Types of Organisations
Describe two main features of a Sole Trader.
A Sole Trader is a business owned and managed by one person. Key features include total control over decision-making and unlimited liability, meaning the owner is personally responsible for all business debts.
State two examples of Internal Stakeholders and two examples of External Stakeholders.
Internal Stakeholders: Employees and Shareholders (or Managers/Directors).
External Stakeholders: Customers and Suppliers (or Government/Local Community).
Define "Internal (Organic) Growth".
Growth achieved through the business's own resources, such as opening new branches or developing new products internally.
Define "Internal Sources of Finance" and explain why they are often the "cheapest" option for a firm.
Funds from within (retained profit/assets). Cheapest because there is no interest to pay and no loss of control/ownership.
Define market segmentation and state one example of a segmentation variable.
Market segmentation is the process of dividing a market into distinct groups of customers who share similar needs or characteristics, in order to target them more effectively. Examples of segmentation variables include age, gender, income, geographic location, or lifestyle.
Distinguish between a Private Limited Company and a Public Limited Company in terms of share ownership and capital raising.
A Private Limited Company (Ltd) sells shares to known individuals (family/friends) and shares cannot be traded on the stock exchange. A Public Limited Company (PLC) can sell shares to the general public, allowing for much greater capital raising.
Explain why Shareholders and Employees might have conflicting interests regarding a company's profit distribution.
Reveal Answer
Shareholders want high dividends to maximize their return on investment, while employees seek higher wages and benefits. Since wages are an operating expense that reduces net profit, a financial gain for one group often results in a direct financial loss for the other.
Describe the difference between Mergers and Acquisitions.
A Merger is when two firms agree to form a new combined entity. An Acquisition (or takeover) is when one firm buys a controlling interest in another.
Justify the use of a Leasing arrangement rather than a bank loan for a startup airline acquiring its first fleet.
Leasing avoids a massive upfront cash outflow (preserving liquidity) and allows the startup to upgrade planes more easily without the risk of asset depreciation.
Distinguish between primary and secondary market research.
Primary (field) research involves collecting new, first-hand data directly from customers, e.g. surveys, interviews, focus groups, and observations. Secondary (desk) research involves using data that already exists, collected by someone else, e.g. government publications, market analyses, and media articles.
Explain why a government might choose to keep certain essential services (like national defense) in the Public Sector.
Public sector services are often "public goods" that are not profitable for private firms to provide, or are too vital for national security/welfare to be left to the profit-driven private sector.
Analyse how a local community (as a pressure group) can influence the decision-making of a factory planning to expand.
The local community can act as a pressure group by organizing protests or lobbying for the denial of planning permits, damaging the factory's brand image and causing costly legal delays. To maintain their social license to operate, management may be forced to invest in expensive pollution-mitigation technology or relocate the expansion entirely.
Explain the concept of "Knowledge and Technology Transfer" as a benefit for a host country.
When an MNC enters a host country, it brings advanced manufacturing techniques, software, and management styles. Local employees learn these skills, which eventually spreads to local businesses, improving the international competitiveness of the host nation.
Justify a strategy to improve the "Acid-test ratio" for a company that currently has a high level of unsold inventory.
Sell stock at a discount to turn it into cash. (Acid-test excludes stock, so turning stock into cash increases the ratio.)
Explain how extension strategies can prolong a product's life during the maturity or decline stage of the product life cycle.
Extension strategies — such as price reductions, product modifications, new promotional campaigns, or entering new markets — aim to boost sales and delay the decline stage, keeping the product profitable for longer rather than allowing it to be withdrawn from the market.
A successful partnership is considering incorporating as a Private Limited Company. Evaluate the impact this change would have on the owners' liability and control.
Owners gain limited liability (protection of personal assets). Control: while they gain "legal personality," they may lose some control if they bring in many new shareholders and must comply with stricter disclosure laws.
Jack Ma stated: "Customers first, employees second, shareholders third." Discuss the implications of this prioritization for a company's long-term survival.
Prioritizing customers first builds strong brand loyalty and consistent revenue, while employees second ensures a motivated workforce capable of delivering high-quality service. In the long term this benefits shareholders (third) by creating a sustainable, profitable business model, though it may cause short-term conflict if dividends are reduced.
Analyse the impact of a Multinational Company (MNC) on the local businesses of a host country.
MNCs provide competition that can force local firms to become more efficient, but they can also "crowd out" local businesses that cannot compete with the MNC's economies of scale.
Analyse the appropriateness of seeking Business Angels for a high-risk tech startup that lacks physical collateral for a bank loan.
Business Angels provide capital without requiring collateral (unlike banks) and often offer mentorship/expertise, though they take an equity stake.
Analyse the importance of having a Unique Selling Point (USP) for a business entering a highly competitive market.
A USP differentiates a business's product from rivals, helping to build customer loyalty and enabling premium pricing, which increases sales revenue and market share. Without a USP, a firm risks competing purely on price, which tends to lower profit margins.
Discuss the extent to which a Social Enterprise (like a Cooperative) can successfully compete with a for-profit PLC in a mass market.
Cooperatives can compete by leveraging customer loyalty (members are owners). However, they often struggle with slow decision-making and limited access to the massive finance that PLCs use to dominate markets.
A firm is facing a financial crisis. Evaluate the strategies management could use to manage the conflicting needs of its Creditors (Banks) and its Employees.
Management could prioritize Creditors by cutting costs (redundancies) to ensure loan repayment and avoid bankruptcy, though this destroys staff morale. Alternatively, they could negotiate temporary wage freezes with Employees to preserve jobs, risking default on debt. The best strategy is often a compromise — renegotiating debt terms while offering employees equity or future bonuses.
Discuss the extent to which the Repatriation of Profits by an MNC outweighs the benefits of Job Creation in a developing host country.
While MNCs create thousands of jobs (reducing unemployment), the profit generated is often sent back to the home country (repatriated) rather than reinvested locally. If the MNC uses exploitative low wages, this "economic drain" may be seen as more damaging than the benefit of low-quality employment.
Evaluate the usefulness of Ratio Analysis when comparing two firms in completely different industries (e.g., a supermarket vs. a software firm).
Limited usefulness. Different industries have different "norms" (e.g., supermarkets have low margins but high volume; software has high margins but high R&D).
Evaluate the effectiveness of below-the-line (BTL) promotion compared to above-the-line (ATL) promotion for a small business with a limited marketing budget.
BTL promotion (e.g. direct mail, sponsorship, loyalty programmes) is directly controlled by the business and targeted at a specific audience, making it more cost-effective for a small budget than ATL promotion (mass media advertising), which reaches a huge audience but is expensive and largely untargeted. However, BTL alone may have limited reach, so a combined (TTL) approach could be more effective if the budget allows.