Topic Review for Paper 2 - Edexcel GCSE Business

Summary

This video explores the key concepts of Edexcel GCSE Business Theme 2, covering business growth, finance, globalization, ethics trade-off, marketing mix, production processes, and more. The discussion ranges from internal and external business growth, including sources of finance and structural changes like turning a private company into a public limited company, to complexities of globalization and its effects on businesses. It tackles marketing strategies around the 4Ps (Product, Price, Place, Promotion) and production processes, emphasizing quality control and logistical considerations. The video concludes with insights into the importance of effective communication, organizational structures, recruitment, and training methods to enhance productivity and retain employees.

Highlights

• Business growth can be internal (organic) or external (inorganic) and each comes with its own set of pros and cons. 🌱
• Globalization opens new markets but also introduces more competition for businesses. 🌐
• Successful marketing strategies require a well-integrated use of the 4Ps to align with business goals. 📊
• Different production processes offer various benefits, and quality assurance is key to maintaining standards. 🔍
• Organizational structure and communication are crucial for smooth business operations and effective decision-making. 💬

Key Takeaways

• Understand the distinction between internal and external business growth, and how these strategies impact a company's expansion. 🚀
• Learn how globalization affects businesses, including competition and opportunities for increased market size. 🌏
• Grasp the nuances of marketing strategies, with a focus on the 4Ps: Product, Price, Place, and Promotion. 📈
• Get insights into production processes and how quality control measures contribute to business success. 🏭
• Recognize the role of effective organizational structures and communication in enhancing productivity and employee retention. 🏢

Overview

This informative session delves deep into the essentials of Edexcel GCSE Business's Theme 2. First, the topic of business growth is unpacked, highlighting the differences between internal (organic) and external (inorganic) growth strategies. These strategies come with their own advantages and disadvantages, such as cost-effectiveness and speed.

Next, the global landscape is explored, discussing how globalization impacts businesses by expanding markets but also increasing competition. The importance of the marketing mix is accentuated, with a breakdown of the 4Ps: Product, Price, Place, and Promotion, which help in crafting a comprehensive marketing strategy.

Lastly, the session covers various business operations aspects, from production processes like job and flow production to quality control and assurance. The closing segment emphasizes effective organizational structures and communication as essential for productivity, alongside strategic recruitment and training to foster employee growth and retention.

Chapters

• 00:00 - 00:30: Introduction and Business Growth The chapter discusses different types of business growth, focusing on internal or organic growth. It describes internal growth as involving entering new markets, whether geographical or product-based, often through innovation, research and development, or new technology. Internal growth is noted to be less expensive compared to external growth, but it comes with increased risk and slower progress as it does not involve acquiring an existing, ready-made business.
• 00:30 - 01:00: External Growth and Public Limited Companies External growth, often termed inorganic growth, involves processes such as acquisitions, mergers, or takeovers where a company buys an already established business. This approach, while costlier, allows for faster market or regional entry.
• 01:00 - 02:00: Economies of Scale and Sources of Finance The chapter discusses the concept of economies of scale and its relevance to business finance. It elaborates on how businesses, particularly those listed on the stock exchange, can utilize large finances to expand into new markets and products. As businesses grow, they tend to achieve economies of scale, such as purchasing economies of scale, where buying in bulk reduces the average cost per unit. This reduction in cost per unit may allow businesses to decrease their prices, potentially undercutting rival companies.
• 02:30 - 03:30: Changing Business Objectives The chapter discusses various aspects related to changing business objectives, specifically focusing on sources of finance that offer a competitive advantage. It explains the difference between internal and external sources of finance including retained profits and the sale of long-term assets on the internal side, and loan capital on the external side. It also highlights the importance of being cautious when selling too many assets as it might negatively affect the business operations.
• 04:00 - 05:30: Business and Globalization The chapter 'Business and Globalization' discusses financial aspects of business operations in the global context. It covers the differentiation between loan capital and share capital. Loan capital refers to money borrowed from lenders like banks, incurring interest over time, which becomes challenging when interest rates rise. On the other hand, share capital, sometimes referred to as flotation, involves raising money by selling company shares, especially significant for public limited companies.
• 05:30 - 07:00: Ethics, Sustainability, and Pressure Groups The chapter titled 'Ethics, Sustainability, and Pressure Groups' discusses the reasons why business aims and objectives change over time as a business evolves. Key points include changes in market conditions, technology, financial performance, and legislation, which may prompt a business to adapt its objectives. The chapter also covers how businesses may shift their focus towards survival or growth in response to these changes.
• 07:00 - 09:00: Marketing Mix and Product Life Cycle The chapter discusses the concept of the marketing mix and its relationship with the product life cycle. It highlights strategic decisions businesses might make when considering how to position their products within the market, such as scaling workforce size and adjusting product offerings. Additionally, the chapter covers the impact of globalization on business operations, emphasizing the increasing interconnectedness of global markets and its implications for trade, focusing particularly on the dynamics of imports and exports.
• 10:00 - 11:30: Pricing Strategies and Place in Marketing The chapter discusses the impact of globalization on UK businesses, particularly in terms of competition and opportunities. On one hand, globalization increases competition as consumers have the option to purchase from abroad, not just domestically. This presents a challenge for local businesses. On the other hand, globalization offers opportunities for businesses to source cheaper or higher-quality components and supplies from overseas. Moreover, UK businesses can expand their markets by exporting their products to international customers. This dual impact of globalization allows businesses to navigate and strategize their pricing and market placement effectively.
• 12:00 - 14:00: Business Operations and Production Processes The chapter 'Business Operations and Production Processes' discusses the implications of market size and potential sales on business expansion to new locations leading to multinational status (MNC). It highlights considerations for multinational companies, including dealing with tariffs. An example provided is about a UK business facing tariffs while selling to the US.
• 15:00 - 21:00: Logistics, Quality, and Customer Service Foreign companies selling goods in the US face higher prices, reducing demand and competitive advantage. Multinational companies might prefer to locate in countries within trade blocks such as the EU in Europe or ASEAN in Asia to mitigate these issues. The chapter discusses the importance of logistics, quality, and customer service in maintaining competitiveness and navigating these challenges.
• 22:00 - 24:00: Finance, Income Statements, and Investment The chapter discusses the concept of trade blocks and their impact on multinational companies. It highlights that trade blocks allow for free trade among member countries, eliminating tariffs and creating a competitive advantage in e-commerce for multinational companies. The chapter also delves into the ethical considerations companies must weigh, specifically the trade-off between ethics and profits. It notes that while behaving ethically can sometimes increase costs or prices, potentially reducing profits, it is an important aspect for companies to consider in their operations.
• 24:10 - 28:30: Organizational Structures and Communication The chapter discusses the trade-off between sustainability and profitability in business. It is suggested that while adopting sustainable practices and using renewable resources may lead to higher costs due to the integration of new technology, it may consequently result in reduced profits. Additionally, the chapter highlights the role of pressure groups, which are organized groups trying to influence governments or businesses to adopt certain practices.
• 28:30 - 31:30: Recruitment and Training This chapter discusses the impact of pressure groups on businesses, particularly in terms of the marketing mix, also known as the four Ps. It highlights how groups such as Greenpeace can influence companies to modify their products, materials, or energy use to be more environmentally friendly, potentially leading to higher costs and altered pricing strategies.
• 31:30 - 45:00: Motivation and Final Notes The chapter discusses the impact of sustainable resource usage on production costs and pricing strategies in business. It covers the adaptation of elements within the marketing mix, such as product, place, or promotion, due to these changes. The focus is on the first 'P' of the marketing mix: 'Product', particularly the 'design mix' during the research and development stage of the product's life cycle. Important factors considered are aesthetics and function.

Topic Review for Paper 2 - Edexcel GCSE Business Transcription

• 00:00 - 00:30 right let's have a session on theme two for edexel let's go so first thing to think about is business growth so you've got internal growth which is sometimes called organic growth internal growth is about entering new markets that's new geographical regions or new products that could be because you did some sort of innovation or research and development R&D or because you utilize your new technology that you've got it's less expensive usually versus external growth but it's slower or riskier as you're not buying a ready-made business
• 00:30 - 01:00 or success an external growth sometimes called inorganic growth is essentially you do an acquisition a merger or a takeover so you just buy a ready-made business it's more expensive but it's faster in terms of entering a particular Market or particular region now you might be a growing private limited company and then you turn into a public limited company a PLC you do that through a flotation and that will raise you enormous Finance because you're going to get lots of individuals that will buy shares in in your public
• 01:00 - 01:30 limited company when you're on the stock exchange and then you can use that enormous Finance to expand your business into new markets into new products and so forth now a growing business likely will get economies of scale so a growing business means more output more output means you get economies of scale probably purchasing economies of scale bulk buying essentially and if you get purchasing economies of scale that will lower your average cost per unit per one which will maybe allow you to lower your prices lower than your Rivals which will
• 01:30 - 02:00 give you a competitive Advantage number two is sources of Finance so you've got internal sources of Finance examples there being retain profits retain profit is the portion of a company's net profit that is not paid out to shareholders via dividends then you've got selling assets selling assets is usually selling long-term assets like equipment like Machinery but you've got to be cautious of not selling too many assets otherwise you'll have no business and then on the external side you've got loan capital
• 02:00 - 02:30 which is essentially just bank loans so it's money that a business borrows from A lender such as a bank for a specific period of time and you pay interest on that so obviously now we have interest rates that have been increasing every month for the last year that will mean higher costs for having loan Capital now the opposite of loan capital is share Capital sometimes called flotation as I mentioned before if you become a public limited company that's essentially Capital Money you get from selling shares share capital is the money that a company raises by selling shares to
• 02:30 - 03:00 investors number three is why business aims and objectives change as the business evolves well you might have changes in market conditions changes in technology changes in the financial performance of a business maybe it starts doing better or worse and there's changes in legislation or laws so that's why your objectives might change as you evolve the next thing is how they may change as the business evolves so you may choose to focus on Survival or to CH to focus on growth you may choose to
• 03:00 - 03:30 enter a market or exit a market you may increase or reduce the size of your Workforce how many employees you got you may increase or decrease the size of your product range how many products you sell next thing to think about is business and globalization what is globalization well it's the world becoming more interconnected so there's more trade when we think about trade we're thinking about imports and exports so it's led to both of those now the impact of Imports on businesses let's think UK businesses is that if there's
• 03:30 - 04:00 Imports UK businesses have competition from overseas because customers no longer just buy from your your business the domestic business they might buy from abroad so that gives you competition but it means you can use the importing from the other countries businesses to buy components buy supplies from abroad sometimes they might be cheaper or of better quality on the export side if you're a UK business and now there globalization that means you can sell abroad to overseas customers and that gives you a big in
• 04:00 - 04:30 Market size and potential sales it may lead to new locations for sales or for production and this would make you a multinational company an MNC next thing to think about with business and globalization is considerations for multinational companies so you might have to consider the fact you're going to have a tariff now a tariff let's just say that you are a UK business and you want to sell to the US but the US put tariffs on foreign sales and you'll UK
• 04:30 - 05:00 so you're foreign well that will mean that when you sell your goods in the US there's going to be higher prices for you so that's going to mean your demand is reduced because your higher prices so lower demand means you're less able to compete you might lose your competitive Advantage when you sell into that country being the US also trade blocks are of importance so a multinational company may want to locate in a country that is within a trade block such as in Europe the European Union or in Asia you got asan and then you want to go into
• 05:00 - 05:30 that trade block and then it gives you access to the members of that trade block because there's going to be free trade between the members and there'll be no tariffs in that case how multinationals compete well they compete on e-commerce and they might adapt their marketing mix next thing to think about is the ethics tradeoff eics versus profit trade-off to be clear because sometimes but not always by being more ethical that's doing morally the right thing may lead to higher costs or higher prices meaning profits fall so more
• 05:30 - 06:00 ethical equals less profits maybe there's also a sustainability or environmental tradeoff so the sustainability versus profit tradeoff is that sometimes but not always by being more sustainable using renewable resources for example may lead to higher costs because of new technology you need to bring into the business but it might mean that profits fall so more sustainable might mean less profits maybe next thing to think about is pressure groups so that's an organized group of people trying trying to influence governments or businesses how
• 06:00 - 06:30 a pressure group might impact a business well it might mean the pressure group is successful in changing the business's marketing mix so we're thinking the four Ps here so it could be it might influence the business to change its product maybe it's a green pressure group like Greenpeace for example and it might mean the businesses pressurized into considering different raw materials that it might use or different energy um within its factories that might impact on its prices it might be that it costs more than therefore to bring in that
• 06:30 - 07:00 Machinery or use those sustainable resources which means the cost of production have gone up which means the business might need to put the prices up so more expensive and that would adapt the P within the marketing mix and it could also be of course place or promotion could be influenced next thing to think about is the marketing mix the first of the four Ps is product first question here is the design mix so you're thinking when you're considering the design of your product in the research and development stage of the product of the product life cycle you're thinking about Aesthetics how it looks function
• 07:00 - 07:30 does it do what it's supposed to do and does it make economic sense in terms of making it for what you're likely going to be charging based on your market research a way to think about it is AFC Arsenal Football Club life cycle we're thinking about R&D stage and then you move into the introduction stage the growth stage the maturity stage and then the decline stage let's think about each one in a bit more detail so the research and development stage you probably do lots of market research there lots of product development there so you're going to have lots of costs and no sales so you're going to have a cash flow
• 07:30 - 08:00 issue in the R&D phase then if your business is successful it'll move into the introduction phase it doesn't have to move for all the stages so it moves into the introduction stage likely low sales unless of course you've got lots of brand awareness lots of initial awareness and then you move into the growth stage in the growth stage you're going to see the fastest rate of growth in your sales sales are increasing super super fast you might need to continue that by advertising Lots but you're likely to see lots of Rivals in the growth stage because they are seeing that your sales are are growing fast
• 08:00 - 08:30 they keep growing fast until they reach their Peak and their Peak or their is there is when you're in the maturity stage sometimes called saturation and then you unfortunately might move into the decline phase decline phase you still have sales but they're just slowing down and the way to stop yourself going into the decline phase and try and remain in the maturity phase as long as possible is to employ extension strategies so when we're thinking about extension strategies here are some use extens and strategies to be
• 08:30 - 09:00 aware of improve packaging but then you need to think about the cost of improving the packaging will it be effective are you combining you with some sort of segmentation change you might add new or more features to the product but what's the cost of this is there lots of R&D costs here will it appeal to the target market by doing that will it lead to higher prices because you've got to recoup those R&D costs new target market maybe you think about segmentation here changing the location the income the demographics it's common for businesses to work down
• 09:00 - 09:30 the income debt segments but it also could be that you expand geographically need to just think about what the issues there in terms of that type of segmentation you do are there any new costs for example Associated there in that extension strategy then you got to think about advertising as another extension strategy just do more but then you need to think about what type of advertising you're going to do are you going to go advertising in terms of billboards magazines internet newspaper television and then you could reduce your prices but if you reduce your prices you'll want to think about how sensitive the demand will be to lower
• 09:30 - 10:00 prices example you lower your prices by 10% you lower your prices by 10% you'll want your demand to increase by more than 10% to have larger amounts of Revenue continuing on with product the product differentiation so about your products being different sometimes called USP so benefits there of having a differentiated product it improves brand image brand awareness it might improve Customer Loyalty therefore increasing sales leading to reduced marketing costs
• 10:00 - 10:30 because everybody's aware of your product being so super duper next thing in terms of the P's is price let's just go from Basics 101 stuff the law of demand so if prices go up demand goes down but in longers you need to think about the extent for example if prices are going up by 10% yeah demand Falls but what if it only def Falls by 1% that will mean more Revenue overall hence the happy face so the extent of changes in demand compared to what you've done in
• 10:30 - 11:00 prices is a super evaluation point to score big next thing in terms of price is pricing strategies so price skimming is when you start of a high price and then you reduce the price over time you'll do that if you've got brand awareness or if there's no one else that's AAL to your product in the market advantages of this you'll recoup your research and development costs if particularly if you're able to get away of those high prices for a long amount of time disadvantages you might alienate your customers who not willing to pay that high price or if they know what
• 11:00 - 11:30 you're up to they might might just wait until you lower your prices price penetration is the opposite of price schimming so you start low and then you increase those prices over time um we've had that with Netflix over time D where they've just increased prices year after year um you do that initially with those low prices to grow awareness in the market encourage switching behavior from consumers but the disadvantages is If the product quality isn't actually there then your struggle to maintain the demand when you increase those prices so it depends on the product quality the
• 11:30 - 12:00 last one to think about is competitive pricing which is when you set prices around the same level as your Rivals you might undercut the key thing here is it's common in oligopolies where there's four to six firms that dominate a market advantage of doing this maintain market share disadvantage is well you need to compete on other things if you're doing competitive pricing because you've essentially set your prices the same or same abouts as everybody else so you might want to compete on other things like USP like product differentiation and that might lead to more R&D next
• 12:00 - 12:30 thing to think about is it depends on points for Price strategies so product life cycles is always a go-to evaluation point where are you in the product life cycle are you in the introduction phase well in that case you might have no awareness so you need to use price penetration maturity stage you might use competitive pricing because it's become a saturated market decline phase where you might use the product as a loss leader being that you charge a really low price at first and then you raise it over time an extreme version of price penetration that is and then um next
• 12:30 - 13:00 thing to think about is the level of competition so how many rivals you've got so you might use competitive pricing if you've got lots of Rivals you might undercut them and go lower than them and the next thing to think about is research and development costs so if you had really big research and development cost in the R&D stage of the product life cycle you may need to do price schimming at first to recup them and that's going to be even more effective for evaluation if you have no other Rivals then the next thing to think about is promotion so you make customers is aware of your product you remind
• 13:00 - 13:30 customers of your product this is why you do promotion therefore that increases the sales of your product changes the perception about your product sometimes you might want to adapt for different segments of the market so that's why you might do promotion and then the last thing is to persuade customers of course to buy it promotion think about types of promotion where you've got advertising advertising think be Min Billboards magazines internet newspapers television but you need to think about the cost of doing those for example television is very expensive and it depends on what segment you're targeting because you want the
• 13:30 - 14:00 people that you're targeting to buy whatever your product is well you want them on that particular source of media for example if you are looking to sell to a mass Market television might make sense even though it is expensive another type is sponsorship so sponsorship advantages here brand awareness disadvantages the cost of sponsorship the risk of Who You sponsor CU they might do something weird it depends on of course um if it aligns well with whatever your business is and there's always a risk product trials essentially samples well it's going to
• 14:00 - 14:30 encourage consumer switching encourage them to try your product but you need to think about the cost of it and the extent that you do product trials special offers so you could be thinking of BG off here buy one get one free for example that's a form of sales promotion it's shortterm by nature and then you need to think about well what's going to happen when that special offer finishes when it ends are the people are the consumers going to still be buying that product it might depend on the quality of the product itself ultimately that will be the important thing there in the long term then branding though that's
• 14:30 - 15:00 there to remind reinforce perception of a product but it requires persistence you've got to do it a long a lot of times and you got to think about the cost of it next thing to think about is online promotion the types of online promotion where you've got targeted advertising you tailor that to the appropriate segment but you want to question the cost there you got viral advertising doesn't always work it requires a bit of luck social media well it takes time and effort and then you think about the cost of it e newsletters I just the question that do people
• 15:00 - 15:30 actually read them those those newsletters that often come into your email accounts and do they just get diluted through the 10 billion emails you've already got next thing to think about is place within the marketing mix so place it's sometimes referred to as distribution because it's about how customers how customers can buy the products important that you get that so you might get products through websites e-commerce or through Mobile's mcommerce and of course the channel of distribution is that they're delivered to your door or you might collect them from store or you might buy them in
• 15:30 - 16:00 store or you might buy them from a retailer store that you sold your product to or via a wholesaler who bought loads from you or you might be thinking about if it's Tes sales through the phone so it's about how consumers how customers buy those products lots of different ways that can happen and that's the place in the four Ps next thing to think about is the integrated marketing mix and the important term this this is essentially the all the four Ps in the marketing mix they need to work together they need to be aligned they need to be aligned for the segment that you T Target I'll give you an example you've got a high quality
• 16:00 - 16:30 product well if you've got a high quality product you'll probably charge a high price you'll be very selective about promotion and where you promote it you'll be very selective about which retailer can stock that product you don't want to damage the reputation of your product by doing it in a cheapened place and you'll use that to build your competitive Advantage so if we're thinking about the marketing mix being integrated it's important that it's Dynamic and it evolves over time so over time that high quality product maybe you've got lots of Rivals now well if you use that high price you might have
• 16:30 - 17:00 to move into the second phase of price skimming and start to lower that price you might need to be selective about promotion and now you need to try new segments and therefore new forms of promotion if you were being selective about which retailer that can stock the product and you've evolved over time now you might be working down income segments looking to Target different income brackets along the way or you could use multi- channels of distribution and that's that you sell in different ways to the consumer so you might have a store a website you sell to a retailer and so forth next thing to
• 17:00 - 17:30 think about is business operations so what's the purpose of operations well it's to produce goods and to produce Services then next thing to think about is types of production processes so you've got job production which is a manufacturing process in which a single product is made to order for a specific bespoke customer there's motivational benefits here employees like it they're involved in the whole process but it could lead to higher prices because of higher costs then on the other end of the extreme you've got flow production
• 17:30 - 18:00 that's a manufacturing process in which a product is made continuously 24/7 usually on an assembly line so using Machinery using Capital but you might get economies of scale because you're making loads of output loads of output purchasing economies of scale technical economies of scale it will lower your average cost per unit you got lots of productivity there and the key thing is it might lead to more competitive prices because you can make it cheaper but it might lead to demot motivated staff and a lack of flexibility as well because
• 18:00 - 18:30 you're using an assembly line if you need to make something else because consumer demands change it'll be difficult for you to adapt then in the middle of those two types of manufacturing processes is batch production and that's in which a group of identical products are made at the same time in groups in batches good thing here is you got a bit of flexibility and it's a kind of a balance between job and flow production and maybe gets the best of both worlds so in job production you get that specific nature and you can still have a bit of that in batch production but also you
• 18:30 - 19:00 rtain those competitive prices that you'll get out of flow production because of the economies of scale but just to a lesser extent in each one next thing to think about is just in time what is it well just in time is there to reduce waste by producing goods and services only when they are needed benefits of just in time will reduce stock costs as just enough raw materials components arrive when you need them so it can save and storage costs improved deficiency of course through using just in time but problems of just in time you
• 19:00 - 19:30 need to have a very good relationship with your suppliers it requires accurate demand forecasting and also you might lose out an economies of scale versus just in case versus buffer stocks because you're getting smaller quantities coming in next thing to think about is procurement well procurement is the process of buying goods raw materials stock and then supplies are very important of course because with suppliers you want to be thinking about Hoops Hoops Hoops you want to be thinking about quality you want to be thinking about reliability and price
• 19:30 - 20:00 next thing to think about is logistics so Logistics what is it it's the process of planning organizing managing the flow of goods and services from the point of origin maybe the supplier maybe the factory into the point of consumption the shop maybe in simple terms it's Transportation so considerations you want to think about well the cost of your Logistics Department the reputation of your Logistics Department maybe you need to get it to your customers quick particularly if you use e-commerce online delivery you want to be thinking about customers being satisfied as well
• 20:00 - 20:30 in terms of online deliveries that timely delivery next thing to think about is quality so why is quality important well quality is important because it's going to increase your sales attract customers retain customers particular if you become reliable and dependable over time another why reason why quality is important it's going to reduce costs there's no defects there's no need for recalls no need for refunds that's all super full cash flow and it's going to give the business a competitive Advantage but how do you keep high
• 20:30 - 21:00 quality levels well how you keep it is through QC QA QC is quality control that's the process of ensuring that products or Services Meet customer requirements inspections and sampling basically but quality assurance is the systematic set of activities that are used to ensure that products or Services Meet customer requirements so it might be that you do some sort of planning of how you're going to make a product that it ensures top quality you might train your staff and then you might have daily Mee meeting so you can always seek to improve your production process that's
• 21:00 - 21:30 QA quality assurance sales process so you're thinking about product knowledge service with speed you'll want within the sales process you'll want customer engagement you'll want to respond to any feedback you get from your customers and then you want to give them after or post sales service that could be warranties technical supports or customer service why is customer service important well to attract retain customers increased sales of course reduce costs less complaints if you've got top Customer Service improveing employee morale build
• 21:30 - 22:00 brand reputation next thing is finance income statements so you run a bagel business well you've got revenue of £100 that's always at the top of the income statement the next thing in the income statement is cost of sales that's the direct costs involved so if we're talking about a bagel business over there direct costs will be the dough they'll be if it's a salt beef Bagel the salt the beef that's £ 2020 it's a direct cost to get your first profit gross profit it's Revenue Minus cost of sale so here you can see it's £80 because 100 - 20 is 80 then you've got
• 22:00 - 22:30 operating expenses and interest that's the indirect costs the day-to-day operational business cost it could be Insurance it could be rent for example let's just say really silly numbers here that's £30 that allows us to calculate our next profit which is net profit and net profit is of course gross profit minus operating expenses and interest so 80 minus 30 is 50 that leaves us onto the next thing that's important back to that Bagel business is ratio analysis and those two margins you have to know
• 22:30 - 23:00 this is for sure one of these will feature so gross profit margin formula there is gross profit divided by Revenue Times by 100 so you can see you've done 80 divided by 100 times by 100 80% that's the first one the second one is net profit margin that's net profits £50 divided by Revenue 100 times by 100 that's 50% perhaps net profit margin is more useful because it accounts for both types of costs that's the cost of sales the direct costs and the operating expenses the indirect costs but it's
• 23:00 - 23:30 also useful to work out your margins because you can compare your businesses to other businesses of different sizes and you're comparing in percentages not in raw numbers that might be useful to look at efficiency of sales next thing is investment types of investment well new Machinery new buildings new vehicles and then you might want to think about in investment questions you're probably going to be faced with the AR formula which is the average annual profit divided by the cost of investment Times by 100 expressed to percentage so average rate of return is this formula
• 23:30 - 24:00 I've just said it but the important thing is you might have to calculate that top bit hence the white star so average annual profit well the formula for that average is just mean from math if you doing GC gcsc math which I'm sure you have be then then average annual profit is just total profit divided by how many years so you had total profits of 20 over how many years 10 20 divided by 10 is two next thing to think about is using financial data so you might use gross profit margins you might use net profit margins and you want to compare against yourself in previous years have
• 24:00 - 24:30 you been trending upwards also you want to compare against Rivals are you better than the industry average are you better than your main competitors your main Rivals but for a bit extra you might want to consider the perspective of other stakeholders so think about employees what do they care about they probably care about training wages and so forth customers well they care about prices quality customer services now let's move on to the final bit which is HR we deal with organizational structures first so organiz ational structures to be aware of will be hierarchical or tall we're thinking
• 24:30 - 25:00 advantages of these structures well more opportunities for promotion because there's more layers of management better for staff motivation um second thing to think about is Staff might gain more support from their line manager because you're going to have a narrower span of control within a taller structure and then thirdly you might be thinking about a higher degree of supervision because of that smaller that narrower span of control and that might mean that line managers are just more effective disadvantages well many layers of management will mean narrow spans of
• 25:00 - 25:30 control as we said but it could mean the chain of command is long and that could make communication possibly slower as instructions will take longer to travel through the different levels or layers of management in the organization um and also it might mean they're less responsive to change in terms of firm making decisions it's a slow oil tanker as it were in making decisions as opposed to a flatter more Nimble structure where there's fewer levels within the business fewer layers of management lines of communication will be short so
• 25:30 - 26:00 the firm is perhaps more responsive to change more responsive to making quick decisions staff within a flat management structure might feel more empowered perhaps they work more independently because of the wider span of control and that might mean they take on more responsibility on the disadvantages side for flat structures well a wide span of control means that tasks are likely to be delegated evaluation Point who are you delegating to are they capable of of doing it do they have the skills are they motivated to do that but also it
• 26:00 - 26:30 might be that there's less promotion opportunities within a flatter structure and that might be an issue for staff retention next thing to think about in organizational structures is centralization which leads to consistency it's easier for control and it's quicker decision makings always with centralization there's lots of C's there centralization consistency control and then there's lots of D's when you think about decentralization so decentralization leads to better decisions as you make local decisions you're decentralizing it
• 26:30 - 27:00 the decisions aren't being made by a select few at the top of the organization it's being made at a local level it might allow local experts to make decisions and of course it involves delegation all the D's there with decentralization next thing is why is effective communication important well employees are more productive employees complete the job well and it might lead to improved motivation next thing what are the barriers to effective communication well if your MNC you're dealing in different countries so that could lead to language barriers or
• 27:00 - 27:30 cultural issues or time zones could be a problem in terms of effective being good communication next thing is different ways of working where you've got part-time full-time and then flexible hours and then permanent temporary and freelance in terms of your contracts and then you're thinking using technology well you might use technology like remote working working from home essentially and that would promote efficiency that's why it's good roles and responsibilities well usually they're in this order directors at the top senior managers then supervisors then operational staff and then support
• 27:30 - 28:00 staff next thing to think about is how businesses recruit well they create documents they create a person specification about what they want in when they recruit somebody what do they want from that person and then a job description what are you likely to do in that job and then they create an application form it will be blank because they want you as the candidate to fill it out and when you fill out that candidate you'll send that document that fied application form along with your curriculum V your CV next thing is types of recruitment well
• 28:00 - 28:30 likely it could be an internal versus external question so internal recruitment leads to increased morale there's more opportunities if you are recruiting from within your business productivity might improve reduce costs on Advertising perhaps because you're recruiting from within your business you can use your internet you can use your emails or your teams or whatever you use in your business to try and find that next person perhaps because you've already worked at the business if you're recruiting internally from inside your business it might lead to more knowledge more skills perhaps more likelihood that
• 28:30 - 29:00 there's going to be a successful hire in terms of that recruitment because they're already used to the culture of your business on the other side you got external recruitment well that means you're recruiting from outside your business so course there's going to be a wider pool of candidates it might lead to more or improved diversity within the organization which is always a good thing and then New Perspectives or it might lead to more Innovation or creativity or just simply bringing in ideas from your Rivals to your business to make you better as a business as a
• 29:00 - 29:30 firm so that's why external recruitment might be useful as opposed to internal recruitment next thing is why train your workers will they become more skilled and therefore more productive and if they're more productive it might improve efficiency brings your average cost per unit down gives you a competitive Advantage become more motivated well they might become more motivated as they feel more valued now because you're trading them you're offing them training courses and that means they could become more productive and then just rinse and repeat those same chains from before stay with the business longer so that's going to if you train them up they stay
• 29:30 - 30:00 with you longer that leads to increased staff retention and then increased retention is clearly good because they become more experienced with you and that could lead to efficiency gains in the future next thing is why motivate workers well to retain your employees and that's obviously going to be benefit there in terms of experience but also cost you don't need to replace them if you're retaining them improved productivity of your workers and then how to motivate workers well Financial methods of motivation that would be remuneration bonuses commission
• 30:00 - 30:30 promotion and fringe benefits and then non-financial methods of motivation would be job rotation job enrichment and autonomy that's the end of this sesh best of luck watch out for the final sesh video for paper 2 and other than that see you at the next sesh