1.1 • enhance reputation/image • increase competitiveness • increase
sales • increase profit • to gain awards/recognition • encourage repeat
business/customer loyalty • satisfy/motivate employees • increase
staff retention • staff recruitment easier • unique selling point •
satisfy stakeholder needs • reduces stakeholder issues (award for
each different stakeholder if correct) • ethical consumerism.
1.2 Improve - above the minimum wage • good working environment • fair wage
• avoid using child labour • non-financial incentives.
1.3 Reasons to be ethical - o • social trend • corporate social
responsibility • attract ethical investors • mission statement • ability
to charge premium prices • lower production costs allowing ethical
practices and high profits • government regulations encouraging
ethical practices. • shareholders demand higher dividends • lose
control • higher profit • risk of takeover.
1.4 Laws are legal requirements while ethics are moral obligations.
2.1.1 Advantages: Easy to construct because it is based on past performance . Likely to be more realistic and
attainable because it is based on figures from previous years
2.1.2 Disadvantages: Unexpected events would render it unachievable (1) eg a sharp rise in interest rates .
Assumes that there are no major changes from one year to another.
2.2.1 Advantages: As it is based on needs and benefits allocation of resources tends to be more efficient (1).
Drives managers to find cost effective ways to improve operations (1). Useful for service departments
where the output is difficult to identify (1). Increases staff motivation by providing greater initiative and
responsibility in decision-making (1). Increases communication and coordination within the organisation (1).
Forces cost centres to identify their mission and their relationship to overall goals
2.2.2 Disadvantages: It is time-consuming because decision makers are forced to justify every detail related to
expenditure . Honesty of the managers must be reliable and uniform .
2.3 Cont. Incremental budgeting
2.3.1 Advantages: The budget is stable and change is gradual . Managers can operate their departments on a
consistent basis . The system is relatively simple to operate and easy to understand . Co-ordination
between budgets is easier to achieve . The impact of change can be seen quickly
2.3.2 Disadvantages: Assumes activities and methods of working will continue in the same way (1). No incentive
for developing new ideas (1). No incentives to reduce costs (1). Encourages spending up to the budget so
that the budget is maintained next year (1). The budget may become out of date and no longer relate to the
level of activity or type of work being carried out (1). The priority for resources may have changed since the
budgets were set originally (1).
3.1 Variable - change as output varies.
3.2 Fixed - do not vary according to the amount of output
3.3 Break Even
3.3.1 W -external factors • ignores economies of scale • assumes selling price
does not change • selling price might change with bulk orders • fixed costs
could rise with new proposals • variable costs could change • assumes
everything produced is sold • does not account for a range of products •
apportionment of fixed costs if more than one product is produced •
assumes all costs/revenue are linear • does not take into account start-up
3.3.2 Selling Price - Variable Price
3.3.3 Average Selling Price = Sales revenue divide annual output
3.3.4 Contrubution - Selling price minus variable cost
3.5.1 S - shows viability • shows where more funding is needed • to show
stakeholders e.g. banks • monitor business performance • for budgeting purposes
• compare proposals • shows where savings can be made.
3.6 actual wages vs budged wages • more employees might have
been needed • (minimum) wage has increased • staff may have
been given a pay rise • employees worked more hours than
anticipated/overtime • more skilled employees were used.
4.1.1 Social – preference for reusable nappies, care for the environment, etc •
Legal – minimum wage, tax payable, health and safety laws
4.1.2 Technology – IT software/hardware, robots
4.1.3 Political – government policies on foreign investments, incentives
offered to businesses, stability of ruling party, tax
4.1.4 • Legal – minimum wage, tax payable, health and safety laws
4.2.2 s - to help respond to external factors which might impact on
business/to help draw up contingency plans for changes in
external environment/ to help to make strategic decisions
based on social trends/political factors.
4.2.3 Political – government campaign/funding, change of government, EU funding
4.2.4 • Technology – equipment/machinery to aid farming • Demand • Cost of supplies
4.3.2 S- examines the internal/external environment a business operates in •
can build on strengths • overcome weaknesses • make sure
opportunities are identified and exploited • know what threats the
business faces • highlight the positives. Indicative benefits: • better
planning • higher profits • greater control • reduce risk • increase
chance of success • exploit opportunities • get ahead of competitors •
allows contingency plans to be drawn up • supports financial
application • resolve issues before they occur • devise a solution.
4.4 Ansoffs Matrix
18.104.22.168 Market Penetration
22.214.171.124 New Product Development
126.96.36.199 Market Development
4.4.5 S - Brief outlook
4.4.6 W - Does not consider other factors - competition
4.4.7 assesses levels of risk the matrix is split into four
quadrants – market penetration, product development,
market development and diversification enables a firm
to determine into which quadrant a planned investment
fits diversification - a new product in a new market
diversification being the most risky option.
4.5 Boston Matrix
5 External Stakeholders
5.1.1 Raise awarness to public
5.1.2 Provide Grants
5.1.3 Government loans
5.1.4 Grant planning permission
5.1.5 Changes in legislation
5.1.6 advice on start-up
5.1.7 tax break
5.1.8 price cap
5.1.9 Makes sure employes paid fairly
5.2 Local Communities Impact
5.2.1 • could protest if not happy • could complain • might generate bad publicity • might
object planning applications • write to the press • talk to local radio • might boycott
produce/service • frequent the business • recommend business to others.
5.3 government/revenue and customs/tax office(1) • Local
government/council/parish council (1) • customers (1) • competitors (1)
• local community (1) • suppliers (1) • environmentalists/pressure
groups (1) • bank (1) • investors (1) • trade unions (1)
6.1.1 A type of license that a party acquires to allow
them to have access to a business's proprietary
knowledge, processes and trademarks in order
to allow the party to sell a product or provide a
service under the business's name.
6.1.2 S - trade under an established brand • established customer base •
support/advice network • training is provided • reduced risk • easier to
obtain finance • advertising is paid for • financial support • equipment
6.1.3 W - royalty fees/pay percentage of profit to franchisor • high start up payment to
franchisor • does not have full control • has to follow rules laid down by franchisor •
franchisor could close down • dependent on reputation/image of other franchisees •
high targets set by franchisor • set prices • cannot sell other products • cannot
decorate/promote shop own way. • cannot chose geographical location
6.2 Private Limited Business
6.2.1 A type of company that offers limited liability, or legal protection for
its shareholders but that places certain restrictions on its ownership.
These restrictions are defined in the company's bylaws or regulations
and are meant to prevent any hostile takeover attemp.
6.2.2 Tax advatages
6.3 Public Limited Business
6.4 Sole Trader
7 Variance Analysis
7.1 s - identifies adverse/favourable • identifies underspend/overspend • compares actual figures to budget
figures. • monitor and control financial performance • identify overspend • minimise waste • set future
budgets/amend budgets • control expenditure • identify reasons for variance.
8 Order tracking - information on the status of an order •
information on the despatch of an order.
8.1 S - enable planning of
schedule • indicate whether
work can be completed on
9 Technology Software
9.1 Advantages: • Greater yields • Lower maintenance • Lower
wages • Faster output/saves production/admin time • Improved
stock control • Effect on quality/less wastage.
9.2 Disadvantages: • Lack of skills • Costs of hardware and software • Training • Effect on quality/wastage •
Maintenance / breakdown costs • Cost of updates in technology • Reliability • Reliance on technology cost
of upgrade • cost of maintenance • security issues - risk of hacking, virus, firewalls, encryption , storage, cost of electricity
9.3 spreadsheet • accounting package (• formulas can be used
• can be edited/changed • templates can be used.
(e)identify two disadvantages of using IT in a business)
9.4 -methods using it to communicate – emails, video conferencing, skype/webcam
10 Enviromental Importance
10.1 • enhance reputation/image • to meet consumer demand •
competitive advantage • satisfy specific needs of
stakeholders/pressure group • to observe legal requirements • to
minimise contribution to global warming • to minimise pollution •
ethical issues • preserve the environment for the future.
11.1 • interest rates • inflation rate •
recession/growth/state of economy/economic
climate • employment/unemployment rate •
exchange rates • government spending • taxation
(other than VAT) • minimum wage. • recession •
price/availability of raw materials • stakeholders
e.g. government, customers, competitors, local
community, suppliers • insurance premiums •
weather • unexpected events.
11.2 Consequences to moving main workforce - • cash-flow problems •
efficiency of factory • huge variances • objectives not met •
demoralised workforce • project not going to plan • problems
obtaining finance • loss of business. • cause overspending • business
unable to run smoothly.
13.1 Internal: • degree of risk (internal factors) • likelihood of success • cost •
time • profitability • staffing • impact on workforce • retained profit
available • knowledge of the market – experience/expertise • practical
and operational matters
13.2 External: • wider business environment • customer profile • legislation • degree
of risk (external factors) • economic stability • economic conditions – exchange,
interest, inflation rates, etc • social trends • disposable income levels.
13.3 An increase in the national minimum wage
13.3.1 higher labour costs higher cash
outflows decreased net cash flow
lower returns on investment.
13.4 An increase in interest rates
13.4.1 higher costs of business borrowing increased bank loan/overdraft
payments higher cash outflows higher costs of consumer borrowing
decreased disposable income fewer customers/lower sales lower
cash inflows decreased net cash flow lower returns on investment.
20.1 E.G Outflow Year 0 £11,000,000 Inflow =
£1,500,000+£1,500,000+£2,500,000+£2,500,000+ 3, 000,000/4,500,000
Payback period = 4 years and 8 months
21 Quantitative and Qualitative Data
21.1 high degree of risk – diversification - Ansoff’s Matrix likelihood of success – unknown
product/unknown market diversification – spread risk, would not be entirely dependent on the UK
costume jewellery market gap in the market for heat-sensitive babygrows likely increase in
demand for jewellery cost – £11m equity funded plus borrowing requirement sunk costs - strategic
risk when debt funded ARR 8% (lower than current ROCE of 9%) predicted net cash flow for first 6
years £16,280,000 payback period 4 years 8 months (past Pearce’s planned retirement date)
current modest returns on investment company struggling to survive despite being very busy lack
of market research/product testing conversion to plc – time, money, bureaucracy, loss of control,
share price volatility, risk of takeover directors’ conflicting aspirations directors’ different stages of
life directors’ differing domestic situations aims and objectives staffing issues – high absent