Rafaela Valencia-Dongo

Business Studies
Summary 1 (chapter 1 & 2)

1. Explain the difference between a “need” and “want” and include three examples of each one.
(P8)

- All humans have needs and wants that want to be satisfied. However, these two terms are
completely different as a need is a good or service that an individual can’t live without, so in
fact, it is a primary necessity. On the other hand, a want is a good or service that is not essential
in order to live, as it an unlimited desire of things that are not primary necessities.

Need: Access to healthcare, nutritional food and shelter

Want: Iphone 7, MacBook Pro and a trampoline

2. Match Concept with definition:

Scarcity – Consumer Goods – Shareholders – Stakeholders – Leadership – Motivation –

Commodity – Value – Enterprise – Capital- Opportunity Cost

Consumer Goods: Goods and services sold to ordinary people (consumers) rather than businesses.
Scarcity: The amount of resources available is limited.
Opportunity Cost: A benefit, profit or value that a firm or person has to give up in order to achieve
something else.
Stakeholders: An individual or group with an interest in the operation of a business.
Shareholders: Any person, company or other institution that owns a part of a company’s stock.
Capital: Cash or goods that a business uses to generate income

3. Match the following concepts with their definition:

A) Objectives: The goals set by the business

B) Entrepreneurs: People who take risks and set up a business
C) Sole trader: Business entity which is owned and run by one individual and where there is no
legal distinction between the owner and the business
D) Job description: Describes the tasks and terms involved in a specific position

4. Identify and explain why mergers may be unsuccessful, give at least two reasons ( P 33-36)

Merger are owners of two different firms that agree to join and create one business, allowing the
business to expand. This might sound as an advantage for both owners, however mergers might be a
unsuccessful because:

1. No common vision: which means mergers don’t have a clear statement of what their new
business will stand for, what are the objectives, how the organization will operate, and how the
business is going to highlight within similar organizations.
 2. Poor communication: When the firm starts to expand the communication link between the
Managers and the staff might stop interacting, which causes drawbacks when it gets to
decision-making, the morale becomes to decrease and some orders may not be notified to the
superiors.
3. Weak leadership: When merging two organizations you need a strong figure that will be in
charge of motivating the staff, creating positivism within the company, and someone that
communicates successfully the energy to everyone. Yet, if the leaders of the businesses merged
have different values, visions and forms of working that doesn’t reflect on the new firm created,
then all credibility is lost and the new business might fail.
4. Lack of motivation: Meaning that workers might feel they are ignored or turned apart as they
are part of a business that hires millions of workers, so they are not motivated neither trained
to achieve better results.

5. What are franchises and how do they work? What are the advantages of starting a company
with a franchise? (P49)

A franchise is an arrangement between two existing organizations normally a public limited

company and a private limited company.
A franchise arrangement is when a franchisee, which is the new firm, trades under the name of a
franchisor, which is the existing company.

Benefits for the franchisee:

1. Many people already know the brand, so there is no need to build a customer base
2. Accounted systems usually are provided by the franchisor
3. As there is an existing customer base, offering established products reduces the risk of
failure
4. Easier to obtain finance, as banks see franchises as less risky

6. What does SMART objectives mean, explain each one of them (P55-56)

SMART is an acronym for Specific, Measurable, Achievable, Relevant and Time-bounded. They all work
together to put power behind your goals and ensures you can measure your progress more often and
take new actions.

Smart (What do you really want?) focus on a particular area

Measurable (How much of it do you want?) Numbers are essential for business, therefore, put concrete
numbers and make sure to use you can measure it.

Achievable (Is your want challenging enough?) Dream big and aim for the stars but keep one foot
firmly based in reality, as you work on your SMART objectives handle on realistic growth in your
industry.

Relevant (Is your want truly important for you?) Make your goals relevant to the realities of the
market.
Time-bounded (When is the deadline to get what you want?) state a clear period of time to complete
it

7. Draw the Maslow Hierarchy of Needs and include examples at each level (P77-78).

8. Draw a chart mentioning the motivation methods and analyze how they affect satisfaction
according to Herzberg. (P82 83)
Two-Factor Theory of Motivation

Motivation methods How they affect satisfaction Examples

Hygiene
- Are those job factors - If these factors are absent they  Job security
which are essential for lead to dissatisfaction.  Holidays
existence of motivation - Symbolized the physiological  Pensions
at workplace. needs which the individuals  Paid insurance
wanted and expected to be  Good working
fulfilled. conditions
-  Salary
 - These factors are extrinsic to  Relationships
work. with peer or
superiors

Motivational - These factors help to meet the  Access to

- symbolized the human need to grow information
psychological needs psychologically,  Recognition for
that were perceived as - These factors are inherent to achievement
an additional benefit work  Personal growth
- If a job completes these  Meaningfulness of
motivators, workers are the work
motivated.

Without these two factors stakeholders are dissatisfied and unmotivated. By adding the Hygiene
method they’re satisfied but unmotivated. Then with both motivational and hygiene methods the
stakeholders are satisfied and motivated.

9. State the three types of leadership. Then explain which do you think is the best type of
leadership. (P101-104)

A. Autocratic
a. The leader makes all the decisions and has complete control of the company and
decision-making
b. Don’t care about the opinions of others
c. In crisis situation they fit perfectly
d. Leave workers feeling ignored, resentful and unmotivated.
B. Democratic
a. Decisions are made by the people and for the people, therefore, they play an important
role at the moment of decision-making
b. Increase participation
 c. Treats people equally
C. Laissez-faire
a. Required highly trained and motivated staff
b. Leader leaves all the work to his employees and has no interference
c. Suits to an easy-going leader

In my opinion the democratic leadership style is the most effective and appealing to workers, as it
allows workers to be part of the decision-making and makes them feel part of the team. So if they fail,
the company fails, however if they work hard, the reward is for them and the company. It’s a balance
leadership.

10. Write down the process for personnel recruitment and briefly comment what to consider
in each block. (P108- 114)

Stage I- Defining the Job Role:

 Job description: description of the job, tasks involved and the terms
 Person specification: description of the skills and abilities that a candidate should have to be
successful in the job
 Part time or full time: define if the job would be part time or full time , if the employee would
be allowed flexible hours. State the advantages and drawbacks

Stage II- Internal or External:

 Internal recruitment: involves re-organization, redeployment, promotion and internal
advertisement
 External recruitment: means that you fill the vacancy with an outsider which involves job
centers, media advertising, visiting universities and recruitment agencies.
All this depend on:
- Size of the firm
- Type of position
- Number of positions

Stage III- Selection:

 Interview: Verify qualifications, assess personalities and aptitudes for the job
 Aptitude tests: IQ tests to exercise that assess specific job
 Psychometric tests: Assess personalities and preferences. Also they focus on writing,
comprehension and spatial awareness.
 Assessment centers: carry out multiple interviews and tests that last between one and three
days.

11. The Peruvian fishing company TASA, based in Lima, has decided to take over a smaller rival
company, CENTINELA, based in Ica. Juan, the owner of TASA did this because he is seeking
to expand the business. He decided to use external growth methods by buying a competitor
because in that way TASA would be able to get more fishing quota. The company CENTINELA
uses local workforce and has a bunch of important stakeholders.
a) What is meant by external growth? What is the difference with internal growth? (P34)
- External growth is when a business buys another business by takeover. This usually
happens with large organizations, commonly with public limited companies that seek
to grow quickly.
- Internal growth is when a business moves into a new market abroad because they are
expanding, therefore they can choose when, where and how to open their new outlets.

b) Include examples of all stakeholders (internal and external) that may exist. (P59-61)
- External
 Suppliers
 Customers
 Trade Unions
 Local community
 Government
- Internal
 Tasa owned by Juan which is now owner of Centinela
 Workers

c) Explain why external growth is the best option for Juan to achieve the goal for quick expansion.
(P33-35)
- External growth is the most effective option in this case as Juan is buying a business
that has already its business model so he doesn’t need to start from the bottom.

d) A year after the takeover, the business is starting to lose money. Identify and explain possible
problems that Juan might be facing during the expansion. (at least five problems) (P35-36)
1. Clash of cultures: Workers are used to work in a different environment and when the
business merges they can feel out of place.
2. Communication: When the firm starts to expand the communication link between the
Managers and the staff might stop interacting, which causes drawbacks when it gets
to decision-making, the morale becomes to decrease and some orders may not be
notified to the superiors.
3. Management Challenges: When a business buys another one it may need to replace
their managers to make sure all areas are covered.
4. Morale: Meaning that workers might feel they are ignored or turned apart as they are
part of a business that hires millions of workers, so they are not motivated neither
trained to achieve better results.
5. Production problems: Tasa might struggle with large order and maintaining stock
levels