BUSINESS DECISION UNIT 7

Learning Aim A:
EXAMINE THE BUSINESS PRINCIPLES AND PRACTICES
THAT DETERMINE BUSINESS DECISIONS

The aim of this unit is to consolidate understanding and

skills to enable you to interpret data, and to formulate
decisions and solutions to complex business problems
given. You will consider business situations/scenarios
where you are required to select and use appropriate
evidence from several sources to support your arguments.

You will predict probable consequences, identify

faulty arguments or misrepresentations of information or
data, compare information and data, provide reasonable
alternatives, and evaluate and justify your proposed
solutions. To complete the assessment task within this unit,
you will need to draw on your learning from across your
program.
This unit will help you to understand the importance of
decision making and planning in a business and enable you
to progress to employment, self- employment, training or
higher education. This has been selected as an externally
assessed unit as it allows you to demonstrate your ability to
extract relevant information and apply the knowledge and
understanding you have developed.
Business decision-making is the process of selecting
the best course of action to achieve organizational
goals, requiring critical thinking, data analysis, and
strategic planning.

It involves various types, including strategic, tactical,

operational, financial, and ethical decisions, each impacting
different aspects of a business. Key factors influencing
decisions include profitability, market conditions,
competition, customer needs, risk management, regulatory
compliance, and technological advancements.

Businesses use structured processes—identifying problems,

gathering data, evaluating alternatives, implementing
solutions, and reviewing outcomes—alongside tools like
SWOT analysis, cost-benefit analysis, decision trees, and
financial modeling. Effective decision-making relies on a
balance of data-driven insights, experience, stakeholder
considerations, and adaptability to changing environments,
ensuring sustainable growth and competitive advantage.
A1 BUSINESS IDEAS AND OBJECTIVES

As businesses progress from start-up to maturity, their

focus shifts due to internal factors like financial resources,
workforce expansion, and operational capacity, as well as
external factors such as market trends, competition, and
government regulations. In the start-up phase, decisions
revolve around funding, product development, and market
entry, while the growth stage emphasizes scaling
operations, expanding customer reach, and optimizing
At maturity, businesses prioritize operational efficiency,
marketing strategies.
diversification, and brand positioning, whereas in the
decline or renewal stage, they may restructure, innovate,
or exit the market. Effective decision-making at each stage
ensures adaptability, competitiveness, and long-term
sustainability.
Business Ideas and Objectives for Start Ups

Start Up businesses are new businesses established by an

entrepreneur who believes that there will be demand for a
product or range of product ideas. Start-ups have a high level
of risk as there is no established customer base and because
of high start-up costs and low revenue, sources of finance
come from investment and loans.

At this stage, ideas and objectives are heavily influenced by

the interests and skills of the entrepreneur, product
innovation, finding gaps in the market, current trends, and
likely demand.

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 Ideas and Objectives for Developing Business

A Developing Business is one that has survived the

first two years. They may be beginning to establish a
customer base and have a stronger idea of customer
wants and needs and where their brand fits in the
market.
At this stage, ideas and objectives are influenced by
changes in external factors such as social trends and
the economy. Entrepreneurship may be replaced by
intrapreneurship and decisions on changes to the
product portfolio and new markets to enter will be made.
Businesses in maturity may have an established
customer base and strong brand. They will likely broad
product range but there may be a lot of competition.
At this stage, ideas and objectives will be influenced by
the need to develop new products. Changes may be
made to processes such as production, inventory
management, procurement and sales may be
developed.

Organizational structures will need to be revised as

business expands.

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Classification of Business Ideas and Objectives

Development of New Products

This involves creating and launching new goods or services to meet

the wants and needs of customers. This requires investment in market
research to establish customer needs and investment in innovation to
develop ideas.

Changes to Processes

This involves adapting the methods used to complete tasks in the

production of goods and services and the way in which customers
interact with the business to improve efficiency. This may include
including more capital in production or allowing customers to make
purchases online.

Changes to Systems
Systems are the combination of processes, people and
technology that work together to achieve business goals. This
includes customer relationship management (CRM), sales,
procurement, inventory management and human resource
management.
Changes to Structure
Organizational structures are the frameworks of roles and
responsibilities in an organization. To make effective use of
human resources as the environment changes, roles,
responsibilities, and departments need to be reviewed and
adapted to meet changing market needs.
Criteria to Evaluate an idea or Objective.

When considering an idea or objective, it is important for

businesses to conduct a process of evaluation to reduce the
risks associated with it. This is due to a range of factors such as
changing customer preferences, the actions of competitors and
their own strengths and competencies.
When evaluating an idea or objective, a business should
consider.
 Costs (financial and non-financial)
 Returns (financial and non-financial)
 How the idea/objectives contribute to the businesses long-
term strategy
 A2 AIMS AND OBJECTIVES

Aims and objectives are stated goals and visions a business aims to achieve.
They lay a foundation for all planning and strategy to set a clear and focused
direction of all business decisions.

Aims are the long-term goals that a business aims to achieve. They are
usually broad and represent the overall vision of the organization. Aims support
decision making as they provide a focus for all initiatives to align with.

An example of a business aim at Amazon is, “To be the Earth’s most customer-
centric company.”

Objectives are the specific and measurable steps that a business needs to take
to meet its long-term aims. They give employees clarity on what to focus on and
allow the organization to track performance against planning.
An objective at Amazon to support their aim could be, "Increase the accuracy
of personalized product recommendations by 15% within the next 6 months, as
measured by the click-through rates on recommended items."

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Typical Business Objectives

Profit Maximization

Profit maximization aims to achieve the highest profit margin possible

by increasing sales revenue or reducing costs. Profit maximization has
the benefits of increasing shareholder value and satisfaction, attracting
future investments, and financial resources to fund growth and providing
a buffer for economic downturns.

For example, "Increase net profit margins by 10% within the next fiscal
year by reducing operational costs through efficiency improvements."

Sales Maximization

Sales maximization aims to increase the total volume of sales (units

sold), even at the expense of reduced profit margins. This strategy may
be used by firms penetrating new markets, clearing excess inventory,
operating in an off-peak season or at a time or operating in very
competitive markets. Sales maximization has the benefits of increased
market share, increased brand recognition and economies of scale.

For example, "Achieve a 15% increase in total units sold by the end of Q3
through prices reductions."

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Market Share

Market share refers to the percentage of an industry's sales

that a particular company controls. Strategies to enhance
market share may include aggressive marketing, competitive
pricing, and product differentiation. Higher market shares
have the benefits of increased bargaining power with
suppliers, brand recognition, customer loyalty, improved
reputation, and economies of scale.
For example, "Expand market share by 5% in the North
American region within 12 months by introducing two new
product lines and enhancing distribution channels.
Brand Recognition
Brand recognition is how well consumers can identify a brand
through its logos, slogans, and colors. It helps create
awareness and familiarity, leading to customer loyalty.
Companies invest in marketing, public relations, and social
media to improve their brand visibility and stand out from
competitors.
For example, "Increase brand awareness by 25% by the
end of Q4, as measured by social media engagement and
website traffic."
Product Development
Product development is the creation of new products or
improvements made to existing ones to better meet customer
needs. This involves investment in research, design, and
testing. This is essential to adapt to changing customer
preferences, allowing businesses to remain competitive.
For example, "Launch three new products within the next 18
months, achieving at least 20% of total revenue from these
new products within the first year of their release."
 What is the relationship between a business vision, aims and objectives?

Compan Vision Aims Objectives

y
Become the
"To accelerate the world's leading provider Increase production
Tesla transition to sustainable energy." of capacity by 50% over the
sustainable next year.
energy.
"Create economic opportunity Connect
LinkedI for every member of the global professionals Achieve 1 billion users by
n workforce." worldwide. 2025.
Be the
"To create a better everyday life most Reduce carbon footprint by
IKEA for the many people." sustainable 30% by 2030.
home furnishings
retailer.
"To empower every person Lead in Grow Azure revenue by
Microso and every organization on the cloud computing 40% year- over-year.
ft planet to achieve more." solutions.
Coc "To refresh the world... To inspire Increase market Launch 5 new products in
a- moments of optimism and share in emerging Asia- Pacific by next year.
Cola happiness." markets.
A2 BUSINESS"To
OWNERSHIP
inspire and nurture the human Expand glob
spirit – one person, one cup, and presence al Open 1,000 new stores
Starbuc one neighborhood at a time." with loca in Asia within five years.
Owners are individuals or groups that have legal possession
engagement l
of a business. This
ks
means that they have the responsibility for . the business assets and liabilities and
are rewarded with the profits generated from their operations. Becoming a
business owner requires some form of financial investment and different levels of
risk depending on the ownership structure.

Ownership structures include.

 Sole trader
 Partnership
 Private limited company
 Public limited company
Unlimited liability exists where there is no legal separation between the business
owners and the business itself. This means that, if the business falls into financial
12 initial investment but are personally
difficulty, the owners not only lose their
responsible for settling any further debt. This may mean taking out a personal
loan, remortgaging their house or using their savings if they have any. Sole
 Limited liability means that there is a legal separation between the business owners and the business itself.
This means that, if the business falls into financial difficulty that cannot be resolved with the business
assets, the owners only lose what they invest. Private and public limited companies have limited liability.

A sole trader is a business that is owned and controlled

by one person. They make all decisions and keep all the
profits but are responsible for all investment and have
unlimited liability.

A private limited company is an organization that has

a legal separation from its owners. The owners therefore
have limited liability. Private limited companies can raise
finance for the sale of shares. However, there are
restrictions on how shares can be sold, e.g., they cannot be
sold on the stock market and if a shareholder wants to sell
a share, they must offer them for sale to other
shareholders in the first instance.

A partnership is a business that is owned by two or more people. The partners

sign a partnership agreement to outline expectations and how profit will be shared.
Ordinary partnerships have unlimited liability, but limited liability partnerships can be
formed.

A public limited company is an organization that is owned by its shareholders who

purchase shares on the stock market. Profit is distributed based on the percentage of
shares owned. They are required to publish their financial accounts so potential
shareholders can assess their true financial position. There are no restrictions on who
can purchase shares.

Reasons a Business Might Change its Ownership.

To finance growth,

To address competitive pressures in the

market. Business failures leading to a
take-over.
To bring in new skills and ideas
Sharing the workload
To gain limited liability

A2 LOCATION OF THE
BUSINESS
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The location of the business could be local,
national, or international. Local businesses sell in a
smaller region such as one town or city. National
businesses may sell in multiple outlets across a
Proximity to Target Market

Businesses need to consider how close they are to their potential customers.
They will consider how far customers are willing to travel for their goods and
services as convenience is one of the primary customer needs. A location that
can be reached by most customers in 20 minutes would generally be seen
as appropriate but convenient locations tend to be more expensive. Firms
offering more unique or specialist products may find their customers willing to
travel further. It is essential that firms carry out appropriate market research to
understand their customers.

Availability and Cost of Labor

Businesses need to consider how close they need to be to their potential

workforce. Between 30 - 45 minutes is generally viewed as a reasonable
amount of time to commute to work. Therefore, businesses need to ensure
that appropriate numbers of qualified people are available within this
distance at an affordable wage rate. Major cities have large numbers of
people with good transport networks, but they tend to have more expensive
rents.

Proximity to Materials and Suppliers

Businesses need to consider how close they are to their suppliers of raw
materials. Being closer to suppliers can reduce transportation costs, which can
be especially important for heavy, bulky, and delicate items. Firms may also
need to be closer to their suppliers if their deliveries are time-critical, e.g., if
they use just- in-time production, they may need a short lead time between
placing orders and deliveries arriving.

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Property Prices

Costs related to property such as rent, purchase prices, taxes and

insurance can vary greatly by location. When deciding on a location,
businesses will need to weigh up the property costs in comparison to
the benefits of the area such as proximity to customers and suppliers.
City center locations tend to have higher rents than out-of-town
locations, but they offer greater proximity to higher numbers of
customers.

Infrastructure

Infrastructure refers to the physical structures of a country that

support the operations of organizations and the lifestyles of people
living there. This includes transportation systems (railways, airports
etc.), utility supplies (electricity, water etc.) and communication
networks (5G etc.). Businesses need to consider the quality of the
infrastructure when deciding their location as it will affect how
easily their customers, suppliers and employees can access them.

Competition

Businesses need to consider the location of their competitors

when deciding on the location of their business. Locating near
competitors could either be beneficial or damaging depending on
the business and the market. Some businesses may decide to
locate in a different location to their competitors to reduce local
rivalry. However, clustering near to competitors can often attract
more customers to an area.

A3 Human Resources
Human resources are the people who work for an
organization. Their knowledge and skills are a key asset and
contribute to the production, quality, and efficiency of the
business. The human resources department of an organization
are responsible for ensuring there are the right numbers of
staff with the right knowledge and skills to support the
production of high-quality goods and services in a profitable
Recruitment refers to the process of analyzing the skills
requirements of an organization, advertising a job position,
interviewing, and selecting a proper candidate to offer a position.

Training is the method used to

develop the skills of existing staff to
perform their roles to the highest
standard. HR will manage the training
needs for staff from their initial
induction to training in new skill needs
that emerge as the environment changes. This may include training
on using new machinery or improving IT literacy.

Contract management is an HR role where company

representatives and employers agree to an exchange of work for
remuneration in a legal document. This may involve some form of
negotiation over remuneration and other benefits.

Remuneration is the money given to workers in exchange for the

work they do. This usually comes in the form of wages or salaries,
but the cab also includes commission, bonuses, share issues and
overtime. Remuneration strategies match the amount of money
paid with the level of skill, responsibility and workload being
exchanged. Good remuneration packages will attract high levels of
talent which supports recruitment strategies. However, staffing is
often the highest cost in an organization so overgenerous
remuneration can reduce the company’s profitability.

Managing flexibility in the workforce may involve analyzing the

workforce needs of the organization and planning a combination of
full-time, part-time and contract staff.

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A3 Physical Resources
Physical resources in business are physical items like
machines, equipment, buildings, and stock. They are essential
for making products and providing services. Companies must
think about quality, cost, and suppliers when buying these
resources to stay efficient and profitable.
Some key decisions around physical resources include.
 Renting or buying property
 Leasing or buying non-current assets.
 Procurement practices, e.g., just-in-time

Benefits and Drawbacks of Renting Property

Benefits of Renting

Flexibility: Renting helps businesses quickly adjust to changes,

allowing them to move or downsize easily without being tied down by
long-term contracts.

Lower Upfront Costs: Renting needs less money upfront than

buying, as you do not pay large deposits or additional costs like stamp
duty and solicitor fees.

Maintenance Responsibilities: Landlords typically take care of

maintenance and repairs, allowing businesses to save time and focus
on their operations instead.

Greater Choice of Properties: Renting offers more choices, so

businesses can meet their present needs without being tied down
long-term.

Drawbacks of Renting

Lack of Control: Tenants need landlord approval on customizations

to the property, which restricts their ability to adapt to the space.

No Equity Building: Rent payments do not build ownership, so

businesses do not benefit from increases in property value over time.

Rising Costs: Rental prices can rise unexpectedly, making it difficult

to budget.
Dependency on Landlord: Businesses depend on landlords for
property management, which can cause problems if the landlord is
unresponsive or chooses to sell the property.
Benefits and Drawbacks of
Buying Property Benefits of
Buying Business Premises
More Control: When a business owns its property, it can control
and modify the space as needed, adapting it to its specific needs
and branding.

Additional Income Stream: When a business owns its property,

it can profit by selling it if its value increases and can rent it out for
extra income at times when they are not using it.

Lower Long-Term Costs: Monthly mortgage payments generally

stay fixed over time whereas rents continue to rise.

Stability: Owning property gives your business stability and a

permanent base, plus it can be listed as an asset to help raise
capital.
Drawbacks of Buying Business Premises

High Upfront Costs: Buying property requires a large deposit,

usually around 40% of the price, plus significant upfront costs like
stamp duty and legal fees.

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Long-Term Commitment: Buying property ties up capital that could be
invested in the business and selling it later can be complicated and time-
consuming.

Ongoing Costs: Owning property means you are responsible for repairs,
maintenance, business rates, and insurance.

Ongoing Risks Property values can drop, leading to negative equity, and
mortgage payments may rise due to rises in interest rates.

Leasing Non-Current
Assets Benefits of Leasing
Lower Upfront Costs: Leasing usually needs little or no upfront payment,
helping businesses save cash and use funds for other important expenses.

Flexibility and Upgradability: Leasing allows easy upgrades to newer

technology, helping businesses stay current and adapt to changes without the
hassle of selling old equipment.

Maintenance and Support: Many lease agreements cover maintenance and

support, lowering repair costs for the lessee and keeping the equipment in good
condition.

Drawbacks of Leasing

Higher Long-Term Costs: Over time, total lease payments can be higher than
buying the asset outright, making leasing possibly more costly in the long run.

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Lack of Ownership: Leasing means businesses do not build
equity in the asset. After the lease ends, they own nothing,
which can be a disadvantage for long-term investors.
Limited Customization: Since leased assets are not owned
by the lessee, there may be limits on how much they can
customize or change them for specific needs.
Buying Non-Current
Assets Benefits of
Buying
Ownership and Equity: Buying non-current assets gives
businesses full ownership, helping them build equity. This
stability can attract investors and secure loans more easily.
Long-Term Cost Savings: Buying assets costs more in the
upfront but saves money long-term by avoiding lease payments.
For assets with long lifespans, total ownership costs can be
lower than leasing.
Customization and Control: Owning assets lets businesses
customize them for their needs without lease restrictions,
improving productivity and operational efficiency.
Potential for Appreciation: Some non-current assets, like
real estate or valuable equipment, can increase in value over
time, offering potential profits when sold and boosting a
company's finances.
Drawbacks of Buying
Higher Upfront Costs: Buying non-current assets usually
needs a large upfront investment, which can put financial
pressure on small businesses or startups.
Depreciation and Obsolescence: Non-current assets lose
value over time due to depreciation. Market changes or new
technology can also make some assets outdated, resulting in
financial losses.
Maintenance Responsibilities: Owners must cover all
maintenance and repair costs for assets. These ongoing
expenses can add up and affect cash flow, especially with
high upkeep needs.
Long-Term Commitment: Buying an asset is a long-term
commitment that may not fit changing business needs or
markets. If conditions change, selling the asset may be
difficult or lead to losses.
Just-in-Time
Reduced Inventory Costs: JIT reduces the need to hold
large amounts of stock, which can significantly lower costs
related to storage, handling, damage, and obsolescence.
Increased Efficiency: By delivering materials only when
needed, JIT reduces waste and time, which boosts overall
efficiency and productivity.

Improved Quality Control: JIT emphasizes quality as

businesses cannot afford defects when they have low stock
levels, leading to better products and fewer customer
complaints.
Flexibility: As there are low levels of stock being held, JIT
lets businesses adjust production to match customer
demand, increasing or decreasing output as required.
Risk of Supply Chain Disruptions: JIT relies on prompt
supplier deliveries with delays or disruptions stopping or
delaying production.
 Increased Complexity: JIT implementation is complex, needing
accurate forecasting and coordination among supply chain partners,
making it difficult to manage effectively.

Higher Reliance on Suppliers: JIT requires strong supplier

relationships, as any supply chain issues can greatly disrupt operations.

Limited Buffer Stock: With low inventory, companies may struggle to

handle sudden demand increases, leading to lost sales and unhappy
customers.

A3 Sources of Finance

Businesses need money to operate. As well as ongoing running costs

such as buying raw materials and paying wages, they need to cover
startup costs in the early stages and investment as the business grows.

Internal sources of finance are funds that a business generates itself.

External sources of finance are fund that have come from

outside of the business

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Internal Sources of Finance

Owner’s capital is money invested into the business

that personally belongs to the owner from their personal
savings. They may have saved this over a long period of
time, received a redundancy payment or inheritance. The
benefits of this are that the business will not have to pay
back interest in this. However, drawbacks may include it
usually being a small amount of money and the negative
impact on the owner’s personal life if the business fails and
the money cannot be paid back.

The net current assets are the money that a business

has available for day-to-day spending. It is the difference
between all the current assets (stock, debtors, and cash)
and the current liabilities (short term loans and creditors).
To ensure adequate liquidity, managers must maintain a
higher level of current assets than current liabilities.

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Sale of assets is a method of raising money by selling
assets that are no longer in use to improve liquidity. For
example, if a business is not using a machine anymore, they
could sell it and use the money to invest in a more useful
asset. The benefits of this method are that the money does
not have to be paid back, there are no interest payments,
and it frees up space. However, a drawback may be that the
business needs the assets later and has to buy or lease a
new one.
The benefits of mortgages are that property can be bought
at once rather than saving and interest rates are low
compared to other borrowing methods. Drawbacks are that
over time the interest adds a lot to the repayment and the
property can be taken away if payments are missed.

Bank loans (medium term) are fixed amounts of money that

are given to businesses by banks that are paid back in
installments over an agreed amount of time. The
installments include interest. Benefits include them being
easy to arrange as they are a common product and
repayment terms can be flexible so a business can arrange
affordable payments. A drawback is the interest payment
can make the asset being bought much more expensive in
the long run.
The share issue (long term) refers to selling percentage
ownership to an investor with the agreement that they receive
a share of any profits and can vote in strategic decision
making. The benefits of share issues include raising large
amounts of finance quickly, which do not have to be paid
back. Drawbacks include the original owners losing some
decision-making power and having to split profits across more
people.

Overdrafts (short-term) are facilities within your bank

account where you have arranged for the bank to allow your
balance to go below zero. Benefits include giving you the
flexibility to buy the materials and equipment you need while
you are waiting for payments to come in, you can continue to
operate during quieter periods or seasons, and they are easy
to arrange. Drawbacks include the high interest rates that are
usually charged on overdrafts, meaning they should only be
used in the short term, and they are only usually agreed for
small amounts of money.
Venture capital (medium term) is investments made by
investors in businesses that are a riskier investment,
usually newer businesses. Investors may be individuals,
banks, or other financial institutions. Venture capitalists
believe that these investments offer high potential growth. A
benefit is that a business may receive investment when other
options are unavailable to them. Drawbacks include having to
give a large share of the business to the investor. Due to the
risky nature, the investors may require a higher share of their
investment.

Debentures are long-term loans to businesses by

individuals, usually for large sums. An agreement is made
between the business and the investor on interest payments
and when the debenture is to be repaid in full. Benefits
include raising large sums of money without having to share
ownership. Drawbacks include compulsory interest payments
that must be made annually regardless of whether the
business makes a profit.
Leasing (medium term) is the rental of assets from another
company in exchange for regular, usually monthly, payments.
Typical assets that are leased are vehicles and machinery. Benefits
are that you can use an asset to enhance production without
having to find large amounts of money in one go and the leasing
company is responsible for the maintenance. Drawbacks are that
over the long term, it works out to be an expensive way to access
an asset and the assets is never owned.

Hire purchase (medium term) is a method of buying an asset by

paying in installments. Usually, a deposit is made as first payment
and then monthly installments until the final payment. Benefits are
that businesses can buy assets they cannot afford to buy in one
go and the asset is eventually owned, unlike with leasing.
Drawbacks include the interest charges adding to the overall debt
and the asset is not owned until the last payment so could be
taken back if payments are missed.

Debt factoring is a way of raising finance by selling your

outstanding debtors (trade receivables) to another business who
will then chase payments. Benefits include increasing your
liquidity quickly and reducing the time and resources it takes to
chase the debt. Drawbacks include
28 the reduction in profits due to

the fees that the debt factoring company charges for this service.
Invoice discounting is the use of a third-party business to
borrow money when you send out an invoice to a customer.
The lender will lend the business money once an invoice is
issued under the assumption that it can be repaid once the
customer makes payment. Benefits include immediate
improvements to cash flow rather than waiting for 30 - 90
days, which is normal credit terms. Drawbacks include the
reduction in profits because of the fees charged.

Trade credit is an agreement to make purchases from

another business without having to make payment straight
away. Standard trade credit periods are 30 days but longer
can be negotiated. Benefits of trade credit include
improvements to short-term liquidity and being able to wait
for your own debtors to make payments before you need to
make yours. Drawbacks include missing prompt payment
discounts and a mismatch in the times of credit terms

you give to your customers compared to what your

suppliers give to you.
Crowd funding is the gathering of small amounts of
donations or investments from a large number of people. This
is often promoted through social media or using organizations
such as Kickstarter. Benefits include it being a potentially fast
way of raising finance. Drawbacks include it being uncertain
and having to publicly promote new business ideas and
innovations that may be copied.

Peer-to-peer lending is borrowing directly from another

individual rather than from a financial institution. There are
websites set up to match individuals or businesses that need
to borrow money from lenders. Benefits include it being a fast
process and interest rates can be competitive. Drawbacks
include credit checks and application fees.

A3 MANAGEMENT INFORMATION SYSTEMS

Management information systems gather data from a
range of resources and generate reports to support managers
in their decision making. A variety of different systems used
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by different departments of an organization can be collated in
a single database. Information may include sales data,
A3 Quality Processes

To keep customers, and attract new ones, a business must

ensure the quality of the product/service and customer care.

Quality can be defined as meeting the wants, needs and

expectations of the customers buying the good or service.

Quality control is a method of assessing the quality of a

product produced. It is often done by taking a sample of finished
products and checking them against pre-decided criteria of how
the product meets consumer needs.
Quality assurance is a method of preventing substandard
products from being produced. This often involves various
checks throughout the production process. This may include
inspecting raw materials upon delivery, checking the standard of
finished part-time goods and encouraging all staff to check for
and prioritize quality.

Benchmarking is a practice of comparing the standards of

competitors to get an idea of the general and expected
standards in a market.

Quality circles are groups of people within an organization who

are brought together to analyze quality issues and devise
solutions. These are beneficial because workers can offer a
perspective that managers may miss, and workers are more
likely to be invested in the solutions if they feel that their
opinions are valued.

Self-checking or inspection is a decision that managers will

consider in their quality control plan. Encouraging self-checking
can be motivating for staff as they may feel more valued and
therefore more motivated. However, it requires a strong culture
of staff who care about quality. Inspection can make people feel
micro-managed and can have a negative impact on morale.
However, specialist inspectors can be used and there may be
more consistency in quality standards.
ISO-9000 is a set of published standards of quality issued by
the International Organization for Standardization (ISO). This
sets out standards across a range of areas within a business with
guidance on expected quality in those areas.

Total Quality Management (TQM) is a

management approach to creating a culture
where all staff are committed to making
continuous improvements to the quality of
products. The theory is that if each person can
spot the defects in their own areas there will be
continuous small improvements that have a
large impact on overall quality.

A3 LEGISLATION AND REGULATIONS

Legal Constraints are laws that must be followed by businesses

in their activities. These are implemented by the government with
the aim of protecting the public and the economy. Legal
constraints vary from country to country so businesses must be
aware of the differences when running internationally.

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Health and Safety at Work

Employers have a responsibility to ensure the welfare of

their employees and visitors in the workplace. There are
various pieces of legislation that outline employer
requirements which vary from country to country. Find out
more about health and safety legislation in the UK.
Standard expectations of employers are to provide and
keep safe equipment, provide safety training and clothing
where required, to ensure work areas and exits are free
from hazards and to ensure provisions for welfare such as
first aid and evacuation plans are made and communicated.
Full cooperation of employees is expected.

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Data Protection

The Data Protection Act sets out how organizations can use
personal data. Anybody who manages data must adhere to
the principles of data protection by ensuring data is.
1.used fairly, lawfully, and transparently.
2.used for specified, explicit purposes.
3.used in a way that is adequate, relevant, and limited to
only what is necessary.
4.correct and, where necessary, kept up to date.
5.kept for no longer than is necessary.

6. managed in a way that ensures proper security,

including protection against unlawful or unauthorized
processing, access, loss, destruction, or damage.
 Employment Rights and Protection

Employee rights are the expected fair treatment an

employee must receive in the workplace. Legislation to
protect employees varies from country to country. Find out
more about employee protection legislation here. In the UK,
employees have the right to a minimum wage, sick pay,
maternity, and paternity pay and redundancy pay.
Employees can request flexible work and should be
provided with a pays lip. Employees cannot be
discriminated against and their safety in the workplace
should be ensured.

Consumer Rights and Protection

Consumers have the right to goods and services of expected

quality. Legislation exists to protect consumers from
fraudulent business practices, dishonest advertising and
faulty and dangerous goods and services. The legislation
sets out laws that businesses must adhere to when
marketing and selling their goods and services. For example,
The Consumer Rights Act 2015 requires that all products
sold must be fit for purpose, as described and of
satisfactory quality.

The General Product Safety Regulations 2005 (GPSR)

requires that all products must be safe in their reasonable use.
Examples of how a business may follow this regulation are
product testing and adapting to ensure that no injury can be
caused in its use, providing appropriate labelling, and giving
clear instructions on how the product should be used.
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The Food Information Regulations 2014 require food
packaging to prove an honest description of the contents of
packaged food as to not mislead the customer. This includes
nutritional information as well as food composition, e.g., you cannot
call sausages ‘pork sausages unless they have at least 42% pork.

The Trade Descriptions Act 1968 makes it an offense for

businesses to make a sale based on misinformation. This act
requires businesses to be more honest in their communications
about a product. For example, the size, composition of
ingredients, source of raw materials and testing that has been
performed on the product.

The Consumer Protection from Unfair Trading Regulations

prevents businesses from harassing or misleading customers to
make a sale. This includes making false or misleading messages,
missing out important product details, using aggressive sales
techniques or using branding features of a competitor.
Environmental Legislation

Environmental protection legislation regulates how businesses

dispose of their waste with the aim of reducing the impact of
business activity on the environment. The Environment Protection
Act 1990 details the requirements of businesses in terms of
disposal of waste, pollution, and dangerous substances. Failure to
comply may result in fines.
Supply Chain Legislation

The UK Modern Slavery Act 2015 places responsibility on businesses to cut slavery in their supply chain.
The law requires businesses to cut poor working conditions in their own operations and ensure all
employees receive a living wage. It also requires businesses to conduct audits on their suppliers about their
treatment of staff and use of materials. The act also requires that businesses offer training to their staff on
the issue of modern-day slavery and how to eliminate it in their
supply chain.

Events Legislation

A premises license is a certificate granted by the government to provide permission for certain activities to
take place at the awarded location. Locations may include permanent locations such as a restaurant or

36
moveable locations such as gaming vans. Activities include drinking alcohol, music performances, indoor
sports events, showing films and theatrical performances.

Insurance

Public liability insurance is a method of protection employed by a business to cover any expenses that
may arise due to a member of the public or other organizations being injured or having their property
damaged by the activities of that business. This includes injuries that result from slips and falls at a
business’ premises as well as damage to the equipment or vehicle of a contractor. It works by paying an
external provider a regular sum of money in return for support with legal costs in case any arise.

A4 Porter’s Five Forces Analysis

Porter’s Five Forces

Porter’s Five Forces is an analysis tool used to assess the level and threat of competition in a market.
Businesses can use this tool to better understand their position and establish their competitive advantage.
The five forces are.

1. Competition in the industry

2. Threat of new entrants
3. Power of suppliers
4. Power of customers
5. Threat of substitutes
Existing Industry Rivalry

Existing industry rivalry refers to competitors already selling the same or similar goods and services. The
number and capabilities of competitors impact whether a firm can compete on price or if they need to focus
on non-price competition.

Firms need to establish where they are positioned in relation to their competition. Firms may analyze the
industry to establish the market leader. Price leaders are the dominant firm in a market and have the power
to set prices that the rest of the market are obliged to follow. Price leaders enjoy economies of scale,
37
meaning their average unit costs are low. If a smaller firm were to attempt to compete on price, the price
leader could drop their prices to a level that is unprofitable for smaller firms.

Threat of New Entrants

The threat of new entrants refers to the ease at which new firms can set up selling the same or similar goods
and services. The easier it is for new firms to enter the market, the higher the risk of the market share of
existing firms being depleted. This puts pressure on firms to undertake competitive behaviors such as
reducing prices and improving product quality.

Industries with high barriers to entry have lower threats of new entrants. Barriers to entry reduce the threat
of new entrants to a market. These include high set-up costs, economies of scale, strong brand image and
government regulation.

Bargaining Power of Suppliers

Each industry has a range of suppliers that provide goods and services to other producers in the supply
chain. The power of each supplier depends on the number of suppliers selling each product, how unique
their products are and how easily firms can switch between different suppliers.

In industries where there are many suppliers, their bargaining power is low as firms can switch to another
supplier. Where a good or service is unique, the bargaining power of suppliers is high as firms would find
difficulty in finding another supplier that meets their needs. Where it is difficult for firms to switch
between suppliers, for example, if suppliers have them tied into a contract, their bargaining power is high.

Bargaining Power of Customers

Customers will seek to reduce the price they pay for their goods and services. Where the bargaining power
of customers is high, firms can be pressured to lower prices and improve quality to maintain their customer
base. The power of customers depends on the number of customers in comparison to suppliers, the

38
proportion of a firm’s sales distributed to each customer and how easily it would be for firms to find a new
client base.

In industries where there is a high number of customers compared to suppliers; their bargaining power is
low as firms can sell to other customers. Customers who represent a large proportion of a firm’s sales have
high bargaining power as firms aim to maintain large contracts. In industries where it is easy to find a new
client base, bargaining power is low.

An example of customers with high bargaining power includes airlines ordering in-flight food. Due to the
large number of orders made by individual airlines, airline food suppliers will seek to keep customers.
Individual customers at McDonalds have less power as the impact of one customer switching to another
firm is minimal.

Threat of Substitutes

Substitute products are those from a different industry that can meet the same customer needs as the
industry’s products. This creates an opportunity for a customer to switch products and reduce industry
profitability. Firms which have products with few close substitutes enjoy the power to keep prices high.

Examples of substitutes include public transport instead of car purchase and plant-based meat alternatives.

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A4 5Cs Analysis

The 5 Cs is an analysis tool used to investigate marketing decisions by focusing on the areas of the
company, customers, competitors, collaborators, and climate.

Company - determine the company’s position. What are their strengths and weaknesses? Can they adapt to
meet the needs of the customer?

Customers - Research the needs of the customer? How satisfied are they with the current products? Are
their needs likely to change in the future?

Competitors - Who else is selling rival products to you? Are there any new competitors emerging? How
can a business differentiate itself from competition?

Collaborators - Who else does a business work with? How can those relationships be improved? E.g.,
deals with suppliers and lenders.

Climate - What external factors may affect a business? E.g., social trends, changes in technology and
environmental concerns.

A4 Ansoff Matrix

Ansoff matrix is a tool that can be used by key business decision makers when making decisions on growth
strategies. Recommended strategies depend on whether the business is looking at launching new products
or selling existing products and whether they are selling to existing markets or entering new markets.

Market penetration: Existing products in existing markets

Product development: New products in existing markets

Market development: Existing products in new markets

Diversification: New products in new markets

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Market Penetration Strategy

Market penetration is the growth strategy where a business is selling existing products to existing
markets. This is a low-risk strategy because the business is already familiar with the products and the
customers. Techniques may include making changes to the marketing mix to increase sales and drive out
competitors. This may include product repositioning, lowering prices, increasing promotion, and
broadening channels of distribution. Relationship marketing techniques, such as loyalty schemes, can
encourage customer loyalty and repeat purchases.

Drawbacks of market penetration include limited potential growth, existing competition, and complacency.

Market Penetration Example

The Tiffany engagement ring was launched in 1886 and is still sold today. It is priced between $13,000 -
$40,000. It is aimed at high income people who are at the stage in their lives where they are settling down.

Existing product: Tiffany engagement ring launched in 1886. Priced between $13,000 - $40,000 USD.

Existing market: high-income couples.

Product Development Strategy

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Product development is the growth strategy where a business launches new products into existing markets.
This strategy may be used in a very competitive market where current products do not stand out from
competitors. Businesses using this strategy will already have some understanding of their customers and
existing relationships with suppliers. However, the risk is in their knowledge of the new products.
Techniques may include heavy investment in R&D, extension strategies, market research, creating a strong
USP, limited editions and gaining first mover advantage.

Product Development Example

Tiffany homeware includes a range of products such as tableware and stationery. The quality is luxurious,
and it is sold at very high prices. One red wine glass can cost up to $600. This range is aimed at high
income people at the stage in their lives when they are settling down.

New product: Tiffany homeware. $600 for an etched red wine glass.

Existing market: high-income people/couples.

Market Development Strategy

Market development is the growth strategy where a business launches existing products into new markets.
There may be markets in a different geographical area such as another country or a different segment of the
market. Techniques may include undertaking market research into customer needs, using a distributor or
agent in overseas markets, having a price range to suit different income groups or changing some of the
product size or functions to meet different customer needs.

Market Development Example

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The Diamond Source Initiative is a range of diamond rings that come with information about how the
diamond was sourced. This was launched in 2019. This line is aimed at millennials as it was found that
they were more reluctant to buy diamonds due to unethical practices in their mining.

Existing product: Engagement rings through 'Diamond Source Initiative'. Tiffany provides provenance
information about its diamonds.

New market: Millennials who are buying less engagement rings for multiple reasons including ethical
concerns about how they
are sourced.

Diversification Strategy
Diversification is the growth strategy where a business launches new products into new markets. This is
the most high-risk strategy as the business is unfamiliar with both the products and the customers. Firms

undertaking a diversification strategy should invest heavily in market research and R&D to understand the
needs of the new customers and production techniques. It is advisable to have a comprehensive risk
assessment and backup plan.
Diversification Strategy Example

The Blue Box Cafe opened in 2017. Customers can come for a ‘Breakfast at Tiffany’s’ for $29. This gives
them the luxury experience of Tiffany’s without the high price tag. The main markets for the cafe have
been Instagrammers and tourists.

New products: The Blue Box Cafe opened in 2017. $29 for breakfast.

New markets: tourists and Instagrammers.

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A4 Boston Matrix
The Boston Matrix is a model that businesses can use to analyze their product portfolio and make decisions
on investment, promotion, and withdrawal of products. The aim is to achieve a well-balanced portfolio of
products. To use this model, products are categorized on their market share and the growth of the market.

Question marks have a low market share in high growth markets. High growth markets have a lot of
potential customers but having a low market share means the business is small compared to competition.
Larger competitors may have a stronger brand image, more money for investment and benefit from
economies of scale. As there is a high risk that these products may not be successful, managers need to
consider whether they are worth the large investment necessary to grow them.

Rising stars are products in high growth markets with a high market share. They are strong compared to
competition. Sales will be high, but costs will also be high at this stage due to the large investment required
to maintain their market position. If they can maintain their market position when market growth slows
down, they can become cash cows.

Cash cows have a high market share in low growth markets. Cash cow products are more mature, are well
known to consumers, have a high level of sales compared to rivals and as a result require little investment
in marketing and R&D. Cash cow products are profitable and profits can be reinvested into developing
question marks and rising star products.

Dogs have a low market share in low growth markets. There is little potential for dogs so managers should
consider removing them from the market. If there is remaining stock, they may want to try using sales
promotions to clear it. There may be options to reposition the product into a growing market, but it is more
likely that investment in
a new product will be
more success.

A4 Product Life Cycle

The product life cycle is the stages a product goes through from development, launch, maturity, and decline.
Different marketing strategies are appropriate at different stages of the life cycle, e.g., informative
advertising at launch, reminder advertising at maturity and discounts to clear stock during decline.

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A4 Competitor Analysis
A competitor analysis is an investigation into the activities and performance of key rivals. This can help
establish a firm’s standing in the market and explore opportunities and gaps. The analysis will first identify
key rivals and then their strengths and weaknesses. As competitor actions change regularly, a competitor
analysis is an ongoing function of a marketing department.

A4 The Marketing Plan

The main features of a marketing plan.

 7 Ps
 USP
 Target market
 Market Segmentation

A4 The Seven Ps
Product - what are the customer thoughts regarding the products you are considering bringing to the
market? Do they have preferences for features, colors, design etc.? What are your competitors offering? Do
you have a USP? What branding will be effective for your customers? What does your packaging need to
do? What packaging design will stand out from competitors and appeal to your customers aesthetically?
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Price - What are customers willing to pay for your product? What are your costs? Can the price you are
planning on charging cover those costs? How competitive is the market you are planning to sell in? Does
this affect whether you need to follow the pricing decisions of the market leader? Is your product new on
the market? Is market skimming or price penetration more appropriate for your new product?
Promotion - How can you find out the pricing of different methods of promotion? Usually there is a direct
relationship between the cost of promotion and the number of people that promotion is likely to reach.
What social media do your potential consumers use? What magazines, newspapers, websites do they read
on a regular basis? Could advertising in these be effective? Where are they based geographically? How can
you reach them?
Place - What retailers do your customers frequent? Where would they expect to see your type of product?
Do they feel comfortable shopping online? Should you set up a website or would they prefer to buy your
goods in person? Where are your competitors selling? What can be done in store for your products to stand
out?
People - What kind of service do your customers expect? Do they need to ask questions or see
demonstrations when purchasing a product like yours? What annoys them about customer service staff?
Would your customers prefer to have cheaper, better-quality services? What kind of training is available to
improve customer service among your staff? What is the expectation of staff appearance?
Process - What processes do you need to have in place of pleasant and efficient experience for your
customers? What payment methods do they prefer to use? What is the impact of this on the payment
processes you need to set up? How will customers queue? What irritates them about queueing layout and
times? Do you need changing rooms?
Physical environment - What do customers expect from your physical premises? What can be done to
improve the layout, appearance, lighting, and smell of your premises? What do your competitors do? Can
you visit the competitors’ premises? What do customers like about the different business premises they
visit? Are they willing to pay more for improvements to the physical environment?
A4 Target Market

A target market is the specific group of consumers a business wants to reach with its products. This group
shares similar traits, such as demographics, hobbies, interests, and buying behaviors, which influence their
wants and needs.

A clearly defined target market has a range of benefits, including:

Gaining a competitive edge by creating products that meet the specific needs of niche groups. Knowing
your target market helps businesses focus their research, understand customers better, and offers products
that truly address their needs.

Businesses can spend their marketing budget more wisely by focusing on a specific group instead of the
entire market. This way, they can use communication channels that effectively reach that audience without
wasting resources on the broader market.
46
Research and development costs can be lower and faster because businesses better understand their target
market's needs. This knowledge helps them create products that meet specific demands and bring them to
the market quickly.

Company Specific Product Target Market Unique Selling Proposition (USP)

Name
Families with Combines fun, nutritious options with a toy that
McDonald's Happy Meal children enhances the dining experience for kids.
Air Zoom Pegasus Runners Offers superior cushioning and breathability,
Nike 39 and fitness specifically engineered for long-distance running.
enthusiasts
Young adults and
Pumpkin Spice seasonal coffee Delivers a unique blend of spices and rich flavor
Starbucks Latte drinkers that evokes the cozy feeling of fall.
Features advanced camera technology and
Tech-savvy seamless integration with other Apple devices for
Apple iPhone 15 consumers an unparalleled user experience.
Provides one-of-a-kind accommodation that
Travelers seeking reflects the character of the local area, enhancing
Airbnb Unique Stays local experiences the travel experience.
Young retail Enables easy access to a curated portfolio of fine
Vino vest Wine Investment investors wines, with potential for appreciation over time.
Offers a project-based curriculum that emphasizes
Aspiring software real-world skills and job placement assistance
Micro verse Coding Bootcamp developers without upfront costs.
Simplifies the estate planning process with user-
Online Will Millennials friendly tools that allow for quick and affordable
Willful Creation and young families will creation tailored to modern lifestyles.

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A4 Unique Selling Point

USPs are unique selling points. These are features of a product that
make it stand out from competition in a way that is appealing to a
target market. Market research can give a clear picture of what is
already offered by the competition. A thorough competitor analysis
can help identify gaps that can inform USP. Thorough research into
customer preferences can inform a USP. Gathering customer
opinions on existing competitors can help identify features that can
be improved or added.

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A4 Segmentation

Market segmentation is the practice of dividing a population into segments based on a variety of factors.
These segments can then be targeted more specifically in terms of research and resulting marketing
strategies. Benefits include being able to better satisfy wants and needs when focusing on a smaller
population with similar characteristics, but drawbacks include missing potential markets.

Demographic segmentation is the practice of dividing a target market into distinct groups based on
observable characteristics such as age, gender, income, family
structure or body type.

An example of segmenting by body type is at Lululemon, an

athletic apparel brand originating from Canada. In Asian
markets, they have launched the ‘Asian fit,’ where the sizing is
tailored to meet local preferences and body types.

Geographic Segmentation is the practice of dividing the

population into segments based on the characteristics of the
location where people live such as country, city or area people
live in, the climate in that area, population densities and local
cultures.

An example of segmenting by local cultures is McDonalds, a global fast-food brand. They sell assorted
products in different parts of the world based on local preferences such as the McAloon Tikki burger in
India, the teriyaki McBurney in Japan, the Piranha burger in Brazil and poutine in Canada.

Psychographic segmentation is the practice of dividing a target market into distinct groups based on
psychological characteristics, such as their values, beliefs, interests, lifestyles, and personality traits.

An example of segmenting by lifestyle is Red Bull, an energy drink brand. They target people who enjoy
adventure and extreme sports with their advertising themes and sponsorship of sports events such as cliff
diving.

Behavioral Segmentation is the practice of dividing the population into segments based on behaviors,
actions, and interactions with a brand or product. This includes how often they buy the product, their
purchasing patterns, how often they use the product, loyalty status, when they make purchases and what
their priorities are in terms of product benefits (e.g., price or quality).

An example of segmenting by usage is Netflix, a video streaming platform. Gathering data on the shows
they watch, how often they watch, how long for and what time of day or week are most popular allows them
to make recommendations tailored to their behavior increasing further engagement.

Benefits and Drawbacks of Segmentation

Benefits of Segmentation

Clarity in market research: Grouping consumers by their characteristics helps generate more clarity in
market research results. This leads to a better understanding of each group, enabling more targeted
48 needs.
marketing strategies that effectively address their specific
Customer Satisfaction: Understanding the wants and needs of target groups helps companies innovate
effectively. This increases the chances of creating popular products and services and more engaging
promotion, leading to higher customer satisfaction and loyalty.

Identifying potential markets: Firms can use market segmentation to uncover niche markets or markets
where there are needs not being met by existing brands. This can open opportunities for growth.

Efficient resource allocation: Segmentation helps companies identify which groups are most profitable.
By concentrating on these profitable segments, businesses can invest in more resources where they will get
better returns and cut back on less profitable areas.

Drawbacks of Segmentation

Limited market size: Focusing on specific market segments instead of the entire market means a business
reaches fewer customers with each product. This limits potential sales and, consequently, the revenue the
business can earn.

Lack of economies of scale: Making assorted products for various market segments lowers the number
produced of each item. This means businesses miss economies of scale, such as negotiating better prices
with suppliers when buying raw materials in bulk.

Risk of segment reliance: If a business depends too much on one market segment, it risks losing all its
customers if market conditions change or consumer preferences shift.

Increased complexity: Marketing to multiple segments with assorted products and strategies adds
complexity. This requires more resources for research, promotion, and distribution, which can lead to
misunderstandings about customer needs.

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Examine the business principles and practices that determine business decisions.

Business ideas - Thoughts on how to innovate products, services, and processes in a profitable way.

Business objectives - The aims or targets that a business works towards.

49
Internal environment - The processes and culture within an organization

External environment - The factors outside of an organization that may have an impact on their activities.

Start-up - a newly formed business that is generally small.

Entrepreneur - A person who starts up and takes on the risk of a business.

Product innovation - a change in the appearance or the performance of a product or a service or the
creation of a new one

Gap in the market - an opportunity for a business to sell a product or service not currently being offered.

Current trends - The general direction things are developing in such as fashion.

Likely demand - A prediction of the sales of products and services

Stages of business growth - start-up, growth, expansion, maturity etc.

Economic climate - The overall health of the economic systems within which a firm operates.

Social and economic trends - Changes in the way people live their lives and the flow of money in the
economy.

Intrapreneurship - an entrepreneurial activity that takes place within the context of a large corporation.

Competition in the market - Rival firms selling the same or related products and services.

Product portfolio - The range of goods sold by a business.

New markets - Customers that a business does not yet sell to

Innovations - New or improved products and processes

Changes to processes - Adapting the way in which tasks are

completed.

Production processes - Actions and steps in creating a

product.

Business systems - Ways in which tasks are completed in an

organization.

Sales systems - The processes involved in selling products to customers and receiving payment.

Procurement systems - The processes involved in buying equipment, raw materials etc. by a business.

Organizational structure - The way staff are arranged in a business to carry out their activities.

Management responsibilities - Duties of managers

Organization of the workforce - A responsibility of50

managers to allocate tasks to subordinates.
Costs and returns - The benefits and drawbacks of a decision.

Financial returns - When benefits can be measured by the money received.

Non-financial returns - When the benefits cannot be measured using money received.

Long-term strategy - The goals of a business that they are aiming to achieve over a number of years.

Aims and objectives - The goals of a business.

Profit maximization - An objective to increase the amount of revenue left after costs.

Sales maximization - An objective to increase the number of products customers buy.

Market share - An objective to increase sales compared to rival businesses.

Brand recognition - An objective to increase the familiarity of the business amongst

the population.

Product development - An objective to achieve company growth by offering modified or new products to
current market segments.

Market development - An objective of company growth by identifying and developing new market
segments for current company products.

Efficiency savings - An objective to reduce costs by reducing waste growth - An objective to increase the
size of a business, e.g., by increasing sales.

Sole trader - A business owned and operated by one person partnerships - businesses with two or more
owners.

Limited companies - Firms owned by shareholders who have limited liability.

Change in ownership - A sole trader becomes a partnership or limited company.

financing growth - The use of investment from additional owners to increase the size of the business.

Competitive pressures - Rivalry from other businesses in the market that can cause a business to change
their aims and objectives.

Takeover - When a failing company is bought out by another, and ownership is transferred.

Flat organizational structure - An organizational structure that has a wide span of control, few
management levels, and a short chain of command.

Matrix organizational structure - A flexible organizational structure in which teams are formed within
functional areas and across functional areas.

Hierarchical organizational structure - A formal or traditional structure where the organizational chart
has many layers of authority.
51
Business location - The geographical site of a business

Local business - A business that operates in a small area.

National business - A business that operates in multiple locations within one country.

International business - A business that operates in multiple countries.

Operational decisions - Day-to-day choices made within a business.

Human resources - The recruitment process, deciding wage rates, deciding the proportion of full and part-
time staff, agreeing contracts and planning training.

Recruitment process - Efforts to attract the best staff for positions in the organization.

Wage rates - The price of labour full-time staff - Workers who have contracts to work around 35 - 40
hours per week.

Part-time staff - Workers who work shorter hours or fewer days than full-time staff.

Conditions of employment - The specific details of a job offer, such as working hours, salary or wages,
and fringe benefits which are agreed in a contract.

Training methods - The ways in which skills are developed for staff.

Physical resources - premises, non-current assets, procurement practices business premises - The building
where business operations take place. It can be bought or rented.

Buy or rent - A choice of whether to purchase an asset or use an asset belonging to another business for a
regular fee non-current assets - Items of value that the business will keep in their current state for over a
year.

Please rent an asset for a period for a fee hire purchase - To rent an asset until the final payment where
ownership is transferred buy outright - To pay in full for an asset.

Procurement practices - To process the purchase equipment and materials in an organization.

Just-in-time processes - Organizing purchasing of goods so that they arrive as and when they are needed
in the production process.

Just-in-case - A traditional stock management system where buffer stocks are held.

Financial resources - money or other items of value that are used to acquire goods and services.

Sources of finance - Where or how businesses obtain money for investment or liquidity, such as from
working capital, loans, or overdrafts.

Management information systems - Systems used to support decision making by storing and analyzing a
variety of information types.

52
Data processing tools - Processing tools used to store copious amounts of data relevant to a business
organization.

Quality processes - Methods used to ensure high standards in production of goods and services such as
testing and inspection.

Quality control - Methods to check the standards of goods produced at the end of the production process.

Quality assurance - Methods to ensure high standards of produced products by checking all stages of the
production process.

Total quality management - A philosophy that involves everyone in an organization in a continual effort
to improve quality and achieve customer satisfaction.

quality circles - Voluntary groups of people drawn from various production teams who make suggestions
about quality.

best practice - An optimal way recognized by industry to achieve a stated goal or objective.

benchmarking - a process by which a company compares its performance with that of high-performing
organizations.

Legislation - Laws or sets of laws to regulate industry regulation - government intervention in a market
that affects the production of a good

Health and safety at work - regulations protecting the employees from working in dangerous conditions
without proper clothing or equipment.

Data protection - Method of ensuring that personal data is correct and is not misused either by those
holding it or others who have no right to access it.

Employment rights and protection - Regulations that protect the rights of workers.

Consumer rights and protection - Regulations that protect the rights of those buying and using products.

Business models - A plan that details how a company creates, delivers, and generates revenues.

Porter's Five Forces - threat of entry, threat of substitute, supplier power, buyer power, and competitive
rivalry.

5Cs analysis - Customers, competitors, company skills, collaborators, and context

Ansoff Matrix - An analytical tool to devise various product and market growth strategies, depending on
whether businesses want to market new or existing products in either new or existing markets.

Boston Matrix - A model which analyses product portfolio according to market share and market growth.
Products are categorized as question marks, stars, cash cows and dogs.

Product Life Cycle - The stages through which goods and services move from the time they are
introduced on the market until they are taken off the market.
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Competitor analysis - The practice of identifying rivals and potential rivals and understanding their
strengths and weaknesses.

Economic trends - The overall direction of inflation, balance of payments, interest rates, and exchange
rates

Market trends - The overall direction of buying and selling in a market.

Marketing plan - An outline of the strategies to be used to appeal to the target market.

7ps - The extended marketing mix - product, price, promotion, place, people, processes, and physical
evidence

USP - A feature of a product that makes it stand out from its rivals.

Target market - The intended buyers of a product

Market segmentation - Dividing a market into distinct groups of buyers who have different needs,
characteristics, or behaviors.

Demographic segmentation - segmenting markets by age, gender, income, ethnic background, and family
life cycle

Geographic segmentation - the grouping of consumers based on where they live.

Psychographic segmentation - dividing a market into different segments based on social class, lifestyle,
or personality characteristics

Behavioral segmentation - Dividing a market into segments based on their buying habits.

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