12 markseasy
Define'business ethics'
Business
13 questions · 64 marks · ≈ 64 min · spans 13 of 29 topics
Assembled from the topic question banks — not an official Cambridge International paperDefine'business ethics'
[case-study] GreenTech Industries operates a large manufacturing plant producing electronic components. The business has recently faced significant criticism from local residents and environmental groups for polluting the nearby river with chemical waste. The company's reputation has been damaged, with several major clients threatening to cancel contracts. Market research shows that 78% of consumers now consider environmental responsibility when making purchasing decisions. The Managing Director is under pressure from shareholders to address these environmental concerns.
Outline two reasons why GreenTech Industries should respond to these environmental issues.
Define‘globalisation’
Extract:
Soapy Sudds Manufacturer (SSM)
SSM is a public limited company that was set up 25 years ago. SSM manufacture soap powder in country Y. The soap powder is used for washing clothes. SSM sells all its soap powder to large retailers in country Y. SSM’s sales have been increasing for many years in country Y but sales in the last year have remained the same. The directors of SSM are considering ways to increase sales.
SSM has a total of 100 employees with 60 in the Operations Department. It uses flow production in the factory and has 10 production lines with 5 workers and 1 supervisor for each line. The Operations Manager is aware that production workers are unhappy and often complain about their jobs being boring. These workers have always been paid by an hourly rate. The Human Resources Manager has recommended changes to ensure fewer workers leave each year to work for other businesses.
The directors of SSM have decided to expand the factory. They will need $15m to do this. The directors have also considered taking over a competitor. SSM is likely to benefit from economies of scale as it grows.
The Marketing Director thinks SSM should start selling soap powder in markets in other countries. SSM will need to carry out either primary market research or secondary market research to forecast the potential total sales in these new markets. There are many existing manufacturers in these countries. SSM need to consider the problems when entering new markets in other countries such as tariffs or quotas.
Appendix 1
Manufacturing process to make soap powder
All the different types of soap powder are manufactured on production lines using flow production. SSM makes use of specialisation.
Each production line has the following stages:
Each of these stages uses machinery controlled by a production worker.
Appendix 2
Email from the SSM Finance Director to the Managing Director
SSM has a cash-flow problem which may get worse. Please see charts below.
Appendix 3
Newspaper article from Main News 1 October 2021
Retailers have reported increased sales for most types of products such as sales of washing machines which have increased by 15%. Economic growth in country Y is predicted to increase.
Many businesses have been recruiting additional employees and there are now shortages of some skilled workers. The government in country Y has recorded an increase in inflation to 8% so far this year, which is a worry.
Consider the effects on SSM of the following changes in country Y:
Which effect is likely to have the greatest impact on SSM’s profit? Justify your answer.
Refer to the following insert when answering the question
Extract:
RMT Clothing Ltd
RMT Clothing Ltd is a medium-sized clothing retailer based in Country X. It was founded in 1995 and has grown to 50 stores across the country, selling affordable fashion for men and women aged 18-35. RMT currently employs 800 people, and had annual revenue of $85 million last year.
The company is facing increasing competition from online retailers. RMT's CEO, Sarah Jones, is considering whether to close 10 underperforming stores and invest in expanding the company's e-commerce operations instead. This would involve making 100 store staff redundant but hiring 50 new employees to work on the website and in the distribution centre.
RMT's financial performance over the last 3 years is shown in table 1 below.
Table 1: RMT’s Financial Performance 2020 to 2022
| Year | Revenue ($m) | Profit ($m) | Online sales (%) |
|---|---|---|---|
| 2020 | 80 | 4.0 | 15 |
| 2021 | 82 | 3.8 | 18 |
| 2022 | 85 | 3.5 | 22 |
The company's main stakeholders have differing views on the proposed changes. Shareholders are concerned about falling profits and want to see a clear plan for growth. Employees are worried about potential job losses. Customers have been complaining that RMT's website is difficult to use compared to competitors.
RMT is also facing external challenges including rising energy and material costs, as well as changing consumer preferences towards more sustainable fashion. However, there are opportunities to expand into new international markets through e-commerce.
Sarah needs to decide on the best strategy to ensure RMT's long-term success in a rapidly changing retail environment.
Consider the potential responses of the following two pressure groups to RMT's proposed changes:
Analyse how each pressure group might respond to RMT's plans for redundancies and store closures. Which pressure group should RMT be most concerned about? Justify your answer.
Refer to the following insert when answering the question
[case-study] Elton is a sole trader. He sells specialist clothing and equipment for sports, including baseball and hockey. It is a niche market. Elton started his business 5 years ago and it has remained small. A wide range of inventory is important. Elton has been looking at the financial performance of his business. The profit margin for 2018 was 35%. An extract of the accounts is shown in the below table.
Revenue and cost information for Elton’s business for 2018 and 2019 ($) 2018 2019 Revenue ($) 24 000 25 000 Cost of sales ($) 7 200 Y Gross profit ($) 16 800 18 000 Expenses ($) 8 400 10 000 Profit ($) X 8 000
Do you think Elton should be pleased with the financial performance of his business? Justify your answer using appropriate ratios.
[case-study] GCF is a public limited company. It provides a range of computer services to businesses, including designing websites and creating apps. The Human Resources Director uses ideas based on Maslow’s Hierarchy of Needs to help keep GCF’s 250 employees well-motivated. An extract of methods used is shown in the table below. GCF plans to expand by taking over one of its competitors. This will cost $50m. To finance the takeover, GCF is considering issuing new shares.
Extract of methods used at GCF to motivate employees ‘Employee of the month’ award Organises team building courses
Explain one advantage and one disadvantage to GCF of issuing new shares as a source of finance.
[case-study] LMA is a family-owned restaurant. The business was started 20 years ago and has remained small. LMA is a partnership. The partners are considering whether LMA should become a private limited company. The Finance Manager is analysing LMA’s cash-flow forecast. An extract is shown in Table 2.1.
Table 2.1 : Extract from LMA’s cash-flow forecast 2023 ($000)
July August September Cash inflow 420 300 330 Cash outflow 410 320 360 Net cash flow X (20) (30) Opening balance 60 70 50 Closing balance 70 50 Y
Calculate X and Y.
Show your working.
[case-study] TFN is a travel business which sells holidays. It has 37 shops and 1000 employees. Last year TFN’s profit increased to $46 million. The Managing Director knows that good customer service has helped maintain customer loyalty. He said: ‘TFN’s managers use ideas from Herzberg’s two-factor theory to help motivate employees. All employees are provided with off-the-job training and each manager has a wide span of control.’
Outline two reasons why profit might be important to TFN.
Define‘non-current assets’
[case-study] Mark is launching a new children's toy business called 'SafePlay'. He plans to market his products directly to parents through online advertising and promotional events at toy shops and nurseries. Mark has developed colourful marketing materials featuring happy children playing and claims that his toys 'are 100% safe for all ages' and 'guarantee no choking hazards'. He is also considering celebrity endorsements from popular parenting bloggers. Mark knows that marketing regulations will be important for his business.
Extract from Mark's marketing strategy
Target market Parents with children (25-45) Main advertising claim '100% safe for all ages' Promotional locations Toy shops and nurseries Marketing budget USD 12,000
Outline two reasons why legal controls on marketing will be important for Mark's business.
[case-study] GBU is a public limited company. It makes a range of beauty products, including shampoo and soaps for the mass market.
Last year, GBU’s revenue fell. The Marketing Director has been looking at some results from its primary market research. It was based on a sample of 2000 people, see Table 4.1. She believes maintaining customer loyalty is more important than attracting new customers.
Table 4.1: Market research
Question 1: Where do you buy beauty products? Shop Online Mail order 1,100 700 200
Question 2: Do you buy GBU beauty products? Yes No 1,700 300
Calculate the percentage of people who buy beauty products online. Show your working.
[case-study] Elton is a sole trader. He sells specialist clothing and equipment for sports, including baseball and hockey. It is a niche market. Elton started his business 5 years ago and it has remained small. A wide range of inventory is important. Elton has been looking at the financial performance of his business. The profit margin for 2018 was 35%. An extract of the accounts is shown in the below table.
Revenue and cost information for Elton’s business for 2018 and 2019 ($) 2018 2019 Revenue ($) 24 000 25 000 Cost of sales ($) 7 200 Y Gross profit ($) 16 800 18 000 Expenses ($) 8 400 10 000 Profit ($) X 8 000
Explain one advantage and one disadvantage to Elton of operating in a niche market.