Business Activity

BUSINESS IGCSE SYLLABUS
Business Activity: it means adding value (difference between the cost of inputs and the final selling price)
and meeting the customers needs. To do this, they combine the factors of production to make products which
satisfy people's wants and needs. Objectives: profit, added value, growth, survival and provide a service.
Factors of production: Land all of the natural resources. Labour effort of the people. Capital finance,
machinery and equipment needed. Enterprise the skill and risk−taking ability to put all the factors together by
entrepreneurs.
Purpose of private sector: to make profit in a satisfactory level (not tooo high). Added value to gain more
profit, by adding features to make it reasonable for the increase of price. Growth to make jobs more secure, to
increase the salaries and status of managers, to spread the risks, to obtain a higher market share and to obtain
advantages of economies of scale.
Purpose of public sector (owned and controlled by gov.): more social objectivesto provide a service
(health, education, etc.) with the money from tax−payers, to provide jobs, to provide a competition or stop
monopoly and to keep prices low.
Classification of firms: Primary sector extraction of natural resources and materials. Secondary sector using
the material provided by the 1st sector and turning them into processed goods. Tertiary sector provide services
to consumers and other sectors.
Importance of the sector in countries: this depends on how many workers are being employed and the value
of output of goods and services. From the primary to the secondary and onto the tertiary there is an increase of
level of output and value of it and an increase of workers employed.
Business growth and size: it is useful for investors (to decide where to put their savings), for the government
(taxing), for competitors (to compare their size with others), for workers (to know with how many people they
might be working) and for banks (to see the gearing impact a loan would have).
Reasons of expanding: it will bring benefits such as higher profits, more status and prestige for owners and
managers, benefits from popularity and it controls greater market share.
Methods of measuring: # of employees but some companies may use capital intensive methods (lots of
machines) which use few people and have great output levels. Value of output and sales some firms may
employ few workers and sell very expensive computers. Other may have lower sales with cheaper products
but employing more workers. Profit It is very difficult to compare because it depends on efficiency and the
skills of the managers (big companies may make very low profits with bad managers). Capital employed the
problem is comparing labour−intensive companies with capital−intensive (problem with # of employees).
Biz organization:
Stakeholders: owners set up the business. Take a share of the profits. May have to pay for the losses made.
They are risk−takers (may loose their money). Workersemployed. Have to follow instructions given by the
owners. Have full or pat−time contracts (legal documents detailing the conditions of employment). They earn
money from working in weekly wage or monthly salary. If there is not enough work for all the workers in a
business, they could be made redundant. Managersemployees. Give instructions to the other workers, organise
resources and take important decisions. The decisions they make decide on the survival of the business.
Consumers they buy the products or services the business make. Without them biz would make losses and
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fail. So biz need to be market−orientated and attract consumers to their products. Whole community it is
affected by biz decisions. Harmful products. Using resources. Pollution. Other products may benefit the
community. Biz provide jobs and raise the standard of living.
Organisation:
Changing biz environment: the government need to appeal to its economic objectives which are: low price
inflation to raise the REAL INCOME, to decrease imports and to incentive biz to expand. Low levels of
unemployment unemployed try to look for a job but they can't find it. They don't produce goods or services
(no economic growth) and subsides to them cost the government a lot of money and increase in taxes.
Economic growth level of output of goods and services in a country increases. GDP. Increase in this will
mean an increase in the standard of living. Balance of payments difference between exports and imports.
Governmental economic policies: It has lots of economic power, by taxes mostly. It can use laws, interest
rates and supply policies to reach the economic objectives.
Fiscal policy: they spend money for better living standards and for better economic growth. They raise the
money with direct taxes income tax on consumers (lowers disposable income) and corporation tax on
company's profits (less encouragement to start a business). And indirect taxes VAT (prices rise and wages
can go up too) and Import duties (local firms have equal competition, manufacturing bus may suffer and
retaliation could occur).
Interest Rates: the cost of borrowing money. Most governments set these interest rates. Less disposable
income because firms have to pay for higher interests. New investment will be delayed (less expansion)
because it can be more difficult to take out a loan. Less demand for products which are expensive but needed
because loans are more difficult to pay. Exchange rate appreciation (rise of exchange rate).
Impact of technology: it is essential to keep up to changing markets and cheaper production techniques to
obtain a bigger market share. If they accept change, they will become more efficient and competitive.
However, these changes might be costly: researching, buying equipment and machinery and training staff.
Internet and e−commerce(use of the internet and electronic communications to carry out business
transactions) is now an indispensable medium for advertising. It can offer lots of information and it is a fast
method. However there are problems to this related with security and that customers might not find the site.
Economic environment: Market economy all resources are owned privately. No government control over
land, capital and labour. They make more of the more profitable goods, the most demanded. They make fewer
of the less profitable, the least demanded. Ad: consumers are free to choose what they want to buy, workers
are encouraged to work hard because they are no taxes. Biz competition lowers prices. New biz are
encouraged to set up. Dis: No free services, only rich people can afford to buy health and education. Many
uncontrolled booms and recessions in the economy. Encouragement of monopolies, limiting the choice of
consumers. Mixed economy private sector: made up of businesses not owned by the government. They will
choose what to produce, how it should be produced and what price. Most wil aim to run profitably. However,
the government will control the activity. Public sector: biz owned and controlled by the government. Some
goods and services are provided free to the consumer. Profit is not always an aim, while as services to the
community can be.
International trade: balance of imports (goods bought from another country) and exports (goods or services
sold to another country) may affect an exporting/importing biz. Multinational biz affect local economies: +
competition, growth, consumer choice and jobs. AD: job, new investment in buildings and machinery, reduce
imports (new products are produce not bought) and increase export of extra output and taxes will be paid. Dis:
jobs created are often unskilled, may force local firms out of biz due to their efficiency, profits are sent back
to the ` home', often use non−renewable primary resources from the country and their influence on the
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government and economy and could ask for large grants to keep them operating.
Competition & biz: competition in most of the times lead to more efficient biz and cheaper prices.
Governments may encourage competitiveness of their industries by privatising the public corporations,
improving training and education and increasing competition in all industries.
Exchange rates: the price of one currency in terms of another. Determined according to the demand and
supply of each currency on a daily basis. Tariff barriers try to reduce the imports of products by putting taxes
on them. Firms will benefit if imported goods are more expensive because more home−produce goods are
going to be sold. Biz will suffer higher costs if they have to import raw materials. Other countries may do the
same and retaliation may occur, so biz trying to export will loose sales. Quotas a limit in the quantity of
imports of a particular good.
Ownership and internal organisation:
Few: register
Owned by 1 and send annual
person and accounts to the Owner keeps
Sole Trader
controlled by Inland Revenue. all the profits.
Register name to
him.
the registrar
Unlimited
Liability:
held
responsible
for the
debts the
company
owns.
Few:
Partnership
2−20 owners.
agreement
Partnership Controlled
(written and
by them.
legal
agreement).
Unlimited
Ltd
Plc
To the
owners
Lots: To
registrar of
companies
articles of
Shareholders: association
+ than 2.
(rights, duties
To
Limited
Board of
&rules) and
shareholders.
Memorandum of
directors
assoc
(objectives &
name, address,
etc.)
Same as ltd
Lots: Mem of
Ass. Sell a
As ltd
Limited
Ad: Little capital and legal
requirements. Control and quick biz
decisions. Incentive to work harder.
Close to customers. Secret accounts.
Dis: Difficult sources of capital.
Unlimited liability. Difficult to
specialise. Difficult to expand.
Unincorporated biz (if the owner
dies, the company ends because
they do not have a separate legal
identity).
Ad: more capital can be raised.
Shared responsibilities and
specialisation bt partners. Still
motivated. Shared losses. Secret
accounts. Close to customers.
Dis: Unincorporated.
Disagreements. 1 partner may
compromise all of them. Limited
capital to 20 people.
Ad: Shares raise large amount of
capital. Incorporated. Easy
expansion. Secret accounts. +
incentive if few shareholders.
Limited liability. + easy to hire
specialists with more capital.
Dis: Lots of legal requirements.
Loosing control (slower). Less
motivation. Disagreements. Sell of
shares needs to be approved by
other shareholders. Cannot sell
shares to the general public.
Ad: large amount of capital can be
raised with the selling of shares.
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minimum # of
shares. Publicise
accounts. Be
available at the
Stock Exchange.
Prospectus
(invitation to
buy shares by
the board of
directors)
Incorporated. No restriction in
buying, selling or transfer of shares.
Higher status easier to get loans,
suppliers and buyers. Easier to buy
and sell credit. Faster and easier
expansion. Easier to hire specialists.
Can sell shares to the general public.
Dis: Lots of legal requirements. Far
from customers. Slow decisions.
Disagreements in the board of
directors. Poor motivation. Public
accounts. Loss of control.
Diseconomies of scale and not
protected to take−overs.
Ad to franchisor: fast expansion
paid by the franchisee. Money from
license payment and products. Does
not manage.
Franchisor
owned and
N/A
Franchising
controlled by
franchisee.
To franchisee N/A
Owned by
Public
government.
None
corporations Board of
directors.
To
Unlimited
government.
Ad to franchisee: known brand and
product (less chance of failure). No
advertisement payment. Supplied by
the franchisor. Trained by
franchisor. More status for loans.
Ad: important industries need to be
owned by the government.
Monopolies owned by the
government. The government may
absorb falling companies to secure
jobs. Mass communication is
needed for messages to the people.
Dis: very poor efficiency, no
motivation by shareholders.
Subsidies lead to laziness because
losses will be paid by the
government. No close competition.
Can be used for political reasons.
Growth of multinational companies: sell and produce goods in many countries. Reasons of importance &
growthto produce goods with in countries with lower costs of production. To extract materials which the firm
may need. To produce goods nearer to the market to reduce transport costs. To avoid barriers to trade. To
expand into different market areas to spread risks.
Control and responsibility: organisational charts show the levels of management and division of
responsibilities within an organisation. It shows how everybody is linked together, it lets workers see their
own position to identify who they are accountable to and who they have authority over, it shows the
relationship and links between different departments and it gives a sense of belonging to everyone in a
department. Delegation giving a subordinate the authority to perform particular tasks. Just the authority to
perform the task delegated. Chain of command is the structure in an organisation which allows instructions to
be passed down from senior management to lower levels. Span of control number of subordinates working
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directly under a manager.
Internal and external comm.: It is the transferring of a MESSAGE(info or instructions) from the sender to
the receiver. Importance: It must be effective to avoid serious problems. Better communication means better
management and more efficiency.
Process for effective com: 1− Transmitter, he wishes to pass info and chooses next two features for an
effective com. 2− Medium of com, method of sending the message. 3− receiver. 4− Feedback, confirmation of
receiver.
1 or 2 way com: 1 way has no feedback or reply. 2way has a response or discussion. Adv. of 2 way com:
com is more effective bc of feedback − more resp (motivation) to the receiver bc they feel part of the process .
Internal and External Com: internal is bt people in an organization. External is bt organizations or bt an
organization and somebody not in the organization. Both are equally important.
Importance: For image and efficiency of the business.
Problems: Loose clients, misunderstandings.
Verbal or oral: one−to−one, telephone, video conferencing (telephone + live video) and meetings.
Adv: Fast. In meetings, efficient for talking to lots of people. Immediate feedback. Body language (except
telephone).
Dis: In big meetings there is no way to tell if everybody listens or is understanding. Feedback takes time. No
evidence or record.
Written: letters (have structure), memos (only internally), reports (detailed and w/difficult language), notices
(available to all and without feedback), faxes and e−mail.
Adv: Hard evidence of the message (− disagreements). Messages with detailed info. Can be copied and sent
to many people.
Dis: No direct feedback. Few 2−way com. Language can be difficult to understand. Long messages can be
boring. No body language.
Visual: Videos (training), posters (for important but simple messages) and charts and diagrams ( Data
presentation).
Adv: Info presented attractively. More attention from the receiver. Better understanding of message.
Dis: No feedback. Some people don't understand these diagrams.
Barriers to effective communication: Sender language is too difficult (technical terns may not be
understood)/ avoid technical terms, sender has to ensure that the message uses understandable language. − too
fast or not clearly enough/sender should ask for feedback and make the message as clear as possible− sender
communicates wrong the message /sender must make sure that the right person is receiving the message. − the
message is too long and detailed /message should be as brief as possible and with the main points as clear as
possible. Medium lost message / ask for feedback. − Wrong channel / sender must select the appropriate
channel. − The message is sent down a long chain of command, message lost or distorted / shortest possible
channel should be used − No feedback received / a meeting would be more appropriate. − Breakdown of the
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medium / other forms of communication should be used. Receiver might not be listening or paying attention /
emphasise on the importance of the message, ask for feedback. − Receiver may not like or trust the sender
(unwilling to act upon the message) / trust bt the sender and receiver, use another sender. − Feedback no
feedback / maybe no feedback was asked, maybe due to an incorrect medium. − received too slowly or is
distorted
Financing business activity: Use starting up a business, expanding an existing business and making the
business survive. Capital expenditure money spent on fixed assets which will last for more than 1 year.
Revenue expenditure money spent on day−to−day expenses which do not involve the purchase of a long−term
asset (wager & rent).
Long− term finance available for more than 10 years. Usually to buy a long−term fixed asset or expand a biz
or to finance a take−over. Short−term needed for day−to−day operations. Up to three days.
Internal Retained profit (may be too small for their use but they don't need to be paid back). Sale of existing/
redundant assets (better use of the tied capital but not an option for new biz and not fast). Running down
stocks (reduces the opportunity cost and storage cost but it must be done carefully not to loose customers) and
owner's savings (no interest and fast but may be too little capital and it increase the risk taken by the owner).
External: money obtained from individuals or institutions outside of the biz. Issue of shares (permanent source
of capital with no interest but dividends will be expected by SH and ownership and control of the company
declines). Bank loans (usually quick and varying in length, + easy for bigger companies but it has to be repaid
with interests and a collateral is required). Selling debentures, loan certificates from ltds (can be used for
long−term but same disadv of loans). Factoring of debts (fast and avoids risk of collecting the debt but the
firm doesn't receive all the money).
Factors affecting the decision: Purpose and time period the source and the use have to match. Amount
needed. Status and size plc's status gives them more choice (banks will accept + easily). Unincorporated biz
can't sell debentures or issue shares. Control. Risk and gearing Loans will raise the gearing (% of loan−raised
capital over total capital raised).
Marketing: is the management process which identifies customers wants, anticipates their future wants and
then goes about satisfying them profitably. It finds current consumers requirements, it predicts future
consumer requirements, it helps to make profits for the business and it satisfies consumer needs.
Market Research: it is important to see if the product/s will be successful and will have a great number of
sales that would result in the performing of the biz objectives. Primary research is the collection and
collation of original data via direct contact with potential or existing customers (field research):
questionnaires detailed qualitative information (opinion or judgement emitted) can be gathered. But questions
may be badly made so answers may be inaccurate and they take a lot of time and money in carrying them out
and collating data. Interviews interviewer is able to explain any questions and detailed information can be
gathered. But the interviewer may lead to the interviewee to bias and interviews are time−consuming and
expensive. Consumer panels They can provide detailed info about their opinions but they can be
time−consuming, expensive and biased if their answers are influenced by the opinion of others. Observation
recording (rating of tV), watching and audits. It is inexpensive but the information gives only basic figures
and no reasons for their choice. Experiments They are easy to set up, carry out and gather consumer's
reactions. But people might be biased and sample of people might not be the correct. Secondary research, or
desk research, is the use of information that has already been collected and is available for use by
others: Internal from some departments records and opinions. External trade and employer's associations,
specialist journals, research reports, newspapers, government data and market research agencies' reports.
Accuracy of research: Depends on how carefully the sample is drawn up and the way the questions were
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made. The sample needs to be truly representative of the total population. The size of the sample is important.
A preliminary investigation on a small group may be done to see if the results are accurate. Secondary
research may not be accurate because the reason why they were carried out is not known or newspapers may
be biased.
Ways of presenting data: table or tally chart, pictogram, line graph, bar chart or pie chart.
Market segmentation: is where the market has been divide up into groups of consumers who have similar
needs. This is done to be able to make the best advertising and it makes it easier to identify groups of people
with the same consumer needs and wants.. Knowing which type of consumers are targeted and where there
are more probabilities of them seeing the ad is important. Most common segments income group, age, region
(e.g. regions w/ different climates), gender, use of the product (cars for transport or entertainment) and
lifestyle (single with same income than a married man with 3 children). Mass market is a very big market
where there are likely to be lots of competitors and consumers. Niche Market is a very small market or market
gap which is not very well satisfied by other biz and where other companies intend to sell.
Marketing Mix: It is divided into four parts which are essential in marketing a product. Each part has to be
considered carefully to make sure that it all fits together and one part does not counteract the other so as to
make a successful product.
Product: Branding the brand name is the unique name of a product that distinguishes it from other brands.
Brand loyalty is when consumers keep buying the same brand. Brand image is an image or identity given to a
product which gives it a personality of its own. Gives it an added value price than unbranded products, unique
packaging, assured quality and higher quality than unbranded products. Packaging is the physical container or
wrapping for a product. It has to be suitable for the product to be put in. It has to give protection to the
product. It's eye−catching, it promotes the brand image, it carries information about the product and it's easy
to open. Life cycle 1 developed and tested. 2introduction or launched into the market, slow sales and
advertising is used. No profits made bc costs are still not covered. 3. Growth of sales. Advertising bc +
persuasive to encourage loyalty. Prices are reduced to try and affect competition and profits start as
development costs are covered. 4. Maturity. Sales increase slowly. Competition is intense. A lot of ads to
maintain growth. Highest profit. 5. Saturation. Sales stabilize at their highest point. Competition is high but
there are now new competitors. Stable ads but profits start to fall as sales are static and prices have to be
reduced to be competitive. 6. Decline in sales as new products come along. The product is withdrawn from the
market when sales become so low and prices have been reduced so far that the product is unprofitable.
Advertising stops and is reduced.
Price: it must fit with the rest of the marketing mix. Pricing strategies Reasons are to break into a new market,
to increase its market share, to increase its profits and to make sure all its costs are covered and a particular
profit is earned. Cost−plus (total cost of product + a percentage mark−up profit), penetration (lower price than
competitors' in order to enter the market), skimming ( high price for a new or unique product), competitive
(same price or just below than competitors') and promotional (sold at a very low price for a short period of
time) and psychological ( particular attention is paid to the effect that the price of a product will have upon
customers' perceptions of the product).
Place: Channels of distribution means by which a product is passed from the place of production to the
consumer or retailer. Business have to know which channel of distribution is most suitable for the product
they sell
1: Manufacturer/Consumer. Agricultural products sold directly. Catalogue order by mail or internet. Sold from
manufacturer to manufacturer. For fast, direct selling (to keep freshness).
2: Manufacturer/retailer/consumer. When the products are expensive or when the retailer is large (e.g.
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supermarket).
3: Manufacturer/wholesaler/retailer/consumer. The wholesaler breaks bulk. Some retailers don't want to buy
very large quantities nor they have space for storage.
4: Manufacturer/agent/wholesaler/retailer/consumer. When exporting. The agent is an independent person that
is appointed to deal with the sales and distribution of a product, so the manufacturer forgets about these
factors. Also, the agent is aware of local market conditions.
Role of wholesalers: break bulk, buys in bulk, big storage, promotion carried out not by manufacturer, can
give advice on marketing info (competitor's price).
Selecting the channel of dist to use: What type of product, is the product very technical (for assessing buyers
who don't know very well the info about the product), how often is it purchased, how expensive is the
product, how perishable is the product (need to be sold in lots of shops to be sold quickly), where are the
customers, where are the competitors located.
Methods of transport: Road haulage cheap, fast, versatile, anytime delivery, free ads on the lorry side.
Railways long−distance, cheaper on long distances, faster but has to be finally transported by road. River
slow, cheap for large and heavy products but it needs a suitable river to deliver the products. Sea international
trade, quick and cheap to load in containers. Air small, expensive goods or perishable. Expensive way.
Pipelines transport liquids or gas over long distances. Cheaper and more direct.
Marketing Budget: it is a financial plan for the marketing of a product or product range for some specified
period of time. It specifies how much money is available to market the product or range, so that the Marketing
department know how much they may spend.
Production: is the provision of a product or a service to satisfy consumer wants and needs. Resources are
used by biz to produce goods and services in order to fulfil some biz objectives. Job production products are
made specifically to order ( product meets exact requirements, workers often have more varied jobs and more
motivation. But skilled labour is used and costs are higher.) Batch where a quantity of a product is made at
one time, then a quantity of other.(flexible way of working, production can be easily changed, some variety of
working and production is not affected to a great extent if machinery is broke down. But it can be expensive
in storage and transport). Flow when large quantities are produced in a continuous process (costs are low, easy
in capital−intensive production, unskilled workers needed, low prices, goods are produced quickly and there is
no need to move goods from one part of the factory to another. But very boring, capital costs are very high
and one machine broken brings down the whole line of production). Economies of scale factors that lead to a
reduction in average costs as a biz increases in size. Purchasing in bulk, same # of people for + product lines,
own ways of transport and advertising, + status to raise capital + easily, + efficiency bc they can afford to pay
specialists and flow production. Diseconomies of scale factors that lead to an increase in average costs as a biz
grows beyond certain size. Poor com (messages get lost, it takes longer to make decisions and remoteness of
managers from customers) and low morale (workers feel insignificant and unvalued − efficiency. ) Lean
production techniques used by biz to cut down on any waste and therefore increase efficiency. Kaizen is a
continuous improvement by eliminating waste. JIT virtually eliminates the need to hold stocks of raw
materials or unsold stocks. Supplies arrive just at the time they are needed.
Costs: they help managers decide if the product will give profits. To compare the cost of two different
locations of the factory, to decide on the price to charge for their product. Fixed do not vary with the number
of items sold or produced in the short term. They have to be paid if the company is making or not profits.
Variable vary with the number of items sold or produced. Total costs sum of previous.
Quality control: biz need to try to ensure that the biz will maintain a good reputation and increase sales
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selling good quality products. Products shouldn't have any faults.
Location of Industry: 2 options, it is moving location or it is setting for a first time. The factor may not be all
equal because of the different type of industry (service, retail, manufacturing ,etc.).
Manufacturing: it depends a lot on production methods. If job production (by customer) − importance to raw
materials nearness. If flow + importance to materials. Market nearness means less transport fees (+ if the
product gains weight with manufacture). Maintaining the freshness of the product (mostly foods).
Components/raw materialsif these are heaver, transport fees are higher. If raw materials need to be fresh.
External economies of scale support business (which install equipment and maintain it) need to be near for
quick response. Availability of labour some labour is necessary, if particular labour is needed. Government
influence pays state−funded grants to encourage firms to settle where they want, also in the contrary, the
restrictions and laws in the area. Transport and com near a transport system (more in exports). Power some
bus., need a reliable source of energy (that won't cut). Water supplysame as power. Personal preferences of
owners. Climate normal, not too extreme (unless needed for special purposes).
Retail: shoppers near the area visited regularly by targeted customers. Popular area. Type of shopper. Nearby
shops + densely visited area to reach them by ads. Near competition (to make a mass visiting point for
people). Customer parking if they use their cars parking is important so that they can stop to shop. Rent/taxes
if nearer to the CBD, +rent and taxes. Security low rate of crime bc can affect nearby shops and shoppers, also
insurance coverage.
Service: customers near customers for quick response or being the nearest service to them. Some don't need to
be near. Personal preference. Technology it allows them to contact customers without being physically in the
same space. Labour. Climate (e.g. tourism). Near to other bus. if the bus services other companies. Rent/Tax.
Home or abroad: amount of space provided for construction, run out of raw material, trade union problems
or high wages, +tax/rent, to be nearer to new markets, government incentives and tariff barriers.
Productivity: is the output measured against the inputs used to create it output (over a period)/# of
employees.
Technology: Automation equipment used in the factory is controlled by a computer. Mechanisation
production is done by machines but operated by people. Quick accurate and work non−stop.
Financial info and decision−making: cash importance it's a liquid asset. Immediately available for spending.
Not to go into a liquidity crisis. Cash flow planning is done to prevent cash flow problems. Cash is a liquid
asset bc its immediately available for purchasing goods and services. Opening bank balance /inflows (sales,
debtors, total cash inflow) / Outflows (materials and wages, rent and other expenses, total cash outflows)/net
cash flow/ closing bank balance.
Profit: it is the money made from all the sales after the cost have been deducted from the sales revenue. It is a
biz objective and is important for management and survival.
Balance Sheet: shows the value of a biz's assets and liabilities at a particular time. Tells how much the biz is
worth In total. Working capital current assets −current liabilities.
Performance: ROCE OPERATING PROFIT/NET ASSETS X 100 (percentage). If it rises, then prices have
been put up or costs have been reduced. GPMARGIN GP/SALES TURNOVER X 100 (percentage). Says the
added value. NPMARGIN NP bef tax/SALES TURNOVER X 100 (percentage). Compare this to the GP and
see how much are the indirect costs worth.
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Liquidity Ratios: CURRENT RATIO SALES TURNOVER CURRENT ASSETS/CURRENT LIABILITIES
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Motivation at work: is the reason why people work, and why they work hard and effectively. Motivated
workershigh productivity (effective working) increased outputhigh profits. There are three motivation
theories.
F.W. Taylor: motivated by personal gain. He saw how much output people saw and then if they reached a
further target output he would reward them with extra pay. Problem is if you can't measure somebody's
output. (services: teachers, police, etc.)
Maslow: he made a hierarchy of needs. Most of all physiological needs (basic needs with wages). Then safety
(danger, poverty. With job security, health plan). Then social (friendship, belonging. Colleagues' support).
Esteem (status, respect, achievement. Give recognition) Self−actualization (succeeding your potential. With
promotion and delegation).
McGregor:2 types of managers. X thinks people don't like to work−people must be threatened and
pressurized−people don't want delegation−people are not ambitious, only want security. Y thinks people do
not dislike work. Not need to be supervised, committed to hard work. Will accept responsibility and seek it.
Creative potential un−used, self−actualization is greatest need.
Methods of payment: performance−related pay, commission (small percentage of sales), profit−sharing
(bonus if all worker work well), salaries, wages.
Job satisfaction: enjoyment of doing the job. Non−monetary rewards. Job rotation.
Leadership: Autocratic tell the employees what to do. Keep all to themselves (decision, control,
information). Laissez−faire give the objectives and employees make their own decisions. Democratic
involved in decision making. Discuss decisions.
Human Resources: recruit and select. Monetary rewards. Training. Redundancy and Dismiss.
Recruitment: vacancyjob analysis (duties and tasks) job description ( responsibilities and duties) job
specification(outlines requirements, qualifications, physical and skills) job advertising (Internal: noticeboard
or newspaper. Saves time and money, person already trained and adapted, motivating. But now new ideas or
methods−External: Local or national newspaper, specialists magazines, recruitment agencies save time. Job
centersguvernamental.). cost, time and job specification should be analysed. application forms(a resume of
persons qualifications. Shows document details, academic achievements, experience and references).
interviewing best fitted CVs(used to assess abilities, qualities and character and personality). Training
(induction, by seeing − on the job, by practice − off the job, for more specialized and actualized jobs, for multi
skills). Some cost money, output rate and/or time.
Firing: Dismissal told to leave the job bc of unsatisfactory work. Redundancy business needs to reduce the #
of workers (merge of companies, + profits, machinery). Redundancy payment is made.
Trade union: group of united workers to ensure their interests are protected. Better for big companies
negotiating with all the workers. Types craft (particular skilled work), general (workers from different jobs),
industry (certain industry) and white−collar (office−related jobs). A shop steward is an unpaid representative
of them. Closed shop is when all employees have to be of the same union. Single−union agreement firm deals
with only 1 trade union. Employer associations united employers to get benefits (have more power tog, give
advice and do bulk buying).
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Benefits of them: strength in numbers, improve work conditions, services (health and education mostly),
advice if dismissed, improve comm. with managers, improve pay, influence on government.
Collective bargaining: Negotiation of important issues bet trade unions or EAs. Productivity agreement
where workers and management agree an increase in benefits in return for higher productivity.
Industrial Action: action taken by a union to stop production. Can be striking (not working), picketing
(protest in front of business), work to rule (work strictly to the rules to slow down), go slow and overtime ban
(wont work anymore than regular hours). No strike agreement dispute settled by an arbitrator. Lock−out
employees are locked−out from their work−place.
Worker participation: when workers contribute to decision making in the business (democratic). Work
councils witch discuss issues related to the employees. Quality circles groups of employees witch discuss
ways into improve they way jobs are carried.
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