IB Exam Units 1,2,3,4 & 5

Q1 1a. Define the term entrepreneur. someone who combines the four factors of production (land, labour, capital & enterprise) and is willing to take a financial risk when starting a business venture. 1b. Explain the enterprise skills Gemma & Dave have and why these would be important to ensure success. Gemma is creative and Dave in innovative. Gemma’s creativity will ensure her products are unique thus giving her a unique selling point and therefore likely to promote sales. Dave’s innovation will ensure the business does not become stagnant and keeps up with consumer's wants. 1c. Explain the advantages & disadvantages of the type of business ownership Gemma & Dave would have. Gemma & Dave would form a partnership. A partnership requires more than one owner (no more than 20) so there is additional capital available. Each partner may specialise in different areas of the business, thus enhancing efficiency. as there are more shareholders, the risks and responsibilities are shared equally (unless otherwise stated in the deed of partnership agreement). However Partnerships are unincorporated and therefore have unlimited liability. This could be especially disadvantagious when starting a new business venture, as the risks are higher. There is no continuity, so if a partner dies or wishes to leave the partnership, the partnership agreement becomes void and the partnership is dissolved.

Q1 1d. Using the case study, explain the terms nationalisation and privatisation. Also state what sector Gemma used to work for and what sector she now works in. Nationalisation is when a private business is bought by the government/state and therefore becomes a public business. Dave’s previous employer was a bank operating in the private sector. The recession led to the bank being bought by the government/state, thus the bank was nationalised. Privatisation is when a public business is bought by the private sector. This often happens to increase efficiency, as private business operate to make a profit, whereas public businesses operate to provide a service. Gemma previously worked in the public sector (government school) however she now works in the private sector (fee paying international school)

Q2 2a. Why is Gemma’s objective not a SMART objective. Gemma’s objective does not meet the criteria of a SMART objective. It is not specific, rather vauage in that she wants to sell Asian furniture in the UK, but does not specify what type of furniture and where in the UK. It also have no time constraints, as she has merely stated that she wants to achieve 500,000thb sales turnover, but she have not identified a time frame for this, 2b. Define ethics moral guidelines that determine decision making, distinguishing right from wrong. 2c. Define corporate social responsibility. When a business actively considers the interests of stakeholders and in particular society when making decisions. The business will take responsibility for the impact of those decisions and will actively try to minimise any negative impact upon them and promote any positive impact upon them.

Q2 1a. Critically analyse Gemma’s idea of outsourcing to Cambodia. If Gemma outsources production to Cambodia, it will bring her production costs down because wages are lower in Cambodia. Therefore she will be able to increase her profit margin or reduce her selling price, which may, in turn increase sales. However Dave’s concerns are justified. Developing economies such as Cambodia often use child labour. From an ethical perspective, children should have a right to a childhood and not be required to work. However we must consider the possibility that working in factory maybe a better alternative, such as having no money for food and shelter and/or begging. Therefore in an ideal world, it would be unethical to use child labour however maybe acceptable in countries like Cambodia.

Q3 3a. Define the term stakeholder. A stakeholder is anyone who is affected by the decisions of the business, either negatively or positively. There can be internal (those working for the business) or external stakeholders (those not directly involved in the business but still affected by the decisions). 3b. Define the term stakeholder conflict. Business decisions will usually affect one group of stakeholders in a positive way and another group in a negative way, rarely are all stakeholders affected in positive way by the same decision. Stakeholder conflict occurs when there is a difference in the objectives of each stakeholder group. Naturally. 3c. Explain why a business might experience lower profits by meeting it’s stakeholder objectives A businesses main aim is usually to make a profit. So when a business focuses on satisfying another aim, they sacrifice their efforts in maximising profits. For example, a business may want to enhance its image, so therefore invests more money in environmentally friendly vehicles, this is as the expense of maximising profits, however the company may improve it’s image.

Q3 3d. Explain which stakeholders would be affected if Gemma & Dave go ahead with their business venture.. Competitors of similar products Thailand’s suppliers (exports) UK economy / consumers Employees (making the lights) / (selling the lights) Logistics UK customs UK independent H&S employees etc

Q4 4a. Explain the actonym PESTLE / STEEPL PESTLE is an acronym standing for Political, environmental, social, technological, economic and legal factors. These are external factors that affect how a business operates. 4b. Using the PESTEL analysis method, explain how external factors have affected businesses in your country. Thailand – Political – political instability  riots (businesses destroyed)  curfew  Sales in business affected Environmental – Flooding  businesses forced to close  reduction in GDP in country Social  Korean fashion is very popular  clothing stores started selling more and more Korean clothes. Technological  limited technological application  no chip & pin (increases the chances of fraud)  slow internet connections  discourages businesses dependent upon internet to locate in Thailand Economical  Thailand’s has economic growth rate of 2%  growing economy, more people spending money. Increase in exports, boosting Thailand’s surplus. Legal – Import tax  reduces demand for foreign goods, bad for businesses specialising in foreign goods.

Q4 3c. Using the case study, provide a thorough SWOT analysis for Gemma’s business venture of selling fairy lights in the UK. Strengths – proximity to production (living & working in Thailand ) Good Enterprise skills. Dave has a background in Business Weaknesses – Gemma is working full time, she may not have time to run the business. Lack of experience Opportunity – no competitors in the UK. Asian furniture becoming more popular. Exchange rates Threats – exchange rates. UK import tax. UK H&S Laws