4 forces
2 main variables:
High rivalry when:
Market to operate
Cheap and easy for new firms to enter
Product to sell
Threat from substitute products
Market –
High supplier power
Remain in the existing market
High consumer power
Enter new market
Large number of firms with similar market share
Product –
High fixed costs
Continue selling existing product
Slow market growth
WWW.ZNOTES.ORG
Develop new ones
Market penetration involves achieving higher market

shares in existing markets with existing products
Low risk – market penetration Conducting a force field analysis:
Product development involves the development and sale Analyse the current and desired situation
of new products in existing markets List the driving and constraining factors
Market development involves selling existing products in Allocate a numerical score to each
new markets Place them on the force field diagram
Product development involves innovation Sum them and establish whether it is worth moving
Market development involves repositioning ahead with the proposal
Medium risk – market development, product Identify how to reduce the constraining factors
development Unskilled or inexperienced managers may not identify all
Diversification involves selling, different, unrelated the all the relevant factors
products in new markets Allocation of numerical values is subjective
Diversification involves identifying new areas for growth.
If successful, it reduces the overall risk of the business 20.6. Decision Tree analysis
High risk – diversification
A diagram that sets out the options connected with a
20.4. Evaluation – Ansoff’s matrix decision and the outcomes and economic returns that
may result
Allows analyses of the degree of risk associated with each Main features of a business decision:
business strategy All of the options open to a manager
Subjective, requires further research Different possible outcomes which can arise
Only considers 2 factors Chances of these outcomes
Must consider external factors – SWOT, PESTLE analysis Economic returns
Further research beyond the matrix is required Depends on the accuracy of data
Probabilities may be according to past data, not always
true for future
20.5. Force field analysis Aid the decision making process, cannot replace risk and
impact of non-numerical, qualitative factors
It is a technique for identifying and analysing the positive
consideration
factors that support a decision and negative factors that
Features of a decision tree diagram:
constrain it
Constructed from left to right
Helps managers understand the pros and cons of a
Each branch represents an option with the
decision, helping them strengthen the driving factors and
consequences and chances of their occurrence
reduce the negative factors
Circles show the range of outcomes
Placed on a force field diagram
Probabilities are shown alongside the outcomes
The economic returns of every outcome are given
WWW.ZNOTES.ORG
Helps communicate the sense of purpose and focus to all

21. Strategic Implementation managers and employees
Allows the original objectives to be compared with actual
Implementation means putting into effect to carrying out outcomes to see how well the company has performed
an idea Planning process helps managers consider the business’s
Strategic implementation is the process of planning, strengths and weaknesses
allocating and controlling resources to support the
chosen strategies Limitations
Effective strategic implementation requires:
Appropriate organisational structure Maybe made obsolete due to rapid and unexpected
Adequate resources internal and external changes
Well motivated staff The plan must be adaptable and flexible
Leadership style and organisational culture which
encourages change The value of corporate plans
Control and review systems to monitor progress
Corporate plan contents must be shared with:
Potential investors
21.2. Business Plans Major lenders
Other stakeholder groups
A business plan is a written document that describes a
Employees
business, its objectives and its strategies, the market it is
in and its financial forecasts
Contents of a business plan: 21.6. The main influences on a
Executive summary - overview of the business corporate plan
Description of the business opportunity
Marketing and sales strategy Internal
Management team and personnel
Operations Financial resources
Financial forecasts Operating capacity
Managerial skills and experience
21.3. Importance of business plans Staff numbers and skills
Culture of the organisation
Helps obtain finance
Provides a sense of direction and purpose External
Helps develop objectives and strategies of a business
Original forecasts can act as budgets and control Macro-economic conditions
benchmarks Central bank and government policy changes
Can be rewritten and adapted to accommodate new and Technology changes
revised strategies Competitors actions
21.4. Corporate plans - what do they 21.7. Corporate culture - what is meant
contain? by this
A corporate plan is a methodical plan containing the Corporate culture is the values, attitudes and beliefs of
details of the organisation’s central objectives and the the people working in an organisation that control the
strategies to be followed to achieve them way they interact with each other and with external
They include: stakeholder groups
Overall objectives Corporate culture - the way we do things around here
Strategies to meet objectives The culture of an organisation gives it a sense of identity
Main objectives of each key departments It effects the way employees act, take decisions
21.5. Corporate plans - what are they 21.8. The main types of corporate
for? culture
Benefits Power culture
Helps have a clear focus and a sense of purpose Concentrating power among just a few people
WWW.ZNOTES.ORG
Autocratic leadership style

21.11. Corporate culture and strategic
Role culture implementation
Each member of staff has a clearly defined job title and How does a corporation’s culture affect strategic
role implementation
Bureaucratic organisations
Employees operate within the rules and show little In a power culture, the business will not consult and
creativity communicate with staff on major strategic changes
Power and influence is determined by a person’s position They will be imposed in a take it or leave it attitude
May lead to resentment and resistance
Task culture In a task/people culture, active participation will be
encouraged
Based on cooperation and teamwork
Two-way communication may lead to employees willingly
Similar to a matrix structure accepting change
Works in teams and are encouraged to be creative Strong culture promotes and facilitates successful
implementation, weak culture doesn’t
Person culture
Strong culture - widespread share of common beliefs ,
practices and norms in a business
When individuals are given the freedom to express
themselves fully and make decisions for themselves
Evaluation - importance of corporate culture
Most creative type of culture
It drives people’s behaviour and attitudes
Entrepreneurial culture Determines the way employees are treated
Supports brand image and relationships
This encourages management and workers to take risks,
Determines how strategic decisions are made and
to come up with new ideas and test out new business
implemented
ventures
Organisational culture affects economic performance and
Success is rewarded but failure is not criticised
long term success
21.9. Changing organisational culture -

21.12. Change - techniques for
possible reasons for change
implementing, managing and
Product led business responds to changing market controlling change
conditions
Investors may demand more transparency and What change means
recognition
Merger and takeover Change management involves planning, implementing,
Declining profits and market share controlling and reviewing the movement of an
Change in economic conditions organisation from its current state to a new one
It is done in response to internal and external pressures
21.10. Problems of changing Occurs whether or not we want it
Evolutionary or incremental change occurs slowly over a
organisational culture period of time
Dramatic or revolutionary change id unanticipated
Time-taking
May involve changes to personnel, job descriptions, Major causes of change
communication methods and working practices
Common elements to the different approaches:
Focus on the positive aspects and how to strengthen
them and how to reduce the negative aspects
Establish new objectives and mission statement
Encourage ‘bottom-up’ participation of workers
Train staff in new procedures and new ways of
working to reflect the changed value system
Change the staff reward system
WWW.ZNOTES.ORG
Ideas are exchanged within these groups, helped develop

an appropriate action plan
Responsibility of implementing the plan remains with the
senior manager
21.13. Promoting change

Process of promoting change:
Establish a sense of urgency
Create an effective project team to lead the change
Develop a vision and strategy for change
Communicate the changed vision
Empower people to take actions
Stages of the change process Generate short term gains which benefit many people
Consolidate these gains to produce more change
1. Where are we now and why is change necessary Build change into the culture
2. New vision and objectives
3. Ensure resources are in place to enable change
4. Give maximum warning about the change to
21.14. Resistance to change
employees
Reasons why managers and employees may resent and
5. Involve staff in the plan for change and its
resist change:
implementation
Fear of the unknown
6. Communicate
Fear of failure
7. Introduce initial changes that bring quick results
Losing something of value
8. Focus on training
False beliefs about the need for change
9. Sell the benefits
Lack of trust
10. Always remember the effects on individuals
Inertia - reluctance to change in order to maintain
11. Check on how individuals are coping and support
their status quo
them
Lead change, not just manage it 21.15. Contingency planning and crisis
Managing change involves:
management
New objectives
It involves preparing an organisation’s resources for
Resources (FOP and finance) available for
unlikely events
implementation
It involves identifying how to minimise the potential
Actions to ensure change is introduced
impact of a disaster and prevent it from happening in the
Leading change involves:
first place
Worker motivation at all levels of hierarchy
Steps in contingency planning:
Dynamic leaders
Identify the potential disasters that could affect the
Corporate culture which encourages change
business
Support available for all managers to make the
Assess the likelihood of these occurring
process easier
Minimise the potential impact of risks
Involves protecting the company’s assets,
Project champion
reputation and public goodwill
Project champion is a person assigned to support and Plan for continued operations of the business
drive a project forward, who explains the benefits of Advantages and limitations of contingency planning:
change and supports the team in its implementation \
Someone who has enough influence in the organisation
Not involved in day-to-day planning and implementation
Help remove barriers to implementation
Project groups or teams
Project groups are created by an organisation to address

a problem that requires input from different specialists
WWW.ZNOTES.ORG
22. Enterprise Resource 22.3. Benefits and Drawbacks
Planning Benefits –
Production is according to demand, more efficient, lower

ERP involves the use of a single computer application to wastage
plan the purchase and the use of resources in an More sustainable
organisation to improve the efficiency of operations Ability to use JIT more efficiently
Using one database program, it becomes easier to Reduces costs – supply chain management
coordinate and link together all of the support systems of Better customer service
a business Better coordination
Supply chain includes all the stages in the production Increased information available to the management, help
process from obtaining raw materials to selling to the future decision making
consumer – from point of origin to point of consumption
Limitations –
22.2. Stages of supply chain High costs of database and computer systems
management May cause resentment as not using the tried and tested
ways of operations
1. Plan – decide which resources Implementation takes time – 1-3 years
2. Suppliers – choose the most cost effective suppliers
3. Costs – record at every stage of production 22.4. Evaluation
4. Manufacture – check quality and monitor progress
5. Deliver – identify and pick cost effective transport Not for short-term
systems Effective way to save costs and increase competitiveness
6. Returns – reimburse customers for any defects and Expensive
returns If want to do both B2B and B2C, ERP is necessary
WWW.ZNOTES.ORG
CAIE A2 LEVEL
Business (9609)
Copyright 2021 by ZNotes

These notes have been created by Ria Agrawal for the 2020-22 syllabus
This website and its content is copyright of ZNotes Foundation - © ZNotes Foundation 2022. All rights reserved.
The document contains images and excerpts of text from educational resources available on the internet and
printed books. If you are the owner of such media, test or visual, utilized in this document and do not accept its
usage then we urge you to contact us and we would immediately replace said media.
No part of this document may be copied or re-uploaded to another website without the express, written
permission of the copyright owner. Under no conditions may this document be distributed under the name of
false author(s) or sold for financial gain; the document is solely meant for educational purposes and it is to remain
a property available to all at no cost. It is current freely available from the website www.znotes.org
This work is licensed under a Creative Commons Attribution-NonCommerical-ShareAlike 4.0 International License.

Caie A2 Business 9609 Theory v1

Uploaded by

Copyright:

Available Formats

Caie A2 Business 9609 Theory v1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Caie A2 Business 9609 Theory v1

Uploaded by

Copyright:

Available Formats

ZNOTES.

UPDATED TO 2020-22 SYLLABUS

Voluntary export restrictions – an export country

Businesses Benefits of free trade

Pros Cons Wider choice of goods and services

Country A business which produces in many countries

If value of imports exceeds

Benefits Drawbacks 2.2. Synergy and integration

2.1. External growth 2.4. Joint ventures and strategic

3. External influences on 3.3. The law, consumer rights and

3.5. The law and business competition

Accounting and Financial Transparency Long-term balance of payments

Expensive 4.2. Economic growth

Fall in the real value of debt

Business strategies during inflation

Cost push inflation – 4.8. Unemployment

Deindustrialisation Cheaper in international markets, increased

Costs of unemployment 4.11. Macro-economic policies

Exchange rate fluctuations

Demand is greater than supply – appreciation – rise in the

Appreciation of the currency

Cheaper raw materials, increased competitiveness

Depreciation of the currency

Monetary policy and the exchange rate

Drawbacks of floating exchange rate & benefits of joining

Subsidies to lower prices Hard HRM

Gives greater variety

5.4. Part time and flexi time contract

6. Ways to improve labour productivity: Depends on culture, legal structure etc

Factors affecting skills of workers needed:

1. Pace of technological change

5.13. Trade unions and their role in HRM 5.16. Evaluation

Union recognition and collective bargaining

Conflict of interest It involves keeping all important decision making powers

6.8. Organisational structure – the Written communication

7. Business Communication Reduces social contact, interpersonal contact is lost

5. Establish trust between receiver and sender

7.8. Formal communication networks

Poor attitudes of either the send or the receiver

Sender is not trusted

7.10. Horizontal communication

8.3. Situational analysis

They give a sense of direction \n

8.5. Marketing strategies

8.6. Marketing tactics Marketing planning – evaluation

8.7. Marketing budget Complex

Promotional elasticity of demand

Significance of R&D and possible

Facilitator collects and coordinates with experts

New ideas fail due to design defects/manufacturing

Why sell products in other countries?

Saturated home markets

3. Goods don’t have to be physically exported,

10.2. Impact on average fixed costs

10.4. Excess capacity – evaluating the

2. Long term Security

10.8. Outsourcing evaluation

10.5. Working at full capacity

Higher productivity Finance