MANAGEMENT OF BUSINESS

MANAGEMENT OF BUSINESS

FOR CAPE? EXAMINATIONS

JEROME PITTERSON

CAPE is a registered trade mark of the Caribbean Examinations Council (CXC?). MANAGEMENT OF BUSINESS for CAPE? EXAMINATIONS is an independent publication and has not been authorised, sponsored, or otherwise approved by CXC.

Macmillan Education 4 Crinan Street, London, N1 9XW

A division of Macmillan Publishers Limited Companies and representatives throughout the world.

macmillan-

ISBN 978-0-230-40043-6

ISBN 978-0-230-48319-4 AER

Text ? Jerome Pitterson, 2014 Design and illustration ? Macmillan Publishers Limited, 2014 The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988.

First published 2014

All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, transmitted in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publishers.

Designed by Oxford Designers and Illustrators and Macmillan Education Illustrated by JB Illustrations Cover design by Clare Webber Cover photograph by Art Directors and Trip/ Chris Kapolka Picture research by Thomas Bonsu-Dartnall Typeset by CjB Editorial Plus

The author and publishers would like to thank Judy Sewsaran for her assistance in preparing this book.

Author's acknowledgement: I want to thank God for the knowledge and strength he has bestowed on me to complete this text successfully. Sincere gratitude is also extended to my family, for their support and inspiration throughout this process, and to the students I have taught for their encouraging words and who are waiting to see this publication. Thanks to everyone who had a part to play in the completion of this book.

The author and publishers would like to thank the following for permission to reproduce their photographs: Alamy/Rolf Brenner p186, Alamy/Cultura Creative p189, Alamy/Howard Davies p12, Alamy/Martin Floren Emmanuel p16, Alamy/David Kilpatrick p19, Alamy/View Pictures ltd p51: Corbis/Bob Krist p14, Corbis/Roy McMahon p13; Fotolibra/Jana Anderson p33, Fotolibra/Clifford Haroo p21; Getty Images/Mark D Callahan p20; Thinkstock p187.

The author and publishers are grateful for permission to reprint the following copyright material: Extract from Functions of the bank by Caribbean Development Bank ? Caribbean Development Bank. Reprinted by permission of the Bank. Extract from `Costing' by T. Lucey ? 2000, Cengage Learning EMEA Ltd. Reproduced by permission of Cengage Learning EMEA Ltd. Extract from with permission of Entrepreneur Media, Inc. ? 2014 by Entrepreneur Media, Inc. All rights reserved. Extract from `Innovation and Entrepreneurship' by Peter F. Drucker ? Peter F. Drucker. First published in 2007 by Taylor & Francis Ltd. Extract from `Organizational Behaviour' by Stephen P. Robbins and Timothy A. Judge, 15th Edition, ? 2013. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ. Extract from info@.jm ? Small Business Association of Jamaica. Reprinted by permission of the organization.

These materials may contain links for third party websites. We have no control over, and are not responsible for, the contents of such third party websites. Please use care when accessing them.

Although we have tried to trace and contact copyright holders before publication, in some cases this has not been possible. If contacted we will be pleased to rectify any errors or omissions at the earliest opportunity.

3

Contents

List of figures and tables

7 Protectionism

54

Other barriers to trade

55

Introduction

10

Multiple Choice Questions

56

UNIT 1 MANAGEMENT PRINCIPLES AND

Extended Essay Questions

57

PROCESSES

11 MODULE 2 THE MANAGEMENT OF PEOPLE 58

MODULE 1 BUSINESS AND ITS ENVIRONMENT 12 5 The Functions and Theories of Management 58

1 Economic and Legal Structures

12 The need for and nature of organisations

58

Types of economic activity

12 The major management theories

58

Economic sectors and legal structures

14 The functions of management

64

The private sector

15 The roles of management

65

The public sector

23 Multiple Choice Questions

67

Privatisation

26 Extended Essay Questions

67

Multiple Choice Questions Extended Essay Questions

27

28 6 The Organisation and its Structure

68

Classification of organisations

68

2 Business Objectives

29 Factors influencing the classification of organisations 72

Nature, role and importance of objectives

29 Characteristics of the formal organisational structure 73

Business ethics and social responsibility

32 Centralisation and decentralisation

75

Obligations of the firm to stakeholders

34 Multiple Choice Questions

76

Good corporate governance

34 Extended Essay Questions

76

Importance of business ethics and integrity Code of ethics Government's response to social irresponsibility Multiple Choice Questions Extended Essay Questions

34

34 7 The Theory and Application of Motivation

77

35 Factors that stimulate and influence motivation

77

Theories of motivation

78

35

36 Financial and non-financial motivational strategies

80

Implications for managers

85

3 Decision Making

37 Multiple Choice Questions

87

Essential features of information

37 Extended Essay Questions

87

Significance of qualitative versus quantitative

decision making

37 8 Leadership

88

The stages of decision making

38 Leadership theories

88

Factors affecting decision making

39 Theory X and Theory Y

88

Multiple Choice Questions

45 The Trait Theory

89

Extended Essay Questions

46 Leadership skills

90

Leadership styles

92

4 Caribbean Business Environment

Factors influencing the choice of leadership style

94

and Globalisation

47 Leadership roles

95

The nature and structure of Caribbean

Informal leadership

95

business organisations

47 Multiple Choice Questions

96

Caribbean business culture

48 Extended Essay Questions

97

The growth of multinational corporations

in the Caribbean

49 9 Team Management and Conflict

98

The impact of trade liberalisation and globalisation

50 The nature of teams

98

4 CONTENTS

Stages of team development

99

Types of formal group

99

Characteristics of effective teams

99

Team or group cohesiveness

100

Evaluation of team work

101

Benefits of team management to the organisation 101

Conflict management

101

Multiple Choice Questions

106

Extended Essay Questions

106

10 Management of Change

107

Factors that may cause change in the organisation 107

Differences between leading and managing change 108

Resistance to change

108

Strategies for managing change

110

The importance of communication in the

management process

111

Multiple Choice Questions

112

Extended Essay Questions

112

11 Communication in Business

113

Types of communication

113

The communication process

113

Channels of communication

114

Factors influencing the choice of channel used

116

Lines of communication

117

Barriers to effective communication

119

Reducing barriers to communication

120

Multiple Choice Questions

122

Extended Essay Questions

123

12 Human Resource Management

124

The role and importance of human

resource management

124

The functions of human resource management

124

Labour?management relations

131

Laws affecting health and safety in the workplace 134

Multiple Choice Questions

135

Extended Essay Questions

136

MODULE 3 BUSINESS FINANCE AND

ACCOUNTING

137

13 The Need for Capital and Sources of Finance 137

The need for capital

137

Sources of finance

140

Criteria for seeking finance

140

How to choose from these sources of funds?

143

Money and capital markets and international

financial institutions

143

The money and capital markets

145

Multiple Choice Questions

147

Extended Essay Questions

147

14 Accounting Information and

Financial Statements

148

Why do we need accounting records?

148

Internal users of accounting information

148

External users of accounting information

149

Getting started with accounting

149

Components of financial statements

152

Multiple Choice Questions

158

15 Financial Statements Analysis

159

Financial analysis

159

Importance of financial analysis

159

Ratio analysis

159

Types of ratio

160

Multiple Choice Questions

166

Extended Essay Questions

166

16 Budgetary Accounting

167

Projections

167

The budgeting process

167

Categorisations of budgets

168

Operational budgets

168

Types of budget

168

Budgetary control

170

Multiple Choice Questions

172

17 Investment Appraisal

173

Investment

173

Investment appraisal

173

Analytical methods of appraisal

173

Limitations of investment appraisal

178

Comparison of methods of appraisal

178

Multiple Choice Questions

179

END OF UNIT ASSESSMENT

180

UNIT 2 APPLICATIONS IN MANAGEMENT

184

MODULE 1 PRODUCTION AND OPERATIONS

MANAGEMENT

185

18 The Nature of Production

185

The production process

185

Factors of production

185

What to produce?

186

Production methods

186

Factors that influence the method of production used 190

When to produce?

191

Location of production

191

Multiple Choice Questions

195

Extended Essay Questions

195

19 Forecasting Techniques

196

Forecasting techniques

196

CONTENTS 5

Qualitative forecasting techniques Quantitative forecasting techniques Multiple Choice Questions Extended Essay Question

20 Production Design Strategies and Capacity Planning Product design planning Product design strategies Capacity planning Capacity utilisation Options available to increase capacity Economies and diseconomies of scale Diseconomies of scale Business layout Multiple Choice Questions Extended Essay Questions

21 Costing Direct costs Indirect costs Fixed costs Variable costs Fixed costs per unit Semi-variable cost Approaches to costing Including stock Application of marginal costing 'Make or buy' decisions Multiple Choice Questions Extended Essay Question

22 Inventory Management Importance of inventory Importance of inventory control Inventory control management Multiple Choice Questions Extended Essay Question

23 Lean Production and Quality Management Importance of quality Dimensions of quality Techniques for improving quality Multiple Choice Questions Extended Essay Questions

24 Productivity Factors that affect productivity Methods of measuring productivity Methods of improving productivity Multiple Choice Questions Extended Essay Questions

196 25 Project Management

247

199 Critical Path Analysis (CPA)

247

202 Decision trees

250

203 Multiple Choice Questions

253

MODULE 2 FUNDAMENTALS OF MARKETING 254

204

26 The Concept of Marketing

254

204

The core marketing concepts

254

204

Multiple Choice Questions

260

206

Extended Essay Question

260

207

208 27 The Marketing Environment

261

208 The micro-environment

261

210 The macro-environment

262

210 Multiple Choice Questions

265

215 Extended Essay Questions

265

215

28 Marketing Research

266

216 Importance of conducting marketing research

266

216 Importance of developing a research plan

266

216 Stages of marketing research

266

216 Limitations of market research

272

216 Multiple Choice Questions

274

217 Extended Essay Questions

275

217

29 Principles of Segmentation

276

217

Market segmentation

276

219

Criteria for effective segmentation

278

220

Bases of segmentation

278

221

Consumer buying behaviour

281

223

The consumer decision-making process

223

(the buying process)

281

224 Factors influencing buying behaviour

283

224 Multiple Choice Questions

284

224 Extended Essay Questions

284

225

30 Product Management

285

228

The concept of product

285

229

Dimensions of the product mix

286

230 Product line and extension

286

230 The Boston Matrix

286

230 New product development process

289

231 The product lifecycle

290

239 Branding and packaging

292

240 Characteristics of services

293

Multiple Choice Questions

296

241

Extended Essay Questions

297

241

243 31 Pricing Decision

298

243 Introduction to pricing

298

246 Factors influencing pricing decisions

299

246 Pricing strategies

302

6 CONTENTS

Multiple Choice Questions

305 Selection of business types

345

Extended Essay Questions

306 Determining a location

345

Globalisation and trade liberalisation

345

32 Distribution Management

307

E-commerce

345

The role of distribution in the organisation

307

Intellectual property

346

Factors influencing distribution decisions

307

Multiple Choice Questions

347

Types of distribution channel

308

Extended Essay Question

348

Introduction to logistics strategy

309

Types of distribution strategy

310 38 Types and Nature of Assistance Available

Multiple Choice Questions

311 to Small Firms

349

Extended Essay Questions

311 Government agencies

349

33 Promotion Strategy The concept and objectives of promotion Tools of promotion Multiple Choice Questions

Non-government agencies

350

312

Financial institutions

350

312

Types of assistance offered to small businesses

351

312

Extended Essay Question

352

318

Extended Essay Questions

319 39 Preparation of a Business Plan for

a Small Business

353

34 Internet Marketing

320

Feasibility study

353

Development of internet marketing

320

The business plan

353

Opportunities created by internet marketing

321

Elements of a business plan

354

Challenges associated with internet marketing

322

Multiple Choice Questions

359

The importance of e-commerce to

Extended Essay Question

359

business organisations

322

Challenges created by e-commerce

323 END OF UNIT ASSESSMENT

360

Multiple Choice Questions Extended Essay Question

325

40 Internal Assessment

364

325

Choosing an appropriate topic or title for

MODULE 3 SMALL BUSINESS MANAGEMENT 326 your research

364

Introduction

365

35 The Nature and Characteristics

Literature review

366

of Entrepreneurship

326

Writing your methodology

367

Corporate entrepreneurship (`intrapreneurship')

326

Presentation of data

368

Social entrepreneurship

326

Analysis of data

369

Characteristics of successful entrepreneurs

327

Interpretation of results

370

Benefits of entrepreneurship

328

Conclusion and recommendation

370

Drawbacks of entrepreneurship

329

References and citations

370

Multiple Choice Questions

330

Appendices

370

Extended Essay Question

330

Note to teachers

370

36 Economic Systems and Business Growth

331

Glossary

372

The economy problem

331

Types of economic system

331 Answers to Multiple Choice Questions

384

Criteria for measuring size and growth of businesses 334

Index

386

A comparison of small firms and large firms

335

Strategies for growth

338

Multiple Choice Questions

343

Extended Essay Questions

343

37 Major Challenges and Opportunities Faced

by Small Businesses

344

Identifying successful business opportunities

344

Sourcing capital (finance)

344

7

List of figures and tables

Figures

Figure 1.1 An example of industry in the primary sector

Figure 1.2 An example of industry in the secondary sector

Figure 1.3 An example of industry in the tertiary sector

Figure 1.4 Private-sector organisations Figure 1.5 A sole-trader business Figure 1.6 A public limited company Figure 1.7 A cooperative business Figure 1.8 A franchise Figure 1.9 Public-sector organisations

Figure 2.1 The hierarchy of objectives Figure 2.2 Scotiabank

Figure 3.1 The stages of decision making

Figure 4.1 Business culture factors Figure 4.2 Digicel headquarters, Kingston

Figure 5.1 A basic system Figure 5.2 The three levels of management

Figure 6.1 Functional organisational structure Figure 6.2 Product organisational structure Figure 6.3 Geographical organisational structure Figure 6.4 Matrix organisational structure Figure 6.5 Team organisational structure Figure 6.6 Network organisational structure Figure 6.7 Virtual organisational structure Figure 6.8 Narrow span of control Figure 6.9 Wide span of control

Figure 7.1 Maslow's Hierarchy of Needs

Figure 10.1 Managing change

Figure 11.1 The communication process Figure 11.2 The flow of communication

Figure 12.1 The recruitment plan

Figure 14.1 The double entry system

Figure 16.1 The budgetary process

Figure 17.1 NPV graph

178

Figure 18.1 The production process

185

12 Figure 18.2 An example of job production

186

Figure 18.3 An example of batch production

187

13 Figure 18.4 An example of flow production

189

14 Figure 19.1 Examples of common trends

199

15 Figure 19.2 A scatter diagram

201

16 Figure 20.1 Diseconomies of scale

210

19 Figure 20.2 Process layout

211

20 Figure 20.3 Product layout

212

21 Figure 20.4 Fixed-position layout

213

24 Figure 20.5 Cellular layout

214

31 Figure 21.1 Fixed costs

217

33 Figure 21.2 Variable costs

217

38 Figure 21.3 Fixed costs per unit

217

Figure 21.4 Semi-variable costs

217

48 Figure 21.5 A breakeven chart

221

51

Figure 22.1 Stock control levels

225

62 Figure 22.2 Simpson Lumber Yard stock control

64

graph

226

68 Figure 22.3 A typical economic order quantity graph 227

69 Figure 22.4 Economic order quantity graph

69

for Questions 6?8

228

70 Figure 25.1 The sections of a node

247

71 Figure 25.2 Lines representing activity

247

71 Figure 25.3 Network diagram

248

71 Figure 25.4 New network diagram

248

73 Figure 25.5 Three possible situations in CPA

249

74 Figure 25.6 New diagram, using dummy activity 249

78 Figure 25.7 Network diagram

249

Figure 25.8 A decision tree

250

110 Figure 25.9 The revised decision tree

251

113 Figure 25.10 A more complex decision tree

252

118 Figure 25.11 Network diagram for Questions 1?3

253

125 Figure 26.1 Core marketing concepts

254

150 Figure 28.1 Stages in developing a research plan 267

168 Figure 29.1 Market coverage strategies

277

Figure 29.2 The consumer decision-making process 282

8 LIST OF FIGURES AND TABLES

Figure 30.1 The Four Ps

285

Figure 30.2 Attributes of the product

285

Figure 30.3 Dimensions of the product mix

286

Figure 30.4 The Boston Matrix

287

Figure 30.5 New product development process

289

Figure 30.6 The four-stage product lifecycle

290

Figure 30.7 The five-stage product lifecycle

291

Figure 30.8 Extending the product lifecycle

291

Figure 30.9 Secondary packaging

293

Figure 31.1 Price ceiling

301

Figure 31.2 Price flooring

301

Figure 31.3 Penetration pricing and price

skimming compared

304

Figure 32.1 Types of distribution channel

308

Figure 32.2 One-channel intermediary

309

Figure 32.3 Two-channel intermediary

309

Figure 36.1 Market share illustrated in a pie chart 335

Figure 36.2 Diseconomies of scale

337

Figure 36.3 An example of conglomerate integration 339

Figure 40.1 Examples of statistical tools

369

Tables

Table 1.1 Benefits and problems associated

with a change in legal structure

23

Table 2.1 The firm's social responsibilities

to stakeholders

34

Table 3.1 The decision-making process

39

Table 3.2 Possible impact of factors on a firm's

decision making

44

Table 5.1 Contributions of classical theories to

modern organisations

61

Table 5.2 Contributions of modern theories

to modern organisations

63

Table 5.3 Mintzberg's ten roles for top management 65

Table 8.1 An evaluation of different leadership styles 93

Table 9.1 An evaluation of conflict

management strategies

104

Table 11.1 An evaluation of communication methods 117

Table 11.2 Methods of overcoming barriers

to communication

121

Table 13.1 Advantages and disadvantages of

sources of capital

141

Table 14.1 Transactions illustrating the double

entry system

151

Table 14.2 Cash inflows and outflows

156

Table 15.1 Net profit figures for analysis

159

Table 15.2 Data for calculating investment

or shareholders' ratios

162

Table 15.3 Data for calculating efficiency and

activity ratios

163

Table 17.1 KEP Industry initial capital outlays

and annual cash inflows

174

Table 17.2 initial capital outlays and annual

cash inflows for three projects

174

Table 17.3 Initial capital outlays and annual

cash inflows for two projects

175

Table 17.4 Forecasted data for Projects A and B

175

Table 17.5 An extract of discount factors for $1

176

Table 17.6 Investment information for

DGF Company Ltd

177

Table 17.7 Information for NPV/DCF analysis

177

Table 17.8 Comparison of methods of appraisal

178

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download