UNIT 1 - Production and the Factors of Production

Production
 Converting raw resources into goods or services
 Satisfy needs and wants of people
Manufacturing
 Converting raw materials into finished- and semi-finished goods
 Likely to use people, tools, equipment, and machinery
 Goods are mass-produced
 Make consumer goods, sold for the consumer, and intermediary goods, used by
other manufacturers
 Some manufacturers make capital goods that are equipment used in manufacturing
Provision and Delivery of Services
 Direct Services | aim directly at consumers
o Banking, telecommunications, personal services, care services, education,
and public transport
 Commercial Services | support businesses with transportation of goods
o Trade | involves exchange of goods and services between different owners
for money
 Export and import agencies
 Retailing
o Aids to Trade | services provided by commercial enterprises to support
businesses in the trading process
 Comms systems
 Transport
 Advertising
Four factors of Production
 Land | need land to locate premises
 Labour | the workforce such as manual, skilled, and managers
 Capital | anything that confers value or benefit to its owner
o Working capital is the stock of raw materials that will be used up in
production. For example, wheat to make bread is the working capital
o Fixed capital refers to the stock of man-made resources to help make goods
and services and can be used again. Used in production of working capital
into goods or services. For example, the rolling pin to beat the dough is fixed
capital
 Enterprise | an entrepreneur that risks their own money in a business venture

Unit 2 - Industrial Sectors and Commerce

The Chain of Production
Primary Sector → Secondary Sector → Tertiary Sector
Primary Sector
 Production that involves extracting raw materials from the earth
o Mining and Quarrying
o Fishing
o Forestry
o Agriculture
  Squeezing the milk from the cow’s udders and sterilising it and whatnot
Secondary Sector
 Production that involves converting raw materials into finished or semi-finished
goods
 Turning that milk into cheese
Tertiary Sector
 The production of services
 Showing the cheese to you in stores hoping you’ll buy it
Interdependence Between Sectors
 Primary Sector’s Reliance on Secondary Sector
o Farmers rely on Bakeries to buy their wheat
 Secondary Sector’s Reliance on Tertiary Sector
o Bakers rely on shops and groceries to buy their baked goods
Deindustrialization
 The decline in manufacturing

Unit 3 - Division of Labour

Specialisation
 Workers specialise in certain skills and tasks. Allows people to concentrate on a
limited range of tasks
 Many firms specialise in a narrow range of goods such as Toyota makes cars and car-
related stuff
 Specialisation inside firms such as HR
 Different regions specialise such as IT in Bengaluru
 Different countries specialise
Specialisation By Individuals and the Division of Labour
 Increase productivity
o Workers do tasks they are best at
o Work tasks become easier and makes it easier to train workers
o Workers’ skills improve as they regularly repeat the same tasks
Specialisation by Firms
 HSBC provides banking services
 Allows firms to become experts in their field
 Focus more effectively on a narrow range of business or commercial activities
 Improve efficiency because they can employ specialist workers and used a limited
amount of machinery and resources
o Learn and develop most appropriate working practices
o Be more effective at meeting demands
o Enjoy lower costs
 More likely to produce larger quantities and thus lower costs
Specialisation by Regions and Countries
 By specialising in a specific thing and trading with other countries, world output and
income will rise
Advantages Disadvantages

Allows workers to become an expert at what More likely that worker becomes bored
they do. Practice makes perfect because of constant repetition

The easier it will be to find work Risk of unemployment when a demand for
a certain skill or trade declines

Get paid more Harder to find jobs and gain money when
demand for skill declines

Efficiency is improved People may become dissatisfied and bored

which results in poorer quality of work

Greater use of specialised tools, machinery, Problems can occur if one stage of
and equipment is possible when workers production relies on another
specialise

Production time is reduced because workers

don’t waste time changing tasks

Organisation of production becomes easier Loss of flexibility in workplace

The Interdependence of Countries
 Globalisation occurs when trade, technology, and information, and jobs spread
across national borders and cultures
 Main problem is interdependence because they rely on other countries for the
supply of goods and services they do not produce
 One economy is likely to affect another if something happens

Unit 4 - Sources of Buying

Buying
 Buyers need to find the best possible quality at the lowest possible cost. Resources
can be bought from:
o Suppliers in the home country or from overseas
o Directly from the supplier
o Through and intermediary such as wholesaler or distributor
o By mail order
The buying Process
 Firstly, fill a requisition form which basically says “I need this (material) and I need
(quantity) of it”
 Secondly, negotiate. Probably you found a better supplier and so review the terms
and conditions of both
 Thirdly, the order is placed
 Fourthly, argue with the poor person on why you haven’t received your items yet.
Make sure to berate them as well
 Fifthly, check the items you received against the invoice
Buying from Suppliers at Home
Advantages Disadvantages

Transport costs are lower May lead to lost opportunities

Communication is easier Choices are limited

Buying from home suppliers is done more quickly Small local suppliers are less
efficient

A business might win support from customers if it uses Local suppliers could result in
local suppliers higher costs
Buying from Suppliers in Other Countries
Advantages Disadvantages

Cheaper suppliers Likely to have different technical and

industrial standards

Buyers will have greater choice when May require complex and unfamiliar
selecting a supplier documents

Some products have superior quality than May be more difficult to settle trading
those at home disagreements

Access to world-class technology Hidden costs such as fees or tariffs

Overseas suppliers may be able to supply in Distance means delivery times are longer
larger quantities

Challenging cultural differences such as

language
Buying Direct From Supplier
Advantages Disadvantages

Cheaper to buy direct Break in supply means shortages

More control over production May not have facilities to deliver the order

Buying large quantities help ensure Buying from small number of suppliers means
uniformity reduced variety of produce available

May be easier to build long-lasting business

relationship with large suppliers

Communication is shorter, hence more

effective
Buying Through an Intermediary
Advantages Disadvantages

Wide range of choices Be more expensive

Reduce transport costs May not be able to supply large quantities

 May take responsibility for May lack knowledge of specific materials or items
delivery

Less control over production

Mail Order
Advantages Disadvantages

Often cheaper or exact price May not be able to use credit card

Time between placing an order and receiving Return of goods can be inconvenient
said order is short

Goods can be outsourced from all over the Lack of personal contact between buyers
world and sellers

Convenient method of buying Goods may not live up to expectations

Outsourcing
 Having to arrange somebody outside a business to carry out work for the business

Benefits Drawbacks

Lower costs Loss of control

Increased Reliance on suppliers

capacity

Superior quality Disagreement from eployees

UNIT 5 – The costs associated with buying and selling

The costs associated with buying
- Transport costs
o Will depend on size, weight, distance, containers, insurance, wages, etc.
- Transaction costs
o Financial costs incurred when goods are exchanged
o Taxes such as VAT (value added tax which is a sales tax imposed on every
stage of production)
o Tariffs which are like a tax on goods imposed by the government
o Currency exchange fees because payment must be made in the currency
used by the seller
- Administration costs
o Range of documentation to prove that the transaction occurred\
- Environmental costs
o Pollution
o Loss of habitat
o Waste produced
 o Depletion of non-renewable resources
- Research costs
- Staffing costs
The costs associated with selling
- Sales staff
o Salaries, travel, and accommodation
- Payment processes
o Cash
o Cards
o Mobile phones
- Stolen inventory
o Risk of theft is an example of a shrinkage cost
 Loss of inventory due to factors such as theft, shoplifting, errors, and
damage to inventories
o Accurate stock takes in a safe, secure, protected environment reduces these
factors
- Damaged inventory
o Inventories getting damaged while handling
- Distribution costs
o Online sales such as ecommerce and mcommerce
 Shipping costs or airfreight charges

UNIT 6 – Sole traders, cooperatives, and partnerships

Private and Public Enterprises
- Goods or services may be split up into the private or public sector
- In the private sector, commercial enterprises can either take
o Unincorporated where there is no legal difference between the owner and
the business and everything is carried out in the name of the owner
 Often to be small and owned by one person or a small group
 Sole traders, cooperatives, partnerships
o Incorporated is where there is a separate identity between the owner and
the business (the business can sue, be sued, and take over or be closed
down)
 Are often called limited companies
 Private limited companies
 Public limited companies
- In the public sector, a range of organisations, such as government departments,
public corporations, and other agencies provide services that may not be supplied by
the private sector such as healthcare, education, and defence
Sole Traders
- Simplest form of commercial enterprise
- One owner and can employ any number of people
 - The implications of this organisation are
o Requires no legal requirements
o No special documents required
o Raise capital using their own personal resources
o Complete ownership and control of the enterprise
o Any profit made belongs to the owner
o All sole traders have unlimited liability (owner of a business is responsible for
all business debts, possibly beyond the original amount invested)
Pros Cons
Simple set up process Unlimited liability
- Cheap/quick - Personal assets at risk if business
- Sales immediately fails
- Takes in income tax
No need to publish accounts Fewer sources of finances
- Private finances - Cannot issue shares
- Expansion is harder
Retain all profits Need to be multi-skilled
- No shareholders/partners - Production
- 100% of profits - Marketing
- Distribution of product
Decision making Difficult to take holiday
- Control over business
Cooperatives
- A private business that is owned or partly owned by the people who use its products,
services, or supplies
- Members can purchase shares that allow them to vote at annual general meetings
- Capital is raised from selling shares
- Any profit is distributed among members as dividend
o Worker Cooperatives
 Jointly owned by the employees
 Employees are likely to
 Contribute to production and be involved in decision making
 Share in the profit (usually equally)
 Provide some capital
Partnerships
- Business that is owned by a minimum of two and a maximum of twenty individuals
- All partners agree to a “Deed of Partnership”
o Profits are distributed
o Control is distributed
Pros Cons
Potential for more finance Unlimited liability
- More partners, more finance - Personal assets at risk if business
fails
- Responsible for other partners’
 misconduct and negligence
Shared workload Shared profits
- Can take holiday
- Take cover
Specialise in expertise Shared decision making/control
- Increase in productivity and - May lead to conflict
innovation
Partners industry contacts
- Access to suppliers/markets

- Might get a question that tells you whether this business should convert from a sole
trader/cooperative/partnership to a sole trader/cooperative/partnership. If you do,
think of the PLUMS method
o P – how are the Profits distributed
o L – is it Limited liability
o U – is it unlimited liability
 Above two are N/A because it will still be unlimited liability
o M – management
 Desire for control
o S – sources of finance
 Need for finance?

UNIT 7 – Types of Commercial Enterprises

Limited Companies
- Are incorporated which means they have a separate legal identity from their owners
- Implications of this organisation are
o Necessary to follow an official procedure to form a limited company
o Two official documents are required to set up a limited company
o Capital is issued by issuing shares. Shareholders are
 Joint owners
 Entitled to vote on important matters
 Get dividends paid from profits
o Owned by the shareholders but are run by directors elected by the
shareholders
o The profits may be distributed between the shareholders
o The owners have limited liability
- How they are formed
o A number of documents must be sent to the Registrar of Companies
 A body responsible for recording the details of all limited companies
trading in the country
o These documents make up the company’s institution which are the rules that
dictate how the company should be structured and governed
o If the documents are acceptable, the company will get a certificate of
incorporation which allows it to trade as a limited company
 - Memorandum of association
o Sets out the constitution and gives details about the company
 Name of the company
 Name and address of the company’s registered office
 Objectives of the company and the nature of its activities
 Amount of capital to be raised and the number of shares to be issued
- Articles of association
o Deals with the internal running of the company
 Rights of the shareholders on the type of share that they hold
 Procedures for appointing directors
 Length of time directors should serve before re-election
 Timing and frequency of company meeting
 Arrangements for auditing company accounts
Private Limited Companies
- Owned by shareholders and managed by a director
- Shareholders choose the director
o Shareholders are known to the company
o Shares are not sold on the stock exchange
o Shareholders losses are limited to their investment
Pros Cons
Limited liability No access to stock exchange
- Shareholders personal possessions - Smaller volume of finance available
are not at risk
- Encourage investment
Additional sources of finance Shared profits
- Raise finance through selling shares - Many shareholders means diluted
(debt and equity available) profits
Control of who shareholders are Legal requirements to publish financial
- Less risk of conflict between owners accounts
and managers - Competitors may be able to see
High prestige More Administration
- Corporation tax
- Register business with company
accounts and company house
- Inland revenue
Public Limited Companies
- Company that offers it shares to the general public via the stock exchange
- Type of limited company (limited liability)
- Must raise a minimum of 50,000£ share capital in the UK
- Minimum of two directors and one company secretary
- To go public, a company must write a prospectus
o A document produced by a company that wants the public to buy its shares
- Going public is expensive because
o Needs lawyers to ensure that the prospectus is legally correct
 o The prospectus has to be printed and distributed
o A bank may be paid to process share applications
o The company must insure against the possibility that some shares are not
sold, therefore, a fee must be paid to an underwriter who must buy any
unsold shares
 An underwriter is an institution that agrees to buy any unsold shares
for a fee, resulting from a flotation (going public)
o There are advertising and administrative fees
- A private limited company might like to go public to have access to the stock
exchange so that it can expand its finance

UNIT 8 – Franchising
Franchise, Franchisor, and Franchisee
- Franchisor is a creator of a franchise who enables the franchisee to use the
successful business formula in exchange for
o Initial fee
o Cut of profits
- The franchisor controls the
o Product range
o Interior of outlet
o Staff uniform
- The franchisee is a person or company who has paid to become part of the franchise
- The franchisee controls the
o Staff training
o Staff requirement
o Stock control
- A franchise is a business model where an owner allows another operator to trade
under their name
Should the Entrepreneur become a franchisee?
Pros Cons
Brand recognition Limited freedom in decision making
- Customers know it - Forced to follow franchisor
- Don’t need to do price penetration
Easier than starting from nothing Susceptible to ‘other’ franchisees
- Franchisor gives training to you, - KFC ran out of chicken
product range, and the suppliers
Less Risk means more likely to give you a Initial fee to be part of franchise
loan
- Piggyback on success of the
franchise to get a bigger or cheaper
loans/finance
Cut of profits to be paid to franchisor
Evaluation
 - Size of the fee
- Size of the cut of the profits
- Appetite for risk
- Could set up your own business
Should the business use franchising to grow?
Pros Cons
Speed up growth Reduced control
- Franchisees cover capital expenses - May be hard to meet your
such as rent/bills standards
- You need less borrowing - Consistent experience
Less HR costs Profit sharing
- Employees of franchises are not - Because franchisee takes on costs
your problem
- Less costs for HR
Less operational costs
- Franchisee solves day to day issues
Initial fee and ongoing profits
Franchisee may bring you on to national or
international level
Evaluation
- Size of fee you receive
- Size of cut of the profits
- Amount of control you keep
- Quality of the franchisee

UNIT 9 – Public Corporations and Privatisation

Characteristics of Public Corporations
- State owned
- Created by law
- Incorporation
- State funded
- Provide public services
- Public accountability
Reasons for the public ownership of businesses
- Avoiding wasteful duplication
- Maintaining control of strategic industries
- Saving jobs
- Filling the gaps left by the private sector
- Serve unprofitable regions
Reasons against public ownership of businesses
- Cost to government
 o Make losses
- Inefficiency
- Difficult to control
Privatisation
- The transfer of public sector resources to the private sector
- Can take place in a number of forms
o Sale of public corporations
 Sell shares in the business to anyone who wants them
o Deregulation
 Removing legal restrictions that prevent private sector competition
o Contracting out
 Contractors are given a chance to provide a service that was
previously supplied by the public sector
o The sale of land and property
 In some countries, the government has sold land to the private sector
Why does privatisation take place?
- To generate income
- To reduce inefficiency in the public sector
o Lack incentive to make a profit in the public sector
- As a result of deregulation
o Legal barriers were removed
- To reduce political interference
o Government could not use these organisations for political aims
Possible Effects of Privatisation
- Consumers
o Will benefit from privatisation to meet consumer needs and return a profit to
the owner which improves efficiency
- Workers
o May be a negative because some workers are often made redundant but
does reduce costs
o May weaken companies through the loss of experienced staff and make it
more difficult and expensive to scale up in the future
- Businesses
o Profit has become the main objective
o Increased investment
o Diversified into new areas
- Government
o Huge amount of revenue generated by privatisation but can also be
expensive

UNIT 10 – The functions and types of retailers

The chain of distribution
 - Producer to consumer
o No wholesaler and retailer means prices decrease which increases demands
and sales
o Sales decrease in volume and distribution costs increase and reach decreases
which increases marketing costs
- Producer to retailer to consumer
o Way to overcome marketing costs as retailers have high reach
o Won’t receive full price consumer pays and if retailers increase, distribution
costs increase
- Producer to wholesalers to retailers to consumer
o Wholesalers buy in bulk which increase sales, lowers distribution costs,
lowers risks, and reduces marketing costs
o Retailer and wholesaler seek a margin and less able to provide effective
customer service
Functions of Retailers
- Buying stock from suppliers
o Buy in bulk and sell small quantities to customers is called bulk breaking
- Storing
o To hold the right amount of inventory
- Providing credit facilities
o Allow customers to buy goods and pay later
- Introducing new products
- Advertising and window displays
o The use of posters and other materials to promote goods where customers
conduct their transactions is called point-of-sale advertising
o Encourages impulse buying
- After-sales service
o May try to add extra value to its product
 Good customer service
 Extra features
Types of Retailers
- Street markets
o May pay rent to local authorities
o Some traders sell what they make or grow
o Haggling is encouraged
o Street markets are not encouraged
- Independent retailers
o Small shops operated by sole traders
o Have fallen due to large chain stores
- Specialty shops
o Narrow range of goods and provide expert advice and detailed information
about certain goods and services
- Department stores
 o Large stores that are divided into different departments usually spanning
multiple floors
- Chain stores
o A retail operation where there are 10 or more outlets
- Supermarkets
- Hypermarket
o A large single-storey, warehouse-type building that sells a wide range of
goods very cheaply
- Ecommerce
Unit 11 – Location Factors and Techniques in Retailing
Location Factors for Retail Outlets
- Availability of labour
- Closeness to markets
- Transport links
- Availability of power
- Availability of raw materials
- Competition
- Availability of suppliers
- Communication
- Government tax breaks and subsidies
- The work of planning authorities
Techniques in Retailing
- Branding
- Using your own brands/own labels
- Logos
- Packaging
- Self-service
- After-sales service
- Barcoding
- Electron point of sale
- Loss leaders
o Products are sole below cost which makes the store lose money. However, it
is hoped that the customers buy other products to generate a profit
- Sales
- Special offers
- Loyalty cards and programmes

Unit 12 – Developments in Retailing

Developments in Retailing
- Omnichannel retailing
o A fully integrated approach to commerce that provides shoppers with a
unified experience across all online and offline channels
 o Shoppers use different touchpoints with the same retailer when making a
transaction
- Self-scan checkouts
- Click and collect
o Order goods online and pick them up in store
o More flexible and convenient shopping experience
o Do not have to wait for delivery
o Waiting times are reduced
o Shoppers don’t pay delivery charges
- Mobile Retailing
o Shopping online using a mobile device such as a smartphone or tablet
Reasons for the survival of Small Scale Retailers
- Personal service
o Offering high-quality customer service is way of adding value
 It is easier for smaller business to offer personal service
 Communications are more effective
 Closer to their customers
- Flexible opening hours
o Might be open at times to suit the needs of local customers
- Additional services
o Provide additional services to attract certain types of customers and possible
to charge a higher price
 Free repair service for phones and tablets
 Free servicing and maintenance
 Interesting and unique in-store environment
 Offer product trials
 Free gift-wrapping
 Offer free installations for products
Impact of Changes in Retailing
- On businesses
o Lower costs and improve efficiency
o Added cost of training for new technology
o Update to IT systems
o Invest money in new working practices and systems
o If they adapt to the changes, then they are likely to have increase in sales
revenue
- On Individuals
o Shopper easier and more convenient
o More choice
o Lower prices
o More information
o Better experience
Unit 13 – Wholesaling
Wholesaler’s role in the chain of distribution
- Provide an important link between producers and retailers
Functions of Wholesalers
- Breaking bulk
o Buy huge quantities of goods and break into smaller quantities
- Risk bearing
o They own the goods they buy
 Must meet the cost of storage
 Must find the money to buy the goods
- Advice to retailers
- Offering trade credit
- Freeing up storage space for smaller stores
- Preparing goods for resale
- Delivering to retailers
Types of Wholesalers
- General
o Wide variety of non-perishable goods
- Cash-and-carry
o Customers are expected to bring money and take their goods with them
- Voluntary chains
o A group of independent retailers that join together voluntarily to organize
collective buying
o Buy from a centralized buyer
The impact of changes in wholesaling
- On manufacturers
o Adapting to the needs of retailers (Ex. Different packaging)
o Business to business trade still involves wholesalers
- On retailers
o Many large retailers buying directly from manufacturers
- On consumers
o Gives consumers cheaper goods and more choice
Unit 14 – Ecommerce
Characteristics of Ecommerce
- Use of websites
o To provide information about the products sold by the consumer
o To give traders visibility on the internet
o Websites provide secure and efficient payment systems
o Use website to collect information
o Websites have a review system so that users can provide feedback
- Bricks and clicks
 o Retailer selling goods online and from a store
- Availability of a wide range of goods
- Delivery to customer
- Return options
Effects of Ecommerce
- Increase supply of goods and services around the world
- More goods are distributed from warehouses
- Communication through online orders
- More national and international customers
- Somewhat reduce the overall carbon footprint
o Energy is still used to ship packages
 Refer to page 122
Ecommerce Location Factors
- Operators will favour fulfilment or distribution centres close to major road networks
- No need for footfall
- Need for space for increase inventory
- Availability of specialist labour
UNIT 15 – International Trade
What are the benefits of international trade?
 Obtaining goods that can’t be produced domestically
 Goods can be obtained cheaper overseas because some countries produce goods
more efficiently than others
 Countries that have an abundance of certain commodities can sell them off
Visible Trade
 The buying and selling of physical goods. Some examples might include wheat,
cars, aluminium, etc.
Invisible Trade
 Exchange of services such as tourism, financial services, and transport
Flows of money
 Movement of money between countries resulting from transactions
Primary Income
 Flow of money resulting from ownership of overseas assets
Balance of Trade and balance of Payments
 Record of all transactions relating to international trade
 The current account shows the value of all imports and exports over a period of
time. This includes visible balance which is the difference between the total value
of visible exports and imports
 Value of visible exports – value of visible imports
  Capital and financial accounts is a part of balance of payments which records
transactions related to savings and investments
Deficits and Surpluses in the Balance of Trade
 The difference between a nation’s exports and imports of goods and services
 Current account deficit occurs when the value of imports is greater than the
value of exports. The current balance will be negative
 Current account surplus occurs when the value of exports is greater than the
value of imports. The current balance will be positive
UNIT 16 - Trading Blocs and the Difficulties Facing Exporters
What is a trading bloc?
 A group of countries in the same region that join together and enjoy trade free of
tariffs, quotas, and other trade barriers
 Trade between members will be completely free of trade barriers
 There will be a tariff on imports from non-members. This means that all countries
belonging to the bloc impose the same tariff
 Free movement of labour, capital, and goods between members of the trading
bloc
The impact of trading blocs on countries
Advantages Disadvantages
More consumer choice and faster economic Encourage regional, rather than global, free
growth because goods will be cheaper since trade
there are no trade barriers. Firms will be
able to exploit economies of scale
Attract foreign businesses to invest because Financial cost to the government and the
they want access to a larger and barrier- taxpayer
free market
Result in closer cooperation between It is possible for firms to become too
members powerful and result in the formation of
regional monopolies
Reduce cross-border conflict, promote Countries may start to heavily rely on
peace, and achieve social and economic trading within the bloc which would make
gains them more vulnerable to price changes
Members may start to standardise trading
practices, laws, and other customs within
their bloc
Impact of Trading Blocs on Businesses
Advantages Disadvantages
May allow members to specialise in Inefficient producers may be protected
production of goods it has expertise in from competition which could divert trade
away from more efficient producers and
potentially harm members
Markey for firms’ goods and services should The benefits may be distributed unequally
increase
As volume of trade increases, producers are Benefits accrued within the bloc can incite
able to benefit from economies of scale tensions with other regions
Resources may be easier to obtain and Members may have different levels of
labour easier to recruit economic power
Trading blocs may provide a For smaller businesses, opening up
counterbalance against globalisation competition and the large market may
result in more competitors
Difficulties facing exporters
 The difference in language
 The huge distance between countries may increase cost of transportation and
labour
 Different countries may use different methods of payment
 It is necessary to adapt/modify goods when selling overseas due to differing
cultures and tases
 Wide range of documents may be used to support transactions such as the bill of
lading which is a document used in shipping that shows details of the goods,
their destination, and the terms under which the shipping company has agreed
to carry them
 Currency exchange. This means that the buyer and seller must decide whether to
pay at the price during payment, when payment has been made, during shipping,
or when the goods have arrived
UNIT 17 – Multinationals
What are multinational companies?
 A large business with significant production or operations in two or more
companies
 They have huge assets, highly qualified and experience professional executives
and managers, powerful advertising and marketing capability, highly advanced
and up-to-date technology, highly influential both economically and politically,
very efficient by exploiting huge economies of scale, and ownership and control
is centred in the home country
Reasons for the existence of MNCs
 Economies of scale can reduce costs
 Access to natural resources/cheap materials can reduce costs of goods they
produce
 Lower transport and communication costs
 Access to customers in different regions
Advantages of operating as an MNC
 Larger customer base
 Lower costs
 Higher profile
 Avoiding trade barriers
  Lower taxes
Disadvantages of operating as an MNC
 Poor communication
 Control and coordination
 Poor worker motivation
 Bureaucracy
Impact of MNCs on host countries
 Benefits
o Increase in income and employment
o Increase in tax revenue
o Increase in exports
o Transfer of technology
o Improvement in the quality of human capital
o Enterprise development
 Drawbacks
o Environmental damage
o Exploitations of less developed countries
o Repatriation of profits
o Lack of accountability

UNIT 31 – Communications
What is communication?
- Communication is about receiving and sending information
o Sender
o Message
o Receiver
o Feedback
- Channels of communication are routes which information might travel in a business
o Downward communication is passing messages from the top of the
organisation to those at the bottom
 Subordinates look at their managers for guidance
 Allows decisions made by management to be carried out by the
employees
 Allows managers to give instructions, control, and organise
o Upward communication is passing messages from the bottom of the
organisation to those at the top
 Helps managers understand the neds of employees
 Managers aware of problems
 Helps staff feel they’re valued
 Provides managers with information to help make decisions
o Horizontal communication is the exchange of information between
colleagues on the same level of importance in an organisation
The importance of good communication in business
- Efficiency and profitability may suffer
- Lead to mistakes, wasted resources, and confusion
o Mistakes occur
o Costs rise
o Decision making slows down
o Staff motivation suffers
- Appropriate methods of communication
o Different types of messages will require different methods of communication.
Some factors to consider are
 Direction of communication
 Nature of communication
 Costs
 Speed
 Whether a record is needed
 Length of message
 Recipient of message
Types of communication
- Oral
o People talking to each other
o Best form of communication needs to be spread quickly
o There may not be a record of the message sent
- Written
o Type of message that uses the written word
o Ex. Email
o A record of the message can be sent
o More expensive than oral communication
- Electronic
o Uses electronic methods such as texts, images, sound, etc.
Methods of Oral Communication
- Telephone
- Meetings
- Face-to-face communication
Methods of Writing Communication
- Letters
- Agenda
- Minutes
Methods of Electric Communication
- Internet
- Videoconferencing
- Email
UNIT 32 – The Importance of transport and its different forms
The Importance of Transport in the chain of distribution
- Operate more efficiently in the transport of goods, logistics
- Movement of goods
o Transport is needed to move raw materials and components in the stages of
production
- Movement of people
o Huge numbers of people are transported every day in the world
o Allow businesses to recruit workers from distant locations and gives the
business more choice in recruitment
- Globalisation
o Cost of flying has reduced
o People can travel to business meetings more easily and goods can be
transported more cheaply
- Employment
The different forms of transport available to commerce
- Road
o Flexible, cost-effective, wide range of modes, short distances, fast, connect
other transports
o Expensive for heavy and bulky, road accidents, congestions, environmental
costs, slow compared to other methods, loads may be limited
- Rail
o Cost effective for long ranges, suitable for heavy and bulky, minimal
disruption, no delays by congestion, suitable for transporting large numbers
of people between cities, environmentally friendly
o May cause delays due to having a fixed route, not good for small quantities of
goods, run on timetables, set up costs and maintenance costs are high,
disruption can be significant
- Sea
o Very cheap per-mile, environmentally friendly, does not require
maintenance, large quantities, provides access to great number of
destinations
o Slow, cargos are prone to damage, delays due to bad weather, some
countries are landlocked, no good for small loads
- Air
o Fast, no maintenance of network infrastructure, good for small quantities,
useful in countries where there is not much roads and rails
o Expensive, delays due to bad weather, small capacity, trans-shipping costs,
emissions are substantial
- Inland waterways
o Canals, rivers, and large lakes
- Pipelines
o Transport liquids and gases underground and underwater
UNIT 33 – Modes of Transport and their Efficiency
Roads
- Delivery Vans to carry small quantities of goods
o Significant increase in the use of vans because of the growing online industry
- Buses are for transporting people to and from work, school, and keep in touch with
relatives
o City buys
o Rural bus
o Intercity bus
- Taxis are flexible and convenient
o The price are often calculated by a meter and depend on the length and time
or are discussed beforehand with the driver
- Motorcycles transport one or two people cheaply
o Dodge traffic and so are useful for couriers with small packages

Railways
- Passenger trains are used for the transportation of people (not illegally)
o May take several minutes, hours, or days depending on the route
- Freight trains
o Takes traffic of roads and reduce carbon emissions
o Carries coal, iron, ore, sugar, fertiliser, gravel, sand, and oil
Air
- Passenger aircraft
o Lower costs of operating passengers
o Transport large numbers of people very quickly between countries
- Freight planes are designed specifically to transport freight
Sea
- Ferries are designed to carry people
- Tankers carry huge amounts of oil, petroleum, chemicals, and other liquids
- Bulk carriers
o Single-deck vessels that have tanks on top and sides to make as much room
as possible for cargo
o Used to carry one type of solid cargo
- Cruise liners
o Growth in popularity of cruising in recent years
- Cargo liners
o Accommodate different types of cargo
- Ore-bulk-oil carriers
o Carry dry cargo and a tanker can only carry liquid cargo
Containerisation
- Packing and transporting goods in metal containers of the same shape and size
- Use of standard containers changed the world of freight transportation
- More efficient
The Benefits to a business of having its own transport
- Their own transport fleets are more reliable
- They are more flexible
- Can offer a better customer service
- Use their own fleets to reinforce their brand
- Owning a private fleet will be cheaper
The Efficiency of Different Forms of Transport
- Want supplies and deliveries quickly
- Need transport provision to be reliable
- Maintain highest standards of safety
- Particular forms are favoured depending on the situation
- Convenience
- Carriers are likely to optimise routes

UNIT 34 – Warehousing
The Role of Warehousing
- May have specialist loading and unloading facilities
- Seasonal demand means that they stock up certain goods throughout the year until
they are needed to cope with seasonal demand
- Protecting supply
o Perishable goods often require specialised storage facilities
- To help make prices of some goods more stable
o Prices fluctuate when there is a mismatch between supply and demand
The Functions of Warehouses
- Store large inventories of goods
o Store them until needed
- Built to protect goods from loss or damage due to heat, dust, win, moisture, or
infestation
- Warehouses are responsible for any losses resulting from the storage of goods
- May provide services by adding value to the goods they store
o May be processed, graded, or branded
Types of Warehouses
- Bonded warehouses
o Goods are subject to customs and excise duties
o The payment of these goods can be delayed when stored in bonded
warehouses
 o Goods are allowed to be repackaged, branded, and matured. However, firms
are not allowed to manufacture in bonded warehouses
o Activities at bonded warehouses are under close scrutiny
- Cold storage
o Some goods have to be stored in a temperature-controlled environment to
 Reduce the amount of food that goes to waste
 Prolong the shelf-life of foods and therefore provide goods out of
season for customers
 May offer refrigerated transportation
 May offer emergency cold storage if a customer loses power
 Can adjust temperatures of cold rooms to meet the needs of different
goods
- RDC
o Manufacturers and other suppliers deliver goods to RDCs when they need to
be stored for a short time
o The goods are sorted into orders and redistributed
 Think like Amazon’s warehouses
- Cash-and-carry Warehouse
o When retailers run out of goods, instead of waiting for delivery, retailers go
to cash-and-carry warehouses to buy goods. However, they do not offer
credit facilities and must bring their own transportation

UNIT 35 – The Purposes and Methods of Advertising and Promotion

Purpose of Advertising
- Marketing is the range of activities that help a business sell its products
- Increase revenue
o To sell more goods and boost revenues
- Increase market share
o Take advantage of economies of scale which helps gain competitive edge
- Build a brand
- Building customer relationships
o Establish a bond through effective communication and meet their needs
- Develop customer loyalty
o Above leads to this
Main Methods of Promotion
- Below-the-line does not use media and are
o Point of Sale
 Carrier Bags and Wrappers
 Layout of products for shoppers to look at certain products
 Display material
o Catalogues and brochures
o Circulars and leaflets
 Shared leaflet distribution
  Solo distribution
 Collated in local newspapers
 Placed under car windscreen wipers
 Distribution on the street
o Free gifts and samples
o Trade fairs and exhibitions (e.x. Legoland)
Main Methods of Advertising
- Above-the-line uses media and are
o Television | creative adverts have an impact but is very expensive and short
o Newspapers | national and local reach but has no movement or sound
o Cinema | big impact with screen but has a limited audience
o Radio | cheap production but may be ignored due to lack of visual
o Posters and billboards | seen repeatedly but may be damaged by vandals
o Internet | can be updated regularly but may be irritating when pop-up
UNIT 36 – Approaches to Advertising and The Role of social media
Approaches to Advertising
- Persuasive advertising
o Carrot or the stick
 Person can be persuaded by rewarding or punishing them
o Scarcity
 Making products seem unique and unavailable
o Use of language
 Written in second person to be more persuasive
o Short, sharp, messages
 Focus on one important feature of a product in an advert
- Informative advertising
o Launching new products
 Consumer needs to be aware of its existence
o Updating or modifying products
 May be used to show how products have been improved
o Complex products
 Consumers need to understand how it solves their problem
o Promoting events
o Government announcements
 Inform the people
o Legal reasons
 Required by law to provide consumers with certain information
Competitive Advertising
- Create a contrast between its product and the similar product by competitors
Collective Advertising
- Group of firms get together to promote a product in general
Role of social media
- Provide cost-effective and in-depth tool for gaining insights into a firm’s customers
- Identifies customer needs
o Broad reach
o Ability to target
o Free or low-cost
o Personal
o Fast
o Easy
- Advertising
o Enable to communicate with them more effectively
UNIT 37 – The Impact of Technology on Advertising and Promotion
Impact of Changing Consumer Preferences on Advertising
- Emphasis on healthy eating
- Increase in demand for leisure activities
- Preference for online shopping
- Growing demand for convenience
- Fall in demand for traditional television
- Emphasis on the environment
- Emphasis on building relationships
Impact of Technology on Advertising and Promotion
- Internet banner adverts
- Television-style adverts
- Adverts seen on devices divert traffic towards products’ websites
- Web-based games
- Social media
- Adverts combined with promotions via email campaigns
- Ecommerce
o Converting customer traffic into paying customers
- Offline-style advertising
o Paying a fee for an advert to appear on a website
- Cost-per-mille
o Advert on a website but payment is according to times advert is displayed
- Pay-per-click
o Visitors click on the advert
- Affiliate marketing
- E-newsletters
- Digital communication
o Use of devices to exchange information digitally
- Online targeted advertising
o Adverts can be targeted to specific groups
- Viral Advertising
 o Technique by businesses to encourage internet users to share its publicity
material via social media
- Digital communication for small businesses
o Advertorials
o Blogs

UNIT 38 – Trading Documents

Documents that might be used in a credit transaction
- Enquiry
o A letter sent to a supplier to find out what the supplier has to offer
o Customer to retailer
- Quotation
o A response to a letter of enquiry from a supplier quoting the price and other
details of the goods that the supplier is able to offer
o Retailer to customer
- Order
o A document requesting specific goods to be delivered
o Customer to retailer
 Details of the goods
 Price per unit
 Purchase order number
 Reference number
 Date the order was placed
 Date the goods are required
 Total price and the total amount due
 The name and signature of the person who placed the order
 A list of special instructions
 The company’s registration number
- Advice note
o A document from a supplier saying when goods are to be delivered
 Inform buyer that goods have been dispatched
 Alert the buyers to prepare receiving the goods
 Alert the buyer to start making arrangements for the payment of the
goods
o Retailer to customer
- Delivery note
o The document that describes the goods that have been delivered by the
supplier
 Comes with the goods and is used to check if correct items and
quantity was received
o Another copy, called the goods received note, is signed by the customer to
confirm that the correct goods have been delivered
o Retailer to customer
- Invoice
 o A business document that contains details, such as the amount owed, about
the exchange of goods between a buyer and a seller
o Retailer to customer
- Debit note
o A document used to inform a customer that they have been undercharged,
stating the amount outstanding and the reason for the undercharging
o Retailer to customer
- Credit note
o A document used to inform a customer that they have been overcharged
o Retailer to customer
- Statement of account
o A document sent to a customer showing a summary of recent transactions
and the total amount outstanding
- Receipts
o