1.3.3.

1 [Marketing Objectives and Strategies]

>Marketing: the management process of identifying, satisfying and anticipating
consumer demands for profit

>Marketing Strategy: methods used by a business to achieve their marketing

objectives

Marketing Objectives
>Increasing Market Share:
- Market Share: the percentage of the total market that it controls

+Methods to increase Market Share:

- Innovation - producing new products and services
- Strengthening consumer relationships and creating loyalty
- Buying up competitors

>Increasing Revenue:
- Revenue: the income of a business

+Methods to increase revenue:

- Increasing the number of consumers
- Increasing the number of purchases per customer
- Raising Prices

>Building a Brand:
- Brand: a name, term, design, symbol or other feature that distinguishes a
business/product from the competition

+Brands can be built by:

- Being innovative
- Not copying established brands
- Being consistent when speaking to customers
- Offer more cutting prices when promoting

The Product Life Cycle

>The Product Life Cycle - shows the sales of a product over time
>Is valuable as it has implications for cash flow
>Marketing decisions & Marketing Mix are based on where the product is in the
product life cycle
>Stages include:
- Development
- Introduction
- Growth
- Maturity
- Decline

Development
>The first stage of the product life cycle
>The research & development department develop a product to satisfy consumer
needs
>The marketing department does the marketing research
>Costs are high as there are not sales to cover costs
>Cash flow is tight at this phase as the product isn’t bringing in any revenue
therefore no profit
>All capital is invested into the product
>Development has a high failure rate as there isn’t enough demand yet
>Also could be because the business can’t make the product cheaply enough to
make a profit

Introduction
>Involves high costs in research and development
>The product is launched in either one or several markets, can be launched with
complementary products
>Businesses heavily promotes the product to build sales
>However the business needs to make sure that they have enough resources and
capacity to meet the demand created by the promotion
>Prices may be initially high in order to cover promotional costs - Price Skimming
>Prices may be initially low in order to encourage sales - Penetration Pricing
>When sales rise, revenue generated has to pay for fixed costs of development
before the product makes profit
>Businesses will try and persuade retailers to sell their products
>Competition may be limited if it’s an innovative product
Growth
>Competition may increase as competitors may be attracted to the market
>Promotion shows differences from competitors’ products
>The product is improved/developed and it could be targeted at a different segment
of the market
>Rising sales encourages more outlets to sell the product

Maturity
>Sales reach their peak and profits increase as the fixed costs of development have
been covered
>Products face heavy competition as competitors have joined the market
>Product becomes saturated and sales may begin to drop
>Price may be reduced to stimulate demand which leads to a decrease in profits

Decline
>Product doesn’t appeal to customers anymore leading to a rapid fall in sales and
profits
>Products in this phase have limited production
>The product may be withdrawn from the market or sold to another business

Extension Strategies
>Product development:
- Improving and redesigning a product
- The packaging could be changed or special editions of the product could be
made

>Promotion:
- Running new ad campaigns
- Providing special offers
- Local Advertising
- Rebrand the product
- Re-launch the product into the market

>Changing the target market

>Price Reduction
Product Portfolios + The Boston Matrix
>Product Portfolio - the collection of all the products and services offered by a
company

>The Boston Matrix - marketing planning tool which compares market growth with
market share

Question Marks
>All contain new products; small market share but high market growth
>Not profitable yet and can either succeed or fail
>Has a high chance to become stars if managed correctly
>Need to have high amount of marketing to success
>Business can do various things with question marks:
- Brand Building
- Maximizing sales and profit in the short term
- Selling off the product

Cash Cows
>Has high market share but low market growth
>Cash Cow Products are in the maturity phase in the product life cycle
>Already been promoted and produced in high volumes
>Meaning costs are low as they need either none or low investments
>They bring in a high volume of money
>Needs close monitoring in case they become dogs

Stars
>Has high market growth and high market share
>Profitable in their growth phase and have the most potential
>Can become cash cows if managed correctly
>Competitors will try and take advantage of the growth in the market
>The firm will need to spend a lot of money on promotion to keep their market share
>Money may be needed to be spent to increase capacity to keep up with demand
Dogs
>Has low market share and low market growth
>If they’re still profitable, the firm will harvest profit for the short term
>If the product is no longer profitable, it can be sold off
>They require no investment as they are in the decline phase in the product life cycle
>Product may be discontinued
>Products may become obsolete or replaced

Uses of the Boston Matrix

>Valuable way of showing where a business’s products are position in the market
>Marketing decisions are based on the position of the product
>The conclusions drawn from such an analysis are to transfer the surplus cash from
cash cows to the stars and the question marks, and to close down or sell off the
dogs

Limitations of the Boston Matrix

>Products may not be low or high market share, could be in the middle [medium]
>People argue that the Boston Matrix is too simple
>High market share doesn’t always led to high profits
>High costs are also involved with the high market share

Concept of the Marketing Mix

4 Key Components of the Marketing Mix:
>The Marketing Mix: the 4 elements used in a firm’s marketing strategy that is
designed to meet consumer needs and wants - includes: Price, Place, Promotion
and Product

Product:
>It is important that products meet consumer needs and wants, in order to do this,
the business needs to address features relating to the product.
- How consumers use the product
- The appearance of the product
- Financial Factors [need to be affordable]
- The Product Life Cycle
- The product’s USP

Price
>The Pricing policy of a business is often a reflection of the market at which the firm
is focussing on
>Prices will not always be set at a level that would maximize sales for short-run
profits.
Promotion
>Consumes must be given information about the products and be encouraged to buy
them
>Businesses have multiple methods in doing this

Place
>Products must be available at convenient locations at times when customers want
to buy them.
>This means that businesses need to make decisions in which way products need to
be physically distributed
>Need to also take into account how the product is sold

Mass Marketing Strategies

>Mass Marketing Strategies need to appeal to the whole market instead of individual
segments of the market
>The product needs to have a mass appeal meaning it may not be different from
competitors
>Because of this, advertising needs to show the products USPs
>Large quantities produced mean lower average costs meaning the business can
exploit the economies of scale which leads to higher profits

>Mass Markets are normally dominated meaning they need to promote their
products in certain ways to be competitive:
- Expensive advertising campaigns helps to maintain brand awareness
- Sponsorships and product endorsements deals
- Promotional activities [percentage discounts, BOGOF]
- Being price competitive is important as pricing is used by consumers to
decide between competing products
- Can lead to price wars between businesses
- Customer loyalty and saver schemes can get consumers to make repeat
purchases

Niche Marketing
>Market Segment: consumers who can be grouped in different ways [e.g; income,
gender, lifestyle, ethnicity, religion, age, interests]

>Niche markets have more emphasis on creating a product that is differentiated or

unique compared to products being sold in mass markets
>Development of USPs are important in Niche Markets

>Niche marketing are more specialized and needs businesses to do effective market
research
>In order to understand the consumer’s needs, wants, values and aspirations

>Businesses that operate in niche markets need to be more cost effective as they
don’t have big budgets to spend on expensive marketing campaigns

>As the market size is smaller, firms will be focused on building their reputation and
establishing customer loyalty
>May concentrate on adding value through strong customer service and introducing
loyalty programs

>Pricing strategies used in niche markets will depend on the products being sold
>If it’s recently developed and a highly specialized product, it may be best to use
price skimming
>This is because there are not substitute products and consumers will be prepared
to pay the price

>Small turnovers discourage larger firms from entering the market

B2B Marketing [Business to Business]

>B2B: the sale of one business’s product to another business or organization

>B2B doesn’t need to focus on the emotional component in marketing, instead it’s
more focused on being informative

>B2B marketing doesn’t use usual traditional advertising media as they are costly
and most viewers are not in the target audience
>Trade Journals and Trade shows are normally used for advertisements

>Consumers would be interested in the quality of the product

>They’ll be more concerned about any cost savings or potential revenue due to them
not having emotional interest in the product

>Much stronger emphasis on building long-term relationships between the two

businesses
>Along with having a highly effective customer service

>Important to understand the particular needs of the consumer [more specialized]

>Volume of sales orders may be very large meaning stakes are high as each
contract negotiated could be very profitable
B2C [Business to Consumer]
>B2C - the sale of one business’s product to a consumer

>Consumers want to know the benefits of the products they are buying
>Has short statements outlining some of the benefits

>Not looking to build a long-term relationship with suppliers

>Consumers want a variety of distribution channels for their own convenience

>Emotional connection with the product or supplier

Consumer Behavior
>Customer Loyalty:
- Strong customer service before and after sales is important to help build a
strong brand and customer loyalty
- Creates a good relationship with customers to encourage them to make
repeat purchases
- Sales-people try to make consumers satisfied to encourage them to purchase
something
- Customer service is important as the item purchases represents a large
portion of total income
- Consumers need information about the product and how it functions and
performs
- After sales service is also important as consumers are able to get help with
products after purchasing it
- Makes the customer feel valued and they’re more likely to return to the
business in the future [more important for expensive items]
- Businesses have discovered that it is more cheap to keep loyal customers
instead of gaining new customers through marketing

Loyalty Cards and other Saver Schemes

>Are used to help to tie a customer to a particular provider or retailer
>Useful in markets where there are many substitutes and many are purchased
>Can help to improve customer retention
>Can be used to help collect important data on buyer behavior and purchase
decisions

>Saver Schemes: where customers collect points based on the amount they spend
1.3.3.2 - Product Service Design
The Design Mix
>The process of creating a new product is known as Product Design
>When designing a new product designers have to take into account:
- The shape and appearance
- Whether it fits the intended function
- How easily and cost effectively it can be made from the design
- The dimensions and preferred material should be used
- Should the image have a corporate image
- Needs to meet the needs of the consumers
- Aesthetically pleasing
This is known as the design mix; contains function, aesthetics and cost of the
product

● Function - What the product should do and how well it does it, eg a washing
machine should wash clothes
● Cost – How cost-effective the product will be to manufacture, eg the product
should be made and sold profitably
● Aesthetics – How the product appeals to consumers, eg how the product looks,
feels or smells

Changing social trends

>Because of changing social trends, businesses may need to change the aesthetics
and/or the function of the product

>Consumers are concerned with the overuse of resources and want businesses to
minimize the total amount of waste they produce
>Hence wanting products to become reusable and recyclable

>Consumers are also demanding raw materials should be ethically sourced

>This is so the environment is preserved and to protect the environment

>Because of these factors, business who meet these consumer wants are able to
charge higher prices as there is a demand for them
>However not all consumers will be willing to pay the premium prices so the
business has to decide whether it is worth adapting to these changes
>This is because it’s costly to adapt to these types of changes
1.3.3.3 [Promotion and Branding]
What is promotion?
>Promotion: designed to inform consumers about a product and try to persuade
them to buy it

>Promotional Objectives includes:

- Increasing Sales
- Increasing Profits
- Increasing awareness of the product
- Remind consumers about previous products
- Reach a target audience that is spread over a wide range
- Showing consumers that rival products are inferior
- Improve or develop the image of the business

Types of Promotion
Above-the-line promotion
>Above-the-line promotion: involves advertising in the media
>Adverts: used to promote goods and services and to promote a firm’s public image

>The choice of media being used depends on the target audience and how many of
them will see or hear the advertisement, examples being:

MEDIA ADVANTAGES DISADVANTAGES

Television >Huge audiences can be reached >Expensive

>Use of products can be demonstrated >Messages may be short lived
>Sound and movement can be used >Viewers may avoid TV ads
>Scope for targeting groups with TV >Delay between seeing ads &
shopping for product

Newspapers & >National and Local Coverage >No movement or sound

Magazines >Reader can look back >Individual ads may be lost in other
>Ads can be linked to articles and large quantities of ads
features
>Vouchers can be used
>Can be used for targeting
>Cheap

Cinema >Big Impact with a big screen >Limited audience

>Used for local & national advertising >Message may only be seen once
>Targeting for specific age groups >Message is short lived
>Sound and movement can be used

Radio >Sound can be used >Not visual

>Targeting for minority audiences >May get ignored
>Cheap >Minimal Impact
>Can target the younger generation >May be annoying/disruptive
Posters & >Produces national campaigns >Can be deliberately damaged
Billboards >Seen multiple times >Limited information can be shown
>Good for short & sharp messages >Difficult to evaluate effectiveness
>Large posters have big impacts

Internet >Updated regularly >Pop-up ads and others may be

>Targeted advertising irritating
>Hits & responses can be measured >Technical problems can rise
>Can be used on mobile devices
>No delay between seeing ads &
shopping for the product online

>Informative Advertising:
- Adverts designed to increase customer awareness of products
- Gives clear features and information about the product

>Persuasive Advertising:
- Designed to put pressure on customers to buy the product
- Tries to convince customers to buy a certain brand instead of competitors
- Designed to appeal to customer’s emotions
- Designed to appeal to people’s respect for authorities and celebrities

>Reassuring advertising:
- Aimed towards existing customers
- Designed to be ‘comforting’ and to reassure consumers they made the right
choice by buying their products and to continue doing so

Below-the-line promotion
>Below-the-line promotion: forms of promotion that does not involve advertising

Examples of Below-the-line promotion:

>Sales promotion:
- Incentives used to encourage people to buy products
- Used to boost sales so customers are attracted to buy the product
- Can be used to raise awareness for products
+Examples of sales promotion:
- Free Gifts
- Coupons
- Loyalty Cards
- Competitions
- BOGOF Offers
- Money-off deals
>Public Relations:
- Is used to communicate with stakeholders
- Main purpose is to increase sales by improving the image of the business
- Also done to increase awareness about the business
+Examples of Public Relations:
- Press releases - information that is released to the media
- Press Conferences - representatives meet in person with the media
- Sponsorships
- Donations
- An advantage is that it is often a cheap method of promotion

>Merchandising and Packaging:

- May arrange the point of sale so that it can be eye catching
- Most likely to have an increase in sales
+Example of Merchandising and Packaging:
- Product Layout
- Display Material
- Stock

>Direct Mailing:
- When letters or leaflets are sent directly to households
- The contain information about the product or recent price changes
+Examples of Direct Mailing:
- Direct/Person Selling:
- Exhibition and Trade Fairs

Advantages of Exhibition and Trade Fairs:

- Products can be tested out on consumers before a full launch
- Some exhibitions are overseas, businesses can use it as a way to break into
foreign markets
- Products can be physically demonstrated and questions can be physically
asked and answered
- Exhibitions can attract the media
- Customers can speak to business higher-ups face-to-face
Choosing Methods of promotion / what affects it:
>Cost:
- Not all businesses can afford to advertise using media sources
- Meaning they need to find the most cost-effective way

>Market Type:
- Local businesses often rely on advertising through local newspapers
- Meanwhile businesses aiming their products into mass markets are more
likely to use television and national newspapers

>Product Type:
- Certain products are best suited to certain methods of promotions

>Stage in the Product Life Cycle:

- Promotional methods change as a product becomes older

>Competitors’ Promotion:
- Common for businesses to copy successful methods of promotion used by
rivals

>Legal Factors:
- In many countries there are laws to protect consumers, this can affect the
style of promotion methods used

Types of Branding
>Branding: creates a clear and obvious logo, name or statement
>Helps consumers to instantly recognise promotional material from a particular
brand

Corporate or Manufacturer Branding

- Corporate Branding is how the business brands itself
- Within it there may be separate product brands aimed at different market
segments
- Manufacturer brands are brands created by the producers of goods and
services

Own branding [Private/Distributor Brands]

- Brands/Products manufactured in-house to a supermarket or retailer
- Unlikely that large budgets have been spent on this type of branding
- These products don’t have a distinctive logo and promote them
- This makes them cheaper to produce, however they can’t charge premium
prices
 - Main advantage is that consumers may choose this option as it's cheaper
however they are considered a lower quality product compared to others

Product Branding
- Relates to specific individual products that corporate brand makes
- Individual products will have its own logo and slogan
- It will also have the corporate brand included to show that it is associated with
the business
- Usually has expensive marketing so they have a higher retail price
- Many consumers are willing to pay more if they’re buying a trusted product
- However some consumers may not want to pay the higher price

Generic Branding
- Products that contain the name of the actual product category
- This is instead of a products name or businesses name
- Sold at a lower price

Benefits of Strong Branding

>Added Value:

>Ability to charge a premium price:

- This is because of the customers loyalty that has been built over a period of
time
- Less likely to switch to a cheaper price due to this

>Reduced Price Elasticity of Demand:

- Firms prefer if their products are inelastic in demand
- This is because a price increase will have a smaller effect on demand

>Harder barriers to entry:

- Strong branding can create a barrier to entry making it difficult for new firms to
enter the market

Products may need to rebrand

>Is a marketing strategy which involves the change to the design, promotion, pricing
or distribution of an existing brand
>Is used to make a new identity when the brand name is no longer suitable
Different Ways to build a brand:
>Exploiting the USP:
- A clear USP will help consumers to differentiate the product from competitors
- This could be done by incorporating special designs into the product

>Advertising:
- Used to promote and maintain customer awareness of a brand
- Is used to persuade consumers that their product is unique
- In competitive markets, large amounts of capital is required

>Sponsorships:
- Widely used in competitive markets
- Corporate brands may sponsor large sporting events
- Cheap method of promotion
+Sponsorships help to:
- Raise brand awareness
- Develop brand loyalty
- Create positive PR
- Build Brand positioning
- Support other promotional campaigns
- Create emotional commitments to the brand
- Promotes good relations with consumers

>Social Media:
- Use of social media allows businesses to focus easily on a particular
consumer group
- Helps businesses to get to know their consumers better and improves
communication between both parties
- Helps to increase trust in the brand

Changes in Branding and promotion to reflect social trends

>Businesses are under pressure to keep up to date with trends, patterns, fashions
and new technology
>This extends to methods of promotion that businesses use

Social Media Channels used:

>Viral Marketing:
- Involves any strategy that encourages people to pass on messages to others
about a product or a business via the internet
- Creates the potential for rapid growth in the exposure of a message
- Exploits the process of rapid multiplication
- Spreads awareness about the brand and advertises it
>Social Media:
- An increasing number of businesses are developing their own social networks
which are linked to main social media platforms

>Emotional Branding:
- The practice of using the emotions of consumers to build a brand
- Produced in order to appeal to the consumers emotions in order to buy their
products
Pricing Strategies [1.3.3.4]
>Part of the marketing strategy for businesses
>Price Strategies: a set of plans about pricing which help a business to achieve it's
marketing and corporate objectives

Uses of Pricing Strategies:

>Can be used for new products
>May be more suitable for existing products

Cost Plus Pricing [Mark-up on Unit Cost]

>Cost Plus Pricing: when a firm adds a percentage of mark-up to the costs of
making or buying a product [the unit cost]
>Price = Unit Cost + [(unit cost/100) x mark-up]
>The mark-up is usually a percentage of the unit cost

Advantages
>Simple and easy to cover costs
>Easy to justify

Disadvantages of Cost Plus Pricing

>Ignores market conditions
>May be difficult to identify precisely all the costs associated with the production of
the production of a product, especially for multi-product businesses

Price Skimming:
>Price Skimming: when a new product first enters the market and is sold at a high
price for a certain period of time

>The aim is to generate high levels of revenue with the new product before
competitors arrive into the market
>Along with exploiting the popularity of the new product as it is unique

>Consumers will pay more as the product has scarcity value and the high price helps
to boost the product’s image and increase the appeal of it

>Prices usually drop when the product has been in the market for over a year
>Competitors have entered the market by this point with imitative products at lower
prices, this can prevent through patents and trademarks

>Some businesses use price skimming as a long term strategy to keep their brands
more exclusive
Disadvantages
>However potential customers can be put off by the initial price and consumers who
bought it for the initial price may be annoyed by the sudden price drop

>Cannot last for long, as competitors soon launch rival products which put pressure
on the price
>Distribution (place) can also be a challenge for an innovative new product. It may
be necessary to give retailers higher margins to convince them to stock the product,
reducing the improved margins that can be delivered by price skimming.
>A firm may slow down the volume growth of demand for the product. This can give
competitors more time to develop alternative products ready for the time when
market demand (measured in volume) is strongest.

Advantages
>An advantage is that the high prices help to generate revenue and when the price
lowers, other customers in the market are drawn to the product
>Another one being is that those who can wait can benefit from the low prices

Penetration Pricing
>Opposite of Price Skimming
>Penetration Pricing: launching a new product into the market at a low price in
order to attract customers and gain market share for a limited time

>Works best for businesses that can benefit from lower costs when producing large
quantities of a product

>Is used to secure an initial position in the market from where further progress can
be made.

>Businesses hope that consumers will be attracted to the product due to its low price
and continue to buy it when the price increases.

>Benefits of Penetration Pricing:

- Beneficial when product is targeted at low/middle class families
- Grow sales of new product lines very quickly
- Fast growth in sales allows businesses to lower production costs as they are
able to exploit the economies of scale
- Strategy can place place pressure on rivals
- Encourages word-of-mouth recommendation for the product because of the
attractive pricing
- It forces the business to focus on minimizing unit costs right from the start
- The low price can act as a barrier to entry to other potential competitors
- Can be used as an extension strategy
Disadvantages
>A disadvantage is that consumers may expect the low price to stay so the business
could lose customers if they raise the price
>Can damage the brand image
>Penetration pricing may simply attract customers who are looking for a bargain,
rather than customers who will become loyal to the business and its brand
>The strategy is likely to result in retaliation from established competitors, who will
try to maintain their market share

Predatory Pricing
>Aims to eliminate competitors from the market
>Involves charging a lower price for a period of time until competitors leave the
market

>Some forms of predatory pricing is illegal in some countries

>Is when businesses sell a product below the cost of production in order to force
competitors out of the market
>It is illegal as in the long-term it can cause a lack of competition

>Due to a lack of competition, a monopoly would be created which would have

negative effects for the consumers [e.g low quality products for high prices]

Advantages:
>The business can excel from their competitors
>Can push competitors out of the market

Competitive Pricing
>Is when a business monitors their competitors’ prices to make sure that their own
prices are either lower or at an equal level
>Normally used by businesses that are operating in a competitive market
>By charging the same price as competitors, a price war is avoided

Advantages
selling prices should be line with rivals, so price should not be a competitive
disadvantage

Disadvantages
The business needs some other way to attract customers. It has to use non-price
methods to compete
Psychological Pricing
>Bases the price on the consumers’ expectations
>A high price may make people think that the product has a high quality
>One common example is setting the price just below a round figure making
consumers think that they are paying a cheaper price

Advantages
>Generates more sales
>Easy to implement

Disadvantages
>Requires constant demand
>Customers feel manipulated

Factors affecting Price Strategy

>Differentiation and USP:
- Can use this to charge a higher price for their products
- This is because it is differentiated from rivals
- Consumers are willing to pay more for products that have additional features

>Price Elasticity of Demand - influences the price of a product:

- Depends on the availability of substitutes
- Type of product
- If it is an expensive product
- Strength of Brand
- If demand is inelastic there will be a scope for price increases
- If demand is elastic the product may benefit from prices being cut

>Level of Competition:
- If the price is set above that of rival products with no unique USPs then no
one would purchase it causing bad publicity
- If the price is set too low, compared to competitors, consumers will question
the quality of the product
- If there is low competition in a market, a business can set a high price
- If there is high competition in a market, a business can’t charge higher prices

>Strength of Brand:
- Businesses with strong brands will be able to charge higher prices for their
products
- Companies with strong brands are in a better position to use price skimming
when introducing new products
- They can also use predatory pricing in order to discourage new businesses
from entering the market
>Stage in the Product Life Cycle:
- As a product passes through the Product Life Cycle, prices for them has to be
adjusted
- As the Product is in the maturity stage, prices may slightly reduced in order to
be competitive
- If the product is in the decline stage, the price of the product has to be
decreased

>Costs and the need to make a profit:

- In the long term, price must cover all the costs of production along with
generating profit
- Could be the reason why businesses use cost-plus pricing
- The prices must be acceptable to consumers - depends on how price
sensitive the target market is

Changes in Social Trends can affect Pricing Strategies

>The internet led to the rise of online retailers and price comparison sites
>These are useful for consumers are it allows them to shop around and find the best
deals easily

Online Sales / Retailing

>Online Retailers need to be more price competitive due to it being easy for
consumers to compare prices
>If there are substitutes for a similar product, the retailer with the cheapest price will
achieve the sale

>Online retailers may choose to compete with other aspect of final pricing such as
offering free delivery and free returns
>These extra benefits may entice the consumer to buy high priced products

Dynamic Pricing
>Dynamic Pricing: The constant changing of prices reflecting on the changing
market conditions

>Aim of dynamic pricing is to maximize revenue and profits by filling capacity with
limites sales quantities

Auction Sites
>Sells goods to the consumer who offers the highest price
>Allows sellers to get the best possible price for goods and services
>Sellers have to pay fees to use the site
>Creates the sense of importance to act quickly
>Helps to encourage more sales
Personalized Pricing
>Involves the use of data relating to specific online shoppers such as browsing
history, search history, demographic area, etc.

Subscription Pricing
>Involves charging customers a regular monthly fee for the use of a service or
access to specific products
>Main advantage is that it keeps consumers tied down into long-term contracts

Price Comparison Sites

>Make it easier for customers to compare prices for a product between different
retailers or suppliers
>These sites are popular as they save the consumers while they search for the
lowest prices
>The consequences for retailers is that they need to have effective information
systems so that they are aware of the prices their competitors have set so that they
can be price competitive
1.3.3.5 Distribution
Importance of Distribution
>Distribution refers to the location where consumers can buy their products from
>If businesses are not able to get their products in the right place at the right time,
they’re not likely to be successful
>If products are not available in convenient locations, consumers may not have time
to search for them

Distribution Channels
>Channel of Distribution - the route a product takes from the manufacturer or
producer to the consumer.

>Businesses are able to choose from a number of different distribution channels

>Some products use:
+Four-Stage Channels of Distribution:
- Involves the use of wholesalers and retailers when transferring products from
producers to consumer

+Three-Stage Channels of Distribution:

- Where retailers take products from producers and sell them to consumers

+Two-Stage Channels of Distribution:

- Involves producers sell their products directly to consumers

Wholesaling/Wholesalers
>Wholesalers buy goods from manufacturers in bulk and sell them in small quantities
to retailers - Breaking Bulk
>Wholesalers help to make distribution easier as without them, manufacturers would
have to separate deliveries to lots of retailers and would have to send individual
invoices
>Wholesalers are able to store more goods than a retailer can
Retailers
>They buy goods and sell them straight to consumers
>They provide a number of services:
- Buys large quantities from manufacturers and wholesalers and sell small
quantities to consumers - Breaking Bulk
- Sell in locations that are convenient to consumers
- They may add value to products by providing other services
Two-Stage Distribution
>Producers market their products directly to consumers
>Some manufacturers may use direct selling methods:

>The Internet:
- Has made it easier for producers to sell their products to the consumers
- Is also known as E-Commerce
- Allows access to a worldwide market

>Direct Mailing:
- Where suppliers send promotions through the mail, direct to consumers which
entices them to buy their products

>Door-to-door Selling:
- Where sales people visit households directly, inviting them to buy their
products and services
- However is heavily complained about as it disrupts people while they do their
everyday activities

>Mail Order Catalogs:

- Where Catalogs are distributed to consumers who may buy the products
shown
- People would fill in the order form and post it back to the country

>Direct Response Adverts:

- Business place adverts in newspapers, magazines or on television inviting
people to buy their products

>Shopping Parties:
- Representatives of the business organize parties to invite consumers to the
social event
- This is in order to have a nice social event while having the opportunity to buy
products

>Telephone selling:
- Most people are not welcome to businesses that call them in order to sell
them goods and services
- This practice is still widespread

>Main advantage of direct selling:

- Intermediaries are not needed - producers make profit
- Producers can reach customers that don’t like going to the shops
>Disadvantages of direct selling:
- Can become increasingly difficult to sell directly to a large number of
customers

Three-Stage Distribution
>A producer will sell their products to the retailer who will then sell them to the
consumers
>Producers prefer this as it can help the product be sold to a larger number of
people
>They help manufacturers the distribution and volume of sales they are looking for
>Applies to most mass market products
>Introduces an intermediary into the distribution process

>Advantages:
- Makes it easier for producers to distribute their products
- Makes it more convenient for consumers to buy these products

>Disadvantages:
- Poor customer service could limit sales
- Could cause higher prices for the consumer as the intermediaries must make
a profit

Four-Stage Distribution
>A producer will sell bulk to the wholesalers
>Retailers then buy their stock from the wholesalers to put in their shops
>Customers then buy the products from the retailers

Agents/Brokers
>Normally used in three-stage & four-stage distribution
>They sell products to customers on behalf of the business
>They’re often paid commission for the products/services they sell

Multi-Channel Distribution
>Multi-Channel Distribution: when businesses sell through more than one method
-Gives flexibility for consumers and gives a wide market coverage for manufacturers

Choosing the Appropriate Distribution Channel

>The Nature of the product:
+Different types of products may require different distribution channels:
- Most services are usually directly sold to the consumer as unlike goods, they
can’t be held in stock

- Fast-moving consumers goods can’t be directly sold as it wouldn’t be sold

effectively in single units, wholesalers and retailers are used to break bulk
 - Businesses that produced high quality, exclusive good carefully choose what
outlets will sell their products as the image of those products are important

- Products that might need an explanation/demonstration may need to be sold

by specialists

>Cost:
- Businesses will normally choose the cheapest option
- They prefer direct products as intermediaries will take a share of the profit
- Supermarkets will buy directly from manufacturers so that they can bulk buy
and get lower prices
- Most businesses sell directly to their consumers through a website which
helps to keep costs low

>The Market:
- Producers selling to mass markets are more likely to use intermediaries
- Producers selling to niche markets are more likely to use direct selling
- Producers that sell overseas are most likely to use agents
- Businesses that sell goods to other businesses will use more direct channels

>Control:
- For some producers, it is important to have complete control over distribution

Changes in Distribution Methods

>Many Changes in Distribution Methods reflect on the technological and social
trends:
- Growth in online shopping
- Building of large malls
- Sellers using call centers
- Supermarkets extending their product range and opening hours
- Shopping becoming a leisure activity
- Growth in the use of television shopping channels

Online Distribution
>2 Main Types of Online Distribution:
>Businesses to Consumers [B2C]:
- The selling of goods and services directly to consumers
- Most web-based retailing involves ordering goods online and getting it
delivered
 - New ‘click & collect’ services are producing in which people order goods
online and then pick them up from the store
+Other examples of B2C e-commerce:
- Tickets for air, rail and coach travel
- Tickets for sports, cinemas and attractions
- Holidays, hotel rooms
- Access to online music and streaming services
- Wide range of goods on auction sites

>Business to Business [B2B]:

- Involves businesses to sell other businesses online
- Businesses can use specialist software to purchase resources
- This software helps to find the cheapest suppliers and carries out all the
paperwork

ADVANTAGES

DISADVANTAGES
>Businesses face increasing competition
>Lack of human contact
>Heavy dependence on delivery services where the business has a lack of control
on the quality of the service
>Technical problems
>Some people do not have access to the internet
>Some people do not have credit cards
>Security risks
>Consumers not being able to physically view the product
>Fake businesses may develop
Changing from Product to Service
>Due to the expanding of the tertiary sector, businesses have been focussing on
distributing more services
>This is because services are sold directly to consumers
>Businesses need to develop and adapt to changes because of new technology and
change in consumer behavior
1.3.4.1 Staffing Approaches
Staff as an asset:
>Employers see their staff as something valuable and have concern for their welfare
>The Skills and abilities of staff mean that they are able to add value to a product or
service
>Businesses would treat their staff as a valued asset and invest into them

>Needs that employers need to meet for their staff:

- Acceptable remuneration [payments]
- Reasonable holidays, sick leave, maternity/paternity leave and pensions
- A safe and comfortable working environment
- Staff Training
- Job security and opportunities to interact with colleagues
- Recognition and professional relationships
- Clear and effective communication and leadership
- Chances for promotion
- Opportunities to work in a team and solve problems

Staff as a cost:
>Employees get paid for their work meaning they are a cost to the business -
normally in the form of wages or a salary
>Wages - is paid to a worker based on the amount of work they have done
>Wages are normally used for lower-skilled or manual workers

>To protect people from getting underpaid, governments sets National Minimum
Wage Rates
>Minimum Wage - the legal minimum that a business must pay their workers per
hour
>NMW rates can lead to more motivated workers which can help increase
productivity - it can also lead to increased costs

>Salary - a fixed amount that is usually paid monthly

>The worker doesn’t usually get paid extra for working harder or working extra hours
>Usually paid for highly skilled workers

>Other ways that employees cost a business:

- Recruitment Costs
- Training Costs
- Staff Welfare
- Severance costs
>Due to staff being seen as a costs, business with try to reduce these costs through
different methods:
- Paying Minimum Wage
- Using a zero-hours contract
- Neglecting investment in training
- Using financial incentives to raise productivity
- Providing minimal employee right
- Having penalties for employees who are late, break rules or increase costs for
the business
- Using cheap and worse recruitment methods

Disadvantages to the ‘Staff is a cost’ approach

>This approach may lower employment costs but it could also create a false
economy
>This is because productivity may lower due to poor motivation
>Staff turnover and rates of absence may also increase
>Increase conflict between staff and management
>Can make staff feeling exploited, neglected, stressed and unhappy when working

Flexible Workforce
>Beneficial to businesses are it allows them to adapt and change easily
>Flexible Workforce: a workforce that can perform a variety of different tasks
>Businesses can increase the flexibility of their workers through multiple
methods:

>Multi-skilled / Multi-skilled workforce:

- Multi-Skilled: Using Training to ensure that staff can perform a range of
different roles within the businesses to bring greater workforce flexibility

Advantages
- Multi-skilled workforce can employ fewer workers as it doesn’t need to hire
and train a different workers for separate job aspects - can help to lower
recruitment costs
- Can allow workers to be moved between different jobs when necessary
- Helps to maintain output levels even if staff is absent
- Can help to increase motivation as employees have more variety in their job -
can lead to increased productivity

Disadvantages
- A firm may face additional training costs to make its workforce multi-skilled
and the cost of labor may increase as people may expect to be paid more
- Loss of Production as employees switch between jobs
>Part-Time and Temporary Staff:
- Part-Time Workers: people who work less than approximately 30 hours a
week
- Temporary Workers: those who are employed for a limited amount of time

Advantages
- Some people prefer to work part-time as it better suits their lifestyle
- The use of part-time staff provides flexibility for the business
- Can help bring in people with good experience and skill into the business but
who are unable to work full-time
- If a business doesn’t need the temporary staff, the business can not renew
the contract saving on costs

Disadvantages
- However some people who work part-time may wish to have a full-time job
- Lack of Job Security
- Are Paid Less

>Zero Hour Contracts:

- Zero Hour Contracts: A firm employs a worker with the employment contract
of a minimum of zero hours a week. So the employee is not guaranteed
working hours

Advantages
- The staff only work when they’re needed - employers won’t waste money
paying for labor when it isn’t needed
- Employees might prefer zero hour contracts as it means they can work
around their commitments.
+Zero Hour Contracts do have certain rights:
- They’re entitled to minimum wage
- Paid Holiday
- Rest breaks
- Protection against discrimation

Disadvantages
- However the staff are under no obligation to accept work so it may be difficult
for employers to find staff in busy times
- However they provide little financial security
>Flexible working:
- Workers complete a set number of daily/weekly/monthly hours at times that
suit them
- There are usually core hours in the middle of the day when that all of the
workers need to be present for
- Helps the workers achieve a work-life balance and can help to improve their
motivation
- However it can harder for a firm to set up meetings if the employers don’t
know exactly when all of their staff will be in for work

>Home Working:
- Employees can work from home all week or a few days per week
- This can help employees on travel costs and can work around outside
commitments
- People may find it difficult to work from home as they may be distracted
- Employers may gain from the freed up desks and freed up office space as it
can be made available for other employees
- However it can be difficult to monitor the performance of staff who are working
from home
- They could be full-time or part-time employed - could also be self-employed

>Outsourcing:
- Outsourcing: Involves getting other people or businesses to carry out tasks
that were originally carried out internally by the business
- Business can outsource some tasks to external businesses

Advantages:
- Advantage for employers as they don’t have to invest money into training staff
for tasks they may need to do occasionally
- Allows the business to focus on the main capabilities while letting others doing
the surrounding work
- Surges in Demand can be met quickly
- High Quality service can be provided to firms who outsource their work

Disadvantages:
- Firms who accept outsourcing need to make profit which could make their
services expensive
- Arrangements can be time consuming
- Services provided may be low quality
Advantages and Disadvantages of a Flexible Workforce
Advantages
>A flexible workforce allows a business to expand and contract quickly in response
to changes in demand for its products.
>In contrast a workforce made up of permanent employees is difficult to downsize
quickly due to the cost and due to the time it takes to fulfill the legal requirements
>Businesses may also be reluctant to take on more permanent staff in case demand
falls again and they are left with too many staff

>Some specialist jobs need to be done but it may be a waste to employ a permanent
worker full time.
>In some cases it is cheaper to employ temporary staff or subcontractors compared
to permanent staff - temporary staff can be immediately laid off if not needed without
much cost

>Employers are responsible for training permanent staff - by outsourcing work or

hiring temporary staff the business may be able to pass on training costs

>Employing workers who can job share or work flexible hours allows the business to
be more efficient

Disadvantages
>Workers may have less loyalty for the business if they are working there temporarily
>May be mainly motivated by financial gain

>Businesses who outsource their work may have poor quality which can damage
their reputation with consumers.
>Workers would be able to move on and not take responsibility for the poor work

>Communication is also a problem as workers are not always available to work with
them

>Can be costly to employ peripheral workers

>Temporary workers may have a poor work ethic / do not have the qualifications
>Too many peripheral workers employed alongside core workers can cause
demotivation amongst core workers

Dismissal and Redundancy

>Contract of employment: a legally binding agreement between the employer and
employee about the duties and rights of the employee and the employer - includes
hours and salary
>Dismissal: the act of ordering or allowing someone to leave their position of
employment

>Redundancy: the state of no longer being needed

>Reasons for Dismissal:

- If the employee has breached their contract of employment
- If their contract has ended - choice of only the employer
- If the employee is unable to do their job

+Can be done for unfair reasons as well:

- If an employment tribunal finds out that an employee has been dismissed for
unfair reasons, it has the power to restore the employee back to their original
position

>Reasons for Redundancy:

- Is also a legal method of dismissing employees
- Employees are entitled to redundancy and severance payments by law
- Workers are likely to be redundant during a recession or when the business is
struggling because of external factors

Employee/Employer Relations
>Employees and Employers need each other
>Employers need hard-working employees to contribute to the production of
products
>Employees need a secure income to support themselves and their families
>Having good Employer-Employee relationships benefits both parties
>It can increase employee motivation and productivity which can help increase
profits

>However this can be difficult because of areas of conflict:

>Rates of Pay:
- Employers often attempt to restrain wage growth to help control their costs
and remain competitive
- In contrast, employees want higher wages as they need to keep up with the
high rising costs for living and they also want to raise their living standards

>The Introduction of Technology:

- Employers want to use new technology as it helps to increase efficiency in the
business
- However employees may resist this as they are anxious about learning new
production techniques or they fear to lose their jobs
>Flexible working:
- Employers prefer to employ a flexible workforce as it helps to manage to
production more effectively and it helps to keep costs down
- However some methods to develop a flexible workforce can be unpopular with
employees

>Work Conditions:
- Employees normally want better conditions/facilities from their employers
- However employers may find it too expensive or inappropriate

Ways of resolving these areas of conflict

>Individual approach:
- An increasing number of employers have been developing relations with
employees at an individual level
- Meaning terms of employment and disagreements are negotiated by the
employee and a representative of the employer
- In smaller businesses, it is most likely going to be the owner of the business
- In bigger businesses, it is most likely going to be a manager or someone from
Human Resources

- This is also known as Individual Bargaining

- It can help to create flexible working environments - they’re often based in the
employee’s personal circumstances
- It can also be used to negotiate wages, holidays and other benefits directly
with the employer
- With this method, pay and other conditions vary between employees.
- People with better negotiating skills may get better benefits which may lead to
a conflict
- People argue that individual bargaining may favor the employer as in a large
firm, the negotiating skills of most employees won’t match that of a human
resources manager due to different training and experience
- Many employees would prefer to be represented by an equally skilled and
trained body

Collective Bargaining
>Collective Bargaining - is when a group of employees is represented by workforce
representatives - they negotiate with the employers on employee issues
>Alternative to Individual Bargaining
>An example being is Trade Unions
>A representative body would have strength and influence to negotiate for the
people who are members
>Without this, employers and managers would be able to set wages and conditions
without taking account the interests of employees
>For collective bargaining to take place:
- Employees must be free to join representative bodies
- Employers must recognize such bodies as the legal representatives of
workers and agree to negotiate with them
- These bodies have to be independent of employers and the state
- These bodies should negotiate honestly in their members’ interests
- Employers and employees should accept negotiated agreements without
having to use the law to enforce them

>Bargaining between employers and employees has led to conflict in the past.
>A failure to reach an agreement can result in industrial action - the worst that can
happen is that there would be a strike
>Industrial action can damage the employer, employees and customers

Advantages and Disadvantages of Collective Bargaining

1.3.4.2 - Recruitment, Selection and Training
>Recruitment : the process of finding and hiring someone for a job role that needs
filling

>A business may need new staff because:

- The business is expanding and more labor is needed
- People are leaving and they need to be replaced
- Positions have become vacant due to promotion
- People are required for a given period to cover temporary staff absence

+In addition to this, provide feedback for unsuccessful candidates

>Identify Vacancy:
- This is the first stage as businesses need to identity the amount and what
type of people they need to employ
- The overall business plan would help to provide this information
- The business would also need to choose between part-time, full-time,
temporary and permanent workers.

>Write job descriptions and job specifications:

- The right people are most likely to be selected if job descriptions and
specifications are made

>Advertise the job:

- Due to advertising costing money, businesses must place ads in media where
they are most likely to attract sufficient interest from the ‘right’ type of
applicants
- Whereas a vacancy in an important role of the business would need to attract
interest from wider areas therefore a national newspaper is more appropriate

>Process the Applications:

- Job applications can be made on standard forms shared with applicants who
respond to the ad
- Some applicants write letters which include their CV [Curriculum Vitae]
- CV [Curriculum Vitae] - A document that contains personal information,
qualifications, experience, names of referees, hobbies and reasons why the
person is suitable for the job

>Shortlist the most suitable applicants:

- Going through applications, the business would create a shortlist as the are
unable to interview every applicant and some of them are unsuitable
>Asses most suitable applicants:
- Shortlisted applicants may be invited for an interview - in which interviewers
are able to find out more about the applicants by asking them questions
- It also gives the opportunity for candidates to provide more detailed
information about themselves and ask questions about the job and business
- The people interviewing are normally experienced or have been trained in
interviewing
- Many job interviews are carried out by one or more person

>Appoint most suitable candidates:

- After the interviews, interviewers must decide who they want to appoint
- In most cases candidates are told the outcome of the interview via post at a
later date
- This allows the business to have more time to evaluate the performance of
the candidates - a business might also check references before making a final
decision

>Provide feedback for unsuccessful candidates:

- The recruitment process ends when a job offer has been made and accepted
- It is polite to provide feedback to unsuccessful candidates

Online Recruitment
>An increasing number of businesses are using online recruitment methods
>People are able to submit application forms online and may be asked to take an
online test
>Advantages:
- People are able to apply for jobs at any time
- Their application details can be stored by a business until they are needed
- Cheap Alternative

Job Description
>Job Description: states the title of the job and outlines the tasks, duties and
responsibilities associated with that job

>If a new job is created, a new job description has to be made

>If the business is replacing someone who is leaving, the job description may be the
same
>However the job description can be updated when someone leaves

>The main purpose of it is to show what is expected of the employee

Person Specification
>Person Specification - Provides details of the qualifications, experience, skills,
attitudes and any other characteristics that would be expected of a person appointed
to do a particular job

>Used to assess applicants when going through their applications

>Applications that don’t fit the person specification can be ignored

Internal and External Recruitment

>Internal Recruitment : is when a business recruits someone who already works for
the business

Advantages of Internal Recruitment:

>Often Cheaper:
- No adverts need to be placed and no adverts have to be paid for at
commercial rates

>Familiarity with Internal Recruits :

- The Internal recruits are most likely be familiar with the procedures and
working environment of the business
- Can lead to more productivity in the first year of employment

>The employer knows the Recruits:

- The qualities, abilities and potential of the candidates are mostly known by the
employer
- Often difficult to predict how an external recruit will perform in a particular
work environment

>Motivates Workers:
- Regular internal recruitment can help motivate employees
- They may see the career progression with their employer

Disadvantages
>Leaves vacancy in another department
>Can cause resentment among colleagues who aren’t selected
>External Recruitment: is when a business hires someone from outside of the
business

Advantages
>Brings in Fresh ideas and Experience:
- The employer may want to hire someone with new and different ideas
- Bringing experiences from different businesses can help keep the business
competitive

>Larger number of applicants:

- Might attract a larger number of applicants than internal recruitment
- This would allow the employer to have the maximum number of candidates to
choose from

Disadvantages
>Long and expensive process
>Candidates have a longer induction process
>Will only have seen a candidate at recruitment- might not be representative of of
they’re like at work

Ways that employers can get the maximum number of applicants

>Word of Mouth:
- Word of Mouth: when a person hears about something from someone else
- Often means when a person hears about a job opportunity by someone else -
usually someone who works in the place of employment

>Direct Application:
- People who want jobs send their details to employers who they would like to
work for just incase a vacancy arises

>Advertising:
- The employer may place advertisements in local or national newspapers or
specialist magazines and journals
- Employers may use the internet - company website
- Billboard advertisements on the employer’s premises
- However they are costly but they reach a wide number of potential applicants

>Private employment agencies:

- Businesses may use this serve to find candidates
- Best used for finding temporary workers
- However they also specialize in finding permanent employees
- Executive agencies specialize in recruiting company executives and finding
jobs for executives who want to find a new job
- Can take out most work for the employer but it is costly
>Headhunting:
- Headhunting: when an agency draws up a list of people they think would be
suitable for a job
- Having cleared the list with the business, the agency would approach those
on the list and discuss the possibility of them taking the job
- A final selection takes place and one person is selected
- No people have to formally apply or need to be interviewed
- Normally works best when there is a limited number of people available to
take on the post and where the agency knows about most of those people

>Job Centers:
- Business can use them to advertise job vacancies
- Job Centers are operated by the government
- Often used by people who are unemployed and vacancies tend to pay less
than the average wage
- For businesses, this is a cheap way to advertise job vacancies
- However job centers is not best to use for all job vacancies

>Government Funded Training Schemes:

- Some businesses take trainees from government-funded training schemes

Costs of Recruitment, Selection and Training

>These costs are significant as they underline the importance of employing an
effective recruitment process
>This is so it can attract and retain high quality staff
>Recruitment costs tend to rise directly in relation to the level of the vacancy post.

Significant Recruitment Costs to a business:

>Cost of advertising the vacant position:
- Adverts can be placed in specialist magazines or newspapers in order to
attract the right people - however it can be expensive
- Professional Social Media sites can also be used - can help the business to
reach a larger audience

>Businesses may use specialist recruitment agencies:

- This is done in order to find and recruit professional staff
- Often used if the job is unique or for a senior position
- Recruitment agencies advertise and short list candidates and may interview
they final choices
>Shortlisting and accessing candidates might be done by existing staff:
- This costs money as the employees won’t be able to do their regular job
- The more the senior staff involved, the more expensive it is as their labor
hours are more expensive

>Other Expenses:
- Sending existing staff to recruitment fairs to talk to potential candidates
- Paying travel expense for candidates coming for an interview

Recruitment and Selection Costs

>The Human Resources department will incur costs when identifying the number
and type of staff required

>Some administrative costs will be incurred when checking and updating job
descriptions and person specifications
>Costs would be higher if the nature of the jobs have changed or a new job has
been created

>Jobs need to be advertised, if internal recruitment is used then costs would be

normally used compared to external recruitment

>Time spent handling and sorting through job applications. Jobs ads are used to
attract people and this cost can be reduced by designing a job advertisement that
attracts a small group of candidates and discourages those who are not suitable

>Interviewing process can also be expensive as it would involve highly paid senior
staff - this is because while doing the interviewing process, they’re not doing their
normal job
>Some businesses also create tests and have multiple rounds of interviews

>After this, the performance of the interviewees needs to be evaluated - the more
people involved, the higher the costs.
>Some official procedures need to take place which may add to the cost

Training Costs
>Can get so high that businesses can be reluctant to make heavy investments in
training.
>Some training costs are necessary and have to be met by the business
>Examples of Training Costs:
- Training costs and other resources
- Loss of Output
- Employees Leaving
Training
>Training: the process of increasing the knowledge and skills of workers so that
they can perform better when they do their job

>Training Objectives:
- Making workers more productive vt teaching them more effective ways of
working
- Giving workers the skills they need to use new equipment and technology
- Educating workers about new methods in working
- Making workers more flexible
- Preparing workers to move into a different job roles within a level of the
business
- Improving standards or work / improving quality
- Implementing health and safety at work policies
- Increasing job satisfaction and motivation
- Assisting in recruiting and retaining high quality staff

Induction Training
>Induction Training: introducing a new employee to the new job and new
workplace to allow them to settle quickly

>Includes:
- Introduction of the business
- Familiarization of the key policies and procedures
- Includes health and safety of the business
- Employees getting information about their job and training on how to do it

>Reasons to for Induction Training

- Prevents the employee from not feeling fully supported and causing factors
which makes them unable to work effectively
- In turn reduces the chances of lower productivity, poor quality of work or the
possibility of the employee leaving the business
- Reduced chances of the new employee from making mistakes which in turn
help to reduce business costs

On-The-Job Training
>On-The-Job Training: when the new employees is trained from within the business
by the employer or an experienced employee

Examples of On-the-job training:

>Learning from other workers:
- The new employee could watch other employees do a task and repeat it with
their help
- Can work together with the other employee
>Mentoring:
- Mentoring: Is when a more experienced employee helps and provides advice
to the new employee

>Job Rotation:
- Job Rotation: When the new employee spends time doing one job and then
another period of time doing another
- Allows the new employee to receive a broad experience needed to do more
specialist jobs

>Traditional Apprenticeships:
- Involves a mix of different training methods
- When the business decides that the apprentice has gotten proper
qualifications, they would be hired as a full time employee

>Graduate Training:
- Typically offered to people with university degrees after they have graduated

Advantages of On-the-Job Training

>Easy to Organize
>has lower costs
>Training is Job Specific
>Output is still being produced

Disadvantages of On-the-job Training

>Trainers are not fully productive during the training process
>Bad practices are passed on
>No new ideas are brought to the business
>Can cause stress if the new employee is forced to work with others
>Trainers can get frustrated if they’re not paid

Off-the-Job Training
>Off-the-Job Training: training that takes places away from the immediate work
place

>Is normally used when the employee needs to know general information about the
business or its practices.
>Also useful for employees when they are learning new skills that would be difficult
for them to learn in a real work environment
Advantages
>Trainers are specialists
>New ideas are brought to the business
>No job distractions
>Output is not affected if mistakes are made
>Workers’ learning cannot be distracted by work
>Training could take place outside work hours if necessary
>Customers and other are not put at risk

Disadvantages
>Can be expensive
>No benefit to the business while training
>Training might no be specific to their day-to-day job
>Not output because employees don’t contribute to work
>It may take time to organize
>Trainees may feel that some of the training is not relevant to them

Benefits of Training
>Managers:
- They’ll benefit as workers would be motivated and more satisfied
- This makes them more cooperative and easier to work with
- Workers are also more flexible which can help managers in their organization
- Providing training can help to improve the image of the business and makes it
easier to attract new employees and retain high quality employees

>Owners:
- Business would also benefit from training if productivity is higher
- Costs would be lower and the business might gain a competitive advantage in
their respective markets
- Can help to improve financial performance - higher profits and higher rewards
for the owners

>Employees:
- If the workers have been trained they would be able to do their job effectively
- Can help to provide more job satisfaction
- Employees will feel more valued if their employee is paying for their training

>Customers:
- If training improves employee quality and skills, consumers will benefit form
the better quality products and improvements in customer service
1.3.4.3 Organization Design
>As organizations begin to grow, thought has to be given to the way in which the
different people and jobs are to be structured
>Helps to ensure the work is coordinated effectively and the organization is following
in the correct direction

What an organization chart/structure shows:

Hierarchy:
>An organization chart sets out who has authority and responsibility to make
decisions
>It shows the position of people in the hierarchy, chain of command and path of
communication
>The relationships between the different positions in the business
>The Roles of employees and their job titles

>Structure is important as it helped them to divide the work and coordinate activities
in order to achieve business objectives

>Span of Control: measures the number of subordinates reporting directly to the

manager

>Delegation: passing on decision making power down the organizational structure

to a lower level

>Hierarchy: refers to the management with an organization

The Chain of Command: the path of authority along with the instructions passed on

Centralized and Decentralized Structure

>Centralized Structure: when the majority of major decisions in the organization
are taken at the very top of the organization by the senior management
Advantages
>Senior management have lots of experience when it comes to making decisions
>Senior management has an overview of the business to the decisions made are
consistent
>Senior management are not biased towards a specific department so they can
make the best decisions for the business as a whole
>Senior management can make big decisions quickly as they don’t have to consult
others
>Senior Management have complete control over resources
>Coordination and Control is easy
>Can prevent individual departments within the business from acting independently

Disadvantages
>Not many people have enough expertise to make decisions about all aspects of the
business
>Excluding employees from decision making may demotivate them
>The organization would react slowly to the change which would allow competitors to
get ahead
>This is because senior management doesn’t spend enough time at the ‘ground
level’ so they’re slow to notice consumer changes
>Less creativity and fewer ideas
>Procedures may be needed to make decision making easier

Decentralized Structure
>Decentralized Structure: where decision making is passed lower down the
organization structure through the process of delegation

Advantages
>Involvement in the decision making motivates employees
>Employees can use expert knowledge of their sector
>Day-to-day decision can be make quickly without having to ask senior manager
>Workers have autonomy
>Takes pressure off of senior management
>Provides promotional opportunities

Disadvantages
>Junior employees may not have enough experience to make decisions
>Inconsistencies may develop
>Junior employees may not be able to see the overall situation and needs of the
organization
>Senior managers lose control of resources
>High Costs
>Some employees may not want extra responsibility
Tall Structures
>Has many layers of management
>Businesses with this structure often have a long chain of command
>Managers have a narrow span of control
>They also have a small number of subordinates

Advantages
>Areas of business are closely managed
>Managers have a tight control over employees
>Excellent progression opportunities
>Communication within the immediate team is likely to be excellent
>Many layers of the hierarchy means there are plenty of opportunities for promotion

Disadvantages
>Slow communication because of the long chain in command
>Employees may be demotivated due to a lack of autonomy
>Organizational changes can be slow to implement
>Poor communications throughout the organization because of the multiple layers in
the hierarchy

Flat Structures
>Flat Structures: an organizational structure with only a few layers of management
>Managers have a wide span of control with more subordinates
>Usually a short chain of command
>Commonly used by smaller businesses

Advantages
>Less Managerial Layers
>Better communication
>More autonomy and responsibility for employees
>Employees may feel more motivated - can lead to more production
>Can allow senior managers to get a better understanding of day-to-day challenges
faced by employees when it comes to business operations
>Can allow the business to be more competitive

Disadvantages
>Lack of progression opportunities
>Higher workloads for managers
>Managers have more subordinates
>If the span of control is too wide, it can demotivate the managers

How to improve Organizational Structure - Delayering

>Delayering: the removal of managerial layers in the hierarchy
>Helps to create a flatter structure which creates a wider span of control
>Delayering can help to lower costs
- Reducing management jobs will help to save money in salaries

>Helps to give junior employees more responsibility and can help to improve
efficiency and communication

>It can cause a rise in costs in the short run as the business would need to retrain
staff for their new rules
>An increase in costs can also be caused by having to give out redundancy pay as
many managerial employees would be made redundant

>if there is too much delayering, managers can end up becoming stressed and
overworked with huge spans of control

Matrix Structure
>Matrix Structure: organizational structure combines the traditional
departments seen in functional structures with project teams

>Can be represented as a grid

>Ensures that the staff are pursuing clearly defined

objectives

Advantages
>Ideal for businesses that work on a project-by-project basis
>Flexible structures meaning that staff from different departments can partake in
different job roles
>Can help to exploit the specific skills of staff
>Working together allows expertise from the different departments to be immediately
available - can lead to a prevention in delays
>Can help to increase motivation and efficiency as relationships are built up

Disadvantages
>Possible communication problems between departments
>Conflict of interest across the project
>Staff are stretched across different projects leading to them not spending time in
their own departments
Impact of different organizational structures on business efficiency and
motivation

>Efficiency: the measurable ability to avoid wasting resources, energy, efforts,

money and time in doing something or in producing a desired result
>Can also be the process of motivating employees to take action in order to achieve
their goal

Efficiency Motivation

Matrix • Matrix organizations are only • Staff are involved in a series of

suitable when the business projects which can be more
works on a project by project interesting than just one job, which
basis. means it can be more motivating
• For this type of work this
type of organization is very
efficient
Tall • Communication is slow in a • Staff can be motivated because
tall hierarchy as there are there are lots of opportunities for
many layers for the promotion, with lots of layers in the
information to pass through hierarchy
• This can lead to delayed
decision making

Flat • Flat structures can be very • Staff are motivated in a flat

efficient because those structure as they are given more
employees that are most responsibility
affected by a rota can be • Also staff are motivated because
involved in the writing of the they have had a hand in managing
rota of who works when and running the business
Motivation - 1.3.4.4
Importance of Motivation
>A motivated workforce is likely to be more productive - leading to the business to
have a higher productivity
>This is because they are happy with their job and are willing to work hard
>By being motivated, employees are more likely to be reliable and are more aligned
with the business’ objectives

>Motivated employees are also going to be more loyal to the business so there
would be less absences and labor turnover which helps to reduce costs
>A business that motivates employees would be a more attractive prospect for future
employees

Taylor’s Theory of Scientific Management

>Believed that workers were motivated by money
>Believed that workers would do the minimum amount of work if they were left by
themselves
>His theory suggests that people only work in order to maximize their income
>This means to make people work harder, money should be used as a threat and as
an incentive

>His theory argued that:

- Workers do not naturally enjoy work so they need close supervision and tight
management control
- Therefore leads to managers needed to rely on division of labor [breaking
down production into a small series of tasks]
- Workers should be then given appropriate training and tools so that they were
able to work as efficiently as possible
- Workers are then paid according to the number of items they produce in a set
period of time [PIECE-RATE PAY]
- In turn workers are encouraged to work hard and maximize their productivity

>Believed by using Piece-Rate Pay, the more productive workers received a better
pay rate

Advantages Disadvantages

1 Enhanced production Requires huge capital

2 Ability to control Management takes control

3 Decreases inaccuracy Planning reduces productivity

 4 Decreased autocracy Demotivating approach

5 Cost of production reduced Overly bureaucratic

6 Pay system Mechanistic

7 Quick decision making Not suitable for teams

8 A benefit to customers Work division

9 Efficiency increased Avoids bargaining

Best use of resources and

10 Loss
development

11 Beneficial to the nation Unemployment

12 Less production time Adverse effects

13 Worker instructions Stress

14 Good working conditions Wrong assumption

Owners and investors

15 Follows narrow application
benefitted

Avoids labor and

16 Time-consuming
management disputes

Elton Mayo’s Theory of Human Relations

>Carried out workplace experiments in which he discovered that there were more
factors affecting workplace productivity other than money
>His findings centered on the importance of interpersonal relationships as a factor
which affected productivity

>Factors identified:
- Workers gain satisfaction from a certain level of freedom and control over
their work environment
- Workers who feel they belong to a team tend to work more effectively
- Group norms tend to have a strong influence over worker’s behavior and
productivity
- Communication between workers and between managers improves morale
- Managers taking an active personal interest in their employees has a
beneficial impact on workers’ performance

Advantages
>Gives the worker freedom
>Increases teamwork
>Increases the level of communication
Disadvantages
>Gives the worker unwanted responsibilities - can cause stress
>Less control over the employees

Herzberg’s 2 Factor Theory

>Believed that:
- Motivated workers give their best performance all the time - willing to embrace
change and great at problem solving
- Workers who do things

>Believed that employees have motivating factors:

- Interesting work
- Recognition
- Personal achievement
- Personal Responsibility
- Scope to develop
- A sense of growth as a person

>Also believed that employees had hygiene factors - if they were met then
employees would be motivated, but if not met the employees would be dissatisfied
[EMPLOYEE NEEDS]:
- Good working conditions
- Good interpersonal relationships
- Good Pay
- Supervision
- Company policy and administration

>These hygiene factors don’t motivate employees

>Insteady they have to be satisfied in order to prevent dissatisfaction in the staff
>This is because it is believed it is impossible to motivate a dissatisfied staff

Advantages:
>Emphasis on Motivation from within
>Companies can focus on problems affecting employees
>Money is treated as a secondary

Disadvantages
>Job Satisfaction and Job Productivity are not directly related
>Ignores External factors
Maslow’s Hierarchy of Needs
>Believed that people have 5 sets of needs

>These needs can arranged in a hierarchy -

the basic needs of life at the bottom and the
more important needs at the top

>Meeting each level of needs is a priority

until they are met, when a person will focus
on the next level of unsatisfied needs

>Businesses use the hierarchy to understand how to motivate employees

>This can be done using multiple techniques
>The hope is to move people up the hierarchy as it tends to generate the highest
work-place performance

The Need What are they Business How they can be

Implication achieved

Self-Actualisation >Intellectual needs >Scope to develop >Promotion

new skills and Opportunities
>Fulfilling Potential meet new
challenges >Challenging
>Achieving Work
Targets >To develop one’s
skills >Job Enrichment

>Opportunities to
develop

Esteem >Self-Respect >Status >Job title

>Recognition of
>Level of Status Achievement >Authority
>Power
>Trust >Responsibility of
others

>Trust

>Recognition of
achievements
 Social >Feeling wanted >Team Working >Working in a
team
>Sense of >Communication
Belonging >Mentoring and
>Social facilities Coaching
>Part of the team

Safety >Safe working >A clear job role >Health and safety
environment and description regulations being
>Clear lines of met
>Job Security accountability
>Insurance

Physical >Basic needs >Pay levels >Acceptable

[food and shelter] >Working income
Conditions
>Acceptable
working conditions

>Self - Actualization: a sense of self fulfillment reached by feeling enriched and

developed by what one has learned and achieved

Financial Motivation Methods

>Piecework: paying each member of staff a set amount of money per unit
produced
>Usually used when the quantity produced can be easily measured

Advantages
>Encourages an increase in speed/output
>The quicker and more efficient workers earn the most money
>Can motivate workers to produce high quality products

Disadvantages
>Likely to lead a decrease in quality as staff are rushing to make the most products
>Managers have to make quality control measures

>Commissions: paying staff a certain percentage of the revenue they generate

from sales
>Usually given as a bonus on top of wages
>This method is usually used in sales roles

Advantages
>Increase motivation and performance of staff
Disadvantages
>May lead to mis-selling as staff want to sell more expensive products so they can
maximize their commissions - can lead to consumer dissatisfaction
>Can lead to overselling
>Can lead to consumers feeling overwhelmed
>Businesses do not know their labor costs on a monthly basis

>Bonuses: paying an additional sum as an additional reward on top of the

salary when a specific target is met

>The target could be in sales, profit, productivity or customer services

>Targets can be set for individual employees, teams, departments or the entire
business
>The bonus could be a fixed sum of money or a percentage of the employee’s
wages
>Can be negotiated with managers

Advantages
>Can help motivate employees as they are only paid if the target is set
>Can make the staff feel valued

Disadvantages
>Large sums can negatively warp staff behavior
>Their mentality can shift to reaching the target through any means possible

>Profit-Sharing: When profit targets are set and when they are met, a portion
of it is shared amongst the employees

>The amount an employee receives is based off of their salary

>If the business makes a small amount of profit, the staff may not receive a share
>Usually includes all employees of the business

Advantages
>Can motivate all employees
>Encourages employees to work towards an overall goal
>Can align staff goals and business goals

Disadvantages
>Can cause conflict among staff members - This is because people who may not
work hard would receive the same amount of bonus as hard-working staff
>Mindset of the staff can change as they may expect to receive a share of the profits
annually - can create a hostile work environment
>A business may not make enough profits on an annual basis to satisfy shareholders
and employees
>Performance-Related Pay: When employees are paid based on their
individual performance

>The amount is determined by the individual meeting targets - this is done by using
an annual appraisal system
>This payment system was specifically designed to motivate employees

Advantages
>Can motivate employees to meet their set targets
>A good PRP system will reward the best performers
>It is an effective way of dealing with poor performance
>Rewarding high performance can assist in retaining staff
>It provides a direct incentive for employees to achieve defined work targets
>The contribution an employee makes is recognised with a tangible reward
>A healthy performance based culture can be developed with its introduction

Disadvantages
>Can demoralize other employees seeing others getting increased pay
>Can feel the PRP process can be unfair and biased against them
>The bonus can be too low
>Targets may be too difficult to achieve

Non-Financial methods of motivation

>Reasons why businesses use non-financial methods for motivation:
- The chance to earn more money may not be an effective motivator
- Financial incentives are difficult to operate
- Individual reward schemes may no longer be effective as production has
become organized into group tasks
- Other factors may be more important in motivating employees

>Delegation: when decision-making power is passed over to employees

>Managers need to trust the employees that they are delegating responsibility to
>The employees also need to trust the managers who are giving them the extra
responsibilities

Advantages
>Allows staff to meet Maslow’s esteem and self-actualization needs
>Motivator for Herzerg’s theory
>Can help to save time in tasks
>Can help to motivate managers
Disadvantages
>Employees might not want the extra responsibility
>Potential Extra Costs
>Decrease in the quality of work

>Empowerment: passing power onto staff and a higher role in decision making

>Quality circles let groups of workers from various departments meet to suggest
improvements to productivity and quality

Advantages
>Makes employees feel trusted
>Allows staff to meet Maslow’s esteem and self-actualization needs
>Motivator for Herzerg’s theory
>Gives employees self-confidence
>Develops a motivated work environment
>Increase employee motivation
>Can help business become more efficient
>Less frustration from the employees towards the senior staff

Disadvantages
>Seen as a method of delayering
>Can make managers redundant
>Employees doing more work but for the same pay
>Businesses may be unwilling to implement it

>Consultation: asking employees their views as a part of the decision making

process [the managers retain the power to make the decision]

Advantages
>Can help to meet the esteem needs on Employees [Maslow]
>Changes to the business is less likely to be resisted
>Employees can bring ideas to benefit the business
>Can make an employee feel valued and needed

Disadvantages
>Can be seen as a meaningless process by managers as ideas given may contradict
them
>Can be seen as time consuming
>Employee recommendations can be ignored by senior managers
>Team-Working: Allowing employees to work together in groups to organize
their work

>Can lead to job enrichment and empowerment

Advantages
>Can lead to tasks being completed faster
>Can lead to teams covering a variety of different tasks
>Can help to meet Maslow’s social needs
>Recognises Mayo’s belief of human relations to increase motivation
>Responsibility is shared
>Allows for flexible working

Disadvantages
>Can cause conflict amongst employees
>The performance of productive employees may be dragged down by unproductive
team members
>Can cause resentment as unproductive employees may get the same amount of
credit despite not working
>Failure of senior management to work together
>Conflicting ideas and opinions can cause tension
>Unnecessary meetings can cause time waste

>Flexible Working: allows employees to adjust where and when they work in
order to suit their lifestyles

Advantages
>Can be a key factor in order to meet Herzberg’s hygiene needs
>Can help to motivate workers
>A flexible workforce allows a business to expand and contract quickly in response
to changes in demand for its products.
>In contrast a workforce made up of permanent employees is difficult to downsize
quickly due to the cost and due to the time it takes to fulfill the legal requirements
>Businesses may also be reluctant to take on more permanent staff in case demand
falls again and they are left with too many staff

>Some specialist jobs need to be done but it may be a waste to employ a permanent
worker full time.
>In some cases it is cheaper to employ temporary staff or subcontractors compared
to permanent staff - temporary staff can be immediately laid off if not needed without
much cost

>Employers are responsible for training permanent staff - by outsourcing work or

hiring temporary staff the business may be able to pass on training costs
>Employing workers who can job share or work flexible hours allows the business to
be more efficient

Disadvantages
>Workers may have less loyalty for the business if they are working there temporarily
>May be mainly motivated by financial gain

>Businesses who outsource their work may have poor quality which can damage
their reputation with consumers.
>Workers would be able to move on and not take responsibility for the poor work

>Communication is also a problem as workers are not always available to work with
them

>Can be costly to employ peripheral workers

>Temporary workers may have a poor work ethic / do not have the qualifications
>Too many peripheral workers employed alongside core workers can cause
demotivation amongst core workers

>Job Enrichment: giving staff additional responsibility and more challenging

work by widening the scope of their job

>The training needed for job enrichment is given by the business

>Comes from Herzberg’s 2 Factor Theory
>Employees are given varied tasks

Advantages
>Can help to get further promotions
>Makes the employee feel rewarded
>Meets Herzberg’s motivator factors
>Meets Maslow's top 2 level of needs

Disadvantages
>Some staff may seem the extra responsibility as an unwanted burden
>Not all employees may react the same way to job enrichment
>Can be argued that it is only used to reduce the labor force

>Job Rotation: when employees are moved from one job to another

>Often used when the job becomes too repetitive for the employees
Advantages:
>Helps to prevent boredom amongst the employees
>Workers can become multi-skilled
>Helps the employees gain experience in a variety of skills
>Businesses would benefit from the widely trained workforce

Disadvantages
>Prevents potential productivity as employees waste time adjusting to the new job
>Fall of output
>Worker motivation is not guaranteed
>Can lead to employee dissatisfaction to increase

>Job Enlargement: gives the employee a greater range of work ro do at the

same level

Advantages
>Can make employees feel a sense of esteem
>Variety of jobs can help to prevent boredom
>Encourages satisfaction for employees

Disadvantages
>Most staff recognise that they are being asked to do more work for no extra reward
>Increased costs
>Lower efficiency
>Lowe quality of output
 Leadership - 1.3.4.5
>Leader: a person who identifies key issues to be addressed, set objectives
and decide what to do in order to deal with the issues and who should deal
with them

>Manager: a person fulfilling a major role to oversee putting plans into actions,
making sure all details are correct and resources are allocated correctly

Leadership Management
Innovators – encourage others to Directing and monitoring others
accept change

Natural abilities and instincts Problem solver

Respected and trusted by followers Official position of responsibility

Inspires others Plans

Motivates Organizes

Original ideas Co-ordinates

Develops others Maintains the business

Wins followers Has employees

Creates change Manages change

Circumstance What Managers would do What leaders would do

Key Staff Leaving Recruit new staff with care Rethink the design and
responsibilities of the job

Important customer threatens Get staff to ease the situation Take personal responsibility for
to leave and go somewhere as best as they can the customer’s disappointment
else and sort the problem out

Downturns leading to Hire a HR specialist company Call a staff meeting to explain

redundancies to handle the whole process the situation and how to deal
with it
Promising new product idea Take control of the Delegate the project to a rising
has been proposed development and assemble a young manager, providing
project team resources when needed

Types of Leadership Styles

Autocratic
>Autocratic: when the leader makes all of the decisions on their own

>Identifies the objectives of the business or the department

>Issue instructions and expect them to be obeyed
>They know exactly what they want done and they don’t pay attention to what
employees say
>Communication would be one-way [top to down] with the manager not expecting
any communication or feedback from the employees
>Closely supervises all employees:
- This is because managers do not trust the employees

Advantages
>Decisions can be made very quickly
>Organizational goals are reached more quickly
>Clear chain of command
>Increase in productivity
>Useful to use when dealing with a large quantity of unskilled workers
>Useful to use in crisis management

Disadvantages
>Creativity can be reduced
>Not everyone is aligned with the same vision
>Reduction in autonomy
>Morale can be negatively impacted
>Can demotivate able and intelligent employees

Democratic
>Democratic: when trust is put into the employees and they are encouraged to
make decisions

>Expect their staff to be involved in the decision making

>Authority would be delegated to them believing that it is the best way to get the
work done
>Democratic managers will agree clear objectives with staff
>Will listen to advice
>Confidence is shown in the workforce m
>Takes a weight of the decision-making from the leader
>2 Way Communication

Advantages
>Improved employee engagement
>Increased job satisfaction
>Increased employee morale
>Increased productivity
>Employees feel more valued
>Strengthened workplace relationships

Disadvantages
>Often drawn-out decisions making process
>Choosing between multiple options can leave some employees disappointed
>Difficulty pivoting quickly
>High-stake decisions can be rushed

Paternalistic
Paternalistic: similar to autocratic style but more attention is given to the
social needs and views of the employees

>Leaders with this style see themselves as a father figure

>They care about the best interests of the staff and listen to their views
>Sill makes all of the decisions but with the belief that it’s best for the staff
>Consult the employees over issues and listen to their feedback
>Believes that getting involved and caring about human relations is a positive
motivator for employees

Advantages
>Employee Loyalty
>Decisions are made with Employee Interests in mind
>Employees feel cared for and valued

Disadvantages
>Employees can become too reliant on the employer
>Employees have to persuaded by the employers to agree with decisions
>Can be time consuming
>Method of leadership can upset employees as they feel like that they are being
treated as children
Laissez-Faire
>Laissez-Faire: when the leader does not intervene much with employees
doing their jobs

>Leave the staff alone to get on with their job

>Do not provide a clear sense of direction
>Mostly appropriate for a small but highly motivated staff team
>Employees are allowed to make decisions and solve problems without much
guidance from management
>Management will only get involved if they’re needed

Advantages
>Creative environment
>Employees feel motivated
>Employees feel important
>Relaxed company structure

Disadvantages
>Management can seem uninvolved
>Lack of support
>Makes employees feel less valued
>Difficult for newcomers
>Can cause conflict amongst employees

Democratic Paternalistic Autocratic

Style Derived >Belief in >Belief in Mayo’s >Belief in Taylor’s

From Maslow’s work on human Scientific method
Hierarchy of needs relations view of staff

>Belief in >Maslow’s lower

Herzberg's and middle order
motivator factors needs

Approach to Staff Delegation of Consultation with Orders must be

authority staff obeyed

Approach to Staff Salary + employee Salary + Fringe Payment by

Remuneration shareholdings Benefits results

Approach to HR Recruitment and Emphasis on Recruitment and

management Training based on training and training based on
teamwork and appraisal for skills; appraisal
attitudes personal linked to pay
development
Difficulty developing from an entrepreneur to a leader
>Adapting to the mindset:
- Entrepreneurs normally have the desire to have a greater control over their
lives - want more autonomy and desire to do things their way
- Leaders needs to distinguish some control and delegate that onto
subordinates
- They have to believe that specialists will do better than them in certain areas

>Stress:
- The livelihood of the entrepreneur and their families is dependent on the
success of the business
- With more growth, there is more success but more at risk leading to more
stress
- There are more staff and more responsibilities with an increased scope of
conflict as more people are involved
- Some stakeholders have different needs which may cause conflict

>Sharing ownership and control:

- Some entrepreneurs may struggle with the loss of control as the business
expands
- Some entrepreneurs may find it difficult to share control and resent others for
influencing the shape and direction of the business
- They may feel that their leadership is being undermined which can cause
conflict

>Trust:
- They may develop a lack of trust in people
- As the business grows, there in the need to delegate and employ specialists
- Leaders may feel insecure as specialists may know more than them

>Lack of leadership qualities:

- There may be a concern that entrepreneurs lack the necessary skills and
qualities to be a leader
- Can include management, communication, problem solving, decision making
and organizational skills
- As the business grows, the decisions become bigger and more complex

How to solve these problems

>Delegate and Trust
>Earn Respect
>Maturity and Experience
>Education
>Reduction of Stress