Student question: business size

QUESTION:

Hello Luke

When they ask “what aims can a manager have in the size of the business?” should I know all the reasons or not? If so what are the most important reasons?  

Thank you

ANSWER:

Thanks for the question!
Please let me know where you found the question about the aims a manager might have in the size of a business so that I can have a bit more background/context.
Overall, the aims can be diverse, but classified into one of two broad “categories”, i.e. the management will seek growth or prefer to remain small/current size.
Four main reasons are provided in favour of business growth. Let’s briefly take a look at each:
1. Possibility of higher profits for the owners.
This is probably the most obvious reason in favour of growth because it is rooted in what just about all entrepreneurs were motivated by when they started their businesses: profit. The profit motive drives the creation and growth of businesses.
If, for instance, a cafe opens a new branch in an up-and-coming, growing area, it has done so because it is motivated by the potential to earn greater profit. The owner(s) of the cafes could earn more revenue from the sales of the new cafe and, as a result, more profit. To put it simply: they might become wealthier.
NB: This reason (1) might not be an applicable answer to your question. Can you see why? It is because the question asks about “managers”, not owners. Remember, managers are paid salaries by the owners of the business.
2. More status and prestige for the owners and managers
This can be interpreted and applied in a few ways. For example, the owners might believe that they have a greater status in their community due to the growth of their business. Using the cafe example referred to earlier, the growing presence and visibility of the business through the opening of new branches could offer a sense of personal achievement for the owners. After all, it should be remembered that they took a risk (personal, financial – also think of opportunity cost here) in opening the intial cafe in the first place.
For managers – and even other employees – the above can also apply to a certain extent. Not only might there be a sense of pride in the growing status of the cafes, but managers will most likely have greater responsibilities (think of an area manager who would now have more cafes to oversee in his/her region). This growth in the business and resulting tasks for managers might well lead to higher salaries.
As you can tell, this reason (2) applies directly to your question.
3. Lower average costs
I will not explain this now as it is too much information to cover right away at the start of your studies. However, please briefly read through the section in your textbook on Economies of scale. You will have an even better idea of how this applies once you have worked through Business Studies.
4. Greater market share
The growth of a business can, potentially, lead to a growth in market share. Continuing with the cafe example: the new branch is an opportunity for more sales to be made under the name of the business. The growth in sales is likely to lead to a growth in market share. In other words, the proportion of sales by the cafe grows in terms of the broader market which includes all cafes.
If the growth in market share is especially significant, it can allow the business to make certain claims – for example, “South Africa’s favourite coffee shop”. This can be seen as a very useful benefit in advertising.
A business that controls much of the market for a product is, moreover, one that suppliers should be keen to assist. If a supplier understands the popularity of the growing business, it is probably going to want to ensure that the business stocks its products and would be willing to offer certain incentives, such as discounts, branding etc.
Also, “market share” – like economies of scale – is a concept that you will become more familiar with and comfortable using as your progress through Business Studies.
To sum up: the above are 4 reasons in favour of growth. Please note, though, that growth is not necessarily the aim of owners or mangers. Some businesses prefer to remain small or their current size. The reasons for this are also found in your textbook (they can also be understood as reasons against growth). Your task now is to read and understand these to the point that you are comfortable in explaining them – if you have any questions after doing so or need some confirmation, please feel free to reply!
Business-growth-and-success

Market share and growth: South African banks

SA-Bank-Cards

Two articles to read through when covering the concepts of market share and business growth:

http://m.news24.com/fin24/Companies/Financial-Services/Capitec-ousts-Nedbank-from-No-4-slot-20130508

http://businesstech.co.za/news/banking/37442/is-capitec-really-the-4th-biggest-bank-in-sa/

1 The first article claims that Capitec has recently overtaken Nedbank as South Africa’s 4th largest bank. In other words, Capitec has grown as a business. The second article, however, raises some points about what we consider as “growth” and how this would affect Nedbank and Capitec’s ranking.

Q: In which ways can we view Capitec as larger than Nedbank? At the same time, what criteria would we use to see Nedbank as remaining in 4th position?

2 According to the first article, FNB has the highest adspend (finance spent on advertising) of all the banks. However, FNB’s market share declined in spite of this. On the other hand, Capitec has the lowest adspend but its market share grew.

Q: Does this mean that advertising is not a sure way to increase market share? Are there other factors that we need to consider here?

Question: SWOT analysis

Question:

Hi Luke

 
In the book IGCSE Business Studies page 253, Activity 16.4, I am asked to carry out a SWOT analysis on a product of my choice. I was just wondering – does this have to be an existing product, or can the product be fictional?
 
Regards
Daniël
 
Answer:
 
Hi Daniël

 
You may use either a real product or a fictional one. This should be fine so long as your layout is correct; the strengths, weaknesses, opportunities and threats are realistic for the type of product used; and you use business-related terminology.
 
A common mistake with the SWOT analysis: it can be easy to confuse the internal/external nature of the SWOT elements. Remember that strengths and weaknesses relate to the internal situation of the business, whilst opportunities and threats are external of the business and thus tend to be more out of the control of the firm. 
 
 
Regards
Luke

Article with questions: “Twitter secures advertising deal…”

An interesting article involving business, social media and advertising: http://www.bbc.co.uk/news/business-22263984

Questions:

1. What do you think attracts potential advertisers to Twitter? Answer in light of this statement: “Marketing messages can be tailored to very precise groups of people, based on their age, gender and the interests and affiliations they have expressed through interaction with social media.

2. Since Twitter is a global social media platform with diverse users from around the world, suggest the types of businesses that are likely to advertise on Twitter.

3. Do you think advertising might have any negative impact on Twitter’s reputation and credibility?

4. Advertising on Twitter is an example of which of the 4 marketing P’s?

twitter_icon4

Update!

Hi everyone

To those who have completed and submitted assignment 2 (AS and IGCSE) following the guidelines posted here previously: thank you for your excellent work! The vast majority have earned very good marks and you should be on the right track going forward, as you now have a better understanding of what is expected at this level. To those who still need to submit this assignment: please do so as soon as you are able and ready – exercises and feedback you will receive is valuable and helpful!

As we heading into the exam season now, many of you are preparing to write during the upcoming May/June session. I will be uploading some posts over the next while (with one revision post to follow this), so please remember to follow the links you receive via email if you are following this blog.

I‘m also preparing for university exams at this time, so I would appreciate your patience and understanding during this very busy period. I will still do my best to return assignments and answer your emails and questions promptly.

Writing AS Level essays (IGCSE students can pay attention too)

A general pattern with answers to (what should be treated as) essay and long answer questions is that AS Level students try to ‘compress’ their answers and provide just enough information. This usually ends up looking like one lengthy, messy paragraph that shows little skill of being able to organise thoughts in a logical way. Please avoid this – here’s how:

Essay questions generally require that you discuss (even analyse) the content of the question and whatever concepts are relevant to it. If you know your work well enough, a number of thoughts will probably come to mind quite quickly after reading the question. This is definitely a good thing, but it also means that you need to make sense of it all.

That’s why I recommend starting with a list of the main points you want to discuss in your answer. Writing up a quick list with very brief notes in point form means that you now at least have something to refer to throughout the rest of the essay. It also means your mind doesn’t have to constantly try and keep track of what you have said and haven’t said – very distracting half way through an essay!

Next, like all good essays, you need to start with an introduction in which you describe the problem or the question and how you will approach it. There are some variations here which will depend on the exact nature of your essay, but the main point is to bring the examiner to focus on what it is you will be discussing. I also highly recommend defining key points and concepts. For example, if your essay question is based on objectives, then you should explain what is meant by that term. If you need to discuss leadership styles, then consider a brief outline of them, from democratic to autocratic leaders.

Now we get to the substance of the discussion: this is where you should provide a body of paragraphs, each dealing with the main content of your essay. If you were to discuss the challenges and opportunities when switching from one method of production to another, for instance, then you would allow each challenge and each opportunity in its own paragraph; the only rule against this is where one is related to the other, in which case you may discuss them together in a single paragraph. Another example: if a question has to do with the pros and cons of market research, each pro and each con should be explored separately unless one could offset/arise with the other. Basically, each paragraph of the body should have its own topic which you discuss.

This part of your essay is, of course, the lengthiest. The number of paragraphs can vary, but as a general rule you should have at least 3 paragraphs. The total number might be more if you are dealing with quite a number of reasons/advantage/disadvantages. As for the length of each paragraph: normally, 3-5 sentences will be sufficient. This will all depend on how well you can get to the ‘heart’ of the matter – check whether what you are saying really does deal with what has been asked.

Examples are very helpful in showing the examiners that you have understood the question and the theory related to it. If you can provide a suitable, relevant example (hypothetical ones are often useful), the chances are that the he or she will be able to easily identify your abilities at this level.

Throughout the essay, please try to use business-related terminology (wording) as much as possible. Instead of saying, “they will make a lot of money”, consider “the firm could potentially earn greater profit”. Another example: “the owners could get rich” should be “shareholders might receive an increase in dividends”, and “treating the people badly” could read “unethical treatment of employees may have long-term consequences”.

Lastly, all good Business Studies essays end with a conclusion in which the main points are summed up or an evaluative comment is offered. This does not mean you have to repeat everything you have discussed, but rather that you briefly review the question and how you addressed it. Alternatively, an evaluative comment means that, for example, you briefly discuss other relevant points that need to considered before expansion. You could also evaluate by judging the usefulness of something, such as the market research a certain business uses.

An essay consisting of an introduction, paragraphs (body) and a conclusion shows the examiner your ability to order your thoughts and pay attention the important information. This is a chance to demonstrate sound logic and reasoning.

Here is a list of the questions you need to treat as essays in the assignments:

  • Assignment 1: Question 4 
  • Assignment 2: all questions. Note that questions 1 & 2 and questions 3 & 4 complement each other, i.e. question 1 relates to question 2 (they are part-questions). Offer more depth for the questions worth 12 marks
  • Assignment 3: Question 5
  • Assignment 4: all questions (as with assignment 2).
  • Assignment 5: Questions 1, 2 and 6.

Some encouragement and useful tips

Hi everyone

I know that for many of you starting out with Cambridge IGCSE or AS studies for the first time can be a bit of a daunting experience. I shared some tips and motivation with one of your fellow-students a while ago who was experiencing some difficulty adjusting to CIE studies, so I think you all might benefit the discussion too:

 

I completely understand where you are coming from regards Business Studies, the workload and wanting to really understand the subject and ultimately earn a good mark. Cambridge is, in general, quite a step up for any student in terms of the amount of work to be covered, the depth and the overall standard required. There is a great deal of writing, learning and preparation required for every subject.

 

 

Speaking from experience though, it is a standard you can achieve! Yes, it takes hard work and perseverance, as well as a lot of dedication – but again, judging from my communication with many of you, I believe you are capable of making it and really performing to your best!

 

 

Some of us put a lot of pressure on ourselves; sometimes it’s really unnecessary, and other times it keeps us on our toes. What you must avoid, however, is letting your own expectations overwhelm you. This is when things become much more difficult than they seem, and your perception (a very powerful thing!) doesn’t work in your favour. To give you an example from my own CIE studies: I never enjoyed Maths (to say the least). In my final year, I remember writing the first paper and thought it went ok…I still doubted though, and thought that I would really have to try excel in the second paper if I was to earn at least a C. That second paper started pretty badly…the first two pages seemed like such a blur and so foreign to what I had learnt! Without exaggeration, I really thought I was going to either fail or receive a mark that meant I couldn’t pass with matric exemption. I though I would repeat the subject. I mentally prepared myself for this outcome.

 

 

As it turned out, I earned a B for Maths – a pleasant surprise, needless to say! Here’s my point: yes, set the bar high and expect a lot from yourself, but don’t be too hard on yourself. My problem – and something I still work on – is not getting too ahead of myself. Planning and preparation is important, just don’t let it be in control of you and don’t get ahead of yourself. Being nervous can be a good thing and work to your advantage, but it must not affect your every day life and your enjoyment of what you do.

 

 

Now to answer some questions and concerns:

 

 

– Not to worry if you experience a lack of time for revising your notes. This is not a rule that is set in stone. It’s good if you are making use of my tips and advice, but please remember to adapt them to suit your needs – no two students are completely alike. If you can only revise a certain amount of notes, that’s fine. If on occasion you can’t manage to revise your notes, that’s also fine – if you make use of our blog and/or do activities and assignments, you are still interacting with the work.

 

 

– You won’t get all the work entirely ‘in your head’ at an early stage or in ‘one go’. Rather focus on understanding what you read and being able to answer questions about it. For the moment, you need to be able to work through each unit with understanding; you will soon see how they fit together.

 

 

– If you’re following a study schedule, you will have sufficient time to revise for the exams. That is the time period you will use to get it all ‘in your head’ and ‘cement’ your understanding in preparation for the final exams. Right now, you should be exploring all this new information you are learning about.

 

 

– There will always be some areas that students don’t enjoy. You can do some extra research on your side to make things more interesting and fun. For instance, read the newspapers (even online) or check out The Economist magazine – it’s not really as difficult to follow as you might initially think. This way, you should start seeing how the theory works in reality.

 

 

– You need to consider every unit as important…I can’t say that some are more important than others, or that some sections can be left out. What you can do, though, is use the syllabus I uploaded to the blog as a checklist. This helps to make sure you are covering everything as necessary. It’s also kind of rewarding when you can ‘tick’ off a section. It means you’re one step closer!

 

 

– Again, speaking from experience, you should expect to make mistakes. Later on, you might find yourself say, “I should’ve been doing this from the start!”. Allow yourself to make those mistakes and – most importantly – to learn from them. That’s all part of life 🙂

 

 

 

– Don’t be scared about misunderstanding certain concepts or parts of the work. If there’s absolutely anything you have even just a bit of doubt about, contact me as soon as you can. Make a note of it to remind yourself, and then let me know.

 

Keep moving on and looking forward!

AS Level Assignment 2 guidelines

Hello AS students!

Please download the attached guidelines for your 2nd Business Studies assignment. These are fairly extensive and should offer a good idea of what is expected in your answers in terms of what needs to be addressed and in what depth.

NB: the uploading of these guidelines to the blog does not mean that the second assignment is due – I understand that you may have different schedules to other students. I would recommend that you print out these guidelines and keep them at hand when you begin working on the second assignment.

Here is the link to the guidelines: AS Level Assignment 2 guidelines

All the best, and if you are on holiday at the moment – enjoy the time off!