BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Multinational company (1)
This is an organization, owned by shareholders, that operates in two or more countries. For example, RDB
operates in Denmark, Sweden and Germany.
Industry (2)
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 (3)
This is the growth of a business due to an increase in the size of the organization 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 (3)
A visionary is an entrepreneur who has the foresight and driving force behind a company’s growth and
development. Visionaries can see market trends before they happen, or even set the trends. For example,
they will be instrumental behind a company’s product development, acquisitions and strategic
partnerships.
Growth (4)
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 (5-6)
This is the manufacturing sector of the economy. Ball bearings output is part of the secondary sector.
Market size (6-7)
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 (8)
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 (12)
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.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Internal / organic growth (13)
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 (14)
This is a business organization 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 (15)
The workforce refers to all the personnel (staff) of an organization. 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 RDB’s customers (lines 85-86). For Anna, a more global workforce
that resembles RDB’s growing customer base from other parts of the world is a strategic priority (lines 165166).
Production (16)
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 (16)
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 (19)
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 (19)
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 (19)
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. RDB’s prices are high due to the high quality of its ball
bearings.
Competitor (20)
A competitor is a rival business in the same industry, challenging for the same client base. RDB’s
competitors include UAB and FIB.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Market share (24)
This is a measure of the size of a business in comparison to others in the same industry. It refers to an
organisation’s proportion of the total value of sales revenue expressed as a percentage of the total market
value.
Wages (25)
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 (26)
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 (28)
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 (28)
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 (29)
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 organization for awarding
international quality standards is the International Standards Organisation (ISO), founded in 1947. Its most
widely recognised standard is the ISO 9000.
Export (29)
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 (30)
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.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Chief Executive Officer (33)
The CEO of a company is the most senior person at the top of the organizational 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 (34)
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 organization.
Tall organizational structure (35)
A firm with a tall organizational structure has many layers in its organizational hierarchy. Therefore,
managers in such structures tend to have a narrow span of control.
Empowered (35)
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 (35)
This refers to the group of managers in charge of running individual departments within an organization.
Middle managers set departmental objectives (which are in line with the organization’s 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 (36-37)
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
organization. TQM emphasises a ‘right first time’ approach to production.
Benchmarking (37)
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 (37)
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 organization.
Profitable (38)
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).
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
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 organizations a competitive advantage.
Gross profit margin (38-39)
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 (38-39)
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 (44)
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 (45)
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 (46)
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 (46)
This is the negotiation process whereby trade union representatives (of the ball bearings industry) and employer
representatives (the management team at RDB) discuss employer-employee issues with the intention of
reaching a mutually acceptable agreement.
Promotion (47)
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 (48)
Also known as organizational 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 47-48).
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Work patterns and practises (51)
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 organization.
Standard of living (53)
The term ‘standard of living’ in the general sense refers to the wellbeing of a country’s 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 (53)
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 Maslow’s hierarchy of needs).
Working environment (53-54)
This refers to the physical and intangible conditions of the workplace, such as the physical work
environment of RDB’s 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 (55)
A manager is someone with decision-making authority in an organization and has responsibility for
problem-solving. Managers are involved in complex tasks including planning, organising, budgeting and
controlling resources to achieve organizational objectives. Managers tend to focus on achieving specific
goals within a given timeframe.
External environment (56)
This refers to the factors that are beyond the control of any individual organization, 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 (58)
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 RDB’s contingency plans yearly to identify probable threats such as the ‘millennium bug’
(line 59).
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Flow production (63)
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 (64)
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 (65)
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 (66-67)
HRM is a broad term used to describe the overall management of an organization's workforce. It includes
attracting, selecting, training, assessing, rewarding and retaining workers at the organization.
Factory floor (70)
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 (76)
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.
Industrialization (78)
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 (82)
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 RDB’s 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.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Logistics (82)
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. RDB’s logistics would be improved by having factories located
nearer to their customers, especially in growing markets such as China, India and Brazil.
Distribution (82)
Distribution is about getting the right products to the right customers in the right place and at the right
time. For instance, RDB’s 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 (83)
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 RDB’s factories to be nearer to their customers would improve logistics and
distribution, thereby shortening the company’s working capital cycle.
Corporate social responsibility (88-89)
CSR is the conscience of a business organization with consideration of the firm’s 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 (89-90)
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 (91)
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 justin-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 (95)
Having a vision means to have a picture or idea of what success would look like in the future. Having a
vision gives an organization a clear sense of purpose. Anna Holstein’s vision for RDB is to make the world’s
most technologically advanced and energy-efficient ball bearings (lines 95-96) which would be produced
in small “green” factories located near to their customers (line 96).
Downsizing (97)
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.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Offshored (98)
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 (99)
This is the continual human resource planning process of aligning the needs and priorities of an
organization with those of its workforce. It involves an examination of the current size and skills of the
workforce with the organization’s 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 (100)
Senior managers are those who have company-wide decision-making authority. These managers will be
highly experienced staff who take risks in leading the organization. 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 RDB’s smaller and greener factories in
China, India and Brazil (lines 100-101).
Redundant (103)
Also known as retrenchment, this occurs when workers are legally dismissed because their job no longer
exists, perhaps because of a restructuring of a company’s workforce to suit its operational objectives.
Redundancy would be inevitable if Anna Holstein sells the two RDB megafactories in northern Germany
and Sweden.
Recruited (103)
Recruitment is the hiring of workers for a position in an organization. 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 (105)
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 (107)
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
people’s 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 (108)
A budget is a financial plan of expected revenue and expenditure for an organization, or a department within
an organization, for a given time period. RDB’s marketing department has a small budget so this has meant the
department has been ‘sleepy’ and has unchallenging marketing objectives (line 108).
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Objectives (108)
These are the relatively short term targets of a business organization. RDB’s marketing department’s
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 (109)
Advertising is the main form of promotion, used to shape and develop brand awareness and foster
customer perceptions, knowledge and attitudes towards a firm’s 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 (109)
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 firm’s products or brands. Examples of promotion
used at RDB include advertising in trade journals and promotional activities at trade shows (line 109).
Trade journals (109)
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 (109)
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 (113)
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 (113)
These are individuals or other organizations 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 (113-114, 165)
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 RDB’s promotion of the firm’s ball bearings (line 165).
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Marketing department (114-115)
The marketing department of an organization has overall responsibility for identifying and satisfying
customer wants and needs. It is in charge of ensuring that the firm’s products sell. This is done through a
series of marketing activities such as market research, advertising and brand development.
Market research (115)
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 RDB’s marketing less ‘sleepy’ (line 108).
Primary research (115)
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 (115)
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 (117)
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 (118)
The term ‘product’ can refer to goods or services. In the case of RDB, the product is high-quality ball
bearings produced for other businesses.
Restructuring (119)
Also known as reorganization, this is the act of making significant changes to the organizational structure
of an organization. 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 (119)
This is an organization'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).
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Transition costs (120)
These are the payments made by an organization for changing from one organizational set-up (such as
RDB’s existing workforce in Sweden, Germany and Denmark) to another system (such as offshoring
production to India, Brazil and China).
Stock exchange (123)
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 company’s 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 (123)
A public limited company (PLC) is an incorporated business owned by its shareholders who can openly
trade the company’s 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 (124)
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 (131)
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 (133)
See redundancy (103).
Going public (134)
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
organizations and governments.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Relocation (137)
This means changing from one business location to another. For example, Anna Holstein intends to
relocate RDB’s 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 firm’s customers).
Industrial parks (141)
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 São Paulo (competing against locally-based ball bearings manufacturers). However, some
industrial parks offer tax incentives for businesses to locate there.
Shareholders (143)
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 company’s 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 (144)
This refers to any set of factors in the internal and/or external business environment that moves an organization
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 (147)
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 (148)
This refers to the management process of formulating a firm’s 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 firm’s marketing mix in order to achieve its strategic
goals.
Cells (150)
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.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Strategic objectives (151-152)
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 Holstein’s
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 (152)
Also known as tactical objectives, operational objectives are short term targets that affect a division of the
organization, 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 (152)
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 (153)
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 (155)
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 (159)
See ‘Corporate social responsibility’ (line 88-89).
Cell production (163)
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 just-in-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 (166)
Businesses may have several strategic goals so ranking these by their level of importance to the organization is
known as determining its strategic priority. Subsequently, operational (or tactical) planning and resource
allocation (including budgets) are based on a firm’s strategic priorities. For Anna Holstein, developing a global
identity and a global workforce were her strategic priorities for RDB.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
Demographic changes (166)
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 (170)
Globalization is the growing integration and interdependence of economic, social, technical and cultural
issues of the world’s 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 (4)
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 (58)
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
Organization 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 country’s 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 (59)
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.
BUSINESS AND MANAGEMENT --- PAPER 1 CASE STUDY PACK
KEY TERMS
CASE STUDY: ROYAL DANISH BEARINGS (RDB)
For use in May and November 2013
Key terms in italics apply to HL students only
MBA postgraduate degree (72)
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 organizations,
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 (72)
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 (130)
This refers to the opinion that an act is prescribed by a person’s 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 (133)
This is a voluntary and unwritten agreement between the workers of an organization 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 (156)
An investor is an individual or organization 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 (156)
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 organization 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.