Edexcel Business A Level Revision

Business ethics - The moral principles that guide the way a business behaves Remuneration - Reward for employment in the form of pay, salary, or wage, including allowances, fringe benefits, bonuses, cash incentives etc. Ethics can be reflected in the way the business recruits, motivates and rewards staff. Is it ethical to pay just the living wage? Should London businesses pay above the living wage? Should senior managers be paid higher remuneration than others in the business? Is it ethical for CEO's to be paid hundreds of more times better than the average employee in the business. The recruitment process needs to be fair and free from bias and should at least follow the law. A company needs to spend money regularly on staff training and development. The trade-off is that these strategies require a significant amount of ongoing financial investment which reduces the business's profits, at least in the short term. Rewards for staff, such as basic pay and bonuses, n...

Growth - A common corporate objective which means expanding the sales revenue of a business, probably in the hope that profits will increase too. Diseconomies of scale - occurs when a business grows so large that the costs per unit increase. As output rises, it is not inevitable that unit costs will fall. (UNIT COSTS RISING AS WELL OUTPUT RISING) When a business expands, they expect economies of scale, but are often shocked to find that they are outweighed by diseconomies. Diseconomies of scale can occur due to: POOR INTERNAL COMMUNICATION BETWEEN DIFFERENT DEPARTMENTS AND ALONG THE CHAIN OF COMMAND - the more layers there are in the business hierarchy and the wider the spans of control for managers, the greater the risks of workers receiving unclear instructions about what they are supposed to do. POOR EMPLOYEE MOTIVATION - which is where workers can feel more isolated or alienated and less appreciated in a larger business so their loyalty and productivity may red...

A strong culture - is one which is deeply embedded into the ways a business or organisation does things. With a strong culture, employees and management understand what is required of them and they will try to act in accordance with the core values. A weak culture - can arise when the core values are not clearly defined, communicated or widely accepted by those working for the organisation.  It can also occur if there is little alignment between the way things are done and the espoused values. This can lead to inconsistent behaviour of people in the organisation which in turn results in inconsistent customer experiences! Strong Culture Weak Culture Staff respond positively to culture values Little alignment with culture values Shared sense of responsibility towards vision, mission and objectives Employees have to be forced to perform duties Motivated and loyal workforce Greater management control...

Corporate culture - The values, beliefs and standards shared by people and groups within an organisation. These will impact on the way that people within the organisation interact with each other and with other stakeholders. "The way we do things around here" - Charles Handy The culture of a business is reflected in many ways, e.g; How employees are recruited - the cultural factors that make one applicant more suitable than another  The way that visitors and guests are looked after How the working space is organised The degree of delegation and individual responsibility (effects decision making) How long new employees stay in a business (retention) How contracts are negotiated and agreed The personality and style of the sales force The responsiveness of communication (impacts staff motivation) The methods used for communication (impacts staff motivation) How staff address each other (first name, last name etc) The speed in which decisions are made (effects de...

Cell production - A form of flow production whereby the production line is split into a series of self contained cells which teams in these cells work together to create one unit of output. Each cell takes responsibility for the production of complete units of output. MASLOW AND HERZBERG ALERT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! The members of the cell work as a team to achieve goals and ensure quality standards are met. Cell production often leads to increased productivity due to: Increased motivation (team spirit and added responsibility) Specialisation ( the process of concentrating on and becoming expert in a particular subject or skill)   CELL PRODUCTION ADVANTAGES DISADVANTAGES Increases quality, teamwork and motivation Depends on staff being well trained or experts in their role

Batch production - Identical or similar items are produced together in groups (batches), each item passing through the production process at the same time, before moving onto the next Examples of batch production: Printers = printing a certain number of newspapers, magazines or books and then resetting their machines to produce a batch of another issue or titles Baker = produces a batch of 50 white loaves. Only after they are completed will he or she start baking 50 loaves of brown bread. Factory = produces a batch of size 14 t-shirts, then a batch of size 12 t-shirts Aims: Concentrate skills Achieve better use of equipment and so will produce good quality products more economically than manufacturing them individually.   BATCH PRODUCTION ADVANTAGES DISADVANTAGES Costs savings can be achieved when buying in bulk and allows for quicker and cheaper production of individual items Time consuming as it may take time to swi...

Whilst budgets are widely used to in business, you should appreciate that they have some important limitations. In particular: Budgets are only as good as the data being used to create them . Inaccurate or unreasonable assumptions can quickly make a budget unrealistic Budgets can lead to inflexibility in decision-making Budgets need to be changed as circumstances change , for example sales figures can be affected by many variables in demand such as changes in tastes, the actions of a competitor and so on. Budgeting is a time consuming process – in large businesses, whole departments are sometimes dedicated to budget setting and control. This has an associated OPPORTUNITY COST Budgets can result in short term decisions to keep within the budget rather than the right long term decision which exceeds the budget Managers can become too preoccupied with setting and reviewing budgets and forgetting to focus on the real issues of winning customers Costs covere...

Sole traders - (Unincorporated) An individual owning the business on his/her own. Registered as self-employed and has unlimited liability. The sole trader owns all the businesses assets personally and is personally liable for the business debts. Therefore, their home and all of their assets may be used to pay off any debts that may incur and are unable to pay ADVANTAGES Quick and easy to set up (they can always be transferred to a limited company once launched) Simple to run - owner has complete control over decision making Minimal paperwork Easy to close/shut down All profits go to the shareholder Financial records remain private Motivation is high as the success of the individual and the business are one and the same DISADVANTAGES Full personal liability - "unlimited liability" Harder to raise finance - sole traders often have limited funds of their own and security against which to raise loans The business is the owner - the business suffers if the owner b...

Job empowerment - giving employees the power to do their job. The concept is closely linked to motivation and customer service. Put simply, employees need to feel that their actions count. Empowerment is a catch-all term that covers: Giving authority to make decisions to front-line staff (e.g. hotel receptionist, call centre assistant) Encouraging employee feedback Showing more trust in employees This is a stage beyond delegation, giving employees more control over their working situation. ADVANTAGES Increasing the Productivity and Morale. Those who are given the responsibility to create their own decisions can feel more trusted in which their contributions have a direct factor in the success of the company. This can actually offer them to boost their morale. Bigger Involvement Leading to Bigger Commitment. When employees are given greater involvement by increasing their responsibility, they are able to become more involved in the development of strategies for the organ...

Bonus - designed to motivate employees by rewarding them for achieving particular targets or standards set by the employer. KEY FEATURES  Can help to recruit, motivate and retain staff Can increase employee commitment to the business ADVANTAGES A bonus payment to an employee can be used as an incentive, especially in a field where employees must make sales or meet specific goals. Bonus payments do not have to be awarded on a holiday, at the end of the year or as an incentive. A bonus payment can also be used as a means of appreciation for an employee’s hard work throughout the year or in a specified amount of time in the year. Receiving a bonus payment will not only show the employee he was appreciated for his hard work, but it will motivate him to continue to work hard for further rewards. DISADVANTAGES Not all jobs show a clear link between performance and productivity or profit Employees may neglect other goals to concentrate on bonus targets. Because bonus...

Commission - based on the percentage of business generated by an employee such as a salesperson. Commission is a payment made to employees based on the value of sales achieved. KEY FEATURES An incentive to increase worker productivity Knowing that extra effort means more pay can motivate Depends on selling price of product ADVANTAGES  Enables high performing sales people to earn huge amounts.  The payroll cost is related to the value of business achieved rather than just the amount produced. Increased sales due to it being a motivator DISADVANTAGES No incentive to build relations with customers Income can be unreliable, especially in a recession May lose customers if employees are using aggressive sales techniques in order to secure commission which damages the business' reputation