PRINCIPLES OF BUSINESS

. Complete Revision for

CSEC Principles of Business

Multiple Choice Examinations
By
Nalini Maharaj
Prakash Rajkumar

Based on new syllabus (2019)

SBA General Guidelines

Study Guide

Topic by Topic

Genesis Book Publisher

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 PRINCIPLES OF BUSINESS

TABLE OF CONTENTS
PAGE NO.

ORGANIZATIONAL PRINCIPLES

 UNIT 1: THE NATURE OF BUSINESS 1-34

 UNIT 2: INTERNAL ORGANIZATIONAL ENVIRONMENT 35-61

 UNIT 3: ESTABLISHING A BUSINESS 61-75

 UNIT 4: LEGAL ASPECTS OF BUSINESS 76-85

PROMOTION AND LOGISTICS

 UNIT 5: PRODUCTION 86-100

 UNIT 6: MARKETING 101-121

 UNIT 7: LOGISTICS AND SUPPLY CHAIN 122-138

FINANCE, GOVERNMENT AND TECHNOLOGY

 UNIT 8: BUSINESS FINANCE 139-152

 UNIT 9: ROLE OF GOVERNMENT IN AN ECONOMY 153-161

 UNIT 10: TECHNOLOGY AND

THE GLOBAL BUSINESS ENVIRONMENT 162-194

EIGHT MULTIPLE CHOICE TESTS

 Test 1 186-197

 Test 2 198-209

 Test 3 210-221

 Test 4 222-233

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 Test 5 234-245

 Test 6 246-258

 Test 7 259-270

 Test 8 271-282

ANSWER KEY: EIGHT TESTS 283-285

ANSWER KEY: UNITS 286-

SBA GUIDE 287-289

EACH UNIT CONTAINS STRUCTURED QUESTIONS, ACTIVITIES AND MULTIPLE

CHOICE QUESTIONS

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Unit 1: The Nature of Business

SECTION 1: THE NATURE OF BUSINESS

 Overview of basic terms in business

 Some trading instruments and contemporary concepts: mobile money, tele-banking, e-
commerce
 Subsistence economy to the development of money
 Forms of business organizations
 Public and Private sector
 Economic Systems
 Multiple Choice and Structured questions

Key Points: General Knowledge

Explanation of some terms in business

Term Explanation
Organization A group of persons coming together to achieve a particular goal. There is a degree
of permanence in the unit. The organization is characterized by division of labour
and specialization e.g. a school; hospital; Neal and Massy Group of Companies;
Trinidad Cement Limited
Enterprise An initiative or business activity
Entrepreneurship The willingness of an individual or group to undertake the risks of
conceptualizing, developing and operating a business
Barter A system of exchange without the use of money e.g. trading oil for wheat
Profit The excess of total revenue gained from sale of the good or service after deducting
the total cost of producing the good or service.
Loss The excess of total cost incurred in producing the good or service after deducting
the total revenue from sale of the good or service.
break-even A position of zero profits; total cost incurred in producing the product is equal to
total revenue gained from sale of the product.
Trade The activity of exchange involving buyers and sellers.
Economy The network of economic agents and trading activities in a country, involving,
producers, consumers, households and firms.
Exchange The giving up of one thing for another with or without the use of money.

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Producer The economic agent that makes the good or generates the service.
Consumer The economic agent that buys or uses the good or service.
Product The concept of a good or service.
Good A tangible product e.g. a book, it can be touched and stored for use at a later date.
Service An intangible product or series of related activities. The service and the provider
are inseparable and the service is consumed at one point in time.
Market A physical or virtual situation where buyers and sellers interact to trade.
Commodity A good traded in bulk e.g. wheat. These goods are usually the output of
agriculture and other primary sector activities.
Capital Physical inputs into the production process e.g. machinery and equipment,
financial inputs such as loans and equity and human capital inputs.
Labour The effort of animals or specifically the physical or mental output of humans. Also
called human capital input into production.
Specialization The focus of effort on a particular task leading to expertise in the area e.g. a
paediatrician; a Mathematics teacher
Division of Labour The dividing of a job into different tasks or specializations, to be performed by
different persons e.g. assembling a car or the job of providing education in a
school.
Globalization The opening up of markets internationally, leading to a reduction of trading
barriers among countries and greater access to goods and services.
Human Resources The citizens of a country who are available, willing and capable to work. All
categories of professional, skilled, semi-skilled and unskilled workers in a country.

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Development of trading instruments

Basic instruments used in trade include:

Trading Instrument Features Advantages Disadvantages

Money Order  Method of  Acceptable form  A bank fee is
payment that of payment attached to the
shows the  Can be used by money order
amount of persons without
money to be paid a bank account
to the person or
business stated
on the order

 Method of  Guaranteed by  A bank fee is

Bank Draft payment that the bank issuing attached to the
can be issued in the draft bank draft
foreign currency  Allows for the
transferring of
large sums of
money across
territories

 A feature of e-  Facilitates the  Subject to delays

Telegraphic Money Order banking or quick payment of arising out of
electronic salaries from one problems with
banking that organization to the technology
allows for funds multiple banks e.g. crashing of a
to be transferred computer system
to a person’s
account
electronically
 Referred to as
electronic money
transfer

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Credit Card  A credit facility  The customer  The card attracts

offered by a has access to a maintenance
bank money that can fee from the
 The customer be used in bank, as well as,
that uses the emergency interest on
card takes a loan situations borrowed money
from the bank to  Moneyless  Can lead to
be re-paid with transactions persons abusing
interest the use of the
credit facility
 Technology
problems such as
identity theft

Cheques  The person  Allows persons  Subject to fraud

paying the to issue cheques such as, false
money, orders instead of money signatures
the bank to pay  Variety of
the amount cheque types  lack of funds to
indicated on the available: encash cheque
cheque to a from drawer
business or Open Cheque: leading to
person named on can be easily “bounce” cheque
the cheque encashed at the
bank on which it
is drawn

Crossed Cheque:
two vertical or
diagonal lines
are drawn on the
cheque; usually
encounters a
waiting period
(deposited in
payee’s account)
to be encashed

Manager’s
Cheque: Issued
when large sums
of money are
transacted

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 Allows for a
 A document used credit facility to  Not readily used
Bill of Exchange to settle debts in be allowed for by small
trade the importer businesses
 An order that  The exporter has
requires the options in terms
person to whom of executing the
it is addressed to bill
pay an amount
of money to a
specified party.
 May be used in
situations of
credit facilities to
importers
 The document
can be
discounted by a
bank; kept until
maturity or sold
to a third party.

Tele-banking

According to businessdictionary.com, tele -banking or telephone banking is the 'provision of certain

banking services through telephone.' Key features include:

 automated service
 simple to use from a landline or cellular phone
 usually available 24 hours, everyday
 allows user to know account balance; credit card balance
 transfer funds between accounts in the same bank; stop payments
 access information by receiving SMS

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 make utility payments

 calls are recognized from registered number
 customer gets a secured PIN number

E-Business and E-Commerce

E-Business or specifically 'electronic business ' incorporates the processes that allows a business to use
electronic media involving internet technologies to conduct business operations. This has enabled
organizations to increase competitiveness.

E-Business technologies include:

 3D modelling
 knowledge management
 supply chain and logistics optimization models

Whereas, E-Commerce or 'electronic commerce' is the process for buying and selling goods and services
and transferring funds using the internet or computer networks. E-commerce is an E-Business process.
E-commerce involves: Electronic Data Exchange; Electronic Mail; Electronic Bulletin Boards; Electronic
Fund Transfer; Digital Library; Electronic Publishing.

Key Features of e-commerce:

 Enables the use of electronic fund transfer; debit and credit cards, e-wallet, mobile money in
transacting business i.e. Non-Cash Transactions
 Service can be available anywhere and anytime
 Wider scope for marketing activities
 Increased ways to provide customer support
 Improves inventory management
 Faster communication with stakeholders

Benefits of e-commerce:

 opportunity to expand market reach

 operate business every day, all day
 enhance customer outreach e.g. emails, video conferencing, electronic forms, chats etc.
 digitalizing information reduces the cost of storage and paper
 enhances the image of the business
 provides the customer with options to compare alternatives
 increases competition that can benefit customers e.g. discounts
 consumers marginalized by location can gain access to products

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 customers can shop at their convenience

Drawbacks of setting up an e-commerce business:

 may require expert help

 can be costly
 website can be too slow
 lack of system security
 network bandwidth issues
 integrating e-commerce system with existing components
 hardware and software compatibility issues
 user resistance in terms of switching from traditional shopping methods

The entrepreneur should consider:

 website must be user friendly

 ensure that there is a privacy policy to protect consumers
 provide customer support
 ensure that adequate product information is posted
 ordering system should be easy
 provide on time delivery facility
 virus software, firewall

Mobile Money

According to businessdictionary.com, mobile money is described as ' the use of a mobile phone in order
to transfer funds between banks or accounts, deposit or withdraw funds or pay bills'. It further
encompasses using a mobile device to buy products. This may be in a physical or electronic setting.

A mobile wallet or mobile money transfer is a payment service through which individual or business
clients can send or receive money using mobile devices. This facilitates convenient transactions.
(Source: techopedia.com)

Further, a 'mobile money wallet' e.g. Bibi money Mobile Wallet (www.bibimoney.com) is described as a
product that allows financial institutions with their own mobile wallet solution that works with any
mobile phone i.e. smart phone and on any mobile network. Services include bill payments, remittance,
and payments from persons to merchants. A key benefit is that of customer acquisition.

RBC (registered trademark of the Royal Bank of Canada) has offered 'RBC Digital Banking' as an
alternative to traditional banking. customers can use the ' mobile app RBC Caribbean' to facilitate
banking on the go using a mobile device. Customers can for example, deposit and withdraw cash, check
account balances, process wire transfers and pay bills.

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Another contemporary concept utilizing mobile money is the E-wallet. This facility is an online, prepaid
account. It does not require a credit or debit card. E-wallet is a payment option. The client can sign in
to the business site E-wallet service and create a wallet, money can be transferred into the using e-
banking or debit card or credit card. If the customer chooses to buy from the site he/she can use the e-
wallet. The customer does not have to enter debit or credit card details for every transaction. However,
online transactions carry the risk of password theft and there is no refund on purchases. A mobile
phone can be used as a wallet.

Using the E-wallet allows the customer to store credit card and bank account numbers.

(Source: economictimes.indiatimes.com; officialpayments.com)

The transition of business activity from bartering to the use of money: Subsistence Economy
to Money Economy

 Economic activities were born out of the desire of human beings to satisfy their immediate

personal basic needs. A subsistence living.

 Needs are essential for survival e.g. food, clothing, shelter.

 Human beings strive to satisfy their wants and needs. Wants are our desires.

 Given that needs and wants are unlimited in relation to scarce or limited resources, it is
necessary to make choices. Choice leads to OPPORTUNITY COST i.e. the cost of the alternatives
or options foregone / given -up.
 The early method of satisfying basic needs was called DIRECT PRODUCTION.
 Direct Production means that human beings provide what they need for themselves and for
their families; on their own e.g. they hunted, fished and grew food. They did not depend on
other persons to produce the goods and services they needed or desired.
 Early economies were then described as SUBSISTENCE ECONOMIES. Here human beings
focused on survival and not so much on improving standard of living or economic well-being.
They were able to get what they needed from nature; they provided for themselves.
 As a result of specialization, human beings began to produce in excess of what was needed for a
family. This extra amount was SURPLUS.
 Surplus production led to the development of the Barter System. This is a system of exchange
of goods or services for goods or services. This was money less transaction.

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Barter

Barter is described as the trading or exchanging of goods and services for goods and services without the
use of money. Surplus production or excess was traded to get what the farmer did not produce. This
was termed indirect production or the satisfaction of needs and wants through other persons.
Moreover, barter provides an alternative form of trading without the need to hold cash for transactions.
Barter can lead to an increase in production and trade which can lead to flexibility e.g. countries can
trade goods and services for goods and services. It can also facilitate access to more services.

Problems or drawbacks of the barter system include:

 A double coincidence of wants e.g. Farmer A had corn to trade and wanted bananas. Farmer A
had to find someone who wanted corn and had bananas to trade.
 An exchange rate e.g. Farmer A and Farmer B had to agree on how much corn would be
exchanged for given quantity of bananas.
 Divisibility of the commodity e.g. Some goods such as live animals were difficult to divide into
smaller quantities for trade.
 Storage of wealth e.g. given the perishable nature of some commodities such as food goods,
storage for long periods of time became relatively impossible.

Division of Labour and Specialization

 Division of Labour is basically the breaking up or dividing a job into various tasks to be
performed by different persons in an organization.
 Specialization: As a result of division of labour, workers concentrate on particular areas of the
job. Each worker can become more specialized in specified areas.
 Main advantages of specialization include: workers become more skilled and competent in job
performance; efficiency and productivity increases; increase scope for using automation and
mechanization
 Main disadvantages of specialization include: repetition of the same task can become boring
and lead to errors; individuals can lose their competences as a result of not using certain skills;
automation can result in less need for labour leading to unemployment;

Think

How can a country utilize barter to benefit its economy?

How has the concept of 'mobile money' redefined the banking sector?

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Money

In early economies money addressed most of the problems associated with the barter system. In
contemporary societies money is associated with notes and coins. However, in early economies items
such as shells, beads, precious stones and arrow heads were classified as a medium of exchange.

Characteristics of Money

 Durability: money should be able to be used over a long period of time

 Acceptability: money should be legal tender
 Divisibility: there should be unit divisibility e.g. $1.00 can be divided in 20 five cent pieces
 Portability: money should be convenient to handle and transport

Functions of Money

 Medium of exchange: Money facilitates trade. Goods and services could be exchanged for
money, thereby addressing the problems of the barter system. In the digital age, mobile money
or mobile wallets and e-wallets can facilitate trade.
 Measure of value: Money is used as a declaration of the price of products e.g. high prices can
signal that products are of high quality
 Store of Value: money can be saved and invested
 Standard of deferred or postponed payment: money can be earned and spent at a future date
or it can facilitate credit

Legal Tender

Legal tender means that, by law the commodity must be accepted when exchanged for a good or service
or to pay a debt.

Structured Questions

1. Describe the concept of 'mobile money'. (4 marks)

2. Outline TWO advantages and TWO disadvantages of the 'barter system'. (4 marks)

3. Distinguish between the terms 'e-business' and 'e-commerce'. (4 marks)

4. Explain the concept of 'tele-banking'?

5. Outline THREE key functions of 'money. (6 marks)

Research: Place students into groups of 4-6 pupils. Each group will research the application of 'mobile
money ' in contemporary business organizations.

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Reasons for Establishing a Business

Key reasons why an individual or group will want to undertake the risks of establishing a business:

 To realise a dream or desire

 To satisfy a need or demand in the market
 To utilize a skill or particular area of expertise
 To take advantage of new opportunities in the market e.g. removal of protectionist barriers
making it easier to enter new markets; government legislation encouraging the growth of
business such as low interest loans

Various Forms of Business Organizations

Key Terms:

 Incorporated: The business is registered as a separate legal entity from its owners. The
company can enter into contracts. Shareholders have limited liability.
 Unincorporated: The business and the owners are one and the same.
 Liability: The obligation to be borne by the owners or shareholders e.g. debts
 Limited Liability: The liability or obligation of the owners or shareholders extends only to their
investment in the business.
 Unlimited Liability: The liability or obligation of the owners or shareholders can extend beyond
their investment in the business to their personal wealth and assets.
 Nationalization: A situation where the state or government assumes the assets of a business
entity to ensure that the products are available to citizens e.g. water and electricity.
 Privatization: A situation whereby the state sells the assets in a public sector entity to the
private sector.
 Public corporation: State owned organizations that may be profit oriented.

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Type of business Features Advantages Disadvantages

Sole trader or sole One owner Quick decision making The owner assumes
proprietor unlimited liability
There may be employees Flexible in terms of
hired in the business responding to The business and the
environmental influences owner is one and the
same, if the owner dies
Not legally complicated to the business ceases to
start exist

All profits belong to the Growth is difficult

entrepreneur
Long hours of work
Simple tax accounting

Partnership May consist of 2 to 20 Profits divided among Owners have unlimited

partners who contribute partners liability
capital and expertise to the
business Greater access to capital Like the sole trader,
than the sole trader growth may be difficult
May contain a Deed of and there is limited
Partnership: This outlines Can be made a legal resources
the relationship between arrangement
partners e.g. profit sharing; Decision making can be
conflict resolution; More access to the time consuming
termination of partnership; expertise of owners
capital contribution The actions of one
Sharing of workload partner can adversely
May have a silent or sleeping affect the business
partner who contributes Partners usually pay taxes
capital but does not as individuals
participate in the operation
of the business

May be a limited partnership

where some partners have
limited liability but at least
one partner has unlimited
liability

Co-operatives Co-operatives are institutions Creates employment for Limited capital input
owned and operated by the members depending on the size of
members. the co-operative or credit
Democratic management union

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Types of co-operatives
include: consumer, producer, Benefit from economies May lack managerial
financial, services and worker of sale expertise in membership
co-operatives.
Support services e.g.
A credit union is a co- purchasing and marketing
operative which acts as a for members
financial institution.
Membership may comprise Profits shared among the
members of specific groups members
or open for anyone

Public Companies A public limited company has Limited liability Increased expansion may
shares traded on the stock lead to diseconomies of
exchange Issue shares for raising scale
funds
A minimum of two Subject to public scrutiny
shareholders Economies of scale of financial records

(plc.) Conflict in stakeholder

expectation
Legal entity

Administration includes: a
Memorandum of
Association; Articles of
Association; Prospectus;
Financial Reports
Incorporated

Private Companies 2 to 50 shareholders Limited liability Capital is still limited as

Usually owned by families shares are not publicly
Legal entity Control is maintained traded
(ltd.) within a small group of
shareholders Limited managerial
Administration includes: a expertise
Memorandum of
Association; Articles of
Association; Financial
Reports;
Incorporated

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A franchise is a legal
Franchise agreement in which the Access to new markets for The franchisee must pay
franchisor allows the the franchisor the royalties regardless of
franchisee to use the business size
established name of the Source of revenue for the
business and to produce franchisor The franchisee has to
products to the franchisor’s operate under supervision
standards. The franchisee bears of the franchisor
some of the risk
Royalties are paid to the The franchisee is legally
franchisor. Franchisee benefits from bound to sell only the
the support provided by products of the
the franchisor e.g. franchisor.
training

The franchisee’s risk is

reduced because it is
selling a recognized brand

Government control of
Public Sector factors of production on Government provides In order to finance
behalf of citizens public goods that the expenditure, government
private sector will not can increase taxes
Motive to provide services to provide
citizens Inefficient use of state
Government provides resources
Consists of nationalized welfare services to poorer
industries, executive members of society Political interference in
agencies, local and municipal private sector
authorities, government Government sets the
departments, public control mechanisms in
corporations place for the conduct of
business

Private individuals or
Private Sector businesses own the factors Brings more competition Will only provide products
of production and product variety to the that citizens can pay for
market
Motive is to maximize profits
Increased use of Engages in the production
Consists of sole traders, technology of de-merit goods once
partnerships, public and there is demand
private companies, Provides investment and
multinationals, employment
conglomerates, franchises

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Notes:

Memorandum of Association: A document that outlines the external relationship of the company and
gives details of its existence e.g. company name, objects of the company, share capital and divisions,
whether the business is a public company, liability, guarantee

Articles of Association: A document stating the firm’s internal relationships (the running of the
company). This includes the voting rights, conduct of meetings, election methods, management’s
powers and how profits will be shared.

Prospectus: A document prepared by a public company intended to provide details of new issues of
shares. It outlines what the intention of the company.

Structured Questions

1. State THREE reasons why a person will want to undertake the risk of establishing a business. (3 marks)

2. Explain the concept of 'liability' in a business. (4 marks)

3. Distinguish between the 'public sector and the 'private sector'. (4 marks)

4. State TWO advantages of a 'partnership' type of business. (2 marks)

5. State TWO disadvantages of a 'sole trader or sole proprietor' type of business. (2 marks)

6. Differentiate between 'a private limited company' and 'a public limited company'. (4 marks)

7. Explain the concept of 'a franchise'. Give an example. (4 marks)

Research: Place students into groups of 4-6 pupils. Each group will research one business entity from
the list. Students can drawn numbers. (Name, Vision/Mission, Objectives of the business, Liability,
Products of the business etc.)

List:

1. Franchise business

2. A co-operative business

3. A private limited company.

4. A public limited company

5. A sole trader or sole proprietor business

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Economic Systems
Key Terms

Economic System: An economic system describes the organization of a country’s resources to decide on
the basic economic questions.

Basic Economic Questions: Scarcity forces society to consider three issues: What to produce with the
available supply of resources? How to produce these products (methods or techniques)? Who should
benefit from the production of these goods and services?

Merit Goods: Products funded by the state because of the potential benefits to society e.g. health care,
education, medicines

Demerit Goods: Products which produce negative externalities, where the social costs are borne by the
society e.g. Gambling, cigarettes, alcohol

Public Goods: Goods provided to the public or society. These goods are non –excludable in that all
members of society stand to benefit from production of these products. It is the government that
provides these goods for the benefit of all citizens e.g. roads, street lights, defence.

Describing Economic Systems

Criteria Subsistence Command, Free, Capitalist or Mixed Economy

Economy Controlled or Market Economy
Planned Economy
Description Use direct State or government Private ownership of Existence of both
production to satisfy in charge of factors the factors of the private and
needs of production production public sector.
Early or traditional
economy
What to produce? Decided by the Decided by the state Decided by the Decided by the
individual e.g. a or government on consumer and consumer and
farmer based on his behalf of citizens businesses that private businesses
needs produce what as well as the state
consumers want
How to produce? Decided by the The state decides Decided by the Decided by the
individual; usually the means of private private sector
involves simple production and the entrepreneur businesses as well as
methods of factor inputs into the state
production; labour the process
intensive
For whom to For self; for survival For all citizens ; For persons or Public sector
produce? provide public goods business groups who provides for all
to benefit all of are willing to citizens; Private
society demand sector for individual
with the ability to

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pay
Motive Survival To provide for the To make a profit Private sector: to
welfare of citizens maximize profits
Public sector: to
provide for the
welfare of citizens

Some Advantages and Disadvantages of Economic Systems

Economic System Advantages Disadvantages

Subsistence Economy  Utilizes natural resources to  Limited choice of goods available
meet needs  Individuals could not produce
everything to satisfy their needs
Command , Controlled  Basic needs of society are met  Lack of consumer choice
or Planned Economy  Provision of public goods  No competition to government can
result in low quality products
Free, Market or  Greater choice of products  Provide de-merit goods
Capitalist Economy available to meet consumer  Lack of provision of public goods
demand  Increased inequality between rich
 Competition stimulates the and poor
economy and product
development
Mixed Economy  The government provides the  Government may seek to control the
public goods that the private private sector
sector will not provide  Government investment can ‘crowd
out’ private sector investment

Structured Questions

1. Differentiate between a 'planned economic system' and a' free market system'. (4 marks)

2. Outline the role of the government in a mixed economic system. (4 marks)

3. Define the term 'subsistence economy'. (2 marks)

4. State ONE advantage and ONE disadvantage of

(i) a mixed economic system (2 marks)

(ii) a planned economic system (2 marks)

(iii) a free market system (2 marks)

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Functional Areas and Stakeholders

Key Objectives

Pupils will:

 describe the key functional areas in the business: Production, Marketing, Finance, Human
Resource, Research and Development
 identify key stakeholders involved in the activities of the business
 discuss the role and key functions of the stakeholders

Functional Areas or Key Departments in a Business

Functional Areas/Departments Key Functional Activities

Production  The transformation of raw materials into finished products
 Establish quality control standards for products
 Engage in stock control measures
 Proper production record keeping
 Prepare production budget and cost estimation
 Control the production activities
 Communication with other functional areas

 Develop the marketing mix strategy: product, price,

Marketing and Sales promotion, place, people, process, physical evidence
 Activities such as segmentation, targeting, developing
positioning statement
 Distribution and transportation of goods
 Collections of money
 Promotional activities
 Engage in market research

Finance  Proper money management for the entire organization

 Producing financial statements
 Statutory deductions
 Payroll system
 Budgeting for the organization and disbursement of financial
resources to the other departments

Human Resources or Personnel Develop and implement policies in areas such as:
 Human resource planning
 Recruitment and selection
 Training and development
 Performance management

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 Rewards system
 Industrial relations
 Occupational safety and health
 Grievance, dismissal and discipline procedures

Research and Development  Engage in new product research such as product

specifications, production time line and costing;
 New product development based on product guidelines and
regulations;
 Evaluate the functionality of existing products and consider
upgrades or changes;
 Conduct quality checks on products to ensure that products
meet necessary benchmarks;
 Engage in innovation to keep organization competitive such as
applying creative solutions to problems and converting
opportunities to ideas

Structured Questions

1. Identify the key functional areas or departments in a typical business. (4 marks)

2. Choose TWO key functional areas and state TWO main activities. (6 marks)

3.Explain the role of the 'research and development' functional area to the survival of a business. (6
marks)

Research: Place students into groups of 4-6 pupils. Present the following case.

Case: A manufacturing company is involved in the production of confectionary products. There is an

increased demand for its confectionary line of sweets during Easter and Christmas. Explain how this
increased demand can impact the functional areas of the business.

Each group will discuss one key functional area.

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Stakeholders

Identify the key stakeholders involved in a business

According to investopedia.com, a 'stakeholder is a party that has an interest in a company, and can
either affect or be affected by the business'.

Internal Stakeholders have a direct • Employees

relationship with the business • Owners/ shareholders/investors

•Suppliers
External Shareholders do not •Customers
directly work in the business but •Government
may be affected by the operations •Community
of the business or may have a •Environment
direct effect on the business •Creditors
•Trade Unions and Future Generations

Managing stakeholder interest in the business can sometimes lead to conflict for example, in trying to
maximize shareholder or owner return on investment can directly impact the organization's ability to
provide improved benefits to employees. Managers, must therefore try to balance the interest and
expectations of the stakeholder groups.

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Role and Functions of the stakeholders involved in business activities

Stakeholder Group Role and Function in business activities

Employer  Protect the health, safety and welfare of employees

 Ensure that employees receive their rights according to employment law
e.g. rate of pay, hours of work, leave, make statutory deductions, keep
employment records; discipline and dismissal
 Duty to pay
 Provide work to do
 Provide accurate information to employees about rights according to the
employment contract
 Give employees an opportunity to have complaints and grievances
addressed

Shareholders  Provide capital for growth and expansion or to launch the venture's
products
 May provide guidance to management
 May help set the strategic direction of the organization

Employees  Responsible for carrying out tasks as specified by the company

 To be efficient in the carrying out of duties
 To provide knowledge, skills and commitment in carrying out tasks

Consumers  To purchase products that meet their needs and wants

 Provide feedback to firms on customer service and products
 May recommend a product to other potential customers

Suppliers  Provide the raw materials that the firm needs at reasonable prices
 May provide solutions to the company in terms of the company's supply
chain

Communities  provides the workforce that a firm need

 Act as a lobby group or' watchdog' to ensure that the firm is meeting its role
as a corporate citizen
 includes groups in the community such as NGO’s e.g. trade unions; Parent/
Teachers Associations etc.

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Government  Tax collection from businesses
 Create the legal frame for the operation of business e.g. Labour laws;
Occupational Safety and health; Registration of business
 Maintain a stable investment climate to foster business establishment and
growth
 Provide incentives to stimulate growth e.g. subsidies and grants to business
 Promote the business sector through trade missions and trade

Structured Questions

1. Define the term 'stakeholder' and identify TWO stakeholders in a typical business. (4 marks)

2. Explain the role of the following stakeholder groups in the functioning of a business organization (a
business example can be used if necessary): (3 marks each)

(i) the government

(ii) employees

(iii) owner(s) /employer

(iv) community

Research: Place students into groups of 4-6 pupils. Each group will identify a business and outline the
various stakeholder involvement. Consider for example:

- how the trade union impacts the business

-how the government impacts the business

-role of employer and employees in the business

- the impact of consumers to the business

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Ethics
Pupils will:

 discuss the concept of ethics in the business environment

 explain the ethical and legal issues in the establishment of a business
 explain the ethical and legal issues in the operation of a business
 explain the ethical and legal principles that must be implemented in the establishment and
operations of a business
 explain the consequences of unethical and illegal business practices
 describe some careers in the field of business

Concept of Ethics in Business

Ethics in business

 Ethical business practices deal with doing what is right, moral and just in practices.

 Ethics depends on the individual perception of issues.

 Companies can develop ethical codes of conduct and communicate these practices throughout

the organization. There should be management commitment in implementing ethical codes and

new employees should be oriented towards the process.

 Ethical issues in the organization can impact the corporate brand of an organization. Business

ethics provide guidelines for the organization's interactions with internal and external

stakeholder groups. The concept of business ethics seeks to create a workplace that sees

respect as a core value. Moreover, it can foster a positive work environment.

 Some activities may be unethical but not illegal e.g. testing products on animals. The choice of

managers or workers to behave unethically can result in illegal behaviours.

 Unethical activities include: misleading or advertisements with false claims; improper disposal of

waste; using expired or poor quality raw materials; taking bribes in the tendering process;

colluding to prevent competition; poaching workers from other companies; not following clear

policy guidelines; improper handling of equipment; working in unsanitary conditions.

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 Illegal activities are for example insider trading; money laundering, tax evasion, not paying the

minimum wage.

Ethical and Legal Issues in the Establishment and Operations of a Business

Legal Issues:

 The obligation of the business to abide by the laws governing the work place such as,
occupational safety and health; employment laws; discrimination; equal opportunities;
minimum wages; payment of taxes; statutory deductions such as deducting and remitting
income taxes and national insurance payments;

 Registering the business to secure its name and to ensure the validity of the business to help
secure funding.

In Trinidad and Tobago for instance: all sole proprietors, partnerships and limited liability
companies must reserve a business name;

Limited liability companies has to file articles of association;

Businesses may also seek to protect ideas and products by applying for trademarks, patents or
copyrights.

(ttconnect.gov.tt)

In Barbados , in establishing a business steps include incorporation and registration with

corporate affairs and Intellectual property office. (gov.bb)

Ethical and Legal Principles that should be adopted in the establishment and operation of a business

 The organization must know what it wants in establishing a 'culture of ethics'; adopt a code of
ethics;
 Establish a climate that seeks to reinforce the core values such as respect, fairness, trust
worthiness, good citizenship that emphasize ethical conduct. This can be done by establishing a
system of incentives.

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 The organization must put in place selection criteria aimed at pinpointing candidates who can fit
into the ethical environment of the organization;
 Ensure that training programmes, performance appraisals, coaching, mentoring, dismissal and
discipline programmes reflect and reinforce the desired ethical behaviours;
 Develop appropriate consequences and rewards to reflect ethical and legal compliance e.g.
through the dismissal and discipline procedures and rewards and incentive programme e.g.
rewards for OSHA compliance;
 Create a physical environment to reflect what the organization stands for;
 Management must reflect what it expects from stakeholders;
 Develop and implement policies for environmental sustainability e.g. proper disposal of waste,
recycling, reducing use of non-biodegradable materials;

Developing a Code of Ethics

A code of ethics is a company document that communicates the organization's values and shows the
commitment to standards and benchmarks. The Sarbanes-Oxley Act (2002), in response to business
scandals, mandates a stricter code of conduct with respect to corporate governance and financial
controls. The code of ethics is viewed as the standards that are 'reasonably necessary to promote' for
example; honest and ethical conduct,' 'full, fair, accurate, timely and understandable disclosure in the
periodic reports,' and 'compliance with applicable governmental rules and regulations.'

The code of ethics is also seen as guidelines governing the day to day decision making processes. It
brings clarity to what is expected within the scope of organizational values and policies. It brings
alignment of the organization's vision, mission and values with standards /benchmarks of 'professional
conduct'.

A 'compliance code' forms part of the code of ethics whereby the organization meets all legal
requirements.

The principles to be respected by all internal and external stakeholders in the code of Ethics are for
example:

 Observe the laws and regulations so that conduct of business activities will be compliant with
laws;

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 Ensure integrity of conduct e.g. free and fair competition, honest relationships with
stakeholders;
 Avoid discrimination based on sex, sexual orientation, age, race, nationality, religion, political
opinion in dealing with stakeholders; recruitment and selection and other personnel processes;
 Avoid the abuse of authority in the organization structure;
 Protection of occupational health and safety
 Protection of the environment
 Prohibit unethical behaviours in the conduct of business
 Ensure fairness and transparency in contracts and tendering process
 Promote fair competition
 Protection of Personal information: Personal data of employees, customers, shareholders and
other entities will be treated with the strictest of confidence and confidentiality and within the
organization's privacy policy. Personnel dealing with this type of information must be compliant
with legislation and privacy policy.
 Conduct of management: Professionalism, loyalty, honesty, fairness; confidentiality, conflict of
interest;
 Dealing with personnel: selection of personnel, establishing the employment relationship,
managing human resources, protection of workers, dissemination of information on policies,
training of human resources;
 Relationship with stakeholders e.g. dealing with customers with impartiality, communication
with customers, conduct of personnel towards customers; selection of suppliers based on equal
opportunities, loyalty, impartiality and based on objective criteria of assessment; accounting to
shareholders with transparency, accuracy, in a timely manner according to company policy and
legal requirements.
 Giving and accepting gifts to acquire advantages is prohibited;
 Organization can sponsor activities that benefit the community without conflict of interest.

Consequences of illegal and unethical business practices

Unethical business practices can include: pilfering of company's property, dishonest conduct in financial
dealings, testing products on humans and animals, giving kickbacks; using underhanded means to
discredit a competitor; pollution; false advertising; immoral behaviour based such as bullying,
harassment; These behaviours carry consequences such as:

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 Impacting sales negatively as clients and customers stop buying products as they do not want to
be associated with an 'unethical business';
 Can lead to a fall in share prices as investors lose confidence;
 Increase turnover of valued employees;
 Affect the health and safety of customers;
 Workers can be dismissed;
 Image of business can suffer
 May be subject to litigation in the courts
 Endangering users

Illegal business practices would include: tax evasion; money laundering, failure to comply with financial
obligations, bribery: These behaviours carry consequences such as:

 'summary conviction or on conviction on indictment to the penalty prescribed' (Part VII

Offences and Penalties (42 and 43): The Financial Obligations Regulations, 2010)
 cheating the government of income
 distorting the GDP figures in the economy
 enacting new legislation to prevent illegal actions by business

Some Careers in the field of Business

According to' businessdictionary.com', a career can be defined as, ' The progress and actions taken by a
person throughout a lifetime, especially those related to that person's occupations.' According to
'education.vic.gov.au', apart from paid employment and a single occupation, the term career, 'is seen as
a continuous process of learning and development. Further, activities such as, training, education,
employment, work experience, community activities, volunteer work and leisure activities may
contribute to a career.

Functional Areas Career Path Examples

Marketing
Production  Production Manager
 Production Engineer
 Quality Control Officer
 Production Line Worker
Finance  Finance Manager
 Payroll Officer
 Accounts Clerk
 Budget Analyst
Human Resource  Human Resource Manager
 Compensation Specialist
 Health and Safety Officers
 Training and Development Officers
 Industrial Relations Officer
 Compliance Officer

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Information  Software Developer
Technology  I.T specialist
 Web Page Designer
 Database Analyst
 Privacy Coordinator
 Information Security Analyst
 Information Assurance Analyst
Research and
Development  Research and Development Scientist
 Business Development Analyst

Some Examples Explained:

Compliance Officer: Ensures that the business complies with external regulatory requirements e.g.
employment laws and trade agreements; and internal company policies and procedures. This office will
seek to develop, implement and update or revise policies for compliance to prevent illegal and unethical
business conduct. The office must also collaborate with other functional areas to guide issues to
appropriate channels. Further, the compliance office will develop and implement a system for handling
violations of rules and procedures. Also, providing regular and proper reporting to management.

Strategic Planner: This involves engaging in research and analysis of business information, tracking and
analysis of industry trends, designing scenario analysis and forecasting models. A strategic planner will
examine business strategic performance, track market opportunities and threats and develop action
plans. The office involves an understanding of the past, present and future of the business.

Entrepreneur: The entrepreneur is a person who comes up with or conceptualizes the business idea,
exploits opportunities in the environment and assumes the risk of establishing and operating a business
venture e.g. A nascent entrepreneur is described as a person who is in the process of starting a new
business and may use his/her skills in the business development.

Web Designer: A person who builds or redesigns websites. This includes making the site visually
appealing and functional.

Web Planner: A person who will be involved in anticipating the skills and resources needed by the
business for developing, constructing and operating the web. This will involve defining the audience;
formulating the purpose; gather domain information to support web.

Graphics Designer: A person who creates visuals manually or utilizing computer software. The visuals
are intended to capture the consumers’ attention. He /She combines techniques in art and technology
to communicate through web screens, images or print media.

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A Marketing Career Example

Brand marketing: This deals with creating a market identity for the business and its products. Career
paths:

 Brand Manager
 Assistant Brand manager
 Brand strategist
 Product Manager
 Merchandiser

Public Relations: This deals with enhancing the visibility of the business to the public in an effort to
attract customers, investors and employees. Career paths include:

 Communications manager
 Marketing Communications Coordinator
 Marketing Consultant
 Public Relations Officer

E-commerce marketing: Use the internet to offer brands and products e.g. online shops, email
marketing. Career paths include:

 e-commerce online Product Manager

 e-commerce Marketing Specialist
 e-commerce Marketing Manager

Sales: Engage the client in face to face, telephone or internet setting to sell products. Career paths
include:

 Sales Representatives
 Regional Account Manager
 Sales Director
 Sales Consultant

Advertising and Promotion: Engages the customers via messages and offers. Career paths include:

 Advertising Director
 Copy Writer
 Creative Director
 Graphic Artist
 Media Planner
 Promotions Specialist

Market Research: Gather and analyse data related to the market and marketing strategies. Career
paths include:

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 Data Analyst
 Marketing Analyst
 Research Officer

Structured Questions

1. Describe the concept of 'ethics'. (2 marks)

2.Outline ONE unethical business practice and ONE illegal business practice. (4 marks)

3.Explain the concept of a 'code of ethics' in the business environment. (4 marks)

4. Outline TWO main areas in a 'code of ethics'. (4 marks)

5.Outline TWO consequences of unethical business practice. (4 marks)

6. Outline TWO consequences of illegal business practice. (4 marks)

7. Describe TWO career paths in the field of business. (4 marks)

Debate 1: Group A versus Group B (Groups choose agree or disagree)

Topic: Testing products on animal subjects can be deemed unethical. Agree or Disagree.

Research: Place pupils in groups of 4-6 students.

Each group will research a career path in business e.g. Human Resources; Finance; Information
Technology; Production; Legal

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MULTIPLE CHOICE EVALUATION: Unit 1

1. In early economies, man engaged in direct production. Sometimes they produced more than
what was needed for their consumption. Which statement appropriately reflects how surplus
was dealt with in these economies?
a) Through exchange of goods for money
b) Through the establishment of the barter system
c) Through a system of exchange
d) Through the price mechanism

2. Barter is a system of exchange. Which statement does NOT reflect the barter system?
a) The direct exchange of goods for goods
b) A moneyless system of exchange
c) A system of indirect production
d) A system of exchange involving the exchange of goods and services for an establish medium
of exchange or currency.

3. The barter system produced certain disadvantages. Which drawback is described in the case
illustrated?
Marcus had to find someone who wanted his potatoes and the trading party must possess the
tomatoes that Marcus wanted, for the trade to take place.
a) Store of value
b) Indivisibility of some goods
c) Rate of exchange
d) Double coincidence of wants

4. Main features of e-commerce include:

I. enables the use of electronic funds transfer

II. knowledge management
III. service can be available anywhere and anytime with internet access
IV. facilitates improved inventory management
a. all of the above
b. I, II and IV
c. I, III and IV
d. II, III and IV

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5. E-commerce is specifically

a. a business using electronic media to conduct business

b. the electronic process of selling goods
c. the process of buying and selling products using the internet
d. the process of electronic funds transfer

6. A key disadvantage of a franchise agreement is

a. The franchisor gains recognition in a new market
b. The franchisee can use an internationally known name
c. The franchisee cannot introduce new products outside of the agreement in the place of
business
d. The franchisor gains from royalty payments

7. Which of the following is NOT a key element of a credit union?

a. Depositors earn interest on their savings
b. Members elect the management committee
c. All credit unions are made of members of a particular group
d. Members can borrow from the credit union

8. Which of the following institution is NOT part of the private sector?

a. Multi nationals
b. Conglomerates
c. Public companies
d. Public corporation

9. Which of the following defines the term ‘public company’?

a. A company owned by the state or government
b. A company owned by 2 to 50 shareholders
c. A company whose shares are traded on the stock exchange
d. A public sector profit making entity

10. A state owned organization established to provide a national service is termed a

a. Public company
b. Public corporation
c. Private company
d. Municipal authority

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11. A key feature of a subsistence economy is
a. Every community depended on the output of the government
b. The people as well as the state owned the factors of production
c. Productivity was geared towards profit maximization
d. Production was based on fulfilling basic needs for survival

12. Which of the following statements are key disadvantages of a command or planned economy?
I. Limited choice of goods and services
II. Provision of basic goods and services
III. Provision of public goods
IV. Lack of incentive for workers to be innovative
a. All of the above
b. l, ll and lll
c. ll, lll and lV
d. l and lV

13. Key disadvantages of the free market or capitalist economy are

I. No production of public goods
II. Little or no government interference
III. Complete freedom of choice
IV. Large companies can limit competitive activity and create monopolies and cartels
a. l, ll and lll
b. l and lV
c. l and lll
d. all of the above

14. Advantages of mixed economies include

I. The public sector provides public goods such as street lights
II. Increased choice of goods and services for consumers
III. Government may seek to control private sector activity
IV. Decision making in the economy is shared
a. All of the above
b. l, ll and lll
c. ll, lll and lV
d. l, ll and lV

15. People who conceptualize and undertake the risk of starting a business venture are specifically
a. Superiors
b. Subordinates
c. Managers
d. Entrepreneurs

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16. Tax evasion, money laundering and insider trading are specifically
a. Unethical practices
b. Illegal practices
c. Misrepresentation
d. Corrupt practices

17. Misleading advertisements, testing products on animals, using expired food items in business is
considered
a. Illegal
b. Unethical
c. Practical
d. Economical

18. A major function of the Government in business activities is

a. to buy goods and services
b. to set up the legal frame work for business conduct and operations
c. to compete with businesses
d. to train business persons

19. The Finance department is responsible for all of the following functions, EXCEPT
a. money management in the entire business
b. payroll system
c. making statutory deductions
d. performance management system

20. 'Duty to pay for work done' is a key function of which stakeholder group?
a. Employees
b. Employers
c. Shareholders
d. the Society

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Unit 2: Internal Organizational Environment

Pupils will:

 describe the functions of management

 outline the key responsibilities of management to stakeholder groups
 construct simple organizational charts
 interpret simple organizational charts

Management Functions
Management is described as a process that involves planning, organizing, directing and controlling the
organization’s resources (human and non- human) to achieve the vision, mission and goals of the
organization.

Functions include:

 Planning: This is the process of determining what is to be achieved in the organization. It

involves forecasting and analysing information, setting goals in the relevant time frame and
decision making. Planning determines the actions to be taken to achieve the goals.
 Short term Planning: This is setting objectives to be achieved at the operational level of
the organization that is at the department and employee level.
 Long term planning: This is goal setting at the strategic level or corporate level of the
organization. It involves creation of the vision, mission, goals and business strategy.
This is determined by senior management levels.
 Organizing: This creates the overall framework or structure to accomplish tasks to facilitate goal
achievement. It involves work arrangement, resource allocation, allocating responsibilities at
the managerial and non- managerial levels and defining the relationship between these
positions.
 Directing: This flows out of the organizing function and is concerned with ensuring that tasks
are clearly defined and that employees are engaged in activities to achieve goals and objectives.
Directing involves motivation and supervision of employees.
 Controlling: This is the process of monitoring performance against set goals. It involves taking
remedial or corrective action to ensure that any gaps found are dealt with effectively. It also
considers reviewing plans and changing as necessary.
 Coordinating: This is the management process of ensuring that there is harmony among the
different functional areas in the organization. It is necessary to prevent departmentalization
and coordinate efforts to achieve the overall organization goals. Coordination also involves
creating an understanding of task interdependency in the organization where the output of one
department or task forms the input of another department or task.

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 Delegating: This is the process of transferring responsibility for a task to lower level positions or
workers in the organization hierarchy e.g. from manager to department employees. This may
take the form of assigning responsibility for performing tasks, allocating authority to give orders
to others and giving decision making power within a defined scope. A key purpose of delegation
is distribution of the workload within the organization structure. Moreover, delegation
develops the skills and competences of staff.
 Motivating: This is the process of creating a drive in employees to want to achieve a higher
level of productivity. It involves management providing the right stimuli in the environment to
influence worker’s actions and perception e.g. providing competitive salaries, flexible working,
good working conditions, promotion, status, opportunities for development, achievement,
challenging jobs.

Management Responsibilities to Stakeholders

 Managers have to be aware of all the stakeholder groups and challenges they pose to the
organization. Management also needs to be cognizant of the most influential stakeholders.
Consequently, the organization’s management has certain responsibilities to all major
stakeholder groups.

Management responsibilities to:

Stakeholder Group Management responsibilities

Internal: Employees  Meet the legal requirements of the employment contract e.g.
abide by employment legislation such as equal opportunities,
minimum wages, occupational safety and health
 Provide proper working conditions
 Pay competitive salaries
 Provide assistance to employees in preventing stress at work
 Ensure that there is appropriate job design
 Provide opportunities for training and development
 Respect worker representatives
 Maintain proper channels of communication
External:
 Shareholders/Owner  Manage the resources of the organization to provide high returns
on the entrepreneur’s investment
 Provide up-to date and truthful financial reporting
 Maximise the efficiency of the firm
 Protect the corporate brand of the organization
 Change the direction of the organization as necessary to ensure
profitability and survival with the consent of shareholders/owners

 Government  Adhere to all legislation governing the operation of business in a

country
 Make the necessary statutory deduction on behalf of workers

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 Pay taxes

 Society  Recognize the issues of corporate social responsibility e.g.

environmental protection, assist in development of communities,
support charities and social programmes; contribute to the
economy

 Customers  Provide goods of high quality at market prices

 Provide the necessary after-sales services
 Deal with customer complaints in a timely manner
 Abide by consumer protection laws
 Provide good customer service free from any hint of
discrimination

STRUCTURED QUESTIONS

1. Outline THREE key functions of management or a manager. (6 marks)

2. Outline the areas of:

(i) short term planning

(ii) long term planning (2 marks each)

3. Outline the responsibilities of management to each of the following stakeholder groups:

(i) employees

(ii) shareholders/owners

(iii) society (2 marks each)

Research: Place students into groups of 4-6 pupils. Each group will take a stakeholder group and

(a) Discuss the responsibilities of management to the stakeholder group;

(b) Outline consequences of management not meeting its responsibilities.

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Organization Structure and Design

Key terms

 Authority: The legitimate right exercised by a manager to issue commands and make decisions.
 Unity of Command: This is the principle that states that each person in the organization should
receive commands from one superior and report to only one manager.
 Delegation is the downward transfer of authority and responsibility in the hierarchy.
 Responsibility: The obligation to carry out an assigned task or achieve certain objectives.
 Accountability: The obligation to accept the consequences of one’s actions and the obligation to
report to a superior or manager for one’s actions.
 Span of control: The number of workers or subordinates under the direction a manager or
supervisor. Spans of control can be narrow or wide. A narrow span shows fewer subordinates
under the control of the manager. This is applicable in situations where the job is complex or
for new workers on the job. A wide span is applicable in situations where the work is routine or
where workers are experts and need little supervision. A wide span is characterized by a greater
number of subordinate reporting to a manager. The appropriate span of control depends on
the complexity of the job, the competences of the manager, the training of workers and the
level of centralize decision making in the organization.
 Chain of command: The reporting relationship from top to bottom of the organization or the
line of authority in the organization.

Line and Staff Relationships

Line Relationship

 Line relationships take a hierarchical form in the organization. Authority is passed down the
hierarchy of the structure. The line shows the relationship between the manager and employee.
 Line relationships or the length of the chain of command can result in tall structures or flat
structures.
 A tall structure has many levels and a long chain of command. This structure tends to be
inflexible.
 A flat structure has few levels and there is the possibility of greater use of teamwork. It tends to
be more flexible in nature.

Staff Relationship

 This gives managers the right to serve in an advisory role. These managers can provide
specialized advice or technical assistance to other managers. There is no direct control over
subordinates or activities in departments.

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Line Authority and Staff Authority

Managing Director

Legal officer

Production manager Marketing manager Finance manager

Line relationship

Staff relationship

An organization chart is a pictorial or graphic representation of the structure of the organization. It

shows the formal patterns of role relationships in the organization.

Organizational activities can be group in a number of ways to produce various structures e.g.

 A functional organizational structure: In this structure activities are structured by purpose or

functions in the organization. It is a simple structure that allows tasks to be structured together
based on technical expertise. However, this structure can create departmentalization whereby
departments or functions seek to operate independently not seeking the organization’s interest.

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A functional organizational structure

Managing Director

Executive Secretary

Production Manager Human Resource manager Marketing Manager Finance manager

Sales Manager Advertising Manager

 A Matrix Structure: This is a combination structure that joins functional areas with structures
for projects and teams. The functional areas flow vertically down the chain of command.
Simultaneously, a worker can be horizontally attached to a project team. Matrix structures offer
flexibility for organization employees to utilize skills and competencies. It is based on the
individual having expertise in functional areas and be able to transfer these skills to projects.
Difficulties can occur in areas of control of tasks, role ambiguity and role conflict.

 A Committee Structure: This is the formation of a group of organizational members delegated

with specific organizational objectives to achieve. The committee benefits form expertise of
members and various views on matters are considered. However, decision making can be slow
and some members may compromise their positions on issues.

 A Product –based structure: In this instance, work is divided by the product provided. This
structure allows the organization to offer a range of products. Each product (good or service)
will have various functional areas. However, there may be the duplication of tasks and
responsibilities and each product group may become too independent.

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Product –based structure organizational structure

Managing Director

Executive Assistant

Product 1 Product 2 Product 3

Production Marketing and Sales

The Informal Organization Structure

 This structure is existed simultaneously with the formally defined organization structure.
 It is formed from the interaction of persons in the organization and individual social needs.
 The informal group structure has its own norms or guidelines for behaviour apart from the
formal structure.
 The informal structure is flexible and its communication method is the grapevine. This structure
is not represented on the official organization chart.
 At times the informal group’s objectives may be in conflict with that of the formal structure.
The informal group may also have its own leader rather than the legitimate, positional leader in
the organization.
 The informal group provides a sense of support and belonging for membership.

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STRUCTURED QUESTIONS

1. Define the following:

(i) chain of command

(ii) span of control (2 marks each)

2. Explain using diagrams where necessary explain the concepts of

(i) functional organization chart

(ii) line relationship

(iii) line and staff relationship (3 marks each)

Pupils will:

 outline the main characteristics of a good leader

 discuss some leadership styles
 identify potential sources of conflict in organizations
 outline dysfunctional or negative strategies used by employers and employees to deal with
conflict
 describe conflict resolution strategies within an organization
 establish guidelines for the conduct for effective management and staff relations in the
workplace
 identify strategies for motivating employees
 evaluate the role of teamwork in organizational success
 outline strategies for effective communication in the organization

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Leadership
 Leadership can be described as a process of influencing an individual, group or team to work
towards achieving particular targets or goals.
 Characteristics of effective leaders include:
 Persistent
 Integrity
 Motivated to achieve
 Maturity in actions
 Self –confident
 Able to work under pressure
 Conscious of change
 Objective in decision making
 Possess emotional intelligence or self- awareness to enable empathy and manage
emotions
 Energetic
 Determined and decisive
 Visionary and strategic thinker

Leadership Styles

Leadership styles are a combination of characteristics or traits, competences and skills, attitudes and
behaviours that an individual use in a leadership role.

Autocratic or Directive Leadership Style (Authoritarian)

 The leader assumes responsibility and authority over the subordinates, workers or followers.
 The leader makes decisions and issues orders for subordinates to follow.
 This style is appropriate when managing a crisis situation in an organization
Advantages:

 Help inspire confidence in the worker as he/she is clear on what is to be achieved

 The leader feels a sense of control over situations
 Facilitates quick decision making
 Helping in orienting new workers to unfamiliar situations
Disadvantages:

 It can cause the worker to experience frustration at not having control over work situations.
 The worker can become dependent on the leader
 Stifle worker initiative and creativity
 Workers may have a lack of commitment to objectives

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Democratic or Participative Leadership Style

 The leader facilitates consultation and shares responsibilities with the followers or workers
 Shared decision making
 Promotes involvement and team work
Advantages:

 The leader is supported by the workers or followers

 Members are encouraged to contribute to decision making
 Results in greater commitment from members
 Encourages creativity among group members
Disadvantages:

 Conflict in decision making between leader and followers

 Slower decision making process
 Does not work efficiently if workers are not competent or interested in tasks

Laissez-faire leadership style

 Also called ‘free rein’ where the leader assumes a passive role and lets workers make their own
decisions about the work situation
 The leader still engages in the overall goal setting and monitoring of workers
 The leader is available when needed
Advantages:

 Workers are motivated as they have autonomy

 Opportunity for personal development with subordinates
 Can work effectively if workers possess expertise and training in their field of work
Disadvantages

 There may be a lack of clear direction and workers may get caught up in irrelevant activities
 The work may not get done and the leader will eventually have to step in

Charismatic Leadership style

 A leader who motivates and inspires followers or workers because of his or her strong
personality
Advantages

 Able to motivate subordinates to achieve a vision

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Disadvantages

 Conflict may occur as individuals compete to be close to the leader

 The leader may not possess the skills needed to effectively lead in difficult situations

Transformational Leadership style

 A style of leadership that facilitates change in response to challenges faced by organization

Advantages

 Encourages innovation, creativity and learning in the organization

 Allows for risk to be taken to facilitate growth
 Workers are encouraged to learn and make decisions in defined areas
Disadvantages

 Risky in terms of decision that may be taken

 If the leader is not clearly informed, he/she may not understand the type of change needed
 Can be met with high resistance by some

There is no one ‘best’ style of leadership. Instead contemporary management studies indicate that a
leader’s style can be contingent or situational. That is, based on the particular circumstances the leader
is faced with e.g. for emergency situation the leader can be autocratic; when developing a new product
line the leader can be democratic to allow many ideas to come forward.

STRUCTURED QUESTIONS

1. List FOUR characteristics of an effective leader. (4 marks)

2.Distinguis between 'autocratic leadership style' and 'democratic leadership style'. (4 marks)

3. State ONE situation where authoritarian leadership is appropriate. (2 marks)

4. Describe the concept of 'laissez- faire leadership style'. (4 marks)

Motivation
 Management is responsible for creating an environment whereby the individual needs such as
physical well-being, job satisfaction, personal development, achievement and respect are

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reconciled with the organizational needs e.g. increased productivity, low absenteeism, harmony,
low turnover. Met needs can result in a productive workforce.

Diagram of Maslow’s Hierarchy of Needs

self-actualization needs

esteem needs

affiliation needs

safety and security needs

physiological needs

 Maslow Hierarchy of Needs

Level of need Description Organizational Examples
Physiological Needs  Basic needs of food  Provide competitive salaries,
, clothing, shelter, dental and medical plans
survival needs  Flexible working
Safety and Security Needs  Need for personal  Implementation of occupational,
and physical safety; safety and health laws; provide
job security employment contracts
Affiliation Needs  Need to feel a part  Encourage social events e.g. sports
of the organization, day
socialize, need to  Redesign job to include team work
belong
Esteem Needs  The need for  Provide status symbols e.g. cars,
individual preferential office space, titles,
recognition; status promotion
Self-actualization Needs  The desire for self-  Provide opportunities for
fulfilment individuals to develop e.g. career
advancement

 Herzberg ‘s Two Factor Theory of Motivation

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 Motivators are factors that causes increased satisfaction at work and results in greater
effort, productivity and performance e.g. recognition for work done, increased
autonomy on the job, advancement on the job, job enrichment. These factors are
present in the content of the job.
 Hygiene Factors or maintenance factors: These factors when present in the work
context helps the worker to be less dissatisfied with the job environment e.g. level of
supervision, degree of interpersonal relations, salary, working conditions, company
policies. The presence of these factors does not motivate the worker to achieve a
higher level of productivity but helps them to be less dissatisfied with the circumstances
of the job.

Financial and Non-Financial Incentives

Financial Incentives Non-financial Incentives

 Pay and allowances: basic pay; travelling  Job Security where the worker is provided
allowance; pay increments with a contract legally binding the business
 Incentive pay based on output and the employee;
 Gain sharing where a bonus is earned for  Challenging work through mentoring, job
increasing productivity or wastage redesigning, job enlargement and job
reduction enrichment;
 Profit sharing where a portion of  Recognition where the employer shows
company's profits are shared with appreciation for an employee's hard work;
employees as a bonus  Enhanced Job titles can be provided to
 Stock options which gives employees the meet employees esteem needs;
right to purchase a specific number of  Opportunities for promotion and
shares in the business at a fixed price advancement should be provided to avoid
 Retirement benefits such as gratuity, career stagnation; this provides upward
leave encashment benefit, company mobility in the organization's hierarchy
pension  Empower employees by involving them in
decision making within their scope;
 Encourage competition e.g. reward
persons with perfect attendance with a
gift basket or gift voucher;

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 Engage in job rotation activities designed

to expose the employee to various jobs to
improve versatility;
 Leadership can motivate by leading by
example through demonstration of values,
commitment and attitude that is expected
from employees; the leader/manager
should be a positive role model;
 Encourage an environment of creativity
where mistakes are treated as part of
learning. This should be done within
reason in terms of what risk can be
tolerated.
 Provide effective feedback to employees
and encourage two-way communication;
 Create an environment that advocates for
work /life balance e.g. stress
management; training and development;
financial management; exercise;
meditation; social activities etc.
 Flexible working time e.g. compressed
work week; late arrival and working later;
 Compensatory time off e.g. when a
worker uses personal time for company
business;

STRUCTURED QUESTIONS
1. Outline TWO financial incentives and TWO non-financial incentives that management can use to
motivate workers. (4 marks)

2. Discuss TWO ways in which management can meet the needs of employees. (4 marks)

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Conflict
Conflict: Behaviour intended to obstruct the achievement of some other person’s goals. Conflict can be
described as a dispute or disagreement that prevents individual or organizational goals from being
achieved.

Internal Sources of Conflict

 Differences in perception: People view things in different ways.

 Limited resources: Resources are limited and individuals have to compete for their share.
 Departmentalization and Specialization: Most work in organizations is divided into specialist
functions. People may tend to focus on their own areas and not on co-operating with others.
 The Nature of Work Activities: Where the task or job of one person is dependent upon the work
of others, there is potential for conflict if there is no collaboration and co-operation.
 Role conflict: This is where the person is not clear on what they he/she is supposed to do in the
organization.
 Unequal or inequitable treatment: Persons feel they are not treated fairly for example
discrimination based on gender, disability or position in the organization.
 Individual differences: People have different attitudes, personalities and stress levels.
 Informal Groups: Members follow group norms or guidelines that are not in line with the
organization’s goals but based on the informal group.
 Organization issues: Communication flow e.g. where information leaks through the informal
channel or grape vine; inappropriate leadership style; managerial behaviour towards
employees; safety and health issues leading to employees needs not being met; breakdown in
salary negotiations
 Age Gap: Relationships between old and young employees can sometimes be strained as a
result of lack of understanding between parties on issue

Strategies for Managing Conflict

 Clarification of goals and objectives: People need to be aware of what they have to
achieve; their role and functions.

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 Resource Distribution: Ensure that to some extent people are provided with the tools to
do their jobs.
 Develop proper policies and procedures: Ensure that policies are fair to employees e.g.
Health and Safety; Promotion; Discipline; Grievance.
 Non-Monetary Rewards: e.g. challenges at work; delegation; praise; flexible working
hours
 Develop interpersonal and group process skills: Encourage people to work through
situations.
 Group Activities: Selecting appropriate persons to work on tasks.
 Leadership and Management: Choosing an appropriate leadership style suited to the
situation that is likely to assist in dealing positively with conflict.
 Ensure that there is effective communication and the sharing of information
throughout the organization.

Third Party Involvement Strategies to resolve conflict

 Mediation: This is a process whereby recommendations are made for resolving the
conflict after the mediator has heard both parties’ cases, but the final responsibility for
settlement still lies with the parties themselves.
 Arbitration: This is a process whereby the third party effectively adjudicates/ gives a
ruling/ passes judgment on the disputes by determining the means of settlement, after
hearing evidence from both parties. The parties agree in advance to accept the
arbitrator’s findings and the award is therefore binding.
 Conciliation: A process of intervention designed to narrow disagreements between the
parties by clarifying positions and keeping negotiations going, but where the
responsibility for settlement of the dispute/conflict still lies with the parties themselves.
 Trade Union Representation: Represent workers interest to help settle disputes
between workers and management.

Negative or dysfunctional ways of dealing with conflict:

Employers may employ or use the following adversarial tactics in dealing with conflict:

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 A lock out, where the owners or managers intentionally refuse entry to the compound to
employees.
 The use of scab labour or temporary labour to cover striking employees during industrial
disputes.
 Threats of dismissal or disciplinary action against workers who dispute the actions of
management.
 Management refuses to recognize the legitimate trade union and therefore, refuses to negotiate
with the employees’ representatives.

Employees may employ or use the following adversarial tactics in dealing with conflict:
 Strike action or refusal to perform the job accompanied by demonstrations and organized
protest actions.
 Work to rule is a situation where the workers decide when to work and what to accomplish. It
may lead to the disruption of work flow and the reduction of output levels of the firm.
 Sick out is a situation where workers collectively take sick leave to disrupt the functioning of the
organization.
 Sit in is a situation where workers are present on the plant site or compound but refuse to go to
perform their tasks. They sit in a particular area for the work period.

Establish guidelines for the conduct of good management and staff relations

 Establish a 'code of conduct' for both managers and employees; Address unacceptable
behaviour in the workplace; address professionalism and dress code; conflict of interest; issues
of smoking, alcohol and drugs;
 Communicate a clear mission and vision to all internal stakeholders. Engage stakeholders with
how the company's mission align with personal goals;
 Conduct regular meetings e.g. with departments to discuss progress towards the mission; find
out about gaps and get feedback and suggestions on meeting goals;
 Encourage teamwork with management and staff e.g. company retreat, sports, charitable
activities;

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 Allow for communication to be free from barriers; encourage feedback; use a variety of media
to relay messages to ensure target audience is reached;
 Practice good leadership in terms of adapting style to the situation; value the employees’
contribution; provide direction; allow autonomy when necessary; develop employees;
 Recognize the role of employee representation in the dialogue process e.g. trade union
representation;

Trade Union

 A trade union is an organization made up of members (employees) in various occupations,

trades or professions.
 The key function of the trade union is to represent the interests of workers. The trade union
seeks to promote the interest of workers through the process of collective bargaining.

Role of Trade Unions

 Act as a pressure group to influence government decision making

 Negotiate for better or more competitive salaries and wages
 Set regulatory standards for some unions e.g. craft unions; provide training; negotiate rights of
workers e.g. part time and temporary workers
 Provide additional services to members e.g. discounts at merchants, social events
 Enhancement of workforce e.g. money management workshops
 Seek the welfare of workers and the wider society
 Promote a system of democracy for electing union officials; ensure the participation of workers
in the workplace

STRUCTURED QUESTIONS
1.Identify THREE potential sources of conflict within an organization. (3 marks)

2. Outline TWO negative strategies used by employers to deal with a conflict. (4 marks)

3. Outline TWO negative strategies used by employees to deal with a conflict. (4 marks)

4. Discuss TWO strategies involving third parties that are used to resolve a conflict within the
organization. (6 marks)

5. Outline THREE guidelines for establishing good relations between management and employees. (6
marks)

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Communication
Diagram of the Communication Process
ENCODE MESSAGE CHOOSE APPROPRIATE MEDIUM

SENDER MESSAGE AUDIENCE OR

RECEIVER
NOISE LANGUAGE

BARRIERS TO COMMUNICATION

FEEDBACK LOOP

 Communication can be described as the transmission or relaying of information, ideas, opinions

or understanding from a person or group to another person or group.
 The communication process involves the following:
Sender: the person or group initiating the process or articulating the message
Receiver: the person or group for whom the message is intended or the target audience
Message: the fact, opinion, information or idea to be sent or transmitted
Medium: the means by which the message is transmitted or the channel of communication
Feedback: sent from the receiver to the sender and provides information on the receiver’s
perception of the message

Communication Channels (mediums)

Channels Examples
 Verbal:
Spoken Spoken e.g. face to face, telephone, voice mail or voice messaging
Written Written e.g. letters, memos, manuals, faxes (facsimile), pagers, e-mails

 Non-verbal:

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Messages transmitted Non -verbal e.g. facial expressions, gestures, posture, proximity to others
without the use of words
Visuals or graphics Visuals e.g. pictures, charts, videos

Electronic means of communication includes emails, faxes, pagers, text messaging

Barriers to communication
 The choice of words used in speech and writing
 Words may mean different things in different context
 Specialized jargon used or technical language
 The communication source may not be credible or trustworthy
 Different perceptions
 Noise
 Conflicting non-verbal signals
 Emotional interference
 Information overload
 Filtering of information before it reaches receiver

Formal communication channels in the organization result from the structure and design of the
organization. It may be downward, upward or horizontal.

Informal communication channels exist outside of the formal structure. It is used to transmit gossip,
personal information and social opinions. This is termed the grapevine.

Good communication includes:

 Clarify the message to be sent
 Determine the purpose of the communication
 Select the proper medium
 Consider the environment in which the message is to be sent
 Ensure proper timing
 Active listening

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 Plan the communication strategy

 Seek feedback and give feedback on the communication

STRUCTURED QUESTIONS
1. Describe ONE way in which management can communicate with the following stakeholders.
(i) Employees
(ii)Shareholders
(iii) Suppliers (2 marks each)
2. Outline TWO strategies for effective communication between managers and employees. (4 marks)
3.Explain with examples 'verbal' and 'non-verbal' communication channels. (6 marks)

Teamwork

Team: A group of persons who come together to achieve a particular goal or to accomplish a particular
task. Each team member has a role to perform for the accomplishment of tasks.

Teamwork: A group of persons working together, interacting, communicating to accomplish a particular

goal. Through teamwork, each member contributes to the achievement of tasks.

Advantages of Teamwork Disadvantages of Teamwork

o Leadership is shared o Time consuming to make decisions

o Creative problem solving from inputs and complete tasks
of individuals of the team o Conflict may arise as a result of
o Pooling of resources, ideas and personality clashes or other types of
expertise bias e.g. racial prejudice

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o Greater control over the tasks

assigned since job is shared
o Motivation of the workers personally
and collectively
o Increase in the amount of work done
and thus, increase level of productivity
o Improvement in the quality of work
o Fostering a participative approach to
work giving a feeling of belonging a
making a meaningful and significant
contribution to the organization
o Provide for continuity e.g. if a member
of the team leaves, the team or
project continues
o Use of technology to carry out tasks
e.g. e-mail instead of meeting face to
face
o Development of negotiation, team
building and conflict management
skills
o Provides ideas to management

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Factors to consider in Selecting Members of Teams

A manager or team leader can consider the following factor when deciding on the composition of an
effective team:

o Compatibility of team members

o Goal to be accomplished
o The ages of team members
o Cultural and religious differences
o The prospective team member’s interest in the particular task
o Qualifications and experience

Structured Questions

1. Define the term 'teamwork'. (2 marks)

2. Discuss the value of teamwork in an organization. (4 marks)

3. State TWO advantages and TWO disadvantages of teamwork. (4 marks)

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Multiple Choice Evaluation: Unit 2

1. The responsibility of conducting quality control on finished goods and services belongs to
a. Finance department
b. Production department
c. Marketing and sales department
d. Human resources department

2. Deciding on a performance management system, compensation packages and recruitment and

selection are key elements of
a. Production function
b. Marketing and sales function
c. Human resource or personnel function
d. Finance function

3. Making payments on behalf of the company, designing payroll systems and making statutory
deductions are responsibilities of
a. Human resource department
b. Marketing and sales department
c. Production department
d. Finance department

4. The formal relationships in an organization and the outline of reporting relationships from top
to bottom of the organization is specifically the
a. Organization structure
b. Organization chart
c. Span of control
d. Responsibility

5. An organization structure that reflects the chain of command from top to bottom of the
organization and the authority flow shows
a. Staff relationships
b. Line relationships
c. Responsibility
d. Authority

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6. An organization structure that shows the relationship and roles in an organization divided
according to areas such as production, marketing, finance and personnel is a
a. Product based structure
b. Functional structure
c. Geographic structure
d. Matrix structure

7. Key characteristics of the informal organization structure are

I. Representation on the organization chart
II. Borne out of personal need to interact
III. Informal communication channel or grapevine
IV. Possess its own goals and norms
a. l, ll and lll
b. l, ll and lV
c. ll, lll and lV
d. all of the above

8. Staff relationships exist to

a. Exert authority down the chain of command
b. Provide advice and support to line managers
c. To advise the informal organization members
d. To be leaders

9. Ensuring that responsibilities are defined and departments are allocated resources are key
elements of
a. Planning
b. Organizing
c. Directing
d. Controlling

10. Measuring actual achievement of objectives against standards is

a. Planning
b. Organizing
c. Controlling
d. Directing

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11. Esteem needs can be met by the organization by providing
a. Pension and gratuity benefits
b. Job contracts
c. Health benefits
d. Promotion and status

12. According to Herzberg’s theory of motivation, workers are motivated or satisfied on the job
when which of the following factors are present?
a. Salary
b. Good working conditions
c. Achievement
d. Good inter personal relations

13. George allows his subordinates to make decisions on getting the task done. He does not
interfere in the work process except when needed. George is displaying
a. Democratic leadership
b. Autocratic leadership
c. Transformational leadership
d. Laissez faire leadership

14. In a crisis situation, a leader may have to tell and instruct workers on what needs to be done.
He or she displays
a. A laissez faire leadership style
b. A transformational leadership style
c. A participative leadership style
d. An authoritarian leadership style

15. Which of the following is NOT a key form of written communication in organizations?
a. Memorandum
b. Annual report
c. Minutes of meetings
d. Speeches

16. The use of graphic representation and pictures to communicate a message is specifically
a. Written communication
b. Electronic communication
c. Oral communication
d. Visual communication

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17. The strategy of using a third party to settle conflicts whereby the parties to the conflict agree to
accept the judgement of the third party is
a. Communication
b. Mediation
c. Arbitration
d. Conciliation

18. An organization representing the worker’s interest on a collective level is a

a. Manufacturer’s Association
b. Trade Union
c. Credit Union
d. Co-operative

19. A grievance procedure is

a. A set of steps to be followed in dealing with a formal complaint
b. A set of steps to be followed to dismiss a worker
c. A set of steps to be followed in disciplining a worker
d. Using an arbitrator

20. A Major disadvantage of engaging in teamwork is

a. pooling of ideas
b. conflict as a result of personality differences
c. creative problem solving
d. shared leadership

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Unit 3: Establishing A Business

Pupils will:

 define the terms entrepreneur and entrepreneurship

 explain the key functions of an entrepreneur
 identify key characteristics or traits of an entrepreneur
 describe the role of the entrepreneur in the decision making process
 Outline the role of entrepreneurs in economic development
 Outline reasons why an individual may want to establish a business
 Outline the steps in establishing a business
 Identify the main reasons in preparing a business plan
 Describe the key elements of a business plan
 Identify sources of information for conducting research
 Discuss the significance of conducting a feasibility study
 Explain the relationship between planning and the operation of a venture
 Identify key regulatory statutory/government practices for the establishment and
conduct of different types of businesses
 Outline the factors that determine the location of a business
 Explain the significance of collateral in accessing capital to establish a business

Concept of the entrepreneur

 An entrepreneur is a person who accepts the responsibility of providing products to consumers

with the aim of making a profit. The entrepreneur makes the initial investment in the business
to realize a business idea. He or she bears the risk associated with failure and the successes of
the venture.
Roles of the entrepreneur include:

 Conceptualizing or devising the business idea

 Planning the goals of the business in the long term (strategic), medium term (tactical) and short
term(operational)
 Accessing funding from various sources e.g. self, family, bank loan, government agencies, credit
union
 Organizing the resources of the business to achieve the organizational goals e.g. allocating
resources, defining job responsibilities and reporting relationships
 Operating or transforming the inputs of the business to output
 Evaluation of business performance e.g. setting benchmarks, analysing gaps in actual
performance from projected performance

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 Engage in change management as the business meets challenges in the internal and external
environment

Traits and leadership qualities of an effective entrepreneur

 Creativity in developing new, innovative ideas to sustain the business in a declining markets
 Flexibility in terms of decision making and leadership style
 Goal oriented in terms of setting targets and monitoring achievement towards goals
 Persistent in working towards achieving set targets
 Possess a propensity to take risk such as entering a new market, adding a new feature to a
product, change the organization structure, make investment decisions

Reasons for starting a business

 Achieving growth as an individual

 or self- actualization
 Achieving one’s dream through one’s effort
 Self- employment
 Creative satisfaction
 Freedom to develop the business according to one’s desires and enjoy flexibility
 Financial independence

Role of the entrepreneur in economic development

Entrepreneurs use their acceptance of risk to do the following in an economy:

o Use resources and borrow for investment e.g. setting up ventures which leads to the creation of
wealth and capital;
o Creation of employment opportunities in businesses which aids in reducing the unemployment
rate;
o Can encourage linkages among businesses i.e. backward and forward linkages e.g. providing
specialized machinery for firms in the construction sector; landscaping and maintenance
services to government agencies;
o Promote export of locally made products such as, using local raw materials e.g. processing fruits
and vegetables to condiments and exporting to other countries;
o Improve the standard of living or economic well-being of persons associated with
entrepreneurship; GDP and per capita income can increase with the creation of business;
o Spreading the economic concentration of power from a few to more persons in the society;
o Contribute to the development of communities by providing assistance through job creation;
assisting charitable events and infrastructural development;

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o Engage in regional development e.g. trading with CARICOM nations; setting up businesses in
other regional countries;
o Foster a culture of innovation and creativity that reduces the dependence on social services;
o Contribute to taxation in the economy.

Role of the entrepreneur in decision making.

What is decision making?

Decision making can be described as a process where the decision maker selects a particular option
from possible alternatives. In arriving at a decision or course of action the objective is to achieve a
particular goal.

According to (managementstudyguide.com), the decision maker should follow the following steps in
decision making:

 define the problem or issue

 collect data and information
 arrive at possible options and weigh options
 choose the best course of action
 plan and implement option
 follow up of action taken

In carrying out the decision making process, the entrepreneur must determine certain courses of action,
for example:

o what to produce
o how much to produce
o methods of production
o where to locate production

Therefore, he or she must determine how to allocate the factors of production and other input factors
to produce the goods and or services of the business. The entrepreneur will have to make different
decisions every day in the operation of the business. Some decisions will affect the entire organization.

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Steps in establishing a business

Step 3 Step 5
Step 1 identify acquire
conceptualize input funding for
or develop the resources venture
business idea

Step 2 Step 4 Step 6

engage in create the develop the
market business operating
research to plan or blue framework
test the print
feasibility
of the idea

Some rules and regulations governing business conduct

 Registration of business
 Adhere to employment legislation e.g. Occupational safety and health requirements; Equal
Opportunities legislation; Equality and diversity legislation; Pay legislation; Maternity and
paternity
 Make necessary statutory deductions e.g. national insurance
 Pay taxes
 Receive the necessary planning permits e.g. environmental clearance to build
 Observe regional agreements such as CSME and CARICOM requirements
 Observe international issues such as trading blocs e.g. European Union, international law,
international treaties
Some Laws to consider in Trinidad and Tobago in the conduct of business (www.legalaffairs.gov.tt)
(Chapter 81-84)
Companies Act Hire Purchase Act
Partnership Act Sale of Goods Act
Co-operative Societies Act Protection Against Unfair Competition Act
CARICOM Enterprises Act Consumer Protection and safety Act

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Fair Trading Act Standards Act

Opportunities and challenges facing organizations: Examples include

Opportunities Challenges
 New markets as a result of globalization  Political instability
and the removal of protectionist barriers  Economic issues e.g. inflation,
 New technologies that can enhance unemployment
production  Social factors e.g. crime, changing
 Demographic changes e.g. increased demographics
incomes, population structure  Meeting environmental regulations
 Improvements in infrastructure e.g. roads,  Inability to keep up with technological
communication networks change
 Greater access to international markets  Legal regulations governing the conduct of
through trade agreements business
 Government policies to facilitate trade  Negotiating entry into a trading bloc

Collateral

 A form of security or surety used to secure or get a loan;

 A means of compensating for the risk borne by the lender e.g. bank;
 Collateral provides the lending institution with the assurance of the borrowers’ intention to pay
back a loan;
 Collateral reduces or minimizes the lenders risk by providing an item of value to support the
loan;
 If the borrower defaults on the loan the lending institution can take the pledged collateral to
offset the losses incurred;
 The value of the item used as collateral should be comparable to the value of the loan; the item
should also have equity (the value of the item or asset after deducting outstanding
debts/liabilities);
 Types of collateral includes: land, building, equipment, securities or shares, vehicles, money.
 According to 'thebalance.com' when a loan is backed by collateral it is referred to as a 'secured
loan'. This type usually attracts a lower interest rate than an unsecured loan.
 If an entrepreneur does not have the collateral to access a loan, as is often the case, then other
options will have to be sought. This may include 'equity financing,' where the venture is financed
by investor who puts capital into the venture for equity share or becoming part owner e.g. angel

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investors (individuals who are willing to invest in ventures that can provide a higher rate of
return than traditional investments); or venture capitalist (a group that invest in existing
ventures that are growing and require capital for expansion)

Elements of a Business Plan

 A business plan is a detailed, written description of the proposed business. It outlines the vision,
mission and goals of the business and key functional areas and activities.
 Coulter (2003) describes the business plan as a 'blueprint and road map for operating the
ongoing business.'

•describe proposed business venture

•contains vision, mission and goals
executive •introduces the plan to the audience
summary

•details of any background information

company •owners or shareholders; if business existed before
background

•outlines the business structure; management levels

operational •resource allocation; legal aspects of the business; information for investors
plan

•marketing plan:market research, nature of product; industry trends;

marketing mix
functional • production plan: capacity planning; stock control; quality control
area plans • financial plan:budgeting and forecasting of the financial position

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Key reasons for developing a business plan

 Allows the entrepreneur to conduct research into the feasibility of the venture. It involves
assessing key areas so that proper planning is done and assessing opportunities.
 It communicates to the target audience the purpose of the venture and what it wants to achieve
in the future.
 Provides the entrepreneur with guided steps for beyond initial start-up phase. Further, it
provides ways that the entrepreneur can deal with uncertainties in the external environment.
 Provides a guide for potential investors as to the attractiveness of the business, in terms of
projected financial statements e.g. cash flow analysis; balance sheet; income statements;
 Used by financial lending agencies as a tool for assessing level of risk in the business;
 Provide guidelines for the entrepreneur in operating the business and decision making. It
should guide the venture towards growth and help in taking advantage of opportunities and
overcoming challenges.

Relationship between planning and the operation of a venture

The planning process helps the entrepreneur to map out plans to achieve the business goals. This can
be achieved in different time fames in the operation of the venture for example:

 Short term planning will usually cover a year and looks at processes in the venture at present
and how these can be improved e.g. improving skills levels through training; servicing machinery
and equipment;
 Medium-term planning will usually cover more than a year (2-3 years). This will address short
term issues that were not dealt with effectively. The aim will be to revise and strengthen
policies to prevent the occurrence of short term problems.
 Long term planning will see the venture 4 to 5 years in the future. This will consider the vision
of the organization and how effective the venture is in realizing the vision. The venture will look
at plans to solve problems and in assessing the strengths, weaknesses, opportunities and threats
of the business and the political, economic, social and technological environments, develop
strategies to achieve the long term goals.

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Feasibility Study

 The feasibility study is an investigation or research to determine if the business idea has a
probability of success. It assesses the viability of the idea against costs and projected revenue.
The feasibility study incorporates an evaluation of the opportunity cost of entering a particular
business.
 The process of assessing the feasibility of a business idea can reveal any problem issues or
strengths and weaknesses to be addressed before the business plan is written. It can therefore
provide information to write the business plan.
 Moreover, it seeks to address the potential of the venture to generate profits.
 It also identifies whether there is a target market for the good or service.
 Common feasibility studies include:
Technical Feasibility Study: This assesses the company’s technology requirements as well as, the
procedures needed to undertake a venture.
Marketing Feasibility Study: This assesses the likelihood that there will be a demand for the
product; the determination of the target market; does the product have the potential to create
a market presence.
Economic Feasibility: This is an assessment of the company’s ability to complete the venture
given the present financial resource base. It is basically a cost /benefit analysis.

Location of Business Enterprise

Entrepreneurs must decide on the most suitable location to situate the business. The site chosen should
provide the organization with a number of key advantages. These would include factors such as:

 Advantages that occur as a result of locating close to a source of raw material or accessibility to
land space or climatic factors suitable for the production of certain goods
 Access to target markets
 Access to various categories of labour e.g. skilled, professional, semi-skilled and unskilled
 Access to low cost or affordable labour
 Access to proper infrastructure e.g. roads, utilities, communication networks
 Government economic policy such as, development of rural areas

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 Affordable rent if necessary to gain access to the target market

 Industrial inertia: Some industries avoid relocation regardless of environmental pressures that
should encourage them to leave, because of factors existing in the present environment e.g.
labour costs, cost of relocating plant or infrastructure. The initial advantages may no longer be
relevant. Therefore, the industry survives even though the initial benefits are no longer
relevant; firms may stay because of other factors.

Sources of information for conducting research

Market Research: An investigation into the market with the objective of finding out the size of the
market, market share of a company’s brand or products and that of competitors.

Marketing Research: The collection and analysis of data from the market to deal with issues or policies
in marketing e.g. find out what customers want. Marketing research is a part of market research.

Aims of Market Research

 To find out what customers want in the market and to assess the changes in taste patterns so
that the business can meet the needs of the market efficiently
 To gauge customer behaviour and what influences behaviour so that appropriate stimuli can be
used to attract customers
 To evaluate demand so as to set production targets and ensure that for example, there is
enough sales personnel to service the market
 To identify market opportunities by analyzing information to forecast the growth potential in
the market

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The Basic Market Research Process

develop the
identify problem or collect information
research plan based
issue and define using methods e.g.
on problem and
research objectives interviews
objectives

analysis of
Use findings for Present relevant information using
decision making findings statistical techniques
e.g. averages

According to 'entrepreneurship.org,' market research is ' the process of gathering, analysing and
interpreting information about a market, about a product or service to be offered for sale in the market,
and about the past, present and potential customers for the product or service.'

In conducting market research the entrepreneur can consider two main categories of data sources:
Primary Research Sources and Secondary Research Sources.

PRIMARY SOURCES SECONDARY SOURCES

 new research; first hand sources;  using information that has already been
published by other sources;
 collected through site visits;
questionnaires, focus groups, surveys; face  internal to the organization: reports, sales
to face interviews; records, financial records;

 online means can include online  external to the business: industry surveys;
questionnaires and video conferencing published companies' financial records;
focus groups; journals; trade magazines; books, trade
associations' publications, banks, mass
media;

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Structured Questions

1. Define the term 'entrepreneur'. (2 marks)

2. Outline THREE roles of an entrepreneur. (6 marks)

3. State TWO qualities of an effective entrepreneur. (2 marks)

4. List THREE reasons why an individual will want to start a business. (3 marks)

5. Outline TWO roles of the entrepreneur in economic development. (4 marks)

6. Explain the role of the entrepreneur in 'decision making'. (4 marks)

7.State TWO government regulations that a business must observe. (2 marks)

8. Define the term collateral. Give two examples of collateral. (4 marks)

9. Outline THREE areas in a typical business plan. (6 marks)

10.Discuss TWO reasons for developing a business plan. (4 marks)

11. Explain the importance of conducting a feasibility study. (4 marks)

12.State THREE factors that an entrepreneur must consider in locating a business. (6 marks)

13. Describe the term 'market research'. (2 marks)

Research: Place pupils in groups of 4-6 students. Have each group research aspects of primary or
secondary sources of data.

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Multiple Choice Evaluation: Unit 3

1. Security used to offset a lender’s risk is termed
a. Savings
b. Venture capital
c. Collateral
d. Shares

2. Which of the following is NOT a traditional source of collateral for a small business?
a. Stocks or shares
b. Building and equipment
c. Property
d. Insurance policy

3. A written description of the key areas of a proposed business venture is called a or an

a. Operational plan
b. Production plan
c. Financial plan
d. Business plan

4. The section of the business plan that outlines how the business will be managed in terms of
departments and resources is specifically
a. The executive summary
b. The operational plan
c. The marketing plan
d. The financial plan

5. When an organization engages in market research and requires original information particular
to the organization and suited to that organization’s needs, it is required to gather this
information from
a. Primary sources
b. Secondary sources
c. Trade journals
d. Annual reports

6. Sources of information already published can be used for market research by companies. This is
termed
a. Primary sources
b. Secondary sources
c. Qualitative data
d. Quantitative data

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7. Tactical planning is planning in the medium term where the strategic goals are broken down to
be more specific and within a specific time frame e.g. a budget. Strategic goals are the overall
goals that define the organization. Strategic goals are by nature
a. Short term
b. Long term
c. Medium term
d. Short to medium term

8. Planning at the operational level such as setting individual employee’s work load per week is
specifically
a. Long term planning
b. Short term planning
c. Medium term planning
d. Short to medium term planning

9. Developing a business idea based on a passion, to be self -employed, to utilize a skill or to meet
market demand is the stage of
a. Market research
b. Conceptualization
c. Creating the operational plan
d. Planning

10. An investigation of the business idea to determine whether it is likely to generate financial and
economic benefits against the risk of failure is appropriately termed
a. A Business plan
b. A Feasibility study
c. Market research
d. Qualitative research

11. Assessing the venture’s technological requirements, as well as, the procedures needed to undertake the
venture is specifically a / an
a. Economic feasibility
b. Marketing Feasibility
c. Technical feasibility
d. Cost of benefit Analysis

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12. People who conceptualize and undertake the risk of starting a business venture are specifically
a. Superiors
b. Subordinates
c. Managers
d. Entrepreneurs

13. The first stage in a typical market research process is

a. presenting the findings
b. identify the problem
c. collect information
d. develop a research plan

14. Which of the following is NOT a key reason for developing a business plan?
a. The business plan is a guide for potential investors.
b. The business plan communicates with the target audience, the purpose of the venture.
c. The business plan guides in the operation of the business.
d. The business plan keeps the business focused and helps it to be unresponsive to
environmental changes.

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Unit 4: Legal Aspects of a Business

Pupils will:

 explain the concept and define a contract

 identify the types of contracts
 describe the characteristics of a simple contract
 describe the characteristics of a specialty contract
 explain the conditions for offer and acceptance
 explain various ways in which a contract can be ended or discharged
 explain the role of business documentation in business transactions
 describe business documents
 evaluate the principles of insurance
 explain the various types of insurance policies
 explain how insurance facilitates trade

CONTRACTS

Key Points

1. A contract can be described as a legally binding agreement between parties.

2. The key elements of a contract are:

 As a result of an offer and acceptance, an agreement comes into existence.

 There is the element of value described as consideration.
 The parties to the agreement intend to create legal relations.
3. Validity (legally acceptable) of a contract is also affected by the following factors:

 Capacity: This relates to the competency of the party to enter into a contract e.g. a child’s
capacity may be limited or someone who is intoxicated.
 Form: This relates to whether the contract is verbal or written e.g. a specialty contract must be
written.
 Content: All parties should agree to any terms of the contract.
 Genuine consent: All parties should in good faith agree to the terms of the contract. There
should not be any misrepresentation or duress on the part of the parties.
 Illegality: In a situation where the nature of the contract is illegal, this makes the contract void
(there is no legal validity).

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4. Void/Voidable/Unenforceable Contracts: This describes a situation where the contract has no
legality or legal effect or where it does not meet the key elements or validity factors.

5. In order for a determination to be made whether there is agreement, offer and acceptance should be
present. The person who makes the offer is the offeror. While, the person to whom the offer is made is
the offeree.

6. An Offer: A presentation or announcement of one party’s willingness to enter into a contract with
another party. It can also be described as a promise for an act. An offer can be made to a specific
person or the general public.

7. Acceptance: The unconditional agreement to accept the terms of the offer. Acceptance may be in
the forms of writing, oral or inferred by the conduct of the accepting party.

8. A Counter-offer: This is described as a rejection of the original offer made by the offeror. This cancels
the original offer and the person to whom the offer was originally made (the offeree), now makes an
offer (counter-offer).

9. An Invitation to treat: This is described as an invitation made to another party to make an offer.
Invitations to treat include the presentation of goods for sale in a store display; advertising goods for
sale; inviting tenders; a company’s prospectus inviting the general public to purchase shares.

10. Consideration: In order for a contract to be valid, a tangible benefit must be exchanged. This may be
in the form of a promise to carry out an act or pay a sum of money.

11. Executory consideration: This type of consideration encompasses mutual promises to perform the
acts in the future.

12. Executed consideration: The consideration for the promise is an act that is performed or carried out.
Therefore, one party promises to do something if the other party performs an act or does something.

13. Past consideration: If an act was performed before a promise of payment was made, then,
consideration is not valid.

14. Types of contracts:

 Simple contract: This may be a written or verbal agreement or one implied by conduct.
Simple contracts are legally binding or valid when they have the elements of offer and
acceptance; consideration; genuineness; capacity; legality; possibility and good faith. A
simple contract must satisfy all the stated elements. Examples include, buying a grocery
item or hiring a taxi.
 Specialty contract: This is a formal agreement in writing. Specialty contracts are also
referred to as deeds. These contracts must be signed; sealed and delivered. Examples
include mortgage contracts and sale of land.

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 Contracts of record: This type of contract is handed down by court order. Examples
include alimony payment or an order to cease a particular activity.

15. Termination and discharge of a contract may occur in the following circumstances where the rights
and obligations of the parties to a contract come to an end. Termination and discharge have different
ways to end or bring a contract to an end. Some of the ways may overlap.

Discharge of a contract may occur in the following instances:

 Performance: The contract comes to an end when the parties have carried out their obligations.
 Agreement: The contract may be discharged if there is agreement by both parties to end the
contract in the event that the contract is executory, where obligations are outstanding.
 Frustration: The contract can be discharged or terminated if performance becomes impossible
based on future circumstances that makes performance different from what was initially
expected.
 Breach: The contract can be discharged if one party fails to perform his /her obligations.

Termination of a contract may occur in the following instances:

 Legislation: The contract can be terminated if the original contract entered into was of an illegal
nature.
 Impossibility of performance: This occurs when one party is unable to fulfil his/her duties
agreed upon in the contract because the circumstances made it impossible.
 Breach of contract: This is where one party fails to meet his/her obligations as outlined in the
contract.
 Rescission: The act of rescinding the contract or termination based on misrepresentation, illegal
actions or a mistake.
 Completion: A contract is basically terminated once all obligations outlined in the contract have
been fulfilled.

Record Keeping and Business Documents

The importance of Record Keeping and Documentation in a business includes the following reasons:

 To keep track or monitor the progress of business activities to see whether the business is
making a profit, or manage expenses, or evaluate the business strategy
 To provide a financial history to banks and other lending institutions when accessing loans
 To prepare and file tax returns
 To provide written records of transactions in business to aid decision making
 To identify sources of revenue and expenditure in the business

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 To evaluate the company’s present performance against set targets or against past
performance, to identify gaps in performance

Some key business documents:

 The Requisition: An internal document used to control the flow of stocks in the organization. It
informs the organization of internal stock needs e.g. the quantity of stationery needed per
person or department.

 Letter of Enquiry: A document used by a potential client to request information from a

prospective supplier e.g. terms of payment, goods available for sale.

 Catalogue: A document that gives details about products available for sale e.g. size, quality,
price and colours. It provides the procedure for ordering the products.

 A Tender: This is also called a bid. It outlines the requirements and specifications of tendering
for a project.

 Quotation: A document that provides information requested by the potential purchaser e.g.
details of the products and pricing details.

 The Purchase Order: a document which describes the goods to be purchased, the quantity and
the price of the items.

 An Advice Note: The seller sends an advice note to the purchaser. This informs the purchaser
of the goods to be sent and any conditions for receipt.

 A Delivery Note: A document used in transporting the goods to the purchaser. The buyer
would check to see if the delivered items match the items listed on the delivery note.

 A Destination Sheet: A document used by the seller that outlines the destination of goods for
delivery.

 Goods Received Note: A document that confirms receipt of goods and whether the items were
received in good or damaged condition.

 Stock Card: A document that provides up- to -date information on goods received e.g. stock
levels, items received and disbursed. As stocks are received, the stock cards are updated.

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 Sales Invoice: A document that outlines the goods purchased and sent to the buyer by the
seller. It provides information such as, quantity and description of goods, the amount (or unit
price) and price of items. The sales invoice indicates that payment for goods is due.

 The Pro forma Invoice: An invoice sent under particular circumstances to a buyer e.g. before all
invoicing details are clear. When all details are clarified a final sales invoice is sent.

 A Debit Note: A document that is issued to the purchaser when he/she has been undercharged
by the seller. This can occur when there are errors in calculations or when the customer is not
billed for transport costs.

 A Credit Note: A document that is issued to a purchaser when he/she has been overcharged by
the seller. This can occur when there are errors in calculation or as compensation for damaged
or faulty goods.

 A Statement of Account: This document summarizes a customer’s transactions over time. It is

sent to the customer or purchaser when payment is due. Basically, it used when goods are
purchased on credit.

INSURANCE

Key Points

Insurance: A legal contract in which an insurer promises to pay a specified amount to another party, the
insured, if a particular event happens and the insured suffers a financial loss as a result (Oxford
Dictionary of Business and Management).

1. Insurance is therefore a contract that provides compensation against the risk or likelihood of an event
happening.

2. Risks are described as insurable or non-insurable. An insurance company will only insure against risks
that are calculable or predictable that is, insurable. Actuaries are persons who calculate risks.

3. The expense incurred to pay for insurance is a premium. This is paid into a pool for compensation by
persons requiring insurance for that risk (pooling of risk).

4. Principles of Insurance: Compensation will only be issued if the insured has complied with the
principles of insurance. The major principles area:

 Utmost Good Faith: The insured must give accurate and relevant information to the insurance
company. The insurance company must also provide all relevant information to the client
concerning the insurance policy.

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 Insurable Interest: An insurance company will only insure against a risk only if the party would
suffer if the event insured against happens or occurs.
 Proximate Cause: An insurance claim will only be honoured if the loss suffered is as a direct
result of the insured risk occurring.
 Indemnity: This is compensation for losses incurred. Indemnity seeks to restore a person to
where he/she was before the loss was sustained. This does not apply to life insurance or
personal accident.
 Subrogation: This principle states that where a claim is settled, the insurer (the insurance
company) has the right to recover a claim paid, from a negligent third party. This means that
the insured cannot bring a claim on the negligent third party if the claim was already settled.
 Contribution: Insurance companies come together to compensate the insured party, to ensure
that the insured does not profit from the event occurring. This is in the event that the insured is
covered for the same risk by different companies.
 Average Clause: The insured will only be compensated in the proportion or ratio that he/she is
insured at today’s value. If for example, a person’s property is under insured, the insurer
(insurance company) can adjust a claim to reflect this under insurance.

5. Types of Insurance Policies:

 Life Insurance or Life Assurance

 Non-Life Insurance

Life Insurance or Life Assurance

 Assurance: This is based on risk that is bound or known to happen, e.g. death (that must occur).
 Insurance: This is based on the likelihood of the risk occurring, although, the details of when it
will happen are unclear or if it will happen.
 Types of Life Insurance:
Whole Life Policies: These policies are payable on the death of the insured.
Term Policies: These policies are taken for a specified period of time, for example, a
mortgage guarantee policy which is accessed by persons who need mortgages. If the
person dies before the end of the mortgage/loan period, the proceeds of the policy will
be used to settle the outstanding mortgage/loan amount.
Annuity: These policies provide for a specified sum of money to be made payable on a
specified date or on the death of the insured. It can be structured in a number of ways
e.g. a lump sum payment and monthly payments until the death of the insured.
 Non-Life Insurance Policies: For Example:
Marine Insurance: This deals with the sea and provides coverage against certain risks at
sea, for example:
o Cargo Insurance: This provides coverage for loss or damage to cargo while in
transit.

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Motor Insurance: This is a compulsory insurance coverage for all drivers. This includes:
o Third party Cover: this provides minimum legal cover (injury to third party on
roads) but also covers compensation for property of third parties.
o Full Comprehensive Cover: This includes third party cover, as well as, damage to
the insured vehicle, personal injury to the driver, damage or loss of personal
items in the car.
Aviation Insurance: This covers the plane/aircraft against damage by accident and the
operators against injury claims or death of passengers or personnel/crew.
Property Accident Insurance: This provides coverage of risks related to property such
as, accidental damage to machinery and vehicles. It also covers intentional damage
caused by vandalism.
Personal Accident Insurance: Coverage and compensation are provided for loss suffered
due to total or partial disability caused by accidents.
Fidelity Guarantee: Insurance that provides coverage to employers for financial losses
sustained as a result of theft/dishonesty by employees e.g. in situations of
embezzlement or misappropriation of finances.

The Role of Insurance in Trade

Insurance:

 Encourages enterprise or industry by covering risks of business firms.

 Facilitates trade between countries whereby, businesses would be compensated for losses
incurred during transit.
 Provides a source of capital for business investors.
 Provides coverage against personal risk when an individual is not able to manage it.
Structured Questions
1. Distinguish between a contract and 'an invitation to treat'. (4 marks)
2. Outline THREE ways of terminating a contract. (6 marks)
3. State the key elements of a contract. (3 marks)
4.Explain with an example the concept of 'a counter offer'. (4 marks)
5. Discuss the importance of business documents in the operation of a business. (4 marks)
6.Define the term 'insurance'. (2 marks)
7.Outline THREE principles of insurance. (6 marks)
8.Discuss the role of insurance in trade. (4 marks)

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Multiple Choice Evaluation: Unit 4

1. John makes an offer to sell his taxi car to Jeremy for $30 000.00. Jeremy rejected John’s offer
and suggested that he wants the vehicle but he is willing to pay $20 000.00. Jeremy’s
expression is an example of
a. Invitation to treat
b. Counter offer
c. Acceptance
d. Void contract

2. Which of the following statements BEST describes a contract?

a. A mutual agreement between parties
b. A legally binding agreement between parties
c. A promise made between parties
d. A statement of intent

3. For a contract to be valid it must contain essential features. The feature that describes an
expression of interest of one party to another and a subsequent act of indication to accept the
terms outlined is
a. Offer and acceptance
b. Form or consideration
c. Capacity of parties
d. Good faith

4. A display of electronic items, with an asking price is an example of

a. An offer
b. An invitation to treat
c. A contract
d. An agreement

5. When a contract has been executed or may have come to an end before its time, discharge of
the contract takes place. If one party fails to honour the terms of the contract this may lead to
termination of the contract. This is termination by
a. Performance
b. Breach
c. Frustration
d. Deed

6. Techno Doc. A computer store, displays a computer sale sign in its showcase. Chantel goes into
the store to enquire about a computer that was displayed for sale. She is told that it is no longer
available. She is upset and demands to get the computer. The store owner
a. Is bound by law to provide the computer
b. Has to enter into a contract with Chantel to provide the computer
c. Does not need to provide the computer since the display was an invitation to treat
d. Is dishonest

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7. The ability and right of parties to a contract to understand the terms, be able to give consent
and to sign the contract is the condition of
a. Intention
b. Consideration
c. Counter offer
d. Competence or capacity

8. A document that outlines the transactions of a business, the money paid and outstanding
balances is
a. A bid
b. A statement of account
c. A credit note
d. A pro forma invoice

9. A document sent to a customer outlining the customer’s indebtedness to a business for failure
to be billed for transport costs is a
a. A credit note
b. A notice
c. A debit note
d. A statement of record

10. A document outlining the indebtedness of the organization to the customer for damaged goods
is a
a. Credit note
b. Debit note
c. Pro forma invoice
d. Catalogue

11. A document used internally in the organization to request supplies from a warehouse is a
a. Delivery note
b. Requisition
c. A purchase order
d. An invoice

12. Max has insured his property against the risk of suffering a financial loss because of floods. Max
wants to ensure that his neighbour’s house is protected; however, he is not the owner and
cannot succeed in this venture. This describes the insurance principle of
a. Insurable interest
b. Indemnity
c. Proximate cause
d. Contribution

13. Fidelity guarantee insurance is

a. Life insurance
b. Insurance coverage for employers in the event of theft or fraud by employees
c. Liability insurance
d. Life assurance

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14. The principle where insurance companies come together to compensate the insured party, in
the event that the insured party is covered for the same risk by different companies is specifically

a. average clause
b. proximate cause
c. contribution
d. indemnity

15. A premium is specifically

a. The down payment on a policy.
b. The expense incurred to pay for insurance.
c. The administrative cost of the policy.
d. The amount paid to cover a vehicle.

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Unit 5: PRODUCTION

Pupils will:

 identify factors of production

 identify industries developed from the natural resources in the Caribbean
 differentiate between the terms production and productivity
 explain the importance of productivity
 explain the role of capital in the production process
 differentiate among types of capital
 classify types and levels of production
 describe the characteristics of cottage industries
 outline the functions of small businesses
 discuss the advantages and disadvantages of small business
 explain how a business grows both internally and externally
 outline the opportunities for and benefits of developing linkage industries
 explain the effects of growth on a business

Aims of Production

 The basic aim or purpose of production is to produce goods and services to meet the needs of
the target market.
 Production refers to the creation of goods and services, that is, the creation of utility to meet
customer needs
 Needs are things or items that are essential or necessary for human survival e.g. food, shelter,
clothing.
 Production also facilitates the provision of products (goods and services) that people may want
to consume or use, but which are not necessary for survival (non-essential product).
 Productivity deals with the capacity to produce and the efficiency of productive activity e.g. a
high level of productivity.

Factors of Production

 Factors of production describe the scarce resources used in the production process. These
resources are land, labour, capital and entrepreneurship/enterprise.
 Each of these factors receives a payment or reward in return for its input in the production
process: land receives rent; labour receives wages; capital receives interest and enterprise
receives profit.

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The Factor of Land

 Land includes the physical land as well as, the natural resources or endowments found in
nature.
 Land includes gold, oil, bauxite, natural gas, deserts and forests
The Factor of Labour

 Labour is the factor that describes the physical efforts and mental contribution of people in the
production process.
 Labour is usually divided in three categories:
a) Semi-skilled and unskilled workers: jobs in this category require little or no special
training or educational qualifications for example, cleaners, loaders, drivers and
watchmen.
b) Skilled workers characterized by a high level of training and mastery of skills e.g.
mechanics, plumbers, engineers, builders.
c) Managerial and professional workers which require university level and professional
qualifications such as, teachers, doctors, lawyers, university lecturers, accountants.
Labour Quality

The quality of labour available for production is influenced by factors such as:

 The standard or quality of health of the workforce and the availability of health care available to
the population
 Natural talent or abilities available within the workforce
 The availability of training and developmental facilities in the country e.g. primary, secondary
and tertiary level institutions; skills development facilities
 Quality of educational programmes available e.g. access to local and foreign degrees and skills
programmes; industry relevant educational programmes; updated syllabuses and trained
instructors

Labour Supply Determinants

 Population growth rate e.g. if the population is growing and migration patterns remain constant
the labour supply will increase
 Population structure e.g. if the population is ageing or very young, the labour supply will be
smaller
 Cultural patterns and traditions e.g. the role of women in the workplace
 Economic issues e.g. wages, types of employment, taxation
 Labour mobility e.g. people’s willingness to migrate to other areas, government zoning
 The quality of the labour force in terms of the skills, knowledge and competences of the labour
force
 Governmental policies in terms of the educational and training policies to meet the needs of the
market and improve labour supply; health services available

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 Migration patterns e.g. the ease with which individuals are allowed to leave a country would
affect the labour force. Migration is both internal and external.

Migration

 Migration is described as the movement of people from one place to another.

 Internal migration is the movement of people within a country e.g. from a rural area to urban or
town areas.
 External migration is the movement out of one’s country to another country e.g. from Trinidad
to the United States of America.

Some Effects of Internal Migration

 Decrease in the labour supply of the community from which the migrants move
 A loss of skills and competences as a result of people moving from the community
 Effect on social and cultural systems e.g. relationships, traditions
 Increased urbanization of certain areas leading to social and economic problems e.g. poor
housing, creation of slums
 Strain on the provision of public goods such as health care in highly populated areas

Some Effects of External Migration on a Country

 External migration can result in a ‘brain drain’ for the home country. A brain drain is the result
of migration of skilled and professional persons from a community and country. This may lead
the country to import skilled and professional labour from abroad.
 Migration disrupts family life and cultural traditions.
 Some countries benefit from people migrating into that country

The Factor of Capital

 Capital includes assets such as machinery and equipment needed to produce the good or
service; and money needed for investment in business.
 Venture Capital refers to the money used to finance start-up businesses and activities
considered to be risky, and may not be able to attract financing through commercial banks.
 Fixed Capital refers to items such as, buildings, machinery and equipment used over the long
term in the production process.
 Working Capital consists of the short term assets used up daily in the business. This includes
cash in hand; cash in bank; raw materials; work in progress and finished goods.

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 Diminishing marginal returns: When a variable factor such as labour is added to a fixed factor
e.g. land, at first output increases to a maximum point and then the extra output from
additional units of the variable factor will diminish or fall.

The Factor of Enterprise or Entrepreneurship

 Entrepreneurship refers to the skills, abilities and talents available to lead and transform the
business into a viable entity. These persons are the risk takers and strategic decision makers in
the business. They provide the managerial expertise to help the business achieve its goals.
Entrepreneurs conceptualize the business ideas and decide when it is time to change the
business focus.

Production Levels

A firm’s production level refers to the volume of output produced to satisfy the market. Volume of
output can be at the:

 Subsistence Level: This is where sufficient amounts are produced with the motive of survival
and not to improve the economic well- being of the population.
 Domestic or local level: All production or transformation occurs locally or in the home country.
Surplus products are consumed within the national borders.
 Surplus level or excess production: Production levels that meet local or domestic demand as
well as, some measure of foreign demand for the country’s products (exports).

Types of Production

Types of production describe the forms of economic activities involved in the production of goods and
services. This is the industrial structure of the economy. The types of production are primary,
secondary and tertiary production.

 Primary production: This is the first stage of productive activity. It involves the extraction of
raw materials through processes such as, mining, agriculture and fishing.
 Secondary production: This is the second stage of productive activity. This involves
transforming inputs into finished products such as, manufacturing and processing, construction
and baking.
 Tertiary production: This is the final stage of productive activity. It involves services such as
transportation and distribution of finished goods; service industries such as banking, insurance,
hairdressing, medical and dental services and education.

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Primary Production

agriculture for example growing the wheat

Secondary Production

baking for example baking bread and pastries

Tertiary Production

selling and transporting directly to the consumer or

selling, transporting, advertising selling to retailers

Methods of Production

 Job or unit production: This involves the making of a single unit of a product from start to finish.
The product is usually customized to the customer’s specifications e.g. a joiner making a piece of
furniture.
 Batch production: This usually involves increase use of automation on a production line to
produce a batch of standardized products in large quantities for example, bread.
 Flow or process production: This involves increase use of automation to create a continuous
production line or flow of production for example production in oil refineries.

The method of production chosen will depend on the nature of the product, the quantity of the product
needed to meet demand, the level of automation in the firm and the size of the organization.

Quality Control

 The quality control process in the organization is designed to ensure that the products (goods
and services) meet the standards set by the firm or industry, international requirements or
minimum legal requirements.
 Quality control measures would include: monitoring for defects on the production line, setting
standards for business operations e.g. code of conduct; adhering to legal obligations; collecting
feedback from clients or customers; performance appraisals for employees; refurbishing plant
and equipment.

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Cottage Industries

 A cottage industry can be classified as a small or micro business that produces a good or service
through the use of simple technology and small amount of start-up capital.
 Cottage industries can be seen in industries such as craft, for example, floral design, drapery,
leather and natural material craft; food items, for example, baked items, pepper sauce,
seasonings and; personalized direct services such as hairdressing, babysitting, sewing.

Features of cottage industries:

 Inputs: simple tools and equipment; small amount of financial capital

 Profits are initially ploughed back into the business to by equipment and expand production.
 Labour supply is usually one person or family members.

Importance of Cottage Industries:

 A source of employment for persons

 Additional source of income
 Fulfilment of self-actualization needs
 Development of individual skills
 Use of local raw materials
 Development of the skills level in the society leading to entrepreneurship
 Avenue to earn foreign exchange
 Promotion of the country in trade shows and exhibitions

Factors affecting the development of cottage industries:

 Accessibility of inexpensive source of raw materials

 Need for training and developmental programmes in skills development
 Need for venture capital loans to be made available to entrepreneurs at low interest rates
 Government assistance to mount trade shows and exhibitions

Linkage Industries

A linkage industry is one that is linked to another industry or borne out of the development of another
industry. The output or finished products of one firm becomes the input or raw material for the

Linkages may be backward or forward:

 Backward Linkage: One industry produces the raw material for another industry. One firm is
linking with another firm in a previous stage of production e.g.

Vegetable Producer Tourism

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Manufacturer of farm machinery Agriculture

 Forward Linkage: One industry or firm links or connects with another industry or firm in a
further stage of productive activity e.g.

Timber/wood supplier Home Furniture Maker

Agricultural produce Canning and Preservation industry

 Example of linkage industry

Sugar cane producer/farmer Sugar industry Confectionary Producer

Benefits of linkage industries domestically and regionally:

 May lead to increased employment and improved economic well-being in the region or country
 May lead to reduced dependency on imported raw materials and products
 May lead to growth in connected industries
 Encourage human resource development to meet new industry needs
 Promote regional integration
 Promote greater scope for foreign exchange earnings through increased output
 Promote innovation and investment in new technology and research and development
 Promote industrialization in developing nation states which can lead to economic growth and
increased standard of living

Problems that hinder or impede the development of industrial linkages:

 Lack of available venture capital funding for primary sector development

 Limited access to foreign markets for example, access to trading blocs
 Investment in capital such as equipment and machinery can be expensive

The role of Government in the development of domestic and regional linkages:

 Subsidizing the development of sectors to link with existing businesses

 Provide incentives to firms to encourage the use of raw materials available in the region
 Assist the development of linkages through the promotion of businesses e.g. trade fairs

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 Provide industry relevant training and development

 Government collaboration in the area of capital funding

Business Size

The scale of production refers to the level of output of the firm. The entrepreneur has to decide on the
scale of production as well as, the size of business to operate and manage. This decision will impact
profitability, survival and the ability to access funding.

Large businesses tend to acquire certain advantages over smaller firms, in that, by producing in larger
quantities or by increasing the scale of production, allows the unit cost of production to decrease. The
lowest cost of production is the optimum point. However, costs will eventually rise and some firms may
accept a higher cost level in order to achieve increased production levels.

Economies of Scale

When a firm expands there are benefits which results in cost savings related to large scale production
operations. These advantages or economies of scale can be internal or external.

Examples of Internal Economies of Scale:

 Technical economies of scale: The larger the organization, the more opportunities are available
for division of labour and automation of production. This can result in increased output levels.
 Managerial economies of scale: Larger firms tend to attract the best talent in the industry by
providing competitive salaries, mobility and opportunities for development.
 Marketing economies of scale: Large firms can engage in bulk buying of raw materials, thereby
reducing the cost of production. The large firm can engage in mass production of standardized
goods and save in advertising and distribution costs.
 Financial economies of scale: Less risk is associated with large firms than small firms. The large
firm is therefore able to attract financing at lower interest rates from banks. Moreover, a large
firm can raise capital by issuing shares or going public.

External economies of scale are cost savings or advantages that accrue as a result of external factors.
These include:

 Firms benefit from being part of a cluster of similar businesses in an industry through improved
infrastructure development and marketing in the industry e.g. in an Industrial estate.
 Peripheral or temporary workers can locate next to industries to provide contract labour to
groups of firms.

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 Linkage industries can develop from industries to provide services that would allow the large
firm to save on costs in the long term e.g. outsourcing of accounting and maintenance activities;
food catering and insurance.

Dis-economies of Scale

The increase in cost levels as a result of expansion and increased scale of production is referred to as dis-
economies of scale. This can occur at both the internal and external levels.

Internal dis-economies of scale:

 Large firms may employ automation to mass produce standardized products. This limits the
variety of goods available to the consumer thereby, limiting choice. Standardization reduces the
ability of the firm to adapt to market changes and it may be difficult to redeploy capital.
 A large firm can experience communication problems and this can make management difficult in
terms of control and decision making.

External dis-economies of scale:

 Shortages of input factors in an industry can severely impact the production levels in large firms.
 Businesses that belong to a particular industry can decline if the industry as a whole is declining.
 Negative externalities such as pollution can impact negatively on all businesses in the industry.

Large businesses versus Small businesses

Large Business

Advantages of large business Disadvantages of large business

 find it easier to access financing to raise  more hierarchical structure leading to
capital management problems
 experience economies of scale such as  increased barriers to communication
marketing economies  may become impersonal in dealing with
 more capital available to finance research clients
and development  standardization of output can lead to a
 employ more automation and lack of flexibility in responding to changes
mechanization resulting in mass in the environment
production
 usually involves limited liability

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Small Business

Advantages of small business Disadvantages of small business

 improved internal communication as a  usually involves unlimited liability
result of less layers of management  seen as high risk making it difficult to
 more personal interaction with clients; access financing
customization  unable to spread risk making small firms
 less complicated to start susceptible to economic pressures
 tends to benefit from government  unable to compete with the cost savings in
assistance large firms

Role of the small business in Caribbean nations or developing states:

 Supply smaller geographically dispersed markets

 Development of entrepreneurial talent
 A source of employment in rural or less developed areas
 Provide customized services
 Link with large firms to distribute products
 Readily respond to changes in the market

Methods of Business Expansion

Internal Growth:

 Expanding production as a result of working existing plant and equipment to full capacity
 Extending capacity by increasing plant size
 Creating or expanding product lines

External Growth:

 Mergers or the voluntary joining of two companies to create a legal entity or new business. A
horizontal merger occurs where two or more organizations at the same stage of production join
to form one larger organization. A vertical merger occurs when two firms at different stages of
the production process join. This can be forward or backward in the same production process.
 A takeover can also result in growth. This can be done through the influencing of shareholders.
This is usually not welcomed by the firm being taken over.
 Growth can also occur through conglomeration. Where firms in unrelated businesses merge to
form a group of companies.

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Reasons why firms grow include:

 To achieve economies of scale and experience cost savings

 To gain larger market share and increased profits
 To achieve greater security in terms of survival through diversification
 To reduce the level of competition in the industry
 To spread the risk of the firm
 To achieve a managerial objective
 To gain access to regional and international markets

Industries developed from natural resources in the Caribbean

Resources Related Industries

For example:

People: culture and natural talents; Tourism and Festivals (Carnival and Music); Craft

Natural resources: e.g. beaches, Fishing; Energy(Petroleum, Gas); Mining and

Quarrying(diamonds, bauxite, oil and gas);
sunshine; land; forests; natural
Quarrying(sand and earth); Desalination; Transportation;
gas(Trinidad); bauxite (Jamaica and Agriculture(bananas, citrus, cocoa, sugar cane, mangoes,
Guyana); oil (Trinidad); coconut); Housing; Timber and Lumber; Alumina
industry(exported to make aluminium products);
asphalt(Trinidad); iron ore and mineral
processing lime stone to make Cement(Jamaica); Asphalt
resources(Guyana); sand and earth (Trinidad); Tourism
materials (Guyana, Jamaica, Trinidad
and Tobago, Dominica)

Note: Key environmental issues arising out of industries:

 Deforestation; Slash and Burn

 Pollution of waterways
 Soil erosion
 Flooding
 Squatting or unregulated settlement

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 Unregulated quarrying and mining
 Over fishing and reef destruction
 Increased disposal of waste (chemical, solid and liquid)
 Destruction of ecosystems

Structured Questions

1. Define the following terms: (I) production and (II) productivity (2 marks each)

2. List the factors of production. (4 marks)

3. State TWO factors that influence Labour Quality. (2 marks)

4.Distinguish between venture capital and fixed capital. (4 marks)

5.Differentiate between domestic or local level of production and surplus level production. (4 marks)

6. Using examples, outline the types of production. (6 marks)

7.State what is a cottage industry. (2 marks)

8. Outline TWO benefits of the development of cottage industries. (4 marks)

9. Using an example, explain what is a linkage industry. (4 marks)

10. Outline TWO advantages and TWO disadvantages of (I) large businesses (II) small businesses ( 4
marks each)

11. Discuss TWO methods of external growth that a business can consider. (4 marks)

12. List TWO industries coming out of the natural resources of the Caribbean region. (2 marks)

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MULTIPLE CHOICE EVALUATION: Unit 5

1. A measure of the output of a person, firm or economy relative to inputs of labour, capital and
raw materials is specifically
a. Maturity
b. Productivity
c. Effectiveness
d. Growth

2. The mental and physical contribution of people to the production process is referred to as
a. Land
b. Labour
c. Capital
d. Enterprise

3. Which of the following are key effects of internal migration?

I. Increased GDP
II. Social relations are affected within the community
III. More foreigners enter the country
IV. Create a strain on health and education in target areas
a. l only
b. l, ll and lll
c. ll and lV
d. none of the above

4. A volume of output that is produced locally and where surplus is used within the local
community is described as production at the
a. surplus level
b. domestic level
c. subsistence level
d. frugal level

5. Timber/Wood Supplies Office Furniture Maker

The above diagram illustrates a linkage where the timber/wood producer supplies the office
furniture maker with raw materials. This is an example of the timber/wood company linking
a. Forward with the office furniture maker
b. Backwards with the office furniture maker
c. Horizontally with the office furniture maker
d. No linkage is illustrated

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6. Which of the following statements outline a KEY benefit of linkage industries to the Caribbean
region?
a. Increased automation
b. More division of labour
c. Assist in developing regional self sufficiency
d. Improve the quality of life in the region

7. Being part of a cluster of industries e.g. an industrial estate; a firm can benefit in areas such as
infrastructure development and marketing. This is a situation of
a. Internal economies of scale
b. External economies of scale
c. Internal diseconomies of scale
d. External diseconomies of scale

8. In a large firm, managers may find it difficult to manage. Problems in areas such as, decision
making, communication and policy implementation may be experienced. These issues are
specifically
a. Internal economies of scale
b. External economies of scale
c. Internal diseconomies of scale
d. External diseconomies of scale

9. When an industry is in decline, all businesses connected to it, in the cluster, may feel the
negative effects. This is MOST LIKELY
a. Internal economies of scale
b. External economies of scale
c. Internal diseconomies of scale
d. External diseconomies of scale

10. A merger exists where two or more companies join together to form a single business entity. A
merger that occurs where two or more businesses at the same level of production join together
is called
a. A horizontal merger
b. A vertical merger
c. A conglomerate
d. A sole trader

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11. When a firm expands it can achieve certain benefits called economies of scale. The utilization of
equipment to full capacity as a result of increased production, is specifically
a. Financial economies of scale
b. Technical economies of scale
c. Risk bearing economies of scale
d. Marketing economies of scale

12. A situation whereby a variable factor e.g. labour is added to a fixed factor e.g. a building, the
marginal output increases to a maximum point and then declines, is termed
a. The efficiency of production
b. The law of diminishing returns
c. The law of supply
d. The law of demand

13. Transforming factor inputs into finished good is specifically

a. tertiary production
b. secondary production
c. primary production
d. domestic production

14. Which of the following belong to tertiary production?

I. baking
II. fishing
III. hairdressing
IV. banking
a. all of the above
b. I, II and II
c. II, III and IV
d. III and IV

15. Which of the following products is NOT usually associated with the output of cottage industries?

a. production of photocopying equipment

b. condiments e.g. pepper sauce
c. craft items
d. baked goods

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Unit 6: Marketing

Pupils will:

 explain the concept of the term market and marketing

 explain key marketing activities
 describe the marketing mix
 describe key factors that influence consumer behaviour
 identify factors affecting the areas of packaging and presentation of goods
 describe methods of promoting sales
 identify techniques of selling
 explain some terms of sale
 list key functions of some consumer organizations
 outline the role of customer service
 describe the forms of customer service
 explain the concept of intellectual property rights

Distinguish between the terms market and marketing.

Market: A market is a place where people meet to exchange or buy and sell their goods
and services. A market can be a physical place, as well as, a virtual setting.

Definitions of Marketing:
1. The Institute of Marketing defines marketing as ‘the management process responsible for
identifying, anticipating and satisfying consumers’ requirements profitably.’
2. Kotler and Armstrong (1999) define marketing as, ‘a social and managerial process by which
individuals and groups obtain what they need and want through creating and exchanging
products and value with others.’
3. According to Boone and Kutz (1999), ‘Marketing is the process of planning and executing the
conception, pricing, promotion, and distribution of ideas, goods, services, organizations and
events to create and maintain relationships, that will satisfy individual and organizational
objectives.’

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4. Marketing refers to all the processes involved in selling goods or services in the most profitable
and efficient manner.

5. According to https://whatis.techtarget.com, Social Media Marketing (SMM), 'is a form of

internet marketing that utilizes social networking websites as a marketing tool. The goal of
SMM is to produce content that users will share with their social network to help a company
increase brand exposure and broaden customer reach.'
6. https://www.techopedia describes SMM as 'techniques that target social networks and
applications to spread brand awareness or promote particular products.' It aims to create a
social media presence on major platforms, create 'shareable content and advertorials' and
encourage 'customer feedback' throughout the campaign by utilizing surveys and contests.
Moreover, SMM is seen as a targeted type of advertising. It is viewed as creating a 'more
immediate connection between the customer and seller'.

7. www.marketing-schools.org describes 'integrated marketing' as, 'a marketing strategy that

stresses the importance of a consistent, seamless, multi-dimensional brand experience for the
consumer.' This means that each branding effort-across television, radio, print, Internet and in
person- is presented in a similar style that reinforces the brand's ultimate message."
8. Integrated Marketing is built around a 'strong, focused brand image'. It is communicated
through a 'clear, consistent voice'. It utilizes a mix of traditional and digital media in the
promotional activities. Moreover, its presence (look and feel) is consistent on all platforms.

The Marketing Process

o The marketing process begins with an examination of what people want from a product
or service, this is market research.
o Then there is the stage of product development. This is an assessment of how to
produce a product or service that will satisfy people’s requirements and make a profit
for the producer.
o Product testing on the market i.e. pilot project. If the pilot project is successful, then
the product is marketed. If the initial pilot project fails, the product may be redesigned
and retested.

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o Next the firm has to develop a marketing strategy. This is a plan of how to get the
product to the market at an appropriate price. This involves pricing, promotion, product
and package design and place or distribution.
o The firm has to engage in monitoring and evaluation of the product performance in the
market.
o After-sales service is provided.

Identification of marketing activities:

Marketing activities include:

o Market research
o Pricing
o Packaging
o Branding
o Sales promotion
o Advertising
o Distribution

Before developing the marketing strategy using the marketing mix the marketing department usually
engages in the following processes regarding the market:
1. Market Segmentation: This is the process of identifying common characteristics among
consumers in the market. The market is then segmented or divided in groups of buyers based
on needs, characteristics or behaviour e.g. age, income, occupation, region, occasion.
2. Market Targeting: This involves evaluating the market segments’ attractiveness and selecting
which segment to enter. Generally, companies would select segments in which they can
generate the greatest customer value. Target segments will also be chosen based on
sustainability and profitability.
3. Market positioning: this involves developing the marketing strategy involving the use of the
marketing mix to help the product to get noticed by the consumer.

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Describing the Marketing Mix

The Marketing Mix

The marketing mix is a term used to refer to the range of marketing activities, techniques and strategies
that a firm uses to reach its target market. The activities are referred to as the Four P’s: Product; Price;
Place; Promotion. In recent times, developments have now included ‘the Seven Ps’. This includes
product, price, promotion, place, people, processes and physical evidence.

Product

The term product refers to the good or service that is needed by the targeted group or the product, idea
or service that the firm wishes the target group to buy. The following must be considered in discussing
the nature of the product:
o Packaging: This is the outer wrapping or container for goods. Packaging presents the product
in an attractive way and also serves to give details about contents, any potential hazards or
dangers, correct usage etc. The packaging of a product does the following: protect the product,
promote the product, preserve the life of the product, prevent health hazards, make it more
convenient to handle the product, enhance the appearance of the product.

o Labeling: Labels are important features of the packaging of a product. It consists of printed
information that describes the product. A label performs the following functions: Identification,
that is it gives the brand name of the product; Grading, it gives the grade of the product;
Product description, it tells about the composition of the product or ingredients, uses, identifies
the maker, caution or side effects, expiry date, date of manufacture, storage etc.

o Branding: This is giving the product a distinctive name, term, symbol or design to enable it to be
recognized easily. The brand name or trademark differentiates one product from another
product. A trademark can be registered so that one firm only can use it. The reasons for
branding are as follows: to provide legal protection for ownership rights; to be able to promote
the product more easily through advertising; to promote the firms image by using the name of
the firm as the brand; to gain greater control over different products in a product line.

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o The Product Life Cycle: All products have a life cycle that describes the stages in which product
sales rise and eventually fall. An understanding of this cycle assists in the preparation of a sound
marketing plan. However, it should be used with other methods to determine strategy. A key
limitation of the product life cycle is, it does not consider environmental factors. The stages in
the cycle are as follows:
 Pre- launch: Consists of all the developmental work undertaken before the product is
introduced to the market. Lead-time is the time between design of a product and its
production.

 Introduction: The product is advertised and placed on the market for sale. Large
amount of capital tends to be used in introducing the product to the market. At this
stage sales may be low or high.

 Growth: If consumers accept the product, sales and profits will increase steadily. This is
the time for increased marketing to promote maximum demand for the product.

 Maturity: Once a market is established, sales may not increase. The firm may face
competition from producers of the same or similar products. Maturity may mean that
profits will fall. At this stage the firm will try to improve the product or find a new one.
The firm may engage in price cutting or heavy advertising. The firm may

 Decline: At this stage sales volume and profits fall steadily. Some firms may harvest or
divest the product, while other firms may try to revive the product by adding new
features.

Price
Price is the amount that is asked for the product. The price must be attractive to customers,
competitive so that it is favoured, enough to cover cost of production and gain a profit for the firm.
Most products have a price plateau that represents the price the customer expects to pay for a good or
service.

A pricing strategy involves any pricing policy by a firm to gain market attention. Some examples
include:
 Penetration Pricing: A new firm entering the market may price its product below that of its
competitors. The aims are to gain entry into the market and increase market share.

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 Cost-plus pricing: This involves taking the unit cost, adding overheads and a profit margin to
arrive at the selling price.
(Price = unit variable cost + fixed cost + mark -up)
 Market-oriented pricing: The seller surveys the market to find out what consumers are willing
to pay before setting the price.
 Promotional pricing: this is a form of sales promotion used by producers and retailers that
involves ‘introductory-price’ offers, ‘money-off’ packs, ‘two-for-the -price-of-one” offers etc.
Loss leading is where firms use special offers or discounts in order to attract new customers.
They may sell below cost or accept a low profit in the process.
 Market-skimming pricing: This involves charging a relatively high, introductory price for a
product in order to secure a large profit margin.
 Psychological pricing: Firms keep prices just below certain levels so that they appear cheaper to
the customer. This also includes matching high quality with high price.
 Differential pricing: This is where the same product is sold at different prices to different
market segments e.g.
a) Price lining: The seller identifies different segments of a market and prices the product
to match each segment.
b) Price discrimination: Prices vary between customers and market.
 Dumping: Products may be sold below cost or at a loss just to obtain some income from them.
 Forces of demand and supply will also affect pricing strategy.

Pricing Objectives
Some common pricing objectives are as follows:
 Survival: In the case where there is increasing competition, changing economic environment
and changing tastes, the firm must set low prices to attract consumers.
 Profit Maximization: The aim is to set a price that will maximize current profits.
 Market-share leadership: Companies believe that increase market share will mean lower costs
and increased profits. To achieve this they may set prices as low as possible.
 Product Quality Leadership: The aim is to have the highest quality product on the market. The
company will charge a high price to cover the high product quality and high cost of research and
development.

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Promotion
Promotion is the act of attracting the attention and interest of the target market to the product or
service offered for sale. Promotion also refers to the ways in which consumers are made aware of the
availability of the good or service and the qualities it has. This is done by:
 Advertising
 Sales Promotion
 Personal Selling
 Public relations

Advertising: Advertising is a process of communication used by firms to create awareness of their

product offering. An advertisement is a message. It is used to provide information on the availability of
a product or to encourage or convince potential buyers.

Functions of Advertising:
 To introduce new products on the market;
 To highlight the features of a product in order to differentiate form competitors;
 To build loyalty towards a brand;
 To create awareness of promotional activities;
 To educate and inform consumers about the goods and services

Types of advertising:
 Informative: This type aims at informing and educating the consumer about a particular product
or service.
 Persuasive: This is aimed at persuading or convincing the consumer to buy goods or services.
 Competitive: This type aims to gain market share by telling the good points about a product and
comparing these with the competitors.
 Defensive: This form of advertising reacts to competitive advertising by a competitor.
 Reminder: Used in the maturity stage of the product life cycle, where the product is well known
and the customer is reminded of its availability. Used to maintain presence in the market.

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Ways in which advertising can persuade the consumer:

Advertisers can use stimuli such as sex appeal, ambition, personalities, issues of healthy lifestyle, making
tasks easier to persuade the consumer to buy the good or access the service.

Forms of Advertising
DIRECT FORMS INDIRECT FORMS
Circulars Press: Newspapers, Magazines, Trade magazines or journals
Catalogues Television and radio, website, internet (websites, videos,
Free samples social media)
Souvenirs Cinema screens: Slides, films
Word of Mouth Posters, signs and wallscapes
Cell phones Point of Sale: Special shop display
Chat room Exhibitions, fairs, carnivals
Mobile caravans

Advantages and Disadvantages of Advertising

Advantages of Advertising Disadvantages of Advertising

 Creates consumer awareness of the  Controlling demand e.g. people may
product offerings available buy a product that they do not
 Promotes competition between firms necessarily need
and can assist in reducing prices.  Mislead the consumer with claims
 Generates increased revenue and  Not always in the public interest e.g.
profits from which the cost of demerit goods like alcohol and
advertisement is met. cigarettes/tobacco.
 Increases demand for the product.  The cost of advertising is passed on to

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 Contributes to revenue generation for the consumer in higher prices.

newspapers  Spoil or damage the natural landscape
 Provides linkage to other related e.g. billboards.
industries e.g.  High costs of advertising campaigns
advertising/entertainment. can cause high barriers to entry for
 Creates employment small competing firms wishing to enter
 Encourages the production of products a market.
of high standards.
 Helps to increase market share.
 Increased profits from advertising
provide funds for research and
development of new products.

Sales Promotion
 Short-term incentives given to channel members by a firm to encourage sales.
 Examples include: free samples, coupons, premiums, price discounts, cash refunds, extra
volume for the same price or price packs (e.g. 20% more for the same price), contests and
sweepstakes, point of purchase displays (inside retail outlets), trade show and exhibitions.
 ‘Loss leader’: This is a technique where a retailer sells a manufacturer’s product at a price
below the retailer’s purchase price (cost). This is used to attract customers into the business
place and to gain market share or penetrate a market.
Techniques of selling

Personal selling is a presentation made by individuals representing a firm or business to prospective

clients or consumers to persuade or encourage them to purchase a product. It is interactive and face to
face contact between the firm’s sales representatives and prospective customers. Personal selling
includes:
a) Prospecting: This involves identifying prospective customers e.g. through client databases.
b) Communicating: The sales person or sales representative should be able to effectively
communicate the firm’s message to the target audience.

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c) Merchandising and servicing: This refers to the display of goods so that the potential customers
can conveniently see them and be influenced to buy. Techniques in merchandising include:
attractive window displays, use of in house displays, layout of premises, allowing customers to
interact with goods.
d) Market Research: Sales representatives provide valuable information to firms about customer
behaviour. A good sales person must therefore have:
o Technical knowledge of the products e.g. contents, shelf life, uses
o The ability to plan strategies considering markets and competitors
o Confidence, able to withstand criticism courteously, energetic and friendly
o Proper deportment, good grooming
o Good and effective communication skills
The sales team is an important source of feedback for strategic decision makers since these sales
persons operate on the front line and have direct contact with channel members.

Different types of retailers/methods include:

o Large and small department stores
o Supermarkets, mini-marts, groceries, shops
o Chain stores
o Vending machines
o Internet websites e.g. AMAZON
o Door-to-door sales personnel
o Street and market vendors
o Auctions
o Mobile shops or shops on wheels
o Mail order organizations
o Telemarketing

Sales agents or brokers:

 Persons who provide assistance to the producer to sell goods or services. Types of agents or
brokers include the following: stock market agents, import and export agents for international
trade, insurance agents or brokers.

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Patterns in retailing:
o Bar codes: A magnetic code made up of vertical, parallel lines. A scanner is able to read the
code and this displays product information used to generate receipt and stock information.
o Logos/Branding: Many large firms now use logos or symbols with the company title on their
products to assist recognition and legal protection. The brand or logo makes the product
exclusive and distinctive.
o Credit facilities: Many retailers offer suitable credit facilities e.g. hire purchase
o Malls, shopping centers or hypermarkets which provides multiple shopping options to
customers with facilities such as parking, banking, entertainment and food options
o Franchise which gives a retailer the right to sell a product owned by another company through a
franchise agreement.
o Electronic transfer: Customers pay using automatic teller machines which transfer funds
electronically to the retailer’s account.
o Selling through the Internet: Shopping via the Internet is also called e-commerce. Customers
can access a shopping channel through their Internet service provider.
o Tele marketing: Selling via the telephone

Public Relations
Public relations (PR) refer to the act of promoting a business organization’s company image or
promoting the corporate brand. This is done to encourage sales or to influence investors to buy shares
in order to finance business activities. The public relations department may be internal to the firm or
sourced from outside e.g. an agency. This department handles the publicity of the firm. Publicity is
intended to give a favourable or positive image of the firm to stakeholders, especially during periods of
uncertainty. This may take the form of:
o Press releases that provide information to the media e,g, newspapers, magazines, radio,
television and the internet
o Sponsored activities such as, charities, sporting events, environmental and cultural activities
o Information leaflets explaining different features of the product
o Scholarships and funding for developmental programmes

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o Special awards to workers that are highlighted in the media.

Terms of Sales
This refers to the way that payment for purchases are made.

Type Features Advantages Disadvantages

Cash Using cash for payments No interest charged; Risk of money being lost
May receive cash or stolen
discounts
Credit Sale / Goods are paid for by Goods become the Interest is payable thus
Credit Selling instalments; property of the buyer increasing the cost
Credit is usually for 6 months immediately;
to one year Buyer enjoys the use of
goods while paying for
them;
No down payment
Hire Purchase Deposit/down payment Goods become the Interest payments
made; property of the buyer increase cost
Goods are paid by after the final payment;
installments; Buyer enjoys the use of
Balance is spread by equal goods while paying for it
installments at specified
dates over a fixed period
Lay-away Deposit made Customer is protected Goods received only after
against price changes or full payment
fluctuations
Discounts Reduction in the price that Customers receive a Sometimes there is no
producers or traders may reduction in price exchange or refund on
allow their customer discounted goods

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Cash Discount: Discount given to traders if they pay for goods within a specified period of time as stated
in their terms of sale agreement. Cash discounts are given as a means of boosting sales and encouraging
prompt payment.
Trade Discount: A trade discount or quantity discount is a price reduction given by a seller to purchases
in bulk, and calculated in accordance with the quantity bought.
Trade Credit: A trade credit occurs when a supplier allows a customer (a business) a certain period of
time (typically one or two months) after receiving the products in which to pay for them.

Distribution/Place
Distribution refers to storing and moving products to customers, often through intermediaries such as
wholesalers and retailers. It also includes the transportation, which includes the physical movement of
goods.

The task of distribution is getting the right amount of goods to the right places where customers can
conveniently buy them. Goods much reach the place in time to replenish stocks and must be in good
condition. Distribution also involves the selection of appropriate channels of distribution.

Institution set up to regulate business activities: Consumer organizations

This includes:
 The Bureau of Standards: A corporate entity established to develop and enforce standards
relating to quality of goods manufactured in a country or imported for use in the country. A
bureau of standards may also promote health and safety.
 Services provided by the Bureau of Standards may include writing of standards, inspection of
goods, testing of materials, calibration of instruments, certification (ISO certification), and
training.
 The Ombudsman is an official office set up to receive complaints and provide assistance to
persons who believe that they were unfairly treated by a public sector office or public services

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personnel. A citizen can launch a grievance to the Ombudsman. The office in turn investigates
the matter and provides advice for redress.
 Non-Governmental Organizations e.g. trade unions e.g. Federation of Independent Trade
Unions, Housewives Associations, environmental groups e.g. Green Peace, Copyright
organizations;

Elements of Demand and Supply: The price mechanism

Factors that influence consumer behaviour

 Price of the product

 Price of substitutes and complements
 Quality of product
 Taste: Individual likes and dislikes
 Tradition and Culture: Values, customs and traditions of the society; The sub culture
that a person may belong to e.g. religious sub cultures
 Income level of the individual will affect buying decisions with respect to quality of good
chosen and services accessed;
 Spending patterns: spending trends of a particular group that a person is affiliated to
e.g. clubs, families; person's ability to budget for savings/investments and manage the
rest of disposable income; spending on luxuries versus essential products
 Brand loyalty: Identifying with a particular brand name for reasons such as quality, price,
fashion; history; celebrity affiliation;

Demand
 Effective demand: The willingness to acquire or purchase a product backed by the ability to pay
for the good or service.
 The determinants of quantity demanded:
 The price of the product
 The price of other products: Substitutes are products which are used in place of each
other and gives relatively the same level of satisfaction e.g. butter and margarine;

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Complements are products where the use of one product gives rise to the use of
another e.g. petrol and cars; tyres and cars
 Income levels
 Wealth of individuals
 Environmental factors e.g. wars, natural disasters
 ‘ceteris paribus’: other things being equal or constant
 The basic law of demand states that there is a negative relationship between price and quantity
demanded; the lower the price, the higher the quantity demanded. As price increases, quantity
demanded decreases. Other factors such as income are held constant.

Supply
 Supply relates to the firms or producers of the good or service and what they are willing to
provide on the market.
 The major determinants of supply are:
 The price of the product
 The price of inputs or factors of production
 The level of technology e.g. advances in production technology
 Government intervention e.g. taxes and subsidies
 The basic law of supply states that there is a positive relationship between price and quantity
supplied. Firms are willing to supply more to the market if price rises.
 The basic motive of the firm is to maximize profits.
 The quantity supplied is the amount of a product that firms are willing to offer to the market for
sale.

Customer Service

What is customer service? Investopedia.com describes 'customer service', 'as the process of ensuring
customer satisfaction with a product or service'. The process usually takes place while the actual
transaction is being performed. It encompasses the policies and practices that guide the way the
organization (employers and employees) interact with the customers and clients.

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Customer service plays an important role in 'maintaining ongoing client relationships.' The maintenance
of this relationship affects the business' ability to gain revenue. It is important to note that front line
customer service representatives are responsible for creating the first perception of the business. This is
important for some businesses in gaining the competitive edge.

Benefit s of good customer service to a business:

 attract customers by gaining advertising by other satisfied customers
 repeat business and new business which translates to revenue
 gaining customer loyalty
 reduce cost of marketing as customers use word of mouth and social media (Facebook, Twitter
etc.); gaining the competitive edge by positioning the business as a superior customer service
provider

Forms of Customer Service

This deals with ways in which the organization can ensure customer satisfaction and meeting individual
customer needs.
 Warranty: According to business dictionary.com, warranty is 'a legally binding assurance that a
good or service is, among other things, fit for use as represented, free from defective material
and workmanship, meets statutory and/or other specifications.' The warranty document will
describe the conditions under which and the period specified, the product will be repaired by
the manufacturer or seller, replaced or compensated for without cost to the buyer.
 After sales service; making repairs: According to management studyguide.com, after sales
service refers,' to various processes which make sure customers are satisfies with the products
and services of the organization.' Techniques include: Taking customers' calls; Keeping in touch
with customers; Provide support (install product, maintain product); Listen to customers'
grievances; exchange products as necessary if found defective (due to no fault of customer);
 Feedback: Take feedback from customers; this helps the business to gain knowledge of the
customer and upgrade service to meet customer needs; Give feedback so that customers will
know that their complaints are being handled and that the business cares about customer
satisfaction.
 Online chats: Create a website where customers can register complaints or access on line help

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 Call center/telephone service/toll free number: Provide a toll free number where customers
can call to register queries or concerns and comments;
 Suggestion box/handling complaints: In store customers can be given a chance to fill out
suggestion forms or cards and place in a box. Cards can cover various aspects of the customer
experience in the business;
 Surveys: The organization can conduct surveys to find out the level of customer satisfaction.
This can be done online, via a questionnaire in store or by telephone or cellular phone.
 Counter and face to face service: This initial contact point between persons can place the
business in a positive or negative light. The Customer Service Representative is most times the
first contact with an organization. This person should be trained to deliver on the company's
mission, vision and core values; be able to listen to the needs of the customer; be able to ask
questions to find out what the customer wants and seek to address the issues; be able to
respond to all questions, if the customer service representative needs help he/she should go to
the supervisor but do not leave the customer feeling his/her issues were not addressed; be
knowledgeable about department and products ; be timely; relay accurate information;

Protecting Ideas

According to wipo.int, intellectual property refers' to creations of the mind, such as inventions; literary
and artistic works; designs; and symbols, names and images used in commerce.' Intellectual property is
protected by law. This allows persons to gain recognition and benefit financially from their creations or
inventions. It aims to facilitate an environment where persons are rewarded and protected for being
creative and innovative.

There are four main ways of protecting ideas or regulate the use by others.
1. By patent: This gives the right to be the sole user or producer of a completely new product to a
person or a business.

2. By registered design: A new design that has a distinctive visual appearance may
be registered prior to its actual production.

3. By trademark: Using a logo or symbol to distinguish a firm’s brand (branding).

4. By copyright: This gives legal protection by persons or businesses over certain

kinds of intellectual material e.g. artistic work, literary works,
sound recordings and films.

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Franchise:
A franchise gives a person or a business (the franchisee) the right to sell a good or service that is owned
by someone else (the franchisor). A franchise agreement usually involves the franchisor retaining an
interest in the product in some way e.g. ingredients and preparation, the franchisor may receive a
percentage of the profits. The established company maintains control over its brand.

Structured Questions
1.Define the term marketing. (2 marks)
2. Explain the concept of Social media marketing (SMM). (4 marks)
3.Describe the concept of Integrated marketing. (4 marks)
4.List FOUR marketing activities, (4 marks)
5.Briefly describe the elements of the Marketing Mix. (8 marks)
6. Describe the importance of product packaging. (4 marks)
7.State THREE functions of advertising. (3 marks)
8. Distinguish between a cash discount and a trade discount. (4 marks)
9.Outline the role of the Bureau of Standards in regulating business activity. (4 marks)
10. Describe the concept of customer service. (4 marks)
11.Identify THREE ways the business can ensure customer satisfaction. (6 marks)

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MULTIPLE CHOICE EVALUATION: Unit 6

1. Which of the following statements most appropriately defines marketing?

a. Promoting goods and services

b. Identifying, anticipating and satisfying consumer requirements
c. The distribution of goods
d. The selling of goods

2. The product life cycle describes the stages in which product sales rise and eventually fall. At
which stage will firms experience a saturated market, where sales are constant and then fall?
a. Introductory
b. Growth
c. Maturity
d. Decline

3. The time between the design of a product and its production is referred to as

a. Cycle time
b. Production time
c. Lead time
d. Promotion

4. A situation whereby a firm uses special offers or discounts to attract customers and where it
may sell below cost is MOST appropriately termed
a. Economies of scale
b. Optimum strategy
c. Profit maximization
d. Loss leading strategy

5. Which of the following statements best describes promotional pricing?

a. Pricing the product to enter the segment
b. Selling below cost
c. Introducing price offers, money off packs
d. Pricing below competition

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6. The firm’s strategy of charging a relatively high introductory price for a product with the aim of
securing a large profit margin is termed
a. Differential pricing
b. Market skimming pricing
c. Price discrimination
d. Market oriented pricing

7. Which of the following can be categorized as common pricing objectives of a firm?

I. Survival
II. Profit maximization
III. Market share leadership
IV. Product quality leadership
a. l and ll
b. l, ll and lV
c. ll, lll and lV
d. all of the above

8. The act of attracting the attention and interest of the target market to the product offering is
BEST described as
a. Transporting
b. Product innovation
c. place
d. promotion

9. The type of advertisement that aims at educating the consumer about a good, service or issue is
referred to as

a. Defensive advertising
b. Competitive advertising
c. Persuasive advertising
d. Informative advertising

10. The presentation made by persons representing a firm to potential buyers is called

a. Advertising
b. Public relations
c. Personal selling
d. Branding

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11. Which of the following activities is NOT a part of the merchandising process?

a. Clear labelling and price marking

b. In-house displays
c. Layout of premises
d. Transportation of goods

12. The process of promoting an organization’s corporate image is BEST described as

a. Advertising
b. Sales promotion
c. Personal selling
d. Public relations

13. Payment for purchases can be made in a number of ways. A situation where a deposit is made
for the goods but the consumer only assumes possession after full payment is described as

a. A discount
b. A hire purchase plan
c. A lay-away plan
d. A credit sale

14. A quantity discount is a price reduction given by a seller to buyers who purchase in bulk. It is
calculated in accordance with the quantity purchased. This is referred to as

a. Cash discount
b. Trade discount
c. Trade credit
d. Discount

15. A situation where a supplier allows a customer, a certain period of time after receipt of goods,
to pay, is appropriately termed a
a. Cash discount
b. Trade discount
c. Trade credit
d. discount

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Unit 7: Logistics and Supply Chain

Pupils will:
 explain the term logistics and supply chain operation
 describe the links in the chain of distribution
 differentiate between multi modal and intermodal transport
 interpret information on transport documents
 explain the role of transport in marketing
 identify advantages and challenges of supply chain operation
 explain the impact of logistics and supply chain operations
 identify problems in distribution
 outline ways in which distribution problems can be dealt with
 outline the impact of information technology on logistics and supply chain operation

Supply chain management involves the activities of planning, designing, controlling and implementing
the processes involving procurement, manufacturing, distribution and sales if a business or enterprise.
The fulfilling of business objectives related to supply chain would include an integrated approach
involving networks of sellers or vendors, agents, distributors, other service providers to move inputs or
raw materials and the finished goods to different locations.

Logistics is specifically, 'the management of the flow of goods and supplies.' this also includes the flow
of information, data and business documentation between businesses. A key role of logistics is in the
delivery of raw materials from a supplier to the production function and in dispatching finished goods
from the production facility to the customer. Logistics is a sub-component of the Supply Chain
Management function.

Source: managementstudyguide.com/logistics-and-supply-chain

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Logistics involves: Flow of goods through the following

Networks of Intermediaries such

Retailers and final
transportation by as wholesalers and
consumers
road /rail/air/ water retailers

The Activities of Supply Chain Operations and Logistics

•plan and develop strategy for procurement

•selection of manufacturing location
Supply Chain •design and develop distribution network and plan
strategy for finished goods
Operations

•outlining the details of procurement

•details of transportation mode
•finished goods distribution
Logistics •sales order fulfilment and documentation process
•inventory management

Logistics

The Council of Supply Chain Management Professionals, defines logistics as '... that part of supply chain
management that plans, implements and controls the efficient, effective forward and reverse flow and
storage of goods, services and related information between the point of origin and the point of
consumption in order to meet customers' requirements.'

Components of Logistics

 Procurement logistics is the process used to select suppliers and negotiate contracts for delivery
of products. This involves for example, market research, make or buy decisions, ordering and
order control;

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 Production Logistics involves controlling the flow through the supply chain from point of entry
to the destination or distribution.
 Distribution logistics involves the delivery of finished products to the customer. This entails
warehousing and transportation (air, rail, water, truck, passenger transport, warehousing and
storage fleet maintenance and insurance;
 Disposal logistics also called reverse logistics deals with activities related to the 'reuse of
products and materials. This area aims to reduce logistics costs, improve services and manage
environmental sustainability;

Forward Logistics:

 delivering goods to receivers;

 moving through a process: supplier of raw materials, manufacturer, distributor, retailer
customer

Reverse Logistics:

 operations related to the 'reuse' of products and materials; durable products are returned e.g.
trade -in, return empty bottles for credit, repair, salvage or disposal, or utilizing returnable or
reusable items;
 getting materials products back form users;
 According to (www.lean supplysolution.com), 'Reverse logistics usually involves returns, recalls,
repairs and refurbishment, repackaging for restock or resale, recycling and disposal.'
 Businesses can experience cost savings by reusing materials;
 Reverse logistics is also called 'green logistics'.

Impact of logistics and supply chain operations on competitiveness of business:

 Improve competitiveness by managing supply chain and logistics in such a way to eliminate
'bottlenecks' in the logistics system, identify problems and diagnose issues; consider an
'Intelligent Logistics System'. This entails using networks of dry ports and truck staging areas,

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monitoring and controlling using ICT such as GPS, GIS and data exchange technologies, mobile
devices;
 Gain the competitive advantage: To achieve the advantage over competitors’ logistics can be
used to provide value in services e.g. faster delivery
 Gain comparative cost advantages: The business can partner with suppliers and logistic
suppliers. The firm will outsource its non- core competencies thereby reducing logistics costs.
this includes:
 Second party(2PL): Deals with the carriers who are providing a transport service over 'a
specific segment of a transport chain'. Examples include: Maritime shipping company, a
rail operator or a trucking company that are hired by a company to transport cargo from
one point of origin to a specific destination e.g. manufacturer to distribution center;
distribution center to port etc.
 Third party(3PL): The use of external individuals or organizations to carry out logistics
activities (outsourcing) traditionally executed within the business. Other businesses for
example that offer warehousing, distribution management, freight consolidation; Third
party providers are freight forwarders, Courier companies; transportation services
companies;
 Fourth party(4PL): This integrates third party competencies and other organizations to
'design, build and run comprehensive supply chain solutions.' A Fourth Party Logistics
(4PL) contractor would manage the Third Party components (truckers, custom agents)
thereby assuming responsibility of the complete process for the contracting business.
4PL acts as a 'single interface between the client and multiple logistics service providers;
4PL tends to manage all aspects of the client's supply chain.

Describe the chain of distribution

Chains of Distribution: The chain of distribution or channels of distribution is the series of stages that
finish product goes through to reach the consumer. It can apply to domestic trade or to export or
foreign trade. It can be direct or indirect.
 Direct chain of distribution: There is no intermediary between producer and consumer.
 Indirect chain of distribution: This involves the use of intermediaries.

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Chain 1:
Producer-Wholesaler-Retailer-Consumer
A producer sells goods in large quantities to wholesalers. The wholesaler breaks down the large
quantities for sale to retailers and also stores stocks in warehouses. The retailer in turn breaks the
quantities into smaller units for the final consumers.
Chain 2:
Producer-Wholesaler-Consumer
The retailer is omitted. The wholesaler assumes the role of the retailer.
Chain 3:
Producer-Retailer-Consumer
The wholesaler is left out and the retailer may assume the role of the wholesaler.
Chain 4:
Producer-Consumer
There is no intermediary between the producer and consumer.

Wholesaler
The Wholesaler purchases goods in large quantities from producers and thus assumes some of the risks
of the manufacturer such as, warehousing goods. This is at a cost and there is the risk of demand falling
or goods becoming obsolete.
Roles of the Wholesaler:
o Breaking bulk produce for sale to retailers
o Warehousing facilities: Wholesalers usually have closer proximity to the target market
o Assumes risk: By buying large quantities, the wholesaler undertakes risks as prices could fall and
tastes may change leaving the wholesaler with stocks of obsolete goods
o Key source of market research for producers
o Helps manufacturers advertise goods
o Helps maintain price stability as goods are incrementally released on the market to prevent
surplus or glut, leading to price reduction
o Provides credit facilities to retailers to ensure goods are sold.

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Retailers
Retailers provide goods directly to the consumer. They possess ownership of the goods and bare all
risks of losses should demand fall or taste change.
Role of the retailer includes:
o Breaking bulk into small quantities to meet the demand of individual consumers
o Provides outlets close to targeted markets to ensure timely provision of products
o Provides credit facilities e.g. hire purchase to consumers
o May provides delivery service to customers free or at a cost
o Gives technical product advice to customers
o Provides after-sales service as part of the service package
o Acts as a source of market intelligence to the manufacturer

Transport
Transportation is the movement or conveying of goods or human beings from one point to another. It is
an indirect service and is part of tertiary production. Transportation dealing with business is called
commercial transport.
Multimodal and Intermodal transport

 Multimodal: This describes the movement of cargo from the point of origin to the destination
point by using several 'modes of transport'. Each mode used in the transportation process may
have a different transport provider, but all operate under a single transport contract or bill of
lading. Also, multimodal can utilize a company with all modes of transport or utilizing a single
contract the shipper can use an agent. The agent will be responsible for all the coordinating,
loading and unloading and any delays.
 Intermodal: This is the movement of cargo from point of origin to destination point using
several modes of transport. Each of the modes has a different transport provider, operating
under its own transport contract (independent contract). The shipments are handled by several
different shipping companies; multiple carriers during a single journey where each part of the
journey is handled by a separate transport carrier. The business or person/shipper will have
several contracts, one with each transport provider to handle a specific part of the transport or
shipment process.

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 In differentiating between multimodal and intermodal transport one must consider the type of
contract or bill of lading and the transport provider or carrier. Summarily, in multimodal
shipping one company or one contract will handle all parts of the process. Whereas, intermodal
shipping or transport utilizes several modes of transport with different transport carriers, each
with a different contract.
source: https://shippingand freightsource.com; www.macandrews.com

Factors influencing the choice of transport method:

o The geographic distance between channel members
o Domestic trade or international trade
o Nature of good to be transported e.g. fragile or perishable items; large bulk items; items
needing high security; dangerous chemicals requiring special containers
o Cost of transportation method
o The availability of ports of entry and exit e.g. airports, harbors, ports
o Handling charges and insurance costs e.g. freight costs
o Availability, location and costs of warehouse facilities

Some documents used in International Trade

 Import Licence: A permit that specifies the good to be imported and in what quantity. It is used
by the government to restrict the importation of certain goods.

 Bill of Lading: A document used in the transportation of goods via ship. It outlines details of the
goods and the destination. The bill of lading gives title to the goods. Moreover, it is used as a
receipt for the goods. The document is also a contract between the seller and the shipping
agent.

 Airway Bill: A document used to transport goods by air. It gives title to the goods as well as,
serves as a receipt of goods.

 Certificate of Origin: A document that shows the country of manufacture or origin of goods. It
is an important document in trade within a free trade area. It prevents non-member countries
from taking advantage of free trade arrangements within area e.g. low tariffs.

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Some terms that may be contained in documents:

 ‘FOR’ means free on rail: The seller pays for transport and insurance to the railway station and
loading on train. After, the buyer assumes responsibility for transport and insurance.
 ‘FOB’ means free on board: The seller pays for transport and insurance to the port and loading
cargo on ship or aircraft. After the buyer assumes responsibility for transport and insurance.
 Franco: The seller pays all transportation and insurance costs to the buyer’s premises wherever
it is located.
 Loco: Price of goods excluding transport costs. The buyer has the responsibility for transport
and loading costs to his/her destination.
 Carriage Forward: The cost of delivery is borne by the purchaser.
 Carriage Paid or Carriage Free: The cost of delivery is borne by the seller of the goods.
 Certificate of origin: A business document stating the country of origin of goods or where the
goods were made. This is used to determine if the goods will attract tariffs.
 ‘FAS’ means free alongside ship: The seller is responsible for payment of transport to the port
but not loading costs.

The different forms of transport:

Land: This includes road, rail, and pipelines. Road includes, bicycles, cars, trucks, buses, tankers, task car;
Rails include trains
Water: Via rivers and sea. This includes cargo liners, bulk carriers, passenger liners and ferries, tankers
Air: Freights and passenger and cargo planes.
Digital Delivery: According to https://www.excella.com, 'digital service delivery' is 'the electronic
delivery of information including data and content across multiple platforms and devices like web or
mobile'. This reduces the reliance on paper and seeks to improve the user experience e.g. Dell Digital
Delivery which allows the customer to purchase selected software at the same time a new computer is
ordered, which can be downloaded and installed, when customer gets the computer.

Specific goods would require specialized forms of transport e.g. the use of pipelines and tankers to
transport oil and gas; timber and logs via rivers and barges; flower and perishable food items when
shipped from one country to the next needs to be in a temperature controlled container; fragile items
e.g. computers need to be packaged in Styrofoam and cardboard to prevent damage; chemical and
other flammable substances must be transported in special containers to prevent spills.

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Efficient distribution of goods depends on the availability of proper infrastructure such as access roads,
airport, harbors and ports.

Explain the role of transport in Marketing

Transport is important in international, regional and local trade so that consumers can have access to a
variety of goods and services; to improve the ability of firms to supply markets; to provide valuable raw
materials and capital inputs into the transformation process of businesses; to develop infrastructure of
countries to facilitate trade; to provide greater access to markets; to develop commercial and political
links between trading partners.

Distribution problems include:

o Shipping delays
o Storage costs
o Misdirection of goods
o Industrial unrest
o Impaired communication in the distribution chain
o Spoilage
o Theft
o Red tape or unnecessary paper work
o Warehouse inefficiency
o Safety standards
o Inconsistency in weights, measures and sizes
o Adverse conditions e.g. hurricanes, floods

Some Problems Possible Solution

Theft or pilfering Insurance, proper record keeping
Low productivity Better working conditions, incentives, increased on-the –job
training
Spoilage Better packaging, refrigeration and storage

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Red tape and bureaucracy Proper procedures; Ensuring the procedures are known by all
involved; improved communication between agents in trade;
accessing feedback from agents to improve processes

Inconsistent Measures Use of standard measures or proper conversion techniques

Lack of proper security Increase governmental and private sector collaboration in
measures developing policies to protect goods and personnel in transit
e.g. CCTV cameras on major roadways
Moneyless transactions
More border patrols in the water and port security

Identify advantages and challenges of supply chain operations

Advantages:
 minimize inventory

 reduce costs
 reduce waste
 improving the time, it takes to get the product to market or minimizing shipping and transport
delays
 companies are linked through the supply chain
 allows for the identification of critical risk factors with the business, its suppliers; allows for
better control over suppliers;
 provide information on customer needs;
 helps to improve customer care services;
 improve communication among channel members;
Disadvantages:
 may be expensive to implement in a small business
 the business will have to hire expertise to manage the system or outsource

Explain the impact of logistics and supply chain operations on the competitiveness of a business

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Impact of logistics and supply chain:

(csmp.org)
 Create improved customer service: expectation of accuracy in product and quality to be
delivered; available at right location; right delivery time; after sales services
 Reduce Operating Costs: decrease purchasing costs; decrease production costs; decrease total
supply chain costs
 Improved financial position: Control and reduce supply chain costs; decrease fixed assets (need
for warehouse, transportation vehicles); increase cash flows as products reach customers in a
timely manner

Impact of information technology on logistics and supply chain operations

Key areas include:

Global Positioning systems (GPS): This is a satellite navigation system used to determine the ground
position of an object (techterms.com). Key uses in logistics and supply chain:
 to manage and track delivery trucks;
 keep supply chain in the know whether vehicles are on course or will be delayed due to whether
restrictions; adjustments can be made to mitigate delays;
 GPS provides data as to where a truck is in its delivery cycle;
 a means to track containers at sea or lost at sea and to locate inventory entering ports of entry;
 improve efficiency of travel in terms of direction
 control of units from a centralized base of operations
 planning routes before the start of a trip;
 estimate arrival time of goods to customers

Geographic Information System (GIS): 'A system designed to capture, analyze, store, manipulate,
present and manage all types of geographical data such as map and GPS '(www.techopedia.com). It
allows users to view data patterns and relationships. Key uses in logistics and supply chain:
 tool to map manufacturing, supplier locations, clients, distribution centers and vehicle routes
etc.;
 can be part of the decision support system for supply chain management

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 track how long it will take to reach delivery locations;
 find the shortest route between points on the supply chain network;
 map alternative paths in case of problems in the shortest route
 solving routing problems by analyzing a number of possible solutions;

Portnet: (www.portail.portnet.ma) describes a portnet as, ' a computer tool which enables the e-
processing of authorizations, permits, certificates, customs documents and other deliveries...'. This is
undertaken by the State or government. It facilitates import and export operations. It facilitates a
digital signature and e-payment. Key uses in logistics and supply chain operations:
 speed up delivery of goods across borders (imports and exports);
 increase efficiency of movement of goods;
 facilitating just in time delivery processes;
 helping to increase good governance practices;
 speed up procedures of entry and withdrawal of goods;
 improving the traceability of operations via the flow of information
 reducing movement costs
 information can be accessed at any time;
 savings in transportation costs and storing documents

Telemarketing: Telemarketing is basically marketing products to existing and potential customers. This
involves two elements (https://yourbusiness.azcentral.com): Outbound and Inbound telemarketing:
 Inbound telemarketing involves the handling of incoming calls by customers and potential
customers e.g. responding to advertisements, general enquiries about products. The
telemarketer has to try to move the sale forward e.g. taking orders, sending a sales
representative;
 Outbound telemarketing involves making calls to potential customers to create product
awareness or to encourage the prospect to place an order;
 Key uses in logistics and supply chain would include: moving a sale through stages: customer
identifies a need; seeks information on products; evaluates offers and negotiates the outcome;
telemarketing creates a direct relationship between seller and customer and helps the seller to
get instant feedback on products;

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E-Commerce: E-commerce enhance supply chain operations by:

 providing customers with product information in a timely manner e.g. upgrades;
 provides new distribution channels to get products to the users;
 reduces the channel members between the business and the customer thereby reducing costs;
 simplifies the company's inventory management system by utilizing 'shopping cart software'.
the company can advertise or carry more items and employ just in time inventory processes in
meeting needs;

Global Logistics Providers: Logistics providers add value to the stages of supply chain operations.
Logistics enables effective and efficient storage and flow of goods from the stage of raw materials to the
manufacturing cycle and to the point of usage or consumption. Therefore, logistic providers meet the
needs of importers and exporters by managing transport essentials. They also help the organization in
problem identification and implementing solutions (www.nwccindia.com). Key uses in logistics and
supply chain:
 Ensuring real time tracking and management of distribution;
 Manage customs requirements and documentation;
 Utilizes the transportation cycle;
 Helps the business to enter new markets by providing distribution;
 Helps the business to enter global distribution;
 Some global logistic providers are:
Company Services
DHL  parcel, warehousing/distribution, freight forwarding, intermodal, trucking

UPS  parcel, trucking, freight forwarding, warehousing/distribution

FedEx  parcel, trucking, freight forwarding, warehousing/distribution

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Logistics hubs e.g. Jamaica: A logistics hub is a, 'regional cross-docking point, where products from
multiple supply sources arrive and are sorted in accordance to the needs of the destination points.
Products are then delivered to these points without being stored at the hub (Creating National Wealth
Through the Jamaica Logistics Hub/ Caribbean Policy Research institute).' Key uses in logistics and supply
chain operations:
 reduce cost associated with transportation, storage and distribution of goods;
 facilitates trade;
 opens up international markets

Structured Questions
1. Define the term supply chain management. (2 marks)
2. Define the term logistics. (2 marks)
3.Outline TWO components of the logistics process. (4 marks)
4.Explain the concept of reverse logistics. (4 marks)
5. Describe each of the following types of logistics: (I) Second Party; (II) Third Party (III) Fourth Party
(3 marks each)
6. Explain the concept of chain of distribution. Give examples of TWO chains. (6 marks)
7.Differentiate between multimodal and intermodal transport. (4 marks)
8. Describe the concept of digital delivery as a form if transport. (4 marks)
9.Outline TWO problems in the distribution process and STATE one possible solution for each. (4 marks)
10.Discuss TWO forms of information technology used in supply chain and logistics. (4 marks)

Research: Place students into groups of 4-6 pupils. Each group will produce a Graphic representation to
explain Forward Logistics and Reverse logistics.

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MULTIPLE CHOICE EVALUATION: Unit 7

1. Which of the following activities is NOT a key feature of the components of Logistics?

a. procurement logistics
b. production logistics
c. distribution logistics
d. compensation logistics

2. Supply chain operations entails which of the following activities

I. planning and developing strategies for procurement

II. designing and developing distribution network
III. selection of manufacturing location
IV. finish goods distribution
a. all of the above
b. I, II and III
c. I, II and IV
d. II, III and IV

3. Forward logistics is specifically

a. 'green logistics'
b. getting materials back from users
c. delivering the goods to customers from the point of raw materials to manufacturer,
distributor, retailer and customer
d. forwarding salvage items to the business

4.Which of the following statements BEST describes ‘a direct chain of distribution’?

a. one which involves the use of wholesalers

b. one which involves the use of retailers
c. one which does not involve the use of intermediaries between producer and consumer
d. one which involves the use of intermediaries

5. Which of the following statements outline the KEY roles of retailers?

I. Breaking of bulk items

II. Provide sales outlets near to the target market
III. Warehousing of stocks
IV. Provide after-sale services
a. l and lll only
b. l, ll and lll only
c. I, lll and lV only

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d. l, ll and lV only

6.A document used in shipping, that gives a description of the cargo, its destination and title of
ownership is called a/an
a. Airway bill
b. Bill of lading
c. An invoice
d. A consignment note

7. Multimodal transport is a process involving

a. several modes of transport operating under a single transport contract

b. several modes of transport each with an independent contract
c. one mode of transport with one contract
d. one company and one contract

8. A document that shows the country of manufacture of goods is called a/an

a. airway bill
b. certificate of authenticity
c. certificate of origin
d. certificate of lading

9. Specific goods require specialized forms of transport. Which of the following forms of transport is

BEST suited to transporting natural gas from the ocean?

a. barges
b. tankers
c. pipelines
d. trucks

10. Which of the following is NOT a key distribution problem?

a. Shipping delays
b. Theft
c. Red Tape or unnecessary paperwork
d. Worker incentives

11. A Global Positioning System is specifically used in logistics and supply chain to

I. track where delivery vehicles are in the delivery cycle

II. improve efficiency
III. track containers at sea
IV. planning routes before the start of a delivery
a. I, II and III

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b. II, III and IV
c. I, II and IV
d. I, II, III and IV

12. 'A regional cross-docking point, where products from multiple supply sources arrive and are then

delivered to destination points' is appropriately termed a/an

a. portnet
b. logistics hub
c. logistics store point
d. logistics distribution centre

Unit 8: BUSINESS FINANCE

Pupils will:
 identify various financial institutions
 describe the functions and services of financial institutions
 describe the role and functions of financial regulatory bodies
 describe the relationship between financial institutions and regulatory bodies
 outline ways that individuals manage personal income
 differentiate between savings and investment
 explain short term and long term financing
 identify personal sources of capital for establishing a business
 identify the purposes of basic financial records for sole traders

Financial Sector: functions and services

The financial sector is made up of agencies such as:

 government financing agencies, the central bank, commercial banks, mortgage companies, unit
trust, stock market, development banks (the Caribbean Development Bank, the Agricultural
Development Bank), credit unions, insurance companies, building societies, microfinance
agencies;

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Commercial Banks: A commercial bank is a for profit financial institution that provides a range of
financial services to individuals and business clients. Basic functions and services of commercial banks
include: accepting clients’ deposits; lending to individuals and businesses (short term loans and long
term loans, mortgages); processing payments on customers’ behalf; providing night safe deposit
services for business clients; online banking services (using the internet); tele-banking services (using the
telephone); investment services; foreign exchange transactions e.g. money orders, bank draft; credit
facilities e.g. overdrafts; credit cards and debit card facilities; mobile money facilities; ATM facilities or
automatic teller machine facilities e.g. deposit and withdraw cash;

Mortgage Company: A firm engaged in originating and or funding mortgages for residential or
commercial properties. Some mortgage companies offer 'turnkey mortgage services'. These include
'origination, funding and servicing mortgages' (investopedia.com). Origination is the process the
individual has to go through to obtain a mortgage or home loan.

Unit Trusts: An unincorporated mutual fund structure that allows funds to hold assets and provide
profits for the individual unit holder. The investment fund is set up under a trust deed e.g. Trinidad and
Tobago Unit Trust provides a series of mutual funds both TT$ and US$, asset management, financial
advisory, bureau de change, ATM services, call centre, card services;

Development Bank E.g. Caribbean Development Bank(CDB): The CDB services include: assisting
borrowing member countries to develop their economies; assist in expanding production and trade;
promote investment, mobilize financial resources for development, provide technical assistance to
borrowing members; to support regional and local financial institutions, support and stimulate the
development of capital markets (www.caribank.org).

A development bank is a financial institution established 'to fund new and upcoming businesses and
economic development projects by providing equity capital and or loan capital'
(www.businessdictionary.com)

Credit Union: A non-profit co-operative controlled by member/owners. Members are able to access
lower cost services e.g. low interest loans, credit cards and deposit at a higher interest rate than market
rates. The members are the depositors, borrowers and shareholders

Insurance Companies: Insurance companies operate by collecting premiums from large groups of
people or pooling risk against the possibility of an event occurring. Insuring large numbers of people
allows the companies to pay claims and at times turn over a profit. These companies use utilize
statistics to project the likelihood of an event occurring. They provide coverage against risks such as,
fire, car accidents, illness, disability, death. Some insurance companies also provide annuities and
investment services;

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Building Societies: An institution that provides banking and other financial services such as, mortgages
and demand deposit accounts (investopedia.com). Building Societies tend to focus on savings and
mortgages.

Microfinance Agency: A financial institution that provides banking services to low income groups and
individuals (www.investorwords.com). These agencies tend to provide loans to members (low income
earners or groups), offer insurance and deposits. The aim is to improve the quality of life of the poor.
The persons who access the services of microfinance agencies would usually have no access to
traditional banking institutions.

Stock Market: The collection of markets and exchanges where the issuing and trading of equities, bonds
and securities takes place (investopedia.com). Its benefits include:

For firms:

 Raising capital for business

 Facilitate growth through share acquisition e.g. mergers
For investors:

 Although investment in the stock market is risky by nature, it provides higher capital gains in the
long term.
 Provides a diversified portfolio
For the economy:

 Promotes economic growth through investment in business

 Used as an indicator of the economy’s performance in terms of share price performance
 Provides for good corporate governance in terms of record keeping for publicly listed firms
 Provides an avenue for government to access funds

Key Stock Market Terms

 Dividends: The return on shares paid to the shareholder. The portion of profit available for
distribution to shareholders.
 The dividend is expressed is stated as a percentage of the nominal or par value of the share. Par
value is the issue price; the price the share was originally or initially sold for.
 ‘Bulls’: Agents who buy or hold shares anticipating a price rise and make a profit at selling
shares at a higher price. A ‘bullish’ market is characterized as one where prices are generally
rising.
 ‘Bears’: Agents who sell shares anticipating a fall in market prices. ‘Bears’ look purchase shares
at a later time at lower prices. In a ‘bearish’ market prices are generally falling.
 ‘Stags’: Agents who buy new issues of shares (e.g.at an IPO) expecting to resell at a profit when
‘second hand’ trading starts on the stock exchange.

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 Stock broker: An agent who buys and sells shares on behalf of his/her clients. The stock broker
deals with the public.
 Stock Jobber: An agent or wholesaler of stocks and shares. He/she deals with stock brokers and
jobbers exclusively. The stock jobber buys shares from brokers and other jobbers at a low price
and sells at a higher price (does not deal with the wider public).
 Initial Public Offering (IPO): This occurs when a company goes ‘public’ that is, traded on the
stock exchange; it issues shares to the public with an IPO.
 On-line Trading: The use of the internet to buy and sell shares or keep track of portfolio
performance.
 Cross Listing: The listing of a company’s shares on different stock exchanges or stock markets.
The company must meet the requirements of the different stock exchanges. Shares are traded
in multiple currencies and time zones. This facilitates greater avenues for raising capital e.g.
New York Stock Exchange and European Exchange.
 Ordinary shares or equities: Each share in the publicly traded company yields dividend or part
of the profits. Ordinary shares carry the right to vote at the annual general meeting. A
dividends payment depends on the performance of the business.
 Preference shares: These shares carry a fixed rate of interest. While ordinary shares carry
variable dividend payments. Preference shareholders are paid before ordinary shareholders but
are not normally able to vote at the annual general meeting.

Role and Function of Financial Regulatory Bodies

The role of regulatory bodies such as the Central Bank and the Financial Services Commission is to
monitor, control and guide various industry sectors in order to protect depositors and consumers in an
effort to maintain stability in the national economy.

The function of these regulatory bodies is to enforce regulations and licenses of various financial
activities. This is aimed at ensuring that these institutions function within the confines of legislation.

Central Banks

 The central bank in a country is the official government’s bank. It is the central authority
regulating the financial sector in the economy and managing the public debt.
 Key roles of the central bank includes:
a. The banker to the government: Managing the country’s debt and issuing bonds to raise
revenue; the government has an account in the central bank
b. Banker to commercial banks: Each commercial bank is required to keep a reserved ratio with
the central bank. Further, all commercial banks are required to be inspected by the central bank
to ensure that they meet financial requirements.

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c. The central bank has the authority to issue bank notes.
d. Advisor to the government in terms of managing the money supply through monetary policy
such as influencing the interest rates
e. Lender of last resort to commercial banks to prevent failure of the commercial banks
f. To hold the country’s gold reserves and foreign currency
g. To manage the exchange rate and influence the demand and supply of foreign currency

The Central Bank of Trinidad and Tobago (www.central-bank.org.tt)

 The Central Bank of Trinidad and Tobago is the supervisory authority for the financial
institutions regulated by it;
 The Central bank is responsible for ensuring that institutions comply with Anti- Money
Laundering and Combating Financing of Terrorism legislative and regulatory requirements;
 The Central Bank Issues Guidelines and Circulars which provide guidance to the industry
focusing on anti-money laundering and combating the financing of terrorism;
 Contribute to national initiatives against money laundering;

Jamaica Deposit Insurance Corporation(JDIC)

 JDIC was created by the Government of Jamaica;

 The main objective of the JDIC is 'to protect depositors and promote stability and confidence in
Jamaica's financial system (www.jdic.org); establish and manage the Deposit Insurance Scheme;
 It seeks to strengthen the sector's regulatory framework
 Main goals include: provide the highest level of coverage possible to small depositors; restore
and maintain confidence in deposit-taking institutions; provide a clearly defined system for
dealing with problems which may arise in insured financial institutions (www.jdic.org);

Relationship between Financial institutions and regulatory bodies

Examples:

Financial Institution Regulatory Body Relationship

Commercial Banks The Central Bank The Central Bank regulates commercial
(T&T) banks by e.g.:
 adjusting the reserve ratio (the
portion of deposit balances that
commercial banks must have on
hand) held in the central bank;
 adjustment of interest rates to
control savings and borrowing;
 ensuring compliance with Anti-
Money Laundering and Combating

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Financing of Terrorism legislation;

 Inspection of commercial banks to
ensure compliance with financial
requirements;

Insurance Companies Supervisor of Insurance(T&T)

The Supervisor of Insurance is responsible
for enforcing the Insurance Act; Example:
Insurance Act Chapter 84:01;
 'Part 1 5. The Supervisor shall be
charged with the general
administration of this Act...'
 'Part 1 8. Subject to subsection (2)
where in relation to a policy, a
dispute or difference arises between
a company and a policy holder, the
Supervisor may upon written
request of either party act as
arbitrator of the dispute or
difference.'
 'Part 1 9. 'The Supervisor shall
maintain such registers .........and
maintain separate registers for (a)
companies which are registered to
carry on various classes of insurance
business in Trinidad and Tobago; (b)
privately administered pension fund
plans.......

Financial Services Non-bank financial institutions

Commissions (entities licensed or registered The FSC is responsible for:
(FSC)(Barbados) under specific Acts of  administration of specified
Parliament e.g. credit unions, enactments (licensing or registration
insurance companies) of financial institutions);
 supervising and regulating the
financial institutions;
 establishing standards for control
and management of risk in the
financial services sector;
(www.fsc.gov.bb)

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Ways used by an individual to manage personal income

Personal income includes compensation from a number of sources including salaries, wages and
bonuses received from employment or self-employment; dividends and distributions received from
investments, rental receipts from real estate investments and profit sharing from businesses
(investopedia.com).

Ways to manage personal income include:

 Make a budget; this entails making a statement of expenditure and how these will be funded by
income and other sources; the individual has to prioritise needs and wants;

Sample of a personal budget for Mrs. J. (Monthly)

Income Amount $ Expenditure Amount S

Salary Fixed time payments:
 Mortgage or Rent
Income from other  Cable
sources  Internet
 Cell/Telephone
 Insurance/Annuity
 Emergency fund

Variable Payments:
Total income after  Food
income tax is deducted  Gas for Car

Unplanned expenses
 Entertainment

Total Expenses
Net Income(Income less
Expenses)

 Allocate for savings and investment based on disposable income;

 Engage the financial advising process conducted by a trained professional e.g. banker; insurance
agent;

Personal assets used for funding a small business

The entrepreneur can use his/her personal assets. This includes:

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 Personal savings
 Family savings
 Life insurance policies
 Property, vehicle
 Fixed assets owned and needed in the venture

Personal sources of capital for setting up a business

The entrepreneur can access personal capital through:

 Friends and family: The entrepreneur accesses private financing from family and friends. This
can also take the form of equity financing where the family or friend becomes a shareholder.
 Personal savings: This includes life insurance policies where the owner can borrow against the
cash value of the policy; A home equity loan, that is, accessing a loan backed by the value of the
property.
 Government grants: Accessing a government backed grant to facilitate start-ups e.g. in Trinidad
and Tobago the government offers the Micro-Enterprise and Training grant aimed at needy
persons who want to undertake a small business venture or access skills training
 Loans: Access loans from commercial banks backed by collateral.
 Equity: The entrepreneur sells ownership in the venture to acquire financial investment. This
allows the investor to become a shareholder in the venture and share in the profits.
 Venture capital: Access funding from individuals or firms that finance or invest in start-up
ventures. the venture capitalist may provide funding for a stake in the business venture.
 Crowd funding: This is the use of small amounts of capital from a large number of individuals to
finance a new business venture (www.investopedia.com).

Purposes of basic financial records for sole traders

Record keeping in a small business refers to the 'orderly and disciplined practice of storing business
records'. This activity allows the venture to comply with financial regulations or meeting legal
requirements. Further, it allows the sole trader to keep track of the business; plan for the future; meet
legal compliance and tax preparations.

Bookkeeping is the recording and classifying of accounting transactions. Types of bookkeeping include:

 Single-Entry bookkeeping: This involves recording transactions as payments are made from and
deposits are made into the venture's account. This is suited to a 'low volume' of transactions.
 Double-Entry Bookkeeping: This can be used in businesses of any size. Two entries are made
for each transaction. A debit entry and a credit entry. This emphasises that a change in total
assets must equal a change in total equity (Assets = Liabilities + Owner's Equity).

Purpose of basic financial statements

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Statement Purpose
Income Statement(Profit and  shows the revenue and expenses of the venture;
Loss)  results in the profit and loss over a specific period of
time;
 shows how good or how poor the venture performed
financially during the year;

Statement of financial
Position(Balance Sheet)  provides a summary of assets, liabilities and equity of
a business, at a specific date;
 it facilitates decision making and provides
information on the financial position of the business;
 provides information on whether the business has the
ability to meet its debts and obligations;

Statement of Cash Flow  summary of the results of all cash transactions during
the reporting period;
 shows how the business gets cash or inflows and how
the business spends cash or outflows;

Financing a business: Sources: Short term and long term financing

Key terms

 Leasing: A lease is a legal document that outlines the terms and conditions to rent an asset. It is
the hiring out by one firm (the lessor of the asset) e.g. building or machinery to another firm
(the lessee) for a rental period.

 Factoring: A financial service provided by one firm (the factor), a financial intermediary, to
another firm (the client) by discounting unpaid invoices issued by the customers. The client sells
the debt owed by the customers to the factoring firm and the factor collects the payment due.
The factor is a source of funding that agrees to pay the company the value of the invoice minus
a discount for fees.

 Internal Sources of Finance:

 Retained Earnings: A firm keeps part of the profits generated to finance expansion or
new machinery instead of possible paying dividends.
 Selling assets: The firm may sell off assets such as building, equipment or machinery to
raise funds.

 Short Term Sources of Finance:

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 Overdraft: a credit arrangement with a bank that allows the firm to borrow and spend
money up to a fixed amount when needed. The overdraft is subject to an interest rate.
 Short term loan: Borrowing from commercial banks
 Hire purchase: A credit facility whereby the firm pays a down-payment and assumes
possession of the good and pays monthly instalments until the amount is repaid.
 Leasing
 Trade credit: A credit facility arrangement between two firms e.g. a manufacturer and
retailer that allows the retailer a period of time to settle debt.
 Crowd funding: The use of small amounts of capital from a large number of persons to
finance a venture;
 Angel investors: Private investors who tend to finance ventures in early stages of
survival; an equity investor who finances the venture for an ownership stake;

 Long Term Sources of Finance

 Share capital: Selling shares in company on the stock exchange
 Debenture: A long term loan taken by a firm. The firm issues the debenture on the
stock exchange at a fixed rate of interest.
 Long term loans: borrowing from commercial banks
 Bonds: Financial securities (shares, government stock, debentures) issued by the
government or firms to raise funds

Savings versus Investment

 Savings: Income that is not used up in consumption e.g. money placed in bank account, sousou
(paying into a pool to receive a hand until all members receive a hand), credit union deposits,
insurance;
Objective: Meet short term needs
Risk: Lower risk and rates of return than investment

 Investment: Money used to add to the capital of a business e.g. spending on expansion of
factories or purchasing machinery or equipment or spending on training and development,
buying shares, credit union shares, mutual funds, opening a business; bonds and debentures;
Objective: Long term growth
Risk: Low to high risk and; variable to high rates of return

Budgets

 A budget is a financial statement indicating projected income or revenue and projected

expenditure or spending.
 Budgets allow individuals to prioritize needs and wants, keep track on spending, allocate money
towards savings and investment, manage credit and create an emergency pool.
 At a national level, the government presents a yearly budget outlining sources of revenue
generation and projected spending in different ministries or sectors.
 Balanced budget: expected revenue equals projected expenditure

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 Deficit budget: expected revenue is less than projected expenditure

Structured Questions
1. Outline the Main functions of TWO institutions in the Financial Sector. (4 marks)

2. Describe the relationship between the Central Bank and Commercial Banks. (4 marks)

3. Outline the goal of the Jamaica Deposit Insurance Corporation. (2 marks)

4.State TWO ways that an individual can manage personal income. (2 marks)

5.State FOUR personal sources of capital an entrepreneur can access. (4 marks)

6.Identify the main purpose of a Cash Flow Statement. (2 marks)

7. Outline THREE sources of Short Term finance. (6 marks)

8.Outline THREE sources of Long Term finance. (6 marks)

9. Distinguish between Savings and Investments. (6 marks)

10. Describe the importance of a budget to an individual. (4 marks)

Project

Each student is required to create a Financial Dictionary containing key terms in this unit.

Each student is required to make a personal budget.

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MULTIPLE CHOICE EVALUATION: Unit 8

1. Which of the following is LEAST LIKELY to be a source of long term financing for business?

a. Bonds
b. Bank loan
c. Mortgage
d. Bank overdraft

2. Which of the following is NOT a main loan providing institution for individuals and businesses?
a. Commercial banks
b. Agricultural development banks
c. Credit unions
d. Central bank

3. Savings is that part of income that is not spent. Which of the following is NOT a form of savings?
a. A fixed term deposit in a bank
b. A sou sou hand
c. Buying shares on the stock exchange
d. Placing money in a cash box at home

4. The central bank is an important financial institution in an economy. Which of the following is
NOT a major function of the central bank?
a. Banker to commercial banks
b. Advisor on monetary policy to the government
c. Lender of last resort to commercial banks
d. Provider of online commercial banking services to businesses

5. Which of the following instruments is NOT a source of long term funding?

a. Debentures
b. Share capital
c. Bonds
d. Trade credit

6. The hiring out by one firm of an asset e.g. machinery to another firm for a rental period is
termed

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a. Factoring
b. Overdraft
c. Credit
d. Leasing

7. A situation where expected income is less than projected expenditure is

a. A balanced budget
b. A deficit budget
c. A surplus budget
d. Equilibrium

8. Where an individual’s income is equal to spending or expenditure his/ her budget is

a. A balanced budget
b. A deficit budget
c. A surplus budget
d. A fixed budget

9. A financial institution established to finance new ventures and economic development projects

e.g. agricultural undertakings by providing equity capital or loan capital is essentially a/an

a. insurance company
b. commercial bank
c. development bank
d. central bank

10. Recording payments made from a venture's account and deposits into the account is specifically

a. double entry bookkeeping

b. single entry bookkeeping
c. journal entry
d. cash flow entry

11. Where a credit entry and a debit entry are made for a transaction, the entrepreneur uses a

a. journal entry system

b. single entry bookkeeping system
c. double entry bookkeeping system
d. cash flow system

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12. A credit arrangement with a bank that allows the entrepreneur to borrow and spend money up

to a fixed amount and subject to an interest rate is termed a/an

a. trade credit
b. hire purchase agreement
c. overdraft
d. leasing

13. Which of the following are main forms of short term sources of finance?

I. debenture
II. trade credit
III. overdraft
IV. hire purchase
a. all of the above
b. I, II and IV
c. II, III and IV
d. I, III and IV

14. Savings is income that is not used up in consumption. Which of the methods listed is NOT a form

of savings?

a. credit union deposits

b. sou sou
c. bank account
d. buying shares

15. Main forms of investment for a small business include all of the following, EXCEPT

a. spending on business expansion

b. credit union shares
c. mutual funds
d. credit union deposits

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Unit 9: Government and Taxation

Pupils will:
 outline the responsibilities of government in an economy
 describe how the institution of government can influence the business sector to protect the
environment
 state the purposes of taxation
 distinguish between direct and indirect taxes
 describe various forms of government assistance to businesses
 identify and describe social services offered by the government

The government of a country is described as the body of representatives charged with management of
the country’s affairs on behalf of the citizens.

Responsibilities of a government in an economy include:

 Security of the State or National Security: The government is responsible for the protection of
the country from external threats and for maintaining law and order by setting the legal
framework. The government is also responsible for disaster preparedness in the country.

 Protection and welfare of citizens: The government has the responsibility for the well -being of
all citizens through the provision of social services and merit goods such as, health and
education, and various grants made to the less fortunate, elderly and disabled citizens. This is a
key area in the redistribution of income in the economy. Further, the state or government is
responsible for maintaining the traditions and cultural heritage of the nation e.g. through
funding of the arts.

 As a major employer, the government is responsible for job security of workers and ensuring
that severance benefits are paid to workers should they become redundant. The government is
therefore responsible for employment legislation to meet the needs of the workforce e.g. health
and safety, equal opportunities, maternity benefits and general labour laws.

 Environmental sustainability through protection of the natural environment. The government is

responsible for legislation relating to environmental issues such as pollution, use of dangerous
chemicals, traffic congestion and deforestation.

 The government is responsible for management of the economy, through fiscal policies
(government expenditure and taxation) and monetary policies (control of the money supply and
interest rates). It is also responsible for the creation of a safe climate for investors through the

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maintenance of political stability, an equitable and fair legal framework, exchange rate controls
and the maintenance of the exchange rate system.

 Another responsibility of the state is infrastructural development e.g. creation and maintenance
of a network of roads, bridges, ports of entry and exit, airports, water and electricity supply.

Adherence by business to laws:

A business operates in an open system, with an external and internal environment and many
stakeholder groupings, as well as, operating within a legal framework. Therefore, the business has to
adhere to or obey the laws governing the environment e.g.

 Deduct and pay in the necessary statutory payments such as National Insurance, health
surcharge and income tax as well as, corporation taxes.

 Abide by labour laws such as, Occupational Safety and Health, Equal Opportunities, Minimum
Wages Legislation and Maternity Benefits.

 Ensure that environmental laws e.g. Certificate of Environmental Clearance or zoning laws are
followed.

Some areas in which the Government regulates business:

 Consumer Protection from unfair treatment e.g. the existence of the Bureau of Standards and
the Ombudsman; Consumer Affairs Division;
 Employee protection e.g. minimum wages; severance benefit; recognition of trade unions
 Hire Purchase Act
 Minimum and maximum price controls
 Zoning or control of land use to protect the environment and pinpoint areas for agricultural
development; housing development; commercial business development.
 Fiscal Policy e.g. taxation
 Waste Disposal from businesses in terms of hazardous substances; packaging; recycling

How government can influence businesses to protect the environment

Governments can seek to establish policies or legislation on areas targeted to environmental

sustainability. These areas should form part of the 'Corporate Social Responsibility ' aspect of the
organization. Moreover, Governments should move to ensure that businesses comply with legislation.
These areas include:

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 Green Technology: This entails using science and technology to protect the environment. It
involves areas such as: green chemistry, environmental monitoring, recycling of waste materials,
purifying water, purifying the air, conserving energy (electric cars, environmentally friendly
devices such as solar panels), rejuvenating ecosystems (replanting trees, managing waste).
Green technology is also called environmental technology or clean
technology.(https://usgreentechnology.com)

 Reforestation: This is the 'replanting of trees in a stretch of terrain which had for some reason
lost its forest cover.' It is, 'a planned or deliberate movement to re-grow vegetation lost due to
human activity, natural calamity or sudden climate change.'(www.eartheclipse.com)

 Proper disposal of waste: Waste management legislation will cover the collection,
transportation and disposal of garbage, sewage and other waste products. Waste management
is the 'process of treating solid wastes'. It encompasses solutions for recycling materials.
(www.conserve-energy-future.com)

 Zoning laws: Zoning is the restriction on the way land within a specified area can be used.
Planning and development laws help in preserving natural habitats, ensuring that a business fit
into the landscape with other types of institutions and to prevent overcrowding. It is also used
to cluster businesses in an area and to spread development to less developed areas.

 Appropriate use of technology in the production and disposal of waste: Examples include: Low
pollution garbage collection trucks. Where the truck generates electricity required for loading
and unloading while the truck is operating; use of new generation garbage incineration facilities
(ash recycling and power generation) (Japan); using dispensers for dry foods in supermarkets
reduces the need for packaging (Eco-point initiative Italy); EU legislation restricts the amount of
hazardous materials used in electrical and electronic equipment. This makes it easier and safer
to recycle waste.(eceuropa.eu)

Taxation

 A tax is levied on the individual or business entity. It is a compulsory payment made by

individuals and businesses to the government.
Principles of taxation include:

 A tax should be fair or equitable.

 The implementation of a tax should be economical in terms of administrative costs.
 Tax deductions should be made at convenient times so as not to disrupt the individual or
business functioning.
 The implementation of the tax should be done with full knowledge of all persons affected.

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Reasons for taxation:

 To generate revenue for government expenditure

 To manage the economy in terms of fiscal policy e.g. an expansionary fiscal policy involves
reducing taxation. This allows the individual consumer to have more disposable income,
thereby increasing purchasing power and stimulating demand. Businesses will have more
money available for investment. A deflationary fiscal policy involves an increase in taxation
intended to reduce the level of demand in the economy.
 To address a balance of payments deficit where the government seeks to reduce the outflow of
money (imports) by using tariffs or a tax on imported goods to increase the price of the imports.
This is intended to discourage imports and encourage the demand for local goods and services.
 To reduce the demand and consumption of de-merit goods and services such as, cigarettes,
alcohol and gambling.
 To redistribute income through expenditure on social welfare programmes

Types of taxes

Direct Tax: The incidence of the tax falls on the individual or business. A direct tax is usually levied on
income and capital, for example:

 Personal Income Tax is levied on the income earned by the worker.

 Corporation tax is imposed on the profits made by companies.
 Capital Gains Tax is imposed on the money from the sale of an asset e.g. property or shares.
 Capital transfer tax is placed on the transfer of property.
 Stamp Duty is levied on transactions such as the sale of land or financial transaction.

Indirect Tax: the incidence or burden of the tax falls on various individuals in the production process. It
is usually paid by the producer who in turn passes the cost to the consumer. The incidence of the tax
results in higher prices to consumers.

 Customs Duties or Tariffs: A tax levied on goods imported into the country.
 Excise Duties: A tax levied on goods manufactured in a country.
 Purchase Tax: a tax levied on the retail price of some goods e.g. tobacco
 Value Added Tax: A tax levied or placed on goods at each stage of production as a percentage of
the value added.
 General Consumption Tax is a type of purchase tax.
Note:

Value Added Tax is an ‘ad valorem tax’. That is a tax levied at a percentage of the value of the goods
e.g. the higher the value of the item, the greater the tax to be paid.

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A specific tax e.g. excise duties is levied or imposed at a fixed amount, regardless of the value of the
goods

Taxation Systems

 Proportional Taxation System: All taxpayers pay the same proportion or percentage of income
in taxes.

 Regressive Taxation System: As an individual’s income increases, the percentage of income

paid in tax, falls. Therefore, a regressive tax represents a smaller portion of the high income
than it represents of the smaller or lower income.

 Progressive Taxation System: As an individual’s income increases, the percentage of income

paid in taxes increases. Therefore, a progressive tax system represents a larger portion of the
high income than the lower income.

Forms of Government Assistance to Business

 Institutions for lending capital: Government through various agencies provide funding for small
entrepreneurs and start- up businesses. Usually, traditional lending agencies such as
commercial banks consider small start -up businesses to be risky in nature. The Government
therefore provides venture capital loans at lower interest rates.
 Training and technical assistance: The government provides training and technical assistance to
business persons in areas targeted for national development e.g. vocational skills; agriculture;
small business development. Further, the national curricular at the pre-school, primary and
secondary schools needs to be up- dated as necessary to be relevant to the environment.
 Research and information centres: Government departments usually conduct market research
and are able to provide information to businesses in terms of potential markets; new
technologies; trade agreements; business registration process; the legal framework.
 Subsidies and grants: Subsidies are payments made to producers intended to reduce the cost
of production, thereby, reducing the price to the consumer.
 Tax incentives: Government can offer tax incentives to business that set up in fields of national
importance e.g. tourism and agriculture.
 Trade Fairs and Promotions: Government can assist business by mounting trade fairs to
showcase goods and services. It can also promote businesses on foreign trade missions.

Impact of social services provided by Government

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 Health care: Some states provide a subsidized or free health care system that citizens can
access regardless of income levels. While this usually results in long lines for services, poorer
members of the society can access these merit goods that they cannot afford in the private
sector. Moreover, the government provides health centres and outreach centres in rural areas
to meet the basic needs of citizens.
 National Insurance Scheme: This provides employed persons who contribute to the scheme
with a retirement benefit and access to grants should injury or death occur on the job.
 Education: The government provides subsidized education and free education to citizens.
Moreover, governments usually provide scholarships for students to study particular fields. In
some countries the state also provides free textbooks up to the secondary level. Education is a
merit good and if left up to the private sector, poorer citizens would not be able to afford access
to educational services.
 Roads and Transport or Infrastructure: The government provides the infrastructural framework
for use by the citizens of the country and the business entities. These are public goods such as
roads and street lights or goods that are non -excludable by nature.

Structured Questions
1. Outline THREE key responsibilities of a Government. (6 marks)

2. Discuss THREE areas in which Government can influence business to engage in environmental

protection. (6 marks)

3.Define the term 'tax'. (2 marks)

4.State TWO reasons for taxation. (4 marks)

5. Explain the concept of direct tax. Give TWO examples. (4 marks)

6. Explain the concept of indirect tax. Give TWO examples. (4 marks)

7. Outline THREE forms of Government assistance to business. (6 marks)

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MULTIPLE CHOICE EVALUATION: Unit 9

1. A tax rate system where the tax rate falls as income rises is
a. A proportional system
b. A regressive system
c. A progressive system
d. An equitable system

2. A tax system where the tax rate remains fixed regardless of income levels is
a. A proportional system
b. A regressive system
c. A progressive system
d. A fixed system

3. A direct tax is paid directly to the government by the person or business entity on which it is
levied. Which of the following is NOT a direct tax?
a. Income tax
b. Corporation tax
c. Value added tax
d. Capital gains tax

4. A tax that is levied on specific goods such as alcohol to discourage consumption is a/an
a. Purchase tax
b. Excise duty
c. Tariff
d. Capital gains tax

5. Which statement best describes a subsidy?

a. A payment levied on firms
b. A bonus given to workers to increase productivity
c. A cash grant given to a business to encourage production of a particular product
d. A tax levied on a good or service

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6. While subsidies encourage business to increase production of needed products. Which of the
following statements describes a major disadvantage of subsidies?
a. Economies of scale from expansion
b. Lower cost passed on to consumers
c. Opportunity cost in terms of less money available to be spent on education and health
care
d. Surplus goods on the market

7. The government can assist the development of small and micro businesses in which of the
following ways?
I. Provide low interest loans
II. Provide technical assistance
III. Reducing subsidies
IV. Reducing taxes
a. l and ll
b. l, ll and lll
c. l, ll and lV
d. all of the above

8. Zoning is a government policy to protect the environment. This involves

a. Creating defined areas for business activities and restricting production in other areas
b. Developing highly urbanized areas
c. Easing restrictions to increase business activity
d. Banning the production of certain goods

9. Government implements fiscal policies such as reducing and increasing taxes for many reasons.
Which of the following is NOT a key reason for taxation?
a. To redistribute wealth
b. To restrict importation of certain goods
c. To reduce the standard of living
d. To reduce the demand for demerit goods

10. A key reason for government’s role in business is

a. Compete with the private sector
b. To crowd out private sector investment
c. To provide services to benefit all citizens
d. To influence private sector decision making

11. All of the following are KEY areas where Government regulates business activity, EXCEPT

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a. Zoning of business location
b. Price controls
c. advertising
d. Consumer protection

12. Using science and technology to protect the environment e.g. recycling is termed

a. zoning
b. green technology
c. Proper disposal of waste
d. environmental sciences

13. In order to reduce the demand for foreign exchange, the government decided to place a tax on
goods imported into the country. It seeks to reduce the consumption of foreign goods. This tax is
called a/an

a. excise duty
b. capital gains tax
c. corporation tax
d. tariff

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Unit 10: Business Technology and the Environment

Pupils will:
 explain the concept of business technology
 explain the role of Information and communication Technology in business
 describe the types of ICT used in the business environment
 distinguish between e-commerce and e-business
 discuss some ways in which ICT can improve the efficiency of business operations
 discuss some ethical implications of ICT usage in the business environment
 outline factors that determine a country's standard of living and quality of life
 explain national income and its variations
 describe the role of education in economic growth and development
 outline reasons for international trade
 identify the functions of major economic institutions and systems
 how economic institutions or trade agreements impact Caribbean nations
 identify major economic problems in the Caribbean and appropriate solutions
 explain the role, benefits and impact of foreign investment

Concept of Business Technology

According to study.com, the term 'business technology' refers to, ' the applications of science, data,
engineering and information for business purposes, such as the achievement of economic and
organizational goals. The main element of technology is the idea of change and how it can affect
business and society.'

Changes in technology will affect how a business operates in both the internal and external
environments. Examples include:
 using accounting software to file information electronically;
 targeting both the consumer and business market with product e.g.' Apple I Phone' enhanced
security features that can benefit business clients;
 using social networking/social media to monitor customer satisfaction and gain new customers;
 Telecommuting where with broadband access employees can work from home or on the field
(flexible working arrangements); video conferencing can save time and money in
accommodating out of town or foreign executives or clients;

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Explain the role of ICT in business

ci.uky.edu, describes 'Information and Communication Technology' or ICT as,' all rapidly emerging,
evolving and converging computer, software, networking, telecommunications, internet, programming
and information systems technologies.' In adopting ICT strategies, a business seeks to utilize aspects of
information, communication and technology to help the business achieve its objectives. It should add
value to business operations and help the business save time and costs. ICT can lead to:
 improved communication in business operations through the use of mobile phones, emails,
internet and intranet e.g. mobile money applications, e-commerce, management information
systems;
 improvements in record keeping and management e.g. using Quick Book, MS Projects
 online market research and information gathering on competitors;
 more efficient deliver using GPS systems
 using the internet to advertise products
 use of robotics and computer aided design software to enhance production; Computer aided
manufacturing to increase production efficiency
 improved stock control management through the application of electronic point of sale,
electronic data interchange and electronic funds transfer
(source: adapted from free. regenesys.net; BBC.co.uk 2012)

Types of ICT used in the business environment

A Management Information System (MIS): A system, manual or computerized designed to collect, sort
and analyse data to provide information to enhance decision making. The information for the MIS is
used to generate reports on areas such as employee absences and overtime, cash flow, sales and
profitability.
Examples of Management Information Systems

Transaction Processing System: Supports the day to day operations of the business e.g. electronic
transfer of funds

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Decision Support System: Provides information for managerial decision making e.g. sales figures for
reports.
Office Automation System: Provide support for office operations e.g. communication
Executive Support System: Provides information for high level management or executive decision
making
Human Resource Information System: Provide information related to the people aspect of the
organization e.g. performance management
Marketing Information System: provides information on the marketing aspects of the organization
e.g. market research, pricing strategies
 Market Research: This can utilize online surveys, blogs, chats, on line face to face interviews;
 Marketing: Web site advertising; emails, discussion forums, blogging, app advertisement, SMS
and MMS, social media advertising;
 Customer support: emails; webinar; social media; online newsletters; member portal;
 Cloud Technology which entails connectivity with systems that can allow personnel to access
resources from various locations.
 Communication; cell phones, smart phones, emails, text messaging, social networking, web
conferencing;
 Traditional productivity software tool: Microsoft Word, Access, Excel, Power point, Adobe
Illustrator
 Functional areas or specialist applications e.g.
Productions: Computer Aided Design, computer aided Instructions; Computer Aided
Manufacture, Net Suite Manufacturing Edition (integrated inventory, warehouse management,
order management, e-commerce platform etc.), Fishbowl Manufacturing (inventory
management with integrated QuickBooks accounting, material requirement planning);

Accounting and Finance: QuickBooks, Sage Intacct (Cloud based accounting software), NetSuite
(enterprise resource planning and customer relationship management), Multi-view (financial
solutions), Deskera ERP (cloud based suite that automates sales, billing, distribution, sales
commission calculations, purchasing, payment etc.);

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Distinguish between e-commerce and E-business.

E-commerce differs from E-business in the following ways:

 E-commerce focuses on the outward processes that impact the external stakeholders
(customers, suppliers, external partners). Processes that impact the external stakeholders
include: sales, marketing, order taking, delivery, customer service, purchasing of raw materials
and supplies e.g. office supplies. This is the process of buying or selling goods and services using
an electronic medium such as the internet (www.tutorialspoint.com);

 E-business contains the E-commerce process but also involves internal businesses processes
such as, inventory management, product development, risk management, finance, production,
knowledge management and human resource management. E-business focuses on cost savings
and efficiency on business processes;

 E-Commerce utilizes information exchange through technology such as, electronic data
exchange(EDI); Email; Electronic fund transfer(EFT) and Digital Libraries;
 A venture can consider E-commerce models such as B2B or Business to Business website that
sells products to other business entities; B2C or Business to Consumer website that sells directly
to the consumer.

Ways in which ICT can improve efficiency of business operations

It is important for businesses to keep up with the changing pace of the technological environment.
Business efficiency can be improved by ICT in the following ways e.g.:

 more efficient business operations e.g. document templates; digital filing system;
 instant communication through the use of emails, video conferencing;
 access to information via websites; request information at any time; share information;
 use software programmes to collect and interpret data;
 customer relationship management software records customer information e.g. buying history,
follow up on complaints;

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Application of Automation and Mechanization

Automation is described as the employment of machines in a continuous process of operation. It is

characterized by minimal use of labour in the process.

Mechanization is the substituting of human and animal labour with machines such as robotics and
computers to produce more efficiently.

Capital intensive production involves the increase use of more equipment and machinery than labour.

Labour intensive production is dependent on the extensive use of manual labour.

Advantages and Disadvantages of Automation and Mechanization

Advantages of automation and mechanization Disadvantages of automation and mechanization

 Increase productive capacity in shorter  Increased unemployment
cycle time  High initial investment costs
 Reduce labour cost  High maintenance costs over time
 Reduction in defects on production line  Prone to technical disruptions
 Minimal need for supervisors  Can only be employed for large output and
 Increase access to tertiary services standardized production
 Machines can become obsolete and
subject to depreciation

Lean Production and efficiency

 Lean production describes production processes designed to eliminate wastage through the
most efficient employment of technology and labour to meet customer requirements.
 To achieve lean production, the firm can utilize the following techniques:
Computer Aided Design (CAD): this uses computer software to design products which can be
configured to meet customer specifications. It reduces the need to construct actual prototypes.
The computer design can be modified and various models evaluated before actual production.
Computer –aided manufacture (CAM): Used in the manufacturing sector in mass or flow
production. It may also involve the use of robotics.

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Computer-aided instruction (CAI): Software application designed to instruct users on
procedures and methods.

Consequences of Unethical use of ICT

Privacy and Data Security issues: Privacy or the 'right of a person not to reveal information
about himself or herself' is of prime concern when using ICT applications. In the business
environment privacy can be compromised when systems are attacked (unauthorized
access/hacking). This has become an issue with the increase use of mobile banking, e-banking
and e-commerce e.g. identity theft

Businesses can seek to upgrade security via password security and personal identification
numbers.

Intellectual Property rights are considered infringed when intellectual work e.g. writings,
theories, studies, songs, music etc. protected by law is used without permission from the owner.
This involves piracy of material protected by intellectual property rights that is, the
unauthorized use, copying, distribution or downloading of software, games, information. The
person or business can lose income and control over material.

When employees access social media during the course of working hours, unless for business
use, this can prove to be a distraction from doing one's job.

Using social media to engage in cyber bullying or intimidating other persons or manipulating
media to damage the image of competitor's product.

Structured Questions
1. Define the term business technology. (2 marks)

2.Explain the role of ICT in the business environment. (6 marks)

3. Describe FOUR ways ICT can be used in business. (8 marks)

4. Differentiate between e-commerce and e-business. (4 marks)

5. How can ICT applications bring about efficiency in a business. (4 marks)

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National Income and Variations

Key points

Gross Domestic Product: GDP

+ Net Property Incomes from Abroad: NPI

=Gross National Product: GNP

-Depreciation

= National Income

 Gross Domestic Product: The total money value of the goods and services produced in a country
in a year.

 Net Property Incomes from Abroad: This is the difference between money coming into the
country e.g. remittance of incomes, interest form investment abroad and money leaving the
country. The figure can be positive or negative.

 Gross National Product: This is the money value of goods and services, produced in a country
and includes money coming in from abroad less money leaving the country, in a year
(GDP+NPI=GNP).

 Depreciation: This is the reduction in the value of an asset over time e.g. wear and tear of
machinery. Also called capital consumption.

 National Income: the money value of all goods and services produced in the country and from
interest abroad after deducting depreciation (GNP-Depreciation=National Income).

Ways of calculating National Income

1. The Income Method: this involves taking into account all the incomes earned by individuals and
firms within a country e.g.

Income from employment+ Profits +Rents +Net Property Incomes from Abroad= Gross National
Product -Depreciation= National Income

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2. The Output Method or Product Method: this involves taking into account all the output in the
country in a year e.g.

Total Domestic Product (GDP) + Net Property Incomes from Abroad = Gross National Product –
Depreciation = National Income

3. The Expenditure Method: this method involves totalling the amount spent on investment and
consumer goods and services in the country in a year e.g.

Investment Expenditure at Market Prices (Business)

+ Consumption Expenditure at Market Prices (Consumers)
+ Subsidies
- Indirect Taxes
+ Net Property Incomes from Abroad
= Gross National Product
– Depreciation
= National Income

Terms to consider

 Market Prices: The final price inclusive of taxes to be paid by the consumer.
 Factor Cost: The cost of factors of production used in producing the good.
 To move from market prices to factor cost: add subsidies and subtract indirect taxes
 Transfer payments: Payments made to individuals who are not engaged in productive activities
e.g. old age pensions and social welfare grants. This should not be counted as income in
National income statistics.

Problems in Computing National Income Statistics

 Double Counting e.g. including transfer payments that is, counting income twice.
 Some activities are not accounted for e.g. the payments made to babysitters, the work of
housewives, and the income from the illicit drug trade.

Uses of National Income Statistics

 To give an indication of the standard of living of a country

 To compare the standards of living of different countries
 To determine the rate at which national income is growing
 To determine which sectors of the economy needs improving

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Standard of Living

 Standard of Living describes the economic well-being of a country’s citizens. It reflects the
amount and quality of goods and services consumed by the population. It therefore reflects the
material comforts at the disposal of and enjoyed by citizens.

 A country may record a high GDP per capita figure, which indicates that on average citizens are
making a certain income. This may indicate a high standard of living. However, not all citizens
may have access to this money. The figure does not show how income is distributed in the
economy.

 Measuring standard of living:

GDP per capita = GDP

Population

National income per capita = National Income

Population

Per capita means per head of the population. It is the average income per head of the
population.

Standard of living indicators are quantifiable or measurable factors. Indicators of the standard of living
of a country may include, for example:

 Factors indicating Standard of Living

- GDP or National income per capita
- Average personal disposable income (the amount of money individuals have to spend
after deductions are taken out).
- Life expectancy
- Quality and quantity of available health care
- Diet of citizens
- Degree of leisure time or recreation enjoyed by citizens
- Income levels
- Employment rate
- Poverty rate

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- Average number of hours of work

- Inflation rate
- Number of paid vacation days per year
- Proper infrastructure
- Economic growth
- Access to education
- Cost of products

 A people can enjoy a high standard of living but a poor quality of life. Conversely, a people can
enjoy a high quality of life but a low standard of living.
Quality of Life

 Quality of life measures the basic freedoms and rights that citizens enjoy e.g. freedom to
worship; freedom of movement; freedom of association; crime rate. It is a qualitative measure
of the life of citizens.
Quality of life indicators include:

 Freedom form bondage or oppression

 Equal opportunities
 Freedom from discrimination from various characteristics such as gender and race
 Freedom of movement
 Freedom to worship
 Freedom of speech
 Freedom to exercise franchise or the right to vote
 The freedom to enjoy recreation
 The right to be educated
 Level of safety experienced by citizens

Economic Growth and Economic Development

 Economic Growth: This describes the expansion of the country’s economy that is, an increase in
the real level of national output or Gross National Product. This is after the effects if inflation
has been taken into account. Economic Growth is a quantitative increase in production.
However, this concept does not take into account the informal economy or environmental
degradation.

 Negative Economic Growth: This situation exists when there is a fall in productive capacity
from one period to another. It may also describe a failure of the economy to expand production.

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 Economic Development: This describes qualitative changes in the economy. It refers to

increases or improvement in living standards, human capital development and the enjoyment of
freedoms. It incorporates the development of telecommunication facilities and greater access
to governmental services. Moreover, it is concerned with environmental sustainability.
Economic development can be measured by the Human Development Index; Infant mortality
rate; the Human Poverty Index and literacy rates. Economic Development can lead to economic
growth.

 Human Resource Development (HRD): HRD describes the training and developmental activities
that create avenues for learning in the workforce. This learning can lead to human capital
becoming the competitive advantage of businesses. This would include on the job training; off
the job training; coaching; mentoring; e-learning; greater access to facilities for learning;
governmental support; national skills development. The development of the individual learning
capacity can lead to the person becoming more effective and efficient. This can lead to
increased output, thereby increasing economic growth.

 Real GDP or Real National Income: ‘Real’ indicates that the effects of inflation have been taken
into account.

 The Human Development Index (HDI): A measure of social and economic development
developed by the United Nations. The HDI is a broader measure than the National Income per
capita measure. It encompasses:

- Health of people that is life expectancy at birth

- Education that is enrolment in primary, secondary and tertiary education
- Standard of Living that is national income per capita

Role of education in economic growth and development

 Education increases productivity: Increases in the abilities and learning of the labour force can
increase labour productivity and foster higher output
 Education enhances creativity and innovation: By applying new ideas and capitalizing on
opportunities where one can implement knowledge on technologies, products and processes
economic growth or productive output can increase.
 Education promotes entrepreneurship by providing tools (knowledge of the environment,
markets, competitors; know-how in producing goods and services) to develop ideas.
 Education fosters technological advancement which facilitates new and improved processes that
leads to increased productivity
 Education facilitates economic progress: Education can promote the transmission of knowledge
and facilitate the implementation of technology which can promote economic growth

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 Education facilitates social progress: Education helps to foster an understanding of the
environment. It improves the quality of life of individuals and leads to increasing social benefits
to people and society

International Trade

 International Trade is trade or the exchange of goods and services between and among nations.

 Reasons for International Trade include:

- Some countries because of their climates are better able to produce certain products
and then trade with the rest of the world.
- Some countries achieve a competitive advantage because of their access to natural
resources e.g. oil, natural gas, asphalt, gold. These countries can extract the raw
materials and sell to other countries.
- Some countries can specialize in the production of certain goods and services and then
engage in trade
- Technological expertise can lead to increases in production
- The development of transportation and communication networks has led to increase
trade among countries.

 Absolute advantage: This situation exists when a country is more efficient in the production of a
good than another country.

 Comparative Cost Advantage: This is based on the assumption that a country will engage in the
production of a good in which it has the least cost than another country or the lower
opportunity cost than another country. This leads to trade.

Advantages of International Trade Disadvantages of International Trade

 Increase utilization of productive capacity  Local industries may have to lobby the
to produce surplus for trade government for protectionist policies to
prevent foreign competition
 Increase employment to produce goods
and services for trade  Dumping of goods in less developed
countries at lower prices than goods
 Improvement in the standard of living as a available on the market, especially where
result of greater access to goods and the goods are no longer needed in the
services more developed country

 Underdevelopment of local industries

 Improved quality of goods and services as
a result of international competition

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Structured Questions
1. Define the terms GDP, GNP and National Income. (2 marks each)

2. Define the term Standard of Living. (2 marks)

3. State THREE indicators of Standard of Living. (3 marks)

4. Define the term Quality of Life. (2 marks)

5. State THREE indicators of Quality of Life. (3 marks)

6. Describe the role of education in economic growth and development. (6 marks)

7. Define the term international trade. (2 marks)

8. Outline THREE reasons for international trade. (6 marks)

Regional and Economic Business Environment

Economic
Institutions and Functions
Systems
Caribbean Community  Promote integration among member nations e.g. The
(CARICOM) Caribbean Examination Council (CXC)
 To foster regional trade and the removal of trade barriers
 To promote economic development in the region
 To encourage co-operation on trade issues with the rest of the
world e.g. the Common External Tariff which is levied at the
same rate by all members on imported goods
Caribbean Single  To promote the free movement of people, goods and services
Market and Economy among member countries
(CSME)  To foster a single market without trade barriers
 To facilitate the free movement of capital
Caribbean  A financial institution that finances social and economic
Development Bank programmes in Caribbean countries
(CDB)  To offer assistance in the event of natural disasters
World Bank  Consists of two institutions: The International Bank for
(IBRD) Reconstruction and Development (IBRD) and the International
Development Association (IDA).
 The main function of the IBRD is to provide low interest loans
to developing countries and the poorest nations. These loans

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are to be used for areas such as education, health,

infrastructural development, and agriculture and environment
al management. the aim is to reduce global poverty.

Inter-American  Foster the economic and social development of nations in the

Development Bank Caribbean and Latin America
(IADB)  Provide loans to borrowing members at competitive interest
rates.
Organization of  Encourage co-operation among member countries
Eastern Caribbean  Promotes economic integration
States (OECS)
Organization of  Promote and maintain peace among member countries
American States (OAS) through the defense of human rights, encouraging free trade,
prevention of trade in illicit drugs, poverty reduction and social
and economic development.
Economic Commission  Coordinating the development of members through
for Latin American collaboration with member states and various institutions
Countries (ECLAC)  Offers technical assistance and training to members
 Provides a forum for discussion on economic and social issues

Association of  Promote communication among Caribbean states

Caribbean States (ACS)  Promote trade through co-operation and reduction in crimes
such as drug trafficking
 Promotes environmentally sustainable tourism
 Disaster response for nations

European Union (EU)  An economic and political union

 A single economy
 Promotes the free movement of goods, services, capital and
people among member states

World Trade  Promotion of trade liberalization

Organization (WTO)  Provides a system of rules for negotiation and settling trade
disputes
 Concerned with fair trade where no one country benefits from
trade at the expense of others
 Concerned with trade in goods, services, intellectual property,
the environment, regional trade agreements and technology
for example.

Caribbean Basin  Promote trade initiatives to allow Caribbean economies with

Initiative (CBI) preferential and duty free access to United States market.
Organization of  Determine the quantity of oil to be supplied on the world
Petroleum Exporting market
Countries (OPEC)  Influence the price of oil on the world market as these
countries act as a cartel
Eastern Caribbean  Promote free trade among members in the Eastern Caribbean

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Common Market
(ECCM)
North American Free  A trade bloc among Mexico, Canada and the United States of
Trade Agreement America.
(NAFTA)  Removal of trade barriers among these members

Caribbean Canadian  Initiative of the Canadian government to provide countries in

Agreement the Commonwealth Caribbean with preferential access to
(CARIBCAN) Canadian markets
Free Trade Area of the  Proposal to remove trade barriers among countries in the
Americas (FTAA) Americas to create a free trade area
International  providing advice to member countries on economic, monetary
Monetary Fund (IMF) and technical matters
 promoting adjustment of exchange rates
 providing short term credit facilities to members for meeting
economic difficulties due to adverse balance of payments

Problems and possible solutions

Problem Possible solution

1. Industrialization: this refers to  Government can establish legislation
business activities such as production on waste disposal and the regulation
and manufacturing on a large scale. of negative externalities or economic
Major heavy industrial activities in the bad.
Caribbean are in areas such as oil  Training and development of locals in
drilling; natural gas extraction and modern technological methods
bauxite. Problems involve: the  Encourage investment in secondary
disposal of industrial waste; reliance and tertiary production
on primary production; capital  Use profits to create businesses to
intensive nature of activities; high foster employment
energy costs; opportunity cost of
investment in these areas.

2. Unemployment: Types of Government can:

unemployment include:  Provide incentive to businesses to hire
a) Seasonal Unemployment: more persons
Persons are employed only  Invest in small business development
when the season for certain  Enhance programmes such as on-the –
types of economic activities job training
comes around e.g. During the  Invest in vocational programmes to

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Carnival season. enhance skills development.

b) Casual Unemployment: Refers  Increase government expenditure in
to persons who work on an on sector development e.g. farming,
–and- off basis. cottage industries; agriculture;
c) Cyclical Unemployment: horticulture; aquaculture
Unemployment that occurs as  Increase access to foreign
a result of the cyclical nature employment through bilateral
of the economy. People are agreements e.g. seasonal employment
laid off during a depression or in the agricultural sector in developed
recessionary period. countries.
Unemployment is reduced  Ensure that firms continue to employ a
during periods of boom. percentage of human capital as they
d) Technological engage in mechanization and
Unemployment: automation e.g. through business levy.
Unemployment that occurs as  Creation of a data base of persons
a result of the adoption or seeking employment
implementation of technology  Proper human resource or workforce
or more capital intensive planning to ensure that there are
means of production. Increase adequate skills development
automation and programmes to meet the demand for
mechanization results in less certain skills in the country
need for human capital.  Encourage foreign direct investment
e) Structural Unemployment: into the country to develop sectors
Unemployment that occurs as and business. This would encourage
a result of long term changes technology transfer, employment,
in the economy and results in infrastructural development, transfer
decrease demand for a good of learning.
or service e.g. movement
away from agriculture based
production to tertiary
production.
f) Frictional Unemployment:
Unemployment that occurs as
a result of the period of time
between one losing or leaving
a job and subsequently finding
one.
g) Residual Unemployment:
Unemployment that occurs as
a result of persons not having
the capacity to undertake or
engage in employment.
Overpopulation: A situation where there is an Government can:
excess of persons living in a defined area e.g. a  Develop policies for family planning
square kilometer. Problems such as poverty,  Develop zoning policies regarding the
social issues e.g. crime and increases in location of industry spread
communicable diseases; lack of proper  Put in place proper roads and utilities
housing and jobs can result from

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overpopulation. such as water and electricity

 Provide incentives programmes for the
Rural-urban drift: The movement of persons location of business in rural areas
from rural or less developed country areas to  Support self-help programmes to
urban centers or towns. develop skills

Migration: Movement of persons from one Government can:

country to another or movement of persons  Encourage Foreign Direct Investment
from one area within a country’s borders to into the country to develop sectors to
another area within the country’s borders. utilize skills
Problems include a loss of skilled and  Encourage more local business
competent labour supply or a ‘brain drain’. investment to utilize skills by providing
subsidies and tax incentives to
business.
 Implementing stricter immigration
rules e.g. make it compulsory for
students to return home
 Improve living standards by fostering
economic growth and development.
 Train local professionals to fill
positions instead of recruiting
foreigners.

Urbanization: A situation where persons Government can:

move from rural areas to settle in cities and  Improve zoning regulations to spread
towns. Problems occur in that: The rural- businesses to less developed areas
urban drift results in fewer persons being left
in rural communities. This reduces the labour
supply in those communities. Urban
communities will tend to become
overcrowded.
Inadequate Sources of Capital: The Caribbean Government can:
region is characterized as having an adequate  Encourage Foreign Direct Investment
supply of labour but inadequate capital (plant,  Borrow money from other countries or
machinery, equipment, technology, lending agencies
infrastructure and money) to put the labour to  Reduce interest rates to stimulate
work. borrowing for investment
Economic Dualism: This situation occurs Government can:
because the economy is based on two  Develop policies to spend the gains
separate sections/sectors. One sector is from the profitable sector in
characterized as being technologically developing the underdeveloped sector
developed and the other underdeveloped due e.g. increase government spending in
to a lack of modern technological inputs e.g. agriculture sector programmes and
agricultural sector. The focus tends to be on training and development
the more advanced sector.  Encourage small business
development by providing funding at
low interest rates to entrepreneurs in

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underdeveloped areas
Debt Burden: This arises from a country’s Government can:
borrowing to finance deficits. Eventually, the  Issue bonds to the public to raise
country has to pay the loan with interest and a capital
substantial portion of revenue generated has  Lower interest rates to stimulate
to go to towards financing this loan. This is a investment
debt burden. The problem is the opportunity  Raise taxes to generate revenue
cost of paying the loan, in terms of using the  Increase trade through trade
money for social and economic programmes in agreements
the country.  Get bailouts from foreign countries
 Reduce government expenditure e.g.
cut social programmes

How economic institutions or trade agreements impact Caribbean Nations

Example: CARIFORUM-EU Economic Partnership Agreement

Purpose:
 To make it easier for persons and businesses from the Caribbean and the European Union
regions to invest in and trade with each other; allows duty free/quota free access for all
CARIFORUM goods into the EU (except sugar);
 To help Caribbean countries grow their respective economies;
 To create jobs;
The agreement facilitates trade in services and investment; access to financial support from the
European Union; easier methods of doing business in the Caribbean.

Example: Caribbean Basin Initiative (CBI)

Purpose:
 Allows most products manufactured or grown in CBI member countries to be eligible for duty
free entry into the United States.
 This agreement created a free trade zone between the United States and 24 Caribbean
countries;

Example: Caribbean -Canada Trade Agreement (CARIBCAN)

Purpose:
 A preferential trade arrangement that guarantees duty free access to Canada for a range of
products. This excludes textiles and apparel, foot ware, luggage, handbags, leather garments,
lubricating oils and methanol;

Example: The CARICOM Single Market and Economy (CSME)

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Purpose:
 Benefit the region by providing opportunities to produce and sell goods and services. It serves
to attract investment.
 Create one market among member countries;
 Encourage full employment of labour and other factors of production;
 Produce a greater variety of goods and services to trade with;
 Free movement of goods and services: eliminating barriers to intra-regional movement goods
and services; using common standards; free movement of capital; free movement of labour;
 to allow CARICOM owned businesses to operate in other member states without restrictions'
 Common External Tariff: a duty applied by all CSME members to products imported from a non-
member;
 Common Trade Policy where members agree on matters relating to regional and international
trade;
Role, benefit and impact of foreign investment

According to investopedia.com, foreign investment, 'involves capital flows from one country to another,
granting extensive ownership stakes in domestic companies and assets.' Foreign investments can be
classified as:
o Foreign direct Investment (FDI) which are physical investments e.g. opening a manufacturing
plant, purchasing buildings, machinery and equipment in a host/foreign country;
o Foreign indirect investment is where companies, corporations or investors by shares in foreign
companies that are traded on the stock exchange; also called foreign portfolio investment (FPI)

Foreign Investments are usually made by companies, corporations or individuals looking to grow, or take
advantage of cost savings (cheaper production and labour costs or lower taxes).

Benefits:
 allows the investor to seek the highest rate of return;
 allows owners of capital to reduce their risk by allowing them to spread their investment;
 encourages the spread of best practices across borders e.g. accounting standards, corporate
governance;
 according to Feldstein (2000) et al., the host country benefits from foreign direct investment by
- gaining corporate tax revenues
- accessing training which helps in human capital development in the host country
- allows the transfer of technology in capital inputs to the host

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Impact

Positive: developing and underdeveloped nations are impacted as foreign investment is a way of
increasing the capital for investment and economic growth or increases in Gross Domestic Product. It
helps to reduce poverty and increase the standard of living or economic well-being of some impacted by
the investment. It also aids in human capital development as locals can be trained in managerial
competencies and how to use new technologies.

Negative: Repatriation of profits to home country; worker exploitation by not recognizing the legitimate
trade union; poor working condition for host country workers to minimize costs; may use transfer
pricing to benefit the company thereby affecting the level of taxes to be paid to the host country;

Structured Questions
1. Identify the main functions of (I) CARICOM) (II) IMF (3 marks each)

2. Give ONE example of a trade agreement and its impact on Caribbean nations. (4 marks)

3.Identify THREE economic problems in the Caribbean and suggest appropriate solutions. (6 marks)

4. Explain the role and impact of foreign investment. (6 marks)

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MULTIPLE CHOICE EVALUATION: Unit 10

1. Caribbean Single Market and Economy (CSME) ‘free movement’ of productive resources applies
to
I. Capital
II. Services
III. Goods
IV. Human resources
a. All of the above
b. l and ll
c. l, lll and lV
d. ll, lll and lV

2. A key function of the Caribbean Development Bank (CDB) is

a. To facilitate the development of goods and services
b. To facilitate loans at reduced interest rates for social and infrastructural development
c. To reduce import duties among member countries
d. Fostering free trade and the removal of tariffs

3. Major goals of the Organization of American States (OAS) includes

I. The promotion of human rights
II. The promotion of sustainable development
III. The promotion of free trade
IV. The promotion of free movement of people
a. l and lV
b. l, ll and lV
c. l, ll and lll
d. all of the above

4. The key role of the World Trade Organization (WTO) is

a. To reduce poverty
b. To develop trade in more developed countries
c. To develop trade restrictions
d. To liberalize international trade

5. An economy usually experiences periods of boom and recession. A period of recession usually
results in unemployment. This is specifically
a. Technological unemployment
b. Cyclical unemployment
c. Seasonal unemployment
d. Frictional unemployment

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6. Unemployment that stems from a lack of fit between the job market and job seeker or where
there is a deficiency in sourcing workers to fill vacancies is MOST LIKELY
a. Cyclical unemployment
b. Structural unemployment
c. Real –wage unemployment
d. Frictional unemployment

7. A key problem facing Caribbean nations is Population Density. Under -population in an area
affects a country by
a. Placing a strain on the country’s financial resources
b. Reducing the labour supply available
c. Increase social costs in certain areas
d. Causing high interest rates in the country

8. Which statement BEST describes the problem of ‘Debt Burden’ experienced by Caribbean
nations?
a. A situation where government spends more than it receives in revenue
b. Small island developing nations have to borrow extensively from international
institutions to balance their respective budgets
c. Growth is stifled due to low demand for goods and services
d. A situation of high interest rates in the country affecting investment

9. A situation where there are two sectors in an economy at different levels of development and
where one is significantly more technologically advanced is specifically
a. Foreign direct investment
b. Fiscal austerity
c. Economic dualism
d. Human resource development

10. Which of the following statements are effects of Foreign Direct Investment on a host country?
I. Employment generation
II. Exploitation of resources
III. Introduction of technology
IV. Social investment in sports and charities
a. l and lll
b. l, ll and lll
c. l and lV
d. all of the above

11. Extending opportunities to citizens for training and development in areas needed to encourage
economic growth and development is specifically
a. Human development index
b. Human resource development
c. Human resource management
d. Human ecology

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12. Which of the following initiatives can the government implement to develop the manufacturing
sector in respective countries in the Caribbean Region?
I. Provide tax breaks to firms
II. Reduce interest rates to make borrowing for investment more attractive
III. Increase corporation taxes to increase government revenue
IV. Provide subsidies to reduce factor costs
a. l, ll and lll
b. ll, lll and lV
c. l, ll and lV
d. all of the above

13. The total money value of goods and services produced in a country in a year is specifically
a. Gross national product
b. Gross domestic product
c. National income
d. Property Incomes

14. An organization that seeks to make the most efficient and best use of labour and technology to
improve production for example, using just –in –time inventory systems; reducing the number of
defects; or reducing costs is engaged in
a. Computer aided production
b. Division of labour
c. Specialization
d. Lean production

15. Using computer technology to design products or building prototypes using software is
appropriately termed
a. Computer- aided manufacturing
b. Computer-aided design
c. Computer –aided instruction
d. Software developers

16. In order to increase efficiency and speed of production, a soft drink firm replaced its human
labour with machines. This is an example of
a. Computer aided manufacturing
b. Computerized production line
c. Mechanization
d. Technology

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MULTIPLE CHOICE

Tests

This test consists of 60 multiple choice questions

Time: 75 minutes

INSTRUCTIONS: Students are required to answer all questions by

shading the appropriate letter on the answer sheet.

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Test 1

1. Country X pays for wheat from Country Y with the commodity bananas. This system of
exchange can be described as

a. Electronic transfer
b. Bill of lading
c. Barter
d. Financial trade

2. A situation where each party to trade must have what the other party wants is BEST described
as

a. Double coincidence of wants

b. Medium of exchange
c. Store of value
d. Rate of exchange

3. A card that allows the client the facility of using money and pay the bank at a later date, with
interest is a

a. Discount card
b. Debit card
c. Credit card
d. Smart card

4. The organization of the factors of production to decide what to produce; how to produce and
for whom to produce is specifically

a. A network
b. An economic system
c. A planned economy
d. A mixed economy

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5. All of the statements are characteristics of a sole trader EXCEPT

a. The sole trader has limited liability.

b. The sole trader may hire other persons to work in the business.
c. The sole trader makes all decisions.
d. The sole trader has unlimited liability.

6. Which of the following are key features of telebanking?

I. usually available 24 hours, everyday
II. customer can access account balances
III. customer can transfer funds between accounts
IV. business can sell products online using the shopping cart feature

a. all of the above

b. I, II and III
c. I, III and IV
d. II, III and IV

7. Which of the following are main functions of money?

I. measure of value
II. medium of exchange
III. acceptability of the currency
IV. store of value

a. I, II and IV
b. II, III and IV
c. III and IV
d. all of the above

8. Which of the following statements are key features of a private company?

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I. There must be proper record keeping for taxation purposes
II. An unlimited amount of shareholders
III. The business is incorporated
IV. Shareholders enjoy limited liability

a. l, ll, lll and lV

b. l, ll and lll
c. ll, lll and lV
d. l, lll and lV

9. A co-operative is an institution that is specifically

a. Traded on the stock exchange

b. Owned and operated by members
c. Owned by private shareholders
d. Maintain roads and oversee public facilities

10. An economic system is the mechanism by which a country will utilize its limited resources
among unlimited needs and wants. Which of the following statements accurately reflect the
basic economic questions that must be answered by each economy?

I. The decision of what to produce

II. The decision of when to produce
III. The decision of which production method to use
IV. The decision of who is to benefit from the production of goods and services

a. l, ll and lll
b. ll, lll and lV
c. l, lll and lV
d. l, ll and lV

11. Health and education are products which provide some benefit to the society. These goods are
SPECIFICALLY referred to as

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a. De-merit goods
b. Public goods
c. Merit goods
d. Beneficial goods

12. Which of the following does NOT reflect management’s responsibility to shareholders?

a. Providing returns on the owners’ investment

b. Providing accurate information on accounting procedure
c. Providing appropriate information on the side effects of using the product
d. Invest the company’s money wisely

13. Which department in a business is responsible for product quality standards, capacity planning,
product design and stock management?

a. Human Resource Management

b. Marketing
c. Finance
d. Production

14. Management is BEST described as

a. The process whereby planning, organizing, directing and controlling the business are
carried out.
b. A group of people who organize the business.
c. A system for co-ordinating the business.
d. A body responsible for motivating the workers.

15. Motivation is creating a drive in the worker to achieve particular goals. An organization that
ensures that workers have a job contract and that the physical surroundings are free from
hazards is meeting workers

a. Esteem needs
b. Affiliation needs
c. Safety and security needs
d. Basic physiological needs

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16. The chain of command is

a. The right to issue commands.

b. The flow of authority from top to bottom of the organization.
c. The amount of persons a manager has to oversee.
d. The feedback system in the organization.

17. The organization structure outlines the formal relationship between each department, job and
management in a business. A functional organizational structure is one where

a. The business has wide spans of control.

b. The business is organized into departments such as marketing, finance, production and
human resources.
c. The business is divided along product lines.
d. The business is divided along geographic lines.

18. Ethical issues can affect the corporate brand of an organization: Which of the following actions
are unethical BUT not illegal in nature

a. Money laundering
b. Testing products on animals
c. Sexual harassment in the workplace
d. Embezzlement from company's pension fund

19. Which of the following traits should an effective leader possess?

I. Ability to lead by example

II. Ability to effectively delegate tasks
III. Be flexible as necessary
IV. Use appropriate leadership style

a. l and lll
b. ll, lll and lV
c. lV
d. all of the above

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20. Conflict is a dispute or disagreement that prevents the achievement of goals. A MAJOR source
of conflict between workers and management is

a. Leadership style
b. Trade unions
c. Dividend payments
d. Government policy

21. A team is described as a group of persons who come together to achieve a particular goal. A
key advantage of teamwork is

a. The lengthy time taken to make decisions

b. Fostering a participative approach to work
c. A strong personality is likely to dominate the team
d. Can meet the safety needs of workers

22. Communication is defined as the transmission of ideas, information, facts and opinion from an
individual or group to other individuals or groups. Which flow diagram represents the effective
communication process?

a. Sender – message- receiver

b. Sender-receiver-feedback
c. Sender-message-medium-receiver
d. Sender-message-medium-receiver-feedback

23. Collateral is BEST defined as

a. A type of capital used in the business.

b. A computer based system to collect, process and retrieve information.
c. A form of security or surety used to secure or get a loan.
d. A type of short term loan offered by banks.

24. Which of the following statements is LEAST LIKELY to be a major function of the entrepreneur?

a. Conceptualizing the business idea

b. Accessing funding for the business
c. Evaluating the performance of the business
d. Promoting staff

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25. Planning involves developing proposals for the future activities of the firm. Short term planning
specifically deals with

a. Tactical planning activities usually for a few years

b. Strategic planning which involves the creation of major goals
c. Operational planning which involves the day to day management of the business
d. High level decision making

26. An asset handed over as security for a loan if the debtor fails to pay is

a. Consideration
b. Collateral
c. Contract
d. Car

27. A business plan is a detailed description of the proposed business. Which of the following is
NOT included in the business plan?

a. Financial plan
b. Operational plan
c. Executive summary
d. Business associations

28. An example of unethical behaviour in business would be

a. To install cameras to monitor employees

b. To conduct experimental research on animals
c. To pay workers minimum wage
d. To withhold dividend payments to shareholders

29. The key distinction between a contract and a social agreement is

a. Offer and acceptance

b. Capacity of parties involved
c. The intention to create legal relations
d. Invitation to treat

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30. Mary decides to unconditionally agree to all terms and conditions of an offer made by Max.
Mary has made a/an

a. Consideration
b. Acceptance
c. Counter offer
d. Performance

31. A valid contract is

a. A counter offer
b. A void contract
c. Enforceable by law
d. Form or consideration

32. For a contract to be valid it must contain essential features. The feature that describes an
expression of interest of one party to another and a subsequent act of indication to accept the
terms outlines is

a. Offer and acceptance

b. Form or consideration
c. Capacity of the party
d. Good faith

33. An internal document used by departments of a business to request goods from the purchasing
department in a company is

a. An advice note
b. A credit note
c. A requisition
d. A catalogue

34. A document that outlines the supplier details; a specific number; customer’s details; terms of
sale and details of goods is referred to as

a. Statement of accounts
b. Pro forma invoice
c. Purchase requisition
d. Stock card

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35. A permit allowing the trader to bring a specified quantity of particular goods into a country as a
means of import restriction is

a. Import licence
b. Export licence
c. Import quota
d. Tariff

36. Insurance calculates the risk that a particular event happens. Assurance is

a. Risk that is likely to happen e.g. car accident

b. Premium paid to cover risk
c. Insurance against an event that must occur e.g. death
d. Pooling of money to pay for a risk that must happen

37. Jobs requiring a high level of training or vocational qualifications e.g. plumbers, electricians,
engineers are referred to as

a. Unskilled
b. Professional
c. Semi-skilled
d. Skilled
38. Movement of people from a home country e.g. Trinidad and Tobago to live and work in Canada
is specifically

a. Emigration
b. Internal migration
c. External migration
d. Rural-urban drift

39. The factor of production that consists of the money invested in business and the assets e.g.
machinery and equipment is

a. Land
b. Labour
c. Capital
d. Enterprise

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40. A level of output that meets the basic needs of the society but not significant to improve the
way of life or standard of living is BEST described as production at the

a. Export level
b. Subsistence level
c. Domestic level
d. Surplus level

41. Which of the following features is NOT characteristic of a cottage industry?

a. One-person business or family type business

b. Utilizes a high degree of mechanization
c. Small amount of capital needed for start up
d. Use simple tools and equipment

42. ' Integrated marketing' is most appropriately defined as

a. The process if selling goods in the most profitable way.

b. A form of internet marketing utilizing social networking websites.
c. A marketing strategy that emphasizes the importance of a consistent, seamless,
multidimensional brand experience for the consumer.
d. A marketing process that stresses what the customer wants.

43. Which of the following list of activities specifically gives the composition of the 4Ps in
marketing?

a. People, price, promotion, place

b. Place, product, price, promotion
c. Process, price, promotion, place
d. Physical evidence, product, place, price

44. A firm has to protect its ideas and regulate the use of its products by others. One way this can
be done is to be given the rights legally to be the sole producer of a new product. This is
appropriately called a/an

a. Patent
b. Registered design
c. Trademark
d. Copyright

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45. The price the customer expects to pay for a good or service is referred to as a

a. Price ceiling
b. Price flow
c. Price plateau
d. Cost price

46. A firm’s strategy to keep a product’s price below certain levels, so that the good or service
appears cheaper to the customer is MOST LIKELY:

a. Psychological pricing
b. Differential pricing
c. Dumping
d. Market skimming pricing

47. Which of the following is NOT a key aspect of promotion?

a. Advertising
b. Personal selling
c. Public relations
d. Transportation

48. Wholesalers have all BUT the following role

a. Breaking bulk
b. Bearing risk in case of price fluctuations
c. Reduce transportation cost to manufacturers
d. Sell in small quantities to the final consumer

49. Which of the following is NOT a service offered by commercial banks?

a. Provide debit and credit cards

b. Accepting deposits from customers
c. Providing loans to customers
d. Lender of last resort to commercial banks

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50. Which of the following activities form part of Supply Chain Operations?
I. planning and developing strategy for procurement
II. sales order fulfilment
III. selection of manufacturing location
IV. developing the distribution network
a. all of the above
b. I, II and III
c. II, III and IV
d. I, III and IV

51. Savings refer to that part of income that is not used. Which of the following is NOT a main form
of savings?

a. Keeping money in a savings account

b. Investing in stocks on the stock exchange
c. Membership in a credit union
d. Participating in a sou sou

52. A non-profit co-operative controlled and owned by members, that provides low interest loans
to membership is specifically a/an

a. Development Bank
b. Commercial Bank
c. Insurance Company
d. Credit Union

53. The economic well-being enjoyed by the citizens of a country is the specifically

a. Quality of life
b. Standard of living
c. Per capita income
d. Gross domestic product

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54. Stamp duty, income tax and property tax are examples of

a. Indirect taxes
b. National taxes
c. Direct taxes
d. Non- tax revenue

55. Gross National Product (GNP) measures

a. The total value of incomes produced in a country in one year

b. The total value of incomes produced in a country and from interest abroad in one year
c. The total value of capital used in a country during one year
d. Total production by domestic factors

56. Where a country seeks to expand its economy, the focus is on economic growth. Economic
growth is BEST described as

a. Increase in tax revenue

b. An increase in the country’s real Gross Domestic Product
c. Increase in spending
d. An increase in the quality of life of citizens

57. Which of the following statements best describe the reasons for international trade?

I. specialization
II. to increase choice to consumers
III. geographic and climate factors
IV. to break up monopolies

a. l, ll and lll
b. ll and lV
c. I, ll and lV
d. l, ll, lll and lV

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58. Restrictions on the way land within a specified area can be used is best described as

a. Planning
b. Development
c. Zoning
d. Land Settlement

59. The World Trade Organization seeks to promote which of the following objectives:

a. To create a single economy.

b. To provide financial and technical assistance to developing nations
c. To promote communication among Caribbean States
d. To Promote trade liberalization

60. The key purpose of the International Bank for Reconstruction and Development (IBRD) is to

a. Determine the demand for oil on the world market

b. Reduce poverty in non-oil producing countries
c. To promote trade liberalization
d. To provide loans and financial services to poor nations in trying to reduce poverty

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Test 2

1. Early economies were structured whereby people engaged in production to satisfy their basic
needs and not to improve their standard of living. This system is BEST described as

a. A mixed economy
b. A subsistence economy
c. Indirect production
d. The barter system

2. The problem of barter where it was sometimes not possible to divide certain commodities for
trade is appropriately referred to as

a. Store of value
b. Indivisibility of goods
c. Standard of value
d. Double coincidence of wants

3. The use of a card that facilitates the use of funds directly from a person’s bank account to a
merchant’s account and where a person spends his or her own money is BEST described as a

a. Credit card
b. Debit card
c. Smart card
d. Gold card

4. Which of the following is NOT a key feature of e-commerce?

a. enables the use of electronic fund transfer

b. allows faster communication with stakeholders
c. can be used from a landline or cellular phone
d. service can be available anywhere and anytime with available networks

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5. A document detailing the amount of profit each partner gets; salaries and interest each partner
will receive in a partnership is SPECIFICALLY called

a. The articles of association

b. A partnership deed
c. The memorandum of association
d. The partnership accounts

6. Max invested in a publicly traded company. If the company goes bankrupt, Max loses only what
he invested in the company. This is a case of

a. Limited liability
b. Unlimited liability
c. Limited company
d. Limited partnership

7. The memorandum of association gives information about the company and governs its
relationship with the external environment. All of the following statements EXCEPT one are
included in the statement. Which statement is not included?

a. The amount of money to be raised by issuing shares.

b. The objectives of the company and some of its actions.
c. The rights and obligations of directors
d. The address of the company’s registered site or office

8. A public limited company (plc.) is distinguished from a private limited company (ltd.) by which of
the following key points?

a. Shares in the public limited company are family owned. Whereas, in a private company,
shares are public.
b. Shares in the public limited company are traded on the stock exchange. While, shares in
the private limited company are not.
c. There is a minimum of two shareholders in both companies.
d. There is no distinction.

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9. Which of the following statements accurately reflects the major purpose of the public sector?

a. Profit maximization
b. Sales maximization
c. Welfare of citizens maximization
d. Maximization of production efficiency

10. An economy characterized by individuals engaging in direct production for basic survival, is BEST
described as

a. Free economy
b. Subsistence economy
c. Planned economy
d. Mixed economy

11. Cigarettes and alcohol are goods that are sold to consumers. While persons may gain
employment in these industries, the consumption of these goods produces negative effects in
terms of social and health issues. These goods are MOST appropriately described as

a. Merit goods
b. De-merit goods
c. Public goods
d. Non-beneficial goods

12. Employees represent a key internal stakeholder group. A key responsibility of management to
employees is

a. To maximize profit on sales revenue

b. Eliminate discrimination in the workplace
c. To contribute to the economy by paying taxes
d. To be a good corporate citizen

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13. The Finance department is specifically responsible for

a. The pricing strategy of the products

b. Ensuring that corporate and income taxes and statutory deductions are made
c. Quality control measurement
d. Rewards and recognition policy for employees

14. The process of establishing objectives and setting objectives to work in the short term, medium
term and long term is referred to as

a. Directing
b. Co-ordinating
c. Planning
d. Controlling

15. An organization that provides proper salaries and medical plans for employees is meeting their

a. Affiliation needs
b. Esteem needs
c. Safety needs
d. Physiological needs

16. Which of the following statements BEST defines ‘Span of Control’?

a. The reporting relationship from bottom to top of the organization

b. A representation of the structure of the organization
c. Assigning tasks to persons
d. The number of subordinates under the control of a manager

17. A LINE organization structure

a. Illustrates a direct flow of authority from top to bottom of the organization

b. Is based on groups of specialists who produce expert advice to the organization
c. Is a short term , committee type of structure
d. Illustrates the formal horizontal relationships between workers

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18. A structure that involves representation from various functional areas, to deal with specific
organizational issues or problems and is usually dissolved on completion of the responsibility is
referred to as

a. Work group
b. Task force
c. Staff group
d. Matrix structure

19. A democratic leader is one that tends to

a. Allow workers to do a job and participate when necessary

b. Make all the decisions
c. Consult with workers
d. Lead by example

20. Mediation is one way of solving a conflict. This is

a. A situation where a third party keeps the negotiation on going

b. A situation where a third party listens to both sides and makes suggestions to resolve
the issue
c. A situation where a third party comes to a judgement on the issue
d. Making peace

21. Which of the following statements describe the MAJOR advantages of teamwork in business
organizations?

I. The pooling of different ideas and opinions

II. Greater control of tasks assigned to individuals
III. Development of social skills
IV. Motivation of workers individually and collectively

a. l and lll
b. l, ll and lll
c. ll and lV
d. I, ll, lll and lV

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22. The medium of communication is the means by which the sender sends the message. Which of
the following are key verbal methods of communication used in organizations?

I. Face to face meetings

II. Presentations
III. E-mails
IV. Workshops

a. l, ll and lV
b. l, ll and lll
c. ll, lll and lV
d. all of the above

23. A 'code of ethics' is BEST conceptualized as

a. A document that shows the organization's core values and demonstrates the
commitment to standards.
b. A document that outlines the operational plans for the organization.
c. A compliance code.
d. A circular memorandum stating how employees should behave.

24. Which of the following is NOT a key trait of a successful entrepreneur?

a. Willingness to undertake risk

b. Creative and innovative
c. Flexible and adaptable to change
d. Authoritarian style in dealing with employees

25. Which of the following describes an illegal business activity?

a. Avoiding taxes
b. Evading taxes
c. Paying workers minimum wages
d. Government setting maximum prices or price ceilings

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26. Collateral is required to reduce the risk the lender is made to bear. Which of the following is
NOT a main form of collateral?

a. Property or real estate

b. Plant/manufacturing facility
c. Stocks
d. Insurance policy

27. The main role of the Executive Summary in a business plan is to

a. Outline how the business will be managed

b. Introduce the business by outlining the description of the business; mission and goals
c. Show projections of income and expenditure
d. Provide details of the plant and its capacity

28. Consideration in a contract is described as

a. The price offered for the product

b. The price for which one party secures the legal obligation on the part of the other
party
c. The price advertised for the product
d. The intention to create legal relation

29. Which of the following is NOT an example of a simple contract?

a. Purchasing goods on credit from a shop

b. Hiring a taxi
c. Purchasing an item from the cafeteria
d. Financing a mortgage

30. Mark is twelve years old. He is the sole heir of the family’s house. Mark agrees to sell the house
to his neighbour for $200 000. This contract is void because of which feature?

a. Legality
b. Capacity
c. Possibility
d. consideration

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31. In a credit sale, the consideration due from the customer to pay at a future date is

a. Executed
b. legal
c. Implied
d. Executory

32. An agreement for the sale of a manufacturing plant must be made in writing. This is an
example of a

a. Contract of record
b. Simple contract
c. Specialty contract
d. Seal

33. A business document that outlines the transactions the business has conducted, outstanding
money to be paid, opening and closing balances of the business is specifically a

a. Pro forma invoice

b. Statement of account
c. Stock card
d. Bill of lading

34. Which of the following statements BEST describes a bill of lading?

a. A document representing title to the goods.

b. A document showing the size and quantity of goods.
c. A convenient way of payment.
d. A document limiting the quantity of certain items.

35. An agreement by the insurer to make good the losses suffered by the insured by means of
money or replacement is a principle of insurance called

a. Utmost good faith

b. Indemnity
c. Subrogation
d. Proximate cause

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36. Which of the following are KEY determinants of the labour supply?

I. Capital
II. Economic conditions
III. Quality of the labour force
IV. Governmental policies

a. l and lll
b. ll, lll and lV
c. lll and lV
d. all of the above

37. A situation where there is a movement of skilled and professional persons from a community or
country is specifically called

a. Rural-urban drift
b. Brain drain
c. Internal migration
d. External migration

38. Converting raw materials into finished goods for example, constructing a building or processing
canned goods are activities belonging to which type of production?

a. Domestic output
b. Primary production
c. Secondary production
d. Tertiary production

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39. Which of the following factors should be present for cottage industries to achieve the goal of
employment?

I. Training programmes to develop skills

II. Accessibility to raw materials
III. Financial support through low interest loans
IV. Government assistance to set up trade shows

a. l and ll
b. l, ll and lll
c. l and lV
d. l, ll, lll and lV

40. Benefits that accrue to a firm through expansion for example, technical advantages through
automation and mechanization are referred to as

a. Diseconomies of scale
b. Economies of scale
c. Cost savings
d. Marginal costing

41. All of the following are key examples of Primary Sources of data, EXCEPT

a. Published financial records

b. Site visits
c. video conferencing focus group
d. Face to face interview

42. Kelly has developed a line of exotic, organic soaps. She gives her line of products a distinctive
name and design. She wants to differentiate her soaps. Kelly has engaged in marketing activity
of

a. labelling
b. psychological pricing
c. positioning
d. branding

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43. Which of the following is NOT a function of a label?

a. A label gives the grade of the product

b. A label gives a product description
c. A label gives the manufacturer and country of origin
d. A label makes it convenient to handle the product

44. A pricing strategy that enables a firm to price its products below that of its competitors to enter
a segment is BEST described as

a. Cost plus pricing

b. Penetration pricing
c. Market oriented pricing
d. Psychological pricing

45. Which of the following is NOT a key aspect of promotion?

a. Advertising
b. Personal selling
c. Public relations
d. Transportation

46. Short term incentives to channel agents and consumers, to encourage sales e.g. free samples,
price discounts and trade discounts describe

a. Advertising
b. Sales promotion
c. Public relations
d. Personal selling

47. Which of the following is NOT a function of the central bank?

a. Lender of last resort

b. Raise or lower interest rates
c. Providing loans to private individuals
d. Government banker

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48. Which of the following is NOT a KEY way to ensure good customer service?

a. Warranty
b. Statement of income and expenditure
c. Patenting ideas for good customer service
d. After sales service

49. Investment activity is usually risky in nature. Which of the following are main forms of
investment?

I. Placing funds in a new business enterprise

II. Buying property
III. Placing funds in money market and income funds
IV. Placing funds in term fixed deposits

a. l, ll and lV
b. l, ll, lll and lV
c. l, ll and lll
d. l and ll

50. A tax rate system where the proportion of taxes collected rises as income increases is

a. A proportional system
b. A regressive system
c. A progressive system
d. An equitable system

51. The standard of living measures the economic well-being of the citizens. Whereas, the quality of
life describes

a. Citizens access to material comforts

b. Access to a better life characterized by freedom and access to public utilities
c. The per capita income of citizens
d. The total output of goods and services in the country

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52. Government raises revenue to finance expenditure through the levying of taxes. Which of the
following is NOT a main role of taxation?

a. To redistribute income
b. To reduce the demand of certain goods
c. To reduce the importation of certain goods
d. To burden the population

53. To convert Gross National Product (GNP) to Net National Income (NI) the following must be
considered

a. Add net property incomes from abroad

b. Subtract the value of imports
c. Subtract the value of indirect taxes
d. Subtract capital consumption or depreciation

54. "The management of the flow of goods and services' is specifically

a. capacity planning
b. logistics
c. supply chain operations
d. marketing

55. The movement of cargo from the origin to the destination using several modes of transport thus
a single transport contract or bill of lading is BEST termed

a. Single entity service provider

b. multimodal transport
c. intermodal transport
d. mode of distribution

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56. Which of the following are main types of Indirect taxes?
I. Customs duties
II. Excise Duties
III. Purchase tax
IV. General Consumption Tax
a. I,II and III
b. I, II, III and IV
c. II, III only
d. I and IV only

57. A major section of CARICOM’s operation is the Common External Tariff (CET). This is where a
tariff is applied by all member states at the same rate on imports. The aim of the common
external tariff is

a. To increase exports of some member nations

b. To encourage imports from non-member nations
c. To increase the free movement of goods
d. To prevent unfair competition among member states

58. Which of the following is NOT a key purpose of the CARIFORUM-EU Economic Partnership
Agreement is
a. To gain easier access to Caribbean and EU regions to invest in and trade with each other
b. To create jobs
c. To help Caribbean economies grow
d. To allow investors to seek the highest rate of return

59. An index of the degree of over- population or under-population in a defined area which
measures the average number of people living in a square mile is

a. Population count
b. Population density
c. Population width
d. Population statistics

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60. The loss of jobs as a result of changes in the economy, such as a recession, is specifically,

a. A skill deficit
b. Frictional unemployment
c. A brain drain
d. Cyclical unemployment

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Test 3
1. In early economies, it was not always possible to produce to satisfy all individual wants and
needs. Man therefore engaged in trade with each other. This is most appropriately described
as

a. Direct production
b. Indirect production
c. Subsistence production
d. Domestic production

2. A medium of exchange that is acceptable to parties involved in trade and reduces the need to
barter can BEST be called

a. Services
b. Goods
c. Money
d. Coins

3. To transfer money from one bank account to another utilizing computers is appropriately
termed

a. Debit card transfer

b. Credit card transfer
c. Electronic transfer
d. Telebanking

4. A situation where Country A trades oil to get wheat from Country B, is appropriately called

a. Scarcity
b. Opportunity cost
c. Barter
d. Mutual trade

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5. Like sole traders, partners in a partnership business may have unlimited liability. However,
there may be a partner who contributes capital but does not participate in the daily running of
the business. This partner normally has limited liability and is appropriately titled

a. A sleeping partner
b. A slack partner
c. A simple partner
d. A sole partner

6. A KEY disadvantage of both a sole trader and partner is

a. All partners face limited liability

b. Owners face unlimited liability
c. Owners may disagree
d. Decision making is a long process

7. Shareholders who receive dividends before other shareholders and where the dividend is fixed
are referred to as

a. Ordinary shareholders
b. Preference shareholders
c. Shareholders
d. Directors

8. A legal agreement in which an established company allows a venture to use the established
name of the business and to produce the established company's products is termed a

a. Franchise
b. Conglomerate
c. Multinational
d. Public company

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9. There are many social issues that arise from the free market system. An economic system
created to establish more equal distribution of income among citizens by full government
involvement is commonly called

a. A capitalist system
b. A planned or controlled system
c. A mixed system economic system
d. A subsistence economy

10. The profit maximizing motive of the free enterprise system produces a major disadvantage to
the citizens of a country. Which of the following statements best addresses this drawback?

a. Too much freedom of choice

b. Competition produces higher standards of goods and services
c. The provision of merit goods
d. Lack of interest in providing public goods

11. Goods such as roads and street lights are usually provided by the state. These goods can be
consumed by each member of the society regardless of income or status levels. They are non-
excludable in nature. They are

a. Merit goods
b. De-merit goods
c. Public goods
d. State goods

12. The government sets the legal framework in which businesses operate. A major responsibility of
management towards the government is

a. To provide compensation for accidents in the workplace

b. To support charities and special causes
c. To reward workers with equitable wages
d. To pay taxes and make the necessary statutory deductions

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13. Which of the following is NOT a key role of the Marketing Department?

a. Recruitment and selection of marketing personnel

b. Development of the marketing mix strategy
c. Engage in market research
d. Ensure that the product is transported by appropriate means

14. The function of ensuring that a business has put in place the relevant structure to achieve its
objectives; allocating resources and delegating tasks is BEST described as

a. Planning
b. Controlling
c. Directing
d. Organizing

15. Affiliation needs can be met in the organization through

a. Having employees work in workgroups and teams

b. Providing safe working conditions
c. Provide incentives to employees
d. Empowering employees

16. Unity of command is appropriately described as

a. A worker should report to multiple managers

b. One worker should report to one manager to avoid conflict
c. The level of authority in the organization
d. The number of persons who report to a particular manager

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General
Manager

Industrial
Relations
Officer

Production Marketing Finance

Manager Manager Manager

17. The above organization chart represents

a. Line relationships
b. Line and staff relationships
c. A functional chart
d. A matrix organization

18. Which of the following statements best describe the key advantages of the informal group in
organizations?

I. Cause worker stoppages from industrial actions

II. Acts as a support system for workers
III. May help the team to accomplish tasks
IV. Passes gossip via the grapevine

a. l, ll and lll
b. l, ll and lV
c. ll and lll
d. all of the above

19. An authoritarian leader is one who

a. Sells the idea to workers

b. Tells the idea to workers
c. Consults with workers on developing the idea
d. Encourages worker participation in decision making

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20. A situation where both parties to a conflict e.g. management and trade union, agree to let a
third party rule on a matter with the outcome being accepted by the parties is appropriately
termed

a. Conciliation
b. Accommodation
c. Arbitration
d. Mediation

21. While teamwork is likely to bring benefits to a business, there are also limitations to consider. A
MAJOR drawback of teamwork is

a. Increase in the amount of work accomplish by the team

b. Shared leadership
c. Conflict as a result of diverse personalities
d. Increase use of technology to accomplish tasks

22. A major disadvantage of electronic means of communication such as, e-mails, fax messages and
telephone messages is

a. Can be speedy
b. Can be transmitted over large geographical spaces
c. Relies on the electronic capabilities available to the receiver
d. Can be sent to large groups of persons at the same time

23. Which of the following activities are considered illegal in nature?

I. using poor quality materials
II. insider trading
III. tax evasion
IV. money laundering
a. all of the above
b. I, II and III
c. II, III and IV
d. I and III

24. Which of the following are reasons why an individual will undertake to start a business rather
than work for someone else?

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I. To gain financial independence
II. To be self employed
III. To take instructions from a superior
IV. Self –actualization

a. l, ll and lll
b. l and lll
c. ll and lV
d. l, ll and lV

25. Preparing a business to meet future challenges and change in the next 5 to 10 years is

a. Short term planning

b. Tactical planning
c. Long term planning
d. Operational planning

26. Finance provided to start up small businesses considered to be risky in nature is called

a. Short term capital

b. Long term capital
c. Working capital
d. Venture capital

27. The section of a business plan that outlines the strategies and decisions of the key functional
areas such as finance, production and marketing is a/an

a. Feasibility study
b. Operational plan
c. Forecast
d. Budget

28. A business can have a clearly defined policy of what the business stands for; the acceptable and
unacceptable behaviours; how it would relate to its stakeholders. This is specifically

a. An employment contract

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b. An ethical code of conduct
c. A psychological contract
d. A dress code

29. The offeror and the offeree must exchange something for a contract to exist e.g. Z promises to
paint R’s wall, in exchange for R to repair Z’s van. The benefit received by both Z and R is
termed

a. An offer
b. An acceptance
c. A consideration
d. Validity

30. A contract is a legally binding agreement between two or more persons. Whereas, an invitation
to treat is

a. An unconditional acceptance
b. A clearly stated offer
c. An agreement
d. An indication of a party’s willingness to encourage someone else to make an offer

31. A contract can become void in which of the following instances?

a. When there is unconditional acceptance

b. One party to the contract has misrepresented items for sale
c. All terms to the offer were clearly communicated
d. Where consideration has been exchanged

32. A offers his car for sale to B, for $100 000. B accepts the offer, but, introduces a new term to
the acceptance, in that, he wants to buy the car for $95 000. This has created a /an

a. Acceptance
b. Offer
c. Counter offer
d. Consideration
33. Which of the following statements is NOT a situation in which a credit note might be issued?

a. To correct an overcharge on an invoice

b. When damaged goods have to be returned to the supplier

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c. The seller did not include transport cost in the quotation
d. The seller charged too much for transport to the buyer

34. The airway bill is

a. A statement of stock or inventory on a plane that serves as a receipt for the goods
b. A document representing title to the goods
c. A document that states the description and destination of goods
d. A document issued by the importer

35. To allow an insurer to accurately assess insurance premiums, the potential client has to be
truthful and give all relevant information. The insurer must also provide all necessary
information to the client. This is the principle of

a. Proximate cause
b. Insurable interest
c. Utmost good faith
d. Average clause

36. Natural talent, training facilities and quality of education available in a country are key
influences on the

a. Labour supply
b. Labour quality
c. Labour flexibility
d. Skilled labour

37. Plant, machinery and equipment needed to facilitate a start-up business of a risky nature is
referred to as specifically
a. Capital
b. Fixed capital
c. Working capital
d. Venture capital

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38. Production levels where output satisfies the domestic market and surplus can be exported to
other countries is described as production at the

a. Surplus level
b. Domestic level
c. Subsistence level
d. Tertiary level

39. A hairdresser and doctor provide direct services to a client or customer. They are involve in
production that is MOST LIKELY at the

a. Primary stage
b. Secondary stage
c. Tertiary stage
d. Domestic stage

40. Hire Purchase is specifically

a. using cash for payment

b. paying for goods by instalments
c. making a deposit or down payment and the balanced paid for in instalments
d. giving a reduction in the price of the goods

41. The office set up to deal with persons who feel they were unfairly treated by a public sector
office or personnel is the

a. Bureau of Standards
b. President
c. Ministry of Consumer Affairs
d. Ombudsman

42. Which of the following is the BEST reason for branding a product?

a. To give details of the product

b. To grade the product
c. To provide legal protection for ownership right
d. To prevent hazard

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43. The use of a logo or symbol to distinguish a firm's brand is appropriately termed

a. A patent
b. A franchise
c. A trademark
d. A copyright arrangement

44. Which of the following statements is a KEY disadvantage of advertising?

a. Educates the consumer on product attributes

b. Creates employment
c. Promotes competition among firms
d. Can result in high costs that can cause barriers to entry for competing small firms

45. A situation where a retailer sells a manufacturer’s branded product at a price below cost, with
the intention of attracting customers is referred to as

a. Loss leader
b. Customer maximization
c. Market share leader
d. Market leader

46. A good sales person should satisfy all of the following criteria EXCEPT

a. He/she must be a consumer of the good or service.

b. He/she should possess a sound knowledge of the product.
c. He/she should be able to plan and implement strategy.
d. He/she should possess drive, energy and courtesy

47. A commercial bank is a financial institution that accepts deposits and makes loans available to
Private individuals. Whereas, the central bank is

a. A monetary authority that issues credit cards.

b. A monetary authority that provides investment services to individuals.
c. A monetary authority that keeps documents safe.
d. A monetary authority set up to control the money supply.

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48. Short term financing for business is usually available for a period up to one year. Which of the
following is NOT a short term measure of financing?

a. Mortgage
b. Bank loan
c. trade credit
d. loan from family

49. A financial institution that provides banking services to low income groups and individuals with
the aim to improve the quality of life of the poor is a/an

a. Insurance company
b. Credit Union
c. Microfinance Agency
d. Stock market

50. A major feature of consumer protection legislation is

a. To punish businesses
b. To discourage production of certain goods
c. To set price controls on critical goods and services
d. To encourage businesses to locate in rural area

51. The aim of a subsidy or cash grant to a business is

a. To meet higher order needs

b. To improve working conditions
c. To discourage the production of certain goods
d. To encourage the production of certain goods

52. Per capita income means

a. Total income of the population per head

b. Marginal income per person
c. Average income per head of the population
d. Cost per head of the population

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53. Gross domestic Product (GDP) per capita is calculated by

a. Population divided by GDP

b. GDP divided by the population
c. Adding all incomes in the country
d. Adding indirect taxes and subtracting factor costs

54. Economic growth is a quantitative measure of growth in output. However, economic

development is a qualitative measure of

a. The increase in the purchasing power of citizens.

b. The increase in the access to goods and services by citizens.
c. The improvement in the quality of life of citizens.
d. The increase in employment levels.

55. The current account in the balance of payments, contain two sections, the balance of trade and
the invisible balance. The balance of trade records

a. Imports and exports of services and income on investment

b. The balancing figure
c. All inflows and outflows of investment
d. Imports and exports of physical goods such as vehicles and food items

56. To reduce competition and protect local infant industries, a physical limit can be placed on the
quantity of specific goods imported into a country. This is specifically called a/an

a. Tariff
b. Import licence
c. Export licence
d. Quota

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57. Which of the following statements outlines the roles of the Organization of American States?

I. Promote poverty reduction and social and economic development

II. Promote and maintain peace among member countries
III. Encourage free trade
IV. Allow for the free movement of people, goods, services and capital

a. l, ll and lV
b. ll, lll and lV
c. l, ll and lll
d. all of the above

58. The Caribbean Single Market and Economy is aimed at

a. Infrastructural development in the Caribbean

b. Improving the balance of payments of Caribbean economies
c. The countries of the European Union that have adopted the euro as their currency
d. Promoting the free movement of people, goods and services among member countries

59. When a country has a high debt burden it can lead to the effect of ‘financial austerity’. Which
statement BEST describes this effect?

a. Interest rates increase

b. Less money is available for social services and salaries
c. Servicing the debt burden
d. Spending more on goods and services

60. Manufacturing industries form part of the secondary sector. Which of the following outline key
ways in which the government can develop the manufacturing sector?

I. Provide incentives for firms to set up e.g. tax holiday

II. Develop infrastructure e.g. roads
III. Raise the school leaving age
IV. Organize trade fairs to promote goods

a. l, ll and lll
b. ll, lll and lV
c. l and ll
d. l, ll and lV

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Test 4
1. The situation where an individual produces what he/she needs e.g. through agriculture or
fishing is termed

a. Division of labour
b. Direct production
c. Indirect production
d. Exchange

2. A facility offered by the bank where a customer in using the card takes a loan from the bank to
be repaid with interest is called

a. Loan facility
b. Bank card facility
c. Credit card facility
d. Debit card facility

3. Some banks facilitate customers paying utility bills, checking account balances and transferring
money between accounts using the telephone. This is most appropriately described as

a. Electronic transfer
b. Debit card transfer
c. Credit card transaction
d. Telebanking

4. A document used to settle debts in trade and may allow for a credit facility for an importer is

a. Loan
b. Bill of Exchange
c. Airway Bill
d. Credit Card Facility

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5. A co-operative is an incorporated business where the members are also the owners. Which of
the following statements are principles of co-operatives?

I. Membership is voluntary
II. One member, one vote
III. Unlimited liability
IV. Surplus is allocated to members

a. l and lll
b. l, ll and lll
c. l, ll and lV
d. l, ll, lll and lV

6. Shareholders who receive their dividend payment after preference shareholders and may not
receive any dividends if the company does not make a profit are termed

a. Ordinary shareholders
b. Preferred shareholders
c. Directors
d. Major shareholders

7. A company where shares are traded on the stock exchange is BEST described as

a. Partnership
b. Public company
c. Private company
d. Conglomerate

8. Popular franchises are KFC, Pizza Hut and Burger King. A franchise is a licence granted to a
trader or business to sell or manufacture a particular good or service for a period of time.
Which of the following statements outline a key advantage of a franchise?

a. The franchiser offers advice in setting up and training for employees

b. The franchisor fee can be expensive
c. Rules are applied by the franchiser
d. Share of sales revenue is paid in royalties to the franchiser

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9. An economic system in which the factors of production are shared by the state and private
business owners is commonly referred to as

a. A planned economy
b. A free economy
c. A mixed economy
d. A subsistence economy

10. All of the following statements are advantages of a command economy, EXCEPT

a. There is the provision of public goods

b. There is no wasteful competition
c. Lack of competition leads to poor services and inefficiencies
d. There is more equal distribution of income

11. Which of the following is one key way that the state seeks to restrict the consumption of de-
merit goods e.g. cigarettes?

a. Reduce taxes on the use of these goods

b. Increase taxes on the use of these goods
c. Increase share prices of stocks in the company
d. Increase the availability of the good

12. Customers represent a major stakeholder group for an organization. Which of the following is
NOT a responsibility of management to customers?

a. To provide redress for damage products

b. To provide proper instructions for using products
c. To provide after sales services
d. To provide safe working conditions

13. All of the following are functions of the Human Resource Department, EXCEPT

a. Recruitment and selection of production workers

b. Dismissal of employees
c. Deal with industrial relations issues
d. Engage in market research to find out what customers want

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14. A major function of management is to ensure that the business operates as a cohesive unit,
where all departments are aligned to achieve the organizations goals. This function is called

a. Co-ordination
b. Control
c. Planning
d. Organizing

15. The highest level of needs according to Maslow is self-actualization. The organization can assist
the worker to achieve this level of needs in which of the following ways?

a. Provide proper working conditions

b. Allow workers to work in teams
c. Design the job so that the worker can have autonomy or control over tasks
d. Provide prime parking space

16. The process whereby a manager assigns tasks to subordinated who are qualified and capable is
BEST referred to as

a. Authority
b. Responsibility
c. Delegation
d. Empowerment

17. Retirement benefits such as gratuity, company pension, profit sharing and stock options are
specifically

a. recognition benefits
b. financial incentives
c. non-financial incentives
d. entitlement benefits

18. Arbitration is the third party involvement strategy to resolve conflict whereby

a. Recommendations are made by the third party to resolve the conflict.

b. A worker representative helps to settle the dispute.
c. A third party effectively passes judgment on the dispute.
d. Satisfying the needs of the group

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19. A democratic leader is one who

a. Tells workers what to do

b. Allows workers to participate in decision making
c. Leaves workers to do what they want
d. Inspires workers through his or her personality to achieve a vision

20. A legally recognized third party that represents workers interest is specifically named

a. A non-governmental organization
b. A trade union
c. A lobby group
d. A stakeholder

21. Which of the following is NOT a key factor to consider in choosing members of a team?

a. The ages and age gap of potential team members

b. Cultural and religious differences of potential members
c. Potential team members’ interest in the goal to be accomplished
d. Potential team members’ membership in professional associations

22. Negotiations between management and the workers representatives to arrive at the terms of
the employment relationship is

a. Mediation
b. Collective bargaining
c. Industrial action
d. Grievance procedure

23. A key advantage of a Management Information System (MIS) is that it provides a data base for
the organization. Which of the following is NOT an example of a MIS?

a. A notebook of transactions and customers kept by a sole trader

b. A decision support system
c. A human resource management system
d. An internet system

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24. Which of the following is NOT a key step in establishing a business?

a. Identification of business opportunities

b. Engage in market research
c. Developing a code of conduct for employees
d. Creation of a business plan

25. Primary market research deals with data collection from the source or first-hand research.
Which of the following is NOT a source of primary research?

a. Focus group survey

b. Government statistics
c. Observation of behaviour
d. Interviews

26. Which of the following factors is NOT a key influence on consumer behaviour?

a. Taste and fashion

b. Price of the product
c. Price of substitute goods
d. Availability of raw materials in the transformation process

27. A business plan is a comprehensive written description of the elements of the proposed
business. Which of the statements is NOT included in the Marketing section?

a. Advertising plans
b. Competitor analysis
c. Trends in the market
d. Employee rewards and recognition plans

28. A study that investigates whether a new business idea is likely to be profitable is called a/an

a. Market study
b. Market segmentation
c. Feasibility study
d. Operational study

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29. A contract cannot exist if there is no consideration. Mary agrees to babysit Joan’s children with
the agreement that Joan will pay her $40.00 per hour. The consideration in this case is

a. The $40.00 to be paid for babysitting services

b. The agreement between Mary and Joan
c. There is no consideration
d. The validity of the contract

30. A simple contract does not have the elements of signing, sealing and delivery. Whereas, a
contract of record is

a. An order of the court e.g. ordering the business to cease a dangerous practice
b. A specialty contract that must be signed
c. An agreement between parties
d. A record by both parties

31. An agreement between two parties to commit an illegal act, makes a contract

a. Valid
b. Void
c. Legally binding
d. Good

32. Simple contracts require consideration. Which of the following rules apply to consideration?

I. Consideration must be real

II. Consideration must be possible
III. Consideration must not be past
IV. Consideration must be financial

a. l and ll
b. l and lll
c. l, ll and lll
d. all of the above

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33. A document that outlines the terms, specifications and requirements of a project or order is
termed

a. Purchase order
b. Statement of record
c. Tender
d. Catalogue

34. In which of the following situations might a debit note be issued.

I. Where discounts were left out

II. Where the seller undercharged the buyer
III. Where transportation costs were not included
IV. Where a higher price has been stated on the invoice

a. l and ll
b. l, ll and lV
c. ll and lll
d. l, ll, lll and lV

35. In the Caribbean region, it is important to note whether goods have been made in the
CARICOM territory. These goods would not incur import tariffs. Which is the most appropriate
document to show this?

a. Insurance certificate
b. Certificate of origin
c. Origin label
d. Import licence

36. An insurance policy that seeks to cover employers from the risk of financial losses they may
sustain, as a result of disloyal and dishonest employees is specifically

a. Fidelity guarantee
b. Indemnity
c. Liability insurance
d. Subrogation

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37. Items such as buildings, machines and equipment that are used over a long term period of time
in a business is specifically called

a. Fixed capital
b. Capital
c. Venture capital
d. Working capital

38. An important element in the creation of wealth in an economy, that usually involve the risk
associated with investment and a willingness to undertake risk is

a. The factor of land

b. The factor of labour
c. The factor of capital
d. The factor of enterprise

39. Primary production is the first stage of the production process. This involves the extraction
from natural resources. Which of the following is the BEST example of primary production?

a. Construction
b. Baking foodstuff
c. Quarrying
d. Transportation of goods to supermarkets

40. Cottage industries are typically small businesses, usually found in homes, entrepreneurial
estates and community centres. Which of the following is/ are the BEST example(s) of cottage
industries?

a. Tailoring, leather craft

b. Oil refining, sugar processing
c. Large batch production of shirts
d. A supermarket

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41. In a large firm, managers may find it difficult to manage. Problems in areas such as, decision
making, communication and policy implementation may be experienced. These issues are
specifically

e. Internal economies of scale

f. External economies of scale
g. Internal diseconomies of scale
h. External diseconomies of scale

42. In the marketing process, which is the most appropriate step to include in the box to complete
the process?

Product development 4Ps (product, price, promotion, place)

a. Market research
b. Public relations
c. Advertising
d. Distribution

43. Packaging is the outer wrapping for a good. Which of the following statements BEST describe
the functions of packaging?

a. Packaging presents the product in an attractive way

b. Packaging protects the product, promotes the product and gives details of the product
c. Packaging helps to get the product noticed
d. Packaging causes the price to increase

44. The legal protection by persons or businesses over certain kinds of intellectual material for
example recordings, films and literary works is referred to as

a. A patent
b. A registered design
c. A trademark
d. A copyright

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45. Short term incentives to channel agents and consumers, to encourage sales e.g. free samples,
price discounts and trade discounts describe

a. Advertising
b. Sales promotion
c. Public relations
d. Personal selling

46. Which of the following statements is NOT a key use of advertisements?

a. To inform potential buyers of the availability of goods and services

b. To persuade people to buy or behave a particular way
c. To highlight the competitors’ products
d. To increase market share by stimulating demand

47. Inflation is a general increase in price levels. The central bank can seek to reduce inflation
levels by

a. Issuing new money into the system

b. Acting as the bankers bank
c. Increasing interest rates to encourage savings
d. Acting as the governments banker

48. Which of the following is LEAST likely to be a long term method of financing?

a. Mortgage
b. Debenture
c. Hire purchase
d. Trade credit

49. The development of technology has allowed buying and selling on the internet via sites like
AMAZON.com. This is specifically termed

a. E-trading
b. Online trading
c. E-commerce
d. E-business

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50. Import tariffs, purchase taxes and property taxes are examples of

a. Direct taxes
b. Indirect taxes
c. Income taxes
d. Transfer payments

51. Which of the following is NOT a social service provided by government?

a. Health care and national income services

b. Access to jobs in government enterprises
c. Pension and welfare
d. Education

52. Which of the following is a MAIN disadvantage of ICT implementation in business operations?

a. ability of clients to request information at anytime

b. records customer history
c. high maintenance costs
d. instant communication

53. Gross Domestic product (GDP) can be measured by using the Income approach. The Income
approach is BEST described as

a. A measure of income from employment

b. A measure of income from rent
c. A measure of income from profits
d. A measure of all incomes earned from the factors of production

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54. Quality of life indicators include which of the following factors

I. GDP per capita

II. freedom of worship
III. freedom of speech
IV. equal opportunities

a. l and ll
b. l, ll and lll
c. l, ll and lV
d. ll, lll and lV

55. Foreign Investment can be defined as

a. angel investors in small ventures

b. capital inflows from one country to another
c. investing in business entities likely to succeed
d. remitting money to one's home country

56. Which of the following are KEY benefits of Foreign Investments?

I. allows investors to seek the highest rate of return
II. encourages the spread of best practices across borders
III. the host country gains from technology transfer
IV. the host country gains corporate tax revenues
a. I, II and III only
b. all of the above
c. I, III and IV only
d. I and IV only

57. A main benefit of the Caribbean Single market and Economy (CSME) is

a. Increased employment arising from access to larger job market

b. Facilitate the development of less developed countries
c. Promote and defend human rights
d. Reduce poverty

58. A key function of the Caribbean Development Bank (CDB) is

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a. To provide greater opportunities for citizens to travel in the region
b. To restructure economies in the Caribbean
c. To foster trade by the removal of tariffs
d. To stabilize economies by providing loans at reduce interest rates when needed

59. Extensive borrowing by a government to finance a deficit budget and where a part of revenue
generated has to go towards financing the debt is specifically called

a. Debt burden
b. Debt financing
c. Debt relief
d. Debt consideration

60. Human capital development aims to develop a flexible, trained and competent workforce.
Which of the following are key ways of investing in people?

I. Improve infrastructure and facilities at learning institutions

II. Organize trade exhibitions to highlight jobs
III. Improve access to tertiary education
IV. Provide opportunities for the development of and access to vocational qualifications

a. l, ll and lll
b. ll, lll and lV
c. l, lll and lV
d. l, ll and lV

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Test 5
1. In early economies the development of money helped to deal with the problems associated
with the barter system. Which of the following are key problems associated with the barter
system?
I. storage of wealth
II. exchange rate
III. divisibility of the commodity
IV. division of labour and specialization
a. all of the above
b. I,II and III
c. II, III and IV
d. I, II and IV

2. Placing money in a savings account that can be accessed at a future date describes which of the
functions of money?

a. Standard of deferred payment

b. Measure of value
c. Store of value
d. Medium of exchange

3. When parties to trade live in different countries or are geographically far apart, they can use a
written agreement where the drawer instructs the drawer to make a payment of a specified
amount by a specified time to a payee. This situation is appropriately termed

a. Credit arrangement
b. Debit arrangement
c. Electronic transfer
d. Bill of exchange

4. The utilization of the internet to buy and sell goods and services for example via a website is
specifically called

a. E-bay
b. E-banking
c. E-commerce
d. E-business
5. The process that a business goes through to acquire its own identity and to be able to engage in
trade under its own name is known as

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a. Memorandum of association
b. Incorporation
c. Articles of association
d. Deed of partnership

6. A KEY advantage of a sole trader is

a. Difficulty in setting up venture

b. Owner has unlimited liability
c. Growth prospects are difficult to access
d. Not legally complicated to set up

7. A type of co-operative created by people who are involved in production and assist members to
source and purchase equipment is commonly called a

a. Retail co-operative
b. Workers’ co-operative
c. Credit union
d. Producer co-operative

8. Nationalized industries are public corporations which are controlled by the state. Which
statement outlines the MAIN objective of nationalized industries

a. Inefficiencies are funded by the government

b. Government seeks to provide essential services to the citizens
c. Government runs the business to make a profit
d. Government seeks to finance business activity

9. All of the following are disadvantages of the free market system EXCEPT

a. There is usually unequal distribution of wealth

b. Only consumers with the means to purchase goods and services will benefit
c. Freedom of choice
d. Freedom of choice leads to the production of demerit goods

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10. In a capitalist or free market system the prices of goods and services are determined by

a. The forces of demand and supply

b. The government
c. The public sector
d. The businesses alone

11. A franchisee pays a percentage of money earned to the franchisor for use of the business
image. This payment is specifically termed

a. Royalties
b. Dues
c. Fees
d. Credit

12. A corporate social responsibility policy outlines the organizations responsibilities to the
environment and wider society. Which of the following statements is a major responsibility of
management to the society?

a. To be a good corporate citizen and support social causes

b. To honour contracts with customers
c. To reward workers
d. To invest the company’s money in self

13. All functional departments have a responsibility to implement health and safety practices.
Which department is responsible for developing the health and safety policy?

a. Production
b. Finance
c. Marketing
d. Human resources

14. The function of authorizing a subordinate to perform a task or make a decision, but, where
management has the ultimate responsibility for the decision or task is referred to as

a. Motivation
b. Delegation
c. Organization
d. Decentralization

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15. An organization can meet the esteem needs of workers by

a. Pay market rate salaries

b. Allow workers to participate in team work
c. Provide proper working conditions
d. Provide an avenue for promotion

16. The right or power of a manager to command is referred to as

a. Authority
b. Responsibility
c. Functional organization
d. Delegation

17. The method of communication used by members of the informal group to transmit personal
information is

a. Internal communication e.g. memorandum

b. The grapevine
c. The company’s official intranet
d. The company’s bulletin board

18. One of the major objectives of an organization is growth. Which of the following statements
are major effects of growth in an organization?

I. Higher per unit costs as production expands

II. Expanded organization structure
III. Lower per unit cost of production as a result of economies of scale
IV. Increase need for human resources

a. l and ll
b. ll and lll
c. ll, lll and lV
d. all of the above

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19. A leadership style where the leader or manager leaves the workers to accomplish a task, but,
assist when called upon to do so is specifically

a. A democratic or participative style

b. Laissez faire or free reign style
c. An authoritarian style
d. A charismatic style

20. Both management and workers can respond negatively in dealing with conflict. Which of the
following are negative ways management can respond to situations?

I. Engage in protest and strike action

II. Engage in a lock out
III. Employ scab labour
IV. Issue threats of dismissal

a. l only
b. l, ll and lll
c. ll, lll and lV
d. all of the above

21. Which of the following are key legal issues that must be considered in establishing and
operating a business?
I. registering the business
II. deducting and remitting income taxes
III. observing relevant legislation or laws
IV. establishing a code of ethics
a. all of the above
b. I, II,III
c. II,III and IV
d. III and IV only

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22. Unethical business practices such as immoral behaviour, bullying, and dishonest conduct carry
consequences. Which of the following is NOT a key consequence of unethical behaviour

a. Increased turnover of valued employees

b. May lead to court litigation
c. Distortion of the GDP figures
d. Can affect the health and safety of customers

23. In a Marketing career, a person can branch off into many job areas. Which of the following is
NOT a key job path in Marketing?

a. Brand Manager, Merchandiser

b. Public relations Officer, marketing consultant
c. e-commerce online Product manager, e-commerce Marketing Specialist
d. Compensation Manager, Performance Appraisal Officer

24. The Research and Development function in a business is primarily responsible for

a. The development of marketing strategies

b. The development of human resources strategies
c. The development of new product ideas
d. The development of market research strategies

25. Which of the following is NOT a source of secondary data?

a. Internet research sites

b. Companies’ published accounts
c. Conducting product test with customers
d. Specialists’ trade magazines

26. An acceptance made through the postal service is effective

a. When the letter is received by the offeror

b. When the offeree enters the post office
c. When the letter is posted by the offeree
d. When the letter is stamped

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27. Which of the following is NOT included in the financial section of the business plan?

a. Costs of equipment
b. Projected costs of operating the business
c. Projection of income and expenditure
d. The overall compensation package

28. The feasibility study should seek to answer the following questions, EXCEPT

a. Is the business idea workable?

b. Is the business idea likely to be profitable?
c. Can the potential revenue generated cover the financial costs of start up?
d. Are the promotional strategies meeting the needs of the target market?

29. An advertisement in the newspaper inviting bids or tenders for government projects is a/an

a. Offer
b. Invitation to treat
c. Acceptance
d. Guarantee

30. A contract that is formally laid out, with, the obligations of the parties written down, for
example, a land sale is

a. A contract of record
b. A simple contract
c. A specialty contract
d. A general contract

31. A refusal by either party to fulfil the requirements of a contract is termed

a. An acceptance of the contract

b. A breach of contract
c. An invitation to treat
d. A counter offer

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32. A document used in international trade that gives a record of goods; shows title to goods and
acts as a receipt for the goods is specifically

a. Bill of lading
b. Airway bill
c. Import licence
d. Bill of exchange

33. An internal inventory control document that lists the quantity of a product that is available is
called

a. Purchase requisition
b. Statement of record
c. Airway bill
d. Stock card

34. Venture capital refers to

a. short term assets used up daily in the business

b. items such as building, machinery and equipment
c. money used to finance start up businesses which are seen as being risky
d. assets used in business

35. Which statement BEST describes the value of insurance to business?

a. Insurance protects against destruction

b. Insurance is taken out on the lives of employees
c. Insurance reduces the uncertainty in trading
d. Insurance protects cargo on the sea

36. Which of the following are factors of production?

a. Land, labour, capital , government legislation

b. Enterprise, human resources, land, capital
c. Capital, human resources
d. Labour, building, capital, enterprise

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37. Stock of raw materials, work in progress, cash balance are used for the day to day operations
and constantly being used up in the production process are specifically

a. Venture capital
b. Fixed capital
c. Working capital
d. Human capital

38. A construction firm links with the distributor of large machinery to get construction equipment
e.g. trucks, cranes and backhoes, to use in the production process. This is an example of

a. Backward linkage
b. Forward linkage
c. Personal selling
d. Integration

39. Bulk buying which reduces the cost of production is commonly termed

a. Technical economies of scale

b. Managerial economies of scale
c. Marketing economies of scale
d. Financial economies of scale

40. The following pricing strategy: Price=unit variable cost + fixed costs + mark up; is BEST
described as

a. Penetration pricing
b. Cost-plus pricing
c. Market oriented pricing
d. Promotional pricing

41. Which of the following is NOT an example of sales promotion?

a. Contests and sweepstakes

b. Point of purchase displays
c. An infomercial
d. Cash refunds on purchases

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42. A distribution chain that involves the use of wholesalers and retailers to get the product from
the producer to the consumer is specifically a/an

a. direct chain of distribution

b. horizontal chain of distribution
c. vertical chain of distribution
d. indirect chain of distribution

43. A person who assists buyers and sellers in overseas trade or an insurance agent who sells
insurance for different companies is commonly called a

a. retailer
b. wholesaler
c. broker
d. consume

44. Which of the following is NOT a problem associated with distribution?

a. Storage costs
b. Red tape or unnecessary paper work
c. Inconsistency in weights, measures and sizes
d. Price of shares in the company

45. The choice of an appropriate transport method is critical to the distribution activity. Which of
the following is NOT a key factor in influencing this choice?

a. Cost of transport
b. Warehousing costs
c. Insurance costs
d. Cost of production

46. A situation where a supplier allows a customer, a certain period of time after receipt of goods,
to pay, is appropriately termed a

a. Cash discount
b. Trade discount
c. Trade credit
d. Discount

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47. If a commercial bank has a cash deficit and has exhausted all means of acquiring money, then,
the central bank can provide a loan to prevent the commercial bank from failing. In this
capacity the central bank acts as

a. A loan provider
b. A lender of last resort
c. A commercial bank
d. A credit facility

48. A long term loan stock at a fixed interest rate is specifically

a. Debenture
b. Shares
c. Dividends
d. Government grant

49. The use of small amounts of capital from a large number of individuals to finance a new
business venture is appropriately termed

a. micro finance
b. angel investment
c. crowd funding
d. equity

50. A person’s annual income is $60 000.00. A tax of 25% is levied on all income. So, the tax paid
for the year is $15 000.00. This is an example of which taxation system?

a. Regressive system
b. Progressive system
c. Proportional system
d. Equal system

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51. A corporation tax reduces the profitability of the firm. However, a subsidy to the firm

a. Reduces market share

b. Reduces revenue
c. Encourages the firm to increase output and reduce the cost of the product
d. Increases the final market price of the good

52. GDP in Country D for 2013 was $ 300 000 000

Population in Country D was 1.5 million persons

Form the information above, what is the GDP per capita?

a. $200 per head

b. $2000 per head
c. $20 000 per head
d. $1000 per head

53. Gross Domestic Product (GDP) is the total value of goods and services produced in a country in
one year. To calculate Gross national product, the GDP must be added to

a. Depreciation of assets
b. Only income from investments abroad
c. Net property incomes from abroad
d. Only money remittance from abroad

54. Adding consumer expenditure, investment expenditure, government expenditure and net
exports describes which approach to measuring National Income?

a. The income approach

b. The output approach
c. The expenditure approach
d. The national income and expenditure approach

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55. A custom duty imposed on goods imported into a country, with the intention to raise the price
of foreign goods in order to reduce demand is a/an

a. Quota
b. Embargo
c. Subsidy
d. Tariff

56. A summary of assets, liabilities and equity of a business at a specific date is

a. Cash Flow Statement

b. Balance Sheet Statement
c. Income Statement
d. Profit and loss statement

57. Which statement is LEAST LIKELY to be a goal of the World Trade Organization (WTO)?

a. To settle trade disputes between countries

b. To operate a system of trade rules
c. To provide a forum to negotiate trade agreements
d. To create full employment through trade in countries

58. A financial institution that offers assistance in the event of natural disasters and finances social
programmes in the Caribbean is

a. World Trade Organization

b. World Bank
c. Caribbean Development Bank
d. Organization of Eastern Caribbean States

59. A situation where two distinct sectors in an economy exist, where one sector is highly
industrialized and capital intensive and the other sector based on primary production and uses
less technology is characterized as

a. Population density
b. Debt burden
c. Economic dualism
d. Economic development

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60. Foreign Direct Investment (FDI) is an important factor in the growth of developing countries.
All of the following outline advantages of Foreign Direct Investment, EXCEPT

a. FDI adds to national output

b. Profits are sent to the home country
c. FDI creates jobs through capital investment
d. The host country benefits from new knowledge and technology

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Test 6
1. The situation that explains the problem of barter whereby it was difficult to determine how
much of one item should be traded for another is

a. Double coincidence of wants

b. Indivisibility
c. Rate of exchange
d. Perish ability

2. Money helped to solve the problems associated with the barter system. Which of the following
are key characteristics of money?

I. Medium of exchange
II. Acceptability
III. Durability
IV. Indivisibility

a. All of the above

b. l, ll and lll
c. ll and lll
d. ll, lll and lV

3. Which statement best describes the key feature of a centrally planned economic system?

a. The public and private sector jointly determine what to produce.

b. The state determines the allocation of factors of production
c. The private sector determines how to produce goods and services
d. The citizens decide how resources are to be allocated.

4. The key economic motive of the free enterprise system is

a. Survival
b. Equal distribution of income
c. Profit maximization
d. Market leadership

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5. The mixed economy is characterized by the interplay of both the public and private sectors. The
MAIN aim of the public sector is to

a. Maximize revenue
b. Maximize profits
c. Crowd out private sector involvement
d. Provide services or public goods to all members of society

6. A PRIMARY role of the personnel or human resource department is to

a. Engage in recruitment and selection of staff

b. Engage in promotional campaigns for the organization
c. Engage in the scheduling of jobs on the production line
d. Engage in the development of strategic goals for planning

7. It is advisable that a supervisor have a narrow span of control in which of the following situation

a. When subordinate workers are experts in their respective fields

b. When the jobs are simple and routine
c. When new recruits are hired and need training
d. When the objectives are relatively simple to carry out

8. Which of the following management functions involve the aligning of departmental objectives to
the overall business goals and ensuring that tasks are interdependent

a. Planning
b. Organizing
c. Controlling
d. Co-ordinating

9. The MAIN purpose of providing fringe benefits and incentives to workers is to

a. Develop a skilled workforce

b. Motivate workers to increase efficiency
c. Engage workers in profit sharing
d. Manipulate workers to support the company

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10. Which of the following statements BEST describes a democratic leader?

a. Allowing workers full autonomy over the job

b. Telling workers what to do and instructing them on the procedure
c. Setting objectives with worker participation
d. Able to use an appropriate style of leadership

11. Advancing the welfare of members is a key role of a trade union. Which of the following is NOT
a key purpose of a trade union?

a. Educate workers
b. Represent the workers interest in collective bargaining
c. Third party representation in the grievance procedure
d. Represent workers regardless of the situation

12. An entrepreneur is an individual who is willing to undertake the risk of a new business venture.
Which of the following is NOT a MAJOR function of the entrepreneur?

a. Planning the objectives of the venture

b. Seeking new opportunities for the business
c. Engage in change management
d. Defining individual workers job descriptions

13. Planning is a key management function. The purpose of planning is to allow management to

a. Allocate resources
b. Forecast key problem areas and develop business strategy
c. To recruit and select workers
d. To motivate workers

14. Commercial banks usually require that borrowers provide some measure of security should the
borrower default on loan payments. This is specifically

a. Collateral
b. Dividends
c. Stocks and bonds
d. Fixed deposits

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15. A document used to settle debts in trade which allows for a credit facility to be allowed for an
importer is specifically

a. Promissory note
b. Bill of exchange
c. Import licence
d. Import quota

16. A situation where the state or government assumes the assets of a private business entity is
namely

a. Privatization
b. Nationalization
c. Creating a public company
d. Creating a public sector

17. A key advantage of a partnership business is

a. The use of an established company’s name

b. Shares are traded on the stock exchange
c. Sharing of workload
d. Limited liability

18. The document that outlines details of new issues of shares and the intention of the company is
termed a/an

a. Prospectus
b. Memorandum of association
c. Articles of association
d. Franchise agreement

19. Statutory deductions such as National Insurance and income tax is the responsibility of

a. Personnel department
b. Finance department
c. Production department
d. Marketing department

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20. When managers act in an advisory capacity and provide technical assistance to other managers,
they are acting in

a. A line relationship
b. A staff relationship
c. A functional relationship
d. A consultancy function

21. A document summarising a customer's transactions over time and sent to the customer when
payment is due is a

a. sales invoice
b. debit note
c. statement of account
d. bill of exchange

22. Which of the following is NOT a key source of internal conflict?

a. Differences in perception
b. Departmentalization
c. Differences in attitudes
d. Government policy

23. Which of the following factors does NOT affect the validity of a contract?

a. Illegality of the situation

b. Capacity of parties to a contract
c. Income level of the parties
d. Consideration

24. Insurance that covers a business person for financial losses sustained as a result of
embezzlement by employees is termed

a. Fidelity guarantee
b. Full comprehensive
c. Third party
d. Annuity

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25. The compensation for losses incurred where a person is restored to the state he/she was in
before the loss occurred ( does not apply to life or personal accident insurance) is

a. indemnity
b. insurable interest
c. proximate cause
d. subrogation

26. Which of the following is NOT a key factor influencing the labour quality available in a country?

a. The quality of health care available in the country

b. The skills, abilities and competencies in the labour force
c. Quality of educational programmes and facilities in the country
d. The level of inflation in the country

27. Short term assets used daily in the business such as, cash in hand and raw materials is
specifically

a. Venture capital
b. Working capital
c. Fixed capital
d. Capital

28. Services such as banking, insurance and advertising fall under which type of production?

a. Tertiary production
b. Secondary production
c. Primary production
d. Subsistence level

29. A small or micro business that produces a good or service using simple technology and small
amount of start- up capital is appropriately termed

a. Service industry
b. Primary industry
c. Cottage industry
d. Subsistence industry

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30. Which of the following is NOT a method of business expansion?

a. Extending capacity by increasing plant size

b. Horizontal merger
c. A takeover
d. Forward linkage

31. Which of the following is NOT a major marketing activity?

a. Market research
b. Pricing
c. Packaging
d. Industrial relations

32. Which of the following are reasons for branding products?

I. To provide legal protection for ownership

II. To promote the image of the company
III. To promote the product

a. l and ll
b. ll and lll
c. lll only
d. all of the above

33. Protecting ideas is an important element in remaining competitive in business. Which of the
following are key ways of protecting ideas or regulating the use by others?

I. By copyright
II. By trademark
III. By patent
IV. By franchise agreement

a. All of the above

b. l and lll
c. ll, lll and lV
d. lV only

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34. Telemarketing, street and market vendors, internet websites, groceries and department stores
are examples of

a. Franchising
b. Retailing
c. Wholesaling
d. Direct selling

35. Main roles of a wholesaler include:

I. breaking bulk for sale to retailers
II. undertaking risks by buying in large quantities
III. provides credit facilities to retailers
IV. provides warehousing facilities
a. I, II and III
b. II, III and IV
c. all of the above
d. III and IV only

36. Which of the following is NOT a key determinant of consumer buying behaviour?

I. Price of the product

II. Income levels
III. Cost of factors of production
IV. Brand loyalty

37. The movement of cargo from origin to destination using several modes of transport. Each mode
has a different transport provider operating under its own transport contract, is specifically
a. multimodal transport
b. digital delivery
c. free on board
d. intermodal transport

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38. A system designed to capture, analyze, store, manipulate, present and manage all type of data
such as maps and can solve routing problems by analyzing a number of possible solutions is

a. hub
b. GIS
c. GPS
d. Portnet

39. Which of the following are sources of short term financing for a business?

I. Hire purchase
II. Overdraft
III. Debentures
IV. Trade credit

a. l, ll, lll and lV

b. l, lll and lV
c. l, ll and lV
d. none of the above

40. A tax levied on the profits made by business organizations is specifically

a. Personal income tax

b. Corporation tax
c. Value added tan
d. Capital transfer tax

41. Which of the following measures is used by government to reduce the disposable income of
consumers?

a. Reduce income tax

b. Increase income tax
c. Reduce interest rates
d. Increase corporation tax

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42. Government seeks to regulate business activity through which of the following activities?

I. Implementing fiscal policy e.g. taxation

II. Controlling land usage or zoning
III. Employment legislation
IV. Consumer protection legislation

a. l, ll and lV
b. l, ll and lll
c. all of the above
d. ll, lll and lV

43. Payments made by government to producers with the intention of increasing supply of the good
to the society at reduced costs is specifically termed

a. Trade credit
b. Tax reduction
c. Subsidies
d. Technical payments

44. Private investors who tend to finance ventures in early stages of survival for an ownership stake
is

a. venture capitalist
b. angel investors
c. crowd investor
d. early investor

45. A key drawback of using per capita income to measure standard of living is

a. Per capita income does not show how the income is actually distributed in the economy
b. Per capita income is a marginal figure of income in the economy
c. The problem of double counting
d. The problem of the hidden economy and income detection

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46. Which of the following are key indicators of quality of life in an economy?

I. The right to be educated

II. Freedom of speech
III. Per capita income
IV. Equal opportunities

a. l only
b. l, ll, lll and lV
c. l, ll and lll
d. l, ll and lV

47. An increase in the real level of national output is termed

a. Economic development
b. Inflation
c. Human resource development
d. Economic growth

48. A standing order service provided by a commercial bank entails

a. A customer giving the bank instructions to make payments of varying amounts from the
customer’s account
b. A customer instructing the bank to make payments of fixed amounts from the
customer’s account
c. The bank taking the initiative to withdraw amounts from the customer’s account
d. The bank acting on behalf of the recipient of the money

49. Which of the following is NOT a key example of investment

a. opening a venture
b. expanding a factory
c. money placed in a bank account
d. placing money in mutual funds

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50. Benefits of international trade include which of the following factors?

I. Access to a wider variety of goods and services

II. Development of political links with trading partners
III. Greater need to place protectionist barriers such as tariffs
IV. Greater access to new markets

a. All of the above

b. l, ll and lll
c. ll and lll
d. l, ll and lV

51. A direct tax that is levied on transactions such as the sale of land or financial transactions is a/an

a. income tax
b. stamp duty
c. capital transfer tax
d. excise duty

52. A payment made to a producers intended to reduce the cost of production, thereby reducing
the price to consumers is referred to as

a. a tax
b. a subsidy
c. venture capital
d. microfinance

53. The distribution of part of a company’s earnings and profit to shareholders is specifically

a. Profit sharing plan

b. Payment of dividends
c. Payment of bonus
d. Incentive scheme

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54. A business document sent to the buyer to inform of an error of omission on the invoice e.g. an
undercharge is specifically

a. Debit note
b. Credit note
c. Invoice
d. Statement of record

55. Which of the following methods can the government use to reduce the impact of economic
dualism?

a. Increase income taxes

b. Re-invest profits from one sector to develop struggling sectors
c. Devalue the country’s currency
d. Close down the struggling sector

56. Which of the following factors determine the standard of living in a country?

I. Average income per head of the population

II. Level of employment
III. Inflation levels

a. l and lll
b. ll and lll
c. l and ll
d. all of the above

57. A key drawback of privatization is

a. Emphasis on profit creation

b. Less burden on public sector financing
c. Greater efficiency in production
d. Goods become more expensive

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58. The World Trade Organization (WTO) is a key player in international trade. Which of the
following statements is NOT a function of the WTO?

a. Supervising the resolution of trade disputes

b. Facilitating free trade through the reduction of trade barriers
c. Assist in the implementation of trade policies worldwide
d. Promote the creation of trading blocs or regionalism

59. A MAJOR economic problem facing Caribbean nations is industrialization. Which of the
following is a key drawback of industrialization?

a. Rise in economic growth

b. Rural-urban drift
c. Increased economies of scale
d. Rise in standard of living

60. Which of the following are KEY disadvantages of foreign direct Investment?

I. Transfer of technology to host country

II. Local dependency on foreign capital
III. Repatriation of profits
IV. Exploitation of local resources

a. l, ll and lll
b. ll, lll and lV
c. l, lll and lV
d. all of the above

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Test 7
1. A situation where excess production was traded to get what one could not produce is
specifically termed

a. Direct production
b. Double coincidence of wants
c. Indirect production
d. Specialization

2. Which of the following are key characteristics of money?

I. Divisibility
II. Store of value
III. Measure of value
IV. Durability

a. All of the above

b. l, ll and lll
c. lll and lV
d. l and lV

3. The term ‘incorporated’ in business means

a. The business and the owners are one and the same
b. The full obligation of the business is borne by the owners
c. The business is registered as a separate legal entity form its owners
d. The obligation of the business only extends to the shareholders investment

4. Unlimited liability is BEST described as

a. The obligation of the shareholders extend beyond their investment in the business
b. The obligation of the shareholders extend only to their investment in the business
c. The business is a legal entity
d. The business and the owners are one and the same

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5. Major advantages of a sole trader include

I. Flexibility in responding to environmental factors

II. Simple tax accounting
III. Owner has limited liability
IV. Quick decision making

a. l, ll, lll and lV

b. l, ll and lll
c. l, ll and lV
d. l only

6. A company with 2 to 20 shareholders and where shares are family owned is specifically\

a. a public company
b. a conglomerate
c. a co-operative
d. a private company

7. Which of the following is NOT included in the Articles of Association?

I. Details on shares to be issued

II. How profits will be shared
III. Voting rights
IV. Liability issue

a. All of the above

b. l and ll
c. l and lll
d. l and lV

8. A good that is non-excludable where all members of the society stand to benefit from its
production is termed

a. Public good
b. A private good
c. A merit good
d. A de-merit good

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9. Which of the statements below reflect the essential characteristics of a market or capitalist
economy?

I. The state makes decisions on behalf of the citizens on what to produce

II. The private entrepreneur decides on the methods of production
III. Private individuals own the factors of production
IV. The motive is profit maximization

a. All of the above

b. l, ll and lll
c. ll, lll and lV
d. lll and lV

10. Which of the following is NOT a key function of the finance department in an organization?

a. Budgeting for the organization

b. Making statutory deductions
c. Recruitment of finance personnel
d. Production of financial statements

11. Performance Management strategies e.g. employee appraisals are developed by the

a. Human resource or personnel department

b. Production department
c. Marketing department
d. Finance department

12. The management team at BVC Enterprises engages in job design, resource allocation and
defining the relationships between positions in the organization hierarchy. The team is
engaging in the function of

a. Planning
b. Organizing
c. Directing
d. Controlling

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13. Which of the following is NOT a key responsibility of management to the government?

a. Abide by the employment legislation existing in the country

b. Make the necessary statutory deductions
c. Protect the corporate image of the company
d. Pay corporation or income taxes

14. A leadership style where the leader inspires because of his or her personality but may lack the
skills needed to lead in some situations is specifically

a. Autocratic leadership style

b. Democratic leadership style
c. Laissez faire leadership style
d. Charismatic leadership style

15. A matrix organization structure is BEST described as

a. A structure based on functional areas

b. A structure based on geographic location
c. A combination structure with both functional areas and project structure
d. A structure based on various product groupings

16. Max belongs to a group in his organization. This group is based on Max’s need to interact with
persons his own age. This group is appropriately called

a. An informal group
b. A formal group
c. A task force
d. A committee

17. CVS Public Limited Company, engages its employees in projects requiring teamwork and ensures
employee participation in social events, this is in keeping with meeting employees’

a. Self -actualization needs

b. Esteem needs
c. Affiliation needs
d. Physiological needs

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18. Which of the following is NOT a positive means of resolving conflict in an organization?

a. Ensure effective communication

b. Develop interpersonal and group skills
c. Mediation
d. Use of scab labour to replace striking workers

19. Barriers to communication in organizations include ALL of the following EXCEPT

a. Differences in perceptions
b. Noise
c. Filtering of messages
d. Active listening

20. Which of the following are MAJOR opportunities facing organizations in the business
environment?

I. New markets as barriers to trade are removed

II. Economic factors such as unemployment and inflation
III. Government policies to facilitate trade
IV. New technologies

a. All of the above

b. l, ll and lll
c. ll, lll and lV
d. l, lll and lV

21. Which aspect of a business plan gives an outline of the business structure, management levels,
resource allocation and legal requirements of the business?

a. The Executive Summary

b. The Operational Plan
c. The Marketing Plan
d. The Financial Plan

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22. A situation where the content of a contract is illegal e.g. human trafficking or selling illegal drugs
makes the contract

a. Void
b. Valid
c. A counter offer
d. An invitation to treat

23. Advertising a property for sale in the daily newspaper is specifically a/an

a. Offer
b. Agreement
c. Invitation to treat
d. Counter offer

24. Mr. Jonas insured his property for $800 000.00 in 1995. Today it is worth $1 500 000.00. Mr.
Jonas did not upgrade the insurance policy to reflect this change. His property was burnt in an
electrical fire. Mr. Jonas received a ratio of $ 800 000.00 in compensation. His property was
under insured. This reflects the principle of

a. Utmost good faith

b. Indemnity
c. Subrogation
d. Average clause

25. A type of insurance policy that is taken for a specified period of time e.g. mortgage guarantee
policy is specifically a/an

a. Whole life policy

b. Annuity
c. Third party insurance
d. Term policy

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26. A business document that provides details to a potential client about products available for sale
and their available sizes, quality, price and colours and steps for ordering is termed a/an

a. Letter of enquiry
b. Requisition
c. Quotation
d. Catalogue

27. NMB Ltd. did not include transport costs in an invoice sent to customer B. Which of the
following documents must be sent to the customer to rectify the problem of the undercharge?

a. A debit note
b. A credit note
c. A statement of account
d. A stock card

28. A document that prevents non-member countries from entering a free trade arrangement
without paying tariffs is

a. Airway bill
b. Certificate of origin
c. Bill of lading
d. Import licence

29. Corporation tax is a direct tax that is imposed on

a. goods manufactured by companies

b. the capital transfer
c. the profits of companies
d. the revenue of companies

30. Home care activities such as baby sitting, geriatric care or small business such as hair dressing is
specifically

a. Primary production
b. Secondary production
c. Tertiary production
d. Extractive industry

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31. Which of the following is an appropriate form of transport for perishable food items and flowers
being transported from one country to another?

a. An open tray van

b. A container
c. Cardboard boxes
d. Temperature controlled containers

32. A chain of distribution involves a series of stages that a product goes through to reach the
consumer. Which of the following represents a direct chain of distribution?

a. Producer-website-consumer
b. Producer-wholesaler-consumer
c. Producer-consumer
d. Producer-retailer-consumer

33. E-commerce is specifically

a. Using credit card facilities

b. Selling through the internet
c. Selling via telephone
d. Using bar codes in selling

34. A tax levied on the retail price of some goods is a/an

a. personal income tax

b. purchase tax
c. value added tax
d. corporation tax

35. A long term loan taken by the firm that is issued on the stock exchange at a fixed rate of interest
is

a. a debenture
b. lease
c. share capital
d. trade credit

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36. Which of the following is NOT a function of commercial banks?

a. To provide loans to private individuals

b. To facilitate clients’ deposits
c. To provide investment services
d. To develop monetary policy

37. A basic financial statement that shows the revenue and expenses for a venture is

a. the balance sheet

b. the cash flow statement
c. the income or profit and loss statement
d. the sales journal

38. Highly liquid short term financial instruments are traded in which type of market?

a. Capital market
b. Money market
c. Buyer’s market
d. Seller’s market

39. Internal sources of finance available to firms include

a. Overdraft
b. Hire purchase
c. Short term loans
d. Selling assets

40. An excise duty is

a. A tax levied on goods imported into a country

b. A tax levied on land
c. A tax levied on goods manufactured in a country
d. A purchase tax

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41. A tax rate system where all citizens regardless of income level pay the same rate in tax is a

a. Proportional system
b. Regressive tax system
c. Progressive tax system
d. Simple tax system

42. Which of the following are MAIN problems in computing national income figures?

I. Double counting
II. Some activities are not accounted for
III. Some goods are not exchanged for money and the value must be estimated
IV. Some figures may be high given the inflation rate

a. All of the above

b. l, ll and lll
c. lll and lV
d. lV

43. Comparative cost advantage leads to trade. This is a situation where

a. One country is more efficient in the production of a good than another country
b. Automation leads to economies of scale
c. One country will produce a good in which it has the lower opportunity cost than another
country
d. Expertise leads to increase production

44. Cloud Technology is specifically

a. using cell phones to communicate

b. connectivity with systems that allow personnel to access resources from various
locations
c. software tools
d. Management information systems

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45. International trade may produce certain drawbacks for a country. Which of the following is a
MAIN disadvantage of international trade?

a. Increased utilization of productive capacity

b. Increased employment
c. Improved quality of goods and services
d. Increased lobbying by local firms for protectionist policies

46. Which of the following is NOT a production application of ICT

a. Computer Aided Design
b. QuickBooks
c. Computer Aided Manufacture
d. Computer Aided Instruction

47. Which of the following is NOT a regulatory body?

a. The Central Bank
b. Supervisor of Insurance
c. A commercial Bank
d. Financial Services Commissions

48. Main forms of government assistance to business are

I. providing funding for small entrepreneurs
II. providing training and technical assistance to persons in areas of national development
III. providing subsidies and grants
IV. providing tax incentives to encourage investment in business
a. I, II and III
b. all of the above
c. II, III and IV
d. III and IV

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49. A KEY advantage of the employment of automation and mechanization is

a. high maintenance costs over time

b. prone to technical disruptions
c. reduce labour costs
d. increase unemployment

50. The process of selling the assets of government owned business to the private sector is
commonly called

a. Privatization
b. Nationalization
c. Industrialization
d. Entrepreneurship

51. In order to address the problem of increasing inflation (general increase in the price levels in a
country), the government can engage in which of the following actions

a. Increase taxation
b. Reduce taxation
c. Increase government spending
d. Reduce interest rates to make borrowing more attractive

52. Problems associated with industrialization include high energy costs, disposal of industrial waste
and reliance on the primary sector. What action can be taken to address these issues?

a. Provide incentive to business to hire more persons

b. Develop policies for family planning
c. Encourage investment in the secondary and tertiary sector
d. Increase corporation taxes

53. One way to deal with the issue of technological unemployment is to

a. Increase corporation taxes

b. Use a business employment levy to ensure that firms continue to employ a percentage
of human capital
c. Reduce taxes on firms
d. Reduce access to modern technology

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54. Unemployment that occurs as a result of persons not having the capacity to undertake or
engage in employment is specifically

a. Residual unemployment
b. Frictional unemployment
c. Technological unemployment
d. Structural unemployment

55. Government can implement which of the following initiatives to deal with the loss of a skilled
labour force?

a. Develop family planning policies

b. Develop the infrastructure
c. Invest in the training and development of locals to fill key positions in industries
d. Zone business development

56. A MAJOR aim of the International Monetary Fund (IMF) is

a. Promoting adjustment of exchange rates

b. Create a free trade area
c. Promote economic integration
d. Removal of trade barriers

57. The promotion of free movement of goods, services, capital and people among member states
is the prime objective of which association?

a. Association of Caribbean States

b. CSME
c. World Trade Organization
d. CARICOM

58. Which of the following is NOT a key responsibility of governments in Caribbean nations?

a. Looking after the welfare of citizens

b. Maintaining national security
c. Ensuring that the private sector maximize profits
d. Managing the economy through fiscal and monetary policies

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59. Which factor is NOT an indicator of Standard of living?

a. freedom of speech
b. National income per capita
c. life expectancy
d. average personal disposable income

60. Foreign investment provides certain benefits to a host country EXCEPT

a. Bring in foreign exchange

b. Profits are repatriated to the home country
c. Creates employment of locals
d. Encourages technology transfer to the developing countries

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Test 8
1. Money helped to address the problems of the barter system. Which of the following are key
functions of money

I. Medium of exchange
II. Store of value
III. Acceptability
IV. Measure of value

a. All of the above

b. l, ll and lll
c. ll, lll and lV
d. l, ll and lV

2. Mass production is the production of goods on a large scale. It usually involves automation of
processes. Which of the following is a KEY disadvantage of mass production?

a. Standardization leads to lower per unit costs

b. Standardization leads to a lack of variety
c. Standardization leads to economies of scale
d. Division of labour and specialization

3. Miss. Lue decides to invest her back pay by buying shares in a public company. Miss Lue will
bear the obligation of

a. Limited liability
b. Unlimited liability
c. Incorporation
d. Un-incorporation

4. Country B’s government decides to take over the assets of a private water company. This is a
situation of

a. Nationalization
b. Privatization
c. Conglomeration
d. Horizontal merger

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5. Company T has decided to automate its production line. This means that there is less need for
manual labour. Production will become

a. Capital intensive
b. Labour intensive
c. Routine
d. Job or unit production

6. The MAJOR features of a co-operative business structure are

I. Owned and operated by the members

II. Profits are shared among the members
III. Shares are traded on the stock exchange
IV. Provides services to members

a. l, ll, lll and lV

b. l, ll, and lll
c. l,ll and lV
d. lll only

7. Which of the following is NOT characteristic of a command or planned economy?

a. Existence of both the public and private sector.

b. The state is in charge of the factors of production.
c. The state decides the methods of production.
d. The government decides on what to produce.

8. All of the following are functions of the production department EXCEPT

a. To engage in stock control

b. To establish quality control standards for products
c. To prepare production budgets and cost estimation
d. To deduct income tax from production workers’ salaries

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9. All functional area managers are responsible for ensuring that there is harmony among the
various departments and that there is an understanding that all departments must work
together to achieve the organizational goals. This is specifically the function of

a. Controlling
b. Directing
c. Organizing
d. Co-ordinating

10. Customer satisfaction is a major aim of all organizations. Which of the following is a KEY
responsibility of management to customers?

a. Provide up to date financial reporting

b. Maximize efficiency
c. Provide necessary after-sales services
d. Adhere to legislation concerning business operations

11. Autocratic leadership style may be relevant to situations that require quick, decisive decision
making however, it may result in which of the following drawbacks?

a. Stifle worker initiative and creativity

b. A lack of clear direction to get the job done
c. Longer decision making period
d. Workers jostling for the leaders attention

12. A situation where labour is added to a fixed factor such as a plant site results in increased total
productivity. However, as more labour is added the fixed factor becomes strained e.g. less room
to move, more conflict. After some time the extra worker’s productivity begins to fall. This is
the principle of

a. Ceteris paribus
b. Diminishing marginal returns
c. Economies of scale
d. Diseconomies of scale

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13. To avoid conflict in the organization, it is important to ensure that each person receives
commands from one superior or manager. The is the organization principle of

a. Delegation
b. Span of control
c. Unity of command
d. Chain of command

14. An example of a management information system is the transaction processing system. This is
specifically designed to

a. Provide information to managerial decision making

b. Provide support for office operations
c. Provide information for high level management decision making
d. Provide support for the day to day operations of the business such as transfer of funds

15. According to motivation theorist, the individual has a need to be recognized for his or her
individual contribution. The organization can meet this level of needs by

a. Providing flexible working

b. Providing a job contract
c. Redesigning the job to facilitate teamwork
d. Providing promotional opportunities

16. Which of the following statements is NOT a feature of good communication?

a. Proper timing of information

b. Seeking feedback
c. Selection of the appropriate medium
d. Ensuring filtering of information before message is received

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17. A business faces certain opportunities and challenges in its external environment. Which of the
following are critical challenges facing organizations?

I. Negotiating entry into trading blocs e.g. NAFTA

II. Greater access to international markets as a result of globalization
III. Political instability
IV. Meeting environmental regulations

a. l and ll
b. l, ll and lll
c. l, lll and lV
d. ll, lll and lV

18. Mary buys a piece of furniture from a large retail store. She paid a down payment and is
supposed to pay equal instalments for the next eighteen months. Mary assumes possession of
the furniture. Which type of consideration is exhibited by Mary in this contract?

a. General consideration
b. Executory consideration
c. Executed consideration
d. Past consideration

19. Terminating a contract if performance becomes impossible based on future circumstances is

specifically termination by

a. Agreement
b. Frustration
c. Breach
d. Legislation

20. ZXC Ltd. realized that a customer has been given faulty goods in a shipment that was paid for by
the customer. The sales manager issues a specific document to rectify the error and provide
compensation for the faulty goods. This is termed

a. A debit note
b. A credit note
c. A statement of account
d. A stock check

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21. Short term assets used up daily in the business, is specifically

a. venture capital
b. fixed capital
c. working capital
d. capital equipment

22. Which of the following are KEY determinants of the labour supply in a country?

I. Population growth rate

II. Population structure
III. Cultural patterns
IV. labour mobility

a. l, ll, lll and lV

b. l and ll
c. lll and lV
d. ll, lll and lV

23. Company D is engaged in production that meets local demand as well some measure of foreign
demand for the products. This is specifically production at the

a. Subsistence level
b. Surplus level
c. Domestic level
d. Tertiary level

24. When two firms at different stages of the production process join, this is referred to a

a. takeover
b. horizontal merger
c. vertical merger
d. conglomerate

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25. MAJOR disadvantages of large business include all of the following EXCEPT

a. Standardized output can lead to inflexibility

b. Increased barriers to communication
c. Employment of more automation and mechanization
d. Impersonality in dealing with clients

26. A business can expand through external growth. A merger where two or more organizations at
the same stage of production join to form one legal entity is appropriately termed

a. A horizontal merger
b. A vertical merger
c. A takeover
d. A conglomeration

27. Which of the following is NOT a typical example of a cottage industry?

a. The work of a tailor who operates from home

b. The making of leather craft
c. The construction of houses
d. The making of garden condiments e.g. pepper sauce

28. Which of the following is NOT a main factor in locating a clothing factory?

a. Access to proper infrastructure

b. Government policy on the location of business
c. Access to skills
d. Access to tertiary level educational institutions

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29. Significant drawbacks of employing increased automation and mechanization are

I. Increased output
II. Increased unemployment
III. Increased maintenance costs
IV. Increased investment costs

a. l, ll, lll and lV

b. l, ll, and lll
c. ll, lll and lV
d. none of the above

30. All of the following are critical marketing activities EXCEPT

a. Market research
b. Distribution
c. Industrial relations
d. Branding

31. Creating a marketing strategy to help the product get noticed by the customer and occupy a
place in the minds of the target customer is appropriately

a. Market segmentation
b. Market targeting
c. Market positioning
d. Market research

32. Market vendors, door to door sales personnel and an internet website are specifically

a. Wholesalers
b. Producers
c. Retailers
d. Consumers

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33. The marketing research department of Company A is engaged in data collection. The team uses
internet sites and trade journals to gather data. They are collecting information from which
source?

a. Primary sources
b. Secondary sources
c. Quantitative methods
d. Qualitative methods

34. Which of the following are the MAIN roles of the central bank?

I. To provide short term loans to private individuals

II. To regulate the money supply in the economy
III. To be the banker to commercial banks
IV. To be the banker to the government

a. l, ll and lll
b. l, ll, lll and lV
c. ll, lll and lV
d. l and lV

35. Which statement clearly explains the role of the central bank as a ‘lender of last resort’?

a. The official lender to the government

b. The final lender to a commercial bank in need of funding to prevent collapse
c. The final authority on the money supply
d. The lender of foreign exchange

36. The stock market is a situation where shares and securities are traded. Which statement
explains the role of the stock market for firms?

a. Promotes economic growth

b. Used as an indicator of a country’s performance
c. Used to raise capital for expansion
d. Provides an avenue for government to access funding

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37. Shares that carry a fixed rate of interest are specifically

a. Ordinary shares
b. Preference shares
c. debentures
d. loan stock

38. 'Electronic delivery of information including data and content across multiple platforms', is
termed

a. multi- media transfer

b. digital delivery
c. On line delivery
d. E-markets

39. Which of the following represent important long term sources of financing available to firms?

I. Share capital
II. Leasing
III. Debentures
IV. Trade credit

a. l, ll and lll
b. l, ll, lll and lV
c. l and ll
d. l and lll

40. Savings is that part of income that is not used up for consumption. All of the following are forms
of savings EXCEPT

a. Opening a business
b. Placing money in a fixed deposit
c. Credit union deposits
d. Placing money in a safe at home

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41. An open cheque is one that

a. Cannot be cashed directly but has to be lodged to the customer’s account

b. Can be exchanged for cash instantly at the bank on which it is drawn
c. Is dated for payment in the future
d. That is dishonoured

42. Which of the following are specific areas in which government seeks to regulate business
activity?

I. Consumer protection
II. Zoning or land control
III. Taxation
IV. Waste disposal

a. l, ll, lll and lV

b. l, ll and lll
c. l, ll and lV
d. l and ll

43. Taxation should satisfy certain basic principles. Which of the following is NOT a principle of
taxation?

a. A tax should be fair and equitable

b. A tax should be economical to administer
c. There should be full disclosure on the implementation of a tax
d. A tax should equal in that all persons must pay the same amount of money in taxes.

44. In order to prevent the importation of certain de-merit goods or to address a balance of
payment deficit, the government can implement which type of tax?

a. Tariff
b. Excise duty
c. Embargo
d. Quota

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45. Mr. Eton’s monthly salary increased in January. This was accompanied by a simultaneous
increase in the percentage of income paid in taxes. This type of system is

a. Proportional
b. Progressive
c. Regressive
d. Equitable

46. 'A computer tool which enables the e-processing of authorizations, permits, certificates and
other customs documents', is called a/an

a. Portnet
b. e-processing system
c. GPS
d. GIS

47. Taking into consideration the sum of wages, profits, rents and net property incomes from
abroad suggest calculating national income using which method?

a. The expenditure method

b. The output method
c. The product method
d. The income method

48. Which of the following examples represent transfer payments?

a. Salaries
b. Wages
c. Rent
d. Social welfare grants

49. Government can MOST likely effect an improvement in the economic wellbeing of citizens by

a. Reducing corporation taxes

b. Increasing the money supply
c. Reducing income taxes to increase disposable income
d. Increasing income taxes and reducing government spending

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50. 'A regional cross-docking point where products from multiple supply sources arrive and are
sorted in accordance to the needs of the destination points,' is termed a/an

a. GIS
b. DHL
c. e-business
d. logistics hub

51. 'A satellite navigation system used to determine the ground position of an object,' is termed a

a. GPS
b. GIS
c. Portnet
d. Hub

52. Which of the following statements can be used to argue FOR the nationalization of a country’s
water supply?

I. The service will be available to all citizens at a subsidized rate

II. The government will control the decision making process
III. Less focus on profit maximization and more on the provision of an essential service
IV. The enterprise will be owned by shareholders

a. All of the above

b. l, ll and lV
c. l and lll
d. l and lV

53. Which of the following are means to eradicate a country’s ‘debt burden’?

I. Increase interest rate to encourage savings

II. Lower interest rates to stimulate investment
III. Get bailouts from other countries
IV. Raise taxes to generate revenue

a. ll, lll and lV

b. lV only
c. l,ll and lV
d. none of the above

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54. Caribbean nations face the problem of inadequate sources of capital. This is in terms of
technology, equipment, machinery, plant sites and infrastructure. One way of addressing this
problem is

a. To encourage foreign direct investment

b. To increase interest rates
c. To raise taxes
d. To zone business location

55. Which one of the following initiatives can the government use to reduce the unemployment
rate in a country?

a. Increase corporation taxes

b. Increase minimum wages
c. Increase access to venture capital, low interest loans to small start-up businesses
d. Reduce government spending

56. Which of the following is NOT a main function of The Caribbean Development Bank?

a. To offer assistance in the event of natural disasters

b. To finance social programmes in Caribbean countries
c. To finance economic programmes in Caribbean countries
d. To promote the free movement of people across Caribbean nations

57. Which of the following are KEY indicators of economic development in a developing country?

I. More access by citizens to educational facilities

II. Improvements in telecommunications
III. Greater access to improved public services
IV. The physical increase in output

a. l, ll and lll
b. l, ll, ll and lV
c. lll and lV
d. ll, lll and lV

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58. Which of the following is NOT a main function of the Caribbean Single Market and Economy
(CSME)?

a. To facilitate the free movement of capital

b. To foster a single market without trade barriers
c. To promote free movement of people
d. To foster a political union

59. A country’s national income for 2012 was $600 million. The population was 2.5 million people.
Calculate the country’s per capita income for the year ending 2012.

a. $240
b. $450
c. $1000
d. $390

60. Based in the initiatives listed below. Which measures can encourage more private sector
domestic investment in the local economy?

I. Reduce corporation taxes

II. Reduce interest rates to facilitate borrowing
III. Increase individual income taxes
IV. Reduce government spending and borrowing

a. All of the above

b. l, ll and lll
c. l, ll and lV
d. I and lll

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ANSWER KEY

TEST 1

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60

TEST 2

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60

TEST 3

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54

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7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60

TEST 4

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60
TEST 5

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60

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TEST 6

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60

TEST 7

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60
TEST 8

1 13 25 37 49
2 14 26 38 50
3 15 27 39 51
4 16 28 40 52
5 17 29 41 53
6 18 30 42 54
7 19 31 43 55
8 20 32 44 56
9 21 33 45 57
10 22 34 46 58
11 23 35 47 59
12 24 36 48 60

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UNIT ANSWER KEY

UNIT ANSWER KEY

1 2 3 4 5

1. b 1. b 1. c 1. b 1. b
2. d 2. c 2. a 2. b 2. b
3. d 3. d 3. d 3. a 3. c
4. c 4. a 4. b 4. b 4. b
5. c 5. b 5. a 5. b 5. a
6. c 6. b 6. b 6. c 6. c
7. c 7. c 7. b 7. d 7. b
8. d 8. b 8. b 8. b 8. c
9. c 9. b 9. b 9. c 9. d
10. b 10. c 10. b 10. a 10. a
11. d 11. d 11. c 11. b 11. b
12. d 12. c 12. d 12. a 12. b
13. b 13. d 13. b 13. b 13. b
14. d 14. d 14. d 14. c 14. d
15. d 15. d 15. b 15. a
16. b 16. d
17. b 17. c
18. b 18. b
19. d 19. a
20. b 20. b

6 7 8 9 10

1. b 1. d 1. d 1. b 1. a
2. c 2. b 2. d 2. a 2. b
3. c 3. c 3. c 3. c 3. c
4. d 4. c 4. d 4. c 4. d
5. c 5. d 5. d 5. c 5. b
6. b 6. b 6. d 6. c 6. d
7. d 7. a 7. b 7. c 7. b
8. d 8. c 8. a 8. a 8. b
9. d 9. c 9. c 9. c 9. c
10. c 10. d 10. b 10. c 10. d
11. d 11. d 11. c 11. c 11. b
12. d 12. b 12. c 12. b 12. c
13. c 13. c 13. d 13. b
14. b 14. d 14. d

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15. c 15. d 15. b

16. c

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SBA GUIDE
Based on: (Caribbean Examinations Council; Syllabus Principles of Business; Effective for examinations
from May-June 2019; Caribbean Secondary Education Certificate)

Note

 Each candidate must submit a report on a project done in the preparation for the final examination;
 Data gathering can be done individually or in groups;
 All group members must be identified in the report;
 The SBA report 'should not exceed 1000 words', appendices are not included in word limit;
 A project report exceeding the maximum 1000 words will incur a penalty of 10% of score gained;
 Student's report should be submitted 'electronically' and following a suggested format.

Business Cognate Group: Principles of Accounts, Principles of Business,

Economics

Any student doing more than one subject in the cognate group e.g. POA & POB; POB &ECON.; POA &
ECON or POB, POA & ECON., is required to submit one SBA project report.
The report should be based on a topic that is relevant to the cognate area subjects undertaken by the
student e.g. POB and POA.
Objectives/Research Questions will reflect the relevant Cognate areas

Research Project Outline

Step 1: Identify the issue, topic or problem to be investigated. This must be in a business related area of
study e.g. POB, POA, ECON.). This will form the Research Topic and the Research Problem or Thesis
Statement.

Step 2: Discuss the background of the issue, topic or problem: Consider the following points;

Name of business/venture; length of existence; products; identify issue/problem facing the organization;
Description of the issue/problem with relevant theoretical underpinning (theorists relevant to the issue);
State why study is important and what the study seeks to determine; State why you are interested in the
study and the importance to society;

Step 3: State the objective of the study; This should include:

Two to three research questions this must match to relevant syllabus objective
If study is based on one subject e.g. POB, then syllabus objectives for that subject must be identified
e.g.Syllabus Objective: POB Section (-) Objective (-)

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If study is based on cognate subjects, then relevant syllabus objectives must be identified for each subject
and a combination is presented. POB Section (-) Objective (-)
Econ. Section (-) Objective (-)

Step 4: Describe the methodology and data collection instruments. This should include for example:

Primary data sources e.g. interview (include questions in appendix); State why interview was conducted.
State the type of data gathered i.e. qualitative versus quantitative data;
Secondary data sources e.g. published business data like final accounts, studies in journals (include in
appendix). State type of data i.e. qualitative versus quantitative data. State why this type of source was
used.
State limitations of the data collection process.
Note: quantitative data usually deals with numbers and statistics; qualitative data usually deals with
words, texts;
Quantitative data collection methods can include: obtaining data form records; administering surveys
/questionnaires with closed ended questions;
Qualitative data collection used for example, more open ended questions in interviews;

Step 5: Presentation and Analysis of Data

Restate research question

State what was done to answer the respective research question
Present data: Use tables to show data in one period to the next; graphs e.g. bar graph, pie chart, line
graph etc...
Analyse Data: review research objective and make sense of the data presentation; observe trends or
outliers; mode, median, mean
State findings: ensure findings are consistent with analyses;

Step 6: State conclusions based on findings. This includes:

What do the results mean in terms of the study;

Conclusions flow out of findings;
How can it be applied to understanding the situation or issue?
Limitations of the study and future research

Step 7: Make at least two recommendations based on findings. This includes

Realistic suggestions based on findings e.g. if a change is suggested, consider what needs to be changed,
how it will come about and what resources may be needed
Consider the overall benefit of the recommendation; how will the recommendation help resolve certain
issues
Should help the researcher to better understand problem or issue

Step 8: Bibliography or References. This includes:

Names of authors, publishers, name and date of publication e.g. APA Style or Chicago Manual
Alphabetical order

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Document retrieved from http:// www.----------------------
Person interviewed: Name, interview via personal communication, Date

Step 9: Appendices. This will include:

Supplementary material at the end of the study e.g. questionnaire; data tally; interview questions;
excerpts from financial records etc.

Possible areas of research

Marketing Mix strategies and the impact on small businesses e.g. Mini Marts, Tyre Shops, Stationery and
Photocopying Stores, Book Stores, Clothing Stores, in terms of profitability or increased sales;
Impact of the implementation of e-commerce on the sales of a business;
Impact of financial and non-financial incentives on employee turnover in a fast food outlet;
Effects of the implementation of ICT on the sales level or profitability of a venture;

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Bibliography
Leslie, D., Singh, K., Principles of Business for CSEC Examinations, Cambridge University Press (2011),
Cambridge.

Oxford Dictionary of Business and Management, Oxford University Press (2006), Oxford.

Robinson, K., Hamil, S., CXC Principles of Business with SBA, Study Guide and Exercises, Carlong
Publishers (Caribbean Ltd.) (2001), Kingston

Waterman, I. L.,Ramsingh, D., Principles of Business for Caribbean Examinations 4th Edition,
Macmillan Education (2005), Oxford.

Whitcomb, A., Essential Principles of Business for CSEC 3rd Edition, Pearson Education Ltd. (2006),
Essex.

Worthington, I., Britton, C., The Business Environment 5th Edition, Pearson Education Limited (2006),
Essex.

Other Websites:

hanushek.stanford.edu www.smallbusiness.chron

ideas.repec.org cerasis.com

ec.europa.eu www.reference.com

www.oecd.org unctad.org

www.jamaicatradeand investment.org www.ict-pulse.com

www.balance.com bizfluent.com

caricom.org www.scu.edu

http://www.imf.org www.logisticsmgmt.com

www.supplychainopz.com

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