1.1-1.2 Business & Types of buisness entities
Distinguish between consumer and customer
Consumer - A consumer is someone who consumes a product/goods and services
Customer - A person who purchases goods and services for personal use
Distinguish between strategic objectives as strategies
Strategic objectives are the longer-term goals of a business, such as profit maximization, growth, market standing and increased market share.
Strategies are the various plans of action that businesses use to achieve their targets. They are the long-term plans of the organization as a whole.
Compare organic and inorganic growth by explaining their definitions.
Organic growth is expansion using internal resources (e.g. opening new stores);
Inorganic growth involves external methods like mergers (e.g., Disney acquiring Pixar).
Comparison: Organic is slower but lower risk; inorganic is faster but costlier.
Define the term “multinational company (MNC)” and outline two key features.
MNC: A firm operating in multiple countries.
Features: Global brand presence, decentralized decision-making, local subsidiaries.
Define the term "Initial public offering" (IPO)
An initial public offering (IPO) occurs when a business sell all or part of its business to shareholders on a public stock exchange for the first time. This changes the legal status of the business to a publicly held company.
State and Define the term "CSR"
Corporate Social Responsibility
decision/attempt by a business to take responsibility for their action/activities by considering the interests of and the impact on a wide range of stakeholders in society. The business accepts the moral and legal obligations to society, not just to investors, that result from its operation.
Distinguish between internal and external stakeholders
Internal: stakeholders are part of the organization, such as employees, managers, directors, and shareholders.
External:not directly involved in the running of an organization but have a direct interest in its operations.
Explain two different types of economies of scale and their impact on competitiveness.
Financial economies - Large firms often receive lower interest rates on loans than smaller firms as they are perceived as being less risky. A cheaper loan lowers the cost per unit (average cost).
Managerial economies - Occurs when large firms can employ specialist managers who are more efficient at certain tasks and this efficiency lowers the average cost (AC). Managers in small firms often have to fulfil multiple roles and are less specialised
Marketing economies - Large firms spread the cost of advertising over a large number of sales and this reduces the AC. They can also reuse marketing materials in different geographic regions which further lowers the AC
Purchasing economies - Occur when large firms buy raw materials in greater volumes and receive a bulk purchase discount which lowers the AC
Technical economies - Occur as a firm can use its machinery at a higher level of capacity due to the increased output thereby spreading the cost of the machinery over more units & lowering the AC
Risk bearing economies - Occur when a firm can spread the risk of failure by increasing its numbers of products i.e greater product diversification - less failure lowers AC
Analyse two reasons why MNCs may locate production in low-income countries.
Lower labor and production costs.
Proximity to raw materials or growing markets.
State and Explain 1 advantage and 1 disadvantage of limited liability company
Advantages:
Raising finance – Sell shares to raise capital without interest charges.
Limited liability – Lower risk for investors.
Economies of scale – Lower costs due to larger operations.
Disadvantages:
Bureaucracy – Complex legal and regulatory requirements.
Disclosure of information – Must share financial data publicly.
Loss of control – Risk of takeover if shares are publicly traded.
(Hoang, 2022)
How does growth differ from profit as business objectives?
Profit:
Short- to medium-term goal focused on maximizing net income (revenue minus costs).
Aim: Financial stability, shareholder returns, and reinvestment.
Growth:
Long-term goal focused on expanding market share,sales revenue, operations, or influence.
Aim: Scaling the business
Define the term "Remuneration"
refers to the total compensation an employee receives in exchange for their work, including both financial and non-financial rewards.
Examine one benefit and one limitation of joint ventures as a growth strategy.
(other teams can steal the points by naming more benefits or limitations after the initial answering team)
Benefits: Shared risk, pooled expertise, local market knowledge.
Limitations: Cultural conflict, unclear leadership, profit-sharing.
Joint ventures can be strategic for entering foreign markets, but alignment of goals is essential.
Evaluate the impact of MNCs on the local workforce in developing economies, one negative and one positive.
Positive impacts: Employment, technology transfer, training.
Negatives: Wage suppression, labor exploitation, local business displacement.
Define the term "cooperative" and State two features of a cooperative.
1. ‘for profit social organization’ that is established owned and managed collectively by members, each of whom has a financial interest in the business and a say in how the business is run.
2.
Two features include: • A cooperative society works on the principle of sharing and welfare. If any surplus (or loss) is generated, it is distributed/shared amongst the members (shared profits or losses of members). • An elected managing committee has the power to take decisions. Members have the right to vote, by which they elect the members who will constitute the managing committee (shared decision making between members). • There is limited liability of the members of a cooperative society. Liability is limited to the extent of the amount contributed by members as capital (limited liability of members)
Examples of vision and mission statements:
To be the most successful premium manufacturer in the industry - BMW
The company exists to benefit and refresh everyone it touches - Coca-Cola
To organise the world's information and make it universally accessible and useful - Google
Inspire and develop the builders of tomorrow - Lego
To help people and businesses throughout the world realise their full potential - Microsoft
To make people happy - Walt Disney Company
Question: With reference to the above examples, explain the role of vision and mission statements in business organizations.
Vision:
Inspires employees and stakeholders by painting a future ideal.
Guides strategic decisions to align with long-term objectives.
Mission:
Clarifies the business’s target market, products/services, and values.
Helps employees and customers understand the company’s identity.
(award 200 if no reference)
Case: Enigma is a monopoly electricity provider in a cold Northern European country, serving over 90% of households. Despite heavy losses in 2010 and receiving a government rescue package, it awarded large bonuses to senior managers. This triggered backlash from shareholders and the public, who viewed it as unethical use of public funds.
Q: Evaluate solution to Government/Shareholders vs. Enigma conflict (over bailout money used for bonuses)
Solutions:
Repay government bailout when the company returns to profitability.
Introduce transparent performance-based pay criteria for senior managers.
Allow government oversight in executive appraisal processes.
Some managers could voluntarily return bonuses as a goodwill gesture.
Evaluation:
Repayment improves public trust but may strain future investments.
Clear performance criteria rebuild shareholder confidence, but may demotivate top talent if perceived as too rigid.
Government oversight increases accountability but limits Enigma’s autonomy.
Voluntary return of bonuses may seem superficial unless paired with structural reforms.
accept any solution with evaluation
Discuss how Ansoff’s Matrix can guide external growth strategies.
Ansoff Matrix outlines growth strategies: Market Penetration, Product Development, Market Development, Diversification.
Firms may use Market Development via franchising or Diversification via acquisition.
External growth fits high-risk/high-reward quadrants.
Discuss the ethical considerations MNCs face when operating in countries with weak labor laws and recommend suggestions.
Issues: Child labor, low wages, poor working conditions.
Suggestion: MNCs must consider CSR to maintain brand reputation and ethical legitimacy.
Case study: Carol runs Carol’s Designs (CD), a small online business making custom party dresses. Due to cash shortages and missed delivery deadlines, her bank suggested finding a partner. She approached Juan, a business angel and engineer, to become a 50% partner.
Question: Explain one advantage and one disadvantage for CD of forming a partnership.
Advantages:
• Juan as a business angel will inject some money to the business. Carol will be able to raise finance and solve her cash-flow shortages. • Carol will be able to delegate some of her tasks and concentrate on the operations of the business, to meet deadlines and the increasing demand of dresses. • Juan may bring new ideas for the operational side of the business.
Disadvantages:
• Carol will have to share all her decisions with Juan. As Carol is a designer, and Juan is an engineer, they may have a totally different approaches on how to run the business and conflict may arise. Juan has already suggested that Carol be less involved with design and more on operations. However, it could be argued that Carol’s design skills underpins the brand. • Carol will have to share profits with Juan who will own 50 % of the business. • Juan has no knowledge of the dress business so may have little to contribute.
What are the 2 advantages and 2 disadvantages of business acting in a socially responsible way?
Advantages:
Enhanced Brand Reputation: Acting ethically (e.g., sustainable sourcing, fair wages) builds customer trust and loyalty.
Competitive Advantage: CSR can differentiate a business in crowded markets.
Disadvantages:
Higher Costs: Ethical practices often increase operational expenses.
Short-Term Profit Sacrifice: CSR investments may reduce immediate profits.
Examine how the conflict over employee remuneration could have been minimized. 2 arguments
Open communication between management and employees
Negotiation with labor unions
Implementation of a performance-based pay system to align employee rewards with company success.
Establishment of a transparent remuneration policy to ensure fairness.
In 2020, Meta (formerly Facebook) acquired Giphy, a leading GIF search engine, for approximately $400 million. The acquisition was intended to integrate Giphy’s vast media library into Instagram and other Meta platforms to boost user interaction and ad targeting. However, in 2021, the UK’s Competition and Markets Authority (CMA) launched an antitrust investigation.
Analyze 2 advantages and 2 disadvantages of Meta's decision and make a judgement about their decision.
Advantages:
Quick expansion into rich media market.
Enhances digital ad targeting and platform integration.
Improves user experience through direct content control.
Disadvantages:
Legal risks led to forced divestment (costly and reputational damage).
Ethical concerns over dominance and user data collection.
Organic growth alternatives (e.g. in-house GIF tools) may have been safer.
Final judgment:
While the acquisition aligned with Meta’s Ansoff Matrix – Diversification Strategy, it lacked thorough stakeholder and legal analysis. Meta underestimated external threats (regulatory forces), showing that inorganic growth must be weighed against strategic risk and public accountability.
Starbucks entered the Australian market in 2000 with aggressive expansion but closed 61 of its 85 stores by 2008 due to cultural misalignment and poor local adaptation.
To what extent does the Starbucks case in Australia demonstrate the challenges MNCs face in balancing global standardization with local responsiveness?
In your answer, consider:
Corporate culture vs. local culture
Economies of scale vs. differentiation
Impact on brand equity and customer loyalty
Cultural insensitivity: Starbucks’ standard menu and fast-paced service clashed with Australia’s coffee culture (artisan cafés, local roasts, sit-down culture).
Standardization pressure: Starbucks applied a "copy-paste" model instead of adapting its value proposition, undermining local competitiveness.
Evaluation: Success of MNCs depends on strategic balance — Bartlett & Ghoshal’s Model (transnational vs. global strategy).