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IB Business and Management Case Study 2013 KEY TERMS

Summary Notes

Multinational company This is an organisation, owned by shareholders, that operates in two or more countries. For example, RDB operates in Denmark, Sweden and Germany. Industry An industry consists of businesses that are in direct competition as they cater for the same client base. FIB, UAB and RDB all operate within the ball bearings industry. Expansion This is the growth of a business due to an increase in the size of the organisation and/or growth of the ball bearings industry. Expansion is usually measured by an increase in variables such as sales revenue, number of employees or profits. Visionary A visionary is an entrepreneur who has the foresight and driving force behind a companys growth and development. Visionaries can see market trends before they happen, or even set the trends. For example, they will be instrumental behind a companys product development, acquisitions and strategic partnerships. Growth As above (expansion). Growth can be categorised as internal (organic) or external (inorganic). RDB has traditionally grown through internal methods, i.e. using its own resources to expand by building megafactories in Sweden and northern Germany. External growth would require the involvement of third parties such as partners in strategic alliances in Brazil, India and China. Secondary sector

This is the manufacturing sector of the economy. Ball bearings output is part of the secondary sector. Market size This is a measure of the size of an industry. It is usually measured in terms of the value of sales revenue from all businesses in a particular industry, per time period. Capital In its broadest sense, capital refers to non-natural (or manufactured) resources used in the production process. In finance, capital can refer to sources of finance such as loan capital, share capital, venture capital and working capital. Business-to-business B2B is a phrase often referring to e-commerce, although in its broader sense means firms that cater for the needs of other businesses. As RDB operates in the B2B market, it supplies ball bearings to other businesses, such as suppliers of mechanical devices, for example gear boxes and wheel suspension. Internal / organic growth Organic growth occurs when a business expands internally by using its own resources to increase the size of its operations. For instance, RDB may have used a combination of retained profits, loan capital and issuing of new shares to finance the megafactories in Sweden and northern Germany. Company This is a business organisation owned by shareholders who have limited liability. Companies are incorporated institutions, i.e. they are legally separate entities from their owners. RDB is a private limited company, i.e. it is owned by private shareholders. Workforce The workforce refers to all the personnel (staff) of an organisation. The current employees of RDB are from Europe (Denmark, Sweden and Germany). The workforce is loyal (line 132) although Anna Holstein feels they need to be more culturally aware of RDBs customers (lines 85-86). For Anna, a more global workforce that resembles RDBs growing customer base from other parts of the world is a strategic priority (lines 165-166). Production Production refers to the output of goods and/or services. RDB produces ball bearings on a mass scale although it also produces one-off special orders (lines 65-66). Economies of scale

These are cost-saving benefits from operating on a large scale. For example, by mass producing ball bearings, RDB can save on its unit costs by buying raw materials in bulk, using sophisticated technology to raise productivity and gain easier access to low-cost finance. Market position This is an analytical tool that ranks the price and quality of different products, brands or firms according to the views of the general public. RDB, for example, is perceived to be of high price and high quality. Quality Quality refers to the extent to which a product is fit for its purpose, i.e. whether it meets (or exceeds) the needs and wants of the customer by conforming to a certain standard. Dimensions of quality include: durability, reliability, customer service, after-sales care and the physical appearance of the products. Price This refers to the value of a good or service that is paid by the customer. Price will usually cover the costs of production, allowing the business to earn profit. RDBs prices are high due to the high quality of its ball bearings. Competitor A competitor is a rival business in the same industry, challenging for the same client base. RDBs competitors include UAB and FIB . Market share This is a measure of the size of a business in comparison to others in the same industry. It refers to an organisations proportion of the total value of sales revenue expressed as a percentage of the total market value. Wages This is a time-based payment system, often paid on an hourly basis. It is commonly used to remunerate factory workers to encourage (or motivate) employees to work more hours. Just-in-time JIT is a method of stock control whereby materials and components are scheduled to arrive precisely when they are needed for production. It is a prerequisite to lean production because holding large volumes of stock (inventory) can be very costly and wasteful. Unique selling point Also known as a unique selling proposition, this refers to any aspect of a product that makes it stand out positively from other products on the market. Japanese ball bearings manufacturers had a USP due to their flexibility by using just-in-time production methods.

Competitive advantage This refers to any edge (superiority) that a firm has over its rivals, allowing it to generate greater sales and/or profit margins. Brand loyalty and an improved distribution network, for example, can give RDB a competitive advantage. Michael Porter (HL students only) suggested four generic strategies for gaining a competitive advantage: cost leadership, differentiation, cost focus and differentiation focus. International quality standards These are the guidelines used to show that certain quality requirements have been met. Businesses that meet or exceed international quality standards are likely to include the relevant quality award symbols or logos on their products and marketing. The most prominent global organisation for awarding international quality standards is the International Standards Organisation (ISO), founded in 1947. Its most widely recognised standard is the ISO 9000. Export This refers to the act of selling domestic goods or services to overseas buyers, thereby earning money for the local economy. For example, export earnings occur when RDB sells its ball bearings to businesses outside of Denmark. Regional trading bloc This refers to a group of countries that agree to freer international trade with each other, through the removal of trade barriers on the movement of goods, services, labour and capital. Supporters argue that members of a RTB can enjoy mutual benefits of free international trade. Brazil, for example, is a member of the Mercosur trade bloc, trading freely with Argentina, Paraguay, Uruguay and Venezuela. Chief Executive Officer The CEO of a company is the most senior person at the top of the organisational hierarchy. Henrik Holstein was the founder and first CEO of RDB. As the business is a family-run private limited company, Valdemar Holstein became the next CEO and Anna Holstein was expected to take over when her father retired (line 68). Leadership Leadership is the art of getting things done through other people by inspiring, influencing and motivating them. There are various styles of leadership, although all leaders take on a degree of risk and drive the strategic vision of their organisation. Tall organisational structure A firm with a tall organisational structure has many layers in its organisational hierarchy. Therefore, managers in such structures tend to have a narrow span of control.

Empowered) Empowerment is the delegation of decision-making power to workers, thereby helping to boost their morale. It involves granting workers the authority to be in charge of their own jobs and to execute their own ideas. In the case of RDB, middle managers have some autonomy in decision-making and can decide for themselves the best way to deal with a task or a problem. Middle managers This refers to the group of managers in charge of running individual departments within an organisation. Middle managers set departmental objectives (which are in line with the organisations overall aims) and are responsible for implementing strategies to achieve these goals. They are accountable to the senior management team and are responsible for their departmental staff. Total quality management TQM is the process and management philosophy that attempts to encourage all employees to make quality assurance paramount to the various operations (production, finance, marketing and HRM) of their organisation. TQM emphasises a right first time approach to production. Benchmarking This is the process of identifying best practice in an industry, in relation to product quality, processes and operations. Benchmarking against the best rivals in the industry sets the standards for the firm to emulate. Kaizen This is the Japanese term for continuous improvement. Kaizen is a Japanese philosophy used in operations management promoting an approach in the workplace where staff are constantly trying to find ways to improve work processes. By doing so, Kaizen creates efficiency gains for the organisation. Profitable This describes a firm (or its products) earning profits for its owners. A firm is profitable if its sales revenue exceeds its costs of production and running costs. Measures of profitability include calculations of the gross and net profit margins (lines 38-39). Brand loyalty (38) This measures the degree to which customers consistently repurchase the same brand of a product over time rather than buying from rival suppliers. Strong brand loyalty exists when customers are committed to a certain brand and make repeat purchases time and time again. Marketing strategies designed to cultivate loyal customers can give organisations a competitive advantage. Gross profit margin

The GPM is a profitability ratio that measures the proportion of gross profit generated from the sales revenue of a business. For example, if the GPM is 65%, this means for every $100 of sales revenue, $65 is generated as gross profit (with the other 35% being the costs of goods sold). Net profit margin The NPM is also a profitability ratio but measures the proportion of net profit generated from the sales revenue of a business. The difference between NPM and GPM represents the ability of a firm to control its overheads or fixed costs. For example, if the NPM is 45% whilst the GPM is 65%, this means for every $100 of sales revenue, $45 is generated as net profit (with 20% being the cost of overheads). Privately owned A privately owned company means that the business is a private limited company (LTD), owned by private shareholders. As an LTD, the general public cannot buy or sell shares in RDB on a stock exchange. Paternalistic leadership style A leadership style where the manager or leader makes decisions on behalf of his/her team in the belief that these are in the best interest of the workers. Both Henrik and Valdemar Holstein were paternalistic leaders as they felt like a father to the workforce (lines 45 and132). Autocratic An autocratic leader is one who centralises decision-making without consulting others or listening to their points of view. This helps to speed up business decision-making. Valdemar Holstein was occasionally autocratic, especially during collective bargaining agreements with his employees. Collective bargaining This is the negotiation process whereby trade union representatives (of the ball bearings industry) and employer representatives (the management team at RDB) discuss employeremployee issues with the intention of reaching a mutually acceptable agreement. Promotion In human resource terms, promotion refers to the advancement of an employee in terms of their hierarchical ranking, such as a machinist or factory floor worker being promoted to a manager. There are few opportunities for staff to be promoted at RDB (line 47), although they do not seem to mind this. Corporate culture Also known as organisational culture, this describes the norms and the traditions within an organisation. Factors affecting the corporate culture include dress code, work ethos, employee

demographics and leadership style. Employees at RDB liked the corporate culture (lines 4748). Work patterns and practises This describes the changing nature of employment procedures and policies in the economy. There have been several driving forces for more flexible patterns of working time, for example. Other trends include homeworking, offshoring and (for HL students only) the Shamrock organisation. Standard of living The term standard of living in the general sense refers to the wellbeing of a countrys citizens. Economists usually measure standards of living using a range of measures including: income, wealth, healthcare, education, life expectancy, environmental quality, economic and political stability, religious freedom and affordability of housing. The European workers at RDB are said to have appreciated their high standard of living. Job security This refers to the assurance (confidence) given to employees that they will keep their current job for the foreseeable future. Factors affecting job security include a worker's performance, financial success of the business, employment legislation and the current economic climate. Employees at RDB currently enjoy job security which has positive impacts on their level of motivation (security needs being the second layer in Maslows hierarchy of needs). Working environment This refers to the physical and intangible conditions of the workplace, such as the physical work environment of RDBs megafactories. A good working environment is important for the physical, mental and emotional health of the workforce. According to Frederick Herzberg, the working environment is a hygiene factor that must be addressed to prevent dissatisfaction at work. A pleasant and well-resourced workplace will help employees to feel more comfortable at work, thereby boosting their morale. Manager A manager is someone with decision-making authority in an organisation and has responsibility for problem-solving. Managers are involved in complex tasks including planning, organising, budgeting and controlling resources to achieve organisational objectives. Managers tend to focus on achieving specific goals within a given timeframe. External environment This refers to the factors that are beyond the control of any individual organisation, i.e. the external environment affects all businesses in the economy. The most common framework used to examine the external environment is a PEST analysis which examines the political,

economic, social and technological opportunities and threats of the external business environment within which businesses operate. Contingency plans Also known as crisis planning, contingency plans are policies and procedures designed to deal with a crisis (emergency) to ensure the continuity of the business. Being a cautious manager (line 55), Valdemar Holstein is proactive in reviewing RDBs contingency plans yearly to identify probable threats such as the millennium bug (line 59). Flow production This is a production method whereby different operations are continuously and progressively carried out in sequence, with a very large volume of output. Standard-sized ball bearings are mass produced using flow production at RDB. Batch production This is a method of production that involves producing a set of identical products, with work on each batch being fully completed before production switches to another batch. It is used where the level of demand for a product is frequent and steady. At RDB, batch production is used for non-standard-sized ball bearings for established customers. Job production This production method involves the manufacturing of unique or one-off orders. At RDB, job production is infrequently used for special one-of-a-kind orders, such as large ball bearings for power stations or mines (lines 65-66). Human resource management HRM is a broad term used to describe the overall management of an organisation's workforce. It includes attracting, selecting, training, assessing, rewarding and retaining workers at the organisation. Factory floor People who work on the factory floor are at the bottom of the hierarchical structure at RDB. These people, such as the machinists, work in the megafactories where the actual ball bearings are made. Demand Demand refers to the willingness and ability to pay a certain price to obtain a good or service. Demand for ball bearings was growing rapidly in Brazil, India and China but slowing down in Europe. Industrialisation

This is the economic process that a country goes through when transforming from a predominantly primary sector economy into one based on the secondary (manufacturing) sector. Manual labour is often replaced by automation with the mass production of goods. For example, China, Brazil and India have experienced technological innovation leading to greater manufacturing output as a proportion of their respective national output. Location This refers to the geographical position of a business. The location decision is a crucial one, and will depend on both quantitative and qualitative factors (such as Anna Holstein wanting RDBs new greener factories to be located closer to its growing customer base in India, China and Brazil). The location decision is one of the most important that any leader has to make, especially as it is often an irreversible decision. Hence, the location of a business can have profound implications on the profitability and survival of the firm. Logistics Also known as supply chain management, logistics is the art of managing and controlling the sequence of activities from the production of a product to it being delivered to the end customer. Logistics must be efficient and cost effective for a business to be profitable. RDBs logistics would be improved by having factories located nearer to their customers, especially in growing markets such as China, India and Brazil. Distribution Distribution is about getting the right products to the right customers in the right place and at the right time. For instance, RDBs ball bearings are currently made in Denmark, Sweden and Germany but need to be distributed to customers around the world, and increasingly from China, India and Brazil. Working capital cycle This refers to the time interval between cash payments for costs of production and cash receipts from customers. The delay means that businesses must manage their working capital very carefully to continue functioning. Relocating RDBs factories to be nearer to their customers would improve logistics and distribution, thereby shor tening the companys working capital cycle. Corporate social responsibility CSR is the conscience of a business organisation with consideration of the firms actions on its stakeholders and the environment. For example, socially responsible businesses are those that act morally towards their employees, the local community and the natural environment, often going beyond what is required by the law, perhaps by adopting green technologies (line 88). Research and development

R&D refers to the activities that a business conducts with the intention of making discoveries that can lead to commercial successes by adopting new processes and procedures in the workplace and/or launching new products. R&D can help businesses to gain competitive advantages (line 28), ensure business survival and help them to expand their operations. Innovation Innovation is the commercial development, adoption and exploitation of an invention or creative idea that appeals to customers. Sources of innovation include discovery of new production processes, such as just-in-time production (line 26). Innovation can give any business a huge competitive advantage so RDB would need to devote significantly more money to research and development (lines 89-90). Vision Having a vision means to have a picture or idea of what success would look like in the future. Having a vision gives an organisation a clear sense of purpose. Anna Holsteins vision for RDB is to make the worlds most technologically advance d and energy-efficient ball bearings (lines 95-96) which would be produced in small green factories located near to their customers (line 96). Downsizing Downsizing occurs when a business reduces the size of its workforce. Downsizing would be inevitable if Anna Holstein reduces the scale of operations in the Denmark megafactory. Offshored Offshoring is practice of relocating business processes or operations from one country to another. For example, Anna Holstein plans to offshore manufacturing to twelve smaller green factories around the world. Workforce planning This is the continual human resource planning process of aligning the needs and priorities of an organisation with those of its workforce. It involves an examination of the current size and skills of the workforce with the organisations future human resource needs. For RDB, this helps to ensure they get the right number of workers with the right skills and experiences at the right time. Senior manager Senior managers are those who have company-wide decision-making authority. These managers will be highly experienced staff who take risks in leading the organisation. Examples include the marketing director, finance executive and human resources director of a company. Anna envisaged using a senior manager from Europe to work alongside a locally hired manager for RDBs smaller and greener factories in China, India and Brazil (lines 100-101).

Redundant Also known as retrenchment, this occurs when workers are legally dismissed because their job no longer exists, perhaps because of a restructuring of a companys workforce to suit its operational objectives. Redundancy would be inevitable if Anna Holstein sells the two RDB megafactories in northern Germany and Sweden. Recruited Recruitment is the hiring of workers for a position in an organisation. If the megafactories are shut down in Europe, Anna Holstein would need to recruit a lot of new workers locally in Brazil, India and China. Costs This term refers to the outgoings paid by businesses in order to generate output of goods and services or simply to remain in operation. Examples include wages, salaries, rent, raw materials and the costs of making some staff redundant (line 103). Marketing Marketing is the management process of addressing customers needs and wants. It is about making customers want to buy the products of a particular business. It therefore looks at the reasons behind peoples buying decisions, such as the price, physical appearance, or special features of a product. Ultimately, marketing serves to meet the needs and wants of the customer in a profitable way. Budget A budget is a financial plan of expected revenue and expenditure for an organisation, or a department within an organisation, for a given time period. RDBs marketing department has a small budget so this has meant the department has been sleepy and has unchallenging marketing objectives (line 108). Objectives These are the relatively short term targets of a business organisation. RDBs marketing departments objectives are unchallenging (line 108), so Anna Holstein will probably consider using SMART objectives those that are specific, measurable, achievable, realistic and timed constrained. Advertising Advertising is the main form of promotion, used to shape and develop brand awareness and foster customer perceptions, knowledge and attitudes towards a firms products. It communicates marketing messages in a persuasive and/or informative way. Advertising is very limited at RDB, so Anna Holstein wishes to use e-zines and professional websites. Promotion

In marketing terms, promotion is a component of the marketing mix referring to the marketing methods used to inform, persuade or remind people about a firms products or brands. Examples of promotion used at RDB include advertising in trade journals and promotional activities at trade shows (line 109). Trade journals Also known as trade magazines, these are specialist professional magazines published for a particular industry. For readers outside the industry, trade journals can be uninteresting or incomprehensible. A key advantage of advertising in trade journals is the high volume of industry-specific readers and hence potential clients. Trade shows Also known as trade fairs or trade exhibitions (or expo for short) these are exhibitions organized for companies in a specific industry to showcase and demonstrate their latest products. It also allows firms to see the latest products and marketing activities of their rivals and to examine recent industry-specific trends and opportunities. They can also attract members of the press (news media) from around the globe. Communicate Communication is the transfer of information from one party to another. Anna Holstein intends to use information communication technology (ICT) to communicate more effectively to a wider range of external stakeholders of RDB (lines 112-113). External stakeholders These are individuals or other organisations that are not part of RDB but have a direct interest in the operations of the Danish company. Examples include customers, suppliers, rivals, financiers and the governments of Denmark, Sweden and Germany. Brand awareness This term refers to the extent to which a brand name is recognised or well-known to its potential market audience. Brand leaders will have high brand awareness amongst their existing and potential customers whereas less known brands will have low brand awareness. Anna Holstein wants to create brand awareness as a key part of RDBs promotion of the firms ball bearings (line 165). Marketing department The marketing department of an organisation has overall responsibility for identifying and satisfying customer wants and needs. It is in charge of ensuring that the firms products sell. This is done through a series of marketing activities such as market research, advertising and brand development. Market research

This refers to the range of marketing activities designed to discover the opinions, beliefs and feelings of existing and potential customers. It consists of primary and secondary market research, used to help identify and anticipate the needs and wants of customers. Anna Holstein wishes to use market research in order to make RDBs marketing less sleepy (line 108). Primary research Also known as field research, primary research is the collection of new data because the information does not currently exist. Examples included collecting information from questionnaires, interviews, focus groups and observations. Secondary research Also known as desk research, secondary research is the collection of data and information that has already been collected by another source, i.e. the data or information already exists. Examples include gathering sources from trade journals, specialist magazines, newspapers and government statistics. Legislation This refers to the laws governing business operations, such as employment law (e.g. minimum wage legislation or laws regulating the maximum number of hours people work each week) and environmental protection laws. Product The term product can refer to goods or services. In the case of RDB, the product is highquality ball bearings produced for other businesses. Restructuring Also known as reorganisation, this is the act of making significant changes to the organisational structure of an organisation. For RDB, the restructuring would be on a large scale, with huge job losses in Europe and offshoring production to China, India and Brazil. The intention of restructuring is to improve financial efficiency to enable a business to thrive (or survive) in the future. Strategic plan This is an organisation's proposal its business strategy, outlining its strategic direction and including the necessary resources to pursue the strategy. As a management tool, strategic planning starts with strategic analysis (an examination of its current position in the market), followed by strategic choice (the possible options through which the firm can pursue its strategy) and ending in strategic implementation (deciding how to get to where the firm wants to be). Transition costs

These are the payments made by an organisation for changing from one organisational set-up (such as RDBs existing workforce in Sweden, Germany and Denmark) to another system (such as offshoring production to India, Brazil and China). Stock exchange A stock exchange is a place where stocks and shares of companies can be traded using the services of stock brokers. To trade on a stock exchange, the companys shares must be listed on that particular market. The issuing of new shares in a company, such as occurs when companies go public, also takes place via a stock exchange. The main functions of a stock exchange are to enable companies to raise capital and to provide a market for trading of second-hand shares and government bonds. Anna Holstein wishes to sell RDB shares on the Frankfurt Stock Exchange (Germany) probably because it has a very large share of the European market and it is significantly larger and more stable than the Stockholm Stock Exchange (Sweden) and the Copenhagen Stock Exchange (Denmark). Nevertheless, the Frankfurt Stock Exchange is still smaller by market value than the Shanghai Stock Exchange (China) and the Bombay Stock Exchange (India). Public limited company A public limited company (PLC) is an incorporated business owned by its shareholders who can openly trade the companys shares on a stock exchange. The PLC has limited liability and is usually able to raise greater sources of finance than a private limited company. Shares Shares are issued to buyers (called shareholders) who become part-owners of a company as they have bought a stake in (or share of) the company. Share capital is the most important source of finance for public limited companies. Most shares give their owners voting rights in how the company is managed. Shareholders also get to share of the profits made by the company, based on the level of profits made and the number of shares held. Public-private partnerships A PPP takes place when a private sector firm (such as RDB) creates a partnership with the government (such as the German and Swedish governments) to provide certain goods or services. Public-private partnerships can benefit from the dynamics and efficiency of the private sector alongside the benefits of public sector funding and government support. Retrenchment See redundancy Going public The term going public is used to describe a business converting its legal identity to a public limited company, thereby being owned by shareholders who can openly buy or sell shares in

the company on a stock exchange. Shareholders in the public limited company can include individuals, other business organisations and governments. Relocation This means changing from one business location to another. For example, Anna Holstein intends to relocate RDBs megafactories from Europe to emerging markets such as India, Brazil and China. Relocation usually happens because of rising costs at the existing location or other beneficial reasons in a different location (such as improved logistics from being nearer to the firms customers). Industrial parks Also known as an industrial estate, these are areas specifically zoned (planned) for the purpose of industrial development. Industrial parks are zoned for industrial use, rather than residential or commercial (retail) use. Hence, these are usually located on the outskirts of a city for businesses of a specific industry. Valdemar Holstein did not feel that RDB could compete or operate effectively if located in industrial parks in Mumbai or So Paulo (competing against locally-based ball bearings manufacturers). However, some industrial parks offer tax incentives for businesses to locate there. Shareholders Shareholders are the part-owners of a limited company (be it a private or public limited company). They risk capital in return for a share of the companys profits (paid out in dividends if the firm is profitable) and for capital gain (a rise in the value of the shares that they hold). Shareholders are a key stakeholder in a company. For RDB, currently a private limited company, the key shareholders are family members. Change This refers to any set of factors in the internal and/or external business environment that moves an organisation away from its equilibrium. Change can often be disruptive and unsettling so the process must be managed carefully. Examples of change include: new product development, organisational restructuring, relocation, external growth and crisis management. Yet, without change there is always the danger of complacency and there can be no progress without change. Rebrand Rebranding is the marketing activity of creating any combination of a new name, logo, symbol or design for an established brand. The purpose is to update or develop a new brand identity. Rebranding is often used when a firm wants to change its corporate image and/or due to a deliberate change in its business strategy. Marketing strategy)

This refers to the ma nagement process of formulating a firms marketing goals and activities to increase sales and to achieve a sustainable competitive advantage (line 28). Marketing strategy is usually drawn from market research and focuses on all aspects of the firms marketing mix in order to achieve its strategic goals. Cells Cells are autonomous decision-making teams. Cells take full responsibility for quality assurance in their own area but rely on each other to ensure that final production targets are met. They communicate with other cells as if they were external customers. Strategic objectives Strategic objectives are the longer-term, primary goals of a business. Typical strategic objectives include growth (expansion), market leadership, green objectives and profit maximisation. Anna Holsteins strategic objective is to grow RDB by restructuring and using local staff around the world (offshoring), mainly in China, Brazil and India (lines 96-99). Operational objectives Also known as tactical objectives, operational objectives are short term targets that affect a division of the organisation, such as the marketing department. They are specific goals that guide the daily functioning of certain operations. Departments or divisions tend to set their own tactical objectives, such as the separate divisions having their own tactical objectives in China, Brazil and India. Salaries These are a financial payment system, paid as a fixed amount to employees on a regular basis (usually once a month). Salaries create a sense of security as employees know how much they will be paid each month (unlike wages or commission), although do not necessarily create any incentive to work harder. Commission Commission is a financial payment system that rewards workers based on their level of productivity. It is paid as a percentage of the sales made by an employee. Valdemar Holstein suggested using local salespeople who would have an incentive to sell ball bearings as they would earn high rates of commission. Strategic alliances A strategic alliance (SA) is a form of external (inorganic) growth, involving two or more companies working together on a particular project. Valdemar Holstein suggested forming SAs with ball bearings companies to expand in Brazil, India and China. Socially responsible See Corporate social responsibility (line 88-89).

Cell production This is a relatively modern production method that adapts assembly line production using teams (or cells) to complete certain tasks. Each cell is given responsibility for carrying out a complete unit of work in the production process. Cell production is often combined with justin-time production (line 26). It can lead to greater staff motivation due to the variety of work, opportunities for team working and for taking more responsibility . Strategic priority Businesses may have several strategic goals so ranking these by their level of importance to the organisation is known as determining its strategic priority. Subsequently, operational (or tactical) planning and resource allocation (including budgets) are based on a firms strategic priorities. For Anna Holstein, developing a global identity and a global workforce were her strategic priorities for RDB. Demographic changes This refers to the population trends of a country or region of the world. According to the European Commission, the European Union is facing unprecedented demographic changes. These demographic changes include an ageing population (an increase in the average age of the population), lower birth rates, and migration of people across countries. The EC expects that a third of the European population will be over 60 years old by 2050. Globalization Globalization is the growing integration and interdependence of economic, social, technical and cultural issues of the worlds economies, thereby making the world a smaller place. For example, the free movement of labour in regional trading blocs and the presence of multinational corporations mean that RDB will eventually see the end of a traditional happy European family (line 167) in its workplace.

Additional key terms from the case study: There are several additional words/phrases that students might need help with, such as:

Automotive sector This is a general term that covers the manufacturing and commercialization of motor vehicles, such as cars, motor bikes, tractors, lorries (trucks) and other self-powered (motorised)

vehicles. The automotive industry accounts for the largest market for ball bearings manufacturers. 1970s energy crisis Rising demand for and declining supplies of oil in the 1970s led to an energy crisis in many parts of the world, leading to escalating oil prices. In 1973, an oil embargo (ban) imposed by members of the Organisation of Arab Petroleum Exporting Countries (OAPEC) led to oil shortages and elevated oil prices for the rest of the decade. The energy crisis led to uncontrollable rates of inflation throughout the Western world, thereby stagnating economic growth in many countries. Petroleum-rich countries in the Middle East, such as Kuwait and Saudi Arabia (where oil revenues account for 95% of the countrys export earnings), benefitted enormously from the higher oil prices and the shortages in other parts of the world such as the USA, Canada, Western Europe and Australia. Prices stabilised and eventually dropped to more sustainable levels in the 1980s. Millennium bug Also known as the Y2K bug, the Millennium bug was a computer programming problem for storage systems and devices resulting from abbreviating the year from a four-digit code (such as 1999) to just two digits (such as 99). Businesses prepared for the worse since the so called bug could cause computer systems all around the world to crash on the stroke of midnight between 31st December 1999 and 1st January 2000. The media reported that over $300bn was spent on combating the Y2K bug. MBA postgraduate degree An MBA refers to a Master of Business Administration (or master's) degree in business administration. Typical MBA courses introduce post-graduate students to the different areas of business organisations, such as human resources, finance, marketing and operations management. The courses are offered by business schools in many countries and can be tailored to meet the needs of students, be they newly graduated students or corporate executives. Most MBA courses can be taken on a part-time or full-time basis, with some course being offered online through distant learning MBA programmes. Investment bank This is a financial institution that raises capital for individuals, businesses and governments, such as by issuing common securities (shares). Investment banks are also involved in assisting mergers and acquisitions, and dealing in investment funds (such as pension funds and mutual funds). Unlike commercial banks, investment banks do not take bank deposits from individuals, businesses and governments. Moral obligation This refers to the opinion that an act is prescribed by a persons morals and values, i.e. what the individual considers to be right or wrong. Valdemar Holstein feels a sense of obligation and

responsibility towards the workforce who have been loyal to RDB for several generations, so is totally against any redundancies in Denmark. Social contract This is a voluntary and unwritten agreement between the workers of an organisation and the employer for the mutual benefit of the parties involved. The contract determines individual rights and responsibilities and guides individual behaviour and moral conduct. As a paternalistic leader to his workers, Valdemar Holstein feels redundancies would breach his social contract with the RDB employees. Investor An investor is an individual or organisation that commits capital (finance) in a business venture in return for a financial gain if the business is profitable. Most investors will part with their capital in return for a stake in the business. Valdemar Holstein had considered securing the finances of a major investor to fund the modernization of the three RDB megafactories. Financial assistance This is a source of external finance for a business where an investor gives the business financial backing, usually in return for a share of the organisation and its future profits. Valdemar Holstein would be against this idea as it would mean an external investor would have shares in the family-run company. Whilst financial assistance is not prohibited in Germany, Sweden and Denmark, some EU member states (Belgium, Bulgaria, France and Holland) do restrict financial assistance by all companies.

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