Reach out Revision Guide

REACH OUT





IB Revision Booklet for the May 2011 examination

Created by Eavan Zora & Andrew Mackenzie
Version one








Contents Page
Pages Content
3-4 Key terms & issues to revise
5-7 Characters
8 Timeline
9-10 Swot analysis
11-12 Steeple analysis
13-31 Topic 1 – intro to org
32-44 Topic 2 - HR
45-52 Topic 3 – finance
53-61 Topic 4 – marketing
62-65 Topic 6 – bus strategy
66-70 Top tips for paper 1












Reach Out – Key Terms and Issues to Revise

Key Terms Issues to Revise

Unethical Business ethics
Private sector Autism
Social marketing Social marketing
Part time Types of business sectors
Public sector
Public-private partnerships Public-private partnerships
Self-employed Working from home (teleworking)
Start up businesses Start up businesses
Charity Charity
Business plan
Budget
STEEPLE Analysis
SWOT Analysis
Start up costs
Sources of finance Sources of finance
Short term loan
Community grant
Directors
Performance related pay Monetary and non monetary rewards
Non profit making organization Non profit making organizations
Vision statement Vision statement
Mission Statement Mission Statement
USP
Subsidize
Surplus (retained profit)
Revenue
Unqualified therapists
Goodwill
PR Motivation
Informal communication Communication
Flexible working patterns Flexible working patterns
Training Workforce Planning
Workforce Planning Motivation
Laissez Faire Leadership Styles
Decision making
Logo Product portfolio analysis:
Ansoff matrix (option 2)
Product portfolio
Break Even Break Even Analysis
Sponsorship Sponsorship
Market research Market research
CSR CSR
Marketing objectives
Branding Branding
The 3 options
Appendices


Tasks
1. Define all the key terms
2. Set up revision notes for all the issues to revise – these should be split into 2 sections (theory and application to case study)















Characters in Reach Out
Laura Chan • Set up an informal social network site for families with children who have autism. (Online support forum)
• She set up a blog, describing her daily successes and difficulties with Toby – which received thousands of visits daily.
• Her blog became a medium for social networking.
• This was too much for her – as she worked as a part time supermarket cashier and was looking after Toby. Then she got a phone call from Neil.
• They met and quickly realised they could complement each other
• They met and discussed how Laura can become self employed and work from home on a flexible schedule. She could use her knowledge and first-hand experience of families affected by autism.
• She was passionate and had many ideas.
• Despite the many difficulties they faced as a start-up business, they decided to set up a charity for children with autism called Reach Out.
• Both Laura and Neil would be employed part time as joint directors with equal responsibility
• Laura’s title – Director – Communication & Networking
• Laura’s salary would be fixed - $2000 per month. Laura would the security of a financial income
• Both were determined that Reach out would remain a non profit organization with the primary ethical objective of helping children with autism
• Laura wrote a mission statement for Reach Out.
• Laura wanted to further develop the blog and produce and sell PECS cards at a low price – this was a project close to her heart.
• A monthly average of $200 was received as donations from Laura’s blog – which she donated to the business.
• Laura contacted the local university and created a database of interested students who had studied how to support children with autism. She matched these students with local families. Despite Neil’s objections with this, Laura was impatient and pursued her ideas. She insisted that everyone would benefit. By May 2010, she had organised 20 families supported by trainee teachers – Reach Out Therapists.
• Laura and Neil were delighted with the initial success of Reach out but it was becoming too time consuming to supervise the trainee teachers. So they decided to hire a part time manager to supervise the therapists.
• Laura and Neil appointed Andrew.
• But due to his condition, Andrew experiences difficulties with some social situations. Despite Neil’s concern, Laura was delighted. She was confident that Andrew’s appointment would generate PR opportunities and goodwill towards Reach Out.
• Most communication between the 3 was informal
• Laura was away when complaints about Andrew and trainees happened. When she returned, she dismissed Neil’s idea of dismissing Andrew and did not regard these problems as serious. She felt that Andrew’s difficulties could be overcome by further training and support.
• He was becoming increasingly irritated by her laissez faire leadership style and her decision making methods, which were solely based on her intuition and limited experience. Neil preferred to be more analytical and scientific.
• Laura has ethical principles – she didn’t like option 1
• Laura did not like any of the 3 options presented by Neil for different reasons. Although she did see long term advantages in branding. She felt that her control over the charity’s future was in jeopardy and she was unsure about the future growth of Reach out.
Her son Toby • Was 3 years old when he was diagnosed with autism in December 2009.
Neil Johnson • Had previously worked in the public and private sector as an educational consultant.
• Now retired and still acted as an advisor for several public-private partnerships
• He had read Laura’s blog and was moved by her story and wanted to help.
• They met and quickly realised they could complement each other
• Neil also saw the business potential in Laura’s blog.
• Neil has the business experience to run and set up a business.
• Despite the many difficulties they faced as a start-up business, they decided to set up a charity for children with autism called Reach Out.
• He insisted that Reach Out be organised to a professional standard.
• When the business was set up, Neil decided to donate $10,000 himself to cover the costs of the business.
• Both Laura and Neil would be employed part time as joint directors with equal responsibility
• Neil’s title – Director – Finance and Strategy
• His reward package would be based on performance related pay – a commission of 10% of the total cash receipts. He liked the financial motivation to make Reach Out successful
• Both were determined that Reach out would remain a non profit organization with the primary ethical objective of helping children with autism
• Neil was hesitant about the risks of using unqualified staff – he thought it was unethical. (legal issues, health and safety, child protection)
• Laura and Neil were delighted with the initial success of Reach out but it was becoming too time consuming to supervise the trainee teachers. So they decided to hire a part time manager to supervise the therapists.
• Neil would have to train the new part time manager. But the appointment would allow him to concentrate on finance and strategy.
• When Andrew was appointed, Neil was concerned that Andrew did not have enough experience of working with adults.
• Most communication between the 3 was informal
• After a few weeks into his role, a number of complaints were emailed to Reach Out’s central office. Neil investigated this through a fishbone diagram.
• Neil was worried that these complaints would lead to families withdrawing from the scheme. Which would lead to a drop in revenue.
• He confronted Andrew but there were barriers to effective communication.
• During their confrontation, Neil thought Andrew was not listening and making excuses.
• He also discovered that Andrew was lying and didn’t know how to use a computer.
• When Laura returned, Neil told her about the issues and wanted to dismiss Andrew and outsource the therapist scheme management role to an independent freelancer.
• Neil had always been impressed by Laura’s determination but was now seeing it as a weakness for Reach Out.
• He was becoming increasingly irritated by her laissez faire leadership style and her decision making methods, which were solely based on her intuition and limited experience. Neil preferred to be more analytical and scientific.
• When Laura was away on vacation, Neil came up with 3 ways to increase revenue.
• After discussions with Laura, Neil realised that she did not support any of the options. Rather than increase tension with Laura, he decided to agree to her wishes and began researching and began conducting market research into the prices of 3 publishing companies.

Andrew Grandin • Scheme manager would start – to be managed by both Laura and Neil. Responsible for overseeing the scheme and managing the therapists.
• A salary of $1000 per month
• Andrew was quite a character.
• At the age of ten, he was diagnosed with Asperger’s Syndrome, a well known form of autism.
• He was fascinated with trampolines and had gone onto become an Olympic silver medallist.
• His empathy with the vision of Reach out and his celebrity status had become key factors in his appointment.
• But due to his condition, Andrew experiences difficulties with some social situations.
• Most communication between the 3 was informal
• After a few weeks into his role, a number of complaints were emailed to Reach Out’s central office.
• Complaints were about Andrew failing to reply to message or confirm appointments.
• When Neil confronted Andrew, he simply gave excuses and Neil felt that he wasn’t listening.
• Andrew argued that although they were willing to work for $20 an hour, they needed more flexible working patterns in order to attend university lectures.
• Andrew also felt it was unfair that they had to pay transport fees to go to therapy session.
• During their confrontation, Neil discovered that Andrew was lying and didn’t know how to use a computer.

Trainee teachers • One of Laura’s ideas was to involve trainee teachers to work with children with autism.
• Students training to become school teachers needed experience working with children with autism as part of their qualification.
• Laura created a database of interested students who had studied how to support children with autism.
• Although they were not qualified therapists, they would be able to help the children and their families.
• By May 2010, 20 families received support from trainee teachers – Reach Out Therapists. £25 per hour – they would receive $20 and $5 goes to Reach Out.
• This revenue model worked well initially – little liaising, mentoring and monitoring of therapists.
• Andrew was appointed to supervise the therapists.
• Some complaints came about their attendance and punctuality
• Andrew argued that although they were willing to work for $20 an hour, they needed more flexible working patterns in order to attend university lectures.
• Andrew also felt it was unfair that they had to pay transport fees to go to therapy session.
• Option 1 – increase price families’ pay – could remotivate the trainees.


Reach Out Timeline
December 2009 Laura’s life changed dramatically when he son was diagnosed with autism
March 2010 By now Laura had set up an informal social network support using Facebook and twitter for families in the same situation.
By now her blog was set up and had received thousands of visits every day.
1st May 2010 Reach Out was formally launched.
End of May 2010 Reach out Therapists - Laura had organised for 20 families to receive support from trainee teachers.
1st August 2010 Scheme manager would start – to be managed by both Laura and Neil. Responsible for overseeing the scheme and managing the therapists.
After a few weeks Complaints about Andrew and trainees
Neil draws up a fishbone diagram and confronts Andrew while Laura was on vacation
Laura returns – does not support Neil’s 3 options
Neil and Laura clash – Neil agrees to her idea.
Appendix 1 – pre-start up to August 2010











Reach Out – SWOT ANALYSIS
Strengths Weaknesses

- Reach out became a regionally well known brand. Reach Out well-known regionally (line 125)
- Laura has the skills and knowledge in autism –first-hand experience. She has the knowledge, passion and determination.
- Neil has the skills and knowledge in setting up and managing a business.
- Neil’s experience as an educational consultant and advisor (lines 20-22)
- Neil’s skills and expertise to set up and run a business (line 28)
- Owned by two directors who share the same vision and have different skills and abilities. Both highly committed to the success of Reach Out.
- Selling PECS cards at lower prices acted as a USP.
- Business was based on a simple business model that covered costs and allowed the organization to create a surplus.
- Healthy initial cash flow. Steady surplus being made (Appendix 1) Initial success. High initial revenue. Number of families asking for support was doubling in the first 6 months.
- The appointment of Andrew – a real character and a Olympic Silver medallist. Brought about PR opportunities.
- Laura’s informal network created through social networking sites such as Facebook and Twitter (lines 10-11)
- Laura’s popular blog (line 14)
- No debts
- Good supply of cheap labour (lines 61-63)
- Demand for therapist scheme rising rapidly - doubled every month for the first 6 months (lines 77-79)
- Andrew’s empathy and celebrity status (lines 89-90) - The therapists she hires are not qualified (line 65)
- Andrew does not have much experience and has difficulty with some social situations (line 92)
- Complaints regarding the punctuality of therapists and Andrew failing to confirm appointments (line 98-99)
- Therapists are not properly supervised (appendix 2)
- Therapists have to pay for their own public transport (appendix 2)
- Students cannot always attend therapy sessions because slots clash with their university lectures (line 104)
- Andrew does not know how to use a computer (line 107)
- Laura’s decision making methods rely on her intuition and limited experience (line 117)
- The company has not started selling the PECS cards which is a vital part of the mission statement and a source of income (line 160)
- Neil and Laura have different visions of where they want the company to go (line 115)
- Reliance on informal communication (line 94)
- Communication barriers between Andrew and Neil (lines 101-102)
- Conflict between Neil and Laura (lines 109-118)
- Problems with communication systems (Appendix 2)
- Problems with management systems (Appendix 2)
- Problems with staffing (Appendix 2)



Opportunities Threats

- Andrew’s appointment generates public relations opportunities and goodwill (line 93)
- Charge higher fees to re-motivate the students (line 121)
- Develop a family brand that includes a new portfolio of products (line 125)
- Obtain sponsorship from N-pharma (line 133)
- PECS cards USP - lower prices (line 52)
- Option 1: Modify the pricing strategy of the therapist scheme (lines 121-124)
- Option 2: Develop a family brand for Reach Out (lines 125-132)
- Option 3: Obtain sponsorship (lines 133-141)







- Legal issues: Health and Safety/child protection legislation could prevent the company using unqualified therapists (line 66)
- Competitors who already sell the PECS cards will already have market share and experience in this market.
- Other private sector companies provide qualified therapists to their customers (line 5)
- Economic recession – impact on donations and therapist scheme (line146)
- Changes in teaching course requirements could negatively impact
- labour supply
- Families might withdraw from the scheme because of issues with Andrew and some therapists (lines 98-99)
- Laura’s unsure about her control and the future growth of Reach Out (lines 156-159)














Reach Out – STEEPLE ANALYSIS

SOCIAL TECHNOLOGICAL

- The increasing use of social media has enabled Laura to increase awareness of Reach Out.
- The increasing awareness concerning issues like autism has meant more resources are being allocated to such issues. For example trainee teachers are studying the effects of autism.






- It all began with the use of technology social networking sites such as Facebook and Twitter.
- Blog was a great success. Laura’s blog became a medium for social marketing.
- Laura wanted to develop the blog further by adding video clips and podcasts – to make it a professional looking website.
- Database was used for the trainee students.
- The internet has enabled Laura to first write her blog, and then launch Reach Out using sites such as Facebook and Twitter. It also allows Reach Out to keep marketing costs down. Email is used extensively as a method of communication.
ECONOMIC POLITICAL

- The current economic recession may cut future donations and reduce demand for the therapist scheme, but may attract more people to the subsidized PECS cards (should they be launched).
- During times of economic recession, Laura did not like option 2 – increasing prices – some families could not afford it. It would go against Reach Out’s ethical image.




- Government provided very little help to families of children with autism.
- Legal issues of using unqualified trainee teachers. (child protection, health and safety)
- The increasing use of social media has enabled Laura to increase awareness of Reach Out.
- The increasing awareness concerning issues like autism has meant more resources are being allocated to such issues. For example trainee teachers are studying the effects of autism.
- Community grants are a potential source of finance, although they were not used in the start up of Reach Out.
LEGAL ETHICAL
• Health and safety and child protection legislation may have an impact on the use of unqualified therapists by Reach Out.
- Neil and Laura starting this charity to help families of children with autism.
- Unethical issues of using unqualified trainee teachers
- Laura is highly ethical
- Laura considers the fees charged by private sector therapists as unethical.
- Neil is worried that the use of unqualified therapists could be perceived as unethical.
- N-Pharma is looking to sponsor Reach Out as part of its CSR programme.
-
THERE ARE NO ENVIRONMENTAL ISSUES STATED IN THE CASE STUDY



















REACH OUT TOPIC 1

 Difference between private and public sector
 NPOs
 Public private partnerships
 Stakeholders
 Business Start-ups
 SWOT & PEST (Done)
 Business plan
 Business objectives
 Mission and vision statements
 Business ethics & CSR
 Decision making frameworks
 Fishbone model (done)
 Ansoff matrix
 Force Field Analysis
 Organizational Planning Tools

Private Sector

The private sector includes all businesses set up by individuals or groups of individuals. Most business activity is in the private sector. Can be incorporated or unincorporated:

Incorporated: no legal difference between owners and the business (sole traders/partnerships)

Unincorporated: separate legal identity from its owners (LTDs and PLCs)

Public Sector

A sector made up of organizations which are owned and controlled by central or local government or public corporations. They are funded by the government or from their own trading or surplus.

Difference between the two sectors Main aim of private sector businesses is to make a profit, public sector businesses mainly aim to provide a service. Public sector businesses usually operate to provide essential services that would be inefficiently provided or not provided by private sector. The public sector exists to ensure everyone has access to basic services.
Reach Out
Line 4 – the government provided very little help to families with children with autism.
Line 5 – there was no system of free medical support. Private therapists could charge up to $100 per hour for a visit to a newly diagnosed child.
Line 7 – Laura felt it was unethical that private sector companies were taking advantage of some families. Result – some children with autism being excluded from early treatment.
Line 20 – Neil worked for both private and public sector. He was now retired but still acted as an advisor for several public-private partnerships such as schools and colleges.

Public Private Partnerships
Public-private enterprises take place when governments create partnerships with the private sector in the provision of certain services.
The Japanese refer to such businesses as operating in the Daisan sector (or third sector)
Such sectors benefits from the dynamics and efficiency of the private sector along with the benefits of public sector funding and support. E.g. WHO.
Therefore, Neil’s background shows that he has good experience of both the private sector and the public sector.
Ideally this is more efficient than straight public provision. Private sector firms can bring specialist skills, experience, and efficiency to public projects.
Success rate has varied; some have worked efficiently, others not so. Clash of objectives, public sector = public service, private sector = profit motive, can cause conflict. Government has, on occasions, had to provide additional funding at taxpayers’ expense.

Reach Out is an NPO with the primary ethical objective of helping children with autism (Line 43). “no child with autism will be left behind” – mission statement. (Line 45)
It is an organization run in a professional and business-like manner but without profit being the main objective. Instead, Reach Out aims to provide an essential service for children with autism. They also aim to promote this important cause.

It still makes a profit but called surplus. Profit is the reward that is distributed to its owners or investors in return for risking their money (Neil) and resources in the business.
NPOs return this “profit” surplus back into the business for the benefits of its members and in order to enhance its facilities (e.g. Therapists and PECs Cards). Such an organization is still required to meet the needs of its stakeholders.
NPO’s tend to struggle with obtaining finance because they often have limited sources of finance available, i.e. can’t sell shares, difficulty in obtaining bank loans.
NPO is suitable for Reach Out because profit is not a primary objective rather the ethical objective of helping children with autism. Its surplus is to be used to achieve its goal.

Stakeholders
A stakeholder in a business is any individual or group which is affected by the business and so has an interest in its activities. Has a direct interest in the business and is affected by its activities. Charles Handy argues that it is in the best interests of an organization to listen to the needs of its stakeholders. Stakeholders can be internal or external. Reach out’s stakeholders:
Laura – Owner
Neil – Owner
Customers – families and children with autism/could also be considered an SIG – Special Interest Groups.
Employees – therapists & Andrew
General Public for donations
Suppliers of PECS cards
TASK: Write a list of each of their needs as stakeholders using your textbook page 60 and don’t forget to make notes on SIGs
HL: Using the stakeholder map on page 69 – label them according to reach Out’s stakeholders.
What are these stakeholders’ needs?
Laura – ethical business activity
Neil – success/structure
Therapists – financial rewards, subsidized transport, flexible working hours, experience
Customers – affordable therapy/good service
Andrew – good pay and benefits. Training.
Stakeholders’ conflict a Reach Out
Tension between Laura and Neil – different leadership and management styles. Clashed over the future growth of Reach Out.
As these different stakeholders have varied needs and interests, it is likely that conflict will arise. Reach out may have to make certain decisions that addresses the interests of some its stakeholders but at the expense of not being able to meet the needs of other groups. If a stakeholder group is not catered for, disruptions and problems can occur.

Business Start-Ups

Neil and Laura faced many risks when starting their business Reach Out. Many new businesses fail due to mismanagement and underestimating challenges, insufficient demand.
Neil and Laura had to go through a decision-making process to decide where the firm wants to be, how it is going to get there and how success will be monitored.
Why did they start this business?
Laura had the personal experience from her child. She wanted to provide a service to families with children with autism
Neil liked the idea and wanted to make it financially successful. He did it for the challenge and the personal achievement.
What costs did they face as a business?
 Office equipment and computer facilities for Laura/converting her bedroom into an office.
 Communication resources – PECS cards
 Maintaining the website and blog
 Therapists’ salaries
 Laura and Neil’s salaries
 Andrew’s salary
 Market research
Using pages 24-26 what possible problems did they face as a start-up? Make notes.

 Lack of financial capital.
 Cash flow problems and financial working capital.
 Budgetary problems
 Marketing problems
 Un-established customer base
 People management problems
 Legalities
 Production problems
 Poor location
 External influences
(The bold are related to Reach Out!!)
Important reading – page 19-20 Raffo Book

The Business Plan
A plan of how the business will develop overtime; how a new business sets out to achieve its aims and objectives. This is a useful tool for managing financial, marketing and production plans for a new business. A business plan is crucial to the success of a start-up business. A good business plan has to be:
Comprehensive and well researched
Realistic
Coherent
What are the advantages and disadvantages of a business plan? Pages 96-98

Advantages of Business Plans
 Helps owners to align the goals of the business with its operations
 It considerable reduces the risks of failure because it identifies potential problems and opportunities.
 Forces entrepreneurs to look at every aspects of their future business.
 Allows it to plan ahead and forecast potential problems and then take steps to overcome them.
 Gives the business an initial competitive edge.
 Can be used to gain money from lenders.

Disadvantages of Business Plans

 Business plans take a long time to produce and they are only a plan/prediction/forecast
 External factors may make this plan wrong/inaccurate
 The quality of the plan depends on the skills of the entrepreneur writing the plan
 It may reduce the risk of failure but it does not eliminate it.

What is included in a business plan? Make notes page 97

Business Objectives
Why are setting business objectives important?
Without clear aims and objectives, organizations have no sense of direction or purpose.Give a business a sense of unity and can help to unify and motivate management and workers.
They form the foundation for business decision making. Organizations can then create strategies to achieve these goals.
They help to encourage strategic thinking i.e. Planning for the long term.
They provide the basis for measuring and controlling the performance of the workforce, management and the business as a whole. To control – to motivate – to direct
What is the difference between aims and objectives?
What is the difference between tactical and strategic objectives?
Give examples of each for Reach Out.
Examples of Tactical Objectives

 Add podcasts and have a professional looking website.
 Survive in the current market
 Affordable PECS cards – subsidize them to make them more affordable.

Examples of Strategic Objectives

 Remain non profit organization
 Increase surplus
 Make the charity financially sustainable
 Ethical objectives – help each child with autism
 Obtain more sources of finance for the 3 options
 3 options – growth objectives. Esp. option 2: brand/product development

Vision and Mission Statements

A vision statement expresses a desired future outcome that an organization wishes to achieve. Outlines a business’ aspirations (where it wants to be) in the future.

A mission statement states the overall purpose of an organization. It explains what the business is trying to achieve and outlines its values.

Having a vision means to have an image of an ideal situation in the future.

Having a mission means to have a clear purpose.

A mission statement outlines how a vision statement will be achieved.

Differences
 Vision statements focus on the long term, mission statements focus on the medium or long term.
 So mission statements are updated more frequently than vision statements
 Vision statements do not have actual targets on them.
 Mission statements highlight the values of the business, its beliefs and guiding principles. This sets the tone for how managers and employees behave on a day to day basis.

Reach Out

Reach Out’s vision statement is “no child with autism will be left behind” (lines 44-45).
Reach Out’s mission statement is “to provide online support for families of children with autism and to offer them communication resources at a greatly reduced price” (lines 45-47).

Effectiveness?
Depends on the clarity of the vision/mission statement. Reach Out’s vision/mission statements seem very clear and easy to understand.
Depends on who is involved in writing the vision/mission statement. Reach Out’s vision/mission statements have been written by Laura. They are likely to be more representative of her vision/mission rather than the organization as a whole. This could be linked to the conflict over Neil’s suggested marketing objectives proposed later in the case.
Disadvantages
 Time consuming
 Depends on the skills of the writer
 Can be seen as a PR marketing ploy
 May not be supported by all employees.
 Difficult to draft a statement that caters for all the dynamics of a business.

Important reading – Raffo pages 602-614

Business Ethics
Business Ethics – the business values and moral beliefs that underpin business decision making.
All businesses have to make many ethical decisions. Ethical objectives can be explicit (e.g. Not test on animals) or implicit (corporate culture)
What are the advantages and disadvantages of ethical behaviour? Page 49-50
Benefits of ethical behaviour
 Increased sales revenue and profitability
 Increased custom from ethical customers
 It improves the business’ image/reputation
 It reduces pressure from pressure groups
 It can be used for marketing purposes.
 Cost cutting at times e.g. reducing packaging.
 Improved staff motivation

Drawbacks of ethical behaviour
 It can raise costs.
 Takes up management time
 Can cause tension/conflict between stakeholders and their interests, e.g. Reach Out.
 It can reduce revenue.
 Can be seen as a marketing ploy.
 Unqualified therapists (reduced quality) seen as unethical.

Reach Out Laura felt it was unethical that private sector businesses were taking advantage of families with children with autism. Laura and Neil wanted the primary objective for Reach Out to be an ethical one – to help children with autism. Neil was hesitant about the unqualified therapists – felt it was unethical.

Option 1 – increase prices – went against Laura’s ethical objectives. Her ethical principle was to charge families as little as possible. She felt that charging high prices during economic recession would give Reach Out a bad image.

Option 3 – Laura did not want to be linked to N-Pharma – who would see CSR as a PR exercise

Reach Out’s Ethical Objectives
Ethical objectives are likely to receive positive attention because they are seen as benefiting society. Ethical objectives can motivate employees because some are motivated by sound business ethics therefore employee retention is likely to improve.

As an NPO it is suitable for Reach Out to have an ethical objective. The objective itself is simple and easy to understand.

Important Reading – CSR Pages 51-56 – make summary notes

CSR

Self-regulation aiming to ensure that an organization behaves ethically. N-Pharma has offered to sponsor Reach Out as part of its CSR programme. Considering ethical and environmental issues before making decision can improve reputation because consumers are concerned over these issues.
An effective CSR programme can motivate employees because they may also share the same concerns therefore increasing employee loyalty and reducing labour turnover. It may also help recruit high quality individuals.
CSR is seen by some as a PR exercise and, therefore, may not be a cost effective process. Depends on whether the CSR programme is implemented and communicated effectively. It requires the commitment of the entire organization to be effective.

Organizational Planning Tools

At the heart of B&M is decision making. There are 3 levels of decision making in an organization:
Operational decisions (routine, day to day decisions)
Tactical decisions (regular/short term decisions e.g. Pricing decisions
Strategic decisions (high level long term decisions. By SMT)
Planning tools that aid decision making:

 Business plans
 SWOT Analysis
 Decision making frameworks
 Decision trees (HL: revise this it could come up as a HL question)
 Fishbone model

Tools used to aid business planning, normally used before start-up or expansion. Organizational planning tools aid planning and monitoring because they provide a guide for managers to follow.
They allow for monitoring of business performance and are useful when applying for external finance.
Decision-making is likely to be more accurate because organisational planning tools encourage analysis and reflection.

Organizational Planning Tools

Depends on accuracy of business planning tools. Neil is very experienced increasing the chances of accuracy, however Reach Out is new, and so making accurate predictions is likely to be difficult.

Neil: Scientific decision making (HL)

Decisions are made objectively on the basis of following a formal and prescribed procedure. Decisions are made on quantifiable facts and evidence rather than based on subjective opinions, past experience feelings or intuition.

Benefits: decisions are made rationally and logically. Reduced risks involved.

Laura - Intuitive decision making (HL)

Based on a person’s beliefs perceptions, instincts and gut feelings. Decision making is quicker and less expensive. Considers issues not necessarily quantifiable such as the impact of decisions on employees or local community. They will also consider ethical issues.

Which one is right?
Depends on:
 The scale of the decision (tactical, operational or strategic)
 Current and future climate
 Knowledge and past experience


Decision Making Framework
A systematic process of dealing with business problems, concerns or issues in order to make the best decision.
Using page 101 – copy the 7 steps of decision making...

Decision making model

 Identify the business problem, concern or issue
 Gather sufficient data and information in order to make rational decisions
 Analyse data and information to produce possible options.
 Assess the consequences in terms of costs and benefits
 Select the most favourable option and the one most realistically achievable
 Communicate this decision to staff
 Review and evaluate the outcome.

Decision Making Frameworks
Make notes on the decision making frameworks using pages 101-102.
Carry out a force field analysis for each of the 3 options.

Reach Out and Ansoff Matrix
Reach out’s option 2 includes developing a portfolio of products. Strategy known as product development

Product development Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets.

This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

A product development strategy may be appropriate if the firm's strengths are related to its specific customers rather than to the specific product itself.

In this situation, it can leverage its strengths by developing a new product targeted to its existing customers.

Similar to the case of new market development, new product development carries more risk than simply attempting to increase market share.

Market penetration
Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.
Market penetration seeks to achieve four main objectives:

 Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling
 Secure dominance of growth markets
 Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
 Increase usage by existing customers – for example by introducing loyalty schemes
 A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Market development
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.
There are many possible ways of approaching this strategy, including:

 New geographical markets; for example exporting the product to a new country
 New product dimensions or packaging: for example
 New distribution channels
 Different pricing policies to attract different customers or create new market segments.

Diversification
Diversification is the name given to the growth strategy where a business markets new products in new markets.
This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.

Reach Out – Option 2

Creating a brand that is consistent with the mission/vision of the organization, includes name, logo, etc. Selling new products.

Option 2: Develop a family brand is a combination of brand development and product development to existing markets.

Brand Development/Product development
Brand development can help improve brand recognition therefore increasing revenue.
Product development can help boost revenues because it increases the product mix of the organization.
Significant because this is one of Neil’s suggestions to increase revenue. However, it is expensive, $100,000 for an NPO that has only been generating positive cash flow for 3 months. Also, Laura is against the idea of brand and product development.

Fishbone model

Created by Kaoru Ishikawa. Also known as the cause-effect diagram. The fishbone diagram is a management tool used to identify the root causes of a problem. Used for dealing with a problem that has several elements or root causes. Usually use 4 Ms – Management, Manpower, Machines, Materials.
In Reach Out, they used Communication Systems, Management Systems, Staffing 1 and Staffing 2.

A diagram intended to establish the causes of a particular issue/problem. Neil uses a fishbone (Ishikawa) diagram to identify the causes of the complaints from Reach Out customers.

Fishbone Diagrams
Fishbone diagrams can improve decision-making because they encourage a scientific approach to establish cause and effect therefore making it easier to solve the problem of complaints from customers.
Fishbone diagrams are a good visual aid therefore they are easy to understand. Fishbone diagrams can be time-consuming and subject to bias therefore making them redundant.
Depends on the quality of research and the impartiality of the individual who creates the fishbone diagram. Neil is experienced and scientific in his approach to decision-making therefore he is more likely to produce an accurate diagram. However the diagram has no other input other than Neil’s, so could be subject to bias.

Force Field Analysis
Developed by Kurt lewin. Examines forces for and against a decision
Driving forces – advantages of implementing a decision
Restraining forces – limitations or disadvantages of the decision
Aim – to strengthen the driving forces and reduce the impact of the restraining force

Force Field Analysis
For each option, complete a force field analysis
Consider ALL parts of the case study in your answer.
An analysis of the 3 options
Remember, Neil set up these 3 options with the aim of increasing revenue
Option One


Laura’s Reaction:

It seems sensible to assume that the students will be reimbursed from the additional revenue
Reach out is a one incident away from facing serious litigation since despite the fact that they are dealing with very delicate children, the care being given is not fully trained.
Besides the student therapist are not committed their work as they miss sessions arbitrarily. Laura refuses to handle the problem and Neil is too scared of rocking his financial nest.
Revenue from Therapists
20 families. $25 per hour for one to one session. ($20 to therapist, $5 to Reach out).
On the basis of 20 hours per month per family:
What is the total revenue received from each family per month?
20 hours * $25 = $500 dollars in total received from each family.
What is the total revenue received from all families per month?
$500 * 20 families = $10,000 total income received from this.
Per year?
10,000 * 12 = $120,000
How much revenue goes towards Reach out from each family per month?
20 hours * $5 = $100 goes to Reach Out from each family
How much revenue goes towards therapists from each family per month?
20 hours * $20 = $400 towards therapists.
Are these figures realistic?
I have consulted one of the authors of the case study, who reported to me that the figures that Reach Out is forecasting are entirely realistic. This assessment is based upon the experience of the families who were consulted by the case study authors when they wrote it. Some families and therapists would argue that the figures understate the true position considerably. Some therapists would argue that 20 hours a month would not be considered excessive (and, off the record, they would argue that 20 hours a month would be ineffective).

Families with a child with autism have significant financial hardship if they decide to undergo a period of managing the condition with the use of outside therapists (given that subsidized public sector provision is not available in many countries).
Why have Autism organizations not noticed Reach Out and their model - surely using untrained treatment for such a complex disorder would draw comment from professionals? Autistic people are known for wanting order and stability and above all structure - therapists changing and not turning up would cause havoc with this


Pros
Increase Reach Out’s revenue – double
Helps to motivate the students as they will receive more money
Making good use of cheaper alternative to therapy.
Can overcome existing problems faced as a result of motivation problems faced by therapists.
Cons
Goes against their ethical image of charging lower prices to customers
Gives a poor image of the charity
Some families may not be able to afford it and be unhappy.
Autism is a complex cognitive disorder and, for example like dyslexia, is a basket of symptoms with a myriad of demands so therapists must be trained in many aspects. We have no evidence these therapists can cover all this?
Complaints about therapists may mean families would not want to use them again.
Do they need to further train if they are going to charge more? Need to provide a better service.

Option Two

Laura’s reaction


Option Two

Pros
Widen the charity’s product portfolio
Reduce the risk of relying on a small range of products/services
More recognition and awareness. Can help to raise profit and revenue in the long term
Advantages of branding.
Strengthens the name and image of Reach Out to help boost its sales through continued brand extension strategies.
Gives Reach out a brand identity, customer trust and loyalty.

Cons
Inappropriate for a charity to have such marketing objectives.
Opportunity cost: the PECS cards
Expensive - $100,000 in total. Reduced surplus.
Does carry risks with it.
Bad publicity for one product can lead to problems for others – has to maintain consistency in quality
Brand development can help improve brand recognition therefore increasing revenue. Product development can help boost revenues because it increases the product mix of the organization. Significant because this is one of Neil’s suggestions to increase revenue. However, it is expensive, $100,000 for an NPO that has only been generating positive cash flow for 3 months.
Family branding can increase the success rates on new product launches because consumers are already aware of the name and are, therefore, more willing to purchase the product.
If one product fails within a family brand then this can have negative effects on the reputation of other products within the family because they all share the family name.
Depends on the strength of the family brand. Reach Out is new and only regional therefore the benefits of family branding are likely to be fairly small.
Very Important...
Write down a list of advantages and disadvantages of branding page 512, brand development page 516 and family brand page 517!!!
Option Three



Laura’s reaction


Pros
Increased revenue
Both organizations would benefit. Increased funding and support. $10,000 can help Reach Out with PECS cards at a reduced price and have the USP.
Commonly used in charities. A good form of below the line promotion. Increased brand recognition.
Can use N-Pharma’s knowledge and research on autism for its own purposes.
Marketing benefits – Laura’s blog could become more well known


Cons
Laura’s concerns about being linked to a multinational that may only be concerned about PR rather than the cause itself
Negative publicity by this multinational could impact on Reach Out and its own image – brand association.

FINALLY...




Topic 2: HRM At Reach Out

Leadership
 Leaders need to be visionaries
 Leaders need to be good at carrying out the process of change and respond to it.
 Leaders need to motivate
 Leaders need to be able to get to the core of the problem
 They need to be creative and innovative

Things to note:
Neil donated the £10,000 himself so he has a personal interest in this business. (line 36)
Whilst Laura’s salary was fixed, Neil’s reward package was based on PRP (line 40)
Laura had the security of a steady income, but Neil had the financial motivation to make Reach Out successful At first, they thought they would complement each other, but after time, they clashed.

Laura
Task – what are Laura’s strengths and weaknesses according to the case study?
Laura’s Strengths
Keen to raise awareness about autism – wants to be ethical. Has knowledge and first-hand experience of the needs of families with autism (line 24). She was passionate and had many ideas (line 27). This is a project close to her heart. Determined to keep Reach out as a NPO with primary ethical objective of helping children with autism (Line 43). She developed a successful website
Laura’s weaknesses
 She was impatient and pursued her own ideas (line 67)
 Dismissed Neil’s concerns about Andrew.
 Informal communication with Andrew and Neil
 Neil had always been impressed with Laura’s determination, but was now seeing it as a weakness. (Line 114)
 Poor decision making methods, based on intuition and limited experience. (Line 117)
Laissez Faire Leadership Style
One who prefers to have minimal direct input into the work of the employees.
Allow employees to carry out activities freely within broad limits
Leave subordinates to make their own decisions and to complete tasks in their own way. The result is a relaxed atmosphere.
This leader will set objectives but it is upto the employees to decide how best to achieve the objectives using the resources available to them.
‘Let it be’ – the leadership responsibilities
are shared by all
Can be very useful in businesses
where creative ideas are important
Can be highly motivational,
as people have control over their working life
Can make coordination and decision making
time-consuming and lacking in overall direction
Relies on good team work
Relies on good interpersonal relations
Laissez Faire Leadership Style
Name one advantage and one disadvantage of this laissez faire leadership styly
Advantages - Laissez Faire Leadership Style
 This leads to high levels of motivation as staff feel trusted and highly valued by their employer.
 Relaxed atmosphere.
 Employees feel they have control over their own work and can contribute to the success of the organization.
 It is suitable in situations where creativity is required
Disadvantages - Laissez Faire Leadership Style
 There is lack of supervision or direction
 Decision making and coordination is slow and time consuming
 Relies heavily on people’s goodwill and teamwork to achieve the organization’s goals.
 This also encourages slack – when people choose to be less proactive as they know they are not being directly monitored by senior management.
 Can demotivate as there are few incentives to work hard.
Disadvantages - Laura’s leadership style
 Lack of direction for Andrew
 Lack of supervision has caused customer complaints as a result of Andrew’s work
 Decision making skills causing problems for Neil, as based on intuition and limited experience.
 Informal communication with Andrew not helping
 Did not liaise monitor and mentor the therapists – left them to it. This caused problems in motivation and lack of direction.
Final Notes
A laissez-faire approach can cause problems because inexperienced staff can lack the necessary skills therefore increasing the risk of mistakes.
Depends on the individual. Laura’s personality seems to suit a laissez-faire approach where as Neil likes more control. However Andrew clearly needs more guidance thus a laissez-faire approach is probably unsuitable in this instance.
Activity
Now write a list of Neil’s characteristics as a leader…
Draw a table and compare and contrast Neil’s leadership style with Laura’s
Neil
He worked previously in public and private sector – has business experience.
Has educational experience
Has a personal interest in the charity as he put in the $10,000 himself.
Has a controlling personality.
Ethical – hesitant about using unqualified staff.
Forward looking leader
Problem – solver – likes to look at problems and consider ways to solve this.
He preferred to be more analytical and scientific.
Very professional – carried out SWOT, STEEPLE and business plan.
Willing to go through any measures to ensure the success of the charity. Even willing to allow Laura to make final decisions.
HL – Reading
Fiedler – Page 253
Contingency theory – page 256
Charles Handy – Page 261
Peter Drucker – Page 262
Leadership and management – Page 258
Make notes on the above and identify how you can apply them to Reach Out.
Communication at Reach Out
Issues:
Informal communication
Website used to communicate with customers.
Communication barriers between Neil and Laura
Email is used extensively as a method of communication
Fishbone diagram – communication systems
Communication Facts
Reach Out has made effective use of the internet – social networking sites and the website to communicate to customers.
Laura has communicated to parents through her blog and through emails
These methods of communication allowed her to work from home (Line 25)
Andrew has difficulties with social situations (Line 92)
Most communication between Laura, Neil and Andrew was informal.
When Neil confronted Andrew about the complaints, there were barriers to effective communication. (line 101)
Andrew not knowing how to use the computer would cause further communication problems. (line 107) as they rely on this heavily for communication.
Fishbone Diagram Analysis of Communication
Write a summary of what you think the fishbone diagram shows about communication
Fishbone Theory – Page 106
Created by Kaoru Ishikawa. Also known as the cause-effect diagram
The fishbone diagram is a management tool used to identify the root causes of a problem.
Used for dealing with a problem that has several elements or root causes
Usually use 4 Ms – Management, Manpower, Machines, Materials.
In Reach Out, they used Communication Systems, Management Systems, Staffing 1 and Staffing 2.
HL - Fishbone Diagram Analysis of Communication HL
Make notes on the theory behind a fishbone diagram page 107
What are the advantages and disadvantages of using this tool? Page 108
Communication
Why is good communication important?
• It helps to manage the business effectively
• It reduces customer complaints
• It motivates staff – everyone knows what they have to do
• Everyone has a sense of direction and planning is effective.
• Effective communication needs a balance of both formal and informal.
Informal Communication
Informal communication refers to all unofficial channels of communication that exist in the business.
These are non-approved channels.
This can both help and hinder formal communication.
Information that is gained “through the grapevine” can become distorted
But formal communication SHOULD be supported by informal channels.
The informal communication at Reach out has caused a breakdown in communication between management and employees, and between the business and its customers.
Barriers to effective communication
Between Neil and Andrew:
Effective communication will only take place if the message is received and understood by the receiver.
Barriers to effective communication
Barriers include:
 Form of the message
 Jargon
 Skills of sender and receiver
 Choice of communication channel/medium
 Incorrect target for the message
 Stereotypes, perceptions and attitudes
 Layers in the hierarchy
 Breakdown of the channel
 Lack of common sense and purpose
 Use of ICT
 Over reliance on written communication
 Intermediaries
The bold apply to Reach Out
Neil and Andrew..
Andrew unskilled or unwilling to communicate
Communication ICT
Internet
Useful for external communication
Can have lots of information about the business
Can be used to effectively communicate with customers
But needs skills to operate the computer
Email
Allows for immediate communication
Long documents can be sent immediately
Again needs sender/receiver to be skilled with using this technology
Can cause problems if technological breakdowns.
Working from home
Laura works from home on a flexible schedule
Her bedroom was turned into an office and equipped with better computer facilities.
What are the advantages and disadvantages for this for Laura and for the business?
Laura working from Home Pros
 Technology will allow her to communicate from home and still be with her son and look after him
 Motivating for her – allows her to have a flexible working structure
 Saves time and money with travelling
 She can enjoy autonomy in decision making as working practises tend to be less formal.
 She also has the choice in how to organise her work.
 Her working hours will be flexible. This means customers can communicate with her during different times of the day. Useful for her job in dealing with parents/carers.
Laura working from Home Cons
 It does rely heavily on good communication and ICT – which is a concern for Reach Out.
 Laura may get distracted from her work
 She will work in isolation and the office atmosphere is missing
 Causes communication problems between Laura and Neil and Andrew. If she is away from work she does not see what is going on as much.
 High set up costs for Neil $10,000 (line 33)
 Less control for both Neil and Laura
 Can face technological breakdowns,
 Encourages Laura’s laissez faire leadership style as it takes her away from the office.
The Therapists
“Reach Out Therapists” – Facts
From the beginning, Laura had initial plans of involving trainee teachers working with children with autism (line 27)
These are students training to become school teachers
They had studied how to support children with autism
They needed experience of working with children with autism.
Although they were not qualified, they would be able to help the children and their families.
Laura matched them with families who had emailed her asking for affordable therapists, qualified or not.
Neil was hesitant – ethical issues of using unqualified staff, legal issues, health and safety and child protection.
Laura insisted everyone would benefit: children, families, trainee teachers and charity itself.
By 2010, 20 families were supported by the therapists.
Initially this was a success.
Therapists paid $20 per hour.
More families were contacting Reach Out to ask about the therapists scheme. (line 77)
Then Andrew was hired to oversee therapists. Neil needed to train him in workforce planning
After a few weeks – complaints included:
 Punctuality
 Not turning up at all
 Andrew failing to confirm appointments/reply to messages
Therapists were willing to work for $20 per hour
They needed more flexible working patterns in order to attend lectures
Many had to pay for public transport to go to therapy sessions.
Andrew felt this was unfair
Task
Write a list of the advantages and disadvantages of using these unqualified therapists for A) the charity
B) the therapists themselves.
Advantages of “Reach Out Therapists”
 They need the experience of working with children with autism
 Gives them first-hand experience of autism and they get paid for it. Good for their Cv.
 Young, energetic and have the first hand theory as they are currently studying it
 It allows Reach Out to cater for more families
 The families did want affordable therapists – qualified or not
Disadvantages of “Reach Out Therapists”
 Unethical concerns for the charity of hiring unqualified therapists. (H&S, CPO) It depends on whether customers are made aware of them being unqualified.
 They cannot be fully committed to this charity because of their university commitments
 They are unhappy about the money to pay for transport
 They need more flexible working hours to attend uni lectures
 They have been left to it by Laura and Neil from the start. Initially with little liaising, mentoring and monitoring (line 74)
 Managed by Andrew who has difficulties with social situations. Andrew was not monitored himself. Communication problems between Andrew and the therapists.
 This flexible and informal structure caused them to lose control, focus and become demotivated. They have no sense of direction and need proper management.
 Result: complaints, punctuality, absence…
 Their failings are having an impact on the charity, its goodwill, its revenue, its image etc.
Therapists – Fishbone Analysis
HL - Fishbone Diagram Analysis of Therapists
Solution 1
Reach Out could switch to private therapists – could charge upto $100 per hour for a visit to a newly diagnosed child. (Line 5)
However this is costly.
Solution 2
Provide better supervision and training for Andrew which should improve management of the therapists. And should make them more motivated.
Time consuming and costly.
Solution 3
Motivate the therapists by offering them more flexible working patterns and paying for their transport.
Increases costs and may delay launch of PECS Cards.
Contingency plan needs to be developed to cover absent/late therapists
Solution 4
Outsourcing suggested by Neil
Flexible working patterns
Will improve flexibility in the charity. They have consequences for the charity’s workforce planning. This Allows therapists to work hours that suits their needs. Such flexible working hours is needed for these students who need to balance this work with their uni life. According to Handy’s shamrock organization, they would be classified as peripheral workers – reading page 198.
Flexible working patterns
These therapists will be motivated by the pay they receive and the work they are doing with the children. But they want flexible hours and subsidized transport. They are not 100% loyal to the charity because this is not their first priority. So why have flexible working patterns?
Advantages
 It can allow Reach Out to expand and respond to changes in demand
 Cheaper for Reach Out as qualified therapists cost a lot of money.
 More flexible than permanent staff
 If trained well and supervised well, can allow Reach out to operate efficiently and increase demand.
Disadvantages
 Therapists have less loyalty to Reach Out
 Quality of their work has not been supervised. No guarantee they will perform their job well. Perhaps Neil was right to have ethical concerns, H&S and CP concerns.
 Damaging Reach Out’s reputation
 Communication problems occur
 Lack of stability at Reach Out.
Relevant motivational theorists
Taylor – therapists rewarded with salary only.
Maslow – therapists unable to satisfy security needs
McClleland – Neil (need for achievement) Laura (need for affiliation?)
Herzberg – hygiene factors for therapists. Lack of motivators for therapists.
Vroom – outcome of the effort for the therapists.
Outsourcing
Neil wants to dismiss Andrew and outsource the therapist scheme management role to an independent freelancer
What would be the advantages and disadvantages of this?
Outsourcing
The act of moving non core activities away from internal operations by finding an external party to perform such functions.
Outsourcing Benefits
 To reduce costs and eliminate the problems faced as a result of hiring Andrew (would not need to train or supervise him)
 Freelancer would have the knowledge, experience and skills to tackle this job head on.
 They would be able to solve problems of therapists as they have the skill to do so.
Outsourcing Problems
 This would not be their priority – work for several employers
 Requires effective two-way communication
 Loss of control for Neil and Laura
 Quality of the work produced or service provided would be an issue
 Effective workforce planning needed – costly and time consuming,
 Expensive.
Workforce Planning
The process of determining the labour needs of the business now and in the future.
Including the no. of workers and their skills and ways of achieving labour targets.
Neil would have to train Andrew in workforce planning
Reading page 168-173 IBO & Reading page 430-434 Raffo
Salary & PRP
Laura has a fixed salary $2000 per month
Therapists paid on a salary basis $20 per hour session
Reading – Page 281
Neil – PRP. A commission of total cash receipts.
Reading page 282-284

Methods of financial rewards
Neil is motivated by this rewards package. He is rewarded by meeting certain goals. It creates an incentive for him to work harder. Develops a performance culture for Neil, where he strives to achieve targets. This can cause security problems for Neil. It directly links performance with pay. He is worried that targets won’t be met with Laura’s leadership style.
Final reading
Training – types of training
Motivation chapter – theorists and financial and non financial rewards.
Leadership chapter
Corporate Culture (esp. Handy)
Recruitment and selection – especially interviews
It is important that you read these chapters well and have good revision notes on them…






Finance At Reach Out
Issues to revise
• Sources of finance
• Cash flow forecast
• Budgeting
Financial Facts
When they first started, Neil insisted that the organization is set up in a professional manner. He set up a budget and a simple system for their final accounts. He calculated the start-up costs to be $10,000.
He considered sources of finance such as a short term loan from a bank or a government grant from the local public authorities. Neil decided to fund and donate the $10,000 himself. Neil liked the financial motivation to make Reach Out successful. Laura’s goal was to produce and sell PECS cards for a reduced price. USP. Using surplus to subsidise PECS cards. First she had to establish the charity and make it financially sustainable.
Reach out was based on a simple business model that covered costs and allowed the organization to create a surplus. (line 55).
Laura has a fixed salary – a more stable salary compared to Neil.
Therapists charged $25 per hour for sessions.
A monthly average of $200 was received from donations by readers of Laura’s blog. She donated this to Reach Out.
The unqualified therapists would benefit the charity as they were cheaper than qualified therapists (who charged $100 per hour).
In the beginning, Reach Out’s revenue model worked very well and its six month statement of financial activities was healthy with a small surplus.
Initially the revenue ensured a success of several thousand dollars.
Sources of Finance
Neil used personal funds for setting up Reach out. This is an internal source of finance. He did consider a short term loan and a community grant...
Write down one advantage and one disadvantage of each.
Short term Loan
External source of finance. He would have had to pay interest charges on the loan meaning increased business costs. He would have to pay it back over regular instalments. Money would have been obtained straight away and used immediately. He could have managed the payments in agreement with the bank. He possibly didn’t want to commit to owing so much at the start which is why he funded the start-up costs himself.
Don’t forget that they may not have been granted this loan after applying for it. Reach Out could be seen as a risky business as it is new and small.
Community grant
From the local public authorities – non repayable. Government often offers financial aid to support business activities. This can be for small business start-ups, Offered as one lump sum – one off payment. Received immediately and can be used straight away. Hard to obtain, but Reach Out would have possibly been eligible considering the type of organization it is. Doesn’t have to be repaid, so better than a loan as it reduces costs for Reach Out.
Reach Out Is an NPO. Hard to obtain finance. Uses surplus to achieve goals. Limited sources of funding available.
What other sources of finance are available for reach Out?
 Overdraft
 Family and friends
 Sponsorship
 Government subsidies
 Donations
 Venture capitalists and business angels
For each of the above, write down one advantage and one disadvantage from page 337 in IBO book.
Overdraft
Although overdrafts can demand a relatively high rate of interest, they are usually more cost effective than bank loans.
An overdraft provides flexibility for a business that may face cash flow problems from time to time; therefore, it may not be appropriate for Neil’s brand and product development plan.
Loan Capital
This is a medium to long term source of finance that would be able to generate enough capital to support the brand and product development plan. However, a loan will require interest payments and this may cause Reach Out to be a highly geared company; thus, lowering prospects for future sources of finance.
Personal Funds
Personal funds from Neil - This would be an easy way to get additional capital that would avoid interest payments. However, Neil already supplied the start-up capital for Reach Out and he may not want to expose himself to additional risk nor may have additional capital to give.
Family and Friends
Family and Friends – This is also an easy way to get additional capital and both Neil and Laura could ask their friends and family thus spreading the liability. However, this source of finance may not be sufficient to fund Neil’s product and brand development scheme and borrowing from family and friends often provokes arguments and fallouts
Government Grants
Government Grants – Grants do not have to be paid back; however, they are often hard to obtain. However, given the societal benefit of Reach Out’s organizational objectives, a grant could be a viable source of finance.
Government Subsidies
These are often given to organizations that provide essential products/services in order to keep prices down for the consumer. Reach Out may be able to obtain a subsidy for their therapist scheme and use the cost savings to fund the brand and product development plan.
Sponsorships
The pharmaceutical company, N-Pharma, has already offered to sponsor Reach Out. This could amount to a sizable amount of money. However, Reach Out may not want to be affiliated with N-Pharma if they have engaged in unethical business practices in the past.
Choosing the right source of finance depends on...
 Cost
 Use of funds
 Status and size
 Financial situation
 Gearing
Reading: page 179 of Raffo book.
Surplus
Retained profit for a charity. Retained profit: value of profits that the business keeps hold of to use within the business. Benefits of using this is that the business does not rely on borrowing and interest payments. It can be accessed immediately. Not distributed to the owners therefore can be used to expand Reach Out. But it may not be sufficient enough for Reach Out to conduct its business, so other sources may still be needed.
Goodwill
This is the value of an organization’s image and reputation. It may also include the value of a firm’s customer base and its business connections. For example: A firm that treats its workers well is likely to receive a lot of goodwill from its staff.
Goodwill is the sum of customer and staff loyalty and can provide a major competitive edge for a business.
Line 93 – Laura was hopeful that Andrew’s appointment will generate goodwill towards Reach Out.
Goodwill increases the value of an organization therefore businesses seek to increase goodwill. Goodwill can increase customer loyalty because the public is likely to have a positive view of the organization. NPOs seek to improve goodwill through PR and other means because it is likely to increase the success of the organization.
However goodwill can be significantly reduced if the organization acts in an unsatisfactory manner. For example, Reach Out’s goodwill could be reduced by the failings of the therapists.
Write a list of non-financial facts that have had an impact on Reach Out’s financial situation

Cash Flow

Calculations
Cash Receipts Monthly cash receipts have increased by 636% from May 2010 to August 2010.
Expenses Monthly cash expenses have increased by 88% from May 2010 to August 2010.
Net Cash Flow Monthly cash inflow has increased by $11,600 from May 2010 to August 2010.


Comments
Substantial increase, but only for four months. Impossible to ascertain whether growth will continue at such a
high rate.
Charity contributions remain stable, but could fall due to economic recession.
Sales of PECS cards yet to start (future source of revenue).
Increase, but minimal compared to rise in cash receipts.
Costs and salaries remain stable (with the exception of Neil’s commission). This should aid future planning.
Production costs of PECS cards still unknown.
Solid increase resulting in a small surplus. However difficult to make an accurate judgment as records are only
for 4 months and the sale and production of PECS cards has yet to start.

Cash flow
Effective financial management will mean that businesses have enough cash when it is needed.
• Cash flow is one of the most important aspects of any business.
• Cash flow should not be confused with profit - they are different concepts!
• Cash flow shows the money flowing into a business from sales, interest payments received, and any borrowings and the amount of money flowing out of a business through paying for wages, rent, interest owing, paying back loans, buying raw materials and so on.
Poor Cash Flow
• If the cash flowing into a business does not meet the cash flowing out, then eventually a company will be unable to meet its debts and could be forced out of business.
• Poor cash flow - represented by more cash flowing out than in - is the single biggest reason why many businesses, especially new business ventures, fail.
• The product or service they are providing may be excellent and the business could be sound in every other way but if cash flow is not managed, the business could disappear.
Causes of cash flow problems
• Overtrading
• Investing too much in fixed assets
• Stockpiling
• Allowing too much credit
• Taking too much credit
• Overborrowing
• Underestimating inflation
• Unforeseen expenditure
• Unexpected changes in demand
• Seasonal factors
• Poor financial management
Solutions to cash flow problems
• Controlling cash
• Obtaining maximum possible credit for purchases – delay payments of bills to allow time for receipt of income from customers.
• Getting goods to customers quickly and ensuring quick payment (collecting payment efficiently)
• Control debtors and improve credit control. Early payment should be encouraged.
• Minimise spending on fixed assets and keep cash in the business.
• Control costs e.g. Administrative and production costs.
• Sell some fixed assets for cash
• Borrow money (short term loans)
• Raise more share capital
• Only make essential purchases.
Page 339 of Raffo for other ways to resolve liquidity problems.
Reach Out’s cash flow
According to the extract from Reach Out’s monthly cash flow (Appendix 1) Reach Out is likely to achieve a reasonable surplus in its first year due to the increasing positive monthly net cash flow figures.
• There is a positive closing balance pre-start-up
• May has a negative closing balance.
• It is positive after that, highest closing balance in August.
• Monthly cash receipts have increased by 636% from May 2010 to August 2010.
• Substantial increase, but only for four months. Impossible to ascertain whether growth will continue at such a high rate.
• Charity contributions remain stable, but could fall due to economic recession.
• Sales of PECS cards yet to start (future source of revenue).
Expenses
• Monthly cash expenses have increased by 88% from May 2010 to August 2010.
• Increase, but minimal compared to rise in cash receipts.
• Costs and salaries remain stable (with the exception of Neil’s commission). This should aid future planning.
• Production costs of PECS cards still unknown.
Net cash flow
• Monthly cash inflow has increased by $11,600 from May 2010 to August 2010.
• Solid increase resulting in a small surplus. However difficult to make an accurate judgment as records are only for 4 months and the sale and production of PECS cards has yet to start.
Note: Do revise profit and loss accounts – this could come up!!


Budgets (HL)
A Budget is a financial plan for expected revenue and expenditure for an organization or a department within an organization. A budget is prepared in advance for a period of time, usually on a monthly, quarterly or annual basis
• Sales budgets
• Staffing budgets
• Production budgets
• Marketing budgets
• Zero-budgeting
• Flexible budget
Summarise each of these and their meaning using pages 378-379
Advantages of Budgeting
• Informs managers if they are going in the right direction, financially.
• Helps to measure objectives
• Helps to anticipate future problems before they arise
• Helps companies to set a contingency fund
• Provides guidance for decision-making
• Motivating for budget-holders – a sense of empowerment

Disadvantages of Budgeting
• Unforeseen circumstances can cause a large difference between actual and budgeted figures
• Budget holders often over-estimate their budgets. This increases expenditure
• Time consuming: planning, setting, controlling, monitoring and reviewing.
• Ignores qualitative factors that can affect the financial performance of a business. E.g. CSR, motivation, brand development
• Can be considered inflexible.
Variance = actual outcome – budgeted outcome
The difference between the budgeted figure and the actual outcome
Favourable Variances (F) – beneficial to the organization. E.g. Actual costs are lower than estimated costs. Or sales outcome exceeds estimated sales.
Unfavourable Variances (A)– (known as adverse) financially detrimental to the organization. E.g. When costs are higher than expected or sales lower than estimated.



















Reach Out Marketing
E-Commerce and Internet Technology

• Blogs: Facebook and Twitter
• Podcasts
• Websites
• Emails
• Video clips

E-commerce

What are the advantages and disadvantages of using e-commerce to Reach Out and their customers (clients).
Advantages to Reach out

 Give Reach Out the opportunity to raise additional revenue by selling advertising space e.g. sponsorship link.
 Respond to new competitors entering the market.
 Increase distribution by adding a ‘registration form’ for students interested in joining Reach Out.
 Advertising costs are reduced.
 The internet offers convenience and up to date information.
 Remove the need for a marketing agent.
 Blog: spreads word of mouth marketing (Viral marketing).

Advantages to Customers

 Gives the students the opportunity to develop learning beyond their time spent in Reach Out (virtual learning environment)
 Access to resources: “to provide online support for families of children with autism and to offer them communication resources at a greatly reduced price”.
 Reduced transport costs, constant access 24/7, locate away from Reach Out.

Drawbacks of Ecommerce for Reach Out and customers

 Set-up and running costs: ISP, paying for a professional web developer
 Laura is not a professional web developer.
 Spam, viruses, hackers, hardware and system failures, fraud, and customers might have limited access and understanding to technology.
 Less control over the information and messages sent to customers.


E-commerce (E-business) and the marketing mix

What is the effect of e-commerce on the marketing mix?

E-commerce and the Marketing Mix

Price: competitive pricing is required as the PECS systems can be copied by many providers.

Promotion: rely on e-mail to alert customers about its promotional activities

Product: highlighting PECS as a clear Unique Selling Point.

Place: Reach Out’s customers can access material from any place.

Question
How feasible is it for Reach Out to rely on e-commerce?

Feasibility of using ecommerce

 Reach Out cannot rely on e-commerce as students need direct support and training.
 Reach Out could develop distance learning for students and helpers.

Neil’s Marketing Plan

 Neil has created three marketing options using a positioning strategy for Laura to consider.

 This analytical tool ranks Reach Out’s business activities in relation to others in the market.

 Positioning is used to determine whether Reach Out’s products, and services, are a high or low quality. (Position maps)

1) Identify

Identify the competitive advantage:

 PECS are used as a Unique Selling Point (product differentiation) to make their business stand out from those offered by competitions.

 Reach Out has achieved cost leadership by offering low prices for the PECS cards, which Laura makes herself.

 A positive image has been created from Reach Out’s charitable status, community projects and Laura’s effective use of internet courage (Facebook blogs, twitter).


2) Decide

Decide on which marketing technique should be marketed from the Neil’s options.


Option 1 (New Price Structure)
Modify pricing structure:

Charging students higher fees ‘could’ be an example of prestige or psychological pricing as Reach Out is trying to associate itself with a high quality service.

Also, contribution pricing is used in this strategy as it covers any future spending plans: employing professional therapists or building new facilities.

However, this might generate negative PR as it conflicts with Reach Out’s ethical principles.

Option 2 (Creating a Family Brand)
Brand and product development:
What is meant by family branding?

Discuss the extent to which family branding is likely to be successful for Reach Out?

Family Branding

A brand is a name, term, symbol or design that allows consumers to identify the good and services of a business.
Reach out!

Family brand is where a business has a brand which includes a number of different products, for example, the therapist scheme and accessories (T-shirt, mugs and computer mouse mats).
Discuss the extent to which family branding is likely to be successful for Reach Out?


Benefits of family branding:

 Create brand loyalty (demand becomes price inelastic).
 Differentiate Reach Out’s business activities from its competition (brand extension strategy).
 Greater flexibility when making pricing decisions, Reach Out can still achieve its current commitment to sell the PECS cards at lower prices by charging premium prices for the therapy sessions, and accessories.
 To help recognition of Reach Out’s products and services, eventually increasing its market share.
 Create a barrier to entry will make it difficult for other businesses to enter the same market.

Problems with family branding:

 It will be hard to brand PECS which is a generic brand.
 Establishing a successful brand will cost $100,000.
 Brand development conflicts with the Reach Out’s vision and mission statements to offer resources at a reduced price.
 Consistent quality will have to be maintained across the different products. Bad publicity for one product can lead to problems for all products and services.

Option 3 Obtain Sponsorship:

As part of any sponsorship deal Reach Out would have to add a link from Laura’s blog to N-Pharma’s website. This deal connects to the Corporate Social Responsibility area of the syllabus and gives N-Pharma the opportunity to morally recognise and act towards their different stakeholders. However, Laura regards this sponsorship as a shallow PR exercise from an established Multi-National.

3) Implementation

Laura has rejected these options, considering branding as a long term option. However, she is considering the following:

 The PECS cards will still be subsidized.

 Neil has start market research into the prices of three publishing companies that were currently using PECS.

 Michael porter suggested that a firm cannot provide cost leadership and high quality simultaneously.

However, it is important that Laura identifies a strategic focus and develop key areas of Reach Out.

The following business tools might help:

Ansoff
Porters
Perception Maps
SWOT
STEEPLE
Five Forces Analysis

Additional Strategies

1) Asset-led marketing

Focus on Reach out’s core competencies or key strengths:

 Specialist teaching
 PECS cards
 Andrew Grandin (Silver medallist)
 Good leadership and practice
 Laura’s Blog
 Laura’s enthusiasm to make Reach Out successful

2) Social Marketing
Kotler defines social marketing as "differing from other areas of marketing only with respect to the objectives of the marketer and his or her organization. Social marketing seeks to influence social behaviours not to benefit the marketer, but to benefit the target audience and the general society.”
3) Social Marketing and Product

People have identified the need for advice and information about autism, and the lack of free medical care has created a genuine problem. Laura’s blog is seen as good solution for that problem.

4) Social Marketing and Price

"Price" refers to what the consumer must do in order to obtain the social marketing product. If the benefits are perceived as greater than their costs, chances of trial and adoption of the product is much greater. Laura has offered free advice, subsidized PECS cards and competitively priced therapy sessions.

5) Social Marketing and Place

"Place" describes the way that the product reaches the consumer.

For a tangible product, this refers to the distribution system—PECS cards, therapy sessions delivered at Reach Out’s premises.

For an intangible product, place is less clear-cut, but refers to decisions about the channels through which consumers are reached with information or training, e.g. Laura’s blog.

6) Social Marketing and Promotion

Finally, the last "P" is promotion. Promotion consists of the integrated use of advertising, public relations, promotions, media advocacy, personal selling and community promotion campaigns.

7) Ethical Marketing

Ethical marketing refers to the application of ethics into the marketing process. Laura has rejected N-Pharma’s sponsorship offer, which is a company accused of using animal research.

Laura, probably, feels that a multi – national company could exploit her vulnerable target market. Laura’s blog is helping an ethical cause and society.

Researching Publishing Companies

Neil is researching the prices of three publishing companies, A, B and C, that were currently selling PECS cards.

List any additional types of data that Neil might need to consider before choosing a publishing company.

Additional Research Data

 Style, shape, form and colour of the PECS cards (developing new product ideas).

 Whether or not the customers would want products offered by publisher A, B and C (assessing their reaction).

 What people are prepared to pay for PECS cards.

 Information about the consumers targeted for PECS (consumer profiling: income, spending habits, attitudes, lifestyles).

 The price of PECS cards offered by Reach Out’s competitors.

 Forecast sales levels (market trends).

 Location of the publishing companies (deliver costs)






Research Methods

Secondary Research

Information that already exists:

Internal data: existing company reports and materials provided by the publishers selling PECS on their websites.

External data: general publications (yellow pages) or internet pages recommending a particular publisher.

Primary Research
Finding information which did not exist before research began:

Conduct interviews with representatives from publishing companies.

IT based research through email correspondence.

Observations and focus groups could be used to collect feedback from customers (people with autism).

Questionnaires could be used to collect the opinions from professionals, therapists, carers and students

Questionnaires

Open Questions
For Example:

What do you feel is the best thing about the PECS cards provided by company A?

 Elicit or obtain “rich” qualitative data
 Encourage thought and freedom of expression.
 May discourage responses from less literate respondents.
 Take longer to answer and may put some people off.
 Are more difficult to analyse – responses can be misinterpreted.






Closed Questions

For Example:
How often do you use PECS products?
Weekly __ Monthly __ Three times a year __ Never__

 Elicit to obtain quantitative data
 Can encourage ‘mindless’ replies
 Are easy for all literacy levels to respond to.
 Are quick to answer and may improve your response rate.
 Are easy to ‘code’ and analyse

Market Research

What are the benefits and problems of Neil conducting market research?

Benefits of Market Research

 An aid to decision making to help Laura and Neil identify the best way forward.
 Reduces the risk of failure.
 Estimates the size of the potential market for Reach Out’s services.

Problems of Market Research

 Human behaviour – responses of consumers might be unpredictable or dishonest.
 Sampling and bias – not all the views of the consumers can be collected in the market place.

Research Sampling

 Random Sampling: gives each member of a group a chance of being chosen.

 Stratified Sampling: sample is divided into segments (high and low income earners).

 Quota Sampling: the population being segmented into a number of groups (age and gender).

 Cluster Sampling: separating population in different geographical areas.



Marketing Mix (7 Ps)

Product

 Tangible Products: PECS
 Intangibles: therapy services, blog (information and advice exchange).

Price

 PECS cards and unqualified therapists: marginal Cost Pricing, penetration pricing (loss leader) and discount pricing.

Promotion

List the above-the-line and below-the-line promotional techniques mentioned so far.
Can you identify any additional promotional strategies that could be used by Reach Out.

Promotional Techniques
ATL:
The Internet
BTL
Public Relations: Sponsorship.
Merchandizing: T-shirts, mugs, mouse mats
Direct mailing and email

Extension Strategies

ATL
Newspapers: teaching and education publications.
Local Radio Stations.
Posters.
BTL
Direct mailing.
Exhibitions and Trade Fairs.
Public Relations: support autistic students in local school

Place

 Laura’s production of PECS cards: Zero level distribution channel.
 Laura’s blog: Business to customer or website (B2C).

People (Customer Relations Management)

 Laura’s blog has created a positive reputation for Reach Out, using word by mouth promotion.
 However, the quality of Reach Out’s service has been effected by unqualified therapists

Process

 Providing cheap PECS cards to help their customers during a time of recession.
 Additionally, the company is helping community based projects

Physical Evidence

Can Reach Out’s facilities, services and products justify their fees charged to customers?

Revise marketing Objectives and social marketing.














Reach Out – Topic 6
There are 3 stages to Business Strategy

Stage 1: Strategic Analysis – Determining the current position of the organization
Stage 2: Strategic Choices – Determining where the organization is headed.
Stage 3: Strategic Implementation – Determining how the organization should get there.

Stage 1: Strategic analysis—Where is the business now?

Consider Reach Out’s position by analysing its internal and external situation. This analysis will dictate the nature of its future strategy. The opportunities and threats faced will vary according to the nature of the business.

Question: Identify two strengths and two weaknesses of the present “product” strategy.

The “Product” strategy
Strengths
PECS cards are a good choice because they satisfy the needs of the target market.
The service aspect of Reach Out complements and supports their business objectives.
Weaknesses

PECS – cost a lot to produce, need start-up capital to finance the production of cards.

SERVICE – Vulnerable and exposed because of reliance on knowledge and expertise of staff.

Stage 2: Strategic choice—Where is the business aiming to be?

Consider Reach Out’s objectives in the short, medium and long term. To achieve this, the business must examine market opportunities and threats, and then plan for the future.

Question

Explain how continuing a “Single Brand” strategy might improve Reach Out competitive position?

The Single Brand Strategy

Messages can be communicated more easily and accurately to Reach Out’s consumers in its target market. This can help establish the firm’s brand image and the goodwill it requires from potential customers to expand. Therefore, this can have the effect of raising sales in the future.

A single brand might also have the effect of increasing the brand’s quality image. This can give the impression of a more prestigious charity organization amongst its customers. This can augment/increase the levels of donations given to Reach Out.

Single, unified brands also allow Reach Out to better differentiate its services from other charitable organization and gives it a unique selling point that which would increase sales.

Stage 3: Strategic implementation—how is the business going to achieve its objectives?


Question: Applying suitable tools such as Ansoff’s growth matrix and Porter’s generic strategies, and using information contained in the case study, evaluate the Option 1, Option 2 and Option 3 growth strategies available to Reach Out.

Firstly, identify Reach Out’s objectives:

 To survive, to make enough revenue to sustainable surplus.
 To provide a service to the autistic community.
 To promote support for the plight of families of autistic children.
 To provide learning materials at a cheaper price.
Each Option should be evaluated by considering some the following areas:

 Risk
 External factors: recession, competitive market, growth opportunities
 Meeting stakeholders needs: Community
 Target market: Autistic people and carers

Consider the Growth Strategies for each strategy:

PECS – (USP) makes Reach Out’s products stand out from other providers in the market.

Blog – Laura’s blog is seen as having “first mover advantage” in the market. She has established a good reputation and loyal customer base.

Market Leadership - offering competitive fees for therapy session and subsidized PECS cards might create market leadership.

Branding – creates recognition for Reach Out’s products and an opportunity for growth.

Product Development – whereby Reach Out aims at selling new products to existing markets.


a) Ansoff provides four strategic opportunities for enlarging a business. Reach Out can use:

Market Penetration – focusing on the existing products offered by Reach out. Subsidizing the PECS cards and offering affordable fees for therapy sessions is a risk growth strategy.

Product Development – offering t-shirts, mugs and mouse mats strategy is a medium-risk growth strategy or brand extension strategy (family brand).

b) Strategic Alliance

An affiliation with N-Pharma allows Reach Out to share costs of product development, operations and marketing (using sponsorship money).

Affiliated businesses remain independent.

c) Porter’s

Bargaining power of suppliers – Reach Out can conduct technical research to find competitively priced accessories

Bargaining power of buyers – Reach Out’s customers might switch to a different company or substitute their products/service.

Threat of new entrants – strong brand, subsidize PECS cards.

Substitutes – a new ‘ebusiness’ might provide PECS at a competitive price.

Rivalry among existing firms – offering therapy sessions at lower price compared to existing companies.

Finally, analyse the constraints of implementing any decision:

Reach Out might not have the resources to achieve its organizational aims and objectives. For example, Reach Out will require additional finance if they decide to employ qualified therapists and improve the quality of their service.

Stakeholder interests might conflict with Neil’s plans, e.g. the local community and multinational corporations

Strengths (and weaknesses) to be developed, for example, the quality of Andrew Grandin’s performance and management decisions at Reach Out need improvement with additional support and training. Using quality management strategies will help Reach Out with these issues.

Reach Out will need to plan for any changes in the long-term, for example, new entrants into the market or a recession or review the external business environment (e.g. the state of the economy). Cost control will present an important part of any future strategy.

Customers demand better quality products and services at competitive prices. Customers may also change their tastes and habits, such as the desire to purchase additional support material to help their autistic children.



Further reading: Change and Management of Change, P.Huoang, Pages 138 to 150

Topic 5 & Reach Out
Topic 5 is not included in this revision booklet. We will have a lesson on quality which you should read over.
We also recommend you revise the chapter on break even and contribution. We will have a break even lesson – this could come up too.














Top tips for the upcoming B&M exams
By Paul Hoang

Here is the first of several top tips for tackling the exams in May 2010…

Top Revision Tips
“Proper preparation prevents poor performance” - The 5 P’s of effective exam preparation
Tip #1 – Learn the command terms
It is crucial that command words are read properly in the examinations. Each command word in a question indicates to students the skill level that is being tested. Hence, if asked to calculate the break-even point for a business, there is no need to define or to explain the concept of break-even. Refer to the Syllabus Guide (pages 74 to 76) for an explanation and example of each of these command words.
There are 4 skills levels for all Group 3 subjects. Do you know the skills level for each of these command terms? If not, ask your teacher!
• Analyse
• Comment on
• Classify
• Justify
• Examine
• Define
• Explain
• Outline
• Recommend
Note: if using past examination questions for your revision, the word ‘assess’ is no longer a command term in the new B&M syllabus (first examination in 2009).

The Paper 1 Examination
Paper 1 is ‘difficult’ in that it seeks extensive analytical and critical thinking skills. The Reach Out case study paper will assess a student’s skills of problem identification, data handling and analysis, critical thinking, judgemental ability, logical reasoning and justified decision making.
The guidelines here should enable students to be better prepared to tackle the Paper 1 questions in the exam. It is by no means an exhaustive set of guidelines and alternative or additional approaches can be used, as suggested by your teachers.
What to do with the Reach Out Case Study
1. Make a copy of the case study - one as an original reference and one to write notes on. You may want to photocopy this on A3 paper so that there is more space for you to make notes at the sides. Key theories, decisions, constraints, opportunities or problems can be written in the margins for future reference.
2. Read through the Reach Out case study carefully to get an overall feeling and idea about the business, the people involved and the problems the business faces. Do this twice!
3. Make sure that you understand all the issues arising from the case study. Use a dictionary to look up key terms or words that you do not understand.
4. Use one copy of the case study to highlight all possible key terms. Make sure that you can define each and every one of these terms in the context of the Reach Out case study. Definition questions will appear in the examination.
5. Try answering some of the Practise Questions from past exam papers (in the context of the Reach Out case study). Your teachers can download some sample ‘mock’ exam papers for Reach Out on the OCC resources section.
Whilst answering P1 questions, it is important to remember the following:
• Avoid copying large chunks of the Reach Out case study, even if these are in quotation marks, as this wastes time and does not really reveal a candidate’s level of understanding.
• Information and quantitative data presented in the case study should be used to support written answers.
• Refer to the mark allocations for each question when writing your answers.
Source: adapted from Business and Management – for use with the IB Diploma Programme, by Paul Hoang, IBID Press, ISBN: 978-1-876659-63-9


Reach Out – Top 10 activities to prepare for the case study
The second blog entry on teaching and learning strategies for the pre-seen case study 2010…
Top 10 Preparation Activities for Reach Out
1. Identify and define all the key terms in the case study (there are over 80 key terms in this case study and any of these can be asked in the actual exam!)
2. Produce a time line of events (read the case to produce a chronological list of events and the people involved).
3. Produce a personnel profile of all people mentioned in Reach Out: who they are, their roles, their strengths/weaknesses and so forth.
4. Assess the liquidity position of Reach Out using ratio analysis and comment on your findings.
5. Produce a stakeholder map (see Unit 1.4) for Reach Out. Try to distinguish between Reach Out’s internal and external stakeholders.
6. List all the problems faced by Reach Out, under the headings of either: Finance, Personnel, Marketing or Production. Alternatively, the problems could be classified as internal and external constraints/problems. For HL students, consider the sources of conflict at Reach Out and produce a force field analysis (Unit 1.8) for Reach Out.
7. Conduct a fully applied SWOT analysis for Reach Out. To test your understanding, you could produce another jumbled up version of the SWOT analysis to see if you can place the points in the correct category (strengths, weaknesses, opportunities or threats).
8. Conduct an overall PEST analysis for Reach Out by examining the opportunities and threats outlined in the case study. This will involve an analysis of the data in the appendices.
9. Produce a podcast of the Reach Out case study. You can then listen to the case study on your media player; ideal for auditory learners.
10. Apply relevant Business & Management theory to the Reach Out case study. You could examine the strategic options available to Reach Out using Ansoff’s Matrix, Five Forces analysis or Porter’s generic strategies (see Unit 1.7).
Finally, HL students should note that Section C of the Paper 1 examination will come with additional (unseen) information and data in order to address the compulsory question on Business Strategy.
Good luck with the preparations!

Top tips for the upcoming B&M exams #2
Here is the second of several top tips for tackling the exams in May 2010 - Tip #2 – Learn the structure of the exam papers…
Due to the intertwining topics in Business & Management, pre-issued case studies are useful in promoting a holistic approach to the study of the subject. Paper 1 assesses all six topics (five for SL students) of the Business & Management syllabus and also carries the largest component weighting in the examination (for HL students). It is based on a pre-issued case study about a hypothetical business. The Paper 1 examination consists of the following structure:
• Section A (HL and SL) - answer any two out of three structured questions (30 marks)
• Section B (HL and SL) – answer the one compulsory, evaluative structured question (20 marks)
• Section C (HL only) – answer the one compulsory strategic decision-making question using extension material (30 marks)
© IBO, 2007
The Paper 1 Examination:
Level Total Marks Weighting (%) Timing (hours)
SL 50 35 1 ¼
HL 80 40 2 ¼
The Paper 2 examination consists of the following structure:
• Section A (HL and SL) - answer any one out of two questions based on a quantitative aspect (25 marks for HL, 20 marks for SL)
• Section B (HL and SL) - answer two out of three structured questions (50 marks for HL, 40 marks for SL)
Level Total Marks Weighting (%) Timing (hours)
SL 60 40 1 ¾
HL 75 35 2 ¼
Top tips for the upcoming B&M exams #3
Here is the third of several top tips for tackling the exams in May 2010 - Top Tip #3: Plan your revision carefully…
“Unless commitment is made, there are only promises and hopes; but no plans.” Peter F. Drucker, Management guru (1909 - 2005)

Trying to learn the whole Business & Management syllabus without a proper plan is not going to work. A more effective technique is to revise sections of the syllabus in manageable sessions, following a well structured revision timetable. For example, you might want to revise Finance and Accounting in one particular revision session, perhaps focusing on one or two aspects, such as cash flow forecasting (Unit 3.3) or sources of finance (Unit 3.1).
The HL B&M Internal Assessment requires students to propose an Action Plan (as part of the Research Proposal)’; producing a revision schedule is a similar process. Whatever you do, don’t leave everything until the last minute – you simply cannot revise the entire B&M curriculum in one or two nights. Without a plan, you simply don’t know where you’re going and how you’re going to get there. This means valuable revision time is likely to be wasted. Remember the famous saying that failing to plan is planning to fail – and we don’t want that! Below is a list of some of the things you could try as part of your revision plan:
• Draw up a revision plan for each week – and stick to it! Some flexibility might be necessary but remain focused and disciplined.
• Use the B&M syllabus as a starting point when planning your revision.
• Take careful note of the “Learning Outcomes” in the syllabus – examiners use these when setting questions!
• Allocate more time to the topic areas that you find most difficult.
• Build in time for sufficient rest breaks and recreation – a refreshed mind is a more productive one.
• Practice, practice, practice using past exam papers.
• Don’t procrastinate – turn off your mobile phone, home entertainment systems and the Internet (personally, I think Facebook and YouTube are great – but they must be the world’s best procrastination tools!)
Finally, it is vital to build in revision time to learn your quantitative methods. There are plenty of formulae to learn – not all of them are given in the Formulae Booklet, including:
• Payback period (Unit 3.2)
• Average costs (Unit 5.2)
• Break-even output (Unit 5.3)
• Margin of safety (Unit 5.3)
• Closing balance (Unit 3.3)
• LIFO / FIFO (Unit 3.5)
• Net profit (Unit 3.5)
• Full costing (Unit 4.4)
• Reducing balance depreciation (Unit 3.5)
• Variance (Unit 3.4)
Good luck with the planning!