Hotspur & Wren Ltd - Business Studies Case study

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Hotspur & Wren Ltd

Business Studies Case study Questions 2003

Chirag Sequeira 11M


SECTION 1 – BUSINESS ACTIVITY AND THE CHANGING ENVIRONMENT

  1. OBJECTIVES
  1. All business have objectives or targets to meet which are set out by the people who lead or control the business. Two possible business objectives of Hotspur & Wren could be survival, profit maximisation and expansion. Survival is required when trading becomes difficult, periods of recession and threats of takeover. Profit maximisation is producing a level of output which generates the most profit for a business.         
  2. (i) To communicate the objective with Shareholder’s, the business could produce circulars which would be mailed to the customers. A forum might also be held to receive feedback about the proposed changes. Shareholders will be interested in the changes as they receive a dividend.

(ii)To communicate with their customers however, the business might need to adopt other methods such as various media advertising methods, advertising agencies etc.

  1. TYPES OF ORGANISATION
  1. (i) Hotspur and Sons were a partnership.

(ii) Wren & Co is a private limited company.

(iii) Hotspur & Wren Ltd is also a private limited company.

  1. Mergers and takeovers take place when firms join together and operate as one organisation. “Hotspur & Sons” and “Wren & Co” merged in 1967 and there are many reasons why businesses merge. Firstly, mergers are a quick and easy way to expand the business compared to opening and building new sites. Secondly, buying a business is usually cheaper than growing internally. Thirdly, firms can also lower their costs by joining with another firm and gaining economies of scale. Also, growth of the business might be one of its main objectives and the size of the business can be increased with a merger. Lastly, mergers can also take place for defensive reasons and to consolidate its position in the market.
  2. (i) To become a PLC, Hotspur & Wren Ltd would have to produce two documents. The Memorandum of Association, which gives details about the name of the company, the address, the liability of members, the amount of share capital and a description of the business activities. The Articles of Association will also have to be produced which gives details about the voting rights of the shareholder, how profits will be distributed, the duties of the directors, and information about the AGM. These documents are sent to the Registrar of Companies and if successful, the company will be awarded the Certificate of Incorporation and can begin trading. PLC’s have to raise capital from shareholders to be issued a Trading Certificate from the Registrar before starting trading.

        (ii) Below is a table showing the advantages and disadvantages of becoming a PLC for Hotspur & Wren Ltd:

        (iii) Stakeholders are groups that have an interest in what happens as a result of the firm’s activities. On the right are some of the stakeholders in Hotspur & Wren LTD.

(iv) The staff at Hotspur & Wren Ltd might influence the decisions made by the business as they want to see their working conditions improved. They might also be worried that any difficulties in their company could put their jobs at risk.

  1. FACTORS OF PRODUCTION
  1. Factors of production are resources used by businesses to produce goods and services. The four main factors of production are Capital, Enterprise, Land and Labour (CELL). Hotspur & Wren Ltd’s capital are the tools, machinery and equipment such as the new ICT facilities, sewing machines and also their new store. Its labour would be the workforce of the business such as manual workers, skilled workers and management. The land would be any raw material such as wool, cotton, silk etc.
  2. The merger might affect the fixed cost of Hotspur & Wren as its business would have expanded considerably. Costs, such as rents, insurance, heating bills etc will increase as production has been raised. The above fixed costs do not change as a result in change of output unlike variable costs.
  3. Capital intensive techniques involve employing more machinery relative to labour. For example, Hotspur & Wren Ltd might produce curtains or carpets using machines. Labour intensive techniques involve using a larger proportion of labour than capital for example, hand-made carpets or personalised sofa designs.

  1. INDUSTRIAL SECTORS

(a) Hotspur & Wren Ltd is in the secondary sector of industry as it transforms primary products into manufactured goods.

  1. LOCATION
  1. There are various factors involved in the choice of location of a business. The decision of where to locate is crucial to many businesses as it can affect sales, costs, profitability and perhaps even survival. The main factors involved in the choice of location are as follows. The availability of raw materials (esp for primary industries) is an important factor as transport costs of materials can be expensive. Competition in the local area, legislation regarding marketing/ trading, availability of workforce, the local environment (constraints/ opportunities) are also factors. The Government and EU influence is also important.
  2. Agreement with above

  1. GOVERNMENT AND E.U. INFLUENCES
  1. Countries to export to
  2. European legislation
  3. Value of Sterling

  1. TECHNOLOGY AND ENVIRONMENT
  1. Unemployment is concerned with people being out of work. Unemployment has a number of effects on businesses and its aims of expansion.
  2. There are several advantages of selling through the internet.

  1. JUDGING SUCCESS

(a) To measure success of a business


SECTION 2 – HUMAN RESOURCES

2.1 INTERNAL ORGANISATION

  1. William Hotspur is the group managing director. A managing director is involved and has responsibilities in the day-to-day running of the business. The director is often elected by the shareholders; however, it is not necessary for a managing director to own shares.
  2. A marketing department, personnel, and finance department is present at Hotspur & Wren. The function of the marketing department is to market Hotspur & Wren Ltd’s business and its products. They will have to carry out market research, product planning, packaging, pricing, sales promotion, advertising and distribution of the products. The finance department would be in charge of wages, salaries, cash flow forecasts, forecasting invoices and accounts. The personnel department are involved in recruitment, training, terms and conditions of service, contracts, disciplinary and grievance procedures, dismissal.
  3. The merger between Hotspur & Sons and Wren and Co in 1967 would have affected the Marketing and Human Resources Departments.
  4. The chain of command is the way authority and power is passed down in a business. The span of control however is the number of subordinates working under a superior. When two firms merge, the business will increase in size and therefore a longer chain of command with more levels of hierarchy may be present. The leadership styles of the owners might be different and so if the owner wanted to retain control of the business, the span of control would be narrowed. The business objectives might also provide for expansion, in which case, the chain and span of control would be different.
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Delegation: authority passed down from superior to subordinate.

Hierarchy: the order or levels of management of a business, from the lowest to the highest.

2.2 COMMUNICATION

  1. There are two main methods of communication, written and oral. The choice will depend on whether data has to be recorded, whether speed is important, and whom the letter is to be addressed to. The following are the methods:
  • Memo – internal                                        Employees
  • Letter – internal / external                                Customers / Suppliers
  • Report – internal / external                                Customers / Suppliers
  • Oral – internal / external (small businesses)                Employees
  1. The above ...

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