AQA BUSINESS

Price Elasticity of Demand (PED)

Formula:

PED=% Change in Quantity Demanded% Change in PricePED=% Change in Price% Change in Quantity Demanded​

(Always negative because price and demand move oppositely)

What the Value Means:

• PED = -0.5 → Inelastic

  • Price ↑10% → Demand ↓5%

  • Example: Petrol – people buy even if prices rise.

  • Strategy: Can raise prices to boost revenue.

• PED = -2.0 → Elastic

  • Price ↑10% → Demand ↓20%

  • Example: Starbucks coffee – people switch to cheaper options.

  • Strategy: Lower prices or offer promotions.

Key Rule:

• If |PED| > 1: Demand is sensitive (elastic).

• If |PED| < 1: Demand is insensitive (inelastic).

Income Elasticity of Demand (YED)

In economics, "YED" stands for Income Elasticity of Demand. It measures how much the quantity demanded of a good or service changes in response to a change in consumer income. A positive YED indicates a normal good (demand increases with income), while a negative YED indicates an inferior good (demand decreases with income). The formula for calculating YED is: YED = (% change in quantity demanded) / (% change in income). 

Ansoffs Matrix

The Ansoff Matrix outlines four strategies for business growth by combining products (existing or new) with markets (existing or new):

1. Market Penetration – Existing products in existing markets (increase share).

2. Product Development – New products in existing markets.

3. Market Development – Existing products in new markets.

4. Diversification – New products in new markets (riskiest strategy).

Lewins force field analysis

A decision-making tool used to understand the forces for and against change in an organization.

• Driving Forces: Push change forward (e.g. competition, tech, customer demand).

• Restraining Forces: Resist change (e.g. fear, habits, lack of resources).

• Key Idea: Change occurs when driving forces outweigh restraining forces.

• Action: Strengthen driving forces or reduce restraining ones to implement successful change.

Economies of Scale

Definition:
Cost advantages gained when a firm increases production, leading to lower average costs per unit.

Key Points:

• Caused by factors like bulk buying, labor specialization, and efficient machinery.

• Types:

  • Internal: Within the firm (e.g. better equipment).

  • External: Within the industry (e.g. skilled labor pool nearby).

• Only applies when output increases.

Economies of Scope

Definition:
Cost savings from producing multiple different products using the same operations or resources.

Key Points:

• Focuses on variety, not volume.

• Shared inputs (e.g. marketing, distribution) lower costs.

• Example: A dairy firm producing both milk and cheese using the same supply chain.

Diseconomies of Scale

Definition:
When a firm grows too large and average costs start to rise.

Key Points:

• Caused by inefficiencies like poor communication, coordination issues, or excessive bureaucracy.

• Opposite of economies of scale — bigger isn't always better.

• Can reduce productivity and profits.

Synergy

Definition:
The idea that the combined value and performance of two companies is greater than the sum of the separate parts.

Key Points:

• Common in mergers & acquisitions.

• "1 + 1 = 3" effect — combined resources lead to cost savings, increased revenue, or improved capabilities.

• Types: Operational synergy (efficiency), financial synergy (better borrowing), managerial synergy (shared skills).

Overtrading

Definition:
When a business grows too quickly without enough working capital to support the expansion.

Key Points:

• Results in cash flow problems, despite increasing sales.

• Signs include delayed payments, high borrowing, and lack of inventory.

• Dangerous for small or fast-growing businesses.

Methods of Business Growth

1. Merger – Two businesses join together to form one new company. Often done to gain market share or reduce costs.

2. Takeover (Acquisition) – One business buys another (can be friendly or hostile). Allows rapid expansion.

3. Joint Venture – Two businesses collaborate on a project, sharing resources, risks, and profits — but stay separate entities.

4. Franchising – A business licenses its brand and business model to others (franchisees). Quick expansion with lower risk and investment.

Improvement (internal)

1. Kaizen:

• Definition: Continuous improvement through small, incremental changes.

• Key Idea: Everyone in the organization contributes to improving processes, reducing waste, and enhancing quality.

2. R&D (Research & Development):

• Definition: Investment in creating new products or improving existing ones through research and innovation.

• Purpose: Helps businesses stay competitive and meet market demands.

3. Intrapreneurship:

• Definition: Employees act like entrepreneurs within the company, developing new ideas and taking initiative on projects.

• Benefit: Encourages innovation without the risks of starting a new business.

Types of Business Integration

1. Vertical Integration:

• Forward Integration: Acquiring or merging with businesses closer to the customer (e.g., a manufacturer buys a retailer).

• Backward Integration: Acquiring or merging with businesses closer to the supply chain (e.g., a retailer buys a supplier).

2. Horizontal Integration:

• Definition: Merging with or acquiring a competitor in the same industry at the same stage of production (e.g., two car manufacturers combining).

• Benefit: Increases market share and reduces competition.

3. Conglomerate Integration:

• Definition: Merging with or acquiring businesses in unrelated industries.

• Purpose: Diversification to reduce risk across different markets.

Global Business Strategies

1. Exporting:

• Selling products or services to foreign markets.

• Benefit: Low risk and investment but limited control.

2. Licensing:

• Allowing another company in a foreign market to use your brand, patent, or intellectual property for a fee.

• Benefit: Low-cost way to enter a new market.

3. Alliances (Strategic Alliances):

• Forming a partnership with another company to share resources, knowledge, or markets.

• Benefit: Expands market reach and shares risks.

4. Direct Investment:

• Investing directly in a foreign market through establishing facilities, offices, or production plants.

• Benefit: Greater control and long-term benefits, but higher cost and risk.

5. Offshoring:

• Relocating business processes or production to another country (often for cost savings).

• Benefit: Lower labor costs but may lead to criticism or loss of jobs in the home country.

6. Reshoring:

• Bringing business processes or production back to the home country after offshoring.

• Benefit: Better quality control, reduced shipping costs, and improvement in public perception.

Mission vs. Objective

1. Mission:

• Definition: A broad, long-term statement that defines the purpose of an organization and its overall goals.

• Focus: Describes why the company exists and its core values.

• Example: "To provide affordable healthcare solutions worldwide."

2. Objective:

• Definition: Specific, measurable, and time-bound goals that an organization aims to achieve.

• Focus: Details what needs to be done and the steps to reach the mission.

• Example: "Increase market share by 10% within the next year."

Non-Profit vs. Social Enterprises

1. Non-Profit Organization:

• Definition: A business that operates to fulfill a social cause rather than to make profit for owners.

• Revenue Use: Any surplus revenue is reinvested into the cause.

• Focus: Social, charitable, or environmental goals.

• Example: Charities, NGOs (e.g., Red Cross).

2. Social Enterprise:

• Definition: A business that operates for a social or environmental mission while also aiming to be financially sustainable.

• Revenue Use: Profits are reinvested into the social mission, but the organization may still generate profits for owners/shareholders.

• Focus: Combines business principles with social objectives.

• Example: A company selling eco-friendly products with a portion of profits funding environmental projects.

Leadership Styles

1. Autocratic:

• Definition: The leader makes decisions alone, without seeking input from others.

• Key Traits: Centralized control, fast decision-making, low employee involvement.

• Best For: Crisis situations or when quick decisions are needed.

2. Democratic:

• Definition: The leader involves the team in decision-making, seeking input and feedback.

• Key Traits: Collaboration, shared responsibility, empowerment.

• Best For: Building team engagement and encouraging creativity.

3. Paternalistic:

• Definition: The leader makes decisions but acts as a father figure, looking out for the well-being of employees.

• Key Traits: Guidance, care, and concern for employees' personal development.

• Best For: Situations where employees need support but the leader retains authority.

4. Laissez-Faire:

• Definition: The leader provides minimal guidance and allows employees to make their own decisions.

• Key Traits: Freedom, autonomy, low control.

• Best For: Highly skilled or self-motivated teams that require little supervision.

Tannenbaum and Schmidt’s Continuum

Definition:
A model that shows the range of leadership behaviors, from autocratic to democratic. It emphasizes that leaders adapt their style depending on the situation, task, and the maturity of their team.

Key Points:

• Autocratic (Tells): Leader makes decisions alone, gives clear instructions.

• Paternalistic (Sells): Leader makes decisions but tries to persuade the team to accept them.

• Democratic (Consults): Leader involves the team in decision-making, gathering feedback but still making the final decision.

• Laissez-Faire (Joins): Leader gives full freedom to the team, allowing them to make decisions with little interference.

Key Insight: The continuum shows that leaders can shift between more autocratic to more democratic depending on the situation and team dynamics.

Stakeholder Mapping

Definition:
A visual tool used to identify and analyze the various stakeholders in a project or business, based on their interest and power/influence.

Key Points:

• Purpose: Helps prioritize stakeholders and tailor communication and engagement strategies.

• Types of Stakeholders:

  • Internal: Employees, managers, shareholders.

  • External: Customers, suppliers, regulators, government, communities.

Stakeholder Mapping Grid (Power vs. Interest):

• High Power, High Interest: Manage closely (e.g., top executives, key clients).

• High Power, Low Interest: Keep satisfied (e.g., investors, regulators).

• Low Power, High Interest: Keep informed (e.g., employees, local communities).

• Low Power, Low Interest: Monitor (e.g., distant suppliers, peripheral stakeholders).

Use: Tailor actions based on where stakeholders fall on the grid to maximize support and minimize resistance.

Sampling Methods in Business

1. Random Sampling:

• Definition: Every individual in the population has an equal chance of being selected.

• Advantages:

  • Unbiased, provides a representative sample.

  • Simple to carry out if the population is known.

• Disadvantages:

  • Can be time-consuming and costly.

2. Stratified Sampling:

• Definition: The population is divided into subgroups (strata) based on a characteristic, and participants are randomly selected from each subgroup.

• Advantages:

  • Ensures all subgroups are represented.

  • More accurate than random sampling.

• Disadvantages:

  • More complex and time-consuming.

3. Quota Sampling:

• Definition: The population is divided into groups, and a specified number of people from each group are selected to meet the quota.

• Advantages:

  • Quick and ensures representation of specific groups.

  • More flexible than stratified sampling.

• Disadvantages:

  • May lead to bias if the selection process is not random.

4. Opportunity (Convenience) Sampling:

• Definition: The sample is taken from a group that is conveniently available to the researcher.

• Advantages:

  • Fast and inexpensive.

  • Useful for exploratory or pilot studies.

• Disadvantages:

  • May not be representative, leading to biased results.

Positive vs. Negative Correlation

1. Positive Correlation:

• Definition: A relationship between two variables where both increase or decrease together.

• Example: As temperature increases, ice cream sales increase.

• Key Insight: When one variable rises, the other rises as well, and vice versa.

2. Negative Correlation:

• Definition: A relationship where one variable increases as the other decreases (or vice versa).

• Example: As hours spent studying increases, stress levels decrease.

• Key Insight: When one variable rises, the other falls, and vice versa.

The 7 P's of Marketing

Definition:
A marketing model used to define the key elements that influence marketing strategy and customer experience. It includes both traditional and extended marketing elements.

1. Product:

• The goods or services offered to meet customer needs.

• Involves features, quality, branding, design, and warranty.

2. Price:

• The amount charged for a product or service.

• Includes pricing strategies like discounts, bundling, or premium pricing.

3. Place:

• The distribution channels used to deliver the product to customers.

• Involves physical stores, online platforms, or third-party sellers.

4. Promotion:

• Activities used to increase awareness and persuade customers to buy.

• Includes advertising, sales promotions, PR, and digital marketing.

5. People:

• All individuals involved in the product or service delivery.

• Includes employees, customer service, and brand ambassadors.

6. Process:

• The systems and procedures used to deliver the product or service.

• Ensures efficiency, consistency, and customer satisfaction in delivery.

7. Physical Evidence:

• Tangible aspects that influence customers' perception of the product or service.

• Includes packaging, facilities, website design, and branding.

Marketing Mix

Definition:
The marketing mix refers to the combination of factors that a business can control to influence consumers' decisions and achieve its marketing objectives. It traditionally includes 4 P's, but in service-based businesses, it's extended to 7 P's.

The 4 P's (Traditional Marketing Mix):

1. Product:

   • What the business is selling, including its quality, design, features, and branding.

   • Focus on meeting customer needs and differentiation.

2. Price:

   • The price of the product or service, which can influence demand and positioning.

   • Involves pricing strategies, discounts, and perceived value.

3. Place:

   • The channels through which the product or service is sold and delivered.

   • Includes physical stores, online platforms, or distribution networks.

4. Promotion:

   • The strategies used to communicate and persuade customers to buy.

   • Includes advertising, social media, sales promotions, and PR.

Boston Matrix (BCG Matrix)

Definition:
A strategic tool used by businesses to analyze their product portfolio based on two factors: market growth and market share. It helps identify which products to invest in, develop, or discontinue.

Four Categories:

1. Stars (High Market Share, High Market Growth):

   • Products with a high market share in a growing market.

   • Require significant investment to maintain their position but have great potential for growth.

   • Example: A leading smartphone in a rapidly growing tech market.

2. Cash Cows (High Market Share, Low Market Growth):

   • Products with a high market share in a mature, low-growth market.

   • Generate steady revenue with little investment needed.

   • Example: Established household brands like Coca-Cola.

3. Question Marks (Low Market Share, High Market Growth):

   • Products in a growing market but with a low market share.

   • Require significant investment to increase market share but could become stars or fail.

   • Example: A new tech gadget entering a rapidly expanding market.

4. Dogs (Low Market Share, Low Market Growth):

   • Products with low market share in a stagnant or declining market.

   • Typically, businesses should consider discontinuing or divesting these products.

   • Example: A product that has lost relevance due to new technology.

Product Life Cycle

Definition:
The Product Life Cycle (PLC) refers to the stages a product goes through from its introduction to its eventual decline and discontinuation. Understanding the PLC helps businesses manage products and plan marketing strategies.

The 5 Stages of the Product Life Cycle:

1. Introduction:

   • Characteristics: The product is launched, and sales growth is slow.

   • Marketing Focus: Build awareness and generate demand.

   • Challenges: High costs, low profits, and the need for promotion.

   • Example: A new smartphone model.

2. Growth:

   • Characteristics: Sales start increasing rapidly as the product gains acceptance.

   • Marketing Focus: Expand market share and differentiate from competitors.

   • Challenges: Increased competition, but profits start to rise.

   • Example: Popularity of electric vehicles increases.

3. Maturity:

   • Characteristics: Sales growth slows, and the product reaches peak market penetration.

   • Marketing Focus: Maintain market share, differentiate, and improve efficiency.

   • Challenges: Intense competition, price reduction, and saturated market.

   • Example: Soft drinks like Coca-Cola or Pepsi.

4. Decline:

   • Characteristics: Sales and profits begin to decline as the market becomes saturated or demand decreases.

   • Marketing Focus: Decide whether to discontinue the product or attempt to revitalize it.

   • Challenges: Decreased profitability and fading consumer interest.

   • Example: Older technology products like VHS tapes.

5. Extension (Optional):

   • Characteristics: The product can be revived or extended through modifications, rebranding, or new uses.

   • Marketing Focus: Innovate or find new markets to prolong the life cycle.

   • Example: A re-release of a classic game with updated features.

Price Penetration vs. Price Skimming

1. Price Penetration:

• Definition: A pricing strategy where a business sets a low price for a new product to attract customers quickly and gain market share.

• Key Features:

  • Typically used in competitive markets or when entering new markets.

  • The goal is to build customer loyalty and discourage competitors from entering the market.

  • Price is gradually increased after gaining market share.

• Example: A streaming service offering a low subscription price to quickly attract users and build a customer base.

2. Price Skimming:

• Definition: A pricing strategy where a business sets a high initial price for a new product to maximize profit from early adopters before lowering the price later.

• Key Features:

  • Typically used for innovative products with few competitors (e.g., tech gadgets).

  • Targets consumers willing to pay a premium for the latest product.

  • The price is gradually reduced as competitors enter the market or demand decreases.

• Example: A new smartphone model launching at a high price, then reducing the price after a few months when newer models are introduced.

Key Differences:

• Penetration: Low price to quickly attract a large market share.

• Skimming: High price to maximize early profits from customers willing to pay more.

Organic vs. Mechanical Structures

Definition:
These terms refer to two types of organizational structures that describe how a company arranges its hierarchy, communication, and decision-making processes.

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1. Organic Structure:

• Characteristics:

  • Flexible and Adaptable: Allows for decentralized decision-making and flexible roles.

  • Less Formality: Fewer rules, informal communication, and a flatter hierarchy.

  • Collaboration: Emphasizes teamwork, innovation, and employee input.

  • Example: Startups or creative industries where adaptability and innovation are key.

• Advantages:

  • Quick to adapt to change.

  • Encourages creativity and problem-solving.

  • Empowered employees with more autonomy.

• Disadvantages:

  • Lack of clear roles can lead to confusion or inefficiency.

  • Difficult to manage at a large scale.

  • May lack clear direction or accountability.

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2. Mechanical Structure:

• Characteristics:

  • Rigid and Structured: Highly formalized with centralized decision-making and clear hierarchies.

  • Specialized Roles: Employees have fixed, narrowly defined roles and responsibilities.

  • Communication: Vertical, with a focus on clear, top-down communication.

  • Example: Large corporations or manufacturing companies where efficiency and predictability are priorities.

• Advantages:

  • Clear authority and accountability.

  • Efficient in stable environments.

  • Predictable processes and outcomes.

• Disadvantages:

  • Resistance to change.

  • Limited employee innovation or autonomy.

  • Can feel impersonal or bureaucratic.

Kotter & Schlesinger: Resistance to Change

4 Reasons for Resistance to Change:

1. Self-Interest:

   • Explanation: Employees resist change if they perceive it will negatively affect their personal benefits or job security.

   • Example: Employees fearing job loss or reduced benefits.

2. Lack of Trust:

   • Explanation: If employees don’t trust the change leaders or the reasons behind the change, they are likely to resist.

   • Example: Employees doubting management’s motives or capabilities.

3. Different Assessments:

   • Explanation: Employees may resist if they feel the change isn’t necessary or will not improve the situation.

   • Example: Employees who believe the current system is working fine and don’t see the need for change.

4. Fear of the Unknown:

   • Explanation: Change often brings uncertainty, and employees may resist because they fear what the future holds.

   • Example: Employees worrying about new processes, job roles, or technology.

Kotter and Schlesinger’s 6 Ways of Overcoming Resistance:

1. Education and Communication:

   • Strategy: Ensure employees understand the reasons for the change and how it will benefit them or the organization.

   • Example: Holding informational meetings and providing clear explanations.

2. Participation and Involvement:

   • Strategy: Involve employees in the change process, encouraging feedback and participation in planning.

   • Example: Creating focus groups to discuss the change and gather input.

3. Facilitation and Support:

   • Strategy: Offer support to employees who might struggle with the change (e.g., training, counseling).

   • Example: Providing training programs or mentorship to help employees adapt.

4. Negotiation and Agreement:

   • Strategy: Offer incentives or rewards to employees who are most affected by the change.

   • Example: Offering promotions or compensation to employees who help implement the change.

5. Manipulation and Co-optation:

   • Strategy: Persuade or influence key individuals to support the change, often using a more strategic approach.

   • Example: Getting key influential employees on board and using them to influence others.

6. Coercion:

   • Strategy: As a last resort, use authority to force employees to accept the change.

   • Example: Management enforcing a change by making it a requirement for continued employment.

Handy’s Culture Types

Definition:
Charles Handy identified four types of organizational culture based on how authority is distributed and how work is managed. These cultures influence how employees interact, make decisions, and work towards organizational goals.

1. Task Culture:

• Characteristics:

  • Focuses on collaboration and teamwork to achieve specific objectives.

  • Authority is based on expertise and the ability to solve problems, rather than position.

  • Employees are given the freedom to work in teams and focus on achieving results.

• Example:

  • A consulting firm where project teams are formed for each client, and experts from different fields collaborate to deliver solutions.

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2. Role Culture:

• Characteristics:

  • Based on clear, defined roles with formal responsibilities.

  • Authority is typically linked to the position an individual holds in the hierarchy.

  • Focus is on procedures and following rules, with little room for flexibility.

• Example:

  • Large bureaucratic organizations, like government departments or financial institutions, where employees have fixed roles and follow well-established guidelines.

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3. Power Culture:

• Characteristics:

  • Authority is concentrated in the hands of a few individuals, often at the top of the organization.

  • Decisions are made by those with power, and employees are expected to follow orders.

  • There is less emphasis on rules and procedures and more on centralized decision-making.

• Example:

  • A family-owned business where the founder or CEO makes most decisions and employees have limited autonomy.

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4. Person Culture:

• Characteristics:

  • Focuses on the individual, with each person having significant autonomy.

  • Authority is decentralized, and employees are typically self-directed.

  • The organization exists to serve the needs of individuals, rather than having the individual serve the organization.

• Example:

  • Professional services firms (e.g., law firms or consultancy firms) where employees are highly skilled professionals working in a flexible, self-managed environment.

Planned vs. Emergent Strategy

1. Planned Strategy:

• Definition:
  A planned strategy is a deliberate approach to achieving organizational goals, where objectives are set in advance, and actions are carefully formulated and followed through according to a clear plan.

• Key Features:

  • Top-Down: Typically developed by senior management.

  • Formal Process: Involves detailed analysis, forecasting, and structured decision-making.

  • Predictable Outcomes: Based on an understanding of the environment and a plan for achieving long-term goals.

  • Long-Term Focus: Aimed at guiding the organization in a specific direction over an extended period.

• Example:

  • A company sets a 5-year plan to expand into new international markets, with clear steps, budget allocation, and timelines.

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2. Emergent Strategy:

• Definition:
  Emergent strategy refers to a strategy that evolves over time in response to unexpected challenges, opportunities, or changes in the business environment. It develops spontaneously rather than being deliberately planned.

• Key Features:

  • Bottom-Up Approach: Often emerges from day-to-day operations or lower levels of management.

  • Flexible: Allows for quick responses to unforeseen circumstances or market changes.

  • Adaptation: Strategies evolve as new information is gathered and as circumstances shift.

  • Short-Term Focus: Tends to address immediate or unexpected issues rather than long-term planning.

• Example:

  • A company unexpectedly gains market share in an emerging tech sector and shifts its focus to develop new products in that sector, despite not planning for it initially.

The Value of Contingency Planning & Crisis Management

1. Contingency Planning:

Definition: Preparing for unexpected events to minimize impact.
Key Benefits:

• Risk Mitigation: Prepares for disruptions (e.g., supply chain issues).

• Quick Response: Enables fast adaptation to changes.

• Resource Allocation: Ensures resources are ready for emergencies.

2. Crisis Management:

Definition: Handling sudden crises to protect the business.
Key Benefits:

• Protects Reputation: Manages public perception.

• Minimizes Losses: Reduces financial and operational damage.

• Maintains Trust: Keeps stakeholders informed and confident.

Porter’s Generic Strategies

Definition:
Porter’s Generic Strategies describe how businesses can gain a competitive advantage through cost leadership, differentiation, or focus.

1. Cost Leadership:

• Strategy: Aiming to be the lowest-cost producer in the industry.

• Key Focus: Reducing costs to offer competitive prices.

• Example: Walmart – efficient supply chain and cost-cutting to offer low prices.

2. Differentiation:

• Strategy: Offering unique products or services that stand out.

• Key Focus: Brand image, quality, and features.

• Example: Apple – innovative products with a premium price for quality and design.

3. Focus (Niche Strategy):

• Strategy: Targeting a specific market segment with tailored products or services.

• Key Focus: Understanding and serving a particular niche better than competitors.

• Example: Tesla – focusing on high-end electric vehicles in a niche market.

Payables

Payables (also called trade payables or accounts payable) are amounts a business owes to its suppliers for goods or services purchased on credit. These are recorded as current liabilities on the balance sheet because they are usually due within a short time (e.g., 30–90 days).

Payables Days Formula:

(payables/cost of sales)*365

Cost of sales = (Revenue-Gross profit)

Receivables

Receivables refer to amounts owed to a business by its customers for goods or services provided on credit. They are recorded as assets on the balance sheet and are expected to be collected within a short time, typically within 30 to 60 days.

formula: (Receivables/revenue)*365

Overdraft

An overdraft is a financial arrangement with a bank that allows you to spend more money than you have in your account, up to a certain limit. It’s often used as a form of short-term borrowing, but it usually comes with fees or interest charges.

organizational structure

1. Functional Structure:

• Description: Divides by specialized functions (e.g., marketing, finance).

• Advantages: Expertise in each department, efficient resource use.

• Disadvantages: Limited cross-department communication, slow decision-making.

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2. Product-Based Structure:

• Description: Divides by product lines, each with its own resources.

• Advantages: Focus on products, adaptable to market needs.

• Disadvantages: Resource duplication, inefficiency, lack of coordination.

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3. Regional Structure:

• Description: Divides by geographical regions with regional autonomy.

• Advantages: Localized strategies, faster decisions.

• Disadvantages: Duplication, coordination challenges.

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4. Matrix Structure:

• Description: Employees report to both functional and product/project managers.

• Advantages: Cross-functional collaboration, flexibility.

• Disadvantages: Confusion from dual reporting, manager conflicts.

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5. Tall Structure:

• Description: Multiple management levels, narrow span of control.

• Advantages: Clear chain of command, easier to manage small teams.

• Disadvantages: Slow decision-making, communication barriers.

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6. Flat Structure:

• Description: Few management layers, wide span of control.

• Advantages: Quick decisions, more employee autonomy.

• Disadvantages: Lack of clear authority, manager overload.

Span of Control

• Definition: The number of subordinates that a manager can directly supervise.

• Wide Span: Few layers of management, each manager overseeing many employees (common in flat structures).

• Narrow Span: Many layers of management, each manager overseeing fewer employees (common in tall structures).

• Factors Influencing: Employee competence, task complexity, and manager’s capacity to manage.

Taylor motivational theory

Frederick Taylor’s motivational theory was primarily based on the idea of using financial incentives to drive productivity and improve performance. This approach is often referred to as "Piece Rate System" and is part of his broader Scientific Management theory.

Maslow's Hierarchy of Needs

• Physiological Needs: Fair wages, breaks, and comfortable working conditions.

• Safety Needs: Job security, health benefits, and a safe work environment.

• Love and Belonging: Team culture, collaboration, and social connections.

• Esteem Needs: Recognition, promotions, and skill development.

• Self-Actualization: Growth opportunities, meaningful work, and career advancement.

Herzbeg

Herzberg's Two-Factor Theory suggests that job satisfaction and motivation are influenced by two factors:

1. Motivational Factors (Intrinsic): Lead to satisfaction and motivation (e.g., achievement, recognition, growth).

2. Hygiene Factors (Extrinsic): Prevent dissatisfaction but don’t motivate (e.g., salary, job security, work conditions).

SWOT Analysis

SWOT Analysis is a strategic planning tool used by businesses to identify their internal Strengths and Weaknesses, and external Opportunities and Threats. It helps organizations understand where they stand and make informed decisions.

ROCE (Return on Capital Employed) is a profitability ratio that measures how efficiently a business uses its capital to generate profit.

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🔹 Formula:ROCE=Operating Profit/Capital Employed×100

Capital Employed= Total assets-current liabilities or equity+non current liabilites

• Operating Profit = profit from normal business activities before interest and tax.

• Capital Employed = Total assets – current liabilities or Equity + Non-current liabilities.

What it Shows:

• How much profit is made per £1 of capital employed.

• The higher the ROCE, the more efficiently the business is using its capital.

Current Ratio

Definition:
The current ratio measures a company’s ability to pay its short-term debts (due within 1 year) using its short-term assets.

Formula:

Current ratio=Current assets/Current liabilities

Current Assets vs. LiabilitiesCurrent Assets (≤1 Year)

➔ Cash
➔ Receivables (customer debts)
➔ Inventory
➔ Short-term investments

Current Liabilities (≤1 Year)

➔ Payables (supplier debts)
➔ Short-term loans
➔ Taxes/wages owed

Key Metric:
Current Ratio = Current Assets ÷ Current Liabilities

• >1.5 = Safe

• <1 = Danger

Example:

• £10k assets ÷ £7k debts = 1.43 (OK but monitor)

Why It Matters:
✔ Assets fund operations
✖ Liabilities drain cash

Gearing

Gearing Ratio = Total Debt / Total Equity

Total Debt

• This refers to the total amount of money a business owes to external lenders.

• It includes:

  • Short-term debt (e.g. overdrafts, short-term loans)

  • Long-term debt (e.g. bank loans, debentures)

Total Debt = Short-Term Liabilities + Long-Term Liabilities

Total Equity

• This refers to the money invested by the owners of the business plus any retained profits.

• It includes:

  • Share capital (money raised from issuing shares)

  • Retained profits (profits kept in the business instead of being distributed as dividends)

Inventory turnover

Cost of sales/avarge inventory and avarge inventory/cost of sales*365

Carroll’s CSR Pyrami

Carroll’s CSR Pyramid (Bottom to Top):

1. Economic – Be profitable.
   Foundation of the business; must make money to survive.

2. Legal – Obey the law.
   Follow all regulations and legal requirements.

3. Ethical – Do what’s right.
   Go beyond the law; act fairly and morally.

4. Philanthropic – Be a good citizen.
   Support communities, charities, and social causes.

Porter’s Five Forces

Porter’s Five Forces (Used to assess market attractiveness)

1. Competitive Rivalry

   • Intensity of competition in the market

   • High rivalry = lower profits (e.g. many similar competitors)

2. Threat of New Entrants

   • How easy it is for new firms to enter

   • High threat = more pressure on prices & profits

3. Threat of Substitutes

   • Availability of alternative products/services

   • More substitutes = less customer loyalty

4. Bargaining Power of Suppliers

   • Strong suppliers = higher costs for firms

   • Few suppliers = more power over prices

5. Bargaining Power of Buyers

   • Strong buyers = can demand lower prices

   • More choice = more power to customers