BUSS4

• age of the business
• size ad legal status
• ownership
• view of owners and managers
• market conditions
• legislation
• state of the economy
• competition
• risk and attitude to risk
• corporate culture
• political factors
• social attitudes

1) Boom - high levels of consumer spending, business confidence with profits and investment, prices and costs tend to rise faster, low level of unemployment.

2) Recession - falling levels of consumer spending and confidence meaning lower profits - starting to cut back on investment, spare capacity increases and rising unemployment.

3) Slump / depression - very weak consumer spending and business investment; many business failures, rapidly riing unemployment, prices may start falling.

4) Recovery - things start to get better, consumers begin to increase sending, confidence is being regained and starting to invest again, takes time for unemployment to stop growing.

High unemployment:

• lower consumer spending - lower demand for income-elastic products
• demand for inferior goods (lower price, lower quality) may increase
• greater supply of lbour - potential lower wage / salary levels
• danger of lost skills for industries as a whole

Low unemployment:

• consumers have more income - high demand for income elastic goods
• labour market tightens - increased upward pressure on wages / salaries
• harder to recruit ot expand without offering better worker packages

Low unemployment:

• a chance to expand capacity to take advantage of higher demand
• adjust remuneration packages to remain competitive and attract staff
• invest in training to meet sills gap and help retain key staff
• offer more flexible wrking options to attract larger labour pool
• consider outsourcing to access specialist skills where recruitment is tough

High umemployment:

• reduce production capacity if demand falls
• headcount reductions (redundancy, recruitment freeze)
• reduce working capital (particulrly inventories)
• postpone or cancel investment projects
• potentially diversify into new markets

A stronger pound makes it cheaper to pay for imports, but exports will seem more expensive to overseas customers (i.e. less competitive)

Stonger

Pound

Imports

Cheaper

Exports

Dearer

Low effect:

• no export sals - trnoverall in domestic (UK) market
• all business activities located in the UK
• raw materials and other suppliers bought in the UK
• demand predominatly from domestic (UK) customers
• demand is price inelastic
• higher costs can be passed on to customers to maintain margin

High effect:

• significant export sales, perhaps in many countries
• overseas operations, earning profits in foreign currency
• significant purchases from overseas suppliers
• sustantial demand from overseas visitors
• demand is price elastic
• higher costs usually have to be absorbed via a lower margin

• regulate the rights and duties of people carrying out business to ensure fairness
• protects customers from harm
• ensure the treatment of employees is fair and un-discriminatory
• protect investors and creditors
• regulate dealings between business and its suppliers
• ensure a level playing field for competing business

• enforcement of competition law - restricts the ability to undertake takeovers wich might lead to market dominance
• tougher enviromental legislation - adds to business costs e.g. implementation of EU carbon emissions limits added to costs of motor manufacturers
• relaxation of law regarding redundancies - proposed in the UK; could make it easier for firms to change the size of their workforces
• additional legislation to protect consumer buying online - adds complexity to frms using e-commerce, but potentially benefits those firms prepared to abide by the law and protects consumers

• distance selling regulations - gives consumer protection when they buy gods or services by mail order, phone or online
• the sale of good act - requires goods to be described, fit for their purpose and of satisfactory quality, if they are not, the customer can reject them
• supply of goods and services act - customers are entitled to work thats carried out with reasonable skill, in a reasonable time, at a reasonable price
• trade description act - required any descriptions of goods and services fiven to be accurate and not misleading

A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

Reasons why firms are increasingly embracing CSR:

• altruism - being a good citizen
• window dressing - to appease stakeholfers
• contracting benefits - e.g. help recruit, motivate and retain employees
• customer related motivation - attract customers, brand positioning
• lower production costs - i.e. packaging, energy usage
• risk management - address potential legal or regulatory action
• improved access to capital - ethical investment funds

Porter's 5 forces model remains a way a analysing the competitve structure of a market or industry. It helps explain why profits in some industries are so high and are dominated by  a small number of competitors where as others are struggling to make a profit.

High industry profits are associated with:

• weak suppliers
• weak customers
• high entry barriers
• few opportunities for substitutes
• little rivalty between competitors

Low industry profits are associated with:

• strong suppliers
• strong customers
• low entry barriers
• many oportunities for substitutes
• intense rivalry between competitors

• number of competitors - will be higher in industries with many current and potential competitors
• market size & growht prospects - competiton is always more intense in stagnating markets
• product differentiation & brand loyalty - greater loyalty means less competition; lower the product differentiation means the greater the intensity of price competition
• power of buyers & availability of substituts - if the buyers are strong &/or close substitutes are available, it means more rivalry
• capacity utilisation - spare capacity with increase the intensity of competition
• cost of structure of the industry - if fixed costs are a high percentage of the total costs then profits will be dependent on volume; means intense competition over market shares
• exit barriers - if it is difficult to exit an industry, firms will remain therefore adding to the intensity of competiton

• quick access to resources and skills the business needs
• overcomes barriers to entry
• helps spread risk (wider range of products and greater geographical spread)
• revenue growth opportunities (synergy 1+1=3)
• cost saving opportunities (synergy)
• reduces competiton
• may enable economies of scale

• high cost involved
• problems of valuation
• clash of cultures
• upset customers
• problems of integration - change management
• resistance from employees
• non-existant synergy
• incompatibility of management styles, structures and culture
• questionable motives
• high failure rate
• diseconomies of scale

1) Strategic Motives

• focused on improving and developing the business
• closely linked to competitie advantage

2) Financial Motives

• focused on making the best use of financial resources for shareholders
• concerned with improved financial performance

3) Managerial Motives

• focused on the self-interest of managers
• not necessarily in the best interest of sharholders

A strategy to reduce diversity or the overall size of the operations of the company. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable buiness.

Potential causes of the need of retrenchment:

• uncompetitive cost structure
• inadequate returns on investment
• poor competitive position
• financial distress - e.g. hih debt
• market decline
• failed takeovrs
• economic downtun
• change of ownership

The way we do things in a buriness

• how decisons are made
• methods and style of communication
• how customers are treated

Why might culture need changing in a business?

1) To improve business performance:

• declining profits and sales
• inadequate returns on investments
• low quality of customer service

2) To respond to significant other change:

• market changes (growth, competitors)
• political and legal environment
• change of ownership

Tradition and set ways:

• loyalty to existing relationships
• failure to accept the need for change
• insecurity
• preference for the existing arrangements
• different person ambitions

Fear of:

• loss of power, skills and income
• the unknown
• inability to perform as well in the new situation
• break up of work groups

Internal forces:

• desire to increase profitability
• reorganisation to increase efficiency8
• conflict between departments
• to change organisational culture

External forces:

• customer demand
• competition
• cost of inputs
• legislation and taxes
• political
• ethics and social values
• technological changes

• no leadership from the top
• employees do not understand the purpose or even the need for change
• lack of planning and preparation
• poor communication
• employees lack the necessary skills and/or there is insuffiecient training and development offered
• lack of necessary resources
• inadequate / inappropriate rewards

• personal value system
• managers experience
• confidence in subordinates
• felling of security
• nature of the business problems
• type of organisation (size, structure)
• effectiveness of teams and groups
• skills and experience of subordinates
• pressure (time, costs)

1) Authoritarian:

• focus of power is with the manager
• communication is top-down & one-way
• formal system of command and contol
• use of rewards and penalties
• very little delegation
• McGregor Theory X approach

2) Paternalistic:

• leader decides what is best for employees
• links with Mayo - addressing employee needs
• akin to a parent / child relationship
• still little delegation
• a softer form of authoritarian

3) Democratic:

• focus of power is more with the froup as a whole
• leadership functions are shared within the group
• employees have greater involvement in decision making
• emphasis on delegation and consultation

4) Laissez-faire:

• leader has little input into day-to-day decision making
• conscious decision to delegate power
• managers / employees have freedom to do what they think is best
• effective when staff are ready and willing to take on responsibility

1) Leadership as command

• where leaders take direct control

2) Leadership as vision

• where leaders set the vision and core beliefs

3) Leadership as symbolic

• where the leader is he embodiment of the strategy, but not involved day-to-day

4) Leadership as decision-making

• where the leader weighs up the options and decides

• clarify direction
• ensure efficient use of resources
• provide a way of measuring progress
• support effective decision making
• co-ordinate activities
• allocate responsibility
• motivate and guide people

• outdated technology - acquire competitor with leading technology
• skills gap - invest in training and more effective recruitment
• overdependence on a single product - diversify the product portfolio by entering new markets
• poor quality - invest in quality assurance
• high fixed costs - examine potential for outsourcing or offshoring

1) Risk management

• the identification and acceptance or offsetting of the risks threatening a business

2) Contingency planning

• a plan for unforeseen events, including back up procedures, emergency response and post-event recovery

3) Crisis management

• the process of responding to and minimising the damage from an adverse event

• marketing - avoid over reliance on customers or products; develop multiple distribution networks; test marketing new products
• operations - hold spare capacity; quality assurance and control
• finance - credit insurance to protect against bad debts; investment appraisal
• HR - key man insurance to protect against loss of key staff; rigorous recruitment and selection process

• ignore it
• reduce profitability of risk and / or limit the consequences
• share or deflect the risks e.g. by insurance
• make contingency plans - prepare for it
• adapt in order to maintain preformance
• treat it as an opportunity

Risk management:

• identifying what and how things can and might go wrong
• understanding the potential effects if things go wrong
• devising plans to cope with the threats
• putting in place strategies to deal with the risks either before or after they happen

Contingency planning:

• preparing for predictable and quantifiable crises
• preparing for unexpected and unwelcome events
• the aim is to minimise the impact of a foreseeable event and to plan for how the business will resume normal operations after the crisis

• rising living standards
• less protectionism
• lower transport costs
• digital communication
• market liberalisation
• diverging consumer cultures

• an expansion of trade in goods and services between countries
• increase in transfers of financial capital across national boundaries including FDI by multinational companies
• internationalisation of products and services and the development of global brands
• shifts in production and consumption e.g. outsourcing and offshoring

• higher profits and a stonger position and market access in global markets
• reduced technological barriers to movement of goods and services and factors of production
• lower unit costs by outsourcing
• forward verticle integration
• avoidance of transportation costs and tariffs
• extending product life cycles

• economies making a transition from underdeveloped to developed
• rapid industrialisation
• faster long term economic growth than most developed economes
• many inhabitants still in poverty but the rise of the affulent middle class
• business struggle to access global markets (e.g. trade barriers)

• stronger economic growth
• market saturation and maturity in domestic markets (showed by decline in sales)
• easier to reach international consumers using e-commerce
• greater government support
• shareholder pressure to grow revenues and profits

• exporting direct to customers
• selling via overseas agents or distributors
• opening operations overseas
• joint venture or buying a business overseas