SECTION A
1 (a) Define the term ‘leadership’. [2]
- A definition that suggests that ‘leadership is the motivation of people towards achieving a common objective or goal’
(b) Briefly explain two styles of leadership. [3]
- Autocratic – all decisions taken by leader – staff supervised closely, one-way communication – little information given to staff.
Democratic – participation encouraged, two-way communication,
sharing of information, feedback encouraged – involvement of staff in
decision-making.
• Paternalistic – leader assumes he/she in a better position than staff
to know what is best for the organisation, some consultation but final
decisions taken by leaders – no true participation in decision-making.
• Laissez-faire – much of decision-making made by the workforce,
arms-length approach – the reverse of autocratic leadership – lots of
delegation within very broad limits.
2 (a) Define the term ‘debt factoring’. [2]
A definition that suggests that when a business sells its debts /
invoices to a debt-factoring / third party company should be awarded
2 marks
(b) Briefly explain how leasing might be used by a business to improve cash flow. [3]
- Leasing – is obtaining the use of (but not necessarily purchasing)
equipment or vehicles from a leasing or finance company – assets
are acquired over the medium term paying a rental charge over a
fixed period but not having to purchase the asset at the end of the
period.
• Leasing avoids the need to raise what may be significant amounts of
capital to buy assets with a positive impact on net cash flow
• Leasing companies may maintain and update equipment with leasing
• Many answers refer to businesses leasing out unwanted assets and
thus increasing cash flow which is equally acceptable.
3 Explain the possible benefits of mass customisation to a computer manufacturer. [5]
- Mass customisation is a production process where there is a flow
production of products with many standardised components but with
flexible equipment – often computer controlled that allows for
variations in the product – the production process is supported by a
flexible and multi-skilled workforce.
• There are low unit costs due to the flow production but also a
flexibility to meet customers’ individual requirements.
• A business using mass customisation can produce a variety of
products and use a focused or differentiated marketing approach and
achieve higher added value.
• A computer manufacturer can, using mass customisation, make a
customised computer to meet customer specific needs in just a few
hours. By changing just a few of the key components of computer
production – and keeping the rest standard, low unit costs are
achieved with greater product choice.
• The technology of mass customisation gives a computer
manufacturer the advantages of high volumes combined with the
ability to make slightly different products for different markets.
4 (a) Define the term ‘demand’. [2]
- A sound definition is ‘Demand is the quantity/amount that
consumers are willing/able to buy at a given price (or in a particular
time period.).’
(b) Briefly explain two factors that could influence the demand for restaurant meals. [3]
Influencing factors could include:
• the price / cost of a restaurant meal compared to other customer
expenditure options.
• the relative increase / decrease in customer discretionary income.
• the state of the (local) economy in terms of employment, wage and
salary levels, recession or economic prosperity.
• the price / cost of substitute products / services (food and drink price
levels) / changes that might encourage home eating and meals.
• availability and range of restaurant options, quality of meals and
service.
• degree of advertising / promotion, special offers, BOGOF etc.
• the location of a restaurant
• the time period of the meal, busier at lunch and dinner.
SECTION A
5 (a) Analyse problems a business could experience in its first year of trading. [8]
Answers could include a focus on the need to:
• establish and build a customer base of loyal returning customers.
• establish itself in the market.
• effectively manage cash flow – generate sufficient working capital.
• establish good relations with suppliers.
• follow an effective pricing strategy that allows the business to
compete effectively.
Failure to achieve such objectives likely to lead to problems of:
• lack of cash and working capital
• uncompetitive production
• inability to effectively market the business
• insufficient demand to survive
• failure to secure external finance
• inability to repay start-up capital
(b) Discuss whether market research will reduce problems that might be experienced by a new
start-up business. [12]