PEARSON EDEXCEL INTERNATIONAL A LEVEL BUSINESS Student .

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PEARSON EDEXCEL INTERNATIONAL A LEVELPYBUSINESSCOStudent Book 2SAMPLERob Jones

The rights of Rob Jones to be identified as author of this work have been asserted by him inaccordance with the Copyright, Designs and Patents Act 1988.First published 201922 21 20 1910 9 8 7 6 5 4 3 2 1British Library Cataloguing in Publication DataA catalogue record for this book is available from the British LibraryISBN 978 1 292239 16 3CCopyright noticeAll rights reserved. No part of this publication may be reproduced in any form or by any means(including photocopying or storing it in any medium by electronic means and whether or nottransiently or incidentally to some other use of this publication) without the written permissionof the copyright owner, except in accordance with the provisions of the Copyright, Designs andPatents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency, 5thFloor, Shackleton House, 4 Battlebridge Lane, London, SE1 2HX (www.cla.co.uk). Applicationsfor the copyright owner’s written permission should be addressed to the publisher.PYText Pearson Education Limited 2019Designed by Pearson Education Limited 2019Typeset by Pearson CSCEdited by Sarah WrightOriginal illustrations Pearson Education Limited 2019Cover design by Pearson Education Limited 2019Picture research by IntegraCover photo/illustration Getty Images/Dave G KellyInside front cover photo: Shutterstock, Dmitry LobanovShutterstock; 62 123RF: Adrin Shamsudin/123RF; 63 123RF: Chayapon Bootboonneam/123RF;70 Shutterstock: chert28/Shutterstock; 71 Shutterstock: ImagineStock/Shutterstock;79 Shutterstock: Ilonde van Hoolwerff/Shutterstock; 80 123RF: JoseMarie Hernandez/123RF; 85 Shutterstock: David Hanlon/Shutterstock; 86 Shutterstock:Cozine/Shutterstock; 88 Shutterstock: Evan Lorne/Shutterstock; 90 123RF:HongqiZhang/123RF; 98 123RF: Panama7/123RF; 99 Shutterstock: Somkiat.H/Shutterstock; 101Shutterstock: All About Space/Shutterstock; 103 Shutterstock: Selin Aydogan/Shutterstock;104 Shutterstock: Daniel Balakov/Shutterstock; 105 Alamy: Kristoffer Tripplaar/Alamy StockPhoto; 109 123RF: Bacho12345/123RF; 112 Shutterstock: GaudiLab/Shutterstock; 113Shutterstock: Weedezign/Shutterstock; 116 Shutterstock: Asharkyu/Shutterstock; 121Shutterstock: Nasirkhan/Shutterstock; 123 Shutterstock: Africa Studio/Shutterstock; 129Shutterstock: Krzysztof Bargiel/Shutterstock; 131 Shutterstock: CHEN HSI FU/Shutterstock;140 Shutterstock: Natali Glado/Shutterstock; 141 Shutterstock: Gumpanat/Shutterstock;144 123RF: Johnaapw/123RF; 145 Shutterstock: Christian Lagerek/Shutterstock; 149 123RF:Eonaya/123RF; 151 Pearson Education: Tsz-shan Kwok/Pearson Education Asia Ltd; 154123RF: Albertus Engbers/123RF; 158 123RF: Chokniti Khongchum/123RF; 160 Shutterstock:Avigator Thailand/Shutterstock;163 123RF: Tobias Arhelger/123RF; 165 123RF: Satina/123RF; 167 Shutterstock: VanderWolfImages/Shutterstock; 169 Shutterstock: Aisvector/Shutterstock; 170 123RF:Stanisic Vladimir/123RF; 174 Shutterstock: Structuresxx/Shutterstock; 177 Shutterstock:WHYFRAME/Shutterstock; 178 Shutterstock: Specta/Shutterstock; 187 123RF: GeorgiiDolgykh/123RF; 194 Shutterstock: (t) Pics721/Shutterstock; 194 Shutterstock: (b) YannickVidal/Shutterstock; 197 Shutterstock: Kathmanduphotog/Shutterstock; 199 Shutterstock:Rphstock/Shutterstock; 205 123RF: Ekays/123RF; 206 Shutterstock: Roibu/Shutterstock; 208123RF: Nuttawut Uttamaharad/123RF; 212 Shutterstock: Stephane Bidouze/Shutterstock;216 Shutterstock: Chonnanit/Shutterstock; 221 Shutterstock: Katjen/Shutterstock; 224Shutterstock: Richard Thornton/Shutterstock; 236 Alamy: Ren Long/Xinhua/Alamy Live News/Alamy Stock Photo; 239 Nestlé: Courtesy of Nestlé Vietnam; 250 Shutterstock: Petr Akulin/Shutterstock; 253 Shutterstock: Fascinadora/Shutterstock; 255 Shutterstock: IM photo/Shutterstock; 260 123RF: Dmitry Kalinovsky/123RF; 264 Shutterstock: Sreejith tj/Shutterstock;266 Shutterstock: Katjen/Shutterstock; 267 Alamy: Bob Pardue-SC/Alamy Stock Photo; 268Shutterstock: Heromen30/Shutterstock; 272 Shutterstock: Tong stocker/Shutterstock; 274Shutterstock: Africa Studio/Shutterstock; 275 Shutterstock: Dasha Petrenko/Shutterstock;277 Shutterstock: HildaWeges Photography/Shutterstock; 278 Pearson Education: JulesSelmes/Pearson Education; 281 Shutterstock: Elena Elisseeva/Shutterstock; 282 Shutterstock:Pressmaster/Shutterstock; 283 123RF: Panpote Soontararak/123RF; 288 Shutterstock:Rawpixel.com/Shutterstock; 289 Alamy: James Thew/Alamy Stock Photo; 290 123RF: DeyanGeorgiev/123RF; 294 123RF: Max776/123RF; 297 Shutterstock: Natalia D./Shutterstock; 299123RF: Chris Elwell/123RF; 301 Shutterstock: Pedrosala/Shutterstock; 303 Shutterstock:Haak78/Shutterstock; 305 123RF: Stepan Popov/123RF; 306 Shutterstock: Ingus Kruklitis/Shutterstock; 312 Shutterstock: Maxisport/Shutterstock;315 Americans for Tax Fairness: Courtesy of Americans for Tax FairnessOPublished by Pearson Education Limited, 80 Strand, London, WC2R 0RL.www.pearsonglobalschools.comCopies of official specifications for all Edexcel qualifications may be found on the website:https://qualifications.pearson.comPrinted in Neografia in SlovakiaSAMPLEEndorsement statementIn order to ensure that this resource offers high-quality support for the associated Pearsonqualification, it has been through a review process by the awarding body. This process confirmsthat this resource fully covers the teaching and learning content of the specification or part of aspecification at which it is aimed. It also confirms that it demonstrates an appropriate balancebetween the development of subject skills, knowledge and understanding, in addition topreparation for assessment.Endorsement does not cover any guidance on assessment activities or processes (e.g. practicequestions or advice on how to answer assessment questions), included in the resource nor doesit prescribe any particular approach to the teaching or delivery of a related course.While the publishers have made every attempt to ensure that advice on the qualification and itsassessment is accurate, the official specification and associated assessment guidance materials arethe only authoritative source of information and should always be referred to for definitive guidance.Pearson examiners have not contributed to any sections in this resource relevant to examinationpapers for which they have responsibility.Examiners will not use endorsed resources as a source of material for any assessment set byPearson.Endorsement of a resource does not mean that the resource is required to achieve this Pearsonqualification, nor does it mean that it is the only suitable material available to support thequalification, and any resource lists produced by the awarding body shall include this and otherappropriate resources.AcknowledgementsThe authors and publisher would like to thank the following individuals and organisations for theirkind permission to reproduce copyright material.We’d like to thank our teacher reviewers for their contribution to this book: Clive Agent,Arosha Chandima, Pradeep Gangadharan, Mark Hage, Colin Leith and Harrison Mwangi.Photographs(Key: b-bottom; c-centre; l-left; r-right; t-top)Image Credit(s):2 Shutterstock: Anucha sirivisansuwan/Shutterstock; 4 Shutterstock: (cl) Motive56/Shutterstock; 123RF: (tr) Joshua Resnick/123RF; Shutterstock: (cr) Faraways/Shutterstock;6 Shutterstock: Metamorworks/Shutterstock; 8 123RF: Stylephotographs/123RF;11 Shutterstock: Jeffy11390/Shutterstock; 12 Shutterstock: Heromen30/Shutterstock;17 Shutterstock: Brizmaker/Shutterstock; 18 Shutterstock: Tono Balaguer/Shutterstock;21 Shutterstock: Mhgstan/Shutterstock; 23 International Centre for Integrated MountainDevelopment: ICIMOD. 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CONTENTSiiiCOURSE STRUCTUREIVABOUT THIS BOOKVIVIIIPYASSESSMENT OVERVIEWUNIT 3: BUSINESS DECISIONS AND STRATEGYUNIT 4: GLOBAL BUSINESS177PLECOINDEXSAM2316

ivCOURSE STRUCTUREUNIT 3: BUSINESS DECISIONS ANDSTRATEGYDECISION-MAKINGTECHNIQUES 61ASSESSINGCOMPETITIVENESS 1311. CORPORATE OBJECTIVES 39. QUANTITATIVE SALESFORECASTING 6217. INTERPRETATION OFFINANCIAL STATEMENTS 1321710. INVESTMENT APPRAISAL 7118. RATIO ANALYSIS 14111. DECISION TREES 19. HUMAN RESOURCES 1508012. CRITICAL PATH ANALYSIS 9013. CONTRIBUTION 98PLE4. IMPACT OF EXTERNALINFLUENCES 23O3 . SWOT ANALYSIS 9C2. THEORIES OF CORPORATESTRATEGY PYBUSINESSOBJECTIVESAND STRATEGY 2SAMBUSINESSGROWTH 33INFLUENCES ONBUSINESSDECISIONS 104MANAGINGCHANGE 16020. KEY FACTORS INCHANGE 16121. C ONTINGENCYPLANNING 1695. GROWTH 3414. CORPORATE CULTURE 6. ORGANIC GROWTH 417. INORGANIC GROWTH 4615. STAKEHOLDER MODELVERSUS SHAREHOLDERMODEL 1138. PROBLEMS ARISING FROMGROWTH 5516. BUSINESS ETHICS 105121

COURSE STRUCTUREUNIT 4: GLOBAL BUSINESSGLOBALMARKETING 26622. GROWING ECONOMIES 17832. M ARKETING 26723. INTERNATIONAL TRADE ANDBUSINESS GROWTH 18733. NICHE MARKETS 27520526. TRADING BLOCS 212OGLOBAL INDUSTRIESAND COMPANIES 289SAMPLGLOBAL MARKETSAND BUSINESSEXPANSION 221C25. PROTECTIONISM 34. C ULTURAL/SOCIALFACTORS 282E24. FACTORS CONTRIBUTINGTO INCREASEDGLOBALISATION 19527. CONDITIONS THAT PROMPTTRADE 22228. ASSESSMENT OF ACOUNTRY AS A MARKET 23029. ASSESSMENT OF ACOUNTRY AS A PRODUCTIONLOCATION 23930. REASONS FOR GLOBALMERGERS, TAKEOVERSOR JOINT VENTURES 25031. GLOBAL EXPANSIONAND UNCERTAINTY 258INDEX 316PYGLOBALISATION 17735. THE IMPACT OF MNCs 29036. INTERNATIONAL BUSINESSETHICS 29737. CONTROLLING MNCs 306v

viABOUT THIS BOOKABOUT THIS BOOKThis book is written for students following the PearsonEdexcel International Advanced Level (IAL) Businessspecification. It covers the second year of the InternationalA level qualification.PYThe book has been carefully structured to match theorder of topics in the specification although teachingand learning can take place in any order, both in theclassroom and in any independent learning. This bookis organised into two units (Unit 3: Business decisionsand strategy and Unit 4: Global business), each withseveral topic areas.listing the key learning objectives and includes a gettingstarted activity to introduce the concepts. There is a mix oflearning points and activities throughout including globalcase studies to show a range of businesses within real-lifecontexts. Checkpoint questions at the end of each chapterhelp assess understanding of the key learning objectives.OCEach topic area is divided into chapters to break the contentdown into manageable chunks. Each chapter begins byThe content for Unit 3 is applicable for Paper 3(Business decisions and strategy) and the content forUnit 4 is applicable for Paper 4 (Global business). Knowinghow to apply learning to both of these papers will becritical for exam success. There are exam-style questions atthe end of each chapter to provide opportunity for exampractice. Answers are provided in the online teachingresource pack.Learning objectivesEach chapter starts with a list ofkey assessment objectives.ETopic openersIntroduce each of the keytopics in the specification.SPECIFICATION 3.3.1Specification referenceThe specification reference isgiven at the start of each chapterand in the running header.1 CORPORATE OBJECTIVES1 CORPORATE OBJECTIVESBy the end of this chapter you should be able tounderstand: the development of corporate objectives from missionstatement/ corporate aims the critical appraisal of mission statements.PLBUSINESS DECISIONSAND STRATEGYLEARNING OBJECTIVESSAMThis section looks at the goals and aims of corporations and the way that they might present strategyin mission statements. It explores the different theories of corporate strategy, such as Ansoff’s Matrixand Porter’s Strategic Matrix. It identifies the effects of strategic and tactical (i.e. carefully planned)decisions on the resources of the business. The section also considers the way a corporation mightassess the strengths, weaknesses, opportunities and threats that it faces. Finally, it will investigate theimpact of external influences on businesses such as political, economic, social, technological, legal andenvironmental factors.GETTING STARTEDAn objective is something that a business aimsto achieve. The nature and purpose of businessobjectives is discussed in Student Book 1, Chapter 21.This chapter explores the role of corporate aims andcorporate objectives influencing the strategy that abusiness follows.Look at the following two statements. R&F Fitness Centre corporate aim: To encouragetargeted activity to improve levels of fitness. A&L Entertainment Group corporateobjective (one of several): To establish twonew attractions every new season.The first is an aim and the second an objective. Whatis the difference between an aim and an objective?How do the two work together?BUSINESS AIMSAll businesses have aims. These are the things thebusiness wants to achieve in the long term – its purposeor reason for being. The aims of a business are lessspecific than its objectives and can be expressed as avision. Business aims are discussed in detail in StudentBook 1, Chapter 21. A business will often communicateits aim through a mission statement.MISSION STATEMENTSA mission statement states the business’s main purpose.It may also reflect its goals and values. It describes ingeneral terms the company’s core activities. It may alsoreference information such as: the markets in which it operates what its key commercial objectives are in what way it values its stakeholders what its ethics involve (i.e. what it believes to begood or correct).The main elements of a mission statement are as follows. Purpose – a mission statement should outline whythe business exists. It should communicate what thebusiness does, for whom and why.Getting startedAn activity to introduce the key concepts in each chapter. Questions aredesigned to stimulate discussion and use of prior knowledge. These canbe tackled as individuals, pairs, groups or the whole class.3UNIT 33.3.1Values – businesses are likely to state the corporatevalues that they emotionally invest in. These mightinclude qualities such as integrity, sustainability,innovation and quality. The values held by acorporation are likely to influence its culture. Standards and behaviour – some missionstatements may communicate a business’scommitment to high standards. For example,always conducting ethical behaviour (i.e. behaviourthat is good or correct). Strategy – some mission statements may outlinehow the business will try to achieve its mainobjective. For example, a car manufacturer may sayit is committed to the development of driverlesscars to help achieve its aim of making transport aseasy and convenient as possible.A good mission statement should help guide thedecision-making of the firm. Running a business canbe very complicated. It is very easy to get lost in thesmall details of business decision-making. A goodmission statement makes it clear which direction abusiness should take by reminding the owners anddirectors why the business exists. Many peoplemay argue that the only purpose of a business isto generate a profit for its owners. However, mostemployees would like to believe that they go to workto achieve something more than this. A missionstatement makes this point.There are two reasons why a business may createand share a mission statement. The first is to makea commitment to its customers. A mission statementexpresses a promise to customers of what they canexpect the business to aim for. Secondly, a missionstatement can be used to bring a company’s workforce(i.e. all the people who work for a company) togetherwith a shared purpose. Many successful businesses havea mission statement that their employees believe in. Thisis why a mission statement is important in forming astrong corporate culture (see Chapter 14).Some mission statements are brief. Others are longand detailed. Some examples of mission statementsare given below. R&F Fitness Centre: ‘We improve levels of fitness byproviding individual plans for people of all ages andhelping them to achieve their aims.’ R&B Furniture Maker: ‘To help create practical andbeautiful homes for our customers.’ DHC Coffee Shop: ‘To offer a comfortableenvironment and an excellent range of coffee torefresh our customers in body, mind and spirit.’ Key subjectterms arecolourcodedwithin themain text.

ABOUT THIS BOOKviiSkillsRelevant exam questions have beenassigned key skills, allowing for a strongfocus on particular academic qualities.These transferable skills are highly valuedin further study and the workplace.13717 INTERPRETATION OF FINANCIAL STATEMENTSACTIVITY 2SKILLSCASE STUDY: GROSICKI & COPolish baker, Grosicki & Co, makes cakes and biscuits forsupermarkets and large retailers. Table 7 shows thestatement of financial position for the company as at31/12/18.2018 (PLN 000) 2017 (PLN 000)Non-currentassetsIntangible assetsProperty andequipment800912 13420 65420 143450134444511410012009145Total assetsCurrentliabilitiesTrade and otherpayablesCurrent taxliabilities29 799The statement of financial position can be used to helpevaluate the performance of a business. It shows differentinformation from that of the statement of comprehensiveincome, and stakeholders are likely to be interested inboth statements together.Shareholders: Shareholders might use the balancesheet to analyse the asset structure of the business. Thisshows how the funds raised by the business have beenput to use. For example, shareholders in Cattle SnaffleLtd in Table 5 can see that more than 60 per cent of theassets ( 97.7 million) are invested in property, plant andequipment. The balance sheet also shows the capitalstructure of the business, i.e. the different sources of fundsused by the business. For Cattle Snaffle Ltd, nearly 67 percent of the firm’s funding comes from the shareholders.The balance sheet can also be used to assess thesolvency of the business. A business is solvent if it hasenough liquid assets to pay its bills. The value of workingcapital will help to assess solvency. The working capital of abusiness can be calculated by subtracting current liabilitiesfrom current assets. For Cattle Snaffle Ltd, the value ofworking capital is 1.7 million ( 15.1 million 13.4 million).This might be considered inadequate because the value ofcurrent liabilities is only just covered by current assets.1300991130 05448884976?20096009698542221233545511 46447771341611813 103Net assets?Shareholders’equity16 abilitiesRemember that retained profit in the balance sheet isnot cash. It is the amount owed to shareholders thathas accumulated over the years of trading. The amountof cash a business has is shown in current assets.Some of the retained profit may have been used to buymore assets. Only if the company was liquidated wouldretained profit be returned to shareholders.STAKEHOLDER INTEREST866711 987CurrentassetsInventoriesTrade and otherreceivablesCash and cashequivalents138 17 INTERPRETATION OF FINANCIAL STATEMENTSEXAM HINTPROBLEM SOLVING, ANALYSISShare capitalRetainedearnings10 000833510 0006951Total equity18 33516 951WORKED EXAMPLEHassani Ltd is an Algerian manufacturer of sweetsand desserts. It supplies supermarkets and other largeretailers. Table 8 shows some financial informationtaken from its statement of financial position.2018 (DZD million) Table 7 Statement of financial position for Grosicki & Co, as at 31/12/18Current assets1 Complete the balance sheet by calculating the missingvalues for (a) net

PEARSON EDEXCEL INTERNATIONAL A LEVEL . BUSINESS. Student Book 2. Rob Jones. SAMPLE COPY. Published by Pearson Education Limited, 80 Strand, London, WC2R 0RL. www.pearsonglobalschools.com Copies of official specifications for all Edexcel qualifications may be found on the website:

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