business topic 2 3

Topic 2. 3 Making Operational Decisions

The purpose of business operations

The term business operations refers to the part of the business that provides customers with the goods or services that they ordered.

Operations is responsible for taking resources – such as raw materials, finance and the business’ workforce – and using them to create finished goods or services. Operations then ensures that these goods or services arrive on time and to the right quality standards.

There are slight differences in how operations are defined in relation to goods and services:

Goods – When products are produced in a factory, everything that happens within the factory, from making goods to delivering goods, is classed as operations.

Services – When a business provides a service, the processes it uses are known as operations. For example, a dairy company that delivers milk to customers’ homes could have a website or app that customers use to order their milk. The company could also have some form of quality control to ensure customers are happy with the service they receive.

Job production

Job production is when individual products are made one at a time to meet specific customer preferences. An example would be tailor-made suits, which are made specifically to each customer’s measurements and tastes.

Batch production

Batch production involves making a set quantity of identical products. This quantity is known as a ‘batch’. The batch size could be ten, 10,000 or a million identical products. An example would be a bakery making a batch of 100 white bread rolls and then making a batch of 50 wholemeal bread rolls.

Flow production

Flow production involves continuously making identical products. This allows the production process to be heavily automated.

The impact of technology on production

Technology has a big impact on businesses, in terms of both updating existing products and finding new ways of manufacturing products. Technology benefits businesses as it allows them to produce higher quantities, make products more consistent and be more cost-effective.

Businesses try to use technology in a balanced way so that its disadvantages don’t outweigh its many advantages. They need to balance:

Costs - Technology costs money to purchase, but reduces the cost of producing products. For example, using machinery to complete dangerous tasks means a business no longer has to pay the higher wage costs associated with risky jobs. This both reduces costs and improves employee health.

Productivity - Using machinery to mechanise or automate parts of the production process leads to an increase in productivity. This means a business can either reduce its prices to remain competitive or increase its profit margins.

Quality - Businesses need to be consistent in the quality of the products they produce. Mechanising or automating parts of production can help with this.

Flexibility - Businesses often need to balance technology with human flexibility. Automation is good for mass production but it doesn’t work so well for products that will be personalised to meet individual customers’ preferences. For example, in the luxury car industry, customers have a wide variety of optional extras to choose from, which may need to be hand-finished.

MANAGING STOCK Businesses need to manage their stock in the most effective and efficient way possible.

Stock can consist of:

raw materials waiting to be used in production

work in progress

finished stock waiting to be delivered

For example, a car manufacturer’s stock could include car parts and components waiting to be fitted (raw materials), partially built cars (work in progress) and completed cars waiting to be delivered to customers (finished stock).

If the stock materials are not managed efficiently, it could mean production has to stop. As a result, the whole factory production line could come to a halt.

Procurement means getting the right supplies from the right supplier. Effective stock control is important to both customers and businesses.

Customers expect to be able to go into a store and buy the products they desire.

Without appropriate stock control, businesses can run out of stock, which loses them sales and potentially customers. However, holding too much stock can also have negative consequences:

high storage costs, which may mean the business has to raise its prices

increased waste, if the products are perishable, eg fruit and vegetables

reduced income, if the business needs to sell off excess stock at a reduced price

The maximum stock level is the largest amount of stock a business can store on site. In the bar graph example, it is 500 items of stock.

The minimum stock level is also known as buffer stock. This is the lowest amount of stock a business can store on site while still being able to operate effectively. In the bar graph, the minimum stock level or buffer stock is 100 items. Buffer stock ensures a business can still operate for a short while if there are delays to deliveries or there is a large spike in demand. It also allows a business to replace any damaged stock while continuing to meet customer demand.

Lead time is how long it takes from ordering stock for it to arrive. The bar graph shows that the lead time is two weeks.

The reorder level is the point at which a business needs to order new stock in order for it to arrive before its stock falls below the minimum level. In the bar graph, the business would reorder stock when it has 300 remaining.

Many businesses now use computer software that automatically reorders stock when it reaches a pre-set reorder level. For example, stock levels can be automatically updated every time a product is sold to a customer, as products are scanned at the checkout using a barcode scanner. This not only ensures accurate stock levels but also allows stock to be automatically reordered when it reaches a pre-set level.

Just-in-time (JIT) is a stock control method where the business doesn’t store any raw materials. Instead, it has regular deliveries that bring only what is needed before its existing raw materials run out, so buffer stock is not needed.

The business orders smaller but more frequent quantities of stock that are taken straight to the production line on the factory floor. For this method of stock control to be effective, a business needs a good relationship with its suppliers. Suppliers will ideally be local to reduce both delivery costs and lead time.

Advantages of JIT

Removing buffer stock space (which would previously have been used for storage) means more space can be used for sales.

Smaller but more frequent deliveries mean that the products will be fresher. A business can also have new stock delivered more frequently, eg perishable items such as fresh fruit and vegetables.

Businesses will no longer have large amounts of capital tied up in stock that could go out of date or out of fashion. This capital can then be reinvested or spent elsewhere.

Additionally, having less stock that could go out of date will reduce waste, saving money.

JIT reduces production costs, allowing businesses to price their products to give a more competitive advantage.

Disadvantages of JIT

It can be hard for businesses to react to unexpected changes in demand, eg a heatwave causing an increase in the demand for ice cream.

Businesses are unable to use bulk-buy discounts if they only buy in small quantities.

Customers could receive a poor service if the business misjudges the amount of stock it needs and allows products to go out of stock.

Relationships with suppliers

Most businesses don’t produce a product completely. Instead, they have suppliers that supply some of their raw materials or components. Finding suppliers that can meet all of a business’ needs is essential for a business to remain competitive and successful.

There are five key factors a business needs to consider when trying to build a relationship with a supplier

Cost is a vital consideration. If a business can get supplies cheaply, this keeps its variable costs low, allowing it to maintain higher profit margins. Often, the more products businesses buy from suppliers, the more power they have to negotiate discounts.

Quality is essential, even when a product is marketed as a ‘budget’ or a low-cost option. For example, whether a business is making a gourmet or supermarket own-brand bar of chocolate, the quality of the raw products must be considered. Businesses need to make good-quality products that customers want to buy, but at different price points.

Delivery is also important, as the products that are ordered have to arrive on time. For manufacturers, late deliveries interrupt the manufacturing process, and for shops a late delivery could cause them to run out of stock. To avoid this, some businesses fine suppliers a small percentage of the value of any late deliveries. Businesses want quick delivery with minimal lead time so suppliers often set up their businesses near their customers. For example, Silicon Valley is made up of technology companies such as Apple and Facebook and their suppliers.

Availability and capacity of suppliers to meet an unexpected increase in orders is very important. For example, during a heat wave, a local corner shop might increase the quantity of ice creams and ice lollies it orders, and it would need its suppliers to meet the demand.

Trust between the business and the supplier is needed, as many businesses buy using trade credit to allow time to sell products to customers before paying their suppliers. Businesses also need to trust their suppliers to keep designs and other information confidential.

The impact of logistics and supply decisions on businesses

Procurement means getting the right supplies from the right supplier. Logistics means making sure the correct products are procured and that they will arrive when needed. Both procurement and logistics have impacts on a business’ costs, reputation and customer satisfaction.

Costs can be kept lower if production is quick. Delays can cost a business money and can limit cash flow if products are damaged, lost or unavailable.

The quality of the raw materials or services provided by suppliers can have an impact on a business’ reputation. For example, if products are regularly delivered late, this can negatively affect the business’ reputation because it will affect the business’ ability to deliver to its customers on time. If businesses provide high-quality and reliable products, they will have a higher chance of gaining a good reputation.

Customer satisfaction

Businesses aim to have high customer satisfaction by meeting all of their customers’ needs in a simple, quick and effective manner. This is achieved by getting the correct products delivered to the correct places at the correct times. By keeping customer satisfaction high, businesses are more likely to get repeat customers, which will improve sales figures and profits.

The production of goods and the provision of services

If a product or service is of good quality, it means that it is of a high standard. Quality can come from how well a product is made, the use of high-quality raw materials, and ensuring that products will last a long time and work well, eg a watch should tell the time correctly. Post-sales service should also be of good quality. For example, businesses should deal with faults quickly and efficiently.

Businesses have two ways of managing quality – quality control and quality assurance.

Quality control - Quality control is the process of inspecting products and services to ensure that what customers receive is of a high standard. There are many different ways that businesses conduct quality control.

Factory inspectors are often used at the end of production to ensure that products are of the required standard before they reach customers. For example, car manufacturers have a list of checks that they complete before cars are sent out, eg doors must be correctly aligned, car mats must be present and there must be no visible flaws in the paint. A one hundred percent inspection system is often used in high-end restaurants. In this method of quality control, all food is checked by the head chef before it is given to the customer. If the chef spots any imperfections, the whole dish is cooked again before the customer receives it.

How businesses manage product quality, producing high standards of customer service, production processes and checks and staff teams.

Quality assurance - Quality assurance is a process of carrying out quality checks at specific stages during the production process. This ensures that faults and sub-standard products are found sooner rather than at the end of the production process.

Training staff and employing highly-skilled people can come at a cost. This means the quality assurance process can be expensive for businesses, and often the added costs are reflected in what customers are charged.

Cost control and competitive advantage

Businesses seek to achieve high quality and competitive advantage by developing a business culture where employees are motivated and care about their customers, the product and/or service, and the business’ reputation.

Quality management is important to businesses because it helps them to produce high-quality products and services. They need to understand what their customers want, and meet customers’ needs and expectations. This is a way of gaining competitive advantage.

Quality management is also important in relation to costs. Mistakes are expensive, and quality control and quality assurance help businesses to limit additional costs and reduce wastage by aiming to ensure that things are done correctly the first time. For example, quality management can help to:

reduce waste, eg if a car light is damaged during production, it will have to be scrapped and replaced at additional cost to the business

reduce employee costs, as replacing the car light will cost the manufacturer additional wages, because an employee must be paid to replace the light

When a business can offer higher quality and lower costs, it gains a competitive advantage over similar businesses. A good-quality product or service helps to build a strong brand image, which can allow a business to grow its market share. If a business has a product or service that gains a good reputation for being of high quality, the business can charge a premium price.

The sales process

The process of purchasing a product or service is made up of five key stages:

customer interest

speed and efficiency of service

customer engagement

post-sales service

customer loyalty

These stages all contribute to customer satisfaction. This makes the sales process a valuable part of providing good customer service.

1. Customer Interest Businesses need to ensure they attract the attention of potential customers, for example by using emotive language in their advertising.

Product knowledge - Businesses need to ensure that their employees have good product knowledge. Customers expect a high level of product knowledge and customer service. For example, a supermarket employee should be able to direct a customer to any product that they are looking for. Similarly, an employee working in an electronics store should be able to give details to a customer about the features of a TV they are interested in purchasing.

Sales approaches

There are two types of sales technique that can be used to help develop customer interest:

Hard approach – This is when sales employees actively seek out customers and advise them about the products or services on offer, trying to encourage them to make a purchase. This can be done face to face or through cold calling.

Soft approach – This is when sales employees simply advise customers that they are available should the customers require any help or information about the products or services on offer. This approach allows customers to look at the products and services on offer in their own time.

2. Speed and efficiency of service

Good customer service can attract customers to use a business and help them feel valued. It is important for a business to deliver products to its customers quickly and in perfect condition. Damaged products, or products lost in transit, should be replaced quickly and efficiently. Customers are usually happy to pay more for a product or service if it is accompanied by good customer service and is good quality and good value for money.

E-tailers must ensure that their website offers an efficient and user-friendly purchasing process. If the process is too complicated or takes too long, customers will not place orders.

3. Customer engagement

The term ‘customer engagement’ refers to the interactions that take place between a business and its customers during the sales process. Some products don’t require much interaction, eg buying a loaf of bread from a supermarket. However, some products and services require a high level of engagement, eg the sale of a house through an estate agent, or the purchase of a car. In such cases, the salesperson must build a relationship with the customer.

Many businesses use social media to reach their customers. They may ask customers to ‘like’ or ‘follow’ the business, or to make recommendations or post images of themselves using the business’ product or service. Businesses sometimes post updates about their products, eg product launches and upcoming events, to keep customers involved and engaged.

4. Post-sales service

Post-sales service involves providing support for customers who have bought a product or service from a business. For example, a business might provide assistance to a customer who has bought a new computer and needs help using it. Alternatively, post-sales service may involve dealing with complaints efficiently when a product or service is faulty or does not meet customer expectations. Many retailers do this by providing an online service, eg a chat facility with customer service personnel, where questions and problems are dealt with quickly.

Businesses can build positive customer relationships by seeking feedback and acting on feedback from customers. Businesses may gather this feedback using traditional methods, eg questionnaires, or newer methods, eg social media. Access to the internet and new technologies means that businesses can receive feedback from customers quickly and can also respond quickly to complaints and other issues.

5. Customer loyalty

When a business provides excellent customer service, customers are more likely to remain loyal and the business may gain repeat customers.

Businesses often find it more cost-effective to retain existing customers than to find new ones through advertising

Customer service

There are many factors that contribute to providing good customer service:

knowledgeable, helpful and friendly staff

meeting all legal requirements

quick delivery

efficient service

excellent post-sales service and support

good product availability

Good customer service is important, as customers who are satisfied with their purchase and the customer service they have received are more likely to become regular customers. When customers post recommendations online or speak positively about a business to people they know, this helps the business to build a good reputation and positive brand image.

Differentiation is the process of making a product or service different from others so as to make it more appealing to a particular target market, eg smartphone manufacturers often differentiate their products by offering faster processing speeds and a longer battery life. Excellent customer service is a method of differentiating a product from the competition and providing a competitive advantage, which allows businesses to charge a premium price. This will also lead to increased sales via repeat purchases.

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Edexcel GCSE Business Studies Past Papers

This section includes recent GCSE Business, Business Studies, Business Communications and Business Studies and Economics past papers from Pearon Edexcel. You can download each of the Pearson Edexcel GCSE Business past papers and marking schemes by clicking the links below.

Pearson Edexcel GCSE Business June 2022 (1BS0) Past Papers

Paper 1: Investigating Small Business (1BS0/01) Download Past Paper     -    Download Mark Scheme

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Pearson Edexcel GCSE Business November 2021 (1BS0) Past Papers

Paper 2: Building a Business (1BS0/02) Download Past Paper     -    Download Mark Scheme  

Pearson Edexcel GCSE Business November 2020 (1BS0) Past Papers

Paper 1: Investigating Small Business (1BS0/01) Download Past Paper    -   Download Mark Scheme

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The above papers are labelled June 2020

Pearson Edexcel GCSE Business June 2019 (1BS0) Past Papers

Edexcel GCSE Business June 2018 Past Papers

Business Studies, Business Communications and Business Studies and Economics: Unit 1:  Introduction to Small Business  (5BS01/01) - Download Past Paper    -   Download Mark Scheme

Business Studies: Unit 3:  Building a Business  (5BS03/01) -  Download Past Paper    -   Download Mark Scheme

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Business Studies and Economics: Unit 5:  Introduction to Economic Understanding  (5BS05/01) -  Download Past Paper    -   Download Mark Scheme

Business Studies  (Short Course): Unit 6: Introduction to Small Business  (5BS06/01) -  Download Past Paper    -   Download Mark Scheme

Edexcel GCSE Business June 2017 Past Papers

Business Studies, Business Communications and Business Studies and Economics: Unit 1:  Introduction to Small Business  (5BS01/01) - Download Past Paper  -  Download Mark Scheme

Business Studies: Unit 3:  Building a Business  (5BS03/01) -  Download Past Paper  -  Download Mark Scheme

Business Communications: Unit 4:  Business Communications  (5BS04/01) -  Download Past Paper  -  Download Mark Scheme

Business Studies and Economics: Unit 5:  Introduction to Economic Understanding  (5BS05/01) -  Download Past Paper  -  Download Mark Scheme

Business Studies  (Short Course): Unit 6:  Introduction to Small Business  (5BS06/01) -  Download Past Paper  -  Download Mark Scheme

Edexcel GCSE Business June 2016 Past Papers

Business Studies, Business Communications and Business Studies and Economics: Unit 1: Introduction to Small Business (5BS01/01) - Past Paper Currently Unavailable -  Download Mark Scheme

Business Studies: Unit 3: Building a Business (5BS03/01) -  Download Past Paper  -  Download Mark Scheme

Business Communications: Unit 4: Business Communications (5BS04/01) -  Download Past Paper  -  Download Mark Scheme

Business Studies and Economics: Unit 5: Introduction to Economic Understanding (5BS05/01) -  Download Past Paper  -  Download Mark Scheme

Business Studies (Short Course): Unit 6: Introduction to Small Business (5BS06/01) -  Download Past Paper  -  Download Mark Scheme

Edexcel GCSE Business June 2015

Business Studies, Business Communications and Business Studies and Economics: Unit 1: Introduction to Small Business (5BS01/01) -  Download Past Paper  -  Download Mark Scheme

Edexcel GCSE Business June 2014

Edexcel GCSE Business June 2013

For more GCSE Business Studies past papers from other exam boards click here .  

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Revision Sheets Topic 2.3 Making Operational Decisions (Pearson Edexcel Business)

Subject: Business and finance

Age range: 14-16

Resource type: Assessment and revision

Last updated

28 September 2021

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Here you will find easy to follow revision sheets which will help your students to recap the topics in 2.3 Making Operational Decisions, these include:

2.3.1 Business Operations 2.3.2 Working With Suppliers 2.3.3 Managing Quality 2.3.4 The Sales Process

Attached at the end of the notes are revision questions which the students should be able to answer once they have studied the topic. Enjoy!

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Here you will find easy to follow revision sheets which will help your students to recap the topics in Theme 1 - Investigating Small Business & Theme 2 - Building a Business Includes over 200 practice exam questions to test your students knowledge! As well as extended response questions! topics can be bought separately if needed from my shop! SAVE 50% FOR THE WHOLE OF THEME 1 & 2 WITH THIS BUNDLE.

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BUSINESS STUDIES NOTES, FORM 3 ALL TOPICS

Form three business notes for all the topics tested in the Kenya Certificate of Secondary Education, KCSE;

• DEMAND AND SUPPLY

Meaning of demand

Demand is the quantity of a product that buyers are willing and able to buy at a given price over a given period of time .

Factors that determine the demand for a product (determinants of demand)

• The price of a product:  if the price is low, more will be demanded, if high less will be demanded.
• The buyer’s income: the higher the people’s income the higher the demand for gods and services and vice versa.
• Government policy : if the government imposes high taxes on a commodity, it becomes expensive and less of it is demanded. The effects of a subsidy are to lower the price of the product leading to an increase in its demand. The government may also influence the demand of a product by enacting laws that either limits or promotes the consumption of a product.
• The population : with many people available more of the goods are demanded and if the people are few, less is bought from the market.
• Tastes, fashions and preferences :  if people have a preference for a product they will demand more of it. If their preferences changes to another product, they will reduce the demand of the product they were using before.
• The distribution of incomes : where income is well distributed, the demand for goods and services is high as opposed to when the income in the hands of a few people.
•   Future expectations of price changes : if the prices are expected to go up in the future, more goods will be demanded in the present and if the price is expected to go down in the future, fewer goods will be demanded in the present.
• The weather : certain goods are demanded more during certain weather conditions e.g heavy clothes during cold seasons or umbrellas during rainy seasons.
• Price of related products : for goods that are compliments of one another, e.g pen and ink, a fall in the price of one leads to an increase in the demand of the other. In the case of the goods that are substitutes of one another, e.g soda and fruit juice, an increase in the price of one leads to an increase in the demand of the other.
• The terms of sale : the better the terms of sale, for example, provision of credit or better discounts, the higher the demand for a given product.

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Types of demand

Derived demand:  a product is said to have derived demand when it is demanded to help in the production of other goods and services for example the demand of building materials arising from the demand of houses.

Joint demand: items are said to have joint demand if the use of one will require the use of another. The goods are complimentarily used together like pen and ink.

Demand schedule and demand curve

Demand schedule

A demand schedule is a table showing the quantities of a commodity that consumers are willing and able to buy at different prices within a given period of time. A demand schedule can be prepared for an individual or for the entire market.

Demand curve

A demand curve is the graph showing the quantities demanded against the prices. On the y-axis is recorded price and the x-axis the quantities demanded.

Draw a demand curve given the following demand schedule

The graph shows that the demand curve (DD) slopes from the left to the right, indicating that as prices goes down the quantity demanded increases and vice versa.

This tendency of demand to increase as price decrease and to reduce as the price increase is referred to as the law of demand. Therefore a normal demand curve slopes from left to right.

Movement along a demand curve and a shift in demand curve

Movement along the demand curve

A movement along a demand curve refers to changes in quantity of a product demanded as a result of change in its price only. As the price of the product increases the quantity demanded decreases. It leads to a movement from one point to another on the same demand curve as shown below:

• In a movement along the demand curve no new demand curve is created. If price increase from P 0 to P 1 in the diagram above quantity demanded will fall from Q 1 to Q 2 e. movement from a to b .
• If price fall from P 2 to P 3 , the quantity demanded increase from Q 2 to Q 3 e. movement from a to c.

  Shift of the demand curve

This is when the demand curve moves either to the right or left. It occurs as results of changes in factors influencing demand other than price of the product concerned. This can be illustrated as below:

In (i) at price OP the quantity demanded is OQ. After the demand curve shift from D 0 D 0 to DD a different quantity OQ 1 is demanded although the price remains at OP. thus points L and M are on different demand curves.

Similarly when the demand curve shifts from D 1 D 1 to D 2 D 2 as in (ii) a different quantity OQ 3 is demand at the same price OP 2 as before. Thus the two points R and S are on two different demand curves.

A shift of demand curve to the left (decrease in demand) can be brought about by the following factors:

• A decrease in people’s incomes.
• A decrease in the price of a substitute product.
• Lower population in the area.
• Negative changes in tastes, fashions and preferences towards the product.
• The introduction of a new but cheaper substitute.
• Deterioration in the terms of sale e.g. lower discounts

A shift of demand curve to the right (increase in demand) can be as a result of:

• An increase in the people’s incomes.
• An increase in the price of a substitute product.
• An increase in population.
• An improvement in terms of sale e.g. where better discount are given
• A decrease in the price of a complementary product.
• An improvement in tastes, preferences towards particular product.

Differences between a movement along a demand curve and a shift of a demand curve

Supply is defined as the quantity that suppliers are willing and are able to take to market at a given price over a given period of time.

Factors which influence supply of a product

• The price of the product : the higher the price, the higher the supply while the lower the price, the lower the supply.
• The cost of production : an increase in the cost of production leads to a reduction in the supply of goods, while a decrease in the cost of production leads to an increase in the supply of goods.
• The level technology : an improvement in the level of technology leads to a reduction in cost of production in an increase in supply.
• The government policy ; this includes the imposition of taxes, subsidies, quotas and price controls. Taxes increase the cost of production hence supply will decrease. A subsidy lowers the cost of production leading to an increase in the supply. Imposition of quotas places an upper limit on the quantity that may be supplied irrespective of the price. Where the government sets prices, firms will react accordingly. If the price set is high, the supply will be high, if the price set is low, the supply will also be low.
• Available of inputs : shortage of raw materials leads to low production, hence low supply.
• Future expectations of price changes : where producers expect the price of goods to increase in the future, they may decide to restrict supply, until that when the prices go up.
• Natural factors: bad weather like droughts and floods leads to poor harvests, hence low supply of agricultural products. Favorable weather conditions leads to more harvests hence more supply.

Supply schedule and supply curve

A supply schedule is a table showing the relationship between supply of a commodity and its price. It shows the quantity supplied at various prices. The supply curve is a graphical illustration showing the trend taken by supply as price either increases or decrease.

Draw a supply curve using the figures given in the supply curve below.

The supply curve (SS) slopes from the right to the left showing that as the price increases, the supply also increase. For example, at a price Shs. 8, the supply is 20 units. As the price goes up to Shs. 16, the supply also goes up to 40 units.

Movement along the supply curve

This is said to be a movement along a supply curve when the quantity supplied of a commodity changes as a result of a change in its price “all other factors remaining constant”. It leads to a movement from one point to another on the same supply curve as shown below:

In (i) when price changes from OP 0 to OP 1 the movement is downwards from point X to point Y on the same supply curve S 0 S 0 . This leads to the supply of OQ 1 instead of OQ 0.

In (ii) when the price changes from OP 2 to OP 3 the movement is upwards from T to point Z on the same supply curve. The quantity supplied changes from OQ 2 to OQ 3.

Shift of a Supply curve

A shift of the supply curve is when the entire curve moves either to the left or right as a result of changes in factors influencing supply other than the price of the commodity involved.

In (iii) the whole supply curves S 2 S 2 shifts to S 3 S 3 resulting in the reduction of quantity supplied from OQ 3 to OQ 4 at the same price OP 3 as before . Instead a point on curve S 2 S 2

EQUILIBRIUM PRICE AND EQUILIBRIUM QUANTITY

• SIZE AND LOCATION OF A FIRM
• Meaning of firm and industry

A firm is an individual enterprise or business unit under one control an ownership e.g. a business unit carrying the production of a good or service such as production of soap or a legal service firm.

A firm is a single business unit or enterprise under one ownership, management and control e.g. KCC, Brookside etc.

An industry consists of all those firms producing the same type of products in the same line of production. A sop industry consists of all those firms producing soap while an insurance industry consists of all these firms providing insurance services.

An industry refers to a group of firms producing the same products for a given market e.g. the milk industry which includes firms such KCC and Brookside. In some cases where we have a single firm, the firm becomes the industry.

• Factors which influence the decision on what goods and services to produce .
• Profitability

Businesses tend to provide goods and services that would yield maximum profit.

• Level of competition

In order to survive in a competitive market, firms must come up with products with products that consumers prefer. A firm may therefore develop products that are not currently available or copy rivals ideals and improve on them.

• Cost of production

A firm would produce commodities for which production costs are low.

• Demand/ market

A firm will produce commodities that have the highest demand since demand leads to high sales volume.

• Availability of resources

A firm can only produce commodities for which the necessary resources are available. Such resources include raw materials, labor, equipment, adequate space and appropriate technology.

• Government policy

A firm should produce goods which are favored by the government policy e.g. low taxation and subsidies. Firms should not produce goods that are illegal as it will be breaking the law.

• Determining the size of the firm

The following are some of the ways/factors which the size of a firm may be determined:

• Level of output/volume of output

A firm’s size may be judged by the level of output. A large firm will produce on large scale, while a small firm will produce on small scale.

• Number of employs in the firm

A small firm is likely to employ only a few employees, while a large firm will most often employ many workers.

• Floor area covered by the premises

A firm with large floor area covered by premises may be said to be large.

• Size of the market controlled by the firm

Large firms control large proportions of the total market of a particular product. Small firms may only control a small size of the market.

• Capital invested

The larger the capital of the firm in terms of assets the larger the firm and vice versa.

• Methods of production adopted

A large firm will most often adopt capital intensive methods of technology, where operations will be highly mechanized while small firms use more labour then machinery.

• Sales of volume

Small firms have low levels of sales with a given period while large firms have huge levels of sales.

• Location of the firm

Location is the site or place from which the business operations/firms would be established. The management has to make appropriate decisions concerning the location of the firm since a good location would lead to success while a bad location would lead to failure of the business enterprise.

Factors that influence the location of a firm

• Raw materials

The availability of raw materials is one of the factors that determine the locations of a firm. Firms should be located near the source of raw material when:

• The raw materials are heavy and bulky so as to avoid high transport as cost to the firm.
• The raw materials are perishable so as to ensure they get the firm in fresh.
• The competition for the raw materials is high should be located near their source so as to ensure that it gets all the raw materials it requires at all times.

          Advantages of locating a firm near the source of raw materials

• Transport cost of raw materials in minimized
• Storage cost of raw materials will be minimized.
• It is easier for the firm to select the quality of raw materials required.
• Easier to get fresh raw materials and undamaged raw materials.
• Production process can run uninterrupted because of constant supply of raw materials thus continuous production.
• Labour (human resources)

Labour is a basic factor of production. It can be skilled, unskilled or semi-skilled labour. It is important for firms ton be located in an area where there is large supply of labour so as to ensure adequate supply of this important factor. Location of the firms near the source of labour reduces the cost of transporting labour force to factories and also reduces time wasting in transporting labour from far.

Reasons for locating near market

• If the finished product is perishable, then the firm should be located near the market so as to ensure that it gets to the market in fresh state.
• If the finished product is bulky, the firm should be located near the market so as to avoid high cost of transport to the market.
• If the final product is fragile, the firm should be located near the market so as to avoid losses that may result from breakages as the product is transported to the market.
• If there is high completion, the firm should be located near the market as this will make it easy to get to the customers fast.
• Where a product is made as per customers’ specification, the firm should be located near the market.
• Transport and communication

A firm should be located in an area that is well served by means of transport. This ensures that both raw materials and finished products can be transported with ease.

A firm should be located in an area that is well served by means of communication. This ensures that the firm is able to communicate with its customers and suppliers, and vice versa.

Poor developed transport and communication facilities may lead to:

• High transport cost especially where raw material or the finished products are bulky.
• Delays in receiving the raw materials and distributing the finished products.
• Where communication network is poor, business people will not able to give or get information in time.
• Availability of power

Industries require electric power to operate. They should, therefore be located where electricity is readily available.

Industries should be located in areas with adequate security .

• Auxiliary services

Firms should be located where auxiliary services such as insurance, banking and warehousing are available.

Many firms require water in one or more processes. Such firms should be located in an area where water is readily available.

The government may formulate policies that may have implications on the location of the firms, especially with regard to physical planning. Such planning may be aimed at checking rural-urban migration, environmental degradation or for strategic concerns.

The government may therefore encourage the development of firms in some areas by offering concessions to industrialists such as:

• Offering free land
• Reduction on taxes
• Offering subsidies
• Improvement of infrastructure
• Offering direct financial assistance

LOCALISATION AND DELOCALISATION

Localization of firms is a situation where many firm are concentrated in a particular area.

Delocalization of firms describes a situation where location of firms is spread in different regions to minimize the problems of localization.

Advantages of localization

• Firms will benefit from already from established skilled labour pool from which they can recruit their employees.
• Firms will benefit from already established infrastructure such as transportation and communication.
• Firms will benefit from auxiliary services firms that may already have been established.
• Such areas have social amenities such as hospitals and schools.
• Employment is created in such areas.
• Joint management of wastes can be carried out by all firms.
• Firms may benefit from already established markets.
• Firms may be able to get raw materials easily, as they may use the by-products produced by other industries as their raw materials.

Disadvantages of localization

• As many people move to such areas in search of jobs, slums may be created.
• Land becomes very expensive in such areas.
• Congestion and traffic jams are a common problem in such areas.
• In case of war such areas can become a target of attacks.
• Leads to rural-urban migration leaving the old and the young in the rural areas.
• A lot of environmental degradation through pollution by many cars, deforestation, discharges of waste and mining in the area.
• Social problems such as crime, prostitution and illegal drugs are a common problem in such areas.

Advantages of delocalization

• It ensures that all areas are developed.
• To ensure that employment opportunities are evenly distributed all over the country.
• It reduces rural-urban migration since people can get jobs in the rural areas once industries are delocalized.
• It promotes the development of infrastructure all over the country.
• It leads to the establishment of auxiliary services e.g. banks and insurance firms, in rural areas for the benefit of the residents.
• It enhances the development of social amenities such as schools and hospitals in all areas of the country.
• It lessens losses in case of attack by enemies during war.
• People in rural areas are provided with goods and services closer to where they are.

Disadvantages of delocalization 

• Pollution is spread to the rural areas.
• The security in such areas may not be guaranteed.
• It might be expensive to hire and attract appropriate labour.
• Auxiliary services such as banks and postal services may be lacking in such areas.
• Incentives offered by the government to industries in order to delocalize add to public expenditure, which is an added burden to tax payers.
• Industries may not enjoy the benefits that accrue from concentration of industries e.g. developed infrastructure.

Ways in which the government may motivate industries to delocalize

• By giving entrepreneurs free of cheap land to construct their factories.
• By giving tax incentives to those who locate their industries in the delocalized area.
• By giving cheap loans to entrepreneurs wishing to establish industries in areas with few industries.
• By providing security in the new industrial areas.
• By providing subsidies to those industrialists who are willing to delocalize.
• By providing the appropriate infrastructure in the area.
• By providing social amenities e.g. schools and hospitals in areas where the delocalized industries are to be established.
• By offering financial assistance to the delocalized industries.

ECONOMIES OF SCALE

Economies of scale are the benefits the firm or industry derives from expanding its scale of production/the advantages of operating on large scale.

There are two types of economies of scale;

Internal economies of scale

• External economies of scale

These are advantages that accrue to a single firm as its production increases, independent of what happens in the other firms in the industry.

Internal economies of scale result from an increase in the level of output and cannot be realized unless output increases.

The internal economies of scale may be achieved by a single plant of the firm or they may arise from an increase in the number of plants.

The internal economies of scale include;

• Marketing economies (Buying and selling economies)

These are the benefits which a firm derives from large purchases of inputs or factors of production due to the discounts offered in the process e.g. trade and quantity discounts

The firms may also incur less cost per unit in transportation of the goods bought

Selling economies of scale arise from the distribution and sale of the finished product as the scale of production increases, i.e it is likely to incur less cost per unit in areas such as advertising, distribution e.t.c

• Financial economies; As a firm grows, its assets also increase. These assets can be used as security to borrow money/loan from financial institutions at low interest rates.

Large firms can also raise more funds through selling and buying of shares and debentures.

• Risk bearing economies; Large firms can reduce risks involved in the market failure through diversification of products or markets.

Diversification of markets or products can be done so that;

• Failure of one product is offset by the success of other products
• A failure of a product in one part of the market may be offset by the success of the same product in another part of the market

-Large scale firms are also able to obtain supplies from alternative sources so that failure in one does not significantly affect the activities of the firm.

• iv) Managerial economies/staff economies

Large firms are able to hire/employ specialized staff and management. This increases the firms efficiency and productivity i.e.

• The staff is able to make viable decisions that can go along way in increasing the firms output.
• The firm/management is also able to put in place better organizational structures which allow for departmentalization and subsequent division of labour.Division of labour leads to specialization and hence the overall increase in the firms output.

-the costs of hiring/employing the specialized staff/management are spread over a large number of units of output of variable cost of production.Thus,the cost of labour is minimized when production increases leading to increased profits.

• v) Technical economies;

These are benefits that accrue to a firm from the use of specialized labour and machinery. Large firms have access to large capital which they utilize to obtain those machines and hire the specialized labour.The machines use the latest technology and are put to full use, making the firm production more efficient i.e. cost of the machines and labour are spread over many units of output hence less costly but giving higher profits.

• vi) Research economies;

Large firms can afford to carry out research into better methods of production and marketing.(Research is necessary because of the increased competition in the business world today) This improves the quality of the products and increases the sales and profits made by the firm.

• Staff welfare economies;

Large firms can easily provide social amenities to their employees including recreations, housing, education, canteens and wide range of allowances. These amenities work as incentives to boost the morale of the employees to work harder and increase the quality and quantity of output. This leads to higher sales and profits.

• Inventory economies

A large sized firm can establish warehouses to stock raw materials and therefore enjoy large stocks of raw materials for use when the raw materials are in short supply.Thus, the firm can avoid production stoppages that can be occasioned by shortages of the raw materials. The suppliers of such material may be sold at a higher price to realize profit.

External economies of scale;

External economies of scale are those benefits which accrue to a firm as a result of growth of the whole industry. They are realized by a firm due to its location near other firms. They include;

• Easier access to labour; Where many firms are located in one area a pool of labour of various skills is usually available. Therefore firms relocating to the area find it easy to obtain.
• Improved/efficient infrastructure; Usually where many firms are located, infrastructure would be highly developed e.g. roads, power, water and communication facilities. Firms relocating in that area thus enjoy the services of infrastructure already in place.
• Firms may be able to dispose off their waste product easily
• Ready market may be available from the surrounding firms
• Readily available services such as banking, insurance and medical care
• Adequate supply of power due to large volume of consumption e.t.c

Diseconomies of scale

A firm cannot continue to expand indefinitely or without a limit.As a firm grows or industry expands, the benefits the firm can reap or get from such growth or expansion have a limit.

Any further expansion in the scale of production beyond the limit will actually create negative which would increase the cost of production.

The negative effects to a firm due to its size or scale of production are referred to as diseconomies of scale.

Diseconomies of scale are therefore the problems a firm experiences due to expansion.

Sources of diseconomies of scale

Diseconomies of scale may arise from;

• Managerial functions which become increasingly difficult to perform as the firm expands. Communication and consultations take more time than before.
• Changing consumer tastes which may not be fulfilled immediately because decision-making may take too long.
• Increase in the costs of transporting raw materials, components and finished products.
• Labour unrest or disputes and lack of commitment from the employees because they are not involved in decision making
• Stoppage of production process when disputes arise since all production stages are interdependent and labour specialized.
• Lack of adequate finances for further expansion of the firm.

There are two forms of diseconomies of scale fiz internal diseconomies and external diseconomies of scale.

Internal diseconomies of scale

These are the problems a firm experiences as a result of large scale production due to its persistant growth. They include;

• Managerial diseconomies of scale

These are the losses which may arise due to the failure of management to supervise and control the operations properly. This may be because the firm is large resulting into;

• Difficulties in controlling and coordinating the departments leading to laxity among employees.
• Difficult in decision making and communication and co-ordination between management and workers. Delays in decision making means lost opportunities.
• Impersonal relationship between management and workers, and staff problems not easily established which could lead to low morale, disputes, unrests/skills.
• An increase in management tasks leading to increase in number and impact of risks i.e. any error in judgement on the part of management may lead to big losses.
• Marketing diseconomies of scale

These are losses which may arise due to changes in consumer tastes. These may be as a result of;

• A change in tastes leading to fall in demand for the firms products. A large firm may find it difficult to immediately adjust to the changes in the tastes of consumers, hence it will experience fall in its scale.
• An increase in the scale of production, which leads to higher demand for factor of production such as labour, raw materials and capital. This will result into higher prices for them. This will push up the prices of the goods and services produced, which will cause a fall in sales.
• High overhead costs

When the output of a firm increases beyond a certain limit, some factors may set in to increase the average costs.e.g the overhead costs incurred in production and marketing activities may increase. This is because firms may intensify their promotional campaign, incur heavy transport expenses and be forced to offer generous discounts in an effort to attract more clients. All these are factors that may increase overheads without any corresponding increase in real benefits to the firm.

• Financial diseconomies of scale

These are losses which may arise due to a firm’s inability to acquire adequate finances for its expansion. This will prevent the firm from expanding further thereby limiting its capacity to increase the volume of its output.

External diseconomies of scale

These are demerits that affirm experiences as a result of growth of the entire industry. These include;

-scramble for raw materials

-inavailability of land for expansion

-scramble for available labour

-competition for available market

-easy targets especially in times of war.

Existence of small firms in an economy

As the firm grows in size, its scale of production increases.However, many firms remain small even though they face stiff competition from larger firms. Some of the reasons for existence of small scale firms include;

• Size of the market

Large scale production can only be sustained by a high demand for a product. If the demand for a product is low, it may not be advisable for a firm to produce on a large scale, hence it will remain small.

• Nature of the product;

The nature of the product sometimes makes it impossible to produce in large quantities e.g. personal services e.g. hairdressing, painting or nursing can only be provided by an individual or a small firm.

• Simplicity of organization

Small firms have the considerable advantage of simplicity in organization. They avoid bureaucracy, wastage and managerial complexity associated with large scale organizations.

Where a firm intends to take advantage of simplicity, the proprietor may maintain its small firm.

• Flexibility of small firms

Small firms are flexible i.e. one can easily switch from one business to another where an owner of a business wishes to maintain flexibility so as to take advantage of any new opportunity, he/she may have to maintain a small firm.

• Quick decision making

In a situation where proprietors want to avoid delay in decision-making, they may opt to maintain a small business as this would involve less consultation.

• Belief that a small firm is more manageable

Many small businesses have the potential of expansion, yet their owners prefer to have them remain small believing that big businesses are difficult to run.

• Rising costs of production

In situations where production costs rise too fast, such that diseconomies of scale set is very early, the firm has to remain small.

• Need to retain control

In order to retain control and independence, the owners of the firm may wish to keep it small.

• Legal constraints/Government policy

In some situations, the laws may restrict the growth of a firm. In such circumstances the existing firms remain small.

• Small capital requirements

As opposed to large scale firms, small firms require little amounts of capital to start and operate.

Implication of production activities on environmental and community health

As production activities take place in a given area, the environment and the health of the community around may be adversely affected by these activities. Some of these effects include;

• Air pollution

This is caused by waste which is discharged into the atmosphere leading to contamination of the air. Such waste may be in funs of industrial emissions and toxic chemicals from the firms. These pollutants cause air-borne diseases. Acid rain due to such emission may also affect plants.

• PRODUCT MARKET

The term ‘market’ is usually used to mean the place where buyers and sellers meet to transact business. In Business studies, however, the term ‘ market’ is used to refer to the interaction of buyers and sellers where there is an exchange of goods and services for a consideration.

NOTE : The contact between sellers and buyers may be physical or otherwise hence a market is not necessarily a place, but any situation in which buying and selling takes place. A market exists whenever opportunities for exchange of goods and services are available, made known and used regularly.

Definition:

• Product market; Is a particular market in which specific goods and services are sold and with particular features that distinguish it from the other markets.

-The features are mainly in terms of the number of sellers and buyers and whether the goods sold are homogeneous or heterogeneous

-Product market is also referred to as market structure .

-Markets may be classified according to the number of firms in the industry or the type of products sold in them..

TYPES OF PRODUCT MARKET

The number of firms operating in a particular market will determine the degree of competition that will exist in a given industry. In some markets there are many sellers meaning that the degree of competition is very high, where as in other markets there is no competition because only one firm exists.

When markets are classified according to the degree of competition, there are four main types, these are;

• Perfect competition
• Pure monopoly(monopoly)
• Monopolistic competition

PERFECT COMPETITION

The word ‘perfect’ connotes an ideal situation.

This kind of situation is however very rare in real life; a perfect competition is therefore an hypothetical situation.

This is a market structure in which there are many small buyers and many sellers who produce a homogeneous product. The action of any firm in this market has no effect on the price and output levels in the market since its production is negligible.

Feature of Perfect Competition

• Large number of buyers and sellers : The buyers and sellers are so many that separate actions of each one of them have no effect on the market. This implies that no single buyer or seller can influence the price of the commodity. This is because a single firms (sellers) supply of the product is so small in relation to the total supply in the industry. Similarly; the demand of one buyer is so small compared to the total demand of one buyer is so small compared to the total demand in the market that he/she cannot influence the price.

Firms (suppliers) in such a market structure are therefore price takers i.e. they accept the prevailing market price for their products.

• Identical or homogeneous products ; Commodities from different producers are identical in all aspects e.g. size; brand and quality such that one cannot distinguish them. Buyers cannot therefore show preference for the products of one firm over those of the other.
• Perfect knowledge of the market; Each buyer and seller has perfect knowledge about the market and therefore no one would effect business at any price other than the equilibrium price (market price).If one firm raises the price of its commodity above the prevailing market price, the firm will make no sale since consumers are aware of other firms that are offering a lower price i.e. market price. All firms (sellers) are also assumed to know the profits being made by other firms in the industry (in selling the product)
• Freedom of entry or exit in the industry ; The buyers and sellers have the freedom to enter and leave the market at will i.e. firms are free to join the market and start production so long as the prevailing market price for the commodity guarantees profit. However if conditions change the firms are free to leave in order to avoid making loss.

In this market structure, it is assumed that no barrier exists in entering or leaving the industry.

• Uniformity of buyers and sellers ; All buyers are identical in the eyes of the seller. There are therefore, no advantages or disadvantages of selling to particular buyers. Similarly, all the sellers are identical and hence there would be no special benefit derived from buying from a certain supplier.
• No government interference ; The government plays no part in the operations of the industry. The price prevailing in the market is determined strictly by the interplay of demand and supply. There should be no government intervention in form of taxes and subsidies, quotas, price controls and other regulations.
• No excess supply or demand ; The sellers are able to sell all what they supply into the market. This means that there is no excess supply. Similarly, the buyers are able to buy all what they require with the result that there is no difficult in supply.
• Perfect mobility of factors of production ; The assumption here is that producers are able to switch factors of production from producing one commodity to another depending on which commodity is more profitable to sell. Factors of production are also freely movable from one geographical area to another.
• No transport costs ; The assumption here is that all sellers are located in one area, therefore none of them incurs extra transport costs or carriage of goods. The sellers cannot hence charge higher prices to cover the cost of transport. Buyers, on the other hand, would not prefer some sellers to others in an attempt to cut down on transport costs.

NOTE: The market (perfect competition) has normal demand and supply curves. The individual buyers demand curve is however; perfectly elastic since one can buy all what he/she wants at the equilibrium price. Similarly, the individual sellers supply curve is also perfectly elastic because one can sell all what he/she produces at the equilibrium price.

Perfect competition market hold on the following assumptions;

• There are no transport costs in the industry
• Buyers and sellers have perfect knowledge of the market
• Factors of production are perfectly mobile
• There is no government interference

Examples of perfect competitions are very difficult to get in the real life but some transactions e.g. on the stock exchange market, are very close to this.

Criticism of the concept of perfect competition

In reality, there is no market in which perfect competition exists. This is due to the following factors:

• Very few firms produce homogenous products. Even if the products were fairly identical, consumers are unlikely to view them as such.
• In real situations, consumers prefer variety for fuller satisfaction of their wants; hence homogenous products may not be very popular in these circumstances.
• There is a common tendency towards large-scale operation. This tendency works against the assumption of having many small firms in an industry.
• Firms are not found in one place to cut down on transport costs as this market structure requires.
• Governments usually interfere in business activities in a variety of ways in the interest of their citizens. The assumption of non-interference by the state is therefore unrealistic in real world situations.
• Information does not freely flow in real markets so as to make both sellers and buyers fully knowledgeable of happenings in all parts of a given market.

A monopoly is a market structure in which only one firm produces a commodity which has no close substitutes.

Some of the features in this market structure are;

• One seller or producer ; supplying the entire market with a product that has no close substitute consumers therefore have no option but to use the commodity from the monopolist to satisfy their need.
• Many unorganised buyers ; in the market the buyers compete for the commodity supplied by the monopoly firm.
• The monopoly firm is the industry ; because it supplies the entire market, the firms supply curve is also the market supply curve, and the demand curve of the firm is also the market demand curve.
• Entry into the market is closed ; such barriers are either put by the firm or they result from advantages enjoyed by the monopoly firm e.g. protection by the government.
• Huge promotional and selling costs ; are incurred in order to expand the market base and to maintain the existing market. This also helps to keep away potential competitors.
• The monopoly firm is a price maker or a price giver ; the firm determines the price at which it will sell its output in the market. It can therefore increase or reduce the price of its commodity, depending on the profit it desires to make.
• Price Discrimination is may be possible ; This is a situation where the firm charges different prices for same commodity in different markets.

Price discrimination may be facilitated by conditions such as;

• Consumers being in different markets such that it is difficult for one to buy the product in the market where it is cheaper.
• The production of the commodity is in the hands of a monopolist.
• Market separation.

Market separation may be based on the following factors;

• Geographical; Goods may be sold at different prices in different markets.
• Income; Seller may charge different prices for his/her products to different categories of consumers depending on their income.
• Time; a firm may sell the same commodity at a higher price during the peak period and lower the price during the off peak period.

Sources of monopoly power

• Control of an important input in production ; A firm may control a strategic input or the entire raw materials used in the production of a commodity. Such a firm will easily acquire monopoly by not selling the raw materials to potential competitors.
• Ownership of production rights ; Where the right to production or ownership of commodity i.e. patent rights, copyrights and royalties belong to one person or firm, then, that creates a monopoly. Similarly if the government gives licence to produce a commodity to one firm, then this will constitute a monopoly.
• Internal economies of scale ; The existence of internal economies of scale that enable a firm to reduce its production costs to the level that other firms cannot will force these other firms out of business leaving the firm as a monopoly.
• Size of the market; where the market is rather small and can only be supplied profitably by one firm.
• Additional costs by other firms ; A firm may enjoy monopoly position in a particular area if other firms have to incur additional costs such as transport in order to sell in the area. These additional costs may increase the prices of the commodity to the level that it becomes less attractive hence giving the local firm monopoly status.
• Where a group of firms combine to act as one ; Some firms may voluntarily combine/amalgamate or work together for the purpose of controlling the market of their Examples are cartels
• Restrictive practices; A firm may engage in restrictive practices in order to force other firms of business and therefore be left as a monopoly. Such practices may include limit pricing i.e. where a firm sells its products at a very low price to drive away competitors.
• Financial factors; where the initial capital outlay required is very large, thereby preventing other firms from entering the market.
• Government Policy ;Where the government establishes a firm and gives it monopoly power to produce and sell ‘cheaply’

Advantages of monopoly

• A monopoly is able to provide better working conditions to employees because of the high profits realised
• In some monopolies, high standards of services/goods are offered
• Monopolies always enjoy economies of scale. This may help the consumer in that the goods supplied by a monopoly will bear lower prices.
• A monopolist may use the extra profit earned to carry out research and thus produce higher quality goods and services.
• The consumer is protected in that essential services such as water and power supply is not left to private businesses who would exploit the consumers.

Disadvantages of monopoly

• A monopolist can control output so as to charge high prices
• Consumers lack freedom of choice in that the product produced by a monopoly has no substitute
• Low quality products may be availed to consumers due to lack of competition.

MONOPOLISTIC COMPETITION

Monopolistic competition is a market structure that falls within the range of imperfect competition i.e. falls between perfect competition and pure monopoly. It is therefore a market structure that combines the aspects of perfect competition and those of a monopoly.

Since it is not possible to have a market that is perfectly competitive or a market that is pure monopoly in real world, all market structures in real world lie between the two and are thus known as imperfect market structures.

In a monopolistic market, there are many sellers of a similar product which is made to look different. This is known as product differentiation. These similar products are made different through packaging, design, colour, branding e.t.c

The following are the assumptions of a monopolistic competition.

• A large number of sellers ; Who operate independently.
• Differentiated products ; Each firm manufactures a product which is differentiated from that of its competitors, yet they are relatively good substitutes of each other. The differences may be real in that different materials are used to make the product or may be imaginary i.e. created through advertising,branding,colour,packaging e.t.c
• No barriers to entry or exit from industry ; There is freedom of entry into the industry for new firms and for existing firms to leave the industry.
• Firms set their own prices ; The prices are set depending on the costs incurred in production and the demand in the market.
• No firm has control over the factors of production ; Each firm acquires the factors at the prevailing market prices.
• Presence of non-price competitions; Since products are close substitutes of each other, heavy advertising and other methods of product promotion are major characteristics of firms in monopolistic competition.
• Buyers and sellers have perfect knowledge of the market .

This is a market structure where there are few firms. The firms are relatively large and command a substantial part of the market. It is a market structure between the monopolistic competition and monopoly.

Types of Oligopoly

Oligopoly may be classified according to the number of firms or the type of products they sell. They include;

• Duopoly; This refers to an oligopoly market structure which comprises of two firms. Mastermind Tobacco and British American Tobacco (BAT) are examples of duopoly in Kenya.
• Perfect/Pure oligopoly refers to an oligopolistic market that deals in products which are identical. Examples of pure oligopoly are companies dealing with petroleum products such as oil Libya, Caltex, Total, Shell, National Oil, Kenol and Kobil. These firm sell products which are identical such as kerosene, petrol and diesel.
• Imperfect/Differentiated Oligopoly; this is an oligopolistic market structure where firm have products which are the same but are made to appear different through methods such as packaging, advertising and branding.

Features of oligopoly

• Has few large sellers and many buyers.
• The firms are interdependent among themselves especially in their output and pricing.
• Non-price competition, firms are in a position to influence the prices. However, they try to avoid price competition for the fear of price war.
• There is barriers to entry of firms due to reasons such as; requirement of large capital, Ownership of production rights, control over crucial raw materials, Restrictive practices etc
• High cost of selling through methods of advertisement due to severe competition.
• Products produced are either homogeneous or differentiated.
• Uncertain demand curve due to the inter-dependence among the firms. Hence the shifting of the demand curve is not definite.
• There is price rigidity i.e once a price has been arrived at in an oligopolistic market, it tends to remain stable.

This feature explains why a firm in oligopolistic market faces two sets of demand curves resulting to a Kinked Demand Curve. One curve, for prices above the determined one, which is fairly gentle and the othere curve for prices below the determined one which is fairly steep.

THE KINKED DEMAND CURVE

• i) The kinked demand curve illustrates the rigidity price behaviour oligopolists.
• ii) The curve has two parts with different elasticities: AB is elastic and BC is inelastic.

iii) Sellers cannot increase price from price OP o to OP 1 because the Quantity bought will decrease (fall).

• iv) The sellers cannot reduce price from OP 1 to OP 2 because very little amount will

increase in demand.

• The sellers will stick to price OP o because it is the most profitable and most popular to both sellers & buyers.
• CHAIN/CHANNELS OF DISTRIBUTION

Introduction

• Channels of distribution are the paths that goods and or services follow from the producers to the final users.
• The persons involved in the distribution of goods from the producer to consumer are called middlemen or intermediaries.
• There are different channels that different products follow. Some of the channels include the following:
• Producer agent      wholesaler      retailer
• Producer co – operative society    marketing board      wholesaler     retailer
• Producer marketing board      wholesaler     retailer
• Producer wholesaler      retailer
• Producer wholesaler       consumer
• Producer retailer      consumer
• Producer  consumer

Costs incurred by middlemen while distributing goods

• Buying costs. They incur this cost by paying for them from the producers or other middlemen.
• Transport cost . Some middlemen do transport goods from the producer to other middlemen or to the final users.
• Storage costs. Middlemen do keep the goods until their demand arises. This will therefore require them to hire or construct their own warehouses.
• Advertising or marketing costs . Some middlemen do carry out marketing of goods on behalf of the producers and other middlemen. In the process, they pay for such services.
• Insurance costs. Middlemen do insure the goods they are trading in to ensure compensation in the event of loss.
• Operation costs. Middlemen just like other businesses do incur operating costs such as salaries to employees, electricity, maintenance among others.
• Preparation costs. Some middlemen to prepare goods before they are sold to the consumers. Such activities include packing, assembling and blending. They have to meet such costs on behalf the producer, other middlemen and consumers.

CHANNELS OF DISTRIBUTING VARIOUS PRODUCTS (refer to Inventor book three pages 50 to 53)

ROLES OF MIDDLEMEN

The following are some the roles performed by middlemen in the chain of distribution

• Bulk accumulation (assembling). They similar goods from different producers in small quantities and then offering the large amount gathered to buyers who may want to buy in large volumes.
• Reducing transactions. The interactions between the producers and the consumers will be reduced since the middlemen are the ones who will be communicating to the consumers.
• Bulk breaking. They buy in large quantities and then sell in small quantities as desired by the consumers.
• Risk taking. They assume all the risks related with the movement of goods from the producers to the consumers. Such risks include theft, damages, loss due to bad debts.
• Finance provision. Middlemen provide finance to the producers by buying goods in large quantities and paying for them in time.
• Provision of information. Middlemen gather market information from the consumers then pass to the producers who in turn produce goods in line with the tastes of consumers.
• Marketing/product promotion . Middlemen are involved in marketing of goods hence stimulating the interest of consumers.
• Provision of transport. Middlemen do transport goods from the producers up to the where the consumers can access them. Both the producers and consumers are hence relieved of transport costs.
• Variety provision
• Availing goods to consumers

FACTORS TO CONSIDER BEFORE SELECTING A DISTRIBUTION CHANNEL

Factors that influence the choice of a distribution channel include the following:

• Product nature. Perishable products should be sold directly to the consumers because delays may result to losses since they go bad fast. In addition, bulky products need direct selling in order to reduce transportation and stock handling costs.
• Nature of the market. Where the market is concentrated in one area, direct selling is appropriate. A longer channel of distribution is preferred where the market is widely spread.
• Role of intermediary . The channel chosen should be able to perform the services related to the product being sold e.g. for technical goods, the middleman should be able to offer technical support to the customers.
• Resources and size of the firm/producer . If the producer is small, then direct selling would be appropriate. Large firms with sufficient financial resources can opt for long channels of distribution.
• Channels used by competitors . If a firm wants its products to compete with those of the competitors, then is it prudent to use similar channels. A firm that wants to avoid competition should use a different channel of distribution.
• Government policy . The channel chosen should be able to meet government regulations such as all middlemen distributing pharmaceutical products must be recognized by the relevant government bodies (Pharmacy and Poisons Board).
• Marketing risks . In the event the firm wants to avoid risks related to distribution, it will opt for middlemen.
• State four channels for distributing imported goods.
• Explain five factors that can influence the choice of a channel of distribution.
• Outline five costs incurred by middlemen in the distribution process.
• Describe the roles played by middlemen in the distribution chain.
• Outline the circumstances under which a producer would sell directly to consumers.
•   NATIONAL INCOME
• This is the total income received by the providers/owners of the factors of production in a given country over a given time period.

Terms used in national income

• Gross Domestic Product (GDP) . This is the total monetary value of all goods and services produced in a country during a particular year. Such goods and services must have been produced within the country.
• Net Domestic Product (NDP) . This is the GDP less depreciation. Depreciation is the loss in value of the assets such as machines used in the production of goods and services.
• Gross National Product (GNP) . This measures the total monetary value of all the goods and services produced by the people of a country regardless of whether they in or outside the country. It takes into account exports and imports. The difference between exports and imports is called net Factor Income from abroad. GNP therefore is the sum of GDP and net factor income from abroad.
• Net National Product (NNP) . This recognizes the loss in value of the capital used in the production of goods. Capital here refers to capital goods. NNP is the difference between GNP and the depreciation.
• Per capita income. This is the average income per head per year in a given country. It is also the national income divided by the population of the country.

CIRCULAR FLOW OF INCOME

• This is the continuous movement of income between the households (providers of factors of production) and the firms (producers of goods and services).
• The factors of production are received from households.
• The firms pay the rewards of such factors to the households (expenditure to the firms and income to the households).
• The households in turn use the income to buy the goods and services produced by the firms (expenditure to households and income to firms).

Assumptions/features of circular flow of income

• Existence of two sectors only. It is assumed that the economy has only two sectors that is households and firms. The households provide the factors of production while firms are involved in the production of goods and services.
• Total spending by households . It is assumed that the households spend all their income on the goods and services produced by the firms i.e. no savings.
• Total spending by the firms . It is assumed that the firms spend the money received from the sale of goods and services to pay for the rewards of production factors.
• Lack of government intervention. The government does not influence how the firms and households carry out their activities. Such interventions are in the form of taxes, price controls among others.
• Closed economy . Exports and imports do not exist in such an economy.

Factors affecting the circular flow of income

• The factors can either lead to increase in income and expenditure (injections) or lead to a reduction in the volume of flow (withdrawals).

The factors include the following:

• This takes place when the households do not spend all their income on the purchase of goods and services. This reduces the income to be received by firms hence savings is a withdrawal from the circular flow of income.
• Taxation reduces the amount of money available for spending therefore it is a withdrawal/leakage from the circular flow of income.
• Government expenditure. The government may buy goods from the firms or provide subsidies. This will translate in to an injection into the circular flow of income.
• When firms put more capital into the production, output will increase hence an increase in income (injection).
• When goods and services are bought from other countries, money will be spent hence a reduction in the circular flow of income (withdrawal).
• Through exports, a country is able to receive money from other countries (injections)
• Investments
• Government spending

Withdrawals

APPROACHES USED IN MEASURING NATIONAL INCOME

• Expenditure Approach .

National income is arrived at summing expenditure on all final goods and services (that have reached the final stage of production). Such expenditure is divided into:

• Expenditure on consumer goods ( C)
• Expenditure on capital goods (I)
• Expenditure by government (G)
• Expenditure on net exports (X – M)

Therefore national income = C+I+G+(X – M)

Problems associated with expenditure approach

• Lack of accurate records particularly in the private sector.
• Approximation of expenditure of the subsistence sector.
• Difficulty in differentiating between final expenditure and intermediate expenditure
• Double counting may exist
• Fluctuating exchange rates may cause problems in the valuation of imports and exports.
• Income approach
• In this method, the national income is arrived at by summing all the money received by those who participate in the production of goods and services.
• Such incomes are in the form of rewards to the production factors (wages, rent, interest and profits).
• Public income is also taken into account i.e. it is the income received by the government from its investments (Parastatals, joint ventures).
• Transfer payments are excluded since they represent a redistribution of incomes from those who have earned them to the recipient’s e.g.
• National insurance schemes.

Problems related to this method

• Determination of what proportion of transfer payments constitute in the income of a country.
• Inaccurate data may exist since business people may not tell the truth about their income in order to evade tax.
• Price fluctuations may make national income determination difficult.
• Income from illegal activities is not captured.
• Valuation of income from subsistence economy may be difficult e.g. housewives.

Assignment: Read and make short notes on Output approach (refer to Inventor book three pages 65 – 66).

USES OF NATIONAL INCOME STATISTICS

• Indicators of standards of living. If the national income is equitably distributed, then the standards of living will be high.
• Measuring economic growth. The statistics of one year are compared with previous year to show whether there is improvement or not.
• Inter country comparison. They are used to compare the economic welfare among countries hence knowing which country is better off and by how much. However, the following challenges may be faced when carrying the comparisons: different in currencies, different goods and services, disparity in income distribution and difference in tastes and preferences.
• Investment decisions. They assist the government and other investors to know the sectors to

put their money. The statistics provide relevant information concerning the performance of each sector.

• Basis of equitable distribution of income. The statistics can be used to spread income to the hands of majority of the citizens incase a few individuals control the economy.
• Planning purposes. The statistics will show the contribution of each sector thus helping the government in allocating the funds to the various sectors.

Factors which influences the level of national income.

• Quantity and quality of production. If the factors are more in terms of quantity of good quality, the output will be high hence increasing in national income.
• State of technology. A country with high level of technology will produce goods in large volumes hence high national income.
• Political stability. Countries which are relatively stable politically experience high production hence high national income level.
• Accuracy of accounting systems. If the methods used to gather data are accurate, then the overall statistical figures will the accurate hence reliable.
• Proportion of the subsistence sector. Subsistence sector’s output is not normally included in the statistical figures. If it represents a large proportion, therefore the national income level will be low.
• For other factors refer to Inventor book three pages 68 – 69.

Reasons why high per capita income is not an indicator of a better living standard in a country

• Statistical problems. The collection of the national income data may be inaccurate meaning that the national income figures might be incorrect hence wrong per capita income.
• Changes in money value. If the currency has been devalued, there can be change in the value of money without necessarily representing any changes in the welfare of the people.
• Income distribution. The per capita may be high even though the income is in the hands of very few people thus it is not a representative of the majority.
• Nature of products. If the products are not meant to satisfy immediate wants of the people, then an increase in per capita income may not lead to a higher economic welfare.
• Peoples’ hard work and attitude. Increased national income may mean less sleep and more worries. People have no time to enjoy what they produce and their welfare may be low despite the rise in national income.
• Social costs. People may migrate from rural areas to urban areas straining family relationships while an increase in industries may create pollution, congestion and other environmental disruptions.
• State four problems encountered in comparing standards of living in different countries using national income statistics
• Using a diagram, describe the circular flow of income.
• Explain five factors that may influence the level of national income of a country
• Outline four limitations of expenditure approach used in measuring national income.
• Explain five reasons why high per capita income may not translate to better living standards in a country.
• Describe five factors that affect the circular flow of income.
• POPULATION AND EMPLOYMENT

Population refers to the number of human beings living in a particular region at a particular time.

The size of the population is ascertained through national headcount, which is referred to as a national census. It is an international requirement that each country must hold a national census at least every ten years.

Population issues are major concerns to business people because people are consumers of goods and services as well as providers of factors of production.

Basic concepts in population

• Fertility – this is defined as the ability of a woman to give birth to a live child.
• Fertility rate – refers to the average number of children born per woman during her child bearing years in a given population.

Factors that determine fertility rate

• Literacy levels among women.
• The marriage rate among people in the productive age bracket.
• Cost of bringing up children.
• Economic significance of a large family, e.g. children seen as a source of cheap labour e.t.c.
• Cultural beliefs e.g. where many children were a source of prestige.
• Availability of medical facilities.
• Religious factors e.g. where some religions prohibits use of family planning
• Birth rate – refers to the number of live births per 1000 people per year. This is also referred to as crude birth rate and may be calculated as follows:

CBR= Number of Births    x 1000    

Total population

Factors that are likely to lead to high birth rates

• Cultural practices e.g taking children as security during old age.
• Early marriages prolomnging the woman’s reprodcutive life.
• Children being seen as a sou=rce of cheap labour.
• Where people are opposed to family planning methods
• Ignorance- lack of knowledge to family planning methods
• Religious beliefs which encourage large families and discourage use of family planning methods.

Factors that may lead to decline in birth rates

• Delayed marriages dues to such things as staying in school for long period
• Craving for high standards of living leading to people having few children
• Where small families are considered fashionable
• Use of family planning methods
• Availability of retirement schemes making people to stop children as security in old age.
• Mortality/death rate – refer to the number of people who die per thousand people per year. Is also known as natural attrition rate and may be calculated as follows:

MR= Number of death   x 1000    

• Infant mortality rate- refers to the number of child deaths per thousand children below the age one year per annum.
• Population growth rate – refers to the rate at which the population of a country is increasing or decreasing. It can be calculated as follows.

This is a special ledger which is used to record cash and cheque transactions.

It contains only the cash in hand and cash at bank (i.e. cash and bank) accounts

• Nominal ledger

This ledger is used to record business expenses and incomes (gains).It contains all the nominal accounts.

• Private ledger

This ledger is used in recording private accounts i.e. confidential and valuable fixed assets and the personal accounts of the proprietors such as capital accounts and drawing accounts.

• The general ledger

The general ledger contains all other accounts that are not kept in any other ledger e.g. buildings, furniture and stock accounts.

-Personal accounts of debtors or creditors who do not arise out of sale or purchase of goods on credit are found in the general ledger e.g. debtors as a result of sale of fixed asset on credit and expense creditors.

• C) Private accounts

These are accounts that the business considers to be confidential and are not availed to everybody except the management and the owners.

-These accounts may be personal or impersonal.

-They include capital account, drawings accounts, trading, profit and loss accounts.

Types of ledgers

The following are the main types of ledgers that are used to keep the various accounts

• The sales ledger (Debtors ledger)

This is the ledger in which accounts of individual debtors are kept.

-It is used to record the value of goods sold on credit and the customers to whom the credit sales are made, hence contains the personal names of the debtors.

-It is called a sales ledger because the accounts of debtors kept here in are as a result of sale of goods on credit. An account is kept for each customer to which is debited the value of credit sale. Payment made by the debtor are credited to the account and debited in the cash book.

• Purchases ledger(creditors ledger)

The purchases ledger contains accounts of creditors i.e. contains the records of the value of goods bought on credit and the suppliers of such goods.

It is a record of the debts payable by the business due to credit purchases.

An account is kept for each creditor to the credit side of which is posted the value of.

• b) Impersonal accounts

This category of ledger accounts includes all other accounts that are not personal in nature e.g. buildings, purchases, rent, sales and discounts received.

Impersonal accounts fall into two types

• Real accounts
• Nominal accounts
• Real accounts; These are accounts of tangible assets or property e.g. buildings,land,furniture,fittings,machinery,stock,cash(at bank and in hand)e.t.c

These accounts are also used to draw up the balance sheet.

• Nominal accounts; These are accounts of items that relate to gains and losses and whose balances at the end of the accounting period.

-All expenses, revenues, sales and purchases are hence nominal accounts.

-The main business expenses include purchases,sales,returns,insurance,stationary,repairs,depreciation,heating,discount allowed, lighting interests,printing,wages,rent,rates and advertising.      

The value of losses is included in the same side as the expenses when drawing up the final accounts though it is not an expense.    

-The income (revenues) include sales,returns,claims out, interest receivable, dividends receivable and commission receivable. Profit is usually categorised together with these incomes when drawing up the final accounts.

Classification of ledger accounts

Many businesses handle few transactions, hence they have few records to keep. Their accounts can thus be kept in a single ledger referred to as the general ledger

As a business grows the volume of transactions increases. This single ledger, therefore, becomes very bulky with accounts and it becomes difficult to make reference to it.

In order to simplify the recording of transactions and facilitate reference to the accounts, ledger accounts are usually classified and each category kept in a special ledger.

NOTE (i) Since many transactions are cash transactions which are normally recorded in the bank and cash accounts a need arises to remove them from the main/general ledger to a separate ledger called the cash book.

(ii)  The number of ledgers kept depends on the size of the business.

Classes of accounts

All accounts can be classified into either personal or impersonal accounts.

• Personal accounts

-These are account of persons

-They relate to personal, companies or associations.

-They are mainly accounts of debtors and creditors.

NOTE: capital account is the proprietors personal account, showing the net worth of the business hence it is a personal account.

-The account balances of these accounts are used to draw up the balance sheet.

-In the ledger, the trial balance total is not affected.

Purpose of a trial balance

The purpose of a trial balance include;

• Checking the accuracy in the ledger accounts as to whether;

i-The rule of double entry has been adhered to or observed/ complied with.

ii-There are arithmetical errors in the ledger accounts

• Gives a summary of the ledger i.e. summary of the transactions which have taken place during a given period
• Provide information (account balances) for preparing final accounts such as the trading account, profit and loss account and the balance sheet.
• Test whether the ledger account balances have been posted to the right side of the trial balance.

Limitations of a trial balance

Even when the trial balance totals are equal, it does not mean that there are no errors made in the ledgers. This is because there are some errors that do not affect the trial balance.

A trial balance only assures the book keeper that the total of debit entries is equal to total credit entries. The errors that do not affect the trial balances are;

• Error of total omission; This occurs when a transaction takes place and nothing about it is recorded in the books of accounts i.e. it is completely omitted such that neither a credit nor a debit entry is made in the ledgers.
• Error of original entry; this occurs where both the debit and credit entries are made using similar but erroneous figures. As the wrong amount is recorded in the two accounts.
• Error of commission; This occurs where double entry is completed but in the wrong persons accounts especially due to a confusion in names e.g. a debit entry of shs.2000 was made in Otieno’s account instead of Atieno’s account.
• Compensating errors; These are errors whose effects cancel out e.g. over debiting debtors account by sh.300 and under debiting cash account by sh.300.
• Complete reversal of entries; This occurs where the account to be debited is credited and the account to be credited is debited e.g. the sale of goods to Lydia on credit may be recorded as follows;

Dr.sales a/c

Cr.Lydius a/c              instead of

Dr.Lydius a/c

Cr.sales a/c

• Error of principle; This is where a transaction is recorded in the wrong account of a different class from the correct one e.g. repairs of machinery was debited in the machinery instead of debiting the repairs account.

TRIAL BALANCE

-A trial balance is a statement prepared at a particular date showing all the debit balances on one column and all the credit balances on another column.

NOTE: A trial balance is not an account but merely a list of assets, expenses and losses on the left and capital liabilities and incomes (including profits) on the right.

-The totals of a trial balance should agree if the double entry has been carried out correctly and there are no arithmetic errors both in the ledger as well as in the trial balance itself.

-If the two sides of a trial balance are not equal, it means there is an error or errors either in the trial balance or in the ledger accounts or in both.

Errors that may cause a trial balance not to balance

• Partial omission; A transaction was recorded on only one account i.e. a debit or a credit entry might have been omitted in one of the affected accounts.
• Transfering (posting); a wrong balance to a trial balance.
• Different amounts for the same transaction might have been entered in the accounts(Amount Dr.different from amount cr)
• Failure to post a balance to the trial balance (omission of a balance from the trial balance.
• Posting a balance to the wrong side of the trial balance
• Recording a transaction on the same side of the affected accounts(partial reversal entry)
• Arithmetic mistakes might have been made when balancing the ledger accounts
• Arithmetic errors in balancing the trial balance.

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The 70 Best Business Topic Ideas for Presentations and Research Papers for College Students

Find your perfect business degree.

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Education is not just about listening to instructors expound on theories and learning from their lectures. A good part of life for college students also revolves around doing presentations and writing research papers; therefore, you will need to acquire an excellent research topic about business.

Business topics for presentations and research papers range from traditional ideas, such as business management and economics, to more modern topics, such as digital transformation and e-commerce. In any case, a good research paper and presentation topic will be meaningful, timely, and interesting to an audience.

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A research paper is a good measure of a student’s understanding of the topic. It allows them to apply what they learned by tackling certain subjects relevant to their course. By developing their ability to communicate through oral and written exercises, research papers shape the accuracy and integrity of your thoughts. Let us help you find the right research topic about business!

Why Choose the Right Business Topic Ideas?

A great business research paper requires a topic that is relevant and one that will distinguish it from other papers. While business is prevalent in society and the global stage in general, it is still not that easy to frame a topic that will be fresh and applicable to today’s world.

After all, thousands of research have already been done when it comes to business. It can be a real challenge to find something that has not been studied yet or add anything new and valuable to those that already exist. But it is indeed possible to look into the present situations and developments and identify new angles from existing research to make it applicable in the modern age.

Choosing the right business topic ideas will give you an easier time when you need to do research and start writing it. A good topic considers your field of interest and your subject, leading you to a research paper that will not only help you acquire the best grades but also expand and test your knowledge and research skills. And because writing a research paper should factor in social impact, it requires extensive and consistent study as opposed to sporadic and casual reading.

Tips for Picking the Best Business Topic Ideas

When starting a research paper or class presentation, the most challenging part is always getting started. It is ideal for students to develop the skill of producing a good research topic. These tips might help.

• Brainstorm for ideas on your field of study. You can do this by asking the right questions, such as “ What problems do businesses face these days?” You can also get inspiration from the news regarding business, finance, and economics.
• Prepare a list of keywords and concepts to choose from. Use this to form a more focused research topic as well.
• Read up on the chosen keyword or concept. When you’ve decided, start to learn more about it by reading the background information for a good overview.
• Give the topic a greater focus but be careful not to make it too broad or too narrow. To be sure, keep the subject limited in the areas of geography, culture, time frame, or discipline.

Business Topic Ideas for the Different Fields of Business

Business communication.

It is common for information to be shared between the company and its employees or the company and its customers. Effective communication within or outside of the business is vital for a company to function. Business communication is a continuous process that can be done in many ways and various channels.

When a business has good communication with its internal and external affairs, it can run smoothly. It is vital in transmitting information that can impact the industry and its success. For business communication students, finding a topic that can best suit their research papers is not that hard when they understand its importance and how it can affect the running of a business.

Here is a list of topic ideas that can help business communication students:

• The different ways men and women communicate in the business environment
• The effects of good business communication on business development and growth
• Communication and its relation to marketing effectiveness
• How effective communication can help in dealing with global companies
• The theories of communication and their different roles in the corporate world
• How communication influence decision-making within the company
• The effect of communication in overcoming business challenges
• Effective communication skills in the management sector
• Convincing customers to buy products through good communication
• How business communication and effective marketing go hand in hand

Business Administration

When it comes to business administration programs, students are required to think of research topics that resolve a particular subject in an area of specialization. The issues are not expected to be broad or new; instead, they must be able to get the message across regarding the areas covered by the degree program. It can be ideas on business management, leadership skills, communication methodologies, business policies, trade, and commerce, or financial management.

Here are some of the relevant and exciting topics for business administration:

• How does management affect an organization’s performance?
• The effects of advertisement on consumer behavior
• In what ways can human resources promote industrial harmony?
• The Impact of staff motivation incentives on productivity
• The everyday challenges of small and medium enterprises at the start of trade
• Short-term management and its risks
• How does corporate sustainability affect the organizational process?
• Weighing the pros and cons of startup and established companies
• The strategy of corporate sustainability
• The roles of budget analysis and budgetary controls on an organization’s operation

Business Ethics

There is a connection between ethics and global business. Two of the essential foundations of global commerce are business ethics and corporate responsibility. Studying Business Ethics is vital for many Business majors. This is where they learn how businesses should treat their employees and other organizations in global and local contexts.

Today, the business environment has changed drastically, owing mostly to government policies and political stability. To keep up with the current dynamics, ethical principles and moral-ethical problems must be advanced.

Courses related to business ethics must carefully choose topics that address common issues and improve businesses in terms of ethical practices. Some of the ideas students can explore for Business Ethics research and presentation include:

• The impact of gender discrimination on employees’ performance
• The effects of a company’s environmental practices on consumer trust
• Examine the repercussions of abuse of laborers in the construction industry
• The connection between profit-seeking and product quality
• Misleading advertisements and their impact on consumers’ trust levels
• The importance of trust in modern economics
• How do companies make a difference to global problems?
• Are companies accountable when consumers misuse their products?
• The ways a company can create a healthy and more balanced work environment
• Does workplace diversity play an important role in productivity?

Small Business

he evolution of small businesses in the digital era is an interesting study for many Business major students. It is true that big companies and organizations can shell out massive amounts for advertising and brand enhancement, but they can still lose out to small businesses, especially in niches like flower shops, coffee houses, and bakeries.

That is only one aspect of small businesses. There are many more areas that students can explore to understand the issues and ideas that surround small companies and their ability to compete with their giant counterparts. Take a look at some of these research topics:

• What struggles do small business owners encounter in marketing?
• Digital marketing and its impact on small businesses
• How should small companies deal with a crisis?
• Is relationship building important for small businesses?
• The common products that consumers purchase from small companies
• The impact of online marketing strategy on conversion and revenue growth
• The challenges of starting a small company
• How can small companies contribute to global change?
• The effect of a business plan on small business growth
• Finance models for different spheres of small business

Business Management

As one of the most significant tasks for many businesses and organizations, business management focuses on planning and organizing. Like the Business Administration programs, Business Management includes marketing, accounting, economics, and finance as its core subjects.

Professors often give research assignments to business students to measure their analytical skills and understanding of supervising a business or managing people.

We’ve gathered some of the most interesting research topics for Business Management courses:

• How did the rapid technological developments revolutionize marketing?
• What is sustainable development and what is its impact on modern businesses
• Frugal innovations to help small to medium businesses create value for profits and return?
• Why companies should enshrine corporate social responsibility
• Keeping the balance between employee expectations and the organization’s profit
• The role of financial managers in maintaining records of business expenses
• How does employee motivation increase the earnings of organizations?
• The importance of a digital marketing strategy to small businesses
• Understanding the process of taxation and its relation to the profit of the business
• How to handle a crisis in an organization

Global Business

The age of globalization has dawned, and businesses must adapt to the changes and repercussions it brings. Globalization has a way of influencing the trends in the market and how companies should approach consumers. It can also determine the emerging marketing methods that can contribute to the success of an organization.

Students who study global business aim to understand how companies around the world are connected. When they look at the industry from an international perspective, they will be able to navigate the impact of boundaries and cultures on the operation and management of global companies. Developing a global mindset is essential.

Keep these ideas in mind when exploring topics for their research paper:

• The challenges of company expansions to different countries
• Examining world markets and how they benefit from globalization
• How does globalization affect consumer behavior
• The rise of the foreign exchange market in the era of globalization
• Going digital and its effects on international business
• The influence of culture on marketing and branding
• The advantages and disadvantages of outsourcing the business
• The many ways for foreign companies to handle scam
• How can war impact company profits around the world?
• The different structures suitable for international business

Business Law

Also known as mercantile law or commercial law, business law governs the dealings between people and commercial matters. It can be divided into two areas. One is the regulation of commercial entities with a basis on laws of partnership, company, and bankruptcy.

The other is the regulation of commercial transactions through the laws of contract. Students who are in the field of business law must know how to stop problems before they can hurt the organization or bring about legal repercussions.

Searching for topics in this field can be daunting but doable. To inspire students, we have listed down some ideas that can help them with their research and presentation:

• The various ways a company can curtail harmful human behaviors in the workplace
• Examining the effectiveness of penalties on serious work infractions
• How companies offer treatment in cases of workplace accidents
• When are data confidentiality policies applicable in a business?
• The lawful ways to regulate online gambling websites
• The importance of copyright and trademark on businesses
• A comparative analysis of business laws in the Western and Eastern World
• How do laws impact e-Commerce?
• The implications of data privacy on businesses and consumers
• Looking at data privacy laws from an international perspective

When the most viable picks for research topics have been provided, it is time to choose the most suitable one for a specific area of specialization and field of interest. A careful study of the issue at hand and selecting a topic that encompasses the academic course or specialization will do the trick.

While you are at it, it is vital to find the balance between a relevant and original topic and an interesting one. Remember, a presentation and research paper do not have to be uninteresting to be effective. Your selected research topic about business is important, so choose wisely. Pick something that you are interested in, and the rest will follow.

Frequently Asked Questions

What are the basic things to know about delivering a successful presentation.

• Have Effective Content: Make sure the content of your presentation is relevant, organized, accurate, and concise. Use visuals and examples to support your points.
• Practice: Take the time to practice your presentation. Practicing out loud may help you identify any issues in the presentation, as well as anticipate how your audience may respond.
• Engage your Audience: Establish a connection with your audience by using eye contact, gestures, and speaking clearly.
• Use Visual Aids: Incorporate visuals like PowerPoint slides, posters, and other props to make your presentation more dynamic.
• Be Positive: Present your material with enthusiasm and confidence. Even if you don’t feel confident in what you’re presenting, practice your material until you feel more comfortable.

What are the top components of a business presentation?

• Visuals: Visuals such as slides, graphs, diagrams and videos help draw and keep the audience’s attention and ensure that the message is clear.
• Content: Content is the main part of a business presentation and is made up of talking points, summaries, facts and figures.
• Delivery: Delivery refers to the style and method used to present the content and visuals. This includes the presenter’s body language and vocal delivery.

What must be avoided in any presentation?

• Rambling or becoming distracted
• Being overly verbose or using unduly complicated language
• Reading from written notes most of the time
• Not rehearsing and/or not knowing the material
• Not engaging with the audience
• Glancing at the slides too often
• Focusing on slides with too many words or too much detail
• Apologizing for the presentation
• Failing to make connections and summarize key points
• Talking too quickly or loudly

Watch this YouTube video for examples of do’s and dont’s:

Check this out: THE BEST BUSINESS PROGRAMS WITH NO APPLICATION FEE

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AQA A Level Business Study Resources for 3.3 - Decision-Making to Improve Marketing Performance

Last updated 27 Oct 2019

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This collection of study resources is designed to support students exploring Section 3.3 (Decision-Making to Improve Marketing Performance) of the AQA A Level Business specification.

Key Topic Videos

Primary market research explained.

Topic Videos

Secondary Market Research Explained

Quantitative and qualitative marketing research, sampling and marketing research, positive and negative correlation, confidence intervals, price elasticity of demand, income elasticity of demand, segmentation, targeting and positioning (marketing), market mapping (positioning), niche and mass markets (introduction), extended marketing mix (7p's), consumer goods and industrial goods, the boston matrix explained video, product life cycle, pricing strategies: price skimming, pricing strategies: penetration pricing, pricing strategies: dynamic pricing, pricing strategies: cost-based pricing, value of branding, multi-channel distribution, digital marketing (overview), technology & marketing decision making, interactive learning activities, 3.3 decision making to improve marketing performance - impossible 5 revision activity.

Quizzes & Activities

Key Topic Study Notes

Internal and external influences on marketing objectives.

Study Notes

Why is market research needed?

Primary market research, secondary market research, marketing research - sampling, correlation, market segmentation, market mapping, niche markets and mass markets, market positioning, target market, consumer and industrial products, boston matrix (product portfolio model), pricing strategies and tactics - introduction, pricing and business objectives, price skimming, penetration pricing, dynamic pricing, brands and branding: introduction, place (distribution) - introduction, distribution channels, digital marketing, technology and marketing decision-making, our subjects.

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Managing Anger, Frustration, and Resentment on Your Team

• Nihar Chhaya

Four strategies to help managers respond with compassion.

Anger and resentment across your team can make an already stressful leadership job feel worse. But how you respond to your employees’ frustrations is critical to ensuring negative emotions don’t limit your effectiveness. The author offers four recommendations to try: 1) Balance your emotions first before reacting to your team’s frustration. 2) Lean into their anger with an intent to learn. 3) Redesign team goals together. 4) Build deeper trust by owning your part.

With so much instability in the workplace these days, you may feel untethered in your daily job responsibilities as well as your long-term career. And when insecurity leads to frustration, it can be hard to keep your temper. But when you are in a leadership role, you face an even more formidable challenge: managing your team’s moods without letting their episodes of anger impair your effectiveness.

• Nihar Chhaya  is an executive coach to senior leaders at global companies, including American Airlines, Coca-Cola, DraftKings and Wieden+Kennedy.    A former F500 corporate head of talent development, he is the President of  PartnerExec , helping leaders master influence for superior business and strategic outcomes. You can sign up for Enviable, his weekly newsletter .  

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3 Ways to Humanize Your Asynchronous Course

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• Classroom Management
• Digital Learning
• Student Engagement

I n face-to-face courses, there are many spontaneous points of contact when we can solicit feedback from our students and get a sense of how they are doing. Students ask questions before, during, and after class, and sometimes we can tell when they are struggling just by looking at their faces. This instant and informal feedback allows us to adjust our classes on the fly.

In asynchronous online courses, these live feedback elements are removed. If students are confused, they must take the initiative to contact us through email or virtual office hours . Often, it seems that they don’t bother reaching out—no matter how many times we remind them to contact us with questions.

This leaves many of us to merely hope that our students are understanding and engaging with the course material. But this doesn’t sit right with me; I want my students, instead of drifting alone in the digital void, to feel like they are in a class with other human beings.

To encourage this proactive communication and help my students experience the human side of online courses, I made the following three changes to my asynchronous classes. Since implementing these new approaches, I’ve received substantive positive feedback from my students; they’ve said they feel more connected to me as their instructor, better understand the course content, and have an improved sense of their learning progress.

1. Don’t wait for students to come to you—actively seek out their feedback

Last semester, I decided to stop waiting for my online students to make the first move and instituted mandatory (i.e., graded) weekly feedback surveys . They worked shockingly well. Throughout the course, I had a much better sense of how my students were doing compared to previous semesters.

Here’s how I do it.

I set up graded surveys in the learning management system (LMS). My asynchronous class was set up to run with weekly modules due by Sunday night. In each week’s assignments, I included a short feedback survey using my LMS quiz tool. The survey asked just one question: “What content did you find most challenging or confusing this week?” I chose to ask this specific question so I could focus on responding to students’ biggest obstacles, and I asked only one question to keep the survey from feeling burdensome to students. To incentivize them to answer, I set my LMS to give them a small number of points upon completion (in total, surveys amounted to three percent of the course grade).

“Delivering online asynchronous learning that feels like a personal, human experience—rather than a one-sided conversation with a computer—doesn’t come without planning.”

I promptly review and respond to surveys. If students were required to complete these surveys, I knew I needed to actively respond to some of the overlapping themes I saw in their answers. So every Monday morning, I set aside 45–60 minutes to review the survey results and create a response video (using a webcam and screen capture software; my personal favorite is Open Broadcaster Software). I’d focus on one or two main areas of confusion for students and provide additional examples. I shared this video with my students in an LMS post, along with other course announcements and reminders (more on that later).

Some students used the surveys to ask more specific and procedural questions (e.g., “Can you tell me why I got number three on the quiz wrong?”) or they asked a content question that I didn’t address in the video. For these students, I responded to them in writing. If a student felt entirely lost on the week’s content, I reached out to them directly to set up a time to meet during virtual office hours.

Implementing this approach in my asynchronous classes brought a sense of connection that had been missing, and the students seemed to enjoy this connection as well. One student said, “The check-in assignments are awesome because they encourage students to ask for help when they need it. It’s a great way to promote a supportive learning environment and make sure everyone gets the assistance they need. Plus, getting rewarded for seeking help is a fantastic incentive to reach out and clarify any doubts. It’s a win-win situation!”

2. Guide your students with a personal touch

In face-to-face classes, guiding students’ attention is fairly simple (e.g., “All eyes up front; I have a special announcement”). In asynchronous courses, it’s harder. Written announcements don’t command the same attention; they can be easily ignored, especially if your course is just one of several other courses a student is taking. I’ve never been a full-time asynchronous student, but I cringe whenever I think about what it must be like to deal with four to six courses worth of LMS pages, emails, and written announcements. It’s a lot to sift through, and students need more help to direct their efforts.

I’ve found two things help with this.

I post one announcement video each week and show my face. In addition to the response video in my LMS, I post a second announcement video (with my webcam on) each Monday morning. This achieves a few objectives:

It adds a personal touch. To start each week, students are reminded there is a human being teaching their course. A friendly face, plus a short comment about a good movie I just watched or something funny my four-year-old did over the weekend, can help remind students that I am a person, I am approachable, and I am there to help them in the course.

It’s efficient. I can give feedback, clear up confusion, and make announcements in short videos much more efficiently than having students hunt for information in our LMS course. It’s also often more efficient to show students something via screen capture, rather than having them read a written description. When I record the videos, I try to keep them as short as possible out of respect for students’ time, while making sure they still convey the information they need to know.

It’s consistent. My students know to expect the video on Monday morning, and they also know it’s the main source of information from me each week. Obviously, things come up that require subsequent announcements from time to time. But, as a general rule, I accumulate information throughout the week and send all of it to students in the Monday morning video. It reduces students’ mental load to know that I’m going to get them all the information they need in one short video at the same time each week.

“I’ve never been a full-time asynchronous student, but I cringe whenever I think about what it must be like to deal with four to six courses worth of LMS pages, emails, and written announcements. It’s a lot to sift through, and students need more help to direct their efforts.”

If you’re not happy with the rate at which students are watching these videos, here’s an easy way to incentivize them: Pick a number each week and disclose that number at a random point in each announcement video. Then set up an auto-graded quiz in your LMS each week that awards a small amount of course points for correctly identifying that week’s number.

I provide a written weekly guide. In each weekly module in my LMS, I have a page that tells students exactly what to do that week, typically organized by learning objectives. Rather than a student being told “Read chapter five, watch all these videos, and do the chapter five homework,” the weekly guide leads them narratively through shorter readings, videos, and activities for each learning objective. (I offer an example below.) It’s a way to personally guide asynchronous students through the learning process.

Here’s how to set up a weekly guide. (This is a guide I created in the LMS for my accounting class, as an example. Keep in mind that it’s just a screenshot, so the hyperlinks and videos won’t work.)

At the top of the page, give a brief introduction of the week’s topic.

List everything that is due for the week in a concise bulleted list.

Go through each learning objective in order. For each learning objective, do the following:

Describe the objective and why it’s important.

Tell students which readings relate to the objective and what each reading covers.

Give links to any video materials students should watch, as well as any handouts that accompany the videos. Describe what is in each video so students know what to expect.

Link to any practice assignments for the learning objective.

At the bottom, link to your email address or discussion forums in your LMS so students can quickly ask for help if needed.

I keep the tone conversational yet professional, and I make sure to point out when something is particularly important or tricky, just like I would in a face-to-face course. Students seem to appreciate the extra help in keeping organized and frequently mention the weekly guides as a strength in their course evaluations.

3. Incentivize connection and good communication in group projects

In asynchronous courses, students can (hopefully) expect prompt and helpful communication from their instructors. Unfortunately, classmates can be a different story, turning group projects into frustrating exercises.

To address this issue, I have implemented graded group-project planning discussions. These written discussions, which take place in the LMS, are graded on completion and on-time submission. The focus of these discussions is on the logistics of completing the project, including division of labor, best methods of communication, and group-imposed deadlines for completion and review of work. For example, if I expect a group to be working on a project during week four, I assign the planning discussion over weeks two and three (i.e., they must make introductory posts in week two and response posts in week three). The intent is that, by the time week four begins, the group already has a plan and a mutual understanding of how to proceed.

“A friendly face, plus a short comment about a good movie I just watched or something funny my four-year-old did over the weekend, can help remind students that I am a person, I am approachable, and I am there to help them in the course.”

These discussions signal to students that I care not just about their final group project submission, but about how conscientious they are in terms of timely communication with their group members. Students hopefully get the message that it’s rude to leave fellow group members hanging, and the class points associated with the discussion incentivize students to be responsive.

This current semester is the first time I’ve implemented this strategy, but it already appears to be working. Thus far, students in two different asynchronous classes have turned in group projects. The students’ peer evaluations of each other were largely unproblematic; compared to previous semesters, I received fewer emails from students complaining that they couldn’t get a group member to respond to emails or contribute to the group’s work. The only time I had to personally step in to facilitate communication, it turned out to be a technical problem, not a human communication failure. I’m optimistic things will continue to go well, and these planning discussions will become a permanent tool in my courses.

Approaching asynchronous communication with intentionality and personality

Delivering online asynchronous learning that feels like a personal, human experience—rather than a one-sided conversation with a computer—doesn’t come without planning. I have learned (often the hard way) that communication in asynchronous courses needs to be much more intentional and deliberate than in face-to-face courses. Without these planned communication points, I had way too many instances of students waiting to ask for help until it was too late, ignoring written announcements, getting confused about due dates, and having needlessly frustrating group project interactions.

Implementing these strategies has helped my students avoid many of these pitfalls, and I hope they help yours as well. Now that I include these elements in my courses, I know that my students are aware that they have an active, attentive, and responsive professor ready to help them, rather than an impersonal instructor who built a course, turned it on, and stepped away.

Jill Weber is an associate professor in the accounting department at the University of Wisconsin-Whitewater. She has taught numerous sections of fully-online, asynchronous courses since 2018 and is an active participant in online course quality initiatives within her institution.

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April 2, 2024, update for Office 2016 (KB5002452)

This article describes update 5002452 for Microsoft Office 2016 that was released on April 2, 2024.

Be aware that the update in the Microsoft Download Center applies to the Microsoft Installer (.msi)-based edition of Office 2016. It doesn't apply to the Office 2016 Click-to-Run editions, such as Microsoft Office 365 Home. (See  What version of Office am I using? )

Improvements and fixes

This update removes the Organization Chart Add-in for Microsoft Office programs  object type because of insufficient support for an extended range of supported characters.

Note:  To get the improvement, you have to install  KB 5002572  together with this update.

How to download and install the update

Microsoft Update

Use Microsoft Update to automatically download and install the update.

Download Center

This update is available to manually download and install from the Microsoft Download Center.

Download update 5002452 for 32-bit version of Office 2016

Download update 5002452 for 64-bit version of Office 2016

If you're not sure which platform (32-bit or 64-bit) you're running, see  Am I running 32-bit or 64-bit Office?  Additionally, see  more information about how to download Microsoft support files .

Virus-scan claim

Microsoft scanned this file for viruses by using the most current virus-detection software that was available on the date that the file was posted. The file is stored on security-enhanced servers that help prevent any unauthorized changes to it.

Update information

Prerequisites

To apply this update, you must have Microsoft Office 2016 installed.

Restart information

You might have to restart the computer after you install this update.

More information

How to uninstall this update.

Windows 11 and Windows 10

Go to  Start , enter Control Panel in the search box, and then press Enter.

In the Control Panel search box, enter Installed Updates .

In the search results, select  View installed updates .

In the list of updates, locate and select  KB5002452 , and then select  Uninstall .

File information

The English (United States) version of this software update installs files that have the attributes that are listed in the following tables. The dates and times for these files are listed in Coordinated Universal Time (UTC). The dates and times for these files on your local computer are displayed in your local time together with your current daylight saving time (DST) bias. Additionally, the dates and times may change when you perform certain operations on the files.

Learn about the standard  terminology  that is used to describe Microsoft software updates.

The  Office System TechCenter contains the latest administrative updates and strategic deployment resources for all versions of Office.

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Producer's death surrounds Netflix's '3 Body Problem': What to know about the 2020 poisoning

A former gaming executive was sentenced to death last month in china for fatally poisoning lin qi, a billionaire whose yoozoo games had links to '3 body problem' on netflix..

A former gaming executive was sentenced to death last month in China for the murder of a billionaire credited as a producer on Netflix's sci-fi series " 3 Body Problem ," according to multiple reports.

Xu Yao was arrested in 2020 shortly after Lin Qi, the founder of the high-profile Chinese gaming company known as Yoozoo Games, was poisoned to death at the age of 39. Shanghai First Intermediate People’s Court found Xu guilty of murder on March 22, the day after "3 Body Problem" premiered on Netflix.

According to the New York Times , Xu had become "disgruntled" after he felt sidelined within the company and set about on a murderous plot to exact revenge on Lin and others within Yoozoo Games, also known as Youzu Interactive.

Lin died 10 days after ingesting tea that Xu reportedly poisoned, according to reports. Four other people in the office who drank poisoned beverages between September and December 2020 also became sick but did not die, according to court records cited by the Associated Press .

What is '3 Body Problem'? Explaining Netflix's trippy new sci-fi and the three-body problem

Yoozoo Games holds rights to book behind '3 Body Problem'

Yoozoo Games owns the adaptation rights to "Remembrances of Earth's Past," a best-selling science fiction trilogy by Chinese author Liu Cixin that is the basis of the Netflix series " 3 Body Problem ."

Created by " Game of Thrones " showrunners David Benioff and D.B. Weiss , the Netflix series tells the story of a humanity confronting a terrifying cosmic threat kicked off by a fateful experiment in 1960s China. Alexander Woo, "True Blood" and "The Terror" writer, also serves as an executive producer on the series, which Yoozoo granted Netflix the right to adapt in 2020.

But it's hardly the first adaption of Liu's books.

Lin, who founded Yoozoo in 2009, reportedly spent millions of dollars in 2014 buying up copyrights and licenses connected to the trilogy in the same year it was first translated into English, the Times reported. The book series, which counts former President Barack Obama as a fan , has also spawned a stage adaptation, an animated series, and the Chinese-language series "Three-Body" that premiered last year.

Lin was credited posthumously as an executive producer on the series .

Lin also hired Xu in 2017 to head a subsidiary of Yoozoo called The Three-Body Universe that held the rights to Liu's novels, according to media reports. However, Xu's poor performance led to a demotion and pay cut less than three years later,  The Times reported , citing Chinese media.

Xu Yao began poisoning colleagues over business dispute

The demotion, paired with a dispute over the running of the busines, is reportedly what motivated Xu to begin poisoning his colleagues three months after the Netflix deal was brokered, according to reports.

Lin is believed to have been fatally poisoned after he ingested a beverage that Xu had laced with poison, the court heard, as reported by the AP. The Hollywood Reporter, citing local media,  reported  at the time Lin was allegedly sickened by a cup of poisoned pu-erh tea.

Of the other four who were sickened by the poisoned food, one of them was Xu's replacement as the head of the subsidiary, according to the Times.

After Lin died, the  BBC reported  that his company issued an emotional statement on its official Weibo microblog.

"Goodbye youth," it said, adding, "We will be together, continue to be kind, continue to believe in goodness, and continue the fight against all that is bad."

Eric Lagatta covers breaking and trending news for USA TODAY. Reach him at [email protected]

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Israel’s Deadly Airstrike on the World Central Kitchen

The story behind the pioneering aid group and how it mistakenly came under attack..

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”

The Israeli airstrike that killed seven aid workers delivering food in Gaza has touched off outrage and condemnations from across the world. Today, Kim Severson on the pioneering relief crew at the center of the story, and Adam Rasgon on what we’re learning about the deadly attack on the group’s workers. It’s Thursday, April 4.

Kim, can you tell us about the World Central Kitchen?

World Central Kitchen started as a little idea in Chef José Andrés’ head. He was in Haiti with some other folks, trying to do earthquake relief in 2010. And his idea at that point was to teach Haitians to cook and to use solar stoves and ways for people to feed themselves, because the infrastructure was gone.

And he was cooking with some Haitians in one of the camps, and they were showing him how to cook beans the Haitian way. You sort of smash them and make them a little creamy. And it occurred to him that there was something so comforting for those folks to eat food that was from their culture that tasted good to them. You know, if you’re having a really hard time, what makes you feel good is comfort food, right? And warm comfort food.

So that moment in the camp really was the seed of this idea. It planted this notion in José Andrés’ mind, and that notion eventually became World Central Kitchen.

And for those who don’t know, Kim, who exactly is Chef José Andrés?

José Andrés is a Spanish chef who cooked under some of the Spanish molecular gastronomy greats, came to America, really made his bones in Washington, DC, with some avant-garde food, but also started to expand and cook tapas, cook Mexican food. He’s got about 40 restaurants now.

Yeah. And he’s got a great Spanish restaurant in New York. He’s got restaurants in DC, restaurants in Miami.

Come with me to the kitchen. Don’t be shy.

He’s also become a big TV personality.

Chef, are you going to put the lobster in the pot with the potatoes?

We’re going to leave the potatoes in.

Leave the potatoes in!

He’s one of the most charismatic people I’ve ever been around in the food world.

He’s very much the touchstone of what people want their celebrity chefs to be.

So how does he go from being all those things you just described, to being on the ground, making local comfort food for Haitians? And how does this all go from an idea that that would be a good idea, to this much bigger, full-fledged humanitarian organization?

So he started to realize that giving people food in disaster zones was a thing that was really powerful. He helped feed people after Hurricane Sandy, and he realized that he could get local chefs who all wanted to help and somehow harness that power. But the idea really became set when he went to Houston in 2017 to help after Hurricane Harvey.

And that’s when he saw that getting local chefs to tap into their resources, borrowing kitchens, using ingredients that chefs might have had on hand or are spoiling in the fridge because the power is out and all these restaurants needed something to do with all this food before it rotted — harnessing all that and putting it together and giving people well-cooked, delicious — at least as delicious as it can be in a disaster zone — that’s when World Central Kitchen as we know it today sort of emerged as a fully formed concept.

The first pictures now coming in from Puerto Rico after taking a direct hit — Hurricane Maria slamming into the island. And as you heard, one official saying the island is destroyed.

Shortly after that, he flew to Puerto Rico, where Hurricane Maria had pretty much left the entire island without water and in darkness.

He flew in on one of the first commercial jets that went back in. He got a couple of his chef buddies whose kitchens were closed, and they just decided to start cooking. They were basically just serving pots of stew, chicken stew, in front of the restaurants.

The lines got longer. And of course, chefs are a really specific kind of creature. They really like to help their community. They’re really about feeding people.

So all the people who were chefs or cooks on the ground in Puerto Rico who could wanted to help. And you had all these chefs in the States who wanted to fly down and help if they could, too. So you had this constant flow of chefs coming in and out. That’s when I went down and followed him around for about a week.

And what did you see?

Well, one of the most striking things was his ability to get food to remote places in ways the Salvation Army couldn’t and other government agencies that were on the ground couldn’t. You know, the Federal Emergency Management Agency, FEMA, doesn’t deliver food. It contracts with people to deliver food.

So you have all these steps of bureaucracy you have to go through to get those contracts. And then, FEMA says you have to have a bottle of water and this and that in those boxes. There’s a lot of structure to be able to meet the rules and regulations of FEMA.

So José doesn’t really care about rules and regulations very much. So he just got his troops together and figured out where people needed food. He had this big paper map he’d carry around and lay out. And he had a Sharpie, and he’d circle villages where he’d heard people needed food or where a bridge was out.

And then he would dispatch people to get the food there. Now, how are you going to do that? He was staying in a hotel where some National Guard and military police were staying to go patrol areas to make sure they were safe. He would tuck his big aluminum pans of food into the back of those guys’ cars, and say, Could you stop and drop these off at this church?

During that time in Puerto Rico, he funded a lot of it off of his own credit cards or with cash. And then he’s on the phone with people like the president of Goya or his golf buddies who are well-connected, saying, hey, we need some money. Can you send some money for this? Can you send some money for that?

So he just developed this network, almost overnight. I mean, he is very much a general in the field. He wears this Orvis fishing vest, has cigars in one pocket, money in the other. And he just sets out to feed people.

And there were deliveries that were as simple as he and a couple of folks taking plastic bags with food and wading through a flooded parking lot to an apartment building where an older person had been stuck for a few days and couldn’t get out, to driving up to a community that had been cut off. There was a church that was trying to distribute food.

We drive through this little mountain road and get to this church. We start unloading the food, and the congregation is inside the church. José comes in, and the pastor thanks him so much. And the 20 people or so who are there gather around José, and they begin praying.

And he puts his head down. He’s a Catholic. He’s a man who prays. He puts his head down. He’s in the middle of these folks, and he starts to pray with them. And then, pulls out his map, circles another spot, and the group is off to the next place.

And when Russia invades Ukraine, he immediately decided it was time for World Central Kitchen to step into a war zone. You know, so many people needed to eat. So many Ukrainians were crossing the border into Poland.

There are refugees in several countries surrounding Ukraine. So a lot of the work that they did was feeding the refugees. They set up big operations around train stations, places where refugees were coming, and then they were able to get into cities.

One of their operations did get hit with some armaments early on. Nobody was hurt badly. But I think that was the first time that they realized this was an actually more dangerous situation than perhaps going in after there’s been an earthquake.

But the other thing that really made a difference here is, José Andrés and World Central Kitchen would broadcast on social media, live from the kitchens. In the beginning, he’d be holding up his phone and saying, we put out 3 million meals for the people of Puerto Rico, chefs for Puerto Rico. It was very infectious.

And now, one of the standard operating procedures for people who are in the World Central Kitchens is to hold up the phone like that — you can see the kitchen, busy in the back — and talk about how many meals they’ve served. They have these kind of wild meal counts, which one presumes are pretty accurate. But they’re like, we served 320,000 meals this morning to the people of Lviv.

I mean, that scale seems important to note. This is not the kind of work that feeds a few people and a few towns. When you’re talking about 300,000 meals in a morning, you’re talking about something that begins, it would seem, to rival the scope and the reach of the groups that we tend to think of as the most important in the disaster-relief world.

Absolutely. And the meals — there are lots and lots and lots of meals. But also, World Central Kitchen hires local cooks. They’ll hire food truck operators, who obviously have no work, and pay them to go out and deliver the meals. They’ll pay local cooks to come in and cook. That’s what they do with a lot of their donations, which is very different than other aid organizations. And this then helps the local economy. He’s trying to buy as much local food as he can. That keeps the economy going in the time of a disaster. So that’s a piece of his operation that is a little different than traditional aid operations.

So walk us up to October 7, when Hamas attacked Israel. What does Chef José Andrés and the World Kitchen do?

Well, he had had such impact in Ukraine. And I think the organization itself thought that they had the infrastructure to now take food into another war zone. Gaza, of course, was nothing like Ukraine. But World Central Kitchen shows up. They’re nimble. They start to connect with local chefs.

Right now, they have about 60 kitchens in the areas around Gaza, and they’ve hired about 400 Palestinians to help do that. But getting the food into Gaza became the difficulty.

How do you actually get the food into the Gaza Strip? Large amounts of food that require trucks? You’ve got to realize, getting food into Gaza right now requires going through Israeli checkpoints.

And that slows the operation down. You might get eight trucks a day in, and that is such a small amount of food. And this has been incredibly difficult for any aid operations.

So World Central Kitchen, playing on the experience that they had in a war zone and working with government entities and trying to coordinate permissions — they took that experience from Ukraine and were trying to apply it in the Gaza Strip. Now, they had worked for a long time with Israeli officials. They wanted to make sure that they could get their food in.

And they decided that the best way to do it would be to take food off of ships, get it in a warehouse, and then get that food into Gaza. It took a long time to pull those permissions through, but they were able to get the permissions they needed and set this system up, so they could move the food fairly quickly into North Gaza.

And once they get those permissions, how big a player do they become in Gaza?

World Central Kitchen became a kind of a fulcrum point for getting food aid in to Gaza in a way that a larger and more established humanitarian aid operations couldn’t, in part because they were small and nimble in their way. So the amount of food they were moving maybe wasn’t as large as some of the more established humanitarian aid organizations, but they had so much goodwill. They had so much logistical knowledge.

They were working with local Palestinians who knew the food systems and who understood how to get things in and out. So they were able to find a way to use a humanitarian corridor to have permissions from the Israeli government, to be able to move this food back and forth. And that’s always been the secret to World Central Kitchen — is incredibly nimble. So —

Just like in Puerto Rico, they seemed to win over just about everybody and do the seemingly impossible.

Right. And World Central Kitchen says they delivered 43 million meals to Gazans since the start of the war. And I don’t think there was any other group that could have pulled this off.

Hey, this is Zomi and Chef Olivier. We’re at the Deir al-Balah kitchen. And we’ve got the mise en place. Tell us a little bit about it, Chef.

And then, this caravan, this fairly efficient caravan of armored vehicles, labeled with World Central Kitchen logo on the roof, on the sides — the idea was they head on — this humanitarian quarter, they head on this road. The seven people who went all in vests — three of whom are security people from Great Britain — you have another World Central Kitchen employee who has handled operations in Asia, in Central America. She’s quite a veteran of the World Central Kitchen operation.

And you have a young man who someone told me was like the Michael Jordan of humanitarian aid, who hooked up with World Central Kitchen in Poland. He was a hospitality student and had just become an indispensable make-it-happen guy. And you have a Palestinian guy who’s 25, a driver.

So this is the team. They have all the clearances. They have the well-marked vehicles. It seemed like a very simple, surgical kind of operation. And of course, now, as we know, it was anything but that.

After the break, my colleague Adam Rasgon on what happened to the World Central Kitchen workers in that caravan. We’ll be right back.

So Adam, what ends up happening to this convoy that our colleague Kim Severson just described from World Central Kitchen?

So what we know is that members of the World Central Kitchen had been at a warehouse in Deir al-Balah in the Central Gaza Strip. They had just unloaded about 100 tons of food aid that had been brought via a maritime route to the coast of the Gaza Strip. When they departed the warehouse, they were in three cars.

Two of the cars were armored cars, and one was a soft-skinned car, according to the organization. When the cars reached the coastal road, known as Al Rashid Street, they started to make their way south.

And what do we know about how much the World Central Kitchen would have told the Israeli military about their plans to be on this road?

Yeah. So the World Central Kitchen said that its movements were coordinated. And in military speak or in technical speak, people often refer to this as deconfliction. So basically, this process is something that not only the World Central Kitchen but the UN, telecommunications companies going out to repair damaged telecommunications infrastructure, others would use, where they basically provide the Israeli military with information about the people who are traveling — their ID numbers, their names, the license plate numbers of the cars they’ll be traveling in.

They’ll sort of explain where their destination is. And the general process is that the Israelis will then come back to them and say, you’re approved to travel from this time, and you can take this specific route.

And do we know if that happened? If the IDF said, you’re approved, use this route on this night?

So we heard from the World Central Kitchen that they did receive this approval. And the military hasn’t come out and said that it wasn’t approved. So I think it’s fair to assume that their movements were coordinated and de-conflicted.

OK. So what happens as this seemingly pre-approved and coordinated convoy trip is making this leg of the journey?

They started to make their way south towards Rafah. And the three cars suddenly came under fire. The Israeli army unleashes powerful and devastating strikes on the three cars in the convoy, most likely from a drone. The strikes rip through the cars, killing everyone inside.

Shortly thereafter, ambulances from the Palestine Red Crescent are dispatched to the location. They retrieve the dead bodies.

They bring those bodies to a hospital. And at the hospital, the bodies are laid out, and journalists start to report to the world that indeed, five members of the World Central Kitchen staff have been killed. And the Palestine Red Crescent teams were continuing to search for other bodies and eventually brought back two more bodies to the hospital for a total of seven people killed in these airstrikes.

And when the sun comes up, what does it end up looking like — the scene of these struck trucks from this convoy?

So early in the morning when the sun comes up, a number of Palestinian journalists headed out to the coastal road and started taking pictures and videos. And I received a series of videos from one of the reporters that I was in touch with, essentially showing three cars, all heavily damaged. One had a World Central Kitchen logo on top of it, with a gaping hole in the middle of the roof.

A second car was completely charred. You could barely recognize the structure of the car. The inside of it had been completely charred, and the front smashed.

And do we know if the strike on this convoy was the only strike happening in this area? In other words, is it possible that this convoy was caught in some kind of a crossfire or in the middle of a firefight, or does it appear that this was quite narrow, and was the Israeli army targeting these specific vehicles, whether or not they realized who was in it?

We don’t have any other indication that there was another strike on that road around that time.

What that suggests, of course, is that this convoy was targeted. Now, whether Israeli officials knew who was in it, whether they were aid workers, seems like a yet-unresolved question. But it does feel very clear that the trucks in this convoy were deliberately struck.

Yes. I do think the trucks in this convoy were deliberately struck.

What is the reaction to these airstrikes on this convoy and to the death of these aid workers?

Well, one of the first reactions is from the World Central kitchen’s founder, José Andrés.

Chef José Andrés, who founded World Central Kitchen, calling them angels.

He said he was heartbroken and grieving.

And adding the Israeli government needs to stop this indiscriminate killing.

And then, he accused Israel of using food as a weapon.

What I know is that we were targeted deliberately, nonstop, until everybody was dead in this convoy.

And he just seemed devastated and quite angry.

And so what is the reaction from not just World Central Kitchen, but from the rest of the world to this airstrike?

There’s, frankly, fury and outrage.

The White House says it is outraged by an Israeli airstrike that killed seven aid workers in Gaza, including one American.

President Biden, who has been becoming increasingly critical of Israel’s approach to this war — he came out and said that he was outraged and heartbroken.

Certainly sharper in tone than we have heard in the past. He says Israel has not done enough to protect aid workers trying to deliver desperately needed help to civilians. Incidents like yesterday’s simply should not happen. Israel also has not —

And we’re seeing similar outrage from foreign governments. The British Foreign Secretary David Cameron —

The dreadful events of the last two days are a moment when we should mourn the loss of these brave humanitarian workers.

— said that the airstrikes were completely unacceptable. And he called on Israel to explain how this happened and to make changes to ensure that aid workers could be safe.

So amid all this, what does Israel have to say about the attack — about how it happened, about why it happened?

The response from Israel this time was much different, compared to other controversial airstrikes on the Gaza Strip. Often, when we’re reporting on these issues, we’ll hear from the army that they’re investigating a given incident. It will take days, if not weeks, to receive updates on where that investigation stands.

There are instances where Israel does take responsibility for harming civilians, but it’s often rare. This time, the Prime Minister —

[NON-ENGLISH SPEECH]

— Benjamin Netanyahu comes out with a video message —

— saying that Israel had unintentionally harmed innocent civilians. And that was the first indication or public indication that Israel was going to take responsibility for what had happened.

The IDF works together closely with the World Central Kitchen and greatly appreciates the important work that they do.

We later heard from the military’s chief of staff. Herzi Halevi issued a video statement in English.

I want to be very clear the strike was not carried out with the intention of harming aid workers. It was a mistake that followed a misidentification.

And he said this mistake had come after a misidentification. He said it was in the middle of a war, in a very complex condition. But —

This incident was a grave mistake. We are sorry for the unintentional harm to the members of WCK.

He was clear that this shouldn’t have happened.

I want to talk about that statement, because it seems to suggest — that word, “misidentification”— that the Israeli army believed that somebody else was in this convoy, that it wasn’t a bunch of aid workers.

That’s possible, although it’s extremely vague and cryptic language that genuinely is difficult to understand. And it’s a question that us in the Jerusalem Bureau have been asking ourselves.

I’m curious if the Israeli government has said anything in all of its statements so far about whether it noticed these markings on these three cars in the convoy. Because that, I think, for so many people, stands out as making misidentification hard to understand. It seems like perhaps a random pickup truck could be misidentified as perhaps a vehicle being used by a Hamas militant. But a group of World Central Kitchen trucks with their name all over it, driving down a known aid corridor — that becomes harder to understand as misidentification.

Yeah, it’s an important question. And at this moment, we don’t know exactly what the Israeli reconnaissance drones could see, and whether or not they were able to see, in the darkness of the night, the markings of the World Central Kitchen on the cars. But what is clear is that when the cars were found in the morning, right there was the big emblazoned logo of the World Central Kitchen.

Mm-hmm. I’m curious how you think about the speed with which Israel came out and said it was in the wrong here. Because as you said, that’s not how Israel typically reacts to many of these situations. And that makes me think that it might have something to do with the nature of the aid group that was the target of these airstrikes — the World Central Kitchen — and its story.

I think it does have to do with this particular group. This is a group that’s led by a celebrity chef, very high-profile, who is gone around the world to conflict zones, disaster areas, to provide food aid. And I also think it has to do with the people who were killed, most of who were Western foreign aid workers. Frankly, I don’t think we would be having this conversation if a group of Palestinian aid workers had been killed.

Nor, perhaps, would we be having the reaction that we have had so far from the Israeli government.

I would agree with that.

Adam, at the end of the day, what is going to be the fallout from all of this for the people of Gaza? How do we think that this attack on World Central Kitchen is going to impact how food, medicine, aid is distributed there?

So the World Central Kitchen has said that it’s suspending its operations across Gaza. Because it essentially seems that they don’t feel they can safely operate there right now. And several ships that carried aid for the organization, which were sort of just on the coast — those ships ended up turning back to Cyprus, carrying more than 200 tons of aid.

So aid that was supposed to reach the people of Gaza is now leaving Gaza because of this attack.

Yes. And it’s also had a chilling effect. Another aid group, named INARA, has also suspended its operations in Gaza. And it seems that there is concern among humanitarians that other aid groups could follow.

So in a place where people are already suffering from severe hunger, poor sanitation, the spread of dangerous disease, this is only going to make the humanitarian situation, which is already dire, even worse.

Well, Adam, thank you very much. We appreciate it.

Thanks so much for having me.

We’ll be right back.

Here’s what else you need to know today. The magnitude-7.4 earthquake that struck Taiwan on Wednesday has killed nine people, injured more than 1,000, and touched off several landslides. It was Taiwan’s strongest quake in the past 25 years. But in a blessing for the island’s biggest cities, its epicenter was off the island’s east coast, relatively far from population centers like Taipei.

And the first patient to receive a kidney transplant from a genetically modified pig has fared so well that he was discharged from a Massachusetts hospital on Wednesday just two weeks after surgery. Two previous transplants from genetically modified pigs both failed. Doctors say the success of the latest surgery represents a major moment in medicine that, if replicated, could usher in a new era of organ transplantation.

Today’s episode was produced by Lynsea Garrison, Olivia Natt, and Carlos Prieto, with help from Asthaa Chaturvedi. It was edited by Marc Georges, with help from Paige Cowett, contains original music by Marion Lozano and Dan Powell, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

• April 5, 2024   •   29:11 An Engineering Experiment to Cool the Earth
• April 4, 2024   •   32:37 Israel’s Deadly Airstrike on the World Central Kitchen
• April 3, 2024   •   27:42 The Accidental Tax Cutter in Chief
• April 2, 2024   •   29:32 Kids Are Missing School at an Alarming Rate
• April 1, 2024   •   36:14 Ronna McDaniel, TV News and the Trump Problem
• March 29, 2024   •   48:42 Hamas Took Her, and Still Has Her Husband
• March 28, 2024   •   33:40 The Newest Tech Start-Up Billionaire? Donald Trump.
• March 27, 2024   •   28:06 Democrats’ Plan to Save the Republican House Speaker
• March 26, 2024   •   29:13 The United States vs. the iPhone
• March 25, 2024   •   25:59 A Terrorist Attack in Russia
• March 24, 2024   •   21:39 The Sunday Read: ‘My Goldendoodle Spent a Week at Some Luxury Dog ‘Hotels.’ I Tagged Along.’
• March 22, 2024   •   35:30 Chuck Schumer on His Campaign to Oust Israel’s Leader

Hosted by Michael Barbaro

Featuring Kim Severson and Adam Rasgon

Produced by Lynsea Garrison ,  Olivia Natt ,  Carlos Prieto and Asthaa Chaturvedi

Edited by Marc Georges and Paige Cowett

Original music by Dan Powell and Marion Lozano

Engineered by Chris Wood

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music

The Israeli airstrike that killed seven workers delivering food in Gaza has touched off global outrage and condemnation.

Kim Severson, who covers food culture for The Times, discusses the World Central Kitchen, the aid group at the center of the story; and Adam Rasgon, who reports from Israel, explains what we know about the tragedy so far.

On today’s episode

Kim Severson , a food correspondent for The New York Times.

Adam Rasgon , an Israel correspondent for The New York Times.

Background reading

The relief convoy was hit just after workers had delivered tons of food .

José Andrés, the Spanish chef who founded World Central Kitchen, and his corps of cooks have become leaders in disaster aid .

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The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

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Kim Severson is an Atlanta-based reporter who covers the nation’s food culture and contributes to NYT Cooking . More about Kim Severson

Adam Rasgon reports from Israel for The Times's Jerusalem bureau. More about Adam Rasgon

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