Business Theories (AQA A-Level)

Maslow's Hierarchy of Needs

(bottom) 1. Basic physical needs

2. Safety

3. Social Needs

4. Self-Esteem

(top) 5. Self Actualisation

Herzberg's Hygiene and Motivating Factors

Hygiene factors: company policy, supervision, working conditions, pay, relations with other employees

Motivating factors: Personal achievement, recognition, interesting work, personal development

Hackham and Oldham

Believed that jobs needed to be designed to focus around people to make them motivated.

Five Key Elements: Skill Variety, Task Identity, Task Significance, Autonomy, Feedback

Taylor's Scientific Management

Created in 20th century. Believed workers were motivated by money.

Favoured division of labour and piece-rate pay (paid for level of productivity)

Bartlett and Ghosal's International Business Strategies

Measured against pressure to reduce costs and pressure for local responsiveness (adapting products for different locations/markets)

International Strategy (Bartlett and Ghosal)

- Demands in other markets similar to home market (low local responsiveness) and low pressure to reduce costs

- Centralised structure (decisions made at head office)

Multidomestic Strategy (Bartlett and Ghosal)

- Demands in different markets are very different but there is low pressure to reduce costs. Products will be adapted for different markets.

- Decentralised structure

- Different branches will look and work differently and knowledge won't be shared between separate branches.

Global Strategy (Bartlett and Ghosal)

- Demands of different markets are similar but high pressure to reduce costs

- Business structure will be centralised and the business will coordinate operations across countries to take advantage of economies of scale.

- Products remain standardised, innovation takes place centrally with knowledge passed on to different branches.

Transnational Strategy (Bartlett and Ghosal)

- Pressure to meet costs and meet local needs are both high

- Developing knowledge and ideas locally and sharing them globally.

- Balance between centralisation and decentralisation with responsibilities passed down to each branch based on experience and capabilities.

Power Culture (Handy's Organisational Culture Types)

- Centralised structure where decision making limited to few people.

- Employees likely to be more resistant to change.

- This type may struggle when business grows and cannot be run from the centre.

Role Culture (Handy's Organisational Culture Types)

- Common in bureaucratic firms where authority is defined by job title - decisions come from senior management.

- Usually have poor communication between departments so they respond slowly to change - bad in new or expanding markets.

- Avoid risks so change is quite rare

- High resistance to change from employees because they're not used to it.

Person Culture (Handy's Organisational Culture Types)

- Common in loose organisations of individual workers (eg. accountants, soliciors)

- Objectives defined by the personal ambitions - firms must ensure individuals actually have common goals

- Decisions made jointly so employees are likely to be comfortable with change - but making decisions may be difficult due to employee self-interest.

Task Culture (Handy's Organisational Culture Types)

- Emphasis on getting specific tasks done.

- Respond well to management by objectives e.g.. specific targets for departments/employees.

- Generally have low resistance to change because employees are used to it.

Boston Matrix

- Compares market growth with market share.

4 Components: Question Marks (high m. growth, low m. share), Dogs (low m. share, low m. growth), Rising Stars (high m share, high m. growth), Cash Cow (low m growth, high m. share)

Greiner's Model of Growth

The model shows that each phase of growth is followed by a crisis.

Phase 1: Creativity -> Leadership crisis

Phase 2: Direction -> Autonomy crisis

Phase 3: Delegation -> Control Crisis

Phase 4: Coordination -> Red Tape crisis

Phase 5: Collaboration -> Growth crisis

Self-Interest (Kotter + Schlesinger's reasons for resistance to change)

- People more concerned with their own situation, can't see the individual benefit

Misunderstanding (Kotter + Schlesinger's reasons for resistance to change)

Not fully understanding what change means for them

Low tolerance for change (Kotter + Schlesinger's reasons for resistance to change)

Used to doing things the same way so don't like change

Different assessments of the situation (Kotter + Schlesinger's reasons for resistance to change)

Key stakeholders may have strong disagreements over reasons change is needed so may find it hard to accept.

May not be able to see advantages of change.

Mayhave better idea for change

Re-Order Level formula

Lead time (days) x Average daily use + Buffer Stock Levels

Price Elasticity of Demand formula

% change in quantity demanded / % change in price

NPV formula

Total Present Value - Investment

Average Rate of Return

Average net return / Investment x100

Payback

Amount Invested / Annual Net Return

PESTLE

Political, Economic, Social, Technological, Legal, Environmental

Total float (Def and Formula)

Spare time available; Only non-critical activities have float time.

Latest Finish Time - Duration - Earliest Start Time

Tannenbaum Schmidt (T,S,S,C,J,D,A)

Tells, Sells, Suggests, Consults, Joins, Delegates, Abdicates

Blake Mouton Grid

- Concern for production and concern for people

- Impoverished, Produce or Perish, Team style, Country-Club

Just-In-Time Production

-Low stock with efficient stock control to decrease storage costs and increase flexibility to change.

Kaizen

Constant Improvements instead of one offs

Gross Profit

Sales Revenue - Cost of Sales

Operating Profit

Sales Revenue - Cost of Sales - Operating expenses

Profit of the Year

Operating Profit + Other Profit - Net Financial Costs - Tax

Gearing (Def. and Formula)

Shows what % of finance comes from long-term liabilities

NCL / Total Equity + NCL (x 100)

Recievables Days

Recievables / SR (x 365)

Payables Days

Payables / Cost of Sales (x 365)

ROCE (Def. and formula)

- Shows how much money is made by a business compared to how much is put in

- The higher the ROCE, the better

Operating Profit / Total Equity + NCL (x 100)

Inventory Turnover (def. and formula)

Compares the cost of all sales to the cost of the average stock held. Tells you how many times during the year a business sells all its stock.

Cost of Sales / Cost of Average Stock Held

Retained Profit

Profit after dividends

Profit after tax - dividends

Break-Even Output

Fixed Costs / Contribution per Unit

Contribution per Unit

Selling price per unit - variable cost per unit

Total Contribution

Total revenue - total variable costs OR Contribution per unit x number of units sold

Barriers to entry (Porter's Five Forces)

How easy it is to enter the market

-Patents and trademarks

- Control of distribution (forward vertical integration)

- Price war

Buyer Power (Porter's Five Forces)

When there are many sellers and few buyers.

- Buy supplier out (backward vertical integration)

- Form a buying group with other businesses

Supplier Power (Porter's Five Forces)

When there are few suppliers and many buyers.

- Tie buyers into long-term contracts

- Forward vertical integration

- Develop new products and protect them with patents

Threat of substitutes (Porter's Five Forces)

How likely consumers are to buy an alternative

- Make it expensive or difficult to switch

- Differentiate to create brand loyalty

- target market whose needs aren't being met

Rivalry (Porter's Five Forces)

High competition

- Make it easy to switch

- Bigger promotional budget

Market penetration

Bringing an existing product to an existing market.

Market development

Bringing an existing product to a new market.

Diversification

Bringing a new product to a new market

most risky

Product development

Bringing a new product to an existing market

Segmentation

Dividing market into groups with similar characteristics or needs

Targeting

Deciding which market to focus on and adapt product and marketing mix to suit them

Positioning

Positioning the product in the target consumers' minds so they see it as better than the competition.

Product

Boston Matrix, USP, Product Life Cycle

Pricing

Price skimming, penetration pricing, influences on pricing

Promotion

Advertising, branding, promotional mix

Place

Distribution channels

Promotional mix

Reflects product, budget and competitor activity

Convenience products

Inexpensive, everyday items bought by lots of people

Shopping products

Things like clothes and appliances bought less regularly than convenience products.

More expensive and sold in fewer places.

Speciality products

Things consumers believe to be unique in some way.

Perceived image and quality are more important than price